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2001 Annual Report Management Discussion and Analysis Financial Analysis This Management Discussion and Analysis (MD&A) for the year ended December 31, 2001 should be read in conjunction with the audited financial statements for the twelve-month period ended December 30, 2000. The MD&A is an assessment of the financial affairs of the Company for the most recent fiscal period. All figures are in $US. Since its incorporation the Company has endeavored to secure valuable mineral properties that in due course could be explored, developed and brought into production to provide the Company with positive cash flow. To that end, the Company has expended its funds exploring and developing mineral properties each year since incorporation. As a result, the Company has incurred losses during each of its fiscal years since incorporation. Losses are typical of development-stage exploration and mining companies and are expected to continue until positive cash flow is achieved. The Company knows of no trends, demands, commitments, events or uncertainties outside of the normal course of business that may result in the Company’s liquidity either materially increasing or decreasing at the present time or in the foreseeable future. Material increases or decreases in the Company’s liquidity are substantially determined by the success or failure of the Company’s exploration programs and overall market conditions for smaller resource companies. The Company is not aware of any seasonality in the business that have a material effect upon its financial condition, results of operations or cash flows other than those normally encountered by public reporting smaller resource companies. The Company is not aware of any changes in it’s the results of its operations that are other than those normally encountered in its ongoing business. Liquidity and Capital Resources The Company had positive working capital of $366,000 at December 31, 2001 as compared to ($42,000) at December 31, 2000. Current assets rose 48% to $474,000 and current liabilities dropped 70% to $108,000 during the fiscal year 2001 as the Company continued to pay down its current accounts. The Company’s principal sources of funds continue to be the annual cash payments from our partner on the Bellavista project in Costa Rica and the raising of capital from time to time by issuing securities. Results of Operations The Company experienced a loss of $3,660,000 ($0.09 per share) for the 13 month period ending December 31, 2001 as compared to a loss of $771,000 (0.02 per share) for the 12 month period ended December 31, 2000. The Company incurred cash expenditures totalling $280,000 on general, administrative, and other costs in the fiscal year 2001 as compared to $563,000 in the fiscal year 2000. The use of capital during the period was mainly directed toward company operating expenses rather than asset acquisitions or development programs. Management elected to take a writedown of $3,187,000 on the New Polaris
property to reflect the impairment of this project and value due to the
lack of recent development activity, the depressed gold price and capital
markets for gold shares, and the reduced values of comparable projects
in the junior resource sector. The Company also incurred a $258,000 loss
on the disposition of certain capital assets, principally in Suriname,
where there was a significant reduction in the size of Canarc’s
offices, equipment and furniture.
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