condensed interim consolidated financial statements of ... · three months ended march 31, 2016...

Condensed interim consolidated financial statements of

Pembrook Mining Corp.

For the three months ended March 31, 2016 and 2015

NOTICE TO READER These condensed interim consolidated financial statements have been prepared by management. The Company’s external auditors have not reviewed these condensed interim consolidated financial statements.

Pembrook Mining Corp. Condensed Interim Consolidated Statements of Financial Position All amounts in Canadian dollars

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ASSETS March 31,

2016 December 31,

2015 Current Assets Cash and cash equivalents $ 4,094,600 $ 6,109,460 Other receivables 647,807 1,142,293 Prepaid expenses 86,371 74,437 4,828,778 7,326,190 Investments (Note 3) 384,629 409,200 Property and Equipment (Note 4) 104,140 109,687 Pecoy Mineral Property (Note 5) 14,387,767 14,007,386 Mineral Properties (Notes 6 & 15) 19,323,464 20,481,496 Total Assets $ 39,028,778 $ 42,333,959

LIABILITIES Current Liabilities

Trade and other payables $ 340,730 $ 411,744 Total Liabilities 340,730 411,744 EQUITY Share Capital (Note 7) 118,250,988 118,250,988 Reserves 20,380,704 22,536,149 Deficit (99,943,644) (98,864,922) 38,688,048 41,922,215 Total Liabilities and Equity $ 39,028,778 $ 42,333,959 Commitments (Note 9) Subsequent Event (Note 14) APPROVED BY THE BOARD OF DIRECTORS ON MAY 25, 2016: __________________________________, Director __________________________________, Director

- The accompanying notes are an integral part of these condensed interim consolidated financial statements -

Pembrook Mining Corp. Condensed Interim Consolidated Statements of Loss and Comprehensive (Income)/Loss All amounts in Canadian dollars

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Three months ended March 31,

2016 2015

Operating and Administrative Expenses

General exploration

$ 140,941

$ 126,480 General and administration 762,110 1,040,922 Loss before other items $ 903,051 $ 1,167,402 Other Items Write-down of available-for-sale investments (Note 3)

-

116,757

Loss on disposal of available-for-sale investments (Note 3) - 20,815

Loss/(gain) on disposal of property and equipment (29) 62

Loss on contingent shares receivable - 118,871

Foreign exchange loss/(gain) 181,339 (508,195)

Finance (income) (5,639) (20,872) Net Loss $ 1,078,722 $ 894,840 Other Comprehensive Income Items that may be reclassified subsequently to loss/(income): Mark-to-market loss on available-for-sale investments (Note 3) $ 16,026 $ 137,572 Reclassification adjustment for loss on sale of available-for-sale

investments (Note 3)

- (20,815) Reclassification adjustment for impairment losses included in net

loss

- (116,757) 16,026 - Foreign currency translation differences (Note 2(b)) 2,139,419 (2,403,889) Total Comprehensive (Income)/Loss $ 3,234,167 $ (1,509,049) Basic and Diluted Loss Per Share (Note 7(e)) $ 0.01 $ 0.01 Weighted Average Shares Outstanding During the Period – Basic and Diluted

140,064,987 139,350,987


Pembrook Mining Corp. Condensed Interim Consolidated Statements of Changes in Equity All amounts in Canadian dollars

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Reserves

Share Capital Common Shares

Share-based

Payment Reserve

Available- For-Sale Reserve

Foreign Currency

Translation Reserve

Total Reserves

Deficit

Total Number $ $ $ $ $ $ $ Balance – December 31, 2014 137,684,987 112,304,405 15,621,635 - 2,892,238 18,513,873 (88,197,997) 42,620,281

Net loss for the period - - - - - - (894,840) (894,840) Other comprehensive loss - - - - 2,403,889 2,403,889 - 2,403,889

Total comprehensive loss - - - - 2,403,889 2,403,889 (894,840) (1,509,049)

Private placement for cash 2,380,000 5,950,000 - - - - - 5,950,000

Share issuance costs - (3,417) - - - - - (3,417)

Share-based payments - - 70,808 - - 70,808 - 70,808 Balance – March 31, 2015 140,064,987 118,250,988 15,692,443 - 5,296,127 20,988,570 (89,092,837) 50,146,721

Net loss for the period - - - - - - (9,772,085) (9,772,085) Other comprehensive income - - - 64,105 1,230,433 1,294,538 - 1,294,538

Total comprehensive income - - - 64,105 1,230,433 1,294,538 (9,772,085) (8,477,547)

