PINX:ENZR Energizer Resources Inc Quarterly Report 10-Q/A Filing - 3/31/2012

Effective Date 3/31/2012

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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
 

FORM 10-Q

 

(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012
OR
   
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number 000-51151

ENERGIZER RESOURCES INC.
(Name of registrant in its charter)

 Minnesota
 
20-0803515
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
520 – 141 Adelaide Street West, Toronto, Ontario M5H 3L5
(Address of principal executive offices)
_______________________
 
(416) 364-4911
(Issuer’s telephone number)
_______________________
Securities registered under Section 12(b) of the Exchange Act:None
 
Securities registered under Section 12(g) of the Exchange Act:  Common Stock, $0.001 par value per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  x                              No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes o No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
 
Large accelerated filer  o Accelerated Filer  o
Non-accelerated filer  o Smaller reporting company  x
(Do Not Check if a Smaller Reporting Company)  
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes  o No  x

As of May 14, 2012, there were 156,697,178 shares of the Registrant's common stock issued and outstanding.

Transitional Small Business Disclosure Format Yes  o    No   x

 
1

 

 
Energizer Resources Inc.
 
PART I - FINANCIAL INFORMATION  
     
Item 1.
Consolidated Financial Statements (unaudited) including:
3
 
Consolidated Balance Sheets
 
 
Consolidated Statements of Operations and Comprehensive Loss
 
 
Consolidated Statements of Cash Flows
 
 
Notes to the Consolidated Financial Statements
 
Item 2.
Management Discussion & Analysis of Financial Condition and Results of Operations
15
Item 3
Quantitative and Qualitative Disclosures About Market Risk
47
Item 4.
Controls and Procedures
47
     
PART II - OTHER INFORMATION  
     
Item 1.
Legal Proceedings
48
Item 1a
Risk Factors
48
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
55
Item 3.
Defaults Upon Senior Securities
55
Item 4.
Mine Safety Disclosures
55
Item 5
Other information
56
Item 6.
Exhibits
56
 
CERTIFICATIONS
 
   
Exhibit 31 – Management certification
58-59
   
Exhibit 32 – Sarbanes-Oxley Act
60-61
 
 
2

 
 
PART 1
 
FINANCIAL INFORMATION
As used in this annual report, “we”, “us”, “our”, “Energizer Resources”, “Energizer”, “Company” or “our Company” refers to Energizer Resources Inc. and all of its subsidiaries.
 
ITEM 1.INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

General
The accompanying reviewed interim unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q.  Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles applicable in the United States of America.  Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in our Company's annual report on Form 10-K for the year ended June 30, 2011.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  Operating results for the period ended March 31, 2012 are not necessarily indicative of the results that can be expected for the year ending June 30, 2012.

All references to “dollars”, “$” or “US$” are to United States dollars and all references to “CAD$” are to Canadian dollars. United States dollar equivalents of Canadian dollar figures are based on the exchange rate as reported by the Bank of Canada on the applicable date.

 
3

 


 
ENERGIZER RESOURCES INC.
(An Exploration Stage Company)
 
Unaudited Condensed Consolidated Interim Financial Statements
 
For the nine month period ended March 31, 2012

(Expressed in US Dollars)
 
 


 
4

 
 
Energizer Resources Inc.
(An Exploration Stage Company)
Unaudited Condensed Consolidated Interim Balance Sheets
(Expressed in US Dollars)
 
             
   
March 31, 2012
(Unaudited)
   
June 30, 2011
(Audited)
 
Assets
           
Current Assets:
           
Cash and cash equivalents
  $ 1,169,726     $ 4,536,275  
Dual currency deposits (note 5)
          8,031,076  
Amounts receivable and prepaid expenses (note 6)
    485,580       135,392  
Marketable securities (note 7)
    3,505,587       40,403  
Tax credits recoverable
          12,073  
Loan to related party (note 6)
    257,523        
                 
Total current assets
    5,418,416       12,755,219  
Equipment (note 4)
          6,667  
Total assets
  $ 5,418,416     $ 12,761,886  
                 
Liabilities and Stockholders' Equity
               
Liabilities
               
Current Liabilities:
               
Accounts payable and accrued liabilities (note 6)
  $ 749,102     $ 689,857  
Derivative liability
          12,619  
Total liabilities
    749,102       702,476  
                 
Stockholders' Equity
               
Common stock, 350,000,000 shares authorized, $0.001 par value,156,697,178 issued and outstanding (June 30, 2011 -146,197,178) (note 9)
    156,697       146,197  
Additional paid-in capital
    69,673,556       63,998,735  
Donated capital
    20,750       20,750  
Accumulated comprehensive loss
    (39,336 )     (32,432 )
Accumulated deficit during exploration stage
    (65,142,353 )     (52,073,840 )
Total stockholders' equity
    4,669,314       12,059,410  
Total liabilities and stockholders' equity
  $ 5,418,416     $ 12,761,886  
 
The accompanying notes are an integral part of these condensed consolidated interim unaudited financial statements.

 
5

 

Energizer Resources Inc.
(An Exploration Stage Company)
Unaudited Condensed Consolidated Interim Statements of Operations and Comprehensive Loss
(Expressed in US Dollars)
 
                               
   
March 1, 2004
(date of inception) to
March 31, 2012
   
For the nine months
ended March 31,
   
For the three months
ended March 31,
 
         
2012
   
2011
   
2012
   
2011
 
Revenues
  $     $     $     $     $  
                                         
Expenses
                                       
Stock-based compensation (notes 6,9 and 10)
    22,668,884       3,631,321       237,710       1,513,530        
Mineral exploration expense (note 8)
    21,945,630       3,277,674       1,106,906       1,117,823       196,961  
Impairment loss on mineral properties (note 7)
    11,358,637       3,770,129                    
General and administrative (note 6)
    6,100,380       1,061,596       973,753       153,496       366,145  
Professional and consulting fees
    5,078,701       1,380,506       883,046       700,549       332,607  
Depreciation
    61,919       6,667       6,667       2,223       2,223  
Donated services and expenses
    18,750                          
Foreign currency translation (gain)/loss
    (956,836 )     14,859       (67,826 )     (89,083 )     (48,501 )
                                         
Total expenses
    66,276,065       13,142,752       3,140,256       3,398,538       849,435  
                                         
Net loss from operations
    (66,276,065 )     (13,142,752 )     (3,140,256 )     (3,398,538 )     (849,435 )
                                         
Other Income
                                       
Investment income / (loss)
    829,859       74,239       27,047       45,656       27,011  
Other income
    303,853                          
                                         
Net loss
    (65,142,353 )     (13,068,513 )     (3,113,209 )     (3,352,882 )     (822,424 )
Unrealized (loss) gain from investments in marketable securities
    (45,180 )     (6,904 )     (2,530 )     10,000       8,575  
                                         
Comprehensive loss
  $ (65,187,533 )   $ (13,075,417 )   $ (3,115,739 )   $ (3,342,882 )   $ (813,849 )
                                         
Loss per share - basic and diluted (note 12)
          $ (0.09 )   $ (0.03 )   $ (0.02 )   $ (0.01 )
                                         
Weighted average shares outstanding - basic and diluted
            149,243,214       117,577,323       154,001,134       132,084,283  

The accompanying notes are an integral part of these condensed consolidated interim unaudited financial statements.

