Highly prospective exploration company
Resource projects cover more than 1,713 km2 in three provinces at various stages, including the following: hematite magnetite iron formations, titaniferous magnetite & hematite, nickel/copper/PGM, chromite, Volcanogenic Massive and gold.
Message: MANAGEMENT DISCUSSION AND ANALYSIS
FANCAMP EXPLORATION LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
GENERAL
The following discussion of performance, financial condition and future prospects should be read in
conjunction with the financial statements of the Company and notes thereto for the three month period
ended July 31, 2010. The Company’s financial statements are prepared in accordance with Canadian
General Accepted Accounting Principles. The Company’s reporting currency is Canadian dollars. The
date of this Management Discussion and Analysis is September 24, 2010. Additional information on the
Company is available on SEDAR at
www.sedar.com
and the Company’s web site at
www.fancampexplorationltd.ca
.
NATURE OF BUSINESS
Fancamp Exploration Ltd. is an exploration stage company in the business of mineral exploration.
OVERALL PERFORMANCE
The Company completed the second phase of exploration drilling, bore hole and surface EM geophysical
surveys on its 100% owned McFauld’s Lake Property in Ontario. A total of 4,365 meters of drilling was
completed, together with five down-hole EM surveys and one small surface EM survey. The Company
was encouraged by the results and further drilling is planned for the C-1and C-6 Ni PGM bearing
peridotite conduits, the C-3 volcanic hosted base metal sulphides and the C-2 chromite horizon later this
year.
Fancamp is currently one of the largest property owners in the Eastern Townships of Quebec, holding
claims covering some 382,000 acres in twenty two separate properties. A 2,500 metre plus
reconnaissance drill programme has begun on the Stoke, Clinton and North Megantic properties.
During this quarter, Champion Minerals Inc. earned a 65% interest in the 50% held Fremont Iron Property
by making total cash payment of $1,000,000, issuing 2,900,000 common shares of Champion and
completion of $6,000,000 in work expenditures. Fancamp continues to hold a 17 ½% interest, as well as
50% of a 3% Net Smelter Returns royalty, one third of which may be purchased by Champion for
$3,000,000.
The Company has an option on the Red Paint Lake Property, totaling some 5,040 acres, with its western
part covering an 8 km strike length of the NE trending Marmion Lake Fault System. With this property
and the Norway Lake Property, the Company holds approximately 20 km of strike length on the Marmion
Fault trend.
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The Company appointed John Harvey, P. Eng, Ed Thompson, P. Eng. and Mackenzie Watson to its
Advisory Board.
The Company has engaged the services of Bay Street Connect, an owner-managed firm and leading
provider of Investor Relations Services.
The Company continues to finance its activities through the issuance of shares, exercising of warrants
and options and from property option revenue.
RESULTS OF OPERATIONS
The Company incurred a net profit of $1,055,384 for the three months ended July 31, 2010, compared to
a net profit of $548 for the three months ended July 31, 2009. The profit in 2010 can be attributed to the
receipt of mining property option income and royalty income.
MINERAL PROPERTIES
ONTARIO PROPERTIES
100% Owned McFaulds Fancamp Property, Ontario
A second phase of exploration drilling, and borehole and surface EM geophysical surveys began on the
McFauld’s Lake Property in mid April, 2010 as follow up to the initial programme completed in the fall of
2008. A total of 4,365 meters of drilling was done in this period, together with five down-hole EM surveys
and one small surface EM survey. The field work was completed on July 7, 2010 and to date a total of 33
holes have been drilled (a very low density of coverage compared to our immediate neighbours). The
programme was designed to test five priority targets, C-1and C-6 for Ni PGM; C-2 for VMS; C-3 and C-5
for chromite.
Drilling on the C-1 peridotite intrusive was initially focused on its eastern contact, targeting the shallow
mineralization reported in holes FN 08-02 and FN 08-10 (3.52% Ni/0.9 metres and 2.4% Ni/1.2 metres).
The most significant intersection in this series of shallow holes was in FN 10-01, 100 metres to the south,
which encountered 0.73% Ni, 0.22% Cu, 830 pbb Pd and 225 ppb Pt/ 1.4 metres at a depth of 60 metres.
