UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of MAY, 2006.
Commission File Number: 001-32558
IMA EXPLORATION INC.
--------------------------------------------------------------------------------
(Translation of registrant's name into English)
#709 - 837 West Hastings Street, Vancouver, British Columbia, V6C 3N6, Canada
--------------------------------------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F: FORM 20-F [X] FORM 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): _______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): _______
Indicate by check mark whether the registrant by furnishing the information
contained in this Form, is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
YES [ ] NO [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3- 2(b): 82-_____________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
IMA EXPLORATION INC.
-------------------------------------
Date: May 15, 2006 /s/ Joseph Grosso
------------------------------ -------------------------------------
Joseph Grosso,
President & CEO
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2006 and 2005
(EXPRESSED IN CANADIAN DOLLARS)
(UNAUDITED - PREPARED BY MANAGEMENT)
MANAGEMENT'S COMMENTS ON UNAUDITED
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements of IMA
Exploration Inc. for the three months ended March 31, 2006 have been prepared by
management and are the responsibility of the Company's management.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED BALANCE SHEETS
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
MARCH 31, DECEMBER 31,
2006 2005
$ $
A S S E T S
CURRENT ASSETS
Cash and cash equivalents 15,445,641 7,731,395
Accounts receivable, prepaids and
deposits (Note 8) 404,839 548,492
Marketable securities (Note 4) 186,000 186,000
------------ ------------
16,036,480 8,465,887
MINERAL PROPERTIES AND DEFERRED COSTS (Note 5) 16,554,077 15,032,107
------------ ------------
32,590,557 23,497,994
============ ============
L I A B I L I T I E S
CURRENT LIABILITIES
Accounts payable and accrued liabilities 974,134 976,811
FUTURE INCOME TAX LIABILITIES 1,924,362 1,760,110
------------ ------------
2,898,496 2,736,921
------------ ------------
S H A R E H O L D E R S ' E Q U I T Y
SHARE CAPITAL (Note 6) 59,803,416 50,414,672
CONTRIBUTED SURPLUS (Note 7) 5,903,009 5,854,445
DEFICIT (36,014,364) (35,508,044)
------------ ------------
29,692,061 20,761,073
------------ ------------
32,590,557 23,497,994
============ ============
NATURE OF OPERATIONS AND CONTINGENCY (Note 1)
COMMITMENTS (Note 8)
APPROVED BY THE BOARD
/s/ DAVID HORTON , Director
------------------------
/s/ ROBERT STUART ANGUS , Director
------------------------
The accompanying notes are an integral part of these
consolidated financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
THREE MONTHS ENDED
MARCH 31,
----------------------------
2006 2005
$ $
EXPENSES
Administrative and management services 26,882 32,236
Corporate development and investor relations 88,678 120,586
General exploration 3,794 19,033
Office and sundry 43,786 36,565
Professional fees 89,661 315,224
Rent, parking and storage 29,011 10,324
Salaries and employee benefits 148,273 122,375
Stock based compensation - 1,800,000
Telephone and utilities 6,078 9,508
Transfer agent and regulatory fees 80,802 29,815
Travel and accommodation 44,639 71,680
------------ ------------
561,604 2,567,346
------------ ------------
LOSS BEFORE OTHER ITEMS (561,604) (2,567,346)
------------ ------------
OTHER EXPENSE (INCOME)
Foreign exchange 3,226 (20,507)
Interest and other income (58,510) (29,369)
------------ ------------
(55,284) (49,876)
------------ ------------
LOSS FOR THE PERIOD (506,320) (2,517,470)
DEFICIT - BEGINNING OF PERIOD (35,508,044) (29,597,304)
DISTRIBUTION OF EQUITY ON SPIN-OFF OF ASSETS
TO GOLDEN ARROW (Note 2) - (145,866)
------------ ------------
DEFICIT - END OF PERIOD (36,014,364) (32,260,640)
============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE (0.01) (0.06)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 49,131,397 44,388,798
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
THREE MONTHS ENDED
MARCH 31,
----------------------------
2006 2005
$ $
CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net loss for the period (506,320) (2,517,470)
------------ ------------
Items not affecting cash
Stock based compensation - 1,800,000
------------ ------------
(506,320) (717,470)
Change in non-cash working capital balances 140,977 (216,675)
------------ ------------
(365,343) (934,145)
------------ ------------
INVESTING ACTIVITIES
Expenditures on mineral properties
and deferred costs (1,357,718) (1,520,541)
Purchase of equipment - (3,182)
------------ ------------
(1,357,718) (1,523,723)
------------ ------------
FINANCING ACTIVITIES
Issuance of common shares and special warrants 10,200,400 4,215,145
Share issuance costs (763,093) -
------------ ------------
9,437,307 4,215,145
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 7,714,246 1,757,277
CASH TRANSFERRED TO GOLDEN ARROW (Note 2) - (145,866)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,714,246 1,611,411
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 7,731,395 5,227,354
------------ ------------
CASH AND CASH EQUIVALENTS - END OF PERIOD 15,445,641 6,838,765
============ ============
CASH AND CASH EQUIVALENTS IS COMPRISED OF:
Cash 945,641 838,765
Term Deposits 14,500,000 6,000,000
------------ ------------
15,445,641 6,838,765
============ ============
SUPPLEMENTARY CASH FLOW INFORMATION (Note 10)
The accompanying notes are an integral part of these
consolidated financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED SCHEDULE OF MINERAL PROPERTY INTERESTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
------------------------------------------------------------
NAVIDAD
NAVIDAD AREAS IVA TAX TOTAL
$ $ $ $
------------------------------------------------------------
Balance, beginning of period 13,466,957 113,426 1,451,724 15,032,107
------------ ------------ ------------ ------------
Expenditures during the period
Acquisition costs 71,641 - - 71,641
Assays 2,194 - - 2,194
Communications 15,405 - - 15,405
Drilling 480,545 - - 480,545
Engineering 25,423 - - 25,423
Environmental and social 75,376 - - 75,376
Geophysics 18,818 - - 18,818
Metallurgy 28,181 - - 28,181
Office and other 68,842 - - 68,842
Salaries and Contractors 142,428 - - 142,428
Supplies and Equipment 38,109 - - 38,109
Transportation 89,080 - - 89,080
Project Development 212,773 - - 212,773
IVA Tax - - 88,903 88,903
------------ ------------ ------------ ------------
1,268,815 - 88,903 1,357,718
------------ ------------ ------------ ------------
Future income tax 164,252 - - 164,252
------------ ------------ ------------ ------------
Balance, end of period 14,900,024 113,426 1,540,627 16,554,077
============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
1. NATURE OF OPERATIONS AND CONTINGENCY
The Company is a natural resource company engaged in the business of
acquisition, exploration and development of mineral properties in
Argentina. The Company presently has no proven or probable reserves and
on the basis of information to date, it has not yet determined whether
these properties contain economically recoverable ore reserves.
Consequently the Company considers itself to be an exploration stage
company. The amounts shown as mineral properties and deferred costs
represent costs incurred to date, less amounts amortized and/or written
off, and do not necessarily represent present or future values. The
underlying value of the mineral properties and deferred costs is
entirely dependent on the existence of economically recoverable
reserves, securing and maintaining title and beneficial interest in the
properties, the ability of the Company to obtain the necessary
financing to complete development, and future profitable production.
The Company considers that it has adequate resources to maintain its
ongoing operations for the balance of the year but currently may not
have sufficient working capital to fund all of its future exploration
and development work.
The Company is currently awaiting the decision of the Supreme Court of
British Columbia in respect of a claim made by Minera Aquiline S.A.
("Aquiline") in which it asserts a claim to substantially all of the
Company's Navidad project in central Chubut, Argentina. At the
conclusion of an approximately two-month long hearing, starting in
October and ending in December of 2005, the Supreme Court reserved its
decision concerning Aquiline's claim. If the Company is unsuccessful in
defending the litigation, it is possible that it will cease to have any
right or interest in the Navidad Property. It is not possible at this
point to predict the outcome of the litigation. It is also likely that,
even if the Company is successful in defending Aquiline's claim, the
decision of the trial court will be appealed. The results of any appeal
cannot be determined. In addition, the Company will incur additional
costs in respect of any appeal of that decision or any subsequent
decision and those costs could be material. The Company continues to
expense the legal and related costs of defending the action as they are
incurred and has not made a provision for the future costs that will be
incurred or their potential recovery from the plaintiff.
2. SPIN-OFF OF ASSETS
On July 7, 2004, the Company completed a corporate restructuring plan
(the "Reorganization") which resulted in dividing the Company's assets
and liabilities into two separate companies. Following the
Reorganization the Company continued to hold the Navidad Area
properties, while all other mineral property interests, certain
marketable securities and cash were spun-off to Golden Arrow Resources
Corporation ("Golden Arrow"), a newly created company. The Navidad
project, located in the province of Chubut Argentina, was staked by the
Company in late 2002 and continues to be the focus of the Company's
activities. The Reorganization of the Company was accomplished by way
of a statutory plan of arrangement. The shareholders of the Company
were issued shares in Golden Arrow on the basis of one Golden Arrow
share for ten shares of the Company.
