UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
ANNUAL REPORT
FISCAL YEAR ENDED 8/31/2005
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ________
Commission File Number: 000-50486
TOURNIGAN GOLD CORPORATION
(Exact name of Registrant as specified in its charter)
Yukon, Canada
(Jurisdiction of incorporation or organization)
700 West Pender Street, #301, Vancouver, British Columbia, Canada V6C 1G8
(Address of principal executive offices)
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Shares, without par value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.
67,826,513
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days.
Yes ___ Noxxx
Indicate by check mark which financial statement item the registrant has elected to follow: Item 17xxx Item 18 ___
Page 1 of 134
Index to Exhibits on Page 96
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TOURNIGAN GOLD CORPORATION
FORM 20-F ANNUAL REPORT
FISCAL 2005 ENDED 8/31/2005
TABLE OF CONTENTS
Introduction 3
Glossary 4
PART I
Item 1. Identity of Directors, Senior Management and Advisors 10
Item 2. Offer Statistics and Expected Timetable 10
Item 3. Key Information 10
Item 4. Information on the Company 20
Item 5. Operating and Financial Review and Prospects 40
Item 6. Directors, Senior Management and Employees 65
Item 7. Major Shareholders and Related Party Transactions 83
Item 8. Financial Information 85
Item 9. The Offer and Listing 85
Item 10. Additional Information 90
Item 11. Quantitative and Qualitative Disclosures About Market Risk 91
Item 12. Description of Securities Other Than Equity Securities 91
PART II
Item 13. Default, Dividend Arrearages and Delinquencies 92
Item 14. Material Modifications to the Rights of
Security Holders and Use of Proceeds 92
Item 15. Controls and Procedures 93
Item 16. Reserved 93
Item 16A. Audit Committee Financial Expert 93
Item 16B. Code of Ethics 93
Item 16C. Principal Accountant Fees and Services 93
Item 16D. Exemptions from the Listing Standards for Audit Committees 94
ITEM 16E Purchases of Equity Securities by
the Issuer and Affiliated Purchasers 94
PART III
Item 17. Financial Statements 95
Item 18. Financial Statements 95
Item 19. Exhibits 96
Financial Statements 97
Signature Page 130
Exhibits 131
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INTRODUCTION
Tournigan Gold Corporation is organized under the laws of Yukon, Canada. In this Annual Report, the “Company”, “Tournigan”, “we”, “our” and “us” refer to Tournigan Gold Corporation and our subsidiaries (unless the context otherwise requires). We refer you to the actual corporate documents for more complete information than may be contained in this Annual Report. Our principal corporate offices are located at 700 West Pender Street, #301, Vancouver, British Columbia, Canada V6C 1G8. Our telephone number is 604-683-8320.
We file reports and other information with the Securities and Exchange Commission located at 450 Fifth Street N.W., Washington, D.C. 20549; you may obtain copies of our filings with the SEC by accessing their website located atwww.sec.gov. Further, we also file reports under Canadian regulatory requirements on SEDAR; you may access our reports filed on SEDAR by accessing their website atwww.sedar.com.
BUSINESS OF TOURNIGAN GOLD CORPORATION
Tournigan Gold Corporation (the “Company”) is a mineral exploration company. Its main focus is on exploring three mineral projects in Europe: the Kremnica gold project and the Jahodna uranium project in the Slovak Republic; and the Curraghinalt gold project in Northern Ireland.
FINANCIAL AND OTHER INFORMATION
In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (“CDN$” or “$”). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 20-F contains forward-looking statements. Forward-looking statements may be identified by the use of words like “plans”, “expects”, “aims”, “believes”, “projects”, “anticipates”, “intends”, “estimates”, “will”, “should”, “could” and similar expressions in connection with any discussion, expectation, or projection of future operating or financial performance, events or trends. Forward-looking statements are based on management's current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from these expectations/assumptions due to changes in global political, economic, business, competitive, market, regula tory and other factors. We undertake no obligation to publicly update or review any forward-looking information, whether as a result of new information, future developments or otherwise.
These factors include, but are not limited to, the fact that the Company is in the exploration stage, will need additional financing to develop its properties and will be subject to certain risks since its prospects are located in Northern Ireland and the Slovak Republic, which factors are set forth in more detail in the sections entitled “Risk Factors” in Item #3D, “Business Overview” in ITEM #4B, and “Operating and Financial Review and Prospects” at ITEM #5.
3
GLOSSARY
Adit: A horizontal or nearly horizontal tunnel made for exploration or mining.
Alteration zones: Portions of bedrock where the mineralogic composition of the rock has been changed by physical or chemical means, especially by the actions of hydrothermal solutions.
Andesite: A dark-colored, fine-grained volcanic rock.
Anomalies: Deviations from uniformity or regularity in geophysical or geochemical quantities.
Anomalous values: Results of geophysical or geochemical testing which deviate from the expected or calculated value.
Archean: Rocks formed during the earliest part of Precambrian time, prior to 2,500 million years before present.
Au: Gold.
Base metal:Any of the more common and more chemically active metals, e.g. lead, copper and zinc.
Bedrock conductors: Portions of consolidated earth material which offers a low resistance to the passage of an electric current.
Breccia: Rock composed of sharp-angled fragments embedded in a fine-grained matrix.
Channel Sample: A sample taken continuously over a specified distance.
Cross-cut: A mining tunnel driven perpendicular to the dominant trend of a vein or ore bearing structure.
Cut-off grade: The lowest grade of mineralized material considered economic to mine and process; used in the calculation of reserves.
Deposit: A mineralized body which has been physically delineated by sufficient drilling, trenching, and/or underground work, and found to contain a sufficient average grade of metal or metals to warrant further exploration and/or development expenditures. Such a deposit does not qualify as a commercially mineable ore body or as containing reserves of ore, unless final legal, technical, and economic factors are resolved.
Diamond drill holes: A drilling method whereby rock is drilled with a diamond impregnated, hollow drilling bit which produces a continuous, in-situ record of the rock mass intersected in the form of solid cylinders of rock which are referred to as core.
Differentiated: A natural process during cooling of rocks where by one type of rock can solidify first followed by another kind.
Drive: A mining tunnel driven parallel to the dominant trend of a vein or ore bearing structure.
Electromagnetic: Of, produced by or having to do with magnetic fields associated with currents artificially or naturally maintained in the sub-surface of the earth.
Energy metal: Commonly uranium, known as such because of its use to generate electricity in nuclear-powered generating plants.
Feasibility study: A definitive engineering estimate of all costs, revenues, equipment requirements, and production levels likely to be achieved if a mine is developed. The study is used to define the economic viability of a project and to support the search for project financing.
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Felsic: An igneous rock made up of light colored minerals; composed primarily of feldspar and silica.
Float: Rock this is not outcrop and has been transported some distance from its source
g/t; g Au/t: Grams per metric tonne; grams gold per metric tonne.
-genic: Meaning suitable to or pertaining to, e.g. syngenetic, meaning a ore deposit formed contemporaneously with the enclosing rocks
Geochemistry: The measurement of trace elements in naturally occurring rocks, soils and stream sediments as a means of detecting mineralization.
Geochemical sampling: A mineral exploration method whereby samples of soil, stream sediments, rocks, etal. are collected in a systematic way and analyzed for a suite of elements.
Geophysical: Relating to the physical properties, e.g. magnetic, seismic,et.al. of the earth and rock materials.
Gold or Au: A gold metallic element that is ductile and very malleable. This precious metal has industrial applications a well as being monetary value and used in jewelry.
Grade: The amount of valuable mineral in each tonne of ore, expressed as ounces per ton or grams per tonne for precious metal and as a percentage by weight for other metals.
Grab Sample: Sample of selected rock or saprolite collected at random from within a restricted area of interest.
Grid: A systematic array of points or lines; e.g. a rectangular pattern of pits, boreholes or data collection locations used in mineral exploration.
Ground magnetic survey: A mineral exploration method involving the use of hand held magnetometer instruments which measure the intensity of the earth’s magnetic field. The survey usually takes the form of a regular pattern of parallel lines designed to cover the survey area with the objective of identifying magnetic anomalies, which may be indicative of hidden mineralization.
Hanging wall: The overlying side of a fault, ore body, or mine working, in particular the wall rock above a fault or inclined vein.
Heap leach: A relatively inexpensive processing method based on hydrometallurgical technology, whereby crushed rock is placed on an impermeable liner and is sprayed with a cyanide solution. The resulting gold bearing liquid is collected and the gold is recovered employing conventional technologies culminating in smelting and doré production.
Hectare: A unit of area in the metric system equal to 100 acres, or 10,000 square meters, and the equivalent of 2.471 acres in British Imperial and U.S. Customary measure.
Host rock: A volume of rock within which the ore body occurs.
Hydrogeological studies: Studies concerning the occurrence, movement and condition of ground water.
Hydrothermal solutions: Heated water, with or without demonstrable association with igneous processes.
In-situ-resource: A tonnage of mineralized rock of intrinsic economic interest, the grades and limits of which are known with a specified degree of knowledge, expressed in terms of the material as it exists in the ground prior to mining.
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IP (induced polarization): A geophysical technique for detecting buried disseminated sulphides through the application to the ground of electrical currents.
IP survey: Systematic completion of IP on a grid over the area of interest.
Intrusive: Rock mass formed below the earth’s surface from magma, which has intruded into a pre-existing rock mass.
Lead or Pb: A soft, bluish metal that is ductile, heavy and acid resistant.
Limestone: A rock composed principally of calcium carbonate, used as an essential ingredient in making cement.
Lithological contact: A boundary between two different rock types.
Lode: A tabular or vein-like deposit of valuable minerals between well defined walls of rock.
Mafic: An igneous rock composed chiefly of one or more ferromagnesian (containing iron and magnesium), dark colored minerals.
Mafic-ultramafic: A dark colored intrusive rock.
Magnetic:Having the property of attracting iron or steel, like a magnet.
Metamorphosed: A rock mass which has been subjected to metamorphism. Metamorphism is a geological process where the original mineral composition of a rock is changed or metamorphosed in response to local or regional scale changes in temperature, pressure and the action of chemically active fluids.
Metamorphism: A natural process of heat and compression that changes rocks.
Metasediments: Sedimentary rocks, which are rocks formed out of the consolidation of sediment settled out of water, ice or air, which have been metamorphosed.
Mineralization: The process by which a mineral or minerals, usually metals, are introduced into a rock, resulting in an economically valuable or potentially valuable deposit. Also refers to mineral-bearing rock that has been identified by widely spaced drilling.
Mineralized material: A mineralized volume of rock which has been delineated by appropriately spaced drilling and/or underground sampling to support a sufficient tonnage and average grade of metals to warrant further exploration. Such a deposit does not qualify as a reserve, until a comprehensive evaluation based upon unit cost, grade, recoveries, and other material factors conclude legal and economic feasibility.
NI 43-101:Canadian National Instrument 43-101 on Standards of Disclosure for Mineral Projects.
Net Smelter Return: A royalty payment made by a producer of metals based on gross mineral production from the property, less deductions of certain limited costs including smelter, refining, transportation and insurance costs.
Nickel or Ni: A white metallic metal, very malleable and ductile, largely used in alloys because of its corrosion resisting property.
NSR: Net smelter return.
Ore: Rock that contains one or more minerals or metals, at least one of which has commercial value and which can be recovered at a profit.
Ore body: A continuous volume of mineralized material which may be economic and feasible to mine.
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Outcrop: Bedrock that is exposed at surface, and is not covered by soil or other material.
Overburden: Barren rock material, usually unconsolidated, overlying a mineral deposit and which must be removed prior to mining.
Palladium or Pd: A silver-white metallic chemical element. The metal and its alloys is used in electrical contacts, precision instruments and jewelry and as a catalyst in the chemical industry particularly for automobile exhaust systems to help control pollution.
Platinum or Pt: A silver-white metallic chemical element. It has a high melting point and is resistant to chemical attack. The pure metal and its alloys are used in jewelry, electrical contacts, in laboratories as an acid resistant material and as an important catalyst.
PGM: Platinum group metals, which includes platinum, palladium, ruthenium, osmium, rhodium and iridium.
ppb: Parts per billion.
ppm: Parts per million.
Proterozoic: Rocks formed between 1 and 2.2 billion years ago; the second oldest geological period after Archaean.
Pyrite: A gold colored rock composed of iron and sulphur.
Quartz or qtz: A very common hard rock forming mineral, generally clear to white but can be a variety of colors.
Reserve: That part of a mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination.
Reverse circulation drilling: A type of rotary drilling that uses a double-walled drill pipe with either a hammer or rotary drilling bit. Compressed air, water or other drilling medium is forced down the space between the two pipes to the drill bit and the drilled chips are flushed back up to the surface through the center tube of the drill pipe carrying the sample of rock chips and dust-sized particles to the surface.
Saprolite: Rock that has weathered to clay, but is in place and has not been moved by erosion or other forces.
Schist: A metamorphic rock characterized by a well-developed parallel orientation of more than 50% of the minerals present.
Sediments: Rocks, which are composed of various proportions of clay, silt, sand, gravel and pebbles.
Sedimentary: Formed by the deposition of solid fragmented material that originates from weathering of rocks and is transported from a source to a site of deposition.
Shearing: The resulting action from stresses that cause or tend to cause contiguous parts of a body to slide relatively to each other in a direction parallel to their plane of contact.
Shear zones: Linear areas of weakness along which a failure occurred whereby the portion of mass on one side of the area slides past the portion on the opposite side and which often form conduits for mineralizing fluids.
Silver or Ag: A white metallic element that is ductile, malleable and capable of high polish. This precious metal has major industrial applications in photography, x-ray
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films, electronics and electrical contacts, batteries, brazing alloys, catalysts, mirrors, jewelry and sterling ware.
Stock: An intrusive body that is very approximately circular and generally less than 100m to 200m across.
Stockwork:A mineral deposit in the form of a branching or interlocking network of veinlets.
Stockwork of quartz veins: A crosscutting network of fractures filled with quartz.
Strata: A section of a formation that consist throughout of essentially the same kind of rock.
Stratigraphy: The arrangement of rock strata, especially as to geographic position and chronologic order of sequence.
Strike: Geological measurement of the direction of a horizontal line on the surface of the bed.
Stripping ratio: Ratio of waste to ore.
Sulphides: A rock whose dominant component is the element sulphur.
Tectonic: Pertaining to the forces involved in, or the resulting structures or features of the large scale architecture of the upper part of the Earth’s crust.
Tectonized: A rock mass that has been severally modified by folding and/or faulting.
Tertiary: That portion of the geologic sedimentary section younger than the Cretaceous and older than the Quaternary ranging in age from approximately 55 million to 2 million years old.
Ton: Short ton (2,000 pounds).
Tonne: Metric tonne (1,000 kilograms).
Tuff: A rock formed by volcanic fragments generally less than 4 mm.
U3O8: Uranium oxide, commonly referred to as “yellowcake” and the primary form of uranium purchased and sold. Quantities and grade can be converted from uranium metal by multiplying the metal quantity by 1.17.
Vein: Sheet-like body of minerals formed by fracture filling or replacement of the host rock.
VLF (very low frequency): A geophysical technique which utilizes the magnetic components of the electromagnetic field generated by long distance radio transmitters to delineate geological structures.
VHMS (volcanogenic massive sulphide) deposits: Deposits of base and precious metals were formed as layers at the bottom of bodies of water from sulfur-rich material erupted during volcanic activity
Volcanic: Pertaining to the activities, structures or rock types of a volcano.
Zinc or Zn: A bluish-white metallic element resistant to atmospheric corrosion.
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CONVERSION TABLE
The following table sets forth certain standard conversions from Standard Imperial units to the International System of Units (or metric units).
To Convert From | To | Multiply By |
Feet Meters Miles Kilometers Acres Hectares Grams Ounces (troy) Tonnes Short tons Grams per tonne Ounces (troy) per tonne | Meters Feet Kilometers Miles Hectares Acres Ounces (troy) Grams Short tons Tonnes Ounces (troy) Grams per tonne | 0.305 3.281 1.609 0.621 0.405 2.471 0.032 31.103 1.102 0.907 0.029 34.438 |
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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
--- No Disclosure Necessary ---
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.
--- No Disclosure Necessary ---
ITEM 3. KEY INFORMATION.
3.A.1. Selected Financial Data
3.A.2. Selected Financial Data
The selected financial data of the Company for fiscal years ended August 31st 2005/2004/2003 was derived from the financial statements of the Company that have been audited by Manning Elliott LLP (formerly Bedford Curry & Co. Chartered Accountants), independent Chartered Accountants, as indicated in their audit report which is included elsewhere in this Registration Statement. The selected financial data of the Company for Fiscal 2002/2001 ended August 31st was derived from audited financial statements of the Company, not included herein.
The Company’s financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as discussed in footnotes to the financial statements.
The financial statements are the responsibility of the Company’s management. The auditor’s responsibility is to express an opinion on the financial statements based on their audit.
The auditor’s conducted their audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that the auditor plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. The auditor’s report states that they believe that their audits provided a reasonable basis for their opinion.
The selected financial data should be read in conjunction with the financial statements and other financial information included elsewhere in the Registration Statement.
The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain all available funds for use in its operations and the expansion of its business.
Table No. 1 is derived from the financial statements of the Company, which have been prepared in accordance with GAAP. All material numerical differences between Canadian GAAP and United States GAAP (US GAAP), as applicable to the Company, are described in footnotes to the financial statements.
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Table No. 1
Selected Financial Data
(CDN$ in 000, except per share data)
Audited | |||||
Year | Year | Year | Year | Year | |
Ended | Ended | Ended | Ended | Ended | |
8/31/05 | 8/31/04 | 8/31/03 | 8/31/02 | 8/31/01 | |
Canadian GAAP | |||||
Sales Revenue | $0 | $0 | $0 | $0 | $0 |
Operating Loss | ($2905) | ($2311) | ($1427) | ($187) | ($206) |
Loss for the Period | ($2877) | ($2319) | ($1439) | ($102) | ($1267) |
Basic (Loss) per share | ($0.05) | ($0.06) | ($0.16) | ($0.03) | ($0.47) |
Dividends Per Share | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
Weighted Average Shares (000) | 59226 | 35708 | 9186 | 3625 | 2694 |
Period-end Shares O/S (000) | 67827 | 50457 | 13048 | 6898 | 2756 |
Working Capital | 3243 | $3255 | ($1112) | ($202) | ($340) |
Exploration Properties | 9531 | 6074 | 1339 | 9 | 0 |
Long-Term Debt | 0 | 0 | 0 | 0 | 200 |
Capital Stock | 46560 | 40533 | 28747 | 27524 | 27103 |
Shareholders’ Equity | 13187 | 9672 | 255 | 193 | 527 |
Total Assets | 13746 | 10393 | 1665 | 76 | 19 |
US GAAP | |||||
Net Loss | ($5838) | ($4202) | ($2198) | ||
Net Loss Per Share | ($0.10) | ($0.12) | ($0.24) | ||
Weighted Average Shares (000) | 59226 | 35708 | 9186 | ||
Exploration Properties | $2928 | $2849 | $573 | ||
Shareholders’ Equity | $6573 | $6440 | ($503) | ||
Total Assets | $7133 | $7161 | $906 | ||
(1) Fiscal 2004/2003 results reclassified to conform with Fiscal 2005 presentation. (2) Cumulative USGAAP Net Loss since incorporation to 8/31/2005 was ($39,951,555). (3) Under U.S. GAAP, acquisition costs are capitalized and exploration costs are expensed as incurred unless commercial feasibility is established. | |||||
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3.A.3. Exchange Rates
In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).
Table No. 2 sets forth the rate of exchange for the Canadian Dollar at the end of the five most recent fiscal periods ended August 31st, the average rates for the period, and the range of high and low rates for the period. The data for each month during the previous six months is also provided.
For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. The table sets forth the number of Canadian Dollars required under that formula to buy one U.S. Dollar. The average rate means the average of the exchange rates on the last day of each month during the period.
Table No. 2
U.S. Dollar/Canadian Dollar
Average | High | Low | Close | |
January 2006 | 1.17 | 1.14 | 1.14 | |
December 2005 | 1.17 | 1.15 | 1.16 | |
November 2005 | 1.20 | 1.17 | 1.17 | |
October 2005 | 1.19 | 1.17 | 1.18 | |
September 2005 | 1.22 | 1.19 | 1.19 | |
August 2005 | 1.22 | 1.19 | 1.19 | |
Fiscal Year Ended 8/31/2005 | 1.23 | 1.31 | 1.22 | 1.23 |
Fiscal Year Ended 8/31/2004 | 1.30 | 1.39 | 1.27 | 1.31 |
Fiscal Year Ended 8/31/2003 | 1.45 | 1.59 | 1.33 | 1.39 |
Fiscal Year Ended 8/31/2002 | 1.57 | 1.61 | 1.51 | 1.56 |
Fiscal Year Ended 8/31/2001 | 1.53 | 1.58 | 1.47 | 1.55 |
3.B. Capitalization and Indebtedness
3.C. Reasons For The Offer And Use Of Proceeds
--- No Disclosure Necessary ---
3.D. Risk Factors
In addition to the other information presented in this Annual Report, the following should be considered carefully in evaluating the Company and its business. This Annual Report contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include those discussed below and elsewhere in this Annual Report.
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Corporate Risks
Investors may be disadvantaged because Tournigan is incorporated in Canada, which has different laws
The articles/by-laws and the laws of Canada are different from those typical in the United States. The typical rights of investors in Canadian companies differ modestly from those in the United States; refer to the relevant sections which are discussed in Section 9.A.5 and Section 10.B of this Annual Report. Such differences may cause investors legal difficulties.
U.S. investors may not be able to enforce their civil liabilities against Tournigan or its directors, controlling persons and officers
It may be difficult to bring and enforce suits against the Company. The Company is a corporation incorporated under the laws of the Yukon, Canada. A majority of the Company's directors are resident outside the United States, and all or substantial portions of their assets are located outside of the United States. As a result, it may be difficult for U.S. holders of the Company’s common shares to effect service of process on these persons within the United States or to realize in the United States upon judgments rendered against them. In addition, a shareholder should not assume that the courts of Canada (i) would enforce judgments of U.S. courts obtained in actions against the Company or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States, or (ii) would enforce, in original actions, liabi lities against us or such persons predicated upon the U.S. federal securities laws or other laws of the United States.
As a “foreign private issuer”, Tournigan is exempt from the Section 14 proxy rules and Section 16 of the 1934 Securities Act
The submission of proxy and annual meeting of shareholder information (prepared to Canadian standards) on Form 6-K may result in shareholders having less complete and timely data. The exemption from Section 16 rules regarding sales of common shares by insiders may result in shareholders having less data.
Passive Foreign Investment Company (“PFIC”) designation could lead to an adverse tax situation for U.S. investors
U.S. investors in the Company could be subject to U.S. taxation at possibly adverse or higher rates and under a system that might be more complicated and unfamiliar to them. For example, a U.S investor might be subject to special tax rules with respect to any "excess distribution" received and any gain realized from a sale or other disposition (including a pledge) of that holder's shares. Distributions a U.S. investor receives in a taxable year that are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or the holder's holding period for the shares will be treated as excess distributions. For example, under certain circumstances, a U.S. investor who is an individual might be subject to information reporting requirements and backup withholding, currently at a 28% rate, on dividends received on common shares. If a U.S. Holder holds shares in any year in which the Company is a PFIC, that holder might be required to file Internal Revenue Service Form 8621. Refer to ITEM #10.E.
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Risks Related to The Company’s Mineral Exploration Operations
Operating hazards and risks associated with the mining industry could result in a significantly negative effect on the Company
The Company’s operations generally involve a high degree of risk. Hazards such as unusual or unexpected formations and other conditions are involved. The Company’s operations in the Slovak Republic, Northern Ireland and elsewhere will be subject to all the hazards and risks normally incidental to exploration, development and production of precious, energy and base metals, any of which could result in work stoppages, damage to or destruction of mines and other producing facilities, damage to life and property, environmental damage and legal liability for any or all damage. The Company may become subject to liability for cave-ins and other hazards for which it cannot insure or against which it may elect not to insure where premium costs are disproportionate to the Company’s perception of the relevant risks. The payment of such insurance premiums and of such liabilities would reduce the funds available for exploration activities and could force the Company to cease operations.
The Company has no proven reserves on the properties in which it has an interest; without such proven reserves, the Company is unlikely to find financing to fully exploit its properties
The properties in which the Company has an interest or the concessions in which the Company has the right to earn an interest are in the exploratory stage only and are without a known body of ore. Properties on which mineral reserves are not found may be sold or disposed of causing the Company to write-down or write-off each respective property, thus sustaining a loss.
Mineral prices may not support corporate profit
The mining industry is intensely competitive and even if commercial quantities of gold, energy or base metals are developed, a profitable market may not exist for the sale of same. If a profitable market does not exist, the Company could have to cease operations.
Exploration failure could have significant negative effect on the Company
The expenditures to be made by the Company in the exploration of its gold, energy and base metals properties located in Slovak Republic, Northern Ireland and North America, as described herein may not result in discoveries of mineralized material in commercial quantities. Most exploration projects do not result in the discovery of commercially mineable ore deposits.
The expense of meeting environmental regulations could cause a significantly negative effect on the Company
The current and anticipated future operations of the Company, including further exploration activities require permits from various Northern Ireland/Slovak Republic national/regional/local governmental authorities. Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, mine safety and other matters. Specific laws include: Slovak Mining Activity Act, Slovak Geological Act, and Slovak Environmental Impact Assessment Act; administered by the Slovak Ministry of Economy and its Slovak Main Mining Bureau; in Northern Ireland, the Minerals Development Act and the Crown Estate Act. The permits that the Company may require for construction of mining facilities and to conduct mining operations must be obtainable on reasonable terms to the Company. Unfavorable amendments to current laws, regulations and permits governing operations and activities of mineral resource companies, or more stringent implementation thereof, could have a materially adverse impact on the Company and cause increases in capital expenditures which could result in a cessation of operations by the Company.
The Company anticipates expending $80,000 in Fiscal 2006, to comply with environmental regulations.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment
14
or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violation of applicable laws or regulations.
The Company’s operations are subject to extensive Government regulations which impose significant costs on the Company, and future regulations could increase those costs or limit its ability to produce gold, energy and/or base metals
The Company is subject to extensive federal, state and local regulations in the jurisdictions in which it holds it properties with respect to matters such as:
a. employee health and safety;
b. permitting and licensing requirements;
c. air quality standards;
d. water quality standards;
e. plant and wildlife protection;
f. reclamation and restoration of mining properties after mining is completed;
g. discharge of materials into the environment;
h. surface subsidence from underground mining; and
i. the effects of mining on groundwater quality and availability.
Numerous governmental permits and approvals are required for exploration and mining operations. The Company is required to prepare and present to national, regional, or local authorities data pertaining to the effect or impact that any proposed exploration for or production of gold may have upon the environment. The costs, liabilities and requirements associated with these regulations may be costly and time-consuming and may delay commencement or continuation of exploration or production operations. The possibility exists that new legislation, regulations and orders may be adopted that may materially adversely affect the Company’s operations and its cost structure. New legislation or administrative regulations (or judicial interpretations of existing laws and regulations), including proposals related to the protection of the environment, that would further regulate and tax the mineral resource industry may also require the Company or its customers to change operations significantly or incur increased costs.
Third parties may dispute the Company’s rights to its mining and other interests
While the Company has conducted preliminary title investigations with respect to all its property interests and, to the best of its knowledge, title to all properties is in good standing, this should not be construed as a guarantee of title.
Potential project sites in Northern Ireland, Slovakia and North America may be subject to dispute, prior unregistered claims, or native land claims and ultimate transfer to the Registrant may be affected by undetected defects. Such claims or defects could materially adversely affect one or more of the projects and the Registrant’s financial performance.
Risks Relating to Financial Condition
Going concern assumption used by management highlights doubts on the Company’s ability to successfully continue
The Company’s financial statements include a statement that the financial statements of the Company are prepared on a going concern basis, and therefore that certain reported carrying values are subject to the Company receiving the future continued support of its stockholders, obtaining additional financing and generating revenues to cover its operating costs. The going concern assumption is only appropriate provided that additional financing continues to become available.
The Company’s history of operating losses is likely to continue leading to need for additional potentially unavailable financings and related problems
The Company has a history of losses: ($2,877,394), ($2,319,019) and ($1,439,167) in Fiscal Years 2005/2004/2003. Despite recent capital infusions, the Company will require significant additional funding to meet its long-term business objectives. Capital may need to be available to help maintain and to expand work on the Company’s principal exploration properties. The Company may not be able to obtain additional financing on reasonable terms, or at all. If equity financing is required, then such financings could result in significant dilution to existing shareholders. If the Company is unable to
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obtain sufficient financing, the Company might have to dramatically slow exploration efforts and/or lose control of its projects. The Company has historically obtained the preponderance of its financing through the issuance of equity. There is no limit to the number of authorized common shares, and the Company has no current plans to obtain financing through means other than equity financing and/or loans. Such losses and the resulting need for external financings could result in losses of investment value.
The Company’s need for additional financing to finish property exploration could lead to the Company’s inability to finish proposed property exploration and/or loss of properties
The Company is engaged in the business of exploring mineral properties. The Company believes it has sufficient funds to undertake its planned operations and exploration projects during Fiscal 2006/Fiscal 2007. Additional financing may be required to continue exploration and to develop the mineral properties identified and to place them into commercial production. The exploitation of the Company’s mineral properties is, therefore, dependent upon the Company’s ability to obtain financing through the lease of assets, debt financing, equity financing or other means. Failure to obtain such financing may result in delay or indefinite postponement of work on the Company’s mineral properties, as well as the possible loss of such properties. Such delays, and possible inability to proceed with planned operations could cause loss of investment value.
The Company competes with other exploration companies which have similar operations, and many such competitor companies have operations and financial resources and industry experience far greater than those of the Company
Nevertheless, the market for the Company’s potential future production of gold, energy and/or base metals tends to be commodity-oriented rather than company-oriented. If it successfully reaches commercial production, the Company will still be subject to competition from much larger and financially stronger competitors and such competition may materially adversely affect the Company’s financial performance.
Risks Relating to Management and Specific Operations
The Company’s Articles of Continuation contain provisions indemnifying its officers and directors against all costs, charges and expenses incurred by them
The Company’s Articles of Continuation contain provisions that state, subject to applicable law, the Company shall indemnify every director or officer of the Company, subject to the limitations of the Yukon Business Corporations Act, against all losses or liabilities that the Company’s director or officer may sustain or incur in the execution of their duties. The Company’s Articles of Continuation further state that no director of officer shall be liable for any loss, damage or misfortune that may happen to, or be incurred by the Company in the execution of their duties if they acted honestly and in good faith with a view to the best interests of the Company. Such limitations on liability may reduce the likelihood of litigation against the Company’s officers and directors and may discourage or deter its shareholders from suing the Company’s officers and dire ctors based upon breaches of their duties to the Company, though such an action, if successful, might otherwise benefit the Company and its shareholders.
Key management employees may fail to properly carry out their duties or may leave which could negatively impact corporate operations and/or stock pricing
While engaged in the business of exploring mineral properties, the nature of the Company’s business, its ability to continue its exploration of potential exploration projects, and to develop a competitive edge in the marketplace, depends, in large part, on its ability to attract and maintain qualified key management personnel. Competition for such personnel is intense and the Company may not be able to attract and retain such personnel. The Company’s growth will depend on the efforts of its Directors and its Senior Management, including its Chairman, Damien Reynolds; its President/CEO, James Walchuck; its VP Exploration, Kent Ausburn; its Executive VP, Garry Stock; its CFO, Robert Nowell and its Corporate Secretary, Nancy La Couvée. Loss of these individuals could have a material adverse effect on the Company. The Company has no key-man life insurance and there are no written agreements with the key employees.
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Management and Directors are associated with other mineral exploration companies and such conflicts of interest and/or lack of attention to corporate affairs could have a negative impact on corporate operations and/or stock pricing
Certain of the Directors and Senior Management of the Company (specifically, Peter Bojtos, Michael Hopley, David Montgomery, Damien Reynolds, Ronald Shorr, Robert Nowell and Garry Stock) are also Directors and/or Senior Management and/or significant shareholders of other companies, including those also involved in mineral exploration and mining; refer to ITEM 6.A. for resumes. As the Company is engaged in the business of exploring mineral properties, such associations may give rise to conflicts of interest from time to time. Law requires the directors of the Company to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest that they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board of Directors, any Director in a conflict must disclose his interest and abstain from voting on such matter. In determining whether or not the Company will participate in any project or opportunity, the Directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at the time. If not properly resolved, the Company could be placed at a disadvantage when considering which properties to acquire/explore and if/how to explore existing properties.
Shortages or increased costs of skilled labor in Slovak and Republic Northern Ireland may hamper the Company’s ability to achieve high labor productivity and competitive costs
Metal exploration and mining continues to be a labor-intensive industry. As the demand for gold, energy and base metals has increased, many producers have attempted to increase production, which has resulted in a competitive market for the limited supply of trained metal miners in both Northern Ireland and the Slovak Republic. In some cases, this market situation has caused compensation levels to increase, particularly for “skilled” positions such as electricians and mine foremen. To maintain current exploration levels and to potentially achieve production, we may be forced to respond to these increases in wages and other forms of compensation, and related recruiting efforts by our competitors. Any future shortage of skilled miners, or increases in our labor costs, could have an adverse impact on our labor productivity and costs and on our ability to operate pr ofitably.
There are risks associated with investing in emerging markets such as the Slovak Republic; uncertain impact of joining NATO and the European Union
Because of its relatively recent transition to a market economy, the Slovak Republic is subject to many risks, which may not be as prevalent in mature markets. These risks include:
- adverse changes in the market’s economic and governmental policy;
- consumers with relatively low levels of disposable income;
- relative instability of new institutions;
- shifts in regulation the Company cannot predict;
- inconsistent application of existing laws and regulations; and
- slow legal remedies.
The Slovak Republic joined NATO and the EU during 2004; the political and economic impact is still uncertain.
In Northern Ireland, terrorist attacks/threats and escalation of military or civilian authority activity in response to such attacks may negatively affect the Company’s business, financial condition and results of operations
During much of the 1980s and early 1990s, Northern Ireland was subject to numerous terrorist attacks. Military and civilian authority response to such attacks led to severe restrictions on the use of explosives and other procedures used in mining. A return of terrorist attacks, though not considered likely by the Company, may result in a return to such regulatory measures. In any event, the Company is required to obtain permits and approvals for its use of explosives and certain other mining activities. In addition, a return of terrorist attacks would negatively affect the general business climate and the Company’s ability to efficiently and safely carryout mineral exploration activities.
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Risks Relating to the Company’s Common Stock
Principal stockholders, officers and directors have substantial control regarding stock ownership; this concentration could lead to conflicts of interest and difficulties in the “public” investors effecting corporate changes, and could adversely affect the Company’s stock prices
The Company’s Senior Management, Directors and greater-than-five-percent stockholders (and their affiliates), acting together, hold approximately XX.X% of the shares of the Company, on a diluted basis, and have the ability to control substantially all matters submitted to the Company’s stockholders for approval (including the election and removal of directors and any merger, consolidation or sale of all or substantially all of the Company’s assets) and to control the Company’s management and affairs. Accordingly, this concentration of ownership may have the effect of delaying, deferring or preventing a change in control of the Company, impeding a merger, consolidation, takeover or other business combination involving the Company or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company, which in turn could materially adversely affect the market price of the Company’s stock.
Employee/Director/Consultant stock options could lead to greater concentration of stock ownership among insiders and could lead to dilution of stock ownership which could lead to depressed stock prices
Because the success of the Company is highly dependent upon its respective employees, the Company has granted to some or all of its key employees, Directors and consultants options to purchase common shares as non-cash incentives. To the extent that significant numbers of such options may be granted and exercised, the interests of the other stockholders of the Company may be diluted causing possible loss of investment value. Refer to Table No. 6 and Table No. 7.
The Company has never declared or paid cash dividends on its Common Shares and does not anticipate doing so in the foreseeable future
There can be no assurance that the Company’s Board of Directors will ever declare cash dividends, which action is exclusively within its discretion. Investors cannot expect to receive a dividend on the Company’s common shares in the foreseeable future, if at all.
Low stock market prices and volume volatility for the Company’s common shares create a risk that investors might not be able to effect purchases/sales at prices that accurately reflect corporate value
The market for the common shares of the Company on the Canadian, U.S. and European stock exchanges may be highly volatile for reasons both related to the performance of the Company or events pertaining to the industry (i.e., price fluctuation/high production costs/accidents) as well as factors unrelated to the Company or its industry. The market prices of metals are highly speculative and volatile. Instability in metal prices may affect the interest in mineral exploration properties and the potential development of production from such properties and may adversely affect the Company’s ability to raise capital to explore existing or new mineral properties. The Company’s common shares can be expected to be subject to volatility in both price and volume arising from market expectations. Stockholders of the Company may be unable to sell significant quantities of co mmon shares in the public trading markets without a significant reduction in the price of the common shares.
