Sanatana Diamonds Inc.: Interim Financial Statements.TORONTO Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing -- Sanatana Diamonds Inc (AIM:SAN) - For the three months and nine months ended December December: see month. 31, 2005 Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations (All amounts stated in Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents , unless otherwise indicated) 1. Sanatana Diamonds Inc ("Sanatana" or the "Company") was admitted to the Alternative Investment Market ("AIM") of the London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. on Thursday Thursday: see week. July July: see month. 28, 2005. 2. This Management Discussion and Analysis ("MD&A") should be read in conjunction with the Company's unaudited financial statements for the period ending December 31, 2005 and are intended to provide the reader with a review of the factors that affected the Company's performance during the three and nine months ended December 31, 2005 and the factors reasonably expected to impact future operations and results. Forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. Information 3. When used in this document, words such as "estimate", "expect", "anticipate" and "believe" and similar expressions are intended to identify forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Such statements are used to describe management's future plans, objects and goals for the Company and therefore involve inherent risks and uncertainties. The reader is cautioned that actual results, performance or achievements may be materially different from those implied or expressed in such statements. Sanatana makes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or such factors which affect this information, except as required by law. Overview 4. The Company's exploration activities are carried out solely in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of in Northwest Territories Northwest Territories, territory (2001 pop. 37,360), 532,643 sq mi (1,379,028 sq km), NW Canada. The Northwest Territories lie W of Nunavut, N of lat. 60°N, and E of Yukon. and Nunavut Nunavut (n  `nəvt') [Inuktituk,=our land], territory (2001 pop. 26,745), 772,260 sq mi (2,000,671 sq km), NE Canada. . Sanatana has carried out
prospecting and exploration for diamonds at the Mackenzie Mackenzie, river, c.1,120 mi (1,800 km) long, issuing from Great Slave Lake, Northwest Territories, Canada, and flowing generally NW to the Arctic Ocean through a great delta. Between Great Slave Lake and Lake Athabasca it is known as the Slave River. Diamond
Project since its incorporation in June June: see month. 2004. As at December 31, 2005,
Sanatana held rights to approximately 20 million acres comprising the
Mackenzie Diamond Project. In order to reduce its bonding requirements
for the 2006 exploration season, the Company has subsequently allowed
its rights over approximately 4 million acres of the Mackenzie Diamond
Project, selected based on current exploration results, to lapse (language) LAPSE - A single assignment language for the Manchester dataflow machine.["A Single Assignment Language for Data Flow Computing", J.R.W. Glauert, M.Sc Diss, Victoria U Manchester, 1978]. . In the nine month period ended December 31, 2005 Sanatana has carried out a two pronged prong n. 1. A thin, pointed, projecting part: a pitchfork with four prongs. 2. A branch; a fork: the two prongs of a river. tr.v. exploration program consisting of an airborne airborne /air·borne/ (ar´born) suspended in, transported by, or spread by air. airborne, adj carried through the air. In health care settings, viruses or bacteria may become airborne, e.g. geophysical survey Geophysical survey refers to the systematic collection of geophysical data for spatial studies. Geophysical surveys may use a great variety of sensing instruments, and data may be collected from above or below the Earth's surface or from aerial or marine platforms. that covered most of the Mackenzie Diamond Project and a field exploration program consisting of till sampling, with closer density spacing than that of 2004. The processing of the 2,135 till samples collected during the summer 2005 exploration program continues. The processing of these samples has been completed and about 75% of the samples have been observed as of the end of January January: see month. , 2006. The majority of the 160,000 line kilometer kilometer one thousand (103) meters; 3280.83 feet; five-eighths of a mile; abbreviated km. airborne magnetic survey has been interpreted. Preliminary indications are that there is an increasing correlation between kimberlite kimberlite: see diamond. kimberlite or blue ground Dark, heavy, often fragmented igneous rock that may contain diamonds in the rock matrix. indicator minerals collected from the till samples and magnetic geophysical ge·o·phys·ics n. (used with a sing. verb) The physics of the earth and its environment, including the physics of fields such as meteorology, oceanography, and seismology. anomalies. Exploration expenditures, particularly in relation to the airborne geophysics geophysics, study of the structure, composition, and dynamic changes of the earth, its atmosphere, hydrosphere and magnetosphere, based on the principles of physics. surveys and the field exploration programs, have been in line with predictions and budgets. 5. On July 28, 2005, Sanatana was admitted to AIM, raising approximately $5.0 m to fund its proposed exploration programs over the Mackenzie Diamond Project and general corporate expenses. 6. On January 30, 2006, an access and benefits agreement to all Deline de`line´ v. t. 1. To delineate. 2. To mark out. surface lands within Sanatana's Mackenzie Diamond Project area has been signed with the Deline Land Corporation. This provides access to the Kilekale Lake area where at least 12 targets are scheduled to be subjected to detailed geophysical surveys and drilling for potential kimberlites during the proposed spring 2006 exploration program. Negotiations are still continuing for land use permits in respect of the drill target areas. 7. On January 26, 2006, Kennecott Exploration Canada Inc ("Kennecott") has agreed to provide the necessary Letters of Credit to cover the Annual Bonding Requirements for exploration activities at the Company's Mackenzie Diamond Project. 8. On January 6, 2006, Sanatana has entered into an engagement agreement with Canaccord Capital Corporation ("Canaccord") pursuant to which Canaccord will act as Sanatana's agent and use commercially reasonable efforts in connection with a placement by way of long form prospectus, in the provinces of British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography , Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. , Manitoba Manitoba (mănĭtō`bə), province (2001 pop. 1,119,583), 250,934 sq mi (650,930 sq km), including 39,215 sq mi (101,580 sq km) of water surface, W central Canada. and Ontario Ontario, city, United States Ontario, city (1990 pop. 133,179), San Bernardino co., S Calif., near Los Angeles, in a region of vineyards; inc. 1891. , of up to 4,000,000 flow through common shares at an issue price anticipated to be $1.75 per share for maximum gross proceeds of $7,000,000. The proceeds of the financing will be used for exploration expenditures. 9. Sanatana has applied to list its common shares on the TSX Venture Exchange TSX Venture Exchange Originally called the Canadian Venture Exchange (CDNX), this was a result of the merger of the Vancouver and Alberta stock exchanges. The goal of TSX Venture Exchange is to provide venture companies with effective access to capital while protecting investors. . The listing is subject to the Company fulfilling all of the listing requirements Listing requirements Requirements, including minimum shares outstanding, market value, and income, that are laid down by an exchange for any stock to be listed for trading. of the TSX Venture Exchange, including prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). distribution and financial requirements. 10. At December 31, 2005 the Company held cash of $2.9 m for use in exploration programs and working capital needs. Results of operations 11. Mineral exploration costs form the bulk of the Company's expenditures for the period from June 21, 2004 (incorporation) to March 31, 2005 and for the nine months ending Dec 31, 2005. These costs are set out in the following table:
9 months ended June 2004 to
Dec 31, 2005 March 31,2005
Helicopter and fixed wing
aircraft costs 4,637,488 911,433
Sampling and assays 1,421,773 438,410
Labour 180,344 127,449
Reimbursable bonds and deposits 2,487,186 2,368,584
Geological services 1,397,940 524,840
Project management fees 497,000 -
Other expenses 283,727 576,414
Recoveries (206,789) -
Kennecott option payment (2,500,000) -
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Total costs for the period 8,198,669 4,947,130
12. In the period ended March 31, 2005, Sanatana sourced legacy data and created a multi-dimensional, single data base using the Geoinformatics Geoinformatics is a science which develops and uses information science infrastructure to address the problems of geosciences and related branches of engineering. Geoinformatics combines geospatial analysis and modeling, development of geospatial databases, information systems Intervention A procedure used in a lawsuit by which the court allows a third person who was not originally a party to the suit to become a party, by joining with either the plaintiff or the defendant. Process. In addition a summer field program was carried out in 2004 and 1310 till samples were collected. Based on kimberlite indicator minerals recovered from these till samples at least 7 separate potential diamondiferous kimberlite clusters were identified. 13. From April to December 2005, Sanatana carried out a two pronged exploration program consisting of a 160,000 line kilometre airborne geophysical survey (principally magnetics Mag`net´ics n. 1. The science of magnetism. Noun 1. magnetics - the branch of science that studies magnetism magnetism ) over the majority of the Mackenzie Diamond Project area and a till sampling program at much closer density than last year over the potential kimberlite cluster target areas. A total of 2135 till samples weighing weigh 1 v. weighed, weigh·ing, weighs v.tr. 1. To determine the weight of by or as if by using a scale or balance. 2. approximately 80 tonnes were collected in the period between July and September September: see month. 2005. From September to December, 2005 processing of these till samples was undertaken. Quarterly data (unaudited) 14. Quarterly figures for the Company for the period ending December 31, 2005 are as per the schedule below:
(In thousands of dollars, except per share amounts)
Sept 30 Dec 31 Mar 31 June 30 Sept 30 Dec 31
2004 2004 2005 2005 2005 2005
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Revenue: 0 0 0 0 0 0
Loss from
Operations: 53 23 145 140 190 299
Loss: (53) (23) (145) (140) (190) (299)
Basic and
diluted
loss
per share: (0.01) 0.00 (0.05) 0.00 (0.01) (0.01)
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Management Agreements and transactions with Related Parties
15. For the 9 month period to Dec 31, 2005:
Misape Peter St George Hermes
$ Mgt Inc. Miles Minerals Ltd. Mgt Totals
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Administration
fees - - - 9,000 9,000
Consulting fees - - 32,169 - 32,169
Management
Services 45,500 38,500 - - 84,000
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Totals: 45,500 38,500 32,169 9,000 125,169
Notes: 1 2 3 4
1 Fees paid or accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. to a management company controlled by a director of the Company. The director provides management and technical services 2 Mr. Peter Miles Peter Miles is a British actor. He has played many television roles including several different characters in Z-Cars and Doctor Who. His other television work has included Survivors, The Sweeney, Dixon of Dock Green, Moonbase 3 provides financial and management services 3 Fees paid or accrued for financial and administrative services by a company controlled by a director of the Company 4 Fees paid or accrued for secretarial services by a company controlled by a director of the Company 5 In addition to the above, fees for directors totalled $ 36,625. Critical accounting estimates 16. Critical accounting estimates represent estimates that are highly uncertain and for which changes in those estimates could materially impact our financial statements. Costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the acquisition, exploration and development of non-producing resource properties are capitalised until such time as either economically ec·o·nom·i·cal adj. 1. Prudent and thrifty in management; not wasteful or extravagant. See Synonyms at sparing. 2. Intended to save money, as by efficient operation or elimination of unnecessary features; economic: recoverable reserves are established or the properties are sold or abandoned. Based on the results at the conclusion of each phase of an exploration program, management re-evaluates properties that are not suitable as prospects to determine if future exploration is warranted, and that carrying values Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. are appropriate. The decision to capitalise Verb 1. capitalise - supply with capital, as of a business by using a combination of capital used by investors and debt capital provided by lenders capitalize exploration expenditures and the timing of the recognition that the capitalised exploration is unlikely to have future economic benefits, can materially affect the reported earnings of the Company. Other MD&A requirements 17. Sanatana's business of exploring mineral resources Noun 1. mineral resources - natural resources in the form of minerals natural resource, natural resources - resources (actual and potential) supplied by nature involves a variety of operational, financial and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. risks that are typical in the natural resource industry. The Company attempts to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. these risks and minimise their effect on its financial
performance, but there is no guarantee that the Company will be
profitable in the future, and Sanatana common shares should be
