Exhibit 4.11


 





 


 


AQUILINE RESOURCES INC.


 


INTERIM CONSOLIDATED FINANCIAL STATEMENTS


 


FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009


 


(EXPRESSED IN CANADIAN DOLLARS)


 


(UNAUDITED)


 





















 


MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING


 


The accompanying unaudited
interim consolidated financial statements of Aquiline Resources Inc. were
prepared by management in accordance with Canadian generally accepted
accounting principles. The most significant of these accounting principles have
been set out in the December 31, 2008 audited consolidated financial
statements. Only changes in accounting policies have been disclosed in these
unaudited interim consolidated financial statements. Management acknowledges
responsibility for the preparation and presentation of the unaudited interim
consolidated financial statements, including responsibility for significant
accounting judgments and estimates and the choice of accounting principles and
methods that are appropriate to the Company’s circumstances.


 


The Board of Directors is
responsible for ensuring management fulfills its financial reporting
responsibilities and for reviewing and approving the unaudited interim
consolidate financial statements together with other financial information. The
Audit Committee assists the Board of Directors in fulfilling this
responsibility. The Audit Committee meets with management to review the
internal controls over the financial reporting process and the period end
unaudited interim consolidated financial statements together with other financial
information of the Company. The Audit Committee reports its findings to the
Board of Directors for its consideration in approving the unaudited interim
consolidated financial statements together with other financial information of
the Company for issuance to the shareholders.


 


Management recognizes its
responsibility for conducting the Company’s affairs in compliance with
established financial standards, and applicable laws and regulations, and for
maintaining proper standards of conduct for its activities.


 


MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING


 


Management is responsible
for establishing and maintaining adequate control over its financial
reporting.  Management conducted an
evaluation of the effectiveness of internal control over financial reporting
based on “Internal Control Over Financial Reporting - Guidance for Smaller
Public Companies” issued by the Committee of Sponsoring Organizations of the
Treadway Commission.  Based on this
evaluation, management concluded that the Company’s internal control over
financial reporting was effective as at June 30, 2009.


 


CONCLUSION RELATING TO DISCLOSURE CONTROLS AND
PROCEDURES


 


An evaluation was
performed under the supervision and with the participation of management,  including the Chief Executive and Chief
Financial Officers, of the effectiveness of the Company’s disclosure controls
and procedures as defined in the National Instrument 52-109.  Based on that evaluation, the Chief Executive
Officer and the Chief Financial Officer concluded that the design and operation
of the Company’s disclosure controls and procedures were effective as at June 30,
2009.


 


NOTICE TO READER


 


Under National Instrument
51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a
review of the interim consolidated financial statements; they must be
accompanied by a notice indicating that the financial statements have not been
reviewed by an auditor.


 


The accompanying
unaudited interim consolidated 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 interim consolidated financial
statements in accordance with standards established by the Canadian Institute
of Chartered Accountants for a review of interim consolidated financial
statements by an entity’s auditor.


 





















 


AQUILINE RESOURCES INC.


 


Interim
Consolidated Balance Sheets


(Unaudited - Expressed in Canadian Dollars)


 


	
   

  	
   

  	
  June 30,

  	
   

  	
  December 31,

  	
   

  
	
   

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assets

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash and cash equivalents

  	
   

  	
  $

  	
  496,555

  	
   

  	
  $

  	
  2,357,921

  	
   

  
	
  Short-term investments

  	
   

  	
  14,070,000

  	
   

  	
  4,020,000

  	
   

  
	
  Other receivables and prepaids (Note 15)

  	
   

  	
  1,018,288

  	
   

  	
  1,236,377

  	
   

  
	
  Current portion of long-term foreign tax recoverable

  	
   

  	
  732,166

  	
   

  	
  884,831

  	
   

  
	
   

  	
   

  	
  16,317,009

  	
   

  	
  8,499,129

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Long-term foreign tax recoverable

  	
   

  	
  5,662,998

  	
   

  	
  6,416,917

  	
   

  
	
  Long-term investments (Note 5)

  	
   

  	
  86,150

  	
   

  	
  74,000

  	
   

  
	
  Property and equipment (Note 6)

  	
   

  	
  1,474,103

  	
   

  	
  1,608,121

  	
   

  
	
  Resource assets (Note 7)

  	
   

  	
  129,377,514

  	
   

  	
  123,682,815

  	
   

  
	
   

  	
   

  	
  $

  	
   152,917,774

  	
   

  	
  $

  	
  140,280,982

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Liabilities

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Payables and accruals (Note 15)

  	
   

  	
  $

  	
  2,121,521

  	
   

  	
  $

  	
  5,975,113

  	
   

  
	
  Debt (Note 8)

  	
   

  	
  523,350

  	
   

  	
  514,212

  	
   

  
	
   

  	
   

  	
  2,644,871

  	
   

  	
  6,489,325

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Asset retirement obligation (Note 9)

  	
   

  	
  1,408,930

  	
   

  	
  1,326,930

  	
   

  
	
  Future income tax liability

  	
   

  	
  12,668,380

  	
   

  	
  12,413,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  16,722,181

  	
   

  	
  20,229,255

  	
   

  
	
  Shareholders’ Equity

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capital stock (Note 10(a))

  	
   

  	
  142,102,003

  	
   

  	
  123,860,329

  	
   

  
	
  Warrants (Note 10(c))

  	
   

  	
  7,461,455

  	
   

  	
  7,461,455

  	
   

  
	
  Contributed surplus

  	
   

  	
  15,647,243

  	
   

  	
  15,514,378

  	
   

  
	
  Convertible debenture

  	
   

  	
  15,822,904

  	
   

  	
  15,822,904

  	
   

  
	
  Deficit

  	
   

  	
  (44,587,662

  	
  )

  	
  (42,344,839

  	
  )

  
	
  Accumulated other comprehensive loss

  	
   

  	
  (250,350

  	
  )

  	
  (262,500

  	
  )

  
	
   

  	
   

  	
  136,195,593

  	
   

  	
  120,051,727

  	
   

  
	
   

  	
   

  	
  $

  	
   152,917,774

  	
   

  	
  $

  	
  140,280,982

  	
   

  



 


Nature
of Operations and Going Concern (Note 1)


Commitments (Note 17)


Subsequent
Event (Note 18)


 


On
behalf of the Board of Directors:


 


	
  “MARC HENDERSON”
  (Signed)

  	
  Director

  
	
  “JOHN SUTHERLAND”
  (Signed)

  	
  Director

  



 





 


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


 


2





















 


AQUILINE RESOURCES INC.


 


Interim
Consolidated Statements of Operations


(Unaudited - Expressed in Canadian Dollars)


 


	
   

  	
   

  	
  Three
  Months Ended

  	
   

  	
  Six Months
  Ended

  	
   

  
	
   

  	
   

  	
  June 30,

  	
   

  	
  June 30,

  	
   

  
	
   

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Office and administration

  	
   

  	
  $

  	
  183,108

  	
   

  	
  $

  	
  171,768

  	
   

  	
  $

  	
  351,415

  	
   

  	
  $

  	
  292,688

  	
   

  
	
  IMA legal costs (Note 15)

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  8,556

  	
   

  
	
  Legal and audit (Note 15)

  	
   

  	
  185,848

  	
   

  	
  35,246

  	
   

  	
  239,142

  	
   

  	
  121,003

  	
   

  
	
  Accretion
  of asset retirement  obligation (Note 9)

  	
   

  	
  26,512

  	
   

  	
  30,238

  	
   

  	
  62,469

  	
   

  	
  60,317

  	
   

  
	
  Amortization

  	
   

  	
  8,705

  	
   

  	
  78,694

  	
   

  	
  16,274

  	
   

  	
  157,373

  	
   

  
	
  Travel

  	
   

