Professional Documents
Culture Documents
Li
6.941
magnesium
12
Ti V
47.867 50.942
L e t t e r t o S h a r e ho l de r s
1
Dear Shareholders,
Over the past year, Gossan has been pursuing the development of its two most advanced projects – the Inwood
Magnesium Project and the Manigotagan Silica Sand Project. Both of these projects have defined deposits and are
moving through development towards production. The type of process testing work that needs to be undertaken
at this time to assess these projects’ economic viability is a lengthy but necessary stage of development. Gossan
is continuing to move select projects forward to meet the upcoming demand in the green and alternative energy
economies.
During the year, Gossan has made significant progress in the development of the Zuliani Process for the production
of magnesium. The second stage of the evaluation process – three phases of bench scale testing – were successfully
completed at Process Research Ortech and it was demonstrated that the process could produce magnesium metal
at atmospheric conditions with exceptionally high raw material efficiencies and with low carbon emmissions.
The third stage of evaluation, involving a material increase in the scale of testing using specialized equipment,
is currently being planned and resources are being sourced. When all factors are considered, the direct operating
cost of magnesium ingot produced with the Zuliani Process is expected to be about 30% less than the direct cost of
Chinese magnesium ingot landed in western markets. Magnesium continues to be an important element in attaining
energy efficiency and reducing carbon emissions across the transportation sector due to its qualities of light-weight
strength.
Ongoing testing of silica sand from the Manigotagan deposit for use as frac sand in the oil and gas industry has
resulted in samples of the 20/40, 30/50 and 70/140 mesh fractions consistently meeting ISO 8K and 9K Proppant
ratings. A marketing study is underway to provide product price and market size data along with potential customers
and competitors within economically transportable distances for each product type. Results from this study may
lead to a scoping report providing an initial economic assessment of the Manigotagan deposit.
Other field programs with our joint venture partners - Marathon PGM at the Bird River Project and the Cross Lake
First Nation at the Pipestone Lake Project – have also advanced the Company’s interests. PGMs are the key elements
in catalytic converters which reduce auto emissions of greenhouse gasses. Two new green applications for vanadium
in electrical storage technology – lithium auto batteries and grid-scale load batteries - could, by some analysts’ forecasts,
increase demand for vanadium by over 50% in the next 5 years.
The Company is continuing to actively examine new potential properties to expand its portfolio, primarily in the
gold and magnesium-related sectors.
Gossan’s investment in The Claims Network, a service provider to the insurance industry, is in the process of maturing.
TCN grew rapidly over the past two years and is now generating significant amounts of sales, profits and cash flow.
It is my pleasure to thank Gossan’s officers, directors, staff and consultants for their efforts and the Company’s
shareholders, whom we serve, for their continuing support. Gossan is a unique company well positioned for the
development of a green economy emphasizing renewable energy. The outlook for magnesium, platinum and
palladium, vanadium, and frac sand will also benefit from the ongoing concern with high energy prices, climate
change and the resultant affects upon the transportation industry.
Douglas Reeson
President & Director
s p e ci a lt y M e ta l s
2
magnesium In w o o d p r o j e c t & Z u l i a ni p r o c e s s
12 Magnesium
m a gn e s iu m is essential
Mg The 1,635-hectare Inwood Magnesium Property is located
in south-central Manitoba. In total Gossan’s regional land in imporoving energy
24.305
package covers 6,231 hectares in several claim blocks. The
Company’s land position is designed to hold all of the area’s efficiency & reducing
near-surface beds of high-purity dolomite.
carbon emmissions in
The Inwood Magnesium Project is being advanced based
on the expectation of higher magnesium prices - currently the transport sector
over US $1.20 per pound - and the development of more
energy and cost efficient magnesium extraction process
by lightening vehicle
technology which is the current focus of the Company. weight. This maybe
On March 15, 2007, Gossan entered into a licensing
arrangement for the worldwide rights to a new high ef- particularily important
ficiency magnesium production process being developed by
in extending the range
Douglas J. Zuliani. The new process is based on an efficient
adaptation of the Magnetherm process. The Zuliani process of electric cars
is designed to achieve operating cost savings by process
efficiency improvements that significantly reduce both en-
ergy and key raw material requirements. These enhance- magnesium metal under atmospheric conditions at
ments to the traditional Magnetherm method materially exceptionally high raw material efficiencies. At the
improve both magnesium recovery and silicon reduction demonstrated efficiencies, raw material consumption
efficiency without the need for a vacuum. Energy use and is about 20% lower for dolomite and 30% lower for
cost is further reduced by development of a technically silicon than for a typical Pidgeon plant operating
straightforward method that will ensure highly efficient in China. These findings give further credence to
condensation of liquid magnesium metal. Low cost hydro the Zuliani Process ultimately providing the lowest
electricity is abundantly available in Manitoba. operating cost per pound of magnesium by a material
margin.
