Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 14, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | Desert Hawk Gold Corp. | |
Entity Trading Symbol | DHGC | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Amendment Flag | false | |
Entity Central Index Key | 1,168,081 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 13,056,603 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
CURRENT ASSETS | ||
Cash | $ 98,052 | $ 161,645 |
Inventories (Note 4) | 2,130,092 | 1,745,377 |
Prepaid expenses and other current assets | 39,978 | 142,825 |
Total Current Assets | 2,268,122 | 2,049,847 |
PROPERTY AND EQUIPMENT, net (Note 5) | 4,702,892 | 3,190,156 |
MINERAL PROPERTIES AND INTERESTS, net (Note 6) | 1,269,592 | 1,372,887 |
RECLAMATION BONDS | 1,416,862 | 1,412,804 |
TOTAL ASSETS | 9,657,468 | 8,025,694 |
CURRENT LIABILITIES | ||
Accounts payable and accrued expenses | 793,356 | 813,559 |
Accrued liabilities-officer wages (Note 12) | 253,000 | 247,500 |
Interest payable (Notes 7 and 8) | 4,321,143 | 3,382,152 |
Convertible debt (Note 7) | 600,000 | 600,000 |
Notes payable - equipment (Note 9) | 705,633 | 146,171 |
Note payable - related party (Note 8) | 3,481,357 | 2,125,348 |
Redemption of gold proceeds payable (Note 11) | 151,406 | 56,609 |
Stock redeemable with gold proceeds (Note 11) | 0 | 82,000 |
Total Current Liabilities | 10,305,895 | 7,453,339 |
LONG-TERM LIABILITIES | ||
Asset retirement obligation (Note 10) | 770,234 | 740,268 |
Notes payable - equipment (Note 9) | 1,372,585 | 372,388 |
Note payable - related party (Note 8) | 8,559,135 | 9,665,144 |
Total Long-Term Liabilities | 10,701,954 | 10,777,800 |
TOTAL LIABILITIES | $ 21,007,849 | $ 18,231,139 |
COMMITMENTS (Note 10,11 and 12) | ||
Preferred Stock, $0.001 par value, 10,000,000 shares authorized | ||
Series A: 958,033 shares issued and outstanding | 958 | 958 |
Series A-1: No shares issued and outstanding | $ 0 | $ 0 |
Series A-2: 180,000 shares issued and outstanding | 180 | 180 |
Series B: 249,603 shares issued and outstanding | 250 | 250 |
Common stock, $0.001 par value, 100,000,000 shares authorized;13,056,603 shares issued and outstanding | 12,928 | 12,928 |
Additional paid-in capital | 8,328,806 | 8,328,806 |
Accumulated deficit | (19,693,503) | (18,548,567) |
Total Stockholders' (Deficit) | (11,350,381) | (10,205,445) |
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) | $ 9,657,468 | $ 8,025,694 |
BALANCE SHEETS PARENTHETICALS
BALANCE SHEETS PARENTHETICALS - $ / shares | Jun. 30, 2015 | Dec. 31, 2014 |
Balance sheet parentheticals | ||
Preferred Stock, par value | $ 0.001 | $ 0.001 |
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred Stock Series A, shares issued | 958,033 | 958,033 |
Preferred Stock Series A, shares outstanding | 958,033 | 958,033 |
Preferred Stock Series A 1, shares issued | 0 | 0 |
Preferred Stock Series A 1, shares outstanding | 0 | 0 |
Preferred Stock Series A-2, shares issued | 180,000 | 180,000 |
Preferred Stock Series A-2, shares outstanding | 180,000 | 180,000 |
Preferred Stock Series B, shares issued | 249,603 | 249,603 |
Preferred Stock Series B, shares outstanding | 249,603 | 249,603 |
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 100,000,000 | 100,000,000 |
Common Stock, shares issued | 13,056,603 | 13,056,603 |
Common Stock, shares outstanding | 13,056,603 | 13,056,603 |
STATEMENTS OF OPERATIONS (unaud
STATEMENTS OF OPERATIONS (unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
REVENUE: | ||||
Concentrate sales | $ 854,772 | $ 0 | $ 2,094,641 | $ 0 |
General project costs | 558,734 | 360,316 | 1,585,327 | 423,711 |
Exploration expense | 3,366 | 15,206 | 9,270 | 31,736 |
Consulting | 1,343 | 8,100 | 1,343 | 20,927 |
Officers and directors fees | 48,423 | 144,286 | 89,961 | 178,671 |
Legal and professional | 19,946 | 35,545 | 45,871 | 77,729 |
General and administrative | 96,873 | 89,093 | 233,683 | 144,984 |
Depreciation and amortization | 158,812 | 20,373 | 300,148 | 20,772 |
Total Expenses | 887,497 | 672,919 | 2,265,603 | 898,530 |
OPERATING LOSS | (32,725) | (672,919) | (170,962) | (898,530) |
OTHER INCOME (EXPENSE) | ||||
Interest and other income | 477 | 1,191 | 857 | 1,191 |
Change in fair value of derivatives | 0 | 0 | 0 | 6,673 |
Financing expense | 0 | 249,603 | 0 | (998,412) |
Interest expense | (500,297) | (350,599) | (974,831) | (718,165) |
Total Other Income (Expense) | (499,820) | (99,805) | (973,974) | (1,708,713) |
LOSS BEFORE INCOME TAXES | (532,545) | (772,724) | (1,144,936) | (2,607,243) |
INCOME TAXES | 0 | 0 | 0 | 0 |
NET LOSS | $ (532,545) | $ (772,724) | $ (1,144,936) | $ (2,607,243) |
BASIC AND DILUTED NET LOSS PER SHARE | $ (0.04) | $ (0.07) | $ (0.09) | $ (0.25) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED | 13,056,603 | 11,637,047 | 13,056,603 | 10,575,441 |
STATEMENTS OF CASH FLOWS (unaud
STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (1,144,936) | $ (2,607,243) |
Adjustments to reconcile net loss to net cash used by operating activities: | ||
Depreciation and amortization | 430,309 | 20,772 |
Common stock issued for services | 0 | 85,483 |
Common stock issued for interest expense | 0 | 45,000 |
Preferred stock issued for financing expense | 0 | 998,412 |
Accretion of asset retirement obligation | 29,966 | 18,615 |
Change in fair value of derivatives | 0 | (6,673) |
Net gain on disposal of asset | 0 | (3,370) |
Loss on stock redeemed with gold proceeds | 12,797 | 0 |
Changes in operating assets and liabilities: | ||
Inventories | (384,715) | 0 |
Prepaid expenses and other current assets | 102,847 | (131,854) |
Accounts payable and accrued expenses | 129,172 | (32,715) |
Accrued liabilities - officer wages | 5,500 | (14,500) |
Interest payable, net of amount capitalized | 938,991 | 719,431 |
Net cash provided (used) by operating activities | 119,931 | (908,642) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Additions to property and equipment | (214,474) | (1,540,953) |
Refund of reclamation bonds | 0 | 92,455 |
Increase in reclamation bonds | (4,058) | (1,348,796) |
Net cash (used) by investing activities | (218,532) | (2,797,294) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from note payable-related party | 250,000 | 4,125,000 |
Payment of note payable - equipment | 214,992 | 3,066 |
Net cash provided (used) by financing activities | 35,008 | 4,121,934 |
NET INCREASE (DECREASE) IN CASH | (63,593) | 415,998 |
CASH, BEGINNING OF PERIOD | 161,645 | 8,523 |
CASH, END OF PERIOD | 98,052 | 424,521 |
NON-CASH FINANCING AND INVESTING ACTIVITIES: | ||
Equipment acquired with notes payable - equipment | 1,624,276 | 38,050 |
Accounts payable converted to notes payable - equipment | 150,375 | 0 |
Addition to redemption of gold proceeds payable | 94,797 | 0 |
Fair value of cancelled conversion option | 0 | 164,140 |
Equipment acquired with accounts payable | $ 0 | $ 210,216 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 6 Months Ended |
Jun. 30, 2015 | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | NOTE 1 ORGANIZATION AND DESCRIPTION OF BUSINESS Desert Hawk Gold Corp. (the Company) was incorporated on November 5, 1957, in the State of Idaho as Lucky Joe Mining Company. On July 17, 2008, the Company merged with its wholly-owned subsidiary, Lucky Joe Mining Company, a Nevada corporation, for the sole purpose of effecting a change in domicile from the State of Idaho to the State of Nevada. Lucky Joe Mining Company (Nevada) was the continuing and surviving corporation and each outstanding share of Lucky Joe Mining Company (Idaho) was converted into one outstanding share of Lucky Joe Mining Company (Nevada). On April 3, 2009, the Company filed a Certificate of Amendment with the State of Nevada changing the name of the Company to Desert Hawk Gold Corp. On June 30, 2014, the Company dissolved its sole subsidiary, Blue Fin Capital, Inc. As a result the Company has no subsidiaries. During the year ended December 31, 2009, the Company entered into Joint Venture Agreements with the Clifton Mining Company, the Woodman Mining Company and the Moeller Family Trust for the lease of certain of their property interests in the Gold Hill Mining District of Utah. In 2011 the Company entered into an agreement with DMRJ group which allowed for long term funding of the Kiewit project and helped to provide cash flow for operations during the period from 2009 until 2014 while the permitting process was ongoing. The final permit needed to begin development of the Kiewit property was received in January 2014 and development began in February 2014. Construction at the site was substantially complete at September 30, 2014. Revenue from the Kiewit heap leach operation began in October 2014 with the first sales of gold and silver. