SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of May , 2004.
----- ----
IMA EXPLORATION INC.
-------------------------------------------
(Translation of registrant's name into English)
#709 - 837 West Hastings Street, Vancouver, British Columbia, V6C 3N6, Canada
--------------------------------------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F:
Form 20-F X Form 40-F
--------- ---------
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): _______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): _______
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
--------- ----------
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3- 2(b): 82-_____________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
IMA EXPLORATION INC.
-------------------------------------
(Registrant)
Date May 28, 2004 By /s/ Joseph Grosso
------------------------------ -------------------------------------
(Signature)
Joseph Grosso,
President & CEO
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IMA EXPLORATION INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2004 and 2003
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
MANAGEMENT'S COMMENTS ON UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements of IMA
Exploration Inc. for the three months ended March 31, 2004 have been prepared by
management and are the responsibility of the Company's management. These
statements have not been reviewed by the Company's external auditors.
IMA EXPLORATION INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited - Prepared by Management)
MARCH 31, DECEMBER 31,
2004 2003
$ $
A S S E T S
CURRENT ASSETS
Cash and cash equivalents 8,011,062 4,454,241
Amounts receivable and prepaids 355,263 176,030
Marketable securities (Note 3) 789,445 543,460
------------ ------------
9,155,770 5,173,731
EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Note 4) 111,073 40,472
MINERAL PROPERTIES AND DEFERRED COSTS (Note 5) 8,289,560 6,883,641
------------ ------------
17,556,403 12,097,844
============ ============
L I A B I L I T I E S
CURRENT LIABILITIES
Accounts payable and accrued liabilities 919,648 426,494
------------ ------------
S H A R E H O L D E R S ' E Q U I T Y
SHARE CAPITAL (Note 6) 33,017,115 27,707,597
CONTRIBUTED SURPLUS 3,373,726 1,541,116
DEFICIT (19,754,086) (17,577,363)
------------ ------------
16,636,755 11,671,350
------------ ------------
17,556,403 12,097,844
============ ============
APPROVED BY THE BOARD OF DIRECTORS
/s/ JOSEPH GROSSO , Director
-----------------------------
/s/ ART LANG , Director
-----------------------------
The accompanying notes are an integral part of these interim
consolidated financial statements.
IMA EXPLORATION INC.
INTERIM CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(UNAUDITED - PREPARED BY MANAGEMENT)
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2004 2003
$ $
EXPENSES
Administrative and management services 66,880 59,250
Bank charges and interest 5,506 3,277
Corporate development and investor relations 89,811 73,142
Depreciation 4,310 5,546
General exploration 38,276 58,224
Office and sundry 17,479 7,975
Printing 16,461 7,036
Professional fees 152,138 27,944
Rent, parking and storage 21,843 18,362
Salaries and employee benefits 129,706 50,444
Stock based compensation (Note 6) 1,871,360 -
Telephone and utilities 9,506 10,424
Transfer agent and regulatory fees 13,597 4,538
Travel and accommodation 31,162 10,995
Cost recoveries (21,315) (6,000)
------------ ------------
2,446,720 331,157
------------ ------------
LOSS BEFORE OTHER ITEMS (2,446,720) (331,157)
------------ ------------
OTHER ITEMS
Gain on disposition of marketable securities 75,479 -
Foreign exchange 74,469 17,349
Gain on disposition of mineral property
and deferred costs 299,369 -
Interest and other income 20,680 4,776
Reorganization costs (Note 12(a)) (200,000) -
------------ ------------
269,997 22,125
------------ ------------
LOSS FOR THE PERIOD (2,176,723) (309,032)
DEFICIT - BEGINNING OF PERIOD (17,577,363) (14,158,945)
------------ ------------
DEFICIT - END OF PERIOD (19,754,086) (14,467,977)
============ ============
BASIC AND DILUTED LOSS
PER COMMON SHARE $(0.06) $(0.01)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 37,552,110 27,158,205
============ ============
The accompanying notes are an integral part of these interim
consolidated financial statements.
IMA EXPLORATION INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - PREPARED BY MANAGEMENT)
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2004 2003
$ $
OPERATING ACTIVITIES
Loss for the period (2,176,723) (309,032)
Items not involving cash
Depreciation 4,310 5,546
Stock based compensation 1,871,360 -
Gain on disposition of mineral properties and deferred costs (299,369) -
Gain on disposition of marketable securities (75,479) -
------------ ------------
(675,901) (303,486)
(Increase) in amounts receivable and prepaids (179,233) (82,183)
Increase in accounts payable and accrued liabilities 493,154 33,773
(361,980) (351,896)
------------ ------------
INVESTING ACTIVITIES
Proceeds on disposition of marketable securities 156,494 -
Expenditures on mineral properties and deferred costs (1,433,551) (612,144)
Purchase of equipment and leasehold improvements (74,911) (1,954)
------------ ------------
(1,351,968) (614,098)
------------ ------------
FINANCING ACTIVITIES
Issuance of common shares 5,682,006 1,129,308
Share issue costs (411,237) -
------------ ------------
5,270,769 1,129,308
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 3,556,821 163,314
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 4,454,241 1,436,124
------------ ------------
CASH AND CASH EQUIVALENTS - END OF PERIOD 8,011,062 1,599,438
============ ============
CASH AND CASH EQUIVALENTS COMPRISED OF:
Cash 5,211,062 794,569
Term deposits 2,800,000 804,869
------------ ------------
8,011,062 1,599,438
============ ============
The accompanying notes are an integral part of these interim
consolidated financial statements.