In order to prove out the technology prior to commercializa-
tion, Gossan is undertaking a four stage evaluation process. As the Zuliani Process operates at atmospheric condi-
Initially FactSage thermodynamic modeling was successfully tions, the process avoids the complexities and added
used to verify the process fundamentals. The second stage, costs associated with operating under a vacuum. At-
which involved bench scale testing at Process Research Ortech mospheric magnesium production is also expected
(PRO) of Mississauga was successfully completed earlier in to facilitate direct production of molten magnesium
2010 with the results confirming the predictions from the metal without the added cost, energy and yield losses
initial thermodynamic modeling. The third stage which associated with melting and refining of solid crude
will materially increase the scale of testing using special- magnesium as produced with the Pidgeon Process.
ized equipment is currently being planned with PRO.
When all factors are considered including pre-
Thereafter a fourth stage pilot demonstration plant will be
vailing dolomite & ferrosilicon costs, labor rates,
constructed to confirm commercial viability. Gossan may
energy prices and overseas freight, the direct cost
seek a joint venture partner to assist in the pilot plant and
of magnesium ingot produced with the Zuliani
subsequent commercialization of the process.
Process is expected to be about 30% less than the
On April 27, 2010, Gossan announced the results of the direct cost of Chinese magnesium ingot landed in
Phase III bench scale tests at Process Ortech. The series of western markets, subject to confirmation of the
six tests used a larger sample size in newly designed test process at commercial scale.
equipment and confirmed that the Zuliani Process produces
3
The high raw material efficiencies coupled with the
use of hydro electricity will lower the environmen-
tal impact of magnesium production dramatically
as compared to existing production technologies.
Gossan has contracted Process Ortech to under-
take a Carbon Emission Study of the Zuliani Pro-
cess. Cap and Trade legislation pertaining to Green
House Gas emissions in North America is widely
anticipated to be introduced and mandated. This
legislation, which supports the development of
cleaner production processes, may have a material
effect on the project’s economics.
In 2006, Gossan completed a 27-hole drill pro-
gram, totaling 496 metres, on the Property. Watts, PHASE I
Griffis McOuat independently calculated a Nation-
al Instrument 43-101 compliant resource based
on the results from the 2006 drill program and
25 holes previously drilled on the Property. The
program targeted 80 hectares of the Fisher Branch
Formation which typically outcrops at surface and
extends to a depth of about 12-15 metres.
PHASE III
Pr e ciou s M e ta l s
4
copper bird river projec t
29 Palladium /Platinum /Base Metals
Ni
This complex carries significant concentrations of palladium
and platinum along with nickel, copper, zinc and chromite.
58.693
The Bird River Property is located about 40 km east of Lac
Du Bonnet, Manitoba and, along the Sill, approximately
zinc 6 km west and northwest of Mustang Minerals’ Maskwa B E L OW : caroline mealin, William mcguint y and
Pt
in cash payments and having expended in excess of $3
million on the Bird River Project. To date, Marathon
has expended about $4.6 million on the Project which
195.08
includes the acquisition of a 100% interest in the Ore
palladium Fault Property, subject to a 1% net smelter return royalty.
46 Gossan currently holds an approximate 45% interest in
Pd
the joint venture.
106.42
Pr e ciou s M e ta l s
5
Marathon undertook a major drill program at the eastern end of the Project during the winter of 2008 with the goal of
developing a NI 43-101 resource. The program which totaled 38 holes (6,938m) was comprised of 13 holes (2,047m)
at the Page Block; 4 holes (583m) at the Galaxy Zone; and 21 holes (4,308m) at the Ore Fault North Zone.
Based on the results of the Winter 2008 Drill Program and prior drill data, NI 43-101 compliant resource estimates
were completed by independent mining consultants and Qualified Persons, F.H. Brown C.P.G., Pr.Sci.Nat., and
Antoine Yassa, P.Geo. of P&E Mining Consultants Inc., as follows:
1. Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral
resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other
relevant issues.
2. The quantity and grade of reported inferred resources in this estimation are uncertain in nature and there has been insufficient
exploration to define these inferred resources as an indicated or measured mineral resource and it is uncertain if further exploration
will result in upgrading them to an indicated or measured mineral resource category.
A Winter 2009 Drill Program was completed with a total of 971m drilled in 7 holes designed to enhance the two
known resources. Two holes (534m) were drilled at the Ore Fault North Zone and five holes (437m) were drilled
at the Page Block. All of these holes are within the current resource pit shell and will add to the existing Ni 43-101
resource base. Highlights of the drill program included a 2.8m intersection of Ni-Cu-PGM mineralization grading
2.66% nickel, 2.10% copper, 15.25 gpt silver and 2.03 gpt PGM + gold in a sulphide lens at the Page Block within
hole MP-09-17 and a 2.5m intersection of Cu-Zn-Ag mineralization grading 2.23% zinc, 0.74% copper and 50.47
gpt silver in a sulphide lens at the Ore Fault Zone within hole MF-09-27.