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2015 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In the opinion of management, the accompanying unaudited interim balance sheets and statements of operations and cash flows contain all adjustments, consisting of normal recurring items, necessary to present fairly, in all material respects, the financial position of the Company as of June 30, 2015, and the results of its operations and its cash flows for the three and six months ended June 30, 2015 and 2014. The operating and financial results for the Company for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. These unaudited interim financial statements have been prepared by management in accordance with generally accepted accounting principles used in the United States of America (U.S. GAAP) and are presented in U.S. dollars. These unaudited interim financial statements do not include all note disclosures required by U.S. GAAP on an annual basis, and therefore should be read in conjunction with the annual audited financial statements included in the Companys annual report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 31, 2015. Mineral Exploration and Development Costs The Company accounts for mineral exploration and development costs in accordance with ASC Topic 930 Extractive Activities - Mining Inventories The recovery of gold from certain oxide ores is achieved through the heap leaching process. Under this method, mineralized material is placed on a leach pad where it is treated with a chemical solution, which dissolves the gold contained in the material. The resulting pregnant solution is further processed in a plant where gold is recovered. The Company records ore on leach pad, ore in carbon column in process and gold doré, at average production cost per gold ounce, less provisions required to reduce inventory to net realizable value. Production costs include the cost of mineralized material processed; direct and indirect materials and consumables; direct labor; repairs and maintenance; utilities; depreciation and amortization of property, equipment, and mineral properties; and mine administrative expenses. Revenue from the sale of silver is accounted for as by-product and is deducted from production costs. Costs are removed from ore on leach pads as ounces are recovered based on the average cost per recoverable ounce of gold on the leach pad. Estimates of recoverable gold on the leach pad are calculated from the quantities of material placed on the leach pad (measured tons added to the leach pad), the grade of material placed on the leach pad (based on assay data) and an estimated recovery percentage (based on ore type). The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time. As of June 30, 2015, the Company had a limited operating history and actual results only over that short period of time. Due to this, estimates of recoverable gold are based primarily on initial tests and only limited refinements. Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis. The ultimate recovery of gold from a leach pad will not be known until the leaching process is concluded. The quantification of material inventory on the leach pad is based on estimates of the quantities of gold at each balance sheet date that the Company expects to recover during the next 12-18 months. Property and Equipment Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from five to seven years, or units of production over estimated ounces to be produced. The Company evaluates the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts. Maintenance and repairs are charged to operations as incurred. Replacements and betterments that extend the useful life of the property and equipment are capitalized. The cost and related reserves of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations. Mineral Properties and Leases The Company capitalizes costs for acquiring mineral properties and ongoing mineral lease payments and expenses costs to maintain mineral rights. Upon reaching the production stage, the capitalized costs are amortized using the units-of-production method on the basis of periodic estimates of ounces to be produced. Mineral properties are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment. If a property is abandoned or sold, its capitalized costs are charged to operations. Mine property costs include the building of infrastructure of the processing facility including the heap leach pad and the carbon in column process plant along with water wells, roads and fencing. These costs are capitalized until ready for their intended use at which time they are amortized using the units of production method based on projected units of production which approximates the estimated life of the facility. Additionally, interest is capitalized to mine development until such assets are ready for their intended use. The Company does not have proven and probable reserves at this time. See Note 6. Reclamation and Remediation The Companys operations have been, and are subject to, standards for mine reclamation that have been established by various governmental agencies. The Company records the fair value of an asset retirement obligation as a liability in the period in which the Company incurs a legal obligation for the retirement of tangible long-lived assets. A corresponding asset is also recorded and depreciated over the life of the asset. After the initial measurement of the asset retirement obligation, the liability will be adjusted at the end of each reporting period to reflect changes in the estimated future cash flows underlying the obligation. Determination of any amounts recognized upon adoption is based upon numerous estimates and assumptions, including future retirement costs, future inflation rates and the credit-adjusted risk-free interest rates. For non-operating properties, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Such costs are based on managements estimate of amounts expected to be incurred when the remediation work is performed. Earnings (loss) Per Share Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. At June 30, 2015 and June 30, 2014, common stock equivalents outstanding are as follows: June 30, 2015 June 30, 2014 Convertible debt 857,143 857,143 Convertible preferred stock 27,718,333 27,718,333 Total 28,575,476 28,575,476 However, the diluted earnings (loss) per share are not presented because its effect would be anti-dilutive due to the Companys recurring losses. Going Concern As shown in the accompanying financial statements, the Company has an accumulated deficit incurred through June 30, 2015, which raises substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. The final permit needed to begin development of the Kiewit property was received in January 2014 and development began in February 2014. Construction at the site was substantially complete at September 30, 2014. The Company will need significant funding to continue operations and increase development through the next fiscal year. This funding is expected to come via sales revenues, but the timing and amount of capital requirements will depend on a number of factors, including demand for products and services, metals pricing and the availability of opportunities for expansion through affiliations and other business relationships. If the going concern assumption were not appropriate for these financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used. Reclassifications Certain reclassifications have been made to conform data from prior periods to the current presentation. These reclassifications have no effect on the results of operations or stockholders deficit. New Accounting Pronouncement In July 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-11 Simplifying the Measurement of Inventory |
CAPITAL STOCK
CAPITAL STOCK | 6 Months Ended |
Jun. 30, 2015 | |
CAPITAL STOCK | |
