ENTREE GOLD INC, 6-K filed on 11/2/2016
Report of Foreign Issuer
Document and Entity Information
9 Months Ended
Sep. 30, 2016
ShareBasedCompensationStockOptionFifteenMember
 
Entity Registrant Name
ENTREE GOLD INC 
Entity Central Index Key
0001271554 
Document Type
6-K 
Document Period End Date
Sep. 30, 2016 
Amendment Flag
false 
Current Fiscal Year End Date
--12-31 
Is Entity a Well-known Seasoned Issuer?
No 
Is Entity a Voluntary Filer?
No 
Is Entity's Reporting Status Current?
Yes 
Entity Filer Category
Smaller Reporting Company 
Document Fiscal Period Focus
Q3 
Document Fiscal Year Focus
2016 
Consolidated Statements of Comprehensive Loss (Unaudited) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Expenses
 
 
 
 
Exploration
$ 397 
$ 1,066 
$ 1,342 
$ 4,293 
General and administration
540 
778 
1,598 
2,541 
Consultancy and advisory fees
125 
Stock-based compensation
60 
Foreign exchange (gain) loss
(41)
(1,135)
397 
(2,515)
Loss from operations
900 
718 
3,397 
4,453 
Interest income
(24)
(15)
(79)
(87)
Interest expense
70 
81 
208 
211 
Loss from equity investment
63 
24 
169 
78 
Loss before income taxes
1,009 
808 
3,695 
4,655 
Income tax recovery
(662)
(897)
Net loss
1,009 
146 
3,695 
3,758 
Foreign currency translation adjustment
172 
1,889 
(1,176)
4,171 
Comprehensive loss
$ 1,181 
$ 2,035 
$ 2,519 
$ 7,929 
Net loss per common share
 
 
 
 
Basic and fully diluted
$ (0.01)
$ 0.00 
$ (0.02)
$ (0.03)
Weighted average shares outstanding (000's)
 
 
 
 
Basic and fully diluted
152,810 
147,010 
151,526 
146,997 
Total shares issued and outstanding (000's)
153,045 
147,024 
153,045 
147,024 
Consolidated Balance Sheets (Unaudited) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Assets
 
 
Cash and cash equivalents
$ 13,600 
$ 22,786 
Receivables
29 
98 
Prepaid expenses
323 
311 
Total current assets
13,952 
23,195 
Equipment
84 
109 
Mineral property interests
39,793 
37,714 
Reclamation deposits
479 
479 
Other assets
207 
165 
Total assets
54,515 
61,662 
Liabilities
 
 
Accounts payable and accrued liabilities
248 
1,350 
Total current liabilities
248 
1,350 
Loan payable to Oyu Tolgoi LLC
7,241 
6,824 
Deferred revenue
23,531 
28,925 
Deferred income tax
3,567 
3,567 
Total liabilities
34,587 
40,666 
Stockholders' equity
 
 
Common stock, no par value, unlimited number authorized, 153,045,408 (December 31, 2015 - 147,330,917) issued and outstanding
178,655 
177,206 
Additional paid-in capital
20,519 
20,517 
Accumulated other comprehensive loss
(6,602)
(7,778)
Accumulated deficit
(172,644)
(168,949)
Total stockholders' equity
19,928 
20,996 
Total liabilities and stockholders' equity
$ 54,515 
$ 61,662 
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2016
Dec. 31, 2015
Stockholders equity:
 
 
Common stock, par value
$ 0 
$ 0 
Common stock, Unlimited authorized shares
Unlimited 
Unlimited 
Common stock, issued shares
153,045,408 
147,330,917 
Common stock, outstanding shares
153,045,408 
147,330,917 
Consolidated Statement of Stockholders' Equity (Unaudited) (USD $)
In Thousands
Share Capital
Additional paid in capital
Other comprehensive income (Loss)
Deficit
Total
Beginning Balance, Amount at Dec. 31, 2014
$ 177,139 
$ 20,347 
$ (2,850)
$ (161,118)
$ 33,517 
Beginning Balance, Shares at Dec. 31, 2014
146,984 
 
 
 
 
Net loss for the period
 
 
 
(3,758)
(3,758)
Foreign currency translation
 
 
(4,171)
 
(4,171)
Stock-based compensation
 
 
 
Issue of share capital - stock options, Amount
10 
(3)
 
 
Issue of share capital - stock options, Shares
40 
 
 
 