Hole FN 08-03, in the central part of the C-1 target was deepened, from 486 metres to 603 metres (the
560 metre level) to intersect the eastern peridotite/granodiorite contact. Results from the downhole
geophysics indicated no significant offhole conductor at the bottom of the hole, which translated would
mean no significant conductor down to about the 660 metre level. Hole FN 10-19 located 100 metres
north of FN 08-03 (and 120 metres south of the Noront boundary) was drilled at 85 degrees to the
northeast to a depth of 729 metres, having passed into the granodiorite at a depth of 675 metres in the
hole. Downhole geophysics was carried out in this hole but to a depth of only 669 metres, due to a
blockage. A number of weak offhole conductors were noted at shallower depths but the most interesting
result is a subtle build up toward the hole bottom suggesting a conductor at depth to the south. This is
potentially very significant and hole deepening and additional downhole surveys are certainly warranted.
Management has concluded, based on the results seen in the hole FN-10-19 (a westward shift in the
eastern peridotite/granodiorite contact) that the northern portion of the C-1 target is displaced in a left
lateral sense along probable NW/SE fault structures. Indeed, ground magnetics in the area suggest that
the isolated Eagle 1 structure itself could be a left lateral offset of the C-1 target, a displacement of about
350 metres. This model is potentially a useful exploration tool because it implies a very much closer
connection between Eagle 1 and C-1. Eagle I lies in the lower portion of an intrusive ultrabasic conduit
(its present western side) and the same geometry could apply to C-1. At present little is known of this
sector of the C-1 intrusion, “potentially the most important segment of the C-1 conduit itself” in the words
of the Company's consultant John D. Harvey, P.Eng. In this interpretation, the eastern side of C-1, which
has received most attention to date, represents the perhaps less prospective upper portion of the conduit
with the high grade intersections possibly representing remobilized mineralization from an as yet
unknown source.
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The C-6 peridotite target, with lithological and structural similarities to the Eagle 1 Deposit, some 1.5 km
west, was tested by Hole FN 08-07, which presented geochemically anomalous Ni PGM values, but
downhole geophysics showed no significant responses at shallow depths. Similarily a surface EM survey
was conducted over the northern portion of this target, again with little response. This north south striking
peridotite body however remains a very important target for Ni PGM mineralization at depths below the
penetration limits of surface geophysics.
Of immediate interest for base metal, gold and silver mineralization are the results from the C-2 target
area located near the SE corner of the property. This cluster of VTEM anomalies lies within a NE
trending, approximately 700 metres by 200 metre, magnetic and gravity anomaly. Two drill holes, a
hundred metres apart, FN 10-14 (360 metres total depth) and FN 10-20, (330 metres total depth) were
tested with downhole geophysics which showed the presence of a strong offhole conductor lying between
them. Characteristics of this conductor are suggestive of a massive sulphide body having a strike length
of about 75 metres and dipping steeply to the NW (toward the strong gravity anomaly). Both these drill
holes show strongly anomalous Zn, Cu, Pb, Ag, and Au values sporadically along their entire length in
intermixed felsic and mafic volcanics. Drill Hole FN 10-16 drilled 180 metres to the SE from the above,
encountered anomalous Au and Ag in the vicinity of the granite contact. One assay returned 0.7 metres
running 3.08 grams Au and 23.6 grams Ag. Additional drilling is required in this sector.
In the C-3 target area, one hole was drilled to test for the southwestern extension of the KWG
Resources/Cliffs Natural Resources J.V.'s Big Daddy deposit along strike approximately 2 kilometres to
the northeast. The hole was collared in granodiorite and then intersected about 60 metres of olivine rich
pyroxenite below a 0.8 metres thickness of chromite grading 35.93% Cr
2O3
at a down-hole depth of 220
metres. This relatively high grade is important, given the fact that these deposits can be lenslike or long
continuous beds and can vary considerably in thickness over short distances. The total prospective
distance on the property of this “chromite horizon” is about 3.5 km, and in the view of John Harvey,
P.Eng., “has good potential.”
