UNITED STATES
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 AUGUST, 2004.
Commission File Number: 0-30464
IMA EXPLORATION INC.
--------------------------------------------------------------------------------
(Translation of registrant's name into English)
#709 - 837 West Hastings Street, Vancouver, British Columbia, V6C 3N6, Canada
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(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 the registrant by furnishing the information
contained in this Form, is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
YES [ ] NO [ ]
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.
-------------------------------------
Date: August 27, 2004 /s/ Joseph Grosso
------------------------------ -------------------------------------
Joseph Grosso,
President & CEO
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IMA EXPLORATION INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 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 six months ended June 30, 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)
JUNE 30, DECEMBER 31,
2004 2003
$ $
ASSETS
CURRENT ASSETS
Cash and cash equivalents 7,583,163 4,454,241
Amounts receivable and prepaids 354,868 176,030
Marketable securities (Note 3) 743,840 543,460
------------ ------------
8,681,871 5,173,731
EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Note 4) 118,718 40,472
MINERAL PROPERTIES AND DEFERRED COSTS (Note 5) 9,717,855 6,883,641
------------ ------------
18,518,444 12,097,844
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 709,068 426,494
------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 6) 35,041,949 27,707,597
CONTRIBUTED SURPLUS 3,342,786 1,541,116
DEFICIT (20,575,359) (17,577,363)
------------ ------------
17,809,376 11,671,350
------------ ------------
18,518,444 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2004 2003 2004 2003
$ $ $ $
EXPENSES
Administrative and management services 72,920 57,900 139,800 117,150
Bank charges and interest 1,954 2,692 7,460 5,969
Corporate development and investor relations 119,085 97,524 208,896 170,666
Depreciation 4,400 5,546 8,710 11,092
General exploration 76,760 63,369 115,036 121,593
Office and sundry 24,561 18,058 42,040 26,033
Printing 14,410 7,646 30,871 14,682
Professional fees 230,836 20,322 382,974 48,266
Rent, parking and storage 30,516 14,744 52,359 30,106
Salaries and employee benefits 78,126 53,490 207,832 106,934
Stock based compensation (Note 6) - - 1,871,360 -
Telephone and utilities 11,813 9,382 21,319 19,806
Transfer agent and regulatory fees 26,060 30,807 39,657 35,345
Travel and accommodation 83,652 21,775 114,814 32,770
Cost recoveries (29,025) (6,000) (50,340) (12,000)
------------ ------------ ------------ ------------
746,068 397,255 3,192,788 728,412
------------ ------------ ------------ ------------
LOSS BEFORE OTHER ITEMS (746,068) (397,255) (3,192,788) (728,412)
------------ ------------ ------------ ------------
OTHER ITEMS
Provision on marketable securities (468,325) - (468,325) -
Gain (loss) on disposition of marketable
securities (17,755) - 57,724 -
Foreign exchange 81,161 (22,066) 155,630 (4,717)
Gain on disposition of mineral property
and deferred costs 448,392 - 747,761 -
Interest and other income 30,911 11,935 51,591 16,711
Reorganization costs (Note 12(a)) (149,589) - (349,589) -
------------ ------------ ------------ ------------
(75,205) 10,131 194,792 11,994
------------ ------------ ------------ ------------
LOSS FOR THE PERIOD (821,273) (407,386) (2,997,996) (716,418)
DEFICIT - BEGINNING OF PERIOD (19,754,086) (14,467,977) (17,577,363) (14,158,945)
------------ ------------ ------------ ------------
DEFICIT - END OF PERIOD (20,575,359) (14,875,363) (20,575,359) (14,875,363
============ ============ ============ ============
BASIC AND DILUTED LOSS
PER COMMON SHARE $(0.02) $(0.01) $(0.08) $(0.02)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 40,080,048 31,783,473 39,062,276 29,484,164
