The Company is exposed to a variety of risks arising from financial instruments. These risks and Management’s objectives, policies and procedures for managing these risks are disclosed as follows.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, deposits, accounts payable and accrued liabilities, due to related parties, and other liabilities. The fair value of accounts payable and accrued liabilities and due to related parties approximates their carrying value due to the short-term nature of their maturity.

The Company’s other liabilities are held at fair value and are a Level 1 financial instrument valued using quoted market prices. All of the Company’s other financial instruments are initially measured at fair value and then held at amortized cost.

The Company’s activities expose them to certain financial risks, including currency risk, credit risk, liquidity risk, interest risk and price risk.

Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign exchange rates. The Company operates in the United States and Canada with some expenses incurred in Canadian dollars. The Company’s exposure is limited to cash of CDN$253,000, accounts receivable of CDN$35,000 and accounts payable of CDN$534,000. Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant, the Company’s net loss would change by approximately $22,000.

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company holds cash and cash equivalents with Canadian Chartered financial institutions which are composed of financial instruments issued by Canadian banks. The Company’s accounts receivable consist of HST receivable from the Federal Government of Canada, amounts due from related parties and receivables due for camp and management services provided to other parties. The Company’s exposure to credit risk is equal to the balance of cash and cash equivalents and accounts receivable as recorded in the financial statements.

Liquidity risk is the risk that the Company will encounter difficulties raising funds to meet its financial obligations as they fall due. The Company is in the exploration stage and does not have cash inflows from operations; therefore, the Company manages liquidity risk through the management of its capital structure and financial leverage as outlined in notes 1 and 9 to the consolidated financial statements.

Contractually obligated undiscounted cash flow requirements as at May 31, 2013 are as follows.

	in thousands of dollars
	Total	< 1 Year	1–2 Years	3–5 Years	Thereafter
	$	$	$	$	$
Accounts payable and accrued liabilities	1,801	1,801	-	-	-
Due to related parties	61	61	-	-	-
Office lease	739	86	368	285	-
	2,601	1,948	368	285	-

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company holds excess cash balances in money market funds which limits the risk of loss due to interest rate changes to $nil.