During the quarter ended March 31, 2005 the Company paid $145,866 to
Golden Arrow from the exercise of warrants of the Company that resulted
in the issue of Golden Arrow shares as required by the terms of the
Reorganization. As all warrants that were outstanding as of the
effective date of the Reorganization were exercised by March 31, 2005
the Company has no further obligation to pay amounts to Golden Arrow
for the issue of its shares on the exercise of the Company's warrants.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
3. SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements of the Company have been
prepared by management in accordance with Canadian generally accepted
accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates. The
consolidated financial statements have, in management's opinion, been
properly prepared using careful judgement within reasonable limits of
materiality. These interim consolidated financial statements should be
read in conjunction with the most recent annual consolidated financial
statements. The significant accounting policies follow that of the most
recently reported annual consolidated financial statements.
4. MARKETABLE SECURITIES
MARCH 31, 2006 DECEMBER 31, 2005
---------------------------- ----------------------------
QUOTED QUOTED
RECORDED MARKET RECORDED MARKET
VALUE VALUE VALUE VALUE
$ $ $ $
Tinka Resources Limited
- 300,000 common shares 96,000 99,000 96,000 126,000
Consolidated Pacific Bay Minerals Ltd.
- 900,000 common shares 90,000 324,000 90,000 144,000
------------ ------------ ------------ ------------
186,000 423,000 186,000 270,000
============ ============ ============ ============
The Company has entered into option and sale agreements on certain of
its non-core mineral property holdings for which the Company received
common shares of publicly traded companies as partial consideration.
5. MINERAL PROPERTIES AND DEFERRED COSTS
(a) The Company has either staked, fully paid or holds options to
acquire 100% working interests in mineral properties, located
in Chubut Province in Argentina.
(b) Direct costs related to the acquisition and exploration of
mineral properties held or controlled by the Company are
deferred on an individual property basis until the viability
of a property is determined. Administration costs and general
exploration costs are expensed as incurred. When a property is
placed in commercial production, deferred costs will be
depleted using the units-of-production method. Management of
the Company periodically reviews the recoverability of the
capitalized mineral properties. Management takes into
consideration various information including, but not limited
to, results of exploration activities conducted to date,
estimated future metal prices, and reports and opinions of
outside geologists, mine engineers and consultants. When it is
determined that a project or property will be abandoned then
the costs are written-off, or if its carrying value has been
impaired, then the mineral properties and deferred costs are
written down to fair value.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
5. MINERAL PROPERTIES AND DEFERRED COSTS (continued)
The Company accounts for foreign value added taxes paid as
part of mineral properties and deferred costs. The recovery of
these taxes will commence on the beginning of foreign
commercial operations. Should these amounts be recovered they
would be treated as a reduction in carrying costs of mineral
properties and deferred costs.
Although the Company has taken steps to verify title to
mineral properties in which it has an interest, these
procedures do not guarantee the Company's title. Such
properties may be subject to prior agreements or transfers and
title may be affected by undetected defects.
From time to time, the Company acquires or disposes of
properties pursuant to the terms of option agreements. Options
are exercisable entirely at the discretion of the optionee
and, accordingly, are recorded as mineral property costs or
recoveries when the payments are made or received. After costs
are recovered, the balance of the payments received are
recorded as a gain on option or disposition of mineral
property.
6. SHARE CAPITAL
Authorized - unlimited common shares without par value
- 100,000,000 preferred shares without par value
NUMBER $
Issued - common shares
Balance, December 31, 2004 43,816,207 36,982,307
Private placement 3,333,340 10,000,020
Exercise of options 10,000 31,000
Exercise of agents' options 168,000 546,000
Contributed surplus reallocated on
exercise of options - 131,270
Exercise of warrants 1,485,517 3,784,011
Proceeds collected and paid on behalf
of Golden Arrow shares - (145,866)
Less share issue costs - (914,070)
------------ ------------
Balance, December 31, 2005 48,813,064 50,414,672
Exercise of options 120,000 172,900
Contributed surplus reallocated
on exercise of options - 61,600
------------ ------------
48,933,064 50,649,172
------------ ------------
Private placement, special warrants issued 2,865,000 10,027,500
Less share issue costs - (873,256)
------------ ------------
Balance, March 31, 2006 51,798,064 59,803,416
============ ============
(a) On March 21, 2006 the Company completed a syndicated brokered
private placement financing of 2,865,000 special warrants at
$3.50 per warrant for gross proceeds of $10,027,500. Each
special warrant will entitle the holder to acquire one unit
consisting of one common share and one half common share
purchase warrant. The Company will use its best efforts to
file a prospectus qualifying the distribution of the units and
agent's special warrants within sixty (60) days of the closing
of this placement. In the event that the qualification date
does not occur within that time period, each special
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
6. SHARE CAPITAL (continued)
warrant outstanding will, on exercise or deemed exercise,
entitle the holder thereof to acquire 1.1 units without
further payment on the part of the holder. Each full warrant
entitles the holder thereof to purchase one additional common
share in the capital of the Company at a price of $3.80 per
share until March 21, 2010. In addition to a cash commission
of 6% the underwriters were granted 171,900 agents'warrants,
representing 6% of the number of special warrants issued. Each
agents' warrant is exercisable for one share at a price of
$3.80, for a period of twenty four months, expiring on March
21, 2008. The underwriter's warrants were valued using the
Black-Scholes Pricing Model. The warrants were valued at $0.64
per warrant for a total value of $110,164 and have been
recorded as share issue costs with a corresponding increase to
contributed surplus. At March 31, 2006, no underwriter's
warrants had been exercised.
(b) Stock options and stock based compensation
The Company grants stock options in accordance with the
policies of the TSX Venture Exchange ("TSXV"). A summary of
the Company's outstanding options at March 31, 2006 and the
changes for three months ended March 31, 2006, is presented
below:
OPTIONS WEIGHTED
OUTSTANDING AVERAGE
AND EXERCISE
EXERCISABLE PRICE
$
Balance, beginning of period 4,881,000 2.54
Granted - -
Exercised (120,000) 1.44
------------ ------------
Balance, end of period 4,761,000 2.57
============
Stock options outstanding and exercisable at March 31, 2006
are as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
205,000 0.40 July 19, 2006
119,000 0.50 May 2, 2007
115,000 0.50 September 23, 2007
40,000 0.84 March 7, 2008
300,000 0.90 May 30, 2008
1,235,000 1.87 August 27, 2008
1,347,000 3.10 March 24, 2009
25,000 3.10 March 24, 2007
50,000 4.20 December 1, 2009
865,000 4.16 March 16, 2010
460,000 2.92 November 16, 2010
----------
4,761,000
==========
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
6. SHARE CAPITAL (continued)
(c) Warrants
A summary of the number of common shares reserved pursuant to
the Company's outstanding warrants and agents warrants
outstanding at March 31, 2006 and the changes for the three
months ended March 31, 2006, is as follows:
NUMBER
Balance, beginning of period 1,900,004
Issued (see 6 (a)) 1,604,400
Exercised -
Expired -
------------
Balance, end of period 3,504,404
============
Common shares reserved pursuant to warrants and special
warrants outstanding at March 31, 2006 are as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
1,666,670 3.45 September 14, 2009
233,334 3.25 September 13, 2007
171,900 3.80 March 21, 2008
1,432,500 3.80 March 21, 2010
----------
3,504,404
==========
7. CONTRIBUTED SURPLUS
A continuity summary of contributed surplus is presented below:
$
Balance, beginning of period 5,854,445
Reversal of contributed surplus as a result of
exercise of stock options (61,600)
Contributed surplus as a result of brokers'
warrants issued 110,164
------------
Balance, end of period 5,903,009
============
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
8. RELATED PARTY TRANSACTIONS
(a) Effective January 1, 2005 the Company engaged the Grosso Group
Management Ltd. (the "Grosso Group") to provide services and
facilities to the Company. The Grosso Group is a private
company now owned by the Company, Golden Arrow, Amera
Resources Corporation, Astral Mining Corporation and Gold
Point Energy Corp., each of which owns one share. The Grosso
Group provides its shareholder companies with geological,
corporate development, administrative and management services.