 
6

 

Energizer Resources Inc.
(An Exploration Stage Company)
Unaudited Condensed Consolidated Interim Statements of Cash Flows
(Expressed in US Dollars)
 
                   
   
March 1, 2004
(date of inception) to
   
For the nine months
ended March 31,
 
   
March 31, 2012
   
2012
   
2011
 
Operating Activities
                 
Net loss
  $ (65,142,353 )   $ (13,068,513 )   $ (3,113,209 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Depreciation
    61,919       6,667       6,667  
Donated services and expenses
    20,750              
Non-cash proceeds received
    (74,000 )            
Dual currency deposits
    72,095       90,551        
Impairment loss on mineral properties
    11,358,637       3,770,129        
Stock-based compensation
    22,668,884       3,631,321       237,710  
Issuance of shares and warrants for services rendered
    168,100             168,100  
Change in operating assets and liabilities:
                       
Amounts receivable and prepaid expenses
    (135,392 )     (350,188 )     (55,601 )
Accounts payable and accrued liabilities
    749,928       59,245       (70,537 )
Tax credits recoverable
    (245,186 )     12,073        
Non-cash portion of marketable securities
    (55,497 )     (55,834 )      
Government grants received
    245,186              
Unrealized foreign exchange (loss)/gain in operating assets and liabilities
                (13,496 )
Net cash used in operating activities
    (30,306,929 )     (5,904,549 )     (2,840,366 )
                         
Financing Activities
                       
Proceeds from issuance of common stock, net
    38,099,105       635,000       13,217,120  
Exercise of warrants and stock options
    955,500       69,000       464,200  
Government grants received
                22,903  
Net cash provided by financing activities
    39,054,605       704,000       13,704,223  
Investing Activities
                       
Mineral property acquisition costs
    (3,419,973 )     (2,420,129 )      
Purchase of property and equipment
    (61,918 )            
Investment in dual currency deposits
    (32,938,800 )     (24,938,800 )      
Redemption of dual currency deposits
    32,867,078       32,867,078        
Loan to related party
    (256,014 )     (256,014 )      
Purchases of marketable securities
    (3,418,135 )     (3,418,135 )      
Net cash (used in) provided by investing activities
    (7,227,762 )     1,834,000        
Increase (decrease) in cash and cash equivalents
    1,519,914       (3,366,549 )     10,863,857  
Cash and cash equivalents - beginning of period
          4,536,275       2,505,480  
Cash and cash equivalents - end of period
  $ 1,169,726     $ 1,169,726     $ 13,369,337  
Non-cash investing and financing activities:
                       
Issuance of common stock for mineral properties
  $ 5,190,500     $ 1,350,000     $  
Issuance of common stock & warrants for services
  $ 5,811,125     $ 0     $ 168,000  
Supplemental Disclosures:
                       
Interest received
  $ 817,442     $ 61,822     $  
Taxes received
  $ 12,507     $     $ 12,507  
 
The accompanying notes are an integral part of these condensed consolidated interim unaudited financial statements.
 
 
7

 
 
Energizer Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Consolidated Interim Financial Statements
For the nine month period ended March 31, 2012
(Expressed in US Dollars)
 


1.
Exploration Stage Company

Energizer Resources Inc. (the "Company") was incorporated in the State of Nevada, United States of America on March 1, 2004 and reincorporated in the State of Minnesota on May 14, 2008.  The Company is an Exploration Stage Company, as defined by ASC Topic-915, "Development Stage Entities".  The Company's principal business is the acquisition and exploration of mineral resources.  During fiscal 2008, the Company incorporated Energizer Resources (Mauritius) Ltd. (formerly Uranium Star (Mauritius) Ltd.), a Mauritius subsidiary and Energizer Resources Madagascar Sarl, a Madagascar subsidiary.  During fiscal 2009, the Company incorporated THB Venture Ltd., a Mauritius subsidiary to hold the interest in Energizer Resources Minerals Sarl, a Madagascar subsidiary, which holds the Madagascar properties.  During fiscal 2012, the Company incorporated Madagascar-ERG Joint Venture (Mauritius) Ltd., a Mauritius subsidiary and is in the process of incorporating ERG Madagascar Sarl, a Madagascar subsidiary.  ERG (Madagascar) Sarl will be 100% owned by Madagascar-ERG Joint Venture (Mauritius) Ltd. which is owned 75% by Energizer Resources (Mauritius) Ltd.  The Company has not yet fully determined whether its properties contain mineral reserves that are economically recoverable.

These condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its liabilities in the normal course of business.  The Company has yet to generate revenue from mining operations or pay dividends and is unlikely to do so in the immediate or foreseeable future.  The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations.  As at March 31, 2012, the Company has accumulated losses of $65,142,353.  These condensed consolidated interim financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2.           Significant Accounting Policies

Principals of Consolidation and Basis of Presentation
These condensed consolidated interim financial statements are presented in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), and are expressed in US dollars.   These condensed consolidated interim financial statements include the accounts of Energizer Resources Inc. and its wholly-owned subsidiaries, Energizer Resources (Mauritius) Ltd., THB Ventures Ltd, Energizer Resources Madagascar Sarl, and Energizer Resources Minerals Sarl. In addition, these condensed consolidated interim financial statements include the Company's 75% interest in Madagascar-ERG Joint Venture (Mauritius) Ltd. and its subsidiary ERG (Madagascar) Sarl.   All inter-company balances and transactions have been eliminated on consolidation.  The Company's fiscal year end is June 30.

Condensed Consolidated Interim Financial Statements
These condensed consolidated interim financial statements have been prepared on the same basis as the annual financial statements and should be read in conjunction with those annual financial statements filed on Form 10-K for the year ended June 30, 2011.  In the opinion of management, these condensed consolidated interim financial statements reflect adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

Fair Value of Financial Instruments Hierarchy
ASC Topicñ820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  Cash and cash equivalents and marketable securities that the Company held were in Level 1 and dual currency deposits were in Level 2  within the fair value hierarchy.  The three levels are as follows:

 
8

 
 
Energizer Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Consolidated Interim Financial Statements
For the nine month period ended March 31, 2012
(Expressed in US Dollars)
 

 
2.           Significant Accounting Policies - continued

Fair Value of Financial Instruments Hierarchy - continued
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date.  Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.  Level 1 includes marketable securities such as listed equities and U.S. government treasury securities.

Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.  Level 2 includes those financial instruments that are valued using industry-standard models or other valuation methodologies.  These models consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, current market and contractual prices for the underlying instruments as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.  Instruments in this category include dual currency deposits, over the counter forwards, options and repurchase agreements.

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources.  These inputs may be used with internally developed methodologies that result in management's best estimate of fair value from the perspective of a market participant. Level 3 instruments include those that may be more structured or otherwise tailored to customers' needs.  At each balance sheet date, the Company performs an analysis of all instruments subject to ASC Topic-820 and includes in Level 3 all of those whose fair value is based on significant unobservable inputs.

3.           Recent Accounting Pronouncements Affecting The Company

The following are recent FASB accounting pronouncements which may have an impact on the Company's future condensed consolidated interim unaudited financial statements.
 
·  
"Comprehensive Income (Topic 220): Presentation of Comprehensive Income": ("ASU 2011-05") was issued during June 2011. FASB issued guidance regarding the presentation of Comprehensive Income within financial statements.  The guidance was effective for interim and annual periods beginning after December 15, 2011.
·  
"Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment": ("ASU 2011-08") was issued during September 2011. FASB issued guidance on how to determine whether goodwill amounts on the balance sheet have been impaired.  The guidance was effective for annual periods beginning after December 15, 2011 and interim periods within those years.
·  
"Comprehensive Income (Topic 202): Deferral of the Effective date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No 2011-05": ("ASU 2011-12") was issued during December 2011.  FASB provides clarification and guidance relating to the effects of reclassifications of amounts out of accumulated other comprehensive income and into net income.   The guidance is effective for annual periods beginning after December 15, 2011 and interim periods within those years.
·  
"Balance Sheet (Topic 201): Disclosures about Offsetting Assets and Liabilities": ("ASU 2011-11") was issued during December 2011. FASB issued guidance on how to determine whether it is appropriate to offset or net certain assets and liabilities on the balance sheet and the additional disclosure that this entails.   The guidance is effective annual periods beginning on or after January 1, 2013.
 
The adoption of the Topic 220, Topic 350 and Topic 202 did not have a material impact on the Company's condensed consolidated interim financial statements.  The Company is currently evaluating its impact of Topic 201 on these condensed consolidated interim financial statements.
 
 
9

 
 
Energizer Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Consolidated Interim Financial Statements
For the nine month period ended March 31, 2012
(Expressed in US Dollars)
 

 
4.           Equipment

All of the Company's fixed assets were fully depreciated as of March 31, 2012 (June 30, 2011: $6,667).  For the nine month period ended March 31, 2012, depreciation expense totaled $6,667 (March 31, 2011: $6,667).
 