============ ============ ============ ============
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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2004 2003 2004 2003
$ $ $ $
OPERATING ACTIVITIES
Loss for the period (821,273) (407,386) (2,997,996) (716,418)
Items not involving cash
Depreciation 4,400 5,546 8,710 11,092
Stock based compensation - - 1,871,360 -
Gain on disposition of mineral
properties and deferred costs (448,392) - (747,761) -
Gain (loss) on disposition of
marketable securities 17,755 - (57,724) -
Provision on marketable securities 468,325 - 468,325 -
------------ ------------ ------------ ------------
(779,185) (401,840) (1,455,086) (705,326)
Decrease (increase) in amounts
receivable and prepaids 395 72,537 (178,838) (9,646)
Increase (decrease) in accounts payable
and accrued liabilities (210,580) (73,188) 282,574 (39,415)
------------ ------------ ------------ ------------
(989,370) (402,491) (1,351,350) (754,387)
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Proceeds on disposition of marketable
securities (11,475) - 145,019 -
Expenditures on mineral properties and
deferred costs (1,408,902) (402,589) (2,842,453) (1,014,733)
Purchase of equipment and leasehold
improvements (12,045) (8,487) (86,956) (10,441)
------------ ------------ ------------ ------------
(1,432,422) (411,076) (2,784,390) (1,025,174)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of common shares 1,993,893 3,449,435 7,675,899 4,578,743
Share issue costs - (167,301) (411,237) (167,301)
------------ ------------ ------------ ------------
1,993,893 3,282,134 7,264,662 4,411,442
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (427,899) 2,468,567 3,128,922 2,631,881
CASH AND CASH EQUIVALENTS
- BEGINNING OF PERIOD 8,011,062 1,599,438 4,454,241 1,436,124
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS
- END OF PERIOD 7,583,163 4,068,005 7,583,163 4,068,005
============ ============ ============ ============
CASH AND CASH EQUIVALENTS
COMPRISED OF:
Cash 2,783,163 1,263,136 2,783,163 1,263,136
Term deposits 4,800,000 2,804,869 4,800,000 2,804,869
------------ ------------ ------------ ------------
7,583,163 4,068,005 7,583,163 4,068,005
============ ============ ============ ============
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 SIX MONTHS ENDED JUNE 30, 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 - 329,153 - 851 851 - - 330,855
Contractors - access - 22,918 - - - - - 22,918
Contractors - surveying - 55,918 - - - - - 55,918
Contractors - environmental - 113,502 - - - - 65,166 178,668
Drilling - 1,011,763 - - - - - 1,011,763
Field supplies - 62,560 - - - - - 62,560
Field workers - - - - - - 2,339 2,339
Geological - 420,138 - - - - - 420,138
Geological supplies - 90,504 - - - - - 90,504
Geochemistry - 18,255 - - - - - 18,255
Geophysics - 109,154 - - - - - 109,154
Option payments - - - - - - 12,048 12,048
Travel - 19,782 - - - - - 19,782
Office - 16,718 - - - - 9,083 25,801
Other 788 97,186 788 - - 14,266 43,265 226,643
Vehicles - 59,290 - - - - 2,181 61,471
Foreign value added tax - - - - - 255,258 489 185,397
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
788 2,426,841 788 851 851 269,524 134,571 2,834,214
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, end of period 1,328,103 3,429,052 545,851 392,153 141,718 581,853 3,299,125 9,717,855
========== ========== ========== ========== ========== ========== ========== ==========
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 SIX MONTHS ENDED JUNE 30, 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 fiscal year.
On July 7, 2004 the Company completed a corporate restructuring which
resulted in dividing its assets and liabilities into two separate
public companies. See Note 12(a).
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
JUNE 30, 2004 DECEMBER 31, 2003
--------------------------- ---------------------------
QUOTED QUOTED
RECORDED MARKET RECORDED MARKET
VALUE VALUE VALUE VALUE
$ $ $ $
Ballad Gold & Silver Ltd.
