XTSE:PFN Annual Report 20-F/A Filing - 4/30/2012

Effective Date 4/30/2012

 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1
Form 20-F/A

[  ] Registration Statement Pursuant to Section 12(b) Or (g) of the Securities Exchange Act of 1934

or

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended APRIL 30, 2012

or

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

or

[  ]  SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from ______________ to _________________

Commission File Number: 0-29928

Pacific North West Capital Corp.
(Exact name of registrant as specified in its charter)

Not Applicable
(Translation of Registrant’s name into English)

British Columbia, Canada
(Jurisdiction of incorporation or organization)

650-555 West 12th Avenue, Vancouver, British Columbia V5Z 3X7
(Address of principal offices)

Harry Barr, CEO
info@pfncapital.com, telephone: (604) 685-1870
facsimile: (604) 685-6550
(Name, telephone, email and/or facsimile number and address of company contact person)

Securities Registered or to be Registered Pursuant to Section 12 (b) of the Act.

Title of Each Class Name on Each Exchange On Which Registered
Not Applicable Not Applicable

Securities Registered or to be Registered Pursuant to Section 12(g) of the Act.

Common Shares Without Par Value
(Title of Class)

Exhibits Index is on page 110

Page 1 of 111


 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None
___________________________________________________________________________
(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

103,747,214
___________________________________________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[  ] Yes    [X]  No  

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
[  ] Yes    [X]  No

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.
[X] Yes    [  ]  No

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    [X]  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

        Large accelerated filer [ ]                                Accelerated filer [ ]                                          Non-accelerated filer  [X]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statement included in this filing:

        U.S. GAAP [ ]                    International Financial Reporting Standards as issued   [x]                              Other  [ ]
 by the International Accounting Standards Board     

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
 [  ] Item 17              [  ] Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act.) 
[  ] Yes    [X]  No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be field in Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
 [  ]  Yes     [X]  Not applicable 


 

This Amendment No. 1 (the “Amendment”) to the Annual Report on Form 20-F for the year ended April 30, 2012, filed on July 27, 2012 with the Securities and Exchange Commission (the “Original Report”), is being filed by Pacific North West Capital Corp. (“PFN” or the “Company”) to amend the Original report for the sole purposes of:

(i) adding a disclosure that the information for the year ended April 30, 2011 under Item 3.A. “Selected Financial Data,” prepared in accordance with IFRS, may differ from the information previously published under Canadian GAAP;

(ii) separately presenting the information prepared in accordance with IFRS from the one prepared in accordance with Canadian GAAP under Item 3.A. “Selected Financial Data”;

(iii) adding a reconciliation to US GAAP for financial information for the years ended April 30, 2010, 2009 and 2008 previously published in accordance with Canadian GAAP, under Item 3.A. “Selected Financial Data”;

(iv) amending to comply with Item 18. Financial Statements rather than Item 17 of Form 20-F;

(v) including an audit opinion that refers to and opines on International Financial Reporting Standards as issued by the International Accounting Standards Board and revising the “Emphasis of Matter” paragraph to comply with PCAOB standards;


 

TABLE OF CONTENTS

          Page
General Information  
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 5
CAUTIONARY NOTE TO U.S. INVESTORS REGARDING RESERVE AND RESOURCE ESTIMATES 6
MEASUREMENT CONVERSION INFORMATION 6
Glossary of Mining Terms 7
Mineral Reserves - Definitions 10
PART I  
ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS 11
ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE 11
ITEM 3.  KEY INFORMATION 11
  A.    Selected Financial Data 10
  B.    Capitalization and Indebtedness 13
  C.    Reasons for the Offer and Use of Proceeds 13
  D.    Risk Factors 13
ITEM 4.  INFORMATION ON THE COMPANY 17
  A.    History and Development of the Company 17
  B.    Business Overview 17
  C.    Organizational Structure 17
  D.    Property, Plants, and Equipment 18
    Ontario, Canada 18
    I.         River Valley Joint Venture Project 18
    II.        Sargesson Lake and Kelly-Davis Properties 44
    III.      West Timmins Nickel Project 45
    IV.      Raglan Hills (formerly South Renfrew) 46
    V.        Coldwell Properties 47
    VI.      Goodchild Property 48
    VII.     East Sudbury Property 48
    VIII.   Swayze Joint Venture 49
    IX.      North Duluth Property 50
    Quebec, Canada 50
    I.         Glitter Lake Property 50
    II.        SOQUEM Taureau & Chenneville Projects 52
    III.      Fiedmont Property 52
    IV       Destiny Gold Project 53
    Northwest Territories 56
    I.         Winter Lake 56
    Saskatchewan Project 57
    I.         Nickel Plats Project 57
    British Columbia 58
    I          Rock & Roll Property 58
    Alaska, USA 62
    I.         Union Bay Platinum Property 62
    II.        Kane Property 63
    III.      Tonsina Property 63
    IV.      Nixon Fork Project 64
    Burkina Faso, Africa 64
    I.         Burkina Faso 64
ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS 65
  A.    Operating Results 72
          Twelve Months Ended April 30, 2012 Compared to Twelve Months Ended April 30, 2011 72
          Twelve Months Ended April 30, 2011 Compared to Twelve Months Ended April 30, 2010 73
  B.    Liquidity and Capital Resources 74
          Twelve Months Ended April 30, 2012 Compared to Twelve Months Ended April 30, 2011 74
          Twelve Months Ended April 30, 2011 Compared to Twelve Months Ended April 30, 2010 74
  C.    Research and Development, Patents and Licenses, etc. 74
  D.    Trend Information 74
  E.    Off-Balance Sheet Arrangements 75
  F.     Tabular Disclosure of Contractual Obligations 75
  G.    Safe Harbour 75

3


 
ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 76
  A.    Directors and Senior Management 77
  B.    Compensation 79
  C.    Board Practices 80
  D.    Employees 83
  E.    Share Ownership 83
ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 88
  A.    Major Shareholders 88
  B.    Related Party Transactions 88
  C.    Interests of Experts and Counsel 89
ITEM 8.  FINANCIAL INFORMATION 89
  A.    Consolidated Statements and Other Financial Information 89
  B.    Significant Changes 90
ITEM 9.  THE OFFER AND LISTING 90
  A.    Offer and Listing Details 90
  B.    Plan of Distribution 92
  C.    Markets 92
  D.    Selling Shareholders 92
  E.    Dilution 93
  F.     Expense of the Issue 93
ITEM 10.  ADDITIONAL INFORMATION 93
  A.    Share Capital 93
  B.    Memorandum and Articles of Association 93
  C.    Material Contracts 96
  D.    Exchange Controls 96
  E.    Taxation 97
  F.     Dividends and Paying Agents 103
  G.    Statements by Experts 104
  H.    Documents on Display 104
  I.     Subsidiary Information 104
ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 104
     
PART II  
     
ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 104
ITEM 13.  DEFAULTS, DIVIDEND ARREARS AND DELINQUENCIES 104
ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 104
ITEM 15. CONTROLS AND PROCEDURES 105
ITEM 16.  (RESERVED) 106
ITEM 16A.  AUDIT COMMITTEE FINANCIAL REPORT 106
ITEM 16B. CODE OF BUSINESS CONDUCT & ETHICS 106
ITEM 16C.   PRINCIPAL ACCOUNTANT FEES AND SERVICES 106
ITEM 16D.   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 107
ITEM 16E.   PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATEDPURCHASERS 107
ITEM 16F.   CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT 107
ITEM 16G.  CORPORATE GOVERNANCE 107
ITEM 16H.  MINE SAFETY DISCLOSURE 107

PART III  
   
ITEM 17.  FINANCIAL STATEMENTS 108
ITEM 18. FINANCIAL STATEMENTS 108
ITEM 19. EXHIBITS 108
SIGNATURES 111

4


 

GENERAL INFORMATION

All references in this annual report on Form 20-F to the terms “we”, “our”, “us”, “the Company” and “PFN” refer to Pacific North West Capital Corp.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act").  Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "estimates" or "intends", or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and may be "forward looking statements".  Such statements are included, among other places in this Registration Statement, in the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking statements are based on expectations, estimated and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated.  These include, but are not limited to, the risks of mining industry (for example, operational risks of exploring for, developing and producing crude oil and natural gas, risks and uncertainties involving geology of mineral deposits, the uncertainty of reserve estimates and estimates relating to production volumes, cost and expense projections, potential cost overruns and health, safety and environmental risks), risks relating to the Company's properties (for example, lack of operating history and transportation), fluctuations in mineral prices and exchange rates and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures (collectively "Cautionary Statements").  Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.

5


 

Cautionary Note to U.S. Investors Concerning Reserve and Resource Estimates

The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. These definitions differ from the definitions in the United States Securities and Exchange Commission Industry Guide 7 (“SEC Industry Guide 7”) under the Securities Act of 1933, as amended. Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. Under SEC Industry Guide 7 standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made.

In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the United States Securities and Exchange Commission. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves or that they can be mined economically or legally. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all, or any part, of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or that it can be economically or legally mined. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the United States Securities and Exchange Commission normally only permits issuers to report mineralization that does not constitute “reserves” by Securities and Exchange Commission standards as in place tonnage and grade without reference to unit measures.

Accordingly, information contained in this annual report and the documents incorporated by reference herein contain descriptions of our mineral deposits that may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.

MEASUREMENT CONVERSION INFORMATION

In this Annual Report on Form 20-F, metric measures are used with respect to mineral properties described herein.  For ease of reference, the following conversion factors are provided:

1 mile = 1.609 kilometres   2,240 pounds = 1 tonne
1 yard = 0.9144 metre   2,000 pounds/short ton = 0.907 tonnes
1 acre = 0.405 hectare   1 troy ounce = 31.103 grams

6


 

GLOSSARY

The following are definitions of mining terms and certain other terms used in this Statement.

Ag Periodic symbol for Silver
Alto Alto Ventures Ltd.
Anglo Platinum Anglo American Platinum Corporation Limited
Au Periodic symbol for Gold
assay A chemical test performed on a sample of rocks or core to determine the amount of contained metals
assessment work The amount of work, specified by mining law, that must be performed each year in order to retain legal control of mining claims
BHEM Borehole electromagnetic induction geophysics
breccia A rock in which angular fragments are surrounded by a mass of fine-grained minerals
Calista Calista Corporation
CanAlaska CanAlaska Uranium Ltd.
chalcopyrite A sulphide mineral of Copper and Iron; an important ore mineral of Copper
channel sample A sample from a small trench or channel, cut on a rock surface, usually about 5-10 cm wide and 2 cm deep, to provide accurate distribution of mineralization
chip sample A method of sampling a rock exposure whereby a regular series of small chips of rock is broken off along a line across the face
CIM Canadian Institute of Mining, Metallurgy, and Petroleum Standards on Mineral Resources and Mineral Reserves(see “Mineral Reserves – Definitions” below)
Cu Periodic symbol for Copper
diabase A common basic intrusive igneous rock usually occurring in dykes or sills
diamond drill A rotary type of rock drill that cuts a core of rock that is recovered in long cylindrical sections, two cm or more in diameter
diorite An intrusive igneous rock composed chiefly of plagioclase, hornblende, biotite or pyroxene
EM Survey A geophysical survey method which measures the electromagnetic properties of rocks
Equity Equity Exploration Consultants Ltd.
exploration Prospecting, sampling, mapping, diamond drilling and other work involved in searching and defining or bodies
Feasibility Study A detailed report showing the feasibility of placing a prospective ore body or deposit of the minerals within a mineral property into production, which report typically includes, inter alia, the specific portion or portions of the property that should be included, in a development block, conclusions and recommendations regarding any adjustments that should be made to the boundaries of a development block, a description of the work to be performed in order to develop the mineral resources within the development block and to construct a mine or mines and related facilities on the development block, the estimated capital and operating costs thereof, a proposed schedule for the timing of development and mine construction, and the information obtained and evaluations made in respect thereof

7


 
Freegold Freegold Ventures Limited
Fire River Fire River Gold Corp. – a company trading on the TSX Venture Exchange and having purchased a 100% interest in the Nixon Fork Gold Mine, Alaska, from the Company
First Nickel First Nickel Inc. - the Company’s joint venture partner on the Raglan Hills project
geophysical survey The use of one or more geophysical techniques in geophysical exploration
GeoSim GeoSim Services Inc., a mineral resource estimate consulting firm
GeoSimReport “Revised Mineral Resources Estimate, Lismer’s North and Varley Areas (Incorporating VII Drilling), River Valley PGM Project, Ontario, for Pacific North West Capital Corp., dated May 2006” (the “GeoSim Report”) prepared by Ron Simpson, P.Geo., of GeoSim, and John Londry, then-Vice President of Exploration for the Company
Geovector Geovector Management Inc.
gptor g/t Grams per tonne
grab samples A sample of rock or sediment taken more or less indiscriminately at any place
granite A coarse-grained intrusive igneous rock consisting of quartz, feldspar and mica
ha Hectare - a unit for measuring an area of land equal to 10,000 square metres
Induced Polarization A geophysical survey method which measures the  conductivity properties of rocks
Kaymin Kaymin Resources Limited, a wholly-owned subsidiary of Anglo Platinum
Kinbauri Kinbauri Gold Corp.
km A measure of distance known as a kilometre
Pb Periodic symbol for lead
m A measure of distance known as a metre
mineral An inorganic substance having usually a definite chemical composition and, if formed under favourable conditions, having a certain characteristic atomic structure which is expressed in its crystalline form and other physical properties
mineralization The concentration of metals and their chemical compounds within a body of rock
Ni Periodic symbol for Nickel
Nickel A hard white silver metallic chemical element
NI 43-101 National Instrument 43-101,Standards of Disclosure for Mineral Projects – a Canadian instrument
NSR Net Smelter Return Royalty
opt Ounces per ton
ore A natural aggregate of one or more minerals, which at a specified time and place, may be mined and sold at a profit, or which from some part may be profitably separated
oz A measure of weight known as an ounce
Pd Periodic symbol for Palladium
PGE Platinum Group Elements

8


 
PGM Platinum Group Metals
ppb Parts per billion
ppm Parts per million
Pt Periodic symbol for Platinum
Rh Periodic symbol for Rhodium
Rock & Roll Report NI 43-101 compliant report on the Rock and Roll Property, entitled “2010 Technical Report on the Rock and Roll Property” by Murray Jones, P. Geo. of Equity, and Allan Armitage, Ph.D., P. Geol. and Joe Campbell, P.Geo., of Geovector, dated February 23, 2011 and filed on the Company’s Form 6-K for May 2011
RVI River Valley Intrusion
sample A small portion of rock or mineralization taken so that the metal content can be determined by assaying
sampling Selecting a fractional but representative part of a rock or mineralization for analysis
Stillwater Stillwater Mining Company is engaged in the development, extraction, processing, smelting, refining, and marketing of palladium, platinum and associated metals from a geological formation in southern Montana known as the J-M Reef. This is the only known significant source of platinum group metals in the United States and one of the significant resources outside Russia and South Africa. Stillwater’s corporate office is located in Columbus, Montana.
strike The bearing of a bed or layer of rock
ton 2,000 pounds
tonne A metric ton (2,204 pounds)
vein A fissure, fault or crack in a rock filled by minerals that have traveled upwards from some deep source
WardropReport NI 43-101 compliant “Technical Report and Resource Estimation of the DAC Deposit, Destiny Property, Québec” (the “Destiny Tech Report”) for Alto Ventures Ltd. and Pacific North West Capital Corp. dated March 1, 2011, by Todd McCracken, P.Geo.”, of Wardrop, filed on the Company’s Form 6-K for March 2011
Wardrop Wardrop - a Tetra Tech Company
Zn Periodic symbol for Zinc
3E Pt+Pd+Au
4E Pt+Pd+Au+Rh

9


 

Mineral Reserves – Definitions

Indicated Mineral Resource An Indicated Mineral Resource is part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings, and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
Inferred Mineral Resource An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings, and drill holes.
Measured Mineral Resource A Measured Mineral Resource is part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on a detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings, and drill holes that are spaced closely enough to confirm both geological and grade continuity.
Mineral Reserve As defined by CIM, a Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined.
Mineral Resource A Mineral Resource is a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.
Probable Mineral Reserve A Probable Mineral Reserve is the economically mineable part of an Indicated and, in some circumstances, a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
Proven Mineral Reserve A Proven Mineral Reserve is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.
Qualified Person or QP As defined by CIM, a “Qualified Person” means an individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these; has experience relevant to the subject matter of the mineral project and the technical report; and is a member or licensee in good standing of a professional association.

10


 

PART I

ITEM 1.          IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

This Form 20F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

ITEM 2.          OFFER STATISTICS AND EXPECTED TIMETABLE

This Form 20F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

ITEM 3.          KEY INFORMATION

A.        Selected Financial Data

Pacific North West Capital Corp. ("PFN" or the "Company") has a limited history of operations and has not generated any operating revenues. The following table sets forth, for the periods and the dates indicated, selected financial and operating data for the Company.  This information should be read in conjunction with the Company's audited consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein.  The selected financial data provided below are not necessarily indicative of the future results of operations or financial performance of the Company.  To date the Company has not paid any dividends on its common shares and it does not expect to pay dividends in the foreseeable future.

SELECTED ANNUAL INFORMATION

The audited consolidated financial statements of the Company and its subsidiaries, including comparative, have been prepared in accordance with and using accounting policies in full compliance with International Financial Reporting Standards (“IFRS”) and International Accounting Standards (“IAS”) issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

Unless otherwise noted, all currency amounts are stated in Canadian dollars. The following table summarizes selected financial data for PFN for each of the three most recently completed financial years.  The 2012 and 2011 information set forth below should be read in conjunction with the consolidated audited financial statements, prepared in accordance with IFRS, and related notes.  The 2011 information has been adjusted in accordance with IFRS, and therefore, may differ from the 2011 information previously published in accordance with Canadian GAAP.

    Years Ended 30 April (audited)  
    2012     2011     2010  
Total revenues $ 33,134   $ 52,293   $ 59,296  
General and administrative expenses   2,975,697     1,526,478     1,789,601  
Mineral property cash costs incurred   3,351,736     1,890,288     1,487,026  
Income (loss) before other items in total   (2,975,697 )   (1,698,576 )   (1,789,601 )
Net income (loss) from continuing operations in total   (4,987,597 )   (4,316,193 )   (3,551,664 )
Loss per share – Basic & fully diluted – continued operations   (0.05 )   (0.06 )   (0.06 )
Loss per share – Basic & fully diluted – discontinued operation   -     -     0.04  
Totals assets   13,200,115     15,575,641     11,353,054  
Total long term liabilities   Nil     Nil     Nil  
Cash dividends declared   Nil     Nil     Nil  

The 2010, 2009 and 2008 information set forth below was prepared in accordance with Canadian GAAP, which has been derived from previously published consolidated financial statements.

    YearsEnded 30 April (audited)  
    2010     2009     2008  
Total revenues $ 59,296   $ 247,880   $ 611,704  
General and administrative expenses   1,789,601     2,647,547     2,091,920  
Mineral property cash costs incurred   1,487,026     1,895,727     3,602,672  
Income (loss) before other items in total   (1,789,601 )   (2,647,547 )   (2,091,920 )
Net income (loss) from continuing operations in total   (3,551,664 )   (5,274,994 )   (883,378 )
Loss per share – Basic & fully diluted – continued operations   (0.06 )   (0.09 )   (0.02 )
Loss per share – Basic & fully diluted – discontinued operation   0.04     (0.00 )   -  
Totals assets   11,353,054     15,095,336     17,087,029  
Total long term liabilities   Nil     3,836,415     Nil  
Cash dividends declared   Nil     Nil     Nil  

The 2010, 2009 and 2008 information set forth below was prepared in accordance with US GAAP, which has been derived from previously published consolidated financial statements.

    YearsEnded 30 April (audited)  
    2010     2009     2008  
Total revenues $ 59,296   $ 247,880   $ 611,704  
General and administrative expenses   1,789,601     2,647,547     2,091,920  
Mineral property cash costs incurred   1,487,026     1,895,727     3,602,672  
Income (loss) before other items in total   (1,789,601 )   (2,647,547 )   (2,091,920 )
Net income (loss) from continuing operations in total   (3,352,325 )   (3,455,580 )   (4,939,262 )
Loss per share – Basic & fully diluted – continued operations   (0.05 )   (0.06 )   (0.02 )
Loss per share – Basic & fully diluted – discontinued operation   0.04     (0.00 )   -  
Totals assets   7,683,664     10,961,107     10,637,948  
Total long term liabilities   Nil     3,836,415     Nil  
Cash dividends declared   Nil     Nil     Nil  

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B.         Capitalization and Indebtedness

This Form 20F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

C.        Reasons for the Offer and Use of Proceeds

This Form 20F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

D.        Risk Factors

As resource exploration is a speculative business, which is characterized by a number of significant risks including, among other things, unprofitable efforts resulting from the failure to discover mineral deposits.  The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection, the combination of which factors may result in the Company not receiving an adequate return of investment capital.

To date, the Company’s properties have no proven commercially viable reserves and are currently at the exploration stage and as such prospective purchasers of the Company’s common shares should consider carefully, among other things, that the Company’s exploration of its properties involves significant risks.  Our current Management while considerably experienced in managing exploration projects has limited production experience and as such is dependent upon the production expertise of our joint venture partners.

(i) Exploration Risks

  Mineral exploration involves a high degree of risk and few properties which are explored result in any discoveries of commercial bodies of mineralization or are ultimately developed into producing mines. The long-term profitability of the Company’s operations will be in part directly related to the cost and success of its exploration programs, which may be affected by a number of factors.

  Substantial expenditures are required to establish reserves through drilling, metallurgical processes to extract the metal from the ore and, in the case of new properties, to build the mining and processing facilities and infrastructure at any site chosen for mining. Minerals may not be discovered in sufficient quantities and grades to justify commercial operations or funds required for further expansion may not be obtained on a timely basis. All of the Company’s projects are currently in exploration stages. Estimates and mineral projects can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors and unforeseen technical difficulties, as well as unusual or unexpected geological formations and work interruptions. In addition, the grade of ore ultimately mined may differ from that indicated by drilling results.

(ii) Lack of Cash Flow and Non-Availability of Additional Funds

  The Company's properties are currently being explored or assessed for exploration and as a result, the Company has no source of operating cash flow. The Company has limited financial resources and, if additional funding were needed it may not be available to the Company on terms and conditions acceptable to it. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and the possible, partial or total loss of the Company's interest in current properties. The Company presently has sufficient financial resources to undertake all of its currently planned exploration programs

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  The exploration of any ore deposits found on the Company's exploration properties depends upon the Company's ability to obtain financing through debt financing, equity financing or other means. Failure to obtain additional financing on a timely basis could cause the Company to forfeit all or parts of its interests in some or all of its properties or joint ventures and reduce or terminate its operations.

  None of the Company's properties has commenced commercial production and the Company has no history of earnings or cash flow from its operations. As a result there can be no assurance that the Company will be able to develop any of its properties profitably or that its activities will generate positive cash flow. The Company has not declared or paid dividends on its common shares since incorporation and does not anticipate doing so in the foreseeable future. The only present source of funds available to the Company is through the sale of its common shares. Even if the results of exploration are encouraging, the Company may not have sufficient funds to conduct the further exploration that may be necessary to determine whether or not a commercially mineable deposit exists on any property.

(iii) Operating Hazards and Risks

  Mineral exploration involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Operations in which the Company has a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration, of PGMs and other metals, such as unusual or unexpected formations, cave-ins, pollution, all of which could result in work stoppages, damage to property, and possible environmental damage. The Company does have $10,000,000 commercial general liability insurance covering its operations. Payment of any liabilities in excess of its insurance could have a materially adverse effect upon the Company's financial condition.

(iv) No Proven Reserves

  All of the properties in which the Company holds an interest are considered to be in the exploration stage only and do not contain a known body of commercial ore.

(v) Title Risks

  Due to the large number and diverse legal nature of the mineral properties described herein, full investigation of legal title to each such property has not been carried out at this time. Much of the River Valley property was covered by the Temagami Land Caution and was not in fact open for staking and as such was closed for mineral exploration and development for twenty or more years. In June 1996, the Ontario Government passed legislation allowing the area open for staking mineral claims and on September 17, 1996, the area was re-opened for staking. The Company cannot be certain that native land claim issues may not arise.

  Many of the Company's properties may be subject to prior unregistered agreements of transfer or native land claims and title may be affected by undetected defects. The Company's properties consist of recorded mineral claims which have not been surveyed, and therefore the precise area and location of such claims is undefined.

  There is no guarantee that title to any claim will not be challenged or impugned.

(vi) Uncertainty or Contestation of Contract Rights

  The Company owns or has the right to earn interests in properties under contract with a number of individuals and corporations. The Company has no control over whether these individuals or corporation have the full right to enter into an agreement and no control should any legal action be taken against the vendors of the properties. Should the Company not be able be meet its financial commitments to the vendor of a property this may result in the forfeiture of Company’s right to earn an interest in the property.

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(vii) Conflicts of Interest

  Harry Barr, Linda Holmes and John Londry, directors of the Company, are directors of other mineral resource companies and, to the extent that such other companies may participate in ventures in which the Company may participate, these directors of the Company may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. (See Item 6, Directors, Senior Management and Employees, A. Directors and Senior Management, for detailed disclosure regarding each of Messrs. Barr and Londry and Ms. Holmes and other mineral resource companies which with each is affiliated.) In the event that such a conflict of interest arises at a meeting of the directors of the Company, a director who has such a conflict will abstain from voting for or against the approval of such a participation or such terms. In appropriate cases the Company will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. From time to time several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing for their participating in larger programs, permitting involvement in a greater number of programs and reducing financial exposure in respect of any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment. In accordance with the laws of the Province of British Columbia, the directors of the Company are required to act honestly, in good faith and in the best interest of the Company. In determining whether the Company will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the potential benefits to the Company, the degree of risk to which the Company may be exposed and its financial position at that time. Other than as indicated, the Company has no other procedures or mechanisms to deal with conflicts of interest. The Company is not aware of the existence of any conflict of interest as described herein

(viii) Competition and Agreements with Other Parties

  The mineral resources industry is intensely competitive and the Company competes with many companies that have greater financial resources and technical facilities than itself. Significant competition exists for the limited number of mineral acquisition opportunities available in the Company's sphere of operations. As a result of this competition, the Company's ability to acquire additional attractive mining properties on terms it considers acceptable may be adversely affected.

  The Company may, in the future, be unable to meet its share of costs incurred under agreements to which it is a party and the Company may have its interests in the properties subject to such agreements reduced as a result. Furthermore, if other parties to such agreements do not meet their share of such costs, the Company may be unable to finance the costs required to complete the recommended programs.

(ix) Fluctuating Mineral Prices

  The mining industry in general is intensely competitive and there is no assurance that, even if commercial quantities of mineral resources are developed, a profitable market will exist for the sale of same. Factors beyond the control of the Company may affect the marketability of any minerals discovered. Commodity prices may not remain at current levels and significant price movements over short periods of time may be affected by numerous factors beyond the control of the Company, including international economic and political trends, expectations of inflation, currency exchange fluctuations (specifically, the U.S. dollar relative to other currencies), interest rates and global or regional consumption patterns, and speculative activities. The effect of these factors on the price of minerals and therefore the economic viability of any of the Company's exploration projects cannot accurately be predicted. As the Company is in the exploration stage, the above factors have had no material impact on operations or income.

(x) Shares Reserved for Future Issuance; Potential Dilution

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  As of April 30, 2012, the Company had reserved 19,245,213 common shares for issuance upon the exercise of warrants, incentive stock options and performance shares. Such common shares represent a potential equity dilution of approximately 15.6% based upon the number of outstanding common shares at April 30, 2012, of 103,747,214. Furthermore, the Company may enter into commitments in the future which would require the issuance of additional common shares and may grant additional stock options and/or issue additional warrants. As at April 30, 2012, the Company had an unlimited number of authorized but unissued and unreserved common shares. Issuance of additional common shares would be subject to stock exchange regulatory approval and compliance with applicable securities legislation. The Company currently has no plans to issue common shares other than for the purposes of raising funds for property acquisition, property exploration and general working capital requirements which issuances would be subject to regulatory approval.

(xi) Environmental Regulation

  All phases of the Company's operations in Canada are subject to environmental regulations. It is the Company's belief that if environmental legislation in Canada evolved and required stricter standards and enforcement, in conjunction with increased fines and penalties for non-compliance, including more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees, the cost of compliance therewith may substantially increase and thereby effect the Company's operations.

(xii) Compliance with Applicable Laws and Regulations

  The current or future operations of the Company, including development activities and commencement of production on its properties, require permits from various governmental authorities and such operations are and will be subject to laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs, and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. There can be no assurance that approvals and permits required to commence production on its various properties will be obtained. Additional permits and studies, which may include environmental impact studies conducted before permits can be obtained, may be necessary prior to operation of the properties in which the Company has interests and the Company may not be able to obtain or maintain all necessary permits that may be required to commence construction, development or operation of mining facilities at these properties on terms which enable operations to be conducted at economically justifiable costs.

  The Company’s potential mining and processing operations and exploration activities are subject to various federal and state or provincial and municipal laws and by-laws governing land use, the protection of the environment, prospecting, development, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, mine safety and other matters. Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that the Company obtain permits from various governmental agencies. Permits that the Company may require for construction of mining facilities and conduct of mining operations may not be obtainable on reasonable terms.

  Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

  Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or production costs or reduction in levels of production at producing properties or abandonment or delays in advancement of new exploration properties.

(xiii) Canadian Jurisdictional and Enforceability of Judgments, Risks

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  The Company is a Canadian corporation and is governed in its conduct by the Laws of Canada. All of the Company’s directors are residents of Canada and all its assets are located in Canada and United States. Consequently, it may be difficult for U.S. investors to effect service of process within the United States upon the Company or upon such persons who are not residents of the United States, or to realize in the United States upon judgments of U.S. courts predicated upon civil liabilities under U.S. securities laws. A judgment of a U.S. court predicated solely upon such civil liabilities may be enforceable in Canada by a Canadian court if the U.S. court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities.

(xiv) Adequate Labor and Dependence upon Key Personnel

  The Company will depend upon recruiting and maintaining other qualified personnel to staff its operations. The Company believes that such personnel currently are available at reasonable salaries and wages in the geographic areas in which the Company intends to operate. Such personnel may not always be available in the future. In addition, it cannot be predicted whether the labor staffing at any of the Company's projects will be unionized. The success of the operations and activities of the Company is dependent to a significant extent on the efforts and abilities of its management. The loss of services of any of its management could have a material adverse effect on the Company.

(xv) Forward Looking Statements

  This document contains forward looking statements concerning the Company's operations, economic performance and financial condition, including in particular, the likelihood of the Company's success in operating as an independent company and developing and expanding its business. These statements are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company, and reflect future business decisions which are subject to change. Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect the Company's future results.

(xvi)  Financing Risks

  The Company has a history of losses and no revenues.

  The Company is a mineral exploration company without operations and has historically incurred losses. To date, the Company has not recorded any revenues from its operations nor has the Company commenced commercial production on any of its properties. The Company does not expect to receive revenues from operations in the foreseeable future, if at all. The Company expects to continue to incur losses unless and until such time as properties enter into commercial production and generate sufficient revenues to fund its continuing operations. Until such time, the Company will be dependent upon future financings in order to meet its capital requirements and continue its plan of operations. The Company cannot guarantee that it will obtain necessary future financing. The development of the Company’s properties will require the commitment of substantial resources to conduct the time-consuming exploration and development of properties. The amounts and timing of expenditures will depend on the progress of ongoing exploration, assessment and development, the results of consultants’ analyses and recommendations, the rate at which operating losses are incurred, the execution of any joint venture agreements with strategic partners, the Company’s acquisition of additional properties and other factors, many of which are beyond the Company’s control. The Company may never generate any revenues or achieve profitability.

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ITEM 4.          INFORMATION OF THE COMPANY

A.        History and Development of the Company

The Company was incorporated pursuant to the provisions of the Business Corporations Act (Alberta) on May 29, 1996.  The Company amended its articles by certificate of amendment dated October 22, 1997 to remove the private company restrictions.  On July 13, 2004 the Company continued out of the province of Alberta into the province of British Columbia pursuant to the Business Corporations Act (British Columbia).

The Company's registered and executive office is located at 650-555 West 12th Avenue, Vancouver, British Columbia, Canada V5Z 3X7, telephone (604) 685-1870, facsimile (604) 685-6550.

The Company is a reporting issuer in the provinces of Alberta, British Columbia and Ontario, Canada.

The Company’s common shares traded on the Toronto Venture Exchange from December 19, 1997 and on the Toronto Stock Exchange (“TSX”) from June 8, 2001, under the trading symbol “PFN”; on the Over-the-Counter Bulletin Board (“OTCBB”) since August 30, 2001 and the OTCQX™ since October 26, 2010 under the trading symbol “PAWEF”; and are included for trading on the Frankfurt Stock Exchange, Open Market, under the trading symbol “P7J.F”.

B.         Business Overview

The Company is a mineral exploration company focused on the acquisition, exploration and development of platinum group metals (PGMs), precious and base metals minerals properties.

The Company has not determined whether these properties contain ore reserves that are economically recoverable and the Company is considered to be in the exploration stage.

Management's corporate philosophy is to be a project generator, explorer and project operator with the objective of optioning/joint venturing projects with major and junior mining companies through to production.

The Company’s primary project is the River Valley PGM project in Ontario.

Exploration on the property is generally not affected by seasonal change, with drill programs being carried out year round and surface bedrock exploration limited only by snow cover and spring thaw conditions. Exploration activities are dependent upon the availability of subcontractors, in particular drilling activities. These sub-contractors are generally available, however, may vary in price depending upon availability. The material effects of government regulations on the Company’s business are disclosed in Item 3 – Risk Factors.

The mineral resources industry is intensely competitive and the Company competes with many companies that have greater financial resources and technical facilities.

C.        Organizational Structure

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The Company owns 100%  of Pacific North West Capital Corp. USA, and  99.98% of Pacific North West Capital de México, S.A. de C.V. in México (Mr. Harry Barr, CEO of the Company, owns 0.02%).

D.        Property, Plants, and Equipment

PFN rents executive and administrative office space located at 650-555 West 12th Avenue, Vancouver, British Columbia, V5Z 3X7, Canada, for the sum of $18,048.00 per month, subject to annual adjustments.

Mineral Properties

None of the Company’s mineral exploration properties contain a known commercially mineable mineral deposit.

ONTARIO, CANADA

(I)        River Valley PGM Project

The River Valley mineral claims are located in the Sudbury Region of Ontario.  PFN optioned the River Valley claims following the discovery of highly anomalous PGM values in grab samples in the Dana Lake and Azen Creek areas.  By an agreement dated January 15, 1999 and amended March 11, 1999 (collectively, the “Agreement”), the Company acquired a 100% interest in the River Valley claims from Bailey Resources Ltd., Luhta Resources Ltd. and Pardo Resources Ltd. by issuing 600,000 common shares of PFN and $265,000 in cash over four years. The River Valley claims are subject to a total 3% NSR, of which PFN can purchase up to 2% of the NSR from the vendors for $2,000,000.

On July 14, 1999, PFN entered into an unincorporated 50/50 joint venture agreement (“JV”) over the River Valley property with Kaymin whereby Kaymin was responsible for funding all exploration to completion of a feasibility study, which would give Kaymin an additional 10% interest. In addition, if Kaymin arranged financing for a mine, it would receive another 5% interest, for a total interest of 65%. 

Kaymin continued to fund exploration under the terms of JV until 2007and invested over $22M in the exploration of the property; however, as a result of capital expenditure reductions during the global financial crisis in 2008, no new funds were allocated to the River Valley Project above and beyond the minimal holding costs.

By way of a Mineral Interest Assignment Agreement dated for reference December 13, 2010, as amended April 6, 2011 (“Assignment Agreement”), on April 7, 2011, PFN completed the purchase from Kaymin of Kaymin’s 50% interest in the River Valley claims, providing PFN with an undivided 100% interest in the River Valley PGM Project.  Under the terms of the Assignment Agreement,  Kaymin exchanged its 50% interest in the JV, for a 12% interest in PFN, based on the issued and outstanding common shares of PFN as of November 30, 2010 (67,643,008 common shares). The aggregate purchase price for the 50% interest in the River Valley PGM project was:

  a. 8,117,161 fully paid and non-assessable common shares of PFN (issued); and
  b.  three-year warrants exercisable to purchase 3,000,000 common shares of PFN at a price of $0.30 per common share.

There are no other encumbrances on the River Valley PGM Project associated with the terms of the Assignment Agreement, after an 18-month early disposition period lapses, and there are no back-in rights or take-off agreements between PFN and Kaymin.

In addition to the River Valley claims, PFN holds various other properties that together comprise the River Valley Project as shown below:

a) Goldwright Property.  By agreement dated June 30, 1998 and subsequently amended, the Company earned a 25% interest from Goldwright Explorations Inc. in certain mineral claims known as the Janes property, located in Janes Township, Sudbury Mining District, Ontario, by incurring in excess of $350,000 of exploration expenditures on the properties by May 31, 2001.  Certain of these claims are subject to a 2% NSR.

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b) Washagami Lake Property.  The Company entered into an option to purchase agreement dated February 23, 1999, as amended, whereby the Company could earn a 100% interest in 1 unpatented mining claim unit (16 ha) located in Janes Township, Sudbury Mining District, Ontario, immediately south of the Frontier property, by making cash payments of $28,200 (paid).  On December 10, 2008, the claim was allowed to lapse.

c) Razor Property.  The Company acquired a 100% interest in certain mineral claims located in the Dana Township, Sudbury Mining District for a consideration of $30,000. The property is subject to a 2% NSR.

d) Western Front Property.  Under an agreement dated November 16, 2001, the Company earned a 70% interest in certain mineral claims from a company (the Optionor) that previously had certain directors in common.  As consideration the Company paid $55,000 and issued 20,000 common shares to the Optionors. In addition, exploration expenditures of $50,000 were completed. The Company has the right to purchase an additional 30% interest in the property by paying $750,000 to the Optionor. The property is subject to a 3% NSR the first 1% of which the Company can purchase for $1,000,000 the second 1% can be purchased for $2,000,000. The Company and the Optionor will share the NSR buyout privileges in proportion to their respective interest.

Location Map of River Valley PGM Project relative to the metallurgical facilities in the greater Sudbury region.

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River Valley Lease and Claim  

Property Location and Access

The River valley project is located in the Dana and Pardo townships of Northern Ontario, approximately 60km east of Sudbury, Ontario. The project is road accessible in Canada's premier Ni-Cu-PGM mining and smelting district which boasts perfect infrastructure and community support for mining activities.

Property and ownership:

River Valley PGM Project is 100% owned by Pacific North West Capital Corp.  The project is under two Mining leases. The Mining Leases cover an area of 5381.1 hectares, including 4,756.2 hectares of Surface and Mining Rights and an additional 624.9 hectares of Mining Rights. The Mining Leases cover all of the NI43-101 mineral resources of the River Valley PGM Project.

The River Valley PGM project was acquired in 1998 by PFN through a number of transactions. PFN discovered significant PGM occurrences on the property and entered into a joint venture agreement with Anglo Platinum in 1999. PFN remained operator of the joint venture.

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In January 2011, Pacific North West Capital Corp. successfully negotiated the 100% acquisition of the Project from Anglo Platinum Limited.To the best of PFN’s knowledge there are no environmental or other liabilities associated with the River Valley Joint Venture claims.

