Item
2. Management’s discussion and analysis of financial condition and results of
operations
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly
Report constitute "forward-looking statements.” These statements,
identified by words such as “plan,” "anticipate,” "believe,”
"estimate,” "should,” "expect" and similar expressions
include our expectations and objectives regarding our future financial
position, operating results and business strategy. Forward-looking statements
involve known and unknown risks, uncertainties, assumptions and other factors
that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such factors include, among others,
general business, economic, competitive, political and social uncertainties;
the actual results of current exploration and development activities; changes
in project parameters as plans continue to be refined; changes in labour costs
or other costs of production; future mineral prices; equipment or processes to
operate as anticipated; accidents, labour disputes and other risks of the
mining industry, including but not limited to environmental hazards, cave-ins,
pit-wall failures, flooding, rock bursts and other acts of God or unfavourable
operating conditions and losses; delays in obtaining governmental approvals or
financing or in the completion of development or construction activities, as
well as those factors discussed in the section titled "Risk Factors" in
our Annual Report on Form 10-K which was filed with the SEC on July 27, 2017.
Forward looking statements are based on a
number of material factors and assumptions, including the results of
exploration/development and drilling activities, the availability and final
receipt of required approvals, licenses and permits, that sufficient working
capital is available to complete proposed exploration/development and drilling
activities, that contracted parties provide goods and/or services on the agreed
time frames, the equipment necessary for exploration/development is available
as scheduled and does not incur unforeseen break downs, that no labour
shortages or delays are incurred and that no unusual geological or technical
problems occur. While we consider these assumptions may be reasonable based on
information currently available to it, they may prove to be incorrect. Actual
results may vary from such forward-looking information for a variety of
reasons, including but not limited to risks and uncertainties disclosed in the
section titled “Risk Factors” in our Annual Report on Form 10-K which was filed
with the SEC on July 27, 2017.
We intend to discuss in our Quarterly Reports
and Annual Reports any events or circumstances that occurred during the period
to which such documents relate that are reasonably likely to cause actual
events or circumstances to differ materially from those disclosed in this Quarterly
Report. New factors emerge from time to time, and it is not possible for
management to predict all of such factors and to assess in advance the impact
of each such factor on our business or the extent to which any factor, or
combination of such factors, may cause actual results to differ materially from
those contained in any forwarding looking statement.
CAUTIONARY
NOTE TO U.S. INVESTORS REGARDING ESTIMATES OF MEASURED, INDICATED AND INFERRED
RESOURCES AND PROVEN AND PROBABLE RESERVES
The terms “mineral reserve”, “proven mineral
reserve” and “probable mineral reserve” as used in this Quarterly Report are
Canadian mining terms as defined in accordance with Canadian National
Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”)
and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) –
CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by
the CIM Council, as amended (the “CIM Definition Standards”). These definitions
differ from the definitions in the United States Securities and Exchange
Commission (“SEC”) Industry Guide 7 (“SEC Industry Guide 7”) under the United
States Securities Act of 1933, as amended (the “Securities Act”). Under SEC
Industry Guide 7 standards, a “final” or “bankable” feasibility study is
required to report reserves, the three-year historical average price is used in
any reserve or cash flow analysis to designate reserves, and the primary
environmental analysis or report must be filed with the appropriate
governmental authority.
In addition, the terms “mineral resource”,
“measured mineral resource”, “indicated mineral resource” and “inferred mineral
resource” are defined in and required to be disclosed by NI 43-101; however,
these terms are not defined terms under SEC Industry Guide 7 and are normally
not permitted to be used in reports and registration statements filed with the
SEC. Investors are cautioned not to assume that all or any part of a
mineral deposit in these categories will ever be converted into reserves.
“Inferred mineral resources” have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal feasibility. It
cannot be assumed that all, or any part, of an inferred mineral resource will
ever be upgraded to a higher category. Under Canadian rules, estimates of
inferred mineral resources may not form the basis of feasibility or
pre-feasibility studies, except in rare cases. Investors are cautioned not to
assume that all or any part of an inferred mineral resource exists or is
economically or legally mineable. Disclosure of unit measures in a resource is
permitted disclosure under Canadian regulations; however, the SEC only permits
issuers to report mineralization that does not constitute “reserves” by SEC
standards as in place tonnage and grade without reference to
unit measures.