5.           Dual Currency Deposits

On March 31, 2012, the Company held a total of $nil (June 30, 2011: $8,000,000) with a Canadian bank in short term dual currency deposits ("DCD"), representing $nil (June 30, 2011: $4,000,000).

The Company invests in dual currency deposits ("DCD") under which it contracts to a foreign exchange strike rate at the inception of the contract.  If the spot rate is less than the strike rate on the day of maturity, the Company will receive money in the invested currency.  Conversely, if the spot rate is greater than the strike rate, the Company will receive money in the underlying currency and recognize a foreign exchange loss.

 The Company uses this form of deposit to increase the interest rate, and hence its return, on its deposits and because it makes payments to vendors in both US dollars and Canadian dollars.  Because of this, the Company is somewhat indifferent as to whether the deposit is returned in Canadian dollars or US dollars.  This investment poses a greater risk when compared to investing excess cash in liquid and low risk money market deposits due to the fact that the movement in the underlying foreign exchange rates is uncertain.
 
6.           Related Party Transactions and Balances

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making operating and financial decisions. Parties are also considered to be related if they are subject to common control or common significant influence.  Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related party transactions that are in the normal course of business and have commercial substance are measured at the exchange amount.

The following are the related party transactions for the nine month period ended March 31, 2012:
 
a)
The Company incurred a total of $59,550 (March 31, 2011: $48,810) in office administration and rent expense from a company related by common management.
 
b)
9,420,000 (March 31, 2011: 1,100,000) stock options were issued to related parties during the period with exercise prices between $0.20 and $0.30.  These stock options which were valued at $2,145,231 (March 31, 2011: $237,710) were issued to directors, officers and relatives of directors.
 
c)
The Company incurred $595,446 (March 31, 2011: $576,315) in administrative, management and consulting fees to directors, officers and relatives of directors.
 
d)
The Company incurred $134,834 (March 31, 2011: $Nil) in charges from an mining and engineering firm to which one of the Company's directors serves as a senior officer and a director for.

The following are the related party balances as of for the nine month period ended March 31, 2012:
 
a)
Related party balances of $Nil (June 30, 2011: $168,000) were included in accounts payable and accrued liabilities and $34,319 (June 30, 2011: $Nil) in prepaid expenses.
 
b)
The Company has recorded a short-term loan to a related party totaling  $257,523 (June 30, 2011: $Nil).  This loan is interest bearing and is expected to be paid back in full within the next 12 months.
 
 
10

 
 
Energizer Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Consolidated Interim Financial Statements
For the nine month period ended March 31, 2012
(Expressed in US Dollars)
 

 
7.           Marketable Securities

Marketable securities consist of available-for-sale securities over which the Company does not have significant influence or control.  These investments included $3,471,587 (June 30, 2011: $Nil) invested in a monthly income bond fund and $34,000 (June 30, 2011: $40,403) invested in TSX-Venture entities.
 
8.           Mineral Properties
 
Green Giant Property, Madagascar, Africa
On August 22, 2007, the Company entered into a joint venture agreement with Madagascar Minerals and Resources Sarl ("MMR"), a Madagascar incorporated company.  The joint venture was established with the Company owning a 75% interest and MMR owning a 25% interest in the Green Giant Property.  In order to acquire the 75% interest, the Company paid a total of $765,000, issued 1,250,000 common shares and 500,000 now expired share purchase warrants.  Further, on December 10, 2007, the Company issued 1,250,000 common shares valued at $375,000 and 500,000 now expired share purchase warrants.  As it has not yet determined whether the property has probable or proven reserves, the Company recognized an impairment loss during fiscal 2008 totaling $1,200,560 which represented the total cash paid and the value of common shares and share purchase warrants issued.

On July 9, 2009, the Company entered into an agreement with MMR to acquire the remaining 25% interest for $100,000.  At this point the joint venture with MMR was terminated.  MMR retains a 2% net smelter return (“NSR”).  The NSR on this 25% portion can be acquired by the Company for $500,000 in cash or common shares for the first 1% and at a price of $1,000,000 in cash or common shares for the second 1% at the Company's option.

Malagasy Joint Venture Ground, Madagascar, Africa
On December 14, 2011, the Company entered into a Definitive Joint Venture Agreement (“JVA”) with Malagasy Minerals Limited (“Malagasy”) (Australian Stock Exchange: MGY) to acquire a 75% interest to explore and develop a defined group of industrial minerals (which includes graphite, vanadium as well as approximate 25 other minerals).  Malagasy will retain its 25% interest. The new land position covers an area totaling 2,119 research permits and 827.7 square kilometres.  This land portfolio is mainly adjacent to the south and east of the Company's Green Giant Property in the country of Madagascar.  Under the terms of the JVA, the Company paid Malagasy a total of $2,261,690  and issued 7,500,000 of the Company's shares valued at $1,350,000.   Malagasy has a  free carried interest until the Company delivers a Bankable Feasibility Study (“BFS”).  Upon the delivery of a BFS, Malagasy will be required to contribute its 25% interest in the development and mining operations.   Should either party's interest subsequently fall below 10%, their position will be diluted to a 2% NSR. As it has not yet determined whether the property has probable or proven reserves, the Company recognized an impairment loss during fiscal 2012 totaling $3,770,129 which represented the total cash paid and the value of common shares issued as well as legal and other professional fees paid.
 
Sagar Property -Romanet Horst, Labrador Trough, Quebec, Canada
The Company holds 219 claims located in northern Quebec, Canada which were acquired from Virginia Mines Inc.  ("Virginia") on May 2, 2006.  Virginia retains a  2% NSR on the ground.

 
11

 
 
Energizer Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Consolidated Interim Financial Statements
For the nine month period ended March 31, 2012
(Expressed in US Dollars)
 

 
9.           Common Stock

a)
On July 2, 2010, the Company issued 500,000 common share purchase warrants valued at $78,100 to a company who assisted the with the Company's in listing on the TSX Venture Exchange.  The share purchase warrants were valued using the Black-Scholes pricing model with the following assumptions:  risk free interest rate - 1.54%; expected volatility - 172%;  dividend yield - NIL; and expected life - 4 years.

b)
On October 21, 2010, the Company issued 1,100,000 stock options to a director of the Company valued at $237,710.  The stock options, which vested immediately, were valued using the Black-Scholes pricing model with the following assumptions: risk free interest rate - 1.54%; expected volatility - 172%; dividend yield - NIL; and expected life - 4 years.
 
c)
On December 17, 2010, the Company issued 200,000 shares of common stock valued at $90,000 pursuant to a contract with a party to provide advisory services in China.
 
d) 
During January and February 2011, the Company closed a private placement of 30,936,654 units for gross proceeds of $13,921,495.  Each unit consisted of one common share and one half of one common share purchase warrant.  Each of the 15,468,327 warrants issued can be used to purchase one common share at an exercise price of $0.75 for two years from the date of issue.  In connection with the private placement, the Company paid $704,115, TSX-V fees of $38,411 and 1,564,700 compensation warrants.  The compensation warrant entitles the holder to acquire one unit at $0.45 per unit and expire on February 25, 2013.
 
e)
During the year ended June 30, 2011, the Company issued 4,549,500 shares of common stock for consideration of $886,500.  The shares were issued pursuant to the exercise of several share purchase warrants.
 
f)
On July 1, 2011, the Company issued 5,175,000 stock options to directors, officers and consultants of the Company valued at $1,364,648.   The stock options were valued using the Black-Scholes pricing model with the following assumptions: risk free interest rate - 1.95%; expected volatility - 137%; dividend yield - NIL; and expected life - 5 years.  These stock options vested on the grant date.
 
g)
On October 24, 2011, the Company issued 1,850,000 stock options to directors, officers and consultants of the Company valued at $321,530.   The stock options were valued using the Black-Scholes pricing model with the following assumptions: risk free interest rate - 1.60%; expected volatility - 133%; dividend yield - NIL; and expected life - 5 years.  These stock options vested on the grant date.
 
h)
On December 16, 2011, the Company issued 2,365,000 stock options to directors, officers and consultants of the Company valued at $431,613.   The stock options were valued using the Black-Scholes pricing model with the following assumptions: risk free interest rate - 1.60%; expected volatility - 133%; dividend yield - NIL; and expected life - 5 years.  These stock options vested on the grant date.
 
i)
On December 16, 2011, the Company issued 7,500,000 shares of common stock at $0.18 per share valued at $1,350,000 as consideration for the Joint Venture Agreement with Malagasy Minerals Ltd.
 
j)
On March 4, 2012, the Company issued 460,000 shares of common stock for consideration of $69,000.  The shares were issued pursuant to the exercise of stock options.
 
k)
On March 7, 2012, the Company issued 6,275,000 stock options to directors, officers and consultants of the Company valued at $1,513,530.   The stock options were valued using the Black-Scholes pricing model with the following assumptions: risk free interest rate - 1.00%; expected volatility - 131%; dividend yield - NIL; and expected life - 5 years.  These stock options vested on the grant date.
 
l)
On March 25, 2012, the Company closed a private placement with DRA Minerals Inc whereby it raised a total of $635,000 by issuing 2,540,000 common stock at $0.25 per share.
 