IMA EXPLORATION INC.
CONSOLIDATED SCHEDULE OF MINERAL PROPERTIES AND DEFERRED COSTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
ARGENTINA PERU TOTAL
---------------------------------------------------------------------- ---------- ----------
LIRIO RIO DE LAGUNA DE RIO
GROUP NAVIDAD LAS TAGUAS EVELINA LOS TOROS OTHER TABACONAS
$ $ $ $ $ $ $ $
Balance, beginning of period 1,327,315 1,002,211 545,063 391,302 140,867 312,329 3,164,554 6,883,641
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Expenditures during the period
Assays - 132,553 - 851 851 - - 134,255
Contractors - access - 20,257 - - - - - 20,257
Contractors - surveying - 26,471 - - - - - 26,471
Contractors - environmental - 26,431 - - - - 29,772 56,203
Drilling - 652,980 - - - - - 652,980
Field supplies - - - - - - 2,317 2,317
Field workers - - - - - - 1,839 1,839
Geological - 165,049 - - - - - 165,049
Geological supplies - 38,513 - - - - - 38,513
Geochemistry - 31,641 - - - - - 31,641
Geophysics - 29,456 - - - - - 29,456
Option payments - - - - - - 7,084 7,084
Travel - 2,858 - - - - 1,488 4,346
Office - 17,586 - - - - - 17,586
Other 788 - 788 - - 14,998 13,046 29,620
Vehicles - 26,325 - - - - 1,431 27,756
Foreign value added tax - - - - - 160,057 489 160,546
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
788 1,170,120 788 851 851 175,055 57,466 1,405,919
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, end of period 1,328,103 2,172,331 545,851 392,153 141,718 487,384 3,222,020 8,289,560
========== ========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these interim
consolidated financial statements.
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
1. NATURE OF OPERATIONS
The Company is in the process of exploring its mineral properties in
South America and evaluating other mineral properties. The Company
presently has no proven or probable reserves and on the basis of
information to date, it has not yet determined whether these properties
contain economically recoverable ore reserves. The amounts shown as
mineral properties and deferred costs represent costs incurred to date,
less amounts amortized and/or written off, and do not necessarily
represent present or future values. The underlying value of the mineral
properties and deferred costs is entirely dependent on the existence of
economically recoverable reserves, securing and maintaining title and
beneficial interest in the properties, the ability of the Company to
obtain the necessary financing to complete development, and future
profitable production.
The Company considers that it has adequate resources to maintain its
core operations for the next year.
See also Note 12.
2. SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements of the Company have been
prepared by management in accordance with Canadian generally accepted
accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates. The
consolidated financial statements have, in management's opinion, been
properly prepared using careful judgement with reasonable limits of
materiality. These interim consolidated financial statements should be
read in conjunction with the most recent annual consolidated financial
statements. The significant accounting policies follow that of the most
recently reported annual consolidated financial statements.
3. MARKETABLE SECURITIES
MARCH 31, 2004 DECEMBER 31, 2003
--------------------------- ---------------------------
QUOTED QUOTED
RECORDED MARKET RECORDED MARKET
VALUE VALUE VALUE VALUE
$ $ $ $
Ballad Gold & Silver Ltd.
- 470,000 common shares 235,000 206,800 250,000 325,000
Amera Resources Corporation ("Amera")
- 453,300 common shares 203,985 453,300 270,000 546,000
Tinka Resources Limited
- 300,000 common shares 147,000 141,000 - -
Consolidated Pacific Bay Minerals Ltd.
- 900,000 common shares 180,000 180,000 - -
Other 23,460 154,051 23,460 161,546
------------ ------------ ------------ ------------
789,445 1,135,151 543,460 1,032,546
============ ============ ============ ============
The Company has entered into option and sale agreements on certain of
its non-core mineral property holdings in which the Company received
common shares of publicly traded companies as partial consideration.
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
MARCH 31, DECEMBER 31,
2004 2003
$ $
Office equipment and computers 252,229 206,352
Leasehold improvements 91,846 62,812
------------ ------------
344,075 269,164
Less accumulated depreciation (233,002) (228,692)
------------ ------------
111,073 40,472
============ ============
5. MINERAL PROPERTIES AND DEFERRED COSTS
MARCH 31, 2004
------------------------------------------
DEFERRED
ACQUISITION EXPLORATION
COSTS COSTS TOTAL
$ $ $
Argentina
Navidad - 2,172,331 2,172,331
Lirio Group 221,020 1,107,083 1,328,103
Rio de las Taguas 133,262 412,589 545,851
Evelina - 392,153 392,153
Laguna de los Toros - 141,718 141,718
Other 11,639 475,745 487,384
------------ ------------ ------------
365,921 4,701,619 5,067,540
Peru
Rio Tabaconas 748,377 2,473,643 3,222,020
------------ ------------ ------------
1,114,298 7,175,262 8,289,560
============ ============ ============
DECEMBER 31, 2003
------------------------------------------
DEFERRED
ACQUISITION EXPLORATION
COSTS COSTS TOTAL
$ $ $
Argentina
Navidad - 1,002,211 1,002,211
Lirio Group 221,020 1,106,295 1,327,315
Rio de las Taguas 133,262 411,801 545,063
Evelina - 391,302 391,302
Laguna de los Toros - 140,867 140,867
Other 11,639 300,690 312,329
------------ ------------ ------------
365,921 3,353,166 3,719,087
Peru
Rio Tabaconas 741,293 2,423,261 3,164,554
------------ ------------ ------------
1,107,214 5,812,132 6,883,641
============ ============ ============
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
5. MINERAL PROPERTIES AND DEFERRED COSTS (continued)
(a) Argentinean Properties
The Company has either staked, fully paid or holds options to
acquire 100% working interests in mineral properties, located
in San Juan Province and Chubut Province in Argentina.
