This excerpt taken from the VLKAY 10-K filed Mar 22, 2010.
16. FINANCIAL INSTRUMENTS
Financial instruments recognized in the balance sheet at December 31, 2009, consist of cash and cash equivalents, marketable investment securities, trade and other receivables, accounts payable, certain accrued liabilities and a convertible promissory note. The Company does not hold or issue financial instruments for trading purposes. During 2009, the Company invested all of its excess cash in money market funds or certificates of deposit.
This excerpt taken from the VLKAY 10-Q filed Mar 19, 2010.
The carrying value of the Company's financial instruments consisting of cash equivalents and accounts payable and accrued liabilities approximates their fair value because of the short maturity of these instruments. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
These excerpts taken from the VLKAY 6-K filed Feb 26, 2010.
For IFRS, the measurement and allocation of fair values between the debt and equity components of compound financial instruments issued by the Company is performed differently from the pro-rata method applied under Canadian GAAP. Although the Company's election under IFRS relating to compound financial instruments is expected to eliminate transition variances relating to those debt instruments fully repaid prior to the January 1, 2010 transition date, outstanding debt instruments and compound instruments denominated in foreign currencies will require retrospective restatement at the time of transition to IFRS on January 1, 2010. This may result in material reallocations of balances between the Company's debt and equity accounts. However, recent and proposed amendments to IFRS standards relating to financial instruments may materially impact the adjustments required. Therefore, the Company's determination of the reported value of the transition adjustments will be subject to its review of these amendments to IFRS standards.
14. FINANCIAL INSTRUMENTS
The Company has exposure to the following risks from its use of financial instruments: credit risk, market risk, currency risk, interest rate risk, commodity price risk and liquidity risk.
This excerpt taken from the VLKAY 20-F filed Feb 25, 2010.
Note 15: Financial Instruments
Effective January 1, 2008, the Company adopted new accounting guidance that addresses aspects of the expanding application of fair-value accounting.
This new accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair-value measurements. This new accounting guidance, among other things, requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Under the new accounting guidance, the Company may elect to measure financial instruments and certain other items at fair value that were previously not required to be measured at fair value. This fair value option must be applied on an instrument-by-instrument basis with changes in fair value reported in earnings. After the initial adoption, the election can be made at the acquisition of an eligible financial asset, financial liability, or firm commitment or when certain specified reconsideration events occur. The fair value election may not be revoked once an election is made. The adoption of this new accounting guidance did not have an impact on CNHs financial position and results of operations, as the Company did not elect the fair value option for eligible items.
This excerpt taken from the VLKAY 20-F filed Feb 12, 2010.
Derivative financial instruments
See critical accounting judgments.
Non-derivative financial instruments
Non-derivative financial instruments include cash and cash equivalents, trade and other receivables, investments in equity securities, trade and other payables and debt and other liabilities. These instruments are recognized initially at fair value when the Company becomes a party to the contractual provisions of the instrument. They are derecognized if the Companys contractual rights to the cash flows from the financial instruments expire or if the Company transfers the financial instruments to another party without retaining control or substantially all risks and rewards of the instruments.
The Company classifies its investments in equity securities that have readily determinable fair values as available-for-sale which are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale equity securities are reported as a separate component of equity until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a first-in, first-out basis.
Investments in privately held companies that are not considered equity method investments are carried at cost.
ARCELORMITTAL AND SUBSIDIARIES
(millions of U.S. dollars, except share and per share data)
Debt and liabilities, other than provisions, are stated at amortized cost. However, loans that are hedged under a fair value hedge are re-measured for the changes in the fair value that are attributable to the risk that is being hedged.
Impairment of financial assets
A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. Estimated future cash flows are determined using various assumptions and techniques, including comparisons to published prices in an active market and discounted cash flow projections using projected growth rates, weighted average cost of capital, and inflation rates. In the case of available-for-sale securities, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value less any impairment loss on that financial asset previously recognized in the statement of operations is removed from equity and recognized in the statement of operations.
If objective evidence indicates that cost-method investments need to be tested for impairment, calculations are based on information derived from business plans and other information available for estimating their value in use. Any impairment loss is charged to the statement of operations.
An impairment loss related to financial assets is reversed if and to the extent there has been a change in the estimates used to determine the recoverable amount. The loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognized. Reversals of impairment are recognized in net income except for reversals of impairment of available-for-sale equity securities, which are recognized in equity.
