CA Filed by Filing Services Canada Inc. 403-717-3898

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

 

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

For the transition period from _________ to __________________

 

000-54416

(Commission File Number)

 

EMC METALS CORP.

(Exact name of registrant as specified in its charter)

 

British Columbia, Canada   98-1009717
(State or other Jurisdiction of Incorporation or organization)  

(I.R.S. Employer

Identification No.)

 

1430 Greg Street, Suite 501, Sparks, Nevada 89431

(Address of principal executive offices) (Zip Code)

 

(775) 355-9500

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by sections 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

 

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, a non-accelerated filer, or a smaller reporting company. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filed [ ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes [ ] No [X]

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of May 5, 2014, the registrant’s outstanding common stock consisted of 178,013,747 shares.

   
   

PART I.   FINANCIAL INFORMATION

 

Item 1.  Financial Statments

 

 


(An Exploration Stage Company)

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

QUARTER ENDED MARCH 31, 2014
 
 
1

 
 
EMC Metals Corp.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in US Dollars) (Unaudited)
 
 
As at:
 
March 31,
2014
   
December 31,
2013
 
             
             
ASSETS
           
             
Current
           
Cash
  $ 233,903     $ 785,075  
Prepaid expenses and receivables
    19,308       127,410  
                 
Total Current Assets
    253,211       912,485  
                 
Restricted cash (Note 3)
    144,188       149,868  
Property, plant and equipment (Note 5)
    9,320       10,278  
Mineral interests (Note 6)
    1,613,203       1,613,203  
                 
Total Assets
  $ 2,019,922     $ 2,685,834  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
Current
               
Accounts payable and accrued liabilities
  $ 310,339     $ 247,613  
Convertible debentures (Note 8)
    -       650,000  
Promissory notes payable (Note 9)
    1,204,875       1,204,875  
                 
Total Liabilities
    1,515,214       2,102,488  
                 
Stockholders’ Equity
               
Capital stock (Note 10) (Authorized: Unlimited number of shares; Issued and outstanding: 173,891,597 (2013 – 165,358,337))
    87,502,708       87,310,708  
Treasury stock (Note 11)
    (1,264,194 )     (1,264,194 )
Additional paid in capital (Note 10)
    2,109,493       2,108,327  
Accumulated other comprehensive loss
    (853,400 )     (853,400 )
Deficit accumulated during the exploration stage
    (86,989,899 )     (86,718,095 )
                 
Total Stockholders’ Equity
    504,708       583,346  
                 
Total Liabilities and Stockholders’ Equity
  $ 2,019,922     $ 2,685,834  

Nature and continuance of operations (Note 1)
Subsequent events (Note 14)
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

 
2

 
EMC Metals Corp.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in US Dollars) (Unaudited)
 
 
   
Cumulative amounts from incorporation on July 17, 2006 to March 31, 2014
   
Quarter ended
March 31, 2014
   
Quarter ended
March 31, 2013
 
                   
EXPENSES
                 
Amortization (Note 5)
  $ 2,149,755     $ 958     $ 1,075  
Consulting
    2,261,234       -       35,288  
Exploration
    15,126,677       52,756       307,071  
General and administrative
    7,304,237       47,322       75,247  
Insurance
    951,065       6,689       7,422  
Professional fees
    3,215,555       21,122       46,922  
Research and development
    3,042,091       -       -  
Salaries and benefits
    7,478,292       97,294       143,002  
Stock-based compensation (Note 10)
    5,416,151       1,166       21,032  
Travel and entertainment
    1,626,589       7,266       8,846  
                         
Loss from continuing operations before other items
    (48,571,646 )     (234,573 )     (645,905 )
                         
OTHER ITEMS
                       
Foreign exchange gain (loss)
    351,781       (7,231 )     (10,316 )
Gain on transfer of marketable securities
    181,238       -       -  
Gain on settlement of convertible debentures
    1,268,246       -       -  
Gain on sale of marketable securities
    1,720,016       -       -  
Write-off of mineral interests and property, plant and equipment (Note 5 and 6)
    (16,015,169 )     -       -  
Write-off of land and water rights
    (2,800,000 )     -       -  
Gain on insurance proceeds
    912,534       -       -  
Interest expense
    (847,974 )     (30,000 )     (146,279 )
Other income
    466,463       -       -  
Gain on disposition of assets
    933,075       -       -  
Change in fair value of derivative liability
    453,790       -       -  
Unrealized loss on marketable securities
    (3,070,425 )     -       -  
                         
      (16,446,425 )     (37,231 )     (156,595 )
                         
Loss from continuing operations before income taxes
    (65,018,071 )     (271,804 )     (802,500 )
                         
Deferred income tax recovery
    6,020,527       -       -  
                         
Loss from continuing operations for the period
    (58,997,544 )     (271,804 )     (802,500 )
Loss from discontinued operations (Note 4)
    (25,501,664 )     -       (107,788 )
                         
Loss for the period
    (84,499,208 )     (271,804 )     (910,288 )
Foreign currency translation adjustment
    (2,844,668 )     -       -  
Comprehensive loss for the period   $ (87,343,876 )   $ (271,804 )   $ (910,288 )
                         
Basic and diluted loss per common share
                       
Loss from continuing operations
          $ (0.00 )   $ (0.01 )
Loss from discontinued operations
          $ (0.00 )   $ (0.00 )
                         
Weighted average number of common shares outstanding
            166,022,035       165,358,337  

The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
3

 
 
EMC Metals Corp.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in US Dollars) (Unaudited)
 
 
   
Cumulative amounts from incorporation on July 17, 2006 to March 31, 2014
   
 
Quarter ended
March 31, 2014
   
 
Quarter ended
March 31, 2013
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Loss for the period
  $ (84,499,208 )   $ (271,804 )   $ (910,288 )
Items not affecting cash:
                       
Amortization
    2,360,301       958       5,927  
Research and development
    3,042,091       -       -  
Consulting paid with common shares
    9,379       -       -  
Gain on disposal of assets
    (933,075 )     -       -  
Convertible debenture costs
    (1,149,630 )     -       -  
Unrealized foreign exchange
    799,920       5,680       3,266  
Stock-based compensation
    5,416,151       1,166       21,032  
Unrealized gain on marketable securities
    (46,707 )     -       -  
Realized gain on marketable securities
    (1,720,016 )     -       -  
Write-off of mineral properties and property, plant & equipment
    39,442,452       -       -  
Write-off of land and water rights
    3,243,685       -       -  
Realized loss on transfer of marketable securities
    2,935,895       -       -  
Change in fair value of derivative liability
    (453,790 )     -       -  
Deferred income tax recovery
    (6,020,527 )     -       -  
Finance charge
    504,479       -       87,190  
      (37,068,600 )     (264,000 )     (792,873 )
Changes in non-cash working capital items:
                       
Decrease (increase) in prepaids and receivables
    (4,929 )     108,102       32,247  
Increase (decrease) in accounts payable and accrued liabilities
    (393,907 )     62,726       171,206  
Increase in due to related parties
    1,091,043       -       -  
Asset retirement obligations
    (999,176 )     -       -  
      (37,375,569 )     (93,172 )     (589,420 )
CASH FLOWS FROM INVESTING ACTIVITIES
                       
Cash acquired from subsidiary
    4,543,435       -       -  
Cash paid for Subsidiary
    (10,602,498 )     -       -  
Spin-out of Golden Predator Corp.
    (66,890 )     -       -  
Restricted cash
    (161,161 )     -       -  
Reclamation bonds
    747,862       -       -  
Proceeds from sale of marketable securities, net
    (3,881,287 )     -       -  
Proceeds from sale of property, plant and equipment
    5,633,294       -       -  
Purchase of property, plant and equipment
    (19,920,751 )     -       -  
Proceeds from sale of mineral interests
    517,550       -       -  
Additions to unproven mineral interests
    (4,224,388 )     -       -  
      (27,414,834 )     -       -  
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Common shares issued
    52,676,603       192,000       -  
Share issuance costs
    (1,190,801 )     -       -  
Special warrants
    12,095,274       -       -  
Options exercised
    370,812       -       -  
Warrants exercised
    10,534,109       -       -  
Notes payable
    (11,412,423 )     -       -  
Receipt of promissory note
    2,344,874       -       -  
Convertible debenture
    2,650,000       -       649,175  
Debt issuance costs
    (249,827 )     -       -  
Payment of promissory note and convertible debenture
    (3,335,228 )     (650,000 )     -  
Advances from related party
    191,508       -       -  
Loans advanced to Midway
    (1,822,651 )     -       -  
Loan repayment from Midway
    1,760,221       -       -  
      64,612,471       (458,000 )     649,175  
                         