 
12

 
 
Energizer Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Consolidated Interim Financial Statements
For the nine month period ended March 31, 2012
(Expressed in US Dollars)
 

 
10.        Stock Options

On March 9, 2006, the Company filed a Form S-8 registration statement in connection with its newly adopted 2006 Stock Option Plan (the “2006 Plan”) allowing for the direct award of shares or granting of stock options to acquire up to a total of 2,000,000 common shares. On December 18, 2006, February 16, 2007, July 11, 2007, September 29, 2009, May 3, 2011 and March 1, 2012 the 2006 Plan was amended to increase the stock option pool by a total of 25,000,000 additional common shares.

The following table summarizes the continuity of the Company's stock options, all of which vest on the grant date:
 
               
   
Number
of Options
 
Weighted-Average
Exercise Price ($)
 
Outstanding and exercisable, June 30, 2010
   
13,620,000
   
0.30
 
Granted
   
1,100,000
   
0.25
 
Cancelled
   
(590,000
)
 
0.57
 
               
Outstanding and exercisable, June 30, 2011
   
14,130,000
   
0.29
 
Granted
   
15,665,000
   
0.27
 
Exercised
   
(460,000
)
 
0.15
 
Expired
   
(2,475,000
)
 
0.15
 
Cancelled
   
(3,300,000
)
 
0.31
 
               
Outstanding and exercisable, March 31, 2012
   
23,560,000
   
0.29
 
 
The following is a summary stock options outstanding as of March 31, 2012:
 
                     
     
Exercise
   
Number of
   
Expiry
 
     
Price ($)
   
Stock Options
   
Date
 
                     
     
0.15
   
2,395,000
   
July 11, 2012
 
     
0.35
   
750,000
   
September 2, 2013
 
     
0.40
   
5,350,000
   
May 11, 2014
 
     
0.30
   
4,575,000
   
July 1, 2016
 
     
0.20
   
1,850,000
   
October 24, 2016
 
     
0.21
   
2,365,000
   
December 1, 2016
 
     
0.28
   
6,275,000
   
March 7, 2017
 
                     
     
0.29
   
23,560,000
       
 
 
13

 

Energizer Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Consolidated Interim Financial Statements
For the nine month period ended March 31, 2012
(Expressed in US Dollars)
 

 
11.        Warrants

The following table summarizes the continuity of the Company's warrants:
 
               
     
Number
of Warrants
   
Exercise
Price ($)
 
               
Outstanding, June 30, 2010
   
31,889,667
   
0.41
 
Granted
   
17,737,028
   
0.70
 
Exercised
   
(4,549,500
)
 
0.19
 
Expired
   
(511,500
)
 
0.20
 
               
Outstanding, June 30, 2011
   
44,565,695
   
0.55
 
Expired
   
(946,000
)
 
0.37
 
               
Outstanding, March 31, 2012
   
43,619,695
   
0.56
 
 
The following is a summary warrants outstanding as of March 31, 2012:
 
                     
     
Exercise
   
Number of
   
Expiry
 
     
Price ($)
   
Warrants
   
Date
 
                     
     
0.75
   
15,468,328
   
January 28, 2013 - February 25, 2013
 
     
0.45
   
1,564,700
   
February 25, 2013
 
     
0.50
   
870,000
   
March 15, 2013
 
     
0.30
   
400,000
   
March 15, 2013
 
     
0.15
   
3,650,000
   
April 26, 2013
 
     
0.50
   
21,666,667
   
May 5, 2013
 
                     
           
43,619,695
       
 
12.           Loss Per Share

Basic and diluted loss per share is computed using the weighted average number of common stock outstanding.  Diluted loss per share and the weighted average number of shares of common stock exclude all potentially dilutive shares since their effect is anti-dilutive.  As at March 31, 2012, there were a total of 67,179,695 (March 31, 2011: 61,318,695) potentially dilutive stock options and warrants outstanding.
 
 
14

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Examples of forward-looking statements include, but are not limited to:  (a) projections of our revenues, capital expenditures, growth, prospects, dividends, capital structure and other financial matters; (b) statements of our plans and objectives; (c) statements of our future economic performance; (d) statements of assumptions underlying other statements and statements about us and our business relating to the future; and (e) any statements using the words "believes," "budget," "target," "goal," "anticipate," "expect," "plan," "outlook," "objective," "may," "project," "intend," "estimate," or similar expressions. Any forward-looking statements herein are subject to certain risks and uncertainties in the business of Energizer Resources Inc. including but not limited to, planned capital expenditures, potential increases in prospective production costs, future cash flows and borrowings, pursuit of potential acquisition opportunities, the possibility that the industry may be subject to future regulatory or legislative actions (including additional taxes, changes in environmental regulation, changes in Madagascar French civil law and traditional Malagasy law,  and disclosure requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act), our financial position, business strategy and other plans, objectives for future operations, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of our Company. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.
 
Management’s Discussion and Analysis of Results of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our financial statements included herein. Further, this quarterly report on Form 10-Q should be read in conjunction with our Financial Statements and Notes to Financial Statements included in ourfiscal 2011 Annual Report on Form 10-K for the year ended June 30, 2011, filed with the Securities and Exchange Commission on September 28, 2011.Our actual results could differ materially from those anticipated by the forward-looking statements due to important factors and risks including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 28, 2011.

Our financial statements have been prepared in accordance with United States generally accepted accounting principles. We urge you to read this report in conjunction with the risk factors described herein.
 
BACKGROUND
Company Overview
Energizer Resources Inc. was incorporated in the State of Nevada with the name Uranium Star Corp on March 1, 2004 and reincorporated in the State of Minnesota on May 14, 2008. On December 16, 2009, we  changed our name from Uranium Star Corp to Energizer Resources Inc.Our fiscal year-end is June 30.

During fiscal 2008, we incorporated Energizer Resources (Mauritius) Ltd, a Mauritius subsidiary and Energizer Resources Madagascar Sarl, a Madagascar subsidiary.  During fiscal 2009, we incorporated THB Venture Ltd., a Mauritius subsidiary to hold the interest in Energizer Resources Minerals Sarl, a Madagascar subsidiary, which holds the Madagascar properties. During fiscal 2012, we incorporated Madagascar-ERG Joint Venture (Mauritius) Ltd, a Mauritius subsidiary and ERG Madagascar Sarl, a Madagascar subsidiary.  ERG (Madagascar) Sarlis 100% owned by Madagascar-ERG Joint Venture (Mauritius) Ltd.,  which is owned 75% by Energizer Resources (Mauritius) Ltd.

We have not had any bankruptcy, receivership or similar proceeding since incorporation. Except as described below, there have been no material reclassifications, mergers, consolidations or purchases or sales of any significant amount of assets not in the ordinary course of business since the date of incorporation.

Summary of Our Business
We are an exploration stage company engaged in the search for vanadium, graphite, uranium, gold and other minerals. We have an interest in properties located in the African country of Madagascar and Canada (Province of Québec). None of the properties in which we hold an interest have known mineral reserves of any kind at this time.  As such, the work programs planned by us are exploratory in nature.
 
