EX-99.4 5 financials.htm FINANCIALS DC Filing Services Canada Inc. 403-717-3898

 








Platinum Group Metals Ltd.

(Development Stage Company)

Consolidated Interim Financial Statements

For the six month period ended February 28, 2008


Filed: April 13, 2006





A copy of this report will be provided to any shareholder who requests it.









The attached interim financial statements have not

 been reviewed by the Company’s auditors









PLATINUM GROUP METALS LTD. 

        

(An exploration stage company) 

        

Consolidated Balance Sheets 

        

February 28, 2006 

        
  February 28,    August 31, 
    2006    2005 
ASSETS         
CURRENT         
   Cash and cash equivalents  $  3,755,392  $  2,750,461 
   Marketable securities (market value - Feb. 28/06 $737,500;         
Aug. 31/05 - $272,375)    218,000    251,750 
   Amounts receivable (Note 3)    340,432    344,059 
   Prepaid expenses and other    24,556    53,575 
Total current assets    4,338,380    3,399,845 
PERFORMANCE BONDS    24,553    24,685 
MINERAL PROPERTIES (Note 5)    15,555,483    12,091,549 
FIXED ASSETS (Note 6)    195,200    189,108 
Total assets  $  20,113,616  $  15,705,187 
LIABILITIES         
CURRENT         
   Accounts payable and accrued liabilities  $  2,075,150  $  1,997,633 
   Current portion of capital lease obligation    3,051    5,929 
Total current liabilities    2,078,201    2,003,562 
CAPITAL LEASE OBLIGATION    22,569    22,569 
FUTURE INCOME TAXES (Note 9)    -    - 
Total liabilities    2,100,770    2,026,131 
SHAREHOLDERS' EQUITY         
Share capital (Note 7)    29,956,408    23,513,389 
Contributed surplus (Note 2 (f))    1,751,799    1,723,198 
Deficit accumulated during the exploration stage    (13,695,361)    (11,557,531) 
Total shareholders' equity    18,012,846    13,679,056 
Total liabilities and shareholders' equity  $  20,113,616  $  15,705,187 
CONTINUING OPERATIONS (Note 1)         
CONTINGENCIES AND COMMITMENTS (Note 10)         
APPROVED BY THE DIRECTORS:         
"R.M. Jones"         
R. Michael Jones, Director         
"Frank Hallam"         
Frank Hallam, Director         


See accompanying notes to the consolidated financial statements.

 

 

PLATINUM GROUP METALS LTD. 

            

(An exploration stage company) 

                

Consolidated Statements of Operations  

                         
FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 2006  
  Three Months Three Months   Six Months    Six Months 
    Ended    Ended   Ended    Ended 
  Feb. 28, 2006  Feb. 28, 2005 Feb. 28, 2006  Feb. 28, 2005 
EXPENSES                 
   Amortization  $  16,469  $  19,265  $  30,877  $  34,588 
   Annual general meeting    28,051    20,327    50,563    33,167 
   Corporate finance fees    -    -    -    - 
   Filing and transfer agent fees    26,557    10,063    40,069    13,326 
   Insurance    7,262    9,065    14,254    16,995 
   Management and consulting fees    114,310    34,609    263,063    115,565 
   News releases, print and mailout    7,923    10,387    17,972    15,599 
   Office and miscellaneous    28,822    50,175    64,411    74,554 
   Other taxes    110    -    110    - 
   Professional fees    22,001    5,481    117,399    80,229 
   Promotion    41,973    47,619    70,446    67,414 
   Property investigations    -    910    -    910 
   Rent    21,941    20,812    43,166    49,459 
   Salaries and benefits    247,472    394,063    436,375    544,101 
   Shareholder relations    40,550    889    76,385    1,546 
   Stock compensation expense                 
       (Note 7 (c))    39,944    1,449,500    39,944    1,500,000 
   Telephone    7,704    9,372    21,029    21,117 
   Travel    56,730      120,540      126,537       175,307 
    (707,819)    (2,203,077)   (1,412,600)   (2,743,877)
Less interest and other income    53,234        45,029      79,183      85,530 
Loss before other items    (654,585)     (2,158,048)     (1,333,417)     (2,658,347)
Other items:                 
   Mineral property costs written off    793,298    -    793,298    15,450 
   Write-down of investment in and                 
       advances to Active Gold Group Ltd.                 
       (Note 4)    -    -    -    76,287 
   (Gain) loss on sale and write-down                 
       of marketable securities    -    -    11,115    - 
   Loss on sale of furniture    -    (96)    -    7,065 
   Equity in loss of Active Gold                 
       Group Ltd. (Note 4)    -      -      -      - 
      793,298      (96)      804,413      98,802 
Loss for the period before income taxes    (1,447,883)   (2,157,952)   (2,137,830)   (2,757,149)
Future income tax recovery    -      -      -       
Loss for the period  $  (1,447,883)   $  (2,157,952)   $  (2,137,830)   $  (2,757,149)
 
Basic and diluted loss per share  $  (0.03)   $  (0.06)   $  (0.05)   $  (0.08)
Weighted-average number of                 
   common shares outstanding    45,018,056      36,489,970      45,018,056       36,489,970 

 

 

See accompanying notes to the consolidated financial statements.

 

 

PLATINUM GROUP METALS LTD. 

(An exploration stage company) 

Consolidated Statements of Shareholders' Equity

From commencement of operations, March 16, 2000, to February 28, 2006 

                    Deficit 
            Flow-through    accumulated 
  Common shares  Obligation   special  during  Total 
  without par value  to issue  warrants Contributed exploration  shareholders' 
  Shares  Amount  shares  Number    Amount  surplus  stage  equity
Balance, August 31, 2003 brought forward  27,831,267  $  9,005,078  $  -  $   -  $  -  $ 42,051  $ (4,489,256)  $ 4,557,873 
Issuance of flow-through common shares for cash  1,056,000    1,267,200    -  -    -  -  -  1,267,200 
Issuance of common shares for cash  3,810,207    3,226,590    -  -    -  -  -  3,226,590 
Issued on exercise of warrants  1,747,032    1,428,407    -  -    -  -  -  1,428,407 
Issued on exercise of stock options  132,000    59,200    -  -    -  -  -  59,200 
Issued for mineral properties  10,909    3,600    -  -    -  -  -  3,600 
Future income taxes relating to exploration                       
expenditures applicable to flow-through shares  -    -    -  -    -  -  (346,000)  (346,000) 
Stock options granted to consultants  -    -    -  -    -  92,881  -  92,881 
Net loss  -       -       -      -       -    -    (2,242,627)    (2,242,627) 
Balance, August 31, 2004  34,587,415  14,990,075    -  -    -  134,932  (7,077,883)  8,047,124 
Cumulative effect of change in accounting policy                       
 (Note 2 (f))  -    -    -  -    -  318,000  (318,000)  - 
Issuance of flow-through common shares for cash  173,267    259,901    -  -    -  -  -  259,901 
Issuance of common shares for cash  5,000,000    5,441,078    -  -    -  -  -  5,441,078 
Issued on exercise of warrants  2,469,949    2,272,462    -  -    -  -  -  2,272,462 
Issued on exercise of stock options  903,000    521,873    -  -    -  (13,023)  -  508,850 
Issued for mineral properties  25,000    28,000    -  -    -  -  -  28,000 
Future income taxes relating to exploration                       
expenditures applicable to flow-through shares  -    -    -  -    -  -  (366,000)  (366,000) 
Stock options granted  -    -    -  -    -  1,283,289  -  1,283,289 
Net loss  -       -      -      -      -    -    (3,795,648)    (3,795,648) 
Balance, August 31, 2005  43,158,631  $ 23,513,389  $  -  -    $ -  $ 1,723,198  $(11,557,531)  $ 13,679,056 
Issuance of common shares for cash  2,200,000  $  3,144,287    -  -    -  -  -  3,144,287 
Allotted common shares pending issue for cash  1,700,000  $  2,465,000    -  -    -  -  -  2,465,000 
Issued on exercise of warrants  555,103    749,389    -  -    -  -  -  749,389 
Issued on exercise of stock options  60,000    44,343    -  -    -  (11,343)  -  33,000 
Issued for mineral properties  25,000    40,000    -  -    -  -  -  40,000 
Stock options granted  -    -    -  -    -  39,944  -  39,944 
Net loss  -       -      -      -      -    -    (2,137,830)    (2,137,830) 
Balance, February 26, 2006  47,698,734     $ 29,956,408    $  -      -    $ -    $ 1,751,799    $(13,695,361)    $ 18,012,846 