18
Accordingly, information contained in this Quarterly
Report and any documents incorporated by reference herein contain descriptions
of our mineral deposits that may not be comparable to similar information made
public by U.S. companies subject to the reporting and disclosure requirements
under the United States federal securities laws and the rules and
regulations thereunder.
As
used in this Quarterly Report, unless the context otherwise requires, “we,”
“us,” “our,” the “Company” and “I-Minerals” refers to I-Minerals Inc. All
dollar amounts in this Quarterly Report are in U.S. dollars unless otherwise
stated.
General
We
were incorporated under the laws of British Columbia, Canada in 1984. In 2004,
we changed our corporate jurisdiction from a British Columbia company to a
Canadian corporation. In December 2011, we amended our articles to change our
name from “i-minerals inc.” to “I-Minerals Inc.”
The
Company is engaged in the development of our Helmer-Bovill industrial minerals
property (the “Helmer-Bovill Property”). The Helmer-Bovill Property, in which
we hold a 100% interest, is comprised of 11 mineral leases totaling 5,140.64
acres located approximately 6 miles southwest of Bovill, Latah County, Idaho.
Since inception, the Company has been in the exploration stage but moved into
the development stage in fiscal 2018.
We
acquired the Helmer-Bovill Property from Idaho Industrial Minerals (“IIM”)
pursuant to an Assignment Agreement with Contingent Right of Reverter (the “IIM
Agreement”) dated August 12, 2002, as amended August 10, 2005, August 10, 2008
and January 21, 2010, between I-Minerals USA (formerly Alchemy Kaolin
Corporation), our wholly owned subsidiary, and IIM. Under the terms of the IIM
Agreement, we issued a total of 1,800,000 common shares to IIM.
Our
principal executive office is located at Suite 880, 580 Hornby Street,
Vancouver, British Columbia, Canada and our telephone number is (877) 303-6573.
To
date, we
have
not
earned significant revenues from the operation of our Helmer-Bovill Property. Accordingly, we are dependent on debt
and equity financing as our primary source of operating working capital. Our capital resources
are largely determined by the strength of the junior resource markets and by
the status of our projects in relation
to these markets, and its ability to compete for investor support of its
projects.
Our
Principal Projects
Our
activities at the Helmer-Bovill Property are focused on developing the Bovill
Kaolin Project and the WBL Tailings Project.
The
Bovill Kaolin Project
Our
lead project, the Bovill Kaolin Project, is a strategically located long term
resource of high purity quartz, potassium feldspar (“K-spar”), halloysite and
kaolinite formed through weathering of a border phase of the Idaho Batholith
causing all minerals to be contained within a fine white clay-sand mixture
referred to as “primary clay.” The Bovill Kaolin Project
is located within 3 miles of state highways with electricity and natural gas
already at the property boundary.
Since
2010, our exploration work has focused diamond drilling on the Bovill Kaolin
Project. To date, a total of 258 diamond drill holes have been drilled
totaling 28,251 feet. As a result of these drill campaigns, four deposits have
been identified: Kelly’s Hump, Kelly’s Hump South, Middle Ridge and WBL.
In
June 2014, we completed an updated pre-feasibility study on the Bovill Kaolin
Project (the “2014 PFS”) and on March 8, 2016, we announced the economic
results of our full feasibility study (the “2016 FS”), which included the following
highlights:
-
Updated
Measured and Indicated Resource Estimate
-
Measured
Resources of 5.7 million tons containing 76.5% quartz/K-spar sand, 12.3%
Kaolinite and 4.0% Halloysite.
-
Indicated
Resources of 15.5 million tons containing 57.0% quartz/K-spar sand, 15.5%
Kaolinite and 2.8% Halloysite.
-
667,000 tons of contained halloysite, 3,119,000 tons of contained
kaolinite and 13,235,000 tons of contained quartz/K-spar.
-
Updated
Mineral Reserves. All figures are in thousands of tons.