- 451,500 common shares 112,875 112,875 250,000 325,000
Amera Resources Corporation ("Amera")
- 759,900 common shares 332,505 332,505 270,000 546,000
Tinka Resources Limited
- 300,000 common shares 96,000 96,000 - -
Consolidated Pacific Bay Minerals Ltd.
- 900,000 common shares 99,000 99,000 - -
Cloudbreak Resources Ltd.
- 500,000 common shares 80,000 80,000 - -
Other 23,460 141,148 23,460 161,546
------------ ------------ ------------ ------------
743,840 861,528 543,460 1,032,546
============ ============ ============ ============
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
3. MARKETABLE SECURITIES (continued)
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.
4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
JUNE 30, DECEMBER 31,
2004 2003
$ $
Office equipment and computers 259,486 206,352
Leasehold improvements 96,634 62,812
------------ ------------
356,120 269,164
Less accumulated depreciation (237,402) (228,692)
------------ ------------
118,718 40,472
============ ============
5. MINERAL PROPERTIES AND DEFERRED COSTS
JUNE 30, 2004
------------------------------------------
DEFERRED
ACQUISITION EXPLORATION
COSTS COSTS TOTAL
$ $ $
Argentina
Navidad - 3,429,052 3,429,052
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 11,639 570,214 581,853
------------ ------------ ------------
365,921 6,052,809 6,418,730
Peru
Rio Tabaconas 760,425 2,538,700 3,299,125
------------ ------------ ------------
1,126,346 8,591,509 9,717,855
============ ============ ============
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
5. MINERAL PROPERTIES AND DEFERRED COSTS (continued)
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
============ ============ ============
(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 June 30, 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.
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
5. MINERAL PROPERTIES AND DEFERRED COSTS (continued)
Under the terms of the option agreement, the Company has paid
US $185,000 and was required to make further payments of US
$1,315,000 for a total of US $1,500,000. 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 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) 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 June 30, 2004, the Company has also
received 100,000 shares of Amera at a fair value of
$45,000.
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 at a fair value of
$279,000) 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.
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
6. SHARE CAPITAL
Authorized: unlimited common shares without par value
100,000,000 preferred shares without par value
Issued: JUNE 30, 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 3,192,453 2,758,402 4,969,066 895,859
Exercise of options 286,650 256,350 1,855,850 4,940,428
Exercise of agent's option 89,820 80,838 105,930 95,337
Less: Share issue costs (411,238) - (118,850)
------------ ------------ ------------ ------------
5,068,923 7,334,352 9,830,846 6,352,774
------------ ------------ ------------ ------------
Balance, end of period 41,450,375 35,041,949 36,381,452 27,707,597
============ ============ ============ ============
(a) During the six months ended June 30, 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.
(b) Stock Options
During the six months ended June 30, 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
period:
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.
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
6. SHARE CAPITAL (continued)
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 June
30, 2004, and the changes for the six months ended June 30,
2004, is presented below:
OPTIONS WEIGHTED
OUTSTANDING AVERAGE
AND EXERCISABLE EXERCISE PRICE
$
Balance, beginning of period 2,528,150 1.32
Granted 1,462,000 3.10
Exercised (286,650) 0.65
---------
Balance, end of period 3,703,500 2.07
=========
Stock options outstanding and exercisable at June 30, 2004,
are as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
210,000 0.40 July 19, 2006
119,000 0.50 May 2, 2007
117,500 0.50 September 23, 2007
115,000 0.84 March 7, 2008
300,000 0.90 May 30, 2008
1,380,000 1.87 August 27, 2008
1,462,000 3.10 March 24, 2009
---------
3,703,500
=========
(c) Warrants
A summary of the number of common shares reserved pursuant to
the Company's outstanding warrants and agents warrants
outstanding at June 30, 2004, and the changes for the six
months ended June 30, 2004, is as follows:
NUMBER
Balance, beginning of period 6,042,448
Issued 794,910
Exercised (3,192,453)
Cancelled (38,955)
------------
Balance, end of period 3,605,950
============
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
6. SHARE CAPITAL (continued)
Common shares reserved pursuant to warrants outstanding at
June 30, 2004 are as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
1,042,960 0.60 September 27, 2004
1,039,322 0.75 September 15, 2004
773,668 0.90 March 16, 2005
750,000 3.70 February 23, 2005
---------
3,605,950
=========
(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 six months ended June 30, 2004, the agent
exercised options to purchase the remaining 89,820 units.