Pr e ciou s M e ta l s
6
bird river projec t c ont. SHARPE L AKE PROJECT
Palladium /Platinum /Base Metals G old
A Spring 2009 Drill Program was completed on the Cop- Gossan’s Sharpe Lake Properties are located adjacent
permine Zone located at the western end of the Bird River to Rolling Rock Resources’ Monument Bay Project
Project consisting of 6 holes (549m). Lenses of sulphides (formerly held by a Wolfden-Bema Gold Joint-ven-
were intersected in 5 holes along an 800 metre long miner- ture) where a NI 43-101 compliant inferred resource
alized strike length. A single hole at the Coppermine Zone of 6.3 million tonnes grading 5.98 gpt gold for a
was drilled by Canex Placer Ltd in 1973 which contained a total of 1.2 million ounces of contained gold has
12.2m intersection grading 0.24 % nickel, 0.42 % copper, been developed. Gossan’s Properties are comprised
1.02 gpt platinum and 1.19 gpt palladium. of three exploration permits or license applications
Marathon is continuing prospecting at the Page Block and which cover 16,615 hectares (41,055 acres) along a
Ore Fault Zones to follow up on geophysical anomalies. strike length of 40 km, and are located approximately
Reinterpretation of the Page and Ore Fault drill databases 550 km north-east of Winnipeg.
and re-logging of select Ore Fault and Page holes from as Gossan has focused its attention on the Bear Show-
far back as the 1970’s will assist in further refinement of the ing at the west end of Sharpe Lake. The pervasive
model of mineralization. Gossan contributed to the Win- and intense alteration at the Bear Showing is highly
ter and Spring 2010 Programs which continues this work. significant and reflective of major hydrothermal
As of March 31, 2010, Gossan held an approximate 45% fluid migration.
interest in the project.
The Sharpe Lake Property and its Bear Showing is
During fiscal 2009, Gossan received two $50,000 non-refund- the subject of a National Instrument 43-101 Report
able advance net profits or advance NSR royalty payments that has been filed on SEDAR. The Report is a com-
from Marathon which are payable each September and March pilation of the exploration programs that have been
until commercial production is achieved. These amounts are conducted on the property and recommends a drill
carried on the balance sheet as deferred income. program to investigate gold mineralization at the
Bear Showing. Gossan intends to seek a joint ven-
ture partner to undertake the drill program. Work
P L ATINUM & PA L L ADIUM to date has identified co-incident geophysical and
geochemical anomalies. With a minimum strike
are the key elements length of six kilometres and bounded by bifurca-
tions of the Stull Lake-Wunnummin Fault Zone, a
in cataly tic converters major crustal break, the Bear zone is considered a
high priority target for economic gold deposits.
which reduce auto
emmissions of green
house gasses
S p e ci a lt y M e ta l s
7
titanium PIPESTONE L AKE PROJECT engage in further consultation with its partner, the Cross Lake
22 Vanadium / Titanium /Iron First Nation, in regard to the development of the Property.
Si
100m east of, and along strike of, the most eastern exposures of
At Manigotagan, 170 km northeast of Winnipeg,
the zone of pegmatites.
Gossan continued to develop a silica sand deposit
The demand for lithium is growing strongly due to the use of on the east shore of Lake Winnipeg. The Property 28.086
lithium carbonate in battery-powered vehicles and other is directly across from Black Island where silica sand
electrical storage devices. The highest and best use for was extensively quarried prior to the island becoming
the lithium mineral at Separation Rapids may be as a raw a Provincial Park. On June 3, 2010, an additional lease
material for the glass industry where it would reduce en- was acquired expanding the property to 306 hectares.
ergy requirements and carbon emissions. The demand for
In May of 2008, Gossan conducted a 26-hole sonic
tantalum, the high-tech metal, is growing steadily for use
drill program which identified significant thicknesses
in the manufacture of capacitors that regulate the flow of
of silica sand near surface on the eastern side of the
electricity in cellular phones, pagers, computers and other
Property. This initial program of sonic drilling yield-
electrical appliances. Other applications range from artificial
ed near-perfect 10-foot core sections with excellent
hips to super-alloys for the aeronautics industry to corrosion
recoveries. The quality of this sampling will have
resistant equipment for the chemical and pharmaceutical
important economic implications for assessing the
sectors.
Property.
Drilling to date has been successful in outlining
substantial zones of silica sand with a thickness ex-
ceeding 5 metres and ranging to over 15 metres.
These zones, with lengths known to exceed 400m
and 600m, are both open on one or more sides.