 

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

PLATINUM GROUP METALS LTD. 

            

(An exploration stage company) 

            

Consolidated Statements of Cash Flows 

            
FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 2006     
    Three Months  Three Months  Six Months  Six Months 
      Ended    Ended  Ended  Ended 
      Feb. 28, 2006    Feb. 28, 2005    Feb. 28, 2006   Feb. 28, 2005 
OPERATING ACTIVITIES             
 Loss for the period  $ (1,447,883)  $ (2,157,952)  $ (2,137,830)  $ (2,757,149) 
 Add items not affecting cash             
  Amortization    16,469    19,265  30,877  34,588 
  Loss on sale of capital assets    -    (96)  -  7,065 
  Write-down of investment in and             
  advances to Active Gold Group Ltd.    -    -  -  - 
  Future income tax recovery    -    -  -  - 
  (Gain) loss on disposal and write-down             
  of marketable securities    -    -  11,115  - 
  Mineral property costs written off    793,298    -  793,298  15,450 
  Finders fee received in shares (Note 8)    -    -  -  - 
  Gain on sale of mineral property    -    -  -  80,000 
  Non-cash share compensation expense    39,944    1,449,500  39,944  1,500,000 
 Net change in non-cash working             
 

capital (Note 11) 

    (77,856)     346,574    132,881    103,590 
       (676,028)     (342,709)    (1,129,715)    (1,016,456) 
FINANCING ACTIVITIES             
 Performance bonds    (545)    -  133  - 
 Issuance of common shares    768,280    428,412  3,926,676  2,740,563 
 Allotted common shares pending (Note 7 b (iv))    2,465,000    -  2,465,000  - 
 Issuance of special warrants    -    -  -  - 
      3,232,735    428,412  6,391,809  2,740,563 
INVESTING ACTIVITIES             
 Acquisition of capital assets    (18,912)    (40,520)  (36,970)  (143,334) 
 Sale of capital assets    -    96  -  2,456 
 Acquisition cost of mineral properties    (24,798)    (62,963)  (803,252)  (278,827) 
 Exploration expenditures    (1,313,200)    (1,130,219)  (3,439,576)  (2,043,967) 
 Investment in and advances to Active Gold Group Ltd.    -    -  -  - 
 Proceeds on sale of marketable securities    -    -  22,635  - 
 Recoveries    -    55,000    -    55,000 
      (1,356,910)    (1,178,606)    (4,257,163)    (2,408,672) 
Net increase in cash and cash equivalents    1,199,797    (1,092,903)  1,004,931  (684,565) 
Cash and cash equivalents, beginning of period    2,555,595    2,831,514    2,750,461    2,423,176 
Cash and cash equivalents, end of period (Note 11)  $  3,755,392  $  1,738,611    $ 3,755,392    $ 1,738,611 
SUPPLEMENTARY INFORMATION ON NON-CASH INVESTING AND FINANCING ACTIVITIES:     
(i)  During the period ended February 28, 2006, the Company issued 25,000 common shares with a value of $40,000 in connection with   
  the acquisition of mineral properties.             
(ii)  During the period ended February 28, 2006, the Company sold marketable securities with a fair value of $33,750 for proceeds of   
  $22,635.00             
(iii)  During the year ended August 31, 2005, the Company issued 25,000 common shares with a value of $28,000 in connection with   
  the acquisition of mineral properties.             
(iv)  During the year ended August 31, 2005 the Company acquired 1,407,069 shares of Active Gold Group Ltd. ("Active Gold")   
  from six of Active Gold's founding shareholders, all of whom are at arm's length to the Company, in exchange for 399,999   
  shares of Sydney Resource Corporation, paid from the Company's holdings of that security. As Active Gold is estimated to   
  have nominal value, the transaction was entered into for the purpose of preserving existing business relationships. The   
  Company therefore recorded the exchange as an expense.             
(v)  During the year ended August 31, 2004, the Company issued 10,909 common shares with a value of $3,600 in connection with   
  the acquisition of mineral properties.             
(vi)  During the year ended August 31, 2004, the Company received marketable securities with a fair value of $33,750 relating to the   
  recovery of mineral properties' costs.             
(vii)  During the year ended August 31, 2004, the Company received 1,200,000 shares of Sydney Resource Corp. (TSXV:SYR) with   
  a value of $0.20 per share in exchange for sale of a 100-percent interest in the Company's Simlock Creek, British Columbia   
  gold project and the termination of the earn-in requirements under a related option agreement.         
SUPPLEMENTARY INFORMATION ON CASH FLOWS:             
No interest or income tax expenses were paid during the periods disclosed.             

 

 

 

See accompanying notes to the consolidated financial statements.

 

 


PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



1.

CONTINUING OPERATIONS


The Company is a British Columbia corporation incorporated on February 18, 2002 by an order of the Supreme Court of British Columbia approving an amalgamation between Platinum Group Metals Ltd. (“Old Platinum”) and New Millennium Metals Corporation (“New Millennium”).  The Company is an exploration company conducting work on mineral properties it has staked or acquired by way of option agreements principally in Ontario, Canada and the Republic of South Africa. The Company has not yet determined whether its mineral properties contain ore reserves that are economically recoverable. The Company defers all acquisition, exploration and development costs related to mineral properties. The recoverability of these amounts is dependant upon the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the development of the property, and future profitable production, or alternatively, upon the Company’s ability to dispose of its interests on an advantageous basis.


These financial statements have been prepared in accordance with Canadian generally accepted accounting principles applicable on a going concern basis, which presumes the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. The Company has incurred losses from inception and does not currently have the financial resources to sustain operations in the long-term. The Company’s ability to continue as a going concern is dependent upon its ability in the future to achieve profitable operations and, in the meantime, to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. External financing, predominately by the issuance of equity to the public, will be sought to finance the operations of the Company; however, there is no assurance that sufficient funds will be raised.