Broker-Dealers may be discouraged from effecting transactions in the Company’s common shares because they are penny stocks and are subject to the penny stock rules
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934, as amended, impose sales practice and disclosure requirements on NASD broker-dealers who make a market in “penny stock”. A penny stock generally includes any non-NASDAQ equity security that has a market price of less than US$5.00 per share. The Company’s shares are quoted on the TSX Venture Exchange, and the price of the Company’s common shares ranged from CDN$0.19 (low) to CDN$0.95 (high) during the period from 1/1/2005 to 12/31/2005, trading at CDN$0.95 on 12/31/2005; the closing price of the Company’s shares was $1.65 on 1/31/2006. The additional sales practice and disclosure requirements imposed upon broker-dealers may discourage broker-dealers from effecting transactions in the Company’s shares, which could severely limit the market liquidity of the shares and im pede the sale of the Company’s shares in the secondary market.
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Under the penny stock regulations, a broker-dealer selling penny stock to anyone other than an established customer or "accredited investor" (generally, an individual with net worth in excess of US$1,000,000 or an annual income exceeding US$200,000, or US$300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt.
In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the US SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt. A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities. Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks.
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ITEM 4. INFORMATION ON THE COMPANY
4.A. History and Progress of the Company
Introduction
Tournigan Gold Corporation (the “Company”) is a mineral exploration company. Its main focus is on exploring three mineral projects in Europe: Kremnica (gold) in the Slovak Republic, where acquisition was finalized July 2003; Jahodna (uranium), where acquisition finalized in June 2005; and Curraghinalt (gold) in Northern Ireland, where acquisition was finalized December 2004.
The Company’s mineral properties are without a known body of commercial ore and all proposed programs are an exploratory search for ore.
The Company’s executive office is located at:
700 West Pender Street, #301, Vancouver, British Columbia, Canada V6C 1G8.
Telephone: 604-683-8320
Facsimile: 604-683-8340
e-mail: info@tournigan.com
website:www.tournigan.com
The Company’s registered office is located at:
Macdonald & Company
204 Lambert Street, Suite 200
Whitehorse, Yukon, Canada Y1A 3T2
The contact person is: Nancy La Couvée, Corporate Secretary.
The Company's fiscal year end is August 31st.
The Company's common shares trade on the TSX Venture Exchange in Toronto, Canada, under the symbol ”TVC”; on the OTCBB in the United States under the symbol “TVCZF”; and, in Germany, on the Frankfurt Stock Exchange and Berlin-Bremen Stock Exchange under the symbol “TGP”.
The Company has an unlimited number of common shares without par value authorized. At 8/31/2005, the end of the Company's most recent fiscal period, there were 67,826,513 common shares issued/outstanding; at 1/31/2006, there were 77,892,013 common shares issued/outstanding.
In this Registration Statement, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$).
Incorporation and Name Changes
The Company was incorporated pursuant to the laws of the Province of British Columbia on 11/10/1966 under the name “Tournigan Mining Exploration Ltd.”. On 4/22/1992, the Company's name was changed to “International Tournigan Corporation”. On 6/14/2001, the Company's name was changed to “Tournigan Ventures Corporation”. Effective 12/3/2002, the Company continued its incorporation jurisdiction from British Columbia to Yukon, Canada; at the same time, the Company’s name was changed to “Tournigan Gold Corporation”.
Stock Consolidation
The Company effected a 1:10 stock consolidation on 3/26/2001. All references to the number of shares and per share numbers have been reflected on a post-consolidation basis unless otherwise indicated.
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Other Property Acquisition/Disposition/Exploration
During the late 1990’s, the Company was involved in the acquisition and exploration of numerous mineral properties, including those located in West Africa and Peru. Faced with unsuccessful exploration efforts, in Fiscal 1999, the Company wrote-off its investment in these properties, recording a $12.3 million expense.
Since 1992, the Company has held exploration properties in British Columbia, Canada. Currently, the Company holds 31 mineral claims in the Skeena Mining Division, and four mineral claims in the Omineca Mining Division. During Fiscal 2004, the Company initiated a review of its British Columbian mineral claims, resulting in the renewal of eight mineral claims in the Skeena Mining Division. Deemed uneconomic, a total of 23 other claims, previously written off for accounting purposes by the Company in Fiscal 2001 ($128 write-off), were allowed to lapse. All remaining claims will be retained until the properties can be further assessed.
The Company acquired option interests in two properties in El Salvador in August 2002: El Potosi Project (100%); and Cerro Pedernal Project (60%). Faced with unsuccessful exploration efforts after expending $197,843 on exploration and a management decision to focus corporate activities on its European exploration projects, the Company sold its El Salvador properties on 2/18/2004 to Condor Securities Limited (“Condor”), a private Australian corporation. Consideration was 8,000,000 common shares of Condor at a fair value of $200,000. The investment in Condor represented 24% of Condor’s outstanding common shares at the time. However, the Company does not consider the investment to be an equity investment because the Company does not have, nor will have the ability to exercise significant influence on the affairs of Condor. Subsequent financings by Condo r have diluted the Company’s percentage ownership of Condor. Consequently, the investment is carried at cost. Post-closing terms of the agreement required that Condor list its common shares on a Canadian or Australian stock exchange by 7/15/2005. If this condition was not met, the projects would be returned to the Company and the Company would be obligated to reimburse Condor for expenses incurred on the projects. This condition was removed on June 28, 2005 in return for an additional 200,000 Condor shares.
On July 11, 2003, the Company completed the acquisition of all the outstanding shares of Kremnica Gold, a.s. (“Kremnica”), a Slovak Republic corporation, from Argosy Minerals Inc., an Australian publicly listed mining company. The principal asset of Kremnica is the Kremnica Gold project, a mining license covering 11.8 square kilometres, including title to the Kremnica Mine. The mine is not currently in operation. The purchase price was $500,000.
During September 2003, the Company acquired fifteen prospecting licenses in the Republic of Ireland, entitling the Company to prospect for gold, silver and base metals. Two of the licenses are located in County Donegal, Republic of Ireland, and were acquired at a cost of 60,000 common shares with a value of $17,400. Under the terms of acquisition of these two licenses, there is a 3% net smelter return royalty payable from production.
In December 2004, the Company completed the acquisition from Strongbow Exploration Inc. (“Strongbow”) of Ulster Minerals Limited (“Ulster”), a Northern Ireland corporation which owns the exploration licenses covering the Curraghinalt project. On closing, 5,000,000 shares of the Company were issued to Strongbow. The shares are subject to a pooling agreement under which the shares will be released in 1,000,000 share tranches in each of five consecutive six-month periods until May 3, 2006. The Company has the right of first refusal to purchase any of the shares of the Company under the pooling agreement that Strongbow elects to sell.
Under terms of a Letter Agreement with Strongbow, should the Board of Directors of the Company decide to initiate construction of a mine at Curraghinalt, an additional 5,000,000 common shares must be issued to Strongbow. A 2% net smelter royalty would also be required to be paid to Minco plc. In addition, the Company must pay Strongbow 20% of the tax savings from Ulster’s tax loss carryforwards when utilized. The carryforwards held by Ulster are a consequence of its prior work done on the Curraghinalt and Tyrone gold projects.
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In March 2005, the Company acquired an exploration license and entered into a joint venture with GEOTECHNIC-Consulting spol. s.r.o. of Slovakia (“GTC”), on the adjoining exploration license that includes the Brehov VMS-base metal project. Terms include C$5,000 to GTC for reimbursement of its historical expenses, the issuance of 50,000 Tournigan shares, and a first year exploration program of C$25,000, to earn 35%. In the second year, Tournigan can earn another 35% by paying C$25,000 to GTC and spending C$50,000 on exploration. After earning 70%, Tournigan may purchase the remaining 30% by payment to GTC of cash or shares totaling C$50,000 and the granting of a 2% royalty to GTC; the royalty may be purchased for C$50,000 and the issuance of 50,000 Tournigan shares.
In June, 2005, the Company was granted 3 uranium exploration licenses totalling 99 square kilometres in eastern Slovakia; the Jahodna, Novoveska Huta, Svabovce and Spissky Stiavnik deposits are all hosted on the 3 licenses.
In June 2005, the Company entered into an agreement to acquire up to 100 percent of a portfolio of uranium mineral claims in Wyoming, USA from Sweetwater River Resources LLC (“Sweetwater”). Terms involve Tournigan earning an 85% interest in the portfolio by making an initial payment of US$50,000, funding an initial US$90,000 exploration and acquisition program (which includes any additional claims acquired in the United States), issuing 200,000 Tournigan shares to Sweetwater, and making anniversary payments of US$25,000, US$50,000 and US$50,000 at the end of years one, two and three, respectively. Tournigan would then have the right to purchase Sweetwater’s remaining 15% for shares in Tournigan, based on an independent valuation.
In December 2005, the Company announced the acquisition by staking of an additional portfolio of uranium mineral claims in South Dakota, USA.
Plan Of Operations
Source of Funds for Fiscal 2006 Ending 8/31/2006
The Company’s primary source of funds since incorporation has been through the issuance of equity. Currently the Company does not have operating revenues, and anticipates generating no material revenue during Fiscal 2006. As of 8/31/2005, the Company had working capital of $3.2 million. Since the beginning of Fiscal 2006, the Company has raised $46.3 million through the issuance of equity.
Use of Funds for Fiscal 2006 Ending 8/31/2006
During Fiscal 2006, the Company estimates that it might expend $2.3 million on general/administrative expenses. During Fiscal 2006, the Company estimates that it might expend approximately $8 million on property acquisition and property exploration expenses.
Anticipated Changes to Facilities/Employees
The Company may add additional personnel for its operations in Slovakia. Management anticipates that any property exploration efforts will be carried out by outside contractors.
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ITEM 4.B. BUSINESS OVERVIEW
The Company’s principal business activity is the sourcing, exploration and development of mineral properties. Its main focus is on exploring three mineral projects in Europe: Kremnica (gold) in the Slovak Republic, acquisition finalized July 2003; Jahodna (uranium) in the Slovak Republic, acquisition finalized in June 2005; and Curraghinalt (gold) in Northern Ireland, acquisition finalized December 2004.
Kremnica Project
Gold Exploration
Slovak Republic
The Kremnica gold project is located in the town of Kremnica in central Slovakia, approximately 190 kilometers from Vienna, Austria. The existing gold/silver deposits and advanced exploration targets are contained within a 12 square-kilometer mining license granted in 1961 with no expiration date held by the Company’s Slovakian subsidiary. The property is accessible by paved roads and electrical, natural gas and rail infrastructure is nearby. The project also includes two additional exploration licenses, for a total of 123 square kilometers.
The Company acquired its interest in the project, including the historic Kremnica Mine (no longer in production) in July 2003 and staked the Kremnica South licenses (Lutila and Vyhne) in January and June 2004. The original deposit area contains four prospects; the main Sturec deposit and the Wolf, Vratislav and South Ridge prospects (“satellite” zones of gold/silver mineralization relative to Sturec).
Kremnica has a long history of gold mining, dating back to the founding of the town in 770 AD. Production records begin in 1328 with the last commercial production winding up in 1972. The former Socialist government began an exploration program at Kremnica in the 1980's that was continued sporadically after the fall of Communism until 1995. The project was then joint-ventured by Argosy Mining Inc., which applied western exploration methods to areas of historical mine workings, ultimately owning a 100% interest in the project after expenditure of $8.7 million. Argosy drilled 79 core drill holes and completed numerous reports culminating in a Conceptual Economic Review by Beacon Hill Consultants in 1998.
The Company has continued investigating Kremnica, completing additional drill-testing of existing gold/silver mineralization and commissioning updates and refinements to prior reports. Based on these reports, the Company believes that the Kremnica gold project is the most advanced of its properties. The Company plans to continue to improve the accuracy of these studies in order to clearly demonstrate that Kremnica would be profitable if a mining operation was granted permission, financed, constructed and began commercial production of gold and silver.
The market for gold and silver is characterized by cyclical increases and decreases in the price of each metal, and the Company will attempt to account for this cyclical behaviour in its studies.
The Company must maintain its mining and exploration licenses in good standing and must also obtain permits from various Slovak government agencies, overseen by the Ministry of the Environment, in order to be granted the permission mentioned above. These permits will be applied for on the basis of the results of final studies and reports.
Jahodna Project
Uranium Exploration
Slovak Republic
The Jahodna property is located near the city of Kosice in eastern Slovakia, approximately 120 kilometers from the Kremnica Project. The existing uranium/molybdenum/copper deposit is contained within a 32 square-kilometer exploration license granted in 2005, for a term of four years, extendable to 10 years. The license is accessible by paved roads and electrical, natural gas and rail infrastructure is nearby.
The Company acquired its 100% interest in the exploration license in June 2005. The area was previously explored for uranium mineralization by the former Socialist government
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beginning in the 1980's; exploration continued sporadically after the fall of Communism until 1996. Due to low commodity prices for uranium and little knowledge available about Jahodna, the project was dormant until the Company began its exploration programs in 2005.
The Company’s investigations on the Jahodna project began with additional drill-testing of existing uranium/molybdenum/copper mineralization and, similar to its efforts on the Kremnica project, commissioning updates and validating prior reports. Based on these reports, the Company believes that the Jahodna project is the second-most advanced of its projects. The Company plans to continue to improve the accuracy of these studies in order to clearly demonstrate that Jahodna would be profitable if a mining operation was granted permission, financed, constructed and began commercial production of uranium, molybdenum and possibly copper.
The market for each of these metals is characterized by cyclical increases and decreases in the price of each metal, and the Company will attempt to account for this cyclical behaviour in its studies.
The exploration license covering Jahodna must be maintained in good standing, and permits must be obtained from various Slovak government agencies, overseen by the Ministry of the Environment, in order to be granted the permission mentioned above. These permits will be applied for on the basis of the results of final studies and reports.
Curraghinalt Project
Gold Exploration
Northern Ireland, United Kingdom
The Curraghinalt project is located near the town of Omagh in central Northern Ireland, approximately 127 kilometers west of Belfast. The existing gold deposit is contained within exploration licenses totaling 346 square kilometers. The licenses are granted for two years and extendable to 6 years. The property is accessible by paved roads and electrical, natural gas and rail infrastructure is nearby.
The Company acquired its 100% ownership the licenses by first joint-venturing with the then-owner, Strongbow Exploration Inc. (“Strongbow”) in November 2003, then purchasing the property in exchange for 5,000,000 common shares of the Company, issued to Strongbow in 2004. A further 5,000,000 common shares are to be issued upon the decision to commence construction of commercial scale mining facilities on the properties.
Ennex International plc began exploring for gold on the property in the early 1980’s and drilled 17,783 meters in 255 drill holes plus completed 697 meters of underground work and 2,856 meters of surface trenching. In January 2000, Strongbow acquired the property. The Company has continued investigating the project, completing additional drill-testing of existing gold mineralization and commissioning updates to prior reports. Based on these reports, the Company believes that the Curraghinalt project is the third-most advanced of its projects. The Company plans to continue to improve the accuracy of these studies in order to clearly demonstrate that Curraghinalt would be profitable if a mining operation was granted permission, financed, constructed and began commercial production of gold.
The market for gold is characterized by cyclical increases and decreases in the price of the metal, and the Company will attempt to account for this cyclical behaviour in its studies.
The Company must maintain its exploration licenses in good standing, and must also obtain permits from various Northern Ireland government agencies, overseen by the Department of Energy Trade and Investment and the Crown Estate, in order to be granted the permission mentioned above. These permits will be applied for on the basis of the results of final studies and reports.
Other Projects
The Company also owns or is earning into other exploration licenses containing gold, silver, uranium and/or base metal mineralization. These projects are at an earlier stage and the Company does not yet know exactly the steps required to advance each project to
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the stage of its three principal projects. However, reports similar to those commissioned for the three principal projects will continue to be investigated.
United States vs. Foreign Sales/Assets
The Company has generated no sales revenue since incorporation.
At 8/31/2005, $3,175,615, $6,256,151, $4,045,836 and $268,847 of its assets were located in Slovak Republic, Northern Ireland, Canada, and other locations, respectively.
At 8/31/2004, $1,255,944, $5,108,090, $3,997,374 and $31,447 of its assets were located in Slovak Republic, Northern Ireland, Canada, and other locations, respectively.
4.C. Organization Structure
The Company is incorporated under the laws of the Yukon, in Canada.
The Company currently has four wholly-owned subsidiaries:
a. Kremnica Gold, a.s.;
incorporated in the Slovak Republic on 3/10/1999;
b. Ludovika Holding, s.r.o.
incorporated in the Slovak Republic on March 11, 2005;
c. Dalradian Gold Limited;
incorporated in Northern Ireland on 7/8/2003;
d. Ulster Minerals Limited;
incorporated in Northern Ireland on 11/26/1971.
4.D. Property, Plant and Equipment
The Company’s executive offices are located in leased premises of approximately 5,031 sq. ft. at 700 West Pender Street, Suite 301, Vancouver, British Columbia, Canada V6C 1G8. Approximately 60% of the space is sub-leased to other companies, some of which are related. The Company began occupying these facilities in April 2004. The lease was amended on May 23, 2005 and expires on June 30, 2010; the lease requires annual commitments over the term of the lease of: $160,100 for FY2006, $167,520 for FY2007, $167,520 for FY2008, and $139,600 for FY2009, for an aggregate of $634,740.
Tournigan Gold Corporation (the “Company”) is a mineral exploration company that is primarily focused on exploring three advanced projects: two gold projects in Europe, Kremnica in the Slovak Republic and Curraghinalt in Northern Ireland; and the Jahodna uranium project in the Slovak Republic.
Other projects include: two other uranium licenses in Slovakia, 601 uranium claims in Wyoming and 243 uranium claims in South Dakota, as well as VMS-type licenses in Northern Ireland and Slovakia. Also, the Company holds: fifteen gold, silver and base metal prospecting licenses in the Republic of Ireland totaling 620 square kilometers, which expire on 9/11/2009; two of these licenses were acquired in 2004 by the issuance of 60,000 common shares of the Company; 31 mineral claims in the Skeena Mining Division of British Columbia, Canada, and four mineral claims in the Omineca Mining Division of British Columbia, Canada; all claims will be retained until the properties can be further assessed.
The Company’s exploration properties are without a known body of commercial ore and all proposed programs are an exploratory search for ore.
Qualified Person and QA/QC
Tournigan’s Qualified Person, Dr. Kent Ausburn, PhD, PG, and Vice President of Exploration and Chief Geologist of the Company, has reviewed and approved the technical disclosure contained in this management discussion and analysis.
Tournigan has a Quality Assurance/Quality Control (QA/QC) protocol in place for its ongoing drilling, rock, soil, and stream sediment sampling programs as part of all geochemical sampling, sample preparation, sample shipping and sample analysis and compilation procedures. QA/QC procedures include chain-of-custody protocol and systematic submittal of blanks, duplicates and registered standards as part of every sample shipment to the analytical laboratory.
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Kremnica Project
Gold Exploration
Slovak Republic
Acquisition Details
In July 2003, the Company completed the acquisition of Kremnica Gold, a.s. from Argosy Minerals Inc. The principal asset of Kremnica Gold a.s. is the Kremnica Gold Project in Slovak Republic, a mining license of 11.8 sq. km. that provides title to the historic Kremnica Mine, which is no longer in production. The purchase price for the project was $500,000. Funding of the $500,000 acquisition cost was provided through a loan from Quest Capital Corp., which was repaid in full in November 2003.
The Company reviews the carrying value of its long-lived assets on a periodic basis and has determined that there has been no impairment of the value of the Kremnica project. The reviews for impairment are generally carried out through third party evaluation of the assets or internal tests based on estimated resources and current mineral resource values.
The Company also reviews its asset retirement obligations (“AROs”) at the end of each reporting period. The Company has determined that there have been no significant AROs in respect of the Kremnica project at the end of any financial period as there have been minimal land disturbances requiring immaterial expenses for reclamation.
Property Description and Location
Accessibility, Climate, Local Resources, Infrastructure and Physiography
The Kremnica Gold Project is located at the center of Europe in central Republic of Slovakia. The town of Kremnica is located 17 kilometers west of the city of Banská Bystrica. The project area is accessible from Vienna, Austria by driving east across the border into Slovakia and then northeast through Bratislava. The town of Kremnica has a population of about 7,000 and is also accessible by train from Bratislava, the capital and largest city in Slovakia.
The Kremnica project comprises the Kremnica mining license, the contiguous Lutila and Lucky exploration licenses, and the Vyhne exploration license.
The Kremnica mining license was issued 1/12/1961, and remains valid in perpetuity. The License is currently held by the Company’s wholly-owned subsidiary, Ludovika Holding, s.r.o. The Main Mining Bureau is the permitting agency for mining projects. The mining license fee is currently approximately $2,222 per year for the 12 square-kilometer license. Slovak law states that some work should be done within the license, or the license can be withdrawn. The law is not specific on when, what, or how work must be done. All known mineralization is contained within the mining license, as well as areas for future operations, processing waste and tailings.
The Lucky exploration license was registered 6/5/2002, and became effective on 9/23/2002. The license is held by the Company’s subsidiary, Kremnica Gold a.s. The license is granted for four years, after which a first review can extend the license for an additional four years. A final review can extend the license for another two years, after which the license will lapse. The annual license fees for Lucky are approximately $2,000.
The Lutila exploration license was granted to Kremnica Gold a.s. in January 2004 and was subsequently expanded to include the area covered by the Lucky license, above, totaling 86 square kilometers. The annual license fee is $11,000.
The Vyhne exploration license, granted to Kremnica Gold a.s. in June, 2004, covers an area of 37 square kilometers and has an annual license fee of $5,000.
The three licenses cover the majority of known prospective and mineralized areas within the Kremnica district, as well as a prospective area along trend to the south. The mining license and exploration licenses have been legally surveyed. There are currently
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no other near-by metal claims or other companies working within the district. Within the exploration licenses there are several registered clay deposits. Currently two small clay pits are operating. These clay licenses are not expected to have any material effect on the subject properties.
The Slovak State is entitled to a royalty to be paid as a percentage of net profits once commercial production has commenced. The rate of payment can be between 0% and 10% of net profit, but is open to negotiation between a mine owner and the State. In the case of Kremnica, management expects that the payment would be close to 5% of net profit. The Kremnica project is not subject to any other royalties, back-in rights, payments, or other agreements and encumbrances.
Current Slovak tax law approved by the parliament took effect on 1/1/2004 and has enacted a flat corporate tax rate of 19%.
Geology
Kremnica is located at the northwest end The Carpathian Arc. The Carpathian Arc is host to numerous large precious metal and base metal epithermal and porphyry deposits, many of which are of world-class size. Gold-silver mineralization at Kremnica is a typical epithermal style deposit with the mineralization occurring in large banded to massive quartz veins, smaller quartz veins and sheeted veins
The Kremnica South target consists of a 40 square-kilometre area containing broad low-level gold, silver and arsenic soil geochemical anomalies, beginning 3 kilometres south on strike with the main part of the Kremnica deposit and extending for at least 10 kilometres. This area may represent the Kremnica mineralized volcanic/ hydrothermal system at higher volcanic-stratigraphic and epithermal-hydrothermal levels. The geochemical anomalies give indication of a possible new exploration target with the potential to minimize the Sturec deposit in size and quality.
Prior Exploration
Gold mining commenced at Kremnica as early as the 8th century and is relatively well documented from the year 1328 forward. Historic production form underground and open pit mines has totaled 1.5 million ounces gold and 6.7 million ounces silver. Extensive underground mining occurred within an area 4 kilometers long and 2 kilometers wide. The largest relic of past mining is a surface depression in the area, measuring 600 meters long, and up to 200 meters wide, and 100 meters deep. The district is marked with hundreds of pits, ancient shafts and adits.
The Slovak Geological Survey and Rudne Bane (the state mining company) conducted modern exploration intermittently in the Kremnica district from 1962 until 1992. The exploration work led to discoveries and included driving four major exploration adits, approximately 20 underground crosscuts, and both surface and underground drilling. Exploration defined near-surface low-grade mineralization at the Sturec and Vratislav prospects.
Beginning in 1987, Rudne Bane mined 50,028 tonnes averaging 1.54 g/t gold from a small open pit that operated at a rate of about 30 tonnes per day. The operations were not profitable and closed in 1992.
Kremnica Banska Spolocnost (“KBS”), an investment company comprising former mine managers, obtained title to the Kremnica mining lease from the Slovak government on 4/1/1995. Argosy Mining Corporation of Canada purchased KBS’s share of a joint venture in April 1997, to control 100% of the mining license through its subsidiary Kremnica Gold a.s. Argosy completed a core drilling program in 1996 and a combined core and reverse circulation drilling program in 1997 for a total of 79 holes (12,307 meters).
Current Exploration
Tournigan is carrying out a multi-stage program in and around Kremnica, including exploration drilling at Kremnica South and step-out delineation drilling in the adjacent satellite mineralization areas. Geological mapping, reconnaissance-rock sampling, soil-
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geochemistry surveys were conducted over a large area of Kremnica in order to identify and prioritize drill targets.
Several zones of mineralization have been identified at Kremnica, including the Sturec deposit and the Vratislav, Wolf, South Ridge and Kremnica South zones. Tournigan has advanced Kremnica along a two-pronged path since acquiring the project. Exploration of both known and new target zones has been complemented by detailed work on the main Sturec deposit, and an updated resource estimate and a technical report compliant to National Instrument 43-101 (“NI 43-101”) are near completion and a pre-feasibility study has commenced.
In October, 2005 an in-fill reverse circulation (RC) drill program was completed at Sturec on the site of the former Kremnica Gold Mine. Drilling included 36 in-fill drill holes totalling 3,754 metres, as well as 5 “twinned” holes totalling 235 metres. The twinned holes duplicated 5 pre-existing historic diamond drill holes, to compare drilling recoveries and assay results as part of the necessary Quality Assurance/Quality Control program for the pre-feasibility study.
In addition to the in-fill drilling program, a program of trenching and channel sampling within the boundaries of the proposed pit was completed in November 2005.
An updated NI 43-101 compliant technical report containing a resource estimate for Sturec is now underway by Beacon Hill Consultants (1988) Ltd. Beacon Hill Consultants have also been commissioned to begin a formal pre-feasibility Study at Kremnica, a follow up to their preliminary assessment completed in March, 2004. In addition, an environmental baseline sampling and data collection study is well underway at Kremnica as part of an environmental impact assessment.
A drill program of 4 diamond drill holes totalling 521 metres was completed in 2004 at Vratislav. Results from the program indicated continuation of robust ore-grade gold mineralization down-dip of the known zone of gold-silver mineralization. Management believes Vratislav could add additional tonnes of higher-grade feed to the proposed Sturec open-pit operation. Tournigan plans to test the Vratislav mineralized zone with a series of step-out Reverse Circulation (RC) drill holes in 2006.
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Figure No. 5
Kremnica License Location Map
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Jahodna Project
Uranium Exploration
Slovak Republic
Acquisition Details
In June 2005, the Company acquired the Cermel exploration license which hosts the Jahodna uranium project. The only cost incurred was an immaterial staking fee. The license was applied for directly from the Slovak Main Mining Bureau, after a review of historical data on all Slovak uranium occurrences.
The Company reviews the carrying value of its long-lived assets on a periodic basis and has determined that there has been no impairment of the value of the Jahodna project. The reviews for impairment are generally carried out through third party evaluation of the assets or internal tests based on estimated resources and current mineral resource values.
The Company also reviews its asset retirement obligations (“AROs”) at the end of each reporting period. The Company has determined that there have been no significant AROs in respect of the Jahodna project at the end of any financial period as there have been minimal land disturbances requiring immaterial expenses for reclamation.
Property Description and Location
Accessibility, Climate, Local Resources, Infrastructure and Physiography
The Jahodna project is located 10 kilometers northwest of the city of Kosice, in the eastern part of the Slovak Republic. Kosice is the second-largest city in the Slovak Republic, with a population of about 250,000. An excellent network of roads and railways connect Kosice to the rest of the world, with a small but growing network of regional airline connections.
Jahodna is located in a sparsely-inhabited area of the upper foothills in the Eastern Tatra Mountains at an average elevation of 600 meters above sea level. The Jahodna project is accessible year-round by regional road from Kosice. The climate is temperate, with cold winters bringing moderate snowfall and warm summers. Water, electricity, natural gas and rail connections are nearby. The city of Kosice is highly industrialized and is expected to be able to provide full support for the Jahodna project.
The Cermel license covers 32 square kilometers and is granted for four years, after which a first review can extend the license for an additional four years. A final review can extend the license for another two years, after which the license will lapse.
Geology
The Jahodna uranium-molybdenum-copper deposit occurs as roughly strata-bound lensoid horizons along the contact of the overlying lower Permian meta-volcanic dominated Petrova Hora Formation and the underlying lower Permian meta-sediment dominated Knola Formation. Uranium mineralization occurs primarily as the oxide minerals uraninite, brannerite with lesser occurrences of the uranium-silicate mineral coffinite. Uranium minerals occur with molybdenum, copper, and iron sulfide minerals within the schistose fabric and inter-foliation crenulations, primarily within the Petrova Hora basal andesite-tuff unit. Uranium–sulfide mineralized horizons are spatially associated with ptygmatically-folded quartz-carbonate veins.
The historic uranium-molybdenum resource block is a tabular body that extends approximately 500 meters along strike, 500 meters down-dip, and averages 2.56 meters thick. The Jahodna uranium-molybdenum resource was estimated using a block model method with a cutoff grade of 0.03% for the Block A estimate and a range of cutoff grades from 0.03% to 0.015% for the Block B estimate. Historic metallurgical tests reported recoveries of 88% to 90% uranium and 93% to 94% molybdenum.
Prior Exploration
The state Slovak uranium company (Uranovy Prieksum) began exploring for uranium on the property in the early 1980’s and drilled 17,936 meters in 53 drill holes, with 13 of these holes concentrated on a 500-metre-long zone of mineralization. Each hole was logged
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using radiometry to ascertain uranium levels, with select core intervals geochemically analysed for uranium as well as other metals, especially molybdenum. Three phases of metallurgical studies were also successfully completed by 1994, focusing on leaching (lixiviation) of milled ore with NaOH (lime) and Na2CO3 (soda) at a temperature of ~ 150˚ C resulting in recoveries of 88% to 90% uranium and 93% to 94% molybdenum.
Current Exploration
The Company began work in June 2005 to digitize all available historical data and hired an independent geological consultant to author a technical report on the Jahodna project, including an updated mineralization estimate. Previous metallurgical work was also reviewed in general and found satisfactory.
A data confirmation drilling program was completed at Jahodna in December, 2005, with 3 HQ- and BQ-sized diamond drill holes totaling 1,365 meters drilled before the onset of deep snow conditions. These holes were drilled within the previously-defined uranium and molybdenum mineralization to confirm historic drill results and confirm that the Jahodna resource estimate completed in 1996 is compatible with an inferred resource as defined by Canadian standards. Positive results were announced in February 2006.
Tournigan plans to next carry out an in-fill and step-out exploration diamond drilling program designed to test previously untested gaps within the resource block for high-grade mineralization.
Tournigan drill data will be used to verify the historic Jahodna geochemical data and radiometric and geological drill logs for the independent technical report, which that will include the validation of the historic Jahodna uranium resource estimate to Canadian standards.
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Figure 6
Location of Uranium Exploration Licenses
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Figure No. 7
Jahodna License Location Map
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Curraghinalt Project
Gold Exploration
Northern Ireland, United Kingdom
Acquisition Details
In 2004, Tournigan entered into a Letter Agreement with Strongbow for the purchase by Tournigan of all of the issued and outstanding shares of Ulster Minerals Limited (“Ulster”), the owner of two Prospecting Licenses comprising Tyrone (UM 12/96) and the Curraghinalt project area (UM 11/96). The agreed purchase price for Ulster was 10,000,000 common shares of Tournigan. In addition, Tournigan agreed to pay to Strongbow, whenever Ulster applies the cumulative exploration expenditures disclosed on the books of Ulster as at the date of closing against its income, an amount equal to $0.20 for every $1.00 by which Ulster’s taxes payable are reduced as a consequence of the deduction of such expenditures. Such payments are to be made within 30 days of the date that Ulster claims such expenditures as a deduction.
Pursuant to the Letter Agreement, 5,000,000 common shares of Tournigan were issued to Strongbow in April 2004, recorded at their fair value of $2,350,000. The remaining 5,000,000 common shares of Tournigan will be issued upon the decision by Tournigan to commence construction of commercial scale mining facilities on the properties. A net smelter return royalty of 2% held by the previous owner, and subsequently transferred to Minco plc remains in effect. This royalty covers any future production from Curraghinalt plus a defined “area of influence” surrounding the confirmed mineralized area.
Through its subsidiary, Dalradian Gold, the Company conducted exploration work on the property commencing in April 2003 and has continued work on the Curraghinalt deposit to the present.
The Company reviews the carrying value of its long-lived assets on a periodic basis and has determined that there has been no impairment of the Curraghinalt project. The reviews for impairment are generally carried out through third party evaluation of the assets or internal tests based on estimated resources and current mineral resource values.
The Company also reviews its asset retirement obligations (“AROs”) at the end of each reporting period. The Company has determined that there have been no significant AROs in respect of the Curraghinalt project at the end of any financial period as there have been minimal land disturbances requiring immaterial expenses for reclamation.
Property Description and Location
Accessibility, Climate, Local Resources, Infrastructure and Physiography
The Curraghinalt Project is located in County Tyrone, central Northern Ireland, about 127 km west of Belfast and about 15 km from the city of Omagh. Various highways and local roads provide good access to and within the property. Local access within the project area is along public and private roads.
The property consists of about 34,600 hectares (about 346 square kilometers) contained within two Prospecting Licenses (UM 1/02 and UM 2/02 – the “Licenses”).
The mineral rights conferred by the licenses are held in the name of the Company’s subsidiary, Ulster Minerals Limited, under the terms of License Agreements with the Government of Northern Ireland (Department of Enterprise Trade and Investment) for the base metals, and under the Crown Estate Commission for the precious metals. License UM 1/02 contains the Curraghinalt gold deposit.
The climate at Curraghinalt is typical of Ireland, with generally cool summers and relatively wet winters. Temperatures generally remain above freezing; snowfall is not common. Climatic conditions would not impede year-round exploration or mining activity, either underground or in open pits.
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The property is characterized by farm lands, heath and mixed forest. Outcrop is relatively sparse except on the higher ground or in road cuttings, quarries and stream courses, which makes detailed surface geological mapping difficult.
The terrain in this part of Northern Ireland is hilly, with much of the area mantled by glacial deposits and peat. In places on the property, the overburden depth may reach several tens of meters, but in general the cover is somewhat thinner. Total relief in the area of immediate interest is about 450 meters, ranging from an elevation of about 100 meters above mean sea level in the major river valleys to elevations in excess of 550 meters in the highest hills on the northern edge of the property. The northern part of the property covers a portion of the southern flank of the Sperrin Mountains.
There are numerous smaller supply centers in the surrounding region, of which the largest is Omagh, at the immediate south-west end of the property. These centers are able to provide most of the general residential and small business infrastructure necessary for any mineral exploration or mining operation. Power is readily available, and there is abundant water. There would be no serious problems with regard to transportation.
Geology
The Curraghinalt deposit vein system, occurrences of other gold mineralized quartz veins, and rock and soil gold geochemical anomalies occur within an eight-kilometer-long, west-northwest trending corridor referred to as the “Curraghinalt Trend”.
Gold mineralization at Curraghinalt occurs as quartz-sulphide veins within a sequence of metasediments known as the Dalradian. The Dalradian is well represented world-wide and is host to several large-scale gold deposits in North America, particularly in Newfoundland and South Carolina. Extensions of the Dalradian continue to the north and west of the main Curraghinalt trend, hosting indications of more Curraghinalt-style gold mineralization. Stream sediment geochemical surveys by the Geological Survey of Northern Ireland have shown widespread and abundant anomalous values for gold, silver and pathfinder elements arsenic and antimony.
To the south of Curraghinalt lies an area within the Ordovician Tyrone Volcanic Group which adjoins the Dalradian along the Omagh Thrust, a regional feature believed to have some impact on mineralization. Targets identified include polymetallic volcanogenic massive sulphides (VMS), porphyry copper style mineralization and rhyolite-dome-associated quartz veins and silicified breccias.
The Curraghinalt Project area can clearly be seen to be a large and geologically complex region, with potential for discovery of a variety of mineral deposits. Although exploration to date has been largely directed toward the search for gold, the district has geology that is well suited to hosting polymetallic VHMS deposits, analogous to many of those in the provinces of Newfoundland and New Brunswick, as well as sediment-hosted stratiform base metal deposits.
Prior Exploration
There is no record of any substantial mining activity in the area of the licenses. Exploration activity in the region has focused mainly on gold, contained in vein deposits in metasedimentary rocks and in silicified and brecciated zones in acid volcanic rocks.
Some attention has also been given to the search for “porphyry copper” deposits in intermediate intrusive rocks and to a lesser extent for volcanic-hosted massive sulphide (“VHMS”) deposits in volcanic rocks. Recently, emphasis has shifted to exploring for gold-rich base metal (zinc and lead) semi-massive to massive sulphide deposits, of stratabound and stratiform character, in metasedimentary strata. Results for this latest work have been encouraging, and further exploration is planned.
Exploration in the Tyrone project area over the years has been mostly by surface work, generally of a reconnaissance nature. There have been extensive geological studies coupled with geophysics and geochemistry. A number of scattered diamond drilling programs have tested various targets, mostly for gold and to a lesser degree for base metals. At the Curraghinalt gold deposit, extensive diamond drilling has included detailed sampling for the purposes of establishing mineralization and for metallurgical testwork.