(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 six months ended June 30, 2004, the
agent's option remained unexercised.
(f) See also Note 12.
7. RELATED PARTY TRANSACTIONS
(a) During the six months ended June 30, 2004, the Company was
charged $246,803 by current and former directors and officers
and by companies controlled by directors and officers of the
Company, for accounting, management, and consulting services
provided.
(b) The Company leases its office premises from a private
corporation controlled by the President of the Company. During
the six months ended June 30, 2004, the Company paid $35,440
for rent.
(c) The Company shares its office facilities with Amera. During
the six months ended June 30, 2004, the Company received
$50,340 from Amera for shared rent and administration costs.
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
7. RELATED PARTY TRANSACTIONS (continued)
(d) 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 June 30,
2004, the amount under the agreement would be $981,000.
(e) 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 six months ended June 30,
2004.
The Company's total assets are segmented geographically as follows:
JUNE 30, 2004
---------------------------------------------------------
MINERAL MINERAL
CORPORATE OPERATIONS OPERATIONS
CANADA ARGENTINA PERU TOTAL
$ $ $ $
Current assets 8,547,720 109,174 24,977 8,681,871
Equipment and leasehold improvements 107,400 7,032 4,286 118,718
Mineral properties and deferred costs - 6,418,730 3,299,125 9,717,855
------------ ------------ ------------ ------------
8,655,120 6,534,936 3,328,388 18,518,444
============ ============ ============ ============
DECEMBER 31, 2003
---------------------------------------------------------
MINERAL MINERAL
CORPORATE OPERATIONS OPERATIONS
CANADA 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
============ ============ ============ ============
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
10. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities were conducted by the
Company as follows:
JUNE 30, JUNE 30,
2004 2003
$ $
Investing activities
Proceeds on disposition of mineral
properties 756,000 -
Acquisition of marketable securities (756,000) -
------------ ------------
- -
============ ============
Financing activities
Shares issued on exercise of options 69,690 10,234
Contributed surplus (69,690) (10,234)
------------ ------------
- -
============ ============
Other supplemental cash flow information:
JUNE 30, JUNE 30,
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 damages and 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 SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
12. SUBSEQUENT EVENTS
(a) On July 7, 2004, the Company completed a corporate
restructuring plan which resulted in dividing the Company's
assets and liabilities into two separate companies. Following
the corporate restructuring the Company continued to hold the
Navidad project, while Golden Arrow Resources Corporation
("Golden Arrow"), a newly created company, held all other
mineral property interests. The reorganization of the Company
was accomplished by way of a statutory plan of arrangement.
The following adjustments and pro forma consolidated balance
sheets of the Company and Golden Arrow have been prepared as
if the reorganization had occurred on June 30, 2004:
i) Adjustments
The Company transferred to Golden Arrow: i) all of the
Company's investment in its mineral properties, excluding the
Navidad project; ii) the assets and liabilities of IMPSA
Resources (BVI) Inc., Inversiones Mineras Argentinas Holdings
(BVI) Inc., both wholly-owned subsidiaries of the Company, and
IMPSA Resources Corporation, an 80.69% owned subsidiary of the
Company, and iii) marketable securities at their recorded
values, as follows:
$
Cash and cash equivalents 773,886
Amounts receivable and prepaids 1,091
Equipment 4,286
Marketable securities 548,840
Mineral properties and deferred cost 5,744,530
Accounts payable and accrued liabilities (1,400)
------------
7,071,233
============
The Company also transferred cash of $750,000 to Golden Arrow.