Effect of foreign exchange on cash flows
    411,835       -       -  
                         
Change in cash during the period
    233,903       (551,172 )     59,755  
Cash, beginning of period
    -       785,075       190,215  
                         
Cash, end of period
  $ 233,903     $ 233,903     $ 249,970  
   
Supplemental disclosure with respect to cash flows (Note 13)
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
4

 
 
EMC Metals Corp.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Expressed in US Dollars) (Unaudited) Page 1 of 2
 
 
    Capital Stock                                          
    Number of Shares     Amount     Additional Paid in Capital    
Treasury
Stock
    Accumulated Other Comprehensive Loss     Deficit Accumulated During the Exploration Stage     Total  
             
$
     
$
     
$
     
$
     
$
     
$
 
Balance, July 17, 2006
    -       -       -       -       -       -       -  
Private placements
    5,000,000       3,017,350       -       -       -       -       3,017,350  
Excess of exchange amount over carrying
    -       -       -       -       -       -       -  
Excess of exchange amount over carrying amount of Springer Mining Company
    -       -       -       -       -       (2,490,691 )     (2,490,691 )
Loss for the period
    -       -       -       -       -       (316,382 )     (316,382 )
                                                         
Balance, December 31, 2006
    5,000,000       3,017,350       -       -       -       (2,807,073 )     210,277  
Private placements
    17,577,500       35,598,475       -       -       -       -       35,598,475  
Conversion of special warrants
    5,390,000       5,590,529       -       -       -       -       5,590,529  
Exercise of warrants
    50,000       74,235       -       -       -       -       74,235  
Share issuance costs – broker’s fees
    -       (1,202,721 )     97,565 00       -       -       -       (1,105,156 )
Share issuance costs – shares issued
    100,000       99,910       -       -       -       -       99,910  
Shares issued for mineral properties
    100,000       95,822       -       -       -       -       95,822  
Stock-based compensation
    40,000       38,314       472,489       -       -       -       510,803  
Loss for the year
    -       -       -       -       -       (5,579,477 )     (5,579,477 )
                                                         
Balance, December 31, 2007
    28,257,500       43,311,914       570,054       -       -       (8,386,550 )     35,495,418  
Private placements
    5,322,500       10,543,444       -       -       -       -       10,543,444  
Conversion of special warrants
    7,610,000       7,484,629       -       -       -       -       7,484,629  
Share issuance costs – broker’s fees
    -       (263,169 )     -       -       -       -       (263,169 )
Shares issued for mineral properties
    110,000       206,229       -       -       -       -       206,229  
Acquisition of Gold Standard Royalty Corp.
    2,050,000       4,088,552       138,529       -       -       -       4,227,081  
Acquisition of Great American Minerals Inc.
    1,045,775       2,065,059       419,891       -       -       -       2,484,950  
Acquisition of Fury Explorations Ltd.
    10,595,814       12,963,070       7,343,879       (1,964,364 )     -       -       18,342,585  
Exercise of stock options
    6,637,224       9,690,543       (178,482 )     -       -       -       9,512,061  
Shares issued for repayment of promissory note
    4,728,000       2,017,257       -       -       -       -       2,017,257  
Stock-based compensation
    -       -       2,251,500       -       -       -       2,251,500  
Loss for the year
    -       -       -       -       -       (16,979,873 )     (16,979,873 )
                                                         
Balance, December 31, 2008
    66,356,813       92,107,528       10,545,371       (1,964,364 )     -       (25,366,423 )     75,322,112  
Private placements
    14,500,000       1,123,489       -       -       -       -       1,123,489  
Exercise of stock options
    101,000       110,689       (92,970 )     -       -       -       17,719  
Shares issued for mineral properties
    2,765,643       311,606       -       -       -       -       311,606  
Settlement of convertible debentures
    7,336,874       2,299,061       49,278       -       -       -       2,348,339  
Shares issued for consulting
    89,254       9,168       -       -       -       -       9,168  
Shares issued for acquisition of TTS
    19,037,386       1,976,697       -       -       -       -       1,976,697  
Stock-based compensation before spin-out
    -       -       799,008       -       -       -       799,008  
Spin-out of GPD
    -       (18,044,538 )     (11,300,687 )     -       -       -       (29,345,225 )
Stock-based compensation after spin-out
    -       -       935,995       -       -       -       935,995  
Foreign currency translation adjustment
    -       -       -       -       (2,536,527 )     -       (2,536,527 )
 
 
5

 
 
EMC Metals Corp.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Expressed in US Dollars) (Unaudited) Page 2 of 2
 
 
    Capital Stock                                          
    Number of Shares     Amount      
Additional
Paid in Capital
     
Treasury
Stock
     
Accumulated Other Comprehensive Loss
     
Deficit Accumulated During the Exploration Stage
     
Total
 
             
$
     
$
     
$
     
$
     
$
     
$
 
Loss for the year
    -       -       -       -       -       (18,954,099 )     (18,954,099 )
                                                         
Balance, December 31, 2009
    110,186,970       79,893,700       935,995       (1,964,364 )     (2,536,527 )     (44,320,522 )     32,008,282  
Private placements
    30,252,442       4,563,680       441,565       -       -       -       5,005,245  
Exercise of stock options
    1,320,000       443,329       (219,732 )     -       -       -       223,597  
Exercise of warrants
    7,300,000       1,060,257       -       -       -       -       1,060,257  
Stock-based compensation
    -       -       772,179       -       -       -       772,179  
Foreign currency translation adjustment
    -       -       -       -       99,091       -       99,091  
Loss for the year
    -       -       -       -       -       (4,585,644 )     (4,585,644 )
                                                         
Balance, December 31, 2010
    149,059,412       85,960,966       1,930,007       (1,964,364 )     (2,437,436 )     (48,906,166 )     34,583,007  
Exercise of stock options
    250,000       140,466       (76,796 )     -       -       -       63,670  
Exercise/expiry of warrants
    1,369,301       378,563       (700,170 )     700,170       -       -       378,563  
Stock-based compensation
    -       -       296,127       -       -       -       296,127  
Foreign currency translation adjustment
    -       -       -       -       (984,896 )     -       (984,896 )
Loss for the year
    -       -       -       -       -       (7,156,033 )     (7,156,033 )
                                                         
Balance, December 31, 2011
    150,678,713       86,479,995       1,449,168       (1,264,194 )     (3,422,332 )     (56,062,199 )     27,180,438  
Private placements
    13,679,624       790,508       -       -       -       -       790,508  
Stock-based compensation
    -       -       331,794       -       -       -       331,794  
Shares issued for mineral properties
    1,000,000       40,205       -       -       -       -       40,205  
Issue of convertible debenture warrants
    -       -       252,756       -       -       -       252,756  
Foreign currency translation adjustment
    -       -       -       -       577,664       -       577,664  
Loss for the year
    -       -       -       -       -       (4,965,297 )     (4,965,297 )
                                                         
Balance, December 31, 2012
    165,358,337       87,310,708       2,033,718       (1,264,194 )     (2,844,668 )     (61,027,496 )     24,208,068  
Stock-based compensation
    -       -       74,609       -       -       -       74,609  
Foreign currency translation adjustment on disposal of Springer Mining Company
    -       -                       1,991,268       -       1,991,268  
Loss for the year
    -       -       -       -       -       (25,690,599 )     (25,690,599 )
                                                         
Balance, December 31, 2013
    165,358,337       87,310,708       2,108,327       (1,264,194 )     (853,400 )     (86,718,095 )     583,346  
Private placement
    8,533,260       192,000       -       -       -       -       192,000  
Stock-based compensation
    -       -       1,166       -       -       -       1,166  
Loss for the period
    -       -       -       -       -       (271,804 )     (227,718 )
Balance, March 31, 2014     173,891,597       87,502,708       2,109,493       (1,264,194 )     (853,400 )     (86,989,899 )     504,708  
 
The accompanying notes are an integral part of these condensed consolidated financial statement
 
 
6

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
(Expressed in US Dollars) (Unaudited)
 
1.
NATURE AND CONTINUANCE OF OPERATIONS
 
EMC Metals Corp. (the “Company”) is incorporated under the laws of the Province of British Columbia. The Company is focused on specialty metals exploration and production and has recently acquired various metallurgical technologies and licenses that it is utilizing to gain access to a number of specialty metals opportunities. The Company’s principal properties are located in Australia and Norway.

The Company’s principal asset was the Springer Tungsten mine and mill, held by the Springer Mining Company. On September 13, 2013, the Company signed a binding Letter Of Intent (“LOI”) to sell 100% of the Springer Mining Company entity, its assets and mineral and water rights to Americas Bullion Royalty Corp. (“AMB”), for $5 million cash. The transaction was finalized on December 31, 2013.