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Current Exploration
Since April 2003, work programs completed by Tournigan on the project include compilation and review of the historical data base, underground geologic mapping, structural analysis, soil geochemical surveys, in-fill and step-out drilling, and limited geophysical surveys over the Curraghinalt vein system.
A total of 4,574 metres of diamond drilling have been completed by Tournigan. As part of these programs, Tournigan completed 2,998 metres of in-fill drilling, all located within the boundaries of the various historical resources estimates. The remaining drilling focused on exploration targets.
In 2005, the Company completed 2 diamond drill holes totalling 187 metres at a location south of the Curraghinalt deposit in an area known as the Crows Foot – Bend structural zone. Results from the drilling confirmed the presence of 5 new parallel veins hosting gold mineralization. Deep drill hole CT-26, returned significant ore-grade intervals at deeper depths in all the resource veins than prior drill holes. The results extend known high ore-grade gold mineralization to twice the previously documented depth, and include discovery of a new vein as well as the re-emergence of veins previously thought to have pinched out at depth.
In January 2005, the Company announced the results of an updated independent technical report to NI 43-101 standards, and a gold resource estimate of the Curraghinalt deposit, completed by John Tully & Associates. The resource estimate incorporated a detailed review of the mineralized vein system with the primary focus on structural analysis.
The estimate included recommendations for additional drilling to increase tonnage, and additional underground development to upgrade the classification of the resources. Mr. Tully stated that detailed drilling and underground development delineated the 800-metre strike length of the veins that make up the Curraghinalt resource. Immediately along strike and to the east, another 800 metres of strike extension of the Curraghinalt resource veins was identified by wide-spaced diamond drill holes and trench sampling.
Tournigan believes the project has significant potential for growth and has formulated a development schedule for the project, based on the recommendations of the technical report. The Company’s focus for Curraghinalt is to advance it through all the requisite steps for permitting, building, and operating an underground gold mine, subject to completion and acceptance of satisfactory pre-feasibility and feasibility studies. The permit approvals will include permission for underground development and bulk-sampling to increasing the current resource. Prior to initiating this development, the Company plans an in-fill diamond drill program along the East Extension target with a view to outlining an inferred resource there, defined by an 800-metre trend of the Curraghinalt vein system.
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Other Projects
Uranium Projects in Slovak Republic
When the Jahodna project was acquired in June 2005, the Company also acquired by staking two additional uranium exploration licenses (Spisska Nova Ves and Spisska Teplice) covering other areas of historical exploration and production. The Spisska Nova Ves license covers 13 square kilometers and hosts the Novoveska Huta project, which has extensive historical underground workings, both for production and for exploration. Novoveska Huta is also located in Eastern Slovakia, near the town of Spisska Nova Ves, population 40,000. Prior exploration there includes 5.5 kilometers of underground workings and over 40 drill holes drilled from surface, which defined a zone of uranium and molybdenum mineralization.
The Spisska Teplice license covers 45 square kilometers and includes the Svabovce and Spissky Stiavnik projects. The Spissky Teplice license is also located in Eastern Slovakia, near the town of Poprad, population 55,000. The two projects represent zones of uranium mineralization and former production, with 5 other occurrences of mineralization on the license.
Uranium Properties in USA
In June 2005, the Company entered into an agreement with Sweetwater River Resources LLC (“Sweetwater”) to earn into a portfolio of uranium claims in Wyoming. To earn an 85% interest, the Company made an initial payment of US$140,000 and issued 200,000 common shares as well as make payments totaling US$125,000 until 9/15/2008. The Company would then have the right to purchase the remaining 15% interest by paying Sweetwater in cash or shares, based on an independent valuation.
The current portfolio consists of six claim groups totaling 601 claims, covering 48 square kilometers in Wyoming and two claim groups totaling 272 claims, covering 22 square kilometers in South Dakota. The Wyoming claims are located within the Shirley Basin, Great Divide Basin, and Green River Basin uranium districts. Five of the six claim groups host drill-documented uranium mineralization. The South Dakota claims are within the Southern Black Hills district and also host drill-documented uranium mineralization.
Brehov VMS/Gold/Base Metals Project in Slovak Republic
In March 2005, the Company acquired a 68-square-kilometre exploration license and entered into a joint venture with GEOTECHNIC-Consulting spol. s.r.o. of Slovakia, on the adjoining 1.8-square-kilometre exploration license that includes the Brehov VMS-base metals project. The Brehov joint venture and exploration licenses are located in Eastern Slovakia, 210 kilometres from Kremnica, and cover known precious-metal-rich Volcanic Hosted Massive Sulphide (“VMS”) mineral occurrences that are part of the Tertiary-aged Carpathian Volcanic Arc system.
The licenses carry a considerable database of prior exploration work by the Slovak Geological Survey (“SGS”). Brehov is believed to represent Kuroko-type VMS precious and base-metal mineralization. These types of systems are characterized by precious-metal-rich, zinc-lead-copper mineralization hosted in rhyolitic submarine volcanic rocks. Tournigan Management believes that the combination of high current prices for both precious-metals and base-metals make such deposits attractive as high-value exploration targets.
The Company drilled 10 shallow holes totaling 210 meters at Brehov during 2005, and verified grade and style of precious-metal and base-metal mineralization reported historically by the SGS.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion for the fiscal years ended 8/31/2005, 8/31/2004, and 8/31/2003 should be read in conjunction with the consolidated financial statements of the Company and the notes thereto for those years.
Introduction
The Company is a mineral exploration company. Its main focus is on exploring three projects in Europe: the Kremnica Gold Project in the Slovak Republic, acquisition finalized July 2003; the Jahodna Uranium Deposit in the Slovak Republic, acquisition finalized June 2005; and the Curraghinalt Gold Project in Northern Ireland, acquisition finalized December 2004. The Company also holds uranium claims in Wyoming and South Dakota, USA, gold/base-metal licenses in Northern Ireland and Slovakia, and exploration licenses in British Columbia, Canada. The Company maintains its head office in Vancouver, Canada and has field offices in the towns of Kremnica, Slovak Republic and Gortin, Northern Ireland.
To fund its operations, the Company has issued equity in numerous public offerings and private placements of equity, stock-for-property arrangements, stock-for-debt arrangements, and the exercises of stock options and warrants.
Effective 3/26/2001, the Company consolidated its share capital on the basis of one new share for ten old shares. All references to numbers of shares or to per share data refer to post-consolidation data unless otherwise indicated.
Financing Time Line
Refer to ITEM #10.A.6
On 9/27/2002, the Company completed a partially brokered financing by issuing 4,410,000 Special Warrants at $0.15 per Special Warrant for gross proceeds of $661,500. Costs of the financing amounted to $32,446, resulting in net proceeds to the Company of $629,054. Through an Agency Agreement dated 7/11/2002, the Agent, Canaccord Capital Corporation, sold 1,900,000 of the Special Warrants and the Company sold the remaining 2,510,000. On 9/16/2003, each Special Warrant was converted into one unit consisting of one common share and one-half share purchase warrant. Upon conversion, two half-warrants became exercisable into one common share at $0.25 per share, expiring 9/27/2004. Pursuant to the terms of the Agency Agreement, Canaccord received a commission of 6% of the funds that were placed through it, which was paid by the issuance of 114,000 Series “A” Spec ial Warrants that converted directly into 114,000 common shares on 9/16/2003. Canaccord was also issued 285,000 Series “B” Broker’s Special Warrants (equivalent to 15% of the funds it placed) that were converted on 9/16/2003 into 285,000 warrants exercisable into 285,000 common shares at $0.25 per share, until 9/27/2004. During the year ended 8/31/2004, 1,119,582 warrants from this Special Warrants Financing were exercised at $0.25 per warrant. Subsequent to the year ended 8/31/2004, the remaining 1,370,418 warrants were exercised.
On 4/10/2003, the Company completed a financing by issuing 5,000,000 units at $0.25 per unit for gross proceeds of $1,250,000. Each unit consisted of one common share and one common share purchase warrant. Two warrants entitled the holder to acquire an additional common share at a price of $0.40 per share until 4/12/2004. The agent was issued 150,000 common shares as a corporate finance fee and was paid a commission of 7% of proceeds raised ($87,500). The agent also received an “Agent’s Warrant” entitling the agent to purchase 750,000 common shares at a price of $0.25 per share until 4/12/2004. The purpose of the offering was to raise funds to develop the Company’s gold projects in El Salvador and Northern Ireland. During the year ended 8/31/2004, 3,223,500 warrants from this offering were exercised, and 26,500 warrants expired.
On 10/22/2003, the Company completed a partially brokered private placement of 10,295,000 units at $0.25 per unit for total gross proceeds of $2,573,750. Each unit consisted of one common share and one-half share purchase warrant. One whole share purchase warrant is exercisable at $0.30 per share until 12/31/2004. The agents received a commission of 7% of the brokered amount of the financing, plus 904,000 warrants exercisable under the same terms as above. Funds were used to repay a bridge loan from Quest Capital Inc., to advance the Company’s mineral projects in Northern Ireland and Slovakia, and for general
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working capital. During the year ended 8/31/2004, 771,500 whole warrants from this private placement were exercised.
On 5/11/2004, the Company completed a partially brokered private placement of 10,276,107 units at $0.45 per unit for total gross proceeds of $4,624,248. Partially brokered refers to the fact that Canaccord Capital Corporation and Pacific International Securities Inc. sold 4,624,250 of the Special Warrants and the Company sold the remaining 5,651,857. Pursuant to an Agency Agreement dated 5/11/2004, amongst the Company and the agents, Canaccord and Pacific International, an additional 203,610 units at the offering price of $0.45 per share for a total value of $91,625 were issued as payment of commissions, for a total of 10,479,717 units issued. Each unit consisted of one common share and one-half share purchase warrant. One whole share purchase warrant is exercisable at $0.65 per share until 11/14/2005. Under the terms of the Agency Agreement, the agents received a commis sion of 8% of the brokered amount of the financing, of which $278,315 was paid in cash and $91,625 was paid in the above-noted 203,610 units consisting of one common share and one-half share purchase warrant. The agents were also issued agent’s options consisting of 1,016,499 agent’s units, with each unit comprised of one common share and one-half agent’s share purchase warrant. The 1,016,499 agent’s options are exercisable at $0.70 per unit until 11/11/2005, and the 508,248 agent’s warrants are exercisable into 508,248 common shares at $1.00 per share until 11/11/2005. The private placement funds were raised for exploration on the Company’s Curraghinalt gold project in Northern Ireland, to fund a drill program at the Kremnica gold project in Slovakia, and to provide general working capital.
On 12/16/2004, a non-brokered private placement of 5,000,000 common shares was completed at $0.40 per share for gross proceeds of $2,000,000. A finder’s fee, consisting of 6% of the gross proceeds in cash and 2% of the shares placed (100,000 common shares) was paid to a third party. The shares are subject to a four-month trading hold period expiring on 4/10/2005.
On 12/16/2004, closing of the Ulster Minerals Limited acquisition agreement was completed. The 5,000,000 shares delivered to Strongbow in April 2004 are subject to a pooling agreement such that 2,000,000 shares can be freely traded and a further 1,000,000 shares become free trading on each of April 30, 2005, October 31, 2005 and April 30, 2006. A further 5,000,000 shares must be delivered to Strongbow upon the decision by the Company to construct a commercial mine.
On 8/31/2005, the Company issued 5,000,000 common shares in connection with a non-brokered private placement of 5,000,000 units at $0.40 per unit for gross proceeds of $2,000,000. Each unit consisted of one common share and one-half of a share purchase warrant. One whole share purchase warrant is exercisable at $0.55 per share until August 31, 2007. The Company may require the warrants to be exercised any time after the trading price of its shares exceeds $1.00 per share for 30 consecutive trading days. No finder’s fee or commission was paid on the transaction. Share subscriptions receivable in respect of this transaction were received in cash subsequent to year end.
Subsequent to the end of Fiscal 2005, the Company issued 1,390,500 common shares in respect of the exercise of stock options as follows: 150,000 common shares at $0.25 per share; 400,000 common shares at $0.35 per share; 512,500 common shares at $0.40 per share; and 328,000 common shares at $0.45 per share. Total proceeds from the stock options exercised were $530,100.
On 9/1/2005, the Company received $2,000,000 for share subscriptions receivable in respect of the private placement financing of 8/31/2005.
In September 2005, the Company finalized a definitive option agreement with Sweetwater Resources LLC and issued 200,000 common shares at a fair value of $87,000 under the agreement.
On 9/8/2005, a non-brokered private placement of 5,000,000 units at $0.40 per unit was completed for gross proceeds of $2,000,000. Each unit consists of one common share and one-half of a warrant, with each whole warrant entitling the holder to purchase an additional share at an exercise price of $0.55 per share until 9/8/2007. The Company may
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require the warrants to be exercised any time after the trading price of its shares exceeds $1.00 per share for 30 consecutive trading days. A finder’s fee of $140,000 was paid to a third party.
On 9/21/2005, the Company granted 730,000 stock options exercisable at $0.40 per share for a period of five years to directors, employees and consultants. The options are subject to vesting provisions such that 50% vested on the date of grant and 50% will vest on 9/21/2006.
On 9/30/2005, a non-brokered private placement of 3,500,000 units at $0.50 per unit was completed for gross proceeds of $1,750,000. Each unit consists of one common share and one-half of a warrant, with each whole warrant entitling the holder to purchase an additional share at an exercise price of $0.65 per share until 3/31/2007. The Company may require the warrants to be exercised any time after the trading price of its shares exceeds $1.00 per share for 30 consecutive trading days. Finders’ fees of 75,000 units and $37,500 were paid to third parties.
On 11/11/2005, 1,524,747 unexercised warrants expired and on 11/14/2005, 5,239,857 unexercised warrants expired.
On 11/30/2005, the Company received US$600,000 in settlement of a US$750,000 promissory note. The Company had provided for doubtful collection of the face value of the note in its financial statements for the year ended 8/31/2001.
On 2/22/2006, the Company completed a private placement of 31,207,000 Special Warrants at $1.45 per Special Warrant for gross proceeds of up to $45,250,150. The offering was made on an underwritten basis through a syndicate led by Sprott Securities Inc. and including Dundee Securities Corporation and Canaccord Capital Corporation. Each Special Warrant entitles the holder to acquire one common share, subject to adjustment in certain instances, at any time before June 23, 2006. In the event that receipt for a prospectus is not received within 90 days following its filing, these Special Warrants will be convertible into 1.1 common share in lieu of 1 common share. The Underwriters received an aggregate cash commission of 6% and a total of 936,210 brokers’ warrants. Each brokers’ warrant is exercisable to purchase one common share at $1.65 per share until February 22, 2008.
Some of the foregoing financings involved sales to U.S. purchasers who were U.S. residents. Where this was the case, the Company relied upon the exemption from registration in the United States provided by Regulation D of the Securities Act of 1933.
Critical Accounting Policies
Management is required to make judgments/estimates/assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On a regular basis, the Company evaluates its estimates and assumptions. It bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior Management has discussed with the Audit Committee the development, selection and disclosure of accounting estimates used in the preparation of the consolidated financial statements. Actual results may differ from these estimates under different assu mptions or conditions.
The significant US GAAP versus Canadian GAAP accounting policies that are most critical to aid in fully understanding and evaluating reported financial results include: the expensing of mineral property acquisition/exploration costs until a property has demonstrated proven reserves and production is anticipated; and the disclosure and calculation of stock-based compensation.
Recent Accounting Pronouncements
Since July, 2001, the United States Financial Accounting Standards Board (“FASB”) has issued pronouncements pursuant to Statements of Financial Accounting Standards (“SFAS”) and Interpretations (“FIN”) which are shown in the following table. The standards listed
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in the table have not had a material effect on the Company’s financial position or results of operations.
Table 3
Financial Accounting Standards Board Pronouncements
Date of Issuance | Standard Reference Number | Title Description |
July 2001 | SFAS 141 and SFAS 142 | “Business Combinations” and “Goodwill and Other Intangible Assets.” |
July 2001 | SFAS 143 | “Accounting for Asset Retirement Obligations.” |
August 2001 | SFAS 144 | “Accounting for the Impairment or Disposal of Long-Lived Assets.” |
April 2002 | SFAS 145 | “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections.” |
June 2002 | SFAS 146 | “Accounting for Costs Associated with Exit or Disposal Activities.” |
November 2002 | FIN 45 | "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." |
November 2002 | EITF 00-21 | “Accounting for Revenue Arrangements with Multiple Deliverables.” |
January 2003 | FIN 46 | "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51." |
April 2003 | SFAS 149 | “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” |
May 2003 | SFAS 150 | “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” |
In December 2002, FASB issued SFAS 148, "Accounting for Stock-Based Compensation, Transition and Disclosure." SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also required that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS 148 required disclosure of the pro forma effect in interim financial statements. The transition and annual disclosure requirements of SFAS 148 were effective for the Company’s 2003 fiscal year. The interim disclosure requirements became effective for the second quarter of the Company’s 2003 fiscal year.
In December 2004, FASB issued SFAS No. 153. This statement addresses the measurement of exchanges of nonmonetary assets. The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions,” is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that opinion, however, included certain exceptions to that principle. This statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This statement is effective for financial statements for fis cal years beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges incurred during fiscal years beginning after the date of this statement is
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issued. Management believes the adoption of this statement will have no impact on the financial statements of the Company.
In December 2004, FASB issued a revision to SFAS No. 123R, “Accounting for Stock Based Compensation.” This statement supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This statement focuses primarily on accounting for transactions in which an entity obtains employee services in stock-based payment transactions. This statement does not change the accounting guidance for stock-based payment transac tions with parties other than employees provided in Statement of Financial Accounting Standards No. 123. This statement does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans.” The Company has not yet determined the impact to its financial statements from the adoption of this statement.
In March 2005, SEC staff issued Staff Accounting Bulletin No. 107 ("SAB 107") to give guidance on the implementation of SFAS No. 123R. The Company will consider SAB 107 during the implementation of SFAS No. 123R.
In May 2005, FASB issued SFAS No. 154, “Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20 and SFAS No. 3”. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.
US GAAP Reconciliation
(a) Stock-based compensation
The United States Financial Accounting Standards Board has issued Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB25”). This statement uses the intrinsic value based method whereby compensation cost is recorded for the excess, if any, of the quoted market price over the exercise price, at the date the stock options are granted. As at August 31, 2004, no compensation cost would have been recorded for any period under this method. Statement of Financial Accounting Standards No. 123, “Accounting for Stock Based Compensation” (“SFAS 123”), issued in October 1995, requires the use of the fair value based method of accounting for stock options. Under this method, compensation cost is measured at the grant date based on the fair value of the options granted and is recognized over the exercise period. SFAS 123 allows the Company to continue to measure the compensation cost of employees and directors in accordance with APB 25.
On September 1, 2003, the Company prospectively adopted the revised recommendations of CICA Handbook Section 3870, "Stock-Based Compensation and Other Stock-Based Payments". Under these recommendations, the Company provides certain pro-forma disclosure as required by the fair value method of accounting for stock options beginning with its fiscal year ended August 31, 2003, and recognizes an expense for options granted on or after September 1, 2003. The Company also records stock-based compensation in respect of agents’ warrants issued in connection with common share placements, and includes the fair value thereof in share issuance costs. The Company uses the Black-Scholes option pricing model to estimate the fair value of each stock option on the date of grant and of each warrant on the date of issue. On the exercise of stock options and warrants, common
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stock is credited for consideration received, and for fair value amounts previously credited to additional paid-in capital.
(b) Subscriptions receivable
Under Canadian GAAP, subscriptions receivable are presented as an asset. Under U.S. GAAP, subscriptions receivable are presented as a contra-equity item. Subscriptions receivable at August 31, 2005 were $2,000,000 (2004 - $nil; 2003 - $nil).
(c) Exploration properties
Under Canadian GAAP, acquisition and exploration costs are capitalized. Under U.S. GAAP, acquisition costs are capitalized and exploration costs are expensed as incurred unless commercial feasibility is established. Under U.S. GAAP, mineral properties are reviewed by management for impairment at the end of each reporting period, and a write-down is recorded where necessary. Acquisition costs capitalized under U.S. GAAP during the years ended August 31, 2005, 2004, and 2003 were $79,009, $2,350,701, and $573,203 respectively; exploration costs expensed under U.S. GAAP during the years ended August 31, 2005, 2004, and 2003 were $3,377,543, $2,384,341, and $757,087 respectively.
(d) Trading securities and available-for-sale securities
Pursuant to Statement of Financial Accounting Standards No. 115, investments in securities are classified as either trading, held to maturity, or available-for-sale. During the six months ended February 28, 2005, the Company did not own any securities classified as either trading or held to maturity. The Company did own securities classified as available-for-sale.
The Company’s marketable securities and long-term investment consist of equity securities and are classified as available-for-sale, with the change in fair value during the period excluded from earnings and recorded net of tax as a component of other comprehensive income. Unrealized holding gains and losses, net of tax, are reported as a net amount in a separate component of other comprehensive income.
The Company uses the average cost method to determine the gain or loss on investment securities held as available-for-sale, based upon the accumulated cost bases of specific investment accounts.
At August 31, 2005, the market value of the Company’s marketable securities was $30,000, and the market value of the long-term investment was $200,000.
(e) Comprehensive income
SFAS No. 130, “Reporting Comprehensive Income”, addresses standards for the reporting and display of comprehensive income and its components.
Comprehensive income includes net income and other comprehensive income. For the years ended August 31, 2005, 2004, and 2003, other comprehensive income includes foreign currency translation gains (losses) of ($14,805), ($22,965), and $8,049, and write-down of marketable securities of $22,500, $nil, and $nil, respectively.
(f) Net earnings (loss) per share
Under U.S. GAAP, performance based escrow shares are considered to be contingently issuable until the performance criteria has been satisfied and are excluded from the computation of the weighted average of shares outstanding. The Company's 9,375 common shares held in escrow are not performance based and therefore no adjustments have been made to the calculation of earnings per share.
Diluted EPS has not been disclosed as the effect of the exercise of the Company’s outstanding options and warrants would be anti-dilutive. Diluted net loss per share reflects the potential dilution of securities that could result from the exercise of dilutive options and warrants. As at August 31, 2005 the Company had 5,235,555 (2004: 2,925,000; 2003: 2,000,000) stock options outstanding and 9,264,604 (2004: 13,540,022; 2003: 4,520,289) warrants outstanding which have not been included in the calculation of diluted net loss per share because their effect would have been anti-dilutive.
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(g) Amortization
Under Canadian GAAP, property and equipment are recorded at cost and are amortized over their estimated useful lives as follows:
Computer and electronic equipment | 30% declining balance basis |
Office and field equipment | 20% declining balance basis |
Software | 50% declining balance basis |
Leasehold improvements | over the term of the lease |
Under U.S. GAAP, property and equipment are recorded at cost and are amortized on a straight line basis as follows:
Computer and electronic equipment | 3 years |
Office and field equipment | 5 years |
Software | 2 years |
Leasehold improvements | over the term of the lease |
Liquidity – Fiscal 2003-2005
At 11/30/2005, the Company had working capital of $6,026,757 and a cumulative deficit of $34,615,506. The cash and short term investment component of working capital at 11/30/2005 was $6,301,519. The Company believes that its working capital is sufficient to carry out its current exploration work programs and fund corporate overhead into the last half of calendar 2007. The Company has budgeted current funds for programs to continue to advance the Kremnica and Curraghinalt gold projects, to further evaluate and explore the Jahodna uranium project in Slovakia, and to evaluate its other uranium properties in the USA and Slovakia.
At 8/31/2005, the Company had working capital of $3,242,897 and a cumulative deficit of $34,385,758. The cash and short-term investment component of working capital at the end of the year was $1,647,216.
At 8/31/2004, the Company had working capital of $3,255,080 and a cumulative deficit of ($31,508,364). The cash component of working capital as at 8/31/2004 was $3,790,091, an increase of $3,592,743 over 8/31/2003.
Subsequent to Fiscal 2004, the Company received $3,894,354 from the exercise of warrants, options and the completion of a private placement. The Company budgeted funds to bring the Curraghinalt gold project to initial feasibility stage and the Kremnica gold project to the engineering pre-feasibility stage, if exploration and analysis results permitted.
As at 8/31/2003 the Company had a working capital deficiency of ($1,111,954) and a deficit at August 31, 2002 ($201,658). A private placement was completed in October 2003 for gross proceeds of $2,573,750; the proceeds were used to repay the $550,000 bridge loan, fund exploration programs and provide working capital.
Share Capital
As at 1/31/2006, the Company had 77,992,013 issued and outstanding common shares. There were 6,787,500 warrants outstanding with exercise prices ranging from $0.55 to $0.65 and with expiry dates ranging from 3/1/2007 to 9/8/2007. There also were 4,487,500 stock options outstanding at 1/31/2006, with exercise prices ranging from $0.25 to $0.50 and expiry dates ranging from 5/21/2008 to 9/21/2010. Potential proceeds from exercises of the above warrants would be $3,911,875. Potential proceeds from exercises of the above stock options would be $1,797,150.
Shares issued for property
The Company holds 15 gold, silver and base metal prospecting licenses totaling 620 square kilometers in the Republic of Ireland, which expire on 9/11/2009. Two of these licenses were acquired by the issuance in 2004 of 60,000 common shares of the Company.
On 2/12/2004, the Company signed a letter of intent with Strongbow to acquire Strongbow’s wholly-owned subsidiary, Ulster, a Northern Ireland corporation which owns the
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exploration licenses covering the Curraghinalt gold project in County Tyrone, Northern Ireland. Consideration of the acquisition was 5,000,000 common shares that were issued during the year at a recorded fair value of $2,350,000.
Capital Resources – Fiscal 2003-2005
To date, the Company’s ongoing operations have been predominantly financed by private placements and the exercise of warrants or stock options. In Fiscal 2005, the Company issued 10,000,000 shares pursuant to private placements for net proceeds of $3,840,000, $2,000,000 of which was received on 9/1/2005, and 7,219,860 shares on the exercise of warrants and stock options, for proceeds of $2,078,104. Subsequent to Fiscal 2005 year end, a further 1,390,500 stock options were exercised for proceeds of $530,100, 26,250 warrants were exercised for proceeds of $$17,063, 40,718,210 special warrants were issued pursuant to private placements, for gross proceeds of $49,000,150, and 200,000 shares were issued to acquire exploration properties in Wyoming, USA.
On 9/30/2005, a non-brokered private placement of 3,500,000 units at $0.50 per unit was completed for gross proceeds of $1,750,000. Each unit consists of one common share and one-half of a warrant, with each whole warrant entitling the holder to purchase an additional share at an exercise price of $0.65 per share until March 31, 2007. The Company may require the warrants to be exercised any time after the trading price of its shares exceeds $1.00 per share for 30 consecutive trading days. Finders’ fees of 75,000 units and $37,500 were paid to third parties.
On 9/8/2005, a non-brokered private placement of 5,000,000 units at $0.40 per unit was completed for gross proceeds of $2,000,000. Each unit consists of one common share and one-half of a warrant, with each whole warrant entitling the holder to purchase an additional share at an exercise price of $0.55 per share until September 8, 2007. The Company may require the warrants to be exercised any time after the trading price of its shares exceeds $1.00 per share for 30 consecutive trading days. A finder’s fee of $140,000 was paid to a third party.
On 8/31/2005, the Company issued 5,000,000 common shares in connection with a non-brokered private placement of 5,000,000 units at $0.40 per unit for gross proceeds of $2,000,000. Each unit consisted of one common share and one-half of a share purchase warrant. One whole share purchase warrant is exercisable at $0.55 per share until August 31, 2007. The Company may require the warrants to be exercised any time after the trading price of its shares exceeds $1.00 per share for 30 consecutive trading days. No finder’s fee or commission was paid on the transaction. Share subscriptions receivable in respect of this transaction were received in cash subsequent to year end.
On 12/16/2004, a non-brokered private placement of 5,000,000 common shares was completed at $0.40 per share for gross proceeds of $2,000,000. A finder’s fee, consisting of 6% of the gross proceeds in cash and 2% of the shares placed was paid to a third party.
To Fiscal 2004, the Company’s operations were predominantly financed by private placements. Of total 2004 equity financing, $7,197,998 was raised from private placements, $1,903,319 from the exercise of warrants and $211,250 from the exercise of stock options.
In May 2004, the Company raised $4,624,248 through a partially brokered private placement of 10,276,107 units, each unit consisting of one common share and one-half share purchase warrant. Agents received a commission of 8% of the brokered amount of the financing, of which $278,315 was paid in cash and $91,625 was paid in 203,610 additional units. The private placement funds were used to conduct exploration on the Company’s Curraghinalt gold project in Northern Ireland, to fund a drill program at the Kremnica gold project in Slovakia, and to provide general working capital.
In October 2003, the Company raised $2,573,750 through a partially brokered private placement of 10,295,000 units, each unit consisting of one common share and ½ share purchase warrant. Agents received a commission of 7% of the brokered amount, plus 904,000 warrants. Funds were used to repay the $550,000 bridge loan from Quest Capital Inc., to advance the Company’s mineral projects in Northern Ireland and Slovakia, and for general working capital.
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In September 2002, Special Warrants were issued for cash consideration of $661,500. The purpose of the financing was to raise working capital to allow the Company to identify, source and conduct due diligence on mineral properties and associated projects, and enter into option agreements with respect to those properties. In April 2003, a Short Form Prospectus Offering raised gross proceeds of $1,250,000, to finance exploration programs and provide working capital. In July 2003, a bridge loan of $550,000 was provided to the Company to secure the purchase of Kremnica.
Management Changes
On September 21, 2005, James Walchuck, former President and Chief Operating Operator of the Company, was appointed President and Chief Executive Officer. Damien Reynolds, former Chief Executive Officer of the Company was appointed Chairman, replacing Hein Poulus who remains as a director. Mr. Reynolds was paid a transition allowance of $165,000, equal to one year’s salary, based on the recommendation of an independent consultant.
Effective June 15, 2005, Robert Nowell was appointed Chief Financial Officer of the Company to replace Garry Stock, Interim CFO. Mr. Nowell is a Certified General Accounting with 30 years experience in senior financial management positions.
Effective May 1, 2005, James Walchuck was appointed President and Damien Reynolds, formerly Presdident, was appointed CEO.
In 2004, the Company replaced its legal counsel, Armstrong Simpson, with the law firm Stikeman Elliott. Effective July 1, 2004, Paul Simpson, who is a principal of Armstrong Simpson, was replaced by Nancy La Couvée as in-house Corporate Secretary of the Company. Ms. La Couvée has 18 years of experience in corporate administration of mineral exploration companies.
Effective 4/1/2004 Jon Lever was appointed Chief Financial Officer of the Company. Mr. Lever is a Certified Management Accountant with 16 years experience in managing and monitoring regulatory compliance of junior mineral exploration companies. On 11/2/2004, Mr. Lever resigned for personal reasons, and Garry Stock was appointed Interim Chief Financial Officer. Mr. Stock is a Chartered Financial Analyst and also serves as Executive Vice President of the Company.
On 3/29/2004, James Walchuck was appointed Vice President of Mining. Mr. Walchuck was most recently the Manager of Mines for Barrick Gold Corporation, where he oversaw construction of the Bulyanhulu underground gold mine. Mr. Walchuck's substantial experience in underground mining techniques, project management, budgeting and mine engineering significantly enhances the Company’s management team.
Mr. Garry Stock was appointed Executive Vice-President on 7/8/2003. Mr. Michael Atkinson was appointed a director on 7/10/2003, pursuant with the bridge loan arranged for the purchase of Kremnica; he resigned subsequent to fiscal year end, upon repayment of the bridge loan. Mr. David Montgomery was appointed a director on 9/24/2003. Mr. Michael Hopley resigned as Chief Operating Officer on 12/17/2003, but remained a director.
PROPERTIES
Kremnica Gold Project, Slovak Republic
Project Description
In July 2003, the Company acquired its wholly-owned subsidiary, Kremnica Gold a.s. From Argosy Minerals Corporation for a purchase price of CDN$500,000. The principal asset of Kremnica Gold a.s. was the Kremnica gold project, including a mining license of 12 square kilometers that provided title to the Kremnica mine, exploration licenses covering 123 square kilometers and strike extensions drilled and evaluated by Argosy during 1995-1998.
The Kremnica gold project is located in the town of Kremnica in central Slovak Republic, 190 kilometers northeast of Vienna.
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Tournigan has advanced Kremnica along a two-pronged path since acquiring the project in July 2003. The plan will be advanced through the following stages: a. Environmental Studies; b. Socio-Economic Development; c. Feasibility Studies; and d. Construction and Production. The entire plan is estimated to take 24 to 30 months. The Company has now begun three of the four stages necessary to advance the Sturec gold deposit to production (Environmental Studies, Socio -economic Development and Pre -feasibility studies are now in progress).
An updated resource estimate and a National Instrument 43-101 (“NI 43-101”) compliant technical report are near completion and a pre-feasibility study has commenced. Exploration of both known and new target zones has been complemented by detailed work on the main Sturec deposit.
Current Exploration
Initial work in 2003 was focused on a review of existing data, followed by the initiation of both exploration work as well as an update to a preliminary assessment completed by Argosy in 1998.
The Kremnica gold project was the subject of a preliminary assessment in January 2004. This preliminary assessment produced a more cost-effective open-pit waste stripping ratio than previously assessed and indicated that a 36% larger conceptual mineralization area was contained within the boundaries of the Sturec open-pit model. These preliminary assessment results did not include the Vratislav, Wolf and South Ridge zones, which represent upside potential to the centrally located main Sturec zone, nor did they include the potential for a new discovery at Kremnica South. Vratislav, Wolf and South Ridge are “satellite” areas of mineralization adjacent to and on strike with the main Sturec deposit where historic mining and previous exploration delineated gold-silver mineralization that is still open for additional exploration.
The Company began a multi-stage program in and around Kremnica, including exploration drilling at Kremnica South and step-out delineation drilling in the adjacent satellite mineralization areas. Geological mapping, reconnaissance-rock sampling and a soil-geochemistry survey was conducted over a large area of Kremnica South to prioritize drill targets.
The Company’s exploration drilling program began at Kremnica in August 2004. In the Vratislav zone at Kremnica, four diamond drill holes totaling 522 meters were completed, with results indicating continuation of robust ore-grade gold mineralization extending down-dip of the known zone of mineralization in the zone. The Vratislav zone of mineralization occurs in a broad area that extends from 500-to-1,000 meters north of and on strike with the main Sturec area of mineralization.
Sturec Deposit
Mineralization Estimate: In June, 2005 an in-fill reverse-circulation (RC) drill program commenced within the area of the existing Sturec gold deposit on the site of the former Kremnica Gold Mine. By increasing the drill density to 50-meters by 50-meters, the RC program was designed to upgrade the mineralization category of the Sturec deposit to the Measured and Indicated categories, as defined by the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Standards on Mineral Resources and Reserves Definitions. The program was successfully completed in October 2005, with 36 drill holes totaling 3,754 meters.
In addition to the in-fill drilling program, a program of trenching and channel sampling within the boundaries of the proposed pit began in November 2005, intended to provide increased sample density within the high-grade core of the deposit and assist with upgrading Sturec to the Measured and Indicated categories. Approximately 40-metre to 60-metre long channel crosscuts were excavated and sampled across the faces of five benches located within the core of the historic Sturec deposit.
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An updated NI 43-101 compliant technical report containing an anticipated Measured and Indicated mineralization estimate for Sturec is now underway by Beacon Hill Consultants (1988) Ltd., the lead consultants for the Kremnica Pre-Feasibility Study. The mineralization estimate is now targeted for completion in February 2005.
Pre-feasibility Study: In October 2005, Tournigan commissioned Beacon Hill Consultants to begin a formal Pre-Feasibility Study at Kremnica, a follow up to Beacon Hill’s preliminary assessment completed in March 2004. The 2004 assessment estimated that Kremnica could provide an after-tax, 26.1% Internal Rate of Return (“IRR”) with gold priced at US$385/oz and 32.8% IRR at US$425/oz, based on a capital investment of US$48.9 million. Beacon Hill has targeted April 2006 for completion of the Pre-Feasibility Study.
Environmental and Socio-Economic Studies: Golder Associates have been hired to complete environmental baseline sampling and data collection at Kremnica. The baseline study is part of the environmental impact assessment (“EIA”) that is a component of the pre-feasibility studies. Golder has also been commissioned to conduct the socio-economic study required as part of an EIA.
Vratislav Zone
The Vratislav prospect is an exploration-development target generated by the Company. The Vratislav target is focused in the area of historic mine workings that host sets of quartz veins located roughly 300 meters north of and along strike with the Sturec deposit vein system. In January 2004, Tournigan completed four diamond drill holes at Vratislav designed to test the down-dip extension of gold mineralization. The test drill program totaled 521 meters. The results indicate continuation of robust ore-grade gold mineralization down-dip of the known zone of gold-silver mineralization. Management believes Vratislav could add additional tones of higher-grade feed to the proposed Sturec open-pit operation. Additional exploration is scheduled for Calendar 2006.
Wolf Zone
A total of 341 meters was completed in three diamond drill holes in the Wolf zone. The Wolf zone of mineralization occurs in an area that extends from 1.5- to-2 kilometers north of and on strike with Sturec and begins roughly 500 meters north of Vratislav. The program was designed to test the existence and tenor of gold-silver mineralization and extent of historic mine workings beyond the delineated strike extent of known mineralization. Results from the Company drill program revealed similar thicknesses of somewhat weaker gold and silver mineralization extending 50-to-100 meters beyond the previously delineated zone. Extensive historic underground mine workings were also encountered, suggesting previous extraction of significant amounts of the higher-grade gold-silver mineralization.