  	
  15,210

  	
   

  	
  85,341

  	
   

  	
  39,887

  	
   

  	
  168,268

  	
   

  
	
  Investor relations

  	
   

  	
  202,295

  	
   

  	
  407,672

  	
   

  	
  304,832

  	
   

  	
  613,192

  	
   

  
	
  Salaries and consulting

  	
   

  	
  144,109

  	
   

  	
  1,394,437

  	
   

  	
  307,873

  	
   

  	
  1,540,564

  	
   

  
	
  Stock-based compensation (Note 10(b))

  	
   

  	
  75,664

  	
   

  	
  1,493,444

  	
   

  	
  388,629

  	
   

  	
  2,105,739

  	
   

  
	
   

  	
   

  	
  841,451

  	
   

  	
  3,696,840

  	
   

  	
  1,710,521

  	
   

  	
  5,067,700

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Loss before the following

  	
   

  	
  (841,451

  	
  )

  	
  (3,696,840

  	
  )

  	
  (1,710,521

  	
  )

  	
  (5,067,700

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest income

  	
   

  	
  2,598

  	
   

  	
  51,784

  	
   

  	
  6,234

  	
   

  	
  108,730

  	
   

  
	
  Foreign exchange gain (loss)

  	
   

  	
  (220,201

  	
  )

  	
  (580,132

  	
  )

  	
  (538,536

  	
  )

  	
  (1,062,473

  	
  )

  
	
  Loss on investments held for trading

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (11,700

  	
  )

  
	
  Gain on sale of long-term investments

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  508,909

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss for the  period

  	
   

  	
  $

  	
  (1,059,054

  	
  )

  	
  $

  	
  (4,225,188

  	
  )

  	
  $

  	
  (2,242,823

  	
  )

  	
  $

  	
  (5,524,234

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Basic and diluted loss per share
  (Note 14)

  	
   

  	
  $

  	
  (0.02

  	
  )

  	
  $

  	
  (0.07

  	
  )

  	
  $

  	
  (0.03

  	
  )

  	
  $

  	
  (0.09

  	
  )

  



 


Interim
Consolidated Statements of Deficit


(Unaudited - Expressed in Canadian Dollars)


 


	
   

  	
   

  	
  Three
  Months Ended

  	
   

  	
  Six Months
  Ended

  	
   

  
	
   

  	
   

  	
  June 30,

  	
   

  	
  June 30,

  	
   

  
	
   

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deficit, beginning of period

  	
   

  	
  $

  	
  (43,528,608

  	
  )

  	
  $

  	
  (22,093,421

  	
  )

  	
  $

  	
  (42,344,839

  	
  )

  	
  $

  	
  (20,794,375

  	
  )

  
	
  Net loss for the period

  	
   

  	
  (1,059,054

  	
  )

  	
  (4,225,188

  	
  )

  	
  (2,242,823

  	
  )

  	
  (5,524,234

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deficit, end of period

  	
   

  	
  $

  	
  (44,587,662

  	
  )

  	
  $

  	
  (26,318,609

  	
  )

  	
  $

  	
  (44,587,662

  	
  )

  	
  $

  	
  (26,318,609

  	
  )

  



 


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


 


3





















 


AQUILINE RESOURCES INC.


 


Interim
Consolidated Statements of Comprehensive Loss


(Unaudited - Expressed in Canadian Dollars)


 


	
   

  	
   

  	
  Three
  Months Ended

  	
   

  	
  Six Months
  Ended

  	
   

  
	
   

  	
   

  	
  June 30,

  	
   

  	
  June 30,

  	
   

  
	
   

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss  for
  the period

  	
   

  	
  $

  	
  (1,059,054

  	
  )

  	
  $

  	
  (4,225,188

  	
  )

  	
  $

  	
  (2,242,823

  	
  )

  	
  $

  	
  (5,524,234

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other comprehensive loss

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net
  unrealized gain on available-for-sale  long-term investments

  	
   

  	
  (24,875

  	
  )

  	
  (117,725

  	
  )

  	
  12,150

  	
   

  	
  (40,050

  	
  )

  
	
  Reclassification
  of unrealized gains on  available-for-sale long-term investments

  	
   

  	
  —

  	
   

  	
  (881,683

  	
  )

  	
  —

  	
   

  	
  (1,160,217

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total comprehensive loss

  	
   

  	
  $

  	
  (1,083,929

  	
  )

  	
  $

  	
  (5,224,596

  	
  )

  	
  $

  	
  (2,230,673

  	
  )

  	
  $

  	
  (6,724,501

  	
  )

  



 


 


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


 


4



















 


AQUILINE RESOURCES INC.

Interim Consolidated Statements of Changes in Shareholders’
Equity


(Unaudited - Expressed in Canadian Dollars)


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Accumulated

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Other

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Capital

  	
   

  	
   

  	
   

  	
  Contributed

  	
   

  	
  Convertible

  	
   

  	
   

  	
   

  	
  Comprehensive

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Stock

  	
   

  	
  Warrants

  	
   

  	
  Surplus

  	
   

  	
  Debenture

  	
   

  	
  Deficit

  	
   

  	
  (Loss) Income

  	
   

  	
  Total

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, December 31, 2007

  	
   

  	
  $

  	
  70,994,372

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  8,305,078

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  (20,794,375

  	
  )

  	
  $

  	
  1,108,167

  	
   

  	
  $

  	
  59,613,242

  	
   

  
	
  Exercise of warrants

  	
   

  	
  149,999

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  149,999

  	
   

  
	
  Value attributed to warrants exercised

  	
   

  	
  77,297

  	
   

  	
  (77,297

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Exercise of stock options

  	
   

  	
  3,593,450

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  3,593,450

  	
   

  
	
  Value attributed to stock options exercised

  	
   

  	
  1,412,987

  	
   

  	
  —

  	
   

  	
  (1,412,987

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Private placement, net of issue costs

  	
   

  	
  25,299,260

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  25,299,260

  	
   

  
	
  Warrants valuation

  	
   

  	
  (6,866,755

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (6,866,755

  	
  )

  
	
  Shares issued to acquire Absolut Resources Corp.

  	
   

  	
  29,199,719

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  29,199,719

  	
   

  
	
  Warrants issued

  	
   

  	
  —

  	
   

  	
  7,461,455

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  7,461,455

  	
   

  
	
  Warrants expired

  	
   

  	
  —

  	
   

  	
  (637,712

  	
  )

  	
  637,712

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Warrants
  issued to acquire Absolut Resources Corp.

  	
   

  	
  —

  	
   

  	
  715,009

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  715,009

  	
   

  
	
  Stock options vested

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  6,893,725

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  6,893,725

  	
   

  
	
  Stock
  options issue to acquire Absolut Resources Corp.

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  1,090,850

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  1,090,850

  	
   

  
	
  Convertible debenture, net of issue costs

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  15,822,904

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  15,822,904

  	
   

  
	
  Net loss for the year

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (21,550,464

  	
  )

  	
  —

  	
   

  	
  (21,550,464

  	
  )

  
	
  Reclassification
  of unrealized gain on available-for-sale long-term investments

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (1,253,217

  	
  )

  	
  (1,253,217

  	
  )

  
	
  Net
  unrealized loss on available-for-sale long-term investments

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (117,450

  	
  )

  	
  (117,450

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, December 31, 2008

  	
   

  	
  123,860,329

  	
   

  	
  7,461,455

  	
   

  	
  15,514,378

  	
   

  	
  15,822,904

  	
   

  	
  (42,344,839

  	
  )

  	
  (262,500

  	
  )

  	
  120,051,727

  	
   

  
	
  Private placement, net of issue costs

  	
   

  	
  17,176,020

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  17,176,020

  	
   

  
	
  Exercise of stock options

  	
   

  	
  675,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  675,000

  	
   

  
	
  Value attributed to stock options exercised

  	
   

  	
  390,654

  	
   

  	
  —

  	
   

  	
  (390,654

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Stock option vested

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  523,519

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  523,519

  	
   

  
	
  Net loss for the period

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (2,242,823

  	
  )

  	
  —

  	
   

  	
  (2,242,823

  	
  )

  
	
  Net
  unrealized gain on available-for-sale long-term investments

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  12,150

  	
   

  	
  12,150

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, June 30, 2009

  	
   

  	
  $

  	
  142,102,003

  	
   

  	
  $

  	
  7,461,455

  	
   

  	
  $

  	
  15,647,243

  	
   

  	
  $

  	
  15,822,904

  	
   

  	
  $

  	
  (44,587,662

  	
  )

  	
  $

  	
  (250,350

  	
  )

  	
  $

  	
  136,195,593

  	
   

  



 


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


 


5














 


AQUILINE RESOURCES INC.