IMA EXPLORATION INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED - PREPARED BY MANAGEMENT)
12. SUBSEQUENT EVENTS (continued)
ii) Proforma Balance Sheets
GOLDEN ARROW THE COMPANY
THE COMPANY PRO FORMA PRO-FORMA
$ $ $
ASSETS
CURRENT ASSETS
Cash and cash equivalents 7,583,163 773,886 6,809,277
Amounts receivable and prepaids 354,868 1,091 353,777
Marketable securities 743,840 548,840 195,000
------------ ------------ ------------
8,681,871 1,323,817 7,358,054
EQUIPMENT 118,718 4,286 114,432
MINERAL PROPERTIES
AND DEFERRED COSTS 9,717,855 5,744,530 3,973,325
------------ ------------ ------------
18,518,444 7,072,633 11,445,811
============ ============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 709,068 1,400 707,668
------------ ------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL 35,041,949 7,071,233 27,970,716
CONTRIBUTED SURPLUS 3,342,786 - 3,342,786
DEFICIT (20,575,359) - (20,575,359)
------------ ------------ ------------
17,809,376 7,071,233 10,738,143
------------ ------------ ------------
18,518,444 7,072,633 11,445,811
============ ============ ============
(b) Subsequent to June 30, 2004, the Company issued 85,000 common
shares for $60,500 on the exercise of stock options and
warrants.
IMA EXPLORATION INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 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 six months ended June 30, 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.
CORPORATE REORGANIZATION
On May 3, 2004 the Company announced a proposed corporate reorganization (the
Reorganization). Shareholders approved the Reorganization on June 24, 2004 and
thereafter all necessary court and regulatory approvals were received. The
effective date of the Reorganization is July 7, 2004.
The effect of the Reorganization was 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 retained 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 received shares in the new
company, Golden Arrow Resources Corporation (Golden Arrow), which resulted in
identical ownership by the shareholders before and after the Reorganization.
OVERVIEW
The Company is a natural resource company engaged in the business of acquisition
and exploration of mineral properties in Argentina. The Company's strategy has
been to acquire properties for the purpose of mineral exploration and
exploitation. In the event the Company discovers mineralization capable of
economic production, it intends to develop or 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. 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. 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 damages and 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.
-1-
At the Company's June 24, 2004 Annual General and Special Meeting Messrs.
Carlson, Grosso, Angus, Idziszek, Hurd, Cacos, Lang, Terry and Horton were
elected to the Board of Directors. The officers appointed by the Board are
Gerald Carlson as Chairman, Joseph Grosso as President, Art Lang as
Vice-President and Chief Financial Officer, David Terry as Vice-President,
Exploration and Nikolaos Cacos as Corporate Secretary.
PROPERTIES UPDATE
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 Phase II of the program commenced in late May.
The cost of Phase I in the six months ended June 30, 2004 was $1,500,000. The
budget for Phase II, which will be completed between May and September 2004, is
$2,100,000. Approximately $2,600,000 has been expended in the six months ended
June 30, 2004. Based on the results of the current program the Company will
determine further activities for 2005.
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.
Drilling in the Phase II program has focused on the Esperanza Trend, the Barite
Hill target, and on the Navidad Hill and Connector Zone targets. Two drill holes
were completed within the Galena Hill indicated resource to obtain samples for
metallurgical testing. Results from the Phase II program to date have been
described in News Releases dated July 8 and July 27, 2004.