The shareholder companies pay monthly fees to the Grosso
Group. The fee is based upon a reasonable pro-rating of the
Grosso Group's costs including its staff and overhead costs
among each shareholder company with regard to the mutually
agreed average annual level of services provided to each
shareholder company. During the three months ended March 31,
2006, the Company incurred fees of $192,923 to the Grosso
Group: $189,438 was paid in monthly payments and $3,485 is
included in accounts payable, prepaids and deposits as a
result of a review of the allocation of the Grosso Group costs
to the member companies for the period. In addition, included
in accounts receivable, prepaids and deposits is a $205,000
deposit to the Grosso Group for the purchase of equipment and
leasehold improvements and for operating working capital.
(b) On May 6, 2005, on the signing of an Administration Services
Agreement, the Company transferred its corporate equipment and
leasehold improvements to Grosso Group at their carrying
values of $93,177 as of December 31, 2004. As of March 31,
2006 the Company has received $46,589 from the Grosso Group
for these assets. The remaining balance due from the Grosso
Group is included in accounts receivable.
(c) During three months ended March 31, 2006, the Company paid
$43,050 to directors and officers or companies controlled by
directors and officers of the Company, for technical,
management and consulting services provided.
(d) The Company has agreements with a company controlled by the
wife of the President of the Company for the rental of office
premises. Effective January 1, 2005 the Company subleased the
office premises to the Grosso Group.
(e) The President of the Company provides his services on a
full-time basis under a contract with a private company
controlled by the President. The President is paid an annual
amount of $102,000. In the event the agreement is terminated
by the Company as a result of a change of control, a bonus is
payable consisting of (i) any monthly compensation due to the
date of termination, (ii) options as determined by the board
of directors and (iii) three years of monthly compensation
(which may be adjusted annually). If the termination had
occurred on March 31, 2006, the amount payable under the
agreement would be $1,066,000.
Pursuant to the terms of the agreement, in the event the
agreement is terminated by the Company as a result of the
President's death or permanent disability while providing
services to the Company, or as a result of a material breach
or default by the Company, a bonus in the amount of $461,500
is payable.
On April 12, 2006 the Board accepted the recommendation from
the Compensation Committee to increase the monthly fee,
effective May 1, 2006, to $20,833 and to pay a bonus of
$150,000.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
9. SEGMENTED INFORMATION
The Company is involved in mineral exploration and development
activities, which are conducted principally in Argentina. The Company
is in the exploration stage and, accordingly, has no reportable segment
revenues or operating results for the three months ended March 31,
2006.
The Company's total assets are segmented geographically as follows:
--------------------------------------------
MARCH 31, 2005
--------------------------------------------
CORPORATE ARGENTINA TOTAL
$ $ $
Current assets 15,969,054 67,426 16,036,480
Mineral properties
and deferred costs - 16,554,077 16,554,077
------------ ------------ ------------
15,969,054 16,621,503 32,590,557
============ ============ ============
--------------------------------------------
DECEMBER 31, 2005
--------------------------------------------
CORPORATE ARGENTINA TOTAL
$ $ $
Current assets 8,331,000 134,887 8,465,887
Mineral properties
and deferred costs - 15,032,107 15,032,107
------------ ------------ ------------
8,331,000 15,166,994 23,497,994
============ ============ ============
10. SUPPLEMENTARY CASH FLOW INFORMATION
Non-cash financing activities were conducted by the Company as follows:
----------------------------
THREE MONTHS ENDED MARCH 31,
----------------------------
2006 2005
$ $
Financing activities
Share issue costs (110,164) -
Contributed surplus 110,164 -
------------ ------------
- -
============ ============
11. SUBSEQUENT EVENT
Subsequent to March 31, 2006, the Company issued 15,000 common shares
for $28,050 on the exercises of stock options.
IMA EXPLORATION INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
INTRODUCTION
The following management discussion and analysis and financial review, prepared
as of May 12, 2006, should be read in conjunction with the Company's unaudited
interim consolidated financial statements for the three months ended March 31,
2006 and audited annual consolidated financial statements and related notes for
the year ended December 31, 2005. The consolidated financial statements have
been prepared in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"). Except as otherwise disclosed all dollar figures
in this report are stated in Canadian dollars. Additional information relevant
to the Company can be found on the SEDAR website at WWW.SEDAR.COM.
FORWARD LOOKING STATEMENTS
Certain of the statements made and information contained herein is "forward-
looking information" within the meaning of the Ontario Securities Act or
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934 of the United States. Forward-looking statements are
subject to a variety of risks and uncertainties which could cause actual events
or results to differ from those reflected in the forward-looking statements,
including, without limitation, risks and uncertainties relating to foreign
currency fluctuations; risks inherent in mining including environmental hazards,
industrial accidents, unusual or unexpected geological formations, risks
associated with the estimation of mineral resources and reserves and the
geology, grade and continuity of mineral deposits; the possibility that future
exploration, development or mining results will not be consistent with the
Company's expectations; the potential for and effects of labour disputes or
other unanticipated difficulties with or shortages of labour; the inherent
uncertainty of future production and cost estimates and the potential for
unexpected costs and expenses, commodity price fluctuations; uncertain political
and economic environments; changes in laws or policies, foreign taxation, delays
or the inability to obtain necessary governmental permits; and other risks and
uncertainties, including those described under Risk Factors Relating to the
Company's Business in the Company's Annual Information Form and in each
management discussion and analysis. Forward-looking information is in addition
based on various assumptions including, without limitation, the expectations and
beliefs of management, the assumed long term price of silver and lead; that the
Company can access financing, appropriate equipment and sufficient labour and
that the political environment within Argentina will continue to support the
development and operation of mining projects. Should one or more of these risks
and uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in forward-looking
statements. Accordingly, readers are advised not to place undue reliance on
forward-looking statements.
OVERVIEW
The Company is a natural resource company engaged in the business of
acquisition, exploration and development of mineral properties in Argentina. At
present, the Company has no producing properties and consequently has no current
operating income or cash flows. As of this date the Company is an exploration
stage company and has not generated any revenues. The Company is entirely
dependent on the equity market for its source of funds. There is no assurance
that a commercially viable mineral deposit exists on any of the properties.
Further evaluation and exploration will be required before the economic
viability of any of the properties is determined.
The Company is currently awaiting the decision of the Supreme Court of British
Columbia in respect of a claim made by Minera Aquiline S.A. ("Aquiline") in
which it asserts a claim to substantially all of the Company's Navidad project
in central Chubut, Argentina. At the conclusion of an approximately two-month
long hearing, starting in October and ending in December of 2005, the Supreme
Court reserved its decision concerning Aquiline's claim. If the Company is
unsuccessful in defending the litigation, it is possible that it will cease to
have any right or interest in the Navidad Property. It is not possible at this
point to predict the outcome of the litigation. It is also likely that, even if
the Company is successful in defending Aquiline's claim, the decision of the
trial court will be appealed. The results of any appeal cannot be determined. In
addition, the Company will incur additional costs in respect of any appeal of
that decision or any subsequent decision and those costs could be material.
- 1 -
Effective January 1, 2005, the Company engaged Grosso Group Management Ltd.,
("Grosso Group") to provide services and facilities to the Company. On May 6,
2005, an Administrative Services Agreement was finalized and executed by the
Company and the Grosso Group. The Grosso Group is a private company which is now
owned by the Company, Golden Arrow Resources Corporation ("Golden Arrow"), Amera
Resources Corporation ("Amera"), Astral Mining Corporation ("Astral") and Gold
Point Energy Corp. ("Gold Point"), each of which own one share. The Grosso Group
provides its shareholder companies with geological, corporate development,
administrative and management services. The Grosso Group staff is available to
the shareholder companies on a cost recovery basis without the expense of full
time personnel. The shareholder companies pay monthly fees to the Grosso Group.
The fee is based upon a reasonable pro-rating of the Grosso Group's costs
including its staff and overhead costs among each shareholder company with
regard to the mutually agreed average annual level of services provided to each
shareholder company.
In March 2005 the Company engaged the services of Augusto Baertl of Lima, Peru,
to determine the economic feasibility of the Navidad Project, through a contract
with Mr. Baertl's company, Gestora de Negocios e Inversiones SA. A scoping study
is in process as a first step in the determination of the economic viability of
Navidad. Mr. Baertl's mandate is a continuing one whose objective is ultimately
the achievement of commercial production.
PROPERTIES UPDATE
NAVIDAD
On February 3, 2003 the Company announced the discovery of silver-lead-copper
mineralization at its 100% owned 10,000 hectare (24,700 acres) Navidad property
in north central Chubut Province, Argentina. A Phase I drill program commenced
in November 2003 and was completed in late March 2004. A Phase II drill program
commenced in late May 2004 and was completed in September 2004. Phase III drill
program commenced in November 2004 and was completed in September 2005. The
Company commenced a Phase IV drill program in January 2006 that is ongoing at
the present time.