CAPITAL STOCK | NOTE 3 - CAPITAL STOCK Common Stock The Company is authorized to issue 100,000,000 shares of common stock. All shares have equal voting rights and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company. No shares of stock have been issued during the first six months of 2015. The Company issued a total of 117,854 shares of stock to the note holders of the convertible debt for interest expense through November 30, 2014. These shares were valued at a fair value of $82,500 based upon the stated interest rate contained in the debt agreements. The Company failed to repay the loan in full on the November 30, 2014 maturity date, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders. This issuance was valued at $0.04 per share ($12,000) which was determined by management to be the fair value of a share of common stock based on a 2014 valuation analysis performed by a consultant. The consultant determined that the fair value of the common stock of the Company on a non-controlling, non-marketable basis to be $0.04 per share. Management assessed the consultants valuation and found the methodology to be appropriate for the Company and concluded that the fair value of common shares is $0.04. The issuance was accounted for as financing expense during the fourth quarter 2014. As part of this agreement, the due date of the notes was extended to November 30, 2015, with interest to be paid in cash after November 30, 2014. See Note 7. On May 1, 2014, the Company issued 3,137,066 shares to its president, Rick Havenstrite, as a management incentive. Also, as a part of this agreement, Mr. Havenstrite agreed to forgive $40,000 of accrued but unpaid wages. The issued shares were valued at $0.04 per share as determined by the consultant (see above). Based on this rate, the fair value of the shares issued to Mr. Havenstrite was determined to be $125,483. Of this amount, $85,483 was recognized as officers and directors fees during the year ended December 31, 2014 and $40,000 was recognized as a reduction of accrued officer wages. Preferred Stock On February 19, 2014, the Company agreed to the terms of a Tenth Amendment to the Investment Agreement with DMRJ Group. The Tenth Amendment provides for funding of construction of the heap leach pad and process facility, mining development, and operations through a series of monthly term loan advances totaling a maximum of $5,700,000 over five months. As a part of this amendment, on February 19, 2014, the Company issued to DMRJ Group 249,603 shares of Series B Preferred Stock. The conversion rate of the Series B Preferred Stock is 100 shares of common stock for each share of Series B Preferred Stock. During the quarter ended March 31, 2014, financing expense in the amount of $1,248,015 was recorded in association with this share issuance, using an estimated fair value of the equivalent common shares of $0.05. During the quarter ended June 30, 2014, the Company revised the estimated fair value of the equivalent common shares to be $998,412 based upon a fair value of $0.04 per share. Thus a reduction to financing expense of $249,603 was recorded in the second quarter 2014. As a result of this issuance, DMRJ beneficially owns approximately 67% of the Company (on a fully-diluted basis) with shares convertible into 27,718,333 shares of common stock. DMRJ is considered a related party. In connection with this amendment, the Company amended the Certificates of Designation for the Series A Preferred Stock and the Series A-1 and A-2 Preferred Stock to eliminate the mandatory dividends payable to the holders of the Series A Preferred Stock and to exclude from the definition of convertible securities the shares of all preferred stock previously issued to DMRJ Group and any future issuances of any shares of Series A, Series, B, and Series A-1 and A-2 to DMRJ Group or any of its affiliates. |
INVENTORIES
INVENTORIES | 6 Months Ended |
Jun. 30, 2015 | |
INVENTORIES | |
INVENTORIES | NOTE 4 INVENTORIES The following table provides the components of inventories: June 30, 2015 December 31, 2014 Ore on leach pad $ 1,951,547 $ 1,508,761 Carbon column in process 169,905 211,115 Dore finished goods 8,640 25,501 Total $ 2,130,092 $ 1,745,377 Inventories are valued at the lower of cost or net realizable value, which at June 30, 2015 is cost. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2015 | |
PROPERTY AND EQUIPMENT: | |
PROPERTY AND EQUIPMENT | NOTE 5 - PROPERTY AND EQUIPMENT The following is a summary of property, equipment, and accumulated depreciation at June 30, 2015 and December 31, 2014: June 30, December 31, 2015 2014 Equipment $ 3,090,105 $ 1,465,827 Furniture and fixtures, temporary housing 10,781 10,781 Electronic and computerized equipment 52,874 19,011 Vehicles 56,830 65,330 3,210,590 1,560,949 Less accumulated depreciation (548,670) (357,983) 2,661,920 1,202,966 Kiewit property facilities 2,331,520 2,153,411 Less accumulated amortization (290,548) (166,221) 2,040,972 1,987,190 Total $ 4,702,892 $ 3,190,156 |
MINERAL PROPERTIES AND LEASES
MINERAL PROPERTIES AND LEASES | 6 Months Ended |
Jun. 30, 2015 | |
MINERAL PROPERTIES AND LEASES | |
MINERAL PROPERTIES AND LEASES | NOTE 6 MINERAL PROPERTIES AND INTERESTS Mineral properties and interests as of June 30, 2015 and December 31, 2014 are as follows: June 30, 2015 December 31, 2014 Initial lease fee Yellow Hammer Site $ 175,000 $ 175,000 Kiewit, Cactus Mill and all other sites 600,000 600,000 Total 775,000 775,000 Asset retirement obligation Kiewit Site 687,475 687,475 Kiewit Exploration 10,780 10,780 Cactus Mill 16,133 16,133 Total 714,388 714,388 Accumulated amortization (219,796) (116,501) Total $ 1,269,592 $ 1,372,887 The Company holds operating interests within the Gold Hill Mining District in Tooele County, Utah, consisting of 247 unpatented claims, including the unpatented mill site claim, and two Utah state mineral leases located on state trust lands. Annual claims fees are currently $155 per claim plus administrative fees. On January 6, 2014, we obtained the final permit necessary to commence construction of the heap leach pad and process facility. On February 20, 2014, the Kiewit reclamation bond in the amount of $1,348,000 was posted with the State of Utah, Division of Oil, Gas and Mining. This newly calculated bond amount includes bonding for the Yellow Hammer Small Mine and the Yellow Hammer Exploration sites along with the Herat Exploration site. As such, the asset retirement obligation for these sites was absorbed by the new bond. Funds of $92,705 were received in April 2014 by the Company for these refunded reclamation bonds. Total reclamation bonds posted at June 30, 2015 and December 31, 2014 are $1,416,862 and $1,412,804, respectively. On March 20, 2013, the Confederated Tribes of the Goshute Reservation (Tribes) sent a letter to the Bureau of Land Management (BLM) outlining their review of the Kiewit Mine Project Draft Environmental Assessment. The letter alleged the Environmental Assessment is flawed in the development and analysis of alternatives, conformance with applicable BLM land use plans, and disclosure, analysis and mitigation of impacts on cultural resources, Native American values, and many other environmental resources. On February 6, 2014 the Tribes filed an appeal of the permit with the BLM. On April 10, 2014, the BLM was granted an extension of time to May 7, 2014 to answer the appeal and on May 8, 2014 an additional extension of time was granted to the BLM to June 6, 2014 to answer the appeal. On June 6, 2014 the BLM submitted their response to the appeal. On August 14, 2014, the BLM rejected the Tribes request for a stay. |
CONVERTIBLE DEBT
CONVERTIBLE DEBT | 6 Months Ended |
Jun. 30, 2015 | |
CONVERTIBLE DEBT | |
CONVERTIBLE DEBT | NOTE 7 CONVERTIBLE DEBT On November 18, 2009, the Company issued convertible promissory notes to two of its minority shareholders for a total of $600,000. The notes bear interest at 15% per annum. Interest-only is payable in equal monthly installments of $7,500. The notes were originally convertible at any time at a rate of $1.50 per share, but on July 14, 2010 the promissory notes were amended thereby reducing the conversion price to $0.70 due to the note holders agreement to subordinate their debt to DMRJ Group (see Note 10). The notes are convertible into potentially 857,143 shares of common stock and principal and interest were initially due November 30, 2012. On July 5, 2011, the Company entered into an agreement with the two holders of the convertible debt to begin paying their monthly interest in stock rather than cash. The Company failed to repay the loan in full on the November 30, 2012, November 30, 2013 and November 30, 2014 maturity dates, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders in each of those years. As part of this agreement, the due date of the note was extended each year and has now been extended to November 30, 2015. Interest was paid with stock through November 30, 2014 and will be paid in cash thereafter. Accrued interest payable at June 30, 2015 and 2014 includes $52,500 and $-0-, respectively, for these notes. |
NOTE PAYABLE - RELATED PARTY
NOTE PAYABLE - RELATED PARTY | 6 Months Ended |
Jun. 30, 2015 | |
NOTE PAYABLE - RELATED PARTY | |
