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MAXIMUS VENTURES LTD.
Management Discussion and Analysis
For the Nine Months ended June 30, 2006
This discussion and analysis of financial position and results of operations is prepared as at August 28,
2006 and should be read in conjunction with the unaudited consolidated financial statements for the nine
months ended June 30, 2006 of Maximus Ventures Ltd. (the “Company”) with the related notes thereto.
Those unaudited consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles for interim financial statements. All dollar amounts included
therein and in the following management discussion and analysis (“MD&A”) are expressed in Canadian
dollars except where noted. This discussion contains forward-looking statements that involve risks and
uncertainties. Such information, although considered to be reasonable by the Company’s management at
the time of preparation, may prove to be inaccurate and actual results may differ materially from those
anticipated in the statements made. Additional information on the Company is available for viewing on
SEDAR at
www.sedar.com.Overview
The Company is engaged in the exploration for gold-silver properties. Its primary assets are an option to
earn a 75 percent joint venture interest with Miramar Mining Corporation (“Miramar”) in two properties in
the Hope Bay gold belt in Nunavut and an option to earn a 60 percent joint venture interest in interests
held by NFX Gold Corporation (“NFX”). in the Larder Lake area of eastern Ontario. The Company is also
conducting field reviews and has initiated acquisition of mineral rights on several early stage precious
metal properties in Nevada in the United States.
Highlights of the Third Quarter
• On May 23, 2006, the Company completed a $4.25 million private equity financing. The
financing was comprised on 5 million units at a price of $0.40 per unit and 4.5 million flowthrough
common shares at a price of $0.50 per share. The units consist of one common share and
one-half of one share purchase warrant. Each whole warrant entitles the holder to one additional
common share of the Company at a price of $0.60 per share until November 23, 2007.
• Drilling resumed at the Larder Lake gold project in eastern Ontario in late May.
• Exploration field work resumed at the Hope Bay gold project in Nunavut in May.
• Subsequent to the quarter, on July 4, 2006 the Company acquired 8 million common shares of
NFX under the terms of an option and joint venture agreement.
Exploration Activities
• Hope Bay Project, Nunavut
During the year ended September 30, 2004, the Company entered into an option agreement with Miramar
whereby the Company can earn a 75% interest in the Eastern Contact and Twin Peaks areas in the Hope
Bay gold belt in Nunavut. The Eastern Contact and Twin Peaks claim blocks cover 115 square kilometers
in the northern part of the Hope Bay gold belt. Exploration work at Hope Bay is done by Miramar under
contract to the Company. On March 20, 2006, the Company amended the terms of the agreement to
include an option on the Chicago claim block of Hope Bay. The Chicago claim block at the southwest end
of the Hope Bay Gold Belt was determined to have potential for both gold and base metal mineralization.
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Exploration funding terms were amended to require cumulative expenditures of at least $3,250,000 by
April 30, 2007, $5,250,000 by April 30, 2008, and $7,250,000 by April 30, 2009 to earn a 75% interest in
the Chicago and Twin Peaks claim blocks. Other terms in the Agreement remain unchanged and the field
work will continue to be carried out by Miramar under the direction of the Company.
In May, geophysical and geochemical surveys were started at Twin Peaks and Chicago. Work consisted of
ground magnetic and to map rock contacts under post-mineral cover and electromagnetic surveys to locate
conductive zones that may be carrying pyrite, a mineral commonly associated with gold at Hope Bay.
Upon completion of these surveys data will be analyzed to determine if drill targets are present. Work was
ongoing at the end of the quarter.
• Larder Lake Project, Ontario
On March 7, 2006 the Company completed an option and joint venture agreement with NFX to acquire a
60% interest in the Cheminis, Bear Lake and Fenland properties and a 45% interest in the Barber Larder
property, collectively the Larder Lake properties in Ontario. Under the agreement, the Company would
earn a 60% interest in the Larder Lake property by expending $6,000,000 on or for the benefit of the
property by December 31, 2008. Minimum expenditures must total $1,200,000 by December 31, 2006.