On May 25, 2004, just six months after the first drilling on the Navidad
Project, the Company released the first resource estimate for the Galena Hill
deposit. Since then, a number of resource estimate updates have been released,
the most recent on February 16, 2006 in which the Company reported that Navidad
Project Indicated resources are estimated at 93.4 million tonnes grading 102 g/t
silver and 1.41% lead for a total of 305.7 million ounces silver and 2.90
billion pounds of lead (1.32 million tonnes) making the Navidad discovery a
truly world class silver-lead deposit.
In December 2005 the Company released preliminary metallurgical test results and
announced that it has retained the international mining consulting firm Pincock,
Allen and Holt of Denver, Colorado, to prepare a conceptual study of the Navidad
project. This study is expected to provide preliminary technical, legal, social,
environmental and economic parameters of the Navidad project to guide the
ongoing development of the project. It will be based on the resources outlined
in the February 2006 update.
In addition to its active exploration program, the Company has made a strong
commitment to its ongoing community relations and environmental baseline data
collection programs in the project area. The Company intends to continue
expanding the silver and lead resources at Navidad by systematically drill
testing exploration targets as well as expanding and better defining areas where
resources have been defined.
INDICATED AND INFERRED RESOURCES
On February 16, 2006 the Company announced the results of an updated resource
estimation carried out by Qualified Persons Christine Standing, B.Sc. (Hons),
MAusIMM, MAIG and Neil Burms, M.Sc., P.Geo., of Snowden Mining Industry
Consultants Inc. (Snowden), a National Instrument 43-101 Technical Report
documenting the estimate has been filed with the appropriate regulatory bodies
in Canada and are publicly available on the SEDAR website. The Company has now
defined continuous silver resources over a 3.6 kilometre strike length along the
Navidad Trend in the Galena Hill, Connector Zone, Navidad Hill, Calcite Hill and
Calcite Hill NW deposits. Inferred and indicated resources estimated to date on
the Navidad Project are presented in the table below at a range of cut-off
grades:
- 2 -
NAVIDAD PROJECT TOTAL INDICATED RESOURCES AT VARIOUS
SILVER EQUIVALENT CUT-OFF GRADES(1):
--------------------------------------------------------------------------------
THOUSAND CONTAINED CONTAINED
CUT-OFF GRADE TONNES SILVER COPPER LEAD ZINC SILVER LEAD
(g/t AgEq(1)) (g/t) (%) (%) (%) (M ozs) (M lbs)
--------------------------------------------------------------------------------
50 93,393 102 0.05 1.41 0.16 305.7 2,900
--------------------------------------------------------------------------------
60 83,134 110 0.05 1.52 0.17 293.9 2,792
--------------------------------------------------------------------------------
80 66,615 126 0.05 1.76 0.19 269.1 2,583
--------------------------------------------------------------------------------
100 53,715 141 0.06 2.01 0.21 244.0 2,376
--------------------------------------------------------------------------------
200 22,456 213 0.06 3.03 0.29 153.6 1,498
--------------------------------------------------------------------------------
300 10,069 297 0.08 3.74 0.36 96.1 830
--------------------------------------------------------------------------------
NAVIDAD PROJECT INFERRED RESOURCES AT VARIOUS
SILVER EQUIVALENT CUT-OFF GRADES(1):
--------------------------------------------------------------------------------
THOUSAND CONTAINED CONTAINED
CUT-OFF GRADE TONNES SILVER COPPER LEAD ZINC SILVER LEAD
(g/t AgEq(1)) (g/t) (%) (%) (%) (M ozs) (M lbs)
--------------------------------------------------------------------------------
50 11,063 65 0.03 0.85 0.12 23.0 207
--------------------------------------------------------------------------------
60 9,056 72 0.03 0.91 0.12 20.9 183
--------------------------------------------------------------------------------
80 5,576 92 0.04 1.02 0.13 16.4 125
--------------------------------------------------------------------------------
100 3,920 107 0.04 1.11 0.14 13.4 96
--------------------------------------------------------------------------------
200 597 145 0.06 2.50 0.26 2.8 33
--------------------------------------------------------------------------------
300 41 312 0.17 1.02 0.13 0.4 1
--------------------------------------------------------------------------------
Notes:
1. Silver equivalent calculated using US$6.00/oz silver and $0.35/lb lead.
(AgEq = Ag + (%Pb*10,000/250). No attempt has been made to adjust these
relative values by accounting for metallurgical recoveries as insufficient
information is available to do so.
2. Strict quality control and quality assurance procedures have been observed
at all stages of data collection leading to this resource. Please see IMA's
website (www.imaexploration.com) for a detailed overview of these
procedures.
3. Resource categories (Indicated and Inferred) used here and the preparation
of this resource estimate conform to National Instrument 43-101 "Standards
of disclosure for mineral projects" and those of the Canadian Institute of
Mining, Metallurgy, and Petroleum (the "CIM") "Definition Standards on
Mineral Resources and Reserves, 2004".
4. A National Instrument 43-101 Technical Report documenting the Snowden
Resource Estimate has been filed at www.sedar.com as is required by
Security Commission regulations.
5. An `INFERRED MINERAL RESOURCE' is that part of a Mineral Resource for which
quantity and grade or quality can be estimated on the basis of geological
evidence and limited sampling and reasonably assumed, but not verified,
geological and grade continuity. The estimate is based on limited
information and sampling gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill holes.
6. An `INDICATED MINERAL RESOURCE' is that part of a Mineral Resource for
which quantity, grade or quality, densities, shape and physical
characteristics, can be estimated with a level of confidence sufficient to
allow the appropriate application of technical and economic parameters, to
support mine planning and evaluation of the economic viability of the
deposit. The estimate is based on detailed and reliable exploration and
testing information gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes that are spaced
closely enough for geological and grade continuity to be reasonably
assumed.
7. In the current estimated resource copper and zinc have not been included in
the Silver Equivalent calculation used to define the cut off grades in the
above table as they are expected not to be recovered. Investors are
cautioned that the copper and zinc numbers presented in the above tables
are for completeness and comparison purposes only and do not contribute to
the current resources."
Detailed review of the geological interpretation and block model shows that the
Calcite Hill deposit, the Connector Zone and Calcite Hill NW remain open and
insufficiently drill tested in several areas.
METALLURGICAL TESTWORK
On December 1, 2005 the Company released a summary of preliminary metallurgical
testwork carried out on samples of Galena Hill, Navidad Hill, and Calcite Hill
mineralization demonstrating that Navidad mineralization is amenable to
concentration by simple, cost effective, and environmentally benign differential
flotation processes. In addition to flotation testwork, the Company is also
currently investigating the production of silver metal through
hydrometallurgical means from low-grade, high-recovery silver concentrates. On
February 16, 2006 the Company released highly encouraging preliminary results
from alkaline pressure oxidation followed by thiosulphate leaching of silver
concentrates.
- 3 -
Flotation testwork has been conducted by G&T Metallurgical Services Ltd. of
Kamloops B.C. (G&T), an ISO 9001:2000 accredited firm. All work was performed
under the supervision of Tom Shouldice, P. Eng., General Manager - Operations at
G&T. Peter Taggart, P.Eng, of P. Taggart & Associates Ltd., provided overall
program direction, acting as the Company's representative. Both are considered
Qualified Persons as defined by National Instrument 43-101. A portion of the
February 15, 2006 43-101 Technical Report was authored by Qualified Person Peter
Taggart, P.Eng. describing the flotation testwork; the report is available on
the SEDAR website.
Limited flotation testwork on two composite samples (high lead-moderate silver
and high silver-low lead) from Calcite Hill yielded excellent results. Locked
cycle flotation tests performed on the lead-rich sample yielded a very high
quality lead concentrate containing 80.4% lead and 709 g/t silver at a lead
recovery of 92% and silver recovery of 86%. The silver-rich sample produced a
silver concentrate grading 10,500 g/t silver at a silver recovery of 88%.
Mineralization at Galena Hill consists predominantly of fine-grained galena and
pyrite with lesser amounts of sphalerite and chalcopyrite. Electron microprobe
studies have shown silver to be contained within the lattice of both galena and
pyrite, with the bulk of the silver present within pyrite. Flotation tests to
date have focused on producing separate lead and silver (pyrite) concentrates
through differential flotation. Fourteen rougher and 37 open circuit cleaner
tests were performed on the Galena Hill composite samples. The results of three
locked cycle tests confirm data produced in the open circuit tests. Lead
metallurgical performance at Galena Hill was generally good with 74 to 84% of
the lead reporting to the lead concentrates which grade between 62.0 and 75.3%
lead and include 386 to 968 g/t silver. Subsequent to galena flotation, a pyrite
concentrate was produced that recovered 37 to 57% of the total silver and
contains 1,083 to 3,546 g/t silver. Total locked cycle test silver recoveries
(lead concentrate plus silver concentrate) range from 54 to 82%. Silver
recoveries as high as 93.2% have been obtained with batch flotation tests
designed to maximize silver recovery at the expense of concentrate grade.