19
Reserve
|
Proven
|
Probable
|
Total P&P
|
Tons (1000s)
|
4,155
|
4,548
|
8,702
|
Halloysite %
|
4.8
|
4.0
|
4.4
|
Halloysite Tons
(1000s)
|
200
|
182
|
382
|
Kaolinite %
|
11.1
|
12.5
|
11.8
|
Kaolinite Tons
(1000s)
|
460
|
568
|
1,028
|
Sand %
|
77.8
|
76.8
|
77.3
|
Sand Tons (1000s)
|
3,234
|
3,491
|
6,725
|
Note that values
presented here have been rounded to reflect the level of accuracy.
Proven and Probable
Mineral Reserves are presented using a $57.00 NSR cutoff grade.
-
Economic
Analysis
-
US$386
million Pre-Tax NPV; US$249.8 million After Tax NPV using a 6% discount rate.
-
31.6%
Pre-Tax IRR; 25.8% After Tax IRR.
-
Initial
Capital Cost of $108.3 million and Total Life of Mine capital costs $120.0
million.
-
Life
of Mine in excess of 25 years with a stripping ratio of 0.54:1 (waste:ore).
-
3
year estimated after tax payback.
The
full feasibility study was filed on www.sedar.com on April 20, 2016 and is available on the Company’s
website. The 2016 FS was prepared by GBM Engineers LLC, Mine Development
Associates, HDR Engineering Inc., SRK Consulting (U.S.), Inc. and Tetra Tech. Going
forward our focus is to complete the detailed engineering and commence efforts
to raise the capital necessary to build the mine.
In
May 2017, the Idaho Department of Lands (“IDL”) accepted our operation and
reclamation plan. Together with a water rights permit from the Idaho
Department of Water Resources, we are able to proceed with development and
construction of the mine, subject to obtaining sufficient financing. Effective
May 1, 2017, the Company entered into the development stage.
Plan of Operation
During the next twelve months, our plan of operation is to
complete the longer lead time engineering tasks such as the electricity and gas
planning. In May 2017, the IDL accepted our Operation and Reclamation Plan on
the Bovill Kaolin Project. Avista, the local utility, has started the initial
scoping studies to bring electricity and gas the last five miles from its
current terminus to the proposed mill site. In the interim we will continue to
strengthen our customer list and continue discussions to raise the capital to
fund the mine construction
Engineering work on the Bovill Kaolin Project
As
recommended in the 2016 FS, we are about to begin the contemplated utility
surveys and are undertaking additional pilot plant work to produce customer
samples for marketing purposes and the related testwork for final equipment
selection. Two pilot plants are currently ongoing with the first producing
metakaolin and halloysite and the second producing quartz and K-spar.
Additional work is also ongoing to finalize the process plant water balance and
utilities consumptions. This work together with the General and Administrative
expenses related in part to our continuing financing efforts are estimated to
cost about USD$2,440,000 before taking into consideration any possible land
swap with the IDL.
Outlook
Our
focus continues to be the detailed assessment of all our mineral assets and
advancing the Bovill Kaolin Project towards production. The process of
producing minerals through pilot plant work includes shipping the unprocessed
primary clay to Ginn Mineral Technologies (“GMT”) who undertakes the separation
of the sand fraction (quartz and K-spar) from the clay fraction (kaolin and
halloysite). GMT then sends the sand fraction on to Minerals Research
Laboratory at North Carolina State University (“MRL”) where MRL separates the
K-spar and quartz through flotation. GMT separates the halloysite and
kaolinite into marketable products.
20
A
series of bulk samples has been completed at GMT and MRL. The most recently
completed pilot plant included the production of halloysite and kaolin. The
Company tested a new method of heating the kaolin to make metakaolin. This
technology, known as flash calcination, has resulted in the highest quality of
metakaolin produced to date.
At
present we have, or will have shortly, inventory of all minerals for
distribution to customers. Fine grinding of quartz and K-spar still needs to
be completed.