South Ridge Transition Zone
Tournigan has prepared a drill program for South Ridge (adjacent to Sturec) designed to verify the southwest extension of the vein sets on the South Ridge Transition Zone. Discovery of a significant extension of these vein sets would increase the resource and extend the Sturec open pit to the southwest, and potentially reduce the estimated 1.93:1 stripping ratio.
Kremnica South
At Kremnica South in 2004, the Company started investigating the potential undiscovered existence of another Kremnica-style gold deposit. Kremnica is postulated to have once contained 5-to-6 million ounces of gold prior to the start of recorded production in the year 1328. Management believes the area around Kremnica South could host a similar deposit that was hidden from previous explorers by a cap of less-mineralized hydrothermally-altered (strong clay alteration and silicification) rhyolite flows and tuffaceous rocks.
During Fiscal 2005, the Company completed an exploratory diamond-drilling program (2,808 meters in 11 holes) on the Kremnica South prospect, situated three kilometers south and along strike with the Sturec deposit, site of the former Kremnica gold mine. Kremnica South had not been drill tested until Tournigan initiated its program.
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The drilling program led to the discovery of epithermal gold mineralization in two related zones; Certov Vrch and Bartasova Lehotka, located within an area of hydrothermally altered volcanic rocks. The wide range of pathfinder anomalies in the metallic elements of arsenic, antimony and mercury found in the core samples is considered highly significant as it increases the attractiveness of the project.
The drilling successfully tested for increasing gold concentrations at depth at Certov, providing additional information in the search for a major hydrothermal vent structure at Kremnica South. Bartosova Lehotka encountered low-level gold values at deeper depths, suggesting that the structure penetrated by drilling is below the potentially gold-enriched target zone.
Considering the size of the area of hydrothermal alteration and surface geochemical anomalies relative to the area actually drill-tested, and in light of the gold-silver mineralization discovered during drilling, Tournigan continues to believe that there is a good probability of higher grade gold-silver zones of significant volume existing in the Kremnica South prospect area.
In March 2005, Tournigan extended its license holdings by an additional 37 square kilometers south of the existing Lutila License at Kremnica South. The new Vyhne exploration license covers similar geology and hydrothermal alteration that occurs at Kremnica South, and brings Tournigan’s exploration holdings to 123 square kilometers at Kremnica South, in addition to the 12-square-kilometre Kremnica mining license.
Uranium Projects, Slovak Republic
In June 2005, the Company acquired three uranium exploration licenses totaling 99 square kilometers in Eastern Slovakia; the Jahodna, Novoveska Huta, Svabovce and Spissky Stiavnik historic deposits are all hosted on the three licenses. The uranium projects are situated in areas that have excellent access to electrical, natural gas and rail infrastructure.
Past production from open-pit and underground operations was recorded on the Svabovce, Spissky Stiavnik and Novoveska Huta deposits. Exploration has not taken place in the districts since 1996 due to previous low uranium prices and the collapse of the Slovak economy
Management of the Company considers the reported exploration potential on all three licenses to be very encouraging and is prioritizing exploration targets on its licenses in anticipation of a 2006 exploration program. Tournigan is currently collating and compiling the extensive database available from historic exploration, development and mining of these deposits into a digital GIS format. The Company plans to conduct thorough reviews of exploration targets on each property while completing NI 43-101 compliant technical reports for the Jahodna and Novoveska Huta projects.
Jahodna Project, Slovak Republic
Overview
To enhance the value of its Slovakian uranium assets, in 2005, Tournigan embarked on a program of data verification and mineralization re-estimation beginning at the Jahodna high-grade deposit. This program sets out current and future milestones to be achieved to move Jahodna to a production decision, beginning with the Data Compilation stage, then progressing to the Updated Mineralization Estimate and Exploration Assessments stages, and finally the Preliminary Assessment stage.
The Data Compilation stage was completed In January and includes compilation and digitization of geologic and topographic maps, drill core and radiometric logs into a GIS format data base. High grade results from Phase 1 confirmatory diamond drilling, as part of a historic drill data verification program, were announced in February 2006. A.C.A. Howe International Limited of London has been commissioned to review the data and issue an NI 43-101 compliant technical report on the project (expected February 2006).
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Property Overview
The Jahodna deposit is included in the Cermel exploration license that covers 32 square kilometers. As all of the historic drill core samples had been utilized during three stages of uranium and molybdenum metallurgical studies conducted between 1992 and 1995, initial Tournigan drilling at Jahodna is focused on confirming the data from the diamond drill holes that define the current historic resource estimate that was calculated in 1996 by the former Slovak state uranium company, Uranovy Prieskum.
Drilling
A four-hole diamond drilling program that began in late September 2005 was completed in December 2005 at Jahodna. The program was designed to validate historic drill results and confirm that the Jahodna resource estimate completed in 1996 is compatible with an inferred resource as defined by CIM standards.
The Company plans a 4,500-metre step-out exploration drilling program designed to test 3,000 meters of strike extension and across-strike thrust-fault repetitions to follow-up historic exploration drilling that utilized wide spacings and intersected uranium mineralization in the same contact zone along the 3,000-meter trend.
Updated Mineralization Estimate
In September 2005, Tournigan commissioned A.C.A. Howe International Limited, of London, to author an independent technical report that will include the validation of the historic Jahodna uranium mineralization estimate to CIM standards. Tournigan drill data will be used to verify the historic Jahodna geochemical data and radiometric and geological drill logs. The updated mineralization estimate is now expected to be available by March 2006.
Novoveska Huta Project, Slovak Republic
The Novoveska Huta uranium project is located on the 13-square-kilometer Spisska Nova Ves exploration license, in Eastern Slovakia. The historic Novoveska Huta uranium district contains a mined out open pit deposit and a mined out underground deposit as well as a historically defined mineralization.
A historical estimate was completed by Uranovy Prieksum, the former state uranium company, using a block-model method, and a cutoff grade of 0.015% uranium. Historical metallurgical test work reported recoveries similar to Jahodna, with 88% to 90% uranium and 93% to 94% molybdenum.
Uranium-molybdenum mineralization at Novoveska Huta has similar mineralization-style and character to that at Jahodna. Molybdenum and copper are potential by-products.
The extensive database of Novoveska Huta is now being compiled and will be incorporated into a digital GIS database. A comprehensive review of planned exploration targets will be conducted on completion of the compilation work (January 2006). An NI 43-101-compliant technical report for the project is also scheduled for completion in 2006.
Curraghinalt Gold Project, Northern Ireland
Project Description
Through a Letter Agreement, during 2004, the Company completed the acquisition of Ulster Minerals Limited (“Ulster”), a Northern Ireland corporation which owns the exploration licenses covering the Curraghinalt and Tyrone gold projects located in County Tyrone, Northern Ireland. In settlement, the Company issued 5,000,000 common shares at a recorded fair value of $2,350,000.
Historical Results
Previous exploration on Curraghinalt from the early-mid 1980’s to the early 1990’s included 17,783 meters of drilling, 697 meters of underground development, and 2,856 meters of surface trenching.
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Tournigan began its exploration on the property in April 2003 after a field office was opened in Gortin, County Tyrone, Northern Ireland. Work programs completed by Tournigan on the project include compilation and review of the historical data base, underground geologic mapping, structural analysis, soil geochemical surveys, in-fill and step-out drilling, and limited geophysical surveys over the Curraghinalt vein system.
Current Exploration
Prior to the Company’s acquisition of Ulster, exploration on Curraghinalt was conducted under a 11/7/2002 letter agreement with Strongbow Exploration Inc., which owned Northern Ireland exploration licenses including the Curraghinalt gold project. Field work began on both the Tyrone and Curraghinalt projects in April 2003 after a field office was opened in Gortin, County Tyrone, Northern Ireland and a project manager appointed. Initial work focused on gathering technical data previously generated by former operators from various locations and centralizing the data in the field office.
On the Tyrone project, work during Fiscal 2003 focused on access and logistical issues relative to starting the drilling on the Glenlark prospect. Towards the end of Fiscal 2003, the Company mobilized two diamond drills to initiate its drill program on the Glenlark prospect.
At Curraghinalt, the underground mine workings had been rehabilitated and cleaned prior to the start of a detailed geological mapping program. An orientation soil geochemistry and VLF geophysical surveys were completed over the previously discovered veins at Curraghinalt. This work demonstrated that these methods appear to be successful in tracing gold mineralized veins. As a result a program of soil sampling and VLF geophysics was started over areas considered prospective for the discovery of extensions to the known Curraghinalt veins or possibly new veins. Also, a study was initiated to update the scoping study for the Curraghinalt deposit.
Exploratory drilling by Tournigan at the Curraghinalt gold project began in July 2003. Drilling was initially conducted immediately southeast and along strike of the pre-existing historical mineralization. Subsequent in-fill diamond drilling within this historical deposit area focused on increasing definition and upgrading of the pre-existing historical gold mineralization estimate at Curraghinalt.
As of mid-January 2005, 4,387 meters of diamond drilling by the Company were completed in 26 drill holes at Curraghinalt. The 20 in-fill holes drilled to 8/31/2004 are positioned within the boundaries of the various historical mineralization estimates. The Company continued to develop the exploration potential at Curraghinalt, with planning a new phase of step-out drilling to confirm the continuity of mineralization along strike to the east, as well as shallow drilling of rock and soil gold geochemical anomalies north and northeast of the main Curraghinalt veins.
In early 2005, the Company completed two diamond drill holes totaling 187 meters at a location south of the Curraghinalt deposit in an area known as the Crows Foot – Bend structural zone. Results from the drilling confirmed the presence of five new parallel veins hosting gold mineralization, three more than identified by the trenching program. The veins remain open along strike and down dip. Vein #5 is likely the Bend Vein, which recorded a high-grade intersection near a historic drill hole. Another new hole, located 60 meters east of the same historic hole also recorded a high-grade intercept of 17.56 g/t gold over 1.32 meters.
Results from deep drill hole CT-26 clearly demonstrated the potential for the Curraghinalt veins to extend much deeper than previously studied. The most significant high-grade intercept was at the No. 1 vein, 390 metres below surface. This intercept indicated that high-grade mineralization extends 150% below current resource depth and remains open. At a grade of 66 g/t gold over 1.32 metres, this intercept is over 4 times the average resource grade and is the thickest interval yet documented on the No. 1 vein, giving Tournigan another opportunity to expand resources by exploring at depth.
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Immediately along strike and to the east, another 800 meters of strike extension of the Curraghinalt mineralization veins was identified by wide-spaced diamond drill holes and trench sampling.
As of 8/31/2005, a total of 4,574 meters of diamond drilling had been completed. As part of this program Tournigan completed 2,998 meters of in-fill drilling, all located within the boundaries of the various historical mineralization estimates. The remaining drilling focused on exploration targets.
Mineralization Estimate
Data for the estimate includes 210 historic diamond drill holes, as well as the Company’s 20 in-fill diamond holes. The independent mineralization study provided a detailed review of the mineralized vein system with the primary focus on structural analysis, a level of not previously conducted on the deposit, to provide a much higher level of understanding of the deposit. The Company then began to formulate further plans for the exploration and potential advancement of the project.
In January 2005, the Company announced the results of an independent updated independent technical report on Curraghinalt according to NI 43-101 standards, and a gold mineralization estimate of the Curraghinalt deposit, completed by John Tully & Associates. The mineralization estimate incorporated a detailed review of the mineralized vein system with the primary focus on structural analysis, a level of not previously conducted on the deposit, to provide a much higher level of understanding of the deposit.
The mineralization calculation focused exclusively on the shallow zones that had been comprehensively drill-tested approximately 150 meters below surface, representing less than half of the 1.9-kilometre strike length of the Curraghinalt vein system.
The estimate included recommendations for additional drilling to increase tonnage and additional underground development to upgrade the classification of the mineralization to the CIM Measured and Indicated classifications. Mr. Tully stated that detailed drilling and underground development delineated the 800-meter strike length of the veins that make up the Curraghinalt mineralization.
Curraghinalt Development Program
The Company believes Curraghinalt has significant potential for growth and has formulated a development schedule for the project, based on Mr. Tully’s recommendations. The Company’s plan for Curraghinalt is to advance it through all the requisite steps for permitting, building, and operating an underground gold mine, subject to completion and acceptance of satisfactory pre-feasibility and feasibility studies. The permit approvals will include permission for underground development and bulk-sampling to increasing the current mineralization.
In January 2005, Tournigan reached an agreement in principle (AIP) with the Police Service of Northern Ireland (“PSNI”) regarding the use of advanced, commercially-available, blasting technology at Curraghinalt. The AIP will permit the Company to use this new technology, both in respect of its present exploration activities and any future mining activities at Curraghinalt.
In June 2005, Tournigan completed design of the underground development work for Curraghinalt. This development phase is anticipated to move the existing Curraghinalt mineralization to the CIM Measured and Indicated categories. Prior to initiating exploration development, the Company plans an in-fill diamond drill program on the East Extension target with a view to outlining an Inferred zone of mineralization. The East Extension target is defined by an 800-metre trend of the Curraghinalt vein system.
As part of feasibility work for Curraghinalt, the underground exploration development will allow for sampling and assaying of material from the veins to provide information for the mineralization database as well as for use in additional metallurgical studies. Permits will be sought after Tournigan receives the design of necessary surface infrastructure from the selected contractor.
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Brehov VMS/Gold/Base Metals Project, Slovak Republic
Project Description
In March 2005, Tournigan acquired a 68-square-kilometre exploration license and entered into a joint venture with GEOTECHNIC-Consulting spol. s.r.o. of Slovakia, on the adjoining 1.8-square-kilometre exploration license that includes the Brehov VMS/base-metals project. The Brehov joint venture and exploration licenses are located in Eastern Slovakia, 210 kilometres from Kremnica, and cover known precious-metal-rich Volcanic Hosted Massive Sulphide (“VMS”) mineral occurrences that are part of the Tertiary-aged Carpathian Volcanic Arc system.
Current Exploration
Drilling along three drill-fences totaling 210 meters was completed at Brehov during 2005. The program was designed to test and verify grade and style of precious-metal and base-metal mineralization reported historically by the SGS. Highlights of the program included: successful testing of area with multiple gold anomalies within SGS trench results; an intercept of 2.5 meters grading 5.8% zinc, 2.4% lead and 9.4 g/t silver; a 600-meter by 300-meter mineralized zone within an 8-kilometer by 6-kilometre caldera structure; validity of historical data and reinforcement of the Kuroko-type VMS geologic model.
Future work proposed for Brehov includes historical data compilation, an airborne EM-Magnetics geophysical survey, and diamond drilling focused at defining the boundaries of mineralization as well as the discovery of thicker, higher-grade VMS mineralization.
Uranium Portfolio in Wyoming, USA
Property Description
In June 2005, the Company entered into an agreement to acquire up to a 100% interest in a portfolio of uranium mineral claims in Wyoming, USA from Sweetwater River Resources LLC (“Sweetwater”). At the time of acquisition, the portfolio consisted of 243 claims within six groups of federal lode claims totaling 19.7 square kilometers within the Shirley Basin, Great Divide Basin, and Green River Basin uranium districts in Wyoming. A total of five of the six claim groups host drill-documented uranium mineralization, including two reported historical resource estimates.
Acquisition Terms
To earn an 85% interest, the Company made an initial payment of US$140,000 and issued 200,000 common shares. It is also required to make payments totaling US$125,000 until 9/15/2008. The Company would then have the right to purchase the remaining 15% interest by paying Sweetwater in cash or shares, based on an independent valuation.
Current Exploration
As of 8/15/2005, the number of claims staked has increased to 601 claims covering approximately 48 square kilometers within three prospective-uranium Districts.
The Shirley Basin district was the site of significant historic production, with four uranium mines in operation from 1960 to 1980, and remains prospective for discovery of new uranium deposits. The Company has staked two areas in the Shirley Basin, the MSB block of 132 claims and the NSB block of 45 claims. At MSB, company maps and USGS reports indicate approximately three square kilometers of known uranium mineralization.
The Great Divide Basin district hosts one former producing uranium mining operation and more importantly, was the focus of several large exploration programs at the end of the last uranium boom. Tournigan has staked two areas in the Great Divide Basin: the UT block of 170 claims, and two blocks totaling 81 claims in the Alkali Creek area. The UT block covers areas of close-spaced drilling by the previous operator.
The claims in the Green River Basin include key portions of a 21-kilometre-long zone, which itself is part of a reported 35-kilometer prospective roll-front type trend of
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uranium mineralization. The Company has staked an eight-kilometer trend in the South Pass block with 173 claims. The claims encompass adjacent areas of close-spaced drilling conducted by previous operators.
Tournigan’s USA team is compiling data and assessing the potential for additional claims along identifiable trends on each claim block. Other uranium-prospective areas in the western United States are also being investigated. The Company plans drilling and exploration programs, initially targeting areas with reported resources.
El Potosi and Cerro Pedernal Projects, El Salvador
On 8/24/2002, the Company entered into a Memorandum of Understanding with Brett Resources Inc. whereby the Company could acquire a 100% interest in the El Potosi project, and a 60% interest in the Cerro Pedernal project, both of which are located in El Salvador.
During the year ended 8/31/2003, a satellite imagery study of both the El Potosi and Cerro Pedernal projects in El Salvador was conducted, but due to image quality, the results of this study permitted limited application to evaluation of the projects. During the first quarter of Fiscal 2004, the Company contracted a consulting geologist to conduct a preliminary reconnaissance sampling and geological mapping program on the Cerro Pedernal property and incurred costs of $44,390. Results from the program were determined by the Company to be insufficient to justify additional work at that time. Because of an evolving corporate mandate to focus the Company exclusively on gold projects in Europe, a decision was made to not complete any field work on the property but rather meet the remaining 2003 payment requirement to Brett Resources for El Potosi and pursue a re-structuring whereby the Company would not participate in any direct operational involvement but would continue to maintain a reduced equity position in the projects.
On 2/18/2004, the Company agreed to sell its rights and interests in the El Potosi and Cerro Pedernal projects in El Salvador to Condor Securities Limited (“Condor”), a private Australian corporation, for consideration of 8,000,000 common shares of Condor at a fair value of $200,000. The investment in Condor represented 24% of Condor’s outstanding common shares. However, the Company does not consider the investment to be an equity investment because the Company does not have, nor have the ability to exercise, significant influence on the affairs of Condor.
The Company incurred total costs of $197,843 on its El Salvador projects, including $66,558 during Fiscal 2004. Costs of $122,476 were incurred on the projects during Fiscal 2003. A gain of $2,157 was recorded on disposition.
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Fiscal 2005 Ended 8/31/2005 compared with Fiscal 2004
Performance Highlights – Fiscal 2005
Kremnica Gold Project, Slovakia
a. Contracted Beacon Hill Consultants to conduct a Pre-feasibility Study on
the Kremnica Gold Project.
b. New resource estimate and NI 43-101 compliant technical report for Sturec
by Beacon Hill nearing completion.
c. Environmental impact and socio-economic studies begun at Kremnica by
Golder and Associates.
d. Completed 7,073 meters of diamond and reverse circulation (RC) drilling at
Sturec, Vratislav and Wolf prospects.
Jahodna Uranium Project, Slovakia
a. Acquired three exploration licenses encompassing four historic uranium
deposits (two past producers).
b. An NI 43-101 compliant technical report and modern resource estimate in
progress by ACA Howe.
c. Commenced confirmatory drill program; part of the NI 43-101 technical
report process.
Curraghinalt Gold Project, Northern Ireland
a. Completed design of underground development and bulk sample plan, that
will provide data to upgrade the current resource to the Measured and
Indicated categories.
b. Designed step-out diamond drill program on 800 meters of vein extensions.
c. Agreed in principle with Police Service of Northern Ireland for use of
modern blasting technology for underground.
d. Published NI 43-101 compliant technical report with new inferred
resource estimate.
Wyoming, USA Uranium Claims
a. Acquired six exploration claim blocks (601 claims) in three major uranium
districts in Wyoming, USA - the Shirley Basin, Great Divide Basin, and
Green River Basin uranium districts.
Other Project Acquisitions
Acquired a large exploration license and entered into a joint venture on the Brehov precious-metal-rich VMS project in eastern Slovakia. Completed 210 meters of drilling, confirming historic base and precious metal mineralization.
Corporate
a. Received gross proceeds of $6.1 million by issuing 17.2 million shares
during Fiscal 2005. Received an additional $3.9 million and issued 9.0
million shares subsequent to fiscal yearend; and
b. Promoted James Walchuck, formerly VP Mining, as President and CEO.
Appointed Robert Nowell as CFO.
c. Submitted Form 20-F Registration Statement with the US Securities and
Exchange Commission, that went effective in July 2005.
Comparison of Financial Results for Fiscal 2005 ended 8/31/2005 to Fiscal 2004
The annual financial results for Fiscal 2005 reflect the Company’s growth over the past two years. Since Fiscal 2003, assets have increased 726%, mineral property interests and deferred exploration costs have increased 612%, and shareholders’ equity has increased by more than 51-fold. Since 2003, Tournigan has added gold interests at Curraghinalt (2004), expanded its gold interests in the Slovak Republic with Brehov (2005), and added uranium interests in the Slovak Republic and Wyoming, USA (2005). The Company also raised net proceeds of $9,419,104 in Fiscal 2004 and $6,012,791 in Fiscal 2005 through equity financings.
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The financial results over the past eight quarters are a reflection of the Company’s growth plans to add and develop mineral interests that are primarily funded by equity financings. Mineral property interests and deferred exploration costs have increased each quarter, resulting from the acquisition of Curraghinalt in the third quarter of Fiscal 2004 for $2,350,701, the Brehov project in the third quarter of Fiscal 2005 for $12,500, and uranium properties in Wyoming, USA, in the fourth quarter of Fiscal 2005 for $65,759. In addition, the Company has conducted extensive exploration activities on the Curraghinalt and Kremnica gold projects. Funds for these acquisition and exploration activities as well as operating costs have been provided by equity financings.
During Fiscal 2005, the Company incurred a loss of ($2,877,394), or ($0.05) per share, compared to a loss of ($2,319,019), or ($0.06) per share in Fiscal 2004.
More than 95% of the Company’s operating expenses are generated by head office activities. As the major mineral interests are located in Northern Ireland and the Slovak Republic, and fundraising is a critical component towards achieving the Company’s plans, Senior Management is frequently traveling. Total general and administrative expenses of $2,904,838 in Fiscal 2005 increased by $594,017 over Fiscal 2004, primarily due to overall increased operations requiring additional administrative services and support at head office and in field offices.
A major component of consulting fees and salaries was stock-based compensation expense. The Company recognizes an expense for stock options granted as determined by the Black-Scholes pricing model. During Fiscal 2005, $421,025 of stock-based compensation expense was recorded compared to $581,500 in the prior year. Excluding stock-based compensation expense, consulting fees and salaries increased to $681,349 in Fiscal 2005 from $611,388 in 2004. Costs in 2005 include related party fees of $353,208 (2004 - $355,538), directors’ fees of $88,000 (2004: $127,000), salaries of $96,592 (2004 - $32,428), and other consulting fees of $143,550 (2004 - $96,422). These increases are directly related to the increase in overall Company activities.
In order to finance the Company’s exploration activities and acquisitions as well as to finance operating costs, investor relations are critical to obtaining new investment capital. Advertising, promotion, and investor relations costs have increased to $549,347 in Fiscal 2005 from $219,050 in 2004, primarily due to development of a web-based email program in Europe at a cost of $240,819. Legal and professional fees in Fiscal 2005 totaled $316,091 broken down into legal costs of $150,581 and accounting and audit fees of $165,510. Total legal and professional costs were $141,081 higher in 2005 than in 2004 due to services required for corporate development in connection with acquisitions and financing activities.
Office expenses increased significantly in Fiscal 2005 by $55,245 to $149,905 compared to $93,660 in 2004. The main cause for difference were increases in the associated overhead costs with additional staff. Communications expenses of $94,792 in the current year have increased by $31,050 over 2004 due to increased telephone costs primarily related to travel. Regulatory fees at $78,866 are higher due to additional corporate filings in connection with share issues and property acquisitions. Printing costs were higher in 2005 compared to 2004 due to publication of corporate reports and an increase of public relations materials delivered to a larger mailing list.
Exploration properties increased on a net basis by $3,456,552 in Fiscal 2005 compared to $4,735,042 in Fiscal 2004. The 2004 amount included the Curraghinalt property acquisition agreement recorded at a cost of $2,350,701. Excluding acquisition costs, additions to exploration properties were $3,377,543 in 2005, an increase of $818,746 over the $2,558,797 recorded in the prior year. The main reason is an increase of $513,867 in drilling and assay costs, with the major increase of $1,043,346 in drilling programs in Kremnica offset by a reduction of $525,850 at Curraghinalt. Overall operations on the Company’s properties generally expanded from the previous year with the drilling programs at the Kremnica properties.
At Curraghinalt, $1,274,721 of exploration costs were incurred during Fiscal 2005, a decrease of $615,292 from Fiscal 2004 expenses of $1,890,013. The primary reason for the reduced Fiscal 2005 costs is the change in focus from drilling and associated charges, to
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data compilation and permitting work. While drilling and assay expenses were $525,850 higher in the 2004 period, the Company’s preliminary data compilation and environmental work in anticipation of pre-feasibility studies was reduced by $51,734 in 2005. Consulting, salaries and geologist expenses in 2005 were $314,227 compared to $515,322 in 2004. The reduction of $201,095 was due to a reduced number of personnel on the project. Core storage and re-cataloguing expenses in 2005 are the result of building a new core shed and reorganizing the inventory in the shed.
Total expenditures at Kremnica in Fiscal 2005 were $1,922,865 (2004 - $593,547), predominantly comprised of in-fill drilling at Sturec and consulting management fees. Drilling, assaying, office and field expenses, travel and pre-feasibility study expenses all increased significantly in the year due to the expanded work programs at Kremnica in preparation for a new resource estimate and Pre-feasibility Study. As part of the expanded programs, additional drillers, geologists and support staff have been hired. As pre-feasibility work progresses, expenditures are expected to continue to escalate, in particular, consulting expenses.
Cash Flow in Fiscal 2005
During Fiscal 2005, the Company issued common shares to raise $6,012,791 ($2,000,000 of which was received on 9/1/2005) in new financing pursuant to private placements and security conversions; these funds were mainly used to fund mineral property expenditures, to reduce accounts payable, and to fund overhead costs. Subsequent to the Fiscal 2005 yearend, the Company received gross proceeds of $49,000,150 from private placements, $530,100 from the exercise of options, $17,063 from the exercise of warrants and $712,260 from a settlement of a promissory note.
Additional equity financing will be required to conduct further development work on the Company’s projects and to place any project (if feasible) into production. While the Company has been successful in raising the necessary funds in the past, there can be no assurance it can continue to do so.
Transactions with Related Parties in Fiscal 2005
Transactions with related parties occurred in the normal course of operations. The following related party transactions were recorded during Fiscal 2005:
(a) fees of $389,958 (2004: $450,475) to related parties, comprised of:
i) directors’ fees of $58,000 (2004 - $97,000);
ii) chairman’s fees of $30,000 (2004 - $30,000);
iii) officers’ fees of $72,000 (2004 - $67,000);
iv) fees of $35,000 (2004 - $25,000) from companies controlled by
officers;
v) professional fees of $194,958 (2004 - $180,000) from a company
controlled by the President;
vi) professional fees of $nil (2004 - $25,000) from companies controlled
by directors; and
vii) professional fees of $nil (2004 - $26,475) from directors.
(b) Incurred geological consulting fees of $nil (2004 -$18,025) from a
director, which was capitalized to exploration properties.
(c) Due to related parties of $100,630 (2004 -$139,128) is comprised of
$34,849 (2004: $9,000) payable to officers for unpaid consulting fees and
$65,781 (2004: $127,000) payable to directors for unpaid director fees,
and $nil (2004:$3,128) payable to the President for expenses incurred.
(d) The Company incurred legal fees of $58,667 (2004: $ 5,000) from a law firm
in which a principal is a director. Accounts payable and accrued expenses
includes $11,915 due to the law firm at August 31, 2005 (2004: $nil).
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(e) The Company recovered expense reimbursements of $108,756 (2004 -$49,026)
from Sunrise Minerals Ltd. (formerly Lalo Ventures Ltd.) (“Sunrise”), a public company which is related by a common officer and a common director; $61,490 (2004 - $11,843) from Exeter Resource Corporation (“Exeter”), a public company related by a former director and a former officer; and $41,526 (2004- $nil) from Finavera Energy Canada Ltd. (“Finavera”), a private company related by a common director. The reimbursements are recorded as offsets to the underlying expense items.
(f) Due from related parties of $91,255 (2004: $25,702) includes $16,280
(2004: $20,326) due from Sunrise, $17,628 (2004: $5,376) due from Exeter,
$44,887 (2004: nil) due from Finavera, and $12,460 (2004: $50,958) due
from a director.
Investor Relations – Fiscal 2005 and Fiscal 2004
During Fiscal 2005, the Company carried out an investor relations campaign, primarily directed at investors in Europe, where the majority of the Company’s assets are located. The Company spent $240,819 on an e-mail promotional program directed at current and potential European investors. The investor relations team includes The Windward Agency, retained to provide targeted investor relations activities in North America at a rate of US$4,000 per month and Better Investment Group (“B.I.G.”) Communications Inc. of Germany at a rate of $5,000 per month.
In Fiscal 2004, investor relations activities were managed primarily by the President, Damien Reynolds. During the year, the Company attended several industry trade shows in North America and Europe, and sponsored a number of investor group meetings and presentations. These activities were an important part of the Company’s achievement of raising $7.2 million from private placements during Fiscal 2004.
In February 2004, the Company entered into an investor relations agreement with B.I.G. Communications Inc. at a rate of $5,000 per month. The Company also granted B.I.G. Group 150,000 stock options exercisable at $0.35 per share for a period of five years, subject to vesting requirements. B.I.G. Group is headed by Pascal Geraths, in Frankfurt, Germany. During the year, Mr. Geraths represented the Company and assisted with its investor relations and promotion in Europe, mainly in Germany.
Off Balance Sheet Transactions as at 8/31/2005
During Fiscal 2005, the Company’s only off balance sheet transaction was an increase in leased space at its head office. Existing commitments include an office lease, certain exploration commitments, and contingent commitments to: a) issue 5,000,000 common shares if the Company initiates construction of a
mine in Northern Ireland,
b) conduct exploration pursuant to its acquisition of the Brehov project in
the Slovak Republic, and
c) make annual payments totaling US $125,000 to complete the Company’s
acquisition of uranium claims in Wyoming.
Events Subsequent to Fiscal 2005
The following events occurred subsequent to Fiscal 2005 yearend:
(a) 1,390,500 stock options were exercised, for total proceeds of $530,100:
i) 150,000 common shares at an exercise price of $0.25 per share;
ii) 400,000 common shares at $0.35 per share; and
iii) 512,500 common shares at $0.40 per share.
iv) 328,000 common shares at $0.45 per share.
(b) On 9/1/2005, the Company received $2,000,000 pursuant to a private placement
that closed on 8/31/2005.
(c) In September 2005, the Company finalized a definitive option agreement with
Sweetwater Resources LLC and issued 200,000 common shares at a fair value of
$87,000 under the agreement.
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(d) On 9/8/2005, a non-brokered private placement of 5,000,000 units at $0.40
per unit was completed for gross proceeds of $2,000,000. Each unit consists
of one common share and one-half of a warrant, with each whole warrant
entitling the holder to purchase an additional share at an exercise price of
$0.55 per share until 9/8/2007. The Company may require the warrants to be
exercised any time after the trading price of its shares exceeds $1.00 per
share for 30 consecutive trading days. A finder’s fee of 7% of the gross
proceeds ($140,000) was paid to a third party.
(e) 9/21/2005, James Walchuck, former President and Chief Operating Operator of
the Company, was appointed President and Chief Executive Officer.
Damien Reynolds, former Chief Executive Officer of the Company was appointed
Chairman, replacing Hein Poulus who remains as a director. Mr. Reynolds was
paid a transition allowance of $165,000, equal to one year’s salary, based
on the recommendation of an independent consultant.
(f) On 9/21/2005, the Company granted 730,000 stock options exercisable at
$0.40 per share for a period of five years to directors, employees and
consultants. The options are subject to vesting provisions such that 50%
were vested on the date of grant and 50% will vest on 9/21/2006.
(g) On 9/30/2005, a non-brokered private placement of 3,500,000 units at $0.50
per unit was completed for gross proceeds of $1,750,000. Each unit
consists of one common share and one-half of a warrant, each whole warrant
entitling the holder to purchase an additional share at an exercise price
of $0.65 per share until 3/31/2007. The Company may require the warrants
to be exercised any time after the trading price of the Company’s shares
exceeds $1.00 per share for 30 consecutive trading days. Finders’ fees of
5% of the gross proceeds raised (75,000 units and $37,500) were paid to
third parties.
(h) On 11/11/2005, 1,524,747 unexercised warrants expired and on 11/14/2005,
5,239,857 unexercised warrants expired.
(i) On 11/30/2005, the Company received US$600,000 in settlement of a
US$750,000 promissory note. The Company had provided for doubtful
collection of the face value of the note in its financial statements for
the year ended 8/31/2001.
(j) On 12/21/2005, the Company announced the staking of 272 federal lode
mineral claims covering three uranium-prospective areas in the Southern
Black Hills of South Dakota, USA.
(k) On 1/25/2006, the Company completed a private placement consisting of
31,207,000 Special Warrants at $1.45 per Special Warrant for gross proceeds of $ 45,250,150. The financing was made on an underwritten basis through a syndicate led by Sprott Securities Inc. and including Dundee Securities Corporation and Canaccord Capital Corporation. Each Special Warrant will entitle the holder to acquire one common share, subject to adjustment in certain instances, at any time before June 23, 2006. In the event that the Company does not receive a receipt for a prospectus within 90 days following its filing, these Special Warrants will be convertible into 1.1 common share in lieu of 1 common share. An aggregate commission of 6% was paid to the Underwriters and a total of 936,210 brokers’ warrants were issued to the Underwriters. Each brokers’ warrant is exercisable to purchase one common share at $1.65 per share until February 22, 2008.
Comparison of Financial Results for Fiscal 2004 Ended 8/31/2004 to Fiscal 2003
Performance Summary – Fiscal 2004
The following is a summary of significant events and transactions that occurred during the year ended 8/31/2004:
a. entered into a letter agreement to acquire a 100% interest in Ulster
Minerals Limited, the owner of the exploration license for the Curraghinalt
gold project;
b. raised proceeds of $7.2 million and issued 20.6 million shares on the
completion of private placements;
c. received proceeds of $2.8 million and issued 11.3 million shares on the
exercise of warrants and options;
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d. appointed James Walchuck as VP Mining to lead the advancement of the
Curraghinalt and Kremnica gold properties while Kent Ausburn, VP
Exploration focuses on exploration;
e. initiated a pre-feasibility study on the Curraghinalt gold project;
f. completed an infill diamond drilling program of 20 holes covering a total
of 2,998 meters within the current Curraghinalt mineralization block;
g. completed a scoping study on the Sturec gold deposit at Kremnica;
h. completed 861 meters of step-out drilling around the Kremnica project
and 2,458 meters of exploration drilling at the Kremnica South prospect
after recompilation and interpretation of prior exploration data; and
i. graduated to a Tier 1 issuer listing status on the TSX Venture Exchange.
Financial Summary Fiscal 2004
The Company’s net loss in Fiscal 2004 of ($2,319,019) was mainly comprised of consulting fees and wages of $662,254, travel expenses of $342,598, legal and professional fees of $207,073, and stock-based compensation of $581,500. All other expenses, totaling $525,594, consisted of investor relations, communications, amortization, interest, office expenses, and regulatory fees. The net loss for the year was 61% larger than the Fiscal 2003 net loss of ($1,439,167). With the exclusion of stock-based compensation, the loss was 19% larger than the prior year, due to increased overhead costs resulting from larger premises, and additional employees and senior management personnel.
Of the $662,254 incurred in consulting fees and salaries in 2004, $450,475 is comprised of fees to related parties. Other consulting fees and salaries were $211,779 (2003 - $263,776). Consulting fees to related parties include the President, CFO, Executive Vice President, the Board of Directors, and a former director. In Fiscal 2003, consulting fees to related parties were $149,955. The increase in related party fees is primarily due to the following items which did not occur in the prior year: a $60,000 bonus granted to the President, Chairman’s fees of $2,500 per month, and directors’ fees of $1,000 per month per director.
Travel expenses were incurred by directors, management and consultants in respect of ongoing exploration activities on the Company’s European mineral property interests, travel required to assist with overseas investor relations activities, and for general corporate purposes. As exploration activity increased, so did travel requirements. Professional fees of $207,073 in Fiscal 2004 and $222,113 in Fiscal 2003 were mainly legal in nature and reflected the costs associated with property and corporate agreements, and the general corporate requirements of a public company.
As a result of options granted and agents’ warrants issued in Fiscal 2004, $664,053 was recorded as a credit to contributed surplus. In accordance with the Black-Scholes pricing model, as a result of the exercise of stock options and agents’ warrants during Fiscal 2004, $35,771 was debited to contributed surplus and credited to the value of the options and warrants exercised.