Ongoing work targeting improved silver recoveries for Galena Hill includes
additional flotation tests using alternate reagents, and mineralogical studies
to identify distinct pyrite types present in concentrates and tails.
Hydrometallurgical testwork carried out at SGS Lakefield under the direction of
Dr. David Dreisinger, P.Eng. of Dreisinger Consulting Inc. has shown that silver
concentrates from Galena Hill are amenable to pressure oxidation under neutral
to alkaline conditions followed by atmospheric leaching using calcium
thiosulphate as a lixiviant. Preliminary bench-scale testwork has produced
silver recoveries of 87% after 24 hours and 89% after 72 hours of leaching.
These tests were conducted on a very low-grade silver concentrate (235 g/t
silver), it is hoped that additional improvements in silver recovery may be
realized in future testwork on higher-grade concentrates. The Company is very
encouraged by these results as they indicate that the Navidad Project could
produce silver dore on-site using an environmentally benign lixiviant rather
than the more commonly used sodium cyanide. Calcium thiosulphate is routinely
used as fertilizer in the agricultural industry.
Two distinct styles of mineralization from Navidad Hill were studied. Both
samples had high silver values (436 and 287 g/t Ag) but only one contained
significant lead (3.11% Pb) and both comprised mixed sulfide and oxide
mineralization. Flotation testwork on both samples produced a single bulk
sulphide concentrate. Silver recoveries of approximately 64 to 85% were achieved
in concentrates grading from 10,449 to 12,246 g/t silver.
While significant progress has been made in understanding the metallurgy of the
Navidad deposits, the Company is confident that with additional testwork, our
highly skilled and experienced metallurgical team will continue to unlock
additional value through improvements to metallurgical performance.
EXPLORATION PROGRAM:
The Phase I drill program at Navidad comprised 8,859.6 metres in 53 holes, 37 of
which were drilled on Galena Hill. Phase II drill program comprised 9,596.5
metres of diamond core drilling in 67 holes. Drilling in the Phase II program
focused on the Esperanza Trend, the Barite Hill target, and on the Navidad Hill
and Connector Zone targets. The Phase III drill program was completed in
September 2005 and comprised 23,732 metres in 131 holes. Results from the Phase
III drilling have been described in News Releases dated January 13, March 4 and
March 22, April 19, June 21, August 17, September 29 and October 13, 2005. The
Phase III drill program has focussed on drilling in the Calcite Hill and Calcite
Hill NW areas and expansion and infill drilling on the Navidad Hill and
Connector Zone areas. In addition five holes were completed at the southern end
of the Loma de la Plata prospect.
The Phase IV drill program commenced in January 2006 and is ongoing with 11,081
metres of drilling in 56 holes completed as at May 12, 2006, bringing the
project total to 53,269 metres in 307 holes. The Phase IV program to date has
focussed on infill and expansion drilling on Calcite Hill NW, exploratory
drilling along Esperanza, infill drilling on Galena Hill and stratigraphic
drilling between the Esperanza and Argenta Trends. Results of the first 35 holes
from the Phase IV program were released on April 5, 2006.
- 4 -
The exploration program at the Navidad Project is being carried out under the
supervision of Dr. Paul Lhotka, P.Geo., a Qualified Person as defined by
National Instrument 43-101.
GALENA HILL:
The Galena Hill Deposit is hosted primarily within gently dipping
trachyandesitic volcanic breccias with a matrix of galena, pyrite, calcite, and
barite. These breccias are interpreted to have formed primarily by multiple
hydrothermal fluid pulses. Calcareous mudstones overlie the mineralized volcanic
breccias; these generally contain significant silver, lead and zinc values
within one to five metres of the volcanic-mudstone contact. Sulphides occur in
the mudstone both as crosscutting veinlets and as strataform beds suggesting a
syn-depositional timing for the mineralization event. The Galena Hill deposit
measures approximately 450 by 500 metres in plan view (at 50 g/t silver
equivalent cut-off) and is up to 125 metres thick in its centre. A total of 39
drillholes delineate the Galena Hill resource. Highlights from Phase I drilling
on Galena Hill include 115 metres of 497 g/t silver and 5.71% lead in hole 14
and 63.0 metres of 418.4 g/t silver, including 20.6 metres of 703.0 g/t silver,
in hole 22.
During Phase III, hole 175 and 197 were drilled at Galena Hill in order to
collect metallurgical samples. Hole 175 intercepted 194 metres of 188 g/t silver
and 5.8% lead including 49.8 metres of 481 g/t silver and 14.2% lead. Hole 197
intercepted 74.04 metres of 239 g/t silver and 1.97% lead. Results of these two
holes were incorporated into the resource estimate published on February 16,
2006.
In Phase IV to date a further 23 holes have been drilled at Galena Hill with a
spacing of 25m by 12.5m to determine the optimal drill spacing to upgrade the
Galena Hill Resource from the Indicated to Measured category and to collect
sample material for further metallurgical testwork.
NAVIDAD HILL:
A total of 62 drill holes have been completed to date at Navidad Hill. In
addition to the structurally controlled mineralization located on top of Navidad
Hill, near-surface stratigraphically controlled silver mineralization has now
been identified along the southwest and southeast flanks of Navidad Hill.
Intercepts of structurally controlled, near vertical mineralized bodies on the
top of Navidad Hill include hole NV04-110 which intersected 61.5 metres of 128
g/t silver, including 5.34 metres of 1,006 g/t silver.
Highlights of stratigraphically-controlled mineralization on the western flank
of the Navidad volcanic dome include the exceptional intercept from hole NV04-90
that returned 35.8 metres of 2,850 g/t(83.2 ounces per ton) silver including 7.3
metres of 11,995 g/t(350.3 ounces per ton) silver starting from 16.5 metres
depth. Drill hole 90 was drilled at an inclination of -45(degree) towards the
northeast on the western flank of Navidad Hill, approximately 275 metres
northwest of drill holes 1 and 2 and in an area of little or no outcrop.
Bonanza-grade mineralization in drill hole 90 contains semi-massive
silver-copper-lead sulphides and/or sulphosalts. In several locations native
silver occurs as fine veinlets and grains up to 5 millimetres in size. Further
intercepts in the area include 28.15 metres of 1,115 g/t silver (32.6 ounces per
ton) including 5.97 metres of 4,579 g/t(133.7 ounces per ton) in hole 117 and
58.68 metres of 208 g/t silver (6.1 ounces per ton) in hole 112.
Phase III drilling in the area of hole 90 included holes 139 to 142 which were
completed to provide more detailed information on this zone of very high-grade
silver mineralization. Of these, holes 139 (17.8 metres of 1,037 g/t silver) and
142 (34.5 metres of 1,220 g/t silver) intersected significantly higher grade
than that predicted from the wider spaced drilling and the prior resource block
model. Results of these new holes were incorporated into the resource estimate
published on February 16, 2006.
CONNECTOR ZONE:
At the Connector Zone 37 drill holes have been completed to date. Drilling has
demonstrated that both structurally and stratigraphically controlled high-grade
silver mineralization occurs in this area, as at Navidad Hill. In the
northwestern part of the Connector Zone (holes 40, 68, 105, 106, and 107), the
control on mineralization appears to be stratigraphic with the mineralization
occurring in the same stratigraphic position as at the Galena Hill deposit and
on the flank of Navidad Hill (hole 90). Highlights from this mineralization
style include 46.7 metres of 334 g/t silver from hole 107 and 13.3 metres of 545
g/t silver from hole 105. In the southeastern Connector Zone (holes 32, 86, 87,
108, 131, 153, 154, 155. and 156), the controls on mineralization and the
stratigraphic correlations are less clear. Hole 108 was drilled towards the east
to cross a northerly trending structural zone partially exposed on surface and
intersected an impressive 485 g/t silver over 39.0 metres.
- 5 -
Phase III drilling at the Connector Zone (holes 153-156 and 228-237)), aimed at
providing additional drill density to upgrade previously defined Inferred
Resources to the Indicated Resources category, intersected moderate-grade silver
mineralization over long intervals with rare high-grade structures (e.g. 2
metres of 2,171 g/t silver in hole 234) outside of the current Indicated
Resource. Results include 88.8 metres of 107 g/t silver in hole 153 and 28.8
metres of 148 g/t silver in hole 154, 26 metres of 104 g/t silver in hole 230,
37 metres of 107 g/t silver in hole 231, 21 metres of 237 g/t silver in 234, and
32 metres of 110 g/t silver in hole 237. Much of this mineralization starts at
or very near surface.
CALCITE HILL:
Near the end of the Phase II program a single hole, NV04-88, was drilled to test
favourable stratigraphy on the edge of Calcite Hill in an area where there are
few indications of mineralization or geochemical anomalies at surface. The hole
intersected 72.3 metres averaging 202 g/t silver and 3.45% lead from 70.3 to
142.6 metres depth and included a higher-grade interval containing 12.4 metres
averaging 672 g/t silver.