Phase II drilling at Navidad Hill has returned intersections of 104.6m of 126g/t
silver, including 35.5m of 295 g/t silver, from hole NV04-54, 85m of 83 g/t
silver in hole NV04-70, 1.4m of 3,975 g/t silver in hole NV04-73, and 19m of 149
g/t silver in hole NV04-71. In addition to the structurally controlled
mineralization previously identified at Navidad Hill, near-surface
stratigraphically controlled silver mineralization has now been identified along
the southwest and southeast flanks of Navidad Hill (drill holes NV04-68 and
NV04-73). This new style of mineralization demonstrates potential for moderate
grade, bulk-tonnage silver targets around the south, east and west sides of
Navidad Hill and into the Connector Zone. Results include 29.55m of 145 g/t
silver in NV04-68 starting at 52.2m downhole, and 33m of 92 g/t silver starting
from surface in hole NV04-73, including 7.90m of 286 g/t silver.
At the 6 km Esperanza Trend, results include 2.7m of 831 g/t silver in hole 62
and 800m to the northwest hole 63 intersected 45.8m of 94 g/t silver, including
4.0m of 246 g/t silver. These results confirm the high grades and potential for
a significant structurally controlled zone at Esperanza.
Six drill holes have been completed to date at Barite Hill. The first three
holes (NV04-58 through 60) contain significant near surface intersections of
galena matrix breccia similar in style to that at Galena hill, but with
generally lower silver and lead values.
The remaining portion of the Phase II program will be utilized to increase the
density of drill data within the Navidad Hill - Connector Zone area in order to
allow the estimation of an indicated resource.
-2-
The Company has 18 exploration properties in Chubut Province in addition to
Navidad, several of which are the subject of joint venture agreements. The
parties to the joint venture agreements in this region have agreed not to seek
TSX V Exchange approval for the agreements until certain legal and political
uncertainties can be resolved. Accordingly the Company does not expect to
complete the terms of the agreements in 2004.
The following properties have been transferred to Golden Arrow effective on July
7, 2004 as a result of the Reorganization.
Chubut (Patagonia)
The Company has 100% interests in a number of claims in western Chubut Province.
These properties include the Laguna de los Toros property. Together they cover
an area of approximately 86,000 hectares. A number of these properties have been
farmed-out to joint venture partners. All of these Chubut properties are in the
exploration stage.
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 has issued an additional 300,000 shares and must
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 1% 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.
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 SIX MONTHS ENDED JUNE 30, 2004
The Company reported a consolidated loss of $2,997,996 ($0.08 per share) in the
current period, an increase of $2,281,578 from the loss of $716,418 ($0.02 per
share) in 2003. The increase in the loss in 2004, compared to 2003, was due to a
number of factors of which $2,464,376 can be attributed to operating expenses
while other items resulted in gains and income which improved by $182,798.
-3-
PRO-FORMA BALANCE SHEET AS OF JUNE 30, 2004
The June 30, 2004 pro-forma balance sheet is presented in Note 12. This reflects
the transfer of the assets to Golden Arrow as a result of the Reorganization
which was effective on July 7, 2004.
RESULTS OF OPERATIONS
Corporate Costs and Other Income
The Company's operating expenses for the six months ended June 30, 2004 were
$3,192,788 an increase of $2,464,376 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 six months ended June 30, 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 half 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 $22,650, corporate
development and investor relations increased $38,230, office expense increased
$16,007, printing costs increased $16,189, travel increased $82,044 due to the
attendance and participation in various conferences. The increase in salaries of
$100,898 includes a retiring allowance for the Company's former CFO, William Lee
and the addition of personnel. The increase of $334,708 in professional fees is
primarily due to legal costs incurred in connection with the Aquiline legal
action and increased costs of compliance with reporting requirements. General
exploration decreased $6,557 as activities have been focused on the Navidad
property. Cost recoveries from Amera increased $38,340.
During 2004 the Company recorded a gain of $57,724 on the disposal of marketable
securities, a gain of $747,761 from the farm out of interests in its mineral
properties and a provision for the write down of the carrying value of
marketable securities of $468,325 to reflect the market value at June 30, 2004.