All exploration to date has been carried out with appropriate work permits from the Ontario Ministry of Natural Resources.  For the future exploration activities a more elaborate permit may be required, but to PFN’s knowledge there is no impediment to receiving one.

Claim list and anniversary dates - River Valley

Mining Lease/ Claims Size (Hectars) Township Recorded Current expiry date
CLM450 4777.181 Dana 1-Nov-11 31-Oct-32
CLM451 570.308 Pardo 11-Jan-12 28-Feb-33
S 3017059 256 Pardo 8-Apr-04 5-Oct-12
S 3017060 256 Pardo 8-Apr-04 5-Oct-12
S 3017061 256 Pardo 8-Apr-04 5-Oct-12
S 3017062 256 Pardo 8-Apr-04 5-Oct-12
S 3017085 256 Pardo 8-Apr-04 5-Oct-12

Climate and Local Resources

Climate is temperate, with four distinct seasons, typical of the Southern Shield, and moderated by the proximity to the Great Lakes.  Other than over small lakes, drilling and geophysical surveys can be carried out year round from skidder roads.  Drilling water is sufficient.  Surface bedrock exploration can be done for about 7‑8 months of the year.  An environmental base line study has not been necessary to date.

Infrastructure

Sudbury, a major mining and manufacturing city, can provide all of the infrastructure and technical needs for any exploration work.

Physiography

The property lies at a mean elevation of about 325 metres (m) ASL. Relief is moderate and typical of upland Precambrian Shield topography.  The eastern part around Azen Creek is lower and marshy.  Forest cover is mainly poplar with about 25-33% white pine regrowth.

Outcrop exposure on the property is limited to about 20% with the remaining areas covered mostly by a thin (<1 m) veneer of glacial till; locally gravel, outwash sand and silt reach 10’s of metres in thickness.  Most of the area around the Dana Lake and Azen Creek areas has been logged within the past 10 years and new logging took place in the Azen Creek Area during the summer of 2000.

History and Previous Work

In 1973, the Province of Ontario placed more than 110 Townships in a withdrawn area referred to as the “Temagami Land Caution” – this region was excluded from any type of resource exploration and/or development until June 1996.  The River Valley Property was covered by this withdrawn area and as a result, most of the River Valley Intrusion was never explored for its PGM-Cu-Ni potential.

The earliest recorded work on the River Valley property was by Kennco Explorations (Canada) Ltd. in 1968, at which time they conducted an airborne Mag-EM survey over Janes, Davis, Henry and Dana Townships. 

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Geological Setting

Regional Geology

The River Valley property is primarily underlain by rocks of the RVI, a large Paleoproterozoic intrusion that forms part of the Huronian-Nipissing Magmatic Province or the Huronian Metallogenic Province.

Local Geology

The RVI covers more than 100 square kilometres (km2) and lies adjacent to, and straddles, the Grenville Front within the Grenville Province and the Grenville Front Tectonic Zone (“GFTZ”).  The GFTZ represents a complex zone, several km wide and consisting of generally southeast-dipping imbricate thrust faults.  In the area of the River Valley property, the GFTZ is located along the westernmost edge of the claims where it is represented by a system of eastward-dipping (10-25°) thrust faults.  This fault system separates the intrusive rocks of the RVI from younger sedimentary and intrusive rocks of the Huronian Supergroup (includes Nipissing Diabase). It is likely that intrusive rocks of the RVI interdigitated within Huronian rocks along the fault-bound western contact.

Within Pardo Township, a north-trending apophysis of the RVI appears to be in fault contact with older (Archean Superior Province) mylonitic granitic rocks.  In Dana Township the western boundary is in fault contact with rocks of the Southern Province, and the eastern and northern boundaries are in igneous contact with Archean migmatite and paragneiss of the Superior Province.  The eastern and northern boundaries were previously mapped as being in contact with rocks of the Grenville Province.

The RVI can be separated into two main areas on the basis of structural coherence and preservation of primary igneous features such as contacts and layering.  The eastern part of the RVI, located primarily in Dana and Crerar Townships, is represented by the best preserved portions of the intrusion and as such the most prospective areas for discovery.  PFN’s River Valley property covers about 40% of this area including about 10 km of highly prospective northern igneous contact.  Further to the west, in Henry, Janes, Loughrin, Street and Awrey Townships, the geology of the western part of the RVI is complicated by the effects of Grenville metamorphism.  In this area the rocks are attenuated, folded and structurally modified such that most of the primary features are absent.

Property Geology

The River Valley property as mapped by the Company, includes three main mineralized areas with anomalous PGM-Cu-Ni sulphide mineralization: the Dana Lake Area, Lismer’s Ridge, and Azen Creek Area.

The Dana Lake Area of the River Valley property lies within a north-trending portion of the River Valley Intrusion (RVI). This region of the RVI likely represents an offshoot of the main intrusive body and appears to be an up-thrust and rotated portion of the intrusion.  In its current position, the Dana Lake Area represents a lower stratigraphic position in the intrusion that is now oriented sub-vertical relative to its original, near-horizontal position.  The basal contact of the intrusion undulates in both the horizontal and vertical direction and this undulation is probably a primary igneous contact feature.  However, the area has been structurally disturbed with evidence for dip-slip, strike-slip and rotational displacement on the centimetre to metre scale.  Steeply dipping (>80°), decimetre- to metre-scale, modally layered rocks of the River Valley intrusion overly the contact-related, mineralized breccia unit and are truncated along the western edge of the intrusion by the Grenville Front Fault.

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Locations of mineralized zones in the River Valley Intrusion

Mineralization

An economically important feature commonly shared by the Agnew Lake, East Bull Lake and River Valley Intrusions is the occurrence of a copper-nickel-PGE bearing breccia unit situated at the base of the intrusions, where the footwall contact is preserved. The breccia units are characterized by inclusions of footwall and cognate mafic to ultramafic xenoliths and autoliths set within a gabbronorite to olivine-bearing gabbronorite matrix. Near the contact, marginal footwall breccias and zones of extensive footwall dikes may also be present. Blebby to disseminated chalcopyrite and pyrrhotite, typically in modal amounts from 0.5 to 2%, occur in the matrix of the marginal and brecciated rocks and occasionally within the breccia’s more mafic fragments. This sulphide mineralization commonly contains between 1 g/t and 5 g/t combined platinum-palladium-gold. On the basis of work completed to date, several important observations and conclusions can be made regarding the geological environment of the contact-type PGM-copper-nickel sulphide mineralization on the Property:

• The Breccia Zone (approximately 10 to 195 m intersections), which includes the main mineralized breccia or Main Zone, has relatively consistent, elevated PGM values. The Main Zone occurs within about 20 m of the intrusive contact with Archean paragneiss and migmatite.

• The Inclusion-Bearing Zone (approximately 1.0 to 100 m intersections) is variably mineralized and has scattered, elevated PGM values.

• Sulphide contents generally range from 1 to 5% total sulphide but can be as high as 10% when occurring as localized clusters of disseminated and bleb sulphide. There is a moderate correlation between PGM-bearing sulphide mineralization and patches of blue-grey quartz (referred to as cauliflower) and/or elevated biotite concentrations.

• The majority of sulphide mineralization occurs as magmatic sulphide grains that are primarily disseminated and bleb textured, with subordinate nettextures. Principal sulphide minerals are chalcopyrite, pyrrhotite, and entlandite with subordinate pyrite, cubanite and bornite.

• Although the mineralized sections at the Dana Lake Area and Lismer Ridge are broadly similar, there are several notable differences. Mafic rocks at Lismer Ridge commonly develop a moderate foliation and tend to have a higher proportion of chlorite and biotite. There is also a higher proportion of visible chalcopyrite relative to pentlandite + pyrrhotite at Lismer Ridge and chalcopyrite is more commonly re-crystallized along foliations. At Lismer Ridge, blue quartz is not as prolific within the mineralized sections. These differences are likely the result of a slightly higher metamorphic grade at Lismer Ridge (mid- to upper-amphibolite facies), relative to the Dana Lake Area (greenschist facies). The zones of mineralized breccia starting in the northwest and proceeding to the southeastern extent of the contact on the Property are: Dana North, Dana South, Banshee, Lismer’s Extension, Lismer’s Ridge, Varley, Azen, Jackson’s Flats, and Razor (Figure below)

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Joint Venture Exploration Programs (1999-2008)

Phase 1 Surface (July – December, 1999)

The Phase1 Surface program commenced on December 15, 1999 and included:

  1. Establishing detailed and regional exploration grids
  2. Regional prospecting and sampling
  3. Grid prospecting and sampling
  4. Preliminary geological grid mapping (1:1000 scales)
  5. Stripping and cleaning of selected outcrop areas
  6. Detailed sampling (2.5 x 2.5 m grid) of cleaned outcrop areas
  7. Preliminary mapping (1:250 scale) of cleaned outcrop areas
  8. Orientation biogeochemical survey in area of South and Trench zones; and
  9. Orientation induced polarisation and ground magnetometer geophysical surveys.

24


 

More than 2300 surface samples (27 grabs from regional prospecting, 392 grabs from grid prospecting, and 1636 samples from detailed sampling) were collected during the exploration program.  Background was calculated to be 7 ppb Au, 25 ppb Pt, 23 ppb Pd, 1 ppb Rh, (57 ppb 4E), 82 ppm Cu and 137 ppm Ni; average ratios include 0.82 Pd:Pt and 0.81 Cu:Ni.

Regional prospecting led to the discovery of 2 new areas of highly anomalous PGM values:

  1. Central Reef, located about 1.0 km northwest of the Azen Creek Area main showing (up to 10.38 g/t 4E, 2970 ppm Cu, 530 ppm Ni),

  2. East Reef, located about 2 km east of the Azen Creek Area main showing (up to 0.7 g/t 4E, 707 ppm Cu and 765 ppm Ni.

 The highest value from surface sampling was 12.11 g/t 4E, collected from a ridge several metres south of the Central Zone.

Detailed sampling of cleared outcrop areas returned highly anomalous average values from the 2.5m x 2.5m sample grid: all 1636 detailed samples averaged 958 ppb 4E; 632 samples from the South Zone averaged 975 ppb 4E; 99 samples from the Trench Zone averaged 1168 ppb 4E; and, 165 samples from the Central Zone averaged 1449 ppb 4E.  The highest surface sample was 16.4 g/t 4E (South Zone).

Phase 1 Drilling (February – March, 2000)

The phase 1, 2000 m and 13 hole drilling program was completed between February 28and March 2000.  The program concentrated on mineralization at the Dana Lake Area (claim S-1229230).  A total of 1649 samples were taken from split drill core and sent to XRAL Laboratories in Rouyn-Noranda, Quebec for Pt-Pd-Au-Rh-Cu-Ni assay.

Drilling program was very successful and the highest drill samples was 10,206 ppb 4E (Au+ Pt+Pd+Rh) over 2.3 metres.

Phase 2 Drilling (June – July, 2000)

Phase 2 drilling concentrated on mineralization at the Dana Lake Area (claim S-1229230) where PGMs are associated with disseminated Cu-Ni sulphide mineralization that is hosted by mafic magmatic breccia which is proximal to the footwall contact.  The Phase 2 program was designed to augment Phase 1 drilling, testing the down dip extension of surface mineralization and in-fill drilling of untested areas.

The Phase 2 program consisted of 2820.8m in 14 holes and was completed between June 12th and July 18th, 2000.  Core logging and sampling was fully completed by October 15th; drill hole RV00-03 was extended 27.3 m.  A total of 2177 samples (2158 from RV00-14 to 26 and 19 from RV00-03) were taken from split drill core and sent to XRAL Laboratories (Rouyn-Noranda, Quebec & Don Mills, Ontario) for Pt-Pd-Au, Rh and Cu-Ni assays.  A total of 296 pulps were sent to Accurassay Laboratory in Thunder Bay for sample check assays.

Significant intervals were encountered in holes number DDH 15, 20 and 25 with 1143.2 ppb 4E over 39.10m, 2342.9 ppb 4E over 15.85 and 1948.2 ppb 4E over 11.10 meters respectively.

Phase 3 Drilling (September 2000)

Phase 3 drilling consisted of 10 drill holes at the Dana Lake Area (claim S-1229230) and 3 drill holes at Lismer’s Ridge (claims S-1229542 & S-1229216).  In both areas, PGMs are associated with disseminated and bleb Cu-Ni sulphide mineralisation that is hosted by a heterolithic breccia which is proximal to the intrusive contact.  The Phase 3 program was designed to augment Phases 1 & 2 drilling, testing the down dip extension of surface mineralisation and in-fill drilling of untested areas at the Dana Lake Area, and testing newly discovered surface mineralisation at Lismer’s Ridge.

The Phase 3 program (1958.50 m in 13 holes) was completed September 6 - 25, 2000; core logging and sampling was fully completed by October 30, 2000.  A total of 1142 samples were collected from split drill core and assayed for Pt, Pd, Au, Cu and Ni at XRAL Laboratories (Rouyn-Noranda, Quebec & Don Mills, Ontario).

25


 

Significant intervals were encountered in holes number RV0028 and RV0036, with 1022.2 ppb 3E (Au+Pt+Pd) over 42.35m, including 1386.4 ppb 3E over 7.85m and 7215.8 ppb over 8.8m respectively.

Phase 2 Surfaces (March – October, 2000)

The Phase 2 program consisted of:

  1. Grid cutting
  2. Geophysical surveys
  3. Regional mapping/prospecting and detailed mapping/sampling of newly-cleared areas.

Detailed sampling produced a total of 2133 samples; 831 were collected from newly cleared areas in the Dana Lake Area (S-1229230); 1282 samples were collected from Lismer Ridge (S-1229542, S-1229216).  Regional mapping and prospecting produced an additional 233 samples from regional work across the property.

Phase 4 Drilling (February – July 2001)

The Phase 4 program was separated into two time blocks, to accommodate for the changing weather conditions between seasons:  February 1st to March 21, 2001 and May 14 - July 2001.  Core logging and sampling was fully completed by August 31, 2001.  A total of 10,529 samples from Dana and 7,501 from Lismer Ridge were collected from split drill core and assayed for Pt, Pd, Au, Cu and Ni at XRAL Laboratories (Rouyn-Noranda, Quebec & Don Mills, Ontario).

The highest value from drilling program was as follow:
3.7 g/t 3E over 71.4m including 9.6 g/t 3E over 4.2m in DL-08 drilled in Dana Lake Area and 4.71 g/t 3E over 18 metres including 13.2 g/t 3E over 5.2m and 28.14 g/t over 2m in hole number LR-02 drilled in Lismer Ridge Area.

At the completion of Phase 4 Drilling, an Independent Mineral Resource Study was carried out by Derry Michener Booth and Wahl (DMBW), which incorporated assay data from the 138 holes drilled to date on the property.  The Report estimated an in situ resource at Dana Lake and Lismer Ridge totaling ~593,000 ounces (Pd+ Pt+ Au) at a 0.7 g/t cut-off in 12 million tonnes (measured + indicated + inferred).  The report notes that “there is significant potential to increase resources on the property through further drilling both along strike from and down dip on the currently defined mineralized zones”.

Phase 3 Surface (June – September, 2001)

During the Phase 3 program a total of 1,111 samples were collected from the property with concentrations in the south eastern and western contact areas.

The highest value from surface sampling was 3.9 g/t 3E, collected from the Razor area.

Phase 5 Drilling (November, 2001 – August, 2002)

This Phase 5 program was completed in its entirety between November 17, 2001 and August 31, 2002; drilling was employed from November 22, 2001 to June 24, 2002 (Part 1: November 22, 2001 to March 3, 2002 and Part 2: April 21, 2002 to June 24, 2002).

A total of 22,319 core samples were collected consisting of 10,325 from Lismer Ridge, 10,289 from Dana South, and 1,705 from Banshee Lake.  The core samples were collected from split drill core and assayed for Pt, Pd, Au, Cu and Ni at XRAL Laboratories, located in Rouyn-Noranda, Quebec and Don Mills, Ontario.

Highlights from Phase 5 Drilling: Dana Lake Area, River Valley Property (weighted averages).

DDH From To Int Au Pt Pd 3E* 3E* Pd:Pt
  m m m ppb ppb ppb ppb g/t  
DL-55 198.00 215.50 17.50 162 942 3388 4492 4.49 3.6
incl. 210.50 212.85 2.35 221 1798 6001 8020 8.02 3.3
DL-58 146.30 174.00 27.70 110 641 2147 2898 2.90 3.3
incl. 155.50 159.00 3.50 188 1256 4580 6024 6.02 3.6
DL-59 192.00 200.00 8.00 101 734 2292 3127 3.13 3.1
incl. 193.00 197.00 4.00 136 1060 3433 4629 4.63 3.2
DL-80 270.00 277.50 7.50 166 1319 4091 5576 5.58 3.1
incl. 271.00 274.00 3.00 208 1519 4810 6537 6.54 3.2
DL-83 293.80 340.50 46.70 95 602 1913 2610 2.61 3.2
incl. 296.50 300.00 3.50 176 1778 5481 7435 7.44 3.1

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Highlights from Phase 5 Drilling: Lismer Ridge Area, River Valley Property (weighted averages).

DDH From To Int Au Pt Pd 3E* 3E* Pd:Pt
  m m m ppb ppb ppb ppb g/t  
LR-70 205.50 218.40 12.90 120 732 1794 2646 2.65 2.5
incl. 206.50 210.50 4.00 235 1691 3810 5736 5.74 2.3
LR-72 69.50 71.00 1.50 34 2800 6330 9164 9.16 2.3
- 134.50 134.80 0.30 171 4930 8980 14081 14.08 1.8

Phase 4 Surface (October – December, 2002)

This program was completed on the River Valley property between October 15 and December 31, 2002, and included 1) regional geological mapping and sampling;  2) stripping, detailed mapping and sampling;  3) line cutting, and induced polarization and ground magnetometer geophysical surveys.

A total of 483 samples were collected; 395 grab samples from regional mapping and 88 samples from detailed sampling and mapping.

Of the 395 grab samples, 394 samples assayed from lower limit of detection to 250 ppb 3E (Pt, Pd, Au); 1 sample assayed between 251-500 ppb 3E, (Jackson’s Flats area - 12 ppb Au, 280 ppb Pt, 77 ppb Pd, 4.9 ppm Cu and 10 ppm Ni).

Of the 88 samples that were collected during detailed sampling, the highest value of PGM was 601 ppb Au, 2240 ppb Pt, 2950 ppb Pd, 2540 ppm Cu, and 76 ppm Ni.  This sample was collected at the Banshee South trench.    

Phase 6 Drilling (November 2002 – May 2004)

Phase 6 consisted of 44,131 metres in 208 holes:

  • 70 drill holes at Dana Lake
  • 15 holes at the Banshee Lake
  • 41 drill holes at Lismer Ridge
  • 7 holes at the MacDonald
  • 32 holes at Varley
  • 16 holes at Azen Creek
  • 10 holes at Razor
  • 13 holes at Jackson’s Flats
  • 4 holes at Pardo

A total of 40,131 core samples were collected.  The core samples were collected from sawed drill core and analyzed for Pt, Pd, Au, Cu and Ni as part of a 33 element ICP package at XRAL Laboratories, located in Rouyn-Noranda, Quebec and Don Mills, Ontario.

Phase 5 (July 2003)

Spectrem Air Ltd., based in Lanseria, South Africa, flew airborne mag, EM and radiometric surveys over the River Valley property.

Phase 6 Surface (May to October 2004)

27


 

The Phase 6 Surface consisted of extensive geological mapping of the eastern portion of the property along the northern contact and the interior of the River Valley Intrusive.  The mapping successfully traced the mineralized Breccia Zone along the northern RVI-Archean contact from the south Varley area through to the Razor area.  Assays values from the Breccia Zone were often highly anomalous, with maximum returned values of 4,114 ppb 3E (Pt+Pd+Au).

Untested, potential reef-type mineralization is interpreted to occur where the Marginal Leucogabbronorite Unit is interlayered within the Olivine Gabbronorite Zone near the base of the Layered Series on the south flank of the Turtle Creek Syncline in the South Jackson’s Flat West area.  This interpretation is supported by a significant number of historic geochemical samples taken from this area, which returned Pt + Pd + Au values of greater than 100 ppb.

Mapping in the Azen-Spade Lake and South Azen areas has identified a new mineralized zone straddling the contact between the Layered Gabbronorite Zone and the Upper Leucogabbronorite/Anorthosite Unit.  In the North Spade Lake, South Spade Lake and South Azen showing areas, significant PGE values (to 1696 ppb Au+Pt+Pd) have been returned from coarse-grained pyroxenite pegmatite layers and lenses interlayered with norite and gabbronorite near the top of the Layered Gabbronorite Zone and into the base of the overlying Upper Leucogabbronorite Unit.  This mineralized zone is termed the “Transition Zone” and is a target for reef-type PGE ores in the Upper River Valley stratigraphy.  The Thomson claims are now recognized as a potential Transition Zone target.

A Phase 7 exploration program was completed on the property during 2004 and mid 2005. The program completed 20,740 m of diamond drilling, metallurgical testing and the collection of a 40 tonne bulk sample for metallurgical testing on the Dana North and Dana South Zones. The budget was set at $3.0 million dollars.

In the Phase 7 program particular emphasis was placed on expanding targets identified by reconnaissance drilling, geophysics, and geological mapping especially along the northern contact of the intrusive. The known platinum, palladium mineralization has been identified within the contact breccia zone over a strike length in excess of 15 km. The mineral resource estimates have been primarily concentrated in the Dana Lake and Lismer’s Ridge Zones over a 3 km strike length.

In 2005-2006 (Phase 8), additional mapping and drilling was carried out.  In 2006 and 2007 (Phase 9), further mapping and detailed sampling was completed.

In 2005 a $1.5 million budget (Phase 8) was approved by the joint venture. The program included the processing of the bulk sample at Anglo Platinum’s facilities in South Africa, and additional surface detailed mapping and geophysical work.  A series of drill holes were completed at the end of 2005 to test geological interpretations for the mapping programs.  A series of these drill holes located south of the Azen zone intercepted mineralized breccias and horizons within the River Valley Intrusive.

In 2006 the joint venture has authorized a further $1.1 million (phase 9) lease survey and mapping program to determine the controls on mineralization within the intrusive complex.   At the end of 2009 it is expected that the JV will be in a position to receive a lease on the property from the Ontario Government.

Exploration programs completed on the property during 2007 were directed towards evaluating the potential of PGE mineralization within central portion of the River Valley Intrusive. The programs of prospecting, geological mapping, stripping, and channel sampling were designed to determine the continuity of indicated surface mineralization. The leasing process of the property continued.  The budget was set at $525,000 dollars.

In 2008, a channel sampling program was completed in selected areas to allow comparison of grade estimates obtained using different sampling methods. A limited suite of samples were assayed by the Nickel Sulphide collection fire assay method for comparison with the lead collection fire assay method used in previous years, as well as to obtain better estimates of Osmium, Iridium, Rhodium and Ruthenium concentrations in the mineralization. In addition, a consulting geologist was contracted to review prior year’s exploration work to identify areas where additional work was needed.

28


 

In late 2008, Kaymin informed the Company that, due to the global economic downturn and concomitant drop in metal prices, Kaymin wished to temporarily suspend expenditures on the project other than those needed for normal maintenance of the property. As a result, the Company closed its Sudbury exploration office. A budget of $285,000 was apportioned to allow for compilation and archiving of data collected from the various phases of exploration and drilling, and to provide for property maintenance.

In 2008, a consulting geologist was engaged to review the work completed to date and recommend a future course of action. As part of this study, selected trench areas were re-sampled in detail to compare different sampling methods for consistency. A structural review was also completed.

A further $245,000 budget was approved for the project in 2009 to carry out reclamation work on the River Valley property. As of February 28, 2009, the process of archiving material, storing equipment, and shutting down operations in Sudbury was complete. Reclamation work was completed in August 2009.

An additional $150,000 budget was allocated to fund a detailed geochemical study of the River Valley mineralization was conducted by Dr. Reid Keays of Monash University, Melbourne, Australia. Dr. Keays is an expert in the geochemistry of Ni and PGM deposits. Re-sampling of selected River Valley drill holes was completed in January, 2009, and of the 336 samples were submitted to the Ontario Geoscience Laboratories for analytical work, 154 results have been received to date. In order to improve economy modelling of the deposit the study examined the full suite (Pt, Pd, Rh, osmium, iridium, and ruthenium) PGM content of the ore, and determined the relationship of Rh, iridium and ruthenium concentration from Pt and Pd.

2011 Exploration Program

After Pacific North West Capital Corp. acquired 100% of the project, the company announced that it commenced a five million dollar 15,500 metre exploration program for its 100% owned River Valley PGM Project. During 2011 exploration, PFN completed more than 15,500 metre of drilling and more than 140 line km of 3D IP geophysics survey. Following is a summary of the program achievements;

Resource Drilling, 13,500 metres

  • Focused in the Dana North and Dana South zones
  • Infill drilling to advance inferred to indicated resources, increase grade and close gaps
  • Proximal targets drilled along strike and down-dip to expand current (2006) mineral resources

Exploration Drilling, 2,000 metres

  • Commenced on completion of the resource drilling
  • Drill one new 3D IP chargeability target
  • Drill two under explored targets identified from surface mineralization internally within the intrusion not drilled previously

 Geophysical Surveys

  • During resource drilling, 130 line km of ground 3D IP surveys completed to generate new targets
  • New targets identified, ranked and prioritized for drill testing ( Figure below)

Other Activities

  • Environmental baseline studies

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 Geology Map of River Valley Project

The 2011 drilling program carried out on the Property commenced on April 6, 2011 and was completed on January 13, 2012. Foraco Drilling Ltd., based out of North Bay, Ontario, was contracted to carry out the diamond drill program using a hydraulic VD 5000 diamond drill rig. A total of 46 holes were drilled during three phases of the program totalling 12,767 m of NQ sized core. Dip tests were taken approximately every 50 m with a FLEXIT and later a REFLEX tool. Holes varied in length from 75 to 690 m.

This program was implemented over three stages with each stage having somewhat different but overlapping objectives. The diamond drill program was undertaken in the Dana area of the Property and completed between April 6 and mid-November 2011 (Table 10.2 and Figure 10.1). Main objectives were to:

• improve the confidence of the resource estimates and grade calculations, as well as possibly improve on the existing computations

• test deeper lying portions of the contact for improved grades and widths.

30


 

2011 Drill Results

Drilling continued to establish continuity between previously-identified mineralized intercepts on the deposit. At shallow to moderate depths, drilling encountered moderate- to high-grade gold mineralization in most of the holes drilled. Low-grade gold mineralization ranging 0.5 to 1.5 g/t was encountered over wide intersections in many of the holes ranging 8 to 25 m in length. In some holes, multiple wide low grade zones were cored.

2011 Drill Collar Locations

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Discussion

Work to date at River Valley suggests that the best potential for economic accumulations of PGM‐Cu‐Ni sulphide mineralization is within the Breccia Zone. This zone includes the main mineralized zone. The main zone occurs within about 20 m of the intrusive contact with country rocks. This contact zone extends for over 9 km of prospective strike length and hosts the currently defined resource.

Target areas on IP map

Main Zone of the breccia‐hosted PGM mineralization averages 20‐50 m in thickness, continues to depths of greater than 200 m, and is for the most part open along strike and downdip. In addition, the drilling demonstrates predictable grade to depth with significant high grade intersections (5‐10 gpt 3E over 1‐5 m & 3‐5 gpt 3E over 5‐10 m) enveloped by broader (commonly >20 m and sometimes >100 m) lower grade (1.0‐1.5 gpt 3E) intersections.

32


 

The continuity of mineralization and the remarkable consistency in the geology and stratigraphy along strike and at depth, suggests that there is significant potential to increase resources on the property through further extensional drilling away from the currently defined mineralized zones. Deeper holes confirmed the presence of mineralization at depths greater than 350 m (down dip and down plunge). There is a general correlation between three dimensional induced‐polarization (3D‐IP) geophysical survey anomalies and PGM sulphide intersections.

The intersections for most of the holes correlate with relatively high chargeability, an indication of disseminated sulphide.

2012 Mineral Resource Estimate (NI 43-101 compliant):

The detailed results of the new mineral resources estimate for the River Valley PGM Project are presented in the table below. This NI43‐101 compliant mineral resource estimate was completed by Tetra Tech, Sudbury. The new estimate incorporates the 13,140 metres in 46 holes drilled in the Dana North and Dana South Zones since the May 2006 estimate.  All 462 holes were drilled at a nominal drill section spacing of 25 metres to 100 metres on the eight separate mineralized zones shown in Figure below.

The estimated NI43‐101 compliant Measured and Indicated mineral resources at a cut‐off grade of 0.80 g/t PdEq have increased by 470% from the previous mineral resource estimate filedMay 2006 to 91,339,500 tonnes grading 0.84 g/t Pd+Pt+Au, 0.06% copper, 0.02% nickel and 0.002% cobalt. The compliant Inferred mineral resources have increased by >1000% to 35,911,000 Mt grading 0.53 g/t Pd+Pt+Au, 0.06% copper, 0.03% nickel and 0.002% cobalt.


The mineral resources were estimated using Datamine Studio3(c) software and are reported at a cut‐off grade of 0.8 PdEq. The 0.8 g/t PdEq cut‐off was used pending future assessment of the economics and development potential of River Valley as an open pit mining project. The Company considers the 0.8 g/t cut‐off value to be appropriate because: 1) the PdEq grade is 1.38 g/t for Measured and Indicated and 1.07 g/t for Inferred resources; and 2) rhodium and silver are not included in the PdEq calculation.

Comparisons are made above to the previous NI43‐101 compliant River Valley mineral resource estimate of May 2006 (Technical Report by GeoSIMS available on PFN's SEDAR and EDGAR profile and on the Company's website). The large increase in the mineral resources reported herein is explained by the combined effects of:

  1. incorporation of the 2011 resource drilling results;

  2. inclusion of three mineralized zones that were previously overlooked;

  3. use of PdEq rather than Pd+Pt cut‐off grades; and

  4. use of a length‐weighted average Specific Gravity value of 2.94 measured for River Valley rather than the previous value of 2.89.

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NI43‐101 Compliant Mineral Resources for the River Valley PGM Project, Sudbury, Ontario

Notes to Mineral Resources in Table:

1. The mineral resource estimates in this press release use the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by CIM Standing Committee on Reserve Definitions and adopted by CIM Council on November 27, 2010. The mineral resource estimates provided in this report are classified as "measured", indicated", or "inferred" as defined by CIM. According to the CIM definitions, a Mineral Resource must be potentially economic in that it must be "in such form and quantity and of such grade or quality that it has reasonable prospects for economic extraction".

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2. For the River Valley project, a palladium equivalent (PdEq) cutoff grade was assigned based on economic assumptions from comparisons to other projects, and was used in the resource estimations. Resources reported in this press release use a cutoff of 0.80 g/t PdEq. Grades have assumed 100% recoveries. The parameters used to generate the PdEq value are provided below:

PdEq=( (Au grade*$Au*Factor1)+(Pt grade*$Pt*Factor1)+(Pd grade*$Pd*Factor1)+(Ni grade*$Ni*Factor2)+(Cu grade*$Cu*Factor2)+(Co grade*$Co*Factor3))/($Pd*Factor1)
$Au = US$1271 per oz.
$Pt = US$1885 per oz.
$Pd = US$896 per oz.
$Ni = US$ 9.74 per lb.
$Cu = US$3.00 per lb.
$Co = US$15.90 per lb.
Factor1 = 0.0321508 (converts ounce per tonne to grams per tonne)
Factor2 = 22.04622 (converts pounds to grade percent)
Factor3 = 0.002205 (converts pounds to ppm)

3. The mineral resources were estimated using a block model with parent blocks of 10m x 10m x 5m and using ordinary kriging (OK) methods for grade estimation. A total of eight individual mineralized domains were identified. The determination technique of the mineral resource is based on the combination of geological modelling, geostatistics and conventional block modelling using the OK method of grade interpolation. The block model resource estimate prepared by the Tetra Tech, was based on more than 96,980 metres of diamond drilling in 462 diamond drill holes. The assay data was reviewed and a composite interval of 2.0 metres was used.

Statistical and Variogram analyses were performed to determine the "nugget effect".

4. Rhodium grades were not estimated by the OK methodology. Rhodium values were determined using a regression formula based on the platinum and palladium grades. Rhodium values are not incorporated into the PdEq value. The PdEq value also does not include silver.

5. The QAQC protocols and corresponding sample preparation and shipment procedures for the River Valley Project have been reviewed and approved by Tetra Tech.

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Exploration & Development Plans

Potential exists for expanding the size of the PGM resources even more through extensional and additional drilling along strike, across strike and down-dip of the mineralized zones as currently defined.  Inferred resources can be advanced to indicated and measured resources through denser drilling at the Banshee, Azen and Razor zones.  Furthermore, exploration of new targets (i.e., reef-style mineralization) generated internally within the River Valley Intrusion) and in the adjacent country rocks (i.e., magmatic feeder zones) could result in discovery of new resources. 

With regard to project development, the next logical steps are for proper metallurgical testing of fresh mineralized rock by an independent laboratory, continued baseline environmental studies, and development of a community relations program.  Pending results, these steps would ultimately lead a Preliminary Economic Assessment (aka Scoping Study) of the economics and development potential of the River Valley Project as a large open pit mine and mill operation.

Location of the mineralized zones in the Breccia Unit at the base of the River Valley Intrusion, Sudbury area, Ontario.

36


 

2011 and 2012 Quality Assurance and Quality Control (QA/QC)

All diamond drill core samples were submitted to SGS Laboratories, Toronto, Ontario and assayed for Pt, Pd, Au, Cu and Ni and a 33 element ICP suite. Concentrations of Pt-Pd-Au were determined using standard lead fire assay, followed by dissolution with acqua-regia, and measurement with an ICP (inductively coupled plasma) finish. Lower limited of detection (30 gram sample) are 1 ppb for Au and Pd and 10 ppb for Pt; upper limits are 10,000 ppb by ICP. Concentrations of Cu-Ni were determined by ICP methods with detection limit of 0.5 ppm for Cu and 1 ppm for Ni; upper limit for both Cu and Ni is 1 %.

One standard and one blank were inserted every 40 samples into the sample stream. Duplicates were taken each twentieth sample. This practice continued throughout 2011 Phase IA drilling and included the preparation and insertion of new and necessary standards at the cut-off grade and at the mean grade of the deposits. All sample preparation has been conducted and directed on site by contract geologists and samplers hired by PFN.

Spade Zone

The three drill holes at Spade Zone were designed to test an olivine-bearing gabbronorite unit for PGM mineralization, in follow-up to an intercept in a single hole (SL-01) drilled in the hanging wall to the Azen Zone in 2006. All three holes intersected wide intervals of gabbronorite hosted PGM-Cu-Ni sulphide mineralization (Figure below). Drill hole SL008 was drilled on the same section, but at a stepper angle than SL-01 in order to test for continuity of the mineralization at depth. SL008 intersected two sequences of olivine gabbronorite hosting 3-5 % sulphides, from 34 metres to 166 metres down hole and from 180 to 261 metres down hole, samples which returned anomalous PGM assays and elevated nickel and copper assays. The best composited assay result was a 0.83 gpt 3E over 14 metres, from 182 to 196 metres down hole, including 1.04 gpt 3E over 4 metre from 186 to 190 metres down hole.

Drill hole SL009 was collared 75 metres to the east of SL008. The hole intersected a sequence of olivine gabbronorites from 77 to 99 metres down hole and gabbronorites from 173 to the 308 metre down hole. From 188 metres to 296 metres, the hole intersected a broad interval of 0.3-0.9 gpt 3E assays. The best composite assay from this interval was 1.16 gpt over 3 metres from 271 metres.

Drill hole SL010 was drilled 50 metres east of SL008. The hole was collared in a sequence of gabbronorite-olivine gabbronorites that continued to 253 metres down hole. Assays from several intervals within the gabbronorite returned anomalous results for PGM+Au. The best composite assays were 1.18 gpt 3E over 8 metres from 184-192, including 2.36 gpt 3E over 2 metres.

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Spade Zone Drill Holes Cross Section Drill Holes Location Map

The drill results for the 2012 program combined with the previous drilling reveal the presence of a previously unrecognized PGM mineralized zone, hereafter referred to as the Spade Zone, which is actually separate and apart from the Azen Zone. At this stage, the Spade Zone has been traced for only 125 metres along strike and from 80 metres to 200 metres depth. The zone is open along strike and up- and down-dip, and additional infill and extensional drilling has been recommended for this area.

Its location internally within the River Valley Intrusion means that Spade Zone represents stratiform or reef type PGM mineralization, rather than contact type PGM Mineralization like the underlying Azen Zone (more typical of River Valley PGM mineralization). Furthermore, higher values of Mg, Ni/Pd and Cu/Pd and lower Al, PGM and Pd/Pt suggest host rocks and contained sulphides at Spade Zone that are comparatively less fractionated. These results provide encouragement for systematic PGM exploration internally within the intrusion, using an exploration model based on multiple magmatic pulses in a dynamic system.

Other Targets

The three holes drilled at the Dragon target (Figure below) were designed to test for PGM mineralization below mineralized grab samples of olivine gabbronorite. The holes intersected mineralized intercepts from 8 metres to 3 metres wide at shallow depths. Drill hole DZ001 returned the best assay results: 2m @ 1.84 gpt 3E, including 1m @ 2.55 gpt 3E.

The three holes drilled at the East Banshee target (Figure below) were designed to test an internal IP anomaly for PGM mineralization. The holes did not return any significant PGM assay results. The IP anomaly is explained by the presence of gabbro with up to 10% magnetite grains.

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Collar location map for the 2012 exploration drill holes on the River Valley Property, Sudbury region

On June 15, 2012, the Company announced the filing of the new NI43-101 Technical Report, including a new Mineral Resource Estimate for the River Valley PGM Project, located 100 km from the world-renown Sudbury Ni-Cu-PGM Mining Camp.

On June 19, 2012, the Company announced assay results for exploration drill holes in the River Valley 2012 Phase I exploration program on its 100% owned River Valley PGM Property, located within 100 km northeast of Sudbury, Ontario. This phase of exploration focused on drill testing three targets internally within the River Valley Intrusion Complex (RVIC) for reef style platinum group metal (PGM) mineralization. Significant intercepts are listed in the table and discussed below.

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Composited assay results for the 2012 exploration drill holes at Spade Lake results for the 2012
at Spade Lake

Hole No. From
(m)
To
(m)
Length of
the
Intersect
(m)
Pt
(gpt)
Pd
(gpt)
Au
(gpt)
3E
(gpt)
Ni
(%)
Cu
(%)
SL008 182 196 14 0.22 0.61 0.05 0.83 0.04 0.10
Including 186 190 4 0.29 0.75 0.07 1.04 0.05 0.13
SL009 271 278 7 0.24 0.65 0.03 0.92 0.05 0.07
Including 271 274 3 0.3 0.83 0.04 1.17 0.08 0.10
And 277 278 1 0.5 1.64 0.09 2.23 0.03 0.12
SL010 184 192 8 0.31 0.81 0.06 1.18 0.04 0.09
Including 186 189 3 0.56 1.5 0.1 2.16 0.08 0.15

Non-Reserve Mineral Resource Estimation – Mineral Deposits

SEE “CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING RESERVE AND RESOURCE ESTIMATES” AND “MINERAL RESERVES – DEFINITIONS” ABOVE.