Mineralization encountered to date at Calcite Hill is predominantly hosted
within trachyandesite volcanic rock and to a lesser degree within mudstone which
overlies the volcanic rock. The volumetrically most important style of
mineralization consists of calcite-barite veinlets and breccias with
argentite-acanthite, native silver and lesser galena and chalcopyrite. In
general, this style of mineralization contains high silver grades with minor
amounts of lead and copper. In the upper portions of the host volcanic unit, and
in the overlying mudstone, mineralization tends to be lead-rich and consists
predominantly of medium-grained galena with moderate silver values.
Highlights from Phase III drilling at Calcite Hill include: 122.6 metres of 195
g/t silver in hole 124, 196.1 metres of 113 g/t silver in hole 126, 123.6 metres
of 139 g/t silver in hole 138, 46.6 metres of 300 g/t silver including 10.3
metres of 1,257 g/t silver in hole 143, 83.0 metres of 209 g/t silver in hole
148, 80.2 metres of 246 g/t silver including 25.3 metres of 476 g/t silver in
hole 151, 27 metres of 407 g/t silver in hole 207 and 21 metres of 545 g/t
silver in hole 209.
A total of 60 drill holes were used in the estimate of resources published in
February 2006. In Phase IV 2 additional holes were drilled at Calcite Hill. Hole
272 intersected 9.86m averaging 401 g/t silver and the zone remains open to the
north at shallow depth.
CALCITE HILL NW:
Exploration drilling in Phase III along strike towards the northwest from
Calcite Hill discovered new mineralization. This new mineralization is named
Calcite NW. The mineralization at Calcite Hill NW is dominantly hosted in
sedimentary rocks that overly the volcanic rocks which host the majority of the
mineralization at Navidad Project. Within the overlying sediments strong clay
alteration is widespread and affects pelites, sandstones and conglomerates.
Mineralization can be lead-rich with silver (hole 201), or lead-poor but with
minor values in copper and higher silver grades (holes 202 and 203).
Fine-grained but visible, disseminated native silver was located within a
carbonaceous bed in hole 203. This is a new mode of occurrence of silver at
Navidad Project. At Calcite Hill NW mineralization appears to be
stratigraphically controlled and is disseminated in the host rock; veins or
feeder structures have not been recognized. The zone is nearly flat-lying, shows
good continuity from hole to hole and typically starts at shallow depths of 15
to 50 meters below surface.
Drilling at Calcite Hill NW has defined a central area of approximately 400 x
150 metres x 5 to 60 meters thick (defined by drill holes 178, 179, 202, 203 and
223-227). Highlights include: holes 178 and 179 (30.0 metres of 122 g/t silver
and 25.0 metres of 251 g/t silver, respectively), 202 (10 metres of 435 g/t
silver), and 203 (29 metres of 154 g/t silver). Results outside the core area
include intercepts from holes 199 (31.1 metres of 62 g/t silver and 1.29% lead)
and 201 (22.5 metres of 104 g/t silver and 2.79% lead). The resource estimate
released in February 16, 2006 used 23 holes.
In Phase IV a further 14 holes were drilled at Calcite Hill NW. Highlights
include hole 262 with 25.2m averaging 146 g/t silver including a higher-grade
section of 8.54m averaging 385 g/t silver and hole 264 which averaged 127 g/t
silver over 28.4m, including 455 g/t silver over 6.85m.
ESPERANZA TREND:
Prior to Phase IV a total of 11 drillholes were completed in two areas along the
6 kilometre Esperanza Trend. Highlights include 2.7 metres of 831 g/t silver in
hole 62 and 2.6 metres of 513 g/t silver in hole 79. Interestingly, hole 79
- 6 -
shows signs of the mineralization being stratigraphically rather than
structurally controlled as had been interpreted to date in this area. Hole 63
intersected 45.8 metres of 94 g/t silver, including 4.0 metres of 246 g/t
silver, 800 metres to the northwest. In the same area, hole 82 intersected 54.6
metres of 64 g/t silver, including 26.1 metres of 106 g/t silver and also 6.0
metres of 140 g/t silver. These results confirm the high grades and potential
for a significant structurally and/or stratigraphically controlled zone at
Esperanza. A further 13 holes have been completed at Esperanza during Phase IV,
no results have been released to date.
BARITE HILL:
A total of 8 holes were completed at Barite Hill during Phase II. Although many
of these holes contain significant near surface intersections of galena matrix
breccia similar in style to that at Galena Hill, they have generally lower
silver and lead values. The most significant intercept was from hole NV04-76
that cut 22.1 metres of galena matrix breccia averaging 34 g/t silver and 0.63%
lead in the upper part of the hole and then intersected a different style of
mineralization deeper in the hole that contained 21.7 metres of 88 g/t silver
including 8.4 metres of 191 g/t silver. This deeper mineralization is associated
with calcite veining within a fine-grained muddy sedimentary rock and is
characterized by high silver to base metal ratios.
LOMA DE LA PLATA:
The surface exploration program launched September 2004 resulted in the
discovery of the Loma de la Plata Zone, approximately 4 kilometres west of the
Galena Hill deposit, through grid soil sampling. At Loma de la Plata, an area of
approximately 400 x 400 metres has been systematically sampled with twelve lines
of continuous and semi-continuous channel samples; these sample lines range in
length from 12.5 to 135.9 metres. Highlights of channel samples include:
Line LP-1: 40.1 metres of 740 g/t silver
Line LP-3: 42.9 metres of 684 g/t silver
Line LP-4: 135.9 metres of 159 g/t silver
Line LP-7: 48.5 metres of 315 g/t silver
Line LP-2: 103.3 metres of 290 g/t silver
Line LP-9: 49.5 metres of 410 g/t silver
Line LP-10: 56.0 metres of 452 g/t silver
The Loma de la Plata zone is hosted within quartz-eye phyric trachyandesite
volcanic rocks that dip to the northeast at 15 to 45 degrees. Mineralization
occurs in micro-veinlets and breccia zones and consists primarily of minor
galena and copper oxides with common native silver.
Initial drilling of five holes at Loma de la Plata has confirmed the surface
discovery but has tested only a small portion of the known surface
mineralization. Trenches 7 and 10 are located up to 275 metres from the current
drilling and returned values of 48.5 metres of 315 g/t silver and 56.0 metres of
452 g/t silver, respectively. Of the five drill holes completed at Loma de la
Plata, two (241 and 242) were drilled at angles of -45 and were collared near
trenches where high-grade silver had been defined on surface. Hole 241
intersected 31.5 metres of 562 g/t silver (grade was incorrectly stated in a
October 13, 2005 News Release as 684 g/t) and was drilled under trenches 1 and 3
that returned 40.1 metres of 740 g/t silver and 42.9 metres of 684 g/t silver,
respectively. Hole 242 intersected 28.4 metres of 236 g/t silver and was drilled
under trench 2 which returned 103.3 metres of 290 g/t silver. The strong
correlation between surface results from trenching and sub-surface results from
drilling suggests that little or no surface enrichment of silver has occurred at
Loma de la Plata. The remaining three holes were collared 40 to 90 metres
further to the east and drilled at -60 angles. These holes (243-245) appear to
have missed the better-mineralized north-south trending zone as defined by
trenches 1-3, 8, and 9 and drill holes 241 and 242.
Drilling at Loma de la Plata has confirmed the basic geological model of a
favourable, mineralized, upper-volcanic sequence comprised of quartz-eye bearing
trachyandesites. The units dip approximately 25 to 30 degrees towards the
northeast and the favourable unit is approximately 30 to 35 metres thick in the
area drilled to date. The form and shape of mineralized zones of veinlets and
brecciation is not yet well defined, but is hosted exclusively within the
trachyandesite upper volcanic rocks. Further drilling will be required to
confirm the orientation and ultimate size potential of this zone.
- 7 -
SECTOR ZETA
At Sector Zeta, approximately 5 kilometres west of the Galena Hill Deposit,
seven sample lines ranging in length from 6.7 to 60.0 metres have been completed
covering an area of approximately 80 by 100 metres (see attached figure).
Highlights of the Sector Zeta results include:
Line Z-5: 8.0 metres of 105 g/t Silver and 1.14% Copper
Line Z-6: 12.0 metres of 112 g/t Silver and 1.13% Copper
Line Z-7: 12.0 metres of 133 g/t Silver and 3.27% Copper
Mineralization at Sector Zeta predominantly consists of green copper oxides
within argillicly altered latite volcanic rocks that are often brecciated. The
Company's geologists interpret that the volcanic rocks which host mineralization
here are part of the same volcanic unit that hosts mineralization at Galena and
Navidad Hills and also at Loma de la Plata. At present, the orientation of the
mineralized zone at Sector Zeta is unknown; drill data will be needed to
unambiguously define the geometry and size of the mineralization.