As of March 31, 2004, the Company must make further payments
with respect to option agreements on the Lirio Group of
properties, totalling US $240,000, as follows:
YEAR US $
2004 70,000
2005 170,000
------------
240,000
============
The Company has also agreed to pay net smelter return
royalties ("NSR") of up to US $7,000,000 once commercial
production is achieved on the Lirio Group of properties.
(b) Rio Tabaconas, Peru
The Company holds an option to acquire a 100% interest in
three concessions, in the Cajamarca Department of San Ignacio
Province in northern Peru. In addition, the Company owns ten
concessions, which surround and overlie the optioned
concessions. Collectively these are known as the Rio Tabaconas
Project.
Under the terms of the option agreement, the Company has paid
US $185,000 and was required to make total payments of US
$1,340,000. On June 28, 2002, the Company suspended further
exploration activities at the Rio Tabacanos project. This
decision was made in response to the local community
expressing its concerns with mineral exploration activities.
The Company has deferred any further exploration until an
agreement with the local community has been finalized. As a
result the Company declared force majeure, as allowed under
its option agreement. Accordingly, the Company and the
optionor have deferred payment of the remaining US $1,155,000
option payments until the force majeure is discontinued. On
August 1, 2003, the Company commenced paying US $1,500 per
month to the optionor as compensation during this waiting
period.
(c) During fiscal 2003, the Company entered into agreements with
Amera, a publicly-traded company with common management and
directors, whereby the Company:
(i) optioned its Mogote Property in the NW San Juan
Region of Argentina. Amera has the option to earn a
51% interest in the 8,009 hectare Mogote Property by
issuing a total of 1,650,000 common shares of Amera
to the Company and by incurring US $1.25 million of
expenditures, including work programs and underlying
option payments, all over a five year period ending
July 1, 2007. Amera has also agreed to reimburse the
Company for past payments made and expenditures which
had been incurred by the Company on the Mogote
Property. As at March 31, 2004, Amera has reimbursed
the Company $192,952, and $4,902 remained outstanding
and is included in amounts receivable. The Company
has also received 100,000 shares of Amera at a fair
value of $45,000.
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
5. MINERAL PROPERTIES AND DEFERRED COSTS (continued)
On April 8, 2004, the Company and Amera entered into
a further agreement whereby Amera can earn an
additional 24% interest, for a total 75% interest,
after earning the initial 51% interest, by issuing
300,000 shares of Amera (issued) and conducting an
additional US $3 million of exploration expenditures
over a three year period ending May 20, 2007.
(ii) sold a 100% undivided interest in three mineral
properties, comprising 24,280 hectares (the "Chubut
Properties"), located in Chubut Province, Argentina,
for 500,000 common shares of Amera for a recorded
amount of $225,000. In addition, in the event that a
decision is made to place the Chubut Properties into
commercial production, Amera will pay the Company a
bonus of US$250,000 and a 3% net smelter returns
royalty.
(d) The Company has signed and will continue to sign joint venture
agreements for certain of its non-core properties with other
junior exploration companies. The Company normally receives
shares in these companies as compensation along with their
commitments for exploration expenditures. The issue of these
marketable securities is subject to TSX Venture Exchange
("TSXV") approval. The intent is to sell these securities to
maximize return to the Company.
6. SHARE CAPITAL
Authorized: 100,000,000 common shares without par value
100,000,000 preferred shares without par value
Issued: MARCH 31, 2004 DECEMBER 31, 2003
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
$ $
Balance, beginning of period 36,381,452 27,707,597 26,550,606 21,354,823
------------ ------------ ------------ ------------
Issued during the period for:
Private placements 1,500,000 4,650,000 2,900,000 2,610,000
Exercise of warrants 982,240 955,556 4,969,066 895,859
Exercise of options 101,250 111,600 1,855,850 4,940,428
Exercise of agent's option 4,000 3,600 105,930 95,337
Less: Share issue costs - (411,238) - (118,850)
------------ ------------ ------------ ------------
2,587,490 5,309,518 9,830,846 6,352,774
------------ ------------ ------------ ------------
Balance, end of period 38,968,942 33,017,115 36,381,452 27,707,597
============ ============ ============ ============
(a) During the three months ended March 31, 2004 the Company
completed a brokered private placement of 1,500,000 units at
$3.10 per unit for proceeds of $4,307,500, net of $279,000
agent's commission and $63,500 of related issue costs. Each
unit consisted of one common share and one half non-
transferable share purchase warrant. Each whole warrant
entitles the holder to purchase a common share for $3.70 per
share on or before February 23, 2005. The Company also issued
an option to the agent to acquire 200,000 units at $3.25 per
unit on or before February 23, 2005. Each unit will consist of
one common share and one-half non-transferable share purchase
warrant, exercisable on the same terms and basis as the
private placement.