At the signing of the LOI, AMB paid $3.1 million directly to the existing convertible debt holder to retire a maturing debt plus accumulated interest.
 
 
·
Cash paid by AMB to the convertible debt holder paid the debt in full and released the security interest in the Springer property and assets,
 
·
The cash advanced by AMB formed a new loan, with AMB as lender, as at September 13, 2013,
 
·
The new loan carries a zero interest rate, and
 
·
AMB agreed to additionally fund all Springer property carrying costs until the final payment and closing date.

The sale also included the transfer of interests in the Company’s Carlin Vanadium property mineral assets and the Copper King property tungsten assets in Nevada to AMB, along with Springer Tungsten.

One of EMC’s directors is also a director of the company that purchased Springer. The common director recused himself from director level voting on all board level decisions related to the sale.

With the completion of the sale of the Tungsten asset, the Company’s focus is on the exploration and evaluation of its specialty metals assets, specifically the Nyngan scandium deposit located in New South Wales, Australia and the Tørdal scandium/rare earth minerals deposit in Norway. The Company is an exploration stage company and anticipates incurring significant additional expenditures prior to production at any and all of its properties.

These consolidated financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities at their carrying values in the normal course of business for the foreseeable future. These financial statements do not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern.

The Company currently earns no operating revenues and will require additional capital in order to advance both the Nyngan and Tørdal properties. The Company’s ability to continue as a going concern is uncertain and is dependent upon the generation of profits from mineral properties, obtaining additional financing and maintaining continued support from its shareholders and creditors. These are material uncertainties that raise substantial doubt about the Company’s ability to continue as a going concern. In the event that additional financial support is not received or operating profits are not generated, the carrying values of the Company’s assets may be adversely affected.
 
2.
BASIS OF PRESENTATION
 
Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim condensed consolidated financial statements include the consolidated accounts of EMC Metals Corp. (the “Company”) and its wholly-owned subsidiaries with all significant intercompany transactions eliminated. In the opinion of management, all adjustments necessary for a fair statement of the consolidated financial position, results of operations and cash flows for the interim periods have been made. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2013 and with our Annual Report on Form 10-K filed with the SEC on March 25, 2014. Operating results for the three-month period ended March 31, 2014 may not necessarily be indicative of the results for the year ending December 31, 2014.

Change in functional and presentation currency

The Company’s expenses and overheads are now primarily being incurred in United States Dollars (“USD”) and it is anticipated that cash flows will continue to be primarily in USD. Accordingly the Company determined that effective January 1, 2013, the functional currency of the Company would change from the Canadian Dollar to the USD for the parent company and its wholly owned subsidiaries.

 
7

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
(Expressed in US Dollars) (Unaudited)
 
2.
BASIS OF PRESENTATION (cont’d…)
 
Use of estimates

The preparation of interim condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the deferred income tax asset valuations, asset impairment, stock-based compensation and loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between estimates and the actual results, future results of operations will be affected.

Fair value of financial assets and liabilities

The Company measures the fair value of financial assets and liabilities based on US GAAP guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
 
The Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition, except for those arising from certain related party transactions which are accounted for at the transferor’s carrying amount or exchange amount.
 
Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured at fair value, with unrealized gains and losses being recognized as other comprehensive income until realized, or if an unrealized loss is considered other than temporary, the unrealized loss is recorded in income.
 
Financial instruments, including receivables, accounts payable and accrued liabilities, convertible debentures and promissory notes payable are carried at amortized cost, which management believes approximates fair value due to the short term nature of these instruments.

The following table presents information about the assets that are measured at fair value on a recurring basis as at March 31, 2014, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and included situations where there is little, if any, market activity for the asset:
 
 
   
March 31,
2014
 
Quoted Prices
in Active Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
Assets:
                       
Cash and restricted cash
 
$
378,091
 
$
378,091
 
$
 
$
                         
Total
 
$
378,091
 
$
378,091
 
$
 
$
 
The fair values of cash and restricted cash are determined through market, observable and corroborated sources.

Recently Adopted Accounting Policies

Accounting Standards Update 2013-05 - Foreign Currency Matters (Topic 830) - Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. This standard provides guidance with respect to the treatment of the cumulative translation adjustment upon the sale of a foreign subsidiary whereby the cumulative translation adjustment associated with that subsidiary are taken into net income of the parent company.

Accounting Standards Update 2013-11 - Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forward Exists. This accounting standard deals with the treatment of tax loss carry forwards. The Company has reviewed this standard and has determined that it has little impact on the presentation of its financial statements.

 
8

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
(Expressed in US Dollars) (Unaudited)
 
2.
BASIS OF PRESENTATION (cont’d…)
 
Recent Accounting Pronouncements

Accounting Standards Update 2014-08 - Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This accounting pronouncement provides guidance on the treatment of Property, Plant and Equipment plus the reporting of discontinued operations and disclosure of disposals of components of an entity. The policy is effective December 15, 2014. The Company is evaluating this guidance and believes it will have little impact on the presentation of its financial statements.
 
3.
RESTRICTED CASH
 
The Company has a Bank of Montreal letter of credit of up to C$159,400 as a security deposit related to a Vancouver office lease obligation. The letter of credit is secured by a short-term cash investment of C$159,400 with the bank bearing interest at prime less 2.05% maturing on May 8, 2014. The office lease expires on June 30, 2014.
 
4.
DISCONTINUED OPERATIONS
 
During fiscal 2013, the Company identified a buyer for its tungsten properties and related plant and mill held by its subsidiary, Springer Mining Company (“Springer”) and on December 31, 2013 sold the Springer subsidiary for $5 million (Note 1). Springer was actively involved in the evaluation and re-start of the Company’s tungsten property, located in Pershing County, Nevada. Going forward, the Company has no further assets located in the US or continuing involvement with Springer.
 
A comparison of the Net Loss results from discontinued operations for Q1 of 2013 and 2014 is as follows:

   
Quarter ended
March 31, 2014
   
Quarter ended
March 31, 2013
 
             
EXPENSES
           
Amortization
  $ -     $ 4,852  
Consulting
    -       9,615  
General and administrative
    -       36,012  
Insurance
    -       11,974  
Professional fees
    -       237  
Salaries and benefits
    -       104,177  
Travel and entertainment
    -       1,853  
                 
OTHER ITEMS
               
Interest expense
    -       56,250  
Other income
    -       (117,182 )
                 
Net loss from discontinued operations   $ -     $ (107,788 )

   
Quarter ended
March 31, 2014
   
Quarter ended
March 31, 2013
 
             
Cash flows from discontinued operations
           
Net cash used in (from) operating activities
  $ -     $ (1,789 )
Net cash used in (from) investing activities
    -       -  
Net cash used in (from) financing activities
    -       -  
                 
Net cash used in (from) discontinued operations
  $ -     $ (1,789 )
                 
Non-cash transactions from discontinued operations
  $ -     $ -  
 
 
9

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
(Expressed in US Dollars) (Unaudited)
 
5.
PROPERTY, PLANT AND EQUIPMENT
 
 
2014 Continuing Operations
 
December 31, 2013 Net Book Value
   
Additions (disposals)
(write-offs)
   
 
Amortization
   
March 31, 2014
Net Book Value
 
Computer equipment
  $ 2,375     $ -     $ (169 )   $ 2,206  
Office equipment
    7,903       -       (789 )     7,114  
                                 
Property, plant and equipment
  $ 10,278     $ -     $ (958 )   $ 9,320  

2013 Continuing Operations  
December 31, 2012 Net Book Value
   
Additions (disposals)
(write-offs)
   
 
Amortization
   
March 31, 2013
Net Book Value
 
Computer equipment
  $ 3,402     $ -     $ (286 )   $ 3,116  
Office equipment
    11,058       -       (789 )     10,269  
                                 
Property, plant and equipment
  $ 14,460     $ -     $ (1,075 )   $ 13,385  
 
2013 Discontinued Operations
 
December 31, 2012 Net Book Value
   
Additions (disposals)
(write-offs)
   
 
Amortization
   
March 31, 2013
Net Book Value
 
Land and water rights
  $ 4,252,146     $ (4,252,146 )   $ -     $ -  
Plant and equipment
    25,749,852       (25,749,852 )     -       -  
Buildings
    165,959       (163,235 )     (2,724 )     -  
Automobiles
    11,262       (9,134 )     (2,128 )     -  
                                 
Property, plant and equipment
  $ 30,179,219     $ (30,174,367 )   $ (4,852 )   $ -  

Land and water rights are in respect of properties in Nevada. The plant and equipment is comprised of the Springer Plant and Mill in Nevada which was sold to AMB as part of the binding LOI signed September 13, 2013.
 