The possibility of leaching, or alternatively, concentration of silver and
copper values at or near surface, particularly at Sector Zeta in the case of
copper, cannot be determined from the data available to date and drilling will
be required; no drilling has been carried out in the Sector Zeta area.
ARGENTA TREND:
On January 21, 2005 the Company released the results from a large expansion to
the soil sample grid and follow-up prospecting which uncovered a series of new
mineralized zones to the southeast of Loma de la Plata. The Argenta Trend
includes Sector Zeta and Loma de la Plata and extends approximately 8 kilometres
to the southeast, parallel with the Esperanza and Navidad Trends.
The Argenta Trend is highlighted by anomalous silver, lead and zinc values in
soils with subordinate and sporadic anomalous copper. Recent surface work along
the Argenta trend has discovered high-grade lead values over significant widths.
New discoveries include the "Bajo del Plomo", "Filo del Plomo" and "Ginger"
zones where lead values of up to 10.7% lead over 10 metres, 7.3% lead over 17
metres and 4.8% lead over 21 metres respectively, have been discovered. These
new discoveries are located southeast of the Loma de la Plata zone. With the
addition of the three new zones, the Argenta Trend now consists of five named
mineralized zones along an 8 kilometre strike length. Mineralization styles vary
from silver-copper rich at the northwest end at Sector Zeta, to silver-rich at
Loma de la Plata, to lead-dominant at Bajo del Plomo, Filo del Plomo and Ginger.
Mineralization is hosted by the same trachyandesitic volcanic rocks as the
Galena, Navidad, and Calcite Hill deposits, and in some cases in adjacent
sedimentary rocks. It appears to occur at approximately the same stratigraphic
position as the known resources but with significant differences in sedimentary
facies.
The Company now has over 58 square kilometres of geophysical surveying covering
and extending beyond the Navidad and Argenta Trends. The Galena Hill deposit has
a strong geophysical signature, while other deposits such as Navidad and Calcite
Hills have much more subtle signatures. This additional geophysical coverage
provides a wealth of information about the geology and structure at Navidad in
addition to highlighting new areas prospective for mineralized zones that may be
completely buried.
NAVIDAD AREA PROPERTIES:
The Company has 18 exploration properties in Chubut Province in addition to
Navidad. The Regalo property is currently the subject of a joint venture
agreement.
REGALO:
Work by Consolidated Pacific Bay Minerals Ltd. ("Pacific Bay") on the Regalo
Property, currently under option from the Company, has identified highly
anomalous gold in soils and silt samples over a large area. In a January 12,
2005 News Release, Pacific Bay reported that the Yastekt South zone has strong
associated gold anomalies consistent over almost one square kilometre. The
Yastekt South anomaly comprises 98 soil analyses that average 299 ppb gold.
Normal, "background" gold values in the area are less than 5 ppb. Two of the 98
soil analyses returned values in excess of 3 g/t gold. In a June 21, 2005 press
release, Pacific Bay reported that an outcrop sample on Pacific Bay's Regalo
project has returned an assay value of 205 ppm uranium. On August 22, 2005 press
release Pacific Bay reported that a total of 163 rock samples were collected
- 8 -
from 26 backhoe trenches excavated within the large soil and stream sediment
anomalies described above. Of these, 13 rock samples had detectable gold in the
6 to 41 ppb range. The trench samples identified anomalous arsenic, molybdenum,
vanadium and zinc pathfinder elements in porous, permeable sandstones and
conglomerates with strong quartz-hematite alteration.
SELECTED QUATERLY FINANCIAL INFORMATION AND FOURTH QUARTER
The following selected consolidated financial information is derived from the
unaudited consolidated interim financial statements of the Company. The
information has been prepared in accordance with Canadian GAAP.
----------- -------------------------------------------------- -------------------------------------
2006 2005 2004
----------- -------------------------------------------------- -------------------------------------
MAR. 31 DEC. 31 SEP. 30 JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30
$ $ $ $ $ $ $ $
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Revenues Nil Nil Nil Nil Nil Nil Nil Nil
Loss from Continuing
Operations (506,320) (1,041,118) (1,233,392) (972,894) (2,517,470) (1,164,504) (492,562) (466,021)
Loss per Common Share from
Continuing Operations (0.01) (0.02) (0.03) (0.02) (0.06) (0.03) (0.01) (0.01)
Loss Allocated to
Spin-off Assets Nil Nil Nil Nil Nil Nil Nil (355,252)
Net Loss (506,320) (1,041,118) (1,233,392) (972,894) (2,517,470) (1,164,955) (492,562) (821,273)
Net Loss per Common Share
Basic and Diluted (0.01) (0.02) (0.03) (0.02) (0.06) (0.02) (0.01) (0.02)
----------- -------------------------------------------------- -------------------------------------
SUMMARY OF FINANCIAL RESULTS
For the three months ended March 31, 2006, the Company reported a consolidated
loss of $506,320 ($0.01 per share), a decrease of $2,011,150 from the loss of
$2,517,470 ($0.06 per share) for the three months ended March 31, 2005. The
decrease in the loss in 2006, compared to the 2005 amount, was due to a number
of factors of which $2,005,742 can be attributed to decreases in operating
expenses and $5,408 change in other items.
The Company's 2004 financial statements were reclassified in accordance with
Canadian GAAP. This reclassification did not change previously reported total
losses. The allocation of expenses was calculated on the basis of the ratio of
the specific assets transferred to assets retained. A loss of $355,252 was
allocated to spin-off assets in the June 30, 2004 period.
RESULTS OF OPERATIONS
The Company's operating expenses for the three months ended March 31, 2006, were
$561,604 a decrease of $2,005,742 from $2,567,346 in the 2005 period.
In the 2005 period the Company recorded non-cash stock based compensation of
$1,800,000 and $Nil in the 2006 period as there were no stock options granted.
Other notable changes in the operating expenses are: (i) Professional fees
decreased $225,563 to $89,661 in 2006, primarily due to the reduction in legal
costs incurred in connection with the Aquiline legal action. In the current
period there has been limited work performed compared to the 2005 period; (ii)
Salaries increased $25,898 due to increases in staff and salary levels; (iii)
Transfer agent and regulatory fees increased $50,987 mainly due to the current
period costs of the Company's listing on the American Stock Exchange, which
occurred in July 2005; (iv) Corporate development and investor relations
decreased $31,908 mainly due to the decrease printing costs during the 2006
period; (v) Travel and accommodation decreased $27,041 due to reduced travel in
the 2006 period.
In 2006 the Company recorded interest income of $58,510 compared to $29,369 in
2005, primarily as a result of an increase in funds on deposit.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at March 31, 2006 was $15,445,641, an increase of
$7,714,246 from December 31, 2005. Total assets increased to $32,590,557 at
March 31, 2006 from $23,497,994 at December 31, 2005. This increase is mainly
due to the increase in Navidad carrying value and in cash balance.
On March 21, 2006 the Company completed a syndicated brokered private placement
financing of 2,865,000 special warrants at $3.50 per warrant for gross proceeds
of $10,027,500. Each special warrant will entitle the holder to acquire one unit
- 9 -
consisting of one common share and one half common share purchase warrant. The
Company will use its best efforts to file a prospectus qualifying the
distribution of the units and agent's special warrants within sixty (60) days of
the closing of this placement. In the event that the qualification date does not
occur within that time period, each special warrant outstanding will, on
exercise or deemed exercise, entitle the holder thereof to acquire 1.1 units
without further payment on the part of the holder. Each full warrant entitles
the holder thereof to purchase one additional common share in the capital of the
Company at a price of $3.80 per share until March 21, 2010. In addition to a
cash commission of 6% the underwriters were granted 171,900 agents' warrants,
representing 6% of the number of special warrants issued. Each agents' warrant
is exercisable for one share at a price of $3.80, for a period of twenty four
months, expiring on March 21, 2008.
Options and warrants were exercised which resulted in cash proceeds of
$4,215,145 during 2005. The Company paid $145,866 to Golden Arrow from the
exercise of warrants that resulted in the issue of Golden Arrow's shares as
required by the terms of the reorganization. As all warrants that were
outstanding as of the effective date of the reorganization have been exercised
the Company has no further obligation to pay amounts to Golden Arrow for the
issue of its shares on the exercise of the Company's warrants.
The Company has received $172,900 from the exercise of options from January 1 to
March 31, 2006. Subsequent to March 31, 2006 the Company received $28,050 from
the exercise of options. As at May 12, 2006, the Company had working capital of
approximately $13,500,000.