Share-based payments

-

-

253,041

-

-

253,041

-

253,041

Balance – December 31, 2015 140,064,987 118,250,988 15,945,484 64,105 6,526,560 22,536,149 (98,864,922) 41,922,215

Net loss for the period - - - - - - (1,078,722) (1,078,722) Other comprehensive income

-

-

-

(16,026)

(2,139,419)

(2,155,445)

-

(2,155,445)

Total comprehensive income

-

-

-

(16,026)

(2,139,419)

(2,155,445) (1,078,722)

(3,234,167)

Balance – March 31, 2016 140,064,987 118,250,988 15,945,484 48,079 4,387,141 20,380,704 (99,943,644) 38,688,048


Pembrook Mining Corp. Condensed Interim Consolidated Statements of Cash Flow All amounts in Canadian dollars

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Three months ended March 31, 2016 2015 Operating Activities

Net Loss $ (1,078,722) $ (894,840) Items not affecting cash:

Write down of available-for-sale investment - 116,757 Loss on disposal of available-for-sale investment - 20,815 Finance income (5,639) (20,872) Loss/(gain) on disposal of property and equipment (29) 62 Depreciation expense 5,467 6,667 Share-based payments - 70,808 Unrealized foreign exchange loss/(gain) 181,339 (508,195) Loss on contingent shares receivable - 118,871

$ (897,584) $ (1,089,927) Changes in non-cash working capital: Other receivables 494,621 (94,469) Prepaid expenses (11,934) (104,434) Trade and other payables 17,232 (111,291) Net Cash Used in Operating Activities $ (397,665) $ (1,400,121)

Investing Activities

Additions to mineral properties $ (47,816) $ (217,534) Expenditures related to Pecoy mineral property(Note 5) (1,326,721) (1,205,226) Purchase of property and equipment (2,926) (3,809) Proceeds on sale of property and equipment 118 11,254 Proceeds received on sale of available-for-sale investment 8,545

20,815

Finance income 5,504 20,738 Net Cash Used in Investing Activities $ (1,363,296) $ (1,373,762)

Financing Activity

Net proceeds on share issuances - 5,946,583 Net Cash Provided by Financing Activity $ - $ 5,946,583 Effect of exchange rate on cash and cash equivalents (253,899) 632,619 Change in cash and cash equivalents (2,014,860) 3,805,319

Cash and cash equivalents – beginning of period 6,109,460 11,363,129 Cash and Cash Equivalents - end of period $ 4,094,600 $ 15,168,448

Supplemental cash flow information (Note 10)

- The accompanying notes are an integral part of these condensed interim consolidated financial statements –

Pembrook Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements All amounts in Canadian dollars

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1. Nature of Operations and Going Concern Pembrook Mining Corp. (the “Company” or “Pembrook”) is incorporated under the laws of British Columbia. The Company’s head office, principal address and records office are located at 1040 West Georgia Street, Suite 1160, Vancouver, British Columbia, Canada, V6E 4H1. Pembrook is a minerals exploration company engaged in the identification, acquisition, evaluation and advancement of mineral properties in Peru. The Company is exploring for copper, gold, silver, nickel and other metals. At present, none of the Company’s mineral properties are at a commercial development or production stage. The Company’s objective is to discover mineral deposits and either sell, option, joint venture, or otherwise participate in their development. The recoverability of the amounts shown for mineral properties is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to advance the properties, and attaining future profitable production from the properties or proceeds from disposition. The Company’s continuing operations are dependent upon its ability to secure additional equity capital, divest assets or generate cash flow from operations in the future, none of which are assured. The unaudited condensed interim consolidated financial statements have been prepared on a going concern basis and do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that may be necessary should the Company be unable to secure additional equity capital or generate sufficient cash to continue operations in the future.

2. Significant Accounting Policies

(a) Statement of compliance These unaudited condensed interim consolidated financial statements of the Company have been prepared in accordance with IAS 34 – Interim Financial Reporting. Accordingly, certain disclosures included in annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRSs”) have been condensed or omitted and these unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2015.

The accounting policies applied in preparation of these unaudited condensed interim consolidated financial statements are consistent with those applied and disclosed in the Company’s consolidated financial statements for the year ended December 31, 2015.


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2. Significant Accounting Policies (continued)

(a) Statement of Compliance (continued)

The Company’s management makes judgments in its process of applying the Company’s accounting policies in the preparation of its unaudited condensed interim consolidated financial statements. In addition, the preparation of financial data requires that the Company’s management make assumptions and estimates of the effects of uncertain future events on the carrying amounts of the Company’s assets and liabilities at the end of the reporting period and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates as the estimation process is inherently uncertain. Estimates are reviewed on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. Revisions to estimates and the resulting effects on the carrying amounts of the Company’s assets and liabilities are accounted for prospectively. The critical judgments and estimates applied in the preparation of the Company’s unaudited condensed interim consolidated financial statements are consistent with those applied and disclosed in note 2 to the Company’s consolidated financial statements for the year ended December 31, 2015.