In du s t r i a l Min e r a l s
9
Manigotagan silica sand has potential uses in to specifications of various end uses including proppant frac-
foundries and smelters; in the production of float turing sand, glass, construction, metallurgical flux and other
or container glass; and in the oil & gas industry as markets. The study will provide product price and market size
frac sand. Silica sand from the property has been data along with potential customers and competitors within
subjected to a variety of tests that indicate it is of economically transportable distances for each product type.
a high purity with few contaminants and that it Results from this study may lead to a scoping report provid-
is similar to the silica sands previously quarried ing an initial economic assessment of markets, production
at nearby Black Island. An analysis of 9 washed and logistics.
and scrubbed samples returned a silica content
of 99.0% SiO2. Tests to date indicate that a com-
ponent of these silica sands meet the requirements
for frac sand in oil and gas wells and metallurgical
flux.
Test results of various samples of Manigotagan silica
sand have exceeded all of the minimum standards for
frac sand used by the oil and gas industry. Ongoing
testing for use as frac sand, conducted by PropTester
Inc., has resulted in samples of the 20/40, 30/50
and 70/140 mesh fractions consistently meeting
ISO 8K and 9K Proppant ratings.
Gossan has retained World Industrial Minerals of
Arvada, Colorado, to conduct a marketing study for
its high-purity Manigotagan silica sand. The study
will include a comparison of chemical assay data and
physical specifications from the Manigotagan deposit
in s u r a nce T e ch no l ogy
10
T h e Cl a i m s N e t w o r k
Insurance Technology
M a n a ge m e n t ’ s R e s p on s ibil i t y L e t t e r
11
Management acknowledges responsibility for the preparation and presentation of the
financial statements, including responsibility for significant accounting judgments
and estimates and the choice of accounting principles and methods that are appropri-
ate to the Company’s circumstances. The financial statements have been prepared in
accordance with Canadian generally accepted accounting principles and necessarily
include amounts based on estimates and judgments of management.
Meyers Norris Penny LLP, our independent auditors, is engaged to express a pro-
fessional opinion on the financial statements. Their examination is conducted in
accordance with Canadian generally accepted auditing standards and includes tests
and other procedures which allow the auditors to report whether the financial state-
ments prepared by management are presented fairly in accordance with Canadian
generally accepted accounting principles.
The Board of Directors must ensure that management fulfils its responsibilities for
financial reporting. In furtherance of the foregoing, the Board of Directors has
appointed an Audit Committee composed of three directors, two of whom are in-
dependent. The Audit Committee meets with the independent auditors to discuss
the results of their audit report prior to submitting the financial statements to the
Board of Directors for its approval. On the recommendation of the Audit Committee,
the Board of Directors has approved the Company’s financial statements.
Douglas Reeson Andrew Thomson
President and C.E.O. Director
A udi t or ’ s R e p or t
12
We have audited the balance sheets of Gossan Resources Limited as at March 31, 2010 and 2009 and the
statements of loss and comprehensive loss, statements of changes in shareholders’ equity, and cash flows for
the years then ended. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material respects, the financial position of the
Company as at March 31, 2010 and 2009 and the results of its operations for the years then ended in accor-
dance with Canadian generally accepted accounting principles.
Winnipeg, Manitoba
July 21 2010 Chartered Accountants
In the United States, reporting standards for auditors require the addition of an explanatory paragraph following
the opinion paragraph when there are substantial uncertainties about the Company’s ability to continue as a
going concern, as referred to in Note 1 to these financial statements. Our report to the shareholders dated July
21, 2010, is expressed in accordance with Canadian reporting standards, which do not permit a reference to
such matters in the auditors’ report when the facts are adequately disclosed in the financial statements.