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
6. SHARE CAPITAL (continued)
(b) Stock Options
During the three months ended March 31, 2004, the Company
granted 1,462,000 stock options to its employees, directors
and consultants.
The fair value of stock options granted to employees,
directors and consultants is estimated on the dates of grants
using the Black-Scholes option pricing model with the
following assumptions used for the grants made during the
year:
Risk-free interest rate 2.38%
Estimated volatility 77%
Expected life 2.5 years
Expected dividend yield 0%
The weighted average fair value per share of stock options,
calculated using the Black-Scholes option pricing model,
granted during the period to the Company's employees,
directors and consultants was $1.28 per share.
Option-pricing models require the use of estimates and
assumptions including the expected volatility. Changes in the
underlying assumptions can materially affect the fair value
estimates and, therefore, existing models do not necessarily
provide reliable measure of the fair value of the Company's
stock options.
A summary of the Company's outstanding stock options at March
31, 2004, and the changes for the three months ended March 31,
2004, is presented below:
OPTIONS WEIGHTED
OUTSTANDING AVERAGE
AND EXERCISE
EXERCISABLE PRICE
$
Balance, beginning of period 2,528,150 1.32
Granted 1,462,000 3.10
Exercised (101,250) 0.72
------------
Balance, end of period 3,888,900 1.55
============
Stock options outstanding and exercisable at March 31, 2004,
are as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
237,900 0.40 July 19, 2006
159,000 0.50 May 2, 2007
195,000 0.50 September 23, 2007
145,000 0.84 March 7, 2008
300,000 0.90 May 30, 2008
1,390,000 1.87 August 27, 2008
1,462,000 3.10 March 24, 2009
---------
3,888,900
=========
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
6. SHARE CAPITAL (continued)
(c) Warrants
A summary of the number of common shares reserved pursuant to
the Company's outstanding warrants and agents warrants
outstanding at March 31, 2004, and the changes for the three
months ended March 31, 2004, is as follows:
NUMBER
Balance, beginning of period 6,042,448
Issued 752,000
Exercised (982,240)
---------
Balance, end of period 5,812,208
=========
Common shares reserved pursuant to warrants outstanding at
March 31, 2004 are as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
1,357,222 0.60 May 23, 2004
746,471 0.60 September 27, 2004
1,049,322 0.75 September 15, 2004
1,168,667 0.90 March 16, 2005
100,000 0.75 April 19, 2005
642,526 1.10 April 28, 2004
750,000 3.70 February 23, 2005
---------
5,812,208
=========
(d) Pursuant to a 2,900,000 unit brokered private placement
financing conducted during fiscal 2003, the Company granted an
option to the agent to acquire 195,750 units at $0.90 per
unit. Each unit will consist of one common share and one-half
non-transferable common share purchase warrant. One whole
warrant will entitle the agent to purchase a common share for
the exercise price of $1.10 per share, on or before April 28,
2004. During the three months ended March 31, 2004, the agent
exercised options to purchase 4,000 units and, as of March 31,
2004, options to purchase 85,820 units remained outstanding.
(e) Pursuant to a 1,500,000 unit brokered private placement
financing conducted during fiscal 2004, the Company granted an
option to the agent to acquire 200,000 units at $3.25 per
unit. Each unit will consist of one common share and one-half
non-transferable common share purchase warrant. One whole
warrant will entitle the agent to purchase a common share for
the exercise price of $3.70 per share, on or before February
23, 2005. During the three months ended March 31, 2004, the
agent's option remained unexercised.
(f) See also Note 12.
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
7. RELATED PARTY TRANSACTIONS
(a) During the three months ended March 31, 2004, the Company was
charged $140,358 by companies controlled by directors and
officers of the Company, for accounting, management, and
consulting services provided. As at March 31, 2004, $6,634
remains outstanding and has been included in accounts payable
and accrued liabilities.
(b) The Company has an agreement with a private corporation
controlled by the President of the Company for the rental of
office premises. During the three months ended March 31, 2004,
the Company paid $16,597 for rent.
(c) During the three months ended March 31, 2004, the Company
recorded $4,836 for reimbursement of expenditures and
disbursements incurred on behalf of the Company by the
President of the Company. As at March 31, 2004, $1,347 remains
outstanding and has been included in accounts payable and
accrued liabilities.
(d) The Company shares its office facilities with Amera. During
the three months ended March 31, 2004, the Company received
$21,315 from Amera for shared rent and administration costs.
(e) The President of the Company provides his services on a
full-time basis under a contract with a private company
controlled by the President. The President is paid an annual
amount of $102,000. The contract also provides that, in the
event the services are terminated without cause or upon a
change in control of the Company, a termination payment would
include a bonus of $6,500 per month, retroactive to July 1,
1999, plus an additional three years of compensation at
$15,000 per month. If the termination had occurred on March
31, 2004, the amount under the agreement would be $936,000.
(f) Other related party transactions are disclosed elsewhere in
these interim consolidated financial statements.