The terms “mineral resource”, “inferred mineral resource”, “indicated mineral resource” and “measured mineral resource” have the meanings ascribed to those terms by CIM.

The following italicized text was excerpted from a report entitled, “Revised Mineral Resource Estimate, Dana Lake and Lismer’s Ridge Deposits incorporating Phase VI Drilling, River Valley PGM Project, Ontario for Pacific North West Capital Corp”, dated June 10th, 2004, by Derry, Michener, Booth and Wahl Consultants Ltd. (“Derry, Michener, Booth and Wahl Report”), as filed on Form 20-F on August 9, 2004.

In March 2006 the mineral resources table was updated in the GeoSim Report, as filed on Form 6-K/A on June 6, 2006.  Mr. Simpson was responsible for the calculation of the resource estimate in the Derry, Michener, Booth and Wahl Report.  The GeoSim Report included all of the drill holes from the phase 7 program.

Cut-off Grade

The cut-off grade is the lowest grade of material that can be mined and processed considering all applicable costs, without incurring a loss or gaining a profit. In the subsequent summary of resources, the cut-off grade used for reporting block model statistics within mineralized zone constraints is a combined Pt+Pd grade. The resources within each zone are reported for cut-off grades of 0.7 g/t Pt+Pd and 1.0 g/t Pt+Pd.  The lower cut-off grade of 0.7 g/t Pt+Pd is based on historical resource estimates for the Lac des Iles Mine, which is the only active Pt/Pd producer in Canada. In the resource estimates, no allowance has been made for the respective precious metal prices, or recoveries.

Measured Mineral Resource

A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.

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Mineralization or other natural material of economic interest may be classified as a Measured Mineral Resource by the Qualified Person when the nature, quality, quantity and distribution of data are such that the tonnage and grade of the mineralization can be estimated to within close limits and that variation from the estimate would not significantly affect potential economic viability. This category requires a high level of confidence in, and understanding of, the geology and controls of the mineral deposit.

Indicated Mineral Resource

An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.

Mineralization may be classified as an Indicated Mineral Resource by the Qualified Person when the nature, quality, quantity and distribution of data are such as to allow confident interpretation of the geological framework and to reasonably assume the continuity of mineralization. The Qualified Person must recognize the importance of the Indicated Mineral Resource category to the advancement of the feasibility of the project. An Indicated Mineral Resource estimate is of sufficient quality to support a Preliminary Feasibility Study which can serve as the basis for major development decisions.

Inferred Mineral Resource

An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.  Due to the uncertainty that may be attached to Inferred Mineral Resources, it cannot be assumed that all or any part of an Inferred Mineral Resource will be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration. Confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure. Inferred Mineral Resources must be excluded from estimates forming the basis of feasibility or other economic studies.

Cautionary Note to US Investors concerning estimates of Measured and Indicated Resources:

This section uses the terms “measured resources” and “indicated resources”. We advise US investors that while those terms are recognized and required by Canadian regulations, the US Securities and Exchange Commission does not recognize them. US investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.

Cautionary Note to US Investors concerning estimates of Inferred Resources.  This section uses the terms “inferred resources”. We advise US investors while those terms are recognized and required by Canadian regulations, the US Securities and Exchange Commission does not recognize it. “Inferred resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category or will ever be converted into reserves. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or prefeasibility studies, except in rare cases.  US investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally minable.

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(B) RIVER Valley East and West PGM Project, Ontario

On September 15, 2011, the Company staked 132 mining claims covering approximately 58,000 acres adjacent to its River Valley palladium (Pd), platinum (Pt) and gold (Au) project in the Sudbury area of Ontario (Figure below). The newly acquired claim group is located east of the city of Sudbury, in the townships of Davis, Henry, Janes, Loughgrin, Pardo, Dana Hobbs and McWilliams. The property is situated to the east of the Sudbury Basin and north of Highway 17.  It covers two rock groups that host significant concentrations of Platinum Group Metals (PGM) mineralization; the River Valley-East Bull Lake Suite of rocks and the Nipissing Gabbro.

River Valley West claims cover branches of the River Valley Intrusion from the main intrusive body that hosts the River Valley PGM resource and intrude Huronian sediments to the west. These units are under explored making them attractive exploration targets. The East Bull Lake Suite has the potential to contain at least two different styles of sulphide mineralization: 1) brecciated contact style mineralization (similar to PFN’s River Valley PGM Project); and 2) reef style mineralization in the interior of these intrusive bodies, at the interface or zone of mixing of magmas of differing composition. The Nipissing Gabbro has been explored for PGM on some areas of the property. Public sector geochemical data from the newly acquired claims indicate widespread anomalous PGM, gold and base metals. Hypersthene-bearing gabbro and contact breccia appear to be the most favourable lithologies within the Nipissing for hosting significant PGM mineralization.  A joint venture partner is being sought to further explore the project.

Location of the River Valley East and West Properties

(C) Heaven Lake PGM, Gold Project, Ontario

On December 13, 2010, the Company staked 220 square kilometres 10 km north of Lac des Iles Mine, North of Thunder Bay, Ontario.

The Heaven Lake property is located 130 km north of the city of Thunder Bay and 15 km north of the Lac des Iles PGM Mine. Access is by all‐season paved highways, logging gravel roads and bush trails (Figure below). The roads and trails link to the access road system for the Lac des Iles Mine.  The Heaven Lake claim group consists of 88 contiguous 16‐unit claims on Crown Lands (1408 units), encompassing an area of 22,528 ha and owned 100% by PFN.

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The Heaven Lake Property lies near the boundary of the Archean Superior Province to the west and the Mesoproterozoic Nipigon Embayment to the east (Figure 3). The property is underlain by metamorphosed and deformed Archean volcanic‐sedimentary rocks and intermediate to felsic intrusions of the Wabigoon Terrane . The Archean rocks are disconformably overlain by Mesoproterozoic sedimentary rocks and intruded by Nipigon diabase sills. The latter bodies are related to the ~1100 million‐year‐old Midcontinent Rift (MacDonald et al., 2005).

Indicative Exploration Program

The exploration targets most commonly noted in the provincial assessment reports are Lac des Iles style PGM mineralization and, more recently, Thunder Bay North style Cu‐Ni‐PGM mineralization. At Heaven Lake, however, Ni‐Cu‐PGM mineralization near the base of the gabbro‐pyroxenite intrusion could possibly indicate different target type. This target area should be ranked highly for IP and time‐domain EM surveys on grids with 100 metre line spacing and, pending results, drill testing. Elsewhere on the Heaven Lake property, geophysical surveys and mapping and prospecting surveys by experienced personnel should be carried out to find and explore other prospective mafic intrusions. An additional focus for exploration should be the unexplained airborne EM anomalies about Whitton Lake.

The presence of thick overburden and the flat‐lying Nipigon Diabase unit hinders ground geophysical surveys and surface mapping and prospecting work. A modern airborne geophysical survey with higher resolution and increased depth penetration combined with inversion modelling of EM and magnetic anomalies of interest could better focus follow‐up exploration activities on the ground. Indeed, OFR 6164 (MacDonald et al., 2005) reports the presence of a magnetic anomaly at depth beneath the northeastern part of the Heaven Lake Property. Gabbro has been reported in the area, but also present are thick horizons of magnetic massive pyrrhotite associated with chert. The significance of that magnetic anomaly remains to be determined. Inversion modelling combined with physical property studies warrants consideration, as a means of evaluating the potential of the Heaven Lake Property area to hold large mafic to ultramafic intrusions which do not outcrop.

Several exploration companies have recently staked properties around the Heaven Lake Property. These companies include Platinum Group Metals and HTX Minerals Corp., which are known to have interest in Cu‐Ni‐PGMs.

A joint venture partner is being sought to further explore the project.

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Location of the Heaven Lake Property, northwestern Ontario

(II)       Sargesson Lake and Kelly-Davis Properties

Ownership

The Company acquired a 100% interest in certain mineral claims, known as the Sargesson and Kelly/Davis properties, located in the Janes, Davis and Kelly Townships, Sudbury Mining District, Ontario.  As consideration, the Company paid $68,400 and incurred $30,000 in exploration expenditures.

The property is subject to a 2% NSR.  The Company can purchase 1% of the NSR from the vendors for $400,000 and has the right of first refusal on the remaining 1% NSR.

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(III)     West Timmins Nickel Project

Ownership

By agreement dated October 28, 2004 as amended September 27, 2006 and April 7, 2008, the Company had the option to earn up to a 100% interest in the West Timmins Nickel Project, consisting of 1682 claim units (27,235 ha), from Xstrata Nickel (formerly Falconbridge Inc.). 

Under the terms of the agreement PFN was required to spend $4 million over a five (5) year period in order to vest with a 100% interest in the Project.  Xstrata would retain a 2 % NSR and could, under certain circumstances, back-in and earn up to a 65% interest by completing a feasibility study or spending $20 million on a feasibility study, whichever occurred first.  Under the agreement PFN acted as Project Operator.

Minimum aggregate exploration expenditures of $4 million were to be completed by December 31, 2008.  This commitment was extended to December 31, 2009 to complete additional exploration programs as follows:

  On or before December 31, 2005 (completed) $ 750,000
  On or before December 31, 2006 (completed) $ 1,500,000
  On or before December 31, 2007 (completed) $ 2,500,000
  On or before December 31, 2009 (3,077,592 incurred) $ 4,000,000

Location and Access

The property is located approximately 70 km west of the city of Timmins, Ontario and is within the townships of Belford, Griffin, Melrose, Montcalm, Nova, Strachan and Watson. The property is accessible by road travelling west from Timmins along Highway 101 for 5 km, then heading northwest for 56 km along the Mallette logging road.

Location of the West Timmins Project

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Exploration

The Company’s exploration activities on the West Timmins Nickel Project focused on nickel and associated metals. In addition to airborne geophysical surveys completed in late 2004, a detailed compilation of the historical work in the MFI was completed and has been used to help evaluate and prioritize conductors identified by the AeroTEM survey. In cooperation with Falconbridge, seven priority conductor anomalies have been identified based on geophysical responses, relation to the Montcalm deposit, geological settings and previous work over the conductors.

Follow up line cutting and EM surveys were initiated.  Drill testing of the stronger geophysical and geochemical targets was carried out in early 2006.  The most significant drill results were received in an area 5 km southwest of the Montcalm mine, where large zones of sulphide mineralization were intersected in an intrusive breccia.  Trace nickel and copper mineralization was intersected in parts of the zone.  PFN initiated a deep penetrating program of geophysical surveys to cover the extensive area between the successful drill holes and the mine area, and Xstrata agreed to continue the surveys on and over the mine on their property.  The surveys were laid out to look for sulphide mineral zones at depth associated with magnetic anomalies identified from the AeroTEM survey.

A diamond drill program was completed in 2007 with no significant intersections. The drill program targeted geophysical and geochemical anomalies identified in previous work programs. Numerous additional airborne EM (AeroTEM), Pulse borehole EM, and geochemical anomalies in the Montcalm Intrusive Complex remain to be drill tested.

In a continuing effort to evaluate the Montcalm Intrusion, a deep penetrating UTEM survey was completed in September 2008. Although some geophysical anomalies were identified, interpretations suggest that the anomalies are unlikely to reflect mineralization.

On May 5, 2009, the Company terminated the option agreement with Xstrata Nickel on the West Timmins Property.

(IV)     Raglan Hills (formerly South Renfrew)

Ownership

The Company staked 6 claims (1024 ha) in Raglan Township within the Raglan meta-gabbro mafic complex in June 2006.

Reconnaissance prospecting, sampling and geochemical soil programs was conducted over the property, as well as the historical showing areas.

In 2007 the Company entered into a 50/50 joint venture agreement with First Nickel to evaluate the claims as well as their adjoining claims (1728 hectares) as one property. 

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Location Map of Raglan Hills joint venture property

In 2008 an airborne magnetic and electromagnetic survey was completed on the Raglan Hills property. This was followed by mapping and prospecting in the vicinity of anomalies generated by the airborne survey.

Due to the downturn in commodity prices, PFN informed First Nickel that it would not be participating in the funding of a 2009 exploration program and as a result the Company’s participating interest has been decreased. As per the joint venture agreement with First Nickel, the Company’s participating interest was converted to a 1.5% NSR over the Raglan Hills property.

(V)       Coldwell Properties, Ontario

Ownership

In 2007, the Company acquired 91 mineral claims (20,254 ha) by staking in the Coldwell area near Marathon, Ontario. The claims covered parts of the Coldwell alkaline intrusive complex, which also hosts the Marathon PGM deposit.

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Location Map of Coldwell property near Marathon, Ontario

Airborne geophysical and lake bottom sediment surveys were completed in 2007. The goal of these surveys was to identify targets for follow-up ground evaluation in 2008. Prospecting and a soil geochemical survey were completed in 2008. This work did not identify any significant mineralization.

The Company allowed the Coldwell claims to lapse in July and August 2010.

(VI)     Goodchild Property, Ontario

During the year ended April 30, 2009, the Company acquired 28 mineral claims (6640 ha) by staking in the north east of the Coldwell Area near Marathon, Ontario. These claims were incorporated into the Coldwell project as described in the preceeding section.

As with the Coldwell Project, the Company allowed the Goodchild claims to lapse in February 2010.

(VII)    East Sudbury Property, Ontario

During the year ended April 30, 2009, the Company acquired 124 mineral claims (1,638 units – 26,208 hectares) by staking in the Sudbury area of Ontario.

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Location Map of East Sudbury property near Sudbury, Ontario

A limited program of soil sampling and prospecting was completed on the East Sudbury property in 2008. In September 2009, the Company sold certain of the East Sudbury claims to Trueclaim Exploration Inc. for a 1.5% NSR and 50,000 Trueclaim Exploration Inc. shares.

In September 2009 the property was reduced from 128 claims to 60 claims and from then through December 2009 an additional 56 claims were lapsed.  The Company allowed the balance of the claims remaining to lapse in August 2010.

(VIII)  Swayze Joint Venture, Ontario

In 2007 the Company acquired claims by staking in Kenogaming Township (in the Swayze Greenstone Belt), Ontario. On February 12, 2008, the Company entered into a three-year joint venture agreement with Benton Resources Corp. to evaluate the claims that both parties held in the Swayze Greenstone Belt.  It was proposed that the exploration budget over the three years would be $1,200,000 with the first year’s budget of $400,000.  Total holdings in the Swayze area include 3 properties totaling 8,544 hectares.

Any additional claims acquired in the Swayze Greenstone Belt would be included in the joint venture.  Each company would participate in working the properties as a 50:50 joint venture.  Expenditures and programs on the properties to be determined by an annual joint management committee meeting.

In 2008, and airborne survey was completed over claims in Tooms Township that form part of the Swayze joint venture property. In addition, prospecting and mapping were completed on the Tooms and Heenan Township properties. In late 2008, a small (500 m) drill program was completed on the Heenan Township property. This work did not identify significant mineralization.

On May 5, 2009 the joint venture was terminated.  The Company allowed the Swayze claims to lapse in January 2010 and has no further plans for this project.

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(IX)     North Duluth Property, Ontario

In 2007 the Company acquired 10 mineral claims (81 units – 1296 hectares) in the Crystal Lake Area south of Thunder Bay, Ontario and completed an airborne magnetic-electromagnetic survey over the property. The survey did not identify any significant targets for follow-up work and in February 2009, the property was reduced to 8 claims.  In February 2010, the remaining claims lapsed.

QUÉBEC, CANADA

(I)        Glitter Lake Property, Québec, Canada

Ownership

By an agreement dated August 15, 2003, April 30, 2006 and further amended on April 1, 2008, with CanAlaska, a company that previously had certain directors in common, the Company acquired a 50% interest in certain mineral claims known as the Glitter Lake property, located in the province of Québec.

The Glitter Lake property consists of 63 unpatented mining claims totalling 1,008 hectares. The claims are owned 100% by PFN, and carry expiry dates of 24 June 2011 (extensions have been applied for). Work requirements are $750 per claim.  The claims are situated along the trend of the gabbroic sill that hosts the Horden Lake Cu-Ni deposit and form two groups, one situated to the southwest of the Horden Lake property, the other to the northeast. 

As consideration, the Company, at its option, must issue common shares, make payments and incur exploration expenditures as follows:

          Payments Shares   Exploration Expenditures
  On or before 15 April 2003 (completed)   $ - - $ 50,000
  Upon execution of agreement (paid)     10,000 -   -
  On or before 4 June 2004 (issued)     - 20,000   -
  On or before 15August 2004 (paid)     15,000 -   -
  On or before 28 May 2005 (issued)     - 20,000   -
  On or before 15August 2005 (paid)     20,000 -   -
  On or before 28 May 2006 (issued)     - 20,000   -
  On or before 15 April 2007 (completed)     - -   150,000
  On or before 15 April 2009* (14,953 paid)     - -   200,000
  On or before 15 April 2010*       - -   300,000
  Total     $ 45,000 60,000 $ 700,000

        *    Extensions to these dates have been applied for and are pending.

Upon the Company having vested with a 50% interest by completing the aforementioned payments and obligations, the Company could elect within 45 days to increase its interest to 60% by completing a bankable feasibility study within 24 months.  In the event the Company did not complete a bankable feasibility study within two years, the Company agreed to make cash payments in the amount of $50,000 per annum for each year the feasibility study was not completed. Upon vesting with a 60% interest, the Company could elect within 90 days to earn a 70% interest in the property by placing the property into commercial production within 2 years from the date of this election. In the event that the bankable feasibility study indicated an IRR in excess of 15%, the Company agreed to make annual cash payments of $50,000 to CanAlaska for each year the project is not placed into commercial production. 

In the event that a major mining company elected to participate in the project before the Company vested with a 50% interest, the Company would issue common shares to the value of $100,000 to CanAlaska, within 15 days of the Company becoming vested, or pay such amount that would result in having the Company spent $1 million in exploration expenditures.

The property is subject to 1.5% NSR payable to a third party.  The Company and CanAlaska will share the NSR buyout privileges in proportion to their respective interests.

In 2007 PFN and CanAlaska agreed to an extension of the option.  A field program of sampling historical core stored on the property was also completed in 2007.

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On January 30, 2009, the Company and CanAlaska signed an amendment to the option agreement whereby CanAlaska assigned a 100% ownership of the Glitter Lake property to the Company, in consideration of meeting CanAlaska’s office lease obligations until the end of the lease term in November 2010. This equates to a one-time cash payment of $83,601 dollars.  CanAlaska retains a 0.05% NSR interest in the property along with the existing royalty agreement with the original prospectors of 1.5%. The original option agreement has thus been terminated.

The Glitter Lake Project is located in northeastern Quebec, approximately 135 km north –northeast of the town of Matagami. The property lies at the southwest end of a 40 km long, north east trending belt of metavolcanic and sedimentary rocks intruded by a gabbroic body.  The exploration target is PGM mineralization associated with copper-nickel sulphide mineralization. The Glitter claims surround, and extend along strike from, the Horden Lake Copper-Nickel deposit, which hosts an indicated resource of 8.8Mt at 0.88% Cu and 0.21% Ni, and an inferred resource of 7.8Mt at 0.87% Cu and 0.25% Ni (Southampton Ventures Inc., Press Release, March 2, 2009).

The principal exploration target on the Glitter Lake Property is remobilized magmatic Cu-Ni sulphide mineralization along the contact of the metagabroic intrusion that hosts the Horden Lake deposit. Of particular interest is the potential for relatively high-grade Cu mineralization that could be used to augment the high grade, but relatively low tonnage portion (indicated resource of 2.4 Mt at 1.37% Cu, 0.25% Ni, and inferred resource of 2.0 Mt at 1.34% Cu, 0.34% Ni) of the Horden Lake deposit. 

On May 2, 2012, the Company entered into an agreement with El Condor Minerals Inc. ("El Condor")  to which El Condor has the option to earn a 100% interest in the Glitter Lake Property in the James Bay lowlands region of Quebec.

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El Condor can earn a 100% interest in the Glitter Lake Property by paying an initial $50,000 (paid) and issuing 350,000 common shares to PFN (completed), and by making additional cash payments totaling $100,000 and issuing an additional 650,000 common shares of El Condor to the Company on or before the second anniversary of the Agreement, and by maintaining the Glitter Lake Claims in good standing for the 2-year term of the Agreement. A 2% net smelter return royalty has been granted to the Company, of which 1% may be purchased by El Condor for $1,000,000. The Glitter Lake Property is also subject to a pre-existing aggregate 2% royalty payable to various royalty holders.

(II)       SOQUEM –Taureau & Chenneville Projects, Québec, Canada

On July 28, 2006 the Company signed a 50/50 Cooperation Agreement with SOQUEM Inc. ("SOQUEM") in order to conduct research on platinum properties in the southern portion of the Province of Québec, Canada, in a designated Area of Mutual Interest ("AMI"), with the objective of identifying viable properties for further exploration.  PFN and SOQUEM would pool staffing and funding resources, and share all technical data pertaining to properties located within the AMI, with each party having equal representation of two members each on a technical committee, responsible for setting programs, budget and schedule.  SOQUEM acted as Manager.  The first exploration program agreed upon between the parties was budgeted at $250,000 and was completed by the end of 2006.

In the event that a viable property was identified, the parties would contribute jointly to all staking and acquisition costs, or, if one party elected to do so independently, would do so at its own expense.  In that event, the other party was granted the right of first refusal to acquire a 50% interest in the property.  Exercise of this right would result in the creation of a new joint venture agreement between the parties for the newly acquired property.

The 2006 program’s assay results (1.17gpt Pd, 0.14gpt Pt, 0.29gpt Au, 1.62% Cu, and 0.35% Ni) from the Taureau evaluations justified staking a mafic intrusive and the flying of an airborne EM survey.  Several magnetic bodies with associated conductors were identified, and additional claims were acquired in these areas.

In 2007, work programs continued to evaluate mafic intrusives in the AMI.  The conductor trends identified from the airborne survey in the Chenneville area were staked (254 mineral claims – 15,200 hectares) and evaluated. The Chenneville Project was initiated to follow-up on the PGE-Cu-Ni mineralization located in 2006.  Additional follow-up ground work on the Taureau and Cheneville project areas was completed in 2009, culminating with a 500 m drill program on the Cheneville property.  No significant mineralization was identified during the course of the foregoing investigations.

Both parties agreed to abandon the entire Chenneville property since the fieldwork did not give the significant results expected and the Company and Soquem agreed to terminate the Taureau and Chenneville joint venture in August 2009.

(III)     Fiedmont Property, Val d’Or Québec

On December 16, 2008, the Company entered into an option agreement with Kinbauri whereby the Company could earn a 60% interest in 40 of Kinbauri’s 84 claims covering approximately 3,458 ha, known as the  Fiedmont PGM property, subject to a 2% NSR held by the original vendors. The vendor’s NSR is subject to a 1.0%, $900,000 buyback, to earn a 60% interest.

Under the terms of the Agreement, the Company would pay Kinbauri an aggregate amount of $98,000, issue 150,000 common shares to Kinbauri and expend $400,000 on exploration prior to November 30, 2010 to earn its interest. The Company’s first year commitment was mandatory and included payment to Kinbauri of $38,000 (paid), issuance of 50,000 shares (issued, valued at $4,500), and expenditures of $150,000 (incurred) on exploration prior to November 30, 2009.

The property is situated approximately 15 km northeast of Val d’Or, Québec and is road accessible.

The Company completed an initial drill program targeting potential extensions of the known mineralization in March, 2009; however, no significant assays were returned

The option agreement with Kinbauri was terminated on October 13, 2009.

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(IV)     Destiny Gold Project, Québec

Ownership

On August 14, 2009, the Company entered into an option agreement with Alto Ventures Ltd. (“Alto”) to earn a 60% interest in the Destiny Gold Project (formerly the Despinassy Project) consisting of 175 mining claims totalling 7260 ha.

Under the terms of the Option Agreement with Alto, PFN will pay Alto $200,000 ($100,000 paid), provide Alto with 250,000 common shares of PFN (75,000 common shares issued), and complete a total of $3,500,000 in exploration expenditures over a four year period to earn a 60% interest in the Destiny Gold property. Subsequent to vesting of its interest, PFN will form a joint venture with Alto to further develop the project. Certain claims comprising the property are subject to underlying net smelter return royalties ranging from 1% to 3.5%, with varying buy-back provisions.

 On August 8, 2011 PFN announced that, subject to regulatory and shareholder approvals, it has entered into a letter agreement (“LA”) with Next Gen Metals Inc. (“Next Gen”) (TSX.V:N) whereby Next Gen has been granted an option (“Option”) to acquire the Company’s 60% earn‐in option interest (“Option Interest”) in the Destiny Gold Project located in Abitibi‐Témiscamingue region of Québec, which Option Interest has been granted to the Company pursuant to an agreement with Alto Ventures Ltd. (“Alto”)(TSX.V:ATV).

Location and Access

The Destiny Gold Project is located approximately 75 km north of Val d’Or in the Abitibi-Témiscamingue region of Québec. The property is road accessible, and excellent mining infrastructure and support facilities are available in nearby Val d’Or. 

Geology

The Destiny Gold property is underlain by Archean metavolcanic and metasedimentary rocks of the Abitibi Greenstone Belt. A regional scale structure, the Despinassy shear zone, transects the property. High grade gold mineralization occurs in quartz veins and alteration zones associated with this structure. Mineralization has been identified in several locations along the Despinassy shear zone on the property over a strike distance of about 4 m.

Mineralization

The main area of mineralization, the DAC zone, occurs over a strike length of about 600 m. In this area, four to five identifiable intervals of quartz veining and shear-related alteration zones carry high-grade gold mineralization, with drill intersections ranging up to 178.5 g/t Au over a drill width of 1.0 m.

 The DAC zone hosts a NI 43-101 compliant indicated resource of 166,863 tonnes grading 6.88 g/t Au (36,892 oz) and an inferred resource of 444,753 tonnes grading 4.46 g/t Au (63,839 oz) as calculated by W.A. Hubacheck Consultants Ltd. for Alto in “A Resource Estimate of the DAC Gold Deposit, Despinassy Twp., Val d’Or, Quebec,” dated January 9, 2007 (the “2007 Resource Estimate”), and incorporated into the Wardrop Report.  The DAC zone is open along strike and at depth. The occurrence of high-grade mineralization at the Darla and 20 and 21 zones to the east clearly indicates that the mineralizing system occurs across a significant portion of the property.

Exploration

The Phase 1 program was completed on December 22, 2009 and consisted of 5,600 m of drilling in 14 holes.  Results from the Phase I drilling program were very positive as they validated the deposit model and confirm continuity of gold mineralization between previous wide-spaced holes.  Each of the holes targeting the DAC deposit intersected gold within multiple zones of shearing, strong alteration, quartz veins containing variable amounts of sulphides. Significant gold values were obtained in 100% of the holes drilled including high grade quartz veins containing up to 44.39 g/t Au and wide mineralized shear zones including 21.0 m averaging 1.39 g/t Au and another high grade quartz veins containing up to 16.43 g/t Au over 0.5 m (0.48 oz/ton) and averaging 0.51 g/t and 49.5 m averaging 0.36 g/t Au.  Phase 1 confirmed the large size of the gold system at the DAC deposit.

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The Phase II drilling program began January 26, 2010 and was completed in March 2010. The results from the Phase I and Phase II programs are incorporated into the extensive data base available for the Destiny project for the next stage of work, which may include diamond drilling. Drilling at the DAC Deposit continued to intersect multiple gold zones with high grade values over significant widths. Table below illustrates significant drill intervals.

Table of Significant Gold Assays

Hole Number From (m) To (m) With (m)*downhole Au (g/t)
DES09-128 315.
 458.1
318.6
458.6
3.6
0.5
1.37
2.99
DES09-129 257.7
308.8
407.0
266.0
316.3
407.5
8.3
7.5
0.5
1.10
0.78
16.43
Hole Number From (m) To (m) With (m)*downhole Au (g/t)
DES09-130 299.2
305.5
354.4
312.6
306.7
374.2
13.4
1.2
19.8
0.7
6.02
0.53
DES09-131 94.6
116.8
131.0
119.9
118.9
170.5
25.3
2.1
49.5
0.51
2.42
0.36
DES09-134


Includes
124.8

256.9
259.6

316.7
135.3

266.7
260.6

332.8
10.5

9.8
1.0

6.1
0.41

0.53
2.54

0.28
DES09-135
Includes
Includes


Includes


Includes








Includes
355.75
357.25
365.5

374.85
375.4

386.65
389.15

431.4

446.5

486.55
527.1

527.1
368.0
357.75
366.0

377.0
375.7

391.0
390.15

441.8

70.35

496.9
530.0

527.75
12.25
0.5
0.5

2.15
0.3

4.35
1.0

10.4

23.85

10.35
2.9

0.65
2.85
12.69
51.66

1.55
7.9

0.74
2.34

0.46

0.36

0.35
3.35

12.84
DES09-136
Includes
451.0
460.9
463.3
461.5
12.3
1.6
0.9
3.59
DES09-137
Includes

Includes



Includes
216.3
226.8

251.9
254.0

371.0
372.9
227.6
227.6

258.5
254.5

374.0
374.0
11.3
0.8

6.6
0.5

3.0
1.1
0.92
4.0

1.16
12.0

8.46
20.85
DES09-138
New Vein
22.0
91.0
44.0
92.0
22.0
1.0
0.39
2.57

* Based on core angles and previous drilling, true widths are estimated at approximately 80 to 90% of the downhole lengths reported. Mineralized zones generally start at 0.1 g/t Au and assay averages may include minimal intervals of waste material. No top cuts of assays were used.

54


 

The results from the first 14 holes confirmed the continuity of gold mineralization between holes drilled previously, some of which were spaced from 100m to 200m apart.

The 2010 exploration program was completed in December 2010. A high resolution airborne magnetic survey was conducted along with BHEM surveys that were designed to target massive sulphide mineralization.

Three drill holes were completed and each had a specific objective with respect to defining controls on the mineralization at the Destiny Gold Project. These are summarized as (1) to test selected BHEM conductors and assess the association of areas of sulphide mineralization with gold mineralization, and (2) to test for shallow gold mineralization to the south of the DAC deposit where the high resolution magnetic survey identified magnetic signatures similar to the DAC deposit.

Previous drilling revealed massive sulphide mineralized lenses locally adjacent to the gold mineralization. The companies interpreted these sulphide lenses as important to the gold mineralizing system and completed BHEM surveys in certain drill holes to trace the extent of the massive sulphide mineralization and to help guide drilling at depth.

The 2010 program also included the completion of the Wardrop Report, which incorporated over 7,600 m of additional drilling that was completed on the deposit subsequent to the 2007 Resource Estimate, for an updated NI43-101 compliant report with a resource estimate.

Indicated and Inferred resources have been determined for the DAC deposit. The deposit is made up of narrow high-grade gold-bearing quartz veins occurring within five parallel alteration zones. These alteration zones carry gold at lower grades than the quartz veins but are significantly wider. The Wardrop Report indicates that the additional drilling has expanded the DAC Deposit and significantly increased the contained ounces of gold.

At a cut-off grade of 0.5 g/t Au and using the Inverse Distance Squared (ID2) estimation method, the five gold zones contain an Indicated Resource of about 10.8 million tonnes with an average grade of 1.05 g/t Au (364,000 contained ounces). In addition, the Inferred Resource totals 8.3 Mt with an average grade of 0.92 g/t Au (247,000 contained ounces). Table 2 summarises the Resource Estimate at the 0.5 g/t cut-off.

A cut off grade of 0.5 g/t Au was selected to tabulate the total resources based on the results of similar gold projects located in Ontario and Quebec. In addition, the following parameters were considered; 4:1 stripping ratio, operating costs of $14.30/tonne at 10,000 tonnes per day, long term gold price of $US973/troy ounce, $US to $Cdn conversion of 1.02 and gold recovery of 94%. The resources block considers the mineralization to start at approximately 15 m below surface down to a depth of 400m for the deepest zone (Zone 5).

Mineral Resources are not Mineral Reserves and by definition do not demonstrate economic viability.

DAC Resource Estimation Summary (using ID2 method)

Class Zone Capping
 Grade
(g/t)
Tonnes Above
Capped Grade
Average
Grade
(g/t)
Average
True Width
(m)
Au
 Ounces
Indicated 1 7.53 1,395,600 0.84 16 37,760
  2 19.63 2,942,700 1.19 30 112,644
  3 6.66 1,370,700 0.99 12 43,675
  4 10.80 3,542,600 1.06 21 121,221
  5 14.00 1,573,900 0.97 15 49,231
  Total   10,825,500 1.05   364,530

55


 
Class Zone Capping
 Grade
(g/t)
Tonnes Above
Capped Grade
Average
Grade
(g/t)
Average True Width (m) Au Ounces
Inferred 1 7.53 971,900 0.70 16 21,724
  2 19.63 1,841,100 1.06 30 62,487
  3 6.66 725,500 0.93 12 21,759
  4 10.80 3,085,300 0.89 21 88,767
  5 14.00 1,706,600 0.96 15 52,854
  Total   8,330,400 0.92   247,590

Cut-off Sensitivities for the DAC Deposit Resource Estimate

Class ID2 Cut-off
(Au g/t)
Tonnes AverageGrade
(Au g/t)
Contained
 Ounces Au
Indicated 0.2 24,275,300 0.65 509,960
  0.4 14,371,800 0.90 415,780
  0.5 10,825,500 1.05 364,530
  0.6 8,225,700 1.21 318,840
  0.8 5,359,200 1.48 255,370
  1.0 3,858,800 1.71 212,310
  1.5 1,820,100 2.26 132,490
  2.0 979,900 2.73 86,100

Class ID2 Cut-off
(Au g/t)
Tonnes AverageGrade
(Au g/t)
Contained
Ounces Au
Inferred 0.0 31,535,100 0.43 436,840
  0.2 22,541,600 0.55 401,190
  0.4 12,132,100 0.78 302,500
  0.5 8,330,400 0.92 247,590
  0.6 5,797,600 1.09 203,210
  0.8 3,534,600 1.35 153,420
  1.0 2,521,400 1.53 124,390
  1.5 1,133,600 1.93 70,360
  2.0 385,600 2.29 28,400

On June 27, 2012, the Company elected to terminate its option agreement with Alto Ventures Ltd. (“Alto”) on the Destiny Gold Project in Val d’Or, Quebec.

Pacific North West Capital Corp. decided it would be in the best interest of the company to not pursue additional exploration on these properties and to concentrate efforts on advancing its 100% owned River Valley PGM project.

NORTHWEST TERRITORIES, CANADA

(I)        WINTER LAKE

In 2007, the Company staked two separate blocks of claims, totaling 33 mineral claims of approximately 34,070 ha in the MacKay Lake area of the Northwest Territories.  These claims cover geology similar to that where GGL Resources reported nickel values in a komatiitic environment. 

No exploration work was completed on the property subsequent to staking, and the claims were allowed to lapse May 4, 2009 and reverted to the Crown.

56


 

SASKATCHEWAN, CANADA

(I)            Nickel Plats, Saskatchewan

By agreement dated 30 April 2007, the Company optioned the Nickel Plats property from Diamond Hunter Ltd. (“Hunter”) (Figure below). The property is located approximately 50 km north of La Ronge, Saskatchewan. The property covers a Ni-Cu occurrence (historic resource of 1.7 million tonnes grading 0.74% combined Ni-Cu) within a sulphide rich (pyrrhotite, chalcopyrite and pyrite) gabbro intrusion.

On 30 March 2009, the Company and Hunter signed an amendment to the terms agreement as follows:

      Payments   Shares   Exploration Expenditures
Upon execution of agreement (paid/issued) $ 10,000   75,000 $ -
On or before 30 June 2007 (paid)   20,000   -   -
On or before 30 April 2008 (paid/issued)   30,000   75,000   -
On or before 30 April 2009 (paid/issued)   15,000   50,000   -
On or before 30 April 2010 (paid/issued)   15,000   50,000   -
On or before 30 April 2011 (paid)   20,000   -   -
On or before 30 April 2012 (paid)   20,000   -   -
On or before 30 April 2013     20,000   -   -
Total   $ 150,000   250,000 $ -

Approximately $678,609 in expenditures have been accrued by the Nickel Plats Project, thereby fulfilling all exploration expenditure requirements under the terms of the amended Option Agreement.

In 2007, the Nickel Plats project was evaluated, and a compilation was begun to understand the setting of the mineralization as well as develop an approach to test the known mineralization and other targets that were developed from the work.  Five mineral claims (7,692 ha) were staked in the vicinity to expand to the property to include additional target areas. 

The Nickel Plats Project area is located at or near a terrain boundary underlain by Proterozoic rocks of the Hearne-Reindeer and Reindeer zones to the east of the Archean Hearne Craton and northwest of the Archean Sask Craton. The Reindeer zone forms the core of the Trans-Hudson Orogen and is subdivided into the Rottenstone and La Ronge domains. The Rottenstone domain consists of mainly metasedimentary rocks intruded by tonalite-trondhjemite plutons and small mafic- ultramafic intrusions. The grade of regional metamorphism ranges from lower amphibolite to upper amphibolite. The mafic-ultramafic intrusions are the foci of PFN’s exploration interest.

The property is underlain by gneissic to migmatitic metasedimentary rocks with or without metavolcanic rocks, intermediate to felsic intrusions and, locally, mafic-ultramafic plutons. The pluton at the Gochagar Lake Property is a multiphase intrusive complex consisting of a core of hornblendite and a margin of diorite that was intruded by gabbro. The gabbro is described as relatively fresh which contains xenoliths of the metasedimentary country rocks and hosts nickel-copper sulphide mineralization. The mineralized host rock types are norite, websterite, hartzburgite, hornblendite and even the surrounding metasedimentary rocks.

Exploration work carried out by PFN consists of drill core resampling for modern assays and an airborne electromagnetic (EM) survey. Only a single drill hole was resampled. The assay results confirm the nickel enriched (up to 0.60% Ni) composition of the mineralization relative to copper (up to 0.16% Cu), presence of cobalt (up to 0.022%) and minor amounts of PGM (up to 0.3 gpt Pt+Pd).

In 2008, a total of 2284 line km of VTEM was flown by Geotech over PFN’s Nickel Plats Project area. Mr. Laurie Reed (a renowned geophysical consultant) completed an interpretation of the VTEM survey for PFN. The survey did detect the Gochagar A-Zone deposit. Several similar responses were identified in the vicinity of that zone and elsewhere on the Nickel Plats properties. These targets remain to be geologically proofed and drill tested.

57


 

A 2,284 line km helicopter-borne VTEM (Versatile Time Domain Electromagnetic) geophysical survey was completed by Geotech Ltd. over the Nickel Plats property in 2008, with a large number of anomalies identified, and limited re-sampling of historic drill core on the property was also completed. 

The Nickel Plats adjunct property is subject to a 2.0% NSR. The Company has the right to purchase a 1.0% NSR for $750,000.

A joint venture partner is being sought to further explore the Nickel Plats Project.