Most components of other expenses in Fiscal 2004 of $525,594 (noted above) recorded increases over 2003. Specifically, investor relations increased to $136,121 from $72,849 due to a combination of a series of print and Internet campaigns in European trade publications and websites. During the 2003 and 2004 fiscal years, all other promotional costs were comprised of meetings costs, meals and entertainment.
Financial Summary Fiscal 2003
The Company incurred a net loss of ($1,439,167) (2002 - $102,193) in the year ended 8/31/2003, and a corresponding loss per share of ($0.16) (2002 - $0.03). The Fiscal 2003 loss was due largely to expenses from sourcing and investigation of mineral properties in several countries and establishment of a foreign office. By the end of the Fiscal year, the Company was actively exploring the mineral potential on properties that were owned or under option agreements.
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On July 11, 2003 the Company acquired 100% of the outstanding common shares of Kremnica Gold, a.s., from Argosy Minerals Inc., an Australian publicly listed company. The principal asset of Kremnica is the Kremnica Gold Project, a mining license of 12 square kilometres, including title to the Kremnica Mine. The mine is not currently in operation. The purchase price was 500,000. The following table summarizes the estimated fair value of assets acquired and liabilities assumed at the date of acquisition:
Cash $ 1,000
Prepaid expenses 1,000
Fixed assets 7,000
Mineral properties 498,000
Accounts payable (7,000)
Purchase price $ 500,000
In August 2002, the Company entered into a Memorandum of Understanding with Brett Resources Inc. whereby the Company could acquire a 100% interest in the El Potosi project, and a 60% interest in the Cerro Pedernal project, both of which are in El Salvador. The El Potosi project required staged payments totaling US $1,450,000 over a five-year period. The first two payments of US $25,000 each were paid during the Fiscal 2003. The Cerro Pedernal project required staged exploration expenses totaling US $500,000 over a five-year period, including US $35,000 in the first year. The date of the end of the first year was extended to November 30, 2003. The Company satisfied the requirement by incurring these costs by October 31, 2003. During the year a satellite imagery study of both the El Potosi and Cerro Pedernal projects in El Salvador was initiated. The results of this study were received and a geologist was hired to conduct field work.
On 11/7/ 2002 the Company entered into a Letter Agreement (“Strongbow Agreement”) with Strongbow Resources Inc. (“Strongbow”) to acquire up to a 100% interest in two prospecting licenses in County Tyrone, Northern Ireland. In February 2003, two formal option agreements were executed with Strongbow. Field work began on both the Tyrone and Curraghinalt projects in April 2003 after a field office was opened in Gortin, Northern Ireland and a Project Manager appointed. Initial work focused on gathering technical data previously generated by former operators from various locations and centralizing the data in the field office in Gortin.
On 7/11/ 2003, the Company completed the acquisition of all the outstanding shares of Kremnica Gold, a.s., a Slovak Republic corporation, from Argosy Minerals Inc., an Australian publicly listed junior mining company. The principal asset of Kremnica is a mining license of 12 square kilometres, including title to the Kremnica Mine, which is not currently in operation. Initial work was focused on a review of existing data, followed by the initiation of both exploration work at the Kremnica gold project as well as an update to a preliminary assessment completed by Argosy in 1998.
During the year ended 8/31/2003, the Company was granted 15 prospecting licenses in the Republic of Ireland, which entitle the Company to prospect for gold, silver and base metals for a six year term.
Consulting fees for Fiscal 2003 were $413,731 (29% of total expenses). This included the establishment of a foreign office, corporate staffing, design services, research services, corporate finance, and directors’ fees. Business investigations of $262,729 (18% of total expenses) were comprised of $114,410 due diligence costs on the Omagh project, Northern Ireland, and $148,319 due diligence costs on the Kremnica project, Slovakia. Travel expenses for the year were $247,178 (17% of total expenses). This primarily involved travel to the Company's various foreign properties for purposes of assessment, exploration and development. Mineral Properties expenses of $1,339,099 are comprised of several projects.
The Company repaid loans payable of $592,000 in September 2003 using the proceeds of the closing of the first tranche of a private placement which completed in October 2003.
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5.C. Research and development, patents and licenses, etc.
5.D. Trend information
5.G. Safe harbor.
--- No Disclosure Necessary ---
5.E. Off-Balance Sheet Arrangements
Leased premises: On 4/1/2004, the Company entered into a five-year-plus-three-month lease agreement for office space. On May 23, 2005, the lease agreement was amended to provide for additional space and to extend the term to June 30, 2010. Annual lease commitments are: $160,100 for 2006, $167,520 for 2007, $167,520 for 2008, and $139,600 for 2009, for an aggregate of $634,740.
Exploration licenses: The Company holds, or is in the final stages of application for exploration licenses in Northern Ireland, the Republic of Ireland, the Slovak Republic, and Wyoming, USA. Licenses in each country have the following commitments for exploration expenditures in the 2006 calendar year: Northern Ireland, $721,000; Republic of Ireland, $84,000; and Slovak Republic, $24,000; Wyoming, USA, $nil, and South Dakota, USA, $nil.
Acquisitions: In connection with the purchase of Ulster, the Company must issue 5,000,000 common shares to Strongbow upon the decision of the Company’s board of directors to initiate construction of a mine within the license area. The Company must also pay Strongbow 20% of the tax savings from Ulster’s tax loss carry-forwards when utilized.
5.F. Tabular disclosure of contractual obligations
On 4/1/2004 the Company entered into a five-year-plus-three-month lease agreement for office space. On May 23, 2005, the lease agreement was amended to provide for additional space and to extend the term to June 30, 2010. Annual lease commitments are:, $160,100 for 2006, $167,520 for 2007, $167,520 for 2008, and $139,600 for 2009, for an aggregate of $634,740.
The Company holds, or is in the final stages of application for, exploration licenses in Northern Ireland, the Republic of Ireland, the Slovak Republic, and Wyoming, USA. Leases in each country have the following commitmentsfor exploration expenditures for the 2006 calendar year:
Northern Ireland $721,000
Republic of Ireland $ 84,000
Slovak Republic $ 24,000
Wyoming, USA $ nil
South Dakota, USA $ nil
In connection with the purchase of Ulster, the Company must issue 5,000,000 common shares to Strongbow upon the decision of the Company’s board of directors to initiate construction of a mine. The Company must also pay Strongbow 20% of the tax savings from Ulster’s tax loss carry-forwards when utilized.
Other than disclosed above, the Company does not have any contractual obligations and commitments as of 1/31/2006 that will require significant cash outlays in the future.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES
6.A. Directors and Senior Management
Table No. 4
Directors and Senior Management
January 31, 2006
Date of | |||
First | |||
Election or | |||
Name | Position | Age | Appointment |
Kent Ausburn (1) | Vice President Exploration | 52 | November 2003 |
Peter Bojtos (2) | Director | 56 | August 2002 |
Michael J. Hopley (5) | Director | 58 | April 2002 |
Nancy La Couvee (3) | Corporate Secretary | 46 | July 2004 |
David Montgomery (5) | Director | 56 | September 2003 |
Robert Nowell (4) | Chief Financial Officer | 59 | June 2005 |
Hein Poulus (2)(6) | Director | 58 | September 1999 |
Damien Reynolds (7) | Chairman | 37 | September 1999 |
Ronald Shorr (2) (5) | Director | 68 | June 2002 |
Garry Stock (8) | Executive Vice President | 38 | July 2003 |
James Walchuck (9) | President & CEO/ Director | 49 | March 2004 |
(1) He spends full time on the affairs of the Company. | |||
(2) Member of Audit Committee. | |||
(3) She spends full time on the affairs of the Company. | |||
(4) He spends about 40% of his time on the affairs of the Company. | |||
(5) Member of Compensation Committee. | |||
(6) He spends about 10% of his time on the affairs of the Company. | |||
(7) He spends about 90% of his time on the affairs of the Company. | |||
(8) He spends about 80% of his time on the affairs of the Company. | |||
(9) He spends full time on the affairs of the Company. | |||
Kent Ausburn, Ph.D.,Vice President Exploration, is a senior geologist with over twenty years of experience in the minerals exploration/mining industry, three years experience as a consulting hydro-geologist, leading to a focus on property acquisition with equity positions in both private and public companies. He has extensive field and management experience in the minerals business. From 1997 to May 2992, he was a principal of and Chief Geologist for Cowboy Exploration Ltd.; and from May 2002 to October 2003, he was Exploration Manager for the Company, prior to being appointed VP Exploration.
Peter Bojtos, Director, is a Professional Engineer with over 30 years of worldwide experience in the mining industry. He is a mining executive with entrepreneurial, commercial and public company management skills, coupled with a background in all facets of the industry, from exploration and acquisitions through production, financing and investor relations. Over his career, Mr. Bojtos has visited and evaluated properties in 80 countries. He is a Director of the following public companies: Vaaldiam Resources Ltd. since April 1994; Fischer-Watt Gold Co Inc. since April 1996 (also Vice President); Link Mineral Ventures Inc. since May 1996; Sage Gold Inc. since September 1996; Queenstake Resources Ltd. since June 2000; Kalimantan Gold Corp Ltd. since June 2002; Desert Sun Mining Corp. since June 2002; U.S. Gold Corp. since May 2003; and Falkland Gold& Minerals Ltd. sinc e March 2004.
Michael J. Hopley, Director, is an exploration geologist with over 30 years of experience. He holds a Bachelor's degree in Geology from London University, England. He has held senior level management positions in both junior and major mining companies and has operated in many different parts of the world including Chile, Argentina, Venezuela, Australia, Mexico, United Kingdom as well as North America. A Director of the Company since April 2002, he was Chief Operation Officer from December 2002 until January 2004 and Chief Financial Officer from March 2003 to December 2003. From 1996 to 2001, he was
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President of Fremont Gold Corp.; since December 2003, Mr. Hopley has been President/CEO/Director of Sunridge Gold Corp., a TSX-traded mineral exploration company.
Nancy La Couvée,Corporate Secretary, is a professional corporate administrator who has been involved in that capacity with mineral exploration companies for 18 years. She formerly held the office of Corporate Secretary and Corporate Administrator with Exeter Resource Corporation from January 2004 to December 2004. Previously, she was Corporate Secretary of Olympus Pacific Minerals Inc., Lysander Minerals Corporation and Canden Capital Corp. (now PMI Ventures Ltd.) from 1999 to 2003. From 1995 until 1999 she was Assistant Corporate Secretary of Black Swan Resources Inc. (now Brazilian Diamonds Inc.) and Office Manager/Controller of that firm from 1993 to 1995. During the period 1981 to 1991, she was Assistant to the Treasurer and Accountant of Canada Tungsten Inc. (now Aur Resources Inc.).
David Montgomery, Director, is graduate from Queens University, Belfast in History and Politics. He brings a wealth of connections within Northern Ireland and Britain as well as substantial business experience with both large established conglomerates and small-capitalization start-up companies. He is Chairman of Team Northern Ireland, established by the First and Deputy First Minister's Office of Northern Ireland to stimulate a private sector response to funding major public projects in Northern Ireland. Since May 2000, he has been Chairman of Mecom UK Management, a European media investment company. From October 1992 to January 1999, he was Chief Executive of the Mirror Group, plc, who expanded the newspaper group from a market cap of £230 million to £1.2 billion shortly before its merger with Trinity plc. He is also former non-execu tive director for Donahue Inc., Scottish Media Group, the Press Association and a former Managing Director of News UK. Since June 2002, he has been Chairman of West 175 Inc., a multi-media company listed on the Alternative Investment Market in England.
Robert Nowell,Chief Financial Officer, is a Certified General Accountant with more than 30 years experience in senior financial management positions. Bob joined Tournigan in May 2005 and is also Controller for International Bio Recovery Corp., a TSX Venture Exchange company; CFO for Magnum Uranium Corp, a TSX Venture Exchange company; He has also worked for Jenosys Enterprises Inc., a high technology company in the gaming sector from 2001 to 2003; dba Telecom Corporation, a high technology company in the telecommunications sector from 1988 to 2001; and a forest products company for 8 years to 1987.
Hein Poulus, Director, is a businessman and, since 1996, a partner in the Vancouver office of the Stikeman Elliott law firm. He was Chairman of the Board from September 13, 1999 until September 21, 2005. His background includes: membership in McAlpine, Poulus and Hordo, a Vancouver law firm (1973 to 1979); senior management positions with Kaiser Resources (1979 to 1980), a publicly-traded producer of metallurgical and thermal coal and oil and gas; and with private Kaiser companies (1980 to 1984) whose activities included coal trading, oil and gas, real estate, and professional football. He then served as a senior officer of Southeastern Capital Corporation, a Denver-based leveraged buyout group (1984 to 1990) with interests in broadcasting, petroleum product distribution, and environmental laboratories.
From 1991 to 1993, he was an associate in the law firm of McAlpine Hordo and from 1993 to 1996, he was a partner in the law firm of Smith Lyons (1993 to 1996. Mr. Poulus was born in Djakarta, Indonesia and schooled there and in the Netherlands. He holds undergraduate and law degrees from the University of British Columbia and an LL.M. from the London School of Economics.
Damien Reynolds, Chairman of the Board/Director, trained as an accountant, has been working in the junior mineral exploration sector, in various capacities, for over fifteen years. He was President of the Company from September 1999 until May 2005; and was CEO/President from September 13, 1999 until September 21, 2005. He was He gained industry knowledge through founding, managing, and directorships of public exploration companies. Prior to joining the Company, he was Comptroller of TOTAL Energold Corporation, a mining and exploration subsidiary of the TOTAL Group of France; thereafter, he was Comptroller for Major General Resources Ltd. (now Commander Resources). Since October 2003, he has been a Director of Sunrise Minerals Ltd.
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(formerly Lalo Ventures Ltd.), a TSX-traded mineral exploration company; and from February 2004 to November 2004, he was President/CEO.
Ronald Shorr, Director, has been involved with researching, development, restructuring, and financing corporations for over 30 years, including operations, acquisitions and fund raising. He has acted as an adviser and consultant in several large merger transactions/dispositions and assisted in raising hundreds of millions of dollars in public offerings. Mr. Shorr is a Chartered Financial Analyst (CFAÓ) and graduated from the University of Michigan (B.A.) and Harvard Business School (M.B.A.), subsequently attending graduate school at the Krumb School of Mines at Columbia University. He is a member of the Institute of Chartered Financial Analysts, the New York Society of Security Analysts, and authored a chapter for Economics of the Mineral Industry. Since June 2004, he has been a Director of Maudore Minerals Ltd., a TSX-traded mineral exploration company; and since August 2004, he has been President/CEO/Director. Since April 2004, he has been a Director of Samba Gold Inc., a TSX-traded mineral exploration company. Since May 2002, Mr. Shorr has been a Director of Crown Resources Corp., which is being acquired by Kinross Gold Corp. Previously, working on Wall Street, he was a senior metals analyst: for Bear Stearns, Natwest Bank, E.F.Hutton, and Morgan Stanley Dean Witter.
Garry Stock, Executive Vice President is a Chartered Financial Analyst with eight years experience in investor relations, corporate finance and administration in the junior mineral exploration industry, with specific experience in an international, multi-jurisdictional framework. He has been Executive Vice President since July 2003 and Interim Chief Financial Officer from November 2004 until June 2005. He graduated with an Honours Bachelor in Economics from McMaster University in Hamilton, Ontario, and has prior experience both as a stockbroker and as a pension fund consultant. From March 1996 to November 2002, he was Acting Administrator and Corporate Communications Manager of Argosy Minerals Inc. Since November 2004, he has been Interim CFO of Sunrise Minerals Ltd. (formerly Lalo Ventures Ltd.), a TSX-traded minerals exploration company.
James Walchuck, President/Chief Executive Officer, is a mining professional with over 25 years of experience in the mining industry. He was Vice President Mining of the Company from March 2004 until May 2005, when he was appointed President/Chief Operating Officer; he relinquished the COO position and was appointed CEO in September 2005. The scope of his experience includes work in Canada, Ghana and Tanzania. From 2002 to March 2004, he was mining consultant. Mr. Walchuck was the Manager Mining for Barrick at the Bulyanhulu Gold Mine in Tanzania from July 1999 to August 2002; there he oversaw the building of a multi-million-ounce, high-grade underground mine in 24 months and achieved over two million man-hours without a lost-time accident. Prior to his six-year involvement with Bulyanhulu (first as Senior Project Manager with Sutton Resources then as Manager Mining for Barrick), Mr. Walchuck was Manager of Mining and then Manager - Corporate Operations for Royal Oak Mines. This was preceded by a five-year term as Chief Mining Engineer for Tarkwa Goldfields in Ghana. A member of the Professional Engineers of Ontario for 24 years, Mr. Walchuck holds Bachelor Degrees in both Science and Engineering.
The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company.
The Senior Management serves at the pleasure of the Board of Directors.
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Despite the Company’s Senior Management spending material portions of their time on businesses other than the Company, the Company believes that they devote sufficient time to the Company to properly carry out their duties.
No Director and/or Senior Management has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a Director and/or Senior Management, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct/practice/employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.
During the last five years, no material Canadian/USA regulatory actions were taken against any officer/director or companies they were affiliated with, other than temporary TSX Venture Exchange cease-trade orders.
There are no family relationships between any Directors or Senior Management.
There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a Director or member of senior management.
6.B. Compensation
Directors’ Cash Compensation
The Company pays each independent director $1,000 per month for their services as directors; in the year ended 8/31/2005, the Company paid/accrued an aggregate of $58,000 in directors’ fees. The Company compensates the Chairman at a rate of $2,500 per month for his services; during the year ended 8/31/2005, the Company paid/accrued a total of $30,000 to Hein Poulus for his services as Chairman. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors.
The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Company other than services ordinarily required of a Director. Other than indicated above no Director received any cash compensation for his services as a Director, including committee participation.
Refer to ITEM #7.B., “Related Party Transactions”, for a discussion of other compensation to Directors for special assignments. From time to time, incentive stock options are granted to directors in accordance with the policies of the TSX Venture Exchange and the Company’s Stock Option Plan.
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Senior Management Compensation
Total cash compensation accrued and/or paid (directly and/or indirectly) to all Senior Management during Fiscal 2005 ended 8/31/2005 was $626,408.
Table No. 5 details compensation paid/accrued for Fiscal 2005/2004/2003 ended August 31st for the Senior Management and Directors.
Table No. 5
Summary Compensation Table
Senior Management and Directors
Long-Term Compensation Awards | |||||||||||||
Annual Compensation | |||||||||||||
Name and | Other | Restricted | All | ||||||||||
Principal | Fiscal | Annual | Stock | Options/ | LTIP | Other | |||||||
Position | Year | Salary | Bonus | Comp. | Award/s | SARS (#) | Payouts | Comp. | |||||
Damien Reynolds: Chairman (Former President until May 2005, CEO until September 2005) | |||||||||||||
2005 | $135,000 | $59,958 | nil | 400,000 | nil | nil | nil | ||||||
2004 | $120,000 | $60,000 | nil | 200,000 | nil | nil | nil | ||||||
2003 | $57,000 | 35,000 | nil | 250,000 | nil | nil | nil | ||||||
James Walchuck: President & CEO / Director (Former Vice President Mining until May 2005) | |||||||||||||
2005 | $169,200 | nil | nil | 250,000 | nil | nil | nil | ||||||
2004 | $125,654 | nil | nil | 400,000 | nil | nil | nil | ||||||
Kent Ausburn: Vice President Exploration | |||||||||||||
2005 | $104,000 | nil | nil | 200,000 | nil | nil | nil | ||||||
2004 | $85,500 | nil | nil | 150,000 | nil | nil | nil | ||||||
2003 | $90,247 | nil | nil | 100,000 | nil | nil | nil | ||||||
Garry Stock: Executive Vice President / former Interim Chief Financial Officer | |||||||||||||
2005 | $72,000 | nil | nil | nil | nil | nil | nil | ||||||
2004 | $67,000 | nil | nil | 100,000 | nil | nil | nil | ||||||
2003 | $10,000 | nil | nil | 100,000 | nil | nil | nil | ||||||
Jon Lever: Former Chief Financial Officer | |||||||||||||
2005 | $15,000 | nil | nil | nil | nil | nil | nil | ||||||
2004 | $25,000 | nil | nil | 150,000 | nil | nil | nil | ||||||
Bob Nowell, Chief Financial Officer | |||||||||||||
2005 | $20,000 | nil | nil | 125,000 | nil | nil | nil | ||||||
Michael Hopley: Director; Former COO; Former CFO | |||||||||||||
2005 | $nil | nil | $12,000 | 250,000 | nil | nil | nil | ||||||
2004 | $18,025 | nil | $8,000 | 150,000 | nil | nil | $6,475 | ||||||
2003 | $96,117 | nil | nil | 100,000 | nil | nil | nil | ||||||
Nancy La Couvee: Corporate Secretary | |||||||||||||
2005 | $51,250 | nil | nil | 100,000 | nil | nil | nil | ||||||
2004 | $5,000 | nil | nil | nil | nil | nil | nil | ||||||
Paul Simpson: Former Corporate Secretary | |||||||||||||
2005 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||
2004 | $nil | nil | nil | 30,000 | nil | nil | $61,022 | ||||||
2003 | $nil | nil | nil | 75,000 | nil | nil | $98,465 | ||||||
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Long-Term Compensation Awards | ||||||||
Annual Compensation | ||||||||
Name and | Other | Restricted | All | |||||
Principal | Fiscal | Annual | Stock | Options/ | LTIP | Other | ||
Position | Year | Salary | Bonus | Comp. | Award/s | SARS (#) | Payouts | Comp. |
Peter Bojtos: Director | ||||||||
2005 | $nil | nil | $12,000 | 100,000 | nil | nil | nil | |
2004 | $nil | nil | $12,000 | 50,000 | nil | nil | nil | |
2003 | $nil | nil | $12,000 | 100,000 | nil | nil | nil | |
David Montgomery: Director | ||||||||
2005 | $nil | nil | $12,000 | 100,000 | nil | nil | nil | |
2004 | $nil | nil | $11,000 | 200,000 | nil | nil | Nil | |
Hein Poulus: Director / Former Chairman of the Board until September 2005 | ||||||||
2005 | $nil | nil | $30,000 | 100,000 | nil | nil | nil | |
2004 | $nil | nil | $30,000 | 100,000 | nil | nil | nil | |
2003 | $nil | nil | nil | 200,000 | nil | nil | $20,000 | |
Ronald Shorr: Director | ||||||||
2005 | $nil | nil | $12,000 | 200,000 | nil | nil | nil | |
2004 | $nil | nil | $12,000 | 50,000 | nil | nil | 20,000 | |
2003 | $nil | nil | $12,000 | 100,000 | nil | nil | nil | |
Yale Simpson: Former Director | ||||||||
2005 | $nil | nil | $10,000 | 100,000 | nil | nil | nil | |
2004 | $nil | nil | $12,000 | 50,000 | nil | nil | $25,000 | |
2003 | $nil | nil | $12,000 | 100,000 | nil | nil | 29,200 | |
(2) Other Annual Compensation is directors’ fees. (2) All Other Compensation is consulting fees paid for non-director services. | ||||||||
Compensation Committee Statement on Executive Compensation
As in prior years, all of the judgments regarding executive compensation for Fiscal 2005 were based primarily upon our assessment of each executive officer’s leadership performance and potential to enhance long-term shareowner value. We rely upon judgment and not upon rigid guidelines or formulas or short-term changes in our stock price in determining the amount and mix of compensation elements for each executive officer.
Key factors affecting our judgments included the nature and scope of the executive officers’ responsibilities, their effectiveness in leading our initiatives to increase customer value, productivity and growth, and their success in creating a culture of unyielding integrity and compliance with applicable law. We also considered the compensation levels and performances of a comparison group of comparable companies that are most likely to compete with us for the services of executive officers.
Based upon all the factors we considered relevant, and in light of our strong financial and operating performance in a challenging economic environment, we believe it was in our shareholders’ best long-term interest for the Company to ensure that the overall level of our salary, bonus and other incentive compensation awards was competitive with companies in the comparison group. Quite simply, we continue to believe that the quality, skills and dedication of our executive leaders are critical factors affecting the long-term value of our company. Therefore, we continue to try to maintain an executive compensation program that will attract, motivate and retain the highest level of executive leadership possible.
Our decisions concerning the specific Fiscal 2004 compensation elements for individual executive officers, including the chief executive officer, were made within this framework. We also considered each executive officer’s level of responsibility, performance, current salary, prior-year bonus and other compensation awards. As noted
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above, in all cases our specific decisions involving Fiscal 2004 executive officer compensation were ultimately based upon our judgment about the individual executive officer’s performance and potential future contributions; and about whether each particular payment or award would provide an appropriate incentive and reward for performance that sustains and enhances long-term shareowner value.
Options/SARs Granted During The Most Recently Completed Fiscal Year
During the most recently completed fiscal year, the following incentive stock options were granted to Senior Management, Directors and employees/consultants. No SARs (stock appreciation rights) were granted during this period.
Table No. 6
Stock Option Grants in Fiscal 2005 Ended 8/31/2005
Number | Percentage | Exercise | Market Value of Securities Underlying Options | |||
Of | Of Total | Price | On Date | |||
Options | Options | Per | Grant | Expiration | Of Grant | |
Name | Granted | Granted | Share | Date | Date | Per Share |
Damien Reynolds | 100,000 | 3.32% | $0.45 | 9/17/2004 | 9/17/2009 | $0.36 |
Hein Poulus | 100,000 | 3.32% | $0.45 | 9/17/2004 | 9/17/2009 | $0.36 |
David Montgomery | 100,000 | 3.32% | $0.45 | 9/17/2004 | 9/17/2009 | $0.36 |
Peter Bojtos | 100,000 | 3.32% | $0.45 | 9/17/2004 | 9/17/2009 | $0.36 |
Michael Hopley | 250,000 | 8.31% | $0.45 | 9/17/2004 | 9/17/2009 | $0.36 |
Ronald Shorr | 100,000 | 3.32% | $0.45 | 9/17/2004 | 9/17/2009 | $0.36 |
Yale Simpson | 100,000 | 3.32% | $0.45 | 9/17/2004 | 9/17/2009 | $0.36 |
Nancy La Couvée | 75,000 | 2.49% | $0.45 | 9/17/2004 | 9/17/2009 | $0.36 |
Employees | 160,000 | 5.32% | $0.45 | 9/17/2004 | 9/17/2009 | $0.36 |
Consultants | (1) 950,000 | 31.56% | $0.45 | 9/17/2004 | 9/17/2009 | $0.36 |
Kent Ausburn | 100,000 | 3.32% | $0.45 | 2/16/2005 | 2/16/2010 | $0.29 |
James Walchuck | 250,000 | 8.32% | $0.40 | 6/9/2005 | 6/9/2010 | $0.49 |
Robert Nowell | 100,000 | 3.32% | $0.40 | 6/9/2005 | 6/9/2010 | $0.49 |
Nancy La Couvée | 25,000 | 0.83% | $0.40 | 6/9/2005 | 6/9/2010 | $0.49 |
Damien Reynolds | (2) 300,000 | 9.97% | $0.40 | 8/31/2005 | 8/31/2010 | $0.38 |
Kent Ausburn | (2) 100,000 | 3.32% | $0.40 | 8/31/2005 | 8/31/2010 | $0.38 |
Ronald Shorr | (2) 100,000 | 3.32% | $0.40 | 8/31/2005 | 8/31/2010 | $0.38 |
TOTAL | 3,010,000 | 100% | ||||
(2) 150,000 options subject to vesting such that 25% vest every three months. (2) 50% vest on date of grant; 50% vest on the first anniversary of grant. | ||||||
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Options/SARs Exercised During The Most Recently Completed Fiscal Year
During the most recently completed fiscal year, 649,445 stock options were exercised by Senior Management, Directors and/or employees/consultants; and 50,000 stock options expired unexercised. No SARs (stock appreciation rights) were granted/exercised during this period.
The following table gives certain information concerning stock option exercises during Fiscal 2005 by the Company’s Senior Management and Directors. It also gives information concerning stock option values.
Table No. 7
Aggregated Stock Options Exercises in Fiscal 2005
Fiscal Yearend Unexercised Stock Options
Fiscal Yearend Stock Option Values
Senior Management/Directors
(2) | ||||||
Number | Value of Unexercised | |||||
Of | Number of | In-the Money | ||||
Shares | (1) | Unexercised Options | Options at Fiscal Yearend/ Exercisable/ | |||
Acquired | Aggregate | At Fiscal Yearend | ||||
On | Value | Exercisable/ | ||||
Name | Exercise | Realized | Unexercisable | Unexercisable | ||
Paul Simpson | 105,000 | $23,250 | 100,000 | / Nil | $Nil | / $Nil |
Damien Reynolds | 300,000 | $49,000 | 400,000 | / 150,000 | $4,500 | / $Nil |
Jon Lever | 50,000 | $12,500 | 100,000 | / Nil | $3,000 | / $Nil |
Paul Simpson | 105,000 | $23,250 | Nil | / Nil | $Nil | / $Nil |
Kent Ausburn | Nil | $Nil | 300,000 | / 50,000 | $14,500 | / $Nil |
Nancy La Couvée | Nil | $Nil | 100,000 | / Nil | $Nil | / $Nil |
Robert Nowell | Nil | $Nil | 100,000 | / Nil | $Nil | / $Nil |
Garry Stock | Nil | $Nil | 150,000 | / Nil | $14,500 | / $Nil |
James Walchuck | Nil | $Nil | 520,000 | / 130,000 | $Nil | / $Nil |
Subtotal – Management | 455,000 | $121,750 | 1,670,000 | 330,000 | $36,500 | / $Nil |
Peter Bojtos | Nil | $Nil | 250,000 | / Nil | $14,500 | / $Nil |
Michael Hopley | Nil | $Nil | 250,000 | / Nil | $Nil | / $Nil |
David Montgomery | Nil | $Nil | 300,000 | / Nil | $6,000 | / $Nil |
Hein Poulus | Nil | $Nil | 400,000 | / Nil | $29,000 | / $Nil |
Ronald Shorr | 100,000 | $24,000 | 200,000 | / 50,000 | $1,500 | / $Nil |
Yale Simpson | 50,000 | $8,500 | 200,000 | / Nil | $8,000 | / $Nil |
Subtotal - Directors | 150,000 | $37,500 | 1,600,000 | 50,000 | $59,000 | / $Nil |
Consultants | 44,445 | ($1,111) | 1,255,555 | / Nil | $20,500 | / $Nil |
Employees | Nil | $Nil | 330,000 | / Nil | $5,100 | / $Nil |
Subtotal – Employees & Consultants | 44,445 | ($1,111) | 1,585,555 | / Nil | $25,600 | / $Nil |
TOTAL | 649,445 | $179,250 | 4,855,555 | 380,000 | $121,100 | / $Nil |
(1)
Based on the difference between the option exercise price and the closing market price of the Company's shares, on the date of exercise.
(2)
In-the-Money Options are those where the market value of the underlying securities as at the most recent fiscal year end exceeds the option exercise price. The closing market price of the Company's shares as at August 31, 2005 (being the last business day of the fiscal year) was $0.38.
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Stock Options. The Company may grant stock options to Directors, Senior Management and employees. Refer to ITEM #6.E., “Share Ownership” and Table No. 5, No. 6. No. 7, and No. 9 for information about stock options.
Change of Control Remuneration. The Company has no plans or arrangements in respect of remuneration received or that may be received by Executive Officers of the Company in Fiscal 2005 to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds US$100,000 per Senior Management.
Other Compensation. No Senior Management/Director received “other compensation” in excess of the lesser of US$25,000 or 10% of such officer's cash compensation, except Damien Reynolds, who received a bonus of $59,958. Senior Management/Directors as a group did not receive other compensation which exceeded US$25,000 times the number of persons in the group or 10% of the compensation, other than disclosed in Table No. 5 and ITEM #7.B.
Bonus/Profit Sharing/Non-Cash Compensation. Except for the stock option program discussed in ITEM #6.E., the Company has no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the Company's Directors or Senior Management.
Pension/Retirement Benefits. No funds have been set aside or accrued by the Company since incorporation to provide pension, retirement or similar benefits for Directors or Senior Management.
Written Management Agreements
--- No Disclosure Necessary ---
6.C. Board Practices
All directors hold office until the next meeting of the shareholders of the Company unless they resign or are removed in accordance with the Company’s Articles. Senior Management are appointed to serve at the discretion of the Board of Directors. The Board of Directors and Committees of the Board schedule regular meetings over the course of the year.
The fundamental objective of the Board is to ensure that it operates in a fashion that maximizes shareholder value over the long term. The Board’s duties and responsibilities are all carried out in a manner consistent with that fundamental objective. The principal duty and responsibility of the Board is to oversee the management and operations of the Company, with the day-to-day management of the business and affairs of the Company delegated by the Board to the CEO and other Senior Management.
The Board’s responsibilities include overseeing the conduct of the Company’s business, providing leadership and direction to its management, and setting policies. Strategic direction for the Company is developed through the Board’s annual planning process. Through this process, the Board adopts the operating plan for the coming year, and monitors management’s progress relative to that plan through a regular reporting and review process.
The Board has delegated to the President/Chief Executive Officer, and Senior Management responsibility for the day-to-day management of the business of the Company. Matters of policy and issues outside the normal course of business are brought before the Board for its review and approval, along with all matters dictated by statute and legislation requiring Board review and approval. The President/CEO and Senior Management review the Company’s progress in relation to the current operating plan at in-person and telephone-conference Board meetings. The Board meets on a regular basis with and without management present. Financial, operational and strategic issues facing the Company are reviewed, monitored and approved at the Board meetings.