These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company not be able to continue as a going concern. If the going concern basis was not appropriate for these consolidated financial statements, then significant adjustments would be necessary to the carrying values of assets and liabilities, the reported expenses, and the balance sheet classifications used.



2.

SIGNIFICANT ACCOUNTING POLICIES


These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) and include the following significant policies outlined below. These policies conform, in all material respects, with accounting principles generally accepted in the United States of America (“US GAAP”), except as described in Note 13 of the Company’s annual audited financial statements.


(a)

Principles of consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Platinum Group Metals (RSA) (PTY) Ltd. (“PTM RSA”). PTM RSA holds mineral rights and conducts operations in the Republic of South Africa. All significant intercompany balances and transactions have been eliminated upon consolidation.






PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



2.

SIGNIFICANT ACCOUNTING POLICIES (Continued)


(b)

Mineral properties and deferred exploration costs


Mineral properties consist of exploration and mining concessions, options and contracts.  Acquisition and leasehold costs and exploration costs are capitalized and deferred until such time as the property is put into production or disposed of either through sale or abandonment. The estimated values of all properties are assessed by management on a quarterly basis and if the carrying values exceed estimated recoverable values, then these costs are written down to fair value. If put into production, the costs of acquisition and exploration will be amortized over the life of the property, based on the estimated economic reserves. Proceeds received from the sale of any interest in a property will first be credited against the carrying value of the property, with any excess included in operations for the period. If a property is abandoned, the property and deferred exploration costs are written off to operations.


(c)

Cash and cash equivalents


Cash and cash equivalents consist of cash and short-term money market instruments, which are readily convertible to cash and have original maturities of 90 days or less.


(d)

Marketable securities and investments


Marketable securities are recorded at the lower of cost or market value.


Investments where the Company has the ability to exercise significant influence, generally where the Company has a 20% to 50% equity interest, are accounted for using the equity method.  Under this method, the Company’s share of the investee’s earnings or losses is included in operations and its investments therein are adjusted by a like amount.  Dividends received from these investments are credited to the investment accounts.


Other long-term investments are accounted for using the cost method, whereby income is included in operations when received or receivable.  


Provisions for impairment of long term investments are made, where necessary, to recognize other than temporary declines in value.  


(e)

Fixed assets


Fixed assets are recorded at cost and are amortized on the declining balance basis at the following annual rates:


Computer equipment

30%

Computer software

30%

Office furniture and equipment

20%






PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



2.

SIGNIFICANT ACCOUNTING POLICIES (Continued)


(f)

Stock-based compensation


Effective September 1, 2004, the Company adopted the amended recommendations of the Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments.  Under the amended standards of this section, the fair value of all stock-based awards granted are estimated using the Black-Scholes model and are recorded in operations over their vesting periods.  The compensation cost related to stock options granted after September 1, 2004 is recorded in operations.


Previously, the Company provided note disclosure of pro forma net earnings and pro forma earnings per share as if the fair value based method had been used to account for share purchase options granted to employees, directors and officers after September 1, 2002.  The amended recommendations have been applied retroactively from September 1, 2002 without restatement of prior periods.  As a result, as of September 1, 2004, the deficit was increased by $318,000, contributed surplus was increased by $304,977, and share capital was increased by $13,023 for share purchase options granted in prior years and exercised in Fiscal 2005.


The total compensation expense recognized in the statement of operations for share purchase options granted in Fiscal 2005 amounted to $1,283,289.  


Please refer to Note 7 (c) for a summary of stock options granted in the current period and the related valuation assumptions.


(g)

Income taxes


Future income taxes relate to the expected future tax consequences of differences between the carrying amount of balance sheet items and their corresponding tax values. Future tax assets, if any, are recognized only to the extent that, in the opinion of management, it is more likely than not that the future income tax assets will be realized. Future income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment or substantive enactment.


(h)

Earnings (loss) per common share


Basic earnings per share are calculated using the weighted average number of common shares outstanding, excluding contingently returnable shares held in escrow.


The Company uses the treasury stock method for the calculation of diluted earnings per share. Diluted earnings per share are computed using the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares consist of the incremental common shares arising upon the assumed exercise of stock options and warrants, but are excluded from the computation if their effect is anti-dilutive.





PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006




2.

SIGNIFICANT ACCOUNTING POLICIES (Continued)


(i)

Financial instruments


The fair values of cash and cash equivalents, amounts receivable, accounts payable and accrued liabilities and capital lease obligation reflected in the balance sheet approximate their respective carrying values. The fair value of marketable securities are as disclosed on the balance sheet.


Price risk is the risk that the value of the Company’s financial instruments will vary from fluctuations in foreign exchange rates and the degree of volatility of these rates. The Company does not use any derivative instruments to reduce its exposure to fluctuations in foreign exchange rates.


(j)

Use of estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures during the reporting period. Significant items where management’s judgement is applied include provisions for loss on and the estimated recoverable amount of assets, depreciation, income tax provisions, contingent liabilities, stock compensation and asset retirement obligations. Actual results could differ from those estimates.


(k)

Asset retirement obligations


The CICA issued Section 3110, Asset Retirement Obligations, which became effective January 1, 2004.  This standard focuses on the recognition and measurement of liabilities related to legal obligations associated with the retirement of property, plant and equipment.  Under this standard, these obligations are initially measured at fair value and subsequently adjusted for the accretion of discount and any changes in the underlying cash flows.  The asset retirement cost is to be capitalized to the related asset and amortized into earnings over time.  Adoption of this standard did not have a material impact on the Company’s financial statements.


3.

AMOUNTS RECEIVABLE

Feb. 28, 2006

 

 Aug. 31, 2005

     

Advances receivable

 $        68,724 

 

$      15,786 

Goods and services tax recoverable

 35,902 

 

 7,799 

South African value added tax ("VAT") recoverable

 231,906 

 

 263,466 

Interest receivable

 3,000 

 

 380 

Other

 900 

  

 56,628 

       

 $      340,432 

  

$344,059 






PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006




Advances receivable consist of funds advanced to officers, directors and consulting geologists for exploration and corporate activities conducted in the normal course of business and bear no interest.



4.

INVESTMENTS


(a)

Active Gold Group Ltd.


At August 31, 2003 the Company held 1,461,905 shares (26.79%) of Active Gold Group Ltd. at a cost of $160,327. Active Gold was a private corporation founded by the Company that attempted to acquire and develop gold projects in South Africa.  Active Gold failed to achieve a prospecting license for its Rooderand Gold Project and the project was abandoned.  The Company is now dormant.  Advances by the Company to Active Gold in the normal course of business during 2003 amounted to $45,487 and in 2004 amounted to $90,062.  In 2003 the Company wrote off its investment in and advances to Active Gold after recognizing its equity in that company’s losses.  Advances in 2004 were written off in the year they occurred.


On September 30, 2004 the Company acquired 1,407,069 shares of Active Gold from six of its other founding shareholders, all of whom were at arm’s length to the Company, in exchange for 399,999 shares (market value $131,200) of Sydney Resource Corporation (“SYR”), paid from the Company’s holdings of that security (see Note 4 (c)). As Active Gold was of nominal value, the transaction was entered into for the purpose of preserving existing business relationships.  PTM, therefore, recorded the exchange as an expense of $131,200.