NOTE PAYABLE - RELATED PARTY | NOTE 8 NOTE PAYABLE - RELATED PARTY DMRJ beneficially owns approximately 67% of the Company (on a fully-diluted basis) with shares convertible to 27,718,333 shares of common stock (See Note 3). They are considered a related party. In July 2010, the Company entered into an Investment Agreement with DMRJ. The Agreement has been modified numerous times and currently operates under the Twelfth Amendment to the Investment Agreement dated June 5, 2015. The Amendments have provided for extensions of payment dates, increased funding capacity and other modifications to the debt agreement. The total due to DMRJ at June 30, 2015 and December 31, 2014 is as follows: June 30, December 31, 2015 2014 Principal Current $ 3,481,357 $ 2,124,348 Long-term 8,559,135 9,665,144 Total 12,040,492 11,789,492 Interest payable - current 4,268,643 3,375,652 $ 16,309,135 $ 15,165,144 The Investment Agreement contains certain negative covenants which prohibit us from the following actions or activities: Incurring any indebtedness except in limited circumstances; Creating any significant liens on any of our properties or assets; Enter into any sale and lease-back transaction involving any of our properties; Make any investments in or loans or advances to other parties; Engage in any merger, consolidation, sale of assets or acquisition transaction, except for the purchase or sale of inventory or certain limited investments; Declare or pay any dividends, except for dividends to DMRJ Group; Engage in any business transactions with affiliates; Make capital expenditures except as permitted in the agreement pertaining to our current mining business; Create any lease obligations; Amend, supplement or modify any existing indebtedness; Enter into any swap, forward, future or derivative transaction; Make any change in our accounting policies or reporting practices; Form additional subsidiaries; or Modify or grant a waiver or release under or terminate any principal lease agreement or other material contract. 2015 Activity An Eleventh Amendment to the Investment Agreement was entered into on March 17, 2015 which established new minimum principal and interest payment dates which were then revised with the Twelfth Amendment to the Investment Agreement. The Twelfth Amendment was entered into on June 5, 2015 and allowed for additional funding in the amount of $250,000 which was received by the Company in May and June 2015 and also established new minimum principal and interest payment dates beginning in August 2015 as follows: August 31, 2015 $ 500,000 November 30, 2015 1,000,000 December 31, 2015 4,000,000 February 28, 2016 1,500,000 May 31, 2016 750,000 August 31, 2016 3,000,000 November 30, 2016 3,000,000 Total $ 13,750,000 Management anticipates that the August 31, 2015 payment will not be made. Discussions are currently underway with DMRJ to provide additional funding to finance the purchase of crushing plant equipment to allow for in-house crushing, additional working capital and to finance the expansion into the east extension of the pit. The equipment purchase is anticipated to reduce crushing costs by as much as $100,000 per month. This funding will be provided through the use of the provisional funds established in the Twelfth Amendment to the Investment Agreement as well as additional funding to be provided for in a future amendment to the Investment Agreement. New funding is expected to be approximately $675,000 during July and August 2015. 2014 Activity In January 2014, pursuant to the Ninth Amendment to the Investment Agreement, a third term loan advance was taken in the amount of $25,000. The January 31, 2014 loan payment that was due was not made. On February 19, 2014, the Company agreed to the terms of a Tenth Amendment to the Investment Agreement with DMRJ Group. The Tenth Amendment provides for funding of mining operations through a series of advances (the Monthly Term Loan Advances) totaling a maximum of $5,700,000 over five months. A total of $5,500,000 was drawn. As a provision of this amendment, the maturity date for the entire loan was moved to October 31, 2016. The interest rate on the loan balance was reduced from 24% to 15% and minimum principal and interest payment amounts were established. The first minimum payment, due February 28, 2015, was not made. Payment terms were changed in 2015 pursuant to the Eleventh and Twelfth Amendments (see 2015 Activity). The Companys ability to meet these minimum payments will be dependent upon a number of factors including production variables, metals market pricing, demand for products and services, and the availability of opportunities for expansion through affiliations and other business relationships. In 2014, the first Monthly Term Loan, in the amount of $2,000,000, was used in part to fund the posting of the reclamation bond associated with the Kiewit Project Large Mining Permit. A total of $5,525,000 was drawn during the year ended December 31, 2014 in connection with the Tenth Amendment Monthly Term Loan Advances. In addition, on February 19, 2014, the Company issued to DMRJ Group 249,603 shares of Series B Preferred Stock. See Note 3. Onsite construction of the project is essentially complete at December 31, 2014. If the Company is unable to repay the outstanding balances at maturity, DMRJ Group could foreclose on its security interest and would take control of or liquidate the Companys mining leases and other assets. |
NOTES PAYABLE - EQUIPMENT
NOTES PAYABLE - EQUIPMENT | 6 Months Ended |
Jun. 30, 2015 | |
NOTES PAYABLE - EQUIPMENT: | |
NOTES PAYABLE - EQUIPMENT | NOTE 9 NOTES PAYABLE EQUIPMENT The following is a summary of the equipment notes payable: June 30, 2015 December 31, 2014 Note payable to Komatsu Financial, collateralized by a Komatsu Telehandler lift, due in 48 monthly installments of $2,424 including interest at 4.99%. $ 101,305 $ - Note payable to CAT Financial, collateralized by five pieces of used mining equipment, including three haul trucks, a loader and a grader, due in 36 monthly installments of $49,242 including interest at 4.68%. 1,521,998 - Note payable to HCE Funding, collateralized by a Perkins Elmer AA machine, due in one installment of $7,600 and 22 installments of $520, including interest at 5.00%. 8,412 - Note payable to Komatsu Financial, collateralized by a Komatsu D275 dozer, due in one monthly installment of $21,000 and 47 monthly installments of $11,594 including interest at 2.99%. 430,398 492,955 Note payable to Komatsu Financial, collateralized by a Komatsu PC400 Excavator, due in 24 monthly installments of $1,629 including interest at 1.75%. 16,105 25,604 2,078,218 518,559 Current portion (705,633) (146,171) Long Term portion $ 1,372,585 $ 372,388 Principal payments are as follows for the twelve months ended June 30, 2016 $ 705,633 2017 716,548 2018 597,706 2019 58,331 Total $ 2,078,218 During the first quarter 2015, accounts payable balance of $150,375 relating to lease costs for equipment was converted to notes payable equipment when the Company acquired the equipment. |
REMEDIATION LIABILITY AND ASSET
REMEDIATION LIABILITY AND ASSET RETIREMENT OBLIGATION | 6 Months Ended |
Jun. 30, 2015 | |
REMEDIATION LIABILITY AND ASSET RETIREMENT OBLIGATION | |
REMEDIATION LIABILITY AND ASSET RETIREMENT OBLIGATION | NOTE 10 REMEDIATION LIABILITY AND ASSET RETIREMENT OBLIGATION Remediation, reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties. The Company uses assumptions about future costs, capital costs and reclamation costs. Such assumptions are based on the Companys current mining plan and the best available information for making such estimates. In calculating the present value of the asset retirement obligation the Company used a credit adjusted risk free interest rate of 8% to 10% and projected mine lives of five to 12 years, depending on the site. On an ongoing basis, management evaluates its estimates and assumptions; however, actual amounts could differ from those based on such estimates and assumptions. Changes in the reclamation liability for the periods ended June 30, 2015 and December 31, 2014 are as follows: Six months ended June 30, 2015 Year ended December 31, 2014 Reclamation and remediation liability, beginning of period $ 740,268 $ 69,920 Obligation incurred - 656,567 Accretion expense 29,966 13,781 Reclamation and remediation liability, end of period $ 770,234 $ 740,268 |
STOCK REDEEMABLE WITH GOLD PROC
STOCK REDEEMABLE WITH GOLD PROCEEDS | 6 Months Ended |
Jun. 30, 2015 | |
STOCK REDEEMABLE WITH GOLD PROCEEDS | |