 


Interim
Consolidated Statements of Cash Flows


(Unaudited - Expressed in Canadian Dollars)


 


	
   

  	
   

  	
  Three
  Months Ended

  	
   

  	
  Six Months
  Ended

  	
   

  
	
   

  	
   

  	
  June 30,

  	
   

  	
  June 30,

  	
   

  
	
   

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CASH AND CASH EQUIVALENTS (USED IN) PROVIDED BY:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OPERATING ACTIVITIES

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss for the period

  	
   

  	
  $

  	
  (1,059,054

  	
  )

  	
  $

  	
  (4,225,188

  	
  )

  	
  $

  	
  (2,242,823

  	
  )

  	
  $

  	
  (5,524,234

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjustments for:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Amortization

  	
   

  	
  8,705

  	
   

  	
  78,694

  	
   

  	
  16,274

  	
   

  	
  157,373

  	
   

  
	
  Accretion of asset retirement obligation

  	
   

  	
  26,512

  	
   

  	
  30,238

  	
   

  	
  62,469

  	
   

  	
  60,317

  	
   

  
	
  Stock-based compensation

  	
   

  	
  75,664

  	
   

  	
  1,493,444

  	
   

  	
  388,629

  	
   

  	
  2,105,739

  	
   

  
	
  Loss on investments held for trading

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  11,700

  	
   

  
	
  Gain on sale of long-term investments

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (508,909

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net
  change in non-cash working  capital (Note 13)

  	
   

  	
  (622,458

  	
  )

  	
  (2,847,679

  	
  )

  	
  (2,728,919

  	
  )

  	
  (2,701,203

  	
  )

  
	
   

  	
   

  	
  (1,570,631

  	
  )

  	
  (5,470,491

  	
  )

  	
  (4,504,370

  	
  )

  	
  (6,399,217

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FINANCING ACTIVITIES

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Repayment of debt

  	
   

  	
  —

  	
   

  	
  (75,010

  	
  )

  	
  —

  	
   

  	
  (75,010

  	
  )

  
	
  Issue
  of common shares, net of  share issue costs

  	
   

  	
  17,176,020

  	
   

  	
  16,830,411

  	
   

  	
  17,851,020

  	
   

  	
  18,636,611

  	
   

  
	
  Proceeds
  from convertible debenture  and warrants, net of issue costs

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  16,417,604

  	
   

  
	
   

  	
   

  	
  17,176,020

  	
   

  	
  16,755,401

  	
   

  	
  17,851,020

  	
   

  	
  34,979,205

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INVESTING ACTIVITIES

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Prepaid transaction costs

  	
   

  	
  —

  	
   

  	
  32,769

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Purchase of long-term investments

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (877,500

  	
  )

  
	
  Proceed
  on disposal of long-term  investments

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  1,022,945

  	
   

  
	
  Net purchase of property and equipment

  	
   

  	
  (18,040

  	
  )

  	
  (825,845

  	
  )

  	
  71,111

  	
   

  	
  (914,128

  	
  )

  
	
  Net purchase of short-term investments

  	
   

  	
  (14,000,000

  	
  )

  	
  (3,750,000

  	
  )

  	
  (10,050,000

  	
  )

  	
  (4,900,000

  	
  )

  
	
  Acquisition
  of Minera Argenta S.A. and  Aquiline Holdings Inc.

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (12,250,000

  	
  )

  
	
  Cash
  acquired on Minera Argenta S.A.  and Aquiline Holdings Inc.

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  1,519,508

  	
   

  
	
  Cash acquired on Absolut Resources Inc.

  	
   

  	
  —

  	
   

  	
  505,040

  	
   

  	
  —

  	
   

  	
  505,040

  	
   

  
	
  Additions to resource assets

  	
   

  	
  (2,436,228

  	
  )

  	
  (5,459,489

  	
  )

  	
  (5,257,796

  	
  )

  	
  (11,904,627

  	
  )

  
	
   

  	
   

  	
  (16,454,268

  	
  )

  	
  (9,497,525

  	
  )

  	
  (15,236,685

  	
  )

  	
  (27,798,762

  	
  )

  
														



 


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


 


6





















 


AQUILINE RESOURCES INC.


 


Consolidated
Statements of Cash Flows - Continued


(Expressed
in Canadian Dollars)


 


	
   

  	
   

  	
  Three Months
  Ended

  	
   

  	
  Six Months
  Ended

  	
   

  
	
   

  	
   

  	
  June 30,

  	
   

  	
  June 30,

  	
   

  
	
   

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Effect
  of translation on foreign currency  net monetary assets

  	
   

  	
  (160,682

  	
  )

  	
  (554,087

  	
  )

  	
  28,669

  	
   

  	
  (17,388

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Decrease in cash and cash
  equivalents

  	
   

  	
  (1,009,561

  	
  )

  	
  1,233,298

  	
   

  	
  (1,861,366

  	
  )

  	
  763,838

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash and cash equivalents,  beginning of period

  	
   

  	
  1,506,116

  	
   

  	
  3,264,938

  	
   

  	
  2,357,921

  	
   

  	
  3,734,398

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash and cash equivalents,  end of period

  	
   

  	
  $

  	
  496,555

  	
   

  	
  $

  	
  4,498,236

  	
   

  	
  $

  	
  496,555

  	
   

  	
  $

  	
  4,498,236

  	
   

  
														



 


SUPPLEMENTAL
CASH FLOW INFORMATION (Note 13)


 


 


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


 


7





















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


1.            Nature
of Operations and Going Concern


 


Aquiline Resources
Inc. (“Aquiline” or the “Corporation”) is a publicly traded company listed on
the TSX under the symbol “AQI” involved in the exploration and development of
gold and silver projects in Argentina and Peru. The majority of the Corporation’s
deferred exploration expenses relate to the development of the Calcatreu
property located in the Province of Rio Negro, Argentina, the Navidad Silver
Project and the Regalo gold property in the Chubut Province of Argentina and
the Pico Machay and Chaparra gold projects in Peru. Aquiline also owns and has
interests in platinum and palladium projects in the Sudbury region of Ontario,
Canada and holds a net smelter royalty (“NSR”) on a development stage gold and
silver project in Mexico (“La Jojoba Project”). The Corporation also holds
equity share positions in exploration and development companies that operate
within certain countries in the Americas.


 


The business of
mining for minerals involves a high degree of risk. The underlying value of the
mineral properties is dependent upon the existence and economic recovery of
mineral reserves, the ability to raise long-term financing to complete the
development of the properties, government policies and regulations, and upon
future profitable production or, alternatively upon the Corporation’s ability
to dispose of its interest on an advantageous basis; all of which are uncertain.