6.
MINERAL INTERESTS
 
March 31, 2014
 
Scandium and
other
   
Tungsten
   
Total
 
                   
Acquisition costs, continuing operations
                 
                   
Balance, March 31, 2014 and December 31, 2013
  $ 1,613,203     $ -     $ 1,613,203  
 
December 31, 2013
 
Scandium
and other
   
Tungsten
   
Total
 
                   
Acquisition costs, continuing operations
                 
                   
Balance, December 31, 2012
  $ 554,719     $ -     $ 554,719  
Additions
    1,108,484       -       1,108,484  
Write-off
    (50,000 )     -       (50,000 )
Balance, December 31, 2013
  $ 1,613,203     $ -     $ 1,613,203  
                         
Acquisition costs, discontinued operations
                       
                         
Balance, December 31, 2012
  $ -     $ 198,463     $ 198,463  
Disposal
    -       (198,463 )     (198,463 )
Balance, December 31, 2013
  $ -     $ -     $ -  
 
Title to mineral property interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral property interests. The Company has investigated title to all of its mineral property interests and, to the best of its knowledge, title to all of its properties is in good standing.
 
 
10

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
(Expressed in US Dollars) (Unaudited)
 
6.
MINERAL INTERESTS (contd…)
 
SCANDIUM PROPERTIES

Nyngan, New South Wales Property

On February 5, 2010, the Company entered in to an earn-in agreement with Jervois Mining Limited (“Jervois”), whereby it would acquire a 50% interest in the Nyngan Scandium property (the “Nyngan Project”) located in New South Wales, Australia. The JV Agreement, as amended, gave the Company the right to earn a 50% interest in a joint venture with Jervois, for the purpose of holding and developing the Nyngan Project. On June 22, 2012, the Company received notice of a lawsuit filed against the Company with regard to the achievement of certain milestones required under the JV Agreement. On February 6, 2013, the Company announced agreement of an out of court settlement to the dispute with Jervois. The terms of the settlement transferred 100% ownership and control of the Nyngan Project to the Company, in return for AUD$2.6 million cash payments and a percentage royalty payable to Jervois on sales of product from the project. A total of $1,108,484 (AUD$1.2 million) was paid in June 2013 as part of the settlement. A total of AUD$1.4 million is due June 30, 2014.

Tørdal and Evje-Iveland properties, Norway

During fiscal 2012 the Company entered into an option agreement with REE Mining AS (“REE”) to earn up to a 100% interest in the Tørdal and Evje-Iveland properties pursuant to which the Company paid $130,000 and issued 1,000,000 common shares valued at $40,000. To earn its interest, the original agreement required the Company to pay REE an additional $500,000, incur $250,000 of exploration work and issue 250,000 common shares upon releasing the second of two full feasibility studies on the two properties. The Company subsequently renegotiated the payments required to earn the interest and the Evje-Iveland property was removed from the option agreement. Pursuant to the amendment, the Company earned a 100% interest in the Tørdal property by paying an additional $35,000 and granting a 1% Net Smelter Return (“NSR”) payable to REE.

Hogtuva property, Norway

During fiscal 2011 the Company entered into an option agreement with REE to earn a 100% interest in three scandium and beryllium exploration sites in Norway pursuant to which the Company paid $50,000. To earn its interest, the original agreement required the Company to pay REE an additional $100,000 and issue up to 200,000 common shares. During fiscal 2013, the Company renegotiated the payments required to earn the interest and removed two of the exploration sites from the agreement.

Pursuant to the amendment, the Company earned a 100% interest in the Hogtuva property in consideration for the $50,000 original payment and the grant of a 1% NSR payable to REE. In early fiscal 2014 a decision was made by the Company not to renew its interest in the Hogtuva property and $50,000 in acquisition costs were written off during the year ended December 31, 2013.

TUNGSTEN PROPERTY
 
Springer Property

On November 21, 2006, the Company acquired all outstanding and issued shares of Springer Mining Company (“Springer”). Included in the assets of Springer and allocated to property, plant and equipment (Note 5) are the Springer Mine and Mill located in Pershing County, Nevada. The Company agreed to sell Springer Mining Company on September 13, 2013 (see Note 1), for $5 million, along with the Copper King Tungsten property and the Carlin Vanadium property. The transaction was completed and fully funded on December 31, 2013.
 
7.
RELATED PARTY TRANSACTIONS
 
Accounts payable on March 31, 2014 included $97,000 owed to related parties. Accounts payable on December 31, 2013 included $170,000 owed to related parties.

A total of $350,000 from the loan financing completed on February 22, 2013, $579,875 from the loan financing completed on June 24, 2013 and all of the $100,000 financing completed on August 27, 2013, were funded from a combination of Directors, insiders, and independent shareholders. The Company has paid $78,500 in interest to related parties relating to these loans.

The $100,000 loan financing completed in 2013 was from directors and officers. The loan was repaid in full in 2013.

The loan financing completed on February 22, 2013, of which $350,000 was contributed from directors and officers was repaid in the three months ending March 31, 2014.

Of the $30,000 interest expensed in the three months, $14,375 was payable to a director of the Company.
 
During the three months ended March 31, 2013, the Company accrued a consulting fee of $25,500 for one of its directors. There were no such expenses incurred during the three month period ended March 31, 2014.
 
 
11

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
(Expressed in US Dollars) (Unaudited)
 
8.
CONVERTIBLE DEBENTURES
 
On February 22, 2013, the Company completed a $650,000 loan financing consisting of convertible debentures. The convertible debenture had a maturity date of February 22, 2014 and bore interest at 10% per annum. The lenders had the option to convert the loan into 13,000,000 common shares of the Company. There was no beneficial conversion feature associated with the conversion option. The loan was secured by an interest in the assets of the Company’s wholly owned subsidiary, Wolfram Jack Mining Corp. and the Company’s interest in the Hogtuva and Tørdal properties in Norway. This financing was repaid in full in February 2014.

On February 17, 2012, the Company completed a $3,000,000 loan financing consisting of a term loan of $1,000,000 (Note 9), a convertible debenture of $2,000,000 and warrants to acquire 3,000,000 common shares. The convertible debenture had a maturity date of August 15, 2013 and bore interest at 7% per annum. The lender had the option to convert a maximum of $2,000,000 of the principal amount of the loan into 10,000,000 common shares of the Company. The loan was secured by an interest in the assets of the Company’s subsidiary, Springer Mining Company. There was no beneficial conversion feature associated with the conversion option. The warrants were exercisable at C$0.20 per share expiring February 15, 2014. A relative fair value of $217,267 was assigned to the warrants and recorded in additional paid in capital. The Company paid financing costs of $249,827 and also issued 750,000 purchase warrants exercisable at C$0.20 per share expiring February 15, 2014. These warrants were valued at $58,716 with a volatility of 120%, expected life of 2 years, risk free rate of 1.0% and expected dividend yield of 0.0% and recorded in additional paid in capital. The financing costs were allocated between debt and the equity components. This resulted in a convertible debenture carrying amount of $1,663,681 upon deducting a debt discount of $336,319 from the principal balance of $2,000,000. During fiscal 2013, the Company recognized $138,627 in accretion through interest expense. During fiscal 2012, the Company recognized $197,692 in accretion through interest expense. This financing was repaid in full on September 13, 2013.
 
9.
PROMISSORY NOTES PAYABLE
 
 
   
March 31,
2014
   
December 31,
2013
 
Promissory Note related to discontinued operations
Promissory note with a principal balance of $3,750,000, bearing interest at 6% per annum, maturing July 3, 2013 and secured by land and water rights. During fiscal 2008 the Company entered into a promissory note for $6,750,000 as consideration for the acquisition of land and water rights. The Company subsequently made principal payments of $3,000,000 consisting of a cash payment of $1,000,000 and 4,728,000 units of the Company equity valued at $2,000,000. Each unit consisted of one common share and one-half share purchase warrant exercisable at C$0.75 each and exercisable for a period of two years. The note was secured by a First Deed of Trust on the Cosgrave property land and water rights. In June 2013 the Company returned, to the note holder, the Cosgrave Ranch for the value of the promissory note thereby extinguishing this debt. (Note 5)
 
Nil
   
Nil
 
             
Promissory Notes related to continuing operations
During the year ended December 31, 2012 the Company completed a $3,000,000 loan financing which included a $1,000,000 note payable bearing interest at 7% per annum maturing August 15, 2013. Presented is this principal balance, less financing and costs, which are amortized over the term of the debt using the effective interest method. This resulted in a carrying amount of $831,841 upon deducting a debt discount of $168,159 from the principal balance of $1,000,000. During fiscal 2013, the Company recognized $69,313 in accretion through interest expense. During fiscal 2012, the Company recognized $98,847 in accretion through interest expense. The note payable is secured by an interest in the assets of the Company’s subsidiary, Springer Mining Company. This financing was repaid in full on September 13, 2013.
 