Winnipeg, Manitoba
July 21, 2010 Chartered Accountants
2500 - 201 Portage Ave., Winnipeg, Manitoba, R3B 3K6, Phone: (204) 775-4531, 1 (877) 500-0795
B a l a nce S h e e t s
(Expressed in Canadian Dollars)
13
AS AT MARCH 31, 2010 2009
As se t s
Current
Cash $ 496,639 $ 140,692
Short term investments 20,004 1,326,653
Accounts receivable 13,944 4,048
Prepaid expenses 32,765 12,188
563,352 1,483,581
Non-Current
Mineral properties (Note 5) 4,633,552 4,089,541
Investment in The Claims Network (Note 6) 363,862 224,540
Furniture and equipment (Note 7) 8,523 8,973
5,005,937 4,323,054
$ 5,569,289 $ 5,806,635
Liabilities
Current
Accounts payable and accrued liabilities $ 66,064 $ 38,981
Due to related parties (Note 8) 105,999 125,952
172,063 164,933
372,063 264,933
Shareholders’ Equit y
Share capital (Note 9) 11,322,864 11,304,778
Contributed surplus (Note 12) 1,227,560 1,204,316
Deficit (7,353,198) (6,967,392)
5,197,226 5,541,702
$ 5,569,289 $ 5,806,635
See accompanying notes to financial statements
E x penses
Administrative fees $ 27,390 $ 31,778
Management fees 115,649 119,056
Consulting 37,761 31,399
Office and general 97,247 106,306
Public company costs 181,658 114,153
Investor relations 80,710 92,314
Travel and related 25,847 34,809
Stock-based compensation expense (Note 10) 25,130 17,080
Amortization 2,796 7,952
594,188 554,847
Other Inc ome
Interest and other income 471 30,963
Gain on joint venture (Note 5) 70,742 450,000
ne t los s per share - Basic and diluted (Note 14) $ (0.01) $ 0.00
S tat e m e n t s of C a s h Fl o w s
(Expressed in Canadian Dollars)
15
Operating Ac tivities
Net Loss for the year $ (385,806) $ (11,680)
(495,103) (53,542)
Net change in non-cash working capital:
Accounts receivable (9,896) 5,889
Prepaid expenses (20,577) 14,398
Accounts payable and accrued liabilities 27,083 (31,494)
Due to related parties (19,953) 17,106
(518,446) (47,643)
Investing Ac tivities
Expenditures on mineral properties (546,110) (625,626)
Purchase of short-term investments - (305,437)
Proceeds on redemption of short-term investments 1,306,649 925,000
Acquisition of furniture and equipment (2,346) (778)
Deferred revenue received 100,000 100,000
858,193 93,159
Financing Ac tivities
Issuance of share capital 16,200 -
SHARE CAPITAL
Balance at beginning of year $ 11,304,778 $ 11,304,778
Exercise of stock options - cash 16,200 -
Exercise of stock options - Black-Scholes valuation 1,886 -
c ontributed surplus
Balance at beginning of year $ 1,204,316 $ 1,187,236
Fair value of stock options granted 25,130 30,239
Fair value of stock options exercised (1,886) -
Fair value of stock options forfeited - (13,159)
deficit
Balance at beginning of year $ (6,967,392) (6,955,712)
Net loss and comprehensive loss for the year (385,806) (11,680)
No t e s t o F in a nci a l S tat e m e n t s
(Expressed in Canadian Dollars)
17
1. NATURE OF OPER ATIONS AND GOING CONCERN
Gossan Resources Limited (the “Company”) is a public corporation that was incorporated federally on June 16, 1980. The Company,
directly and through joint ventures is in the business of acquiring and exploring resource properties that it believes contain mineral-
ization. To date, the Company has not earned significant revenues and is considered to be in the exploration and development stage.
It is an exploration and development enterprise and carries on business in one segment, being the exploration for valuable minerals,
exclusively in Canada.
In the opinion of management, all adjustments considered necessary for the fair presentation have been included in these financial
statements. All amounts in these financial statements are expressed in Canadian dollars.
These financial statements have been prepared in accordance with Canadian generally accepted accounting principles applicable
to a going concern. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to
continue as a going concern and, therefore, be required to realize its assets and liquidate its liabilities and commitments in other than
the normal course of business and at amounts different from those in the accompanying financial statements.
The ability of the Company to continue as a going concern and the recoverability of amounts shown for mineral properties are
dependent upon the discovery of economically recoverable reserves; confirmation of the Company’s ownership in the underlying
mineral claims; the acquisition of required permits to mine; the ability of the Company to obtain necessary financing to complete
exploration and development; and the future profitable production or proceeds from disposition of such properties. These financial
statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities
should the Company be unable to continue as a going concern. All of these outcomes are uncertain and taken together cast doubt
over the ability of the Company to continue as a going concern.
As the Company has no revenue producing mines, the Company’s ability to continue as a going concern is dependent upon its ability
to raise funds in the capital markets.
The Company is traded on the TSX Venture Exchange under the symbol “GSS” and on the Frankfurt/Freiverkehr & Xetra Ex-
changes under the symbol “GSR”.
No t e s t o F in a nci a l S tat e m e n t s
(Expressed in Canadian Dollars)
19
(j) Government Assistance
The Company periodically applies for financial assistance under available government incentive programs. All government
assistance received is reflected as a reduction to the related asset category.
3. CAPITAL MANAGEMENT
The Company considers its capital structure to consist of share capital, stock options and warrants. When managing capital,
the Company’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to share-
holders and benefits for other stakeholders. Management adjusts the capital structure as necessary in order to support the
acquisition, exploration and development of mineral properties. The Board of Directors does not establish quantitative return
on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future develop-
ment of the business. As at March 31, 2010, total shareholders’ equity was $5,197,226 (March 31, 2009 - $5,541,702).