(b) Foreign currency translation

The functional currency is the currency of the primary economic environment in which the Company and each of its subsidiaries operates. The functional currency of each subsidiary has been determined through an analysis of the consideration factors specified in IAS 21 “The Effects of Changes in Foreign Exchange Rates”. The Company operates in Peru where its functional currency is the US Dollar. The functional currency of the corporate headquarters is the Canadian dollar.

For the purpose of presenting consolidated financial statements, the assets and liabilities of entities with a functional currency other than Canadian dollars are converted from functional currency to presentation currency at the exchange rate in effect at the reporting date and revenue and expense items are translated at the average exchange rate for the period and exchange differences arising are recognized directly in equity.

(c) Application of New and Revised Accounting Standards

Accounting Standards issued and effective January 1, 2018 The Company is currently evaluating the impact of adopting the following new accounting standards, noted below, on the Company’s condensed interim consolidated financial statements: IFRS 9 Financial Instruments Classification and Measurement (“IFRS 9”) IFRS 9, Financial Instruments: IFRS 9 introduces the new requirements for the classification, measurement and de-recognition of financial assets and financial liabilities. The amendments are effective for annual periods beginning on or after January 1, 2018, with earlier application permitted.


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2. Significant Accounting Policies (continued)

(c) Application of New and Revised Accounting Standards (continued) Accounting Standards issued and effective January 1, 2018 (continued) IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) (Amendment) The amendment to IFRS 9 Financial Instruments which includes the new hedge accounting requirements and some related amendments to IAS 39 Financial Instruments; Recognition and Measurement and IFRS 7 Financial Instruments; Disclosures. IFRS 9 (2013) also replicates the amendments in IAS 39 in respect of novations. The amendments allow for early adoption of the requirement to present fair value changes due to own credit on liabilities designated as at fair value through profit or loss to be presented in other comprehensive income. The amendments are effective for annual periods beginning on or after January 1, 2018, with earlier application permitted.

Accounting Standards issued and effective January 1, 2019

IFRS 16 Leases Under IFRS 16 Leases, the current dual accounting model for leases which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases for lessees, is replaced with a single, on-balance sheet accounting model. The new standard is effective for annual periods beginning on or after January 1, 2019, with early application permitted.

3. Investments

Fair Value as at March 31

2016 December 31,

2015 $ $ Marketable securities: Common shares in Paget Minerals Corp. - 8,545 Common shares in Millrock Resources Inc. 384,629 400,655 384,629 409,200

During the three months ended March 31, 2016, the Company sold all of its 8,645,000 shares of Paget Minerals Corp. (“Paget”) for gross proceeds of $8,545. At December 31, 2015, the Company wrote down its investment in Paget by $77,905 to its fair value of $8,545. At December 31, 2015, the Company’s ownership of 8,645,000 common shares of Paget represented 9.5% of the outstanding common shares of Paget.


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3. Investments (continued)

Under the terms of an agreement with Millrock Resources Inc. (“Millrock”), the Company acquired 7,297,297 shares of Millrock on June 5, 2014 and 872,890 shares of Millrock on June 5, 2015 as part of a transaction to sell its 100% owned subsidiary, Pembrook Mexico Holdings Corp. (“PMHC”) to Millrock. In October 2014, Millrock consolidated its shares on a 10:1 basis resulting in the Company owning 1,602,619 Millrock shares at March 31, 2016 and December 31, 2015. As at March 31, 2016, the investment had a fair value of $384,629 (December 31, 2015 - $400,655), resulting in an unrealized loss of $16,026 recognized in other comprehensive loss. On June 30, 2015, the Company wrote down its investment in Millrock by $205,756 in recognition of a 56% decline in the Millrock share price over a six month period. As there were no further significant or prolonged changes in the fair value of the Company’s investment in Millrock for the remainder of 2015, the Company recognized a net fair value gain of $64,105 in other comprehensive income for the year ended December 31, 2015.