Management
is very pleased with the product development to date. Recent test work has
generated the highest K
2
O grades to date with results consistently
in excess of 14% K
2
O. Sample requests for halloysite have come from
North America, Europe, the Middle East, South America and Asia showing both the
scarcity of halloysite in general and the quality of I-Minerals halloysite in
particular. While we currently have inventory of ULTRA HallopureÒ and
HalloPureÒ several companies have advanced their halloysite
consuming products to near commercialization and have indicated a need for
multiple tons of halloysite to complete the commercialization process. We are
currently assessing the logistics and cost of completing an additional large
pilot plant to make multiple tons of ULTRA HallopureÒ and HalloPureÒ available to customers in life science, clean tech and
plastic / polymer industries.
Based upon opportunities identified in the marketing report prepared by Charles Rivers, internal marketing efforts and customer leads generated through the website, strong interest has been generated in all our mineral products with ever increasing interest in the K-spar. Samples continue to be sent to customers for testing and the response has been very favorable.
Results
of Operation
Six months ended October 31,
2017
We recorded a loss of $1,109,502
($0.01 per share) for the six months ended October 31, 2017 as compared to a
loss of $2,569,593 ($0.03 per share) for the six months ended October 31, 2016. The decrease in the loss recorded for the six months ended October
31, 2017 as compared to the six months ended October 31, 2016 is the net result of changes to a number
of expenses. Of note are the following items:
-
Management and consulting fees of $58,310 (2016 - $188,826) are
comprised of fees to manage our Company and stock-based compensation. The
stock-based compensation recognized in the current period was $8,632 (2016 - $121,770).
Approximately 25% of the fees to manage our Company are charged to management
and consulting fees and the other 75% is charged to mineral property
expenditures and/or capitalized to mineral property interest.
-
Mineral property expenditures of $217,127 (2016 - $667,212) are costs
incurred on our Helmer-Bovill Property. The expenditures in the current period
are pre-development costs that have been expensed during the period. The
Company also capitalized $319,021 of development costs to the balance sheet
during the period. The main components of capitalized costs during the current
period included engineering and consulting ($152,387) and metallurgy ($141,390).
In May 2017, the Company completed permitting work. During the current period,
the Company continues to optimize the metallurgical processes and detailed
engineering.
-
General and miscellaneous expenses of $246,554 (2016 - $360,262)
are comprised of office and telephone expenses, payroll taxes, medical benefits,
insurance premiums, travel expenses, promotional expenses, shareholder
communication fees, transfer agent fees and filing fees. The decrease during
the current period was due primarily to a decrease in mineral marketing
activities as well as investor relations activities.
-
Professional fees of $148,431 (2016 - $244,667) include legal
fees, audit fees and financial consulting fees.
-
Accretion expense of $319,272 (2016 - $243,355) is the
amortization of the fair value of bonus shares and bonus warrants issued to the
lender of the promissory notes. The bonus shares and bonus warrants are
amortized over the life of the promissory notes.
-
Interest expense of $946,682 (2016 - $743,102) is from promissory
notes that bear interest at a rate of 12% per year. Interest increased as
additional funds were advanced.
-
We recorded a gain on change in fair value of derivative
liabilities of $840,060 (2016 – loss of $106,805). The change in fair value of
derivative liabilities is based on the change in remaining term of derivative
instruments and our stock price. The derivatives include warrants as well as
stock options granted to non-employees. The derivative liabilities do not
represent cash liabilities.
Three months ended October
31, 2017
We recorded a loss of $545,503
for the three months ended October 31, 2017 as compared to a loss of $1,174,599
for the three months ended October 31, 2016.
The decrease in the loss recorded for the three
months ended October 31, 2017 as compared to the three months ended October 31,
2016 is the net result of changes to a number of expenses as noted above under
the six months ended October 31, 2017 and 2016. In particular, there was a
reduction in mineral property expenditures from $375,703 to $98,915 as well as
an increase in the gain on change in fair value of derivative liabilities from
$66,529 to $384,916.
21
Liquidity and Capital
Resources
Our aggregate operating, investing and financing
activities during the six months ended October 31, 2017 resulted in a net cash outflow
of $234,328 (2016 – inflow of $247,847). As at October 31, 2017, we had a
working capital deficiency of $1,573,404, including cash of $52,954.