 
Ending Balance, Amount at Sep. 30, 2015
177,149 
20,353 
(7,021)
(164,876)
25,604 
Ending Balance, Shares at Sep. 30, 2015
147,024 
 
 
 
 
Beginning Balance, Amount at Dec. 31, 2015
177,206 
20,517 
(7,778)
(168,949)
20,996 
Beginning Balance, Shares at Dec. 31, 2015
147,331 
 
 
 
 
Net loss for the period
 
 
 
(3,695)
(3,695)
Foreign currency translation
 
 
1,176 
 
1,176 
Stock-based compensation
 
60 
 
 
60 
Issue of share capital - stock options, Amount
112 
(58)
 
 
54 
Issue of share capital - stock options, Shares
585 
 
 
 
 
Issue of share capital - Sandstorm, Amount
1,337 
 
 
 
1,337 
Issue of share capital - Sandstorm, Shares
5,129 
 
 
 
 
Ending Balance, Amount at Sep. 30, 2016
$ 178,655 
$ 20,519 
$ (6,602)
$ (172,644)
$ 19,928 
Ending Balance, Shares at Sep. 30, 2016
153,045 
 
 
 
 
Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Cash flows from operating activities
 
 
Net loss
$ (3,695)
$ (3,758)
Items not affecting cash
 
 
Depreciation
24 
33 
Stock-based compensation
60 
Loss from equity investee
169 
78 
Interest expense
208 
211 
Deferred income taxes
(897)
Gain on release of reclamation deposits
(24)
Unrealized foreign exchange (gains) losses
376 
(2,577)
Other items not affecting cash
Total
(2,879)
(6,901)
Changes in non-cash operating working capital
 
 
Decrease in receivables and prepaids
79 
354 
Decrease (increase) in other assets
(1)
Decrease in accounts payable and accruals
(1,168)
(639)
Deposit on metal credit delivering obligation
(5,500)
Net cash used in operating activities
(9,460)
(7,187)
Cash flows from financing activities
 
 
Proceeds from issuance of capital stock
53 
Net cash provided by financing activities
53 
Cash flows from investing activities
 
 
Mineral property interests
(500)
Reclamation deposits
24 
(4)
Purchase of equipment
(6)
(11)
Proceeds from sale of equipment
16 
Net cash used in investing activities
34 
(515)
Decrease in cash and cash equivalents
(9,373)
(7,695)
Cash and cash equivalents - beginning of period
22,786 
33,517 
Effect of exchange rate changes on cash
187 
(337)
Cash and cash equivalents - end of period
$ 13,600 
$ 25,485 
1. Nature and continuance of operations
Note 1. Nature and continuance of operations

Entrée Gold Inc. was incorporated under the laws of the Province of British Columbia on July 19, 1995 and continued under the laws of the Yukon Territory on January 22, 2003. On May 27, 2005, Entrée Gold Inc. changed its governing jurisdiction from the Yukon Territory to British Columbia by continuing into British Columbia under the Business Corporations Act (British Columbia). The principal business activity of Entrée Gold Inc., together with its subsidiaries (collectively referred to as the "Company"), is the exploration of mineral property interests. To date, the Company has not generated significant revenues from its operations and is considered to be in the exploration stage.

 

All amounts are expressed in United States dollars, except for certain amounts denoted in Canadian dollars ("C$").

 

These consolidated financial statements have been prepared on the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company currently earns no operating revenues. Continued operations of the Company are dependent upon the Company's ability to secure additional equity capital or receive other financial support, and in the longer term to generate profits from business operations. Management believes that the Company has sufficient working capital to maintain its operations for the next 12 months.

2. Basis of presentation
Note 2. Basis of presentation

The interim period financial statements have been prepared by the Company in conformity with generally accepted accounting principles in the United States of America. The preparation of financial data is based on accounting principles and practices consistent with those used in the preparation of annual financial statements, and in the opinion of management these financial statements contain all adjustments necessary (consisting of normally recurring adjustments) to present fairly the financial information contained therein. Certain information and footnote disclosure normally included in the financial statements prepared in conformity with generally accepted accounting principles in the United States of America have been condensed or omitted. These interim period statements should be read together with the most recent audited financial statements and the accompanying notes for the year ended December 31, 2015. The results of operations for the nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016.

3. Significant accounting policies
Note 3. Significant accounting policies

These consolidated financial statements follow the same significant accounting principles as those outlined in the notes to the audited consolidated financial statements for the year ended December 31, 2015.