8. SEGMENTED INFORMATION
The Company is involved in mineral exploration and development
activities, which are conducted principally in Argentina and Peru. The
Company is in the exploration stage and, accordingly, has no reportable
segment revenues or operating results for the three months ended March
31, 2004.
The Company's total assets are segmented geographically as follows:
MARCH 31, 2004
---------------------------------------------------------
CORPORATE ARGENTINA PERU TOTAL
$ $ $ $
Current assets 8,926,227 207,752 21,791 9,155,770
Equipment and leasehold improvements 99,755 7,032 4,286 111,073
Mineral properties and deferred costs - 5,067,540 3,222,020 8,289,560
------------ ------------ ------------ ------------
9,025,982 5,282,324 3,248,097 17,556,403
============= ============ ============ ============
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
8. SEGMENTED INFORMATION (continued)
DECEMBER 31, 2004
---------------------------------------------------------
CORPORATE ARGENTINA PERU TOTAL
$ $ $ $
Current assets 5,075,092 65,637 32,999 5,173,728
Equipment and leasehold improvements 28,974 7,032 4,466 40,472
Mineral properties and deferred costs - 3,719,087 3,164,554 6,883,641
------------ ------------ ------------ ------------
5,104,066 3,791,756 3,202,019 12,097,844
============ ============ ============ ============
10. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities were conducted by the
Company as follows:
MARCH 31, MARCH 31,
2004 2003
$ $
Investing activities
Proceeds on disposition
of mineral properties 327,000 -
Acquisition of marketable securities (327,000) -
------------ ------------
- -
============ ============
Financing activities
Shares issued on exercise of options 38,750 -
Contributed surplus (38,750) -
------------ ------------
- -
============ ============
Other supplemental cash flow information:
MARCH 31, MARCH 31,
2004 2003
$ $
Interest paid in cash - -
============ ============
Income taxes paid in cash - -
============ ============
11. LEGAL
In March 2004, Minera Aquiline Argentina S.A., a wholly-owned
subsidiary of Aquiline Resources Inc., commenced a legal proceeding
against the Company, asserting that the Company unlawfully used
confidential information, and is seeking a constructive trust over the
Navidad Project and other surrounding properties in Chubut Province,
Argentina. The Company is defending this action and the outcome is not
determinable.
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
12. SUBSEQUENT EVENTS
(a) On May 3, 2004, the Company announced a corporate
restructuring which would have the result of dividing its
existing portfolio of mineral properties into two separate
public companies. Following the corporate restructuring the
Company will continue to hold the Navidad project, while the
newly created company will hold all other mineral property
interests. The proposed reorganization of the Company will be
accomplished by way of a statutory plan of arrangement and is
subject to shareholder, regulatory and court approvals.
(b) Subsequent to March 31, 2004, the Company issued 2,146,434
common shares for $1,708,393 on the exercise of stock options
and warrants.
IMA EXPLORATION INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE QUARTER ENDED MARCH 31, 2004
INTRODUCTION
The following management discussion and analysis and financial review should be
read in conjunction with the Company's unaudited interim consolidated financial
statements for the three months ended March 31, 2004 and the audited
consolidated financial statements dated December 31, 2003 and related notes. The
consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles. Except as otherwise disclosed all
dollar figures in this report are stated in Canadian dollars. Additional
information relevant to the Company can be found on the SEDAR website at
www.sedar.com.
FORWARD LOOKING STATEMENTS
Certain information included in this discussion may constitute forward-looking
statements. Forward-looking statements are based on current expectations and
entail various risks and uncertainties. These risks and uncertainties could
cause or contribute to actual results that are materially different than those
expressed or implied. The Company disclaims any obligation or intention to
update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
PROPOSED REORGANIZATION
On May 3, 2004 the Company announced a proposed corporate reorganization (the
Reorganization). The effect of the Reorganization will be to transfer the
Company's non-Navidad mineral properties to a separate company along with
$750,000 of operating cash and the joint venture agreements (including the
marketable securities) relating to the transferred properties. The Company will
retain the Navidad mineral property and certain other mineral properties located
in central Chubut Province and all other assets and liabilities, except for the
assets to be transferred as previously listed. The shareholders of the Company
would receive shares in the new company, Golden Arrow Resources Corporation
(Golden Arrow), which would result in identical ownership by the shareholders
before and after the Reorganization.
The Company is proposing this Reorganization as they are of the view that its
present share price does not properly reflect the value of the Company's assets.
Due to the attention which has been focused on the Navidad project, little
market value is attributed to the Company's other mineral properties. The
Reorganization will be accomplished by way of a statutory plan of arrangement
and is subject to shareholder, court and regulatory approvals. Details of the
Reorganization have been sent to the shareholders and their approval for the
Reorganization will be sought at the Company's June 24, 2004 annual general and
special meeting.
OVERVIEW
The Company is a natural resource company engaged in the business of acquisition
and exploration of mineral properties in South America, principally in Argentina
and Peru. The Company's strategy and primary corporate objective is to acquire
properties for the purpose of mineral exploration and exploitation in known
mining areas adjacent to, or in close proximity to, known major discoveries.