Nil
   
Nil
 
             
On June 24, 2013 the Company completed a $1,204,875 financing consisting of a series of insider and non-insider loans. The loans have a maturity date in June 2014 and bear interest at 10% per annum. The loans are secured by the ownership interest the Company has or earns in the Nyngan Scandium Project. As an inducement to enter into this loan, the lenders received a royalty of 0.2% of average scandium sales value, produced from the Nyngan property, on the first 100 tonnes of scandium oxide product produced and sold. The royalty is capped at $370,000 and EMC retains a right to buy back the royalty from the lenders or their assigns for $325,000 at any time up to the commencement of first production, or three years from loan date, whichever occurs first.
    1,204,875       1,204,875  
Less current portion
 
(1,204,875
)  
(1,204,875
)
    $  Nil     $ Nil  
 
 
12

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
(Expressed in US Dollars) (Unaudited)
 
10.
CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL
 
On March 25, 2014, the Company issued 8,533,260 common shares at a value of C$0.025 per common share for total proceeds of $192,000.

On December 20, 2012, the Company issued 1,000,000 common shares at a value of $40,205 for the Tørdal and Hogtuva projects in Norway.

On December 16, 2012, the Company issued 2,000,000 common shares at a value of C$0.05 per common share for total proceeds of C$100,000.
 
On July 24, 2012, the Company issued 11,679,624 common shares at a value of C$0.06 per common share for total proceeds of C$700,777.

On December 3, 2010, the Company issued 18,929,740 common shares at a value of C$0.19 per common share for total proceeds of C$3,596,651. A total of C$210,249 was received during fiscal 2011.

On November 25, 2010, the Company issued 6,100,000 units at a value of C$0.10 per unit for total proceeds of C$610,000. Each unit consisted of one common share and one-half of one share purchase warrant exercisable at C$0.18 expiring on November 25, 2011. The warrants have a calculated total fair value of C$142,358 using the Black-Scholes pricing model with a volatility of 142.52%, risk-free rate of 1.73%, expected life of 1 year, and a dividend rate of 0%.
 
On June 30, 2010, the Company issued 2,947,702 units at a value of C$0.10 per unit for total proceeds of C$294,770. Each unit consisted of one common share and one-half of one share purchase warrant exercisable at C$0.18 until June 30, 2011. The warrants have a calculated total fair value of C$35,638 using the Black-Scholes pricing model with a volatility of 123.84%, risk-free rate of 1.39%, expected life of 1 year, and a dividend rate of 0%.

On February 17, 2010, the Company issued 2,275,000 units at a value of C$0.20 per unit for total proceeds of C$455,000. Each unit consisted of one common share and one-half of one share purchase warrant exercisable at C$0.25 until February 17, 2011. The warrants have a calculated total fair value of C$78,113 using the Black-Scholes pricing model with a volatility of 131.19%, risk-free rate of 1.34%, expected life of 1 year, and a dividend rate of 0%. All of the warrants were exercised during fiscal 2011.

On November 17, 2009, the Company issued 13,000,000 units at a value of C$0.08 per unit for total proceeds of C$1,040,000. Each unit consisted of one common share and one-half of one share purchase warrant. Each full warrant entitled the holder to purchase an additional share at C$0.15 per share until November 17, 2010.

On October 13, 2009, the Company issued 500,000 common shares at a value of C$45,000 for the Fostung Tungsten project.

On August 27, 2009, the Company issued 1,500,000 units at a value of C$0.10 per unit, pursuant to a non-brokered private placement for proceeds of C$150,000. Each unit consisted of one common share and one-half of one share purchase warrant. Each full warrant entitled the holder to purchase an additional share at C$0.15 per share until August 27, 2010.

On May 13, 2009, the Company issued 89,254 common shares at a value of C$0.12 per share to a consultant for settlement of consulting fees for Fury Explorations Ltd. (“Fury”), a subsidiary of GPD, under the plan of Arrangement of spin-out.
 
On April 21, 2009, the Company issued 51,859 common shares at a value of C$0.10 per share for the Platte River property.

On January 21, 2009, the Company issued 66,784 common shares at a value of C$0.20 per share for the Guijoso property for Fury.

On January 6, 2009, the Company issued 2,147,000 common shares at a value of $250,000 for the Adelaide and Tuscarora projects for Golden Predator Mines US Inc., a wholly owned subsidiary of the Company prior to the spin out.

On November 17, 2008, the Company issued 76,274 common shares in connection with the acquisition of the subsidiary, Great American Minerals Inc.

On October 18, 2008, the Company issued 4,728,000 units to Cosgrave for repayment of a promissory note at a value of $2,000,000. Each unit consisted of one common share of the Company and one-half of one common share purchase warrant with a two year life and exercisable at C$0.75.

In July 2008, the Company completed a private placement consisting of 2,500,000 common shares at C$2.00 per share for proceeds of C$5,000,000. In connection with this private placement the Company paid a finder’s fee of $250,000.
 
In January 2008, the Company completed a private placement consisting of 2,822,500 units at C$2.00 per unit for gross proceeds of C$5,645,000. Included in the proceeds was C$3,620,000 received in advance as of December 31, 2007. Each unit consisted of one common share and one half of one share purchase warrant. Each whole warrant entitled the holder to acquire one additional common share at C$3.00 for a period of 12 months.

 
13

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
(Expressed in US Dollars) (Unaudited)
 
10.
CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL (cont’d…)
 
In November 2007, the Company completed private placements consisting of 17,577,500 units at C$2.00 per unit for proceeds of C$35,155,000. Each unit consisted of one common share and one half of one common share purchase warrant. Each whole warrant entitled the holder to acquire one additional common share at C$3.00 for a period of 12 months following the closing of the placement.
 
In December 2007, the Company issued 5,390,000 common shares pursuant to the conversion of special warrants. The Company paid C$1,016,074 and issued 100,000 common shares valued at C$100,000 as issuance costs and finder’s fees. The Company also granted warrants to acquire 300,000 common shares exercisable at C$1.50 expiring September 22, 2008. The warrants were valued at C$99,000 with the Black-Scholes option pricing model using an expected volatility of 115%, life of one year, a risk free interest rate of 4% and a dividend yield of 0%.
 
In December 2006, the Company issued 5,000,000 common shares at C$0.70 per common share for gross proceeds of C$3,500,000.

Stock Options and Warrants

The Company established a stock option plan (the “Plan”) under which it is authorized to grant options to executive officers and directors, employees and consultants and the number of options granted under the Plan shall not exceed 15% of the shares outstanding. Under the Plan, the exercise period of the options may not exceed five years from the date of grant and vesting is determined by the Board of Directors.

Stock option and share purchase warrant transactions are summarized as follows:

   
 
Warrants
   
Stock Options
 
   
Number
   
Weighted average exercise price in Canadian $
   
 
Number
   
Weighted average
exercise price in Canadian $
 
                         
                         
Outstanding, December 31, 2012
    3,750,000     $ 0.20       13,546,250     $ 0.14  
Granted
    -       -       2,100,000       0.07  
Cancelled
    -       -       (1,477,500 )     0.34  
Exercised
    -       -       -       -  
                                 
Outstanding, December 31, 2013
    3,750,000       0.20       14,168,750       0.12  
Granted
    -       -       -       -  
Cancelled
    (3,750,000 )     0.20       (1,070,000 )     0.20  
Exercised
    -       -       -       -  
                                 
Outstanding, March 31, 2014
    -     $ -       13,098,750     $ 0.11  
                                 
Number currently exercisable
    -     $ -       12,951,750     $ 0.11  
 
As at March 31, 2014, incentive stock options were outstanding as follows:

   
Number of
options
   
Exercise
Price in Canadian $
 
 
 
Expiry Date
               
Options
             
      1,020,000       0.160  
June 16, 2014
      225,000       0.120  
August 27, 2014
      200,000       0.105  
December 16, 2014
      568,750       0.250  
January 4, 2015
      500,000       0.050  
May 9, 2015
      4,800,000       0.100  
November 5, 2015
      250,000       0.315  
May 4, 2016
      500,000       0.250  
May 16, 2016
      300,000       0.155  
September 15, 2016
      2,335,000       0.080  
April 24, 2017
      1,400,000       0.070  
August 8, 2017
      1,000,000       0.100  
May 9, 2018
                   
      13,098,750            
 
 
14

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
(Expressed in US Dollars) (Unaudited)
 
10.
CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL (cont’d…)
 
As at March 31, 2014, there were no warrants outstanding.