The C-5 area drilling was designed to test the large gravity anomaly immediately south of the previously
tested C-5 magnetic anomaly. Three holes drilled on this feature revealed that the gravity anomaly is
actually due to a large gabbroic body with a distinct lithogeochemical signature seemingly unrelated to
the ultramafic to mafic intrusives elsewhere on the property. No further work is planned for this area.
Further drilling is planned for the C-1and C-6 Ni PGM bearing peridotite conduits, the C-3 volcanic hosted
base metal sulphides and the C-2 chromite horizon later this year.
Option to Acquire an 100% interest in the Red Paint Lake Property, Ontario
In May 2010, the Company entered into an option agreement for the acquisition of the 5,040 acre Red
Paint Lake property, located in the Thunder Bay Mining Division, Ontario. This property is located some
13 km (8 miles) NE of the 6.7 million ounce Hammond Reef gold deposit of Brett Resources Inc., recently
acquired by Osisko Mining Corp. in a friendly take-over bid valued at CAD $372M.
The western part of the property covers an 8 km (5 miles) strike length of the NE trending Marmion Lake
Fault System, of which the Hammond Reef shear zone is probably an offset. The property is host to 8
historic gold occurrences, 4 of which lie along the Marmion Trend. This trend is obviously highly
prospective for gold and is largely unexplained in this area.
Together with the Company’s Norway Lake Property immediately to the North, the total strike length held
of the Marmion Trend and its projection is some 20 km (12.5 miles).
A further indication of the prospectivity of this trend are the high lake bottom sediment gold anomalies in
the Norway Lake sector which have yet to be explained. An extensive prospecting program is currently
underway.
100% Owned Norway Lake Property, Ontario (Option fulfilled)
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In 2008, the Company entered into an option agreement for the acquisition of the 4,000 acre Norway
Lake Property located in the Thunder Bay Mining Division, Ontario. This virtually unexplored, 4000 acre
grassroots property is situated some 45 km NE of Atikokan and 170 km west of Thunder Bay. It is
located along the NE trending Marmion Lake fault structure. Major mineral deposits adjacent to this
structure, include the Steep Rock Lake Iron Mines, some 50 km to the SW, and more importantly the
Hammond Reef gold deposit some 23 km SW, a large tonnage low grade deposit owned by Brett
Resources Inc. and currently hosting a 43-101 compliant resource reported at 6.7 million ounces Au. An
extensive prospecting program was carried out in September 2009, together with limited stream sediment
sampling in October 2009. All of the option requirements were fulfilled in May 2010.
50% Owned Desolation Lake Property, Ontario
The Company, in partnership with the Sheridan Platinum Group Ltd., staked 58 claim units (15,104 hectares
or 151 km
2
) in the Desolation Lake area, some 135 miles NE of the Noront discovery in the James Bay
Lowlands. This anomaly is a very distinctive feature occurring at the juncture of a number of large structural
lineaments. The anomaly’s presence has been long known, and during the 1950’s an attempt was made to
drill it, the deepest hole reaching some 800 feet in the overlying limestone. It is now known that the
thickness of the Paleozoic limestone in here is on the order of 500 metres.
Present interest in this feature, of course, has been generated by the remarkable results coming out of the
“Ring of Fire”. Major magnetic anomalies, such as this, associated with structural lineaments are prime
targets in this context and deserve close examination. Recent interpretive studies of the Ontario Department
of Mines suggest that iron formations are a probable cause of the magnetic feature, although, interestingly
they also interpreted the presence of an ultrabasic body in the immediate vicinity.
Airborne TDEM and magnetic surveys were completed in May 2010.
QUEBEC EASTERN TOWNSHIP PROPERTIES
The Company is currently one of the largest property owners in the Eastern Townships of Quebec,
holding claims which cover approximately 382,000 acres covering twenty two properties. This includes
control of 128 miles (205 km) strike length of prospective structure and stratigraphy. Ongoing compilation
work has identified numerous gold and base metal showings. The properties which are currently being
explored are outlined below:
100% Owned Beauce Property, Quebec
The Company intends to drill further targets on this 844 claim, 86,750 acre (34,700 ha) property which
includes the historic Gilbert River placer deposits, the site of Canada's first major gold rush in the 1840's
and 50's. These placers, located in the small Gilbert River Valley, on the eastern side of the Chaudiere
River 60 miles (96km) south of Quebec City, were characterized by the presence of large fist size
nuggets. These placers of pre-glacial age, are restricted to the valley itself and are in the Company's
opinion locally derived. They can be considered, in a geochemical sense, to be a major gold anomaly. To
date, no definite bedrock source has yet been identified, although the Company's reconnaissance drilling
in the area last fall indicated the presence of highly prospective silicification and quartz vein systems.
