September 24, 2009 |
United States Securities and Exchange Commission
Division of Corporate Finance
100 F Street, N.E.
Washington, DC 20549-0404
Attn: Russell Mancuso, Legal Branch Chief
Re: Searchlight Minerals Corp.
Registration Statement on Form S-1/A
(File No. 333-132929)
Dear Mr. Mancuso:
On behalf of Searchlight Minerals Corp. (the “Company”), we are writing to respond to the comments set forth in the comment letter of the staff of the Securities and Exchange Commission (the “Commission”), dated September 11, 2009 (the “Comment Letter”) relating to the above-referenced Registration Statement on Form S-1 (File No. 333-132929) which was amended on September 24, 2009. The Company also has responded to the Comment Letter by the filing of the Pre-Effective Amendment No. 10 to the Registration Statement on Form S-1/A (the “Amended Registration Statement”) with the Commission. The Amended Registration Statement has been filed electronically pursuant to EDGAR, and we will provide you with an additional copy, marked to show all changes.
The following responses correspond to the numbered paragraphs in your Comment Letter. The responses and undertakings contained in this letter are the positions of the Company. For your convenience, we have set forth each comment in bold typeface and included the Company’s response below the relevant comment:
United States Securities and Exchange Commission
Russell Mancuso, Legal Branch Chief
September 24, 2009
Page 2
Actual capital costs, operating costs, production and economic returns, page 7
1. | We note your statement that you are an exploration stage company and are still in the process of exploring and developing your mineral projects. We re-issue comment 2 from our comment letter dated May 24, 2006 in regards to your SB-2 filing, as amended April 26, 2006. As commented previously, the terms development and production have very specific meanings within Industry Guide 7 (see www.sec.gov/about/forms/industryguides.pdf). These terms reference the development stage when companies are engaged in preparing proven and probable reserves for production, and the production stage when companies are engaged in commercial-scale, profit-oriented extraction of minerals. Since you do not disclose any proven and probable reserves as defined by Guide 7, in future filings please remove the terms develop, development or production throughout your document, and replace this terminology, as needed, with the terms such as exploration, construction, or metallurgical testing. |
In response to your comments, the Company has revised the disclosure at pages 7-8 of the Registration Statement and throughout the Registration Statement to remove the terms “develop, development and production” throughout the document, and replace this terminology, as needed, with the terms such as “exploration, construction, or testing,” as they relate to the Company’s current operations. However, the Company has retained the use of the terms “production” or “develop” in the Registration Statement in connection with references to: |
· | the name of the Company’s proposed “production module” and “production facility,” |
· | certain agreements with third parties, which include transaction terms based on future “production” or “development” activities, |
· | risks or other consequences related to a future time when the Company may reach a “production” stage, if at all, |
· | general disclosures related to regulatory issues, |
· | the name of a specific “development agreement” with the Town of Clarkdale related to the construction of a road, and |
· | the concept of “development” costs as they generally concern critical accounting policies. |
United States Securities and Exchange Commission
Russell Mancuso, Legal Branch Chief
September 24, 2009
Page 3
Price Range of Common Stock, page 30
2. | We note your response to prior comment 1. If the number of record holders of your common stock exceeds the number that would permit you to terminate Exchange Act registration of your common stock, please revise your disclosure that implies the contrary. |
In response to your comments, the Company has revised the disclosure at page 31 of the Registration Statement to reflect that the number of holders of record of shares of common stock (including the number of persons or entities holding stock in nominee or street name through various brokerage firms) exceeds the number of holders which would permit the Company to terminate the registration of its common stock under Section 12(g) of the Exchange Act. |
Clarkdale Slag Project, page 62
3. | We note your statement on page 63 that the crushing and grinding circuit effectively liberates gold, silver, copper, and zinc from the slag material and your response to your comment 3 that results thus far are consistent with management’s expectations. We also note your statement in your Form 8-K dated August 21, 2009 that you recovered 400 pounds of copper from over 200 tons of processed slag. Please tell us how these results are consistent with the data on pages 70 and 71. Also, with a view toward clarified disclosure, please tell us whether your operations to date have otherwise extracted minerals at the rates mentioned in the tables on pages 70 and 71. |
In response to your comments, the Company’s press release did not state that the Company had recovered 400 pounds of copper from 200 tons of processed slag, but rather from a portion of the 200 tons of processed slag material. The press release provided, in pertinent part, that: |
Concurrent with work on the Crushing/Grinding circuit, the Company has made significant progress on leaching and extraction. Technical personnel have been testing the vibratory milled product in limited volumes, and loading the pregnant solution on ion exchange (IX) resins, producing dore (gold, silver) metal. These leaching and extraction activities have been conducted in the plant’s laboratory and in small pilot circuits that are representative of the fullscale leaching and ion-exchange resin equipment that has been installed and awaits the transition to continuous plant operations. Work has also been completed on the base metal (copper and zinc) extraction circuits, with over 400 pounds of copper having been recovered to date.