The claims of the PFNs Nickel Plats Project (in grey)

BRITISH COLUMBIA, CANADA

(I)        Rock & Roll Property - Au-Ag-polymetallic project

Ownership

On July 28, 2009, the Company obtained an option from Misty Creek Ventures Ltd. (Misty Creek Ventures Ltd. was dissolved in January 2010 and its interest was transferred to Equity Exploration Consultants Ltd.), First Fiscal Enterprises Ltd. and Pamicon Developments Ltd. (collectively, the “Vendors”) on the Rock & Roll Property.  Under the terms of the Agreement, the Company can earn a 100% interest in the property over a four-year period by completing $2,000,000 ($594,046 incurred) in exploration expenditures, paying the Vendors $130,000 and providing the Vendors with a total of 600,000 (100,000 shares issued) of the Company’s common shares.  The Vendors retain a 2% NSR, of which 1% can be purchased for $3,000,000. The property is also subject to an underlying NSR of 3% and an underlying  Net Profits Interest Royalty ("NPI") of 15%, both of which are payable to Prime Equities International Corporation, and both of which are purchasable by the Forrest Syndicate and/or heirs and assignees in their entirety for $1,500,000 each.

58


 

Location and Access

The Rock & Roll Property is located in the Liard Mining District approximately 9 km west of the Bronson airstrip and 37 km from the Eskay Creek Mine Road in northern British Columbia.

Geology and Mineralization

The Rock & Roll Property hosts precious metals rich in volcanogenic massive sulphide (VMS) mineralization in a volcano-sedimentary host rock package of Triassic age. As such, the mineralization shows similarities to the gold and silver rich mineralization of Barrick Gold’s past-producing Eskay Creek mine.  Known mineralization on the Rock & Roll Property occurs in multiple stacked sulphide lenses in two zones, the Black Dog and SRV zones, over a strike length of approximately 950 m.  A total of approximately 14,000 m of core drilling in 110 drill holes was completed on the property from 1991 to 1997. Only six drill holes tested the host stratigraphy outside of the known mineralization, but at least 5km of strike length of the prospective lithologies is present on the property. There is the potential for additional mineralization along strike and at depth, as historic drilling tested the known mineralization down to depths of only about 160 m.

Exploration

The 2009 exploration program included a 350 line km, AeroTem3, helicopter-borne magnetic/electromagnetic survey conducted by Aeroquest Limited and a drilling program consisting of a total of 540 m of core drilling completed in five holes. The first four holes were designed to test gaps in the historic drilling on the Black Dog Zone in order to establish the degree of continuity of the mineralization and to confirm the historic geological model. Each of the infill drill holes encountered the target mineralization, confirming the continuity of the sulphide lenses and the validity of previous geological interpretations. The table below illustrates selected assay results from this drill program. (Au and Ag in g/t. Cu, Pb and Zn in percent (%).

Hole Number From (m) To (m) Interval (m) Au g/t Ag g/t Cu % Pb% Zn%
RR09-105 76.03 77.9 1.87 0.78 84.6 0.24 0.21 0.89
including 76.77 77.9 1.13 1.14 120.4 0.32 0.30 1.23
RR09-106 62.26 64.3 2.04 0.40 72.2 0.27 0.24 1.63
including 62.26 63.01 0.75 0.90 177.7 0.60 0.63 4.23
RR09-107 39.32 58.73 19.41 0.53 57.9 0.19 0.24 0.91
including 39.32 42.46 3.14 1.31 296.2 0.46 1.25 3.99
RR09-108 46.88 85.59 38.71 0.28 18.3 0.13 0.05 0.72
including 62.74 75.71 12.97 0.40 28.0 0.21 0.06 1.07
RR09-109 No Significant Assays

*Interval represents apparent thickness not true thickness

The final drill hole of this program tested a strong electromagnetic anomaly that was thought to represent the westward continuation of the Black Dog Zone. Drilling at this location failed to return any significant assays.

Further investigations are required to test for a westward extension of the main zones of mineralization.

The 2009 work program on the property was also designed to provide an initial evaluation of the validity of historic assay data. A total of twenty-one samples from five different historic drill holes were obtained for comparison with the original assays. In most cases the samples were taken from the same core interval as the original samples.

Overall historic assay results have been confirmed, and the Company can now embark on a systematic re-sampling of historic core to provide a statistical comparison of the historic assay data with modern data. Commencement of the 2010 Rock and Roll exploration program was announced on September 27th 2010. This program primarily focused on continuation of re-sampling previous drill core, coupled by geological mapping/prospecting that investigated airborne geophysical survey conductors and geological and geochemical targets. The fieldwork was supported by further compilation of data from the 1990-97 programs and the incorporation of new geological interpretations formulating in conjunction with members of the British Columbia Geological Survey.

59


 

The Rock & Roll Report, commissioned by Alto and PFN, and filed on June 1, 2011 on the Company’s Form 6-K, included a new NI 43-101 compliant mineral resource estimate for the Black Dog Deposit. The resource estimate incorporated the mineralized zones of the historic drill core and the 540 m (1772 ft) of the five diamond drill holes that were completed by PFN in 2009/2010. Through this work, PFN significantly increased the resources contained within the Black dog deposit over the previous resource estimate, completed prior to the implementation of the NI 43-101 standards of disclosure.

The NI43-101 compliant mineral resource estimate in the “indicated” category consists of 2,155,679 tonnes grading 0.68 g/t Au (47,040 contained oz of Au), and 82.7 g/t Ag (5,734,445 contained oz of Ag) at a gold-equivalent cut-off grade of 0.5 g/t. The deposit also contains 0.22% Cu (10,500,833 lbs Cu), 0.22% Pb (10,399,960 lbs Pb), and 0.94% Zn (44,522,995 lbs Zn) or 3.11 g/t gold equivalent (AuEq) for an additional 215,239 oz of Au Eq at the 0.5 g/t AuEq cut-off. The AuEq grade is based on $1000/oz Au, $15.80/oz Ag, $2.92/lb Cu, $0.86/lb Pb and $0.86/lb Zn. Tables below give the mineral resource estimate for the Black Dog deposit at varying cut-off grades.

The Black Dog massive sulphide deposit is part of a larger area that includes the SRV Zone hosting precious metal-rich volcanogenic massive sulphide (VMS) mineralization. These occurrences display similarities to other precious metal-rich deposits such as Eskay Creek (50 km to the east-southeast), Greens Creek, and other deposits of the Canadian Cordillera. The mineralization on the Rock &Roll property is hosted by graphitic argillite to siltstone. The Black Dog and SRV zones are dominated by massive pyrrhotite with blebs and lenses of chalcopyrite and sphalerite. Massive pyrite-sphalerite forms finely laminated lenses locally, with minor pyrrhotite, galena and chalcopyrite.

Indicated Mineral Resources, consistent with CIM definitions required by NI43-101, are reported at various cut-off grades in Table 1 (for Au and Ag) and Table 2 (for Cu, Pb, Zn and gold equivalent values). Inverse distances squared interpolation restricted to mineralized domains were used to estimate gold (grams/tonne Au), silver (grams/tonne Ag), copper (% Cu), lead (% Pb), and zinc (% Zn) grades into the block models. Gold, silver, copper, lead and zinc content were combined into a gold equivalent value (using to the prices given above) for resource reporting.

60


 

Gold and Silver Indicated Mineral Resource Estimate at various gold-equivalent cut-off grades. Metallurgical recoveries and net smelter returns are assumed to be 100%

Copper, Lead, Zinc and gold equivalent Indicated Mineral Resource Estimate at various gold-equivalent cut-off grades

On June 27, 2012, the Company elected to terminate its option agreements with Pamicon Developments Ltd. on the Rock & Roll Polymetallic Project, British Columbia.

The Company decided it would be in the best interest of the company to not pursue additional exploration on these properties and to concentrate efforts on advancing its 100% owned River Valley PGM project.

61


 

ALASKA, USA

(I)        Union Bay Platinum Property

The project is located 32 km west of Ketchikan, Alaska.  The exploration target is an enriched platinum bearing zone within or peripheral to a dunite core.

Location Map of Union Bay property, Alaska

By agreement dated October 1, 2002 and amended April 2, 2003 and February 4, 2004, the Company could acquire, from Freegold, a company that previously had certain directors and officers in common, an option to earn up to a 70% interest in the property.

In order to earn its 50% interest, the Company, purchased a private placement of $165,000 (2002), made cash payments, and issued common shares and incurred exploration expenditures as follows:

      Payments   Shares     Exploration
Expenditures
  - Within 5 days from approval date          (issued) $ -   30,000   $ -
  - On or before 1 July 2003                           (paid / incurred)   20,000   -     30,000
  - On or before 30 January 2004                  (issued)   -   30,000     -
  - On or before 1 July 2004                          (paid / incurred)   20,000   -     30,000
  - On or before 1 July 2005                          (paid / incurred)   30,000   -     340,000
  - On or before 1 July 2006                          (paid / incurred)   30,000   -     600,000
    $ 100,000   60,000   $ 1,000,000

Following vesting with a 50% interest on July 1, 2006, the Company had the right to elect within 45 days to increase its interest to 60% by completing a feasibility study within 12 months of vesting with 50%.  This election was not made.

As a term of the agreement the Company, upon vesting with 50%, issued 253,586 common shares at market value of $100,000 to Freegold.  In a previous year, 134,538 common shares were issued, the value of which was accounted in the previous year.

62


 

By Memorandum of Agreement dated May 4, 2007, Freegold and the Company confirmed their 50/50 interest in the property, with the Company as Project Operator.

No programs were carried out during the past year and Freegold and the Company are seeking a joint venture partner to further develop this project.

(II)       Kane Property, Alaska

On June 6, 2007, the Company entered into an option agreement with Stillwater whereby Stillwater could earn 50% of the first selected property by spending US$3.5 million and US$4.0 million on each subsequent selected property by December 31, 2011.  In March 2008, Stillwater elected not to continue with exploration on the property in order to evaluate new ground in southeast Alaska.

The Company continues to maintain the Kane property’s mineral claims and a joint venture partner is being sought to further explore the property.

(III)     Tonsina Property

The Tonsina property, presently defined, consists of 46 State of Alaska mining claims, known as the “Marc” claims 1-46 (ADL Nos. 610060 – 610105; which were staked in June 2006.  These claims comprise a contiguous group of State of Alaska ¼ section claims covering approximately 29.78 sq. kilometers (744.62 hectares, or 7,360 acres), herein referred to as the “Tonsina property”.  The claims are owned 100% by the Company.

The property is located in the Valdez quadrangle in southeast Alaska on state select land, located approximately 6 km south of the village of Tonsina and 110 km north of Valdez.  The property covers prospective PGM mineralization within the Tonsina ultramafic intrusive complex.   Access is relatively good with bush roads 6 km north to the Richardson Highway which connects Anchorage to Fairbanks.  Helicopters are still required to reach the higher elevations.

63


 

The 2007 exploration program identified significant PGM anomalies associated with a sulphide and chromite enriched layer in the Tonsina Ultramafic Complex. An induced polarization survey designed to test the extent of the mineralization was completed in the summer of 2008, and was followed by a ground magnetic survey and surface channel sampling. The results suggest that the zone of sulphide mineralization is continuous over a 300 m strike length.  Future work will focus on determining the total strike extent of this zone, and identifying the best locations for drill testing of the mineralization.

A joint venture partner is being sought to further explore the project.

(IV)     Nixon Fork Project, Alaska

By Letter Agreement (the “Agreement”) dated December 9, 2008 between the Company and St. Andrew Goldfields Ltd. (“SAG”), the Company was granted an option, exercisable until February 15, 2009, to acquire a 100% interest in SAG’s wholly-owned subsidiary Mystery Creek Resources Inc. (“MCR”).  MCR’s assets include the Nixon Fork property, located 56 km northeast of McGrath, Alaska. 

The Company paid US$100,000 upon signing the agreement dated 9 December 2008. The Company exercised the option by agreeing to pay a further US$400,000 of which US$100,000 was paid February 12, 2009, and the balance was paid in three equal installments on May 1, 2009, July 1, 2009 and September 1, 2009.

In June 2009, the Company granted Fire River Gold Corp. (“FAU”) an option to acquire all of the outstanding shares of MCR. FAU paid PFN US$50,000 on signing of the agreement. The sale of MCR to FAU was approved by PFN shareholders in August 2009. The shareholders of FAU approved the purchase of MCR in September 2009.  FAU exercised the option by making further payments totaling US$450,000 and issuing a total of US$2.5 million in FAU shares at a deemed price of $0.45 per share for a total of 6,415,000 shares to the Company.

FAU issued to the Company 1,000,000 share purchase warrants entitling the Company to purchase 1,000,000 shares at an exercise price of $0.50 for a period of twenty-four months from the date of closing. FAU reimbursed all expenses incurred by the Company from May 1, 2009 until the finalization of this transaction for a total CDN$773,766.

(I)        Burkina Faso, Africa

On January 18, 2011, the Company entered into an agreement with Somitra to acquire 100% interest in the properties of Kangara, Kalempo and Lhorosso. The Company can earn a 100% interest in the properties under the following terms of the agreements:

  • US$75,000 on signing of the agreement (paid);
  • US$30,000 on six months following the signing of the agreement (paid);
  • US$105,000 on the first anniversary of the signing of the agreement;
  • US$120,000 on the second anniversary of the signing of the agreement;
  • US$150,000 on the third anniversary of the signing of the agreement; and
  • After completion of transferring the claims, the Company is required to issue 450,000 common shares of the Company to Somitra or pay the sum of US$135,000.

PFN’s Burkina Faso gold Projects lie within the Birimian Greenstone Belt of West Africa, one of the most prolific gold producing regions of the world. The Birimian Greenstone Belt consists of Lower Proterozoic age volcanic and sedimentary units intruded and surrounded by related plutonic rocks and has a long history of gold mining with industrial history beginning in Ghana at the end of the 19th century.

64


 

Each property is subject to a 1.0% NSR with the buyout price of US$1,000,000 for any deposit over 1 million ounces and US$500,000 for any deposit under 1 million ounces.  A joint venture partner is being sought to further explore the project.

 “Property, Plants and Equipment” sections of this report have been reviewed and approved for technical content by Ali Hassanalizadeh M.Sc. MBA, P.Geo, Vice President, Exploration for PFN and a Qualified Person under the provisions of NI 43-101.

ITEM 5:  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the consolidated financial statements and reported amounts of income and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.

Areas requiring a significant degree of estimation and judgment relate to the recoverability of the carrying value of exploration and evaluation assets, fair value measurements for financial instruments and share-based payments, the recognition and valuation of provisions for decommissioning liabilities, the recoverability and measurement of deferred tax assets and liabilities, inventory valuation and ability to continue as a going concern.  Actual results may differ from those estimates and judgments.

Cash and cash equivalents

Cash and cash equivalents comprise cash at banks and on hand, and short term money market instruments with an original maturity of three months or less, which are readily convertible into a known amount of cash.

Investment in associate

The Company’s investments in associates are accounted for using the equity method of accounting.  Under the equity method, the Company’s investment in an associate is initially recognized at cost and subsequently increased or decreased to recognize the Company’s share of earnings and losses of the associate and for impairment losses after the initial recognition date.  The Company’s share of an associate’s losses that are in excess of its investment in the associate are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.  The Company’s share of earnings and losses of associates are recognized in profit or loss during the period.

After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on the Company’s investment in its associates.  The Company determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired.  If there is objective evidence, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in profit or loss.  When a group entity transacts with an associate of the Company, profit and losses are eliminated to the extent of the Company’s interest in the relevant associate.

Foreign currencies

The Company’s reporting currency and the functional currency of all of its operations is the Canadian dollar as this is the principal currency of the economic environment in which they operate.

65


 

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction.  Foreign currency monetary items are translated at the period-end exchange rate.  Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction.  Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive income in the statement of comprehensive income to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive income.  Where the non-monetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss.

Property and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.  The cost of an item of property, plant and equipment consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Depreciation is provided at rates calculated to write off the cost of property, plant and equipment, less their estimated residual value, using the declining balance method using the following rates or the straight-line method over the following expected useful lives:

  Automotive 30%
  Office equipment 20%
  Software 100%
  Leasehold improvements 10 years

Exploration and evaluation properties

Exploration and evaluation expenditures include the costs of acquiring licenses, costs associated with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets acquired in a business combination.  Exploration and evaluation expenditures are capitalized.  Costs incurred before the Company has obtained the legal rights to explore an area are recognized in profit or loss.

Option payments received are treated as a reduction of the carrying value of the related exploration and evaluation properties and deferred costs until the receipts are in excess of costs incurred, at which time they are credited to income.  Option payments are at the discretion of the optionee, and accordingly, are recorded on a cash basis.

Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within property, plant and equipment.

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Recoverability of the carrying amount of any exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

Decommissioning, restoration and similar liabilities

The Company recognizes provisions for statutory, contractual, constructive or legal obligations associated with the reclamation of mineral properties and retirement of long-term assets, when those obligations result from the acquisition, construction, development or normal operation of the assets.  The net present value of future cost estimates arising from the decommissioning of plant, site restoration work and other similar retirement activities is added to the carrying amount of the related asset, and depreciated on the same basis as the related asset, along with a corresponding increase in the provision in the period incurred.  Discount rates using a pre-tax rate that reflect the current market assessments of the time value of money are used to calculate the net present value. 

The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures.  These changes are recorded directly to the related asset with a corresponding entry to the provision.

Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit or loss for the period.  The net present value of reclamation costs arising from subsequent site damage that is incurred on an ongoing basis during production are charged to profit or loss in the period incurred.  The costs of reclamation projects that were included in the provision are recorded against the provision as incurred.  The costs to prevent and control environmental impacts at specific properties are capitalized in accordance with the Company’s accounting policy for exploration and evaluation properties.

Share-based payments

Share-based payments to employees are measured at the fair value of the instruments issued and recognized over the vesting periods.  Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received.  The corresponding amount is recorded to the share-based payments reserve. 

The fair value of options is determined using the Black-Scholes Option Pricing Model which incorporates all market vesting conditions.  The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that will eventually vest.

Taxation

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are generally recognized for all taxable temporary differences.  Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.  Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

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The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the reporting date.

Financial assets

Financial assets are classified as financial assets at fair value through profit or loss (“FVTPL”), held-to-maturity, loans and receivables, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.  The Company determines the classification of its financial assets at initial recognition.  Financial assets are recognized initially at fair value.  The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at FVTPL

Financial assets are classified as held for trading and are included in this category if acquired principally for the purpose of selling in the short term or if so designated by management.  Derivatives, other than those designated as effective hedging instruments, are also categorized as held for trading.  These assets are carried at fair value with gains or losses recognized in profit or loss.  Transaction costs associated with financial assets at FVTPL are expensed as incurred.  Cash and cash equivalents and share purchase warrants held in other companies are included in this category of financial assets.

Held-to-maturity and loans and receivables

Held-to-maturity and loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  Such assets are carried at amortized cost using the effective interest method if the time value of money is significant.  Gains and losses are recognized in profit or loss when the financial asset classified in this category are derecognized or impaired, as well as through the amortization process.  Transaction costs are included in the initial carrying amount of the asset.  Amounts receivables are classified as loans and receivables.

Available-for-sale

Available-for-sale financial assets are those non-derivative financial assets that are not classified as loans and receivables.  After initial recognition, available-for-sale financial assets are measured at fair value, with gains or losses recognized within other comprehensive income.  Accumulated changes in fair value are recorded as a separate component of equity until the investment is derecognized or impaired.  Transaction costs are included in the initial carrying amount of the asset.  Available-for-sale assets include short term investments in equities of other entities.

The fair value is determined by reference to bid prices at the close of business on the reporting date.  Where there is no active market, fair value is determined using valuation techniques.  Where fair value cannot be reliably measured, assets are carried at cost. 

Derivatives designated as hedging instruments in an effective hedge

The Company does not hold or have any exposure to derivative instruments.

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Financial liabilities

Financial liabilities are classified as financial liabilities at FVTPL, derivatives designated as hedging instruments in an effective hedge, or as financial liabilities measured at amortized cost, as appropriate.  The Company determines the classification of its financial liabilities at initial recognition.  The measurement of financial liabilities depends on their classification, as follows:

Financial liabilities at FVTPL

Financial liabilities at FVTPL has two subcategories, including financial liabilities held for trading and those designated by management on initial recognition.  Transaction costs on financial liabilities at FVTPL are expensed as incurred.  These liabilities are carried at fair value with gains or losses recognized in profit or loss.

Financial liabilities measured at amortized cost

All other financial liabilities are initially recognized at fair value, net of transaction costs.  After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest method. Amortized cost is calculated by taking into account any issue costs, and any discount or premium on settlement.  Gains and losses arising on the repurchase, settlement or cancellation of liabilities are recognized respectively in interest, other revenues and finance costs.  Trade payables are included in this category of financial liabilities.

Derivatives designated as hedging instruments in an effective hedge

The Company does not hold or have any exposure to derivative instruments.

Impairment of financial assets

Financial assets, other than financial assets at FVTPL, are assessed for indicators of impairment at each period end. 

Assets carried at amortized cost

If there is objective evidence that an impairment loss on assets carried at amortized cost have been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.  The carrying amount of the asset is reduced, with the amount of the loss recognized in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed to the extent that the carrying value of the asset does not exceed what the amortized cost would have been had the impairment not been recognized.  Any subsequent reversal of an impairment loss is recognized in profit or loss.

Available-for-sale

If an available-for-sale financial asset is impaired, the cumulative loss previously recognized in equity is transferred to profit or loss.  Any subsequent recovery in the fair value of the asset is recognized within other comprehensive income. 

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Derecognition of financial assets and liabilities

Financial assets are derecognized when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Company has transferred substantially all the risks and rewards of ownership of the financial assets.  On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized directly in equity is recognized in profit or loss.

For financial liabilities, they are derecognized when the obligation specified in the relevant contract is discharged, cancelled or expires.  The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

Impairment of non-financial assets

The carrying amount of the Company’s assets is reviewed for an indication of impairment at the end of each reporting period.  If an indication of impairment exists, the Company makes an estimate of the asset’s recoverable amount.  Individual assets are grouped for impairment assessment purposes at the lowest level at which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets.  Recoverable amount of an asset group is the higher of its fair value less costs to sell and its value in use.  In assessing value in use, the estimated future cash flows are adjusted for the risks specific to the asset group and are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money.

Where the carrying amount of an asset group exceeds its recoverable amount, the asset group is considered impaired and is written down to its recoverable amount.  Impairment losses are recognized in profit or loss. 

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased.  If such indication exists, the recoverable amount is estimated.  A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount.  An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized.

Flow-through shares

Any premium received by the Company on the issuance of flow-through shares is initially recorded as a liability and included in trade payables and accrued liabilities.  Upon renouncement by the Company of the tax benefits associated with the related expenditures, a deferred tax liability is recognized and the flow-through liability will be reversed.  To the extent that suitable deferred tax assets are available, the Company will reduce the deferred tax liability and record a deferred tax recovery.

Related party transactions

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 financial and operating decisions.  Parties are also considered to be related if they are subject to common control, 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.

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TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

Initial adoption of IFRS

The Company’s audited consolidated financial statements as at and for the years ended April 30, 2012 have been prepared in accordance with IFRS as issued by the IASB.  Previously, the Company prepared its 2011 annual financial statements in accordance with Canadian GAAP. 

IFRS 1 requires the consistent and retrospective application of IFRS accounting policies as at and for the year ended April 30, 2011 and an opening Statement of Financial Position as at May 1, 2010.

To assist with the transition, the provisions of IFRS 1 allows for certain mandatory and optional exemptions for first-time adopters to alleviate the full retrospective application of IFRS.  The Company has elected to apply the following relevant exemptions:

Business Combinations – IFRS 1 provides the option to apply IFRS 3, “Business Combinations”, retrospectively or prospectively from the date of transition.  The Company elected not to retrospectively apply IFRS 3 to business combinations that occurred prior to May 1, 2010.

Share-based Payments – IFRS 1 encourages, but does not require, first time adopters to apply IFRS 2, “Share-based Payment” to equity instruments that were granted on or before November 7, 2002, or equity instruments that were granted subsequent to November 7, 2002 and vested before May 1, 2010.  The Company elected not to apply IFRS 2 to equity instruments that vested prior to May 1, 2010.

Decommissioning Liabilities - IFRS 1 provides an optional exemption to elect not to retrospectively recalculate the decommissioning liabilities and the related impact on the cost of the related asset and accumulated depreciation.  The Company elected to use this exemption and account for changes in decommissioning liabilities prospectively from May 1, 2010.

Hindsight was not used to create or revise estimates and accordingly the estimates previously made by the Company under Canadian GAAP are consistent with their application under IFRS.  A summary of IFRS 1 mandatory and option exemptions are described in Note 4 to the annual financial statements.

The IFRS accounting policies are set forth in Note 3 to the annual consolidated financial statements for the year ended April 30, 2012.  A detailed explanation of how the transition from Canadian GAAP to IFRS has affected the Company’s financial position, financial performance and cash flow, including the reconciliations required by IFRS 1, is presented in Note 4 to the financial statements.

Canadian GAAP to IFRS differences

Share-based Payments – The Company elected to apply IFRS 2 only to those stock options granted subsequent to November 7, 2002 and not vested before May 1, 2010.  This resulted in an increase of share-based payments reserve as at May 1, 2010 of $36,851 with an increase in deficit of an equal amount, and an increase in share-based payment expense of $162,543 for the year ended April 30, 2011.

Flow-through Shares - Flow-through shares are a unique Canadian tax incentive which is the subject of specific guidance under Canadian GAAP.  Under Canadian GAAP, the Company accounted for the issue of flow-through shares in accordance with the provisions of CICA Emerging Issues Committee Abstract 146, “Flow-through Shares”.  At the time of issue, the funds received are recorded as share capital.  At the time of the filing of the renunciation of the qualifying flow-through expenditures to investors, the Company recorded a deferred tax liability with a charge directly to shareholders’ equity.  Also under Canadian GAAP, a portion of the deferred tax assets that were not recognized in previous years, due to the recording of a valuation allowance, are recognized as a recovery of income taxes.

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IFRS does not contain explicit guidance pertaining to this tax incentive.  Therefore, the Company has adopted a policy whereby the premium paid for flow-through shares in excess of the market value of the shares without the flow-through features at the time of issue is initially recorded as a flow-through liability.  Upon renouncement by the Company of the tax benefits associated with the related expenditures, a deferred tax liability is recognized and the flow-through liability is reversed, with any difference recorded as deferred tax expense.  A portion of the deferred tax assets that were not recognized in previous years, due to the recording of a valuation allowance, will reduce the deferred tax liability and record a deferred tax recovery.

The change in accounting policy related to flow-through shares resulted in an increase in share capital and an increase in deficit of $1,083,067 as at May 1, 2010, and a decrease in share capital and an increase in flow-through tax liability of $77,314 for the year ended April 30, 2011.

Reclassification within Equity section - Under Canadian GAAP, “Contributed Surplus” was used to record the issuance of warrants, stock options and performance shares as well as shares to be issued and warrants to be issued.  Upon adoption of IFRS, the balances in “Contributed Surplus” have been reclassified to “Share-based Payments reserve” and “Warrants reserve”.  In addition, the Company reclassified the balance of the “Accumulated other comprehensive income” that existed under Canadian GAAP into “Investment revaluation reserve”. 

A.        Operating Results

The following discussion and analysis should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto included herein. The Company’s audited consolidated financial statements have been prepared in accordance with IFRS.

The following table summarizes selected financial data for the Company for each of the three most recently completed financial years.  The 2012 and  2011 information set forth below was extracted from and should be read in conjunction with the audited consolidated financial statements, prepared in accordance with IFRS, and related notes.  The 2010 information was prepared in accordance with Canadian GAAP reconciled to U.S. GAAP.

  Years Ended April 30
  2012 2011 2010
Total revenues $         33,134 $         52,293 $         59,296
General and administrative expenses 2,975,697 1,698,576 1,789,601
Mineral property cash costs incurred 3,224,377 1,890,288 1,487,026
Income (loss) before other items in total (2,975,697) (1,698,576) (1,789,601)
Net income (loss) from continuing operations
> In total
> Basic and diluted loss per share – continued operation
> Basic and diluted loss per share – discontinued operation
(4,987,597
(0.05)
-
(4,316,193)
(0.06)
-
(3,551,664)
(0.06)
0.04
Totals assets 13,200,115 15,575,641 11,353,054
Total long term liabilities Nil Nil Nil
Cash dividends declared Nil Nil Nil

Twelve Months Ended April 30, 2012 Compared to Twelve Months Ended April 30, 2011

Results of operations

The year ended April 30, 2012 resulted in a loss from operations of $4,987,597 which compares with a loss of $4,316,193 for the same period in 2011.  The increase in loss of $671,404 was mainly attributable to:

An increase of $335,414 in investor and shareholder relations due to the new marketing program and promotional activities undertaken during the current period by the Company. Cost of $528,228 for the year ended 30 April 2012 compared to $192,814 for the same period in 2011.

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An increase of $260,019 in share-based payments due to the issuance of stock options to employees and consultants.  Cost $531,712 for the year ended 30 April 2012 compared to $271,693 for the same period in 2011.

An increase of $232,267 in management fees due to the amendment increase and bonus paid to the Chairman and CEO in relation to the closing acquisition of the River Valley project from Anglo.  Cost $432,338 for the year ended 30 April 2012 compared to $200,071 for the same period in 2011.

An increase of $434,105 in net loss on equity investment.   Cost $434,105 for the year ended 30 April 2012 compared to $Nil for the same period in 2011.

An increase of $119,115 in travel, lodging and food due to promotional activities and attendance at various trade shows.  Cost $197,270 for the year ended 30 April 2012 compared to $78,155 for the same period in 2011.

An increase of $232,989 in salaries and benefits due to hiring of additional staff.  Cost $415,771 for the year ended 30 April 2012 compared to $182,782 for the same period in 2011.

An increase of $104,236 in office expenses due to the departure of a Tenant that shared office space and expenses.  Cost $170,719 for the year ended 30 April 2012 compared to $66,483 for the same period in 2011.

During the year ended 30 April 2012, the Company incurred mineral property cash costs of $3,224,377 compared to $1,890,288 in the previous year.

Events Subsequent to Year Ended April 30, 2012

On 29 June 2012, the Company terminated the option agreements related to the BC Rock & Roll property and the Destiny Gold Project.

Twelve Months Ended April 30, 2011 Compared to Twelve Months Ended April 30, 2010

The year ended April 30, 2011 resulted in loss from continuing operation of $4,316,193 which compares with a loss of $3,551,664, for the same period in 2010.

General and administrative expenses for the year ended April 30, 2011 were $1,698,576, a decrease of $91,025 over the same period in 2010. Shareholder relations and promotional activities undertaken by the Company, which included attendance at various trade shows, cost $192,814 for the year ended April 30, 2011 compared to $263,840 for the same period of 2010. Salaries and benefits decreased by $4,250 for a total of $182,782 compared to $187,032 in the previous year. An aggregate stock-based compensation of $271,693 was recorded as compared to $308,435 in the previous year. Consulting fees for the year were $318,031 compared to $370,635 in the previous year. Travel and lodging costs of $78,155 were incurred during the year compared to $49,310 of the same period in 2010. All other general and administrative costs were relatively the same compared to the previous year. Interest and other income was $52,293, compared to $52,616 in the previous year.

During the year ended April 30, 2011, the Company incurred mineral property cash costs of $1,890,288.  The Company acquired the Rock & Roll property in British Columbia for acquisition costs of $40,000 and incurred exploration costs of $156,871 during the year.  Also, the Company acquired the Destiny Gold property in Québec for acquisition costs of $30,500 and incurred $440,516 in exploration costs.  In December 2010, as amended on April 6, 2011, the Company completed the purchase of Kaymin’s 50% interest in the River Valley claims, providing the Company with an undivided 100% interest in the River Valley PGM Project.  The aggregate purchase price for the 50% interest in the River Valley PGM project was 8,117,161 common shares of the Company valued at $2,435,148 and 3,000,000 share purchase warrants exercisable at $0.30 per common share for three years valued at $675,570.  The Company also incurred $902,055 in exploration costs related to the River Valley PGM Project.  In January 2011, the Company entered into agreements with Somitra to acquire 100% interest in three properties located in Burkina Faso, Africa.  The Company paid $75,000 on signing the agreement and incurred exploration costs of $111,693.  The Company is now exploring these four properties and, consequently, has recorded a provision for write-down on all other properties in the amount of $2,549,552 during the year.

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The Company is authorized to issue unlimited common shares without par value.  As at April 30, 2012, there were 85,737,788 outstanding common shares compared to 67,543,008 outstanding common shares at April 30, 2010.

B.         Liquidity and Capital Resources

The Company expects that its existing capital requirements arising from the evaluation of its existing mineral properties and fulfilling its exploration commitments will be met from the company's existing cash position.

The Company's future profitability is dependent on the successful definition of geological resources on its mining properties and the establishment of positive comprehensive feasibility studies on these geological resources.  Upon completion of positive feasibility studies, the Company's success is dependent on the successful construction, financing and operation of a facility to extract the minerals from the geological resource located.  The Company will continue to seek new mining opportunities.  The Company presently has no producing properties, and the Company's material properties contain no known mineral reserves; the limited activities on such properties to date have been exploratory in nature.  Except as disclosed herein, the Company does not possess reliable information concerning the history of previous operations including the names of previous operators, if any, on any of its properties.

Future profitability will also be affected by the level of taxes imposed by the jurisdiction in which the Company operates.  Furthermore, the Company's operations may be affected by regulatory authorities in the jurisdictions in which the Company operates.  The Company is not currently aware of any factors or current recommendations by the taxation or regulatory authorities in Canada that may have a material impact on the Company's operations.

Twelve Months Ended April 30, 2012 Compared to Twelve Months Ended April 30, 2011

During the year ended April 30, 2012, the Company’s working capital, defined as current assets less current liabilities, was $4,570,797 compared with working capital of $8,608,818 at April 30, 2011. 

The Company’s total issued and outstanding common shares at April 30, 2012, was 103,747,214 common shares.

The Company had a portfolio of investments with a book value of $1,604,763 and a market value of $1,079,057 as at April 30, 2012.

Twelve Months Ended April 30, 2011 Compared to Twelve Months Ended April 30, 2010

During the year ended April 30, 2011, the Company’s working capital, defined as current assets less current liabilities, was $8,608,818 compared with working capital of $7,249,616 at April 30, 2010.  The Company had no restricted cash included in working capital. 

The Company’s total issued and outstanding common shares at April 30, 2011, was 85,737,788 common shares.

The Company had a portfolio of investments with a book value of $3,496,753 and a market value of $4,815,763 as at April 30, 2011.

C.        Research and Development, Patents and Licenses, etc.

As the Company is a mineral exploration company with no research and development, the information required by this section is inapplicable.

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D.        Trend Information

As the Company is a mineral exploration company with no producing properties, the information required by this section is inapplicable.

E.         Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

F.         Tabular Disclosure of Contractual Obligations

The following table sets out the Company’s contractual commitments as of the latest financial year ended April 30, 2012:

Contractual Obligations(1)   Payments Due By Period  
    Less than 1 yr     2-5 yrs     More than 5 yrs     Total  
Management Agreement(2) $ 266,871   $ 856,787   $ -   $ 1,123,658  
Rent and lease payments   108,559     544,208     508,218     1,160,985  
Total $ 375,430   $ 1,400,995   $ 508,218   $ 2,284,643  

1) No mineral property payments or exploration expenditures are included in the above table as they are considered option payments solely exercisable at the option of the Company.
2) By agreement effective December 1, 2005 (“original agreement”) as amended December 1, 2008 and again on April 1, 2011, the Company entered into a five-year management agreement with a Company controlled by a director and Chairman. Compensation is $20,833 per month for the first year, with a 5% increase on each anniversary date plus benefits. The Chairman and director is also entitled to receive up to 20% of the stock options granted during the period that the agreement is in place. This agreement is automatically renewable for two-year periods. The Company may terminate the agreement at any time but will be responsible to pay the greater of the remaining amount under the contract or two years’ compensation.

Some of the Company’s mineral properties are being acquired over time by option payments.  It is at the Company’s option as to whether to continue with the acquisition of the mineral properties and to incur these option payments.  Current details of option payments required in the future if the Company elects to maintain its interest are as follows:

  Option Payments Due by Period
Option Agreement Obligations Total Less than
1 year
2-3 years 4-5 years More than
5 years
Destiny Gold Project(1) $150,000 $50,000 $50,000 $                  - $               -
Nickel Plats $40,000 $20,000 - - -
Burkina Faso $405,000 $120,000 $150,000 - -
Total $595,000 $190,000 $200,000 $                  - $               -

(1)          On June 29, 2012, the Company terminated the option agreements related to the Destiny Gold Project.

G.        Safe Harbor

The Company seeks safe harbor for our forward-looking statements contained in Items 5E and F.  See the heading “Cautionary Note Regarding Forward-Looking Statements” above.

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ITEM 6.          DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.        Directors and Senior Management

The following table states the name, province or state, and country of residence of each of the directors and executive officers of the Company, the positions and offices presently held by them and the period or periods of time during which each has served as a director of the Company. The directors named below were elected or re-elected by the Company’s shareholders on September 7, 2011.

Name, Province and
Country of Residence
Age Position in the Company Period(s) as a Director of
the Company
Harry Barr
Vancouver, BC
Canada
57 Director, Chairman and CEO since 1996
Linda Holmes(1)(2)
Summerland, BC
Canada
62 Director since September 2007
Dennis Hop (2)
Calgary, AB
Canada
57 Director since October 2007
John Londry(1)
Stittsville, ON
Canada
67 Director since February 2009
Jordan Point(1)(2)
Vancouver, BC
Canada
49 Director since September 2007
William Stone
Burlington, ON
Canada
55 President and Chief Operating Officer N/A
Robert Guanzon
Richmond, BC
Canada
48 Chief Financial Officer N/A
John Oness
Port Coquitlam, BC
Canada
65 Senior Vice President, Business and Corporate Development N/A
Ali Hassanalizadeh
Coquitlam, BC
Canada
43 Vice President, Exploration N/A
Coreena Hansen
Coquitlam, BC
Canada
38 Corporate Secretary N/A

  (1) Denotes member of Audit Committee.
  (2) Denotes member of Compensation Committee.

Business Experience, Function and Area of Experience for the Past Five Years

Harry Barr –Chairman, CEO and Director

Mr. Barr has been involved in the mining industry for over 25 years and has an extensive background in business management, corporate finance, and marketing.

Mr. Barr is currently CEO, Chairman and a Director of the Company. (President from 1996 to September, 2011). CEO, Chairman, President and Director of Next Gen Metals Inc. (September 2009 to present); Director, Chairman and CEO of El Niño Ventures Inc. (from September 2009) and a director of Copper Reef Mining Corporation since June 3, 2011.  

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Mr. Barr previously served as President and Director of Fire River Gold Corp. (1997 – 2011); CEO of Fire River Gold Corp. (2007 – 2011); Chairman & COO of CanAlaska Uranium Ltd. (2004- 2007); Director of CanAlaska (1985-2007); Chairman of Freegold Ventures Limited (1999-2007); Director of Freegold Ventures Limited (1985–2007); CEO of El Niño Ventures Inc. (2003 – 2007); Chairman of El Niño Ventures Inc. (2006-2007); and Director of El Niño Ventures Inc. (1999–2007).

Linda Holmes – Director

Ms. Holmes has been a Canadian and US securities compliance consultant to public companies, and companies desiring to go public, since 1994, and has been involved in the mineral resource industry for over 25 years.

Ms. Holmes is currently a director (since September 2007) of the Company, former director (November 2007-June 2012) of Fire River Gold Corp., a director (since August 2009) of Next Gen Metals Inc.; and a director of El Niño Ventures Inc. (since May 2010).