This excerpt taken from the VLKAY 20-F filed Dec 21, 2009.
(c) Financial Instruments
(i) Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.
A financial instrument is recognised if the Group becomes party to the contractual provisions of the instrument. Financial assets are derecognised if the Groups contractual rights to the cash flows from the financial asset expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Groups obligations specified in the contract expire or are discharged or cancelled.
This excerpt taken from the VLKAY 6-K filed Dec 14, 2009.
The Company applies the requirements of CICA Handbook Section 3855 Financial Instruments Recognition and Measurement, which sets out criteria for the recognition and measurement of financial instruments and requires all financial instruments within its scope, including derivatives, to be included on a Companys balance sheet and measured either at fair value or, in certain circumstances when fair value may not be considered most relevant, at cost or amortized cost.
All financial assets and liabilities are recognized when the entity becomes a party to the contract creating the asset or liability. As such, any of the Companys outstanding financial assets and liabilities at the effective date of adoption are recognized and measured in accordance with the new requirements as if these requirements had always been in effect. Any changes to the fair values of assets and liabilities prior to January 1, 2007, have been recognized by adjusting opening accumulated other comprehensive income (loss). The adoption of this standard did not have any impact on the Companys consolidated financial statements.
Emgold Mining Corporation
Three and Nine Months Ended (Q3 2009)
(expressed in United States dollars, unless otherwise stated)
All financial instruments are classified into one of the following categories: held-for-trading, held-to-maturity, loans and receivables, available-for-sale financial assets, or other financial liabilities. Initial and subsequent measurement and recognition of changes in the value of financial instruments depends on their initial classification:
Held-to-maturity investments, loans and receivables, and other financial liabilities are initially measured at fair value and subsequently measured at amortized cost. Amortization of premiums or discounts and losses due to impairment are included in the statement of operations. The Company has designated accounts receivable and due from related party as loans and receivables; accounts payable and accrued liabilities, due to related parties and the liability portion of preference shares as other financial liabilities.
Held-for-trading financial instruments are measured at fair value. All gains and losses are included in the statement of operations in the period in which they arise. The Company has designated cash and cash equivalents and short term investments as held-for-trading.
Current assets and liabilities
The carrying values of accounts receivable and due from related parties approximate their fair value due to the short-term nature of these balances. The fair value of accounts payable and accrued liabilities and due to related parties, are significantly lower than carrying value due to the Companys current financial condition.
The Companys non-current financial instruments comprise the debt component of preference shares. The preference shares are not traded on any public market. The fair value of the preference shares is dependent on many factors including interest rates, the price of gold, and the market value of the Companys common shares. As a result of these indirect influences, the Company has assessed that the fair value of the components of the preference shares is not determinable, but based on the Companys current financial condition is considered significantly less than its book value.
This excerpt taken from the VLKAY 20-F filed Dec 11, 2009.
30. FINANCIAL INSTRUMENTS
The group's financial instruments consist mainly of cash and cash equivalents, accounts receivable, certain investments, accounts payable, borrowings and derivative instruments.
This excerpt taken from the VLKAY 6-K filed Dec 8, 2009.
11. Financial Instruments
The primary financial instruments currently affecting the Companys financial condition and results of operations are cash and cash equivalents, receivables, deposits and prepaids.
11.1 Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company made significant cuts to its expenses during fiscal 2009. Despite these cuts, the Companys cash and cash equivalents and bullion on deposit are not sufficient to meet its exploration and general and administrative responsibilities during the remainder of fiscal 2010. The Company does not, furthermore, have sufficient working capital to fully fund the estimated costs of pursuing the CAFTA action against the Government that Pac Rim commenced during fiscal 2009. The Company requires additional financing during the remainder of fiscal 2010 to continue to pursue this action through to completion and to carry out its exploration plans and meet its general and administrative responsibilities. Readers are encouraged to thoroughly review the Companys Capital Resources and Financial Condition (Section 7), Risks and Uncertainties (Section 14) and Outlook (Section 16).