STOCK REDEEMABLE WITH GOLD PROCEEDS | NOTE 11 STOCK REDEEMABLE WITH GOLD PROCEEDS An equity financing was initiated in September 2012 for the sale of up to 1,150,000 shares of the Companys common stock. This offering closed December 31, 2012 with proceeds of $130,000 raised through sales of 130,000 shares of the Companys common stock. Under the terms of this offering, the shares can be redeemed for cash generated from the sale of gold for a period of 12 months after commencement of operations at the Kiewit project. Proceeds from 5% of the gold produced during the first year of production will be allocated to fund this option. Shares will be converted on whole ounces only. Each investor received the right to convert a minimum of one-half and up to all of his shares (on a pro rata basis) into the value of the number of ounces represented by the total investment, determined using a base price of $1,000 per ounce. Due to the redemption feature of these shares, management has concluded that the conversion shares should be recorded as a liability and not as equity. Once sales of concentrate began in 2014, all investors in this equity financing had the option to convert their shares for cash from 5% of the gold sales, and all parties chose to convert. Amounts due to these shareholders are disclosed in the following table. The share conversion is complete at June 30, 2015 and amounts due to shareholders are past due. These amounts are expected to be paid to shareholders in 2015. Conversion Shares Due based on $1,000 Gold Price Additional Amount Based on Actual Gold Sales Price Total Due to Shareholders at June 30, 2015 Original Conversion Liability 130,000 Less Conversion: December 31, 2014 48,000 8,609 56,609 June 30, 2015 82,000 12,797 94,797 Total $ 130,000 $ 21,406 $ 151,406 Remaining balance to be redeemed at June 30, 2015 $ - |
COMMITMENTS
COMMITMENTS | 6 Months Ended |
Jun. 30, 2015 | |
COMMITMENTS | |
COMMITMENTS | NOTE 12 COMMITMENTS Mining Properties During the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Moeller Family Trust for the lease of the Trusts Yellow Hammer property in the Gold Hill Mining District of Utah. Pursuant to the agreement, if the Company does not place the Yellow Hammer property into commercial production within a three-year period it will be required to make annual payments to the Trust of $50,000. The Yellow Hammer operated for several months in 2011. Under the terms of the Joint Venture Agreement, the Company is required to pay a 6% net smelter royalty on the production of base metals and a net smelter royalty on gold and silver based on a sliding scale of between 2% and 15% based on the price of gold and silver, as applicable. There were no sales and no royalty expense to date for the Yellow Hammer in 2015 or in 2014. No payment has been made on this property and no official forfeiture notice has been received regarding this nonpayment. Also, during the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Clifton Mining Company and the Woodman Mining Company for the lease of their property interests in the Gold Hill Mining District of Utah. Under the terms of the Joint Venture Agreement, the Company is required to pay a 4% net smelter royalty on base metals in all other areas except for production from the Kiewit gold property and a net smelter royalty on gold and silver, except for production from the Kiewit gold property, based on a sliding scale of between 2% and 15% based on the price of gold or silver, as applicable. The Company is also required to pay a 6% net smelter return on any production from the Kiewit gold property. Additionally, if the Company does not place the Kiewit property, the Clifton Shears-Smelter Tunnel property, and the Cane Springs property into commercial production within a three year period, it will be required to make annual payments to Clifton Mining in the amount of $50,000 per location. The annual payments due on July 24, 2014 were made on July 22, 2014 and accepted by Clifton Mining for the Clifton Shears and Kiewit properties. The Cane Springs property payment was not made in 2013 and this claim was released back to Clifton Mining at that time. Production at the Kiewit property began in the fourth quarter 2014. Royalties of 6% are due to Clifton Mining on sales of gold and silver. Royalties due to Clifton Mining at June 30, 2015 and December 31, 2014 from production at the Kiewit property are $87,980 and $ -0-, respectively. Royalty payments are past due and are expected to be paid in 2015. Employment Agreements In September 2010, the Company entered into employment agreements with its Chief Executive Officer (CEO) and its President and entered into a consulting agreement with one of its directors. Each agreement was for an initial term of between three months and four years and provides for base salary or fees of $120,000 per year. Termination agreements have been reached with the former CEO and one director, providing for payment of accrued compensation and consulting payable over several months commencing with the funding of the Kiewit project. These payments began in February 2014. As of June 30, 2015 and December 31, 2014 accrued compensation of $253,000 and $247,500, and consulting fees payable of $-0- and $15,000, respectively, were due to directors and officers. Of the $253,000 due at June 30, 2015, accrued compensation of $192,700 is due to Rick Havenstrite, President, $42,300 to Marianne Havenstrite, Treasurer, and $18,000 remains to be paid pursuant to the termination agreements. In addition, as part of a management incentive award on May 1, 2014, Rick Havenstrite was awarded 3,137,066 shares of common stock. As part of this award, Mr. Havenstrite agreed to forgive $40,000 in accrued compensation. See Note 3. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2015 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 13 RELATED PARTY TRANSACTIONS The Company recognized rent expense for rental of office space of $3,000 for the six months ending June 30, 2015 and 2014, respectively, paid to RMH Overhead, LLC, a company owned by Rick Havenstrite, the Companys president and a director. Of the amounts recognized as expense, RMH Overhead, LLC was paid $6,000 and $5,000 in the first six months of 2015 and 2014, respectively, leaving a balance of $13,850 remaining in accounts payable at June 30, 2015 and 2014. In addition, the Company purchased equipment for $3,500 and $16,500 from Overhead Door Co. of SNR, another company owned by Rick Havenstrite, during the periods ended June 30, 2015 and December 31, 2014. During the six months ended June 30, 2015 and June 30, 2014, the Company recognized wage expense of $13,846 and $5,538, respectively, for office and accounting services performed by Marianne Havenstrite, wife of Rick Havenstrite, who became an officer of the Company during 2013. $42,300 and $28,500 of accrued wages remains unpaid at June 30, 2015 and December 31, 2014 and is reflected in accrued liabilities. During the six months ended June 30, 2015 and 2014, the Company recognized general project cost expense of $3,105 and $12,827, respectively, for geological services provided by Stuart Havenstrite, the father of Rick Havenstrite. $18,276 and $21,649 remain unpaid to Mr. Havenstrite at June 30, 2015 and December 31, 2014. These amounts are included in accounts payable at those dates. Payments were also made to other family members for the six months ended June 30, 2015 and 2014 for accounting and engineering services in the amount of $42,001 and $22,892. |
ACCOUNTING POLICIES (POLICIES)
ACCOUNTING POLICIES (POLICIES) | 6 Months Ended |
Jun. 30, 2015 | |
ACCOUNTING POLICIES | |
Mineral Exploration and Development Costs | Mineral Exploration and Development Costs The Company accounts for mineral exploration and development costs in accordance with ASC Topic 930 Extractive Activities - Mining |