4. Equipment
Note 4. Equipment

    September 30, 2016     December 31,  2015  
    Cost    

Accumulated

depreciation

   

Net book

value

    Cost    

Accumulated

depreciation

   

Net book

value

 
Office equipment   $ 60     $ 50     $ 10     $ 57     $ 46     $ 11  
Computer equipment     298       256       42       277       232       45  
Field equipment     127       99       28       182       134       48  
Buildings     42       38       4       40       35       5  
    $ 527     $ 443     $ 84     $ 556     $ 447     $ 109  

 

 

5. Mineral property interests
Note 5. Mineral property interests

 

   

September 30,

2016

   

December 31,

2015

 
Ann Mason Project (a)   $ 38,885     $ 36,853  
Other (b)     908       861  
    $ 39,793     $ 37,714  

 

Title to mineral property interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristics of many mineral property interests. The Company has investigated title to its mineral property interests and, except as otherwise disclosed below, to the best of its knowledge, title to the mineral property interests remains in good standing.

 

The Company's two principal assets are the Ann Mason project (the "Ann Mason Project") in Nevada and its interest in the Entrée/Oyu Tolgoi LLC joint venture property in Mongolia (Note 6).

 

a)   Ann Mason, Nevada, United States

 

The Ann Mason Project is defined by a series of both unpatented lode claims on public land administered by the Bureau of Land Management, and title to patented lode claims. The project area includes the Ann Mason and the Blue Hill deposits, several early-stage copper porphyry targets including the Blackjack IP, Blackjack Oxide, Roulette and Minnesota targets, and the Minnesota and Shamrock copper skarn targets.

 

Certain of the unpatented lode claims peripheral to the Ann Mason and Blue Hill deposits are leased to the Company pursuant to a mining lease and option to purchase agreement ("MLOPA") with a Nevada limited liability company. Under the MLOPA, the Company has the option to purchase the claims for $500,000, which, if exercised, will be subject to a 3% net smelter returns ("NSR") royalty (which may be bought down to a 1% NSR royalty for $2 million). The MLOPA also provides for annual advance minimum royalty payments of $27,500 which commenced in 2011 and will continue until the commencement of sustained commercial production. The advance payments will be credited against future royalty payments or the buy down of the royalty.

 

In September 2009, the Company entered into an agreement whereby the Company may acquire an 80% interest in certain unpatented lode claims to the southwest of the Ann Mason and Blue Hill deposits. In order to acquire its interest, the Company must: (a) incur expenditures of $1,000,000, make cash payments of $140,000 and issue 85,000 common shares of the Company within three years (completed); (b) make aggregate advance royalty payments totalling $375,000 between the fifth and tenth anniversaries of the agreement ($150,000 of which has been paid); and (c) deliver a bankable feasibility study before the tenth anniversary of the agreement.

 

In February 2013, the Company entered into an agreement with Sandstorm Gold Ltd. ("Sandstorm") whereby the Company granted Sandstorm a 0.4% NSR royalty over certain of the unpatented lode claims, including the claims covering the Ann Mason and Blue Hill deposits, in return for an upfront payment of $5 million (the "Sandstorm NSR Payment") which was recorded as a recovery to acquisition costs.

 

In addition, certain of the patented lode claims peripheral to the Ann Mason and Blue Hill deposits are subject to a 2% NSR royalty.

 

b)   Other Properties

 

The Company also has interests in other properties in Mongolia (Shivee West), Australia (Blue Rose), the United States (Lordsburg) and Peru (Lukkacha and Cañariaco NSR royalty).

6. Long-term investments
Note 6. Long-term investments

Entree/Oyu Tolgoi JV Property, Mongolia 

 

The Company has a carried 20% joint venture interest in two of the Oyu Tolgoi deposits in the South Gobi region of Mongolia (the "Entrée/Oyu Tolgoi JV Property"). The Entrée/Oyu Tolgoi JV Property is comprised of the eastern portion of the Shivee Tolgoi mining licence, which hosts the Hugo North Extension copper-gold deposit, and all of the Javhlant mining licence, which hosts the Heruga copper-gold-molybdenum deposit. The Shivee Tolgoi and Javhlant mining licences were granted by the Mineral Resources Authority of Mongolia in October 2009. Title to the two licences is held by the Company.