United States Securities and Exchange Commission
Russell Mancuso, Legal Branch Chief
September 24, 2009
Page 4
As noted in the press release, the Company has processed and tested over 200 tons of slag material through the Company’s plant since early July 2009. The processing of the 200 tons of slag material included crushing, grinding and vat leaching. The pregnant solution from the leaching was stored in tote-tanks. However, only approximately one-third of this leach solution was run through the Company’s ion-exchange columns in order to determine whether the process was functioning effectively, and was conducted more from a qualitative perspective, than a quantitative perspective. The copper was selectively loaded on the resins, which separates the copper from the other metals in the leach solution. The copper on the loaded resins was then dissolved from the resins and purified in the electrowinning circuit where purified copper metal was made. To clarify, the 400 pounds of copper was recovered from approximately one-third of the leach solution, and did not reflect the aggregate amount of copper recovered from the entire 200 tons of processed slag material. However, the Company analyzed samples of the leach solution both in the Company’s laboratory as well as with an independent assay laboratory. The Company has conducted additional testing on other portions of the remaining leach solution, and the balance of the leach solution remains at the Clarkdale site. |
The data in the tables on pages 71-72 of the Registration Statement are from assays, which are an analytical method performed by Mountain States on small samples using the fusion assay method, followed by atomic absorption. The Company’s extractions were obtained from the actual production leach at the Company’s plant. An assay is intended to quantify the amount of the specified metal contained in the material/rock. In testing or production, one generally does not achieve 100% extraction, and therefore, an 80% extraction of the specified metal is consistent with management's expectations. The issues related to recovery rates are set forth in the risk factors at pages 7-8 of the Registration Statement. |
The laboratory analysis produced results which reflected that the tested leach solution contained a level of copper extraction with a concentration percentage (0.3%) consistent with the copper content data (0.35-0.37%) obtained by Mountain States (i.e. 0.3% is approximately 80% of the 0.35-0.37% content data), and as reflected in the tables on pages 71-72 of the Registration Statement. Therefore, these results were consistent with the results obtained with the assay testing conducted by Mountain States. |
United States Securities and Exchange Commission
Russell Mancuso, Legal Branch Chief
September 24, 2009
Page 5
Background of Metallurgical Testing at the Searchlight Gold Project, page 80
4. | We note your description of the leach and autoclave test work, which has been performed on samples from your placer claims in Nevada. Generally, contained precious metals from a placer deposit have been separated from its host rock by natural processes and may be recovered by gravimetric processes. In future filings, please describe any gravity separation testing you have performed on your placer claims in addition to the leach testing and provide a mineralogical or metallurgical explanation for how the leach testing may provide better process recoveries. |
In response to your comments, the Company has revised the disclosure at pages 82-83 of the Registration Statement in the section entitled “Background of Metallurgical Testing at the Searchlight Gold Project,” in accordance with your comments. |
Compliance with Section 16 of the Securities Exchange Act of 1934, page 96
5. | Please expand your response to prior comment 5 to explain clearly how decisions are made with regard to the Searchlight Minerals Corp. shares held by Nanominerals such that the officers of Searchlight, who apparently are also owners of Nanominerals and relatives of the sole officer and director of Nanominerals, do not in substance have or share investment control over those shares. Also clarify how Nanominerals is controlled without the group efforts of Dr. Ager and his relatives who are Searchlight officers since it appears that Dr. Ager does not own sufficient Nanominerals shares to control Nanominerals by himself. Include in your revised response a clear analysis of the ability of your officers who are owners of Nanominerals to cause, prevent or influence transactions by Nanominerals. In this regard, we note your statement on page 15 that Nanominerals is an affiliate of Carl S. Ager and Ian R. McNeil. |
In response to your comments, and as discussed with the Staff, the Company understands that Carl Ager and Ian McNeil, in connection with their resignations as officers and directors of Nanominerals in June 2007, had orally agreed to grant full management and operational power and authority of Nanominerals to Dr. Charles Ager, who succeeded them as the sole director and officer of Nanominerals. This oral agreement included a delegation to Dr. Ager, in their capacities as shareholders of Nanominerals, of their voting and investment powers over the 16,000,000 shares of Searchlight common stock owned by Nanominerals. To memorialize this arrangement, Dr. Ager, Carl Ager and Ian McNeil entered into a written Shareholders Agreement, dated September 24, 2009, which grants an irrevocable proxy to Dr. Ager to vote the respective shares of Nanominerals of Carl Ager and Ian McNeil during the time that Mr. Ager or Mr. McNeil, as the case may be, serves as one of the Company’s directors or executive officers. The Company has attached a copy of the Shareholders Agreement. |