Our executive offices are currently located at 520–141 Adelaide Street West, Toronto, Ontario, Canada M5H 3L5. Our telephone number is (416) 364-4911. We maintain a website at www.energizerresources.com (which website is expressly not incorporated by reference into this filing).These offices are leased on a month-to-month basis, and our monthly rental payments are approximately CAD$5,000.
 
 
15

 
 
UNTIL WE CAN VALIDATE OTHERWISE, THE PROPERTIES OUTLINED BELOW HAVE NO KNOWN MINERAL RESERVES OF ANY KIND AND WE ARE PLANNING PROGRAMS THAT ARE EXPLORATORY IN NATURE.  
 
Further details regarding our properties, although not incorporated by reference, including the comprehensive geological report prepared in compliance with Canada’s National Instrument 43-101 on our Green Giant Property (formerly the Three Horses Property in Madagascar) and our Sagar property in Northern Quebec can be found on our company’s website: www.energizerresources.com (which website is expressly not incorporated by reference into this filing) or in our  filings on www.sedar.com(which website is expressly not incorporated by reference into this filing). The websites referred to above are expressly not incorporated by reference into this filing.
 
Properties
Madagascar Properties
Green Giant Property, Madagascar
On August 22, 2007, we acquired a 75% interest in approximately 225 sq. kilometres of mineral research permits in the District of Toliara, Madagascar. This interest is held by a limited liability company that was formed under the laws of Madagascar which held a 75% interest in the property.  The remaining 25% interest was held by Madagascar Minerals and Resources Sarl.  On July 9, 2009, we acquired the remaining 25% interest in the property and now hold a 100% interest in the property.

Joint Venture Ground, Madagascar
On December 14, 2011, as reported in our current report on Form 8-K, filed with the Securities and Exchange Commission on December 15, 2011, we entered into a Definitive Joint Venture Agreement (“JVA”) with Malagasy Minerals Limited (“Malagasy”) (Australian Stock Exchange: MGY (“MGY”)) to acquire a 75% interest to explore and develop a defined group of industrial minerals.  Our company will manage the exploration operations for the industrial minerals on this ground.

Canadian Properties
Sagar Property – Romanet Horst, Labrador Trough, Québec, Canada
On May 2, 2006, we signed a letter of intent for an option to acquire a 75% interest in 200 claims located in northern Quebec, Canada.  The vendor had the right and option to sell the remaining 25% interest in the property.  This agreement was subject to a NSR (“net smelter return”).  The vendor had previously acquired a 100% interest in the property, subject to a 1% NSR on certain claims, and a 0.5% NSR on other claims.

Further details on exploration programs carried out on the properties can be found below.

Competitive Conditions in our Industry
The mineral exploration and mining industry is competitive in all phases of exploration, development and production. We compete with a number of other entities and individuals in the search for, and acquisition of, attractive mineral properties. As a result of this competition, the majority of which is with companies with greater financial resources than us, we may not in the future be able to acquire attractive properties on terms our management  considers acceptable.  Furthermore, we  compete with other resource companies, many of whom have greater financial resources and/or more advanced properties that are better able to attract equity investments and other capital.  Factors beyond our control may affect the marketability of minerals mined or discovered by us.

Employees
As of March 31, 2012, we had nil total employees and nil full-time employees. We engage consultants to serve as officers and to perform professional, geological and administrative functions for us.
 
 
16

 
 
MADAGASCAR PROPERTIES
 

Green Giant Property Description and Location
The Green Giant Property is comprised of 6 mineral permits. The properties are located in the District of Toliara and are referenced as TN 12,306,P(R); TN 12,814, P(R); TN 12,887 P(R); TN 12,888 P(R); TN 13,020 P(R); TN 13,021 P(R) as issued by the Bureau de Cadastre Minier de Madagascar (“BCMM”) pursuant to the Mining Code 1999 (as amended) and its implementing decrees. The total land position is 225 sq.kilometres.  This property can be accessed by both air and road.
 
 
 
17

 
 
Joint Venture Property Description and Location
The “Joint Venture Property” is comprised of a portion of or all of 39 mineral permits. The properties are located in the District of Toliara and are referenced as TN 3,432,P(R); TN 5,394, P(R); TN 13,064 P(R); TN 13,811 P(R); TN 14,619 P(R); TN 14,620 P(R); TN 14,622 P(R); TN 14,623 P(R);TN 16,747 P(R); TN 16,753 P(R); TN 19,003 P(R); TN 19,851 P(R); TN 19,932 P(R); TN 19,934 P(R); TN 19,935 P(R); TN 21,059 P(R); TN 21,060 P(R); TN 21,061 P(R); TN 21,062 P(R); TN 21,063 P(R); TN 21,064 P(R); TN 24,864 P(R); TN 25,605 P(R); TN 25,606 P(R); TN 28,340 P(R); TN 28,346 P(R); TN 28,347 P(R); TN 28,348 P(R); TN 28,349 P(R); TN 28,352 P(R); TN 28,353 P(R); TN 29,020 P(R); TN 31,734 P(R); TN 31,735 P(R); TN 38,323 P(R); TN 38,324 P(R); TN 38,325 P(R); TN 38,392 P(R); and TN 38,469 P(R) as issued by the Bureau de Cadastre Minier de Madagascar (“BCMM”) pursuant to the Mining Code 1999 (as amended) and its implementing decrees.  The total land position is 827.7 sq.kilometres.  This property can be accessed by both air and road.


Agreements
Green Giant Property
On August 22, 2007, we entered into a joint venture agreement with Madagascar Minerals and Resources Sarl (“MMR” or “Madagascar Minerals”), a company incorporated under the laws of Madagascar.  The joint venture was operated through a Madagascar limited liability company in which our company held 75% undivided interest and MMR held the remaining 25% undivided interest.

The consideration paid to MMR to acquire the 75% stake in the joint venture consisted of:  (i) cash consideration totaling $765,000; and (ii) the issuance of 1,250,000 of our common shares and 500,000 now expired common share purchase warrants.

On July 9, 2009, we entered into an agreement to acquire the remaining 25% interest of the Green Giant Property for $100,000.  Upon our  acquisition of the remaining 25%, the joint venture was terminated.  MMR retains a 2% NSR.  We can acquire the NSR on this 25% interest portion at a price of $500,000 in cash or common shares for the first 1% and at a price of $1,000,000 in cash or common shares for the second 1% at our option.

 
18

 
 
Joint Venture Ground, Madagascar, Africa
On December 14, 2011, we  entered into a Definitive Joint Venture Agreement (“JVA”) with Malagasy to acquire a 75% interest to explore and develop a defined group of industrial minerals (as noted below).  Malagasy retains a 25% interest in the exploration and development of the define group of industrial minerals. The new land position covers an area totaling 2,119 research permits and 827.7 square kilometres.  This land portfolio is mainly adjacent to the south and east of the Green Giant Property.  Under the terms of the JVA, we paid Malagasy $2,261,690 and issued 7,500,000 of our common  shares.   Malagasy has a free carried interest until we deliver a Bankable Feasibility Study (“BFS”). Upon the delivery of a BFS, Malagasy  will be required to contribute its 25% interest in the development and mining operations.   Should either party’s interest subsequently fall below a 10% interest, their position will be diluted to a 2% NSR.

The industrial minerals within the agreements are as follows:   Vanadium, Lithium, Aggregates, Alunite, Barite, Bentonite, Vermiculite, Carbonatites, Corundum, Dimensional stone (excluding labradorite), Feldspar (excluding labradorite), Fluorspar, Granite, Graphite, Gypsum, Kaolin, Kyanite, Limestone/Dolomite, Marble, Mica, Olivine, Perlite, Phosphate, Potash –Potassium minerals, Pumice Quartz, Staurolite, Zeolites.

During January 2012, we signed a formal agreement with South Africa's DRA Mineral Projects (“DRA”), a world-leading process engineering and mining project development management firm, for the development of our projects in Madagascar.  Specific focus will be on the development of vanadium and graphite minerals.  This partnership provides us with the ability to both build and manage a mining operation.   It also provides DRA the option to purchase up to 5% of our company through private placement at current market conditions.