4. Property and Equipment

Leasehold Improvement

$

Field & Computer Equipment

$

Furniture & fixtures

$

Software $

Vehicles $

Equipment Under

Finance lease $

Total $

Cost As at December 31, 2015 166,249 336,484 49,809 98,116 55,023 32,057 737,738 Additions - 2,926 - - - - 2,926 Disposals - (829) - - - - (829) Foreign exchange movement - (16,996) - (5,122) (3,581) - (25,699) As at March 31, 2016 166,249 321,585 49,809 92,994 51,442 32,057 714,136 Accumulated depreciation As at December 31, 2015 (130,773) (297,534) (39,252) (94,163) (34,272) (32,057) (628,051) Charges for the period (887) (2,942) (264) (779) (595) - (5,467) Eliminated on disposition - 740 - - - - 740 Foreign exchange movement - 15,296 - 5,062 2,424 - 22,782 As at March 31, 2016 (131,660) (284,440) (39,516) (89,880) (32,443) (32,057) (609,996) Carrying amount As at March 31, 2016 34,589 37,145 10,293 3,114 18,999 - 104,140

Leasehold Improvement

$

Field & Computer Equipment

$

Furniture & fixtures

$

Software $

Vehicles $

Equipment Under

Finance lease $

Total $

Cost As at December 31, 2014 166,249 269,689 49,809 85,392 76,715 32,057 679,911 Additions - 26,871 - - - - 26,871 Disposals - - - - (26,652) - (26,652) Foreign exchange movement - 39,924 - 12,724 4,960 - 57,608 As at December 31, 2015 166,249 336,484 49,809 98,116 55,023 32,057 737,738 Accumulated depreciation As at December 31, 2014 (126,831) (250,085) (38,079) (78,074) (42,277) (25,667) (561,013) Charges for the year (3,942) (10,174) (1,173) (3,933) (3,233) (6,390) (28,845) Eliminated on disposition - - - - 15,336 - 15,336 Foreign exchange movement - (37,275) - (12,156) (4,098) - (53,529) As at December 31, 2015 (130,773) (297,534) (39,252) (94,163) (34,272) (32,057) (628,051) Carrying amount As at December 31, 2015 35,476 38,950 10,557 3,953 20,751 - 109,687


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4. Property and Equipment (continued)

Depreciation expense included in General and Administration in the Statement of Loss

Three months ended March 31, 2016 2015 $ $ General and administration 2,264 4,064 General exploration 3,203 2,603

5. Pecoy Mineral Property

On August 28, 2013 (the “Execution Date”), the Company signed an agreement to earn an interest in Pecoy Sociedad Minera S.A.C. (“PSM”), a company which owns a 100% interest in the Pecoy mineral property located in Peru. Under the agreement, the Company can earn a 51% interest in PSM by completing cash payments totaling US$4,000,000, completing 30,000 metres of drilling and incurring US$12,000,000 in exploration expenditures as follows:

• Completing a payment of US$250,000 on the Execution Date (paid); • Completing a payment of US$250,000 on the earlier of 10 days from the Effective Date

and 12 months after the Execution Date (where the Effective Date is the day that is the earlier of (i) the granting of all the required drill permits and (ii) a deemed date between 18 and 24 months after the Execution Date, as determined in the agreement and which has been established to be February 16, 2014) (paid);

• Completing a payment of US$500,000 on February 16, 2015 (paid); • Completing 6,000 metres of drilling and incurring exploration expenditures of

US$2,000,000 by February 16, 2015 (completed); • Completing a payment of US$500,000 on February 16, 2016 (paid); • Completing 10,000 metres of drilling and incurring US$4,000,000 of exploration

expenditures by February 16, 2016 (completed); • Completing 14,000 metres of drilling and incurring US$6,000,000 of exploration

expenditures by February 16, 2017; and, • Completing a payment of US$2,500,000 on February 16, 2017.

In addition, the Company can earn an additional 29% interest in PSM, bringing the Company’s total interest in PSM to 80%, at its sole discretion, by completing the following within 84 months of the Effective Date:

• Completing a payment of US$1,500,000 on February 16, 2018; • Either completing a feasibility study or completing a minimum additional expenditure

of US$25,000,000; and, • Completing a payment of US$15,000,000 on February 16, 2021.

Under the terms of the agreement, one of the current shareholders of PSM has the right to purchase up to 50% of the product produced by the Pecoy project at fair market value.

The option to acquire an interest in the Pecoy mineral property is classified as a financial asset at fair value through profit and loss, although it is currently carried at cost as the fair value cannot be reliably measured due to the early stage of the project.