During the six months ended October 31, 2017, $1,609,478
was used in operations before changes in non-cash operating working capital
items (2016 - $2,096,510). The decrease in these cash flows was due primarily
to a decrease in mineral property expenditures. During the six months ended October
31, 2017, we spent $340,952 on investing activities (2016 - $nil) and we
received $750,000 from financing activities (2016 - $1,612,736).
We have been financed by advances pursuant to promissory
notes advanced by BV Lending LLC, an entity controlled by Allen L. Ball, a member
of our Board of Directors and our largest shareholder (the “Lender”). During
the six months ended October 31, 2017, the Company was receiving advances
pursuant to the Third Promissory Notes. As at October 31, 2017, the balance of
the Third Promissory Notes was $16,059,325. Subsequent to October 31, 2017,
the Company received the final $400,000 in advances pursuant to the agreement.
The First, Second and Third Promissory Notes had a
maturity date of December 2, 2017. On October 25, 2017, the Company entered
into an amending agreement with BV Lending LLC, which extended the maturity
date to March 31, 2019. Certain conditions may result in early repayment.
An additional CAD$250,000 promissory note was issued in
March 2017 by an arm’s-length lender with a maturity date of December 31, 2018.
We have not as yet put into commercial production
any mineral properties and as such have no operating revenues. Accordingly, we are dependent on debt
and equity financing as its primary source of operating working capital. Our capital resources
are largely determined by the strength of the junior resource markets and by
the status of our projects in relation
to these markets, and our ability to compete for investor support of our
projects.
We
remain dependent on additional financing to fund development requirements on
the Helmer-Bovill property and for general corporate costs. With respect to
funds required for capital cost items, State-sponsored debt financing
instruments may be available on attractive terms, and we intend to pursue such
financial instruments to cover portions of the capital costs associated with
placing the Bovill Kaolin deposits into production. We have commenced efforts
to raise the capital necessary to build the mine.
We do not have the ability to internally generate sufficient cash flows to support our operations for the next twelve months. We have been receiving funds from a company controlled by a director of the Company through promissory notes. We have no formal plan in place to address this going concern issue but consider that we will be able to obtain additional funds by equity financing and/or debt financing; however, there is no assurance of additional funding being available. As a result, our auditors included an emphasis of matter note in their report on the financial statements for the year ended April 30, 2017 about our ability to continue as a going concern.
Off-Balance Sheet
Arrangements
We have no significant off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to shareholders.
Critical Accounting Policies
Measurement Uncertainty
The
preparation of these consolidated financial statements in conformity with US
GAAP requires us to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. We
regularly evaluate estimates and assumptions related to the useful life and
recoverability of long lived assets, stock-based compensation, valuation of
convertible debentures and derivative liabilities, and deferred income tax
asset valuation allowances. We base our estimates and assumptions on current
facts, historical experience and various other factors that it believes to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other
sources. The actual results experienced by us may differ materially and
adversely from our estimates. To the extent there are material differences
between the estimates and the actual results, future results of operations will
be affected. The most significant estimates with regard to our condensed
consolidated financial statements relate to the determination of fair values of
derivative liabilities and stock-based transactions.
22
Stock-based
Compensation
We
account for all stock-based payments and awards under the fair value based
method. Stock-based payments to non-employees are measured at the fair value
of the consideration received, or the fair value of the equity instruments
issued, or liabilities incurred, whichever is more reliably measurable.
The
fair value of stock-based payments to non-employees is periodically re-measured
until the counterparty performance is complete, and any change therein is
recognized over the vesting period of the award and in the same manner as if we
had paid cash instead of paying with or using equity based instruments. The
cost of the stock-based payments to non-employees that are fully vested and
non-forfeitable as at the grant date is measured and recognized at that date,
unless there is a contractual term for services in which case such compensation
would be amortized over the contractual term.
We
account for the granting of stock options to employees using the fair value
method whereby all awards to employees will be recorded at fair value on the
date of the grant. The fair value of all stock options is expensed over their
vesting period with a corresponding increase to additional paid-in capital.
Compensation
costs for stock-based payments that do not include performance conditions are
recognized on a straight-line basis. Compensation cost associated with a share
based award having a performance condition is recognized on the probable
outcome of that performance condition during the requisite service period.