Option to Acquire a 100% interest in the Stoke Mountain Property, Quebec
The Company has an option to acquire a 100% interest in 44 claim units of a prospective gold, copper
and zinc property, located some 56 miles southwest of the Company’s Beauce gold property. The
Company also acquired an additional 131 claim units by staking. A VTEM survey has been undertaken
and in July 2010 the Company began a 2,500 metre plus reconnaissance drill program on this property
and the Clinton Property.
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Activities to date have included geophysics, trenching, sampling and drill results on six drill holes. The
results will permit the Company to focus on a more defined area to determine the nature, extent and
quality of mineralization.
The discovery of angular boulders in the Spring of 2010 with grades up to 23.4%Zn and 2.74%Cu led the
Company to execute a power stripping programme over some 150 metres strike length. This work, in
what is referred to as the main trench, exposed a distinctive, highly altered volcaniclastic unit showing
numerous fragments of jasperoid, widespread disseminated sulphides and local bands of massive pyrite.
The Company intends to focus future exploration activities on determining the source of the mineralized
boulders. Channel sampling by Fancamp reported 1.32g/t gold over 4.0 m, including 4.0g/t gold and
0.61%Zn over 1.0 m. Assay results from Fancamp hole ST-10-06, drilled some forty five metres beneath
this occurrence, reported 6.21g/t Au over 4.2 m, including 22.4g/t Au, 7.73%Zn, 1.73%Cu, 2.62%Pb and
231 g/t Ag over 1.0 m. It is notable that high mercury, indium and tellurium values occur within this 1
metre interval and suggest epithermal mineral assemblages typical of many high grade Nevada gold
deposits. The prospective VMS horizon has a strike length of about 1,200 metres and is the focus of
current drilling. Previous exploration work by Phelps Dodge in the 1990’s,which reported 6.34%Cu over
5.1m in a shallow drill hole, provides additional evidence of the potential for a massive sulphide body, and
the accompanying extensive black chlorite alteration together with a coincident strong Bouger gravity
anomaly, supports this view. The first five holes of the programme, drilled on geophysical targets, did not
intersect significant mineralization. Three of these holes are located 6.5 km NE of the main trench; two lie
at either end of the 1,200 metre VMS horizon.
The Company will be drilling shortly on the Jackson gold showing, which lies immediately south of the
present target area. The showing is a long known occurrence, dating back to the 1880’s and consists of
gold mineralization in sheeted quartz vein systems cutting a highly altered tonalite granite intrusion.
Option to Acquire a 100% interest in the Clinton VMS Prospects, Quebec
The Company has an option to earn a 100% interest in 117 claim units which include a prospective
copper zinc VMS trend located approximately 54 miles south of the Company’s Beauce gold property.
The north block contains six mineralized lenses spread out along a strike length of approximately 6 km as
well as a further 10 km of favourable strike length to the southwest which has not previously been tested.
The south block covers additional prospective stratigraphy. The Company also acquired an additional
129 claim units by staking. A VTEM survey has been undertaken and in July, 2010 the Company began
a 2,500 metre plus reconnaissance drill program to be done on this property and the Stoke Mountain
Property.
Drilling on this property is underway with a second rig, some 100 km SE of Stoke. Initial targets include a
strong conductor picked up on the recent VTEM survey and proximal to a group of mineralized boulders
discovered by Noranda in 1995, returning grades up to 7.96% Zn and 0.21% Cu. A second priority target
is a weak MAX MIN anomaly, apparently associated with a strong Zn in soil geochemical anomaly
outlined by Noranda in 1995 and never tested. Both these targets are several kilometres away from the
known mineralized lenses on this property.
