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24 2005 ANNUAL REPORT consolidated statements of cash flows Years Ended December 31, (in thousands of Canadian dollars) 2005 2004 CASH PROVIDED FROM (USED BY): Operating Activities Net loss for the year $ (5,010) $ (8,706) Items not affecting cash Stock option compensation 364 781 Reduction of future income taxes (211) (1,191) Gain on sale of marketable securities (400) – (Recovery) Loss on sale of exploration and development project (550) 7,226 Write-down of exploration and development projects 4,824 1,166 Amortization 9 10 Changes in non-cash working capital (note 9) 121 45 Recovery of expenses – marketable securities (16) – Cash used by operating activities (869) (669) Financing Activities Issue of common shares 3,147 1,150 Issue of warrants 500 – Cash provided from financing activities 3,647 1,150 Investing Activities Additions to exploration development projects (3,026) (2,617) Sale of exploration and development property 250 – Long-term receivable 1,000 – Sale of marketable securities 650 – Increase in buildings and equipment – (18) Cash used by investing activities (1,126) (2,635) Net increase (decrease) in cash during the year 1,652 (2,154) Cash and Cash Equivalents, beginning of year 998 3,152 Cash and Cash Equivalents, end of year $ 2,650 $ 998 Cash and Cash Equivalents Cash and cash equivalents $ 578 $ 380 Cash for exploration expenditures 2,072 618 $ 2,650 $ 998 See Notes to Financial Statements FINANCIAL STATEMENTS
NUINSCO RESOURCES LIMITED 25 notes to consolidated financial statements 1 NATURE OF OPERATIONS AND GOING CONCERN a) Nature of Operations Nuinsco Resources Limited (the “Company”) is continued under the laws of the Province of Ontario and is engaged in the business of exploring for and developing precious and base metal properties in Canada and Turkey. The Company may conduct its activities on its own or participate with others on a joint venture basis. The recoverability of the cost of projects is dependent upon the discovery of economically recoverable mineral reserves, the Company’s ability to finance the development of a project and its future profitable operation or, alternatively, upon the profitable disposal of a project. b) Going Concern These consolidated financial statements have been prepared using accounting principles applicable to a going concern entity, which assume that the entity will continue operating in the future and be able to realize its assets and discharge its liabilities in the normal course of its business. The Company’s exploration and development projects are in their early stages and, consequently, the Company, having no operating revenues to sustain its activities, has been wholly dependent on debt and equity financings and the optioning and/or sale of resource properties for its funds. Several conditions cast doubt on the validity of the Company’s application of the going concern principle. During the years ended December 31, 2005 and December 31, 2004, the Company incurred losses of $5,010,000 and $8,706,000, respectively. These losses included non-cash property write-downs of $4,824,000 in 2005 and a loss on the sale of the Rainy River property of $7,226,000 plus write-downs of exploration and development projects of $1,166,000 for the year ended December 31, 2004. As at December 31, 2005, the Company had working capital of $1,255,000 (excluding the cash on hand for exploration expenditures). During the year ended December 31, 2005, the Company was able to complete equity financings and received $1,650,000 as a result of selling a major exploration property in 2004. This sale will provide additional funds during 2006 of up to $2,500,000, including $1,000,000 from receivables and $1,500,000 from the sale of the balance of the shares based on the market value of shares of Rainy River Resources Ltd. (“Rainy River”) at the end of 2005. Should the Company not be able to continue to obtain financing for exploration activities and administration costs and should the Company not be able to continue as a going concern, then adjustments would be required with respect to the carrying value of the Company’s assets and liabilities, reported net loss for the year, and the balance sheet classifications used. 2 SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These consolidated financial statements are prepared by management in accordance with Canadian generally accepted accounting principles and include the accounts of the Company and those of its subsidiaries: Lakeport Gold Mines Limited, which is 91% owned; Cameron Lake JEX Corporation, which is 99% owned; and, Confederation Minerals Ltd., which is wholly owned. All of the subsidiaries are inactive. Exploration and Development Projects Exploration and development projects include the direct costs related to the various mineral properties, including cost of acquisition of the properties and deferred exploration and development expenses net of any recoveries. 2005 ANNUAL REPORT
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