Ms. Holmes has been a director and/or officer of, and/or consultant to, numerous public companies including:  IGC Resources Inc. (director: 2003 –2009, Corporate Secretary: 2000 –2009); Copper Mesa Mining Corporation (formerly Ascendant Copper Corporation) (director: 2005 - 2007); Corporate Secretary and manager of compliance: (2005 –2009).

Dennis Hop - Director

Mr. Hop is a Certified Financial Planner (CFP) and has been involved in this specialty area since 1982.  He is President of Hop Estate Planning Partners Ltd., a company specializing in creating consolidated financial and estate plans for high net worth families and private business owners.  Mr. Hop is a director of Mountainview Energy Ltd. and a former director of Breaker Energy Ltd. (2004 – 2009).

John Londry – Director

Mr. Londry received his BSc and MSc degrees in Geology from the University of Windsor.  For over 35 years he has been active in the mineral exploration and mining industry. Mr. Londry’s considerable experience encompasses both grass roots and advanced stage exploration projects throughout Canada, the United States and South America.  He has held senior positions with Camflo, Noranda Exploration, Hemlo Gold Mines and Battle Mountain Gold.  Mr. Londry served as Vice President of Exploration (2004 – 2008) of Pacific North West Capital Corp.

Mr. Londry has been a director of Next Gen Metals Inc. since January 12, 2011.

Jordan Point - Director

Mr. Point is the Executive Director of the First Nations Fisheries Council of British Columbia, an organization that acts at the intersection between the Federal department of Fisheries and Oceans, and the 203 First Nations in British Columbia. He works closely with the leads of the Assembly of First Nations, the First Nations Summit and the Union of BC Indian Chiefs (collectively known as the Leadership Council).  Mr. Point is also a long-term elected Councillor with the Musqueam Indian Band, serving his local community since 1996, with portfolios as chair of the Finance Committee, Economic Development Committee and the Gateway construction initiative.

Mr. Point also served as a public servant for 15 years, and was a senior Program Manager with the Federal Government in Fisheries and Oceans, focused on Aboriginal Affairs, leading negotiations on annual allocations for salmon, and financial contribution agreements with First Nation Bands with interim assignments to the litigation case management unit and the treaty and Aboriginal Policy Unit for the Pacific Region.  

William Stone – President and Chief Operating Officer

William Stone was appointed to President and Chief Operating Officer of the Company in September, 2011.  Dr. Stone, M.Sc and Ph.D, Geology, has held senior positions with international and Canadian mining and mineral exploration companies based in Vancouver and Toronto and has more than twenty-five years of exploration experience, including significant experience with platinum group metals (PGMs) and nickel-copper sulphides and a wealth of technical and practical experience. He served as Principal Geologist and Vice President of Exploration with several Canadian and Australian listed firms, including positions with WMC Resources Ltd. at Kambalda (Western Australia).  Dr. Stone was also a Senior Lecturer in Economic Geology and Geochemistry at the University of Western Australia in Perth. Dr. Stone joined the Company from his most recent position as Vice-President of Exploration, Canada, for Magma Metals Ltd.  Previously he served as Vice President of Exploration for North American Palladium Ltd.

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Robert Guanzon – Chief Financial Officer

Mr. Guanzon is currently the Chief Financial Officer of the Company (2008 – present).  Prior to his appointment, Mr. Guanzon was the accountant for the Company (2007 – 2008).  He was the accountant of RG properties Ltd. (1999 – 2007).  Mr. Guanzon is a Certified Public Accountant, Philippines and currently pursuing his designation as Certified Management Accountant, Canada. Mr. Guanzon brings extensive experience to the Board in dealing in financial matters and corporate strategy.

John Oness – Senior Vice President, Business and Corporate Development

Mr. Oness has extensive experience and education in all aspects of corporate management with strengths in strategic planning, business development and investor relations for public companies.  Mr. Oness is a director and Chief Operating Officer (formerly acting Chief Financial Officer) of El Nino Ventures Inc. (2010 – present) and Chief Operating Officer (formerly Vice-President, Corporate Business Development), of Next Gen Metals Inc. (2010 – present).

Mr. Oness has served as a director, executive and consultant to public companies in the resource and non-resource fields over a 25 year career. He was a director of Alix Resources Corp. (2007 – 2009) and of Sierra Geothermal Power Corp. (2004 – 2006).

Ali Hassanalizadeh – Vice President, Exploration

Mr. Hassanalizadeh, M.Sc, PGeo, MBA possesses extensive experience in mineral exploration and project management. He graduated in geology in 1991 and completed his M.Sc. in Petrology in 1995. In 2010 he completed an MBA at Queen's University, building on his experiences as Project Geologist and Project Manager. Mr. Hassanalizadeh has been responsible for a number of uranium, gold and base metal projects during his exploration career with various explorations companies. He is a member of the Association of Professional Engineers and Geoscientists of British Columbia. He concurrently holds the position of Vice President, Exploration for El Nino Ventures Inc. and Next Gen Metals Inc. (2011 to present).

Coreena Hansen – Corporate Secretary

Coreena Hansen was appointed to Corporate Secretary of the Company in October, 2011.  Ms. Hansen has over nine years experience in corporate compliance and public company management. She has significant expertise in the areas of corporate governance, financing transactions and securities regulatory filings. She currently also holds the position of Corporate Secretary for El Nino Ventures Inc. and Next Gen Metals Inc. (2011 to present).

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Family Relationships

There are no family relationships between the directors and officers of the Company.

Other Relationships

Except as disclosed in Item 7B – Related Party Transactions, there are no arrangements or understandings between any major shareholder, customer, supplier or others, pursuant to which any of the above-named persons were selected as directors or members of senior management.

Conflicts of Interest

Other than as disclosed in Item 3D(vii) – Risk Factors, Conflicts of Interest, there are no existing or potential conflicts of interest among the Company, its directors, officers or promoters.

B.         Compensation

The table below sets forth the compensation paid to or earned by the Company’s members of its administrative, supervisory or management bodies during the fiscal year ended April 30, 2012:

Name
Year
Ended
Apr 30
Salary
($)
Share-
based awards
($)
Option-
based awards
($)
Non-equity incentive
plan compensation
($)
Pension
value
($)
All Other
Compensation
($)
Total
Compensation
($)
Annual Incentive Plans Long-term Incentive Plans
Harry Barr(1) C
EO & Director
2012 254,163 Nil 65,036 Nil Nil Nil 199,580 518,779
William Stone(2)
President & COO
2012 113,010 Nil 45,813 Nil Nil Nil Nil 158,823
Robert Guanzon
CFO
2012 85,905 Nil 16,591 Nil Nil Nil Nil 102,496
John Oness(3)
Senior Vice President
Business & Corporate
Development
2012 63,000 Nil 58,715 Nil Nil Nil Nil 121,715
Ali Hassanalizadeh(4)
Vice President
Exploration
2012 102,534 Nil 15,893 Nil Nil Nil Nil 118,427
CoreenaHansen
Corporate Secretary
2012 30,292 Nil Nil Nil Nil Nil Nil 30,292
Anthony Kovacs(5)
Former Vice President
Exploration
2012 3,841 Nil 8,270 Nil Nil Nil Nil 12,111
Linda Holmes(6)
Former Corporate
Secretary
2012 36,628 Nil 16,591 Nil Nil Nil 3,000 56,219

(1)   Mr. Barr’s salary is paid through Canadian Gravity Recovery Inc. (“CGR”), pursuant to the terms of the management contract between the Company and CGR (as set forth below under the heading “Termination Benefits”). Pursuant to the terms of the management contract between the Company and CGR during the year ended April 30, 2012, Mr. Barr received a bonus in the amount of $199,580; a benefit for the use of a leased vehicle (of which approximately 40% of its use was for personal use) of $12,229; and $12,820 for disability/critical illness and life insurance.
(2)   Mr. Stone’s salary is paid pursuant to a contract with the Company, as set forth below under the heading “Termination Benefits.”
(3)   Mr. Oness was appointed Senior Vice President, Business & Corporate Development, on September 5, 2011.
(4)   Mr. Hassanalizadeh’s salary is paid pursuant to a contract with the Company, as set forth below under the heading “Termination Benefits.”
(5)   Mr. Kovacs resigned as Vice President, Exploration, effective May 21, 2011.
(6)   Ms. Holmes resigned as Corporate Secretary effective October 24, 2011.

Directors who are not members of the Company’s administrative, supervisory or management bodies are each entitled to receive an annual retainer fee of $6,000, an additional $500.00 per meeting for attending directors’ meetings, and may be reimbursed for actual expenses reasonably incurred in connection with the performance of their duties as directors.  

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Compensation paid to or earned by the Company’s directors who were not members of its administrative, supervisory or management bodies during the fiscal year ended April 30, 2012 was as follows:

      Dennis Hop           $8,500
      John Londry          $8,500
      Jordan Point          $9,000

Stock Options Granted During the Fiscal Year Ended April 30, 2012

The table below sets forth the stock options granted to the Company’s director and members of its administrative, supervisory or management bodies during the fiscal year ended April 30, 2012:

Name Options to
purchase
Common Shares
Exercise
Price
($)
Date of
Grant
Expiry Date
Harry Barr
CEO & Director
Nil N/A N/A N/A
William Stone
President & COO
600,000 0.27 Sept 7, 2011 Sept 7, 2016
Robert Guanzon
CFO
Nil N/A N/A N/A
John Oness
Senior Vice President,
Business
& Corporate
Development
Nil N/A N/A N/A
Ali Hassanalizadeh Vice President,
Exploration
Nil N/A N/A N/A
CoreenaHansen
Corporate Secretary
Nil N/A N/A N/A
Anthony Kovacs(1)
Vice President,
Exploration
Nil N/A N/A N/A
Dennis Hop
Director
Nil N/A N/A N/A
John Londry
Director
Nil N/A N/A N/A
Jordan Point
Director
Nil N/A N/A N/A
Linda Holmes
Director
Nil N/A N/A N/A

  (1) Mr. Kovacs resigned as Vice President, Exploration, effective May 21, 2011.

C.        Board Practices

Term of Office

An election of directors takes place at each annual meeting of shareholders and all the directors then in office retire but, if qualified, are eligible for re-election. A director retains office only until the election of his successor. The number of directors to be elected at such meeting is the number of directors then in office, unless the directors or the shareholders otherwise determine. The election is by ordinary resolution of shareholders. If an election of directors is not held at the proper time, the incumbent directors continue in office until their successors are elected. Our last annual general meeting was held on September 7, 2011.

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Our articles also permit the directors to add additional directors to the board between annual general meetings as long as the number appointed does not exceed one-third of the number directors elected at the last annual general meeting. Individuals appointed as directors to fill casual vacancies created on the Board or added as additional directors hold office like any other director until the next annual general meeting at which time they may be re-elected or replaced.

Our officers are appointed by the directors at a meeting following each annual general meeting.

Termination Benefits

The Company does not have any other contracts with a director or member of the Company’s administrative, supervisory or management bodies which provides benefits upon termination of employment, other than as set forth below:

Harry Barr was appointed the President and CEO of the Company on November 29, 1996.  Mr. Barr resigned as the President of the Company on September 7, 2011 and continues as the Company’s Chairman, CEO and a director.  Harry Barr is indirectly paid for his services as CEO and general corporate and management consultant to the Company through Canadian Gravity Recovery Inc. (“CGR”), which entered into a management agreement with the Company dated December 1, 2005, as amended December 1, 2008, and April 1, 2011 (the “Contract”), for a term of five years.  Renewal of the Contract is automatic for subsequent two-year periods if not otherwise terminated.  Pursuant to the terms of the Contract, CGR is paid an annual base fee of $250,000.  CGR is entitled to receive additional bonuses, incentive fees, or other compensation at the discretion of the Board.  Mr. Barr spends approximately 50% of his time on the Company’s business.

The base fee is reviewed every anniversary date with an annual increase negotiated between the parties; however if the parties cannot agree within 30 days to an amendment of the base fee, the base fee is subject to an automatic increase by the Cost of Living Index for the City of Vancouver, British Columbia, as published by the Canadian federal government or by 5%, whichever is greater.  In addition, the Company pays for disability/critical illness insurance and life insurance for Mr. Barr, as well as for the cost of a leased vehicle of up to $1,200 per month.  All reasonable expenses incurred by CGR on behalf of the Company will be reimbursed by the Company.

The Company may terminate the agreement at any time by paying to CGR the greater of (i) the aggregate remaining base fee for the unexpired remainder of the term of the Contract; or (ii) two annual base fees, each base fee multiplied by 24, plus one month of base fee for each year, or portion thereof, served with the Company plus a buy-out of any outstanding stock options at fair market value at the time of termination (the “Termination Fee”).  The Termination Fee will be doubled in the event Mr. Barr is removed or not reappointed as an officer or Director of the Company without the consent of CGR, there is a change of control of the Board or the Company without the consent of CGR, or the agreement is terminated or repudiated by the Company without due and proper cause or otherwise not in compliance with its terms. The termination fee may be paid in whole or in part with common shares of the Company, at the election of CGR.  In the event Mr. Barr is unable to provide adequate services to the Company as a result of disability or otherwise, the Company will fund a disability plan through CGR for a period of three years at 75% of the average base and incentive fees received for the two years preceding the cessation of services.

William Stone was appointed to President and Chief Operating Officer of the Company on September 7, 2011.  Dr. Stone is paid directly for his services and spends approximately 60% of his time on the Company’s business.  Dr. Stone entered into a formal Executive Management Agreement (the “Agreement”) with the Company on December 21, 2011.   Pursuant to the terms of this agreement, Dr. Stone is paid a base fee of $250,000.00 per year.  Dr. Stone is eligible to earn an annual performance bonus based on a target of fifty percent (50%) of his base salary with payment to be made in the form of 50% cash and 50% performance shares.  Performance criteria to be determined annually by Stone, The Compensation Committee and the CEO based on a list of milestones rated out of 100%.  Each milestone accomplished will earn Dr. Stone a set percentage of his performance bonus. 

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The Agreement may be terminated by either party without cause by giving the other party three (3) months written notice of termination.  In the event that Dr. Stone provides notice, the Company is not obligated to provide severance.  If the Company gives notice of termination during the first year, then Stone is entitled to an amount equal to three (3) months’ base salary plus any and all leave and lieu days accrued to the date of termination plus any and all health and insurance benefits for a period of three (3) months from the last date of employment..  In year two: four (4) month’s base salary plus any and all leave and in lieu days accrued to the date of termination plus any and all health and insurance benefits for a period of three (3) months from the last date of employment:  In year three:  five (5) month’s base salary plus any and all leave and in lieu days accrued to the date of termination plus any and all health and insurance benefits for a period of three (3) months from the last date of employment: and; in year four:  six (6) month’s base salary plus any and all leave and in lieu days accrued to the date of termination plus any and all health and insurance benefits for a period of three (3) months from the last date of employment.

In the event of termination without cause within one (1) year of a change of control, Dr. Stone is entitled to payment of twelve (12) months base salary plus a lump sum cash payment equal to the sum of the value of all share option based awards plus annual leave accrued as well as all other compensation payable to Dr. Stone. 

Ali Hassanalizadeh was promoted to Vice President, Exploration of the Company in December, 2011.  Mr. Hassanalizadeh is paid directly for his services and spends approximately 60% of his time on the Company’s business.  Mr. Hassanalizadeh’s Executive Management Agreement was entered into on March 30, 2012.  The Agreement may be terminated by either without cause by give the other party (1) month written notice of termination of employment.  In the event Mr. Hassanalizadeh provides notice, the Company is not obligated to provide severance.  If the Company gives notice of termination then Hassanalizadeh is entitled to an amount equal to:  (1 ½) months base salary plus any and all leave accrued to the date of termination in lieu of notice in the first year of employment:  (2) two months base salary plus any and all leave accrued to the date of termination in lieu of notice for the second year of employment:  and(3) three months base salary plus any all leave accrued to the date of termination in lieu of notice for the third year of employment.  In the event of termination within one (1) year of a change of control termination without cause, Mr. Hassanalizadeh is entitled to payment of twelve (12) months base salary.  Pursuant to the terms of this agreement, Mr. Hassanalizadeh is paid a base fee of $140,000 per annum.  Mr. Hassanalizadeh is eligible to earn an annual performance bonus based on a target of (15%) fifteen percent of his base salary.  Performance criteria to be determined annually between Hassanalizadeh and the President and COO.  In addition, 150,000 performance shares are allocated to Hassanalizadeh at $0.01.  The performance shares will vest over a period of five years at a rate of up to 30,000 shares each year.  The amount of performance shares vested each year may be subject to adjustment based on an evaluation of performance by the President, CEO and Compensation Committee who will determine the level of achievement attained by Hassanalizadeh in meeting established milestones based on a list of milestones rated out of 100%.  Each milestone accomplished will earn Hassanalizadeh a set percentage of his performance bonus.

Committees

Audit Committee

The Company’s Audit Committee must be comprised of at least three directors, who are not employees, control persons or members of the management of the Company or any of its associates or affiliates.  As of the date of this report, the following directors are members of the Audit Committee:  Jordan Point, Chairman of the Audit Committee, Linda Holmes and John Londry.  The Board of Directors of the Company, after each annual shareholder’s meeting must appoint or re-appoint an audit committee.

The Audit Committee:

-    assists the Board in fulfilling its responsibilities for oversight of financial and accounting matters;

-    recommends the auditors to be nominated and reviews the compensation of the auditors;

-    is directly responsible for overseeing the work of the external auditors and pre-approves non-audit services;

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-    reviews the Company’s financial statements and related management’s discussion and analysis of financial and operating results; and

-    establishes procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters. 

The Audit Committee’s mandate requires that all of the members be financially literate and at least one member have accounting or related financial management expertise.

The mandate of the Committee empowers it to retain legal, accounting and other advisors.

Compensation Committee

As at April 30, 2012, the Compensation Committee was comprised of three directors: Dennis Hop, Chairman of the Compensation Committee, Jordan Point and Linda Holmes. The majority of the Compensation Committees is to be comprised of a majority of directors, who are not employees, control persons or members of the management of the Company or any of its associates or affiliates

The primary purpose of the Compensation Committee is to:

-     recommend levels of executive compensation that are competitive in order to attract, motivate and retain highly skilled and experienced executive officers;

-     provide fair and competitive compensation;

-     align the interest of management with those of shareholders and to reward corporate and individual performance;

-     review executive compensation disclosure in public disclosure documents

The Compensation Committee does not have a formal compensation program with set benchmarks; however, the Compensation Committee does have an informal program which seeks to reward an executive officer’s current and future expected performance and the achievements of corporate milestones and align the interests of executive officers with the interests of the Company’s shareholders.

The Compensation Committee, when determining cash compensation to the executive officers, it takes into consideration the extensive experience in the mining industry, responsibilities and duties as executive officers, as well as personal risks and contributions to the Company’s success.  The executive officers receive a base cash compensation that the Company feels is in line with that paid by similar companies in North America; however no formal survey has been completed by the Compensation Committee or the Board in making such a determination.

D.        Employees

During the fiscal year ended April 30, 2012, the Company had 10 full-time employees, located in the Vancouver, British Columbia, Canada offices of the Company, involved in accounting, administration, IT, and investor relations.  Other services are carried out by consultants.

We do not currently have a collective bargaining arrangement with any labour union or association.

E.         Share Ownership

The following table sets forth the share ownership of those individuals in Item 6.A, Directors and Senior Management, above and indicates the percentage of ownership for each based on the 104,047,214 common shares outstanding of the Company as at July 18, 2012. The voting rights attached to the common shares owned by our directors, officers and senior management do not differ from those voting rights attached to shares owned by people who are not directors, officers or senior management of the Company.

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  Stock Options        
Name & Title Number of
 securities
 underlying
 unexercised
 options
(#)
Option
 exercise
 price
($)
Option
 expiration
 date
Number of
 securities
 underlying
 unexercised
 warrants
Common
 Shares
 Beneficially
 Owned
Total number
 of securities and
 common shares
 underlying
 unexercised
 Stock Options
 and unexercised
warrants
Percentage
 of Issued
 and
 Outstanding
 Common
 Shares
Harry Barr
CEO & Director
260,000(1)
490,000 (2)
340,000(3)
190,000(4)
240,000(5)
0.25
0.30
0.25
0.2
 0.60
May 18/17
 Feb 24/16
 Nov 5/14
Apr 22/14
 Feb 22/13
Nil 4,376,913(6) 5,896,913 5.67%
William Stone
President & COO
600,000 0.27 Sept 7/16 Nil Nil 600,000 0.58%
Robert Guanzon
CFO
125,000
75,000
55,000
0.30
0.25
0.60
Feb 24/16
 Apr 22/14
 Feb 22/13
Nil 35,291 290,291 0.28%
John Oness
Senior Vice
President, Business
& Corporate
Development
300,000
300,000
0.30
0.25
Feb 24/16
Feb 1/16
Nil 366,666 966,666 0.93%
Ali Hassanalizadeh
Vice President
Exploration
80,000
100,000
100,000
0.30
0.25
0.50
Feb 24/16
 Jan 5/15
 Jan 5/15
Nil 13,334 293,334 0.28%
CoreenaHansen
Corporate Secretary
Nil N/A N/A Nil Nil N/A N/A
Linda Holmes
Director
100,000
125,000
80,000
70,000
0.25
0.30
0.25
0.60
Oct 11/17
 Feb 24/16
 Apr 22/14
 Feb 22/13
Nil 28,334 403,334 0.39%
Dennis Hop
Director
100,000
100,000
80,000
70,000
0.25
0.30
0.25
0.60
Oct 29/17
 Feb 24/16
 Apr 22/14
 Feb 22/13
Nil 640,000 990,000 0.95%
John Londry
Director
40,000
100,000
75,000
35,000
50,000
0.25
0.30
0.25
0.25
0.25
May 18/17
 Feb 24/16
 Nov 5/14
 Apr 22/14
 Feb 22/13
Nil 15,714 315,714 0.30%
Jordan Point
Director
100,000
100,000
80,000
70,000
0.25
0.30
0.25
0.60
Oct 11/17
 Feb 24/16
 Apr 22/14
 Feb 22/13
Nil 10,000 360,000 0.35%
TOTAL 4,630,000     Nil 5,486,252 10,116,252 9.73%

(1) Of this total 100,000 options are held by Mr. Barr; 80,000 are held by The Public Company Coach Inc and 80,000 are held by Canadian Gravity Recovery Inc. (“CGR”), both private companies wholly-owned by Mr. Barr.
(2) Held by Mr. Barr.
(3) Of this total 170,000 options are held by Mr. Barr and 170,000 are held by CGR.
(4) These options are held by 293020 BC Ltd., a private company wholly-owned by Mr. Barr.
(5) Of this total, 120,000 options are held by Mr. Barr and 120,000 are held by CGR.
(6) Of this total, 1,386,313 common shares are held directly by Mr. Barr; 2,175,500 are held by 293020 BC Ltd.; 97,000 are held by 607767 BC Ltd., a private company wholly-owned by Mr. Barr; 718,100 are held by CGR.

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The stock options granted to directors have been granted at an exercise price at least equal to or greater than the closing price of the Company’s common shares on the TSX as at the date of grant.  Options are typically granted for a period of five years and have a vesting period as determined by the Board.

As at July 18, 2012, our directors, officers and senior management held, as a group, directly or indirectly, an aggregate of 5,486,252 common shares; 3,825,666 options exercisable within 60 days and no warrants exercisable within 60 days.

Stock Option Grants

The stock option grants to directors, officers, other employees and consultants are determined by an assessment of the individual’s current and expected future performance, level of responsibilities, importance of the position held, contribution to the Company and previous option grants and exercise prices including:

-  the remuneration paid to the individual as at the grant date in relation to the total remuneration payable by the Company to all of its directors, officers, employees and consultants as at the grant date;
-  the length of time that each individual has been employed or engaged by the Company; and
-  the quality of work performed by such director, officer, employee or consultant. 

The fair value of stock options is estimated on the date of grant using the Black-Scholes pricing model. The following assumptions were used in the fair value calculation for options granted and/or vested during the year ended April 30, 2012:

Risk-free interest rate 1.49%
Options expected life 3.58 years
Expected volatility 129.05%
Expected dividend yield Nil

Description of Existing Incentive and Stock Compensation Plans

The Company has three existing incentive and stock compensation plans the 2004 Plan, the 2005 Plan and a Performance Share Plan (all as defined below), all of which have been previously approved by the shareholders of the Company and by the TSX. These plans are detailed below and are maintained separate and apart from each other.

(a) Following is a summary of the substantive terms ofthe 2004 Stock Option Plan:

  The Company’s 2004 stock option plan, as amended August 23, 2004 (the “2004 Plan”) provides that the aggregate number of shares of the Company that may be issued shall not exceed 6,324,200 shares. As at April 30, 2012, there are 2,065,366 stock options outstanding under the 2004 Plan which represents 1.99% of the Company’s 103,747,214 issued and outstanding shares. All allowable options have been granted under the 2004 Plan. The 2004 Plan shall remain in effect only until all outstanding options have been exercised, cancelled or have expired.

  If a participant ceases to be a director, officer, consultant or employee of the Company or ceases to be employed by the Company (other than by reason of disability, death or termination for cause), as the case may be, then the option granted shall expire on no later than the 90th day following the date that the option holder ceases to be a director, officer, consultant, or employee or ceases to be employed by the Company, subject to terms and conditions set out in the 2004 Plan. In the event of death of a participant, the option previously granted to him/her shall be exercisable only within the twelve months next succeeding such death.

(b) Following is a summary ofthe substantive terms of the 2005 Plan:

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  The Company’s 2005 Stock Option and Incentive Plan dated August 24, 2005 (the “2005 Plan”) provides that the aggregate number of shares of the Company that may be issued under the 2005 Plan shall not exceed 10% of the issued and outstanding capital of the Company, as such may be from time-to-time. As at April 30, 2012, of the 10,374,721 options allowable for grant under the 2005 Plan, options to purchase up to 4,737,634 common shares have been granted, representing 4.6% of the Company’s issued and outstanding shares.

  Details of this plan are indicated below:

  1. The 2005 Plan is administered by the Board or by a committee appointed by the Board in accordance with terms of the 2005 Plan.

  2. The 2005 Plan shall terminate at 4:00 PM of the next business day following March 31, 2015 (the “Termination Date”).  No incentive under the 2005 Plan may be granted after the Termination Date, but the terms of an incentive agreement may extend beyond the Termination Date in accordance with the terms of the agreement but that no agreement may provide for a period in excess of ten years.

  3. Subject to the provisions of the 2005 Plan, the Board shall have the authority in its discretion to:  (i) to grant Incentive Awards (as such term is defined under the 2005 Plan) to Participants (as such term is defined under the 2005 Plan); (ii) to determine, upon review of relevant information and in accordance with Section 2.16 of the 2005 Plan, the Fair Market Value (as such term is defined under the 2005 Plan) of the shares of the Company; (iii) to determine the exercise price per share of Incentive Awards (as such term is defined under the 2005 Plan) to be granted; (iv) to determine the number of common shares to be represented by each Incentive Award; (v) to determine the Participants to whom, and the time or times at which Incentive Awards shall be granted; (vi)  to determine Management objectives; (vii) to interpret the 2005 Plan; (viii) to prescribe, amend and rescind rules and regulations relating to the 2005 Plan; (ix) to determine the terms and provisions of each Incentive Award granted (which need not be identical); (x) with the consent of the grantee thereof, to modify or amend Incentive Awards; (xi) to accelerate or defer (with the consent of the grantee) the exercise date of any Incentive Award; (xii) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Incentive Award; (xiii) to accept or reject the election as to method of payment made by a grantee pursuant to Section 7.5 of the 2005 Plan; (xiv) to permit other Incentives to employ payment elections, such as net exercise, of Section 7.5 of the 2005 Plan; (xv) to create and implement new and innovative Incentives acceptable under law and policy and grant the same to eligible Participants and (xvi) to take all other acts and make all other determinations deemed necessary or advisable by the Board for the administration of the 2005 Plan.

  4. No individual may receive incentive grants exceeding 5% of issued and outstanding capital of the Company, unless specifically authorized by the Board and permitted by applicable laws and exchange policies.

  5. Unless otherwise provided in the option agreement, the term of each option shall be five (5) years from the date of grant.

  6. Payment for shares shall be paid by cash, in the form of currency or cheque or other cash equivalent acceptable to the Company, non-forfeitable, unrestricted or restricted common shares, which are already owed by the optionee and have an aggregate market reference value at the time of exercise that is equal to the option price or any other legal consideration that the Board may deem appropriate, including without limitation any form of consideration authorized pursuant to Section 7 of the 2005 Plan.

  7. The Board in its sole discretion may permit a cashless exercise of the option.  In the event of a cashless exercise of the option, the Company shall issue the option holder the number of shares determined as follows:

X = Y (A-B) / A

  X = the number of shares to be issued to the option holder.
Y = the number of shares with respect to which the option is being exercised.
A = the market price of the common stock prior to the date of exercise.
B = the exercise price

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  8. The 2005 Plan may be amended by the Board at any time, without shareholder approval subject to the following amendments requiring shareholder approval, as required by law or TSX policies:  an increase in the fixed percentage of shares subject to the 2005 Plan; and any change in the definition of Participant.

  9. The Board may make amendments such as repricing and extending non-insider options.  If required by TSX policy to which the Company is subject, repricing or extension of Incentive Awards to insiders shall require shareholder approval.

  10. Subject to applicable laws and TSX policies, the Board may, in its discretion, assist any Participant in the exercise of awards under the 2005 Plan by authorizing the Company to provide a loan to the Participant (not to exceed the exercise price plus tax liability incurred in connection therewith), permitting the Participant to pay the exercise price in instalments, authorizing the Company to guarantee a loan obtained by the Participant from a third party, or granting a cash bonus to the Participant to enable the Participant to pay tax obligations arising from an award.  Any such loans may be forgiven by the Company at the discretion of the Board.

(c) Previously Approved Performance Shares

  In 2003 and 2004, the shareholders approved the issuance of an aggregate of 2,697,990 nominal value performance shares (1,116,940 in 2003; 1,581,050 in 2004). These performance shares are separate from any performance shares that may be issued under the 2005 Plan.

  As at April 30, 2012, 850,000 of these performance shares have been issued and 750,000 performance shares that have been allotted are outstanding. As at July 18, 2012, the 2,697,990 performance shares represent 2.59% of the Company’s issued and outstanding shares.

  These performance shares have been and shall be issued at the discretion of the Board to such arm’s length parties as the Board considers desirable to attract to the Company due to their particular expertise, management experience, operations experience, financial capacity, industry profile or other such characteristics. Vesting provisions have been and may be imposed at the discretion of the Board at the date of issuance. The value of the performance shares shall be determined by the Board in its sole discretion at the date of issuance. The total number of performance shares granted to any one individual may not exceed 5% of the Company’s issued and outstanding shares at the date of issuance.

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ITEM 7. MAJOR SHAREHOLDERS

A.        Major Shareholders

Based upon the Company’s review of the records maintained by Computershare Investor Services and insider reports filed with the System for Electronic Disclosure by Insiders (SEDI), as at July 18, 2012, the following shareholders beneficially owned, directly or indirectly, or exercised control or direction over, shares carrying more than 5% of the voting rights attached to all outstanding common shares of the Company:

Shareholder Name And Address Number Of Shares Held Percentage Of Issued Shares
CDS & Company
25 The Esplanade
Toronto, Ontario, M5E 1W5
Canada
84,146,521(1) 80.87%
Kaymin Resources Limited(2)
2th Floor, 55 Marshall Street,
Johannesburg 2001
South Africa
8,117,161 7.80%
Shareholder Name And Address Number Of Shares Held Percentage Of Issued Shares
Stillwater Mining Company
1321 Discovery Drive
Billings, Montana 59102
USA
5,750,692 5.53%

(1) CDS & Co. is a depository, the Company has no knowledge as to the beneficial ownership of these shares.
(2) Kaymin Resources Ltd. is a wholly-owned subsidiary of Anglo Platinum Limited of South Africa.

As of July 18, 2012, Computershare Trust Company of Canada, our registrar and transfer agent, reported that we had 104,047,214 common shares issued and outstanding. Of those common shares, 86,433,428 common shares were registered to Canadian residents (53 shareholders); 7,384,625 common shares were registered to residents of the United States (17 shareholders); and 10,229,161 common shares were registered to residents of other foreign countries (6 shareholders).

To the best of our knowledge, we are not directly or indirectly owned or controlled by another corporation, by any foreign government or by any other natural or legal person.

There are no arrangements known to us, the operation of which may at a subsequent date result in a change in the control of our company.

The major shareholders do not have different voting rights from all shareholders.

B.         Related Party Transactions

Other than as disclosed below or elsewhere in this annual report, to the best of our knowledge, there have been no material transactions or loans from the commencement of our 2012 fiscal year to the date of this annual report between our company and: (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the Company; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the Company, and close members of any such individual's family; (d) key management personnel of the Company, including directors and senior management of the Company and close members of such individuals' families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.

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The Company's Board consists of Harry Barr, Dennis Hop, John Londry, Linda Holmes and Jordan Point.  Harry Barr is the Chairman and Chief Executive Officer of the Company, William Stone is the President and Chief Operating Officer, Robert Guanzon is the Chief Financial Officer, John Oness is the Senior Vice President, Business and Corporate Development, Ali Hassanalizadeh is the Vice President, Exploration and Coreena Hansen is the Corporate Secretary. Linda Holmes served as Corporate Secretary to the Company until October 24, 2011 and Anthony Kovacs served as the Vice President of Exploration from January 5, 2010 to May 21, 2011.

The Company paid or accrued amounts to related parties as follows :

  For the Year Ended April 30
  2012 2011 2010
Management fees paid to Mr. Harry Barr(1) - - 16,925
Management fees paid to a company controlled by Mr. Harry Barr(1) 428,694 200,071 172,773
Consulting fees paid to a company controlled by Mr. John Londry(2) 6,600 18,658 8,663
Consulting fees paid to Mr. John Royall(3) 11,500 7,500 16,000
Consulting fees paid to a company controlled by Mr. Anthony Kovacs(4) - 99,399 38,983
Consulting fees paid to Ms. Linda Holmes(5) 36,628 47,000 12,890
Consulting fees paid to Mr. John Oness(6) 63,000 72,500 2,000
Consulting fees paid to Mr. Ali Hassanalizadeh(7) 102,534 59,268 -
Director fees paid/accrued to Ms. Linda Holmes(8) 3,000 - -
Director fees paid/accrued to Mr. Denny Hop(8) 8,500 7,000 7,000
Director fees paid/accrued to Mr. John Londry(8) 8,500 8,500 8,000
Director fees paid/accrued to Mr. Jordan Point(8) 9,000 8,000 8,000

NOTES:

(1) Director and CEO of the Company
(2) Former Vice President of Exploration
(3) Former Director of the Company
(4) Former Vice President of Exploration
(5) Former Corporate Secretary of the Company
(6) Vice President of Corporate & Business Development
(7) Vice President of Exploration
(8) Director of the Company

These transactions, occurring in the normal course of operations, are measured at the exchange amount which is the amount of consideration established and agreed to by the related parties.

C.        Interests of Experts and Counsel

This Form 20F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

ITEM 8.          FINANCIAL INFORMATION

A.        Consolidated Statements and Other Financial Information

The consolidated financial statements of the Company and the accompanying notes have been prepared in accordance with  International Financial Reporting Standards (“IFRS”) and International Accounting Standards (“IAS”) issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

The consolidated financial statements for the year ended April 30, 2012 are prepared on a consolidated basis and include the accounts of the Company and its wholly owned US subsidiaries, Pacific North West Capital Corp. USA and Pacific North West Capital de México, S.A. de C.V. on the basis that the Company owned and effectively controlled a 100% interest in these companies. 

This annual report contains the consolidated financial statements for the Company for the fiscal year ended April 30, 2012 which contains:

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-  Report of the Independent Auditor dated July 12, 2012

-  Consolidated statements of financial position as at April 30, 2012, April 30, 2011 and May 1, 2010.

-  Consolidated Statements of Loss and Comprehensive Loss for the fiscal years ended April 30, 2012 and 2011.

-  Consolidated Statements of Cash Flows for the fiscal years ended April 30, 2012 and 2011.

-  Consolidated Statements of Changes in Equity for the fiscal year ended April 30, 2012 and 2011.

-  Notes to Consolidated Financial Statements

Legal Proceedings and Regulatory Actions

During the fiscal year ended April 30, 2012, the Company was not and is not current a party to, nor is any of its property the subject of, any legal proceedings for which the outcome could have a material adverse affect on the Company, nor, to the Company’s knowledge, is the Company to be a party to any contemplated legal proceedings, the outcome of which could have a material adverse affect on the Company.

There have been no penalties or sanctions imposed against the Company by a court relating to securities

legislation or by a securities regulatory authority during the fiscal year ended April 30, 2012, or any other time that would likely be considered important to a reasonable investor making an investment decision in the Company, and the Company has not entered into any settlement agreements before a court relating to securities legislation or with a securities regulatory authority during the fiscal year ended April 30, 2012.

Dividend Distributions

Holders of our common shares are entitled to receive such dividends as may be declared from time to

time by the Board, in its discretion, out of funds legally available for that purpose. The Company has not, since the date of its incorporation, declared or paid any dividends on its common shares and does not currently intend to pay dividends.  Earnings will be retained to finance further exploration.

B.         Significant Changes

No significant change has occurred since the date of the annual audited consolidated financial statements included in this Annual Statement.

ITEM 9.          THE OFFER AND LISTING

A.        Offer and Listing Details

TSX Exchange – symbol “PFN”

The annual high and low market prices for the common shares of the Company on the TSX Exchange for each of the last five (5) completed financial years are as follows:

Year Ended High Low
May 2011 – April 2012 0.38 0.10
May 2010 – April 2011 0.36 0.08
May 2009 – April 2010 0.245 0.08
May 2008 – April 2009 0.35 0.05
May 2007 – April 2008 0.770 0.280

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The high and low market prices for the common shares of the Company on the TSX Exchange for each full financial quarter for the two (2) most recently completed full financial years are as follows:

Year Ended High Low
April 30, 2012 1st Quarter ended July 2011 0.38 0.25
2nd Quarter ended October 2011 0.34 0.16
3rd Quarter ended January 2012 0.20 0.10
4th Quarter ended April 2012 0.17 0.10
Year Ended High Low
April 30, 2011    
1st Quarter ended July 2010 0.145 0.095
2nd Quarter ended October 2010 0.125 0.08
3rd Quarter ended January 2011 0.215 0.115
4th Quarter ended April 2011 0.36 0.16

The high and low market prices for the common shares of the Company on the TSX Exchange for the most recent six (6) months are as follows:

Month Ended High Low
June 2012 0.11 0.08
May 2012 0.14 0.09
April 2012 0.11 0.10
March 2012 0.17 0.10
February 2012 0.17 0.14
January 2012 0.17 0.11

The high and low market prices for the common shares of the Company on the TSX Exchange on the first trading day of each month in the most recent six months:

Month Ended High Low
June 2012 0.11 0.11
May 2012 0.14 0.12
April 2012 0.11 0.11
March 2012 0.17 0.15
February 2012 0.15 0.14
January 2012 0.12 0.11

On April 30, 2012 the closing sale price of the common shares on the TSX was $0.11 per share.