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5. Pecoy Mineral Property (continued)

Capitalized expenditures relating to the Pecoy project are summarized as follows:

Three months ended March 31, 2016

Year ended December 31, 2015

$ $ Balance, beginning of period 14,007,386 4,909,696 Acquisition and mineral licences 739,227 1,349,711 Assays and sample storage 7,280 381,587 Camp costs, supplies and other 125,656 386,378 Drilling 1,620 4,011,282 Geological consulting fees and salaries 360,725 968,828 Geophysical surveys 533 357,614 Transportation 3,434 333,348 Total 15,245,861 12,698,444 Foreign exchange movement (858,094) 1,308,942 Balance, end of period 14,387,767 14,007,386

On October 28, 2015, the Company entered into a land surface access agreement to an area over the Pecoy mineral property. The agreement has a term of 30 years and can be extended for an additional 30 years. The Company has a First Right of Refusal to purchase the land if it was held for sale by the land owners. The two remaining lease payments under the agreement of US$237,500 are disclosed as Commitments in Note 9.

6. Mineral properties

As of March 31, 2016, the Company held a portfolio of properties in Peru. Note 15 of these condensed interim consolidated financial statements summarizes the amounts capitalized to the Company’s mineral properties. In June 2015, the Company signed an agreement with a multinational mining company whereby the multinational mining company has an option to acquire up to a 60% interest in the Hurricane nickel project by making cash payments and incurring exploration expenditures over a five year period commencing on the date that the multinational mining company is able to commence exploration activities at the project. Upon signing this agreement, the Company received a cash payment of US$100,000. There were no write-downs of mineral properties during the three months ended March 31, 2016. During the year ended December 31, 2015, the Company wrote off the Tambo ($483,332) and Joras ($172,207) projects in Peru following an assessment of exploration priorities in advance of annual June land payments. In addition, the land position at the Lidia project was reduced to the area with the highest potential, resulting in a write-off totalling $5,914,932 during the year ended December 31, 2015.


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6. Mineral properties (continued) The Company has entered into various acquisition agreements for properties which have optional cash payments and exploration commitments required by specific dates as follows: Existing Property Option Agreements Lidia On June 24, 2008, Pembrook signed an option agreement for the Lidia property in Peru, with Andes Mineros S.A. Under the terms of the agreement, Pembrook has the option to acquire a 100% interest in the property, subject to a 2% Net Smelter Royalty (“NSR”) by paying US$550,000 over specified anniversary dates, all of which have been paid. The 2% NSR can be reduced to 1% if the Company makes a US$1,000,000 payment to Andes Mineros S.A. In addition, advance royalty payments of US$35,000 must be made annually commencing on June 24, 2013 until the earlier of the passage of ten years or commencement of production.

Additional Lidia Claims On July 12, 2010, the Company signed an option agreement for additional Lidia claims in Peru with Compania Minera Ares S.A.C. The Company has an option to purchase a 100% interest in the property by completing payments of US$23,105 on execution of the agreement (paid). In addition, the property is subject to an escalating NSR as follows:

• 1 % NSR if less than 100,000 ounces proven resources of gold; • 2% NSR if between 100,000 and 249,999 ounces proven reserves of gold; • 3% NSR if between 250,000 and 749,999 ounces proven reserves of gold; • 3.5% NSR if more than 750,000 ounces proven reserves of gold; • 1.5% NSR on copper extractions

Advance NSR payments of US$26,895 on the first anniversary of the signing of the agreement and US$50,000 per year for ten years commencing on the second anniversary, all to be credited against the actual Net Smelter Return payments, if any are incurred.


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7. Share Capital (a) Authorized and Issued

Unlimited number of common shares without par value authorized. On February 4, 2015, the Company closed a private placement for 2,380,000 shares at $2.50 per share for total net proceeds of $5,946,583 after share issuance costs of $3,417.

(b) Stock option plan Under the Company's Stock Option Plan (the "Plan"), a maximum of 10% of the Company's issued and outstanding common shares (or 14,006,499 shares as at March 31, 2016) can be issued. A total of 10,010,250 options to purchase common shares have been granted and are currently outstanding under the Plan. In addition, the number of shares which may be reserved for issuance to any one individual may not exceed 10% of the issued shares on a yearly basis or 2% if the optionee is engaged in investor relations activities or is a consultant.