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Following are the Company’s corporate governance guidelines:
CORPORATE GOVERNANCE PRACTICES | ||
Composition of the Board | The Board consists of a majority of independent directors. Of the seven members of the Board, the only directors who are considered not to be independent are James Walchuck, the Corporation’s President and CEO, and Damien Reynolds, the Corporation’s Chairman, who receives a regular consulting fee. The independent directors are: Peter Bojtos, Michael Hopley, David Montgomery, Hein Poulus and Ronald Shorr. The Board is responsible for determining whether or not each director is an independent director. To do this, the Board analyzes all the relationships of the directors with the Corporation and its subsidiaries. None of the independent directors is engaged in the day-to-day operations of the Corporation or is a party to any material on-going contracts with the Corporation. More information about each director can be found in the information circular under the heading “Election of Directors”. The Chairman of the Board is Damien Reynolds, who is not an independent director. Hein Poulus is an independent director who acts as “Lead Director” to ensure that the Board's agenda will enable it to successfully carry out its duties. | |
Directorships | Certain members of the Board hold directorships with other reporting issuers. The following table sets out the name of the each reporting issuer that the Corporation’s Board hold directorships with: | |
Peter Bojtos | Desert Sun Mining Corp. Falkland Gold & Minerals Ltd. Fischer-Watt Gold Co Inc. Kalimantan Gold Corp Ltd. Link Mineral Ventures Inc. Queenstake Resources Ltd. Sahelian Goldfields Inc. U.S. Gold Corp. Vaaldiam Resources Ltd. | |
Michael Hopley | Sunridge Gold Corp. Crescent Resources Corp. Neuer Kapital Corp. | |
David Montgomery | West 175 Inc. | |
Damien Reynolds | Longview Strategies Incorporated Buffalo Gold Ltd. Salmon River Resources Ltd. Sunrise Minerals Ltd. (formerly Lalo Ventures Ltd.) | |
Ronald Shorr | Maudore Minerals Ltd. Samba Gold Inc. Crown Resources Corp. | |
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CORPORATE GOVERNANCE PRACTICES | |
Meetings of Independent Directors | The Board has appointed two Committees; 1) the Audit Committee and 2) the Compensation Committee. Both of these committees are comprised of a majority of independent directors and meet regularly. Audit Committee The Audit Committee is chaired by Hein Poulus with Peter Bojtos and Ronald Shorr comprising the remainder of the Committee. All members of this Committee are independent directors and are financially literate. Compensation Committee The Compensation Committee is comprised entirely of independent directors. It is comprised of David Montgomery, Ronald Shorr and Michael Hopley. Pursuant to its written charter, the Compensation Committee is responsible for making recommendations to the Board relating to a review of the adequacy and form of compensation of directors and senior management and ensures that compensation realistically reflects the responsibilities and risks involved in being an effective director and/or a member of senior management. |
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CORPORATE GOVERNANCE PRACTICES | |
Board Mandate | The Board of Directors, either directly or through Committees of the Board, is responsible for the supervision of management of the Corporation with the objective of acting in the best interests of the Corporation. The Board acts in accordance with: the Yukon Business Corporations Act; the Corporation’s articles of incorporation and by-laws; the mandates of the various Board Committees; and other applicable laws and company policies. The Board approves all significant decisions that affect the Corporation and its subsidiaries before they are implemented. The Board supervises their implementation and reviews the results. The Board is actively involved in the Corporation’s strategic planning process. At Board meetings, members of Management regularly meet wi th the directors to discuss and set out the long term goals of the Corporation and the plans to achieve these goals. The Board is responsible for conducting: a) a review of the risks inherent in all of the business activities of the Corporation; b) an assessment of the integrity and adequacy of the internal control policies and procedures and information systems of the Corporation to ensure the Corporation adequately mitigates the risks of its business activities; and a) the development of the authorities of senior management and the Board regarding the major business activities of the Corporation to ensure a common understanding of these key authorities including which activities require pre-approval and post approval requirements. All members of the Audit Committee are independent directors. The Audit Committee is designed such that it has direct communication channels with the Chief Financial Officer and external auditors to discuss and review specific issues as appropriate. The Audit Committee is directly responsible for ensuring that management has designed and implemented an effective system of internal control. Directors may hire outside advisers at the Corporation’s expense, subject to the approval of the Board. |
Orientation and Continuing Education | All new directors receive historical public information about the Corporation, the mandates of the Committees of the Board, and other relevant corporate and business information. The directors are also kept informed of securities regulatory matters. Senior management makes regular presentations to the Board on the main areas of the Corporation’s business. Education opportunities such as seminars and courses are available for all directors in order that they can maintain and augment their skills as directors and to supplement their knowledge of the Corporation’s business. |
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CORPORATE GOVERNANCE PRACTICES | |
Code of Business Conduct and Ethics | The Board has adopted a written code of business conduct and ethics applicable to directors, officers and employees of the Corporation. The code is designed to promote the integrity of the Corporation. Mandated in the code are means of dealing with: conflicts of interest of directors and executive officers, protection and use of corporate assets and business opportunities, confidentiality of corporate information, compliance with laws and regulations, and fairness with shareholders, employees, suppliers, contractors, and competitors. In the event that a director, officer or employee departs from the code, the Corporation is authorized to file a material change report. |
Nomination of Directors | The Board has established a Nominating Committee comprised of Hein Poulus, Ronald Shorr and James Walchuck. The Nominating Committee is composed of a majority of independent directors (James Walchuck, President & CEO is not independent) who are responsible for identifying individuals qualified to become new Board members and recommending to the Board the new director nominees. The Board as a whole is responsible for the assessment of current directors on an ongoing basis. |
Compensation Committee | A Compensation Committee has been appointed by the Board to oversee compensation matters of executives and directors. Its purpose is to ensure that their forms of compensation realistically reflect the responsibilities and risk Involved in being an effective director and/or a member of senior management. The Committee is comprised entirely of independent directors: David Montgomery, Michael Hopley and Ronald Shorr. The Compensation Committee has a charter that sets out its purpose, responsibilities, member qualifications and appointment and removal process, structure and operations, and the process for reporting to the Board. The Committee is responsible for making recommendations to the Board with respect to senior officer and director compensation, incentive-compensation plans and equity-based plans. It also evaluates the CEO’s performance as it relates to the Corporation’s goals and recommends the CEO’s compensation to the Board. |
Regular Board Assessments | The Board is responsible for assessing the effectiveness of the Board as a whole, the committees of the Board and the contribution of individual directors as it relates to the Board’s mandate and the Corporation’s goals. The Board is also responsible for the examination of the size of the Board with a view to determining the impact of the number upon effectiveness and to undertake where appropriate, a program to reduce or enlarge the number of directors to a number which facilitates more effective decision-making. |
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CORPORATE GOVERNANCE PRACTICES | |
Audit Committee | The Audit Committee has a charter that sets out its mandate and responsibilities, which is set out in this Information Circular as Appendix “B”. The Audit Committee is chaired by Hein Poulus with Peter Bojtos and Ronald Shorr comprising the remainder of the Committee. All members of this Committee are independent directors and are financially literate. The Board of Directors delegates its responsibility for oversight of the financial reporting process to the Audit Committee. The role of the Audit Committee includes: • helping directors meet their responsibilities, • providing better communication between directors and the external auditors, • enhancing the independence of the external auditor, • increasing the credibility and objectivity of financial reports, and • strengthening the role of the directors by facilitating in-depth discussions among directors, management and the external auditor. The Audit Committee is directly responsible for ensuring that management has designed and implemented an effective system of internal control. Additionally, the Audit Committee is responsible for the review of the annual and interim financial statements. Following this review, the Committee then makes a recommendation to the Board for approval. The Audit Committee is responsible for managing, on behalf of the shareholders, the relationship between the Corporation and the external auditors. In particular, it is responsible for: (a) overseeing the work of the external auditors engaged for the purpose of preparing or issuing an auditor’s report or related work; (b) recommending to the Board of directors the nomination and compensation of the external auditors; and (c) pre-approval of non-audit services that are then recommended to the Board. Audit Fees- the following fees were billed by the Corporation’s auditors in the previous two fiscal years: 2004 - $32,540 2005 - $25,567 All Other Fees– aggregate other fees billed in each of the last two fiscal years for services provided by the Corporation’s auditor are as follows: 2004 - $43,000 2005 - $3,700 Disclosure of Exemption – the Corporation relies on exemption of section 6.1 from Multilateral Instrument 52-110, Audit Committees for disclosure of its Audit Committee Policies. |
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6.C.1. Terms of Office. Refer to ITEM 6.A and ITEM 6.C.
6.C.2. Directors’ Service Contracts.
--- No Disclosure Necessary ---
6.C.3. Board of Directors’ Committees.
The Company has an Audit Committee, which recommends to the Board of Directors the engagement of the independent auditors of the Company and reviews with the independent auditors the scope and results of the Company’s audits, the Company’s internal accounting controls, and the professional services furnished by the independent auditors to the Company. The current members of the Audit Committee are all independent directors: Hein Poulus (Committee Chairman), Peter Bojtos, and Ronald Shorr. The full Audit Committee met seven times during Fiscal 2005 and has met two times during Fiscal 2006 to date. The Audit Committee charter is included in the Management Information Circular to the annual general meeting to be held on 2/8/2006.
The Compensation Committee is comprised of Michael Hopley, Ronald Shorr and David Montgomery, who superseded Hein Poulus as a member on 10/7/2005. The Compensation Committee is responsible for making recommendations to the Board relating to a review of the adequacy and form of compensation of Directors and Senior Management and ensures that compensation realistically reflects the responsibilities and risks involved in being an effective Director and/or a member of Senior Management. The compensation of executive officers is composed primarily of two elements: namely a base salary and the allocation of incentive stock options. In establishing levels of remuneration and in granting stock options the compensation committee takes into consideration an individual’s performance, level of expertise, responsibilities, length of service to the company and comparable levels of remunerati on paid to executives of other companies of comparable size and progress within the industry. The individual interested executive does not participate in review, discussions or decisions of the compensation committee regarding this remuneration.
6.D. Employees
As of 1/31/2006, the Company had 10 full-time and 10 part-time employees, including the Senior Management. As of 8/31/2005, the Company had 15 full-time and 10 part-time employees, including the Senior Management. As of 8/31/2004, the Company had 13 full-time and five part-time employees, including the Senior Management. None of the Company's employees are covered by collective bargaining agreements.
6.E. Share Ownership
Table No. 8 lists, as of 1/31/2006, Directors and Senior Management who beneficially own the Company's voting securities, consisting solely of common shares, and the amount of the Company's voting securities owned by the Directors and Senior Management as a group. Table No. 8 also includes data on the following companies where the Company is aware that a shareholder has 5% or greater beneficial interest in the Company’s securities: Strongbow Exploration Inc., Sprott Asset Management; Passport Master Fund II LP; and Passport Master Fund LP.
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Table No. 8
Shareholdings of Directors and Senior Management
Shareholdings of 5% Shareholders
as at 1/31/2006
Title of | Amount and Nature | Percent | |
Class | Name of Beneficial Owner | Of Beneficial Ownership | Of Class (14) |
Common | Damien Reynolds (1) | 1,088,900 | 1.40% |
Common | Hein Poulus (2) | 937,032 | 1.20% |
Common | Kent Ausburn (3) | 728,000 | 0.94% |
Common | Ronald Shorr (4) | 440,000 | 0.57% |
Common | Peter Bojtos (4) | 587,500 | 0.76% |
Common | Michael J. Hopley (4) | 250,000 | 0.32% |
Common | James Walchuck (5) | 885,000 | 1.14% |
Common | David Montgomery (6) | 300,000 | 0.39% |
Common | Robert Nowell (7) | 112,500 | 0.14% |
Common | Garry Stock (8) | 253,500 | 0.33% |
Common | Nancy La Couvee (9) | 125,000 | 0.16% |
Directors and Management | 5,707,432 | 7.34% | |
Common | Strongbow Exploration Inc. (11) | 4,000,000 | 5.14% |
Common | Sprott Asset Management (12) | 13,109,500 | 16.85% |
Common | Passport Master Fund LP (13) | 4,773,600 | 6.14% |
5% Non-Insider Shareholders | 21,883,100 | 28.13% | |
TOTAL | 27,590,532 | 35.47% | |
(1) All are held indirectly through Longview Investments Limited,
a private company controlled by Mr. Reynolds.
(2) 400,000 represent currently exercisable stock options.
(3) 375,000 represent currently exercisable stock options.
(4) 250,000 represent currently exercisable warrants.
(5) 825,000 represent currently exercisable stock options
(6) 300,000 represent currently exercisable stock options.
(7) 112,500 represent currently exercisable stock options.
(8) 162,500 represent currently exercisable stock options.
(9) 125,000 represent currently exercisable stock options.
(10) 1,000,000 shares are subject to a pooling agreement, where release is
controlled by Canadian regulatory agencies.
(11) Kenneth Armstrong is the natural person having voting, investment and
dispositive powers.
(12) John Embry is the natural person having voting, investment and
dispositive powers.
(13) James Cunningham (Portfolio Manager) is the natural person having
voting, investment and dispositive powers.
(14) Based on 77,779,513 common shares outstanding at 1/31/2006 and warrants
and stock options held by each beneficial holder exercisable within
sixty days.
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Stock Options. Incentive stock options are granted by the Company in accordance with the rules and policies of the TSX Venture Exchange, the Yukon Business Corporations Act, and the British Columbia Securities Commission, including the number of common shares under option, the exercise price and expiry date of such options, and any amendments thereto. The Company adopted a formal written stock option plan (the “Stock Option Plan”) on 10/1/2003.
The principal purposes of the Company’s stock option program are to (a) promote a proprietary interest in the Company among the officers, directors and employees of the Company and its affiliates, (b) retain and attract the qualified officers, directors and employees the Company requires, (c) provide a long-term incentive element in overall compensation, and (d) promote the long-term profitability of the Company.
The Stock Option Plan provides that stock options may be granted to directors, senior officers, employees and consultants of the Company (and any subsidiary of the Company) and management-company employees. For the purposes of the Stock Option Plan, the terms “employees”, “consultants” and “management company employees” have the meanings set out in TSX Venture Exchange Policy 4.4. In addition, the term “director” is defined in TSX Venture Exchange Policy 4.4 to include directors, senior officers and management company employees.
Under the Stock Option Plan, the Company’s board of directors (the “Board”) may, from time to time, designate a director or other senior officer or employee of the Company as administrator (the “Administrator”) for the purposes of administering the Plan. Currently, the Administrator is the Corporate Secretary of the Company.
The Stock Option Plan provides for the issuance of stock options to acquire at any time up to a maximum of 10% of the issued and outstanding common shares of the Company (subject to standard anti-dilution adjustments). If a stock option expires or otherwise terminates for any reason without having been exercised in full, the number of common shares reserved for issuance under that expired or terminated stock option shall again be available for the purposes of the Stock Option Plan. Any stock option outstanding when the Stock Option Plan is terminated will remain in effect until it is exercised or it expires. The Stock Option Plan provides that it is solely within the discretion of the Board to determine who should receive stock options and in what amounts, subject to the following conditions:
(a) options will be non-assignable and non-transferable except that they
will be exercisable by the personal representative of the option holder
in the event of the option holder’s death;
(b) options may be exercisable for a maximum of ten years from grant date;
(c) options to acquire no more than 5% of the issued shares of the Company
may be granted to any one individual in any 12 month period;
(d) options to acquire no more than 2% of the issued shares of the Company
may be granted to any one consultant in any 12 month period;
(e) options to acquire no more than an aggregate of 2% of the issued shares
of the Company may be granted to an employee conducting investor
relations activities (as defined in TSX Venture Exchange Policy 1.1),
in any 12 month period;
(f) options held by an option holder who is a director, employee, consultant
or management company employee must expire within 90 days after the
option holder ceases to be a director, employee, consultant or
management company employee;
(g) options held by an option holder who is engaged in investor relations
activities must expire within 30 days after the option holder ceases to be
employed by the Company to provide investor relations activities; and
(h) in the event of an option holder’s death, the option holder’s personal
representative may exercise any portion of the option holder’s vested
outstanding options for one year following the option holder’s death.
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The names and titles of the Directors/Senior Management of the Company to whom outstanding stock options have been issued and are outstanding as of 1/31/2006, and the number of common shares subject to such options are set forth in Table No. 9, as well as the number of options granted to Directors/Senior Management and all employees as a group.
Table No. 9
Stock Options Outstanding
as at 1/31/2006
Number of Shares of | ||||
Common Stock | Exercise | Grant | Expiration | |
Name | Outstanding | Price | Date | Date |
Kent Ausburn | 150,000 | $0.40 | 9/21/2005 | 9/21/2010 |
100,000 | $0.40 | 8/31/2005 | 8/31/2010 | |
100,000 | $0.45 | 3/01/2005 | 2/16/2010 | |
50,000 | $0.35 | 1/30/2004 | 1/30/2009 | |
100,000 | $0.25 | 10/01/2003 | 10/01/2008 | |
Peter Bojtos | 100,000 | $0.45 | 9/17/2004 | 9/17/2009 |
50,000 | $0.35 | 1/30/2004 | 1/30/2009 | |
100,000 | $0.25 | 5/22/2003 | 5/22/2008 | |
Michael Hopley | 250,000 | $0.45 | 9/21/2004 | 9/17/2009 |
Nancy La Couvee | 50,000 | $0.40 | 9/21/2005 | 9/21/2010 |
25,000 | $0.40 | 6/9/2005 | 6/9/2010 | |
75,000 | $0.45 | 9/17/2004 | 9/17/2009 | |
David Montgomery | 100,000 | $0.45 | 9/17/2004 | 9/17/2009 |
200,000 | $0.35 | 1/30/2004 | 1/30/2004 | |
Robert Nowell | 25,000 | $0.40 | 9/21/2005 | 9/21/2010 |
100,000 | $0.40 | 6/9/2005 | 6/9/2010 | |
Hein Poulus | 100,000 | $0.45 | 9/17/2004 | 9/17/2009 |
100,000 | $0.35 | 1/30/2004 | 1/30/2004 | |
200,000 | $0.25 | 6/12/2003 | 6/12/2008 | |
Damien Reynolds | Nil | |||
Ronald Shorr | 100,000 | $0.40 | 8/31/2005 | 8/31/2010 |
100,000 | $0.45 | 9/17/2004 | 9/17/2009 | |
50,000 | $0.35 | 1/30/2004 | 1/30/2009 | |
Garry Stock | 25,000 | $0.40 | 9/21/2005 | 9/21/2010 |
50,000 | $0.35 | 1/30/2004 | 1/30/2009 | |
50,000 | $0.25 | 10/01/2003 | 1/30/2009 | |
50,000 | $0.25 | 5/22/2003 | 5/22/2008 | |
James Walchuck | 350,000 | $0.40 | 9/21/2005 | 9/21/2010 |
250,000 | $0.40 | 6/9/2005 | 6/9/2010 | |
400,000 | $0.50 | 4/02/2004 | 4/02/2009 | |
Sub-total Management and Directors | 3,400,000 | |||
Sub-total Employees and Consultants | 1,087,555 | |||
TOTAL | 4,487,500 | |||
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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A. Major Shareholders.
7.A.1.a. Holdings By Major Shareholders.
Refer to ITEM #6.E and Table No. 8.
7.A.1.b. Significant Changes in Major Shareholders’ Holdings.
The participation in private placements of equity by the Company and exercise of stock options/share purchase warrants has lead over the last several years to some significant changes in the holdings of major shareholders direct/indirect holdings of common shares.
Shares Owned | Shares Owned | Shares Owned | |
8/31/2005 | 8/31/2004 | 8/31/2003 | |
Sprott Asset Management | 10,000,000 | Nil | Nil |
RAB Special Situations LP | Unknown | 4,822,222 | 2,600,000 |
RAB Europe Fund Ltd. | Unknown | 4,400,000 | 2,400,000 |
Strongbow Exploration Inc. | 4,000,000 | 5,000,000 | Nil |
Passport Master Fund LP | 1,647,500 | 1,948,000 | Nil |
Passport Master Fund II LP | 1,338,048 | 1,346,996 | Nil |
7.A.1.c. Different Voting Rights. The Company’s major shareholders do not have different voting rights.
7.A.2. Canadian Share Ownership. On 1/31/2006, the Company’s shareholders’ list showed 77,779,513 common shares outstanding, with 1,052 registered shareholders. 884 of these shareholders were U.S. residents, holding 9,328,584 common shares (representing about 12% of the issued/outstanding shares); 161 registered shareholders were resident in Canada, holding 68,227,947 common shares (representing about 88%; and 7 registered shareholders were resident in other countries, holding 222,982 common shares.
The Company has researched the indirect holding by depository institutions and other financial institutions; based on this research and other research into the indirect holdings of other institutions, the Company believes that it has about 1,300 “holders of record” in Canada, holding approximately 88% of the outstanding shares of the Company, and over 2,400beneficial owners that own 100% of its common shares.
7.A.3. Control of Company. The Company is a publicly owned Canadian corporation, the shares of which are owned by U.S. residents, Canadian residents and other foreign residents. The Company is not controlled by any foreign government or other person(s) except as described in ITEM #4.A., “History and Growth of the Company”, and ITEM #6.E., “Share Ownership”.
7.A.4. Change of Control of Company Arrangements.
No Disclosure Necessary
7.B. Related Party Transactions
Payments to Directors for Outside Services | FY2005 | FY2004 | FY2003 | |
Ronald Shorr | Financial Consulting | $nil | $20,000 | $nil |
Michael Hopley | Geological Consulting | $nil | $18,025 | $38,661 |
Yale Simpson (1) | Professional Consulting | $nil | $25,000 | $29,200 |
Hein Poulus (2) | Legal Consulting | $nil | $30,000 | $20,000 |
(1) Paid indirectly: Canaust Resource Consultants, controlled by Mr. Simpson.
(2) Paid indirectly: Ceres Enterprises Inc., controlled by Mr. Poulus.
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Loan to Former President, Damien Reynolds
The Company entered into a loan agreement with the President on 5/24/2004, in the amount of $70,000. The loan was non-interest bearing, secured by a promissory note and repayable by May 25, 2005. As at 8/31/2004, $19,042 had been repaid. The loan was re-paid in full by the due date of May 25, 2005.
President’s Compensation Paid Indirectly
During FY2005/FY2004/FY2003, Damien Reynolds’ compensation as President/CEO was paid indirectly to Research and Resource Capital Group, a company controlled by Mr. Reynolds.
Legal Fees Paid to Former Corporate Secretary, Paul Simpson
During FY2005/FY2004/FY2003, $17,647, $61,022, and $98,465, respectively, was paid for legal services to Armstrong Simpson, LLP, Barristers & Solicitors, a law firm of which Mr. Simpson was a principal.
Rent/Office Expense Reimbursement to Related Companies
During FY2005/FY2004/FY2003, the Company recovered expense reimbursements of $108,756, $49,026, and $nil from Sunrise Minerals Ltd. (formerly Lalo Ventures Ltd.) (“Sunrise”), a public company related by certain common officers, (Jon Lever, Damien Reynolds, and Garry Stock). During FY2005/FY2004/FY2003, the Company recovered expense reimbursements of $61,490, $11,843, $nil, and $nil from Exeter Resource Corporation, a public company related by certain common officers, (Yale Simpson and Nancy La Couvee). During FY2005/FY2004/FY2003, the Company recovered expense reimbursements of $41,526, $nil, and $nil from Finavera Energy Canada Ltd., a public company related by a common director (Damien Reynolds).
Legal fees Incurred
During FY2005/FY2004/FY2003, the Company incurred legal fees of $58,667, $5,000, $nil from a law firm in which a principal is a director.
Due to Related Parties
At 8/31/2005 and 8/31/2004, $100,630 and $139,128, respectively, was due to related parties, comprised of: $100,630 (2004 = $136,000) payable to directors/officers for unpaid consulting fees, $nil (2004 = $3,128 payable to the President for expenses incurred, and legal fees of $11,915 (2004 = $nil) payable to a law firm where a principal is a director.
Due From Related Parties
At 8/31/2005 and 8/31/2004, $91,255 and $25,702, was due from related parties, comprised of: $16,280 and $20,326 from Sunrise, $17,628 and $5,376 from Exeter Resource Corporation, and $nil and $2,961 from Michael Hopley, $44,887 and $400 from Finavera Ltd., and $12,459 and $nil from Damien Reynolds.
Other than as disclosed above and in the MD&A in ITEM #5, there have been no transactions since 8/31/2002, or proposed transactions, which have materially affected or will materially affect the Company in which any director, executive officer, or beneficial holder of more than 10% of the outstanding common shares, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest. Management believes the transactions referenced above were on terms at least as favorable to the Company as the Company could have obtained from unaffiliated parties.
7.C. Interests of Experts and Counsel
--- Not Applicable ---
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ITEM 8. FINANCIAL INFORMATION
8.A. Statements and Other Financial Information
The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as discussed in footnotes to the financial statements.
The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Registration Statement. The audit report of Bedford Curry & Co., independent Chartered Accountants, are included herein immediately preceding the financial statements and schedules.
Audited Financial Statements:
For Fiscal 2005/2004/2003 Ended August 31st
8.A.7. Legal/Arbitration Proceedings
In February 2004, European Gold Resources Inc. (“EGRI”) filed a lawsuit in the Supreme Court of British Columbia claiming that the Company was not entitled to EGRI’s Omagh Property in Northern Ireland and also asking for additional costs. The Company counter-claimed that EGRI failed to honor a September 2002 agreement whereby the Company could acquire the property. In March 2004, the Company and EGRI signed an agreement in which the Company agreed to release any interest in, or to, any part of the property and EGRI agreed to release its claim for damages against the Company. The litigation in the Supreme Court of British Columbia between the parties was terminated.
Other than disclosed above, the Directors and the Senior Management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.
Other than disclosed above, the Directors and the Senior Management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.
8.B. Significant Changes
No undisclosed significant change has occurred since the date of the annual financial statements and/or since the date of the most recent interim financial statements.
ITEM 9. THE OFFER AND LISTING
9.A. Common Share Trading Information
The Company's common shares began trading on the TSX Venture Exchange (formerly the Canadian Venture Exchange) in Toronto, Ontario, Canada, under its former name International Tournigan Mining in May 1981. The current stock symbol is “TVC”. The CUSIP number is 891565103/CA8915651035.
The Company’s common shares began trading on the Berlin-Bremen-Stock Exchange on 4/4/2003, with the trading symbol of “TGP”. Total volume through 2/28/2005 was 9,521,625. Prices ranged from euro$0.13 to euro$0.72; the closing price on 12/31/2005 was euro$0.72.
The Company’s common shares began trading on the Frankfurt Stock Exchange on 5/22/2003, with the trading symbol of “TGP”. Total volume through 2/28/2005 was 346,583,678. Prices ranged from euro$0.12 to euro$0.65; the closing price on 12/31/2005 was euro$0.65.
Publicly available historical trading information on the German exchanges is thought to be unreliable - the Company is investigating subscriptions for stock trading reports as alternatives.
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Table No. 10 lists the volume of trading and high, low and closing sales prices on the TSX Venture Exchange for the Company's common shares for: the last six months, the last nine fiscal quarters; and the last five fiscal years. Prices and volume adjusted for 1:10 stock consolidation effective 3/26/2001.
Table No. 10
TSX Venture Exchange
Common Shares Trading Activity
On 1/25/2002, trading of shares of Tournigan Ventures Corporation (the previous name of the Company) was halted by the TSX Venture Exchange for failure to file comparative audited financial statements for the fiscal year ended 8/31/2001. These statements were filed subsequently and the cease trade order was lifted on 5/21/2002. The Company failed to timely file the required financial statements due to severe financial difficulties.
The TSX Venture Exchange
The TSX Venture Exchange is a result of the acquisition by the Toronto Stock Exchange of the Canadian Venture Exchange (“CDNX”) from its member firms on 8/1/2001. The CDNX resulted from the merger between the Vancouver Stock Exchange and the Alberta Stock Exchange that took place on 11/29/1999, to form the CDNX. The TSX Venture Exchange currently operates as a complementary but independent exchange from its parent, the Toronto Stock Exchange.
The initial roster of the CDNX was made up of venture companies previously listed on the Vancouver Stock Exchange or the Alberta Stock Exchange and later incorporated junior listings from the Montreal Stock Exchange, the Winnipeg Stock Exchange, and the CDN Over-The-Counter Market. The TSX Venture Exchange is a venture market as compared to the
86
Toronto Stock Exchange that is Canada’s senior market and the Montreal Exchange that is Canada’s market for derivatives products.
The TSX Venture Exchange currently has five service centers: Calgary, Toronto, Vancouver, Winnipeg and Montreal. These service centers provide corporate finance, surveillance and marketing expertise. The corporate office for the TSX Venture Exchange is located in Calgary and the operations office is located in Vancouver.
The TSX Venture Exchange is a self-regulating organization owned and operated by the Toronto Stock Exchange, which in turn is owned by its member brokerage firms. It is governed by representatives of member firms and the public.
Organizationally, the TSX Venture Exchange is comprised of seven business areas: Corporate Finance Services, Trading Services and Market Information Services, Compliance, Marketing, Technology, Corporate Affairs and Human Resources.
The TSX Venture Exchange acts as a business link between TSX members, listed companies and investors. TSX Venture Exchange policies and procedures are designed to accommodate companies still in their formative stages and recognize those that are more established. Listings are predominately small and medium sized companies.
Investors in Canada are protected by the Canadian Investor Protection Fund (“CIPF”). The CIPF is a private trust fund established to protect customers in the event of the insolvency of a member of any of the following self-regulatory organizations: the TSX Venture Exchange; the Montreal Exchange; the Toronto Stock Exchange; the Toronto Futures Exchange; and the Investment Dealers Association of Canada.
Post-trade monitoring of market activity occurs in the market surveillance department. Sophisticated software analyses trade data from TRADETSX to detect possible market improprieties. A variety of surveillance and investigative tools allow the TSX Venture Exchange to perform electronic market monitoring and trade reviews.
The surveillance department is also responsible for monitoring and reviewing listed company activities and detecting breaches of the listing policies or the listing agreement. Market surveillance and listed company surveillance activities are closely coordinated.
9.A.5. Common Share Description
Registrar/Common Shares Outstanding/Shareholders
The Company's common shares are issued in registered form and the following information is taken from the records of Computershare Trust Company of Canada (located in Vancouver, British Columbia, Canada), the registrar and transfer agent for the common shares.
Common Share Description
All of the authorized common shares of the Company are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets. Holders of common stock are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders. Holders of common stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available therefore.
Upon liquidation, dissolution or winding up of the Company, holders of common stock are entitled to receive pro rata the assets of Company, if any, remaining after payments of all debts and liabilities. No shares have been issued subject to call or assessment. There are no pre-emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds.
Provisions as to the modification, amendment or variation of such shareholder rights or provisions are contained in the Yukon Business Corporation Act. Unless the Yukon Business Corporation Act or the Company's Articles of Continuation or Memorandum otherwise provide, any action to be taken by a resolution of the members may be taken by
87
an ordinary resolution or by a vote of a majority or more of the shares represented at the shareholders' meeting.
The Company's Articles of Continuation, By-laws, and theYukon Business Corporation Act contain provisions, which require a "special resolution" for effecting certain corporate actions. Such a “special resolution” requires a two-thirds vote of shareholders rather than a simple majority for passage. The principle corporate actions that require a “special resolution” include:
a. Stated capital accounts;
b. Other reduction of stated capital;
c. Amendment of Articles;
d. Constrained shares;
e. Class Votes;
f. Restated Articles of Incorporation;
g. Shareholder approval of amalgamation agreement;
h. Continuance of a Yukon corporation into another jurisdiction;
i. Extraordinary sale, lease or exchange of property;
j. Court-approved arrangements;
k. Dissolution by directors or shareholders in special cases; and
l. Voluntary liquidation or dissolution.
There are no restrictions on the repurchase or redemption of common shares of the Company while there is any arrearage in the payment of dividends or sinking fund installments.
Stock Options
Refer to ITEM #6E. and Tables Nos. 5, 6, and 7 for additional information.
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Warrants
Table No. 11 lists, as of 1/31/2006, share purchase warrants outstanding, the date the share purchase warrants were issued, the exercise price, and the expiration date of the share purchase warrants. There were 11 holders of the 6,787,500 share purchase warrants, 9 of whom were resident in Canada, 2 international holders, and none who were resident in the United States. These warrants were issued in conjunction with private placements and are non-transferable.
Table No. 11
Share Purchase Warrants Outstanding
Number of | Number of | ||||
Share | Share | Expiration | |||
Purchase | Purchase | Date of | |||
Effective | Warrants | Warrants | Share | ||
Date of | Originally | Still | Purchase | ||
Issuance | Issued | Outstanding | Year #1 | Year #2 | Warrants |
8/31/2005 | 2,500,000 | 2,500,000 | $0.55 | $0.55 | 8/31/2007 |
9/8/2005 | 2,500,000 | 2,500,000 | $0.55 | $0.55 | 9/8/2007 |
9/30/2005 | 1,787,500 | 1,787,500 | $0.65 | $0.65 | 3/31/2007 |
6,787,500 | 6,787,500 | ||||
The Company may require any of these warrants to be exercised any time after the average trading price of its shares exceeds $1.00 per share for 30 consecutive trading days.
Escrowed Shares
Escrow is a legal arrangement whereby a thing (usually money or securities) is delivered to a third party (called an escrow agent) to be held in trust pending a contingency or the fulfillment of a condition or conditions in a contract. Upon that event occurring, the escrow agent will deliver the thing to the proper recipient, otherwise the escrow agent is bound by her or his fiduciary duty to maintain the escrow account.
All of the 375,000 pre-consolidation common shares issued prior to the initial public offering of the Company were deposited with Montreal Trust Company (now ComputerShare Trust Company of Canada) pursuant to an escrow agreement dated 3/6/1992 (the “Escrow Agreement”). The Escrow Agreement requires the written consent of the TSX Venture Exchange for the shares to be released from escrow. During Fiscal 1997, 281,250 of these pre-consolidation shares were released and the shares are held by Andy Edmun Daem and John Hembling. As of 1/31/2006, the remaining 9,375 post-consolidation shares were still held in escrow by Computershare Investor Services Inc.
Pooled Shares
Pursuant to the acquisition of Ulster Minerals Limited that was completed on 12/16/2004, 5,000,000 shares that were delivered to Strongbow are subject to a pooling agreement such that 4,000,000 shares can be freely traded and a further 1,000,000 shares become free trading on April 30, 2006.
9.A.6. Differing Rights
9.A.7.a. Subscription Warrants/Right
9.A.7.b. Convertible Securities/Warrants
--- No Disclosure Necessary ---
9.C. Stock Exchanges Identified
The common shares trade on the TSX Venture Exchange in Vancouver, British Columbia, Canada. Also, the common shares trade on the Frankfurt Stock Exchange, the Berlin-Bremen Stock Exchange, and the Munich Stock Exchange in Germany. Refer to ITEM #9.A.4.
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ITEM 10. ADDITIONAL INFORMATION
10.A. Share Capital
10.B. Memorandum and Articles of Association
10.C. Material Contracts
--- Not Applicable ---
10.D. Exchange Controls
Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Company's securities, except as discussed in ITEM 10.E., “Taxation” below.
Restrictions on Share Ownership by Non-Canadians
There are no limitations under the laws of Canada or in the organizing documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of “control” of the Company by a “non-Canadian”. The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Company. “Non-Canadian” generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians.
10.E Taxation
The Company believes the following is a brief summary of all material principal Canadian federal income tax consequences to a holder of common shares of the Company (a “U.S. Holder”) who deals at arm's length with the Company, holds the shares as capital property and who, for the purposes of theIncome Tax Act (Canada) (the “Act”) and theCanada – United States Income Tax Convention (the “Treaty”), is at all relevant times resident in the United States, is not and is not deemed to be resident in Canada and does not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada. Special rules, which are not discussed below, may apply to a U.S. Holder that is an insurer that carries on business in Canada and elsewhere.
U.S. Holders are urged to consult their own tax advisors with respect to their particular circumstances.
Under the Act and the Treaty, a U.S. Holder of common shares will generally be subject to a 15% withholding tax on dividends paid or credited or deemed by the Act to have been paid or credited on such shares. The withholding tax rate is 5% where the U.S. Holder is a corporation that beneficially owns at least 10% of the voting shares of the Company and the dividends may be exempt from such withholding in the case of some U.S. Holders such as qualifying pension funds and charities.
In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of shares of the Company unless (i) at any time in the five-year period immediately preceding the disposition, 25% or more of the shares of any class or series of the capital stock of the Company was owned by (or was under option of or subject to an interest of) the U.S. holder or persons with whom the U.S. holder did not deal at arm's length, and (ii) the value of the common shares at the time of the disposition derives principally from real property (as defined in the Treaty) situated in Canada. For this purpose, the Treaty defines real property situated in Canada to include rights to explore for or exploit mineral deposits situated in Canada, rights to amounts computed by reference to the amount or value of production from such mineralization, certain other rights in respect of properties situated in Canada and shares of a corporation the value of whose shares is derived principally from real property situated in Canada.
The U.S. Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company. A foreign
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corporation, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. The Company believes that it was not a passive foreign investment company for the taxable years ended 8/31/2004 or 8/31/2005 and, furthermore, expects to conduct its affairs in such a manner so that it will not meet the criteria to be considered passive foreign investment company in the foreseeable future.
10.F. Dividends and Paying Agents
10.G. Statement by Experts
10.H. Documents on Display
--- No Disclosure Necessary ---
10.I. Subsidiaries
The Company’s subsidiaries are:
Kremnica Gold, a.s.
Ludovika Holding, s.r.o.
Dalradian Gold Limited
Ulster Minerals Limited
Tournigan Resources Ukraine Ltd.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has not entered into any activities in derivative financial instruments, other financial instruments, or derivative commodity instruments. The Company’s financial assets in the form of cash and cash equivalents are held in short term interest-bearing deposits at institutions with high credit quality ratings. Non-material amounts of foreign currency may be held from time to time for the payment of operating expenses. As the Company is engaged in exploring mineral properties that, if successful, will produce commodities, it can be seen to be exposed indirectly to commodity risk. Such exposure cannot be accurately estimated by quantitative means although the risk would increase as the possibility of project success increased. Industry practice dictates that attempts to hedge commodity risk not begin until at least there are funding agreements in place supported by a bankable feasibility study. The Company has in the past and may in the future finance its activities by the sale of equity and/or debt instruments. This is also an indirect exposure to equity and/or interest-rate risk, which cannot be accurately estimated by quantitative means.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
12.A. Debt Securities --- No Disclosure Necessary ---
12.B. Warrants and Rights --- No Disclosure Necessary ---
12.C. Other Securities --- No Disclosure Necessary ---
12.D. American Depository Shares -- No Disclosure Necessary ---
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
--- No Disclosure Necessary ---
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS --- No Disclosure Necessary ---
ITEM 15. CONTROLS AND PROCEDURES
The Board of Directors has overall responsibility for reviewing the Company's disclosure to ensure the Company provides full and plain disclosure to shareholders and other stakeholders. The Board discharges its responsibilities through its committees, specifically, with respect to financial disclosure to the Audit Committee, which is responsible for reviewing the Company's financial reporting procedures and internal controls to ensure full and accurate disclosure of the Company's financial position.
At the end of Fiscal year ended 8/31/2005 (the “Evaluation Date”), under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15e under the Exchange Act). Based upon that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were effective in timely alerting them to the material information relating to the Company (or its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. The Company’s management’s, including its Chief Executive Officer and Chief Financial Officer, concluded that t he Company’s disclosure controls and procedures are designed and are effective to give reasonable assurance that the information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, identified no change in the Company’s internal control over financial reporting that occurred during the Company’s Fiscal Year Ended August 31, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the Company's principal executive and principal financial officers, or persons performing similar functions, and effected by the Company's Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
a. Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
b. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant;and
c. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant's assets that could have a material effect on the financial statements.
The Company's management, including the Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or internal controls and procedures will prevent all error and all fraud. A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within
92
the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
ITEM 16. RESERVED
ITEM 16A. Audit Committee and Financial Expert
The Company’s Audit Committee consists of three unrelated directors, all of whom are financially literate and very knowledgeable about the Company’s affairs. Ronald Shorr is the “audit committee’s financial expert”. He is a Chartered Financial Analyst (CFAÓ) and graduate from the University of Michigan (B.A.) and Harvard Business School (M.B.A.), and subsequently attended graduate school at the Krumb School of Mines at Columbia University. He is a member of the Institute of Chartered Financial Analysts, the New York Society of Security Analysts, and authored a chapter for Economics of the Mineral Industry.
ITEM 16B. Code of Business Conduct and Ethics
The Company has adopted a written code of business conduct and ethics applicable to directors, officers and employees of the Company. The code is designed to promote the integrity of the Company. Mandated in the code are means of dealing with: conflicts of interest of directors and executive officers, protection and use of corporate assets and business opportunities, confidentiality of corporate information, compliance with laws and regulations, and fairness with shareholders, employees, suppliers, contractors, and competitors.