 

In October 2004, the Company entered into an arm's-length Equity Participation and Earn-In Agreement (the "Earn In Agreement") with Turquoise Hill Resource Ltd. ("Turquoise Hill"). Under the Earn-In Agreement, Turquoise Hill agreed to purchase equity securities of the Company, and was granted the right to earn an interest in what is now the Entrée/Oyu Tolgoi JV Property. Most of Turquoise Hill's rights and obligations under the Earn-In Agreement were subsequently assigned by Turquoise Hill to what was then its wholly-owned subsidiary, Oyu Tolgoi LLC ("OTLLC"). The Government of Mongolia subsequently acquired a 34% interest in OTLLC from Turquoise Hill.

 

On June 30, 2008, OTLLC gave notice that it had completed its earn-in obligations by expending a total of $35 million on exploration of the Entrée/Oyu Tolgoi JV Property. OTLLC earned an 80% interest in all minerals extracted below a sub-surface depth of 560 metres from the Entrée/Oyu Tolgoi JV Property and a 70% interest in all minerals extracted from surface to a depth of 560 metres from the Entrée/Oyu Tolgoi JV Property. In accordance with the Earn-In Agreement, the Company and OTLLC formed a joint venture (the "Entrée/Oyu Tolgoi JV") on terms annexed to the Earn-In Agreement (the "JVA").

 

The portion of the Shivee Tolgoi mining licence outside of the Entrée/Oyu Tolgoi JV Property, Shivee West, is 100% owned by the Company, but is subject to a right of first refusal by OTLLC (Note 5). In October 2015, the Company entered into a License Fees Agreement with OTLLC, pursuant to which the parties agreed to negotiate in good faith to amend the JVA to include Shivee West in the definition of Entrée/Oyu Tolgoi JV Property.  The parties also agreed that the annual licence fees for Shivee West would be for the account of each joint venture participant in proportion to their respective interests, with OTLLC contributing Entrée's 20% share charging interest at prime plus 2% (Note 7).

 

The conversion of the original Shivee Tolgoi and Javhlant exploration licences into mining licences was a condition precedent to the Investment Agreement (the "Oyu Tolgoi Investment Agreement") between Turquoise Hill, OTLLC, the Government of Mongolia and Rio Tinto International Holdings Limited. The licences are part of the contract area covered by the Oyu Tolgoi Investment Agreement, although the Company is not a party to the Oyu Tolgoi Investment Agreement. The Shivee Tolgoi and Javhlant mining licences were each issued for a 30 year term and have rights of renewal for two further 20 year terms.

 

As of September 30, 2016, the Entrée/Oyu Tolgoi JV had expended approximately $28.9 million to advance the Entrée/Oyu Tolgoi JV Property. Under the terms of the Entrée/Oyu Tolgoi JV, OTLLC contributed on behalf of the Company its required participation amount charging interest at prime plus 2% (Note 7).

 

Joint Venture Investment – Entrée/Oyu Tolgoi JV

 

The Company accounts for its interest in the Entrée/Oyu Tolgoi JV as a 20% equity investment. The Company's share of the loss of the joint venture was $169,191 for the nine months ended September 30, 2016 (September 30, 2015 - $78,386) plus accrued interest expense of $207,554 for the nine months ended September 30, 2016 (September 30, 2015 - $210,558).

 

The Entrée/Oyu Tolgoi JV investment carrying value at September 30, 2016 was $195,530 (December 31, 2015 - $148,717) and was recorded in Other Assets.

 

7. Loans payable to Oyu Tolgoi
Note 7. Loans payable to Oyu Tolgoi

Under the terms of the Entrée/Oyu Tolgoi JV (Note 6), OTLLC will contribute funds to approved joint venture programs and budgets on the Company's behalf. Interest on each loan advance shall accrue at an annual rate equal to OTLLC's actual cost of capital or the prime rate of the Royal Bank of Canada, plus two percent (2%) per annum, whichever is less, as at the date of the advance. The loans will be repayable by the Company monthly from ninety percent (90%) of the Company's share of available cash flow from the Entrée/Oyu Tolgoi JV. In the absence of available cash flow, the loans will not be repayable. The loans are not expected to be repaid within one year.