(b)

MAG Silver Corporation


In 2003 the Company earned a finders’ fee of 200,000 shares of MAG Silver Corporation, a company with one director and one officer in common with the Company, with an assigned value of $0.50 per share for introducing MAG Silver to certain individuals and mineral properties located in Mexico. During 2003 the Company sold 100,000 of these shares for proceeds of $67,630. The remaining 100,000 MAG shares owned by the Company had a market value of $363,000 at February 28, 2006 and are included in marketable securities.


(c)

Sydney Resource Corporation


In 2002 New Millennium granted SYR, a company with two directors in common with the Company, an option to earn a 50% interest in New Millennium’s 100% owned Simlock Creek gold project, located in the Cariboo Mining District of British Columbia.  On December 2, 2003 the Company and SYR agreed to terminate the Option and the Company then sold the property to SYR outright in exchange for 1,200,000 shares of SYR at a value of $0.20 per share.  At February 28, 2006 the Company held 800,001 SYR shares with an aggregate cost of $160,000. Market value for these 800,001 shares at February 28, 2006 was $352,000. The shares are included in marketable securities.





PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



5.

MINERAL PROPERTIES

Six month period ended February 28, 2006

 

SOUTH AFRICA

 

CANADA

    
 

Western

       

 

   

 

  
 

Bushveld JV

 

Tweespalk

 

War Springs

 

Lakemount

 

LDI River

 

Shelby Lake

 

 Other

 

Total

Acquisition costs

of mineral rights

   Balance, beginning of year

 $1,804,926 

 

 $23,213 

 

 $103,832 

 

 $136,773 

 

 $540,532 

 

 $307,345 

 

 $248,858 

 

 $3,165,479 

   Incurred during period

 88,101 

 

 9,122 

 

 9,160 

 

 84,800 

 

 -   

 

 -   

 

 95,709 

 

 286,892 

   Less amounts written off

 -   

  

 -   

 

 -   

  

 -   

   

 -   

  

 -   

  

 (90,973)

  

 (90,973)

   Balance, end of period

 $1,893,027 

   

 $32,335 

   

 $112,992 

  

 $221,573 

   

 $540,532 

   

 $307,345 

   

 $253,594 

  

 $3,361,398 

                

Deferred exploration costs

   Assays and geochemical

 $336,438 

 

 $-   

 

 $52,576 

 

 $301 

 

 $-   

 

 $-   

 

 $-   

 

 $389,315 

   Drilling

 2,169,413 

 

 -   

 

 159,047 

 

 -   

 

 -   

 

 -   

 

 -   

 

 2,328,460 

   Geological

 693,706 

 

 714 

 

 160,798 

 

 5,317 

 

 -   

 

 425 

 

 4,152 

 

 865,112 

   Geolophysical

 5,692 

 

 -   

 

 1,053 

 

 -   

 

 -   

 

 -   

 

 2,210 

 

 8,955 

   Maps, fees and licenses

 -   

 

 -   

 

 -   

 

 -   

 

 -   

 

 -   

 

 -   

 

 -   

   Reclamation

 -   

 

 -   

 

 -   

 

 -   

 

 -   

 

 -   

 

 -   

 

 -   

   Site administration

 327,160 

 

 -   

 

 4,244 

 

 4,039 

 

 -   

 

 -   

 

 195 

 

 335,638 

   Travel

 34,259 

  

 -   

 

 6,033 

  

 1,502 

  

 -   

  

 -   

  

 1,066 

  

 42,860 

 

 3,566,668 

 

 714 

 

 383,751 

 

 11,159 

 

 -   

 

 425 

 

 7,623 

 

 3,970,340 

   Balance, beginning of year

 3,965,094 

 

 813,434 

 

 1,632,454 

 

 1,079,611 

 

 215,391 

 

 391,546 

 

 828,540 

 

 8,926,070 

   Less amounts written off

 -   

  

 -   

  

 -   

  

 -   

  

 -   

  

 -   

  

 (702,325)

  

 (702,325)

   Balance, end of period

 $7,531,762 

  

 $814,148 

  

 $2,016,205 

  

 $1,090,770 

  

 $215,391 

 

 $391,971 

  

 $133,838 

  

 $12,194,085 

Total Mineral Properties

 $9,424,789 

  

 $846,483 

  

 $2,129,197 

  

 $1,312,343 

  

 $755,923 

 

 $699,316 

  

 $387,432 

  

 $15,555,483 



Year ended August 31, 2005

 

SOUTH AFRICA

 

CANADA

        
 

Western

       

 

   

 

  
 

Bushveld JV

 

Tweespalk

 

War Springs

 

Lakemount

 

LDI River

 

Shelby Lake

 

 Other

 

Total

Acquisition costs

of mineral rights

   Balance, beginning of year

 $292,480 

 

 $13,054 

 

 $86,986 

 

 $65,188 

 

 $540,532 

 

 $307,345 

 

 $594,120 

 

 $1,899,705 

   Incurred during year

 1,512,446 

 

 10,159 

 

 16,846 

 

 71,585 

 

 -   

 

 -   

 

 204,398 

 

 1,815,434 

   Less recoveries

 -   

 

 -   

 

 -   

 

 -   

 

 -   

 

 -   

 

 (55,000)

 

 (55,000)

   Less amounts written off

 -   

  

 -   

  

 -   

  

 -   

  

 -   

  

 -   

  

 (494,660)

  

 (494,660)

   Balance, end of year

 $1,804,926 

  

 $23,213 

  

 $103,832 

  

 $136,773 

  

 $540,532 

  

 $307,345 

  

 $248,858 

  

 $3,165,479 

                

Deferred exploration costs

   Assays and geochemical

 $121,495 

 

 $14,230 

 

 $306,401 

 

 $20,108 

 

 $-   

 

 $-   

 

 $113,024 

 

 $575,258 

   Drilling

 1,744,881 

 

 -   

 

 458,680 

 

 1,300 

 

 -   

 

 -   

 

 519,886 

 

 2,724,747 

   Geological

 459,855 

 

 91,147 

 

 283,859 

 

 119,241 

 

 39 

 

 885 

 

 94,221 

 

 1,049,247 

   Geolophysical

 11,529 

 

 2,551 

 

 9,352 

 

 5,678 

 

 -   

 

 -   

 

 134,942 

 

 164,052 

   Maps, fees and licenses

 -   

 

 -   

 

 187 

 

 8,752 

 

 -   

 

 -   

 

 3,022 

 

 11,961 

   Reclamation

 -   

 

 -   

 

 -   

 

 -   

 

 -   

 

 -   

 

 -   

 

 -   

   Site administration

 670,940 

 

 98 

 

 17,496 

 

 13,873 

 

 -   

 

 -   

 

 10,637 

 

 713,044 

   Travel

 14,425 

  

 2,328 

  

 9,584 

  

 16,055 

  

 44 

  

 -   

  

 29,114 

  

 71,550 

 

 3,023,125 

 

 110,354 

 

 1,085,559 

 

 185,007 

 

 83 

 

 885 

 

 904,846 

 

 5,309,859 

   Balance, beginning of year

 941,969 

 

 703,080 

 

 546,895 

 

 894,604 

 

 215,308 

 

 390,661 

 

 403,328 

 

 4,095,845 

   Less amounts written off

 -   

  

 -   

  

 -   

  

 -   

 

 -   

  

 -   

  

 (479,634)

  

 (479,634)

   Balance, end of year

 $3,965,094 

 

 $813,434 

  

 $1,632,454 

  

 $1,079,611 

 

 $215,391 

  

 $391,546 

  

 $828,540 

  

 $8,926,070 

Total Mineral Properties

 $5,770,020 

 

 $836,647 

  

 $1,736,286 

  

 $1,216,384 

 

 $755,923 

  

 $698,891 

  

 $1,077,398 

  

 $12,091,549 






PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006




5.