Madagascar Historical Exploration Programs
The Green Giant Property displays extensive gossans outcroppings at surface.  An examination of part of this property revealed several large areas covered with gossanous boulders, which are believed to overlie massive sulphide mineralization.  Phases of the exploration projects were managed by Craig Scherba, one of our outside consultant geologists.

We conducted a first phase of exploration from September to November 2007 that included the following activities:
·   Stream Sediment sampling of all stream on the property area
·   Detailed Geological mapping over selected startigraphic horizons
·   Reconnaissance geological mapping over the entire property
·   Soil sampling over selected target areas
·           Prospecting over selected target areas.
·           Limited trenching over selected targets
·   Construction of a cinder block base camp
·           Construction of a one kilometre long surfaced airstrip
·   Repair and surfacing of the access road from base camp to the airstrip
·   Airborne geophysical surveying conducted by Fugro Airborne Surveys Ltd

During March 2008 to June 2008, a full field exploration program following up on the airborne geophysical survey and results of the 2007 exploration program was implemented.  This exploration consisted of the following:
·           Infill stream sediment sampling
·   Detailed Geological mapping over selected stratigraphic horizons
·   Prospecting over selected target areas
·   Grid emplacement over selected target areas
·           Ground-based magnetometer and frequency domain EM surveys
·   Soil sampling over selected target areas

After reviewing the analytical data from the March 2008 to June 2008 program, additional exploration was conducted from July 2008 to September 2008 in preparation for a drill program.  This exploration consisted of the following:
·   Infill stream sediment sampling
·   Detailed geological mapping over selected stratigraphic horizons
·   Prospecting over selected target areas with the aid of a mobile XRF analyzer

 
19

 
 
Based on compiled analytical results obtained from the various exploration programs, a drill program was initiated on the property from September 2008 to November 2008. This exploration program consisted of the following:
·   Prospecting over selected target areas with the aid of a mobile XRF analyzer
·   Ground-based scintillometer surveying over selected target areas
·   Diamond drilling of 31 holes over 4,073 metres

Based on positive early indications of the presence of potentially economic grades and volumes of vanadium on the property, another exploration program was initiated on the Green Giant Property during the spring of 2009.  The program (completed between April 2009 and July 2009) consisted of an extensive X-Ray Fluorescence analysis (XRF) soil sampling program coupled with mechanical trenching and scintillometer surveys over known areas of vanadium enrichment and new areas, defined by the soil XRF survey.

The discovery of potentially significant vanadium mineralization from prior programs resulted in the initiation of resource delineation drill program during September2009 to December 2009. This program consisted of the following:
·   XRF soil sample analyses (8,490 samples) on lines 200 metres apart and covering 18 kilometre strike length
·   Scintillometer surveying (112 line kilometres) on lines 200 metres apart over an 18 kilometre strike length
·   Trenching (140 trenches for 17,105 metres)
·   Diamond drilling of 54 diamond drill holes over 8,931 metres

The exploration programs to date resulted in the delineation of two vanadium pentoxide (V­2O5) deposits (named the Jaky and Manga), characterized by two separate categories:  oxide and primary. Within the oxide and primary zone of the Jaky and Manga deposits, the total indicated resources was calculated to be 21.74 Mt at 0.759% V­2O5 containing 363.8 Mlb of vanadium pentoxide.  The total inferred resources was calculated to be 4.15 Mt at a grade of 0.655% V­2O5 containing 59.8 Mlb of vanadium pentoxide.

Based on these results, we conducted an additional exploration program on the property from April 2010 to July 2010. This program consisted of the following activities:
·   Diamond drilling of 46 diamond drill holes over 8,952metres
·   Prospecting over selected target areas with the aid of a mobile XRF analyzer (20 grab samples)
·   Geologic mapping over the Manga and Mainty deposits at 1:5000 scale
·   ERT ground geophysical survey (5.64 km)
·   MAG ground geophysical survey (169.53 km)
·   Gradient Array EM ground geophysical survey (128.82 km)

In 2011, the identification of graphite as a potential credit to our  NI 43-101 compliant vanadium resources in the Manga, Jaky and Mainty zones led our geologists to conduct a reconnaissance exploration program (Phase I program) on the properties in September, 2011.  The goal of this exploration program was to delineate new graphitic trends, and compare them to those associated with vanadium mineralization. This program consisted of the following activities:
·   Diamond drilling of 10 holes over 1,157.5 metres
·   Trenching (16 trenches for 1,912 metres)
·   Prospecting over selected target areas

An additional reconnaissance exploration program was conducted from November 2011 to December, 2011 (Phase II program). The purpose of this program was to ascertain the industrial mineral potential on the Joint Venture Property, in addition to further drill testing of graphitic trends on the Green Giant Property in advance of Madagascar’s rainy season. This program consisted of the following activities:
·   Diamond drilling of 20 holes over 2,842metres
·   Prospecting over selected target areas
·   EM31 ground geophysical survey over selected target areas (160.5 km)

2008 Diamond Drilling Program
Diamond drilling completed in 2008 on the Green Giant Property tested a series of gossans and EM conductors, however no Volcanic Massive Sulphide (VMS) mineralization of significance was encountered.  Drilling did confirm the presence of a series of mineral occurrences highly enriched in vanadium and a number of associated anomalous elements, which were first seen in stream sediment sampling programs.  Due to this unexpected result, the focus of exploration shifted to vanadium mineralization part way through the 2008 drill program.
 
 
20

 
 

Composited Vanadium Mineralization in 2008 Drill Holes
 
Hole
Depth in Metres
V2O5
 
From
To
Interval
%
TH-08-01
103.6
115.8
12.2
0.39
TH-08-02
42.7
109.7
36.6
0.27
incl.
100.6
109.7
9.1
0.36
TH-08-07
27.4
54.9
27.4
0.23
TH-08-11
33.5
39.6
6.1
0.41
TH-08-11
57.9
76.2
18.3
0.37
TH-08-12
30.6
114.3
83.7
0.37
incl.
45.7
61.0
15.2
0.40
incl.
86.9
109.7
22.9
0.47
TH-08-13
38.5
141.7
103.2
0.32
incl.
76.2
141.7
65.5
0.36
incl.
112.8
141.7
27.4
0.45
TH-08-14
12.2
109.7
97.5
0.35
incl.
76.2
91.4
15.2
0.66
TH-08-24
4.6
82.3
77.7
0.67
incl.
12.2
61.0
45.7
0.91
TH-08-25
18.3
48.8
30.5
0.32
TH-08-25
100.6
103.6
3.0
0.47
TH-08-26
9.1
36.6
27.4
0.41
incl.
18.3
27.4
9.0
0.76
TH-08-26
67.1
73.2
6.1
0.53
TH-08-27
9.1
97.5
88.4
0.30
incl.
18.3
29.0
10.7
0.88
TH-08-27
146.3
153.9
6.0
0.50
TH-08-31
15.2
51.8
36.6
0.38
incl.
36.6
48.8
12.2
0.56

**Average of Drill Intercepts - 43.9m @ 0.36% V2O5
 
 
21

 

The serendipitous discovery of potentially economic vanadium mineralization on the property changed the course of the 2008 diamond-drilling program.  Through a combination of prospecting, ground based scintillometer surveying, and analysis of airborne radiometrics, five vanadium-bearing trends were identified over the course of the 2008 exploration program.
 
 
Vanadium-Bearing Trends
After reviewing the analytical results from the spring 2009 exploration program, an additional exploration program was carried out between September and December 2009.  This exploration program involved mechanical trenching, diamond drilling with accompanying lithological, structural and geotechnical logging, specific gravity determination, point load tests and metallurgical sampling.
 
The primary aim of the September to December 2009 drill program was to delineate reserves at the Jaky and Manga targets.  A total of 8,931 metres (4,509metres in 30 drill holes at the Jaky target and 4,422metres in 24 drill holes at the Manga target) of diamond drilling was completed.  Selected drill holes were oriented with point load test and orientation measurements recorded.