8. Deferred revenue
Note 8. Deferred revenue

In February 2013, the Company entered into an equity participation and funding agreement (the "2013 Agreement") with Sandstorm whereby Sandstorm provided an upfront deposit (the "Deposit") of $40 million. The Company will use future payments that it receives from its mineral property interests to purchase and deliver metal credits to Sandstorm, in amounts that are indexed to the Company's share of gold, silver and copper production from the current Entrée/Oyu Tolgoi JV Property. Upon the delivery of metal credits, Sandstorm will also make the cash payment outlined below. In addition, the 2013 Agreement provided for a partial refund of the Deposit and a pro rata reduction in the number of metal credits deliverable to Sandstorm in the event of a partial expropriation of Entrée's economic interest, contractually or otherwise, in the current Entrée/Oyu Tolgoi JV Property.

 

On February 23, 2016, the Company and Sandstorm entered into an Agreement to Amend, whereby the Company refunded 17% of the Deposit ($6.8 million) (the "Refund") in cash and shares thereby reducing the Deposit to $33.2 million for a 17% reduction in the metal credits that the Company is required to deliver to Sandstorm. At closing on March 1, 2016, the parties entered into an Amended and Restated Equity Participation and Funding Agreement (the "Amended Sandstorm Agreement"). Under the terms of the Amended Sandstorm Agreement, the Company will purchase and deliver gold, silver and copper credits equivalent to:

 

  · 28.1% of Entrée's share of gold and silver, and 2.1% of Entrée's share of copper, produced from the Shivee Tolgoi mining licence (excluding Shivee West); and

 

  · 21.3% of Entrée's share of gold and silver, and 2.1% of Entrée's share of copper, produced from the Javhlant mining licence.

 

 

Upon the delivery of metal credits, Sandstorm will make a cash payment to the Company equal to the lesser of the prevailing market price and $220 per ounce of gold, $5 per ounce of silver and $0.50 per pound of copper (subject to inflation adjustments). After approximately 8.6 million ounces of gold, 40.3 million ounces of silver and 9.1 billion pounds of copper have been produced from the entire current Entrée/Oyu Tolgoi JV Property the cash payment will be increased to the lesser of the prevailing market price and $500 per ounce of gold, $10 per ounce of silver and $1.10 per pound of copper (subject to inflation adjustments). To the extent that the prevailing market price is greater than the amount of the cash payment, the difference between the two will be credited against the Deposit (the net amount of the Deposit being the "Unearned Balance").

 

This arrangement does not require the delivery of actual metal, and the Company may use revenue from any of its assets to purchase the requisite amount of metal credits.

 

Under the Amended Sandstorm Agreement, Sandstorm has a right of first refusal, subject to certain exceptions, on future production-based funding agreements. The Amended Sandstorm Agreement also contains other customary terms and conditions, including representations, warranties, covenants and events of default. The initial term of the Amended Sandstorm Agreement is 50 years, subject to successive 10-year extensions at the discretion of Sandstorm.

 

In addition, the Amended Sandstorm Agreement provides that the Company will not be required to make any further refund of the Deposit if Entrée's economic interest is reduced by up to and including 17%. If there is a reduction of greater than 17% up to and including 34%, the Amended Sandstorm Agreement provides the Company with the ability to refund a corresponding portion of the Deposit in cash or common shares of the Company or any combination of the two at the Company's election, in which case there would be a further corresponding reduction in deliverable metal credits. If the Company elects to refund Sandstorm with common shares of the Company, the value of each common share shall be equal to the volume weighted average price for the five (5) trading days immediately preceding the 90th day after the reduction in Entrée's economic interest. In no case will Sandstorm become a "control person" under the Amended Sandstorm Agreement. In the event an issuance of shares would cause Sandstorm to become a "control person", the maximum number of shares will be issued, and with respect to the value of the remaining shares, 50% will not be refunded (and there will not be a corresponding reduction in deliverable metal credits) and the remaining 50% will be refunded by the issuance of shares in tranches over time, such that the number of shares that Sandstorm holds does not reach or exceed 20%. All shares will be priced in the context of the market at the time they are issued.

 

In the event of a full expropriation, the remainder of the Unearned Balance after the foregoing refunds must be returned in cash. 

 

For accounting purposes, the Deposit is accounted for as deferred revenue on the balance sheet and the original Deposit was recorded at the historical amount of C$40,032,000. As a result of the Amended Sandstorm Agreement, the deferred revenue amount was adjusted to reflect the $6.8 million Refund which was recorded at the foreign exchange amount at the date of the Refund resulting in a net balance of C$30,865,190. This amount is subject to foreign currency fluctuations upon conversion to US dollars at each reporting period.