In the event that a director, officer or employee departs from the code, the Company is authorized to file a material change report.
Item 16C. Principal Accounting Fees and Services
The audit committee is directly responsible for the appointment, compensation and oversight of auditors; the audit committee has in place procedures for receiving complaints and concerns about accounting and auditing matters; and has the authority and the funding to engage independent counsel and other outside advisors.
The Audit Committee may delegate to one or more designated members of the Audit Committee the authority to grant pre-approvals required by this policy and procedure. The decisions of any Audit Committee member to whom authority is delegated to pre-approve a service shall be presented to the full Audit Committee at its next scheduled meeting.
In accordance with the requirements of the United States Sarbanes-Oxley Act of 2002 and rules issued by the Securities and Exchange Commission, we introduced a procedure for the review and pre-approval of any services performed by Bedford Curry & Co., including audit services, audit related services, tax services and other services. The procedure requires that all proposed engagements of Bedford Curry & Co. for audit and permitted non-audit services are submitted to the finance and audit committee for approval prior to the beginning of any such services.
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Fees, including reimbursements for expenses, for professional services rendered by Bedford Curry & Co. (now Manning Elliott, LLP) to the Company were:
______________________________________________________________________________
Fiscal Year ended December 31, 2005 and 2004 Fiscal Fiscal
Principal Accountant Fees and Services 2005 2004
------------------------------------------------------------------------------
Audit Fees $45,713 $25,567
Audit Related Fees 0 0
Tax Fees 6,400 $0
All Other Fees (1) $17,454 3,700
Total $75,540 $29,267
______________________________________________________________________________
(1) Related to U.S. financial disclosure reviews and income tax matters.
ITEM 16D. Exemptions from the Listing Standards for Audit Committees
--- No Disclosure Necessary ---
ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
--- No Disclosure Necessary ---
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PART III
ITEM 17. FINANCIAL STATEMENTS
The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as discussed in footnotes to the financial statements.
The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Registration Statement. The audit report of Bedford Curry & Co., independent Chartered Accountants, is included herein immediately preceding the audited financial statements.
Audited Financial Statements
Auditor's Report, dated 11/30/2005
Consolidated Balance Sheets at 8/31/2005, 8/31/2004, and 8/31/2003
Consolidated Statements of Operations and Deficit
for the years ended 8/31/2005, 8/31/2004, and 8/31/2003
Consolidated Statements of Cash Flows
for the years ended 8/31/2005, 8/31/2004, and 8/31/2003
Consolidated Statements of Shareholders’ Equity
for the years ended 8/31/2005, 8/31/2004, and 8/31/2003
Notes to Financial Statements
ITEM 18. FINANCIAL STATEMENTS
The Company has elected to provide financial statements pursuant to ITEM #17.
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ITEM 19. EXHIBITS
Page
1. Articles of Incorporation/Bylaws as currently in effect:
---Incorporated by reference to Registration Statement (as amended)
and Form 6-K’s ---
2. Instruments defining the rights of holders of equity or
debt securities being registered.
--- Refer to Exhibit No. 1 ---
3. Voting Trust Agreements: No Disclosure Necessary
4. Material Contracts:
---Incorporated by reference to Registration Statement (as amended)
and Form 6-K’s ---
5. Foreign Patents: No Disclosure Necessary
6. Earnings Per Share Calculation: No Disclosure Necessary
7. Ratio of Earnings To Fixed Charges: No Disclosure Necessary
8. List of Subsidiaries
---Incorporated by reference to Registration Statement (as amended)
and Form 6-K’s ---
9. Statement Regarding Date of Financial Statements: No Disclosure Necessary
10. Notice Required by Rul3e 104 of Regulation BTR: No Disclosure Necessary
11. Code of Ethics as required by ITEM No. 16B
---Incorporated by reference to Registration Statement (as amended)
and Form 6-K’s ---
12.1. Certifications required by Rule 13a-14(a) or Rule 15d-14(a) 131
12.2. Certifications required by Rule 13a-14(a) or Rule 15d-14(a) 132
13.1. Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and
Section 1350 of Chapter 63 of Title 18 of the United States Code 133
13.2. Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and
Section 1350 of Chapter 63 of Title 18 of the United States Code 134
14. Legal Opinion required by Instruction 3 of ITEM 7B: No Disclosure Necessary
15. Additional Exhibits:
Incorporated by reference to Registration Statement (as amended)
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TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
For the Years Ended August 31, 2005, 2004 and 2003
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![[tournigan20ffeb2806011.jpg]](https://capedge.com/proxy/20-F/0001052918-06-000188/tournigan20ffeb2806011.jpg)
AUDITORS' REPORT
To the Shareholders of Tournigan Gold Corporation
We have audited the consolidated balance sheets of Tournigan Gold Corporation as at August 31, 2005 and 2004 and the consolidated statements of earnings and deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at August 31, 2005 and 2004 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.
![[tournigan20ffeb2806012.jpg]](https://capedge.com/proxy/20-F/0001052918-06-000188/tournigan20ffeb2806012.jpg)
Vancouver, British Columbia
November 30, 2005
CHARTERED ACCOUNTANTS
![[tournigan20ffeb2806013.jpg]](https://capedge.com/proxy/20-F/0001052918-06-000188/tournigan20ffeb2806013.jpg)
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TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
Consolidated Balance Sheets
(Expressed in Canadian Dollars)
August 31, | August 31, | August 31, | |
2005 | 2004 | 2003 | |
ASSETS | |||
Current | |||
Cash and cash equivalents | $ 1,647,216 | 3,790,091 | 197,348 |
Subscriptions receivable (note 11) | 2,000,000 | - | - |
Other receivables | 62,583 | 64,634 | 56,838 |
Marketable securities (note 3 ) | 30,000 | - | - |
Prepaid expenses and deposits | 62,762 | 70,453 | 43,707 |
Loan receivable (note 4) | - | 50,958 | - |
Total Current Assets | 3,802,561 | 3,976,136 | 297,893 |
91,255 | 29,063 | - | |
Exploration properties(note 7) | 9,530,693 | 6,074,141 | 1,339,099 |
Long term investments(note 8) | 200,000 | 200,000 | - |
Property and equipment(note 9) | 121,940 | 113,515 | 27,941 |
TOTAL ASSETS | $ 13,746,449 | 10,392,855 | 1,664,933 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||
Current | |||
Accounts payable and accrued expenses | $ 459,034 | 581,928 | 692,856 |
Due to related parties (note 5) | 100,630 | 139,128 | 124,991 |
Loans payable (note 10) | - | - | 592,000 |
Total Current Liabilities | 559,664 | 721,056 | 1,409,847 |
Stockholders’ equity | |||
Common stock (note 11) | 46,559,522 | 40,533,481 | 28,746,977 |
Additional paid-in capital | 1,013,021 | 646,682 | 18,400 |
Special warrants | - | - | 629,054 |
Share subscriptions | - | - | 50,000 |
Accumulated deficit prior to the exploration stage | (27,750,178) | (27,750,178) | (27,750,178) |
Accumulated deficit during the exploration stage | (6,635,580) | (3,758,186) | (1,439,167) |
Total Stockholders’ Equity | 13,186,785 | 9,671,799 | 255,086 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 13,746,449 | 10,392,855 | 1,664,933 |
On behalf of the Board:
“ Hein Poulus” | “James Walchuck” | ||
Director | Director |
The accompanying notes are an integral part of these consolidated financial statements.
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TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
Consolidated Statements of Operations
(Expressed in Canadian Dollars)
Year ended August 31, 2005 | Year ended August 31, 2004 | Year ended August 31, 2003 | |
OPERATING EXPENSES | |||
|
| ||
Consulting fees and salaries | $ 1,102,374 | 1,192,888 1,192,888 | 413,731 |
Advertising, promotion, and investor relations | 549,347 | 219,050 | 72,849 |
Travel | 364,607 | 342,598 | 247,178 |
Legal and professional fees | 316,091 | 175,010 | 222,113 |
Office expenses | 148,905 | 93,660 | 54,022 |
Communications | 94,792 | 63,742 | 36,801 |
Regulatory fees | 78,866 | 55,455 | 39,909 |
Printing | 75,782 | 34,922 | 29,341 |
Rent | 53,128 | 22,830 | 36,132 |
Interest and bank charges | 47,724 | 12,206 | 24,665 |
Property investigations | 41,762 | 18,741 | 262,729 |
Amortization | 31,460 | 17,219 | 3,527 |
Financing fees | - | 62,500 | - |
Commissions | - | - | 9,100 |
| |||
Loss from Operations | (2,904,838) | (2,310,821) | (1,452,097) |
OTHER ITEMS | |||
Interest income | 64,749 | 27,250 | 4,881 |
Foreign exchange gain (loss) | (14,805) | (22,965) | 8,049 |
Write-down of marketable securities | (22,500) | - | - |
Gain on write-down of accounts payable | - | 21,058 | - |
Gain on sale of exploration properties | - | 2,157 | - |
Write-off of exploration property | - | (420) | - |
B.C. Capital Tax | - | (35,278) | - |
27,444 | (8,198) | 12,930 | |
Net loss | (2,877,394) | (2,319,019) | (1,439,167) |
Deficit, beginning of year | (31,508,364) | (29,189,345) | (27,750,178) |
Deficit, end of year | $ (34,385,758) | (31,508,364) | (29,189,345) |
Basic and diluted loss per share | $ (0.05) | (0.06) | (0.16) |
Weighted average number of issued shares | 59,225,546 | 35,707,931 | 9,186,184 |
The accompanying notes are an integral part of these consolidated financial statements.
100
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Year ended August 31, 2005 | Year ended August 31, 2004 | Year ended August 31, 2003 | |||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net loss for the period | $ (2,877,394) | (2,319,019) | (1,439,167) | ||
Items not affecting cash: | |||||
Stock-based compensation | 421,025 | 581,500 | - | ||
Amortization | 31,460 | 17,219 | 3,527 | ||
Write-down of marketable securities | 22,500 | - | - | ||
Financing fee | - | 62,500 | - | ||
Write-off of exploration property | - | 420 | - | ||
Gain on sale of exploration properties | - | (2,157) | - | ||
Gain on write-down of accounts payable | - | (21,058) | - | ||
|
|
| |||
Changes in non-cash working capital items: | |||||
Decrease (increase) in other receivables | 2,051 | (7,796) | (52,744) | ||
Decrease (increase) in prepaid expenses and deposits | 7,691 | (26,746) | (37,707) | ||
Decrease (increase) in loan receivable | 50,958 | (50,958) | - | ||
Increase (decrease) in accounts payable and accrued expenses | (122,894) | (89,870) | 530,877 | ||
Net cash used by operating activities | (2,464,603) | (1,855,965) | (995,214) | ||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Exploration property expenditures | (3,443,302) | (2,565,905) | (832,290) | ||
Purchase of marketable securities | (52,500) | - | - | ||
Purchase of property and equipment | (39,884) | (102,793) | (24,468) | ||
Business acquisition | - | - | (500,000) | ||
Cash from business acquisition | - | - | 1,000 | ||
Net cash used by investing activities | (3,535,686) | (2,668,698) | (1,355,758) | ||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Increase in common stock | 3,958,104 | 8,724,332 | 1,223,048 | ||
Advances from (to) related parties | (100,690) | (14,926) | 75,879 | ||
Increase (decrease) in loans payable | - | (592,000) | 527,215 | ||
Issuance of special warrants | - | - | 629,054 | ||
Increase in share subscriptions | - | - | 35,000 | ||
Net cash provided by financing activities | 3,857,414 | 8,117,406 | 2,490,196 | ||
Increase (decrease) in cash and cash equivalents during the year | (2,142,875) | 3,592,743 | 139,224 | ||
Cash and cash equivalents, beginning of year | 3,790,091 | 197,348 | 58,124 | ||
Cash and cash equivalents, end of year | $ 1,647,216 | 3,790,091 | 197,348 | ||
The accompanying notes are an integral part of these consolidated financial statements.
101
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
Consolidated Statements of Stockholders’ Equity
(Expressed in Canadian Dollars)
For the years ended August 31, 2005, 2004, and 2003
Common Stock | Additional Paid- | Share | Total Accumulated | ||||
Shares | Amount | In Capital | Subscriptions | Deficit | Total | ||
Balance at September 1, 2002 | 6,898,058 | $27,523,929 | $ 18,400 | $ 15,000 | $(27,750,178) | $(192,849) | |
Common stock issued for cash at $0.10 per share | 1,000,000 | 100,000 | - | - | - | ||
Common stock issued for cash at $0.25 per share | 5,000,000 | 1,250,000 | - | - | - | ||
Common stock issued for finder’s fee at $0.25 per share | 150,000 | - | - | - | - | ||
Share subscriptions | - | - | - | 664,054 | - | ||
Share issue costs | - | (126,952) | - | - | - | ||
Net loss | - | - | - | - | (1,439,167) | ||
Balance, August 31, 2003 | 13,048,058 | 28,746,977 | 18,400 | 679,054 | (29,189,345) | 255,086 | |
Common stock issued for cash – conversion of special warrants at $0.15 per share | 4,410,000 | 629,054 | - | (629,054) | - | ||
Common stock issued for finder’s fee at $0.15 per share | 114,000 | 17,100 | - | - | - | ||
Common stock issued as financing fee at $0.25 per share | 250,000 | 62,500 | - | - | - | ||
Common stock issued for cash private placement at $0.25 per share | 10,295,000 | 2,573,750 | - | - | - | ||
Common stock issued for cash stock options exercised | 825,000 | 239,800 | (35,771) | (50,000) | - | ||
Common stock issued for cash warrants exercised | 5,974,873 | 1,910,540 | - | - | - | ||
Common stock issued for cash private placement at $0.45 | 10,276,112 | 4,624,248 | - | - | - | ||
Common stock issued for agent’s fee at $0.45 per share | 203,610 | - | - | - | - |
| |
Common stock issued for exploration property at $0.29 per share | 60,000 | 17,400 | - | - | - | ||
Common stock issued for exploration property at $0.47 per share | 5,000,000 | 2,350,000 | - | - | - | ||
Share issue costs | - | (637,888) | - | - | - | ||
Stock-based compensation | - | - | 664,053 | - | - | ||
Net loss | - | - | - | - | (2,319,019) | ||
Balance, August 31, 2004 | 50,456,653 | 40,533,481 | 646,682 | - | (31,508,364) | 9,671,799 | |
Common stock issued for cash – private placement at $0.40 per share | 10,000,000 | 4,000,000 | - | - | - | ||
Common stock issued for agent’s fee at $0.40 per share | 100,000 | - | - | - | - | ||
Common stock issued for cash – stock options exercised | 649,445 | 215,812 | (36,561) | - | - | ||
Common stock issued for cash – warrants exercised | 5,945,415 | 1,729,479 | - | - | - | ||
Common stock issued for cash – agent’s warrant exercised | 625,000 | 187,500 | (18,125) | - | - | ||
Shares issued for exploration properties | 50,000 | 13,250 | - | - | - | ||
Share issue costs | - | (120,000) | - | - | - | ||
Stock-based compensation | - | - | 421,025 | - | - | ||
Net loss | - | - | - | - | (2,877,394) | ||
Balance, August 31, 2005 | 67,826,513 | $46,559,522 | $ 1,013,021 | $ - | $(34,385,758) | $13,186,785 | |
The accompanying notes are an integral part of these consolidated financial statements.
102
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
1. NATURE OF OPERATIONS AND GOING CONCERN
Tournigan Gold Corporation ("the Company") is a public company listed on the TSX Venture Exchange in Canada and the Frankfurt Stock Exchange in Germany. On December 3, 2002, the Company continued its incorporating jurisdiction from British Columbia, Canada to Yukon, Canada and changed its name from Tournigan Ventures Corporation to Tournigan Gold Corporation.
The Company's principal business activity is the sourcing, exploration and development of mineral properties. At August 31, 2005, the Company had working capital (deficiency) of $3,242,897 (2004 - $3,255,080; 2003 - $1,111,954)) and incurred a loss of $ 2,877,394 (2004 - $2,319,019; 2003 - $1,439,167) for the year then ended. The Company's ability to continue its operations and to realize its assets at their carrying values is dependent upon the continued support of its stockholders, obtaining additional financing and generating revenues sufficient to cover its operating costs. These consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflect ed in the consolidated financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation and basis of accounting -These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company’s consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles.
Cash and cash equivalents -Cash and cash equivalents consist of cash and investments in money market instruments with a term to maturity of 180 days or less.
Marketable securities – Marketable securities are recorded at the lower of cost and market.
Exploration properties- The Company accounts for exploration properties in accordance with the Canadian Institute of Chartered Accountants (“CICA”) handbook section 3061 – “Property, plant and equipment” and abstract EIC-126 of the Emerging Issues Committee (“EIC-126”). CICA 3061 provides for the capitalization of the acquisition and exploration costs of a mining property where such costs are considered to have the characteristics of property, plant and equipment. EIC-126 provides that a mining enterprise is not precluded from considering exploration costs to have the characteristics of property, plant and equipment when it has not established mineral reserves objectively and therefore does not have a basis for preparing a projection of the estimated future net cash flow from the property.
Exploration property costs include initial acquisition costs and related option payments, which are recorded when paid. Property option payments receivable by the Company are credited against exploration property costs when received. Exploration and development costs are capitalized until properties are brought into production, when costs are amortized on a unit-of-production basis over economically recoverable reserves.
CICA 3061 also provides that property, plant and equipment be written down when the long-term expectation is that the net carrying amount will not be recoverable. EIC-126 states that a mining enterprise which has not objectively established mineral reserves and therefore does not have a basis for preparing a projection of the estimated future cash flow from a property is not obliged to conclude that the capitalized costs have been impaired. However, EIC-126 references certain conditions that should be considered in determining subsequent write-downs, such as changes or abandonment of a work program or poor exploration results, and management reviews such conditions to determine whether a write-down of capitalized costs is required.
103
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
2. SIGNIFICANT ACCOUNTING POLICIES(cont’d…)
Accounting standards subsequently issued by the CICA (CICA 1581 and CICA 3062) dealing with intangible assets include reference to “use rights such as drilling, water, air, mineral, timber cutting, and route authorities” as examples of intangible assets. CICA 3062 also states, inter alia, that intangible assets should be amortized over their useful life and tested for impairment. Management has reviewed this potential reporting conflict with the previously issued standards and is of the opinion that it is appropriately accounting for its option and lease interests as having the characteristics of property, plant and equipment.
Environmental protection and reclamation costs -The operations of the Company have been, and may in the future be, affected from time to time in varying degrees by changes in environmental regulations, including those for future rehabilitation and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company may vary from region to region and are not entirely predictable. The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures. Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against statements of earnings as incurred or capitalized and amortized depending upon their future economic benefits. The Company does not anticipate any material capital exp enditures for environmental control facilities because it is at an early stage of exploration. Estimated future rehabilitation and site restoration costs are considered minimal.
Long term investments– Long term investments are carried at cost. The Company periodically reviews the carrying value of its investments, and when a decline in the value of an investment is determined to be other than temporary, the investment is written down accordingly.
Property and equipment - Property and equipment are recorded at cost and are amortized over their estimated useful lives as follows:
Computer and electronic equipment | 30% declining balance basis |
Office and field equipment | 20% declining balance basis |
Software | 50% declining balance basis |
Leasehold improvements | over the term of the lease |
In the year of acquisition, the Company records amortization at 50% of the annual amortization.
The Company reviews the carrying value of property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company’s policy is to record an impairment loss in the period when it is determined that the carrying amount of the asset exceeds the estimate of undiscounted future cash flows from the asset. At that time, the carrying amount is written down to fair value.
Stock-based compensation - The Company has a stock option plan which is described in Note 12. On September 1, 2003, the Company prospectively adopted the revised recommendations of CICA Handbook Section 3870, "Stock-Based Compensation and Other Stock-Based Payments". Under these recommendations, the Company provides certain pro-forma disclosure as required by the fair value method of accounting for stock options beginning with its fiscal year ended August 31, 2003, and recognizes an expense for options granted on or after September 1, 2003. The Company also records stock-based compensation in respect of agents’ warrants issued in connection with common share placements, and includes the fair value thereof in share issuance costs. The Company uses the Black-Scholes option pricing model to estimate the fair value of each stock option on the date of grant and of each wa rrant on the date of issue. On the exercise of stock options and warrants, common stock is credited for consideration received, and for fair value amounts previously credited to additional paid-in capital. The effect of the adoption of these recommendations is described in notes 11 and 12.
104
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
2. SIGNIFICANT ACCOUNTING POLICIES(cont’d…)
Translation of foreign currencies - The Company’s consolidated financial statements are expressed in Canadian dollars. Monetary assets and liabilities in foreign currencies are translated at the prevailing rates of exchange at the balance sheet date. Revenues and expenses are translated at the rates of exchange in effect on the dates of the related transactions. Non-monetary assets and liabilities are translated at the historic rates in effect when the assets were acquired or liabilities incurred. Exchange gains and losses arising on translation are included in determining current earnings.
Earnings per share - The Company uses the "treasury stock method" in computing earnings per share. Under this method, basic loss per share is computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the year.
For the years ended August 31, 2005, 2004, and 2003, the existence of warrants and options affects the calculation of loss per share on a fully diluted basis. As the effect of this dilution is to reduce the reported loss per share, fully diluted loss per share information has not been shown.
Income taxes - Future income taxes relate to the expected future tax consequences of differences between the carrying amount of balance sheet items and their corresponding tax values. Future income tax assets, if any, are recognized only to the extent that, in the opinion of management, it is more likely than not that future income tax assets will be realized. Future income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates at the date of enactment or substantive enactment.
Financial instruments - The Company's financial instruments consist of cash and cash equivalents, subscription receivable, other receivables, marketable securities, amounts due from related parties, long term investments, accounts payable and accrued expenses, and amounts due to related parties. Amounts due from and due to related parties are non-interest bearing. The carrying values of current assets and current liabilities approximate their fair value due to their short maturities.
The Company is exposed to currency risks to the extant that certain of its cash and cash equivalents are denominated in U.K. pounds sterling and Slovakian korunas. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from its other financial instruments and that their fair values approximate their carrying values, except where separately disclosed.
Use of estimates in the preparation of financial statements - The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of expenses for the period. The more significant areas requiring the use of estimates include exploration properties, amortization, income taxes, and stock-based compensation. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
Asset retirement obligations - On September 1, 2004, the Company adopted CICA Handbook Section 3110, "Asset Retirement Obligations." This standard requires liability recognition for retirement obligations associated with the Company's exploration properties. The standard requires the Company to recognize the fair value of the liability for an asset retirement obligation in the period in which it is incurred and record a corresponding increase in the carrying value of the related long-lived asset. Fair value is estimated using the present value of the estimated future cash outflows. The liability is subsequently adjusted for the passage of time, and is recognized as an accretion expense in the statements of operations. The increase in the carrying value of the asset is amortized on the same basis as exploration properties. This change in accounting policy has no effect on the Company' s prior or current financial statements.
105
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
3. MARKETABLE SECURITIES
On January 20, 2005, the Company acquired 150,000 common shares of Lalo Ventures Ltd. at a cost of $0.35 per share. The shares were acquired for short term investment purposes. The market value of the shares on August 31, 2005 was $30,000.
4. LOAN RECEIVABLE
The loan receivable at August 31, 2004 was due from a director.
5. DUE FROM (TO) RELATED PARTIES
Amounts due from (to) directors, officers, companies they control, and companies with common directors and/or officers are unsecured, without interest or fixed terms of repayment.
6. BUSINESS COMBINATIONS
Slovakia- On July 11, 2003, the Company completed the acquisition of all the outstanding shares of Kremnica Gold, a.s. (“Kremnica”), a Slovak Republic corporation, from Argosy Minerals Inc., an Australian publicly listed mining company. The purchase price was $500,000.The following table summarizes the estimated fair value of assets acquired and liabilities assumed at the date of acquisition:
Cash | $ 1,000 |
Prepaid expenses | 1,000 |
Fixed assets | 7,000 |
Mineral properties | 498,000 |
Accounts payable | (7,000) |
Purchase price | $ 500,000 |
Northern Ireland - On February 12, 2004, the Company signed a letter of intent with Strongbow Exploration Inc. (“Strongbow”) to acquire Strongbow’s wholly-owned subsidiary, Ulster Minerals Limited (“Ulster”), a Northern Ireland corporation which owns the exploration licenses covering the Curraghinalt and Tyrone gold projects in County Tyrone, Northern Ireland. The letter specifies that the Company issue 5,000,000 common shares to Strongbow upon completion of a definitive agreement, and 5,000,000 common shares upon the decision of the Company’s Board to initiate construction of a mine. The Company must also pay Strongbow 20% of the tax savings from Ulster’s tax loss carryforwards when utilized. The tax loss carryforwards held by Ulster are a consequence of its prior work done on the Curraghinalt and Tyrone gold projects. Ulster had no assets other than mineral properties and no liabilities on the acquisition date. The purchase price in the business combination has therefore been allocated entirely to the Company’s mineral properties.
On April 30, 2004, the Company issued 5,000,000 common shares pending final closing of the acquisition, and recorded the fair value of $2,350,000 as an addition to mineral properties. The shares are subject to a pooling agreement under which the shares will be released in 1,000,000 share tranches in each of five consecutive six-month periods. The acquisition closed on December 16, 2004. The Company has the right of first refusal to purchase any of the shares of the Company under the pooling agreement that Strongbow elects to sell.
106
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
7. EXPLORATION PROPERTIES
(a)
Curraghinalt Gold Project, Northern Ireland -The Company holds a 100% interest in the Curraghinalt Gold Project. The project is located on two adjoining exploration licenses covering 346 square kilometres in County Tyrone, Northern Ireland. In December 2004, the Company completed the acquisition of Ulster Minerals Limited (“Ulster”), a Northern Ireland corporation, from Strongbow Exploration Inc. (“Strongbow”). Ulster owns the exploration licenses covering the Curraghinalt and Tyrone gold projects.
Pursuant to a 2004 letter agreement, 5,000,000 shares of the Company were issued to Strongbow in April 2004 as consideration for all the outstanding shares of Ulster. The Company recorded the $2,350,000 fair value of the shares as an addition to exploration properties. The shares are subject to a pooling agreement under which they will be released in 1,000,000 share tranches in each of five consecutive six-month periods until May 3, 2006. The Company has the right of first refusal to purchase any of the shares of the Company under the pooling agreement that Strongbow elects to sell. As at August 31, 2005, 3,000,000 shares had been released to Strongbow from the pool.
Should the board of directors of the Company decide to initiate construction of a mine at Curraghinalt, under terms of the letter agreement an additional 5,000,000 common shares must be issued to Strongbow. Pursuant to a royalty agreement between Ulster and Minco plc, a 2% net smelter return royalty would also be required to be paid to Minco plc. In addition, the Company must pay Strongbow 20% of the tax savings from Ulster’s tax loss carryforwards when utilized. The carryforwards held by Ulster are a consequence of its prior work done on the Curraghinalt and Tyrone gold projects.
(b)
Kremnica Gold Project, Slovak Republic –Through its wholly-owned subsidiary, Kremnica Gold, a.s., the Company has a 100% interest in the Kremnica Gold Project located at the town of Kremnica, Slovak Republic. The project includes a mining license covering 11.8 square kilometres and exploration licenses covering 123 square kilometres. Kremnica Gold, a.s. also holds title to the historic Kremnica Mine, which is not currently in operation.
(c)
Uranium Claims, Wyoming, U.S.A. -On June 16, 2005, the Company entered into an option agreement to acquire up to 100% of a portfolio of uranium mining claims in Wyoming, U.S.A. from Sweetwater River Resources LLC (“Sweetwater”). The portfolio consists of six groups totalling 243 federal lode claims that cover 19.7 kilometres within the Shirley Basin, Great Divide Basin, and Green River Basin uranium districts in Wyoming.
Pursuant to the terms of a definitive agreement replacing the option agreement, the Company is required to make an initial payment of US $140,000, issue 200,000 common shares to Sweetwater, and make anniversary payments of US $25,000, US $50,000, and US $50,000 at the end of the first, second, and third years respectively, to earn an 85% interest. The Company would then have the right to purchase the remaining 15% interest by making a payment to Sweetwater in cash or shares based on an independent valuation. The definitive agreement was finalized in September 2005 (note 18(c)).
107
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
7. EXPLORATION PROPERTIES(cont’d …)
(d)
Jahodna, Novoveska Huta, Svabovce and Spissky Stiavnick Uranium Projects, Slovak Republic –On June 7, 2005, the Company acquired four uranium projects in the Slovak Republic. The projects consist of three exploration licenses encompassing 99 square kilometres. The uranium projects include: Jahodna (32 square kilometres), Novoveska Huta (13 square kilometres), and Svabovce and Spissky Stiavnick (45 square kilometres). Past production was recorded at the Novoveska Huta deposit and the Svabovce and Spissky Stiavnick projects.
(e)
Other Projects
i)
Brehov Precious Metals and VMS Project, Slovak Republic -On March 30, 2005, the Company completed a joint venture agreement with GEO-TECHNIC-Consulting spol. s.r.o. (“GTC”) through which it can acquire up to a 100% interest in the Brehov precious metals and VMS (volcanic hosted massive sulphide) project located in the Slovak Republic. The Brehov project consists of a 1.8-square-kilometre exploration license under joint venture and a surrounding 68-square-kilometre exploration license wholly-owned by the Company.
Upon closing, the Company paid $5,000 to GTC for reimbursement of its historical expenses, and issued 50,000 common shares to GTC’s nominee. Under the terms of the joint venture agreement, the Company is required to conduct $25,000 in exploration expenditures on Brehov, with GTC as the contractor, during the first year of the agreement in order to earn a 35% interest in the project. In the second year, the Company can increase its interest to 70% by paying $25,000 to GTC and spending $50,000 on exploration. After earning 70%, the Company may purchase the remaining 30% by paying GTC cash or shares totalling $50,000 and by granting a 2% net smelter return royalty to GTC. This royalty may be purchased by the Company from GTC for $50,000 and the issuance of 50,000 common shares.
ii)
Republic of Ireland -The Company holds a 100% interest in 15 gold, silver and base metal prospecting licenses totalling 620 square kilometres. Two of these licenses were acquired in 2004 by the issuance of 60,000 common shares.
iii)
Northern Ireland -The Company holds certain other exploration licenses in Northern Ireland, covering 1,056 square kilometres.
iv)
British Columbia, Canada - The Company holds a 100% interest in 31 mineral claims in the Skeena Mining Division, and 4 mining claims in the Omineca Mining Division.
v)
El Potosi and Cerro Pedernal Projects, El Salvador –The Company’s exploration projects in El Salvador were sold during the year ended August 31, 2004 (note 8).
108
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
7. EXPLORATION PROPERTIES(cont’d…)
2005 | Curraghinalt Northern Ireland | Kremnica Slovak Republic | Uranium Projects United States | Uranium Projects Slovak Republic | Other | TOTAL |
Balance - beginning of year | $ 4,922,823 | 1,095,765 | - | - | 55,553 | 6,074,141 |
Acquisition costs | - | - | 65,759 | - | 13,250 | 79,009 |
Exploration costs: | ||||||
Drilling and assays | 198,192 | 1,187,622 | - | - | 6,903 | 1,392,717 |
Consulting and salaries | 184,680 | 301,845 | - | 104 | 3,911 | 490,540 |
Office and field expenses | 147,479 | 201,134 | 50,881 | 906 | 6,253 | 406,653 |
Engineering studies | 145,728 | 77,866 | - | - | - | 223,594 |
Reconnaissance geology and sampling | 57,243 | 20,217 | 78,165 | 4,768 | 8,881 | 169,274 |
Geologist | 129,547 | 35,822 | - | 1,203 | - | 166,572 |
Core storage and re-cataloguing | 146,474 | - | - | - | - | 146,474 |
Data compilation | 116,231 | 13,754 | - | - | 8,674 | 138,659 |
Travel | 52,912 | 58,067 | 5,083 | 1,335 | 1,864 | 119,261 |
Satellite imaging and mapping | 23,743 | 15,066 | 1,026 | - | - | 39,835 |
Surveys | 27,089 | 7,613 | - | - | - | 34,702 |
VMS airborne survey | 30,806 | - | - | - | - | 30,806 |
Environmental studies | 14,597 | 3,859 | - | - | - | 18,456 |
|
|
|
|
|
| |
Total costs incurred | 1,274,721 | 1,922,865 | 200,914 | 8,316 | 49,736 | 3,456,552 |
Balance - end of year | $ 6,197,544 | 3,018,630 | 200,914 | 8,316 | 105,289 | 9,530,693 |
109
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
7. EXPLORATION PROPERTIES(cont’d…)
2004 | Curraghinalt Northern Ireland | Kremnica Slovak Republic | El Potosi & Cerro Pedernal El Salvador | Other | TOTAL |
Balance - beginning of year | $ 682,109 | 502,218 | 131,285 | 23,487 | 1,339,099 |
Acquisition costs | 2,350,701 | - | - | 23,807 | 2,374,508 |
Exploration costs: | |||||
Drilling and assays | 724,042 | 144,276 | 10,532 | - | 878,850 |
Consulting and salaries | 238,544 | 174,148 | 17,537 | - | 430,229 |
Geologist | 249,269 | 28,884 | 17,764 | 3,477 | 299,394 |
Office and field expenses | 144,556 | 82,026 | 12,322 | 980 | 239,884 |
Engineering studies | 173,042 | - | - | - | 173,042 |
Data compilation | 149,431 | 6,241 | - | - | 155,672 |
Surveys | 18,582 | 57,827 | - | - | 76,409 |
Travel | 32,432 | 30,484 | 8,403 | 4,222 | 75,541 |
Development plans | 31,841 | 26,489 | - | - | 58,330 |
Reconnaissance geology | 16,618 | 33,101 | - | - | 49,719 |
Environmental studies | 33,131 | - | - | - | 33,131 |
Satellite imaging and mapping | 22,396 | 7,571 | - | - | 29,967 |
Field technicians | 27,509 | - | - | - | 27,509 |
Geochemical surveys | 22,269 | 2,500 | - | - | 24,769 |
Rehabilitation | 6,351 | - | - | - | 6,351 |
|
|
|
|
|
|
Total costs incurred | 4,240,714 | 593,547 | 66,558 | 32,486 | 4,933,305 |
Less: | |||||
Properties disposed of | - | - | (197,843) | - | (197,843) |
Costs written off | - | - | - | (420) | (420) |
Net change | 4,240,714 | 593,547 | (131,285) | 32,066 | 4,735,042 |
Balance - end of year | $4,922,823 | 1,095,765 | - | 55,553 | 6,074,141 |
110
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
7. EXPLORATION PROPERTIES(cont’d…)
2003 | Curraghinalt Northern Ireland | Kremnica Slovak Republic | El Potosi & Cerro Pedernal El Salvador | Other | TOTAL |
Balance - beginning of year | $ - | - | 8,809 | - | 8,809 |
Acquisition costs: | 7,042 | 498,000 | 75,203 | 23,487 | 603,732 |
Exploration costs: | |||||
Communications | 950 | - | - | - | 950 |
Consulting and salaries | 116,743 | 3,700 | 23,556 | - | 143,999 |
Data compilation | 28,884 | - | - | - | 28,884 |
Development plans | 37,971 | - | - | - | 37,971 |
Drilling | 170,228 | - | - | - | 170,228 |
Field supplies | 3,141 | - | - | - | 3,141 |
Field technicians | 6,756 | - | - | - | 6,756 |
Geochemical surveys | 46,627 | - | - | - | 46,627 |
Geologist | 52,654 | - | - | - | 52,654 |
Geophysical IP surveys | 6,772 | - | - | - | 6,772 |
Legal | 25,274 | - | 5,661 | - | 30,935 |
Mapping | 2,522 | - | - | - | 2,522 |
Office, postage, couriers | 3,301 | - | - | - | 3,301 |
Option fee | 5,730 | - | 4,012 | - | 9,742 |
Project management | 58,415 | - | 5,856 | - | 64,271 |
Reconnaissance geology, sampling | 8,371 | 518 | - | - | 8,889 |
Rent, heat, gas | 15,418 | - | - | - | 15,418 |
Satellite imaging | - | - | 3,410 | - | 3,410 |
Structural analysis | 16,865 | - | - | - | 16,865 |
Travel | 61,120 | - | 4,778 | - | 65,898 |
Trenching | 7,325 | - | - | - | 7,325 |
Balance – end of year | $ 682,109 | 502,218 | 131,285 | 23,487 | 1,339,099 |
111
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
8. LONG TERM INVESTMENTS
On February 18, 2004, the Company sold its rights and interests in the El Potosi and Cerro Pedernal projects in El Salvador to Condor Securities Limited (“Condor”), a private Australian corporation, for consideration of 8,000,000 common shares of Condor having a fair value of $200,000. The Company had incurred total costs of $197,843 on its El Salvador projects and consequently, a gain of $2,157 was recorded on disposition of the projects. Condor subsequently completed a share rollback of 2.5 old shares for 1 new share. The terms of the agreement originally required that Condor list its common shares on a Canadian or Australian stock exchange by July 31, 2005, and, if this condition was not met, the projects would be returned to the Company. The Company waived this requirement in June 2005 for consideration of 200,000 additional shares of Condor. The Company now holds 3,40 0,000 shares of Condor, representing 8.9% of the outstanding shares of Condor.