 
22

 
 
Composited Vanadium Mineralization in 2009 Drill Holes

DDH ID
 
From (m)
To (m)
V2O5 (%)
Interval (m)
J-01
 
1.50
25.50
0.65
24.00
J-01
 
25.5
28.10
0.45
2.60
J-01
 
28.10
37.50
0.17
9.40
J-01
 
37.50
42.00
0.40
4.50
J-01
 
42.00
60.00
0.20
18.00
J-01
 
60.00
90.00
0.75
30.00
J-01
 
90.00
97.50
0.36
7.50
J-01
 
97.50
103.50
0.16
6.00
J-01
 
111.00
126.00
0.17
15.00
J-01
 
132.00
136.50
0.32
4.50
J-02
 
1.80
17.00
0.46
15.20
J-02
 
17.00
24.50
1.06
7.50
J-02
 
24.50
38.00
0.37
13.50
J-02
 
38.00
51.50
0.96
13.50
J-02
 
51.50
68.00
0.20
16.50
J-02
 
68.00
69.50
0.64
1.50
J-02
 
69.50
77.00
0.28
7.50
J-02
 
86.00
89.00
0.36
3.00
J-03
 
1.50
22.50
0.57
21.00
J-03
incl.
1.50
9.00
0.65
7.50
J-03
incl.
9.00
16.50
0.44
7.50
J-03
incl.
16.50
22.50
0.65
6.00
J-03
 
22.50
42.00
0.27
19.50
J-03
 
42.00
78.00
1.00
36.00
J-03
 
78.00
93.00
0.15
15.00
J-03
 
93.00
99.00
0.53
6.00
J-03
 
99.00
102.00
0.20
3.00
J-04
 
9.00
23.90
0.22
14.90
J-04
 
23.90
39.10
0.59
15.20
J-04
incl.
27.00
30.50
0.80
3.50
J-04
 
39.10
76.50
0.24
37.40
J-04
 
76.50
85.50
0.57
9.00
J-04
 
85.50
94.50
0.14
9.00
J-04
 
94.50
103.50
0.41
9.00
J-04
 
103.50
109.50
0.19
6.00
J-04
 
119.50
150.00
0.15
30.50
J-04
 
150.00
153.00
0.82
3.00
J-04
 
153.00
168.00
0.19
15.00
J-04
 
196.50
204.00
0.29
7.50
J-04
 
214.50
219.00
0.40
4.50
J-05
 
1.50
9.00
0.83
7.50
J-05
 
9.00
39.00
0.30
30.00
J-05
 
39.00
75.00
0.79
36.00
J-05
incl.
39.00
45.00
0.91
6.00
 
 
23

 
 
J-05
incl.
45.00
55.50
0.70
10.50
J-05
incl.
55.50
73.50
0.89
18.00
J-05
incl.
73.50
75.00
0.50
1.50
J-05
 
75.00
91.50
0.14
16.50
J-05
 
91.50
97.50
0.52
6.00
J-05
 
97.50
115.00
0.17
17.50
J-06
 
0.00
7.50
0.44
7.50
J-06
 
7.50
19.50
1.36
12.00
J-06
 
19.50
33.70
0.45
14.20
J-06
 
33.70
46.70
0.94
13.00
J-06
 
46.70
84.00
0.23
37.30
J-07
 
14.00
170.00
0.18
156.00
J-07
 
212.00
218.00
0.31
6.00
J-07
 
231.50
237.50
0.30
6.00
J-08
 
2.00
8.00
0.41
6.00
J-08
 
8.00
45.00
0.25
37.00
J-08
 
45.00
56.00
0.49
11.00
J-08
 
56.00
68.00
0.82
12.00
J-08
 
68.00
77.00
0.52
9.00
J-08
 
77.00
86.50
0.17
9.50
J-09
 
1.50
6.00
0.27
4.50
J-09
 
6.00
49.50
1.00
43.50
J-09
 
49.50
52.50
0.55
3.00
J-09
 
52.50
66.00
0.14
13.50
J-09
 
66.00
72.00
0.48
6.00
J-09
 
72.00
93.00
0.17
21.00
J-10
 
2.00
5.00
0.36
3.00
J-10
 
5.00
18.50
0.81
13.50
J-10
 
18.50
26.00
0.44
7.50
J-10
 
26.00
47.00
0.26
21.00
J-10
 
47.00
77.00
0.79
30.00
J-10
 
77.00
81.50
0.36
4.50
J-10
 
81.50
89.00
0.17
7.50
J-10
 
101.00
105.50
0.16
4.50
J-10
 
105.50
108.50
0.53
3.00
J-10
 
108.50
120.50
0.15
12.00
J-10
 
120.50
126.50
0.41
6.00
J-11
 
126.50
138.50
0.16
12.00
J-11
 
138.50
141.50
0.57
3.00
J-11
 
141.50
153.50
0.17
12.00
J-12
 
0.50
31.50
0.22
31.00
J-12
 
31.50
45.00
0.41
13.50
J-12
 
45.00
54.00
0.73
9.00
J-12
 
54.00
66.00
0.30
12.00
J-12
 
66.00
94.50
0.14
28.50
J-12
 
106.50
109.50
0.51
3.00
 
 
24

 
 
J-13
 
1.60
16.50
0.71
14.90
J-13
 
16.50
37.50
0.97
21.00
J-13
 
37.50
57.00
0.20
19.50
J-13
 
57.00
63.00
0.45
6.00
J-13
 
63.00
85.50
0.16
22.50
J-14
 
40.50
70.70
0.17
30.20
J-14
 
79.50
97.50
0.10
18.00
J-14
 
120.00
153.00
0.22
33.00
J-14
 
153.00
156.00
0.62
3.00
J-14
 
156.00
159.00
0.29
3.00
J-14
 
159.00
169.50
0.15
10.50
J-15
 
0.20
3.00
0.35
2.80
J-15
 
3.00
69.00
0.17
66.00
J-15
 
87.00
115.50
0.16
28.50
J-15
 
115.50
118.50
0.60
3.00
J-16
 
0.00
14.00
0.45
14.00
J-16
 
14.00
30.50
0.83
16.50
J-16
 
30.50
38.00
0.48
7.50
J-16
 
38.00
45.50
0.20
7.50
J-16
 
51.50
56.00
0.12
4.50
J-16
 
56.00
60.50
0.49
4.50
J-16
 
60.50
63.50
0.18
3.00
J-17
 
2.00
6.50
0.19
4.50
J-17
 
6.50
11.00
0.42
4.50
J-17
 
11.00
23.00
0.93
12.00
J-17
 
23.00
39.50
0.19
16.50
J-17
 
39.50
45.50
0.48
6.00
J-17
 
45.50
62.00
0.16
16.50
J-18
 
1.50
6.50
0.37
5.00
J-18
 
6.50
20.00
0.21
13.50
J-18
 
20.00
24.50
0.54
4.50
J-19
 
36.50
62.00
0.19
25.50
J-19
 
81.90
86.00
0.34
4.10
J-19
 
86.00
113.00
0.13
27.00
J-19
 
113.00
117.50
0.62
4.50
J-20
 
0.50
8.00
0.30
7.50
J-20
 
8.00
27.50
0.50
19.50
J-20
 
27.50
42.50
0.23
15.00
J-20
 
50.00
53.00
0.13
3.00
J-20
 
53.00
57.50
0.48
4.50
J-20
 
57.50
78.50
0.16
21.00
J-21
 
6.5
11.00
0.32
4.50
J-21
 
11.00
26.00
0.73
15.00
J-21
 
26.00
39.50
0.18
13.50
J-21
 
39.50
44.00
0.5
4.50
J-21
 
44.00
59.00
0.16
15.00
J-22
 
117.50
153.50
0.31
36.00
J-22
incl.
141.50
146.00
0.54
4.50
 
 
25

 
 