 


In order to meet
future expenditures, the Corporation will need to raise additional funding.
Although the Corporation has been successful in raising funds to date, there
can be no assurance that adequate funding will be available in the future, or
available under terms favourable to the Corporation. These unaudited interim
consolidated financial statements have been prepared on a going concern basis
that assumes the Corporation will be able to continue to realize its assets and
discharge its liabilities in the normal course of business. In the event the
Corporation is not able to obtain adequate funding, there is uncertainty as to
whether the Corporation will be able to continue as a going concern and
maintain or complete the exploration and development of its resource
properties. These unaudited interim consolidated financial statements do not
reflect the adjustments to the carrying values of assets and liabilities that
would be necessary if the Corporation were unable to obtain adequate financing.  Changes in future conditions could require
material write downs of the carrying values of resource assets.


 


2.            Basis of Presentation and Accounting
Policies


 


The unaudited
interim consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and notes
to the consolidated financial statements required by Canadian generally
accepted accounting principles for annual consolidated financial statements. In
the opinion of management, all adjustments considered necessary for a fair
presentation have been included. Operating results for the three and six month
period ended June 30, 2009 may not necessarily be indicative of the
results that may be expected for the year ended December 31, 2009.


 


The consolidated
balance sheet at December 31, 2008 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by Canadian generally accepted accounting
principles for annual consolidated financial statements. The unaudited interim
consolidated financial statements have been prepared by management in
accordance with the accounting policies described in the Corporation’s annual
audited consolidated financial statements for the year ended December 31,
2008, except as noted below. For further information, refer to the audited
consolidated financial statements and notes thereto for the year ended December 31,
2008.


 


8





















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


2.            Basis of Presentation and Accounting
Policies (Continued)


 


Goodwill
and Intangible Assets


 


Effective January 1,
2009, the Corporation adopted CICA Section 3064 “Goodwill and Intangible
Assets”, which replaced CICA Handbook sections 3062, “Goodwill and Other
Intangible Assets” and 3450, “Research and Development Costs”, as well as
EIC-27, “Revenues and Expenditures During the Pre-operating Period”, and part
of Accounting Guideline 11, “Enterprises in the development stage”. Under
previous Canadian standards, a greater number of items were recognized as
assets than are recognized under International Financial Reporting Standards (“IFRS”).
The provisions relating to the definition and initial recognition of intangible
assets reduce the differences with IFRS in the accounting for intangible
assets. The objectives of CICA 3064 are: 1) to reinforce the principle-based
approach to the recognition of assets; 2) to establish the criteria for asset
recognition and; 3) to clarify the application of the concept of matching
revenues and expenses such that the current practice of recognizing asset items
that do not meet the recognition criteria is eliminated. The new standard also
provides guidance for the recognition of internally developed intangible assets
(including research and development activities), ensuring consistent treatment
of all intangible assets. The portions in the new standard relating to goodwill
remain unchanged.


 


The adoption of
this standard had no impact on the Corporation’s presentation of its financial
position or results of operations as at June 30, 2009.


 


Credit
Risk and the Fair Value of Financial Assets and Financial Liabilities


 


In January 2009,
the Emerging Issues Committee of the CICA issued EIC-173, “Credit Risk and the
Fair Value of Financial Assets and Financial Liabilities” which applies to
interim and annual financial statements for periods ending on or after January 20,
2009. The adoption of this standard had no impact on the Corporation’s
presentation of its financial position or results of operations as at June 30,
2009.


 


Mining
Exploration Costs


 


On March 27,
2009, the Emerging Issues Committee of the CICA approved an abstract EIC-174, “Mining
Exploration Costs”, which provides guidance on capitalization of exploration
costs related to mining properties in particular, and on impairment of
long-lived assets in general. The adoption of this abstract had no impact on
the Corporation’s presentation of its financial position or results of
operations as at June 30, 2009.


 


Future
Accounting Pronouncements


 


International
Financial Reporting Standards (“IFRS”)


 


In January 2006,
the CICA’s Accounting Standards Board (“AcSB”) formally adopted the strategy of
replacing Canadian GAAP with IFRS for Canadian enterprises with public
accountability. On February 13, 2008 the AcSB confirmed that the use of
IFRS will be required in 2011 for publicly accountable profit oriented
enterprises. For these entities, IFRS will be required for interim and annual
financial statements relating to fiscal years beginning on or after January 1,
2011. The Corporation will be required to have prepared, in time for its first
quarter of fiscal 2011 filing, comparative financial statements in accordance
with IFRS for the three months ended March 31, 2010. While the Corporation
has begun assessing the impact of the adoption of IFRS on its consolidated
financial statements, the financial reporting impact of the transition to IFRS
cannot be reasonably estimated at this time.


 


9





















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


2.            Basis of Presentation and Accounting
Policies (Continued)


 


Future
Accounting Pronouncements (Continued)


 


Business Combinations,
Consolidated Financial Statements and Non-Controlling Interests


 


The CICA issued
three new accounting standards in January 2009: Section 1582, “Business
Combinations”, Section 1601, “Consolidated Financial Statements” and Section 1602,
“Non-Controlling interests”. These new standards will be effective for fiscal
years beginning on or after January 1, 2011. Section 1582 replaces
section 1581 and establishes standards for the accounting for a business
combination. It provides the Canadian equivalent to IFRS 3, “Business
Combinations”. Sections 1601 and 1602 together replace section 1600, “Consolidated
Financial Statements”. Section 1601 establishes standards for the
preparation of consolidated financial statements. Section 1602 establishes
standards for accounting for a non-controlling interest in a subsidiary in
consolidated financial statements subsequent to a business combination. It is
equivalent to the corresponding provisions of IFRS lAS-27, “Consolidated and
Separate Financial Statements”. The Corporation is in the process of evaluating
the requirements of the new standards.


 


3.            Capital
Management


 


The Corporation
manages its capital structure and makes adjustments to it, based on the funds
available to the Corporation, in order to support the acquisition, exploration
and development of mineral properties. The Board of Directors does not
establish quantitative return on capital criteria for management, but rather
relies on the expertise of the Corporation’s management to sustain future
development of the business.  The
Corporation defines capital to include its working capital position and the
capital stock, warrant, and option components of its shareholders’ equity.


 


The properties in
which the Corporation currently has an interest are in the exploration stage;
as such the Corporation is dependent on external financing to fund its
activities. In order to carry out the planned exploration and pay for
administrative costs, the Corporation will spend its existing working capital
and raise additional amounts as needed. The Corporation will continue to assess
new properties and seek to acquire an interest in additional properties if it
feels there is sufficient geologic or economic potential and if it has adequate
financial resources to do so.


 


Management has
chosen to mitigate the risk and uncertainty associated with raising additional
capital within current economic conditions by:


 


i)          minimizing discretionary disbursements;


ii)         reducing or eliminating exploration expenditures which
are of limited strategic value;


iii)        exploring alternate sources of liquidity.


 


In light of the
above, the Corporation will continue to assess new properties and seek to
acquire an interest in additional properties if it feels there is sufficient
potential and if it has adequate financial resources to do so.


 


Management reviews
its capital management approach on an ongoing basis and believes that this
approach, given the relative size of the Corporation, is reasonable.  There were no changes in the Corporation’s
approach to capital management during the six months ended June 30, 2009.
The Corporation is not subject to externally imposed capital requirements.  As at June 30, 2009, the Corporation is
seeking sources of additional capital.


 


10





















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


4.            Property
and Financial Risk Factors


 


(a)     Property Risk


 


The Corporation’s major mineral properties are the
Calcatreu gold property, Navidad Silver Project and Pico Machay gold property.
Unless the Corporation acquires or develops additional material properties, the
Corporation will be mainly dependent upon these three properties. If no additional
major mineral exploration properties are acquired by the Corporation, any
adverse development affecting these three properties would have a material
adverse effect on the Corporation’s financial condition and results of
operations.