In 2004 the Company received marketable securities from Amera (300,000 shares,
deemed value $279,000), Tinka Resources Limited (300,000 shares, deemed value
$147,000), Consolidated Pacific Bay Minerals Ltd. (900,000 shares, deemed value
$180,000) and Cloudbreak Resources Ltd. (500,000 shares, deemed value $150,000)
from sale or farm out of its interests in mineral properties. In 2003 no gains,
losses or provisions for losses were recorded. 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 $34,880 primarily as a result of an increase of funds on
deposit. The Company also recorded an increase in a gain from foreign exchange
expense of $160,347 in this period. Cost of $349,589 for fees and expenses
related to the Reorganization have been recorded in this period.
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.
-4-
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.
Quarterly
Financial Information Quarter Ended - Unaudited
----------------------------------------------------
Sept. 30, Dec. 31, March 31, June 30,
2003 2003 2004 2004
---------- ---------- ---------- ----------
Revenues Nil Nil Nil Nil
Net income (loss) before income
taxes (563,502) (2,138,489) (2,176,723) (821,273)
Net income (loss) (563,502) (2,138,498) (2,176,723) (821,273)
Earnings (loss) per share (0.02) (0.07) (0.06) (0.02)
Fully diluted earnings (loss)
per share (0.02) (0.07) (0.06) (0.02)
Quarterly
Financial Information Quarter Ended - Unaudited
----------------------------------------------------
Sept. 30, Dec. 31, March 31, June 30,
2003 2003 2004 2004
---------- ---------- ---------- ----------
Revenues Nil Nil Nil Nil
Net income (loss) before income (284,128) (486,948) (309,032) (407,386)
taxes
Net income (loss) (284,128) (486,948) (309,032) (407,386)
Earnings (loss) per share (0.01) (0.02) (0.01) (0.01)
Fully diluted earnings (loss) (0.01) (0.02) (0.01) (0.01)
per share
-5-
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at June 30, 2004 was $7,583,163, compared to
$4,454,241 at December 31, 2003. The increase in cash is primarily due to the
completion of a financing and exercise of warrants from previous financings. 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, through June 30 , 2004, the Company has received $3,025,899 from the
exercise of warrants and stock options. Subsequent to June 30, 2004 the Company
has received a further $60,500 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 $ 246,803 for the
six months ended June 30, 2004. Mr. W. Lee, the former CFO, was paid salary and
retiring allowance of $68,769; Mr. A. Lang, director and the current CFO, was
paid salary of $18,670; Mr. D. Terry, director and Vice President, Exploration,
was paid fees of $13,000; Mr. N. Cacos, director and the Corporate Secretary,
was paid fees of $9,350; Mr. Sean Hurd, director and investor relations manager,
was paid fees of $14,400; Mr. Gerald Carlson, director and Chairman of the Board
was paid fees of $31,500, $40,114 was paid to a company with which Mr. Angus, a
director of the Company, is associated and Mr. J. Grosso, the President and CEO,
was paid fees of $51,000. The Company leases a portion of its office premises
from a private company controlled by the President and paid rent of $35,440
during the six months ended June 30, 2004. Note 7 to the June 30, 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 half of 2004 was $1,351,350
compared to cash outflow in the first half of 2003 of $754,387.
FINANCING ACTIVITIES
In the first half of 2004 the Company received $7,675,899 from the sale of
common shares, less costs of $411,237 compared to $4,578,743, less costs of
$167,301, in the 2003 period.
-6-
INVESTING ACTIVITIES
Investing activities required cash of $2,784,390 in the first half of 2004 (2003
- $1,025,174), these investing activities were for expenditures on mineral
properties of $2,842,453 (2003 - $1,014,733) primarily to the Navidad; $86,956
for additions to equipment and leasehold improvements (2003 - $10,441); less
proceeds from the disposal of marketable securities of $145,019 (2003 - nil).
CONTRACTUAL COMMITMENTS
The Company has lease commitments for office premises that require payments of
$77,000 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.
-7-
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 June 30, 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: August 27, 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 June 30, 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: August 27, 2004
/s/ Art Lang
-----------------------
Art Lang
Chief Financial Officer