Also, NFX was to issue 8,000,000 NFX warrants expiring in annual blocks or under certain market share
price thresholds. Subsequent to the quarter, on July 4, 2006 the Company acquired 8,000,000 common
shares of NFX under the terms of an option and joint venture agreement.
The Larder Lake project extends about 6 kilometers along the Kirkland Lake-Cadillac fault zone, a
regional scale geologic structure that includes the Cheminis mine at Larder Lake and numerous other gold
occurrences and mines. Drilling in December 2005 and January 2006 identified several additional fault
zones as targets for further drilling. Results of the December and January drilling were reported in a news
release dated February 7, 2006.
Drilling resumed in late May 2006 as reported in a news release dated June 5, 2006. Three objectives were
identified for the 2006 drill program:
1. High grade mineralization below and adjacent to the Cheminis gold mine and the
Fernland and Bear Lake prospects,
2. Shallow, near-surface zones of gold mineralization for resources that might be mined in
an open pit, and
3. Gold targets on the regional faults identified during the 2005 drilling program.
At the end of June, 2006 1,109 meters of diamond drilling had been completed in 3 holes.
Financing Activities
• Private Equity Financing
On May 24, 2006 the Company completed a private equity placement which had raised gross proceeds of
$4,250,000. The private placement comprised 4,500,000 flow-through common shares of the Company at
a price of $0.50 per share and 5,000,000 units of the Company at a price of $0.40 per unit, each unit
consisting of one common share and one-half of one common share purchase warrant. Each whole share
purchase warrant entitles the holder thereof to purchase one additional common share of the Company
until November 23, 2007, at an exercise price of $0.60 per share. However, if the trading price of the
shares of the Company closes at or above $0.80 per share for 20 consecutive trading days any time after
September 24, 2006, then the Company will have the right to provide written notice to the warrant holders
to exercise all unexercised warrants within 30 days or the warrants will be cancelled. No flow-through
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benefits attach to any common shares comprising the units or any common shares issuable upon the
exercise of the common share purchase warrants.
In consideration for completing the private placement the brokers were paid a cash commission totalling
$255,000 and granted non-transferable Agents' Warrants exercisable to purchase a total of up to 570,000
common shares of the Company until November 23, 2007, at an exercise price of $0.45 per share. All of
the shares and warrants, and any shares issued upon exercise thereof, issued with respect to the private
placement are subject to a four-month hold period expiring September 24, 2006, and may not be traded
except as permitted under applicable securities legislation and the policies of the TSX Venture Exchange.
The proceeds of the flow-through shares sold under the private placement, in the amount of $2,250,000,
will be used for exploration of the Company’s gold projects near Larder Lake in eastern Ontario and at
Hope Bay in Nunavut and must be expended as qualifying CEE expenses by December 31, 2007 in
accordance with the Income Tax Act (Canada). The proceeds of the units sold under the private placement
will be used for working capital.
• Acquisition of NFX Units
On April 21, 2006 the Company announced the acquisition of common share purchase warrants of NFX
exercisable to acquire in the aggregate up to 8,000,000 common shares of NFX, which would represent, if
exercised, approximately 17.2% of the issued and outstanding common shares of NFX. The NFX warrants
were acquired pursuant to the option and joint venture agreement between the Company and NFX dated
March 3, 2006 whereby the Company was granted an option to acquire interests in the NFX Larder Lake
properties in Ontario by incurring expenditures over a three-year period. The Company owned no
securities of NFX prior to the option and joint venture agreement. Subsequent to the quarter, on July 4,
2006 the Company acquired 8 million common shares of NFX Gold Corporation (“NFX”) under the terms
of an option and joint venture agreement.
Results of Operations
For the nine months ended June 30, 2006, the loss for the period was $210,172 compared to a loss of
$334,206 during the nine months ended June 30, 2005. The decreased loss in the current period is
primarily a result of a decrease in management and consulting fees. This was a result of certain
management and consulting contracts that were terminated in the previous year.
During the nine months ended June 30, 2006, the Company incurred Property Acquisition and Deferred
Exploration Costs of $1,393,987 (September 30, 2005 - $1,370,471).