 


(b)     Financial Risk


 


The
Corporation’s activities expose it to a variety of financial risks: credit
risk, liquidity risk and market risk (including interest rate, foreign exchange
rate and other price risk).


 


Risk
management is carried out by the Corporation’s management team with guidance
from the Audit Committee under policies approved by the Board of Directors. The
Board of Directors also provides regular guidance for overall risk management.


 


i)      Credit Risk


 


The Corporation’s
credit risk is primarily attributable to short-term investments, other
receivables and foreign tax recoverable. The Corporation has no significant
concentration of credit risk arising from operations. Short-term investments
consist of guaranteed investment certificates, which have been invested with
reputable financial institutions, from which management believes the risk of
loss to be remote. Other receivables consist of goods and services tax due from
the Federal Government of Canada and receivables from other companies. Foreign
tax recoverable consists of value added taxes paid on exploration costs that
are refundable from the Government of Argentina. In Argentina, claims for the
foreign tax recoverable can only be made one year after the stated expenditures
have been paid when there is no tax collection from revenues to offset.
$6,395,164 represents the maximum credit exposure. Management believes that the
credit risk concentration with respect to other receivables and foreign tax
recoverable is remote. Management does not believe the receivables are
impaired.


 


ii)     Liquidity Risk


 


The Corporation’s
approach to managing liquidity risk is to ensure that it will have sufficient
liquidity to meet liabilities when due. As at June 30, 2009, the
Corporation had cash and cash equivalents and short-term investments of
$14,566,555 (December 31, 2008 - $6,377,921) to settle current liabilities
of $2,644,871 (December 31, 2008 - $6,489,325). Other than its current
debt (see Note 8), all of the Corporation’s financial liabilities have
contractual maturities of less than 90 days and are subject to normal trade
terms.


 


iii)    Market Risks


 


Interest Rate Risk


 


The Corporation
has cash balances and no interest-bearing debt. The Corporation’s current
policy is to invest excess cash in investment-grade short-term deposit
certificates issued by its banking institutions. The Corporation periodically
monitors the investments it makes and is satisfied with the credit ratings of
its banks.


 


11





















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


4.            Property
and Financial Risk Factors (Continued)


 


(b)     Financial risk (Continued)


 


iii)    Market Risks (Continued)


 


Foreign Currency
Risk


 


The Corporation’s
functional currency is the Canadian dollar and major purchases are transacted
in Canadian dollars, Argentine Pesos and Peruvian New Soles. The Corporation
funds major operations and exploration expenses in Argentina and Peru. The
Corporation maintains Argentine pesos bank accounts in Argentina and Peruvian
soles bank accounts in Peru. The Corporation is subject to gains and losses due
to fluctuations in Argentine Peso and Peruvian New Soles against the Canadian
dollar.


 


Price Risk


 


The Corporation is
exposed to price risk with respect to commodity and equity prices. Equity price
risk is defined as the potential adverse impact on the Corporation’s earnings
due to movements in individual equity prices or general movements in the level
of the stock market. Commodity price risk is defined as the potential adverse
impact on earnings and economic value due to commodity price movements and
volatilities. The Corporation closely monitors commodity prices of gold and
silver, individual equity movements, and the stock market to determine the
appropriate course of action to be taken.


 


Financial Instruments


 


The
Corporation’s financial instruments consist of cash and cash equivalents,
short-term investments, other receivables, foreign tax recoverable, long-term
investments, payables and accruals, current debt and asset retirement
obligations. As at June 30, 2009, the carrying and fair value amounts of
the Corporation’s financial instruments are the same. Changes in fair value of
the Corporation’s long-term investments are recognized in other comprehensive
income.


 


Sensitivity Analysis


 


Based
on management’s knowledge and experience of the financial markets, the
Corporation believes the following movements are “reasonably possible” over a
six month period. The sensitivity analysis shown in the notes below may differ
materially from actual results.


 


Short-term
investments include deposits at call which are at variable rates. Sensitivity
to a plus or minus 1% change in rates would affect net loss by $70,400.


 


The
Corporation’s long-term investments are denominated in Canadian dollars.
Sensitivity to a plus or minus 10% movement in the Canadian listed equity
prices would affect comprehensive loss by $8,600.


 


The
Corporation is exposed to foreign currency risk on fluctuations of financial
instruments related to cash and cash equivalents, other receivables, foreign
tax recoverable, payables and accruals that are denominated in Argentine Pesos
and Peruvian New Soles. Sensitivity to a plus or minus 5% change in the foreign
exchange rate would affect net loss by $296,100.


 


Price
risk is remote since the Corporation is not a producing entity.


 


12





















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


5.             Long-Term
Investments


 


The
Corporation’s long-term investments include:


 


	
   

  	
   

  	
   

  	
   

  	
  Cumulative

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Other

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Comprehensive

  	
   

  	
  June 30,

  	
   

  	
  December 31,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Income

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
  Cost

  	
   

  	
  Adjustment

  	
   

  	
  Fair Value

  	
   

  	
  Fair Value

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sierra Minerals Inc. (i)

  	
   

  	
  $

  	
  56,000

  	
   

  	
  $

  	
  (31,350

  	
  )

  	
  $

  	
  24,650

  	
   

  	
  $

  	
  21,250

  	
   

  
	
  Columbia Metals Corporation Limited (ii)

  	
   

  	
  187,500

  	
   

  	
  (150,000

  	
  )

  	
  37,500

  	
   

  	
  43,750

  	
   

  
	
  Tinka Resources Ltd. common shares (iii)

  	
   

  	
  —

  	
   

  	
  24,000

  	
   

  	
  24,000

  	
   

  	
  9,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  243,500

  	
   

  	
  $

  	
  (157,350

  	
  )

  	
  $

  	
  86,150

  	
   

  	
  $

  	
  74,000

  	
   

  



 






(i) Aquiline
owns 170,000 common shares of Sierra Minerals Inc.


(ii) Aquiline
owns 625,000 common shares of Columbia Metals Corporation Limited


(iii) Aquiline
owns 300,000 common shares of Tinka Resources Ltd.


 


6.             Property
and Equipment


 


	
   

  	
   

  	
   

  	
   

  	
  Accumulated

  	
   

  	
  Net

  	
   

  
	
  June 30,
  2009

  	
   

  	
  Cost

  	
   

  	
  Amortization

  	
   

  	
  Book Value

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Office equipment

  	
   

  	
  $

  	
  218,803

  	
   

  	
  $

  	
  130,929

  	
   

  	
  $

  	
  87,874

  	
   

  
	
  Leasehold improvements

  	
   

  	
  55,591

  	
   

  	
  39,974

  	
   

  	
  15,617

  	
   

  
	
  Exploration equipment

  	
   

  	
  1,931,699

  	
   

  	
  561,087

  	
   

  	
  1,370,612

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   2,206,093

  	
   

  	
  $

  	
  731,990

  	
   

  	
  $

  	
  1,474,103

  	
   

  



 


	
   

  	
   

  	
   

  	
   

  	
  Accumulated

  	
   

  	
  Net

  	
   

  
	
  December 31,
  2008

  	
   

  	
  Cost

  	
   

  	
  Amortization

  	
   

  	
  Book Value

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Office equipment

  	
   

  	
  $

  	
  167,159

  	
   

  	
  $

  	
  117,540

  	
   

  	
  $

  	
  49,619

  	
   

  
	
  Leasehold improvements

  	
   

  	
  46,028

  	
   

  	
  34,804

  	
   

  	
  11,224

  	
   

  
	
  Exploration equipment

  	
   

  	
  2,001,501

  	
   

  	
  454,223

  	
   

  	
  1,547,278

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   2,214,688

  	
   

  	
  $

  	
  606,567

  	
   

  	
  $

  	
  1,608,121

  	
   

  



 


13














 


AQUILINE RESOURCES INC.