Share based awards with a performance condition are accrued on an award by
award basis.
We
use the Black-Scholes option valuation model to calculate the fair value of
stock options at the date of the grant. Option pricing models require the input
of highly subjective assumptions, including the expected price volatility.
Changes in these assumptions can materially affect the fair value estimates.
Derivative Liabilities
We
evaluate our financial instruments and other contracts to determine if those
contracts or embedded components of those contracts qualify as derivatives to
be separately accounted for in accordance with ASC 815. The result of this
accounting treatment is that the fair value of the embedded derivative is
marked-to-market at each balance sheet date and recorded as a liability and the
change in fair value is recorded in the consolidated statement of loss. Upon
conversion or exercise of a derivative instrument, the instrument is marked to
fair value at the conversion date and then that fair value is reclassified to
equity.
The
classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed at the end of
each reporting period. Derivative instruments that become subject to
reclassification are reclassified at the fair value of the instrument on the
reclassification date. Derivative instrument liabilities are classified in the
balance sheet as current as settlement of the derivative instruments are at the
option of the holder.
We
use the Black-Scholes option valuation model to value derivative liabilities.
This model uses Level 3 inputs in the fair value hierarchy established by ASC
820 Fair Value Measurement.
Mineral Property and Exploration Costs
Costs related to the development of our mineral reserves are
capitalized when it has been determined an ore body can be economically
developed. The development stage begins when an ore body is determined to be
economically recoverable based on proven and probable reserves and appropriate
permits are in place, and ends when the production stage or exploitation of
reserves begins. Major mine development expenditures are capitalized,
including primary development costs such as costs of building access ways,
tailings impoundment, development of water supply and infrastructure
developments.
Exploration costs include those relating to activities carried out
(a) in search of previously unidentified mineral deposits, or (b) at
undeveloped concessions. Pre-development activities involve costs incurred in
the exploration stage that may ultimately benefit production that are expensed
due to the lack of evidence of economic development, which is necessary to
demonstrate future recoverability of these expenses. Secondary development
costs are incurred for preparation of an ore body for production in a specific
ore block or work area, providing a relatively short-lived benefit only to the
mine area they relate to, and not to the ore body as a whole.
23
Drilling and related costs are either classified as exploration or
secondary development, as defined above, and charged to operations as incurred,
or capitalized, based on the following criteria:
-
Whether the costs are incurred to further define mineralization at
and adjacent to existing reserve areas or intended to assist with mine planning
within a reserve area;
-
Whether the drilling costs relate to an ore body that has been
determined to be commercially mineable, and a decision has been made to put the
ore body into commercial production; and
-
Whether, at the time that the cost is incurred, the expenditure:
(a) embodies a probable future benefit that involves a capacity, singly or in
combination, with other assets to contribute directly or indirectly to future
net cash inflows, (b) we can obtain the benefit and control others’ access to
it, and (c) the transaction or event giving rise to our right to or control of
the benefit has already occurred.
If all of these criteria are met, drilling and related costs are
capitalized. Drilling costs not meeting all of these criteria are expensed as
incurred. The following factors are considered in determining whether or not
the criteria listed above have been met, and capitalization of drilling costs
is appropriate:
-
Completion of a favourable economic study and mine plan for the
ore body targeted;
-
Authorization of development of the ore body by management and/or
the Board of Directors; and
-
All permitting and/or contractual requirements necessary for us to
have the right to or control of the future benefit from the targeted ore body
have been met.
Once production has commenced, capitalized costs will be depleted
using the units-of-production method over the estimated life of the proven and
probable reserves. If mineral properties are subsequently abandoned or
impaired, any capitalized costs will be charged to the Consolidated Statements of
Loss in that period.
We assess the carrying cost of our mineral properties for
impairment whenever information or circumstances indicate the potential for
impairment. Such evaluations compare estimated future net cash flows with our
carrying costs and future obligations on an undiscounted basis. If it is
determined that the future undiscounted cash flows are less than the carrying
value of the property, a write down to the estimated fair value is charged to
the Consolidated Statements of Loss for the period. Where estimates of future
net cash flows are not available and where other conditions suggest impairment,
management assesses if the carrying value can be recovered.