Expenses
The Company incurred $251,427 in expenses in the nine months ended June 30, 2006, compared to
expenses of $315,925 in the comparative period. The most significant expense during the current period
was professional fees of $84,523 (2005 - $18,556). This increase was directly a result of the significant
activity undertaking during the current quarter compared to 2005, which included the Company
completing of the $4.25 million private placement and the Larder Lake property acquisition. Most other
expense items decreased in the nine months ended June 30, 2006 compared to the previous period.
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Other Items
The Company earned $36,392 (2005 - $10,352) in interest income through its short-term investments held.
During the nine months ended June 30, 2005, the Company wrote-off $4,513 worth of equipment and
incurred interest expense of $24,120. This interest expense relates to unspent flow-through funds pursuant
to the Canadian Tax Act.
Quarterly Information
The following table sets forth selected unaudited consolidated financial information prepared by
management of the Company.
Summary of Quarterly Results
Quarter
Ended
June 30,
2006
Quarter
Ended
Mar 31,
2006
Quarter
Ended
Dec 31,
2005
Quarter
Ended
Sept 30,
2005
Revenue – interest $ 23,501 $ 5,317 $ 7,574 $ 8,642
Net income (loss) for the period (64,128) (96,769) (49,275) 516,490
Earnings (loss) per share (0.01) (0.01) (0.01) (0.01)
Diluted earnings (loss) per share (0.01) (0.01) (0.01) (0.01)
Quarter
Ended
June 30,
2005
Quarter
Ended
Mar 31,
2005
Quarter
Ended
Dec 31,
2004
Quarter
Ended
Sept 30,
2004
Revenue – interest $ 3,870 $ 3,012 $ 3,470 $ 1,414
Loss for the period (81,805) (84,190) (168,211) (967,714
Loss per share (0.01) (0.01) (0.01) (0.10)
Diluted loss per share (0.01) (0.01) (0.10) (0.10)
Fiscal 2006
There were several significant changes in the key financial data during the third quarter of fiscal 2006.
The Company completed a $4.5 million brokered private placement financing. The Company also
incurred approximately $450,000 in exploration expenditures primarily on the Larder Lake and Hope Bay
projects. Also during the period, 1,333,316 share purchase warrants were exercised for proceeds totaling
$266,663. During the second quarter, the Company issued 500,000 common shares valued at $177,500
pursuant to the acquisition of the Hope Bay project. The Company also incurred $15,890 in stock-based
compensation expense as a result of the granting of 200,000 stock options. These options are vesting over
an 18 month period. During the first quarter, The Company incurred $593,767 in exploration expenditures
primarily on the Hope Bay and Larder Lake projects.
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Fiscal 2005
In the fourth quarter of 2005, the Company had a $583,000 charge against capital stock and a
corresponding recovery to income as a result of the renouncement of the $1,707,500 in exploration
expenditures from a flow-through financing. Also during the fourth quarter, the Company granted
incentive stock options resulting in a stock-based compensation expense of $51,174. Lastly in the fourth
quarter, the Company issued 9,299,966 units at $0.15 per unit for total proceeds of $1,394,995 pursuant to
a private placement. In the third quarter, the Company incurred $328,490 in deferred exploration costs on
the Hope Bay project. Most administrative expenses remained constant during the second and third
quarter. During the second quarter, the Company issued 500,000 common shares at a deemed price of
$65,000 to Miramar pursuant to the option agreement on Hope Bay. During the first quarter, the Company
granted 500,000 incentive stock options resulting in a stock-based compensation expense of $55,255. The
Company also incurred $150,000 in deferred exploration expenditures on Hope Bay.
Liquidity and Capital Resources
The Company started 2006 with working capital of about $1,500,000 and had working capital as at June
30, 2006 of approximately $4,000,000. Exploration and administrative expenditures incurred during the
nine months ended June 30, 2006 were funded from cash generated by the transactions noted below:
a) The Company completed a brokered private placement consisting of 5 million units of the
Company at $0.40 per unit and 4.5 million flow-through common shares of the Company at $0.50
per share. The units consist of one common share and one-half of one share purchase warrant.