United States Securities and Exchange Commission
Russell Mancuso, Legal Branch Chief
September 24, 2009
Page 6
Please note that, in the event that the proxy terminates because either Mr. Ager or Mr. McNeil ceases to serve as a director or officer of the Company, the proxy terminates 61 days after such event. Therefore, the event within their control does not permit them to assume voting powers over the Nanominerals shares until a period in excess of 60 days following such event. Based on this arrangement, Dr. Ager would have voting control over a majority of the issued and outstanding shares of Nanominerals. Dr. Ager has been (since June 2007) and remains as the sole director and officer of Nanominerals. These arrangements are consistent with the Company’s disclosure that Dr. Ager currently is the sole officer and director of Nanominerals, controls its day to day operations, and has sole voting and investment powers over the 16,000,000 shares owned by Nanominerals. |
The Company has used the term “affiliate,” with respect to Messrs. Ager and McNeil and their relation with Nanominerals, in a broad sense to highlight the disclosure that they each have a 17.5% ownership interest in Nanominerals, which reflects the economic interest in Nanominerals held by Messrs. Ager and McNeil. The Company has attempted to disclose in detail the specific arrangements and relationships which Messrs. Ager and McNeil have with Nanominerals and the extent of their management, operational and voting relationships with Nanominerals, including the voting and investment powers over the Searchlight shares owned by Nanominerals. |
Based on these agreements, Messrs. Ager and McNeil fall within the safe harbor of Rule 16a-1(a)(2)(iii), with respect to portfolio securities held by a corporation, because: (i) they are not controlling shareholders of the entity, and (ii) do not have or share investment control over the entity's portfolio. |
6. | In this regard, we note the revisions that you made to footnotes 2 and 3 on page 116. As revised, your disclosure is unclear; you say that the stockholder “does not have any voting or dispositive powers” over the shares while you also state that the stockholder “may be deemed to be a beneficial owner” of the shares for the purposes of Rule 13d-3, a rule that defines beneficial ownership by reference to voting and dispositive powers. Also, your revisions appear to be contradictory to your response 54 in your letter to us dated February 12, 2009. Please clarify, and tell us what has changed since February 12, 2009 that generated your revisions. |
In response to your comments, and in addition to the matters discussed in the response to Comment 5, these issues had been the topic of prior comments from the Staff. The Section 13D legal analysis is complex and fact oriented. The Company continues to attribute the beneficial ownership of the Searchlight shares owned by Nanominerals in the Beneficial Ownership table to each Messrs. Ager and McNeil in order to highlight the disclosure that they each have a 17.5% ownership interest in Nanominerals, which reflects the economic interest in Nanominerals held by Messrs. Ager and McNeil, although there is a legal basis to disclaim beneficial ownership of such shares. The basis for such disclaimer is set forth in the related footnotes. Further, the change in the prior disclosure is not contradictory to prior disclosure, and was intended to clarify that if any beneficial ownership might be attributable to such persons, that there was a legal basis to disclaim such beneficial ownership to a number which would not exceed their proportionate ownership interest in Nanominerals. As noted above in Comment 5, the Company has attempted to disclose in detail the specific arrangements and relationships which Messrs. Ager and McNeil have with Nanominerals and the extent of their management, operational and voting relationships with Nanominerals, including the voting and investment powers over the Searchlight shares owned by Nanominerals. |
United States Securities and Exchange Commission
Russell Mancuso, Legal Branch Chief
September 24, 2009
Page 7
Summary Compensation Table, page 103
7. | We note your response to prior comment 6. Your response does not indicate the authority on which you relied to determine the amount to include in the table. We therefore reissue the last sentence of prior comment 6. |
In response to your comments, the Company has added language to footnote 4 at page 104 of the Registration Statement, as set forth in the prior response letter, to reflect that the amounts to which Mr. Williams may be deemed to have received a personal benefit from amounts paid to the Cupit Milligan firm in the relevant periods were based on the profit percentage derived by Mr. Williams from the revenue earned by Cupit Milligan in the applicable period, as applied to the fees for services provided to the Company. |
The Company has relied on Note 4 to Instruction to Item 402(c)(2)(ix) of Regulation S-K, which provides that “[p]erquisites and other personal benefits shall be valued on the basis of the aggregate incremental cost to the registrant. With respect to the perquisite or other personal benefit for which footnote quantification is required, the registrant shall describe in the footnote its methodology for computing the aggregate incremental cost.” |
United States Securities and Exchange Commission
Russell Mancuso, Legal Branch Chief
September 24, 2009
Page 8
Certain Relationships and Related Transactions, page 106
8. | We note the chart you have provided in response to prior comment 7. |