[The foregoing paragraph contains forward-looking statement regarding the Companys liquidity and its ability to meet its exploration and general and administrative financial responsibilities in fiscal 2010 as well as managements assessment that it will require future financing in order to fund expenses related to the ongoing CAFTA claim initiated by Pac Rim during fiscal 2009 and for general working capital. These estimations are made by management based on anticipated work programs, current cash, cash equivalent and bullion balances, exploration and legal cost estimates, the expectation that the CAFTA claim will proceed during fiscal 2010, and other factors, any of which, if incorrect, can cause actual results to differ such that the Company require financing in order to meet its fiscal 2010 exploration and administrative responsibilities and/or not require financing earmarked for the CAFTA claim. There are no guarantees that additional financing, on acceptable terms, will be available to the Company. Readers are encouraged to review the Risks and Uncertainties outlined in Section 14, particularly Section 14.1]
11.2 Credit Risk
Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Company by failing to discharge its obligations. The Companys credit risk is primarily attributable to its liquid financial assets. The Company limits its exposure to credit risk by depositing its cash and cash equivalents with international financial institutions. The Company does not have financial assets that are invested in asset based commercial paper.
11.3 Foreign Exchange Risk
Foreign exchange risk is the risk that the fair value of the Companys financial instruments will fluctuate because of changes in foreign exchange rates. The Company holds its cash and cash equivalents primarily in U.S. dollar and Canadian dollar denominated accounts and its expenses are primarily incurred in U.S. dollars. At October 31, 2009 the impact of a 10% depreciation or appreciation of the US dollar against the Canadian dollar would result in an increase or decrease of $0.003 million in the Companys net earnings. See Section 15.11 for further discussion of this topic.
The Company has not entered into any derivative contracts to manage foreign exchange risk at this time.
11.4 Fair Values
As at October 31, 2009, the Companys carrying values of receivables, deposits and accounts payable approximate fair values due to their short terms to maturity. The bullion is valued at the lesser of fair value on the date it was received or net realizable value.
11.5 Commodity Price Risk
The Company is subject to price risk from fluctuations in the market price of gold and silver as a result of it holding bullion, which in turn is affected by numerous factors including central bank policies, producer hedging activities, the value of the US dollar relative to other major currencies, global demand and supply and global political and economic conditions. The Company does not have any hedging programs in place to mitigate commodity price risk.
This excerpt taken from the VLKAY 8-K filed Dec 7, 2009.
The Companys 2004 PRIDES contained freestanding forward equity contracts that required holders to purchase shares of the Companys common stock in February 2008. Additionally, the Companys zero coupon convertible notes, floating rate convertible securities, 2008 senior convertible notes and junior convertible trust preferred securities contain an embedded right for holders to receive shares of the Companys common stock under certain conditions. All of these arrangements, the forward equity sale agreement, the forward equity purchase contract and call spread option agreements meet the definition of equity under FASB Emerging Issues Task Force Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock and are not required to be accounted for separately as derivative instruments.
In 2006, the Company entered into a series of contracts that provided the option, but not the obligation, to repurchase 0.9 million shares of its common stock. Upon exercise, the Company could elect to receive the intrinsic value of a contract in cash or common stock. During 2007, the Company exercised its option, which had an intrinsic value of $21,100. The Company elected to receive approximately 0.1 million shares of common stock and used the remaining proceeds, $6,800, to enter into a series of contracts to repurchase up to 0.8 million shares. These options expired during the first quarter of 2008.
These excerpts taken from the VLKAY 6-K filed Dec 3, 2009.
The Company has designated its cash and cash equivalents as held-for-trading; amounts receivable as loans and receivables; marketable securities as available-for-sale; accounts payable and accrued liabilities, as other liabilities.
Prior to the adoption of CICA Handbook Section 3855, the Company disclosed the fair value of its financial instruments. The carrying values of cash and cash equivalents, amounts receivable, amounts receivable from and payable to related parties, and accounts payable and accrued liabilities approximated their fair values due to the relatively short periods to maturity of those financial instruments.
The Companys risk exposure and the impact on the Companys financial instruments are summarized below:
The Company has designated its cash and cash equivalents as held-for-trading; amounts receivable as loans and receivables; marketable securities as available-for-sale; accounts payable and accrued liabilities, as other liabilities.
Prior to the adoption of CICA Handbook Section 3855, the Company disclosed the fair value of its financial instruments. The carrying values of cash and cash equivalents,amounts receivable, amounts receivable from and payable to related parties, and accounts payable and accrued liabilities approximated their fair values due to the relatively short periods to maturity of those financial instruments.
The Companys risk exposure and the impact on the Companys financial instruments are summarized below:
The Company manages credit risk, in respect of cash and cash equivalents, by purchasing highly liquid, short-term investment grade securities held at a major Canadian financial institution in accordance with the Companys investment policy. In regards to amounts receivable, the Company is not exposed to significant credit risk as they are due from governmental agencies.