These properties are expected to command higher acquisition, maintenance and
vendor participation fees, where these higher fees are deemed reasonable to
attempt to reduce the overall risks associated with mineral exploration. In the
event the Company discovers mineralization capable of economic production, it
intends to seek a joint venture partner and/or to sell all or a portion of its
interest in the subject property to finance the development of such property.
The secondary corporate objective is to identify new frontiers through the
evaluation of available historic and satellite data and acquire large parcels of
land in undeveloped regions which considered to have the potential to host
mineral deposits. There are no assurances that the Company's strategies will
achieve the desired results and interests in properties may have been acquired
at higher prices, due to the properties' proximities to other discoveries, and
may have to write-off all or a portion of the value of such properties if they
prove uneconomic. At present, the Company has no producing properties and
consequently has no current operating income or cash flow. As of this date the
Company is an exploration stage company and has not generated any revenues.
- 1 -
There is no assurance that a commercially viable mineral deposit exists on any
of the properties. Further exploration will be required before a final
evaluation as to the economic and legal feasibility of any of the properties is
determined.
On March 5, 2004 Minera Aquiline Argentina SA, a subsidiary of Aquiline
Resources Inc., commenced an action against the Company seeking a constructive
trust over the Navidad properties. The Company believes the Aquiline legal
action is without merit and will vigorously defend itself. A Statement of
Defence has been filed. At this date the outcome is not determinable. The trial
has been set for October 11, 2005 in Vancouver, British Columbia.
PRINCIPAL PROPERTIES
Navidad
On February 3, 2003 the Company announced the discovery of high-grade
silver-lead deposit at its 100% owned 10,000 hectare (24,700 acres) Navidad
property in north central Chubut, Argentina. The Phase I drilling program was
completed in late March 2004 and the next phase of the program is scheduled to
commence in late May. The cost of Phase I in the quarter ended March 31, 2004
was $1,500,000. The budget for Phase II, which will be completed between May and
September, 2004, is $2,100,000.
The Company announced results of a resource calculation on May 25, 2004. Snowden
Mining Consultants Inc. has completed a resource estimation at Galena Hill, the
first systematically drilled target on the Navidad property which includes
Indicated Resource of 207 million ounces of silver and 1.1 million tonnes of
lead at a 50 g/t silver equivalent cut-off grade including: 117 million ounces
of silver and 495,047 tonnes of lead at a 300 g/t silver equivalent cut-off
grade and Inferred Resource of 36 million ounces of silver and 56,776 tonnes of
lead at a 50 g/t silver equivalent cut-off grade. This includes only the Galena
Hill deposit and portions of the adjacent Connector zone and does not include
known and interpreted mineralization in other areas of the property which are
the primary focus of the Phase II drilling program.
Chubut (Patagonia)
The Company has 18 exploration properties in Chubut Province in addition to
Navidad, five of which are currently the subject of joint-venture agreements.
The Company finalized terms for a farm out of the Sierra 2 property to
Cloudbreak Resources Ltd. (Cloudbreak) on February 5, 2004. Cloudbreak can earn
an initial 50% interest in the property by issuing 500,000 shares upon TSX -V
acceptance and an additional 350,000 shares on February 1, 2005; incurring
exploration expenditures on the property (1) US$150,000 in year one (2)
US$350,000 in year two (3) US$500,000 in year three for a total of US$1,000,000.
Cloudbreak can increase their interest to 75% by making additional expenditures
of US$1,000,000 in year four and US$1,500,000 in year 5. The Company has a
budget of $350,000 for planned work on the Laguna de los Toros property.
Valle de Cura
The Company has eight exploration properties in the Valle de Cura region. The
Company received notification in December 2003 that Barrick Gold Corp would not
be exercising its option to earn an interest in the Rio de las Taguas or
Porterillos properties and is continuing to evaluate potential partners to
advance theses drill ready projects and the other, more early-stage, exploration
properties in the area.
Northwest San Juan
The Company has three exploration properties in the northwestern corner of San
Juan Province. The Company negotiated an amendment to the joint venture
agreement with Amera Resources Corporation (Amera) whereby Amera can earn an
additional 24% interest (up to a 75%) in the Mogote property. To earn this
additional participation Amera must issue an additional 300,000 shares and
complete total work expenditures of US$3,00,000 over three years, with a minimum
of US$1,000,000 by May 30, 2005. There are no current plans for work on the
other two properties in this area.
Gualcamayo
The Company has three exploration properties in the Gualcamayo area of San Juan
in addition to retaining a NSR on the Quebrada del Diablo deposit (1.2 million
ounces of gold @~1.1 g/t Au) held by Viceroy Exploration Ltd.. Evaluation of the
properties is ongoing and joint venture opportunities are continuing to be
investigated however, there are no current plans for significant work on the
properties in this area.
- 2 -
Rio Tabaconas (Peru)
The Company had previously declared force majeure, as allowed under the property
option agreement, on the property payments for this project. There have been no
recent developments concerning this project.
SUMMARY OF FINANCIAL RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2004
The Company reported a consolidated loss of $2,176,723 ($0.06 per share) in the
current period, an increase of $1,867,691 from the loss of $309,032 ($0.01 per
share) in 2003. The increase in the loss in 2004, compared to 2003, was due to a
number of factors of which $2,115,563 can be attributed to operating expenses
while other items resulted in gains and income which improved by $247,872.