considered speculative SpeculativeSecurities that involve a high level of risk. speculative Of or relating to an asset or a group of assets with uncertain returns. The greater the degree of uncertainty the more speculative the asset. . 18. There can be no assurance that any funding required by the Company will become available to it, and if so, that it will be offered on reasonable terms, or that the Company will be able to secure such funding through third party financing or cost sharing arrangements. Furthermore there is no assurance that the Company will be able to secure new mineral properties or projects, or that they can be secured on competitive terms. 19. Given the size of the Company and the involvement at all levels of the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and CFO See Chief Financial Officer. , we consider that the disclosure controls and procedures in place as of the end of the period covered by the interim filings are effective. Additional information 20. Additional information relating to the Company is available on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at the SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review website located at www.sedar.com Disclosure of outstanding share data 21. Sanatana's shares trade on the London Stock Exchange Alternative Investment Market ("AIM") under the Symbol SAN. The Company is authorised Adj. 1. authorised - endowed with authority authorized lawful - conformable to or allowed by law; "lawful methods of dissent" legitimate - of marriages and offspring; recognized as lawful to issue shares without par value, and the Company had 30,679,810 common shares on issue at April 1, 2005. On July 28, 2005, the Company issued 2,926,984 fully paid ordinary shares in respect of the financing of $ 5,159,759. Of these, 36,586 shares were issued as listing costs of $ 64,026. At the end of the period ended December 31, 2005, there were 33,606,794 common shares issued and outstanding and no share options or warrants outstanding. Risks and opportunities 22. Mineral exploration and development Sanatana's properties (the "Properties") are in the exploration stage and are without a known body of commercial ore. Development of the Properties will only proceed upon obtaining satisfactory exploration results. Mineral exploration and development involve a high degree of risk and few properties, which are explored, are ultimately developed into producing mines. There is no assurance that even if a body of commercial ore is discovered on the Properties, a mine will be brought into commercial production. The feasibility fea·si·ble adj. 1. Capable of being accomplished or brought about; possible: a feasible plan. See Synonyms at possible. 2. of developing a mineral deposit once discovered is dependent on a number of factors, including the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices and government regulations. 23. The long term profitability of the Company's operations will be in part directly related to the cost and success of its exploration programmes, which may be affected by a number of factors, which are beyond the control of the Company. Additional financing 24. The Company does not currently have sufficient financial resources to undertake by itself all of its planned exploration and possible development programmes. The exploration and subsequent development of the Properties may therefore depend on the Company's ability to obtain additional required financing. The Company has limited financial resources and there is no assurance that additional funding will be available to allow the Company to fulfil ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. its obligations on the Properties. Failure to obtain additional financing could result in delay or indefinite INDEFINITE. That which is undefined; uncertain. INDEFINITE, NUMBER. A number which may be increased or diminished at pleasure. 2. When a corporation is composed of an indefinite number of persons, any number of them consisting of a majority of those postponement of further exploration and the possible loss of the Company's interest in the Properties. Governmental Regulation 25. Exploration, development and mining of the Properties will be affected to varying degrees by: i. government regulations relating to such matters as environmental protection, health, safety and labour; ii. mining law; iii. restrictions on production; price controls; tax increases; iv. maintenance of claims; v. tenure; and vi. expropriation The taking of private property for public use or in the public interest. The taking of U.S. industry situated in a foreign country, by a foreign government. Expropriation is the act of a government taking private property; Eminent Domain is the legal term describing the of property. 26. There is no assurance that future changes in such regulation, if any, will not adversely affect the Company's operations. Government approvals and permits are required in connection with the exploration activities proposed for the Properties. To the extent such approvals are required and not obtained, the Company's planned exploration, development and production activities may be delayed, curtailed, or cancelled can·cel v. can·celed also can·celled, can·cel·ing also can·cel·ling, can·cels also can·cels v.tr. 1. To cross out with lines or other markings. See Synonyms at erase. 2. entirely. 27. Failure to comply with applicable laws, regulations and requirements may result in enforcement action against the Company, including orders calling for the curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. or termination of operations on the properties, or calling for corrective cor·rec·tive adj. Counteracting or modifying what is malfunctioning, undesirable, or injurious. n. An agent that corrects. corrective, n or remedial REMEDIAL. That which affords a remedy; as, a remedial statute, or one which is made to supply some defects or abridge some superfluities of the common law. 1 131. Com. 86. The term remedial statute is also applied to those acts which give a new remedy. Esp. Pen. Act. 1. measures requiring considerable capital investment. Parties engaged in mineral exploration and mining activities may be subject to civil and criminal liability as a result of failure to comply with applicable laws and regulations. 28. Amendments to current laws, regulations and permitting requirements affecting mineral exploration and mining activities could have a material adverse impact on the Company's operations and prospects. Claim Titles and Aboriginal Rights 29. Aboriginal rights may be claimed with respect to the Prospecting Permits or other types of tenure with respect to which rights have been conferred con·fer v. con·ferred, con·fer·ring, con·fers v.tr. 1. To bestow (an honor, for example): conferred a medal on the hero; conferred an honorary degree on her. . The Company is not aware of any aboriginal land claims Aboriginal land claims are claims of Native or Aboriginal peoples (also referred to as Indigenous peoples) about their ownership of land before the arrival of settlers, primarily Europeans. having been asserted or any legal actions relating to aboriginal issues having been instituted with respect to the Properties. The Company is aware of the mutual benefits afforded by co-operative relationships with indigenous Indigenous may refer to:
Sanatana Diamonds Inc.
(An Exploration Stage Company)
Financial Statements
For the three and nine months ended December 31, 2005, the
three months ended December 31, 2004, and the period
from June 25, 2004 (Incorporation) to December 31, 2004
(expressed in Canadian dollars)
(UNAUDITED)
The accompanying unaudited interim financial statements of the
Company have been prepared by and are the responsibility of the
Company's management.