The Companys concentration of credit risk and maximum exposure thereto is as follows relating to funds held in Canada:
The credit risk associated with cash and cash equivalents is minimized substantially by ensuring that these financial assets are placed with major financial institutions with strong investment grade ratings by a primary ratings agency. The Company has no asset backed securities.
Liquidity risk is the risk that the Company will encounter difficulty in obtaining funds to meet commitments. The Companys approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. At September 30, 2009, the Company had accounts payable and accrued liabilities of $64,147 (September 30, 2008 - $21,061). The Company does not have sufficient cash and cash equivalents as at September 30, 2009 in order to meet short-term business requirements. Management is currently relying on equity, third-party and related party financing to manage its liquidity and settlement of liabilities. There is no assurance that managements strategy will be successful.
See notes to financial statements.
KOKOMO ENTERPRISES INC.
(formerly Zab Resources Inc.)
(An Exploration Stage Company)
Notes to the Interim Financial Statements
Nine Months Ended September 30, 2009
This excerpt taken from the VLKAY 6-K filed Dec 2, 2009.
Effective October 1, 2007, the Company implemented the new CICA accounting sections: 3862 (Financial Instruments Disclosure), 3863 (Financial Instruments Presentation), which replaced section 3861 Financial Instruments Disclosures and Presentation.
These new standards revise and enhance the disclosure requirements, and carry forward, substantially unchanged, the presentation requirements. Sections 3862 and 3863 emphasize the significance of financial instruments for the entitys financial position and performance, the nature and extent of the risks arising from financial instruments, how these risks are managed. The Company has included these required disclosures in Note 13 to the financial statements.
Page | 5
GETTY COPPER INC.
MANAGEMENT DISCUSSION & ANALYSIS
SEPTEMBER 30, 2009
This excerpt taken from the VLKAY 6-K filed Nov 27, 2009.
26.5 Financial instruments
During the normal course of its business dealings the company uses various types of financial instruments.
This excerpt taken from the VLKAY 20-F filed Nov 27, 2009.
The Companys financial instruments consist of cash and cash equivalents, amounts receivable, accounts payable and accrued liabilities and due to related parties. The carrying value of the financial instruments is approximate fair value due to their short term to maturity. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not utilize derivative instruments in the management of foreign exchange, commodity price or interest rate market risks.
Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, currency or credit risk arising from these financial instruments.
The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
This excerpt taken from the VLKAY 8-K filed Nov 23, 2009.
The carrying value of accounts payable approximates fair value due to the short-term nature of these instruments.
This excerpt taken from the VLKAY 6-K filed Nov 18, 2009.
(f) Financial Instruments
Financial assets and liabilities:
Investments are recognized and derecognized on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets held are balances receivable from related parties, amounts receivable and prepayments, marketable securities and cash and cash equivalents. These are classified into the following specified categories: loans and receivables and other liabilities and available-for-sale ("AFS") financial assets. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Marketable securities held by the Company that are traded in an active market are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognized directly in reserves through other comprehensive income or loss. With the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets are recognized directly in profit or loss in the consolidated statements of comprehensive income or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously
recognized in the investments revaluation reserve is included in the profit or loss in the consolidated statements of comprehensive income or loss for the period.
The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the financial position reporting date. The change in fair value attributable to translation differences that result from a change in amortized cost of the asset is recognized in profit or loss, and other changes are recognized in other comprehensive income or loss.
Amounts receivable, accounts payable and accrued liabilities that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Impairment of financial assets:
Financial assets are assessed for indicators of impairment at each financial position reporting date. Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For unlisted shares classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.
For all other financial assets objective evidence of impairment could include:
For certain categories of financial assets, such as amounts receivable and prepayments, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of amounts receivable, where the carrying amount is reduced through the use of an allowance account. When an amount receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss in the consolidated statements of comprehensive income or loss.
With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. In respect of AFS equity securities, impairment losses previously recognized through profit or loss in the consolidated statements of comprehensive income or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized directly in equity.
The Company does not have any derivative financial instruments.
This excerpt taken from the VLKAY 6-K filed Nov 18, 2009.
25) FINANCIAL INSTRUMENTS
The financial instruments used by Cemig GT are restricted to Cash and cash equivalents, Consumers and traders, Loans and financings, Obligations under debentures, and index contracts swaps the gains and losses obtained on the transactions are registered in full by the accrual method.