J-22
 
153.50
164.00
0.66
10.50
J-22
 
164.00
170.00
0.12
6.00
J-22
 
170.00
174.50
0.42
4.50
J-23
 
2
42.50
0.15
40.50
J-23
 
93.5
113.00
0.16
19.50
J-23
 
113.00
117.50
0.54
4.50
J-23
 
117.50
121.80
0.21
4.30
J-24
 
0.7
3.5
0.22
2.80
J-24
 
3.5
14
0.34
10.50
J-24
 
14
27.5
0.21
13.50
J-24
 
38
41
0.17
3.00
J-24
 
41
47
0.54
6.00
J-24
 
47
69.5
0.16
22.50
J-25
 
2
12.5
0.33
10.50
J-25
 
23
33.5
0.23
10.50
J-26
 
27.50
41.00
0.35
13.50
J-26
 
41.00
53.00
0.74
12.00
J-26
 
53.00
59.00
0.41
6.00
J-26
 
59.00
90.50
0.18
31.50
J-26
 
90.50
117.50
0.40
27.00
J-26
 
117.50
122.00
0.16
4.50
J-26
 
134.00
162.50
0.15
28.50
J-26
 
162.50
168.50
0.51
6.00
J-27
 
125.00
138.50
0.24
13.50
J-27
 
138.50
162.50
0.53
24.00
J-27
incl.
138.50
144.50
0.63
6.00
J-27
incl.
144.50
150.50
0.32
6.00
J-27
incl.
150.50
159.50
0.65
9.00
J-27
incl.
159.50
162.50
0.42
3.00
J-27
 
162.50
170.00
0.17
7.50
J-27
 
170.00
176.25
0.32
6.25
J-27
 
176.25
186.50
0.19
10.25
J-27
incl.
183.50
186.50
0.42
3.00
J-MET-01
 
2.50
5.50
0.43
3.00
J-MET-01
 
5.50
59.50
1.12
54.00
J-MET-01
 
59.50
64.00
0.51
4.50
J-MET-01
 
64.00
74.50
0.18
10.50
J-MET-02
 
2.50
10.00
1.11
7.50
J-MET-02
 
10.00
16.00
0.51
6.00
J-MET-02
 
16.00
23.50
0.18
7.50
J-MET-02
 
23.50
41.50
0.70
18.00
J-MET-02
 
41.50
64.00
0.22
22.50
J-MET-02
 
76.00
83.50
0.36
7.50
J-MET-02
 
83.50
121.00
0.17
37.50
J-MET-02
 
121.00
124.00
0.93
3.00
J-MET-02
 
124.00
133.00
0.26
9.00
J-MET-03
 
1.50
27.00
0.45
25.50
J-MET-03
 
27.00
78.00
0.80
51.00
 
 
26

 
 
J-MET-03
 
78.00
88.50
0.46
10.50
J-MET-03
 
88.50
96.00
0.17
7.50
M-11
 
7.00
38.00
0.22
31.00
M-11
 
38.00
57.50
0.58
19.50
M-12
 
3.50
20.00
0.47
16.50
M-12
incl.
3.50
9.50
0.64
6.00
M-12
incl.
9.50
20.00
0.37
10.50
M-13
 
123.00
132.50
0.18
9.50
M-13
 
132.50
144.00
0.40
11.50
M-13
 
144.00
153.00
0.17
9.00
M-13
 
153.00
156.00
0.57
3.00
M-13
 
156.00
166.50
0.81
10.50
M-13
 
166.50
175.50
0.36
9.00
M-14
 
1.50
4.50
0.27
3.00
M-14
 
4.50
21.00
0.70
16.50
M-14
 
21.00
30.00
0.33
9.00
M-14
 
30.00
100.50
0.74
70.50
M-14
incl.
30.00
39.00
0.54
9.00
M-14
incl.
39.00
49.50
0.82
10.50
M-14
incl.
49.50
55.50
0.59
6.00
M-14
incl.
55.50
66.00
0.71
10.50
M-14
incl.
66.00
100.50
0.79
34.50
M-14
 
100.50
112.50
0.30
12.00
M-15
 
3.50
26.00
0.72
22.50
M-15
incl.
3.50
12.00
0.60
8.50
M-15
incl.
12.00
26.00
0.81
14.00
M-15
 
26.00
47.00
0.38
21.00
M-16
 
66.5
74.7
0.18
8.20
M-16
 
74.7
81.5
0.64
6.80
M-16
 
81.5
89
0.33
7.50
M-16
 
89.00
180.50
0.80
91.50
M-16
 
180.50
191.00
0.29
10.50
M-17
 
3.40
12.50
0.20
9.10
M-17
 
12.50
29.00
0.45
16.50
M-17
 
29.00
113.00
0.97
84.00
M-17
incl.
29.00
44.00
0.77
15.00
M-17
incl.
44.00
113.00
1.01
69.00
M-17
incl.
102.50
111.50
1.45
9.00
M-17
 
113.00
121.10
0.18
8.10
M-17
 
121.10
126.50
0.36
5.40
M-18
 
4.10
41.00
0.71
36.90
M-18
incl.
4.10
15.50
0.67
11.40
M-18
incl.
15.50
32.00
0.81
16.50
M-18
incl.
32.00
41.00
0.59
9.00
M-18
 
41.00
57.50
0.41
16.50
M-18
incl.
44.00
57.50
0.45
13.50
M-18
 
57.00
77.00
0.13
20.00
 
 
27

 
 
M-19
 
60.50
69.50
0.36
9.00
M-19
 
69.50
156.50
0.94
87.00
M-19
incl.
134.00
156.50
1.23
22.50
M-19
 
156.50
174.50
0.33
18.00
M-19
 
156.50
174.50
0.33
18.00
M-20
 
5.00
90.50
0.98
85.50
M-20
incl.
5.00
30.50
0.65
25.50
M-20
incl.
30.50
42.50
0.42
12.00
M-20
incl.
42.50
75.50
1.55
33.00
M-20
incl.
75.50
83.00
0.33
7.50
M-20
incl.
83.00
90.50
0.97
7.50
M-20
 
90.50
105.50
0.36
15.00
M-21
 
3.50
18.50
0.42
15.00
M-21
 
18.50
36.50
0.26
18.00
M-22
 
68.00
69.50
0.17
1.50
M-22
 
69.50
153.50
0.84
84.00
M-22
incl.
69.50
95.00
0.85
25.50
M-22
incl.
83.00
92.00
1.10
9.00
M-22
incl.
95.00
108.50
0.34
13.50
M-22
incl.
108.50
126.50
1.41
18.00
M-22
incl.
126.50
134.00
0.46
7.50
M-22
incl.
134.00
143.00
1.17
9.00
M-22
incl.
143.00
153.50
0.52
10.50
M-22
 
153.50
164.00
0.34
10.50
M-22
 
164.00
168.50
0.14
4.50
M-23
 
1.70
8.00
0.34
6.30
M-23
 
8.00
30.50
0.73
22.50
M-23
 
30.50
38.00
0.30
7.50
M-23
 
38.00
68.70
0.45
30.70
M-23
 
68.70
77.00
0.95
8.30
M-23
 
77.00
95.00
0.40
18.00
M-24
 
12.50
35.00
0.31
22.50
M-25
 
108.50
111.50
0.33
3.00
M-25
 
111.50
123.50
0.80
12.00
M-25
 
123.50
137.00
0.61
13.50
M-26
 
48.50
77.00
0.82
28.50
M-26
incl.
48.50
54.30
0.54
5.80
M-26
incl.
54.30
74.00
0.94
19.70
M-26
incl.
74.00
77.00
0.55
3.00
M-26
 
77.00
110.00
0.33
33.00
M-26
 
110.00
114.50
0.68
4.50
M-26
 
114.50
132.50
0.30
18.00
M-27
 
2.00
14.00
0.70
12.00
M-27
 
14.00
35.00
0.35
21.00
M-37
 
132.50
233.00
0.86
100.50
M-37
incl.
132.50
141.50
0.60
9.00
M-37
incl.
141.50
159.50
0.90
18.00
 
 
28

 
 
M-37
incl.
159.50
164.00
0.58
4.50
M-37
incl.
164.00
219.50
0.98
55.50
M-37
incl.
192.50
215.00
1.11
22.50
M-37
incl.
219.50
224.00
0.46
4.50
M-37
incl.
224.00
227.00
1.04
3.00
M-37