Mineral Properties and Exploration Expenses

6 Months Ended

Jun. 30, 2011

Mineral Properties and Exploration Expenses [Abstract]

Mineral Properties and Exploration Expenses

4.	Mineral Properties and Exploration Expenses

The Company, through its wholly owned subsidiary Dostyk LLP (sold in 2010), held the Maykubinsk exploration and mining license located in the Pavlodar Oblast Region of Kazakhstan and through its wholly subsidiary, Exploraciones Cigma S.A. de C.V. holds a 100% interest in a mineral concession located in the State of Guerrero, Mexico.

Dostyk LLP - Maykubensk area in the Pavodar Oblast of the Republic of Kazakhstan

In January 2007, the Company entered in an agreement with Eureka Mining PLC, a company registered in the United Kingdom, to acquire an ownership interest in the Dostyk Limited Liability Partnership, (the "Partnership" or "Dostyk"). The Partnership holds the exploration rights to explore 14,000 square kilometers in the Maykubensk area in the Pavodar Oblast of the Republic of Kazakhstan for precious and base metals.

Under the terms of the agreement with Eureka Mining PLC, the Company acquired a 51% interest in the Partnership by paying $300,000 (paid January 25, 2007) into the capital of the Partnership. The acquisition was accounted for using purchase accounting. As a result of the purchase, the Company acquired control of Dostyk and consolidated the financial results of Dostyk, including consideration of a non-controlling interest. In June 2007, the Company increased its ownership in the Partnership from 51% to 71% by contributing a further $700,000 (paid June 13, 2007) to the Partnership's capital. On September 14, 2007, the Company increased its ownership interest in the Partnership from 71% to 90% by contributing a further $1,000,000 to the Partnership's capital. In February 2008 the Company increased its ownership in the Partnership from 90% to 100% by paying $400,000 (paid February 13, 2008) to the owners of the Partnership.

The Company's results of operations include Dostyk's results of operations since the date of the original acquisition. Pro forma results for the pre-consolidation period are not presented as they are not materially different from the Company's historical consolidated financial statements.

As of December 31, 2007, the Company held a 90% interest in Dostyk. The aggregate cost of the acquisition through December 31, 2007 was $2,000,000. The following represents a summary of the assets acquired and the liabilities assumed during the year. Assets and liabilities at the dates of acquisition have been translated from Dostyk's functional currency, the Kazakhstan Tenge ("Tenge"). The average effective exchange rate used was US$0.008462 to 1 Tenge.

Cash	$	1,040,115
Prepaids and other assets		39,540
Mineral properties		2,676,096
Equipment		119,341
Accounts payable and accrued expenses		(46,806	)
Long-term debt		(1,168,818	)
Minority interest		(659,468	)
Purchase price paid in 2007	$	2,000,000

During the six month period ended June 30, 2008, the Company acquired an additional 10% interest in Dostyk for a purchase price of $400,000. At that date, the balance of non-controlling interest was in excess of the purchase price by $166,499. This amount was credited against the capitalized balance in mineral properties. As of that date, the Company owned 100% of Dostyk.

The 2008 acquisition of the remaining 10% interest in Dostyk was accounted for using the purchase method. The aggregate allocation of purchase price to mineral properties was $2,509,597.

During December 2009, the Company agreed to sell its ownership interest in its Kazakhstan subsidiary to a third party for $1,500,000. The only significant asset owned by the subsidiary is the mineral exploration license described in these financial statements. The agreement for the sale of the subsidiary for less than the $2,509,597 carrying value of the subsidiaries' mineral property was an indication that the value of the mineral property has been impaired and capitalized costs of $1,009,597 were written off in 2009. The sale was concluded in 2010 and the purchase price of $1,500,000 was received in 2010.

Mexico

On March 9, 2010, the Company signed a property purchase agreement with Alphamin Resources Corp. ("Alphamin") regarding the sale and transfer by Alphamin of a 100% interest in the Aurora II (title No. 235480) mining concession located in the State of Guerrero, Mexico, to the Company, in consideration for $150,000 and 1,000,000 common shares of Cigma. Alphamin will retain a 1.5% Net Smelter Returns Royalty on production from the Property. On June 11, 2010 the Company's wholly owned Mexican subsidiary, Exploraciones Cigma, S.A. de C.V., filed the Assignment Agreement for the Aurora II mining concession between Alphamin's wholly -owned Mexican subsidiary, Exploraciones La Plata, S.A. de C.V. and Exploraciones Cigma, S.A. de C.V. with the Mexican Public Registry of Mining.

CIGMA METALS CORP 10-Q