OTC Markets Group, Inc.’s OTC Bulletin Board (“OTCBB”) and OTCQX International (“OTCQX”)

Since August 31, 2001, the common shares of the Company have been quoted on the OTCBB under the symbol “PAWEF”.  On October 26, 2010, the Company moved up to the OTCQX platform, the premier tier of the U.S. Over-the-Counter marketplace.  The same symbol of PAWEF applies to the OTCQX.

The high and low market prices for the common shares of the Company for the five (5) most recent full financial years:

Year Ended High Low
May 2011 – April 2012 0.39 0.10
May 2010 – April 2011 0.415  0.07
May 2009 – April 2010 0.239 0.071
May 2008 – April 2009 0.35 0.05
May 2007 – April 2008 0.770 0.280
May 2006 – April 2007 0.500 0.270

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The high and low market prices for the common shares of the Company for each full financial quarter for the two (2) most recently completed financial years:

Year Ended High Low
April 30, 2012 1st Quarter ended July 2011 0.39 0.27
2nd Quarter ended October 2011 0.35 0.15
3rd Quarter ended January 2012 0.18 0.10
4th Quarter ended April 2012 0.17 0.11

Year Ended High Low
April 30, 2011    
1st Quarter ended July 2010 0.15 0.07
2nd Quarter ended October 2010 0.139 0.775
3rd Quarter ended January 2011 0.1937 0.1108
4th Quarter ended April 2011 0.415 00.165

The high and low market prices for the common shares of the Company for the most recent six (6) months:

Month Ended High Low
June 2012 0.13 0.07
May 2012 0.13 0.09
April 2012 0.14 0.11
March 2012 0.16 0.11
February 2012 0.17 0.14
January 2012 0.16 0.11

The high and low market prices for the common shares of the Company for the first trading day of each month in the most recent six months:

Month Ended High Low
June 2012 0.09 0.09
May 2012 0.13 0.12
April 2012 0.12 0.12
March 2012 0.16 0.16
February 2012 0.16 0.16
January 2012 0.12 0.12

On April 30, 2012 the closing sale price of the common shares on the OTCQX was $0.11 per share.

B.         Plan of Distribution

This Form 20F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

C.        Markets

The Company’s common shares have traded on the TSX (and its predecessors, the Canadian Venture Exchange and the Vancouver Stock Exchange) since December 19, 1997 under the trade symbol “PFN”; the Company’s common shares have been quoted on the OTCBB from August 31, 2001 and on the OTCQX since October 26, 2010, under the trade symbol PAWEF; and on the Frankfurt Stock Exchange, Open Market under the symbol P7J.

D.        Selling Shareholders

This Form 20F is being filed as an annual report under the Exchange Act and as such, there is no requirement to provide any information under this section.

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E.         Dilution

This Form 20F is being filed as an annual report under the Exchange Act and as such, there is no requirement to provide any information under this section.

F.         Expense of the Issue

This Form 20F is being filed as an annual report under the Exchange Act and as such, there is no requirement to provide any information under this section.

ITEM 10.        ADDITIONAL INFORMATION

A.        Share Capital

This Form 20F is being filed as an annual report under the Exchange Act and as such, there is no requirement to provide any information under this section.

B.         Memorandum and Articles of Association

Articles

The Company’s Articles of Association and Memorandum are registered with the British Columbia Registrar of Companies under corporation number C0699625. A copy of these Articles of Association and Memorandum were filed as an exhibit with the Company’s initial registration statement on Form 20‑F.

The Company was incorporated pursuant to the provisions of the Business Corporations Act (Alberta) on May 29, 1996.  The Company amended its Articles by certificate of amendment dated October 22, 1997 to remove the private company restrictions.  On July 13, 2004 the Company continued out of the Province of Alberta into the Province of British Columbia, and amended its Articles, pursuant to the Business Corporations Act (British Columbia) (“BCBCA”).

Objects and Purposes

Under the BCBCA we are permitted to conduct any lawful business that we are not restricted from conducting by our Articles, which does not contain any restriction on the business the Company may conduct.

Director’s Powers to Vote on a Proposal, Arrangement or Contract in which the Director is Materially Interested

The BCBCA requires that every director who is a party to, or who is a director or officers of, or has a material interest in, any person who is a party to, a material contract or transaction or a proposed material contract or transaction with the Company, must disclose in writing to the Company or request to have entered into the minutes of the meetings of directors, the nature and extent of his or her interest and must refrain from voting on the matter; however, the BCBCA states that:

1. A director or senior officer of the Company does not hold a disclosable interest in a contract or transaction if:

  (a) the situation that would otherwise constitute a disclosable interest arose before the coming into force of the BCBCA, or the interest was disclosed and approved under, or was not required to be disclosed under legislation that applied to the Company before the coming into effect of the BCBCA;

  (b) both the Company and the other party to the contract or transaction are wholly-owned subsidiaries of the same corporation;

  (c) the Company is a wholly-owned subsidiary of the other party to the contract or transaction;

  (d) the other party to the contract or transaction is a wholly-owned subsidiary of the Company; or

  (e) the director or senior officer is the sole shareholder of the Company or of a corporation of which the Company is a wholly-owned subsidiary; and

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2. a director or senior officer of a company does not hold a disclosable interest in a contract or transaction merely because:

  (a) the contract or transaction is an arrangement by way of security granted by the Company for money loaned to, or obligations undertaken by, the director or senior officer, or a person in whom the director or senior officer has a material interest, for the benefit of the company or an affiliate of the company,

  (b) the contract or transaction relates to an indemnity or insurance,

  (c) the contract or transaction relates to the remuneration of the director or senior officer in that person's capacity as director, officer, employee or agent of the company or of an affiliate of the company,

  (d) the contract or transaction relates to a loan to the company, and the director or senior officer, or a person in whom the director or senior officer has a material interest, is or is to be a guarantor of some or all of the loan, or

  (e) the contract or transaction has been or will be made with or for the benefit of a corporation that is affiliated with the Company and the director or senior officer is also a director or senior officer of that corporation or an affiliate of that corporation.

Director’s Power, in the Absence of an Independent Quorum, to Vote Compensation to Themselves or any Members of their Body

The compensation of the directors is decided by the directors unless the Board of Directors requests approval of the compensation from the shareholders.  If the issuance of compensation to the directors is decided by the directors, a quorum is the majority of the directors in office.

Indemnification of Directors

Under 15.1 of the Company’s Articles, the directors must cause the Company to indemnify its directors and former directors, and their respective heirs and personal or other legal representatives to the greatest extent permitted by the BCBCA.  Under the BCBCA, the Company will be prohibited from paying an indemnity if:

(a)  the party did not act honestly and in good faith with a view to the best interests of the Company;

(b)  the proceeding was not a civil proceeding and the party did not have reasonable grounds for believing that his or her conduct was lawful; and

(c)  the proceeding is brought against the party by the Company or an associated corporation.

Borrowing Powers of Directors

Under 6.1 of the Company’s Articles, the directors may from time to time on behalf of the Company:

(a) borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate,

(b) issued bonds, debentures and other debt obligations either outright or as security for any liability of obligation of the Company or any other person,

(c) guarantee the repayment of money by any other person or the performance of any obligation of any other person, and

(d) mortgage or charge, whether by way of specific or floating charge, or give other security on the whole or any part of the present and future undertaking of the Company.

The borrowing powers may be varied by amendment to the Articles of the Company which requires approval of the shareholders of the Company by special resolution.

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Retirement or Non-Retirement of Directors

There are no such provisions applicable to the Company under the Notice of Articles, Articles or the BCBCA nor does the Board have any mandatory retirement policy for directors.

Directors’ Share Ownership

A director of the Company is not required to hold any common shares in the capital of the Company as qualification for his/her office.

Rights, Preferences and Restrictions for each Class of Shares

Dividends

The Company’s Articles provide that holders of our common shares are entitled to receive such dividends as may be declared from time to time by the Board, in its discretion, out of funds legally available for that purpose. The Company has not, since the date of its incorporation, declared or paid any dividends on its common shares and does not currently intend to pay dividends.  Any dividend declared by the directors may be made payable on such date as is fixed by the directors.

Rights

The Company has only one class of shares, common shares without par value. All of the common shares of the Company rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and the entitlement to dividends.  The holders of the common shares are entitled to receive notice of all shareholder meetings and to attend and vote at such meetings.  Each common share carries with it the right to one vote.  The common shares do not have preemptive or conversion rights.  In addition, there are no sinking fund or redemption provisions applicable to the common shares or any provisions discriminating against any existing or prospective holders of such securities as a result of a shareholder owning a substantial number of shares.

Directors do not currently stand for reelection at staggered intervals.

If there were profits realized by the Company, there is no right held by shareholders to share in the Company’s profits.  There are no rights held by shareholders to share in any surplus in the event of liquidation; nor are they any redemption provisions, sinking fund provisions, liability to further capital calls by the Company or any provision discriminating against any existing or prospective holder of the Company’s securities as a result of such shareholder owing a substantial number of shares.

Changes to Rights

Under the BCBCA, the rights of shareholders may be changed only by the shareholders passing a special resolution approved by 2/3 of the votes cast at a special meeting of shareholders, the notice of which is accompanied by an information circular describing the proposed action and its effect on the shareholders.

Annual and General Meetings

The Board of Directors must call an annual general meeting once in each calendar year and not later than 15 months after the last such meeting. The Board may call an extraordinary general meeting at any time. Notice of such meetings must be accompanied by an information circular describing the proposed business to be dealt with and making disclosures as prescribed by statute.  Admission to such meetings is open to registered shareholders and their duly appointed proxies. Others may be admitted subject to the pleasure of the meeting.

No advance notice will be required to be published at a meeting where directors are to be elected.  The Company must give shareholders not less than 21 days notice of any general meeting of the shareholders.

The Directors may fix in advance a date, which is no fewer than 35 days or no more than 60 days prior to the date of the meeting.  All the holders of common shares as at that date are entitled to attend and vote at a general meeting.

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A quorum for a meeting of shareholders of the Company is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 1/20 (5%) of the issued shares entitled to be voted at the meeting.

The Company’s Notice of Articles and Articles contain no limitations on the rights of non-resident or foreign shareholders to hold or exercise rights on our shares. Except for the Investment Canada Act, which requires certain transactions to be approved by the Minister of Industry and/or the Minister of Canadian Heritage as being of net benefit to Canada before they may proceed, there is no limitation at law upon the right of a non-resident to hold shares in a Canadian company.

There are no provisions in the Company’s Notice of Articles and Articles that would have an effect of delaying, deferring or preventing a change in control and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company or any of its subsidiaries.

There is no provision in the Company’s Notice of Articles and Articles setting a threshold or requiring or governing disclosure of shareholder ownership above any level. Securities Acts, regulations and the policies and rules thereunder in the Provinces of British Columbia, Alberta and Ontario, where the Company is a reporting company, require any person holding or having beneficial ownership or control or direction of more than 10% of the Company’s issued shares to file insider and other reports disclosing such shareholdings.

C.        Material Contracts

During the two years immediately preceding publication of this document, the Company entered into material contracts, other than contracts entered into in the ordinary course of business, as follows:

1. Mineral Interest Assignment Agreement dated December 13, 2010 between Kaymin, Anglo Platinum and the Company, assigning Kaymin’s and Anglo Platinum’s 50% interest in the River Valley property to the Company Platinum’s, thus giving 100% ownership to the Company.

2. Amendment dated April 6, 2011 to the Mineral Interest Assignment Agreement dated December 13, 2010 (“Assignment Agreement”), between Kaymin, Anglo Platinum and the Company. Under the terms of the Assignment Agreement, Kaymin exchanged its 50% interest in the JV, for a 12% interest in PFN, based on the issued and outstanding common shares of PFN as of November 30, 2010 (67,643,008 common shares). The aggregate purchase price for the 50% interest in the River Valley PGM project was:

  a. 8,117,161 fully paid and non-assessable common shares of PFN (issued); and

  b. three-year warrants exercisable to purchase 3,000,000 common shares of PFN at a price of $0.30 per common share.

3. Letter Agreement dated August 8, 2011 between Pacific North West Capital Corp. and Next Gen Metals Inc. for the purchase and sale of the option to acquire a 60% interest in the Destiny Gold Project, Val D’or, Quebec.

D.        Exchange Controls

There is no law or governmental decree or regulation in Canada that restricts the export or import of capital, or affects the remittance of dividends, interest or other payments to a non-resident holder of common shares, other than withholding tax requirements. 

There is no limitation imposed by Canadian law or by the constituent documents of the Company on the right of a non-resident to hold or vote common shares, other than are provided in the Investment Canada Act (Canada).  The following summarizes the material features of the Investment Canada Act (Canada).

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The Investment Canada Act (Canada) requires certain "non-Canadian" individuals, governments, corporations or other entities who wish to acquire a "Canadian business" (as defined in the Investment Canada Act), or establish a "new Canadian business" (as defined in the Investment Canada Act) to file either a notification or an application for review with a governmental agency known as "Investment Canada".  The Investment Canada Act requires that certain acquisitions of control by a Canadian business by a "non-Canadian" must be reviewed and approved by the Minister responsible for the Investment Canada Act on the basis that the Minister is satisfied that the acquisition is "likely to be of net benefit to Canada", having regard to criteria set forth in the Investment Canada Act.  Only acquisitions of control are reviewable under the Investment Canada Act; however, the Investment Canada Act provides detailed rules for the determination of whether control has been acquired and, pursuant to those rules, the acquisition of one-third or more of the voting shares of a corporation may, in some circumstances, be considered to constitute an acquisition of control.  Certain reviewable acquisitions of control may not be implemented before being approved by the Minister; if the Minister does not ultimately approve a reviewable acquisition which has been completed, the acquired Canadian business be divested.  Failure to comply with the review provisions of the Investment Canada Act could result in, among other things, an injunction or a court order directing disposition of assets or shares.

E.         Taxation

Material United States Federal Income Tax Consequences

The following is a general discussion of certain possible United States federal income tax consequences, under current law, generally applicable to a U.S. Holder (as hereinafter defined) of common shares of the Company. This discussion does not address all potentially relevant federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. (See “Canadian Federal Income Tax Consequences” below).

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time and which are subject to differing interpretations. This discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation, which, if enacted, could be applied, possibly on a retroactive basis, at any time. This discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of the Company and no opinion or representation with respect to United States federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares of the Company should consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Company.

U.S. Holders

As used herein, a “U.S. Holder” means a holder of common shares of the Company who is a citizen or individual resident of the United States, a corporation or partnership created or organized in or under the laws of the United Sates or of any political subdivision thereof, an estate whose income is taxable in the United States irrespective of source or a trust subject to the primary supervision of a court within the United States and control of a United States fiduciary as described in Section 7701(a)(30) of the Code. This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to specific provisions of federal income tax law, such as tax-exempt organizations, qualified retirement plans, individual retirement accounts and other tax-deferred accounts, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, nonresident alien individuals, or foreign corporations whose ownership of common shares of the Company is not effectively connected with conduct on a trade or a business in the United States, persons or entities that have a “functional currency” other than the U.S. dollar, shareholders who hold common shares as part of a straddle, hedging or a conversion transaction, and shareholders subject to the alternative minimum tax, and shareholders who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services. This summary is limited to U.S. Holders who own common shares as capital assets. This summary does not address the consequences to a person or entity holding an interest in a shareholder or the consequences to a person of the ownership, exercise or disposition of any options, warrants or other rights to acquire common shares.

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Distribution on Common Shares of the Company

U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Company are required to include in gross income for United States federal income tax purposes the gross amount of such distributions, equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that the Company has current or accumulated earnings or profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below.) To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder, which is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder, which is a corporation.

In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However, an individual whose realized gain does not exceed $200 will not recognize that gain, to the extent that there are no expenses associated with the transaction that meet the requirement for deductibility as a trade or business expense (other than travel expenses in connection with a business trip) or as an expense for the production of income.

Dividends paid on the common shares of the Company generally will not be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% (or 80%) deduction of the United States source portion of dividends received from the Company (unless the Company qualifies as a “foreign personal holding company” or a “passive foreign investment company,” as defined below) if such U.S. Holder owns common shares representing at least 10% (or 20%) of the voting power and value of the Company. The availability of this deduction is subject to several complex limitations that are beyond the scope of this discussion.

Information Reporting and Backup Withholding

Under current Treasury Regulations, dividends paid on the Company’s common shares, if any, generally will not be subject to information reporting and generally will not be subject to U.S. backup withholding tax. However, dividends and the proceeds from a sale of the Company’s common shares paid in the U.S. through a U.S. or U.S. related paying agent (including a broker) will be subject to U.S. information reporting requirements and may also be subject to the 30% U.S. backup withholding tax, unless the paying agent is furnished with a duly completed and signed Form W-9. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific classes of income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income,” and certain other classifications of income. Dividends distributed by the Company will generally constitute “passive income” or, in the case of certain U.S. Holders, “financial services income” for these purposes. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific, and U.S. Holders of common shares of the Company should consult their own tax advisors regarding their individual circumstances.

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Disposition of Common Shares of the Company

A U.S. Holder will recognize gain or loss upon the sale of common shares of the Company equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Company. Preferential tax rates apply to long-term capital gains of U.S. Holders which are individuals, estates or trusts. This gain or loss will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder, which will be long-term capital gain or loss if the common shares of the Company are held for more than one year. Deductions for net capital losses are subject to significant limitations. For U.S. Holders who are not corporations, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains.

Currency Exchange Gains or Losses

U.S. Holders generally are required to calculate their taxable incomes in United States dollars. Accordingly, a U.S. Holder who purchases common shares of the Company with Canadian dollars will be required to determine the tax basis of such shares in United States dollars based on the exchange rate prevailing on the settlement date of the purchase (and may be required to recognize the unrealized gain or loss, if any, in the Canadian currency surrendered in the purchase transaction). Similarly, a U.S. Holder receiving dividends or sales proceeds from common shares of the Company in Canadian dollars will be required to compute the dividend income or the amount realized on the sale, as the case may be, in United States dollars based on the exchange rate prevailing at the time of receipt in the case of dividends and on the settlement date in the case of sales on an established securities exchange. Gain or loss, if any, recognized on a disposition of Canadian currency in connection with the described transaction generally will be treated as ordinary gain or loss.

Other Considerations

In the following circumstances, the above sections of this discussion may not describe the United States federal income tax consequences resulting from the holding and disposition of common shares:

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Company’s outstanding common shares is owned, directly or indirectly, by five or fewer individuals who are citizens or residents of the United States and 60% or more of the Company’s gross income for such year was derived from certain passive sources (e.g., from dividends received from its subsidiaries), the Company may be treated as a “foreign personal holding company”. In that event, U.S. Holders that hold common shares would be required to include in gross income for such year their allocable portions of such passive income to the extent the Company does not actually distribute such income. The Company does not believe that it currently qualifies as a foreign personal holding company. However, there can be no assurance that the Company will not be considered a foreign personal holding company for the current or any future taxable year.

Foreign Investment Company

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If 50% or more of the combined voting power or total value of the Company’s outstanding common shares are held, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31)), and the Company is found to be engaged primarily in the business of investing, reinvesting or trading in securities, commodities, or any interest therein, it is possible that the Company may be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares to be treated as ordinary income rather than capital gain. The Company does not believe that it currently qualifies as a foreign investment company. However, there can be no assurance that the Company will not be considered a foreign investment company for the current or any future taxable year.

Passive Foreign Investment Company

The Code contains rules governing “passive foreign investment companies” (“PFIC”) which can have significant tax effects on U.S. Holders of foreign corporations. These rules do not apply to non-U.S. Holders. Section 1297 of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or more of its gross income is “passive income”, which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the Company is not publicly traded and either is a controlled foreign corporation or makes an election, by adjusted tax basis), of its assets that produce or are held for the production of “passive income” is 50% or more. The Company believes that it qualified as a PFIC for the fiscal year ended April 30, 1997 and the fiscal years ended from April 30, 1998 through April 30, 2002 and April 30, 2006. There can be no assurance that the Company’s determination concerning its PFIC status will not be challenged by the IRS, or that it will be able to satisfy record keeping requirements which will be imposed on a qualified electing fund (“QEF”). Each U.S. Holder of the Company is urged to consult a tax advisor with respect to how the PFIC rules affect their tax situation.

A U.S. Holder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to United States federal income taxation under one of two alternative tax regimes at the election of each such U.S. Holder. The following is a discussion of such two alternative tax regimes applied to such U.S. Holders of the Company. In addition, special rules apply if a foreign corporation qualifies as both a PFIC and a “controlled foreign corporation” (as defined below) and a U.S. Holder owns, actually or constructively, 10% or more of the total combined voting power of classes of stock entitled to vote of such foreign corporation (See more detailed discussion at “Controlled Foreign Corporation” below).

A U.S. Holder who elects in a timely manner to treat the Company as a QEF (an “Electing U.S. Holder”) will be subject, under Section 1293 of the Code, to current federal income tax for any taxable year in which the Company qualifies as a PFIC on his pro rata share of the Company’s (i) “net capital gain” (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Holder and (ii) “ordinary earnings” (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Holder, in each case, for the shareholder’s taxable year in which (or with which) the Company’s taxable year ends, regardless of whether such amounts are actually distributed.

The effective QEF election also allows the Electing U.S. Holder to (i) generally treat any gain realized on the disposition of his Company common shares (or deemed to be realized on the pledge of his shares) as capital gain; (ii) treat his share of the Company’s net capital gain, if any, as long-term capital gain instead of ordinary income; and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of the Company’s annual realized net capital gain and ordinary earnings subject, however, to an interest charge. If the Electing U.S. Holder is not a corporation, such an interest charge would be treated as “personal interest” that is not deductible.

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The procedure a U.S. Holder must comply with in making an effective QEF election will depend on whether the year of the election is the first year in the U.S. Holder’s holding period in which the Company is a PFIC. If the U.S. Holder makes a QEF election in such first year, i.e., a timely QEF election, then the U.S. Holder may make the QEF election by simply filing the appropriate documents at the time the U.S. Holder files his tax return for such first year. If, however, the Company qualified as a PFIC in a prior year, then in addition to filing documents, the U.S. Holder must elect to recognize under the rules of Section 1291 of the Code (discussed herein), any gain that he would otherwise recognize if the U.S. Holder sold his stock on the qualification date or if the Company is a controlled foreign corporation, the U.S. Holder’s pro rata share of the Company’s post-1986 earnings and profits as of the qualification date. The qualification date is the first day of the Company’s first tax year in which the Company qualified as a QEF with respect to such U.S. Holder. The elections to recognize such gain or earnings and profits can only be made if such U.S. Holder’s holding period for the common shares of the Company includes the qualification date. By electing to recognize such gain or earnings and profits, the U.S. Holder will be deemed to have made a timely QEF election. A U.S. Holder who made elections to recognize gain or earnings and profits after May 1, 1992 and before January 27, 1997 may, under certain circumstances, elect to change such U.S. Holder’s qualification date to the first day of the first QEF year. U.S. Holders are urged to consult a tax advisor regarding the availability of and procedure for electing to recognize gain or earnings and profits under the foregoing rules. In addition, special rules apply if a foreign corporation qualifies as both a PFIC and a “controlled foreign corporation (as defined below) and a U.S. Holder owns, actually or constructively, 10% or more of the total combined voting power of classes of stock entitled to vote of such foreign corporation. (See more detailed discussion at “Controlled Foreign Corporation” below).

If the Company is a PFIC for any taxable year during which a Non-Electing U.S. Holder holds Company common shares, then the Company will continue to be treated as a PFIC with respect to such Company common shares, even if it is no longer definitionally a PFIC. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules discussed above for Non-Electing U.S. Holders) as if such Company common shares had been sold on the last day of the last taxable year for which it was a PFIC.

Effective for tax years of U.S. Holders beginning after December 31, 1997, U.S. Holders who hold (actually or constructively) marketable stock of a foreign corporation that qualifies as a PFIC, may annually elect to mark such stock to the market (a “mark-to-market election”). If such an election is made, such U.S. Holder will not be subject to the special taxation rules of Section 1291 discussed above. However, if the mark-to-market election is made by a Non-Electing U.S. Holder after the beginning of the holding period for the PFIC stock, then the Section 1291 rules will apply to certain dispositions of, distributions on and other amounts taxable with respect to the Company’s common shares. A U.S. Holder who makes the mark-to-market election will include in income for the taxable year for which the election was made an amount equal to the excess, if any, of the fair market value of the common shares of the Company as of the close of such tax year over such U.S. Holder’s adjusted basis in such common shares. In addition, the U.S. Holder is allowed a deduction for the lesser of (i) the excess, if any, of such U.S. Holder’s adjusted tax basis in common shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any, of (A) the mark-to-market gains for the common shares in the Company included by such U.S. Holder for prior tax years, including any amount which would have been included for any prior tax year but for the Section 1291 interest on tax deferral rules discussed above with respect to Non-Electing U.S. Holders, over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years. A U.S. Holder’s adjusted tax basis in the common shares of the Company will be adjusted to reflect the amount included in or deducted from income as a result of a mark-to-market election. A mark-to-market election applies to the taxable year in which the election is made and to each subsequent taxable year, unless the Company’s common shares cease to be marketable, as specifically defined, or the Secretary of the IRS consents to revocation of the election. Because the IRS has not established procedures for making a mark-to-market election, U.S. Holders should consult their tax advisor regarding the manner of making such an election.

Under Section 1291(f) of the Code, the IRS has issued Proposed Treasury Regulations that, subject to certain exceptions, would treat as taxable certain transfers of PFIC stock by Non-Electing U.S. Holders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. Generally, in such cases the basis of the Company common shares in the hands of the transferee and the basis of any property received in exchange for those common shares would be increased by the amount of gain recognized. Under the Proposed Treasury Regulations, an Electing U.S. Holder would not be taxed on certain transfers of PFIC stock, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. The transferee’s basis in this case will depend on the manner of transfer. In a transfer at death, for example, the transferee’s basis is equal to (i) the fair market value of the Electing U.S. Holder’s common shares reduced by the U.S. Holder’s adjusted basis in these common shares at death. The specific tax effect to the U.S. Holder and the transferee may vary based on the manner in which the common shares are transferred. Each U.S. Holder of the Company is urged to consult a tax advisor with respect to how the PFIC rules affect their tax situation.

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Certain special, generally adverse, rules will apply with respect to the Company common shares while the Company is a PFIC whether or not it is treated as a QEF. For example, under Section 1298(b)(6) of the Code, a U.S. Holder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in regulations, be treated as having made a taxable disposition of such shares.

If the Company is classified as a PFIC, U.S. Holders who do not make timely QEF Elections (as discussed above) will be subject to a number of special tax rules. For example, gains recognized on disposition of the Company stock or the receipt of an “excess distribution” from the Company is (i) treated as if it were ordinary income earned ratably on each day of the period the U.S. Holder owns shares of the Company at the highest marginal rate in effect during the period in which it was deemed included and (ii) subject to an interest charge as if the resulting tax had actually been due in such earlier year or years (An excess distribution is the amount of any distribution received by the U.S. Holder during the taxable year that exceeds 125% of the immediately preceding three year average of distributions received from the Company, subject to certain adjustments.) Proposed Regulations broadly define a disposition to include any transaction or event that constitutes an actual or deemed transfer of property for any purpose under the Code, including (but not limited to) a sale, exchange, gift, transfer at death, and the pledging of PFIC stock to secure a loan. If the tax described above is not imposed on transfer at death, the recipient of the PFIC stock receives a basis in the transferred stock equal to the lessor of the fair market value or the adjusted basis of the stock in the hands of the U.S. Holder immediately before death. Finally, the foregoing rules will continue to apply with respect to a U.S. Holder who held the stock of the Company while the Company met the definition of a PFIC even if the Company ceases to meet the definition of a PFIC.

Controlled Foreign Corporation

If more than 50% of the total combined voting power of all classes of shares entitled to vote or the total value of the shares of the Company is owned, actually or constructively, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701 (a)(31), each of which own, actually or constructively, 10% or more of the total combined voting power of all classes of shares of the Company (“United States Shareholder”), the Company could be treated as a controlled foreign corporation (“CFC”) under Subpart F of the Code. This classification would effect many complex results, one of which is the inclusion of certain income of a CFC which is subject to current U.S. tax. The United States generally taxes United States Shareholders of a CFC currently on their pro rata shares of the Subpart F income of the CFC. Such United States Shareholders are generally treated as having received a current distribution out of the CFC’s Subpart F income and are also subject to current U.S. tax on their pro rata shares of the CFC’s earnings invested in U.S. property. The foreign tax credit described above may reduce the U.S. tax on these amounts. In addition, under Section 1248 of the Code, gain from the sale or exchange of shares by a U.S. Holder of common shares of the Company which is or was a United States Shareholder at any time during the five-year period ending with the sale or exchange is treated as ordinary income to the extent of earnings and profits of the Company attributable to shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign corporation generally will not be treated as a PFIC with respect to United States shareholders of the CFC. This rule generally will be effective for taxable years of United States Shareholders beginning after 1997 and for taxable years of foreign corporations ending with or within such taxable years of United States Shareholders. Special rules apply to United States Shareholders who are subject to the special taxation rules under Section 1291 discussed above with respect to a PFIC. Because of the complexity of Subpart F, a more detailed review of these rules is outside the scope of this discussion. The Company does not believe that it currently qualifies as a CFC. However, there can be no assurance that the Company will not be considered a CFC for the current or any future taxable year.

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Material Canadian Federal Income Tax Consequences

The summary below is restricted to the case of a holder (a “Holder”) of one or more common shares who for the purposes of the Income Tax Act (Canada) (the “Act”) is a non-resident of Canada, holds his common shares as capital property and deals at arm’s length with the Company.

The following is a general discussion of certain possible Canadian federal income tax consequences, under current law, generally applicable to a non-resident of Canada (as hereinafter defined) of common shares of the Company. This discussion does not address all potentially relevant federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of federal income tax law, such as those described above as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any provincial, local or foreign tax consequences.

Dividends

A Holder will be subject to Canadian withholding tax (“Part XIII Tax”) equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on his common shares. Under the 1995 Protocol amending the Canada-US Income Tax Convention (1980) (the “Treaty”) the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States is, if the Holder is a company that beneficially owns at least 10% of the voting stock of the Company, 5% and in any other case, 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.

Capital Gains

A Holder who disposes of a common share, including by deemed disposition on death, will not be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted “taxable Canadian property” as defined by the Act. Generally, a common share will not constitute taxable Canadian property of a Holder unless he held the common shares as capital property used by him carrying on a business (other than an insurance business) in Canada, or he or persons with whom he did not deal at arm’s-length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the Company.

A Holder who is resident of the United States and realizes a capital gain on disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the common share is derived from, or forms an interest in, Canadian real estate, including Canadian mineral resource properties, (b) the common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 months preceding disposition, or ( c) the Holder (i) was a resident of Canada at any time within the ten years immediately the disposition and for a total of 120 months during the 20 years, preceding the disposition, and (ii) owned the common share when he ceased to be a resident of Canada.

A Holder who is subject to Canadian tax in respect of a capital gain on disposition of a common share must include one-half of the capital gain (taxable capital gain) in computing his taxable income earned in Canada. This Holder may, subject to certain limitations, deduct one half of any capital loss (allowable capital loss) arising on disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect of taxable Canadian property and, to the extent not so deductible, from such taxable capital gains of any of the three preceding years or any subsequent year.

F.         Dividends and Paying Agents

This Form 20F is being filed as an annual report under the Exchange Act and as such, there is no requirement to provide any information under this section.

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G.        Statements by Experts

This Form 20F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

H.        Documents on Display

Any documents referred to in this annual report may be inspected at the head office of the Company, 650-555 West 12th Avenue, Vancouver, British Columbia V5Z 3X7, during normal business hours. 

The Company’s filings with the United States Securities and Exchange Commission (“SEC”), including exhibits filed with this Form 20-F, may be reviewed and copied at prescribed rates at the SEC’s public reference room located at 100 F Street N.E., Washington, D.C. 20549, or accessed through the SEC’s website at www.sec.gov/edgar.shtml.  Further information on the public reference rooms may be obtained by calling the SEC at 1-800-SEC-0330.

The Company also files reports, statements and other information with the Canadian securities administrators and these can be accessed electronically at the System for Electronic Document Analysis and Retrieval’s website at www.sedar.com.

I.          Subsidiary Information

There is no information relating to the Company’s subsidiaries, which must be provided in Canada, and which is not otherwise called for by the body of generally accepted accounting principles used in preparing the audited consolidated financial statements.

ITEM 11.        QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company anticipates its primary market risk, if any, to be related to fluctuations in exchange rates.  Exchange rate risk may arise if the Company is required to use different currencies for various aspects of its operations.  At present, the functional currency for the Company is the Canadian dollar.  Based on the Company’s overall exchange rate risk as at April 30, 2012, the Company believes that a ten percent change in exchange rates would not have a material adverse effect on its financial position, results of operations, or changes in financial position.  The Company intends to monitor its exchange rate risk and take reasonable steps to reduce its exposure.  The Company does not intend to purchase or sell derivative instruments for speculative purposes.

PART II

ITEM 12.        DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES        

This Form 20F is being filed as an annual report under the Exchange Act and as such there is no requirement to provide information under this item.

ITEM 13.        DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There has not been a material default in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within thirty days, relating to indebtedness of the Company of any of its significant subsidiaries.  There are no payments of dividends by the Company in arrears, nor has there been any other material delinquency relating to any class of preference shares of the Company.

ITEM 14.        MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not Applicable

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ITEM 15.        CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

At the end of the period covered by this report, an evaluation of the effectiveness of the design and operations of the Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) was carried out by the Company’s principal executive officer and principal financial officer.

Based upon that evaluation, the Company’s principal executive officer and principal financial officer have concluded as of the end of the period covered by this report the Company’s disclosure controls and procedures were designed and are effective in providing reasonable assurance that:

  • information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Commission rules and forms, and
  • material information required to be disclosed in our reports is accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.

Management Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(e) under the Exchange Act.  Our internal control over financial reporting is intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.  Our internal control over financial reporting includes those policies and procedures that:

  • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
  • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with applicable GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and
  • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we have evaluated the effectiveness of internal control over financial reporting based on the framework and criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.  The Company’s internal control over financial reporting was to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS.

Based on this evaluation, management has concluded that as of April 30, 2012, the internal controls over financial reporting was effective.

All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company will continue to periodically review its disclosure controls and procedures and internal control over financial reporting and may make modifications from time to time as considered necessary or desirable. 

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Changes in internal control over financial reporting

During the Company’s most recently completed financial year ended April 30, 2012, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Attestation report of the registered public accounting firm

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

ITEM 16.        [Reserved]

ITEM 16A.     AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Directors has determined that Jordan Point, Chairman of the Audit Committee, meets the definition of an “audit committee financial expert” as defined in Item 16.A of Form 20F, is financially literate in accordance with Canadian national securities legislation, is independent in accordance with the standards of Director Independence set out under NI 52-110, and has an understanding of internal controls and procedures for financial reporting.

ITEM 16B:     CODE OF ETHICS

The Company has adopted a Code of Business Conduct and Ethics that applies to the Company’s principal executive officer and principal financial officer, directors and employees.  A copy of the Company’s Code of Business Conduct and Ethics, as amended June 28, 2010, is incorporated herein by reference and is posted on the Company’s website (www.pfncapitalcom) and under the Company’s profile on SEDAR at www.sedar.com and will be provided to any person without charge, upon request by mail but may also be made by telephone, facsimile or other electronic means of communication. 

ITEM 16C.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table discloses the aggregate fees billed for each of the last two (2) financial years for professional services rendered by the Company’s audit firm for various services. “Audit fees” are fees billed by the Company’s external auditors for services provided in auditing the Company’s annual consolidated financial statements for the subject year.  “Audit-related fees” are fees not included in audit fees that are billed by the auditors for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements.  “Tax fees” are fees billed by the auditors for professional services rendered for tax compliance, tax advice and tax planning.  “All other fees” are fees billed by the auditors for products and services not included in the foregoing categories.

The fees paid by the Company to its auditors for each of the last two fiscal years, by category, are as follows:

Financial Year Ending Audit Fees Audit Related Fees Tax Fees All Other Fees
April 30, 2012 $   29,318 $         Nil $   4,000 $         Nil
April 30, 2011 $   19,500 $         Nil $   4,000 $         Nil

From time to time, management of the Company recommends to and requests approval from the Audit Committee for non-audit services to be provided by the Company’s auditors.  The Audit Committee routinely considers such requests at committee meetings, and if acceptable to a majority of the Audit Committee members, pre-approves such non-audit services by a resolution authorizing management to engage the Company’s auditors for such non-audit services, with set maximum dollar amount for each itemized service.  During such deliberations, the Audit Committee assesses, among other factors, whether the services requested would be considered “prohibited services” as contemplated by the US Securities and Exchange Commission, and whether the services requested and the fees related to such services could impair the independence of the auditors.

106


 

ITEM 16D.     EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not Applicable

ITEM 16E.      PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None

ITEM 16F.      CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not Applicable

ITEM 16G.     CORPORATE GOVERNANCE

The Company’s corporate governance practices do not differ significantly from the standards and guidelines that have been set by the regulatory agencies.  A copy of the Company’s Corporate Governance Policies is published on the Company’s web site, has been posted to SEDAR and EDGAR, and is incorporated by reference to the Form 20-F that was filed by the Company on July 27, 2010.

ITEM 16H.     MINE SAFETY DISCLOSURE

Not Applicable

107


 

PART III

ITEM 17.        FINANCIAL STATEMENTS

Not applicable.

ITEM 18.         FINANCIAL STATEMENTS

Financial Statements Filed as Part of this Annual Report:

  • Independent Auditor’s Report dated July 12, 2012
  • Consolidated Statements of Financial Position as at April 30, 2012, April 30, 2011 and May 1, 2010.
  • Consolidated Statements of Loss and Comprehensive Loss for the fiscal years ended April 30, 2012 and 2011.
  • Consolidated Statements of Cash Flows for the fiscal years ended April 30, 2012 and 2011.
  • Consolidated Statements of Changes in Equity for the fiscal years ended April 30, 2012 and 2011
  • Notes to consolidated financial statements.

 

Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)


 

JAMES STAFFORD

  James Stafford, Inc.
Chartered Accountants

Suite 350 – 1111 Melville Street
Vancouver, British Columbia
Canada V6E 3V6
Telephone +1 604 669 0711
Facsimile +1 604 669 0754
www.JamesStafford.ca

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Pacific North West Capital Corp.

We have audited the accompanying consolidated financial statements of Pacific North West Capital Corp., which comprise the consolidated statements of financial position as at 30 April 2012, 30 April 2011 and 1 May 2010, and the consolidated statements of loss and comprehensive loss, cash flows and changes in equity for the years ended 30 April 2012 and 30 April 2011, and a summary of significant accounting policies and other explanatory information. 

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board , and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Pacific North West Capital Corp. as at 30 April 2012, 30 April 2011 and 1 May 2010, and the results of its operations and its cash flows for the years ended 30 April 2012 and 30 April 2011 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1 in the consolidated financial statements, which describes matters and conditions that indicate the existence of a material uncertainty that may cast substantial doubt about the ability of Pacific North West Capital Corp. to continue as going concern , including working capital deficit of $4,570,797 and a net loss of $4,987,597 as at and for the year ended 30 April 2012, respectively.