MINERAL PROPERTIES (continued)


(a)

Republic of South Africa


(i)

War Springs and Tweespalk


On June 3, 2002, the Company entered an option agreement whereby it may earn a 100% interest in the 2,396 hectare War Springs property and the 2,177 hectare Tweespalk property both located in the Northern Limb or Platreef area of the Bushveld Complex north of Johannesburg. Acquisition and exploration costs on these properties to February 28, 2006 total $2,969,647 (August 31, 2005 - $2,572,933).

 

The Company may purchase 100% of these mineral rights at any time within three years from the grant of a prospecting permit on each property for US$475 per hectare in year one, or US$570 per hectare in year two, or US$690 per hectare in year three. The Company must also pay prospecting fees to the vendors of US$2.50 per hectare in year one, US$2.75 per hectare in year two and US$3.25 per hectare in year three. Old Order prospecting permits were granted to the Company in August 2003 for the Tweespalk property and February 2004 for the War Springs property. The vendors retain a 1% NSR Royalty on the property, subject to the Company’s right to purchase the NSR at any time for US$1.4 million. A 5% finders’ fee applies to vendor payments.


Under the new Minister and Petroleum Resources Development Act (2002), which became effective in May 2004, Old Order permits must be converted into New Order permits during a transition period.  This process is underway for the War Springs and Tweespalk properties.  The June 3, 2002 option agreement provides for amendments as may be needed to maintain the parties in the same commercial position as they were in under the preceding mineral legislation and such amendments are yet to be completed.


Black Economic Empowerment groups Africa Wide Mineral Prospecting and Exploration (Pty) Limited and Taung Minerals (Pty) Ltd. each have been granted a 15% interest in the War Springs project carried to bankable feasibility.  The Company’s retains a net 70% project interest.


Africa Wide also has a 30% participating interest in the Tweespalk property.  The Company has not recorded a receivable for Africa Wide’s share of costs to date, which at February 28, 2006 are calculated to be $253,945 (August 31, 2005 - $250,994).  The Company expects that Africa Wide will be able to fund their share of costs in the future and amounts recovered from Africa Wide will be treated as a reduction of costs relating to the Tweespalk property.








PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006





5.

MINERAL PROPERTIES (continued)


(a)

Republic of South Africa


(ii)

Western Bushveld Joint Venture


On October 26, 2004 the Company entered into a joint venture with, Anglo American Platinum Corporation Limited and Africa Wide Mineral Prospecting and Exploration (Pty) Limited (the “WBJV”) to pursue platinum exploration and development on combined mineral rights covering 67 square km on the Western Bushveld Complex of South Africa.  The transaction closed effective January 26, 2005. The Company contributed all of its interests in portions of the farms Onderstepoort 98JQ and Elandsfontein 102JQ (see (ii) (1) and (ii) (2) below). Anglo Platinum contributed its interests in portions of the farms Koedoesfontein 94JQ, Elandsfontein 102JQ and Frischgewaagd 96JQ. The Company and Anglo Platinum will each own an initial 37% working interest in the WBJV, while Africa Wide will own an initial 26% working interest. Africa Wide will work with local community groups in order to facilitate their inclusion in the economic benefits of the WBJV in areas such as training, job creation and procurement.


The Company was required to operate and fund an exploration program in the amount of Rand 35 million (at August 31, 2005 approx. US$5.4 million; C$6.44 million) over the next five years in order to earn its 37% interest in WBJV. As of April 2006 this requirement had been completed. After R35 million in expenditures have been funded by PTM, the parties will fund their portion of further expenditures pro-rata based on their working interest in the WBJV.


Once a bankable feasibility study has been completed the respective deemed capital contribution of each party will be credited by adding their contribution of measured, indicated, and inferred PGE ounces from the contributed properties comprising the WBJV, determined in accordance with the South African SAMREC code.  Inferred ounces will be credited at US$0.50 per ounce, indicated ounces will be credited at US$3.20 per ounce and measured ounces will be credited at US$6.20 per ounce. Each party will then have the opportunity to contribute additional capital in order to catch up any resulting shortfall in their contributed capital and thereby maintain their respective working interest in the JV. Should a party not wish to participate, the JV agreement provides a mechanism whereby the parties may elect to become “non-contributory” to the JV and by doing so they would be subject to dilution.


The Company has concluded that it has significant influence over the operations of WBJV and has therefore acquired an investment which will be recorded using the equity method.






PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006






5.

MINERAL PROPERTIES (continued)


(a)

Republic of South Africa


(ii)

Western Bushveld Joint Venture


The initial exchange of the Company’s pre-existing interests in the Elandsfontein and Onderstepoort properties for the interest in WBJV has been recorded at cost as it represents a non-monetary exchange.  The balance paid to date of the Company’s commitment to spend up to R35 million in exploration costs has also been recorded as a cost of the investment and is included under mineral properties.


(1)

Elandsfontein interest


In December 2002 the Company acquired an option to purchase 100% of the surface and mineral rights to 365.64 hectares of the farm Elandsfontein 102 JQ located in the Western Bushveld area. The Company made an initial payment to the Vendors of R 150,000 (approx. C$29,500) and agreed to terms for the purchase of both mineral and surface rights.


The Company exercised its option to purchase the Elandsfontein property by way of written notice on June 26, 2003. A dispute arose with the Vendors as to the purchase price and the matter was referred for Expert Determination as provided for in the option agreement.


In 2005 the Company and the Vendors reached agreement whereby the Company purchased all surface and mineral rights to the property in exchange for 7.0 million Rand. In September 2005 the Company was granted a “New Order” prospecting permit under the new Mineral and Petroleum Resources Development Act (2002) over the Elandsfontein property.










PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



5.

MINERAL PROPERTIES (Continued)


(a)

Republic of South Africa (continued)


(ii)

Western Bushveld JV


 (2)

Onderstepoort interest


During 2003 the Company entered into three option agreements to acquire mineral rights on seven portions comprising approximately 1085 hectares of the farm Onderstepoort 98 JQ located in the Western Bushveld. The Company may earn 100% of the mineral rights over 647 hectares and 50% of the mineral rights over the balance of 438 hectares. To earn its interests the Company must make aggregate prospecting and option payments over time to the vendors of R12.44 million (approximately C$2.24 million) ending April 2008.  Of this amount R834,000 has been paid.  During 2004 the Company was granted old order prospecting permits on five portions of the farm.  In 2005 the Company was granted New Order prospecting permits on the remaining two farm portions. Certain portions covering 569 ha are subject to the vendors right to participate as to a 7.5% working interest, or to convert 1% NSR royalty, which the Company may buy-back for R 5,000,000 (approximately C $900,000).