JOINT VENTURES
Champion Minerals Inc. – Fermont Property, Quebec
Fancamp maintains a 17.5% working interest in the current joint venture agreement with Champion
Minerals Inc. (Champion) in the Mount Wright-Fermont Iron District of Quebec, where Champion has
earned and purchased a total 82.5% interest in 17 separate Iron properties from Fancamp and its partner
The Sheridan Platinum Group Ltd., who together retain an underlying 3% Net Smelter Returns royalty of
which 1% may be bought back for $3.0M. Two of these properties, the Harvey Tuttle and the Fire Lake
North are the subject of Champion’s current exploration programme which is well underway. Champion
intends to complete 8,855 metres of drilling on the Harvey Tuttle property with the objective of achieving a
minimum resource target of 500M Tonnes grading in excess of 30% iron. The Fire Lake North property,
where Champion intends to complete 15,000 metres of drilling, has an objective of achieving a minimum
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resource target of 600-700M tonnes grading in excess of 30% iron. This work will include metallurgical
testing and preliminary scoping studies. The current total exploration budget outlined by Champion is
estimated to be $9,400,000, to be spent by December 31, 2010. Fancamp is responsible for contributing
17.5% of these expenses in order to maintain its proportionate interest in the project.
Fancamp and Sheridan remain the 50/50 owners of the Lamellee South Iron Property located in the
immediate vicinity of Harvey Tuttle. This property, which has never been drilled, hosts extensive
magnetite/hematite iron formation with a Bloom Lake scale airborne magnetic signature. Champion
Minerals retain a right of first refusal on the property.
50% Owned Villebon Property, Quebec
The Company’s 50% held (50% Sheridan Platinum Group) nickel-copper-PGE project, known as the
Villebon Property, in northern Quebec, has been optioned to LiteWave Corp. and St-Georges Minerals
Inc.
To acquire up to 100% ownership in the property, St-Georges will issue a total of 2,250,000 common
shares to Fancamp and Sheridan (issued). Litewave will be required pay the vendors $200,000 over two
years and then an annual advance royalty payment of $20,000 at the end of the third year. The Property
is subject to a 2% Net Smelter Return (“NSR”) on 18 claims and to a 1% NSR on the 5 claims covering
the Villebon Zone. A total of 1% of the 2% NSR can be purchased for $1,000,000. This option had been
delayed but is now in progress. Litewave will reimburse the partner’s property payments totaling $80,000
made to Les Ressources Tectonic on their behalf for the original 5 claims on the Villebon nickel zone.
On December 10, 2009, St-Georges Platinum and Base Metals Ltd. (“SX”) entered into an acquisition
agreement to acquire the properties of St-George Minerals Ltd. (“SGM”) whereby the shares of SX will be
dividended to the shareholders of SGM whereby each holder of a share of SGM will receive 2 shares of
SX. As a result, the Company will receive a total of 2,250,000 common shares of SX.
Other Properties
See Note 5 – Mineral Properties Interests attached to the financial statements for the year ended July 31,
2010 for further information on the Company’s other mineral property holdings.
INVESTMENT IN THE MAGPIE MINES INC.
The Company’s 48.64% owned investment, The Magpie Mines Inc., completed an independent 43-101
compliant report on its titaniferous magnetite deposit.
The 43-101 compliant mineral resources based on three drill holes are as follows:
Indicated: 84M tonnes @ 42.4% Fe 10.7% TiO
2
1.6% Cr
Inferred: 201M tonnes @ 42.1% Fe 10.6% TiO
2
1.5% Cr
This estimate covers about 30% of the total strike length of Deposit #2, whose historical, non 43-101
compliant resource measured 898, 104, 290 short tons @ 43.7% Fe, 10.6% TiO2, 1.55% Cr. (It is
noteworthy, with respect to these historic estimates, that the geological interpretations used in their
calculations by Stratmat in 1960, have been largely confirmed by the new drilling.)
The immense scale of the Magpie Deposits, and their cost efficient open pit production possibilities, make
them a prime candidate for a long term mining operation, recovering iron and titanium and possible
chromium and vanadium byproducts. Metallurgical testing is underway.