 


Notes to Interim Consolidated
Financial Statements


(Expressed in Canadian Dollars)


(Unaudited)


 


Three and
Six Months Ended June 30, 2009


 


7.                                    Resource Assets


 


As of June 30,
2009 accumulated costs with respect to the Corporation’s interest in mineral
properties owned, leased or under option, consisted of the following:


 


	
   

  	
   

  	
  Opening

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Ending

  	
   

  
	
   

  	
   

  	
  December 31,

  	
   

  	
  Acquisitions/

  	
   

  	
   

  	
   

  	
  June 30,

  	
   

  
	
  Description

  	
   

  	
  2008

  	
   

  	
  Additions

  	
   

  	
  Reductions

  	
   

  	
  2009

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Calcatreu gold property - Argentina

  	
   

  	
  $

  	
  35,787,677

  	
   

  	
  $

  	
  66,286

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  35,853,963

  	
   

  
	
  Platinum and palladium - Sudbury, Ontario

  	
   

  	
  50,000

  	
   

  	
  7,747

  	
   

  	
  —

  	
   

  	
  57,747

  	
   

  
	
  Gold properties - La Jojoba, Mexico

  	
   

  	
  50,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  50,000

  	
   

  
	
  Regalo gold property - Argentina

  	
   

  	
  268,035

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  268,035

  	
   

  
	
  Navidad Silver Project - Argentina

  	
   

  	
  57,527,103

  	
   

  	
  4,853,618

  	
   

  	
  —

  	
   

  	
  62,380,721

  	
   

  
	
  Pico Machay - Peru

  	
   

  	
  28,000,000

  	
   

  	
  501,485

  	
   

  	
  —

  	
   

  	
  28,501,485

  	
   

  
	
  Chaparra - Peru

  	
   

  	
  2,000,000

  	
   

  	
  265,563

  	
   

  	
  —

  	
   

  	
  2,265,563

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  123,682,815

  	
   

  	
  $

  	
  5,694,699

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  129,377,514

  	
   

  



 


On a
quarterly basis, management of the Corporation review exploration costs to
ensure resource assets include only costs and projects that are eligible for
capitalization.


 


For a
description of the resource assets owned by the Corporation, refer to Note 11
of the audited consolidated financial statements as at December 31, 2008.
There were no specific changes to resources assets that occurred from January 1,
2009 to June 30, 2009.


 


8.                                    Debt


 


This debt is
related to Absolut’s Chaparra acquisition in 2005. The debt arose on June 8,
2005, is in $US, and no interest is payable. No security has been taken by the
creditors.


 


The fair value of
the loan at the date of issue was $575,527 calculated using an 8% discount
rate. The deemed interest of $47,870 (December 31, 2008 - $24,776) for the
fifteen month period since acquisition of Absolut has been capitalized and
recorded in resource assets.


 


	
   

  	
   

  	
  Balance

  	
   

  	
  Balance

  	
   

  
	
   

  	
   

  	
  June 30,

  	
   

  	
  December 31,

  	
   

  
	
  Creditor/

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  
	
  Creditor
  group

  	
   

  	
  ($Cdn)

  	
   

  	
  ($Cdn)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ex-Shareholders of Compania Minera Colorado*

  	
   

  	
  $

  	
  523,350

  	
   

  	
  $

  	
  514,212

  	
   

  
								



 


$87,225 (US $75,000) of the debt was due in September 2008
and $436,125 (US $375,000) is due in September 2009.


 






* An officer of Minera Calipuy S.A.C., a wholly owned
subsidiary, was owed 35% or US $157,500 of the original face amount of the
loans and is paid on the same basis as other creditors.


 


14

















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


9.                                    Asset Retirement
Obligation


 


The following
table summarizes the changes in asset retirement obligations during the periods
presented:


 


	
   

  	
   

  	
  June 30,

  	
   

  	
  December 31,

  	
   

  
	
   

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Opening balance

  	
   

  	
  $

  	
  1,326,930

  	
   

  	
  $

  	
  422,240

  	
   

  
	
  Additions

  	
   

  	
  —

  	
   

  	
  673,374

  	
   

  
	
  Accretion expense

  	
   

  	
  62,469

  	
   

  	
  125,607

  	
   

  
	
  Foreign exchange effect on liability

  	
   

  	
  19,531

  	
   

  	
  131,894

  	
   

  
	
  Reclamation costs incurred

  	
   

  	
  —

  	
   

  	
  (26,185

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  1,408,930

  	
   

  	
  $

  	
  1,326,930

  	
   

  



 


10.                             Capital Stock


 


(a)          The authorized capital of the Corporation
consists of an unlimited number of no par value common shares.


 


	
   

  	
   

  	
  Shares

  	
   

  	
  Value

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Outstanding at December 31, 2008

  	
   

  	
  67,610,115

  	
   

  	
  $

  	
  123,860,329

  	
   

  
	
  Adjustment to number of shares issued for
  acquisition of Absolut Resources Inc.

  	
   

  	
  78,596

  	
   

  	
  —

  	
   

  
	
  Equity financing, net of issue costs (i)

  	
   

  	
  8,100,000

  	
   

  	
  17,176,020

  	
   

  
	
  Exercise of stock options

  	
   

  	
  500,000

  	
   

  	
  675,000

  	
   

  
	
  Value attributed to stock options exercised

  	
   

  	
  —

  	
   

  	
  390,654

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Outstanding at June 30,
  2009

  	
   

  	
  76,288,711

  	
   

  	
  $

  	
  142,102,003

  	
   

  



 






(i) On June 4,
2009, the Corporation closed an equity financing for gross proceeds of
$18,225,000. The offering was comprised of 8,100,000 common shares at $2.25.


 


(b)         Stock options


 


A summary of the status of the Corporation’s
stock option plan as of June 30, 2009 is as follows:


 


	
   

  	
   

  	
  Share Purchase

  	
   

  	
  Weighted Average

  	
   

  
	
   

  	
   

  	
  Options

  	
   

  	
  Exercise
  Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Outstanding, December 31, 2008

  	
   

  	
  5,245,444

  	
   

  	
  $

  	
  6.40

  	
   

  
	
  Options exercised

  	
   

  	
  (500,000

  	
  )

  	
  1.35

  	
   

  
	
  Options expired/cancelled

  	
   

  	
  (317,112

  	
  )

  	
  8.34

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Outstanding, June 30, 2009

  	
   

  	
  4,428,332

  	
   

  	
  $

  	
  6.83

  	
   

  



 


15

















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


10.                             Capital Stock (Continued)


 


(b)              Stock options (Continued)


 


The
following table reflects the stock options outstanding at June 30, 2009:


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Weighted

  	
   

  	
  Weighted

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Average

  	
   

  	
  Average

  	
   

  	
   

  	
   

  
	
  Options

  	
   

  	
  Exercise

  	
   

  	
  Options

  	
   

  	
  Exercise

  	
   

  	
  Contractual

  	
   

  	
  Expiry

  	
   

  
	
  Granted

  	
   

  	
  Price ($)

  	
   

  	
  Exercisable

  	
   

  	
  Price ($)

  	
   

  	
  Life (Years)

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16,667

  	
   

  	
  9.00

  	
   

  	
  16,667

  	
   

  	
  9.00

  	
   

  	
  0.19

  	
   

  	
  September 9, 2009

  	
   

  
	
  3,333

  	
   

  	
  5.58

  	
   

  	
  3,333

  	
   

  	
  5.58

  	
   

  	
  1.27

  	
   

  	
  October 6, 2010

  	
   

  
	
  1,835,000

  	
   

  	
  12.00

  	
   

  	
  1,835,000

  	
   

  	
  12.00

  	
   

  	
  1.63

  	
   