(c) Stock options

A summary of the Company's outstanding stock options is as follows:

Number of options

Weighted average

exercise price Balance, December 31, 2014 10,021,250 $ 1.64 Forfeitures (11,000) $ 1.79 Balance, March 31, 2015, December 31, 2015 and March 31, 2016

10,010,250 $ 1.64

Number of options exercisable at March 31, 2016 10,010,250 $ 1.64

Exercise price

Number of options

outstanding

Weighted average remaining life of

outstanding options

Number of options

exercisable

Weighted average remaining life of

exercisable options $ (years) (years)

0.50 2,650,000 0.5 2,650,000 0.5 0.75 266,750 1.2 266,750 1.2 1.00 250,000 0.9 250,000 0.9 1.25 600,000 1.9 600,000 1.9 1.75 1,110,500 2.5 1,110,500 2.5 1.80 898,000 3.6 898,000 3.6 2.00 500,000 4.5 500,000 4.5 2.50 3,735,000 6.0 3,735,000 6.0

10,010,250 3.4 10,010,250 3.4


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7. Share Capital (continued)

(c) Stock options (continued)

During the three months ended March 31, 2016 and the year ended December 31, 2015, no stock options were granted.

(d) Share-based payments The fair value of option grants are estimated on the date of grant using the Black- Scholes option pricing model. Changes in the input assumptions used in the Black-Scholes option pricing model can materially affect the fair value estimate. Option pricing models require the input of highly subjective assumptions, including expected price volatility. As Pembrook is a privately-owned company, no observable market exists for its shares or options, and management estimates the price volatility of Pembrook options using the average volatility of five similar mineral exploration company stocks listed on the TSX and the TSX Venture Exchange. The risk-free interest rate assumption is based on yield curves on Canadian government zero-coupon bonds with a remaining term equal to the stock options’ life.

Total share-based payments have been included in the Condensed Interim Consolidated

Statements of Loss as follows:

Three months ended March 31, 2016 2015 $ $ General and administrative - 70,808

(e) Loss per share

In periods where the Company has incurred a loss, exercise or contingent issue of securities has not been included in the calculation of diluted loss per share as increasing the number of shares outstanding would be anti-dilutive.


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8. Related Party Transactions Condensed Interim Consolidated Statements of Financial Position The following amounts were due to companies that have directors in common with the Company:

March 31,

2016 December 31,

2015 $ $ Included in trade and other payables 12,972 20,804

Condensed Interim Consolidated Statements of Loss and Comprehensive (Income)/Loss Transactions with related parties in the normal course of operations have been measured at the fair value, which is the consideration agreed to by the parties.

Three months ended March 31,

Transaction Nature of Relationship 2016 2015 $ $ Expenses included in general and administration on the Condensed Interim Consolidated Statements of (income)/Loss

Management and consultants Director and management in common

102,650 220,437

Expenses included in general exploration on the Condensed Interim Consolidated Statements of (Income)/Loss

Management and consultants Director and management in common

40,000 60,000

Expenses included in Pecoy Mineral Property on Condensed Interim Consolidated Statements of Financial Position

Vehicle Rental Relative of an Officer 7,415 2,231 Expenses included in Mineral Properties on Condensed Interim Consolidated Statements of Financial Position

Vehicle Rental Relative of an Officer - 2,231

Compensation of Key Management Personnel

Three months ended March 31, 2016 2015 $ $ Short-term employee benefits 305,340 526,659 Share-based payments - 49,024

In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company.

Employee benefit expenses included in the Condensed Interim Consolidated Statements of

(Income)/Loss

Three months ended March 31, 2016 2015 $ $ General and administrative 400,488 452,534 General exploration 47,536 14,337


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9. Commitments The following table is a summary of the commitments of the Company at March 31, 2016:

Office and Warehouse

Management

Services

Pecoy

Surface Rights

Total

$ $ $ $ Within one year 135,014 195,048 - 330,062 One to two years 44,973 - - 44,973 Two to three years - - - - Three to five years - - 307,954 307,954 Over five years - - 307,954 307,954 179,987 195,048 615,908 990,943

The table does not include cash payments or exploration expenditures required to maintain property option agreements in good standing with vendors, as those payments and expenditures are conditional on the Company electing to continue with the individual option agreements. If the Company chooses to terminate an option agreement, no further payments or exploration expenditures are required and related capitalized costs are written off.

10. Supplemental Cash Flow Information

As at March 31, 2016 2015 $ $ Composition of cash and cash equivalents:

Cash 4,045,150 15,118,998 Guaranteed investment certificates 49,450 49,450 4,094,600 15,168,448

11. Financial Instruments

The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value as described as follows: Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs other than quoted prices that are observable for the assets or liability either

directly or indirectly; and Level 3 – Inputs that are not based on observable market data. Fair values are determined directly by reference to published price quotation in an active market, when available. Investments in equity instruments that do not have an active quoted market price are measured at cost.