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SUMMARY OF QUARTERLY RESULTS
Selected financial information for the quarter ended July 31, 2010 and the preceding 7 quarters:
2nd Quarter 3rd Quarter 4th Quarter 1st Quarter
Three Months Ended October 31, 2009 January 31, 2010 April 30, 2010 July 31, 2010
Mineral Property Option and Royalty Revenue $25,000 $114,500 $311,853 $1,100,500
Net Income (Loss) ($21,616) ($348,051) $676,337 $1,055,384
Income (Loss) Per Share $0.01 ($0.01) $0.01 $0.02
Fully Diluted Income (Loss) Per Share $0.01 ($0.01) $0.01 $0.02
2nd Quarter 3rd Quarter 4th Quarter 1st Quarter
Three Months Ended October 31, 2008 January 31, 2009 April 30, 2009 July 31, 2009
Mineral Property Option Revenue $2,297,251 $62,500 ($60,369) $38,981
Net Income (Loss) $2,259,638 $617,188 ($1,127,373) $548
Income (Loss) Per Share $0.08 $0.02 ($0.04) $0.00
Fully Diluted Income (Loss) Per Share $0.07 $0.02 ($0.04) $0.00
The net income for the current quarter can be mainly attributed to the option payments received from
Champion Minerals Inc. on completion of the option on the Fermont Iron Property. Net income in other
periods would have also come from property option and royalty payments, while the losses incurred are
mainly due to the costs attributed to stock based compensation calculations.
LIQUIDITY AND CAPITAL RESOURCES
The Company is an exploration stage company in the business of mineral exploration. It is in the process
of exploring its mineral properties interests and has not yet determined whether these properties contain
ore reserves that are economically recoverable. With no producing properties, the Company has no
current operating income or cash flow. All of the Company’s short and medium-term operating and
exploration cash flow is derived through external financing and joint venture option payments.
The Company had working capital of $6,644,574 as at July 31, 2010 (2009 - $2,832,932).
Also see Note 9 “Contingencies” attached to the financial statements.
OFF BALANCE SHEET ARRANGEMENTS
The Company has no off balance sheet arrangements.
RELATED PARTY TRANSACTIONS
See Note 7 “Related Party Transactions and Balances” attached to the financial statements. In addition,
the Company has a number of joint ventures with Sheridan Platinum Group.
SUBSEQUENT EVENTS
See Note 10 “Subsequent Events” attached to the financial statements.
RISK AND UNCERTAINTIES
The Company is in the mineral exploration and development business and as such, is exposed to a
number of risks and uncertainties inherent in this business. The industry is capital intensive and subject
to fluctuations in metal prices, market sentiment, foreign exchange and interest rates. There is no
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certainty that properties which the Company has deferred as assets on its balance sheet will be realized
at the amounts recorded.
The only source of future funds for further exploration programs or for the development and commercial
production of economic ore bodies are the sale of equity capital or the offering by the Company of an
interest in its properties to be earned by another party carrying out further exploration or development.
There is no assurance that such sources of financing will be available, however, management feels that it
can achieve success in this area for the near future.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions which affect the reported amounts of assets
and liabilities at the date of the financial statements and revenues and expenses for the period. These
estimates are reviewed periodically, and, as adjustments become necessary, they are reported in
operations in the period in which they become known.
In accordance with
CICA Handbook Section 3870 (“Section 3870”), Stock-Based Compensation and
Other Stock-Based Payments,
the Company recognizes stock-based compensation expense for the
estimated fair value of equity-based instruments granted to both employees and non-employees.
Compensation costs attributable to stock options or similar equity instruments granted to employees are
measured at the fair value at the grant date, and expensed over the expected vesting period.
Transactions in which goods or services are received from non-employees in exchange for the issuance
of equity instruments are accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable.
Long-lived assets of the Company are reviewed when changes in circumstances suggest their carrying
value has become impaired. Management considers assets to be impaired if the carrying value exceeds
the estimated undiscounted future projected cash flows to result from the use of the asset and its
eventual disposition. If impairment is deemed to exist, the assets will be written down to fair value. Fair
value is generally determined using a discounted cash flow analysis.
Future income tax assets and liabilities are recorded where the accounting net book value of assets and
liabilities differ from their corresponding tax bases. The benefit of future income tax assets is only
recognized when their realization is considered more likely than not.
