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CAPITAL STOCK
 6 Months Ended
Jun. 30, 2016
CAPITAL STOCK [Text Block]
8.

CAPITAL STOCK

Authorized capital stock

The Company is authorized to issue an unlimited number of Common Shares without par value, unlimited Preferred Shares issuable in series, and unlimited Series A Preferred Shares. The Series A Preferred shares are non-redeemable, non-callable, non-voting and with no right to dividends. The Preferred Shares issuable in series will have the rights, privileges, restrictions and conditions assigned to the particular series upon the Board of Directors approving their issuance.

Issued capital stock

The significant transactions relating to capital stock issued for the six months ended June 30, 2016 are:

a)

In the six months ended June 30, 2016, The Company issued 200,200 shares under the Company’s “at-the-market” offering (the “ATM”) for proceeds of $0.53 million.
   
b)

On March 14, 2016, the Company completed a public offering of 5,031,250 units at a price of $2.40 per unit for gross proceeds of $12.08 million. Each Unit consists of one common share and one half of one common share purchase warrant, or a total of 5,031,250 Shares and 2,515,625 Warrants. Each warrant is exercisable until March 14, 2019 and entitles the holder thereof to acquire one Share upon exercise at an exercise price of US$3.20 per share. These warrants are accounted for as a derivative liability, as the functional currency of the entity issuing the warrant is Cdn$.

The following weighted average assumptions were used for the Black-Scholes option pricing model to calculate the $2.09 million of fair value for the 2,515,625 warrants issued in connection with the public offering in March 2016.

Risk-free rate 1.15%
Expected life 3.0 years
Expected volatility 61.2%*
Expected dividend yield 0.0%

  * Expected volatility is measured based on the Company’s historical share price volatility over the expected life of the warrants.

c)

On May 27, 2016, the Company issued 1,212,173 shares to acquire the remaining 40% interest of the Roca Honda Joint Venture for share consideration of $2.68 million.
   
d)

On June 16, 2016 the Company issued 4,551,284 shares to acquire Alta Mesa with value of $11.38 million.

Share Purchase Warrants

The Company has share purchase warrants denominated in Canadian dollars and US dollars.

The following table summarizes the Company’s share purchase warrants denominated in Cdn$:

          Exercise Price     Warrants  

Month Issued

   Expiry Date     Cdn$     Outstanding  

June 2012(1)

   June 22, 2017     13.25     351,025  

June 2013(1)

   June 15, 2017     9.50     456,948  

  (1)

The expiration date for these warrants was extended by one year on March 24, 2016.

The following table summarizes the Company’s share purchase warrants denominated in USD. These warrants are accounted for as derivative liabilities as the functional currency of the entity issuing the warrants is Cdn$.

 

         Exercise Price     Warrants     Fair value at  

Month Issued

   Expiry Date     USD$     Outstanding     June 30, 2016  

June 2015

   January 25, 2017     6.28     1,224,000   $ 35  

March 2016

   March 14, 2019     3.20     2,515,625     1,626  

 

                   $ 1,661  

The US dollar based warrants are classified as Level 2 under the fair value hierarchy (Note 15).

The following weighted average assumptions were used for the Black-Scholes option pricing model to calculate the $1.63 million of fair value for the 2,515,625 warrants at June 30, 2016.

Risk-free rate 0.71%
Expected life 2.7 years
Expected volatility 99.6%*
Expected dividend yield 0.0%

The following weighted average assumptions were used for the Black-Scholes option pricing model to calculate the $0.40 million of fair value for the 1,224,000 warrants at June 30, 2016.

Risk-free rate 0.36%
Expected life 0.6 years
Expected volatility 56.0%*
Expected dividend yield 0.0%

 

*

Expected volatility is measured based on the Company’s historical share price volatility over the expected life of the warrants.