Stock-based compensation

During the three months ended March 31, 2014, the Company recognized stock-based compensation of $1,166 (March 31, 2013 - $21,032) in the statement of operations as a result of incentive stock options granted and vested in the current period. There were no stock options issued during the three months ended March 31, 2014 (March 31, 2013 – 600,000).

The weighted average fair value of the options granted in the period was C$Nil (2013 - C$0.08).

The fair value of all compensatory options and warrants granted is estimated on grant date using the Black-Scholes option pricing model. The weighted average assumptions used in calculating the fair values are as follows:
 
   
2014
   
2013
 
             
Risk-free interest rate
    N/A       0.40 %
Expected life
    N/A    
5 years
Volatility
    N/A       143.82 %
Forfeiture rate
    N/A       0.00 %
Dividend rate
    N/A       0.00 %
 
11.
TREASURY STOCK
 
   
Number
   
Amount
 
             
Treasury shares, March 31, 2014 and December 31 2013
    1,033,333     $ 1,264,194  
                 
      1,033,333     $ 1,264,194  

Treasury shares comprise shares of the Company which cannot be sold without the prior approval of the TSX.
 
12.
SEGMENTED INFORMATION
 
The Company’s mineral properties are located in Norway and Australia. The Company’s capital assets’ geographic information is as follows:

March 31, 2014
 
Norway
   
Australia
   
United States
   
Total
 
                         
Property, plant and equipment
  $ -     $ -     $ 9,320     $ 9,320  
Mineral interests
    203,181       1,410,022       -       1,613,203  
                                 
    $ 203,181     $ 1,410,022     $ 9,320     $ 1,622,523  

December 31, 2013
 
Norway
   
Australia
   
United States
   
Total
 
                         
Property, plant and equipment
  $ -     $ -     $ 10,278     $ 10,278  
Mineral interests
    203,181       1,410,022       -       1,613,203  
                                 
    $ 203,181     $ 1,410,022     $ 10,278     $ 1,623,481  
 
 
15 

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014
(Expressed in US Dollars) (Unaudited)
 
13.
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
 
 
2014
 
2013
 
         
Cash paid during the three months for interest
$ 30,000   $ 56,250  
             
Cash paid during the three months for income taxes
$ -   $ -  

There were no significant non-cash transactions in either of the three month periods ending March 31, 2014 and March 31, 2013.
 
14.
SUBSEQUENT EVENTS
 
Subsequent to March 31, 2014, the Company issued a second tranche of financing of 4,122,150 shares at C$0.025.
 
 
 
 16

 


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion of the operating results, corporate activities and financial condition of EMC Metals Corp. (hereinafter referred to as “we”, “us”, “EMC”, or the “Company”) and its subsidiaries provides an analysis of the operating and financial results between December 31, 2013 and March 31, 2014 and a comparison of the material changes in our results of operations and financial condition between the three-month period ended March 31, 2013 and the three-month period ended March 31, 2014. This discussion should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2013.

 

The interim statements have been prepared in accordance with US Generally Accepted Accounting Principles (“US GAAP”) in accordance with the requirements of U.S. federal securities laws as applicable to the Company, and as permitted under applicable Canadian securities laws. The Company is a reporting company under applicable securities laws in Canada, and in July of 2011 also became a reporting issuer under U.S. federal laws. The reporting currency used in our financial statements is the United States Dollar.

 

The information contained within this report is current as of May 5, 2014 unless otherwise noted. Additional information relevant to the Company’s activities can be found on SEDAR at www.sedar.com.

 

Technical information in this MD&A has been reviewed and approved by Willem Duyvesteyn, a Qualified Person as defined by Canadian National Instrument 43-101 (“NI 43-101”). Mr. Duyvesteyn is a director and consultant of EMC Metals.

 

Overview

 

EMC is a specialty metals and alloys company focusing on scandium and other specialty metals. The Company intends to utilize its knowhow and, in certain instances, patented technologies to maximize opportunities in scandium and other specialty metals.

 

The Company was formed in 2006, under the name Golden Predator Mines Inc. As part of a reorganization and spin-out of the Company’s precious metals portfolio in March 2009, the Company changed its name to EMC Metals Corp. The Company currently trades on the Toronto Stock Exchange under the symbol “EMC”.

 

In 2013, the Company sold the Springer Mining Company, a tungsten mine and mill in Imlay, Nevada. The sale of this asset allowed the Company to direct its efforts towards the development of its scandium properties.

 

Our focus of operations is the exploration and development of our specialty metals assets, including the Nyngan scandium deposit located in New South Wales, Australia and the Tørdal scandium/rare earth minerals deposit in Norway. Prior to January 1, 2014, the Company’s principal asset was the Springer Tungsten mine and mill, held by the Springer Mining Company. On September 13, 2013, the Company signed a binding Letter of Intent to sell 100% of the Springer Mining Company entity, its assets and mineral and water rights to America Bullion Royalty Corp., for $5 million cash. The transaction was closed on December 31, 2013.

 

On February 5, 2010, we entered into an Exploration Joint Venture Agreement (“JV Agreement”) with Jervois Mining Limited (“Jervois”) to develop the Nyngan scandium property in New South Wales, Australia, which is commonly referred to as the Nyngan Project. The JV Agreement, as amended, gave us the right to earn a 50% interest in a joint venture with Jervois, for the purpose of holding and developing the Nyngan Project. On June 22, 2012, we received notice of a lawsuit filed against the Company with regard to the achievement of certain milestones required under the JV Agreement. On February 6, 2013, we announced an agreement of an out of court settlement regarding the dispute with Jervois. The terms of the settlement transferred 100% ownership and control of the Nyngan Project to the Company in return for AUD$2.6 million cash payments and a percentage royalty payable to Jervois on sales of product from the project. We have paid AUD$1.2 million of the required cash payments with the remaining AUD$1.4 million due in June 2014. We have completed metallurgical test work and are pursuing further feasibility study and development options on the Nyngan Project.

 

Principal Properties Review

 

Nyngan Scandium: On February 5, 2010, EMC entered into an Exploration Joint Venture Agreement (“JV Agreement”) with Jervois Mining Limited (“Jervois”) of Melbourne, Australia (ASX: JRV) to co-develop the Nyngan scandium property in New South Wales, Australia which is commonly referred to as the Nyngan Scandium Project (“Nyngan”). The JV Agreement, as amended, gave us the right to earn a 50% interest in a joint venture with Jervois, for the purpose of holding and developing Nyngan, provided EMC did the following:

   
   

 

1.We spent a minimum of AUD$500,000 in exploration and metallurgical test-work on the project within six months after signing, later extended to June 2011.

 

2.We delivered an independently prepared feasibility study (as defined in the JV Agreement) by February 28, 2012: and

 

3.We made a cash payment of AUD$1,300,000 plus taxes to Jervois, within 5 business days of the delivery of the feasibility study.

 

EMC met the minimum spending threshold (#1) with the specified and revised 2011 timeframe, and on February 24, 2012, delivered to Jervois both the feasibility study (#2) and the final cash payment (#3), required to complete the earn-in to the JV. Feasibility study delivery included extensive discussion and presentation of results to the Jervois Board and management.

 

On February 27, 2012, Jervois formally rejected EMC’s claim to have met the earn-in conditions specified in the JV, based on inadequacy of the feasibility study, and returning the cash payment received. The parties discussed possible resolutions to the dispute for several months until Jervois formally filed a lawsuit demanding EMC relinquish all claims to the project. EMC vigorously defended its position with respect to the JV agreement, and in February 2013 the parties reached an out of court settlement that resolved all issues in dispute.

The terms of the settlement transferred 100% ownership and control of the Nyngan Project to the Company, in return for AUD$2.6 million in future cash payments and a sales royalty payable to Jervois. Exploration tenements formally transfer on final cash payment in 2014, but EMC secured the right to proceed with development and implementation of the project immediately. Jervois retains a production royalty on the Nyngan project of 1.7% of sales for products produced from the site for a term of 12years from first production date. A minimum annual royalty applies, based on 10 tpa scandium production.

 

The binding settlement entered into with Jervois brings to an end all court actions, claims and counterclaims, including claims for damages and legal and other costs. The settlement was subject to Australian FIRB approval of EMC’s 100% ownership and that approval was secured on April 2, 2013.

 

Nyngan Project metallurgical test work has been completed and we are pursuing further feasibility study and development options.