The properties in which the Company currently has an interest are in the exploration stage. As such the Company is dependent
on external financing to fund its activities. In order to carry out the planned exploration and pay for administrative costs,
No t e s t o F in a nci a l S tat e m e n t s
(Expressed in Canadian Dollars)
21
the Company will spend its existing working capital and raise additional amounts as needed. The Company will continue to
assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic
potential and if it has adequate financial resources to do so.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative
size of the Company, is reasonable.
There were no changes in the Company’s approach to capital management during the year ended March 31, 2010. The Com-
pany is not subject to externally imposed capital requirements.
5. mineral properties
March 31, 2009 Expenditures Option & Grant Payments Write Downs March 31, 2010
Pipestone Lake (i) $ 1,668,030 $ 21,941 $ - $ - $ 1,689,971
Bird River Joint Venture (ii) 629,251 223,792 (39,732) (2,098) 811,213
Inwood (iii) 563,633 182,703 - 746,336
Separation Rapids 135,667 56,509 - 192,176
Manigotagan Silica (iv) 618,747 100,481 - 719,228
Sharpe Lake (v) 474,210 3,598 (3,182) 474,626
Other 3 - - (1) 2
$ 4,089,541 $ 589,024 $ (42,914) $ (2,099) $ 4,633,552
March 31, 2008 Expenditures Option & Grant Payments Write Downs March 31, 2009
Pipestone Lake (i) $ 1,663,030 $ 5,000 $ - $ - $ 1,668,030
Bird River (ii) 477,446 2,164 - (479,610) -
Bird River Joint Venture (ii) - 149,641 - 479,610 629,251
Inwood (iii) 444,048 145,001 (14,000) (11,416) 563,633
Separation Rapids 128,834 6,833 - - 135,667
Manigotagan Silica (iv) 293,849 340,281 (15,383) - 618,747
Sharpe Lake 468,121 6,089 - - 474,210
Other 3 - - - 3
$ 3,475,331 $ 655,009 $ (29,383) $ (11,416) $ 4,089,541
No t e s t o F in a nci a l S tat e m e n t s
(Expressed in Canadian Dollars)
23
During the 2010 fiscal year, the Company incurred $589,024 (2009 - $655,009) of exploration expenditures and also received
$42,914 (2009 - $29,383) in government grants, which reduced the carrying value of its Mineral Properties by the same
amount.
i) The Pipestone Lake project is a 50% joint venture with Cross Lake Mineral Explorations Inc.
ii) On March 26, 2007, the Company entered into an Option and Joint Venture Agreement on its Bird River Property (“The
Property”) with Marathon PGM Corporation (MAR-TSX). The Property, encompassing over 7,000 hectares, covers over
21 kilometres of the Bird River Sill Complex. This complex carries significant concentrations of palladium and platinum
along with nickel, copper, zinc and chromite. The Property is located about 40-km east of Lac Du Bonnet, Manitoba and,
along the Sill, approximately 6-km west and northwest of Mustang Minerals’ Maskwa Deposit and the historic Dumbar-
ton mine.
Under the terms of the Agreement, Marathon PGM Corporation (“Marathon”) earned an undivided 50% interest in
the Bird River Project (“Project”) by spending $3.0 million on exploration and acquisition costs and cash payments of
$500,000 to the Company. Thereafter, Marathon elected not to earn a further 15% interest by completing a bankable
feasibility study and an additional 5% interest, to a total 70% interest, by arranging project financing. Under certain
conditions and subject to regulatory approval, Marathon may elect to issue its common shares in lieu of cash payments.
Upon formation of a joint venture, Marathon must also make semi-annual, recoverable, advance payments of $50,000
until commercial production is achieved. A $10,000 finders fee was paid in connection with the transaction.
On November 1, 2007, Marathon finalized an Option and Joint Venture Agreement on the adjacent Ore Fault Property
held by Bird River Inc. to explore and potentially acquire the property, subject to a 1% NSR. The Ore Fault Property is
part and subject to the Company and Marathon Agreement.
On August 25, 2008, Marathon triggered the formation of a joint venture by making the final $400,000 cash payment to
the Company (the remaining portion of the $500,000 trigger payment) and having expended in excess of $3 million on the
Bird River Project. At the March 31, 2010 year end, the Company owns an approximate 45% interest in the project and it
has contributed $262,959 to the joint venture’s work programs. If the Company fails to contribute to three successive work
programs, or is diluted to a ten percent equity interest in the Project, the Company’s interest will be reduced to a 3% net
smelter return royalty. On each March 30th and September 30th, from August 25, 2008 to the date of Commencement
of Commercial Production, Marathon is required to make advance payments of a net profits interest or an NSR royalty to
the Company in the amount of $50,000 as long as Marathon remains the manager of the Project.