The Company recognizes into income a future income tax benefit on the renouncement of Canadian
exploration expenditures to its flow-through share investors.
CHANGES IN AND ADOPTION OF ACCOUNTING POLICIES
The Company did not make any changes to its accounting policy during the year.
NEW ACCOUNTING PRONOUNCEMENTS
The following pronouncement recently issued by the Canadian Institute of Chartered Accountants
(“CICA”) will likely impact the Company’s future accounting policies:
In January 2009, the CICA issued Section 1582 “Business Combinations” to replace Section 1581.
Prospective application of the standard is effective January 1, 2011, with early adoption permitted. This
new standard effectively harmonizes the business combinations standard under Canadian GAAP with
International Financial Reporting Standards (“IFRS”). The new standard revises guidance on the
determination of the carrying amount of the assets acquired and liabilities assumed, goodwill and
accounting for non-controlling interests at the time of a business combination.
The CICA concurrently issued Section 1601 “Consolidated Financial Statements” and Section 1602 “Non-
Controlling Interests” which replace Section 1600 “Consolidated Financial Statements. Section 1601
- 9 -
provides revised guidance on the preparation of consolidated financial statements and Section 1602
addresses accounting for non-controlling interests in consolidated financial statements subsequent to a
business combination. These standards are effective January 1, 2011, unless they are early adopted at
the same time as Section 1582 “Business Combinations”.
In January 2009, the CICA issued EIC Abstract 173, “Credit Risk and the Fair Value of Financial Assets
and Financial Liabilities”. The EIC requires the Company to take into account the Company’s own credit
risk and the credit risk of the counterparty in determining the fair value of financial assets and financial
liabilities, including derivative instruments. The abstract applies to interim and annual financial statements
relating to fiscal years beginning on or after January 1, 2010. The Company is currently assessing the
impact of the new standard on its financial statements.
In December 2009, the CICA issued EIC 175, Multiple Deliverable Revenue Arrangements, replacing EIC
142, Revenue Arrangements with Multiple Deliverables. This abstract was amended to: (1) provide
updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should
be separated, and the consideration allocated; (2) require, in situations where a vendor does not have
vendor specific objective evidence (“VSOE”) or third-party evidence of selling price, that the entity
allocate revenue in an arrangement using estimated selling prices of deliverables; (3) eliminate the use of
the residual method and require an entity to allocate revenue using the relative selling price method; and
(4) require expanded qualitative and quantitative disclosures regarding significant judgments made in
applying this guidance.
The accounting changes summarized in EIC 175 are effective for fiscal years beginning on or after
January 1, 2011, with early adoption permitted. Adoption may either be on a prospective basis or by
retrospective application. If the Abstract is adopted early, in a reporting period that is not the first reporting
period in the entity’s fiscal year, it must be applied retroactively from the beginning of the Company’s
fiscal period of adoption.
In February 2008 the Canadian Accounting Standards Board announced 2011 as the changeover date
for publicly listed companies to use IFRS, replacing Canada’s own generally accepted accounting
principles. The specific implementation is set for interim and annual financial statements relating to fiscal
years beginning on or after January 1, 2011. The transition date of May 1, 2011 will require restatement
for comparative purposes of amounts reported by the Company for the year ended April 30, 2011. While
the Company has begun assessing the adoption of IFRS for 2011, the financial reporting impact of the
transition to IFRS cannot be reasonably estimated at this time.
The Company’s conversion plan to transition from Canadian GAAP to IFRS consists of three phases:
• Phase 1 (Scoping and diagnostic) – A preliminary diagnostic review which included the determination, at
a high level, of the financial reporting differences and options under IFRS and the key areas that may be
impacted was completed in 2010.
• Phase 2 (Impact analysis, quantification and evaluation) – In this phase, the Company will perform a
detailed assessment and technical analysis of each area identified from Phase 1 that will result in the
conclusion of IFRS transitional adjustments, decisions on accounting policy choices and the drafting of
accounting policies. The Company has started this second phase with completion expected in the second
quarter of 2011.