The Company's independent auditor has not performed a review of
these financial statements in accordance with the standards
established by the Canadian Institute of Chartered Accountants for a
review of interim financial statements by an entity's auditor.
(The Company's independent auditor has not performed a review of
these financial statements)
Sanatana Diamonds Inc.
(An Exploration Stage Company)
Balance Sheets
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(expressed in Canadian dollars)
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As at December 31, March 31,
2005 2005
(Unaudited) (Audited)
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Assets
Current assets
Cash and cash equivalents $ 2,883,207 $ 1,183,691
Receivables 129,795 172,144
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3,013,002 1,355,835
Deferred offering costs (Note 3(b)) - 189,411
Exploration advances 45,644 320,351
Mineral properties and deferred
exploration costs (Note 2) 8,198,669 4,947,130
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$ 11,257,315 $ 6,812,727
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Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued
liabilities $ 143,693 $ 187,460
Future income tax liability 574,269 599,515
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717,962 786,975
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Shareholders' equity
Share capital (Note 3) 11,389,239 7,421,603
Subscriptions receivable - (1,175,000)
Accumulated deficit (849,886) (220,851)
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10,593,353 6,025,752
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$ 11,257,315 $ 6,812,727
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Going Concern Assumption (Note 1)
Approved by the Board of Directors
--------------------- ---------------------
Peter Miles, Director Glenn Laing, Director
The accompanying notes are an integral part of these financial
statements
(The Company's independent auditor has not performed a review of
these financial statements)
Sanatana Diamonds Inc.
(An Exploration Stage Company)
Interim Statements of Loss and Accumulated Deficit
for the three and nine months ended December 31, 2005,
the three months ended December 31, 2004,
and the period from June 25, 2004 (Incorporation) to December 31,
2004
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(expressed in Canadian dollars)
(Unaudited)
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Nine Months Period from
Three Months Ended Ended June 25, 2004
December 31, December 31, to Dec 31,
2005 2004 2005 2004
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Expenses
Consulting fees $ 53,479 $ - $ 79,103 $ -
Filing fees 21,442 - 38,313 592
Investor relations 13,494 - 54,303 -
Management fees 36,000 - 84,000 -
Office and
administration 28,986 1,250 53,047 4,010
Professional fees 137,964 10,952 249,284 38,737
Transfer agent fees 2,751 350 27,061 350
Travel and
accommodation 23,716 10,640 90,130 32,160
317,832 23,192 675,241 75,849
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Other Income
Interest income (19,037) - (20,960) -
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Loss before
income taxes (298,795) (23,192) (654,281) (75,849)
Decrease in
future income
tax liability - - 25,246 -
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Loss for the
period (298,795) (23,192) (629,035) (75,849)
Accumulated
deficit,
beginning of
period (551,091) (52,657) (220,851) -
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Accumulated
deficit,
end of
period $ (849,886) $ (75,849) $ (849,886) $ (75,849)
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Loss per share,
basic and
diluted $ (0.01) $ (0.00) $ (0.03) $ (0.02)
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Weighted average
number of
common shares
outstanding
- basic and
diluted 33,606,794 6,148,546 32,346,267 3,484,112
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The accompanying notes are an integral part of these financial
statements
(The Company's independent auditor has not performed a review of
these financial statements)
Sanatana Diamonds Inc.
(An Exploration Stage Company)
Interim Statements of Cash Flows
for the three and nine months ended December 31, 2005,
the three months ended December 31, 2004, and the period
from June 25, 2004 (Incorporation) to December 31, 2004
(expressed in Canadian dollars)
(Unaudited)
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Nine Months Period from
Three Months Ended Ended June 25, 2004
December 31, December 31, to Dec 31,
2005 2004 2005 2004
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Cash provided by
(used in):
Operating
activities:
Net loss for
the period $(298,795) $(23,192) $(629,035) $(75,849)
Items not
involving
cash:
Decrease
in Future
income tax
liability - - (25,246) -
Changes in
non-cash
working
capital
balances:
Receivables 111,317 (145,145) 42,349 (145,145)
Accounts
payable
and
accrued
liabilities 84,699 - 67,355 -
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(102,779) (168,337) (544,577) (220,994)
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Investing
activities:
Increase
(decrease)
in exploration
advances (45,644) - 274,707 -
Mineral
properties
and deferred
exploration
costs (1,860,048) (2,811,898) (5,780,511) (2,811,898)
Option
payment
Kennecott - - 2,500,000 -
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(1,905,692) (2,811,898) (3,005,804) (2,811,898)
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Financing
activities:
Common
share
proceeds - 2,314,986 5,095,733 3,874,986
Share
subscriptions
receivable - (1,175,000) 1,175,000 -
Offering
Costs - (131,100) (1,020,836) (131,100)
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- 1,008,886 5,249,897 3,743,886
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Increase
(decrease)
in cash and
cash
equivalents(2,008,471) (1,971,349) 1,699,516 710,994
Cash and cash
equivalents,
beginning of
period 4,891,678 2,682,343 1,183,691 -
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Cash and
cash
equivalents,
end of
period $ 2,883,207 $ 710,994 $ 2,883,207 $ 710,994
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Supplementary
Non-Cash
Information
Shares issued
as listing
costs $ - $ - $ 64,026 $ 5,000
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The accompanying notes are an integral part of these financial
statements
(The Company's independent auditor has not performed a review of
these financial statements)
Sanatana Diamonds Inc.