 

The $6.8 million Refund was paid with $5.5 million in cash and the issuance of $1.3 million of common shares of the Company. On March 1, 2016, the Company issued 5,128,604 common shares to Sandstorm at a price of C$0.3496 per common share pursuant to the Agreement to Amend.

9. Share capital
Note 9. Share capital

The Company's authorized share capital consists of unlimited common shares without par value. At September 30, 2016, the Company had 153,045,408 (December 31, 2015 - 147,330,917) shares issued and outstanding.

10. Stock-based compensation
Note 10. Stock-based compensation

The Company provides stock-based compensation to its directors, officers, employees, and consultants through grants of stock options.

 

a)   Stock options

 

         

 

September 30, 2016

 

 
   

Number of shares

(000's)

   

Weighted average

exercise price CAD

 
Outstanding - January 1, 2016     13,208       0.60  
Granted     100       0.39  
Exercised     (586 )     0.25  
Cancelled     (664 )     0.28  
Forfeited/Expired     (2,310 )     1.21  
Outstanding - September 30, 2016     9,748       0.49  

 

At September 30, 2016, the following stock options were outstanding:

 

Number of shares

(000's)

    Vested (000's)    

Aggregate intrinsic

value CAD (000's)

   

Price per share

CAD

    Expiry Date  
  158       158       2       0.30 – 1.25     Oct - Dec 2016  
  3,215       3,215       104       0.21 – 1.25     Jan – Sep 2017  
  3,530       3,530       63       0.30 – 0.56     Mar – Dec 2018  
  2,745       2,745       209       0.21 – 0.38     Dec 2019 – Dec 2020  
  100       50       -       0.39     Mar 2021  
  9,748       9,698       378                
                                   
                                September 30, 2016  
Weighted average exercise price for exercisable options               0.28  
Weighted average share price for options exercised               0.25  
Weighted average years to expiry for exercisable options               3.36  

 

For the three months ended September 30, 2016, the total stock-based compensation charges related to options granted and vested to employees and directors was $4,498 (2015 –$9,402).

 

For the nine months ended September 30, 2016, the total stock-based compensation charges related to options granted and vested to employees and directors was $60,224 (2015 –$9,402).

 

11. Segmented information
Note 11. Segmented information

The Company operates in one business segment being the exploration of mineral property interests. The Company's assets are geographically segmented as follows:

 

    September 30, 2016     December 31, 2015  
United States   $ 40,220     $ 38,323  
Canada     13,455       22,501  
Other     840       838  
    $ 54,515     $ 61,662  
12. Exploration costs
Note 12. Exploration costs

 

  Three months ended Nine months ended    
   

September 30,

2016

   

September 30,

2015

   

September 30,

2016

   

September 30,

2015

 
United States   $ 347     $ 781     $ 923     $ 3,121  
Mongolia     58       269       340       1,074  
Other     (8 )     16       79       98  
    $ 397     $ 1,066     $ 1,342     $ 4,293  
13. Financial instruments
Note 13. Financial instruments

a)   Financial instruments

The Company's financial instruments generally consist of cash and cash equivalents, receivables, deposits, accounts payable and accrued liabilities and loans payable. It is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values.

 

The Company is exposed to currency risk by incurring certain expenditures in currencies other than the Canadian dollar. In addition, as certain of the Company's consolidated subsidiaries' functional currency is the United States dollar, the Company is exposed to foreign currency translation risk. The Company does not use derivative instruments to reduce this currency risk.

 

b)  Fair value classification of financial instruments

Fair value measurement is based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value which are:

 

Level 1 — Quoted prices that are available in active markets for identical assets or liabilities.

 

Level 2 — Quoted prices in active markets for similar assets that are observable.

 

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

At September 30, 2016, the Company had Level 1 financial instruments, consisting of cash and cash equivalents, with a fair value of $13,599,854.

 

14. Supplemental cash flow information
Note 14. Supplemental cash flow information

There were no significant non-cash transactions during the three and nine months ended September 30, 2016 and 2015.

15. Commitments and contingencies
Note 15. Commitments and contingencies

As at September 30, 2016, the Company had the following commitments:

 

      Total       Less than 1 year       1 - 2 years       Thereafter  
Lease commitments   $ 146     $ 47     $ 99     $ -  
                                 

Under the terms of the Amended Sandstorm Agreement, the Company may be subject to a contingent liability if certain events occur (Note 8).