 

Property Description and Location

 

The Nyngan scandium resource is located approximately 500 kilometers northwest of Sydney, Australia. The property consists of two exploration licenses, controlled by Jervois, which encompass over 9,000 hectares. Nyngan is classified as an Australia Property for purposes of financial statement segment information.

 

The scandium resource is hosted within the lateritic zone of the Gilgai Intrusion, one of several Alaskan-type mafic and ultramafic bodies which intrude Cambrian-Ordovician metasediments collectively called the Girilambone Group. The laterite zone, locally up to 40 meters thick, is layered with hematitic clay at the surface followed by limonitic clay, saprolitic clay, weathered bedrock and finally fresh bedrock. The scandium mineralization is concentrated within the hematitic, limonitic, and saprolitic zones with values up to 350 ppm scandium.

 

The location of the property is provided in Figure 2 below. The location of the exploration licenses that we may earn an interest in are provided in Figure 3 below.

 

   
   

Figure 2: Location of Nyngan Project

 

   
   

Figure 3: Location of the Exploration Licenses

 

Mineral Resource

 

In March of 2010 a NI 43-101 technical report which outlined a resources estimate on the Nyngan Scandium Project was completed. The report, titled, “NI 43-101 Technical Report on the Nyngan Gilgai Scandium Project, Jervois Mining Limited, Nyngan, New South Wales, Australia”, was prepared by or under the supervision of Max Rangott (BSc). The resource estimate is summarized in Table 2 below.

 

Table 2

 

Nyngan Gilgai Scandium Project Resource Estimation
Resource Category

Cut off Sc

(ppm)

Total Tonnes

(kt)

Grade Sc

(ppm)

Overburden Ratio
Measured 100 2,718 274 0.81:1
Indicated 100 9,294 258 1.40:1
Total 100 12,012 261 1.10:1

 

   
   

 

Current Program - Overview

In February of 2010, the Company entered into a joint venture agreement (the “JV”) with Jervois Mining Limited (“Jervois”) of Melbourne, Australia to develop the Nyngan scandium property. The terms of the JV require EMC to earn in to a 50% position through a two stage work program.

 

  1. the first stage required EMC to spend a minimum of A$500,000 on project exploration and metallurgical test work by mid December 2010, and
  2. the second stage required the delivery of a feasibility study in the first quarter of 2012.

 

The stage I work timeframe were extended into 2011 and those first stage requirements were met during the second quarter of 2011. Second stage feasibility study work, was initiated in June 2011. To this end, we engaged SNC-Lavalin Inc. (Brisbane, Australia) to prepare a feasibility study for the partners on the economics of the project. To support process design, costing, and production level assumptions, the results of metallurgical test work done by Hazen Research Inc. together with previous test-work by the CSIRO and METCON Laboratories, were used directly by SNC-Lavalin Inc. in compiling their report.

 

On February 24, 2012, EMC delivered to Jervois the feasibility study for consideration of the earn-in requirement in our agreement as independently prepared by SNC-Lavalin.

 

No further technical work was accomplished during 2012 due to legal dispute proceedings with Jervois. Subsequent to our settlement of legal dispute with Jervois in February 2013, we are assessing near and mid-term technical work programs and project schedule. For further information on the legal dispute with Jervois, please refer to “Item 1.Business - Recent History - Nyngan Project

 

Metallurgy Development

 

The first work phase of the metallurgy development program consisted of detailed metallurgical bench scale testing, and was intended to refine and enhance the Company’s existing material process flow sheet to extract scandium from the resource material. This existing flow sheet, developed by Jervois and external consultants, formed the basis of a preliminary, conceptual engineering report for the processing elements of the project that was completed by Roberts & Schaefer of Salt Lake City, Utah.

 

The Roberts & Schaefer report included capital and operating cost estimates, based on process flow sheets and technical reports done for Jervois or EMC on various metallurgical aspects of the resource. These technical/process reports were done by METCON Laboratories of Sydney, Australia, the Commonwealth Scientific and Industrial Organization (CSIRO), Australia’s national science agency, or by other research work, proprietary to or sourced by Jervois or EMC. The bulk of the process applied by Roberts & Schaefer in their Report was defined by bench scale as well as small scale pilot plant work results compiled by others, and a preliminary flow sheet complied by the CSIRO. This work was carried forward into the later metallurgical test work conducted by Hazen Research and the design work utilized in the SNC feasibility study presented to management in 2012.

 

Note that mineral resources that are not mineral reserves do not have demonstrated economic viability. The above estimates of capital and operating costs are a component of a number of factors required to complete a preliminary assessment of the economic viability of the project, and there is no guarantee that the company will achieve production from the resource at Nyngan.

 

In January 2011, EMC announced results of initial lab test work, independently prepared by Hazen Research, Inc., of Golden, Colorado, USA. These results defined general results involving conventional contained acid leach systems and suggested recoveries from resource of up to 75%. No secondary recoveries were considered in these initial bench-scale tests.

 

The second phase of the Hazen test work program continued through July, and involved continuous pilot plant testing of the acid leach systems, solvent extraction systems and product finish systems identified by earlier CSIRO work. The overall objectives of the test work program were to define and optimize a process or series of processes that achieves an 80% scandium recovery, lowest possible capital and operating costs, and most benign environmental impact, using standard and accepted processes.

 

On January 19, 2012 we announced receipt an independent metallurgical test-work report, titled "Purification of Scandium Extracted from Laterite Ore", outlining the results of a number of pilot-scale tests on Nyngan resource material, and estimated recoveries and grades of scandium oxide product. The report was independently prepared by Hazen and is the final in a series of three phases of semi-continuous pilot plant scale test-work completed by Hazen during 2011. Work was finalized in late November.

   
   


Highlights of the 2011 Hazen semi-continuous pilot plant test-work are as follows:

 

 

In February, 2011 EMC announced results of a series of laboratory-scale tests investigating the production of scandium-aluminum (“Sc-Al”) alloys directly from aluminum oxide and scandium oxide feed materials, prepared by the CSIRO. The overall objective of this research was to demonstrate and commercialize the production of Sc-Al master alloy using impure scandium oxide as the scandium source, potentially significantly improving the economics of scandium aluminum master alloy production.

 

Environmental Permitting Work

 

In April, 2011 EMC announced a general progress report on the project which outlined a series of environmental work steps designed to advance the Environmental Impact Study (“EIS”). Work steps included both ground and surface water assessments, along with other assessments of Aboriginal, ecology, traffic, noise and air quality matters.

 

All of this work has subsequently been completed, including 8 water bores with ongoing test monitoring equipment, and reports on the various other targeted assessments, without material issues in any area. An aerial photography and contour mapping program was also completed, to support the feasibility study work regarding location of site facilities.

 

On January 18, 2012 EMC announced that that key elements of environmental site work on the Nyngan Scandium Project have been completed and a Conceptual Project Development Plan (CPDP) submitted to the NSW, Australia state regulators. The CPDP submission forms the basis for an Environmental Impact Study ("EIS"), the foundation environmental document required for a mining permit in the state.


Specific EIS and property work, contained in the CPDP, completed by year end 2011:

 

Continuing EIS work underway:

 

 

The environmental work was performed under direction from R. W. Corkery & Co., (Orange, NSW, Australia), and formed part of the SNC-Lavalin Nyngan feasibility study.

 

 

 

 

 

   
   

Norway Scandium Property

 

During 2011 we entered into two option agreements with REE Mining AS of Norway, to obtain exploration rights to several properties in central and southern Norway. The Tørdal, Evje-Iveland and Hogtuva properties are classified as Norway Property for purposes of financial statement segment information.

 

Option agreements to acquire central Norway properties, Tørdal and Evje-Iveland were entered into in April 2011 and an option agreement for the Hogtuva property, located in southern Norway, was signed in September 2011. Both of these agreements were subsequently renegotiated to secure 100% ownership positions for EMC.

 

Tørdal and Evje-Iveland Properties, Norway

 

The location of the Tørdal exploration property is provided in Figure 4 below.

Description: EMC-Scandium-sample-map (3).jpg

 

In April of 2011, we entered into an option agreement with REE Mining AS of Norway, pursuant to which we acquired the option to earn 100% of the outstanding common shares in the capital of a Norwegian limited liability company which holds the exploration rights to two pegmatite properties, known as the Tørdal property and the Evje-Iveland property. The properties are both prospective for a grouping of specialty metals, and rare earth elements, including scandium, yttrium, tantalum, beryllium, niobium, zirconium, titanium, lithium, nickel and tin.

 

Terms of the REE Option Agreement provided for a two stage earn-in option including cash payments totalling $650,000, work commitments totalling $250,000, and an EMC share grant of 1 million EMC shares, with payments due in October 2012 and June 2013.