The Companys financial instruments were recognized at fair value and are classified as follows:
· Held for trading: In this category are cash investments and derivative investments (mentioned in item b). They are valued at fair value and the gains or losses are recognized directly in the Income statement.
· Receivables: Credits owed by consumers and traders are in this category. They are recognized at their nominal realization value, similar to the fair values.
· Loans and financings, and Obligations under debentures: These are measured at the amortized cost using the effective interest rates method, and adjusted to fair value. Gains or losses are recognized in the Income statement as and when they incurred.
· Derivative financial instruments: These are valued at fair value and the gains or losses are recognized directly in the income statement.
The Companys financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, inventory, accounts payable, accrued liabilities, payable on third-party purchased ore, deferred revenue, and other long term liabilities. The carrying amounts of financial instruments, except for as noted below, approximate their fair values.
Previously, the Company engaged in the forward sale of gold produced from ore purchased from third parties to ensure the Company achieves an acceptable profit margin on this activity and to protect against a decline in the price of gold. The Company discontinued this practice in August of 2008 and settled all remaining contracts outstanding at that time, resulting in a realized gain on settlement of $0.3 million.
Use of Financial Instruments
The majority of the Corporations cash and cash equivalents at September 30, 2009 were held in the form of bankers acceptances, with the balance held in the form of demand deposits. The Corporations restricted cash and deposits were held in the form of bankers acceptances and term deposits. The Corporations only other financial instruments were its trade and other accounts receivable and its accounts payable and accrued liabilities.
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All bankers acceptances held at September 30, 2009 carried initial maturity periods of three months or less, and their fair values have been estimated by the Corporation by making reference to published yields for such instruments. All term deposits held at September 30, 2009 are included in long term restricted cash, though as individual financial instruments carried initial maturity periods of one year or less. They have been classified as investments held to maturity and accordingly are carried at amortized cost using the effective interest method. Given their short term nature and low investment risk, the Corporation has estimated that the carrying amounts of the term deposits approximate their fair values. The carrying amounts of the Corporations trade and other accounts receivable and accounts payable and accrued liabilities are estimated to reasonably approximate their fair values. The Corporation holds no derivative instruments, and has not employed any hedging activities.
Substantially all of the Corporations cash, demand deposits, bankers acceptances and term deposits are held with major financial institutions in Canada, and management believes the exposure to credit risk with respect to such institutions is not significant. Those financial assets that potentially subject the Corporation to credit risk are primarily receivables, and the Corporations maximum credit risk exposure in respect of its receivables is represented by their carrying amount. Management actively monitors the Corporations exposure to credit risk under its financial instruments, particularly with respect to receivables, and has increased its focus on credit risk given the impact of the current economic climate on its customer base. The Corporation considers the risk of loss to be significantly mitigated due to the financial strength of the Corporations major customers, which include government organizations as well as substantial corporate entities. As at September 30, 2009, no material provision had been recorded in respect of impaired receivables.
The Corporation currently has only limited exposure to fluctuations in exchange rates between the Canadian and US dollar as significantly all of its property, plant and equipment and mineral properties are located, and significantly all of its revenue is earned, in Canada. Should the Corporation be successful in its efforts to increase the consulting services provided in the US market, its exposure to exchange rate risk would accordingly be increased. The Corporations exposure to exchange rate risk will also increase as deposit advances are received under the Silver Wheaton silver purchase agreement, and as it develops and constructs any mines at Bellekeno or any other of its mineral properties.
As at September 30, 2009, the Companys financial instruments consist of cash and cash equivalents, short-term investments, receivables, and accounts payable and accrued liabilities. Unless otherwise noted, it is managements opinion that the Company is not exposed to significant credit, liquidity, or market risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying value, unless otherwise noted.
The risk exposure is summarized as follows:
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company is subject to credit risk on the cash balances at the banks in each of Canada and Ghana, its short-term bank guaranteed investment certificates and accounts receivable. The short-term investments are with Schedule 1 banks or equivalent, with the majority of its cash held in Canadian based banking institutions, authorized under the Bank Act to accept deposits, which may be eligible for deposit insurance provided by the Canadian Deposit Insurance Corporation. The receivables consist primarily of goods and services recoverable of $88,963 which are not considered past due.