RESULTS OF OPERATIONS
CORPORATE COSTS AND OTHER INCOME
The Company's operating expenses for the three months ended March 31, 2004 were
$2,446,720 an increase of $2,115,563 from the comparable 2003 period. A
significant portion of the increase for 2004 is attributed to the Company's
application of the fair value method of accounting for stock options granted to
its employees and directors. In the three months ended March 31, 2004 the
Company recorded a non-cash expense of $1,871,360. During 2003 the Company
disclosed a pro-forma charge of $113,985 for stock options granted to its
employees and directors. Had the Company applied retroactive treatment it would
have recorded this amount as an expense in the first quarter of 2003. Other
increases in the operating expenses can be attributed to the Company's increase
in staff and activities driven by Navidad. The Company has added staff and new
office space and has incurred additional operating expenses as a result of this
increase in activity. Administrative and management services increased $7,630,
corporate development and investor relations increased $16,669, office expense
increased $9,504, printing costs increased $9,425, transfer agent and regulatory
fees increased $9,059, travel increased $20,167. The increase in salaries of
$79,262 includes a retiring allowance for the Company's former CFO, William Lee.
The increase of $124,194 in professional fees is primarily due to legal costs
incurred in connection with the Aquiline legal action. General exploration
decreased $19,948 as more of these expenditures have been capitalized to the
Navidad property's deferred costs. Cost recoveries from Amera increased $15,315.
During 2004 the Company recorded a gain of $75,479 on the disposal of marketable
securities and a gain of $299,369 from the farm out of interests in its mineral
properties. In the March 31, 2003 period no gains were realized. In the March
31, 2004 period the Company realized some gains as a result of trading in its
portfolio of marketable securities. Marketable securities are received by the
Company as a result of the joint venturing of certain of its non-core
properties. The Company's intent is to sell these securities to maximize return
to the Company, not to trade its holdings. Interest and other income increased
$15,904 primarily as a result of an increase of funds on deposit. The Company
also recorded an increase in foreign exchange of $57,120 in this period. Cost of
$200,000 for fees and expenses related to the proposed Reorganization have been
recognized in this period.
- 3 -
SELECTED ANNUAL FINANCIAL INFORMATION
The following selected consolidated financial information is derived from the
consolidated financial statements and notes thereto. The information has been
prepared in accordance with Canadian generally accepted accounting principles.
Year Ended December 31
(Audited)
------------------------------------------
2003 2002 2001
------------ ------------ ------------
INCOME STATEMENT DATA
Total Revenue Nil Nil Nil
Income (loss) from Continuing Operations (3,418,418) (1,440,106) (881,875)
General and Administrative Expenses 3,164,216 1,458,276 945,685
Net Income (Loss) (3,418,418) (1,440,106) (881,875)
Net Income (Loss) per Common Share basic and diluted $(0.11) $(0.06) $(0.06)
SELECTED QUARTERLY FINANCIAL INFORMATION
The following selected consolidated financial information is derived from the
unaudited consolidated interim financial statements of the Company. The
information has been prepared in accordance with Canadian generally accepted
accounting principles.
Quarter Ended - Unaudited
---------------------------------------------------------
June 30, Sept. 30, Dec. 31, March 31,
2003 2003 2003 2004
------------ ------------ ------------ ------------
Revenues Nil Nil Nil Nil
Net income (loss) before income taxes (407,386) (563,502) (2,138,489) (2,176,723)
Net income (loss) (407,386) (563,502) (2,138,498) (2,176,723)
Earnings (loss) per share (0.01) (0.02) (0.07) (.06)
Fully diluted earnings (loss) per share (0.01) (0.02) (0.07) (.06)
Quarter Ended - Unaudited
---------------------------------------------------------
June 30, Sept. 30, Dec. 31, March 31,
2002 2002 2002 2003
------------ ------------ ------------ ------------
Revenues Nil Nil Nil Nil
Net income (loss) before income taxes (436,351) (284,128) (486,948) (309,032)
Net income (loss) (436,351) (284,128) (486,948) (309,032)
Earnings (loss) per share (0.02) (0.01) (0.02) (0.01)
Fully diluted earnings (loss)per share (0.02) (0.01) (0.02) (0.01)
- 4 -
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at March 31, 2004 was $8,011,062 compared to
$4,454,241 at December 31, 2003. The increase in cash is primarily due to the
issue of common shares. In February 2004 the Company completed a brokered
private placement of 1,500,000 units at $3.10 per unit, for proceeds of
$4,238,763 net of costs of $411,237. In addition the Company has received
$1,032,006 from the exercise of warrants and options to March 31, 2004.
Subsequent to March 31, 2004 the Company has received a further $1,700,000 from
the exercise of stock options and warrants.
The Company considers that it has adequate resources to maintain its ongoing
operations but currently does not have sufficient working capital to fund all of
its planned exploration work and property commitments. A Phase II budget for the
Navidad project has been approved in the amount of $2,100,000. The Company will
continue to rely on successfully completing additional equity financing and/or
conducting joint venture arrangements to further exploration on its properties.
There can be no assurance that the Company will be successful in obtaining the
required financing or negotiating joint venture agreements. The failure to
obtain such financing or joint venture agreements could result in the loss of or
substantial dilution of its interest in its properties.