(An Exploration Stage Company)
Notes to Interim Financial Statements
for the three and nine months ended December 31, 2005, the three
months ended December 31, 2004, and the period from June 25, 2004
(Incorporation) to December 31, 2004
(expressed in Canadian dollars)
(Unaudited)
The accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. financial statements for the interim period ended December 31, 2005 are prepared on the basis of accounting principles generally accepted ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") in Canada. These financial statements are unaudited, but in the opinion of management, reflect all adjustments (consisting of normal recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. ) necessary for fair presentation of the financial position, operations and cash flows for the interim period presented. The financial statements for the interim period are not necessarily indicative of the results to be expected for the full year. These financial statements do not contain the detail or footnote Text that appears at the bottom of a page that adds explanation. It is often used to give credit to the source of information. When accumulated and printed at the end of a document, they are called "endnotes." disclosure concerning accounting policies and other matters, which would be included in full year financial statements, and therefore should be read in conjunction with the Company's audited financial statements for the period from June 25, 2004 (Incorporation) to March 31, 2005. 1. Nature of Business and Ability to Continue as a Going Concern Sanatana Diamonds Inc. ("the Company") was incorporated on June 25, 2004 in the Province of British Columbia under the British Columbia Business Corporations Act, and selected March 31 as its fiscal year end. The Company is an exploration stage company. Its principal business activities are the acquisition, exploration and development of mineral properties. The Company has entered into agreements regarding properties in the Northwest Territories in Canada. These financial statements are prepared on a going-concern basis, which contemplates that the Company will continue realizing its assets and discharging its liabilities and commitments in the normal course of business. As at December 31, 2005, the Company has been operating for just over one year, has no source of operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. , and has an accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. deficit of $849,886. The Company is in the process of exploring its mineral property interests and has not yet determined whether its mineral property interests contain mineral reserves that are economically recoverable. The Company's continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the and the underlying carrying value and recoverability of the amounts shown for deferred exploration costs are entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of the mineral property interests, and on future profitable production or proceeds from the disposition of the mineral property interests. The Company is considered to be an exploration stage company as it has yet to generate revenue from operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Although there are no assurances that management's plan will be realized, management believes the Company will be able to continue operations into the future. The financial statements do not include any adjustments to the carrying value of assets and liabilities, the reported revenues and expenses and balance sheet classifications that would be necessary if the going concern assumption were not appropriate. Such adjustments could be material. 2. Mineral Properties and Deferred Exploration Costs The cumulative costs of the Company's interest in its Northwest Territories mineral properties are as follows:
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Three Months ended Nine Months ended
Dec 31, 2005 Dec 31, 2005
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Helicopter and fixed
wing aircraft costs:
Opening balance $ 3,475,750 $ 911,433
Incurred in the period 1,161,738 3,726,055
--------- ---------
Closing balance 4,637,488 4,637,488
--------- ---------
Sampling and assays
Opening balance 1,070,652 438,410
Incurred in the period 351,121 983,363
--------- ---------
Closing balance 1,421,773 1,421,773
--------- ---------
Labour
Opening balance 180,344 127,449
Incurred in the period - 52,895
--------- ---------
Closing balance 180,344 180,344
--------- ---------
Reimbursable bonds and deposits
Opening balance 2,485,198 2,368,584
Incurred in the period 1,988 118,602
--------- ---------
Closing balance 2,487,186 2,487,186
--------- ---------
Geological services
Opening balance 1,415,647 524,840
Incurred / (refunded) in the period (17,707) 873,100
--------- ---------
Closing balance 1,397,940 1,397,940
--------- ---------
Project management fees
Opening balance 448,810 -
Incurred in the period 48,190 497,000
--------- ---------
Closing balance 497,000 497,000
--------- ---------
Other
Opening balance 235,293 576,414
Reclassified to above categories - (341,121)
Incurred in the period 48,434 48,434
--------- ---------
Closing balance 283,727 283,727
--------- ---------
Recoveries
Opening balance (185,717) -
Received in the period (21,072) (206,789)
--------- ---------
Closing balance (206,789) (206,789)
--------- ---------
Option Payment- Kennecott
Opening balance (2,500,000) -
Received in the period - (2,500,000)
Closing balance (2,500,000) (2,500,000)
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8,198,669 8,198,669
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Recoveries are amounts from "Reimbursable re·im·burse tr.v. re·im·bursed, re·im·burs·ing, re·im·burs·es 1. To repay (money spent); refund. 2. To pay back or compensate (another party) for money spent or losses incurred. bonds and deposits" that have been refunded to the Company. On July 31, 2004, the Company entered into a sale and purchase agreement with the Jaeger jaeger (yā`gər), common name for several members of the family Stercorariidae, member of a family of hawklike sea birds closely related to the gull and the tern. The skua is also a member of this family. Joint Venture (the "Jaeger Diamond Property Sale and Purchase Agreement") to purchase the right to any diamonds located on a series of properties (the MacKenzie Diamond Project). The MacKenzie Diamond Project covers approximately 20 million acres in the Inuvialuit The Inuvialuit (in Inuvialuktun: the real people) are Inuit people who live in the western Canadian Arctic region. They are descendants of the Thule people, other descendants of which inhabit Russia. , Gwich'in and Sahtu The Sahtú (or North Slavey) are an Aboriginal peoples of Canada Dene people living in the vicinity of Great Bear Lake (Sahtú, the source of their name), Northwest Territories, Canada. mining districts in the Northwest Territories, Canada. The Jaeger Joint Venture ("Jaeger") initially retained a 20% carried interest in the properties. Pursuant to the agreement the Company issued 16,000,000 common shares to Jaeger and reimbursed costs incurred by Jaeger totalling $76,933. In addition, the Company agreed to pay 100% of the first $4,000,000 in exploration costs, after which Jaeger was to contribute 11.12% of exploration costs above $4,000,000. Under the terms of the November November: see month. 