The Company considers that it has adequate resources to maintain its ongoing
operations for the balance of the year but currently may not have sufficient
working capital to fund all of its future exploration and development work. The
Company will continue to rely on successfully completing additional equity
financing to further exploration and development of Navidad. There can be no
assurance that the Company will be successful in obtaining the required
financing. The failure to obtain such financing could result in the loss of or
substantial dilution of its interest in its properties.
Except as disclosed elsewhere in this MD&A the Company does not know of any
trends, demand, commitments, events or uncertainties that will result in, or
that are reasonably likely to result in, its liquidity either materially
increasing or decreasing at present or in the foreseeable future. Material
increases or decreases in liquidity are substantially determined by the success
or failure of the exploration programs.
The Company does not now and does not expect to engage in currency hedging to
offset any risk of currency fluctuations.
OPERATING CASH FLOW
Cash outflow from operating activities for the three months ended March 31,
2006, was $365,343, compared to cash outflow for 2005 period of $934,145 as a
result of changes in the level of activities and in non-cash working capital.
FINANCING ACTIVITIES
During the three months ended March 31, 2006, the Company received $10,027,500
less costs of $763,093 from the issue of special warrants in a brokered private
placement and $172,900 on the exercise of options, compared to $4,215,145, less
costs of $Nil, for the period ended March 31, 2005.
INVESTING ACTIVITIES
Investing activities required cash of $1,357,718 during three months ended March
31, 2006, compared to $1,523,723 for the 2005 period, these investing activities
were primarily for additions to the Navidad Project in Argentina.
RELATED PARTY TRANSACTIONS
Effective January 1, 2005 the Company engaged the Grosso Group to provide
services and facilities to the Company. The Grosso Group is a private company
now owned by the Company, Golden Arrow, Amera, Astral and Gold Point, each of
which owns one share. The Grosso Group provides its shareholder companies with
geological, corporate development, administrative and management services on a
cost recovery basis. During the three months ended March 31, 2006, the Company
incurred fees of $192,923 to the Grosso Group: $189,438 was paid in monthly
payments and $3,485 is included in the accounts payable as a result of a review
of the allocation of the Grosso Group costs to the member companies for the
period. In addition, included in accounts receivable, prepaids and deposits is a
- 10 -
$205,000 deposit to the Grosso Group. The deposits from the member companies
were used for the purchase of equipment and leasehold improvements and for
operating working capital.
During the three months ended March 31, 2006 the Company paid $43,050 to
directors and officers or companies controlled by directors and officers of the
Company, for technical, management and consulting services provided. The Company
has agreements with a company controlled by the wife of the President of the
Company for the rental of office premises. Effective as of January 1, 2005 the
Company subleased this office space to the Grosso Group. The President of the
Company provides his services on a full-time basis under a contract with a
private company controlled by the President. The President is paid an annual
amount of $102,000. The contract also provides that, in the event the services
are terminated without cause or upon a change in control of the Company, a
termination payment would include a bonus of $6,500 per month, retroactive to
July 1, 1999, plus an additional three years of compensation at $15,000 per
month. If the termination had occurred on March 31, 2006, the amount due under
the agreement would be $1,066,000. Pursuant to the terms of the agreement, in
the event the agreement is terminated by the Company as a result of the
President's death or permanent disability while providing services to the
Company, or by the President as a result of a material breach or default by the
Company, a bonus in the amount of $461,500 is payable. On April 12, 2006 the
Board accepted the recommendation from the Compensation Committee to increase
the monthly consulting fee effective May 1, 2006 to $20,833 ($250,000 per annum)
and to pay a bonus of $150,000.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with Canadian GAAP
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of
revenues and expenses during the period. Significant areas requiring the use of
management estimates relate to the determination of environmental obligations
and impairment of mineral properties and deferred costs. Actual results may
differ from these estimates.
Reference should be made to the Company's significant accounting policies
contained in Note 3 of the Company's consolidated financial statements for the
years ended December 31, 2005, 2004 and 2003. These accounting policies can have
a significant impact of the financial performance and financial position of the
Company. As disclosed previously, the Company has not made any provision for any
potential loss in the event of an adverse judgement related to the Aquiline
legal action.
RECENT ACCOUNTING PRONOUNCEMENTS
Reference should be made to the recent accounting pronouncements in Canada and
in United States that are described in Note 10 of the Company's consolidated
financial statements for the years ended December 31, 2005, 2004 and 2003.
MINERAL PROPERTIES AND DEFERRED COSTS
Consistent with the Company's accounting policy disclosed in Note 3 of the
annual consolidated financial statements, direct costs related to the
acquisition and exploration of mineral properties held or controlled by the
Company have been capitalized on an individual property basis. For certain
acquisitions and related payments for mineral property interests, the Company
records a future income tax liability and a corresponding adjustment to the
related asset carrying amount if the expenditures do not have the corresponding
tax basis. It is the Company's policy to expense any exploration associated
costs not related to specific projects or properties. Management of the Company
periodically reviews the recoverability of the capitalized mineral properties.
Management takes into consideration various information including, but not
limited to, results of exploration activities conducted to date, estimated
future metal prices, and reports and opinions of outside geologists, mine
engineers and consultants. When it is determined that a project or property will
be abandoned or its carrying value has been impaired, a provision is made for
any expected loss on the project or property. In 2006 and in 2005 no impairment
of long-lived assets was identified.
FINANCIAL INSTRUMENTS
The Company's financial instruments consisting of cash and cash equivalents,
accounts receivable and accounts payable and accrued liabilities approximate
their carrying values due to the short-term nature of those instruments. As of
March 31, 2006, the market value of marketable securities was $423,000 (2005 -
$232,500).
- 11 -
RISK FACTORS
The Company's operations and results are subject to a number of different risks
at any given time. These factors, include but are not limited to disclosure
regarding exploration, additional financing, project delay, titles to
properties, price fluctuations and share price volatility, operating hazards,
insurable risks and limitations of insurance, management, foreign country and
regulatory requirements, currency fluctuations and environmental regulations
risks. Exploration for mineral resources involves a high degree of risk. The
cost of conducting programs may be substantial and the likelihood of success is
difficult to assess. For a more complete discussion of these risks and others,
reference should be made to the December 31, 2005 Management Discussion and
Analysis.
SHARE DATA INFORMATION
As of May 12, 2006 there were 48,948,064 common shares, 2,071,904 warrants and
4,746,000 stock options outstanding. As a result of a private placement
completed on March 21, 2006, the Company has 2,865,000 special warrants
outstanding. Each special warrant will entitle the holder to acquire one unit,
without payment of additional consideration, consisting of one common share and
one half common share purchase warrant. Each full warrant entitles the holder
thereof to purchase one additional common share in the capital of the Company at
a price of $3.80 per share until March 21, 2010.
INVESTOR RELATIONS
The Company currently does not engage any outside investor relations
consultants. Mr. Sean Hurd is the Company's Vice-President, Investor Relations
and coordinates investor relations activities. The Company also maintains a web
site at www.imaexploration.com .
- 12 -
FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS
I, Joseph Grosso, President & Chief Executive Officer of IMA Exploration Inc.,
certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of IMA Exploration Inc. (the issuer) for
the interim period ending March 31, 2006;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings;
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the issuer, as of the date and for the
periods presented in the interim filings;
4. The issuer's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures and
internal control over financial reporting for the issuer, and we have:
(a) designed such disclosure controls and procedures, or caused
them to be designed under our supervision, to provide
reasonable assurance that material information relating to the
issuer, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which the interim filings are being prepared; and
(b) designed such internal control over financial reporting, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with the issuer's GAAP; and
5. I have caused the issuer to disclose in the interim MD&A any change in
the issuer's internal control over financial reporting that occurred
during the issuer's most recent interim period that has materially
affected, or is reasonably likely to materially affect, the issuer's
internal control over financial reporting.
Date: May 12, 2006
/s/ Joseph Grosso,
--------------------------------------------------
Joseph Grosos, President & Chief Executive Officer
FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS
I, Arthur Lang, Chief Financial Officer of IMA Exploration Inc., certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of IMA Exploration Inc. (the issuer) for
the interim period ending March 31, 2006;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings;
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the issuer, as of the date and for the
periods presented in the interim filings;
4. The issuer's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures and
internal control over financial reporting for the issuer, and we have:
(a) designed such disclosure controls and procedures, or caused
them to be designed under our supervision, to provide
reasonable assurance that material information relating to the
issuer, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which the interim filings are being prepared; and
(b) designed such internal control over financial reporting, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with the issuer's GAAP; and
5. I have caused the issuer to disclose in the interim MD&A any change in
the issuer's internal control over financial reporting that occurred
during the issuer's most recent interim period that has materially
affected, or is reasonably likely to materially affect, the issuer's
internal control over financial reporting.
Date: May 12 , 2006
/s/ Arthur Lang
------------------------------------
Arthur Lang, Chief Financial Officer