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11. Financial Instruments (continued) The following table summarizes the Company’s financial instruments:

March 31, 2016 December 31, 2015 Classifications

Carrying amount

Fair value

Carrying amount

Fair value

$ $ $ $ Financial Assets Loans and Receivables Cash and cash equivalents 4,094,600 4,094,600 6,109,460 6,109,460 n/a Other receivables 647,807 647,807 1,142,293 1,142,293 n/a Available-for-sale Investments 384,629 384,629 409,200 409,200 Level 1 5,127,036 5,127,036 7,660,953 7,660,953 Financial Liabilities Other financial liabilities Trade and other payables 340,730 340,730 411,744 411,744 n/a 340,730 340,730 411,744 411,744

The Company’s policy for determining when a transfer occurs between levels in the fair value hierarchy is to assess the impact at the date of the event or the change in circumstances that could result in a transfer. There were no transfers between levels during the three months ended March 31, 2016 or the year ended December 31, 2015. The fair values of the Company’s cash and cash equivalents, other receivables and trade and other payables approximate their carrying values due to their short term nature. The Company’s financial instruments are exposed to certain financial risks, including credit risk, liquidity risk and market risk with respect to currency risk and interest risk. a) Currency risk

The Company is exposed to financial risk related to the fluctuation of foreign exchange rates. The Company operates in Peru where its functional currency is the US Dollar. The functional currency of the corporate headquarters is the Canadian dollar.

As many expenses in Peru are incurred in US Dollars with smaller exposure to Peruvian soles, a significant change in the currency exchange rates between the Canadian Dollar and these currencies could have a material effect on the Company’s financial performance, financial position or cash flows. The Company has not hedged its exposure to currency fluctuations. The Company does, from time to time, convert Canadian Dollars to US Dollars in anticipation of upcoming cash needs in Peru.


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11. Financial Instruments (continued)

a) Currency risk (continued) As of March 31, 2016, the Company is exposed to currency risk through the following foreign currency denominated assets and liabilities:

Amounts in Canadian dollar equivalents Canadian

Dollars

Cash and cash equivalents 2,531,629 Trade and other receivables 639,171 Trade and other payables (218,270)

Assuming that all other variables remain constant, a 1% depreciation or appreciation of the Canadian Dollar against US Dollar would result in an increase/decrease in the total value of the financial instruments of approximately of $29,525.

b) Credit risk

Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company’s maximum exposure to credit risk, defined as the sum of its cash and cash equivalents, other receivables and investments, is $5,127,036. As at March 31, 2016, the Company had $4,094,600 in cash. The Company’s cash is invested in highly liquid short-term interest-bearing investments and in savings accounts with major Canadian financial institutions, which are rated among the strongest financial institutions in the world.

c) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages its liquidity risk through a planning, budgeting and cash forecasting process through which future cash needs are planned and anticipated. The Company’s goal is to ensure that cash balances are sufficient to cover in excess of one year of expenditures. The Company has funded all of its activities through private placements, including $5,950,000 raised in 2015. Cash and cash equivalents and working capital total $4,094,600 and $4,488,048 respectively at March 31, 2016 (December 31, 2015 - $6,109,460 and $6,914,446).


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11. Financial Instruments (continued) c) Liquidity risk (continued)

In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. The following table summarizes the Company’s significant liabilities and corresponding maturities.

At March 31, 2016 Total < 1 year 1-3 years 3-5 years > 5 years $ $ $ $ $ Trade and other payables 340,730 340,730 - - - Commitments 990,943 330,062 44,973 307,954 307,954

At December 31, 2015 Total < 1 year 1-3 years 3-5 years > 5 years $ $ $ $ $ Trade and other payables 411,744 411,744 - - - Commitments 1,919,678 537,874 64,248 329,689 329,689

d) Interest rate risk

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 risk that the Company will realize a loss due to fluctuations in interest rates is mitigated due to surplus funds being held as cash or short-term interest bearing deposits. Assuming that all other variables remain constant, a 1% increase or decrease in interest rates would result in an increase/decrease in the annual interest income of the Company of approximately $32,000.

12. Management of Capital

The capital structure of the Company consists of equity attributable to common shareholders, comprising issued capital, share-based payments reserve, available-for-sale reserve, deficit and foreign currency translation reserve. The Company’s objectives are to pursue the advancement of its mineral properties. In order to do so, it endeavours to safeguard its ability to continue as a going concern, while maintaining a flexible capital structure. As the Company has no cash inflow from operations, the Company may attempt to issue new shares, pursue option agreements and/or joint ventures on properties, or sell assets in order to raise funds in the future. In order to facilitate the management of its capital requirements, the Company prepares annual expenditure budgets that are updated as necessary depending on various factors, including capital deployment, results from the exploration of its properties and general industry conditions. The Company’s current investment practice is to invest its cash surplus in savings accounts with major Canadian financial institutions and in highly liquid short-term interest-bearing investments, generally with maturities of 90 days or less from the original date of acquisition, selected with regards to the expected timing of expenditures from continuing operations. The Company expects its current capital resources will be sufficient to carry its exploration plans and operations beyond its current fiscal year.