 

On January 16, 2013 we announced a renegotiated earn-in immediately accelerating our ownership of the Tørdal exploration licenses to 100%. The renegotiated agreement canceled all outstanding cash payments ($500,000), and all remaining work commitments, in return for payment of certain property costs and other costs totalling $65,000 in December/January 2013, the 1 million EMC share grant, and a 1% net smelter return (“NSR”) on production proceeds from the property. As part of the amended agreement, EMC relinquished all rights to the Evje-Iveland property, which were returned to REE Mining.

 

2012 Tørdal Field Exploration

 

On February 14, 2013 we announced promising results from field exploration work on the Tørdal property during the summer and fall months of 2012, focussed on scandium-bearing pegmatites. The 2012 work included independent assay results of pegmatite rock samples taken from one specific property area, and also includes an extensive pegmatite mapping program covering approximately 30 sq km. The assay results indicated the presence of high levels of scandium and various rare earth elements (REE’s), including heavy rare earth elements (HREE’s) in particular. Field XRF readings indicated elevated scandium content in hundreds of large and small pegmatite bodies found and mapped in the reconnaissance area.

 

   
   

Highlights of the results of the 2012 field exploration are as follows:

 

 

Assay Results of Grab Samples at Tørdal

 

The 2011 summer exploration program on the Tørdal property consisted of reconnaissance, surface soil sampling, and limited pegmatite mapping work in a relatively small area north of the village of Kleppe, in Southern Norway.

 

As a follow-on from that 2011 program, the company then returned to the same area and conducted a series of ‘blasts’, using small explosive charges to generate whole rock samples on select exposed pegmatites, at the locations of the best soil sample results. The exploration team planned 9 blasts and conducted 8, on 5 different pegmatite bodies, from which they assembled 23 grab samples for analysis and assay by OMAC Laboratories in Ireland. Assay results on these samples were received in Q1 2012—in time to help formulate the 2012 summer/autumn season pegmatite mapping program, conducted on a much wider area.

 

Independent assay results on 20 of the 23 samples, covering all 5 targeted pegmatites, are shown below.

 

 

Assay results are as-reported elemental assay results from OMAC Laboratories, and are not converted to oxide equivalent (REO & Sc2O3). Heavy rare earth elements abbreviated “HREE”; and include Yttrium;Total rare earth elements abbreviated “TREE”.

 

The numbered assay samples were formed either by random selection of fresh (un-weathered) whole rock material broken loose from individual pegmatite bodies, or alternatively, based on selectively collecting fresh rock material that was clearly (1) garnet-laden, (2) mica-laden, or showed clear visible (3) gadolinite mineralization. Gadolinite is a beryllium and rare earth-bearing mineral with the chemical formula [(Ce,La,Nd,Y)2FeBe2Si2O10]. The intent was to determine from assay results if certain visible mineralization correlated to the presence and concentrations of target elements; specifically scandium, rare earth elements (REE’s), or other metals of interest and value.

   
   

 

The results in the assay table indicate that all of the selected pegmatites contain interesting levels of both REE’s and scandium. In general, all of the pegmatites contained both target elements, while the mica phase appears to hold the higher scandium concentrations with small REE additions, and the gadolinite phase holds the highest REE concentrations and small scandium additions. The presence of garnet material in samples tended to generate interesting but moderate values for both REE’s and scandium. Assay work was designed to identify 30 specific elements, including all 16 REE elements plus scandium, and the relative concentration of heavy REE’s was of particular interest. The mica and garnet grab sample materials had generally only trace levels of thorium and uranium (average <15 ppm), while the gadolinite grab sample materials had thorium levels between 2,500-5,000 ppm, and uranium levels between 500-1,300 ppm. A full table of OMAC assay results related to these 23 sample analyses is available on EMC’s website at www.emcmetals.com.

 

Reconnaissance Results – Extended Pegmatite Mapping Program at Tørdal

Following on from the 2011 work and the 2012 assay results, EMC conducted an expanded 2012 summer work reconnaissance program at both Tørdal and Evje-Iveland, from July through October. The goals of the 2012 program were to develop detailed mapping of outcropping pegmatite fields over a much broader area than the 2011 program, while also conducting field sampling of scandium mineralization on those pegmatites using a hand-held Niton XRF Analyzer.

The 2012 program concentrated on five separate areas (approximately 30 sq km) as can be seen in the map below:

Area-Tørdal-2013 (2)

 

A total of 1,940 Niton XRF readings were logged on whole rock and pegmatite mineral separates, logged against individually mapped and numbered pegmatite bodies.  The XRF readings ranged up to +6,000 ppm scandium (on a mineral separate), and averaged 661 ppm on 1,504 total logged readings above the instrument’s 20 ppm detection limit. XRF readings focussed on scandium data collection only, although the team diligently noted the visible presence of gadolinite and amazonite mineralization.

The reader is cautioned that hand-held Niton XRF readings are not the same as laboratory assays, and are not NI 43-101 compliant with regard to estimating resource grades. However, the Company is confident that these data readings are highly useful in confirming and shaping the next stage of the exploration program on this property.

A summary of results by area is as follows:

   
   

 

 

Similar work done at Evje-Iveland (total 180 sq km) identified several interesting target areas, but scandium readings were not sufficiently attractive when compared to results at Tørdal. These observations led to the decision to drop Evje-Iveland, as part of an amended agreement which also enabled EMC to achieve an immediate 100% earn-in on Tørdal.

The exploration results of the 2012 work program also allowed EMC to selectively reduce property holdings at Tørdal in January 2013. The property has been reduced from 140 sq km to 90 sq km, with lower ongoing exploration license holding costs as a result.

Next Steps in Norway Exploration Program

 

EMC’s mapping and sampling work has confirmed that much of the Tørdal property is heavily populated with complex, near-surface pegmatite bodies. Based on hand-held XRF readings and mineralogy, these pegmatites show excellent promise for significant scandium enrichment, particularly within bodies containing micas, and for REE mineralization where the rare earth silicate gadolinite is present. Based on the results of 2012 exploration work, planning for future exploration work is underway.

Qualified Person and Quality Assurance/Quality Control

 

Sampling methods followed industry quality control standards. Mr. Kjell Nilsen, an independent geologist consultant currently employed by EMC, conducted the reconnaissance and sampling on the property. Individual whole rock grab samples were collected by hand shovel, from areas where blasted material could be seen to have come from blast points on pegmatite bodies. The assayed samples were individually bagged, sealed, logged on the grid map as to location, boxed in a container suitable for mailing, and sent by express mail to OMAC Laboratories Limited in Galway, Ireland for testing. Assay testing on the samples utilized an ICP-MS spectrometer (Inductively Coupled Plasma-Mass Spectrometry) to test for numerous elements, specifically scandium. The numerous Niton XRF (X-ray Fluorescence) readings were taken at field locations, logged and identified with individual numbered pegmatites, located on grid maps, by the field geology team. Mr. Willem Duyvesteyn, Chief Technology Officer of EMC, is the Qualified Person who is responsible for the design and conduct of the exploration program, and reviewed the program results.

 

 

Other Developments

 

In February 2014 the Company repaid a $650,000 loan financing consisting of convertible debentures taken out in February 2013. The loan was secured by an interest in the assets of the Company’s wholly owned subsidiary, Wolfram Jack Mining Corp. and the Company’s interest in the Hogtuva and Tørdal properties in Norway.

 

On March 25, 2014, the Company issued 8,533,260 common shares at a value of C$0.025 per common share for total proceeds of $192,000.

 

On April 2, 2014 the Company announced that it had secured a 100% interest in an exploration license (EL 7977) covering 34.7 square kilometers in New South Wales (NSW), Australia. The license area is located approximately 24 kilometers west-southwest from EMC’s Nyngan Scandium Project and approximately 36 kilometers southwest from the town of Nyngan, NSW. The license area covers part of the Honeybugle geologic complex, and will carry that name in our future references to the property. The ground was released by the prior holder, and EMC intends to explore the property for scandium and other metals.

   
   

On May 7, 2014 the company announced completion of an initial program of 30 air core (AC) drill holes at its Honeybugle property (Exploration License: EL7977) in New South Wales (NSW), Australia, targeting scandium (Sc). Results on 13 of these holes are shown in detail, in the table below. These holes suggest the potential for scandium mineralization on the property similar to the Nyngan Scandium property, also controlled by EMC, which is 24 kilometers north of Honeybugle.

 

Highlights of initial drilling program results:

§intercepts on these 13 holes averaged 270 ppm scandium over a total 273 meters,
§at an average continuous thickness of 21 meters per hole,
§representing a total of 57% (354 meters) of total initial program drilling.