The Companys approach to managing liquidity is to ensure that it will have sufficient liquidity to settle obligations and liabilities when due. As at September 30, 2009, the Company had a cash and cash equivalents balance of $5,321,361 and a short-term investment of $10,000,000 to settle current liabilities of $341,982 which mainly consist of accounts payable that are considered short term and settled within 30 days. To maintain the Company in good standing and maintain its interests in its exploration properties, management estimates its capital requirements for the next nine months to be approximately $10,000,000. This cost estimate does not include expenses related to the evaluation of potential property acquisitions.
KEEGAN RESOURCES INC.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements, page 14
Six months ended September 30, 2009 and 2008
Expressed in Canadian Dollars
To date, with the exception of Accounts Receivable, Payables and Notes Payable, the Company did not make use of any financial or other instrument for any other purpose. Therefore, the Company is not exposed to the risks associated with such instruments. With the exception of the Balance Sheet classifications of Accounts Receivable, Payables and Notes Payable, there is no financial statement classification that includes such instruments. With the exception of Interest expenses, there is no income, expense, gain or loss associated with such instruments recorded anywhere in the Companys financial records nor included in the Companys financial statements.
The Company has not engaged, nor does it engage, in any off-balance sheet arrangements such as: obligations under guarantee contracts, a retained or contingent interest in assets transferred to an unconsolidated entity, any obligation under derivative instruments or any obligation under a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the Company or that engages in leasing, hedging or research and development services with the Company.
Creator Capital Limited - September 30, 2009 Interim Financials Q3
Page - 23 -
There are no subsequent events to the Period.
This excerpt taken from the VLKAY 6-K filed Nov 16, 2009.
The Company’s activities potentially expose it to a variety of financial risks, including credit risk, foreign exchange risk (currency), liquidity and interest rate risk.
Credit risk is the risk that one party to a financial instrument, will fail to discharge an obligation and cause the other party to incur a financial loss. Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and accounts receivable. The Company deposits the majority of its cash and cash equivalents with high credit quality financial institutions in Canada and holds balances in banks in Argentina and Chile as required to meet current expenditures.
The Company operates in a number of countries, including Canada, Argentina and Chile, and it is therefore exposed to foreign exchange risk arising from transactions denominated in a foreign currency. However, the Company does not typically hold large cash balances in Argentina and Chile and tries to reduce the effects of foreign exchange risk by sending amounts to its foreign operations when such funds are required to meet expenditures.
The Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are held in several currencies (mainly Canadian Dollars, US Dollars, Australian Dollars, Argentine Pesos and Chilean Pesos) and are therefore subject to fluctuation against the Canadian Dollar.
The Company had the following balances in foreign currency as at September 30, 2009:
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Current financial assets and financial liabilities are generally not exposed to significant interest rate risk because of their short-term maturity.
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. The Company manages liquidity by carefully monitoring all expenditures, by periodically raising equity funding and by closely controlling available cash and cash equivalent balances.
This excerpt taken from the VLKAY 20-F filed Nov 16, 2009.
Foreign exchange risk
The Company is primarily exposed to currency fluctuations relative to the Canadian dollar through expenditures that are denominated in US dollars. Also, the Company is exposed to the impact of currency fluctuations on its monetary assets and liabilities.
The operating results and the financial position of the Company are reported in Canadian dollars. Fluctuations in exchange rates will, consequently, have an impact upon the reported operations of the Company and may affect the value of the Companys assets and liabilities.
The Company currently does not enter into financial instruments to manage foreign exchange risk.
The Company is exposed to foreign currency risk through the following financial assets and liabilities that are denominated in United States dollars:
At April 30, 2009 with other variables unchanged, a +/-10% change in exchange rates would increase/decrease pre-tax loss by approximately +/- $55,000.
This excerpt taken from the VLKAY 6-K filed Nov 13, 2009.
Fair value disclosure:
The Corporation has determined that the carrying value of its short-term financial assets and liabilities approximates their fair value due to the immediate or short-term maturity of these financial instruments.
The preferred shares of a subsidiary relate to redeemable and/or convertible preferred shares of Serex in the amount of $800,000. Up to 50% of the preferred shares are redeemable at any time at the option of the preferred shareholders at their issue price, subject to holders with at least 51% of the face value of the preferred shares asking for redemption, and sufficient funds being available in Serex. The preferred shares are also convertible at the option of the holders into common shares of Serex at a price of $3.946 per share.