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13. Segmented Information The Company’s operations involve the acquisition, exploration, and advancement of mineral resource properties. The Company’s reportable operating segments are as follows:

Assets by Geographical Segment March 31, 2016 Canada Peru British Virgin

Islands Total

$ $ $ $ Property and equipment 62,705 41,435 - 104,140 Mineral properties - 19,323,464 - 19,323,464 Pecoy mineral property - 14,387,767 - 14,387,767 Total assets 4,110,538 34,918,240 - 39,028,778 Total liabilities 130,763 208,717 1,250 340,730 December 31, 2015 Canada Peru British Virgin

Islands Total

$ $ $ $ Property and equipment 62,044 47,643 - 109,687 Mineral properties - 20,481,496 - 20,481,496 Pecoy mineral property - 14,007,386 - 14,007,386 Total assets 6,544,535 35,789,424 - 42,333,959 Total liabilities 111,839 298,690 1,215 411,744

Operating Loss by Geographical Segment Canada Peru British Virgin

Islands Total

$ $ $ $ Three months ended March 31, 2016 Finance (income) (5,639) - - (5,639) Depreciation 2,264 3,203 - 5,467 Net loss 685,414 382,333 10,975 1,078,722 Three months ended March 31, 2015 Finance (income) (20,872) - - (20,872) Depreciation 4,064 2,603 - 6,667 Loss on disposal of available-for-sale

investment

116,757

-

-

116,757 Write-down of available-for-sale investment

20,815

-

-

20,815

Loss on shares receivable 118,871 - - 118,871 Net loss 546,746 337,301 10,793 894,840

14. Subsequent Event

On April 13, 2016, the Company closed a private placement for 500,000 shares at USD $1.50 per share for total gross proceeds of USD$750,000.

Pembrook Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements March 31, 2016

Note 15 - Mineral properties

Huiniccasa Hurricane Lidia Acero Tororume Other Total Peru

$ $ $ $ $ $ $Balance, December 31, 2015 10,064,657 2,997,649 1,759,512 916,092 4,384,326 359,260 20,481,496 Acquisition and mineral licenses - - - - - - - Assays and sample storage - - - - - - - Camp costs, supplies and other 9,714 - 1,117 - 10,387 - 21,218 Drilling - - - - - - - Geological consulting fees and salaries 521 - 1,214 - 24,752 - 26,487 Geophysical surveys - - - - - - - Transportation - - - - 111 - 111 Total 10,074,892 2,997,649 1,761,843 916,092 4,419,576 359,260 20,529,312 Foreign exchange movement (595,147) (177,849) (103,936) (54,355) (253,242) (21,319) (1,205,848) Balance, March 31, 2016 9,479,745 2,819,800 1,657,907 861,737 4,166,334 337,941 19,323,464

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Peru

Pembrook Mining Corp. Notes to the Condensed Interim Consolidated Financial StatementsMarch 31, 2016

Note 15 - Mineral properties (continued)

Huiniccasa Hurricane Tambo Lidia Acero Tororume Other Total Peru $ $ $ $ $ $ $ $

Balance, December 31, 2014 8,641,858 2,574,527 533,327 7,903,878 797,954 3,396,200 495,632 24,343,376 Acquisition and mineral licenses 34,626 156,788 - 147,001 - 173,129 6,220 517,764 Assays and sample storage - - - - - 237 - 237 Camp costs, supplies and other 49,807 689 932 7,281 - 58,583 622 117,914 Drilling - - - - - - - - Geological consulting fees and salaries 26,122 - 610 5,021 - 141,417 319 173,489 Geophysical surveys - - - - - - - - Transportation 2,246 - - 56 - 8,510 - 10,812 Total 8,754,659 2,732,004 534,869 8,063,237 797,954 3,778,076 502,793 25,163,592 Write-offs - - (483,332) (5,914,932) - - (172,207) (6,570,471) Recovery of mineral property cost - (124,462) - - - - - (124,462) Foreign exchange movement 1,309,998 390,107 (51,537) (388,793) 118,138 606,250 28,674 2,012,837 Balance, December 31, 2015 10,064,657 2,997,649 - 1,759,512 916,092 4,384,326 359,260 20,481,496

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Peru

condensed interim consolidated financial statements of ... · three months ended march 31, 2016...

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