17. Subsequent events
Note 17. Subsequent events

Subsequent to September 30, 2016, 25,000 stock options with an exercise price of C$1.25, 50,000 stock options with an exercise price of C$0.56 and 35,000 stock options with an exercise price of C$0.30 expired.

4. Equipment (Tables)
Equipment
    September 30, 2016     December 31,  2015  
    Cost    

Accumulated

depreciation

   

Net book

value

    Cost    

Accumulated

depreciation

   

Net book

value

 
Office equipment   $ 60     $ 50     $ 10     $ 57     $ 46     $ 11  
Computer equipment     298       256       42       277       232       45  
Field equipment     127       99       28       182       134       48  
Buildings     42       38       4       40       35       5  
    $ 527     $ 443     $ 84     $ 556     $ 447     $ 109  
5. Mineral property interests (Tables)
Capitalized mineral property acquisition costs
   

September 30,

2016

   

December 31,

2015

 
Ann Mason Project (a)   $ 38,885     $ 36,853  
Other (b)     908       861  
    $ 39,793     $ 37,714  
10. Stock-based compensation (Tables)
         

 

September 30, 2016

 

 
   

Number of shares

(000's)

   

Weighted average

exercise price CAD

 
Outstanding - January 1, 2016     13,208       0.60  
Granted     100       0.39  
Exercised     (586 )     0.25  
Cancelled     (664 )     0.28  
Forfeited/Expired     (2,310 )     1.21  
Outstanding - September 30, 2016     9,748       0.49  

Number of shares

(000's)

    Vested (000's)    

Aggregate intrinsic

value CAD (000's)

   

Price per share

CAD

    Expiry Date  
  158       158       2       0.30 – 1.25     Oct - Dec 2016  
  3,215       3,215       104       0.21 – 1.25     Jan – Sep 2017  
  3,530       3,530       63       0.30 – 0.56     Mar – Dec 2018  
  2,745       2,745       209       0.21 – 0.38     Dec 2019 – Dec 2020  
  100       50       -       0.39     Mar 2021  
  9,748       9,698       378                
                                   
                                September 30, 2016  
Weighted average exercise price for exercisable options               0.28  
Weighted average share price for options exercised               0.25  
Weighted average years to expiry for exercisable options               3.36  
11. Segmented information (Tables)
Segmented information
    September 30, 2016     December 31, 2015  
United States   $ 40,220     $ 38,323  
Canada     13,455       22,501  
Other     840       838  
    $ 54,515     $ 61,662  
12. Exploration costs (Tables)
Exploration costs expensed
  Three months ended Nine months ended    
   

September 30,

2016

   

September 30,

2015

   

September 30,

2016

   

September 30,

2015

 
United States   $ 347     $ 781     $ 923     $ 3,121  
Mongolia     58       269       340       1,074  
Other     (8 )     16       79       98  
    $ 397     $ 1,066     $ 1,342     $ 4,293  
15. Commitments and contingencies (Tables)
Lease payments
      Total       Less than 1 year       1 - 2 years       Thereafter  
Lease commitments   $ 146     $ 47     $ 99     $ -  
4. Equipment (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Property Plant and Equipment
 
 
Cost
$ 527 
$ 556 
Accumulated depreciation
443 
447 
Net book value
84 
109 
Office equipment [Member]
 
 
Property Plant and Equipment
 
 
Cost
60 
57 
Accumulated depreciation
50 
46 
Net book value
10 
11 
Computer equipment [Member]
 
 
Property Plant and Equipment
 
 
Cost
298 
277 
Accumulated depreciation
256 
232 
Net book value
42 
45 
Field equipment [Member]
 
 
Property Plant and Equipment
 
 
Cost
127 
182 
Accumulated depreciation
99 
134 
Net book value
28 
48 
Buildings [Member]
 
 
Property Plant and Equipment
 
 
Cost
42 
40 
Accumulated depreciation
38 
35 
Net book value
$ 4 
$ 5 
5. Mineral property interests (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Capitalized mineral property acquisition Cost
$ 39,793 
$ 37,714 
Ann Mason [Member]
 
 
Capitalized mineral property acquisition Cost
38,885 
36,853 
Other [Member]
 
 
Capitalized mineral property acquisition Cost
$ 908 
$ 861 
6. Long-term investments (Details Narrative) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
LONG-TERM INVESTMENTS
 