As a result of the formation of the joint venture, a gain in the amount of $450,000 was recorded in 2009 to reflect cash
payments made directly from Marathon to the Company as stated in the joint venture agreement. Additionally, two of
the semi-annual $50,000 advance payments received in the 2009 and two of the semi-annual $50,000 advance payments
received in 2010 are currently shown as deferred income. Additionally, the percentage ownership of the joint venture is
subject to change based on its contributions to the joint venture’s work program.
iii) On March 15, 2007, the Company entered into a licensing arrangement for a new magnesium production process (“the
Zuliani Process”), including an option to secure exclusive worldwide rights to the Zuliani Process. A component of the
consideration is the conditional payment of up to 150,000 common shares related to specific measurable events. On No-
vember 12, 2007, 100,000 common shares were issued with an assigned fair value of $21,000 related to the completion of
Phase I of the arrangement. In fiscal 2009, an industrial research grant was received from the Government of Manitoba in
the amount of $14,000 for work undertaken on the Zuliani Process.
iv) In fiscal 2009, the Company received a mineral exploration grant from the Government of Manitoba in the amount of
$15,383 for prior work undertaken on the Manigotagan Silica Project.
v) During the current year, the Company received a mineral exploration grant from the Government in the amount of $3,182
(2009 - $nil) for prior work undertaken on the Sharpe Lake Project
9. SHARE CAPITAL
(a) AUTHORIZED Unlimited number of common shares with no par value
(b) ISSUED
Shares Amount
Balance, March 31, 2009 and 2008 29,020,900 11,304,778
Exercise of options - cash 97,000 16,200
Exercise of options - Black-Scholes valuation - 1,886
No t e s t o F in a nci a l S tat e m e n t s
(Expressed in Canadian Dollars)
25
10. STOCK OPTIONS
A summary of changes in stock options as follows:
Number of Stock Options Weighted Average Exercise Price
Balance, March 31, 2008 2,579,000 $ 0.38
Granted (i)(ii) 410,000 $ 0.18
Exercised (61,000) $ 0.44
Expired (407,000) $ 0.34
Balance, March 31, 2009 2,521,000 $ 0.35
Granted (iii)(iv) 526,000 $ 0.15
Exercised (97,000) $ 0.17
Expired (490,000) $ 0.41
Balance, March 31, 2010 2,460,000 $ 0.30
i) On July 16, 2008, the Company granted 270,000 stock options to directors and consultants. The options are exercisable
at $0.20 and expire on March 28, 2013. The resulting fair value of $24,030 was estimated using the Black-Scholes option
pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 85.0%; a risk-free in-
terest rate of 3.0% and an expected average life of 3.0 years. Of the 270,000 options granted, 150,000 are subject to vesting
terms ranging from six to twelve months. For the year ended March 31, 2009, the impact on expenses was $22,918.
ii) On February 4, 2009, the Company granted 140,000 stock options to directors and an officer. The options vest immedi-
ately, are exercisable at $0.15, and expire on March 28, 2011. The resulting fair value of $6,580 was estimated using the
Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of
85.0%; a risk-free interest rate of 2.00% and an expected average life of 1.7 years.
iii) On June 12, 2009, the Company granted 86,000 incentive stock options to directors. The options vest immediately, are
exercisable at $0.15 per share, and expire on June 28, 2009. The resulting fair value of $258 was estimated using the Black-
Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 85%; a
risk-free interest rate of 0.50% and an expected average life of 16 days. These options relate to a thirty percent retention of
directors fees by the Company for reinvestment purposes which remained payable from the 2008 fiscal year.
iv) On June 12, 2009, the Company granted 440,000 incentive stock options to directors, officers and consultants. The op-
tions vest immediately, are exercisable at $0.15 per share, and expire on March 28, 2012. The resulting fair value of $23,760
was estimated using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of
0%; expected volatility of 85%; a riskfree interest rate of 2.00% and an expected average life of 1.9 years.
The following table reflects the stock options outstanding as at March 31, 2010.
2010 2009
Loss before income taxes as reflected in the statement of operation $ (385,806) $ (11,680)
Expected income tax recovery at statutory rate (120,082) (3,676)
Permanent difference due to stock-based compensation 7,822 5,375
Non-taxable portion of capital gains 46,005 -
Permanent difference due to equity income (43,364) (23,168)
Other temporary differences not recognized in year 24,232 24,238
Change in valuation allowance (45,114) (278, 672)
Capital gain from expiration of warrants - 55,760
Change in prior year estimate 130,501 220,143
No t e s t o F in a nci a l S tat e m e n t s
(Expressed in Canadian Dollars)
27
The following table reflects the future income tax assets (liabilities):
2010 2009
Future income tax asset (liability)
Non-capital loss carry-forwards for Canadian purposes $ 768,674 $ 801,912
$ - $ -
The valuation allowance reflects the Company’s estimate that the tax assets will likely not be realized and consequently they
have not been recorded in these financial statements.
As at March 31, 2010, the following amounts are available to be applied against future years’ income for tax purposes.