Chartered Accountants

Vancouver, Canada
12 July 2012


 
Pacific North West Capital Corp.
Consolidated Statements of Financial Position
(Expressed in Canadian dollars)

  Notes As at 30
April
2012
As at 30
April
 2011
As at 1
 May
 2010
     $ $
      (Note 4) (Note 4)
ASSETS        
         
Current assets        
     Cash and cash equivalents 6 3,440,410 3,880,196 4,475,681
     Amounts receivable 7 154,349 219,746 89,162
     Short term investments 8 1,079,057 4,815,763 2,741,694
     Prepaid expenses   310,696 173,765 40,030
    4,984,512 9,089,470 7,346,567
Investment in associate 9 298,225 - -
Exploration and evaluation properties 10 7,686,109 6,362,048 3,899,594
Property and equipment 11 231,269 124,123 106,893
         
Total assets   13,200,115 15,575,641 11,353,054
         
EQUITY AND LIABILITIES        
         
Current liabilities        
     Trade payables and accrued liabilities 12 413,715 480,652 96,951
         
Total liabilities   413,715 480,652 96,951
         
Equity        
Share capital 13 34,494,642 31,282,121 26,253,869
Reserves   6,722,053 7,255,566 4,128,739
Deficit   (28,430,295) (23,442,698) (19,126,505)
         
Total equity   12,786,400 15,094,989 11,256,103
         
Total equity and liabilities   13,200,115 15,575,641 11,353,054

APPROVED BY THE BOARD:

“Harry Barr”   “Jordan Point”  
Director   Director  

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

Page | 1


 
Pacific North West Capital Corp.
Consolidated Statements of Loss and Comprehensive Loss
(Expressed in Canadian dollars)

    Year ended 30 April
  Notes 2012 2011
    $ $
      (Note 4)
Expenses      
Accounting and audit   33,318 23,500
Bank charges and interest   5,452 9,555
Consulting fees   267,349 318,031
Corporate development   49,382 71,895
Depreciation 11 52,194 33,283
Director fees   29,000 23,000
Insurance, licenses and fees   46,628 60,291
Investor and shareholder relations   528,228 192,814
Legal fees   32,322 43,087
Management fees   432,338 200,071
Office and miscellaneous   170,719 66,483
Part XII.6 tax   3,833 -
Rent   65,231 37,537
Salaries and benefits   415,771 182,782
Share-based payments 14 531,712 271,693
Telephone and utilities   26,307 16,638
Transfer agent and regulatory fees   76,414 57,532
Travel, lodging and food   197,270 78,155
Vehicle lease   12,229 12,229
       
Loss before other items   (2,975,697) (1,698,576)
       
Other items      
Foreign exchange gain (loss)   40,561 (51,645)
Gain (loss) on sale of short term investments 8 (533,630) 44,280
Interest and other income   33,134 52,293
Write-down of exploration and evaluation properties 10 (1,104,376) (2,549,552)
Gain (loss) on revaluation of share purchase warrants 8 (551,264) (112,993)
Flow-through share income 12 537,780 -
Net loss from associate 9 (434,105) -
       
Net loss for the year   (4,987,597) (4,316,193)
       
Other comprehensive income      
Unrealized gain (loss) on short term investments 8 (2,225,549) 1,892,226
Reclassification of (gain) loss on short term investments 8 533,630 (44,280)
       
Net comprehensive loss   (6,679,516) (2,468,247)
       
Loss per share      
Basic 16 (0.05) (0.06)
Diluted 16 (0.05) (0.06)

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

Page | 2


 
Pacific North West Capital Corp.
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)

    Year ended 30 April
  Notes 2012 2011
    $  $
      (Note 4)
OPERATING ACTIVITIES      
       
Loss before tax   (4,987,597) (4,316,193)
Adjustments for:      
     Depreciation 11 52,194 33,283
     Share-based payments 14 531,712 271,693
     Gain or loss on sale of short term investments 8 533,630 (44,280)
     Other income received in shares   - (30,000)
     Write-down of exploration and evaluation properties 10 1,104,376 2,549,552
     Gain or loss on revaluation of share purchase warrants 8 551,264 112,993
     Flow-through share income 12 (537,780) -
     Net loss from associate 9 434,105  
Operating cash flows before movements in working capital      
     (Increase) decrease in amounts receivables   65,397 (130,584)
     Increase in prepaid expenses   (136,931) (133,735)
     Increase (decrease) in trade payables and accrued liabilities   (300,841) 306,387
       
Cash used in operating activities   (2,690,471) (1,380,884)
       
INVESTING ACTIVITIES      
       
Exploration and evaluation expenditures 10 (3,224,377) (1,890,288)
Purchase of property and equipment 11 (161,518) (50,513)
Proceeds from sale of property and equipment 11 2,178 -
Purchase of short term investments 8 (468,189) (2,337,268)
Proceeds from sale of short term investments 8 1,510,942 2,072,432
       
Cash used in investing activities   (2,340,964) (2,205,637)
       
FINANCING ACTIVITIES      
       
Proceeds from issuance of common shares 13 4,748,889 3,021,250
Share issue costs 13 (157,240) (30,214)
       
Cash from financing activities   4,591,649 2,991,036
       
Decrease in cash and cash equivalents   (439,786) (595,485)
Cash and cash equivalents, beginning of year   3,880,196 4,475,681
       
Cash and cash equivalents, end of year   3,440,410 3,880,196

Supplemental cash flow information (Note 20)

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

Page | 3


 
Pacific North West Capital Corp.
Consolidated Statements of Changes in Equity
(Expressed in Canadian dollars)

  Number of
shares
Share
capital
Share-
based
payments

reserve
Warrant
reserve
Investment
revaluation
reserve
Deficit Total
    $ $ $ $ $ $
               
Balances, 1 May 2010 (Note 4) 67,543,008 26,253,869 2,538,382 1,983,859 (393,502) (19,126,505) 11,256,103
Shares issued for              
     Cash 9,892,619 3,000,000 - - - - 3,000,000
     Exploration and evaluation properties 8,217,161 2,446,148 - 675,570 - - 3,121,718
     Exercise of stock options 85,000 21,250 - - - - 21,250
Flow-through shares premium liability - (77,314) - - - - (77,314)
Value assigned to warrants - (331,618) - 331,618 - - -
Share-based payments - - 271,693 - - - 271,693
Share issue costs - (30,214) - - - - (30,214)
Unrealized gain on available-for-sale assets - - - - 1,892,226 - 1,892,226
Reclassification of gain on investments - - - - (44,280) - (44,280)
Net loss for the year - - - - - (4,316,193) (4,316,193)
               
Balances, 30 April 2011 (Note 4) 85,737,788 31,282,121 2,810,075 2,991,047 1,454,444 (23,442,698) 15,094,989
Shares issued for              
     Cash 17,424,426 4,670,389 - - - - 4,670,389
     Exploration and evaluation properties 175,000 19,250 - - - - 19,250
     Exercise of stock options 310,000 111,874 (34,374) - - - 77,500
     Exercise of performance shares 100,000 13,000 (12,000) - - - 1,000
Flow-through shares premium liability - (771,684) - - - - (771,684)
Value assigned to warrants - (673,068) - 673,068 - - -
Share-based payments - - 531,712 - - - 531,712
Share issue costs - (157,240) - - - - (157,240)
Unrealized loss on available-for-sale assets - - - - (2,225,549) - (2,225,549)
Reclassification of loss on investments - - - - 533,630 - 533,630
Net loss for the year -   - -   (4,987,597) (4,987,597)
               
Balances, 30 April 2012 103,747,214   3,295,413 3,664,115   (28,430,295) 12,786,400

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

Page | 4


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

1. CORPORATE INFORMATION

  Pacific North West Capital Corp. (the “Company”) was incorporated under the Business Corporations Act (Alberta) on 29 May 1996 and on 13 July 2004, the Company continued out of the Province of Alberta and into the Province of British Columbia. The Company is in the process of acquiring, exploring and developing Platinum Group Metals (“PGMs”), precious and base metals mineral properties. The Company will attempt to bring the properties to production, structure joint ventures with others, option or lease properties to third parties, or sell the properties outright. The Company has not determined whether these properties contain ore reserves that are economically recoverable and the Company is considered to be in the exploration stage.

  The head office, principal address and registered and records office is located at Suite 650 - 555 West 12th Avenue, Vancouver, British Columbia, V5Z 3X7.

  The Company’s financial statements as at 30 April 2012 and for the year ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has a net loss of $4,987,597 for the year ended 30 April 2012 (2011: $4,316,193) and has working capital of $4,570,797 at 30 April 2012 (30 April 2011: $8,608,818, 1 May 2010: $7,249,616).

  The Company had cash and cash equivalents of $3,440,410 as at 30 April 2012 (30 April 2011: $3,880,196, 1 May 2010: $4,475,681), but management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. If the Company is unable to raise additional capital in the immediate future, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favourable terms and/or pursue other remedial measures or cease operations. These condensed consolidated interim financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

2. BASIS OF PREPARATION

2.1 Basis of consolidation

  The consolidated financial statements include the financial statements of Pacific North West Capital Corp. and its subsidiaries. Subsidiaries are those entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control is obtained to the date control ceases. All inter-company transactions, balances, income and expenses are eliminated in full on consolidation.

Page | 5


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  An associate is an entity in which the Company or any of its subsidiaries have significant influence, and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies and is presumed to exist when the Company holds between 20 and 50 percent of the voting power of another entity. Investments in associates are accounting for using the equity method.

  The subsidiaries and associate of the Company as at 30 April 2012 and 2011 are described below:

    Country of % equity interest
as at 30 April
  Name incorporation 2012 2011
         
  Subsidiaries      
  Pacific North West Capital Corp. USA(1) United States 100% 100%
  Pacific North West Capital de México, S.A. de C.V.(1) Mexico 100% 100%
         
  Associate      
  Next Gen Metals Inc. Canada 22.14% 5.66%

  (1) Inactive entities.

2.2 Basis of presentation

  These consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments which are measured at fair value, as explained in Note 18, and are presented in Canadian dollars except where otherwise indicated.

2.4 Statement of compliance

  The consolidated financial statements of the Company and its subsidiaries, including comparative, have been prepared in accordance with and using accounting policies in full compliance with International Financial Reporting Standards (“IFRS”) and International Accounting Standards (“IAS”) issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

2.4 Adoption of new and revised standards and interpretations

  At the date of authorization of these financial statements, the IASB and IFRIC has issued the following new and revised standards, amendments and interpretations which are not yet effective during the year ended 30 April 2012.

 
  • IFRS 9 ‘Financial Instruments: Classification and Measurement’ is a new financial instruments standard effective for annual periods beginning on or after 1 January 2015 that replaces IAS 39 and IFRIC 9 for classification and measurement of financial assets and financial liabilities.

Page | 6


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

 
  • IFRS 10 ‘Consolidated Financial Statements’ is a new standard effective for annual periods beginning on or after 1 January 2013 that replaces consolidation requirements in IAS 27 (as amended in 2008) and SIC-12.
  • IFRS 11 ‘Joint Arrangements’ is a new standard effective for annual periods beginning on or after 1 January 2013 that replaces IAS 31 and SIC-13.
  • IFRS 12 ‘Disclosure of Interests in Other Entities’ is a new standard effective for annual periods beginning on or after 1 January 2013 that replaces disclosure requirements in IAS 27 (as amended in 2008), IAS 28 (as revised in 2003) and IAS 31.
  • IFRS 13 ‘Fair Value Measurement’ is a new standard effective for annual periods beginning on or after 1 January 2013 that replaces fair value measurement guidance in other IFRSs.
  • IAS 1 (Amendment) ‘Presentation of Financial Statements’ is effective for annual periods beginning on or after 1 July 2012 and includes amendments regarding Presentation of Items of Other Comprehensive Income.
  • IAS 19 (Amendment) ‘Employee Benefits’ is effective for annual periods beginning on or after 1 January 2013 and revises recognition and measurement of post-employment benefits.
  • IAS 27 (Amendment) ‘Separate Financial Statements’ is effective for annual periods beginning on or after 1 January 2013 that prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements.
  • IAS 28 (Amendment) ‘Investments in Associates and Joint Ventures’ is effective for annual periods beginning on or after 1 January 2013 that prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.
  • IFRIC 20 ‘Stripping Costs in the Production Phase of a Surface Mine’ is a new interpretation effective for annual periods beginning on or after 1 January 2013 that prescribes the accounting for stripping costs in the production phase of a surface mine.
  The Company has not early adopted these standards, amendments and interpretations and anticipates that the application of these standards, amendments and interpretations will not have a material impact on the financial position and financial performance of the Company.

Page | 7


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Significant accounting judgments, estimates and assumptions

  The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the consolidated financial statements and reported amounts of income and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.

  Areas requiring a significant degree of estimation and judgment relate to the recoverability of the carrying value of exploration and evaluation assets, fair value measurements for financial instruments and share-based payments, the recognition and valuation of provisions for decommissioning liabilities, the recoverability and measurement of exploration and evaluation properties and deferred tax assets and liabilities, and ability to continue as a going concern. Actual results may differ from those estimates and judgments.

3.2 Cash and cash equivalents

  Cash and cash equivalents comprise cash at banks and on hand, and short term money market instruments with an original maturity of three months or less, which are readily convertible into a known amount of cash.

3.3 Investment in associate

  The Company’s investment in associate is accounted for using the equity method of accounting. Under the equity method, the Company’s investment in an associate is initially recognized at cost and subsequently increased or decreased to recognize the Company’s share of earnings and losses of the associate and for impairment losses after the initial recognition date. The Company’s share of an associate’s losses that are in excess of its investment in the associate are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. The Company’s share of earnings and losses of associates are recognized in profit or loss during the period.

  After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on the Company’s investment in its associates. The Company determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If there is objective evidence, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in profit or loss. When a group entity transacts with an associate of the Company, profit and losses are eliminated to the extent of the Company’s interest in the relevant associate.

Page | 8


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

3.4 Foreign currencies

  The Company’s reporting currency and the functional currency of all of its operations is the Canadian dollar as this is the principal currency of the economic environment in which they operate.

  Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

  Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge.

  Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive income in the statement of comprehensive income to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive income. Where the non-monetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss.

3.5 Property and equipment

  Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

  Depreciation is provided at rates calculated to write off the cost of property, plant and equipment, less their estimated residual value, using the declining balance method using the following rates or the straight-line method over the following expected useful lives:

  Automotive 30%
  Office equipment 20%
  Software 100%
  Leasehold improvements 10 years

3.6 Exploration and evaluation properties

  Exploration and evaluation expenditures include the costs of acquiring licenses, costs associated with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets acquired in a business combination. Exploration and evaluation expenditures are capitalized. Costs incurred before the Company has obtained the legal rights to explore an area are recognized in profit or loss.

Page | 9


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  Option payments received are treated as a reduction of the carrying value of the related exploration and evaluation properties and deferred costs until the receipts are in excess of costs incurred, at which time they are credited to income. Option payments are at the discretion of the optionee, and accordingly, are recorded on a cash basis.

  Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.

  Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within property, plant and equipment.

  Recoverability of the carrying amount of any exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

3.7 Decommissioning, restoration and similar liabilities

  The Company recognizes provisions for statutory, contractual, constructive or legal obligations associated with the reclamation of mineral properties and retirement of long-term assets, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future cost estimates arising from the decommissioning of plant, site restoration work and other similar retirement activities is added to the carrying amount of the related asset, and depreciated on the same basis as the related asset, along with a corresponding increase in the provision in the period incurred. Discount rates using a pre-tax rate that reflect the current market assessments of the time value of money are used to calculate the net present value.

  The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to the related asset with a corresponding entry to the provision.

  Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit or loss for the period. The net present value of reclamation costs arising from subsequent site damage that is incurred on an ongoing basis during production are charged to profit or loss in the period incurred. The costs of reclamation projects that were included in the provision are recorded against the provision as incurred. The costs to prevent and control environmental impacts at specific properties are capitalized in accordance with the Company’s accounting policy for exploration and evaluation properties.

Page | 10


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

 
3.8 Share-based payments

  Share-based payments to employees are measured at the fair value of the instruments issued and recognized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the share-based payments reserve.

  The fair value of options is determined using the Black-Scholes Option Pricing Model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that will eventually vest.

3.9 Taxation

  Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

  Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

  The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

  Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the reporting date.

Page | 11


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

3.10 Financial assets

  Financial assets are classified as financial assets at fair value through profit or loss (“FVTPL”), held-to-maturity, loans and receivables, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at initial recognition. Financial assets are recognized initially at fair value. The subsequent measurement of financial assets depends on their classification as follows:

  Financial assets at FVTPL

  Financial assets are classified as held for trading and are included in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives, other than those designated as effective hedging instruments, are also categorized as held for trading. These assets are carried at fair value with gains or losses recognized in profit or loss. Transaction costs associated with financial assets at FVTPL are expensed as incurred. Cash and cash equivalents and share purchase warrants held in other companies are included in this category of financial assets.

  Held-to-maturity and loans and receivables

  Held-to-maturity and loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortized cost using the effective interest method if the time value of money is significant. Gains and losses are recognized in profit or loss when the financial asset classified in this category are derecognized or impaired, as well as through the amortization process. Transaction costs are included in the initial carrying amount of the asset. Amounts receivables are classified as loans and receivables.

  Available-for-sale

  Available-for-sale financial assets are those non-derivative financial assets that are not classified as loans and receivables. After initial recognition, available-for-sale financial assets are measured at fair value, with gains or losses recognized within other comprehensive income. Accumulated changes in fair value are recorded as a separate component of equity until the investment is derecognized or impaired. Transaction costs are included in the initial carrying amount of the asset. Available-for-sale assets include short term investments in equities of other entities.

  The fair value is determined by reference to bid prices at the close of business on the reporting date. Where there is no active market, fair value is determined using valuation techniques. Where fair value cannot be reliably measured, assets are carried at cost.

  Derivatives designated as hedging instruments in an effective hedge

  The Company does not hold or have any exposure to derivative instruments.

Page | 12


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

3.11 Financial liabilities

  Financial liabilities are classified as financial liabilities at FVTPL, derivatives designated as hedging instruments in an effective hedge, or as financial liabilities measured at amortized cost, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. The measurement of financial liabilities depends on their classification, as follows:

  Financial liabilities at FVTPL

  Financial liabilities at FVTPL has two subcategories, including financial liabilities held for trading and those designated by management on initial recognition. Transaction costs on financial liabilities at FVTPL are expensed as incurred. These liabilities are carried at fair value with gains or losses recognized in profit or loss.

  Financial liabilities measured at amortized cost

  All other financial liabilities are initially recognized at fair value, net of transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest method. Amortized cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains and losses arising on the repurchase, settlement or cancellation of liabilities are recognized respectively in interest, other revenues and finance costs. Trade payables are included in this category of financial liabilities.

  Derivatives designated as hedging instruments in an effective hedge

  The Company does not hold or have any exposure to derivative instruments.

3.12 Impairment of financial assets

  Financial assets, other than financial assets at FVTPL, are assessed for indicators of impairment at each period end.

  Assets carried at amortized cost

  If there is objective evidence that an impairment loss on assets carried at amortized cost have been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced, with the amount of the loss recognized in profit or loss.

  If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed to the extent that the carrying value of the asset does not exceed what the amortized cost would have been had the impairment not been recognized. Any subsequent reversal of an impairment loss is recognized in profit or loss.

Page | 13


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  Available-for-sale

  If an available-for-sale financial asset is impaired, the cumulative loss previously recognized in equity is transferred to profit or loss. Any subsequent recovery in the fair value of the asset is recognized within other comprehensive income.

3.13 Derecognition of financial assets and liabilities

  Financial assets are derecognized when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Company has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized directly in equity is recognized in profit or loss.

  For financial liabilities, they are derecognized when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

3.14 Impairment of non-financial assets

  The carrying amount of the Company’s assets is reviewed for an indication of impairment at the end of each reporting period. If an indication of impairment exists, the Company makes an estimate of the asset’s recoverable amount. Individual assets are grouped for impairment assessment purposes at the lowest level at which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. Recoverable amount of an asset group is the higher of its fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are adjusted for the risks specific to the asset group and are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money.

  Where the carrying amount of an asset group exceeds its recoverable amount, the asset group is considered impaired and is written down to its recoverable amount. Impairment losses are recognized in profit or loss.

  An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized.

Page | 14


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

3.15 Flow-through shares

  Any premium received by the Company on the issuance of flow-through shares is initially recorded as a liability and included in trade payables and accrued liabilities. Upon renouncement by the Company of the tax benefits associated with the related expenditures, a deferred tax liability is recognized and the flow-through share premium liability will be reversed. To the extent that suitable deferred tax assets are available, the Company will reduce the deferred tax liability and record a deferred tax recovery.

3.16 Related party transactions

  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 financial and operating decisions. Parties are also considered to be related if they are subject to common control, 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.

4. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

4.1 Initial adoption of IFRS

  IFRS 1 ‘First-time Adoption of International Financial Reporting Standards’ establishes guidance for the initial adoption of IFRS. The accounting policies in Note 3 have been applied consistently in preparing the consolidated financial statements for the year ended 30 April 2012. The consolidated financial statements for the year ended 30 April 2011 were prepared applying available standards under Canadian Generally Accepted Accounting Principles (“Canadian GAAP”). For the first-time adoption of IFRS, the comparative information for the year ended 31 April 2011 and the opening IFRS statement of financial position on 1 May 2010 (the “Transition Date”) have been revised where appropriate to conform with IFRS using various exemptions and options available under IFRS 1.

4.2 Optional exemptions from full retrospective application

  Business combinations

  IFRS 1 provides the option to apply IFRS 3 ‘Business Combinations’, retrospectively or prospectively from the date of transition. The Company elected not to retrospectively apply IFRS 3 to business combinations that occurred prior to the Transition Date.

Page | 15


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  Share-based payments

  IFRS 1 encourages, but does not require, first-time adopters to apply IFRS 2 ‘Share-based Payment’ to equity instruments that were granted on or before 7 November 2002, or equity instruments that were granted subsequent to 7 November 2002 and vested before the Transition Date. The Company elected not to apply IFRS 2 to equity instruments that vested prior to the Transition Date.

  Decommissioning liabilities

  IFRS 1 provides an optional exemption to elect not to retrospectively recalculate the decommissioning liabilities and the related impact on the cost of the related asset and accumulated depreciation. The Company elected to use this exemption and account for changes in decommissioning liabilities prospectively from Transition Date.

4.3 Mandatory exception to full retrospective application

  Estimates

  In accordance with IFRS 1, the Company’s estimates under IFRS at the date of transition to IFRS must be consistent with estimates made for the same date under Canadian GAAP unless there is objective evidence that those estimates were in error. The estimates previously made by the Company under Canadian GAAP were not revised for application of IFRS.

4.4 Reconciliation to previously reported financial statements

  IFRS 1 requires an entity to reconcile its equity, comprehensive loss and cash flows for prior periods. The reconciliations between the previously reported financial results under Canadian GAAP and the current reported financial results under IFRS are provided as follows:

Page | 16


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

Reconciliation of Consolidated Statement of Financial Position as at 1 May 2010

  Notes Canadian
GAAP
IFRS
Adjustments
IFRS
    $ $ $
         
ASSETS        
         
Current assets        
     Cash and cash equivalents   4,475,681 - 4,475,681
     Amounts receivable   89,162 - 89,162
     Short term investments   2,741,694 - 2,741,694
     Prepaid expenses   40,030 - 40,030
    7,346,567 - 7,346,567
Exploration and evaluation properties   3,899,594 - 3,899,594
Property and equipment   106,893 - 106,893
         
Total assets   11,353,054 - 11,353,054
         
EQUITY AND LIABILITIES        
         
Current liabilities        
     Trade and other payables   96,951 - 96,951
         
Total liabilities   96,951 - 96,951
         
Equity        
Share capital (b) 25,170,802 1,083,067 26,253,869
Contributed surplus (c) 4,485,390 (4,485,390) -
Accumulated other comprehensive income (c) (393,502) 393,502 -
Share-based payments reserve (a)(c) - 2,538,382 2,538,382
Warrants reserve (c) - 1,983,859 1,983,859
     Investment revaluation reserve (c) - (393,502) (393,502)
Deficit (a)(b) (18,006,587) (1,119,918) (19,126,505)
         
Total equity   11,256,103 - 11,256,103
         
Total equity and liabilities   11,353,054 - 11,353,054

Page | 17


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

Reconciliation of Consolidated Statement of Financial Position as at 30 April 2011

  Notes Canadian
GAAP
IFRS
Adjustments
IFRS
    $ $ $
         
ASSETS        
         
Current assets        
     Cash and cash equivalents   3,880,196 - 3,880,196
     Amounts receivable   219,746 - 219,746
     Short term investments   4,815,763 - 4,815,763
     Prepaid expenses   173,765 - 173,765
    9,089,470 - 9,089,470
Exploration and evaluation properties   6,362,048 - 6,362,048
Property and equipment   124,123 - 124,123
         
Total assets   15,575,641 - 15,575,641
         
EQUITY AND LIABILITIES        
         
Current liabilities        
     Trade and other payables (b) 403,338 77,314 480,652
         
Total liabilities   403,338 77,314 480,652
         
Equity        
Share capital (b) 30,276,368 1,005,753 31,282,121
Contributed surplus (c) 5,601,728 (5,601,728) -
Accumulated other comprehensive income (c) 1,454,444 (1,454,444) -
Share-based payments reserve (a)(c) - 2,810,075 2,810,075
Warrants reserve (c) - 2,991,047 2,991,047
Investment revaluation reserve (c) - 1,454,444 1,454,444
Deficit (a)(b) (22,160,237) (1,282,461) (23,442,698)
         
Total equity   15,172,303 (77,314) 15,094,989
         
Total equity and liabilities   15,575,641 - 15,575,641

Page | 18


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

Reconciliation of Consolidated Statement of Loss and Comprehensive Loss
For the year ended 30 April 2011

  Notes Canadian
GAAP
IFRS
Adjustments
IFRS
    $ $ $
         
Expenses        
Accounting and audit   23,500 - 23,500
Bank charges and interest   9,555 - 9,555
Consulting fees   318,031 - 318,031
Corporate development   71,895 - 71,895
Depreciation   33,283 - 33,283
Director fees   23,000 - 23,000
Insurance, licenses and fees   60,291 - 60,291
Investor and shareholder relations   192,814 - 192,814
Legal fees   43,087 - 43,087
Management fees   200,071 - 200,071
Office and miscellaneous   66,483 - 66,483
Rent   37,537 - 37,537
Salaries and benefits   182,782 - 182,782
Share-based payments (a) 109,150 162,543 271,693
Telephone and utilities   16,638 - 16,638
Transfer agent and regulatory fees   57,532 - 57,532
Travel, lodging and food   78,155 - 78,155
Vehicle lease   12,229 - 12,229
         
Loss before other items   (1,536,033) (162,543) (1,698,576)
         
Other items        
Foreign exchange loss   (51,645) - (51,645)
Gain on sale of short term investments   44,280 - 44,280
Interest and other income   52,293 - 52,293
Write-down of exploration and evaluation properties   (2,549,552) - (2,549,552)
Loss on revaluation of share purchase warrants   (112,993) - (112,993)
         
Net loss for the year   (4,153,650) (162,543) (4,316,193)
         
Other comprehensive income        
Unrealized gain on short term investments   1,892,226 - 1,892,226
Reclassification of gain on short term investments   (44,280) - (44,280)
         
Net comprehensive loss   (2,305,704) (162,543) (2,468,247)

Page | 19


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

Reconciliation of Consolidated Statement of Cash Flows
For the year ended 30 April 2011

The transition to IFRS did not have a significant impact on the Company’s consolidated statement of cash flows for the year ended 30 April 2011.  The transition adjustments recognized in the consolidated statements of financial position and consolidated statement of loss and comprehensive loss have resulted in reclassifications of various amounts on the consolidated statements of cash flows.  However, there were no significant changes to the total operating, financial or investing cash flows.  As a result, no reconciliation has been prepared.

Differences between Canadian GAAP and IFRS

(a) Share-based payments

  Employees vs. non-employees

  Under Canadian GAAP, an individual is classified as an employee when the individual is consistently represented to be an employee under law.

  Under IFRS, an individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. This definition of an employee is broader than that previously applied by the Company and resulted in certain contractors and consultants being classified as employees under IFRS.

  Forfeitures

  Under Canadian GAAP, forfeitures are recognized as they occur.

  Under IFRS, an estimate of the number of stock options expected to vest is required, which is revised if subsequent information indicates that actual forfeitures are likely to differ from the estimate.

  Measurement and Recognition

  Under Canadian GAAP, all stock options granted to employees and non-employees are measured and recognized using a fair value based method. For employees, the fair value of the options is measured at the date of grant. For non-employees, the fair value of the options is measured on the earlier of: (a) the date at which the counterparty performance is completed, (b) the date the performance commitment is reached or (c) the date at which the equity instruments are granted if they are fully vested and non-forfeitable. For employees and non-employees, the fair value of the options is expensed or capitalized to mineral property costs as appropriate over the vesting period. For stock options to employee with graded vesting, the total fair value is recognized on a straight-line basis over the vesting period.

Page | 20


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  IFRS 2, similar to Canadian GAAP, requires the Company to measure share-based payment expense related to stock options granted to employees at the fair value of the options on the date of grant and to recognize such expense over the vesting period of the options. Each tranche in a stock option with graded vesting is considered a separate grant with a different vesting date and fair value. Each grant is accounted for on that basis. For stock options granted to non-employees, IFRS requires that share-based payment expense be measured at the fair value of the services received unless the fair value cannot be reliably measured.

  The change in accounting policy related to share-based payments resulted in an increase of share-based payments reserve as at the Transition Date of $36,851 with an increase in deficit of an equal amount, and an increase in share-based payment expense of $162,543 for the year ended 30 April 2011.

(b) Flow-through shares

  Flow-through shares are a unique Canadian tax incentive which is the subject of specific guidance under Canadian GAAP. Under Canadian GAAP, the Company accounted for the issue of flow-through shares in accordance with the provisions of the Canadian Institute of Chartered Accountants (the “CICA”) Emerging Issues Committee Abstract 146 ‘Flow-through Shares’. At the time of issue, the funds received are recorded as share capital. At the time of the filing of the renunciation of the qualifying flow-through expenditures to investors, the Company recorded a deferred tax liability with a charge directly to shareholders’ equity. Also under Canadian GAAP, a portion of the deferred tax assets that were not recognized in previous years, due to the recording of a valuation allowance, are recognized as a recovery of income taxes.

  IFRS does not contain explicit guidance pertaining to this tax incentive. Therefore, the Company has adopted a policy whereby the premium paid for flow-through shares in excess of the market value of the shares without the flow-through features at the time of issue is initially recorded as a flow-through liability. Upon renunciation by the Company of the tax benefits associated with the related expenditures, a deferred tax liability is recognized and the flow-through liability is reversed, with any difference recorded as deferred tax expense. A portion of the deferred tax assets that were not recognized in previous years, due to the recording of a valuation allowance, will reduce the deferred tax liability and be recorded as a deferred tax recovery.

  The change in accounting policy related to flow-through shares resulted in an increase in share capital and an increase in deficit of $1,083,067 as at the Transition Date, and a decrease in share capital and an increase in flow-through tax liability of $77,314 for the year ended 30 April 2011.

(c) Reclassification within equity section

  Under Canadian GAAP, “Contributed surplus” was used to record the issuance of stock options, performance shares¸ share purchase warrants and agent compensation warrants. Upon adoption of IFRS, the balances in “Contributed surplus” have been reclassified to “Share-based payments reserve” and “Warrants reserve”. In addition, “Accumulated other comprehensive income” related to revaluation of available-for-sale investments has been reclassified as “Investment revaluation reserve”.

Page | 21


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

5. SEGMENTED INFORMATION

  At 30 April 2012, the Company operates in three geographical areas, being Canada, the United States and Burkina Faso. The following is an analysis of the net loss, current assets and non-current assets by geographical area:

    Canada United
States
Burkina
Faso
Total
    $ $ $ $
           
  Net loss        
       Year ended 30 April 2012 4,987,597 - - 4,987,597
       Year ended 30 April 2011 4,316,193 - - 4,316,193
           
  Current assets        
       As at 30 April 2012 4,984,512 - - 4,984,512
       As at 30 April 2011 9,089,470 - - 9,089,470
       As at 1 May 2010 7,346,567 - - 7,346,567
           
  Investment in associate        
       As at 30 April 2012 298,225 - - 298,225
       As at 30 April 2011 - - - -
       As at 1 May 2010 - - - -
           
  Exploration and evaluation properties        
       As at 30 April 2012 7,093,158 208,683 384,268 7,686,109
       As at 30 April 2011 6,175,355 - 186,693 6,362,048
       As at 1 May 2010 3,145,604 753,990 - 3,899,594
           
  Property and equipment        
       As at 30 April 2012 231,269 - - 231,269
       As at 30 April 2011 124,123 - - 124,123
       As at 1 May 2010 106,893 - - 106,893

Page | 22


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

6. CASH AND CASH EQUIVALENTS

  The Company’s cash and cash equivalents are denominated in the following currencies:

    As at
30 April
2012
As at
 30 April
2011
As at
 1 May
 2010
    $ $ $
         
  Denominated in Canadian dollars 2,734,541 2,982,591 3,771,579
  Denominated in U.S. dollars 705,869 897,605 704,102
         
  Total cash and cash equivalents 3,440,410 3,880,196 4,475,681

  During the year ended 30 April 2012, the Company issued a total of 13,734,593 flow-through shares (2011: 644,286 flow-through shares) for a total of $3,612,089 (2011: $225,500) (Note 13). As at 30 April 2012, the Company has $1,456,744 (30 April 2011: $Nil, 1 May 2010: $567,771) remaining to be spent on qualifying Canadian exploration expenditures under the terms of the flow-through share agreements.

7. AMOUNTS RECEIVABLE

  The Company’s amounts receivables are as follows:

    As at
30 April
2012
As at
30 April
2011
As at
1 May
2010
    $ $ $
         
  GST/HST receivables 20,510 184,897 10,433
  Interest receivables 310 - 9,658
  Advances receivable 22,338 6,048 67,921
  Shared office costs receivable 110,041 27,651 -
  Other receivables 1,150 1,150 1,150
         
  Total trade and other receivables 154,349 219,746 89,162

  Included in amounts receivables of the Company are amounts due from related parties which are disclosed in Note 19. The amounts are unsecured, interest free and repayable upon written notice given from the Company.

Page | 23


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

8. SHORT TERM INVESTMENTS

  The Company’s available-for-sale investments and share purchase warrants are as follows:

    As at 30 April 2012 As at 30 April 2011
    Cost Fair Value Cost Fair Value
    $ $ $ $
           
  Fire River Gold Corp.
    500,000 shares (2011: 5,363,000 shares).
    575,000 warrants expiring on 18 September 2012 (2011: 2,487,500 warrants).
233,082 75,012 2,496,995 3,108,758
  El Nino Ventures Inc.
    3,319,888 shares (2011: 2,315,656 shares).
    1,470,329 warrants (2011: 1,657,142 warrants).  800,000 warrants expire on 12 October 2013 and 285,714 warrants expire on 28 September 2012.
515,175 381,436 443,344 938,036
  Next Gen Metals Inc.
    4,000,000 warrants expiring on 27 September 2015 (2011: 333,334 warrants).
223,690 46,570 155,000 300,850
  Augen Capital Corp.
    2,257,000 shares (2011: 2,157,000 shares).
    428,500 warrants expiring 30 December 2012 (2011: 428,500 warrants).
182,365 120,704 131,975 91,000
  Benton Resources Corp.
    300,000 shares (2011: Nil shares).
134,539 90,000 - -
  Calais Resources Inc.
    2,083,000 shares (2011: 2,083,000 shares).
125,000 124,980 125,000 125,000
  Goldtrain Resources Inc.
    976,000 shares (1,026,000 shares).
29,280 63,440 30,780 41,040
  Nevada Sunrise Gold Corp.
    300,000 shares (2011: Nil shares).
15,233 54,000 - -
  Others 146,399 122,915 113,659 211,079
           
  Total short term investments 1,604,763 1,079,057 3,496,753 4,815,763

Page | 24


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  El Nino Ventures Inc. and Next Gen Metals Inc. are companies with certain directors in common.

  During the year, the Company sold a total of 4,863,000 shares of Fire River Gold Corp. for total proceeds of $1,358,276, resulting in a loss of $569,196.

  During the year, the Company sold a total of 419,000 shares in other marketable securities for total proceeds of $152,666, resulting in a gain of $35,566.

  During the year, the Company received 4,000,000 share purchase warrants of Next Gen Metals Inc. valued at $223,690 related to the sale of Destiny Gold Project (Note 10).

9. INVESTMENT IN ASSOCIATE

  The Company’s investment in associate is as follows:

    As at 30 April 2012 As at 30 April 2011
    Net Book Value Fair Value Net Book
Value
Fair Value
    $ $ $ $
           
  Next Gen Metals Inc. 298,225 461,333 - -

  The Company accounts for its investment in Next Gen Metals Inc. under the equity method of accounting.

  As at 30 April 2012 Number of
shares
Company’s
interest
Quoted
market
price/share
         
  Next Gen Metals Inc. 5,766,667 22% $0.08

  The Company had no investment accounted for under the equity method of accounting for the year ended 30 April 2011.

Page | 25


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  The Company acquired the investment in Next Gen Metals Inc. through a combination of cash transactions and as part of the agreement related to the sale of Destiny Gold Project (Note 10).