  	
  February 15, 2011

  	
   

  
	
  100,000

  	
   

  	
  12.00

  	
   

  	
  100,000

  	
   

  	
  12.00

  	
   

  	
  1.75

  	
   

  	
  April 1, 2011

  	
   

  
	
  150,000

  	
   

  	
  8.25

  	
   

  	
  150,000

  	
   

  	
  8.25

  	
   

  	
  1.94

  	
   

  	
  June 9, 2011

  	
   

  
	
  125,000

  	
   

  	
  8.25

  	
   

  	
  125,000

  	
   

  	
  8.25

  	
   

  	
  1.96

  	
   

  	
  June 14, 2011

  	
   

  
	
  2,155,000

  	
   

  	
  2.00

  	
   

  	
  2,155,000

  	
   

  	
  2.00

  	
   

  	
  2.43

  	
   

  	
  December 4, 2011

  	
   

  
	
  43,332

  	
   

  	
  6.30

  	
   

  	
  43,332

  	
   

  	
  6.30

  	
   

  	
  3.07

  	
   

  	
  July 23, 2012

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4,428,332

  	
   

  	
  6.83

  	
   

  	
  4,428,332

  	
   

  	
  6.83

  	
   

  	
  2.05

  	
   

  	
   

  	
   

  



 


For
the six months ended June 30, 2009, the fair value of previous year stock
options granted that vested during the period was recorded as follows: $388,629
(six months ended June 30, 2008 - $628,040) expensed as stock-based compensation
and $134,890 (six months ended June 30, 2008 - $593,620) capitalized as
resource assets.


 


(c)               Warrants


 


The
following table reflects the continuity of warrants:


 


	
   

  	
   

  	
  December 31,

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  June 30,

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2008

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  2009

  	
   

  	
  Warrant

  	
   

  	
  Exercise

  	
   

  
	
  Expiry
  Date

  	
   

  	
  Balance

  	
   

  	
  Issued

  	
   

  	
  Exercised

  	
   

  	
  Expired

  	
   

  	
  Balance

  	
   

  	
  Value

  	
   

  	
  Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (i)

  	
   

  	
  237,500

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  237,500

  	
   

  	
  $

  	
  594,700 

  	
   

  	
  $

  	
  13.00

  	
   

  
	
  December 31, 2009

  	
   

  	
  1,818,182

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  1,818,182 

  	
   

  	
  3,027,273

  	
   

  	
  $

  	
  10.00

  	
   

  
	
  October 22, 2011

  	
   

  	
  3,695,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  3,695,000 

  	
   

  	
  2,580,587

  	
   

  	
  $

  	
  2.50

  	
   

  
	
  November 6, 2011

  	
   

  	
  1,615,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  1,615,000 

  	
   

  	
  1,258,895

  	
   

  	
  $

  	
  2.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7,365,682

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  7,365,682  

  	
   

  	
  $

  	
  7,461,455

  	
   

  	
   

  	
   

  



 






(i) On February 8,
2008, the Corporation issued 237,500 warrants in connection with the convertible
debenture. The warrants expire six months after the Conversion Deadline (Note
11).


 


16

















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


11.                          Convertible Debenture


 


On February 8,
2008, Silverstone Resources Corp. (“Silverstone”) purchased a $17.5 million
convertible debenture (the “Debenture”) from Aquiline. Silverstone may elect to
convert the Debenture into Common Shares of Aquiline at a conversion price of
$12.00 or into a contract (“Contract”) granting Silverstone the right to
purchase, at the lesser of US$4.00 per ounce of silver and the prevailing
market price per ounce of silver on the London Metal Exchange at the time
production is delivered, 12.5% of the life of mine payable silver from the Loma
de La Plata zone which is one of seven zones comprising the Navidad project, or
if unavailable, from the other zones of the Navidad project.


 


Silverstone may
elect to convert the Debenture into Common Shares of Aquiline or a Contract at
any time until the Conversion Deadline, which is defined as 30 days after the
earlier of: (a) January 8, 2010; and (b) the Maturity Date which
is defined as the later of the completion of a feasibility study on the
Property, the decision of Aquiline to proceed with a mine, and receipt of all
necessary permits to proceed with construction of a mine.


 


Silverstone and
Aquiline shall negotiate a definitive Contract not yet signed which shall be
subject to Exchange approval. Upon conversion to the Contract, the $17.5
million face value of the Debenture will form part of an upfront payment by
Silverstone of US$50 million to secure the silver, structured as: upon election
to convert to the Contract, US$17,599,750 being equivalent to the CDN$17.5
million face value of the Debenture; US$14,900,250 on the Maturity Date; and
US$17.5 million in four equal installments of US$4,375,000, each three months
apart, the first installment starting three months after the start of
construction and the remaining installments due every three months thereafter.


 


The Debenture
carries a coupon of 150,000 warrants in lieu of interest, with each warrant
entitling Silverstone to purchase one Common Share at an exercise price of
CDN$13.00 per Common Share for a period expiring six months after the
Conversion Deadline.


 


The Corporation
paid a finder’s fee of 6% in cash of the Debenture principal amount (CDN$1.05
million) and 87,500 warrants with the same terms as those granted to
Silverstone, and incurred costs of $32,396.


 


The fair value of
the 237,500 warrants was estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions: dividend yield - 0%; volatility
- 53.3%; risk-free interest rate - 3.06% and an expected life of 1.5 years. The
fair value attributed to the warrants was $594,700.


 


Neither of the
conversion options give rise to a contractual obligation on the part of the
Corporation to deliver cash or another financial asset or to exchange another
financial instrument under conditions that are potentially unfavourable. As
such the Corporation has classified the debenture as an equity instrument net
of cash issue costs in the amount of $1,082,396 and the value attributed to the
warrants of $594,700.


 


17

















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


12.                          Segmented Information


 


The Corporation
operates in the mining, exploration and development business and has operations
in Argentina, Canada, Peru and Mexico. The Corporation has no operating
revenue. The interest income and realized gain on investments held for trading
relate to investments held in Canada.


 


June 30,
2009


 


	
   

  	
   

  	
  Canada

  	
   

  	
  Argentina

  	
   

  	
  Mexico

  	
   

  	
  Peru

  	
   

  	
  Consolidated

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current assets

  	
   

  	
  $

  	
  14,509,086

  	
   

  	
  $

  	
  1,585,018

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  222,905

  	
   

  	
  $

  	
  16,317,009

  	
   

  
	
  Property and equipment

  	
   

  	
  108,177

  	
   

  	
  1,161,927

  	
   

  	
  —

  	
   

  	
  203,999

  	
   

  	
  1,474,103

  	
   

  
	
  Other assets

  	
   

  	
  86,150

  	
   

  	
  5,662,998

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  5,749,148

  	
   

  
	
  Resource assets

  	
   

  	
  57,747

  	
   

  	
  98,502,719

  	
   

  	
  50,000

  	
   

  	
  30,767,048

  	
   

  	
  129,377,514

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  14,761,160

  	
   

  	
  $

  	
  106,912,662

  	
   

  	
  $

  	
  50,000

  	
   

  	
  $

  	
  31,193,952

  	
   

  	
  $

  	
  152,917,774

  	
   

  



 


December 31,
2008


 


	
   

  	
   

  	
  Canada

  	
   

  	
  Argentina

  	
   

  	
  Mexico

  	
   

  	
  Peru

  	
   

  	
  Consolidated

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current assets

  	
   

  	
  $

  	
  6,463,176

  	
   

  	
  $

  	
  1,854,024

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  181,929

  	
   

  	
  $

  	
  8,499,129

  	
   

  
	
  Property and equipment

  	
   

  	
  63,244

  	
   

  	
  1,146,956

  	
   

  	
  —

  	
   

  	
  397,921

  	
   