Inventories | Inventories The recovery of gold from certain oxide ores is achieved through the heap leaching process. Under this method, mineralized material is placed on a leach pad where it is treated with a chemical solution, which dissolves the gold contained in the material. The resulting pregnant solution is further processed in a plant where gold is recovered. The Company records ore on leach pad, ore in carbon column in process and gold doré, at average production cost per gold ounce, less provisions required to reduce inventory to net realizable value. Production costs include the cost of mineralized material processed; direct and indirect materials and consumables; direct labor; repairs and maintenance; utilities; depreciation and amortization of property, equipment, and mineral properties; and mine administrative expenses. Revenue from the sale of silver is accounted for as by-product and is deducted from production costs. Costs are removed from ore on leach pads as ounces are recovered based on the average cost per recoverable ounce of gold on the leach pad. Estimates of recoverable gold on the leach pad are calculated from the quantities of material placed on the leach pad (measured tons added to the leach pad), the grade of material placed on the leach pad (based on assay data) and an estimated recovery percentage (based on ore type). The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time. As of June 30, 2015, the Company had a limited operating history and actual results only over that short period of time. Due to this, estimates of recoverable gold are based primarily on initial tests and only limited refinements. Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis. The ultimate recovery of gold from a leach pad will not be known until the leaching process is concluded. The quantification of material inventory on the leach pad is based on estimates of the quantities of gold at each balance sheet date that the Company expects to recover during the next 12-18 months. |
Property and Equipment, Policy | Property and Equipment |
Mineral Properties and Leases,Policy | Mineral Properties and Leases The Company capitalizes costs for acquiring mineral properties and ongoing mineral lease payments and expenses costs to maintain mineral rights. Upon reaching the production stage, the capitalized costs are amortized using the units-of-production method on the basis of periodic estimates of ounces to be produced. Mineral properties are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment. If a property is abandoned or sold, its capitalized costs are charged to operations. Mine property costs include the building of infrastructure of the processing facility including the heap leach pad and the carbon in column process plant along with water wells, roads and fencing. These costs are capitalized until ready for their intended use at which time they are amortized using the units of production method based on projected units of production which approximates the estimated life of the facility. Additionally, interest is capitalized to mine development until such assets are ready for their intended use. The Company does not have proven and probable reserves at this time. See Note 6. |
Reclamation and Remediation,Policy | Reclamation and Remediation The Companys operations have been, and are subject to, standards for mine reclamation that have been established by various governmental agencies. The Company records the fair value of an asset retirement obligation as a liability in the period in which the Company incurs a legal obligation for the retirement of tangible long-lived assets. A corresponding asset is also recorded and depreciated over the life of the asset. After the initial measurement of the asset retirement obligation, the liability will be adjusted at the end of each reporting period to reflect changes in the estimated future cash flows underlying the obligation. Determination of any amounts recognized upon adoption is based upon numerous estimates and assumptions, including future retirement costs, future inflation rates and the credit-adjusted risk-free interest rates. For non-operating properties, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Such costs are based on managements estimate of amounts expected to be incurred when the remediation work is performed. |
Earnings Per Share, Policy | Earnings (loss) Per Share Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. At June 30, 2015 and June 30, 2014, common stock equivalents outstanding are as follows: June 30, 2015 June 30, 2014 Convertible debt 857,143 857,143 Convertible preferred stock 27,718,333 27,718,333 Total 28,575,476 28,575,476 However, the diluted earnings (loss) per share are not presented because its effect would be anti-dilutive due to the Companys recurring losses. |
Going Concern Policy | Going Concern As shown in the accompanying financial statements, the Company has an accumulated deficit incurred through June 30, 2015, which raises substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. The final permit needed to begin development of the Kiewit property was received in January 2014 and development began in February 2014. Construction at the site was substantially complete at September 30, 2014. The Company will need significant funding to continue operations and increase development through the next fiscal year. This funding is expected to come via sales revenues, but the timing and amount of capital requirements will depend on a number of factors, including demand for products and services, metals pricing and the availability of opportunities for expansion through affiliations and other business relationships. |
Reclassification, Policy | Reclassifications Certain reclassifications have been made to conform data from prior periods to the current presentation. These reclassifications have no effect on the results of operations or stockholders deficit. |
New Accounting Pronouncement | New Accounting Pronouncement In July 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-11 Simplifying the Measurement of Inventory |
Common Stock Equivalents Outsta
Common Stock Equivalents Outstanding (TABLE) | 6 Months Ended |
Jun. 30, 2015 | |
Common Stock Equivalents Outstanding | |
Common Stock Equivalents Outstanding | . At June 30, 2015 and June 30, 2014, common stock equivalents outstanding are as follows: June 30, 2015 June 30, 2014 Convertible debt 857,143 857,143 Convertible preferred stock 27,718,333 27,718,333 Total 28,575,476 28,575,476 |
INVENTORIES (TABLES)
INVENTORIES (TABLES) | 6 Months Ended |
Jun. 30, 2015 | |
INVENTORIES (TABLES): | |
Schedule of Inventory, Current | The following table provides the components of inventories: June 30, 2015 December 31, 2014 Ore on leach pad $ 1,951,547 $ 1,508,761 Carbon column in process 169,905 211,115 Dore finished goods 8,640 25,501 Total $ 2,130,092 $ 1,745,377 |
SUMMARY OF PROPERTY,EQUIPMENT A
SUMMARY OF PROPERTY,EQUIPMENT AND ACCUMLATED DEPRECIATION (TABLES) | 6 Months Ended |
Jun. 30, 2015 | |
SUMMARY OF PROPERTY,EQUIPMENT AND ACCUMLATED DEPRECIATION (TABLES) | |
SUMMARY OF PROPERTY,EQUIPMENT AND ACCUMLATED DEPRECIATION (TABLES) | The following is a summary of property, equipment, and accumulated depreciation at June 30, 2015 and December 31, 2014: June 30, December 31, 2015 2014 Equipment $ 3,090,105 $ 1,465,827 Furniture and fixtures, temporary housing 10,781 10,781 Electronic and computerized equipment 52,874 19,011 Vehicles 56,830 65,330 3,210,590 1,560,949 Less accumulated depreciation (548,670) (357,983) 2,661,920 1,202,966 Kiewit property facilities 2,331,520 2,153,411 Less accumulated amortization (290,548) (166,221) 2,040,972 1,987,190 Total $ 4,702,892 $ 3,190,156 |
MINERAL PROPERTIES AND INTEREST
MINERAL PROPERTIES AND INTERESTS (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
MINERAL PROPERTIES AND INTERESTS (Tables) | |
Mineral Properties and Interests | Mineral properties and interests as of June 30, 2015 and December 31, 2014 are as follows: June 30, 2015 December 31, 2014 Initial lease fee Yellow Hammer Site $ 175,000 $ 175,000 Kiewit, Cactus Mill and all other sites 600,000 600,000 Total 775,000 775,000 Asset retirement obligation Kiewit Site 687,475 687,475 Kiewit Exploration 10,780 10,780 Cactus Mill 16,133 16,133 Total 714,388 714,388 Accumulated amortization (219,796) (116,501) Total $ 1,269,592 $ 1,372,887 |
NOTE PAYABLE - RELATED PARTY (T
NOTE PAYABLE - RELATED PARTY (TABLES) | 6 Months Ended |
Jun. 30, 2015 | |
NOTE PAYABLE - RELATED PARTY (TABLES): | |
NOTE PAYABLE DUE TO DMRJ | The total due to DMRJ at June 30, 2015 and December 31, 2014 is as follows: June 30, December 31, 2015 2014 Principal Current $ 3,481,357 $ 2,124,348 Long-term 8,559,135 9,665,144 Total 12,040,492 11,789,492 Interest payable - current 4,268,643 3,375,652 $ 16,309,135 $ 15,165,144 |
NOTE PAYABLE - RELATED PARTY (TABLES) | The Twelfth Amendment was entered into on June 5, 2015 and allowed for additional funding in the amount of $250,000 which was received by the Company in May and June 2015 and also established new minimum principal and interest payment dates beginning in August 2015 as follows: August 31, 2015 $ 500,000 November 30, 2015 1,000,000 December 31, 2015 4,000,000 February 28, 2016 1,500,000 May 31, 2016 750,000 August 31, 2016 3,000,000 November 30, 2016 3,000,000 Total $ 13,750,000 |
NOTE PAYABLE - EQUIPMENT (TABLE
NOTE PAYABLE - EQUIPMENT (TABLES) | 6 Months Ended |