• Phase 3 (Implementation phase) – This phase includes the collection of financial information necessary
to compile IFRS compliant financial statements and the preparation of the opening balance sheet as at
May 1, 2010 and will be carried out in the second half of its fiscal year 2011.
The Company will also continue to monitor standards development as issued by the IASB and the AcSB
as well as regulatory developments as issued by the Canadian Securities Administrators, which may
affect the timing, nature or disclosure of its adoption of IFRS.
- 10 -
The Company is currently assessing the future impact of these amendments on its financial statements
and has not yet determined the timing and method of its adoption.
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The information provided in this report, including the financial statements, is the responsibility of
management. In the preparation of these statements, estimates are sometimes necessary to make a
determination of future values for certain assets or liabilities. Management believes such estimates have
been based on careful judgments and have been properly reflected in the financial statements.
DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures have been designed to ensure that information required to be
disclosed by the Company is accumulated and communicated to the Company’s management as
appropriate to allow timely decisions regarding required disclosure. The Company’s Chief Executive
Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period
covered by the annual filings, that the Company’s disclosure controls and procedures as of the end of
such period are effective to provide reasonable assurance that material information related to the
Company, is made known to them by others within those entities. It should be noted that while the
Company’s Chief Executive Officer and Chief Financial Officer believe that the Company’s disclosure and
controls and procedures provide a reasonable level of assurance that they are effective, they do not
expect that the disclosure controls and procedures will prevent all errors and fraud. A control system, no
matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met.
INTERNAL CONTROLS OVER FINANCING REPORTING
The Chief Executive Officer and the Chief Financial Officer of the Company are responsible for designing
a system of internal controls over financial reporting, or causing them to be designed under their
supervision, in order to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external reporting purposes in accordance with Canadian
generally accepted accounting principles. We have designed and implemented a system of internal
controls over financial reporting which we believe is effective for a company of our size. During the review
of the design of the Company’s control system over financial reporting it was noted that due to the limited
number of staff, there is an inherent weakness in the system of internal controls due to our inability to
achieve appropriate segregation of duties. The limited number of staff may also result in identifying
weaknesses with respect to accounting for complex and non-routine transactions due to a lack of
technical resources, and a lack of controls governing our computer systems and applications within the
Company. While management of the Company has put in place certain procedures to mitigate the risk of
a material misstatement in the Company’s financial reporting, it is not possible to provide absolute
assurance that this risk can be eliminated.
CAUTION REGARDING FORWARD LOOKING STATEMENTS
Statements contained in this document, which are not historical facts, are forward looking statements that
involve risks, uncertainties and other factors that could cause actual results to differ materially from those
expressed or implied by such forward looking statements. Factors that could cause differences include,
but are not limited to, are volatility and sensitivity to market prices for base metals, environmental and
safety issues, changes in government regulations and policies and significant changes in the supplydemand
fundamentals for base metals that could negatively affect prices. Although the Company
believes that the assumptions used are reasonable, these statements should not be heavily relied upon.
The Company disclaims any intention or obligation to update or revise any forward looking statements
whether as a result of new information, future events or otherwise.
- 11 -
CORPORATE INFORMATION – AS AT JULY 31, 2010
TSX Venture Exchange Trading Symbol: FNC
Authorized Capital: Unlimited common shares
Shares Outstanding: 46,652,787 common shares
Fully Diluted Shares Outstanding: 60,502,856 common shares
Head Office: 7290 Gray Avenue
Burnaby, B.C., V5J 3Z2
Telephone: 604-434-8829
Facsimile: 604-434-8823
Regional Office: 340 Victoria Avenue
Westmount, Quebec, H3Z 2M8
Telephone: 514-481-3172
Facsimile: 514-481-8943
Transfer Agent: Computershare
2
nd
Floor, 510 Burrard Street
Vancouver, B.C., V6C 3B8
Auditor: Chang Lee LLP
606-815 Hornby Street
Vancouver, B.C., V6Z 2E6
Directors: Peter H. Smith, PhD., P. Eng., President and Director
Debra Chapman, Secretary and Director
Gilles Dubuc, Director
Michael Sayer, Director
Fouad Kamaleddine, Director
Robert Granger Q.C., Director
For further information see the Company’s website:
www.fancampexplorationltd.ca
6 Recommendations
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