This excerpt taken from the VLKAY 6-K filed Nov 12, 2009.
10. FINANCIAL INSTRUMENTS
From time to time, the Company has entered into financial instruments with a number of financial institutions in order to hedge underlying cash flow and fair value exposures arising from changes in commodity prices, interest rates, equity prices or foreign currency exchange rates.
In 2008 and 2009, financial instruments which have subjected the Company to market risk and concentration of credit risk consisted primarily of cash, cash equivalents and short-term investments. The Company places its cash and cash equivalents and short-term investments in high quality securities issued by government agencies, financial institutions and major corporations and limits the amount of credit exposure by diversifying its holdings.
The Company generates almost all of its revenues in US dollars. The Company's Canadian operations, which include the LaRonde mine, the Goldex mine, the Lapa mine and the Meadowbank mine project, have Canadian dollar requirements for capital, operating and exploration expenditures.
In the third quarter of 2008, to mitigate the risks associated with fluctuating foreign exchange rates, the Company entered into three zero cost collars to hedge the functional currency equivalent cash flows associated with the Canadian dollar denominated capital expenditures. In March 2009, the Company entered into another zero cost collar for the same purpose. The purchase of US dollar put options has been financed through selling US dollar call options at a higher level such that the net premium payable to the different counterparties by the Company is nil. The hedged items represent monthly forecasted Canadian dollar cash outflows during 2009. At September 30, 2009, the zero cost collars hedge $55.0 million of 2009 expenditures (2008 nil). The cash flow hedging relationship meets all requirements per ASC 815 to be effective, and unrealized gains and losses are recognized within other comprehensive income ("OCI").
Gains and losses deferred in accumulated OCI are reclassified into income when amortization (or depreciation) of the hedged capital asset begins. In other words, gains and losses in accumulated OCI are reclassified into income in the same period or periods the asset affects income. Amounts transferred out of accumulated OCI are recorded in depreciation expense. The total amount of unrealized gain on the hedges was $4.1 million as at September 30, 2009. No amounts were reclassified into income during the nine months ended September 30, 2009 and none are expected to be reclassified into income in 2009. During the three and nine months ended September 30, 2009, the Company reclassified a realized gain of $3.9 million (2008 nil) and $2.5 million (2008 nil) respectively from accumulated OCI to Meadowbank project development costs.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars except share and per share amounts, unless otherwise indicated)
10. FINANCIAL INSTRUMENTS (Continued)
The following table shows the changes in the accumulated other comprehensive income ("AOCI") balances recorded in the consolidated financial statements pertaining to the foreign exchange hedging activities. The fair values, based on Black-Scholes calculated mark-to-market valuations, of recorded derivative related assets and liabilities and their corresponding entries to AOCI reflect the netting of the fair values of individual derivative financial instruments.
As at December 31, 2008, the Company had two unmatured covered call options on available-for-sale securities with a premium including a Black-Scholes calculated mark-to-market valuation, amounting to $3.9 million. Premiums received on the sale of covered call options are recorded as a liability until they mature or the position is closed. Gains or losses as a result of mark-to-market valuations are taken into income in the period incurred. The Company sold these call options against the shares of Goldcorp Inc. ("Goldcorp") to reduce its price exposure to the Goldcorp shares and warrants it acquired in connection with Goldcorp's acquisition of Gold Eagle Mines Ltd. During 2009, the Company has continued to write covered call options on the shares and also the warrants of Goldcorp as they expire and/or were repurchased.
During the three months ended September 30, 2009, the Company recognized a net gain of $1.9 million in the interest and sundry income component of the consolidated statements of income (loss) (2008 nil) related to the written call options of Goldcorp.
During the nine months ended September 30, 2009, the Company recognized a net gain of $8.7 million in the interest and sundry income component of the consolidated statements of income (2008 nil) related to the written call options of Goldcorp.
As at September 30, 2009, the Company had two covered call option positions against the warrants of Goldcorp that were unmatured at period end with a premium, including a Black-Scholes calculated mark-to-market valuation, amounting to $1.4 million (2008 nil). The fair value of the covered call options approximate their carrying value as at September 30, 2009. This amount, currently recorded as a liability, is expected to be recognized through the consolidated statements of income in the fourth quarter of 2009.
There were no metal derivative positions in the three or nine months ended September 30, 2009 and none throughout 2008.
The fair values of the Company's current financial assets and liabilities approximate their carrying values as at September 30, 2009.
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