Jun. 30, 2015 | |
NOTE PAYABLE - EQUIPMENT (TABLES): | |
NOTE PAYABLE - EQUIPMENT (TABLES) | The following is a summary of the equipment notes payable: June 30, 2015 December 31, 2014 Note payable to Komatsu Financial, collateralized by a Komatsu Telehandler lift, due in 48 monthly installments of $2,424 including interest at 4.99%. $ 101,305 $ - Note payable to CAT Financial, collateralized by five pieces of used mining equipment, including three haul trucks, a loader and a grader, due in 36 monthly installments of $49,242 including interest at 4.68%. 1,521,998 - Note payable to HCE Funding, collateralized by a Perkins Elmer AA machine, due in one installment of $7,600 and 22 installments of $520, including interest at 5.00%. 8,412 - Note payable to Komatsu Financial, collateralized by a Komatsu D275 dozer, due in one monthly installment of $21,000 and 47 monthly installments of $11,594 including interest at 2.99%. 430,398 492,955 Note payable to Komatsu Financial, collateralized by a Komatsu PC400 Excavator, due in 24 monthly installments of $1,629 including interest at 1.75%. 16,105 25,604 2,078,218 518,559 Current portion (705,633) (146,171) Long Term portion $ 1,372,585 $ 372,388 Principal payments are as follows for the twelve months ended June 30, 2016 $ 705,633 2017 716,548 2018 597,706 2019 58,331 Total $ 2,078,218 |
CHANGES IN RECLAMATION LIABILIT
CHANGES IN RECLAMATION LIABILITY (TABLES) | 6 Months Ended |
Jun. 30, 2015 | |
CHANGES IN RECLAMATION LIABILITY (TABLES) | |
CHANGES IN RECLAMATION LIABILITY (TABLES) | Changes in the reclamation liability for the periods ended June 30, 2015 and December 31, 2014 are as follows: Six months ended June 30, 2015 Year ended December 31, 2014 Reclamation and remediation liability, beginning of period $ 740,268 $ 69,920 Obligation incurred - 656,567 Accretion expense 29,966 13,781 Reclamation and remediation liability, end of period $ 770,234 $ 740,268 |
STOCK REDEEMABLE WITH GOLD PR27
STOCK REDEEMABLE WITH GOLD PROCEEDS (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
STOCK REDEEMABLE WITH GOLD PROCEEDS {2} | |
STOCK REDEEMABLE WITH GOLD PROCEEDS | These amounts are expected to be paid to shareholders in 2015. Conversion Shares Due based on $1,000 Gold Price Additional Amount Based on Actual Gold Sales Price Total Due to Shareholders at June 30, 2015 Original Conversion Liability 130,000 Less Conversion: December 31, 2014 48,000 8,609 56,609 June 30, 2015 82,000 12,797 94,797 Total $ 130,000 $ 21,406 $ 151,406 Remaining balance to be redeemed at June 30, 2015 $ - |
Capital Stock Common Stock (Det
Capital Stock Common Stock (Details) - Jun. 30, 2015 - shares | Total |
Capital Stock Common Stock | |
The Company is authorized to issue shares of common stock | 100,000,000 |
Percentage of holders of common stock who have option to elect all of the directors of the Company | 50.00% |
Capital Stock 2014 Activity (De
Capital Stock 2014 Activity (Details) - Dec. 31, 2014 - USD ($) | Total |
Capital Stock 2014 Activity | |
Company issued a total of shares of stock to the note holders of the convertible debt for interest expense | 117,854 |
Fair value of shares of stock issued to the note holders of the convertible debt for interest expense | $ 82,500 |
Company was required to issue an additional shares of common stock to these debt holders | 300,000 |
Fair value of additional shares of common stock issued to these debt holders | $ 12,000 |
Per share value of additional shares issued | $ 0.04 |
Fair value of common shares per share | $ 0.04 |
Company issued shares to its president, Rick Havenstrite as a management incentive | 3,137,066 |
Havenstrite agreed to forgive accrued but unpaid wages as a part of the agreement | $ 40,000 |
Fair value of the shares issued to its president, Rick Havenstrite | 125,483 |
Amount recognized as officers and directors fees during the year | 85,483 |
Amount recognized as a reduction of accrued officer wages. | $ 40,000 |
Capital Stock Preferred Stock (
Capital Stock Preferred Stock (Details) - Feb. 19, 2014 - USD ($) | Total |
Capital Stock Preferred Stock | |
Series of monthly term loan advances totaling a maximum of amount over five months | $ 5,700,000 |
Company issued to DMRJ Group shares of Series B Preferred Stock | 249,603 |
The conversion rate of common stock for each share of Series B Preferred Stock | $ 100 |
Preferred Stock (Details)
Preferred Stock (Details) - shares | 3 Months Ended | |
Jun. 30, 2014 | Mar. 31, 2014 | |
Preferred Stock | ||
Financing expense in the amount recorded in association with this share issuance | 0 | 1,248,015 |
Estimated per share fair value of the equivalent common shares | 0.04 | 0.05 |
Company revised the estimated fair value of the equivalent common shares | 998,412 | 0 |
Reduction to financing expense | 249,603 | 0 |
DMRJ beneficially owns approximately with this share issuance of the Company | 67.00% | 0.00% |
Shares of common stock DMRJ beneficially owns approximately | 27,718,333 | 0 |
Inventory (Details)
Inventory (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Inventory Details | ||
Ore on leach pad | $ 1,951,547 | $ 1,508,761 |
Carbon column in process | 169,905 | 211,115 |
Dore finished goods | 8,640 | 25,501 |
Total Inventories | $ 2,130,092 | $ 1,745,377 |
Property And Equipment (Details
Property And Equipment (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Property And Equipment | ||
Equipment | $ 3,090,105 | $ 1,465,827 |
Furniture and fixtures, temporary housing | 10,781 | 10,781 |
Electronic and computerized equipment | 52,874 | 19,011 |
Vehicles | 56,830 | 65,330 |
Net Property and Equipment | 3,210,590 | 1,560,949 |
Less accumulated depreciation | (548,670) | (357,983) |
Gross Property and Equipment | 2,661,920 | 1,202,966 |
Kiewit property facilities | 2,331,520 | 2,153,411 |
Less accumulated amortization | (290,548) | (166,221) |
Net Kiewit property facilities | 2,040,972 | 1,987,190 |
Total Property and Equipment | $ 4,702,892 | $ 3,190,156 |
Mineral Properties And Intere34
Mineral Properties And Interests (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Initial lease fee | ||
Yellow Hammer Site | $ 175,000 | $ 175,000 |
Kiewit, Cactus Mill and all other sites | 600,000 | 600,000 |
Total Initial lease fee | 775,000 | 775,000 |
Asset retirement obligation | ||
Kiewit Site | 687,475 | 687,475 |
Kiewit Exploration | 10,780 | 10,780 |
Cactus Mill | 16,133 | 16,133 |
Total Asset retirement obligation | 714,388 | 714,388 |
Accumulated amortization | (219,796) | (116,501) |
Total Mineral Properties And Interests | $ 1,269,592 | $ 1,372,887 |
Reclamation (Details)
Reclamation (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 | Apr. 30, 2014 | Feb. 20, 2014 |
Reclamation and bond details | ||||
Annual claims fees | $ 155 | $ 0 | $ 0 | $ 0 |
Kiewit reclamation bond in the amount | 0 | 0 | 0 | 1,348,000 |
Asset retirement obligation will be removed and funds received | 0 | 0 | 92,705 | 0 |
Total reclamation bonds posted amounted | $ 1,416,862 | $ 1,412,804 | $ 0 | $ 0 |
Convertible Debt Promissoy Note
Convertible Debt Promissoy Notes (Details) - Nov. 18, 2009 - USD ($) | Total |
Convertible Debt Promissoy Notes | |
Convertible promissoy notes to two minority shareholders | $ 600,000 |
Interest rate of convertible promissoy notes | 15.00% |
Monthly interest payable | $ 7,500 |
Conversion price per share | $ 1.50 |
Reduced conversion price | $ 0.70 |
Convertible common stock shares | 857,143 |
Convertible Debt Agreement (Det
Convertible Debt Agreement (Details) - USD ($) | Jun. 30, 2015 | Nov. 30, 2014 | Jun. 30, 2014 | Nov. 30, 2013 | Nov. 30, 2012 |
Convertible Debt Agreement | |||||
Additional shares of common stock issued to the debt holders | 0 | 300,000 | 0 | 300,000 | 300,000 |
Accrued interest payable | $ 52,500 | $ 0 | $ 0 | $ 0 | $ 0 |
Investment Agreement with DMRJ
Investment Agreement with DMRJ Group (Details) - Jun. 30, 2015 - shares | Total |
Investment Agreement with DMRJ Group | |
DMRJ beneficially owns approximately of the Company (Percentage) | 67.00% |
DMRJ beneficially owns approximately of the Company (Shares) | 27,718,333 |
Summary of total dues to DMRJ (
Summary of total dues to DMRJ (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Summary of total dues to DMRJ | ||
Current Principal amount | $ 3,481,357 | $ 2,124,348 |
Long-term Principal amount | 8,559,135 | 9,665,144 |
Total Principal amount | 12,040,492 | 11,789,492 |
Interest payable - current | 4,268,643 | 3,375,652 |
Total due to DMRJ | $ 16,309,135 | $ 15,165,144 |
New minimum payments as per Inv
New minimum payments as per Investment Agreement (Details) | Jun. 30, 2015USD ($) |