The Company's management may elect to acquire new projects, at which time
additional equity financing may be required to fund overhead and maintain its
interests in current projects, or may decide to relinquish certain of its
properties. These decisions will be based on the results of ongoing exploration
programs and the response of equity markets to the projects and business plan.
The Company does not know of any trends, demand, commitments, events or
uncertainties that will result in, or that are reasonably likely to result in,
its liquidity either materially increasing or decreasing at present or in the
foreseeable future. Material increases or decreases in liquidity are
substantially determined by the success or failure of the exploration programs
or the acquisition of projects.
The Company does not now and does not expect to engage in currency hedging to
offset any risk of currency fluctuations.
RELATED PARTY TRANSACTIONS
The directors provided services to the Company and were paid $140,358 for the
three months ended March 31, 2004. Mr. W. Lee, the former CFO, was paid salary
and retiring allowance of $68,769, Mr. N. Cacos, the Corporate Secretary, was
paid fees of $5,225, Mr. Sean Hurd, director and investor relations manager, was
paid fees of $7,200, Mr. Gerald Carlson, Chairman of the Board was paid fees of
$13,800, $19,684 was paid to a company with which Mr. Tookie Angus, a director
of the Company, is associated and Mr. J. Grosso, the President and CEO, was paid
fees of $25,500. Note 7 to the March 31, 2004 interim consolidated financial
statements and the December 31, 2003 consolidated financial statements discusses
the material related party transactions.
OPERATING CASH FLOW
Cash outflow from operating activities in the first quarter of 2004 was $361,980
compared to cash outflow in the first quarter of 2003 of $351,896.
FINANCING ACTIVITIES
In the first quarter of 2004 the Company received $5,682,006 from the sale of
common shares, less costs of $411,237 compared to $1,129,308, less costs of nil,
in the first quarter of 2003.
INVESTING ACTIVITIES
Investing activities required cash of $1,351,968 in the first quarter of 2004
(2003 - $614,098), these investing activities were for additions of $1,433,351
(2003 - $612,144) primarily to the Navidad; $74,911 for equipment and leasehold
improvements (2003 - $1,954) less proceeds from the disposal of marketable
securities of $156,494 (2003 - nil).
- 5 -
CONTRACTUAL COMMITMENTS
The Company has lease commitments for office premises that require payments of
$61,000 and $26,500 annually. The Company also has commitments for payments on
its mineral properties. These are explained in Note 5 to the December 31, 2003
consolidated financial statements.
CRITICAL ACCOUNTING POLICIES
Reference should be made to the Company's significant accounting policies
contained in Note 3 of the Company's consolidated financial statements for the
year ended December 31, 2003. These accounting policies can have a significant
impact of the financial performance and financial position of the Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with Canadian GAAP
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of
revenues and expenses during the period. Significant areas requiring the use of
management estimates relate to the determination of environmental obligations
and impairment of mineral properties and deferred costs. Actual results may
differ from these estimates.
MINERAL PROPERTIES AND DEFERRED COSTS
Consistent with the Company's accounting policy disclosed in Note 3 of the
annual consolidated financial statements, direct costs related to the
acquisition and exploration of mineral properties held or controlled by the
Company have been capitalized on an individual property basis. It is the
Company's policy to expense any exploration associated costs not related to
specific projects or properties. Management of the Company periodically reviews
the recoverability of the capitalized mineral properties. Management takes into
consideration various information including, but not limited to, results of
exploration activities conducted to date, estimated future metal prices, and
reports and opinions of outside geologists, mine engineers and consultants. When
it is determined that a project or property will be abandoned or its carrying
value has been impaired, a provision is made for any expected loss on the
project or property. No write offs were required in the current quarter.
RISK FACTORS
The Company's operations and results are subject to a number of different risks
at any given time. These factors, include but are not limited to disclosure
regarding exploration, additional financing, project delay, titles to
properties, price fluctuations and share price volatility, operating hazards,
insurable risks and limitations of insurance, management, foreign country and
regulatory requirements, currency fluctuations and environmental regulations
risks. For a more complete discussion of these risks and others reference should
be made to the Company's Management Proxy Circular of May 14, 2004.
INVESTOR RELATIONS
The Company currently does not engage the services of outside investor relations
consultants. Mr. Sean Hurd, a director, is the Company's Investor Relations
Manager and coordinates investor relations activities.
FORM 52-109FT2
CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD
I, JOSEPH GROSSO, CHIEF EXECUTIVE OFFICER of IMA EXPLORATION INC., certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 "Certification of Disclosure in Issuers'
Annual and Interim Filings") of IMA Exploration Inc. the interim period
ending March 31, 2004;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings; and
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the issuer, as of the date and for the
periods presented in the interim filings.
Date: May 28, 2004
/s/ Joseph Grosso
-----------------------
Joseph Grosso
Chief Executive Officer
FORM 52-109FT2
CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD
I, ART LANG, CHIEF FINANCIAL OFFICER of IMA EXPLORATION INC., certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 "Certification of Disclosure in Issuers'
Annual and Interim Filings") of IMA Exploration Inc. for the interim
period ending March 31, 2004;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings; and
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the issuer, as of the date and for the
periods presented in the interim filings.
Date: May 28, 2004
/s/ Art Lang
-----------------------
Art Lang
Chief Financial Officer