· | Please tell us where on pages 109-110 you have disclosed that Nanominerals received 12,000,000 shares of your common stock; and |
· | Given the substance of the related-party transactions, it remains unclear why you do not believe you should disclose (1) the price that Searchlight Minerals Inc. originally paid for the interest in the claims it assigned to you and (2) the amount that the related parties paid to acquire the claims that you then acquired from them by issuing common stock. Please revise or advise. |
In response to your comments, the Company has revised the chart which addresses the issues related to related party transactions raised by the comment set forth above. The chart is attached to this letter. |
With respect to the first item, the chart inadvertently included a reference to the 12,000,000 shares underlying the warrants. The warrants have not been exercised and no shares were issued to Nanominerals by the Company in connection with the transaction. |
With respect to the second item, the Company did not pay any consideration to Searchlight Minerals Inc. in connection with the assignment of the option to acquire the Searchlight Claims. As noted in the disclosure, at page 109 of the Registration Statement in the section entitled “Certain Relationships and Related Transactions - Transactions with Searchlight Claim Owners and Affiliates of K. Ian Matheson,” Searchlight Minerals Inc. (“SMI”), a company controlled by K. Ian Matheson, assigned SMI’s rights in the Searchlight Claims to the Company under prior option agreements with the Searchlight Claim owners. Prior to entering into the option agreements with the Company, the Searchlight Claim owners had optioned their respective interests in the claims to SMI. The Company is not aware of the amount, if any, of consideration paid to the Searchlight Claim owners by SMI in connection with the grant of the option to SMI. The Company notes that the option was not exercised by SMI, and was instead assigned to the Company, as disclosed at page 109 of the Registration Statement. |
With respect to the third item, the Company has revised the chart to reflect that the amount paid by Mr. Matheson and his affiliates includes their allocated share of the actual costs incurred in maintaining the Searchlight Claims out of an aggregate of $87,134. That aggregate amount has previously been disclosed at page 109 of the Registration Statement in the section entitled “Certain Relationships and Related Transactions - Transactions with Searchlight Claim Owners and Affiliates of K. Ian Matheson.” |
United States Securities and Exchange Commission
Russell Mancuso, Legal Branch Chief
September 24, 2009
Page 9
Rights Agreement, page 120
9. | Please revise to describe clearly the purpose, effect and operation of the rights while avoiding reliance on defined terms and long, complex sentences. Also: |
· | if the securities offered in the transaction registered by this Form S-1 include the rights, please tell us why the rights are not included in your fee table and are not addressed in exhibit 5.1; and |
· | please tell us why you have not reported the rights under Item 3.03 of Form 8-K. |
In response to your comments, the Company has revised the disclosure at pages 121-122 of the Registration Statement in the section entitled “Anti-Takeover Effects of Nevada Law, Our Charter Documents and Our Stockholder Rights Plan – Rights Plan,” in accordance with the opening sentence of the comment. Further, the Company has registered the rights, as appurtenant to the shares of common stock which have been registered and included the rights in the fee table (without an additional registration fee). Further, the rights are addressed in a new opinion filed as Exhibit 5.1 to the Registration Statement. Finally, the Company has filed an amendment to the previously filed Current Report on Form 8-K (August 25, 2009) and Registration Statement on Form 8-A (August 25, 2009), each of which includes the revised disclosure. The amended Form 8-K also includes a reference to Item 3.03 of Form 8-K. |
Miscellaneous Items
The Company has attached a copy of an Order, dated September 9, 2009, from the US Department of Interior, Office of Hearings and Appeal, with respect to the denial of the appeal by the Company regarding the closing of a notice of intent relating to the Searchlight Gold Project filed by the Company with the U.S. Bureau of Land Management. The Order is described at page 86 of the Registration Statement in the section entitled “Searchlight Gold Project – Permitting.” As noted in the accompanying disclosure, the Company is proceeding with the new Plan of Operations which was submitted to the Bureau of Land Management in March 2009. |
The Company has attached a copy of the comments from the Bureau of Land Management, dated September 15, 2009, relating to the Plan of Operations for the Searchlight Gold Project. |
United States Securities and Exchange Commission
Russell Mancuso, Legal Branch Chief
September 24, 2009
Page 10
In connection with the Company’s response to your comment letter, the Company acknowledges that:
1. The Company is responsible for the adequacy and accuracy of the disclosure in the filing of the Registration Statement;
2. The staff’s comments or changes to disclosure in response to staff comments, do not foreclose the Commission from taking any action with respect to the filings; and
3. The Company may not assert the staff’s comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
We hope that our responses fully address your inquiries. Please contact us if you have any further questions at the address and phone number in our letterhead.