    Date acquired Number of
shares
Acquisition
value
Company’s
interest at the
date of
transaction
  Next Gen Metals Inc. 3 August 2010 1,216,667 $140,830 5%
    26 September 2011 4,550,000 $591,500 17%
 
As at 30 April 2012
  5,766,667 $732,330 22%

  Movements on equity investments for the year ended 30 April 2012 are as follows:

    Next Gen
Metals Inc.
    $
     
  Balance, 30 April 2011 -
  Additions 732,330
  Company’s share of net loss (434,105)
     
  Balance, 30 April 2012 298,225

  Summary of financial information as at and for the year ended 30 April 2012 for the equity accounted investment, not adjusted for percentage of ownership held by the Company, is as follows:

    Current
Assets
Non-
current
Assets
Total
Assets
Total
Liabilities
Net
Loss
    $ $ $ $ $
             
  Next Gen Metals Inc. 771,797 725,399 1,497,196 115,605 1,960,917

Page | 26


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

10. EXPLORATION AND EVALUATION PROPERTIES

  The Company’s exploration and evaluation properties expenditures for the year ended 30 April 2012 are as follows:

    River Valley BC
Rock & Roll
Destiny Gold Burkina Faso Other
properties
Total
    $ $ $ $ $ $
               
  ACQUISITION COSTS            
               
  Balance, 30 April 2011 3,189,989 60,000 73,954 75,000 - 3,398,943
       Additions 151,300 61,000 58,250 135,000 21,370 426,920
       Payments received - - (50,000) - - (50,000)
       Impairment - (121,000) (82,204) - - (203,204)
  Balance, 30 April 2012 3,341,289 - - 210,000 21,370 3,572,659
               
  EXPLORATION AND EVALUATION COSTS
         
               
  Balance, 30 April 2011 902,055 594,046 1,355,311 111,693 - 2,963,105
       Assaying 523,827 - 164,514 - - 688,341
       Drilling 1,520,691 - - - - 1,520,691
       Engineering and consulting 419,959 10,745 22,410 62,575 208,683 724,372
       Environmental 63,024 - - - - 63,024
       Field expenses 145,047 - - - - 145,047
       Geology 6,519 - - - - 6,519
       Geophysics 269,714 8,000 - - - 277,714
       Governmental credits - - (438,664) - - (438,664)
       Recovery of costs (120,337) - (815,190) - - (935,527)
       Impairment - (612,791) (288,381) - - (901,172)
  Balance, 30 April 2012 3,730,499 - - 174,268 208,683 4,113,450
               
  Total costs 7,071,788 - - 384,268 230,053 7,686,109

Page | 27


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  The Company’s exploration and evaluation properties expenditures for the year ended 30 April 2011 are as follows:

    River Valley BC
Rock & Roll
Destiny Gold Burkina Faso Other
properties
Total
    $ $ $ $ $ $
               
  ACQUISITION COSTS            
               
  Balance, 1 May 2010 1 14,500 43,454 - 788,052 846,007
       Additions 3,189,988 45,500 30,500 75,000 43,310 3,384,298
       Impairment write-down - - - - (831,362) (831,362)
  Balance, 30 April 2011 3,189,989 60,000 73,954 75,000 - 3,398,943
               
  EXPLORATION AND EVALUATION COSTS
         
               
  Balance, 1 May 2010 - 437,175 914,795 - 1,701,617 3,053,587
       Assaying - - 9,640 - - 9,640
       Engineering and consulting 902,055 156,871 428,702 111,693 47,543 1,646,864
       Field expenses - - 2,174 - - 2,174
       Governmental credits - - - - (47,535) (47,535)
       Property fees - - - - 29,723 29,723
       Recovery of costs - - - - (13,158) (13,158)
       Impairment write-down   - - - (1,718,190) (1,718,190)
  Balance, 30 April 2011 902,055 594,046 1,355,311 111,693 - 2,963,105
               
  Total costs 4,092,044 654,046 1,429,265 186,693 - 6,362,048

Page | 28


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  River Valley, Ontario

  By agreement dated 14 July 1999, the Company granted to Kaymin Resources Limited (“Kaymin”), a wholly-owned subsidiary of Anglo Platinum Limited, an option to earn up to a 65% interest in the Company’s portion of certain properties, including the River Valley property, the Goldwright property, the Frontier property (these claims were allowed to lapse on 12 December 2006), the Washagami property (these claims were allowed to lapse on 10 December 2008), the Razor property and the Western Front property, in the Sudbury Region of Ontario. During a prior year, Kaymin elected to vest obtaining a 50% interest in the properties upon having paid the Company $300,000 (received in a prior year) and advanced and spent in excess of $4,000,000 for exploration on the properties.

  Kaymin continued to fund exploration under the terms of the joint venture until 2007 and invested over $22 million in the exploration of the property; however, as a result of capital expenditure reductions during the global financial crisis in 2008, no new funds were allocated to the River Valley Project above and beyond the minimal holding costs.

  By way of a Mineral Interest Assignment Agreement dated for reference 13 December 2010, as amended on 6 April 2011 (the “Assignment Agreement”), the Company completed the purchase of Kaymin’s 50% interest in the River Valley claims, providing the Company with an undivided 100% interest in the River Valley PGM Project. Under the terms of the Assignment Agreement, Kaymin exchanged its 50% interest in the joint venture, for a 12% interest in the Company, based on the issued and outstanding common shares of the Company as of 30 November 2010 (67,543,008 common shares). The aggregate purchase price for the 50% interest in the River Valley PGM project was:

 
  • 8,117,161 fully paid and non-assessable common shares of the Company (issued) (Notes 13 and 20); and

 
  • Three-year warrants exercisable to purchase 3,000,000 common shares of the Company at a price of $0.30 per common share (issued) (Notes 13 and 20).

  Included in the River Valley PGM Project are the following:

  (i) River Valley Property, Ontario

  By agreement dated 15 January 1999 and amended 11 March 1999, the Company acquired a 100% interest in 226 claim units, known as the River Valley Property, located in the Dana and Pardo Townships, Sudbury Mining District, Ontario. As consideration, the Company paid $265,000 and issued 600,000 common shares to the optionors. In addition, minimum annual exploration expenditures of $100,000 were completed. The property is subject to a 3% Net Smelter Return (“NSR”). The Company, at its option, can purchase up to 2% of the NSR from the vendors for $2,000,000.

Page | 29


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  (ii) Goldwright Property, Ontario

  By agreement dated 30 June 1998 and subsequently amended, the Company earned a 25% interest in certain mineral claims known as the Janes property, located in the Janes Township, Sudbury Mining District, Ontario. Certain claims are subject to a 2% NSR.

  (iii) Razor Property, Ontario

  The Company acquired a 100% interest in certain mineral claims located in the Dana Township, Sudbury Mining District, Ontario for consideration of $30,000.

  The property is subject to a 2% NSR.

  (iv) Western Front Property, Ontario

  By agreement dated 16 November 2001, the Company earned a 70% interest in certain mineral claims known as the Western Front property from a company (the “optionor”) with certain directors in common, for consideration of $55,000 and issuance of 20,000 shares. In addition, an exploration expenditure of $50,000 was completed.

  The Company has the right to purchase an additional 30% interest in the property by paying $750,000 to the optionor.

  The property is subject to a 3% NSR, the first 1% of which the Company can purchase for $1,000,000; the second 1% can be purchased for $2,000,000. The Company and the optionor will share the NSR buyout privileges in proportion to their respective interests.

  Heaven Lake PGM Gold Project, Ontario

  On 13 December 2010, the Company staked 220 square kilometres 10 km north of Lac des Iles Mine, North of Thunder Bay, Ontario The property covers entire Heaven Lake Greenstone Belt. The project lies near the junction of Highway 527 and Road 811, midway between Thunder Bay and the railway community of Armstrong.

  River Valley East and West PGM Project, Ontario

  On 15 September 2011, the Company staked 132 mining claims covering approximately 58,000 acres adjacent to its River Valley palladium (Pd), platinum (Pt) and gold (Au) project in the Sudbury area of Ontario. The newly acquired claim group is located east of the city of Sudbury, in the townships of Davis, Henry, Janes, Loughgrin, Pardo, Dana Hobbs and McWilliams. The property is situated to the east of the Sudbury Basin and north of Highway 17. It covers two rock groups that host significant concentrations of Platinum Group Metals mineralization - the River Valley-East Bull Lake Suite of rocks and the Nipissing Gabbro.

Page | 30


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  BC Rock & Roll, British Columbia

  On 28 July 2009, the Company obtained an option from Misty Creek Ventures Ltd. (Misty Creek Ventures Ltd. was dissolved in January 2010 and its interest was transferred to Equity Exploration Consultants Ltd.), First Fiscal Enterprises Ltd. and Pamicon Developments Ltd. (collectively the “Vendors”) on the Rock & Roll property (the “Property”), located in the Liard Mining District approximately 9 kilometres ("km") west of the Bronson airstrip and exploration camp in northern British Columbia. Under the terms of the Letter Agreement, the Company can earn a 100% interest in the Property over a four year period by completing $2,000,000 in exploration expenditures, paying the Vendors $130,000 and providing the Vendors with a total of 600,000 of the Company's shares (Notes 13 and 20). The Vendors will retain a 2% NSR, of which 1% can be purchased for $3,000,000. The property is also subject to an underlying NSR of 3% and an underlying Net Profits Interest Royalty ("NPI") of 15%, both of which are payable to Prime Equities International Corporation, and both of which are purchasable by the Forrest Syndicate and/or heirs and assignees in their entirety for $1,500,000 each.

  Subsequent to the year end, the Company terminated the option agreement with the Vendors related to the Rock & Roll property (Note 22). During the year, the Company recorded a provision for write-down of $733,791 related to the Rock & Roll property.

  Destiny Gold Project, Québec

  In September 2009, the Company entered into an option agreement with Alto Ventures Ltd. ("Alto") on the Destiny Gold Project (formerly the Despinassy Project) located approximately 75 km north of Val d’Or in the Abitibi-Témiscamingue region of Québec (the "Alto Option Agreement”). The property consists of 175 mining claims totalling 7,260 hectares ("ha"). Under the terms of the Alto Option Agreement, the Company will pay Alto $200,000, provide Alto with 250,000 common shares of the Company (Notes 13 and 20), and complete a cumulative total of $3,500,000 in exploration expenditures over a four year period, with minimum exploration expenditures of $1,400,000 to earn a 60% interest in the Destiny Gold property

  On 8 August 2011, the Company entered into a Letter Agreement (the “LA”) with Next Gen Metals Inc. (“Next Gen”) whereby Next Gen was granted an option to acquire the Company's 60% earn-in option interest ("Option Interest") in the Destiny Gold Project which Option Interest was granted to the Company pursuant to an agreement with Alto.

  Under the terms of the LA, the Company will grant to Next Gen an irrevocable right and option to acquire the Company's right, title and interest in and to the Option Interest in the Destiny Gold Project, for an aggregate purchase price of: (i) a total of $675,000 in cash; (ii) 15,000,000 Next Gen common shares; and (iii) 4,000,000 Next Gen share purchase warrants exercisable into 4,000,000 common shares of Next Gen at varying prices for four years from the date of issuance, all of which are due as follows:

  Cash: Next Gen paid to the Company $50,000 on signing the LA and will make the balance of the cash payments to the Company in tranches of: (i) $75,000 on or before the first anniversary of the LA; (ii) $200,000 on or before the second anniversary of the LA; and (iii) $350,000 on or before the third anniversary of the LA.

Page | 31


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  Next Gen Shares: The 15,000,000 common shares of Next Gen will be issued as fully paid and non-assessable common shares, in tranches, as to: (i) 4,550,000 common shares (issued) upon Next Gen's delivery to the Company of a notice of commencement of the Option; (ii) 5,225,000 common shares on or before the first anniversary of the LA; and (iii) 5,225,000 common shares on or before the second anniversary of the LA.

  Warrants: The 4,000,000 Next Gen Warrants shall be issued to the Company upon Next Gen's delivery to the Company of a notice of commencement of the option. The Warrants are exercisable as follows: (i) 1,000,000 Warrants are exercisable at $0.25 per share; (ii) 1,000,000 Warrants are exercisable at $0.30 per share; (iii) 1,000,000 Warrants are exercisable at $0.35 per share; and (iv) 1,000,000 Warrants are exercisable at $0.50 per share.

  In addition to the cash, shares and warrants payable by Next Gen, Next Gen shall also be responsible for all remaining cash payments and exploration expenditures due to be paid or incurred, as the case may be, under the Company’s agreement with Alto, along with any costs and expenditures associated with any resultant joint venture that arises between Next Gen and Alto. The Company will continue to be responsible for issuances of common shares to Alto under its agreement with Alto until the date of exercise of the option and the transfer and registration of the Option Interest from the Company to Next Gen in accordance with the terms of the LA.

  Subsequent to the year end, the Company terminated the option agreement with Alto related to the Destiny Gold Project (Note 22). During the year, the Company recorded a provision for write-down of $370,585 related to the Destiny Gold Project.

  Glitter Lake Property, Québec

  By agreement dated 15 August 2003, as amended on 30 April 2006, the Company could acquire, from CanAlaska Uranium Ltd. (“CanAlaska”), a company that previously had certain directors in common, a 50% interest in certain mineral claims known as the Glitter Lake property, located in the province of Québec. As consideration, the Company, at its option, could issue shares, make payments and incur exploration expenditures (the expenditure commitments for 2008 and 2009 have been extended to 2009 and 2010 as agreed to in an amendment dated 1 April 2008).

  On 30 January 2009, the Company and CanAlaska signed an amendment to the option agreement whereby CanAlaska assigned 100% interest in the Glitter Lake property to the Company for approximately $83,600 in payment of CanAlaska’s remaining lease obligations to the Company that ended in November 2010. CanAlaska retains a 0.5% NSR interest in the property. The original option agreement has thus been terminated.

  On 24 April 2012, the Company entered into an agreement to provide El Condor Minerals Inc. (“LCO”) an option to earn a 100% interest in the Glitter Lake Property, subject to 2 weeks due diligence period. In order to exercise the option, LCO shall make the cash payments and issue shares as set forth below:

Page | 32


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

      Payments     Shares  
      $    
 
  On directors and regulatory approvals   50,000     350,000  
  On or before 24 April 2013   50,000     350,000  
  On or before 24 April 2014   50,000     300,000  
  Total   150,000     1,000,000  

  Upon completion of the option, the Company will retain 2% NSR. 1% NSR can be purchased from the Company for $1,000,000.

  Nickel Plats, Saskatchewan

  By agreement dated 30 April 2007, the Company can acquire, from Diamond Hunter Ltd. (“Hunter”), a 100% interest in certain mineral claims known as the Nickel Plats property, located in the province of Saskatchewan.

  On 30 March 2009, the Company and Hunter signed an amendment to the terms of the agreement as follows:

        Payments     Shares     Exploration
Expenditures
 
        $
        $  
  Upon execution of agreement (paid/issued)   10,000     75,000     -  
  On or before 30 June 2007 (paid)   20,000     -     -  
  On or before 30 April 2008 (paid/issued)   30,000     75,000     -  
  On or before 30 April 2009 (paid/issued)   15,000     50,000     -  
  On or before 30 April 2010 (paid/issued)   15,000     50,000     -  
  On or before 30 April 2011* (paid)   20,000     -     -  
  On or before 30 April 2012* (paid)   20,000     -     -  
  On or before 30 April 2013*     20,000     -     -  
  Total     150,000     250,000     -  

  * The payments of $20,000 are Advanced Royalty Payments based on the price of nickel maintaining a minimum price of US$6.00/lb in the three months preceding each of the 4th, 5th and 6th anniversary of the agreement. In the case that the price of nickel does not maintain a minimum price of US$6.00/lb in the three months preceding each of the 4th, 5th and 6th anniversary of the agreement, the dollar amount of the Advanced Royalty Payments will be less than $20,000 on the 4th, 5th and 6th anniversary of the agreement and the actual dollar amount will be negotiated between Hunter and the Company at the time of the anniversary.

  An additional 100,000 shares may be issued upon the vesting of a 100% interest if the results of feasibility studies are positive.

  The property is subject to a 2.0% NSR. The Company shall have the right to purchase a 1.0% NSR for $750,000.

Page | 33


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  By agreement dated 16 May 2007, the Company can acquire for $10,000 (paid), from Hunter, a 100% interest in certain mineral claims known as the Nickel Plats adjunct property, located in the province of Saskatchewan.

  The Nickel Plats adjunct property is subject to a 2.0% NSR. The Company shall have the right to purchase a 1.0% NSR for $750,000.

  A joint venture partner is being sought to further explore the Nickel Plats Project.

  Tonsina Property, Alaska

  The Tonsina property, presently defined, consists of 46 mining claims in the State of Alaska, known as the “Marc” claims 1-46 (ADL Nos. 610060 – 610105) which were staked in June, 2006. These claims comprise a contiguous group of State of Alaska ¼ section claims covering approximately 29.78 sq. km (744.62 ha, or 7,360 acres), herein referred to as the “Tonsina property”. The claims are owned 100% by the Company. A joint venture partner is being sought to further explore the project.

  The Company acquired certain mineral claims by staking in Alaska. On 6 June 2007, the Company entered into an option agreement with Stillwater pertaining to ongoing exploration on the property (the “Stillwater Option Agreement”). Under the terms of the Stillwater Option Agreement, Stillwater could elect to spend US$3.5 million to earn 50% of the first selected property and US$4.0 million on each subsequent selected property by 31 December 2011.

  Kane Property, Alaska

  In March 2008, Stillwater elected not to continue with exploration on the property in order to evaluate new ground in southeast Alaska.

  The Company continues to maintain the Kane property’s mineral claims and a joint venture partner is being sought to further explore the property.

  Union Bay Property, Alaska

  By agreement dated 1 October 2002 and amended 2 April 2003 and 4 February 2004, the Company acquired from Freegold Ventures Limited (“Freegold”), a company that formerly had certain directors and officers in common, an option to earn up to a 70% interest in the Union Bay Property.

  In order to earn a 50% interest, the Company purchased a private placement of $165,000 (2002) and made cash payments, issued shares and incurred exploration expenditures.

  Following the vesting of its 50% interest on 1 July 2006, the Company had the right to elect within 45 days to increase its interest to 60% by completing a feasibility study within 12 months of vesting. This election was not made.

Page | 34


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  Under the terms of the agreement, the Company, upon the vesting of its 50%, issued 253,586 shares at market value for $100,000 to Freegold.

  By Memorandum of Agreement dated 4 May 2007, Freegold and the Company confirmed their 50/50 interest in the property.

  Freegold and the Company are seeking a joint venture partner to further develop this project.

  Burkina Faso, Africa

  On 18 January 2011, the Company entered into an agreement with Somitra to acquire 100% interest in the properties of Kangara, Kalempo and Lhorosso. The Company can earn a 100% interest in the properties under the following terms of the agreements:

 
  • US$75,000 on signing of the agreement (paid);
 
  • US$30,000 on six months following the signing of the agreement (paid);
 
  • US$105,000 on the first anniversary of the signing of the agreement (paid);
 
  • US$120,000 on the second anniversary of the signing of the agreement;
 
  • US$150,000 on the third anniversary of the signing of the agreement; and
 
  • After completion of transferring the claims, the Company is required to issue 450,000 common shares of the Company to Somitra or pay the sum of US$135,000.

  Each property is subject to a 1.0% NSR with the buyout price of US$1,000,000 for any deposit over 1 million ounces and US$500,000 for any deposit under 1 million ounces.

11. PROPERTY AND EQUIPMENT

  The Company’s property and equipment as at 30 April 2012 are as follows:

    Cost Accumulated
depreciation
Net book
value
    $ $ $
         
  Automotive 122,947 83,097 39,850
  Office equipment 289,522 185,122 104,400
  Software 59,558 48,570 10,988
  Leasehold improvements 76,871 840 76,031
         
  Total 548,898 317,629 231,269

Page | 35


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  The changes in the Company’s property and equipment for the years ended 30 April 2012 and 2011 are as follows:

    Automotive Office
equipment
Software Leasehold
improvements
Total
    $ $ $ $ $
             
  COST          
             
  As at 1 May 2010 86,470 221,564 31,011 - 339,045
  Additions 36,477 7,466 6,570 - 50,513
  As at 30 April 2011 122,947 229,030 37,581 - 389,558
  Additions - 62,670 21,977 76,871 161,518
  Disposals - (2,178) - - (2,178)
             
  As at 30 April 2012 122,947 289,522 59,558 76,871 548,898
             
  DEPRECIATION          
             
  As at 1 May 2010 55,240 152,181 24,731 - 232,152
  Depreciation 10,778 14,403 8,102 - 33,283
  As at 30 April 2011 66,018 166,584 32,833 - 265,435
  Depreciation 17,079 18,538 15,737 840 52,194
             
  As at 30 April 2012 83,097 185,122 48,570 840 317,629
             
  NET BOOK VALUE          
             
  As at 1 May 2010 31,230 69,383 6,280 - 106,893
  As at 30 April 2011 56,929 62,446 4,748 - 124,123
  As at 30 April 2012 39,850 104,400 10,988 76,031 231,269

Page | 36


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

12. TRADE PAYABLES AND ACCRUED LIABILITIES

  The Company’s trade and other payables are broken down as follows:

    As at
30 April
 2012
As at
30 April
2011
As at 1
May
2010
    $ $ $
         
  Trade payables 78,664 366,246 10,543
  Accrued liabilities 23,833 37,092 86,408
  Flow-through shares premium liability 311,218 77,314 -
         
  Total trade payables and accrued liabilities 413,715 480,652 96,951

  During the year ended 30 April 2012, the Company issued 13,734,593 flow-through shares (2011: 644,286 flow-through shares) for total proceeds of $3,612,089 (2011: $225,500). This issuance of flow-through shares resulted in a flow-through share premium liability of $771,684 (30 April 2011: $77,314, 1 May 2010: $Nil) (Note 13).

  During the year ended 30 April 2012, the Company incurred approximately $2,155,345 in qualifying Canadian exploration expenditures resulting in a flow-through share income of $537,780 (2011: $Nil), with a corresponding decrease in the flow-through share premium liability, on the basis that the Company has the intention of renouncing these qualifying Canadian exploration expenditures to the respective investors.

  Included in trade payables and accrued liabilities are amounts due to related parties which are disclosed in Note 19.

13. SHARE CAPITAL

13.1 Authorized share capital

  The Company has authorized an unlimited number of common and preferred shares with no par value. At 30 April 2012, the Company had 103,747,214 common shares outstanding (2011: 85,737,788) and no preferred shares outstanding (2011: Nil).

Page | 37


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

13.2 Shares issuances

  During the years ended 30 April 2012 and 2011, the Company issued common shares as follows:

  On 15 March 2011, the Company closed the non-brokered private placement of 9,248,333 non flow-through units at $0.30 per unit, with each unit consisting of one fully paid and non-assessable common share in the capital of the Company and one-half of one non-transferable share purchase warrant, each whole warrant entitling the holder thereof to purchase one additional common share of the Company for one year at an exercise price of $0.35. A total of 644,286 flow-through units at $0.35 per unit were also placed. Each flow-through unit consists of one fully paid and non-assessable common share in the capital of the Company and one-half of one non-transferable share purchase warrant, each whole warrant entitling the holder thereof to purchase one additional non flow-through common share of the Company at $0.45 for a period of one year. The Company paid finder's fee of $24,775 in cash. This issuance of flow-through shares resulted in a flow-through share premium liability of $77,314 at the date of issue (Note 12).

  During the year ended 30 April 2011, 50,000 shares at a deemed price of $0.11 per share were issued for the acquisition of the BC Rock & Roll project (Notes 10 and 20) and 50,000 shares at a deemed price of $0.11 per share were issued for the acquisition of Destiny Gold project (Notes 10 and 20).

  During the year ended 30 April 2011, the Company purchased the remaining 50% interest in the unincorporated joint venture of the River Valley PGM project from Anglo Platinum Limited through its wholly-owned subsidiary, Kaymin Resources Ltd., issuing 8,117,161 non-assessable common shares of the Company and three-year warrants to purchase up to 3,000,000 common shares of the Company at a price of $0.30 per common share (Notes 10 and 20).

  On 13 July 2011, the Company closed the first tranche non-brokered private placement of 2,583,333 non flow-through units at $0.30 per unit, with each unit consisting of one fully paid and non-assessable common share in the capital of the Company and one-half of one non-transferable share purchase warrant, each whole warrant entitling the holder thereof to purchase one additional common share of the Company for a period of 18 months at an exercise price of $0.40. A total of 4,332,141 flow-through units at $0.35 per unit were also placed (Note 6). Each flow-through unit consists of one fully paid and non-assessable common share in the capital of the Company and one-half of one non-transferable share purchase warrant, each whole warrant entitling the holder thereof to purchase one additional non flow-through common share of the Company for a period of 18 months at an exercise price of $0.45. The Company paid finder’s fees of $68,750 in cash. This issuance of flow-through shares resulted in a flow-through share premium liability of $216,607 at the date of issue (Note 12).

Page | 38


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  On 18 July 2011, the Company closed the second and final tranche non-brokered private placement of 620,000 non flow-through units at $0.30 per unit, with each unit consisting of one fully paid and non-assessable common share in the capital of the Company and one-half of one non-transferable share purchase warrant, each whole warrant entitling the holder thereof to purchase one additional common share of the Company for a period of 18 months at an exercise price of $0.40. A total of 210,000 flow-through units at $0.35 per unit were also placed (Note 6). Each flow-through unit consists of one fully paid and non-assessable common share in the capital of the Company and one-half of one non-transferable share purchase warrant, each whole warrant entitling the holder thereof to purchase one additional non flow-through common share of the Company for a period of 18 months at an exercise price of $0.45. The Company paid finder’s fees of $12,975 in cash. This issuance of flow-through shares resulted in a flow-through share premium liability of $14,700 at the date of issue (Note 12).

  On 26 October 2011, the Company completed the first tranche of its non‑brokered private placement and issued an aggregate of 8,075,452 flow-through units at $0.22 per flow-through unit for proceeds of $1,776,600 (Note 6). Each flow-through unit consisting of one common share in the capital of the Company and one-half of one non-transferable non flow-through share purchase warrant, each whole warrant entitling the holder thereof to purchase one additional non flow-through common share of the Company for a period of 18 months at an exercise price of $0.32. This issuance of flow-through shares resulted in a flow-through share premium liability of $484,527 at the date of issue (Note 12).

  On 21 November 2011, the Company closed the second and final tranche of the non-brokered private placement, the Company issued 486,500 non flow-through units at $0.20 per unit for gross proceeds of $97,300, with each unit consisting of one common share in the capital of the Company and one-half of one non-transferable share purchase warrant, each whole warrant entitling the holder thereof to purchase one additional common share of the Company for a period of 18 months at an exercise price of $0.30.

  Also in its second tranche, the Company issued 1,117,000 flow-through units at $0.22 per unit for gross proceeds of $245,740 (Note 6), with each flow-through unit consisting of one common share in the capital of the Company and one-half of one non-transferable non flow-through share purchase warrant, each whole warrant entitling the holder thereof to purchase one additional non flow-through common share of the Company for a period of 18 months at an exercise price of $0.32. This issuance of flow-through shares resulted in a flow-through share premium liability of $55,850 at the date of issue (Note 12).

  All securities issued pursuant to the first tranche closing are subject to a hold period expiring February 27, 2012. In connection with the closing of both tranches of the financing, the Company paid finder’s fees of $62,474 in cash.

  During the year ended 30 April 2012, 100,000 shares at a deemed price of $0.11 per share were issued for the acquisition of the BC Rock & Roll project (Notes 10 and 20) and 75,000 shares at a deemed price of $0.11 per share were issued for the acquisition of Destiny Gold project (Notes 10 and 20).

  During the year ended 30 April 2012, 100,000 performance shares were exercised for proceeds of $1,000 and 310,000 stock options were exercised for proceeds of $77,500.

Page | 39


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

13.3 Share purchase warrants

  The following is a summary of the changes in the Company’s share purchase warrants for the years ended 30 April 2012 and 2011:

  Year ended 30 April 2012 2011
    Number of
warrants
Weighted
average
exercise
price
Number of
 warrants
Weighted
 average
exercise
price
      $
$
           
  Outstanding, beginning of year 10,941,309 0.36 2,995,000 0.42
  Granted 8,712,213 0.36 7,946,309 0.34
  Exercised - - - -
  Forfeited (7,941,309) 0.38 - -
           
  Outstanding, end of year 11,712,213 0.35 10,941,309 0.36

The following table summarizes information regarding share purchase warrants outstanding as at 30 April 2012.

  Number of
warrants
Exercise
price
Expiry date
       
  3,000,000 $0.30 13 December 2013
  1,291,667 $0.40 13 January 2013
  2,166,070 $0.45 13 January 2013
  310,000 $0.40 18 January 2013
  105,000 $0.45 18 January 2013
  4,037,726 $0.32 26 April 2013
  243,250 $0.30 21 May 2013
  558,500 $0.32 21 May 2013
       
  11,712,213    

Page | 40


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

13.4 Performance shares

  A total of 2,697,990 performance shares are reserved for issue. At the discretion of the Board, these shares may be issued to such arm’s length parties as the Board considers desirable to attract consultants to the Company.

  As at 30 April 2012, a total of 850,000 performance shares have been exercised and issued (2011: 750,000 shares) at $0.01 per share.

  During a prior year, the Board authorized the issuance of up to 300,000 performance shares at an exercise price of $0.01 per share to the Senior Vice-President of Corporate and Business Development of the Company. These shares are to be granted at the discretion of the Board as follows:

  Shares Grant Date  
  150,000 1 February 2011 (allotted as at 30 April 2011*)
  75,000 1 August 2011 (allotted as at 30 April 2012**)
  75,000 1 February 2012 (allotted as at 30 April 2012**)
  300,000    

  * 150,000 performance shares were reserved for issuance at $0.01 per share during the year ended 30 April 2011. The fair market value of the performance shares at the date of allotment/accrual was $28,500 and was recorded in the accounts as share-based payments (Note 14). The offsetting entry is to share-based payments reserve.

  ** 150,000 performance shares were reserved for issuance at $0.01 per share during the year ended 30 April 2012. The fair market value of the performance shares at the date of allotment/accrual was $32,250 and was recorded in the accounts as share-based payments (Note 14). The offsetting entry is to share-based payments reserve.

  During the year, the Board authorized the issuance of up to 300,000 performance shares at an exercise price of $0.01 per share to the President and Chief Operating Officer of the Company. These shares are to be granted at the discretion of the Board as follows:

  Shares Grant Date
  100,000 6 September 2012
  100,000 6 September 2013
  100,000 6 September 2014
  300,000  

Page | 41


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  During the year, the Board authorized the issuance of up to 150,000 performance shares at an exercise price of $0.01 per share to the Vice President Exploration of the Company. These shares are to be granted at the discretion of the Board as follows:

  Shares Grant Date
  30,000 15 December 2012
  30,000 15 December 2013
  30,000 15 December 2014
  30,000 15 December 2015
  30,000 15 December 2016
  150,000  

13.5 Stock options

  The Company has adopted a stock option plan whereby, the Company may grant stock options to employees, directors and/or consultants of the Company. The exercise price of any options granted under the plan will be determined by the Board of Directors, at its sole discretion, but shall not be less than the last closing price of the Company’s common shares on the day before the date on which the Directors grant such options.

  The following is a summary of the changes in the Company’s stock option plan for the years ended 30 April 2012 and 2011:

  Year ended 30 April 2012 2011
    Number of
 options
Weighted
average
exercise
price
Number of
options
Weighted
average
exercise
price
      $   $
           
  Outstanding, beginning of year 8,268,000 0.32 5,430,500 0.36
  Granted 1,000,000 0.30 3,525,000 0.30
  Exercised (310,000) 0.25 (85,000) 0.25
  Forfeited (1,725,000) 0.36 (602,500) 0.50
           
  Outstanding, end of year 7,233,000 0.32 8,268,000 0.32

Page | 42


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  The weighted average fair value of the options granted during the year ended 30 April 2012 was estimated at $0.19877 (2011: $0.20262) per option at the grant date using the Black-Scholes Option Pricing Model. The weighted average assumptions used for the calculation were:

  Year ended 30 April 2012 2011
       
  Risk free interest rate 1.49% 2.57%
  Expected life 3.58 years 4.9 years
  Expected volatility 129.05% 117.12%
  Expected dividend per share 0.00% 0.00%

  The following table summarizes information regarding stock options outstanding and exercisable as at 30 April 2012.

  Exercise price Number of
options
outstanding
Weighted-
average
remaining
contractual
life
(years)
Weighted
average
exercise
price
         
  Options outstanding      
  $0.20 - $0.29 3,558,000 3.53 $0.25
  $0.30 - $0.39 2,775,000 3.48 $0.31
  $0.40 - $0.60 900,000 1.02 $0.59
         
  Total options outstanding 7,233,000 3.20 $0.32
         
  Options exercisable      
  $0.20 - $0.29 2,958,000 3.36 $0.25
  $0.30 - $0.39 1,575,000 3.31 $0.31
  $0.40 - $0.60 833,333 0.89 $0.60
         
  Total options exercisable 5,366,333 2.96 $0.32

Page | 43


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

14. SHARE-BASED PAYMENTS

  Share-based payments for the following options granted by the Company will be amortized over the vesting period, of which $499,462 was recognized in the year ended 30 April 2012 (2011: $231,193):

  Grant date of stock options Fair value of options granted Amount vested in 2012 Amount vested in 2011
    $ $ $
         
  11 June 2008 18,701 - 133
  15 July 2009 8,613 223 2,537
  4 January 2010 42,773 - 17,712
  5 January 2010 69,753 6,837 34,524
  1 February 2011 45,030 18,897 26,133
  24 February 2011 609,754 333,904 147,968
  15 March 2011 18,948 12,080 2,186
  14 June 2011 81,708 81,708 -
  7 September 2011 117,062 45,813 -
         
  Share-based payments from stock options 1,012,342 499,462 231,193
         
  Performance shares allotted(Note 13)   32,250 40,500
         
  Total   531,712 271,693

15. TAXES

15.1 Provision for income taxes

  Year ended 30 April 2012 2011
    $ $
       
  Loss before tax 4,987,597 4,316,193
  Statutory tax rate 26.00% 27.83%
       
  Expected tax recovery 1,296,775 1,201,340
  Non-deductible items (283,107) (92,499)
  Change in future tax rates (38,987) (112,876)
  Change in valuation allowance (974,681) (995,965)
       
  Tax recovery for the year - -

Page | 44


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

15.2 Deferred tax balances

  The tax effects of temporary differences that give rise to deferred tax assets are as follows:

  As at 30 April 2012 2011
    $ $
       
  Tax loss carry-forwards 2,703,631 2,028,665
  Property and equipment 81,004 67,955
  Exploration and evaluation properties 562,546 286,452
  Share issue costs 44,974 34,402
       
    3,392,155 2,417,474
  Valuation allowance (3,392,155) (2,417,474)
       
  Deferred tax assets - -

15.3 Expiry dates

  The Company’s recognized and unrecognized deferred tax assets related to unused tax losses have the following expiry dates:

  As at 30 April 2012
    $
     
  Non-capital losses  
  2014 701,754
  2015 684,375
  2026 851,782
  2027 1,271,389
  2028 1,336,195
  2029 1,530,437
  2030 267,302
  2031 1,471,427
    2,699,862
     
  Total non-capital losses 10,814,523
     
  Total resource-related deduction, no expiry 9,936,292

Page | 45


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

16. LOSS PER SHARE

  The calculation of basic and diluted loss per share is based on the following data:

  Year ended 30 April 2012 2011
       
  Net loss for the year $          (4,987,597) $(4,316,193)
       
  Weighted average number of shares – basic and diluted 97,288,446 69,399,792
       
  Loss per share, basic and diluted $                     (0.05) $(0.06)

  The basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the year. The diluted loss per share reflects the potential dilution of common share equivalents, such as outstanding stock options, performance shares and share purchase warrants, in the weighted average number of common shares outstanding during the year, if dilutive. All of the stock options, performance shares and the share purchase warrants were anti-dilutive for the years ended 30 April 2012 and 2011.

17. CAPITAL RISK MANAGEMENT

  The Company’s objectives are to safeguard the Company’s ability to continue as a going concern in order to support the Company’s normal operating requirements, continue the development and exploration of its mineral properties.

  The Company is dependent on external financing to fund its activities. In order to carry out the planned exploration and pay for general administration costs, the Company may issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and cash equivalents. 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.

  The Company is not subject to any externally imposed capital requirements. There were no significant changes in the Company’s approach or the Company’s objectives and policies for managing its capital.

Page | 46


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

18. FINANCIAL INSTRUMENTS

18.1 Categories of financial instruments

    As at
30 April
2012
As at
30 April
2011
As at
1 May
2010
    $ $ $
         
  FINANCIAL ASSETS      
         
  FVTPL, at fair value      
       Cash and cash equivalents 3,440,410 3,880,196 4,475,681
       Short term investments – warrants 103,883 426,158 275,334
         
  Loans and receivables, at amortized cost      
       Amounts receivable 133,839 34,849 78,729
         
  Available-for-sale, at fair value      
       Short term investments – shares 975,174 4,389,605 2,466,360
         
  Total financial assets 4,653,306 8,730,808 7,296,104
         
  FINANCIAL LIABILITIES      
         
  Other liabilities, at amortized cost      
       Trade payables 78,664 366,246 10,543
         
  Total financial liabilities 78,664 366,246 10,543

18.2 Fair value

  The fair value of financial assets and financial liabilities at amortized cost is determined in accordance with generally accepted pricing models based on discounted cash flow analysis or using prices from observable current market transactions. The Company considers that the carrying amount of all its financial assets and financial liabilities recognized at amortized cost in the financial statements approximates their fair value due to the demand nature or short term maturity of these instruments.

Page | 47


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  The following table provides an analysis of the Company’s financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to 3 based on the degree to which the inputs used to determine the fair value are observable.

 
  • Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities.
  • Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable either directly or indirectly.
  • Level 3 fair value measurements are those derived from valuation techniques that include inputs that are not based on observable market data. As at 30 April 2012, the Company does not have any Level 3 financial instruments.

  As at 30 April 2012 Level 1 Level 2 Total
    $ $ $
         
  Financial assets at fair value      
       Cash and cash equivalents 3,440,410 - 3,440,410
       Short term investments – Shares 975,174 - 975,174
       Short term investments – Warrants - 103,883 103,883
         
  Total financial assets at fair value 4,415,584 103,883 4,519,467

  As at 30 April 2011 Level 1 Level 2 Total
    $ $ $
         
  Financial assets at fair value      
       Cash and cash equivalents 3,880,196 - 3,880,196
       Short term investments – Shares 4,164,605 225,000 4,389,605
       Short term investments – Warrants - 426,158 426,158
         
  Total financial assets at fair value 8,044,801 651,158 8,695,959

  As at 1 May 2010 Level 1 Level 2 Total
    $ $ $
         
  Financial assets at fair value      
       Cash and cash equivalents 4,475,681 - 4,475,681
       Short term investments – Shares 2,466,360 - 2,466,360
       Short term investments – Warrants - 275,334 275,334
         
  Total financial assets at fair value 6,942,041 275,334 7,217,375

  There were no transfers between Level 1 and 2 in the year ended 30 April 2012.

Page | 48


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

18.3 Management of financial risks

  The financial risk arising from the Company’s operations are credit risk, liquidity risk, interest rate risk, currency risk and commodity price risk. These risks arise from the normal course of operations and all transactions undertaken are to support the Company’s ability to continue as a going concern. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

  Credit risk

  Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises primarily from the Company’s cash and cash equivalents and amounts receivable. The Company manages its credit risk relating to cash and cash equivalents by dealing with only with highly-rated financial institutions. As at 30 April 2012, amounts receivable was mainly comprised of Harmonized Sales Tax receivable and amounts receivables from related entities for shared office costs (Notes 7 and 19). As a result, credit risk is considered insignificant.

  Liquidity risk

  Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk by continuously monitoring actual and projected cash flows and matching the maturity profile of financial assets and liabilities. As at 30 April 2012, the Company had $3,440,410 (2011: $3,880,196) in cash and cash equivalents to settle current liabilities of $413,715 (2011: $480,652) and, accordingly, liquidity risk is considered insignificant.

  Currency risk

  The Company is exposed to currency risk to the extent of its acquisition and exploration expenditures on its US properties and African property. The Company’s expenditures will be negatively impacted if the US dollar increases versus the Canadian dollar.

  The majority of the Company’s cash flows and financial assets and liabilities are denominated in Canadian dollars, which is the Company’s functional and reporting currency. Foreign currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than the Canadian dollar.

  The Company’s objective in managing its foreign currency risk is to minimize its net exposures to foreign currency cash flows by holding most of its cash and cash equivalents in Canadian dollars (Note 6). The Company monitors and forecasts the values of net foreign currency cash flow and balance sheet exposures and from time to time could authorize the use of derivative financial instruments such as forward foreign exchange contracts to economically hedge a portion of foreign currency fluctuations. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Page | 49


 
Pacific North West Capital Corp.
Notes to the Consolidated Financial Statements
30 April 2012
(Expressed in Canadian dollars)

  Other risks

  Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest rate risk and commodity price risk arising from financial instruments.

19. RELATED PARTY TRANSACTIONS

  For the year ended 30 April 2012, the Company had related party transactions with