Each whole warrant entitles the holder to one additional common shares of the Company at a price
of $0.60 per share for a period of 18 months. In connection with this private placement, a finder’s
fee of $255,000 and 570,000 warrants each exercisable for one share at a price of $0.45 per share
for an 18 month period.
b) The Company issued 1,383,316 common shares on the exercise of warrants for proceeds of
$276,663.
For the year ending September 30, 2006, the Company anticipates incurring exploration and property
maintenance expenditures on each of the Company’s held projects. The Company has sufficient working
capital to sustain operations for the next fiscal year. The Company’ main sources of financing are through
issuances of equity.
The Company does not anticipate generating revenues in the near future and intends to continue its mineral
exploration activities. These activities, along with further mineral acquisitions, may need to be funded
through additional equity financings.
Critical Accounting Estimates
The most significant estimates are related to the physical and economic lives of mineral assets, and their
recoverability.
Mineral properties and deferred exploration costs
The Company records its interests in mineral properties and areas of geological interest at cost. All direct
and indirect costs relating to the acquisition of these interests are capitalized on the basis of specific claim
blocks or areas of geological interest until the properties to which they relate are placed into production,
sold or management has determined there to be impairment. These costs will be amortized on the basis of
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units produced in relation to the proven reserves available on the related property following
commencement of production. Mineral properties which are sold before that property reaches the
production stage will have all revenues from the sale of the property credited against the cost of the
property. Properties which have reached the production stage will have a gain or loss calculated based on
the portion of that property sold.
The recorded cost of mineral exploration interests is based on cash paid, the assigned value of share
considerations and exploration and development costs incurred. The recorded amount may not reflect
recoverable value as this will be dependant on the development program, the nature of the mineral deposit,
commodity prices, adequate funding and the ability of the Company to bring its projects into production.
Property option agreements
From time to time, the Company may acquire or dispose of properties pursuant to the terms of option
agreements. Because options are exercisable entirely at the discretion of the optionee, the amounts payable
or receivable are not recorded. Option payments are recorded as resource property costs or recoveries when
the payments are made or received.
Cost of maintaining mineral properties
The Company does not accrue the estimated future costs of maintaining its mineral properties in good
standing.
Environmental protection and reclamation costs
Liabilities related to environmental protection and reclamation costs are accrued and charged to income
when their likelihood of occurrence is established. This includes future removal and site restoration costs
as required due to environmental law or contracts.
Transactions with Related Parties
The Company entered into the following transactions with related parties; these transactions were in the
normal course of operations and were measured at the exchange amount, which is the amount of
consideration established and agreed to by the related parties.
a) Paid consulting fees of $Nil (2005 - $22,700) to Buccaneer Management Ltd. (“Buccaneer”), a
company controlled by a former director.
b) Paid consulting fees of $Nil (2005 - $7,200) to Tabo Investments Ltd. (“Tabo”), a company
controlled by a former director.
c) Paid consulting fees of $Nil (2005 - $9,000) to Barbara Dunfield, a former director of the
Company.
d) Paid management fees of $Nil (2005 - $8,000) to Tabo.
e) Paid management fees of $55,282 (2005 - $90,369) to Exploration Management LLC
(“Exploration Management”) a company controlled by the President of the Company.
f) Paid rent expense of $Nil (2005 - $8,000) to
641485 BC Ltd., a company controlled by a former
director.
g) Paid or accrued mineral property expenditures of $452,594 (September 30, 2005 - $1,103,651) to
Miramar Mining Corporation (“Miramar”), a company with a common director and $27,992
(September 30, 2005 - $56,919) for services provided by Exploration Management.
h) As at June 30, 2006, prepaid expenses included $Nil (September 2005 - $9,603 paid to
Exploration Management. An exploration advance of $269,245 (September 2005 - $59,982) was
paid to Miramar.