 
 
 
Company's share of the loss of the joint venture
$ 63 
$ 24 
$ 169 
$ 78 
Accrued interest expense
 
 
207,554 
 
Oyu Tolgoi JV investment carrying value
 
 
$ 195,530 
 
9. Share capital (Details Narrative)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Share Capital Details Narrative
 
 
Common stock, issued shares
153,045,408 
147,330,917 
Common stock, outstanding shares
153,045,408 
147,330,917 
10. Stock-based compensation (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Number of shares
 
Outstanding - beginning of period
13,208 
Granted
100 
Exercised
(586)
Cancelled
(664)
Forfeited/Expired
(2,310)
Outstanding - end of period
9,748 
Weighted average exercise price
 
Outstanding - beginning of period
$ 0.60 
Granted
$ 0.39 
Exercised
$ 0.25 
Cancelled
$ 0.28 
Forfeited/Expired
$ 1.21 
Outstanding - end of period
$ 0.49 
10. Stock-based compensation (Details 1) (USD $)
In Thousands, except Per Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Option Outstanding
 
Number of shares
9,748 
Shares vested
9,698 
Aggregate intrinsic value
$ 378 
Number of Options Exercisable
 
Weighted average exercise price for exercisable options
$ 0.28 
Weighted average share price for options exercised
$ 0.25 
Weighted average years to expiry for exercisable options
3 years 4 months 10 days 
Share Based Compensation Stock Option One [Member]
 
Option Outstanding
 
Number of shares
158 
Shares vested
158 
Aggregate intrinsic value
Price per share minimum
$ 0.30 
Price per share maximum
$ 1.25 
Expiry Date
Oct - Dec 2016 
Share Based Compensation Stock Option Two [Member]
 
Option Outstanding
 
Number of shares
3,215 
Shares vested
3,215 
Aggregate intrinsic value
104 
Price per share minimum
$ 0.21 
Price per share maximum
$ 1.25 
Expiry Date
Jan - Sep 2017 
Share Based Compensation Stock Option Three [Member]
 
Option Outstanding
 
Number of shares
3,530 
Shares vested
3,530 
Aggregate intrinsic value
63 
Price per share minimum
$ 0.30 
Price per share maximum
$ 0.56 
Expiry Date
Mar - Dec 2018 
Share Based Compensation Stock Option Four [Member]
 
Option Outstanding
 
Number of shares
2,745 
Shares vested
2,745 
Aggregate intrinsic value
209 
Price per share minimum
$ 0.21 
Price per share maximum
$ 0.38 
Expiry Date
Dec 2019 - Dec 2020 
Share Based Compensation Stock Option Five [Member]
 
Option Outstanding
 
Number of shares
100 
Shares vested
50 
Aggregate intrinsic value
$ 0 
Price per share minimum
$ 0.39 
Price per share maximum
$ 0.39 
Expiry Date
Mar 2021 
10. Stock-based compensation (Details Narrative) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Notes to Financial Statements
 
 
 
 
Stock-based compensation
$ 4,498 
$ 9,402 
$ 60,224 
$ 9,402 
11. Segmented information (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Segmented information
 
 
Identifiable Assets
$ 54,515 
$ 61,662 
United States [Member]
 
 
Segmented information
 
 
Identifiable Assets
40,220 
38,323 
Canada [Member]
 
 
Segmented information
 
 
Identifiable Assets
13,455 
22,501 
Other [Member]
 
 
Segmented information
 
 
Identifiable Assets
$ 840 
$ 838 
12. Exploration costs (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Total all locations
$ 397 
$ 1,066 
$ 1,342 
$ 4,293 
United States [Member]
 
 
 
 
Total all locations
347 
781 
923 
3,121 
Mongolia [Member]
 
 
 
 
Total all locations
58 
269 
340 
1,074 
Other [Member]
 
 
 
 
Total all locations
$ (8)
$ 16 
$ 79 
$ 98 
13. Financial instruments (Details Narrative) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Sep. 30, 2015
Dec. 31, 2014
Financial Instruments Details Narrative
 
 
 
 
Cash and cash equivalents
$ 13,600 
$ 22,786 
$ 25,485 
$ 33,517 
15. Commitments and contingencies (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
COMMITMENTS AND CONTINGENCIES
 
Less than one year
$ 47 
1 - 2 years
99 
Thereafter
Total
$ 146