25, 2004 Geoinformatics Agreement ("Geoinformatics" - a company with a director in common), the Company acknowledges that Geoinformatics is entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to a 0.9% gross overriding (programming) overriding - Redefining in a child class a method or function member defined in a parent class. Not to be confused with "overloading". royalty and a member of the Jaeger Joint Venture is entitled to a 2% gross overriding royalty. Jaeger is an entity partially owned by a director of the Company. On January 27, 2005, the Company entered into an agreement with the Jaeger Joint Venture, pursuant to which the parties agreed to amend the Jaeger Diamond Property Sale and Purchase Agreement to include a geographical area of common interest within which either party may require that any mineral interests acquired by either party be added to the property to which that agreement applies. The geographical area of interest includes that part of the NWT NWT or N.W.T. abbr. Northwest Territories NWT Northwest Territories (of Canada) bounded by the line of latitude Noun 1. line of latitude - an imaginary line around the Earth parallel to the equator parallel of latitude, parallel, latitude polar circle - a line of latitude at the north or south poles 65[bar]North; bounded on the west by meridian Meridian (mərĭd`ēən), city (1990 pop. 41,036), seat of Lauderdale co., E Miss., near the Ala. line; settled 1831, inc. 1860. 135[bar]West; bounded on the east by meridian 115[bar]West; and bounded on the north by the coastline of the Arctic Ocean Arctic Ocean, the smallest ocean, c.5,400,000 sq mi (13,986,000 sq km), located entirely within the Arctic Circle and occupying the region around the North Pole. . On March 4, 2005, the Company entered into another agreement with Jaeger whereby it issued 3,000,000 common shares (based on a valuation report obtained by management) for an additional 10% carried interest in the property discussed above, increasing the Company's interest to 90%. The purchase of this additional 10% carried interest requires that the Company now pay all exploration and mine construction costs, relieving re·lieve tr.v. re·lieved, re·liev·ing, re·lieves 1. To cause a lessening or alleviation of: relieved all his symptoms; relieved the tension. 2. Jaeger of any responsibility for costs toward the property. The property is subject to a 2.9% gross overriding royalty on diamond production, consisting of a 2% overriding royalty to a member of the Jaeger Joint Venture and 1% of the Company's 90% interest in the MacKenzie property to Geoinformatics. In May 2005, the Company acquired the diamond rights to an additional 42 prospecting permits from a member of the Jaeger Joint Venture for $60,000. In June 2005, the Company acquired from Jaeger Joint Venture all other mineral rights, excluding uranium uranium (y rā`nēəm), radioactive metallic chemical element; symbol U; at. no. 92; at. wt. 238.0289; m.p. 1,132°C;; b.p. 3,818°C;; sp. gr. 19. rights, to the prospecting
permits to which it owns diamond rights, subject to the Jaeger Joint
Venture retaining a 10% production carried interest and subject to a
member of the Jaeger Joint Venture retaining a 2% net smelter returns
royalty (NSR NSRabbr. normal sinus rhythm NSR Normal sinus rhythm, see there ). In June 2005, a member of the Jaeger Joint Venture executed an amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. and restated declaration of trust in which he acknowledges that he holds recorded title to a total of 462 prospecting permits with a total acreage of 19,766,689 acres as bare trustee and nominee nominee n. 1) a person or entity who is requested or named to act for another, such as an agent or trustee. 2) a potential successor to another's rights under a contract. for and on behalf of the Company to the extent of any diamonds or other minerals, excluding uranium, located on, in or under such permits, including the right to explore for and exploit any and all such diamonds or other minerals. The Company has no rights in respect of uranium. The Company also has rights in 52 unpatented mining claims which were staked on the Company's behalf in spring, 2005. These claims were registered to an outside party in June 2005 and are subject to the Company's agreement with the Jaeger Joint Venture by virtue of an area of interest provision contained therein. In July 2005, the Company signed an agreement with Kennecott Canada Exploration Inc (Kennecott) which contains the following options and requirements: i) The agreement grants Kennecott a 15% undivided interest undivided interest n. title to real property held by two or more persons without specifying the interests of each party by percentage or description of a portion of the real estate. in the MacKenzie Diamond Project property in exchange for assuming proportionate pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. responsibility for both a 2% gross overriding royalty and a 2% NSR royalty and for paying $2.5 million (received) to Sanatana to fund the 2005 exploration program, as well as paying an additional $2.5 million to Sanatana on or before the first anniversary of the first closing date of the agreement. Kennecott will also contribute 15% of ongoing exploration costs beginning in 2007. ii) The agreement also grants Kennecott the option to earn up to a 60% interest in any identified kimberlite or deposit ("Development Area") by solely funding the activities on the Development Area until a decision to mine is made. Upon Kennecott earning this further interest in respect of a particular kimberlite or mineral deposit, the Kennecott Agreement provides that the Development Area will be carved carve v. carved, carv·ing, carves v.tr. 1. a. To divide into pieces by cutting; slice: carved a roast. b. out of the entire Mackenzie Diamond Project area and a development joint venture will be created in respect of the carved out area. The development joint venture will be jointly managed with each party funding its own interest and each party having votes according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. its respective interest. The party with the majority interest will be project manger manger cattle trough which served as crib for Christ. [N.T.: Luke 2:7] See : Nativity and be entitled to an annual management fee of 1% of operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . Either party's failure to contribute will lead to dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. of that party's interest in the development joint venture In the event of production of diamonds from any particular development joint venture, the entire Mackenzie Diamond project will become the property of that development joint venture and all subsequent exploration, evaluation and development will be carried out by the development joint venture. Rio Tinto Rio Tinto may refer to:
iii) The agreement requires Kennecott to subscribe To sign up for a service. Contrast with unsubscribe. See opt-in and syndication format. (messaging) subscribe - To request to receive messages posted to a mailing list or newsgroup. In contrast to the mundane use of the word this is often free of charge. for a minimum of $2.5 million or 9.9% of the outstanding shares in the capital of Sanatana on the completion of the initial public offering and grants Kennecott the option to subscribe for an additional $2.5 million or the equivalent number of shares to bring Kennecott's ownership of Sanatana up to 9.9% of the issued and outstanding shares in the capital of Sanatana as at the end of the second closing date. Also, Kennecott may elect to purchase $1M worth of shares on each anniversary closing date until the first time it chooses not to so elect. The reimbursable bond consists of an exploration deposit paid to the Northwest Territories government to ensure required exploration and reporting is done. In order for the deposit to be refunded, exploration activity must be performed on the property in the amount of the deposit during the period to which the deposit relates. These deposits must accompany To go along with; to go with or to attend as a companion or associate. A motor vehicle statute may require beginning drivers or drivers under a certain age to be accompanied by a licensed adult driver whenever operating an automobile. the applications for permits. Permit applications must be filed in the month of December previous to the calendar year to which the application pertains. Future exploration deposits will be required as summarized in the table below. However it should be noted that these amounts are based on the current area of exploration, and are likely the maximum amounts that will be paid. Since deposits are calculated on a per acre basis, should the company decide to reduce the area of exploration; the required deposits will also be reduced. Exploration Deposits Property located above the 68th parallel --------------------------------------------------------------------- Jan 2004 - Jan 2006 Paid by Jaeger Jan 2006 - Jan 2008 $ 1,275,437 Jan 2008 - Jan 2009 2,550,874 Property located below the 68th parallel --------------------------------------------------------------------- 2004 permits: Feb 2004 - Feb 2005 Paid by Jaeger 2005 permits: Feb 2005 - Feb 2006 $ 2,368,584(i) ((i) - Paid Jan 2005) Feb 2006 - Feb 2007 5,020,600 Feb 2007 - Feb 2008 618,594 --------------------------------------------------------------------- In December 2003, exploration deposits of $1,815,544 were paid by Jaeger to the Northwest Territories government for 2004 exploration permits. $1,265,001 of these deposits has been refunded to Jaeger as of the date of these financial statements. In the event that insufficient exploration expenditures are incurred by the Company on the properties above the 68th parallel, the balance of the deposits, $550,543, may not be fully refunded to Jaeger, and the Company may be liable to Jaeger for the shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. . Any shortfall in amounts refunded will be recorded in the period the shortfall becomes likely to occur. Management believes these amounts will be fully refunded to Jaeger. 3. Share capital Authorized: Unlimited common shares without par value Issued: --------------------------------------------------------------------- --------------------------------------------------------------------- Common Shares Number of Shares Amount --------------------------------------------------------------------- Balance, March 31, 2005 30,679,810 $ 7,421,603 Public offering 2,890,398 5,095,733 Offering costs -- (1,192,123) Shares issued as listing costs 36,586 64,026 --------------------------------------------------------------------- Balance, December 31, 2005 33,606,794 $ 11,389,239 --------------------------------------------------------------------- --------------------------------------------------------------------- (a) Flow-through shares As of December 31, 2005, the Company had extinguished ex·tin·guish tr.v. ex·tin·guished, ex·tin·guish·ing, ex·tin·guish·es 1. To put out (a fire, for example); quench. 2. To put an end to (hopes, for example); destroy. See Synonyms at abolish. 3. their commitment to spend unused proceeds from previous flow-through share issuances on qualifying Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. exploration activities. These additional expenditures have not yet been renounced to shareholders. At March 31, 2005, this commitment was $1,021,133. (b) Deferred offering costs Legal, brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. and accounting costs incurred in respect of the Company's AIM registration were deferred until the registration was completed on July 28, 2005. After the AIM registration, the costs previously deferred were recorded as a reduction to proceeds received from the associated common shares issued upon registration. See also Note 3(d). (c) Stock options and warrants The Company did not issue stock options or warrants during the period from June 25, 2004 (Incorporation) to December 31, 2005. As of May 11, 2005, the Company has adopted a stock option plan for the Company's employees and directors. The plan allows for the issuance of options numbering up to 10% of the outstanding number of common shares of the Company. (d) AIM listing The Company completed a listing and placement on the AIM Market of the London Stock Exchange. In conjunction with the placement, 2,890,398 shares were issued at 82 pence pence n. Chiefly British A plural of penny. pence Noun a plural of penny USAGE: Since the decimalization of British currency and the introduction of the abbreviation p, , ($1.75) for gross proceeds of approximately Pounds Sterling 2.4 million Great Britain Great Britain, officially United Kingdom of Great Britain and Northern Ireland, constitutional monarchy (2005 est. pop. 60,441,000), 94,226 sq mi (244,044 sq km), on the British Isles, off W Europe. The country is often referred to simply as Britain. Pounds (GBP GBP In currencies, this is the abbreviation for the British Pound. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) ($ 5.0 million). An additional 36,586 shares were issued to Insinger de Beaufort Beaufort may refer to:
4. Related Party Transactions and Balances At December 31, 2005, the Company did not have any employees and had arrangements with a number of contractors to provide most of the administrative, accounting, and management services required. Certain directors and significant shareholders provided management and consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" to the Company. St. George George, river, c.345 mi (560 km) long, rising in a lake on the Quebec-Labrador boundary, E Canada. It flows N through Indian Lake (125 sq mi/324 sq km) to Ungava Bay (an arm of Hudson Strait). Minerals Limited, a private company 50% owned by a director of the Company, provided management and consulting services to the Company. Pursuant to agreements with the Company's directors, the Company has agreed to pay its directors a fee totalling Pounds Sterling 35,000 GBP ($74,690) per annum Per annum Yearly. .