  	
  1,608,121

  	
   

  
	
  Other assets

  	
   

  	
  74,000

  	
   

  	
  6,416,917

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  6,490,917

  	
   

  
	
  Resource assets

  	
   

  	
  50,000

  	
   

  	
  93,582,815

  	
   

  	
  50,000

  	
   

  	
  30,000,000

  	
   

  	
  123,682,815

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  6,650,420

  	
   

  	
  $

  	
  103,000,712

  	
   

  	
  $

  	
  50,000

  	
   

  	
  $

  	
  30,579,850

  	
   

  	
  $

  	
  140,280,982

  	
   

  



 


13.                               Supplemental Cash Flow
Information


 


	
   

  	
   

  	
  Three
  Months Ended

  	
   

  	
  Six Months
  Ended

  	
   

  
	
   

  	
   

  	
  June 30,

  	
   

  	
  June 30,

  	
   

  
	
   

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Changes in non-cash working capital items:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other receivables and prepaids

  	
   

  	
  $

  	
  235,213

  	
   

  	
  $

  	
  (745,589

  	
  )

  	
  $

  	
  218,089

  	
   

  	
  $

  	
  (976,687

  	
  )

  
	
  Current portion of long-term foreign tax recoverable

  	
   

  	
  (166,027

  	
  )

  	
  (219,535

  	
  )

  	
  152,665

  	
   

  	
  (501,689

  	
  )

  
	
  Long-term foreign tax recoverable

  	
   

  	
  740,162

  	
   

  	
  (3,288,228

  	
  )

  	
  753,919

  	
   

  	
  (3,440,472

  	
  )

  
	
  Payables and accruals

  	
   

  	
  (1,431,806

  	
  )

  	
  1,405,673

  	
   

  	
  (3,853,592

  	
  )

  	
  2,217,645

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  (622,458

  	
  )

  	
  $

  	
  (2,847,679

  	
  )

  	
  $

  	
  (2,728,919

  	
  )

  	
  $

  	
  (2,701,203

  	
  )

  



 


18

















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


14.                             Basic and Diluted Loss
Per Share


 


The
following table sets out the computation for basic and diluted loss per share:


 


	
   

  	
   

  	
  Three
  Months Ended

  	
   

  	
  Six Months
  Ended

  	
   

  
	
   

  	
   

  	
  June 30,

  	
   

  	
  June 30,

  	
   

  
	
   

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Numerator:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Loss for the period

  	
   

  	
  $

  	
  (1,059,054

  	
  )

  	
  $

  	
  (4,225,188

  	
  )

  	
  $

  	
  (2,242,823

  	
  )

  	
  $

  	
  (5,524,234

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Denominator:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Weighted average number of common shares outstanding

  	
   

  	
  70,473,185

  	
   

  	
  61,792,264

  	
   

  	
  69,075,047

  	
   

  	
  59,205,582

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Basic and diluted loss per share

  	
   

  	
  $

  	
  (0.02

  	
  )

  	
  $

  	
  (0.07

  	
  )

  	
  $

  	
  (0.03

  	
  )

  	
  $

  	
  (0.09

  	
  )

  



 


Diluted loss per
share has not been presented for the three and six month ended June 30,
2009 and 2008 because the effect of dilutive options and warrants is
anti-dilutive.


 


15.                             Related Party
Transactions and Balances


 


Included
in other receivables and prepaids is $59,404 (December 31, 2008 - $41,897)
receivable from Laramide Resources Ltd. (“Laramide”), with which the
Corporation has a director in common and common management. The balance
pertains to general and office expenses paid on behalf of Laramide under a
shared office arrangement. The full amount was collected in July 2009.


 


Payables
to a law firm in which a partner is an officer of the Corporation were $100,315
at June 30, 2009 (December 31, 2008 - $97,361). Also, as at June 30,
2009, the law firm held funds in trust for $Nil (December 31, 2008 -
$20,000) on behalf of the Corporation. The Corporation was charged $141,750 and
$155,766 respectively by this law firm for the three and six months ended June 30,
2009 (three and six months ended June 30, 2008 - $26,396 and $73,653
respectively) for legal services included in legal and audit expenses.


 


Included
in other receivables and prepaids is $14,424 (December 31, 2008 - $14,420)
receivable from Crown Point Ventures Ltd. (“Crown Point”) with which the
Corporation has a director in common. The balance pertains to general and
office expenses paid on behalf of Crown Point under a shared office arrangement


 


Included
in other receivables and prepaids is $81,488 (December 31, 2008 - $41,405)
receivable from Treasury Metals Inc. (“Treasury”) with which the Corporation
has an officer and director in common. The balance pertains to general and
office expenses paid on behalf of Treasury under a shared office arrangement.
At the date of this report, $25,000 were already paid by Treasury.


 


Transactions
with related parties were in the normal course of operations and are measured
at the exchange amounts which is the amount agreed to by the related parties.
Any amounts due to or from these related parties are subject to normal trade payment
terms.


 


19

















 


AQUILINE RESOURCES INC.


 


Notes
to Interim Consolidated Financial Statements


(Expressed
in Canadian Dollars)


(Unaudited)


 


Three and Six Months Ended June 30, 2009


 


16.                             Contingencies


 


The
Corporation is involved in various litigation matters arising in the ordinary
course of its business.  The Corporation
has no reason to believe that the disposition of any such current matter could
reasonably be expected to have a materially adverse impact on the Corporation’s
financial position and results of operations.


 


17.                             Commitments


 


(a)              The Corporation entered into agreements
to lease office spaces and warehouses until June 30, 2013. Minimum annual
rent payable in each of the next five years are as follows:


 


	
  2009

  	
   

  	
  $

  	
   167,157

  	
   

  
	
  2010

  	
   

  	
  325,526

  	
   

  
	
  2011

  	
   

  	
  206,203

  	
   

  
	
  2012

  	
   

  	
  149,888

  	
   

  
	
  2013

  	
   

  	
  70,200

  	
   

  
	
   

  	
   

  	
  $

  	
   918,974

  	
   

  



 


The Corporation has arrangements with the tenants in
its corporate offices and expects to recover approximately 40% of the indicated
amounts.


 


(b)             As per the purchase option agreement with
Chaparra’s concession holders, a payment of US $850,000 is required by the
Corporation in October 2009 in order to complete the purchase option of
these mining rights. No security has been taken by the concession holders other
than the mining rights.


 


18.                            Subsequent Event


 


On July 14,
the Corporation announced the signing of a letter of intent (“LOI”) with
Monterrico Metals PLC (“Monterrico”), a subsidiary of Xiamen Zijin Tonguuan
Investment Development Co. Ltd., a consortium of three Chinese companies. The
LOI will allow Aquiline to acquire all of Monterrico’s right, title and
interest in and to, certain mining concessions associated with the Pico Machay
Gold Project in Peru. Under the terms of the LOI, the purchase consideration
has been fixed as US$7.8 million, to be paid over two years in cash as follows:


 


· A deposit of US$200,000 to be paid upon
execution of the LOI, and refundable under certain conditions if the
Transaction Documents are not completed and signed by August 31, 2009;


· An
initial payment of US$1,000,000 to be paid upon execution of the Transaction
Documents, and


· Eight payments (the “Installments”) of
US$825,000 each, made every quarter over the next two years, commencing October 31,
2009.


 


Upon receipt of
the initial payment and execution of the Transaction Documents, Monterrico will
transfer 100% of the Pico Machay project claims to a new Peruvian affiliate
company (the “Affiliate”) to be owned and operated by the Corporation. The
Installments will be represented by a promissory note, which will be secured by
a pledge of the Affiliate’s shares, a mortgage on each of the concessions
comprising the Pico Machay Gold Project and a general guarantee of the
Corporation.


 


20