New minimum payments as per Investment Agreement | |
Minimum payments due on August 31, 2015 | $ 500,000 |
Minimum payments due on November 30, 2015 | 1,000,000 |
Minimum payments due on December 31, 2015 | 4,000,000 |
Minimum payments due on February 28, 2016 | 1,500,000 |
Minimum payments due on May 31, 2016 | 750,000 |
Minimum payments due on August 31, 2016 | 3,000,000 |
Minimum payments due on November 30, 2016 | 3,000,000 |
Total Minimum payments due | $ 13,750,000 |
DMRJ Group 2015 Activity (Detai
DMRJ Group 2015 Activity (Details) | Jun. 30, 2015USD ($) |
DMRJ Group 2015 Activity | |
Additional funding amount | $ 250,000 |
Equipment purchase is anticipated to reduce crushing costs per month | 100,000 |
New funding | $ 675,000 |
DMRJ Group 2014 Activity (Detai
DMRJ Group 2014 Activity (Details) - USD ($) | Feb. 19, 2014 | Jan. 31, 2014 |
DMRJ Group 2014 Activity | ||
Pursuant to the Ninth Amendment to the Investment Agreement, a third term loan advance was taken in the amount | $ 25,000 | |
The Tenth Amendment provides for funding of mining operations through a series of advances totaling a maximum | $ 5,700,000 | |
Total of amount drawn through a series of advances | $ 5,500,000 | |
The interest rate on the loan balance was reduced from 24% to | 15.00% | |
First Monthly Term Loan, used in part to fund the posting of the reclamation bond associated with the Kiewit Project Large Mining Permit | $ 2,000,000 | |
Total amount drawn in connection with the Tenth Amendment Monthly Term Loan Advances | $ 5,525,000 | |
In addition, Company issued to DMRJ Group shares of Series B Preferred Stock | 249,603 |
NOTES PAYABLE EQUIPMENT (Detail
NOTES PAYABLE EQUIPMENT (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
NOTES PAYABLE EQUIPMENT Details | ||
Note payable to Komatsu Telehandler lift | $ 101,305 | $ 0 |
Note payable to CAT Financial | 1,521,998 | 0 |
Note payable to HCE Funding | 8,412 | 0 |
Note payable to Komatsu D275 dozer | 430,398 | 492,955 |
Note payable to Komatsu PC400 Excavator | 16,105 | 25,604 |
Total note payable Komatsu Financial | 2,078,218 | 518,559 |
Less: Current portion | (705,633) | (146,171) |
Long Term portion | $ 1,372,585 | $ 372,388 |
Komatsu Financial Parenthetical
Komatsu Financial Parentheticals (Details) - Jun. 30, 2015 - USD ($) | Total |
Komatsu Financial Parentheticals | |
Komatsu Telehandler lift, due per month in 48 monthly installments | $ 2,424 |
Komatsu Telehandler lift interest rate | 4.99% |
CAT Financial due per month in 36 monthly installments | $ 49,242 |
CAT Financial interest rate | 4.68% |
HCE Funding, due in one monthly installment | $ 7,600 |
HCE Funding, due per month in 22 monthly installments | $ 520 |
HCE Funding interest rate | 5.00% |
Komatsu D275 dozer, due in one monthly installment | $ 21,000 |
Komatsu D275 dozer, due per month in 47 monthly installments | $ 11,594 |
Komatsu D275 dozer interest rate | 2.99% |
Komatsu PC400 Excavator, due per month in 24 monthly installments | $ 1,629 |
Komatsu PC400 Excavator interest rate | 1.75% |
Summary of the equipment notes
Summary of the equipment notes payable (Details) | Jun. 30, 2015USD ($) |
Summary of the equipment notes payable | |
Equipment notes payable for the twelve months ended 6/30/2016 | $ 705,633 |
Equipment notes payable for the twelve months ended 6/30/2017 | 716,548 |
Equipment notes payable for the twelve months ended 6/30/2018 | 597,706 |
Equipment notes payable for the twelve months ended 6/30/2019 | 58,331 |
Total Equipment notes payable | 2,078,218 |
Balance of accounts payable relating to lease costs | $ 150,375 |
Changes in the reclamation liab
Changes in the reclamation liability for the years as follows (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015 | Dec. 31, 2014 | |
Changes in the reclamation liability for the years as follows | ||
Reclamation and remediation liability, beginning of year | $ 740,268 | $ 69,920 |
Obligation incurred | 0 | 656,567 |
Accretion expense | 29,966 | 13,781 |
Reclamation and remediation liability, end of year | $ 770,234 | $ 740,268 |
Present value of the asset retirement obligation calculated using the credit adjusted risk free interest rate from 8% to | 10.00% | 0.00% |
Projected mine lives from 5 years to | 12 | 0 |
Shares redeemed for cash genera
Shares redeemed for cash generated from the sale of gold (Details) - USD ($) | Dec. 31, 2012 | Sep. 30, 2012 |
Shares redeemed for cash generated from the sale of gold | ||
An equity financing was initiated in September 2012 for the sale of shares of our common stock | 0 | 1,150,000 |
Shares of the Company's common stock issued under the terms of this offering | 130,000 | 0 |
Proceeds of common stock issued under the terms of this offering | $ 130,000 | $ 0 |
Percentage of theproceeds of gold produced during the first year of production will be allocated to fund this option | 5.00% | 0.00% |
Base price per ounce used for conversion | $ 1,000 | $ 0 |
Percentage of option to convert their shares for cash from gold sales | 5.00% | 0.00% |
Amounts Due To Shareholders (De
Amounts Due To Shareholders (Details) {Stockholder Equity} - 6 months ended Jun. 30, 2015 - USD ($) | Total |
Conversion Shares Due based on $1,000 Gold Price | |
Opening balance to be redeemed | 0 |
Original Conversion Liability | $ 130,000 |
Less Conversion as of December 31, 2014 | 48,000 |
Less Conversion as of June 30, 2015 | 82,000 |
Total convertiable liability | $ 130,000 |
Remaining balance to be redeemed | 0 |
Additional Amount Based on Actual Gold Sales Price | |
Opening balance to be redeemed | 0 |
Original Conversion Liability | $ 0 |
Less Conversion as of December 31, 2014 | 8,609 |
Less Conversion as of June 30, 2015 | 12,797 |
Total convertiable liability | $ 21,406 |
Remaining balance to be redeemed | 0 |
Total Due to Shareholders | |
Opening balance to be redeemed | 0 |
Original Conversion Liability | $ 0 |
Less Conversion as of December 31, 2014 | 56,609 |
Less Conversion as of June 30, 2015 | 94,797 |
Total convertiable liability | $ 151,406 |
Remaining balance to be redeemed | 0 |
Commitments Mining Properties (
Commitments Mining Properties (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015 | Jun. 30, 2015 | Dec. 31, 2009 | |
Commitments Mining Properties | |||
Annual payments required to the Trust | $ 0 | $ 0 | $ 50,000 |
Percentage of required to pay of net smelter royalty | 0.00% | 0.00% | 6.00% |
Percentage of net smelter royalty on gold and silver minimum | 0.00% | 0.00% | 2.00% |
Percentage of net smelter royalty on gold and silver maximum | 0.00% | 0.00% | 15.00% |
Percentage of required to pay of net smelter royalty on base metals | 0.00% | 0.00% | 4.00% |
Annual payments to Clifton Mining per each of the three locations | $ 0 | $ 0 | $ 50,000 |
Royalty expense | $ 50,276 | $ 123,289 | $ 0 |
Commitments Employment Agreemen
Commitments Employment Agreements (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 | Sep. 30, 2010 |
Commitments Employment Agreements | |||
Base salary or fees to CEO and President | $ 0 | $ 0 | $ 120,000 |
Amount owed by the company to the CEO as accrued compensation | 253,000 | 247,500 | 0 |
Amount owed by the company to the CEO as accrued consulting payable | 0 | 15,000 | 0 |
Accrued compensation due to Rick Havenstrite | 15,000 | 0 | 0 |
Accrued compensation due to Marianne Havenstrite | 42,300 | 0 | 0 |
Compensation to be paid pursuant to the termination agreements | $ 18,000 | $ 0 | $ 0 |
Shares of common stock as a management incentive to Rick Havenstrite | 3,137,066 | 0 | 0 |
Havenstrite agreed to forgive in accrued compensation | $ 40,000 | $ 0 | $ 0 |
Related party payments (Details
Related party payments (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Related party payments | ||
Company recognized rent expense for rental of office space and a vehicle to be paid to RMH Overhead, LLC | $ 3,000 | $ 3,000 |
Amount paid to RMH Overhead, LLC as expense | 6,000 | 5,000 |
Total remaining in accounts payable | 13,850 | 13,850 |
Company purchased equipment from RMH Overhead, LLC | 3,500 | 16,500 |
Company recognized wage expense in the amount of for office and accounting services performed by Marianne Havenstrite | 13,846 | 5,538 |
The unpaid amounts are reflected in accrued liabilities for office and accounting services | 42,300 | 28,500 |
Company recognized exploration expense for geological services provided by Stuart Havenstrite | 3,105 | 12,827 |
The unpaid amounts are reflected in accounts payable for geological services | 18,276 | 21,649 |
Payments were made to other family members for accounting and engineering services | $ 42,001 | $ 22,892 |