(b)

Ontario


(i)

Agnew Lake


The Company has earned a 99% interest in certain claims located near Sudbury, Ontario known as the Agnew Lake property subject to a 2% royalty interest payable to the original vendor. The Company optioned the Agnew Lake property to Pacific Northwest Capital Corporation (“PFN”) on June 18, 2000. PFN may acquire up to a 50% interest in the Agnew Lake Property by issuing 50,000 shares to the Company (received), making cash payments to the Company totalling $200,000 (received) and incurring $500,000 in exploration costs to its own account. In the event that PFN does not incur the required $500,000 in exploration expenses they may exercise their option by payment to the Company of any remaining unspent balance in PFN common shares. According to the terms of a 2001 amendment PFN has paid the Company four payments of 75,000 PFN shares towards the exercise of PFN’s option. PFN is the project operator and is responsible for completion of all assessment and filing requirements as long as it remains operator.

 








PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



5.

MINERAL PROPERTIES (Continued)


(b)

Ontario (continued)


(i)

Agnew Lake (continued)


On June 22, 2001, the Company and PFN optioned their property interests to Kaymin Resources Limited (“Kaymin”), a subsidiary of Anglo American Platinum Corporation Limited. Kaymin may acquire a 50% interest in the combined rights and interests of the Company and PFN by making cash payments of $200,000 to each party (received) and incurring exploration expenditures of not less than $6,000,000. Kaymin can earn an additional 10% interest by completing a bankable feasibility study and arranging financing for any development or construction.

 

At August 31, 2004, the Company had directly performed $512,265 worth of exploration work and caused further work of approximately $3,140,805 to be performed through the joint venture arrangement with PFN and Kaymin.  At August 31, 2005 the project was not active and the Company wrote off its remaining investment in the property amounting to $276,852.  In the period ending November 30, 2005 Kaymin advised the Company that it would cease further funding of the project.  Kaymin also notified the Company that they will vest as to a 26.17% interest in the property in accordance with the terms of their option agreement .


(ii)

Lakemount


On November 6, 2003 the Company acquired an option to earn up to a 62% interest in the 3,017 hectare Lakemount property located near Wawa, Ontario. The Company may earn up to a 51% undivided property interest by completing $2.5 million in exploration and development expenditures ($1,090,770 incurred to February 28, 2006) and by making staged payments totalling $150,000 ($75,000 paid) and 150,000 common shares (50,000 issued) by December 31, 2008. The Company may acquire an additional 11% interest in the property by making a payment of $3.3 million to an underlying holder. The property is subject to NSR royalties ranging from 1.5% to 3.0% and a net sales royalty on precious stones of 1.5%, subject to buy-out and buy-down provisions.


(iii)

Lac des Iles River


On May 5, 2000, New Millennium entered into an option agreement to acquire a 50% interest in the Lac des Iles River property in exchange for payments of $38,500 over three years (paid) and the completion of exploration expenditures in the amount of $1,000,000 over five years, $548,399 of which has been incurred to February 28, 2006. The Lac des Iles River Option Agreement was amended January 27, 2005 to allow the Company an additional three years, to May 5, 2008, to meet its exploration commitments in exchange for making annual cash payments of $5,000 to May 5, 2008 ($20,000 total) and undertaking





PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



5.

MINERAL PROPERTIES (Continued)


(b)

Ontario (continued)


(iii)

Lac des Iles River (continued)


a minimum of $50,000 in annual exploration expenditures. The Company can earn an additional 10% interest on completion of a feasibility study within a further three years.


(iv)

Moss Lake


On August 5, 2004 the Company optioned a 100% property interest in the Moss Lake property for optional cash payments of $85,000 over 3 years ($25,000 paid) and optional share payments of 40,000 common shares over 3 years. The property is subject to an underlying 3% NSR Royalty, from which the Company may buy-back 2.0% at a price of $500,000 per one-half percentage point bought back.


(v)

South Legris


In April 2000 the Company acquired an option to earn a 50% interest in 261 mineral claims located near Thunder Bay, Ontario known as the South Legris property in exchange for cash payments of $98,300 (paid) and the expenditure of $1,000,000 ($492,330 incurred) in exploration expenditures within 5 years of the date of the agreement. The Company terminated the option in 2004 and $587,369 in deferred costs related to the property were written off at August 31, 2004. The South Legris Option Agreement was later amended on January 27th, 2005 to allow the Company an additional three years (to April 10, 2008) to meet it’s exploration commitments in exchange for making annual cash payments of $5,000 to April 10, 2008 ($15,000 total) and undertaking a minimum of $50,000 in annual exploration expenditures. The Company can earn an additional 10% interest in the property by completing a feasibility study within 36 months of earning the 50% interest described above.


(vi)

Seagull


On September 24, 2004 the Company acquired an option to earn up to a 70% interest in the Seagull property located in the Nipigon region of Ontario. The Company can earn an initial 50% property interest by completing certain exploration expenditures and cash payments over 5 years. Cumulative exploration expenditures required were $500,000 ($702,234 incurred to November 30, 2005) within 12 months from the date of the option agreement, $1.5 million within 24 months, $3.0 million within 36 months, $5.0 million within 48 months, and a cumulative total of $7.5 million within 60 months from the date of the option agreement. The Company could earn an additional 10% property interest by completing a bankable feasibility study for the property and could then earn a further 10% property interest by providing or arranging





PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



5.

MINERAL PROPERTIES (Continued)


(b)

Ontario (continued)


(vi)

Seagull


production financing. Required cash payments to the vendors were an initial $75,000 within 30 days of the agreement (paid), $75,000 within year one, $125,000 within year two, $125,000 within year three, $150,000 within year four, and $200,000 within year five for an aggregate total of $750,000. The property is subject to underlying NSR Royalties of 2.4% from which the Company may buy-back 1.4% for $2.0 million.  The Company terminated the Seagull option as of February 28, 2006 so that it could focus its efforts and expenditures on the Western Bushveld Joint Venture in South Africa, resulting in a write-off of $785,288.


(vii)

Shelby Lake


On June 28, 2000, New Millennium entered into an option agreement to earn up to 60% interest in the Shelby Lake property, located in the Lac des Iles area. To earn a 50% interest the Company is required to make cash payments of $10,000 (paid), issue 30,303 shares (issued) and complete $500,000 in exploration expenditures over a four-year period. To February 28, 2006 the Company has incurred costs of $565,869. The Company may earn a further 10% interest by expending a further $500,000 over an additional 30-month period. The property is subject to a 2% NSR royalty, of which the Company can purchase one half back for $500,000.



(c)

Write-down of mineral properties


During the period the carrying values the Company’s mineral properties were reviewed, resulting in $793,298 write-off for the period (write off February 28, 2005 - $15,450). This includes the write-off for Seagull of $785,288 as described above.




(d)

Title to mineral properties


Although the Company has taken steps to verify title to mineral properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements and non-compliance with regulatory requirements.






PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



6.

FIXED ASSETS

 

 Feb. 28, 2006
      Accumulated  Net Book 
   Cost  Amortization  Value 
Computer equipment and           
   software  $  249,161  $  123,369  $  125,792 
Leasehold improvements    22,970  10,623    12,347 
Office furniture and           
   equipment     87,210      30,149      57,060 
   $  359,341    $  164,141    $  195,200 
 

Aug. 31, 2005 
      Accumulated  Net Book 
  Cost  Amortization   Value 
Computer equipment and           
   software  $  223,983  $  103,650  $  120,333 
Leasehold improvements  $  22,970  $  7,345  $  15,625 
Office furniture and           
   equipment     75,418      22,268      53,150 
   $  322,371    $  133,263    $  189,108 

 


7.

SHARE CAPITAL


(a)

Authorized


Unlimited common shares without par value


(b)

Issued and outstanding


During the period ended February 28, 2006:


(i)

the Company issued 25,000 common shares in connection with the acquisition of mineral properties at a fair value of $40,000.


(ii)

555,103 share purchase warrants were exercised for proceeds of $749,389 and 60,000 stock options were exercised for proceeds of $44,343.


(iii)

the Company closed non-brokered private placements for 2.2 million units at a price of $1.45 per unit. Each unit consisted of one common share and one half a common share purchase warrant, with each whole warrant exercisable into a common share at a price of $1.75 for a period of 18 months from the date of closing.  A finder’s fee of $45,704 was paid in cash.


(iv)

The Company agreed to, and announced, a private placement for 1,700,000 units at a price of $1.45 per unit. Each unit consisted of one common share and one half a common share purchase warrant, with each whole warrant exercisable into





PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



7.

SHARE CAPITAL (Continued)


(b)

Issued and outstanding (continued)


(iv)

a common share at a price of $1.75 until March 6, 2008. Consideration for this subscription was received before the end of the period and these shares were allotted and included in share capital as at February 28, 2006. This private placement then closed on March 6, 2006.


During the year ended August 31, 2005:


(v)

the Company issued 25,000 common shares in connection with the acquisition of mineral properties at a fair value of $28,000.


(vi)

2,469,949 share purchase warrants were exercised for proceeds of $2,272,462 and 903,000 stock options were exercised for proceeds of $508,850.


(vii)

the Company closed brokered private placements for gross proceeds of $6,259,900 on April 14, 2005. Proceeds of $259,901 were from the sale of 173,267 flow-through shares at $1.50 per share and $6,000,000 was from the sale of 5,000,000 non-flow-through units at $1.20 per unit. Each non-flow-through unit consisted of one common share and one-half of one common share purchase warrant. Each whole warrant is exercisable to purchase an additional common share until October 14, 2006 at a price of $1.50 per share. Agent’s fees amounted to 7.0% of gross proceeds, which totalled $438,193, which was paid in cash. The Agents’ legal and other costs totalling $24,229 were paid by the Company. The Company paid $47,000 to its lawyers for legal costs relating to the private placement, $20,000 for consulting services, and $29,500 as a filing fee. The Agents also received 517,327 compensation options exercisable into common shares of the Company at a price of $1.50 per share until October 14, 2006.


During the year ended August 31, 2004:


(viii)

the Company issued 10,909 common shares in connection with the acquisition of mineral properties at a fair value of $3,600.


(ix)

1,747,032 share purchase warrants were exercised for proceeds of $1,428,407 and 132,000 stock options were exercised for proceeds of $59,200.


(x)

the Company completed a private placement for total proceeds of $2,040,000 through the issuance of 2,400,000 units at a price of $0.85 per unit. Each unit consisted of one common share and one-half of one common share purchase warrant. Each whole warrant is exercisable into one common share of the Company at a price of $1.10 until October 31, 2004.







PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006


 

7.

SHARE CAPITAL (Continued)


(b)

Issued and outstanding (continued)


(xi)

the Company closed brokered private placements for gross proceeds of $2,721,555 on July 14, 2004. Proceeds of $1,267,200 were from the sale of 1,056,000 flow-through shares at $1.20 per share and $1,454,355 was from the sale of 1,385,100 non-flow-through units at $1.05 per unit. Each non-flow-through unit consisted of one common share and one-half of one common share purchase warrant. Each whole warrant is exercisable to purchase an additional common share until January 14, 2006 at a price of $1.35 per share. Agent’s fees amounted to 8.0% of gross proceeds. Of this amount $188,842 was paid in cash and $26,362 was paid by way of 25,107 non-flow-through units of the offering at the issue price of $1.05 per unit. The Agents’ legal and other costs totalling $42,535 were paid by the Company. The Company paid $36,409 in legal costs relating to the private placement. The Agents also received 241,110 compensation options exercisable into common shares of the Company at a price of $1.20 per share until July 14, 2005.


(c)

Incentive stock option agreement


The Company has entered into Incentive Stock Option Agreements (“Agreements”) with directors, officers and employees. Under the terms of the Agreements, the exercise price of each option is set at the fair value of the common shares at the date of grant.


The following tables summarize the Company’s outstanding stock options:


  Weighted
  Average

Number

Exercise
 

of Shares

  Price

Options outstanding at August 31, 2003

 2,267,000 

 

 0.53 

Granted

 590,000 

 

 1.04 

Exercised

 (132,000)

 

 0.45 

Cancelled

 (300,000)

  

 0.60 

Options outstanding at August 31, 2004

 2,425,000 

 

 0.65 

Granted

 2,046,000 

 

 1.02 

   Exercised

 (903,000)

 

 0.56 

Cancelled

 (155,000)

  

 1.05 

Options outstanding at August 31, 2005

 3,413,000 

 

 0.88 

Granted

 45,000 

 

 1.48 

   Exercised

 (60,000)

 

 0.55 

Cancelled

 (83,125)

  

 1.08 

Options outstanding at February 28, 2006

 3,314,875 

  

 $0.89 


 




PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



7.

SHARE CAPITAL (Continued)


(c)

Incentive stock option agreement (continued)

 

      Weighted   
    Number  Average  Number 
    Outstanding at  Remaining  Exercisable at 
  Exercise  February 28,  Contractual  February 28, 
  Price  2006  Life (Years)  2006 
$  0.35  355,000  1.27  355,000 
  0.50  295,000  2.50  295,000 
  0.55  55,000  0.57  55,000 
  0.70  132,000  2.80  132,000 
  0.75  75,000  1.62  75,000 
  1.00  1,725,375  4.22  1,725,375 
  1.05  50,000  4.67  50,000 
  1.10  392,500  3.94  252,500 
  1.15  90,000  4.74  90,000 
  1.18  50,000  3.96  50,000 
  1.44  50,000  3.03  50,000 
  1.45  20,000  4.90  20,000 
  1.50    25,000    4.86    35,000 
      3,314,875        3,184,875 

 



(i)

During the period ended February 28, 2006 the Company granted 45,000 stock options to employees. The Company has recorded $39,944 of compensation expense relating to stock options granted in this period.


The following weighted average assumptions were used in valuing stock options granted during the period:

 

  Feb. 28, 2006 
Risk-free interest rate  3.87 
Expected life of options  3.50 
Annualized volatility  87.43% 
Dividend rate  0.00% 

 



 

 



PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



7.