Very truly yours, /s/ Jeffrey P. Berg Jeffrey P. Berg of BAKER & HOSTETLER LLP |
CC: | CARL S. AGER KRISTIN LOCHHEAD JOSEPH MCCANN IAN R. MCNEIL MELVIN L. WILLIAMS |
Names of Promoters (Group) | Assets Acquired by Company | Assets Acquired from Company | Principle in Determining Amount | |||
Dr. Charles A. Ager (Carol Ager, Geotech Mining Inc. and Geosearch Mining Inc.) | Searchlight Claims | 280,000 shares of Common Stock | Direct negotiation with management which did not have an interest in the Searchlight Claims based on EITF 98-11, valued at their market price at the date of issue plus reimbursement of costs | |||
Identity of Person Making Determination by Company and Relationship of Person to Company | Assets Acquired by Seller within Two Years Prior to Transfer Date? | Cost of Such Assets | Pages in S-1 Where Disclosed | |||
Then existing management which did not have an interest in the Searchlight Claims (Caisey Harlingten – Chariman and CEO) | No | Allocated share of aggregate costs of $87,134 by Searchlight Claim owners | 109 |
Names of Promoters (Group) | Assets Acquired by Company | Assets Acquired from Company | Principle in Determining Amount | |||
Dr. Charles A. Ager, Carl S. Ager and Ian R. McNeil (Nanominerals Corp. and Carol Ager) | Interest of Joint Venture in Clarkdale Slag Project | (1) Warrants to purchase up to 12,000,000 shares of Common Stock (2,000,000 Warrants issued to unrelated designate of Nanominerals), (2) reimbursement of $690,000 of costs, (3) assumption by Company of obligations of Nanominerals under the Joint Venture Agreement, and (4) royalty obligation | Direct negotiation with management which did not have an interest in the Joint Venture Agreement based on EITF 98-03 plus reimbursement of costs | |||
Identity of Person Making Determination by Company and Relationship of Person to Company | Assets Acquired by Seller within Two Years Prior to Transfer Date? | Cost of Such Assets | Pages in S-1 Where Disclosed | |||
Then existing management which did not have an interest in the Joint Venture Agreement (K. Ian Matheson – director and executive officer) | Yes | $690,000 | 110-111 |
Names of Promoters (Group) | Assets Acquired by Company | Assets Acquired from Company | Principle in Determining Amount | |||
K. Ian Matheson (Debra Matheson, Pass Minerals Inc., Gold Crown Minerals Inc. and Kiminco Inc.) | Searchlight Claims | 1,050,000 shares of Common Stock | Direct negotiation with management which did not have an interest in the Searchlight Claims based on based on EITF 98-11, valued at their market price at the date of issue plus reimbursement of costs. | |||
Identity of Person Making Determination by Company and Relationship of Person to Company | Assets Acquired by Seller within Two Years Prior to Transfer Date? | Cost of Such Assets | Pages in S-1 Where Disclosed | |||
Then existing management which did not have an interest in the Searchlight Claims (Caisey Harlingten – Chariman and CEO) | No | Allocated share of aggregate costs of $87,134 by Searchlight Claim owners | 109 |