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Services Three Months Nine Months Period from
Provided by: Ended Ended June 25, 2004
December 31, December 31, to Dec 31,
2005 2005 2004
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Directors and insiders $ 57,000 $ 129,625 $ -
St. George Minerals
Limited 28,545 32,169 -
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Balances included in
accounts payable and December 31, March 31,
accrued liabilities 2005 2005
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Directors $18,000 $ -
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5. Subsequent Events (a) On January 6, 2006 the Company entered into a financial arrangement with Canaccord Capital Corporation ("Canaccord") pursuant to which Canaccord will act as Sanatana's agent in connection with a placement by way of long form prospectus in the provinces of British Columbia, Alberta, Manitoba and Ontario, for up to 4,000,000 flow through common shares at an issue price of $ 1.75 per share for gross proceeds of $ 7,000,000. Offering size will be a minimum of $5,000,000 and a maximum of $ 7,000,000. A cash commission of 6% will be paid to Canaccord on proceeds raised. In addition Canaccord will be granted warrants to acquire Common shares of the Company equal to 6% of the number of Flow-Through Shares sold under the offering. A corporate finance fee of 100,000 common shares (the "Corporate Finance Fee Shares") shall be paid to Canaccord upon the completion of the Offering. Canaccord will also be paid an administration fee of $7,500, payable as to 50% at the commencement of the engagement and 50% upon closing. Completion of the financing is subject to regulatory approval. It is anticipated that Directors and management of the company will participate in the private placement. (b) On January 26, 2006 Kennecott agreed to provide the necessary Letters of Credit to cover the bonding requirements of approximately $5.2 million for the 2006 exploration season in respect of the 2004 Jaeger permits, the 2005 Jaeger permits and the Diamonds North permits, but excluding the lapsed LEGACY, LAPSED. A legacy is said to be lapsed or extinguished, when the legatee dies before the testator, or before the condition upon which the legacy is given has been performed, or before the time at which it is directed to vest in interest has arrived. Bac. Ab. Legacy, E; Com. Dig. permits. The Company has agreed that (1) any amounts drawn on these letters of credit will constitute a debt owing by the Company to Kennecott, (2) Kennecott will have a security interest in all of the Company's present and after acquired property and assets for any such debt owing, and (3) Kennecott will have the right, 90 days after making demand for any such debt owing, to increase the 15% interest it may earn in the Mackenzie Diamond Project by 1% for each $ 300,000 or portion thereof owing. (c) On January 30, 2006 the Company reached an Access Agreement to all Deline surface lands within the Company's Mackenzie Diamond Project area with the Deline Land Corporation. ("DLC (1) (Data Link Control) See data link and OSI. (2) (Data Link Control) The data link layer protocol (layer 2) that is used in IBM's SNA networking. See SNA, data link protocol and Microsoft DLC. ") This access agreement is key for the Company's proposed spring 2006 Exploration program in the Kilekale Lake area, where at minimum 12 targets will be subjected to detailed geophysical surveys and drilling for potential kimberlites. Subject to the renewal or termination, this Agreement commences on August 15, 2005 and will end December 31, 2007. Under the terms of the Agreement, the Company will: i) Pay Access Fees to DLC at a rate of $ 1,200/ha. for surface right access on the Deline Lands. ii) A $6,500 Annual Administration Fee with respect to the Exploration Activities. iii) For the 2006 Winter Drilling Exploration Activities Sanatana agrees that it will pay DLC a total of $ 25,000 for the completion of a traditional knowledge study. iv) Sanatana will contribute $ 30,000 towards a Social Impact trust, to be created by DLC, which function will be to foster the development of community infrastructure, as well as assist with cultural initiatives. v) Sanatana agrees to cover all of DLC negotiation costs in connection with this Agreement and will remit To transmit or send. To relinquish or surrender, such as in the case of a fine, punishment, or sentence. An individual, for example, might remit money to pay bills. TO REMIT. To annul a fine or forfeiture. 2. $ 30,000 upon execution of this Agreement, and $30,000 upon receipt by Sanatana of the land use permit applied for in December 2005, and to be issued by the Sahtu land and water board for the 2006 Exploration activities. vi) Sanatana agrees to obtain and keep in force throughout the term of this Agreement, comprehensive general third party liability insurance, the limits of which will be no less than $ 5 million, and vii) Consult with DLC to address the Environmental impact of the Exploration Activities and its consequences with respect to wildlife harvesting and migration. (d) On February February: see month. 16, 2006 the Company entered into agreement with Diamonds North and Majescor to purchase 10 prospecting permits registered in the name of Diamonds North Resources Ltd., and covering approximately 372,208 acres which are strategically located within the outer boundaries of the Mackenzie Diamond Project area. As consideration for the Diamonds North permits, the Company granted Diamonds North and Majescor a 1.5% gross overriding royalty on diamonds and a 1.5% net smelter royalty on other minerals, agreed to file a report of work and, when received, refund TO REFUND. To pay back by the party who has received it, to the party who has paid it, money which ought not to have been paid. 2. On a deficiency of assets, executors and administrators cum testamento annexo, are entitled to have refunded to them legacies the deposit lodged in respect of the Diamonds North Permits for the 2005 exploration season, and agreed to provide information and data with respect to the Diamonds North Permits. A member of the Jaeger Joint Venture has retained a 0.5% gross overriding royalty on diamonds and a 0.5% net smelter royalty on other minerals with respect to the Diamonds North Permits. (e) The Company has entered into an agreement, effective September 15, 2005, with St. George Minerals Ltd., a company controlled by a director of the Company, to provide financial and administrative management services. The agreement is for an initial term of three years and thereafter renewable on an annual basis. Under the terms of the Agreement, the Company will contribute 40 % of the gross rental paid by St. George Minerals Ltd for the office space occupied by the Company plus actual staff hours incurred at a set hourly rate. (f) In January 2006, based on results of 2004 till sampling and preliminary results of 2005 airborne geophysical surveying and till sampling, the Company decided to allow 88 of the 2004 Jaeger permits and 2 of the 2005 Jaeger permits (covering a combined total area of approximately 4 million acres) to lapse. The Company will not post bonds for these lapsed permits for the 2006 exploration season. Sanatana Diamonds Inc. (AIM:SAN) |
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