SHARE CAPITAL (Continued)


(ii)

During the year ended August 31, 2005 the Company granted 2,046,000 stock options to directors, officers, employees and consultants, (30,000 of which were cancelled during the same period). The Company has recorded $1,283,289 of compensation expense relating to stock options granted during the year. The stock-based compensation expense was determined using the Black-Scholes option pricing model and the following weighted average assumptions:


  August 31, 
  2005 
Risk-free interest rate  2.93 
Expected life of options  3.50 
Annualized volatility  94% 
Dividend rate  0.00% 



(iii)

During the year ended August 31, 2004, the Company granted 75,000 stock options to consultants and 515,000 stock options to employees. The Company recorded compensation expense of $92,881 relating to the stock options granted to consultants.  No compensation expense was recorded for those granted to employees.  


(d)

Share purchase warrants

      Average 
  Number of    Exercise 
  Warrants    Price 
Balance at August 31, 2003  3,016,981  $  0.79 
Issued to private placement placees (Note 7 (b) (x) and (xi))  1,892,550    1.19 
Issued to agents on brokered financing (Note 7 (b) (xi))  253,663    1.21 
Exercised and converted to common shares  (1,747,032)      0.82 
Balance at August 31, 2004  3,416,162    1.03 
Issued to private placement placees (Note 7 (b) (vii))  2,500,000    1.50 
Issued to agents on brokered financing (Note 7 (b) (vii))  517,327    1.50 
Expired during the period  (241,110)    1.20 
Exercised and converted to common shares  (2,469,949)       0.92 
Balance at August 31, 2005  3,722,430  $  1.47 
Issued to private placement placees (Note 7 (b) (iii))  1,100,000    1.75 
Allotted pending issue (Note 7 (b) (iv))  850,000    1.75 
Expired during the period  (150,000)    1.35 
Exercised and converted to common shares  (555,103)      1.35 
Balance at February 28, 2006  4,967,327    $  1.54 

 


Of the 4,967,327 common share warrants outstanding at February 28, 2005, 3,017,327 are exercisable at $1.50 per warrant expiring on October 14, 2006; 747,000 are exercisable at $1.75 per warrant expiring on April 13, 2007; 203,000 are exercisable at $1.75 per warrant expiring on April 14, 2007; 150,000 are exercisable at $1.75 per warrant expiring on April 21, 2007; and 850,000 are exercisable at $1.75 per warrant expiring on March 6, 2008;



 



PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



8.

RELATED PARTY TRANSACTIONS


Transactions with related parties are as follows:


(a)

Management, salary and consulting fees of $216,110 (2005 - $126,651, 2004 - $128,832) were incurred with directors during the period. At February 28, 2006, $Nil was included in accounts payable (2004 - $Nil).


(b)

The Company received $66,876 (2005 - $68,128, 2004 - $75,982) during the period from MAG Silver Corp. (“MAG”), a company with common directors and a common officer, under the terms of a 2003 service agreement for administrative services.


(c)

During the period the Company received payments of $75,260 against all outstanding amounts due from SYR for past and current administration services provided to SYR.  The amount received was net of a credit adjustment of $7,800 in recognition of SYR’s relative inactivity in the first three quarters of calendar 2005.  SYR has two directors and one advisor who also serve as directors and officers of the Company.  At February 28, 2006 accounts receivable includes an amount of $8,246 due from SYR.


These transactions are in the normal course of business and are measured at the exchange amount, which is the consideration established and agreed to by the noted parties.


9.

INCOME TAXES


The provision for income taxes reported differs from the amounts computed by applying statutory Canadian federal and provincial tax rates to the loss before tax provision due to the following:

 

    2005    2004 
Statutory tax rates    36%      36% 
Recovery of income taxes computed at statutory rates  $  1,657,420  $  914,651 
Effect of lower tax rates in foreign jurisdictions    (34,701)    (23,136) 
Tax losses not recognized in the period that the         
benefit arose    (829,719)      (613,515) 
Future income tax recovery  $  793,000    $  278,000 

 


The approximate tax effect of the temporary differences that gives rise to the Company’s future income tax assets and liability are as follows:





PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006


 


    2005    2004 
Future income tax assets         
   Operating loss carryforwards  $  2,599,980  $  1,763,054 
   Fixed assets    12,875    24,357 
   Mineral properties    72,993    - 
   Share issuance costs    287,579    194,496 
Valuation allowance on future income tax assets      (2,973,427)      (1,981,907) 
    $  -    $  - 
Future income tax liability         
   Mineral properties    $  -    $  427,000 
     $  -    $  427,000 



The Company has Canadian non-capital loss carryforwards available to offset future taxable income in the amount of approximately $6.0 million, which expire at various dates from 2006 to 2012.


The Company has South African non-capital loss carryforwards available to offset future taxable income in the amount of approximately $842,000, which do not expire, subject to business continuity.







PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



10.

CONTINGENCIES AND COMMITMENTS


The Company’s minimum payments under its office and equipment lease agreements, which it has entered into for the years ending on August 31, as well as its South African subsidiary commitments, are as follows as at February 28, 2006.


2006  $  47,296 
2007    76,575 
2008    9,608 
2009    9,608 
2010    - 
  $  143,087 



11.

SUPPLEMENTARY CASH FLOW INFORMATION


(a)

Net change in non-cash working capital



  Period ended    Year ended    Year ended    Year ended 
    February 28,    August 31,    August 31,    August 31, 
    2006    2005    2004    2003 
Amounts receivable  $  (241,107)  $  (102,923)  $  (164,724)  $  217,633 
Prepaid expenses and other    (11,492)    (36,673)    7,918    33,678 
Accounts payable    174,743      (280,358)      490,347      58,120 
  $  (77,856)    $  (419,954)    $  333,541    $  309,431 

 

(b)

Cash and cash equivalents


Cash and cash equivalents consists of the following:

 

 

Feb. 28, 2006 

 Aug. 31, 2005  Aug. 31, 2004 
Cash  $  3,305,392  $  693,661  $  273,176 
Short-term deposits    450,000    2,056,800    2,150,000 
  $  3,755,392  $  2,750,461  $  2,423,176 


 

 



PLATINUM GROUP METALS LTD.

(An exploration stage company)

Notes to the Consolidated Financial Statements

February 28, 2006



12.

SEGMENTED INFORMATION


The Company operates in one operating segment, that being exploration on mineral properties. Capitalized costs for mineral rights and deferred exploration relate to properties situated as follows:

    February 28,    August 31, 
      2006      2005 
Canada  $  2,944,941  $  3,635,298 
South Africa          12,610,542      8,456,251 
        $  15,555,483    $  12,091,549 

 


13.

SUBSEQUENT EVENTS


(a)

Subsequent to the period ended February 28, 2006, 43,971 common shares were issued pursuant to the exercise of 43,971 warrants at a price of $1.50 per share for aggregate proceeds of $65,957, and  35,000 common shares were issued pursuant to the exercise of 35,000 options at a price of $0.35 - $0.55 per share for aggregate proceeds of $15,250.


(b)

The financing described in Note 7.b.(iv) was closed on March 6, 2006