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Outlook
The Company has sufficient financial resources to meet December 31, 2006 expenditure requirements at
Larder Lake, to drill at Hope Bay until the exploration season ends, and to continue reconnaissance for
new exploration opportunities well into 2007, if justified by the results of ongoing work programs. The
Company expects to initiate drilling at the Hope Bay project in Nunavut during the fourth quarter
subsequent to receiving recommendations from Miramar Mining Corporation based on results of magnetic,
electromagnetic, and geochemical surveys.
On July 18, 2006 the Company announced the results of initial assaying from diamond drilling at the
Larder Lake project in eastern Ontario where two diamond drill holes (1150 meters) were completed and a
third hole was started in western part of the Larder Lake Property. Assays reported were as follows:
Hole Numbers From (m) To (m) Length (m) (1) Gold (g/t) (2) Mineralization
Type (3)
PR-06-13 301.15 303.40 2.25 3.88 Flow
including 302.10 302.40 0.30 15.63 Flow
PR-06-15 371.60 375.65 4.05 5.12 Flow
including 372.15 374.40 2.25 7.30 Flow
And 483.40 487.75 4.35 5.69 Carbonate
including 484.35 485.75 1.40 10.18 Carbonate
Notes:
(1) Meters. Length is reported in meters of drilled core and is not necessarily the "true" width.
(2) Au g/t. Gold grades are reported in units of grams per tonne gold. All gold assays were performed by Expert
Laboratories in Rouyn, QC using standard fire assaying protocols. Assay results from the 2006 drill program are
considered accurate, precise and free of contamination as determined from assay results of quality control certified
reference standards, field blank standards and duplicate samples submitted during the program. Core recovery
generally exceeded 95%. All other assays are less than 1.00 g/t Au
(3) Flow - contains abundant pyrite in altered volcanic rock. Carbonate - contains abundant ankerite, quartz veins,
occasional visible gold, and only minor pyrite.
Drilling is continuing at the project. Most of the holes planned for the 2006 program will be widely spaced
and designed to test areas with few or no previously known drill holes. Assays may not be easily
correlated with other holes in the project area so their importance may be difficult to interpret until
additional drilling is completed. As a matter of policy for reporting assays in the future, the Company will
release all assay results from the drill program either when the drilling has been completed or at such
earlier time as the Company deems the results to be material or considers that results can be presented in
the correct geological context.
Subsequent Events
Subsequent to June 30, 2006, the following events occurred:
a) On July 7, 2006 the Company acquired 8,000,000 common shares of NFX upon exercise of
warrants acquired under an option and joint venture agreement.
To exercise the warrants the Company borrowed $2,000,000 from Laurentian Mountain Investment Ltd.
(“LMI”), a private company controlled by the chairman and director of the Company. The LMI loan is
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unsecured, non-interest bearing and is to be repaid from the first $2,000,000 of proceeds from the sale of
NFX shares. The terms of the LMI loan agreement provide for the issuance to LMI of 500,000 common
shares of The Company (issued) and the right to a 10% participation in net proceeds from the sale of NFX
shares after repayment of the loan principal, up to a maximum of $200,000.
The Company has also signed an option agreement with Kodiak International Inc. (“Kodiak”), which gives
Kodiak a 90 day option to purchase from the Company in whole or in part in multiples of 500,000 shares,
8,000,000 shares of NFX at an average price of $0.725 per share.
Other MD&A Requirements
As of August 14, 2006, the Company has:
a) 46,792,330 common shares outstanding;
b) 1,400,000 stock options outstanding with exercise prices ranging from $0.10 to $0.30 and expiring
from November 2009 to March 2011; and
c) 7,336,667 share purchase warrants outstanding with exercise prices ranging from $0.20 to $0.60
per share expiring from September 2006 to November 23, 2007.
Additional information is available on SEDAR at
www.sedar.comCautionary Statement on Forward Looking Information
This Management Discussion and Analysis may contain forward-looking statements that involve risks and
uncertainties. When used in this Management Discussion and Analysis, the words “believe,” “anticipates,”
“expects” and similar expressions are intended to identify such forward looking statements. The Issuer’s
actual results may differ significantly from the results discussed in the forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Issuer undertakes no obligation to publicly release the results of any revisions to these
forward-looking statements that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
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