15. COMMITMENT
By agreement dated June 14, 2007, the Company is committed under an operation lease for its office premises with the follow-
ing lease payments to the expiration of the lease on September 30, 2012:
2011 12,848
2012 12,848
2013 6,424
$ 32,120
Basic and diluted net loss per common share under U.S. GAAP $ (0.03) $ (0.02)
No t e s t o F in a nci a l S tat e m e n t s
(Expressed in Canadian Dollars)
29
Balance Sheets 2010 2009
2010 2009
$ (5,935,547) $ (5,816,749)
No t e s t o F in a nci a l S tat e m e n t s
(Expressed in Canadian Dollars)
31
17. DIFFE R ENCES BETWEEN C A N A DI A N A ND U. S . GENE R A LLY A CCEPTED
A CCOUNTING P R INCIPLES A ND P R A CTICES ( c o n t i n u e d )
In June 2009, the ASC guidance for consolidation accounting was updated to require an entity to perform a qualitative analy-
sis to determine whether the enterprise’s variable interest gives it a controlling financial interest in a variable interest entity
(“VIE”). This analysis identifies a primary beneficiary of a VIE as the entity that has both of the following characteristics: i) the
power to direct the activities of a VIE that most significantly impact the entity’s economic performance and ii) the obligation
to absorb losses or receive benefits from the entity that could potentially be significant to the VIE. The updated guidance also
requires ongoing reassessments of the primary beneficiary of a VIE. The provisions of the updated guidance are effective for
the Company’s fiscal year beginning April 1, 2010. The Company does not expect the adoption of this guidance to have an
impact on the Company’s financial position, results of operations or cash flows.
In August 2009, FASB issued ASU No. 2009‑05 Measuring Liabilities at Fair Value. This update amends ASC 820, Fair Value
Measurements and Disclosure, in regards to the fair value measurement of liabilities. FASB ASC 820 clarifies that in circum-
stances in which a quoted price for an identical liability in an active market is not available, a reporting entity shall utilize one
or more of the following techniques: (i) the quoted price of the identical liability when traded as an asset, (ii) the quoted price
for a similar liability or for a similar liability when traded as an asset, or (iii) another valuation technique that is consistent
with the principles of ASC 820. In all instances a reporting entity shall utilize the approach that maximizes the use of relevant
observable inputs and minimizes the use of unobservable inputs. Also, when measuring the fair value of a liability, a reporting
entity shall not include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the
transfer of the liability. The adoption of this new standard had no impact on the Company’s financial statements.
In January 2010, the FASB issued ASU 2010‑06, Improving Disclosures about Fair Value Measurements, which is included in
the ASC in Topic 820 (Fair Value Measurements and Disclosures). ASU 2010‑06 requires new disclosures on the amount and
reason for transfers in and out of Level 1 and 2 fair value measurements. ASU 2010‑ 06 also requires disclosure of activities,
including purchases, sales, issuances, and settlements within the Level 3 fair value measurements and clarifies existing disclo-
sure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. ASU 2010‑06 is effective
for interim and annual reporting periods beginning after December 15, 2009. The Company is currently assessing the impact
of adoption of ASU 2009‑14 and does not currently plan to early adopt.
PRESENTATION
There are different presentations between Canadian and US GAAP which are as follows:
i) Under U.S. GAAP, there is a difference between net income and other comprehensive income. As current operations has no
other comprehensive income, there is no effect to the statement of loss and comprehensive loss.
ii) No subtotal is permitted under U.S. GAAP within cash flow from operations on the statement of cash flows
Cor p or at e Dir e c t or y
32
He ad Office Gossan Resources Limited
Suite 404 - 171 Donald Street
Winnipeg Manitoba Canada R3C 1M4
Tel: (204) 943-1990
Fax: (204) 942-3434
E-mail: info@gossan.ca
Website: www.gossan.ca
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Winnipeg
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PRECIOUS METAL
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SPECIALTY METAL
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Red
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INDUSTRIAL MINERAL
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River
Fort Frances
100 km U.S.A. 11 Atikokan
95 W o International Falls
Li Mg Si Ti V Ni Cu Zn Pd Pt
6.941 24.305 28.086 47.867 50.942 58.693 63.546 65.39 106.42 195.08
G o s s a n Res ources Limit ed
Suite 404 - 171 Donald Street
Winnipeg, MB R3C 1M4 Canada
Tel: (204) 943-1990
silicon
Fax: (204) 942-3434
14
Si
E- m ail : info@gossan.ca
W eb sit e : www.gossan.ca
28.086
nickel copper zinc
28 29 30
Ni Cu Zn
58.693 63.546 65.39
palladium
46
Pd
106.42
platinum
78
Pt
195.08
TSX Venture Exchange GSS | Freiverkehr & Xetra Exchanges GSR - WKN 904435