9. PROPERTY AND EQUIPMENT
Accumulated | August 31, | August 31, | August 31, | ||
Cost | Amortization | 2005 | 2004 | 2003 | |
Office and field equipment | $ 99,436 | 32,651 | 66,785 | 59,520 | 9,530 |
Computer and electronic equipment | 77,204 | 29,534 | 47,670 | 51,400 | 17,008 |
Leasehold improvements | 6,993 | 362 | 6,631 | 1,501 | - |
Software | 3,135 | 2,281 | 854 | 1,094 | 1,403 |
$ 186,768 | 64,828 | 121,940 | 113,515 | 27,941 |
10. LOANS PAYABLE
2004 | 2003 | |
Bridge loan, due to Quest Capital Inc., repayable on December 31, 2003, priority repayment on any equity or convertible debt financing, bearing interest at 12% per annum compounded monthly and payable monthly, plus a bonus payment of 250,000 common shares of the Company, secured by a General Security Agreement and the shares of Kremnica Gold, a.s. | $ - | 550,000 |
Loan payable, unsecured, without interest or fixed terms of repayment, due on demand. |
- | 42,000 |
$ - | 592,000 |
112
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
11. COMMON STOCK
Common stock activity for the years ended August 31, 2005, 2004, and 2003 was as follows:
Private placements. On August 31, 2005, the Company issued 5,000,000 common shares in connection with a non-brokered private placement of 5,000,000 units at $0.40 per unit for gross proceeds of $2,000,000. Each unit consisted of one common share and one-half of a share purchase warrant. One whole share purchase warrant is exercisable at $0.55 per share until August 31, 2007. The Company may require the warrants to be exercised any time after the trading price of its shares exceeds $1.00 per share for 30 consecutive trading days. No finder’s fee or commission was paid on the transaction. Share subscriptions receivable in respect of this transaction were received in cash subsequent to year end (note 18(b)).
On December 16, 2004, the Company completed a non-brokered private placement of 5,000,000 common shares at $0.40 per share for gross proceeds of $2,000,000. Pursuant to the private placement, the Company paid $120,000 in cash and issued 100,000 common shares as a finder’s fee to a third party.
On May 11, 2004, the Company completed a partially brokered private placement of 10,276,107 units at $0.45 per unit for total gross proceeds of $4,624,248. An additional 203,610 units at the offering price of $0.45 per share for a total value of $91,625 were issued as partial payment of commissions, for a total of 10,479,717 units issued. Each unit consisted of one common share and ½ share purchase warrant. One whole share purchase warrant is exercisable at $0.65 per share until November 14, 2005.
The agents received a commission of 8% of the brokered amount of the financing, of which $278,315 was paid in cash and $91,625 was paid in the above-noted 203,610 units consisting of one common share and ½ share purchase warrant. The agents were also issued agent’s options consisting of 1,016,499 agent’s units, with each unit comprised of one common share and ½ agent’s share purchase warrant. The 1,016,499
agent’s options are exercisable at $0.70 per unit until November 11, 2005, and the 508,248 agent’s warrants are exercisable into 508,248 common shares at $1.00 per share until November 11, 2005.
The private placement funds were raised to complete pre-feasibility studies on the Company’s Curraghinalt gold project in Northern Ireland, to fund a drill program at the Kremnica gold project in Slovakia, and to provide general working capital.
On October 22, 2003, the Company completed a partially brokered private placement of 10,295,000 units at $0.25 per unit for total gross proceeds of $2,573,750. Each unit consisted of one common share and ½ share purchase warrant. One whole share purchase warrant is exercisable at $0.30 per share until December 31, 2004. The agents received a commission of 7% of the brokered amount of the financing, plus 904,000 warrants exercisable under the same terms as above. Funds were used to repay the loan from Quest Capital Inc. (note 10), to advance the Company’s exploration projects in Northern Ireland and Slovakia, and for general working capital.
Short Form Offering Document- On April 10, 2003, the Company completed a financing by issuing 5,000,000 units at $0.25 per unit for gross proceeds of $1,250,000. Each unit consisted of one common share and one common share purchase Warrant. Two Warrants entitled the holder to acquire an additional common share at a price of $0.40 per share for a period of 12 months until April 12, 2004. The agent was issued 150,000 common shares as a corporate finance fee and was paid a commission of ($87,500). The agent also received an “Agent’s Warrant” entitling the agent to purchase 750,000 common shares at a price of $0.25 per share until April 12, 2004. The offering raised funds to develop the Company’s gold projects in Northern Ireland and El Salvador.
113
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
11. COMMON STOCK(cont’d)
Special Warrants Financing - On September 27, 2002, the Company completed a partially brokered financing by issuing 4,410,000 Special Warrants at $0.15 per Special Warrant for gross proceeds of $661,500. Costs of the financing amounted to $32,446, resulting in net proceeds to the Company of $629,054. On September 16, 2003, each Special Warrant was converted into one unit consisting of one common share and ½ share purchase warrant. Upon conversion, two half-warrants became exercisable into one common share at $0.25 per share, expiring September 27, 2004. As part of the financing, the agent was issued 114,000 Series “A” Special Warrants which converted directly into 114,000 common shares on September 16, 2003. The agent was also issued 285,000 Series “B” Special Warrants which converted on September 16, 2003 into 285,000 warrants exercisable into 285,000 common shares at $0.25 per share, until September 27, 2004.
Shares issued for exploration properties- During the year ended August 31, 2005, the Company issued 50,000 common shares in connection with its acquisition of the Brehov project. During the year ended August 31, 2004, the Company issued 5,060,000 shares in connection with its acquisition of Ulster and certain exploration licenses in the Republic of Ireland.
Escrow shares –As at August 31, 2005, 2004, and 2003, there were 9,375 common shares held in escrow.
Warrants –The Company has share purchase warrants outstanding as follows:
Year ended August 31, 2005:
Exercise Price | Balance August 31, 2004 | Issued | (Exercised) | (Expired) | Balance August 31, 2005 | Expiry Date |
$0.25 | 1,370,418 | - | (1,370,415) | (3) | - | September 27, 2004 |
$0.30 | 5,280,000 | - | (5,075,000) | (205,000) | - | December 31, 2004 |
$0.27 | 125,000 | - | (125,000) | - | - | July 10, 2005 |
$0.70 | 1,016,499 | - | - | - | 1,016,499 | November 11, 2005 |
$1.00 | 508,248 | - | - | - | 508,248 | November 11, 2005 |
$0.65 | 5,239,857 | - | - | - | 5,239,857 | November 14, 2005 |
$0.55 | - | 2,500,000 | - | - | 2,500,000 | August 31, 2007 |
13,540,022 | 2,500,000 | (6,570,415) | (205,003) | 9,264,604 |
Year ended August 31, 2004:
Exercise Price | Balance August 31, 2003 | Issued | (Exercised) | (Expired) | Balance August 31, 2004 | Expiry Date |
$0.25 | 750,000 | - | (750,000) | - | - | April 12, 2004 |
$0.40 | 2,500,000 | - | (2,473,500) | (26,500) | - | April 12, 2004 |
$0.25 | 860,289 | 2 | (860,291) | - | - | August 2, 2004 |
$0.25 | 285,000 | 2,205,000 | (1,119,582) | - | 1,370,418 | September 27, 2004 |
$0.30 | - | 6,051,500 | (771,500) | - | 5,280,000 | December 31, 2004 |
$0.27 | 125,000 | - | - | - | 125,000 | July 10, 2005 |
$0.70 | - | 1,016,499 | - | - | 1,016,499 | November 11, 2005 |
$1.00 | - | 508,248 | - | - | 508,248 | November 11, 2005 |
$0.65 | - | 5,239,857 | - | - | 5,239,857 | November 14, 2005 |
4,520,289 | 15,021,106 | (5,974,873) | (26,500) | 13,540,022 |
114
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
11. COMMON STOCK (cont’d…)
Warrants(cont’d)
Year ended August 31, 2003:
Exercise Price | Balance August 31, 2002 | Issued | (Exercised) | (Expired) | Balance August 31, 2003 | Expiry Date |
$0.10 | 1,000,000 | - | (1,000,000) | - | - | July 5, 2003 |
$0.25 | - | 750,000 | - | - | 750,000 | April 12, 2004 |
$0.40 | �� - | 2,500,000 | - | - | 2,500,000 | April 12, 2004 |
$0.25 | 860,289 | - | - | - | 860,289 | August 2, 2004 |
$0.25 | - | 285,000 | - | - | 285,000 | September 27, 2004 |
$0.27 | - | 125,000 | - | - | 125,000 | July 10, 2005 |
1,860,289 | 3,660,000 | (1,000,000) | - | 4,520,289 |
The Company recognizes a share issuance cost for the fair value of agents’ warrants issued using the Black-Scholes pricing model. The amount calculated is recorded as a share issuance cost with a corresponding credit to additional paid-in capital. The Black-Scholes model was developed for use in estimating the fair value of traded securities that have no vesting restrictions. The model requires management to make estimates, which are subjective and may not be representative of actual results. Changes in assumptions can materially affect estimates of fair values. For purposes of the calculation and disclosures, the following weighted-average assumptions were used:
Year ended August 31, 2005 | Year ended August 31, 2004 | Year ended August 31, 2003 | |
Risk-free interest rate | - | 2.5% | 2.5% |
Expected dividend yield | - | 0% | 0% |
Expected stock price volatility | - | 98.4% | 100.5% |
Expected life of warrants | - | 1.4 years | 2.0 years |
Weighted average fair value of agents’ warrants issued in year | - | $0.26 per share | $0.13 per share |
No agents’ warrants were issued during the year ended August 31, 2005. Total stock-based compensation for warrants issued during the year ended August 31, 2004 was $82,553 (2003 (pro-forma) - $90,000).
115
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
12. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION
On October 1, 2003, the Company adopted a rolling stock option plan applicable to directors, employees, and consultants, under which the total outstanding stock options are limited to 10% of the outstanding common shares of the Company at any one time. Under this plan, the exercise price of an option shall not be less than the discounted market price at the time of granting, or as permitted by the policies of the TSX Venture Exchange, and an option’s maximum term is ten years from the grant date.
The Company’s previous stock option plan reserved a total of 2,000,000 common shares. Under that plan, the minimum exercise price of each option could not be less than the discounted market price of the Company's stock on the last business day prior to the date of the grant, and an option's maximum term was five years from the grant date. Options granted under the previous plan expire on June 11, 2008.
Pursuant to the option plan, options granted in respect of investor relations activities are subject to vesting restrictions such that one-quarter of the options vest three months from the date of grant and in each subsequent three-month period thereafter such that the entire option will have vested twelve months after the award date. Vesting restrictions may also be applied to certain other options grants, at the discretion of the directors.
A summary of the changes in the Company's stock option plan in the years ended August 31, 2005, 2004, and 2003 is presented below.
2005 | 2004 | 2003 | ||||
Options | Weighted Average Exercise Price | Options | Weighted Average Exercise Price | Options | Weighted Average Exercise Price | |
Outstanding – beginning of year | 2,925,000 | $ 0.33 | 2,000,000 | $ 0.25 | - | $ - |
Granted | 3,010,000 | 0.44 | 2,200,000 | 0.36 | 2,000,000 | 0.25 |
Exercised | (649,445) | (0.28) | (825,000) | (0.25) | - | - |
Expired | (50,000) | (0.50) | (450,000) | (0.25) | - | - |
Outstanding – end of year | 5,235,555 | $ 0.40 | 2,925,000 | $ 0.33 | 2,000,000 | $ 0.25 |
The Company has share purchase options outstanding as follows:
Exercise Price | August 31, 2004 | Issued | (Exercised and Expired) | August 31, 2005 | Expiry Date |
$0.25 | 425,000 | - | (225,000) | 200,000 | May 21, 2008 |
$0.25 | 450,000 | - | (250,000) | 200,000 | June 11, 2008 |
$0.25 | 300,000 | - | (50,000) | 250,000 | September 30, 2008 |
$0.35 | 1,300,000 | - | (80,000) | 1,220,000 | January 29, 2009 |
$0.50 | 450,000 | - | (50,000) | 400,000 | April 2, 2009 |
$0.45 | - | 2,035,000 | (44,445) | 1,990,555 | September 26, 2009 |
$0.45 | - | 100,000 | - | 100,000 | February 16, 2010 |
$0.40 | - | 375,000 | - | 375,000 | June 9, 2010 |
$0.40 | - | 500,000 | - | 500,000 | August 31, 2010 |
2,925,000 | 3,010,000 | (699,445) | 5,235,555 |
116
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
12. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION(cont’d)
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock options granted. The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions. The model requires management to make estimates, which are subjective and may not be representative of actual results. Changes in assumptions can materially affect estimates of fair values. For purposes of the calculation and disclosures, the following weighted-average assumptions were used:
Year ended August 31, 2005 | Year ended August 31, 2004 | Year ended August 31, 2003 | |
Risk free interest rate | 3.51% | 2.5% | 2.5% |
Expected dividend yield | 0% | 0% | 0% |
Expected stock price volatility | 73.31% | 98.4% | 100.5% |
Expected life of options | 2.0 years | 2.0 years | 2.0 years |
Weighted average fair value of options granted in year | $0.14 per share | $0.26 per share | $0.13 per share |
Total stock-based compensation for the year ended August 31, 2005 was $421,025 (2004 - $581,500; 2003 (pro-forma) - $268,000).
13. NON-CASH TRANSACTIONS
Significant non-cash operating, investing and financing activities for the years ended August 31, 2005, 2004, and 2003 were as follows:
2005 | 2004 | 2003 | |
Shares issued for share subscriptions | $ 2,000,000 | - | - |
Agents’ fees paid in shares | 40,000 | 91,625 | 37,500 |
Shares issued for exploration properties | 13,250 | 2,367,400 | - |
Shares received as proceeds on sale of exploration properties | - | 200,000 | - |
Debt financing costs paid in shares | - | 62,500 | - |
14. RELATED PARTY TRANSACTIONS
The Company had the following related party transactions during the year:
(a)
Incurred fees of $389,958 (2004 - $450,475; 2003 - $149,955) to related parties, comprised of:
i)
directors’ fees of $58,000 (2004 - $97,000; 2003 - $nil);
ii)
chairman’s fees of $30,000 (2004 - $30,000; 2003 - $nil);
iii)
officers’ fees of $72,000 (2004 - $67,000; 2003 - $nil);
iv)
fees of $35,000 (2004 - $25,000; 2003 - $nil) from companies controlled by officers;
v)
professional fees of $194,958 (2004 - $ 180,000; 2003 - $92,500) from a company controlled by the President;
vi)
professional fees of $nil (2004 - $25,000; 2003 - $nil) from companies controlled by directors; and
vii)
professional fees of $nil (2004 - $26,475; 2003 - $57,455) from directors.
117
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
14. RELATED PARTY TRANSACTIONS(cont’d)
(b)
Incurred geological consulting fees of $nil (2004 - $18,025; 2003 - $38,661) from a director, which was capitalized to exploration properties.
(c)
Due to related parties of $100,630 (2004 - $139,128; 2003 - $63,375) is comprised of $100,630 (2004 - $136,000; 2003 - $63,375) payable to officers and directors for unpaid fees and $nil (2004 - $3,128; 2003 - $nil) payable to the President for expenses incurred.
(d)
The Company incurred legal fees of $58,667 (2004 - $ 5,000; 2003 - $nil) from a law firm in which a principal is a director. Accounts payable and accrued expenses includes $11,915 due to the law firm at August 31, 2005 (2004 - $nil; 2003 - $nil). The Company also incurred legal fees of $nil (2004 - $61,022; 2003 - $98,465) from a law firm in which a principal was the former corporate secretary.
(e)
The Company recovered expense reimbursements of $108,756 (2004 - $49,026; 2003 - $nil) from Lalo Ventures Ltd. (“Lalo”), a public company which is related by a common officer and a common director; $61,490 (2004 - $11,843; 2003 - $nil) from Exeter Resource Corporation (“Exeter”), a public company related by a former director and a former officer; and $41,526 (2004 - $nil; 2003 - $nil) from Finavera Energy Canada Ltd. (“Finavera”), a private company related by a common director. The reimbursements are recorded as offsets to the underlying expense items.
(f)
Due from related parties of $91,255 (2004 - $25,702; 2003 - nil) includes $16,280 (2004 - $20,326; 2003 - $nil) due from Lalo, $17,628 (2004 - $5,376; 2003 - $nil) due from Exeter, $44,887 (2004 - $nil; 2003 - $nil) due from Finavera, and $12,460 (2004 - $50,958; 2003 - $nil) due from a director.
15. INCOME TAXES
The following table reconciles the amount of income tax recoverable on application of the statutory Canadian federal and provincial income tax rates:
2005 | 2004 | 2003 | |
Canadian statutory income tax rate | 35.62% | 35.62% | 35.62% |
Income tax recovery at statutory rate | $ (1,024,928) | (826,035) | (512,631) |
Decrease resulting from: | |||
Non-deductible expenses | 160,288 | 220,901 | 12,339 |
Valuation allowance | 864,640 | 605,134 | 500,292 |
Income tax recoverable | $ - | - | - |
Income tax expense attributable to income from operations was $nil for the year ended August 31, 2005 (2004 - $nil; 2003 - $nil).
118
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
15. INCOME TAXES(cont’d)
The tax effects of temporary differences that give rise to significant portions of the future tax assets at August 31, 2005, 2004, and 2003 are presented below:
2005 | 2004 | 2003 | |
Non-capital loss carry-forwards | $ 2,760,989 | 2,096,295 | 1,561,562 |
Exploration properties | 3,083,963 | 3,083,963 | 3,084,932 |
Share issuance costs | 211,081 | 225,731 | 60,981 |
Valuation allowance | (6,056,033) | (5,405,989) | (4,707,474) |
$ - | - | - |
Based upon the level of historical taxable income and projections for future taxable income over the years in which the future tax assets are deductible, management has provided a full valuation allowance for the future tax assets.
Subject to certain restrictions, the Company has exploration and development expenditures of $10,940,440 (2004 - $9,812,791; 2003 - $$9,117,559) and non-capital losses of $7,751,234 (2004 - $5,885,164; 2003 - $4,383,946) available to reduce future Canadian taxable income. There are no expiry limitations with respect to the exploration and development expenditures. The non-capital losses expire as follows:
Year | $ |
2006 | 810,632 |
2007 | 171,201 |
2008 | 163,844 |
2009 | 86,727 |
2010 | 1,431,113 |
2014 | 2,433,233 |
2015 | 2,654,484 |
$ 7,751,234 |
The application of exploration and development expenditures and non-capital losses against future taxable income is subject to final determination of the respective amounts by the Canada Revenue Agency.
119
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
16. SEGMENTED INFORMATION
The Company operates in the single business segment of mineral exploration and development.
The Company operates in four (2004 – four; 2003 - five) geographic segments of which only three (2004 – three; 2003 - three) are reportable segments. The accounting policies of the segments are the same as those described in note 2.
Geographic distribution of operating results in the four geographic segments is as follows:
August 31, 2005 | Northern Ireland | Slovak Republic | Canada | Other | Total |
Total assets | $ 6,256,151 | 3,175,615 | 4,045,836 | 268,847 | 13,746,449 |
Exploration properties | 6,197,544 | 3,040,196 | 24,106 | 268,847 | 9,530,693 |
Net loss | (81,946) | (2,026) | (2,793,422) | - | (2,877,394) |
Significant non-cash items | - | 13,250 | - | 65,759 | 79,009 |
Property and equipment additions | 7,008 | 15,815 | 17,061 | - | 39,884 |
Interest revenue | - | 80 | 64,669 | - | 64,749 |
Amortization | 1,354 | 8,541 | 21,565 | - | 31,460 |
Interest expense | 964 | - | 46,760 | - | 47,724 |
August 31, 2004 | Northern Ireland | Slovak Republic | Canada | Other | Total |
Total assets | $ 5,108,090 | 1,255,944 | 3,997,374 | 31,447 | 10,392,855 |
Exploration properties | 4,922,823 | 1,095,765 | 24,106 | 31,447 | 6,074,141 |
Net loss | (85,348) | (4,381) | (2,229,290) | - | (2,319,019) |
Significant non-cash items | 2,350,000 | - | (62,500) | (180,443) | 2,107,057 |
Property and equipment additions | - | 39,744 | 63,049 | - | 102,793 |
Interest revenue | - | 5,736 | 21,514 | - | 27,250 |
Amortization | - | 4,381 | 12,838 | - | 17,219 |
Interest expense | 285 | - | 11,921 | - | 12,206 |
August 31, 2003 | Northern Ireland | Slovak Republic | Canada | Other | Total |
Total assets | $ 736,955 | 511,218 | 270,408 | 146,352 | 1,664,933 |
Net loss | 9,889 | 12,200 | 1,417,078 | - | 1,439,167 |
Exploration properties | 682,109 | 502,218 | 8,420 | 146,352 | 1,339,099 |
Significant non-cash items | - | - | 37,500 | - | 37,500 |
Property and equipment additions | - | - | 24,468 | - | 24,468 |
Interest expense | 72 | - | 24,593 | - | 24,665 |
Interest revenue | - | - | 4,881 | - | 4,881 |
Amortization | - | - | 3,527 | - | 3,527 |
120
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
17. COMMITMENTS
Premises leases - On April 1, 2004, the Company entered into a five year plus three month lease agreement for office space. Annual commitments remaining over the term of the lease are: $160,100 for 2006, $167,520 for 2007, $167,520 for 2008, and $139,600 for 2009, for an aggregate of $634,740.
Exploration licenses - The Company holds exploration licenses in Northern Ireland, the Republic of Ireland, the Slovak Republic, and the United States. Licenses in each country vary from one to three years and commitments for exploration expenditures are often subject to negotiation. The Company’s exploration expenditures in Northern Ireland for periods beyond 2005 are currently in negotiation. There are currently no other commitments under any of the Company’s other licenses.
Exploration properties- The Company has committed to issue shares, pay cash, and incur exploration expenditures in connection with the acquisition and ongoing exploration of the Curraghinalt and Brehov projects, and the Wyoming, U.S.A. uranium claims, as described in note 7.
18. SUBSEQUENT EVENTS
(a)
Subsequent to year end, the Company issued 468,000 common shares in respect of the exercise of stock options as follows: 150,000 common shares at $0.25 per share; 200,000 common shares at $0.35 per share; and 118,000 common shares at $0.45 per share. Total proceeds from the stock options exercised were $160,600.
(b)
On September 1, 2005, the Company received $2,000,000 for share subscriptions receivable.
(c)
In September 2005, the Company finalized a definitive option agreement with Sweetwater Resources LLC and issued 200,000 common shares at a fair value of $87,000 under the agreement.
(d)
On September 8, 2005, a non-brokered private placement of 5,000,000 units at $0.40 per unit was completed for gross proceeds of $2,000,000. Each unit consists of one common share and one-half of a warrant, with each whole warrant entitling the holder to purchase an additional share at an exercise price of $0.55 per share until September 8, 2007. The Company may require the warrants to be exercised any time after the trading price of its shares exceeds $1.00 per share for 30 consecutive trading days. A finder’s fee of $140,000 was paid to a third party.
(e)
On September 21, 2005, the Company granted 730,000 stock options exercisable at $0.40 per share for a period of five years to directors, employees and consultants. The options are subject to vesting provisions such that 50% vested on the date of grant and 50% will vest on September 21, 2006.
(f)
On September 30, 2005, a non-brokered private placement of 3,500,000 units at $0.50 per unit was completed for gross proceeds of $1,750,000. Each unit consists of one common share and one-half of a warrant, with each whole warrant entitling the holder to purchase an additional share at an exercise price of $0.65 per share until March 31, 2007. The Company may require the warrants to be exercised any time after the trading price of its shares exceeds $1.00 per share for 30 consecutive trading days. Finders’ fees of 75,000 units and $37,500 were paid to third parties.
(g)
On November 11, 2005, 1,524,747 unexercised warrants expired and on November 14, 2005, 5,239,857 unexercised warrants expired.
(h)
On November 30, 2005, the Company received US $600,000 in settlement of a US $750,000 promissory note. The Company had provided for doubtful collection of the face value of the note in its financial statements for the year ended August 31, 2001.
121
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
19. COMPARATIVE FIGURES
Certain figures from the previous year have been re-classified to conform to the current year’s presentation. Such re-classification is for presentation purposes only and has no effect on previously-reported results.
20. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") conform to those generally accepted in the United States ("U.S. GAAP"), and the rules and regulations of the Securities and Exchange Commission in all material respects, except as noted below.
(a) Stock-based compensation
The United States Financial Accounting Standards Board has issued Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB25”). This statement uses the intrinsic value based method whereby compensation cost is recorded for the excess, if any, of the quoted market price over the exercise price, at the date the stock options are granted. As at August 31, 2005, no compensation cost would have been recorded for any period under this method. Statement of Financial Accounting Standards No. 123, “Accounting for Stock Based Compensation” (“SFAS 123”), issued in October 1995, requires the use of the fair value based method of accounting for stock options. Under this method, compensation cost is measured at the grant date based on the fair value of the options granted and is recognized over the exercise period . SFAS 123 allows the Company to continue to measure the compensation cost of employees and directors in accordance with APB 25.
On September 1, 2003, the Company prospectively adopted the revised recommendations of CICA Handbook Section 3870, "Stock-Based Compensation and Other Stock-Based Payments". Under these recommendations, the Company provides certain pro-forma disclosure as required by the fair value method of accounting for stock options beginning with its fiscal year ended August 31, 2003, and recognizes an expense for options granted on or after September 1, 2003. The Company also records stock-based compensation in respect of agents’ warrants issued in connection with common share placements, and includes the fair value thereof in share issuance costs. The Company uses the Black-Scholes option pricing model to estimate the fair value of each stock option on the date of grant and of each warrant on the date of issue. On the exercise of stock options and warrants, common stock is cred ited for consideration received, and for fair value amounts previously credited to additional paid-in capital. The effect of the adoption of these recommendations is described in notes 11 and 12.
The following is a summary of the status of stock options outstanding at August 31, 2005:
Outstanding Options | Exercisable Options | |||||
Range of Exercise Prices | Number | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | |
$0.25 | 200,000 | 2.72 | $0.25 | 200,000 | $0.25 | |
$0.25 | 200,000 | 2.78 | $0.25 | 200,000 | $0.25 | |
$0.25 | 250,000 | 3.08 | $0.25 | 250,000 | $0.25 | |
$0.35 | 1,220,000 | 3.42 | $0.35 | 1,220,000 | $0.35 | |
$0.50 | 400,000 | 3.59 | $0.50 | 270,000 | $0.50 | |
$0.45 | 1,990,555 | 4.05 | $0.45 | 1,928,055 | $0.45 | |
$0.45 | 100,000 | 4.47 | $0.45 | 100,000 | $0.45 | |
$0.40 | 375,000 | 4.78 | $0.40 | 187,500 | $0.40 | |
$0.40 | 500,000 | 5.00 | $0.40 | 500,000 | $0.50 | |
5,235,555 |
| |||||
122
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
20. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(cont’d…)
(b)Subscriptions receivable
Under Canadian GAAP, subscriptions receivable are presented as an asset. Under U.S. GAAP, subscriptions receivable are presented as a contra-equity item. Subscriptions receivable at August 31, 2005 were $2,000,000 (2004 - $nil; 2003 - $nil).
(c) Exploration properties
Under Canadian GAAP, acquisition and exploration costs are capitalized. Under U.S. GAAP, acquisition costs are capitalized and exploration costs are expensed as incurred unless commercial feasibility is established.Under U.S. GAAP, mining properties are reviewed by management for impairment at the end of each reporting period, and a write-down is recorded where necessary. Acquisition costs capitalized under U.S. GAAP during the years ended August 31, 2005, 2004, and 2003 were $79,009, $2,350,701, and $573,203 respectively; exploration costs expensed under U.S. GAAP during the years ended August 31, 2005, 2004, and 2003 were $3,377,543, $2,384,341, and $757,087 respectively.
(d) Trading securities and available-for-sale securities
Pursuant to Statement of Financial Accounting Standards No. 115, investments in securities are classified as either trading, held to maturity, or available-for-sale. During the year ended August 31, 2005, the Company did not own any securities classified as either trading or held to maturity. The Company did own securities classified as available-for-sale.
The Company’s marketable securities and long-term investment consist of equity securities and are classified as available-for-sale, with the change in fair value during the period excluded from earnings and recorded net of tax as a component of other comprehensive income. Unrealized holding gains and losses, net of tax, are reported as a net amount in a separate component of other comprehensive income.
The Company uses the average cost method to determine the gain or loss on investment securities held as available-for-sale, based upon the accumulated cost bases of specific investment accounts.
At August 31, 2005, the market value of the Company’s marketable securities was $30,000, and the market value of the long-term investment was $200,000.
(e) Comprehensive income
SFAS No. 130, “Reporting Comprehensive Income”, addresses standards for the reporting and display of comprehensive income and its components.
Comprehensive income includes net income and other comprehensive income. For the years ended August 31, 2005, 2004, and 2003, other comprehensive income includes foreign currency translation gains (losses) of ($14,805), ($22,965), and $8,049, and write-down of marketable securities of $22,500, $nil, and $nil, respectively.
123
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
20. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(cont’d…)
(f) Net earnings (loss) per share
Under U.S. GAAP, performance based escrow shares are considered to be contingently issuable until the performance criteria has been satisfied and are excluded from the computation of the weighted average of shares outstanding. The Company's 9,375 common shares held in escrow are not performance based and therefore no adjustments have been made to the calculation of earnings per share.
Diluted EPS has not been disclosed as the effect of the exercise of the Company’s outstanding options and warrants would be anti-dilutive. Diluted net loss per share reflects the potential dilution of securities that could result from the exercise of dilutive options and warrants. As at August 31, 2005 the Company had 5,235,555 (2004: 2,925,000; 2003: 2,000,000) stock options outstanding and 9,264,604 (2004: 13,540,022; 2003: 4,520,289) warrants outstanding which have not been included in the calculation of diluted net loss per share because their effect would have been anti-dilutive.
(g) Amortization
Under Canadian GAAP,property and equipment are recorded at cost and are amortized over their estimated useful lives as follows:
Computer and electronic equipment | 30% declining balance basis |
Office and field equipment | 20% declining balance basis |
Software | 50% declining balance basis |
Leasehold improvements | over the term of the lease |
Under U.S. GAAP,property and equipment are recorded at cost and are amortized on a straight line basis as follows:
Computer and electronic equipment | 3 years |
Office and field equipment | 5 years |
Software | 2 years |
Leasehold improvements | over the term of the lease |
124
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
20. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(cont’d…)
(h) Recent accounting pronouncements
Since July, 2001, the United States Financial Accounting Standards Board (“FASB”) has issued pronouncements pursuant to Statements of Financial Accounting Standards (“SFAS”) and Interpretations (“FIN”) which are shown in the following table. The standards listed in the table have not had a material effect on the Company’s financial position or results of operations.
Date of Issuance | Standard Reference Number | Title Description |
July 2001 | SFAS 141 and SFAS 142 | “Business Combinations” and “Goodwill and Other Intangible Assets.” |
July 2001 | SFAS 143 | “Accounting for Asset Retirement Obligations.” |
August 2001 | SFAS 144 | “Accounting for the Impairment or Disposal of Long-Lived Assets.” |
April 2002 | SFAS 145 | “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections.” |
June 2002 | SFAS 146 | “Accounting for Costs Associated with Exit or Disposal Activities.” |
November 2002 | FIN 45 | "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." |
November 2002 | EITF 00-21 | “Accounting for Revenue Arrangements with Multiple Deliverables.” |
January 2003 | FIN 46 | "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51." |
April 2003 | SFAS 149 | “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” |
May 2003 | SFAS 150 | “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” |
In December 2002, FASB issued SFAS 148, "Accounting for Stock-Based Compensation, Transition and Disclosure." SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also required that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS 148 required disclosure of the pro forma effect in interim financial statements. The transition and annual disclosure requirements of SFAS 148 were effective for the Company’s 2003 fiscal year. The interim disclosure requirements became effective for the second quarter of the Company’s 2003 fiscal year.
125
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
20. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(cont’d…)
(h) Recent accounting pronouncements(cont’d)
In December 2004, FASB issued SFAS No. 153. This statement addresses the measurement of exchanges of nonmonetary assets. The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions,” is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that opinion, however, included certain exceptions to that principle. This statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This statement is effective for financial statements for fiscal ye ars beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges incurred during fiscal years beginning after the date of this statement is issued. Management believes the adoption of this statement will have no impact on the financial statements of the Company.
In December 2004, FASB issued a revision to SFAS No. 123R, “Accounting for Stock Based Compensation.” This statement supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This statement focuses primarily on accounting for transactions in which an entity obtains employee services in stock-based payment transactions. This statement does not change the accounting guidance for stock-based payment transactions with parties other than employees provided in Statement of Financial Accounting Standards No. 123. This statement does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans.” The Company has not yet determined the impact to its financial statements from the adoption of this statement.
In March 2005, SEC staff issued Staff Accounting Bulletin No. 107 ("SAB 107") to give guidance on the implementation of SFAS No. 123R. The Company will consider SAB 107 during the implementation of SFAS No. 123R.
In May 2005, FASB issued SFAS No. 154, “Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20 and SFAS No. 3”. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The adoption of this standard is not expec ted to have a material effect on the Company’s results of operations or financial position.
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TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
20. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(cont’d…)
(i) Reconciliation of Canadian and U.S. GAAP
The impact of the above differences between Canadian and United States generally accepted accounting principles on the statements of operations and comprehensive loss, the balance sheets and the statements of stockholders’ equity and deficit, are as follows:
Statements of Operations and Comprehensive Loss
2005 | 2004 | 2003 | |
Net loss as reported in accordance with Canadian GAAP | $ (2,877,394) | $ (2,319,019) | $ (1,439,167) |
Adjustments: | |||
Stock-based compensation | 421,025 | 581,500 | - |
Write down of marketable securities | 22,500 | - | - |
Foreign currency translation | 14,805 | 9,530 | (1,549) |
Amortization | (4,384) | (4,963) | (1,278) |
Exploration costs expensed | (3,377,543) | (2,582,604) | (757,087) |
Exploration disposed | - | 122,640 | - |
Exploration costs written-off | - | 420 | - |
Net loss under U.S. GAAP | (5,800,991) | (4,192,496) | (2,199,081) |
Comprehensive loss: | |||
Foreign currency translation | (14,805) | (9,530) | 1,549 |
Write down of marketable securities | (22,500) | - | - |
Total comprehensive loss under U.S. GAAP | (5,838,296) | (4,202,026) | (2,197,532 |
Net loss per share under U.S. GAAP | $ (0.10) | $ (0.12) | $ (0.24) |
Weighted average number of shares outstanding under U.S. GAAP | 59,225,546 | 35,707,931 | 9,186,184 |
Balance Sheets | ||||
2005 | 2004 | 2003 | ||
Total assets under Canadian GAAP | $ 13,746,449 | 10,392,855 | 1,664,933 | |
Adjustments to U.S. GAAP: | ||||
Deferred exploration property costs | (6,602,983) | (3,225,440) | (757,087) | |
Subscriptions receivable | (2,000,000) | - | - | |
Amortization | (10,625) | (6,241) | (1,278) | |
Total assets under U.S. GAAP | 5,132,841 | 7,161,174 | 906,568 | |
Total liabilities under Canadiam GAAP | $ 559,664 | 721,056 | 1,409,847 | |
Adjustments to U.S. GAAP: | - | - | - | |
Total liabilities under U.S. GAAP | 559,664 | 721,056 | 1,409,847 | |
Total stockholders’ equity under Canadian GAAP | $ 13,186,785 | 9,671,799 | 255,086 | |
Adjustments to U.S. GAAP: |
| |||
Deferred exploration property costs | (6,602,983) | (3,225,440) | (757,087) | |
Subscriptions receivable | (2,000,000) | - | - | |
Amortization | (10,625) | (6,241) | (1,278) | |
Total equity (deficiency) under U.S. GAAP | 4,573,177 | 6,440,118 | (503,279) | |
Total liabilities and equity (deficiency) under U.S. GAAP | 5,132,841 | 7,161,174 | 906,568 | |
127
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
20. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(cont’d…)
Statements of Cash Flows
2005 | 2004 | 2003 | |
|
|
| |
Cash used in operating activities under Canadian GAAP | $ (2,464,603) | $ (1,855,965) | $ (995,214) |
Adjustments to U.S. GAAP: | |||
Exploration properties expensed | (3,377,543) | (2,582,604) | (757,087) |
Exploration property costs written off | - | 420 | - |
Exploration property costs disposed | - | 122,640 | - |
Cash used in operating activities under U.S. GAAP | (5,842,146) | $ (4,315,509) | (1,752,301) |
Cash used in investing activities under Canadian GAAP | $ (3,535,686) | $ (4,192,496) | $ (1,355,758) |
Adjustments to U.S. GAAP: | |||
Exploration properties expensed | 3,377,543 | 2,582,604 | 757,087 |
Exploration property costs written off | - | 420 | - |
Exploration property costs disposed | - | 122,640 | - |
Cash used in investing activities under U.S. GAAP | (158,143) | (209,154) | (598,671) |
Cash flows from financing activities under Canadian GAAP | $ 3,857,414 | $ 8,117,406 | $ 2,490,196 |
Adjustments to U.S. GAAP: | - | - | - |
Cash flows from financing activities under U.S. GAAP | $ 3,857,414 | $ 8,117,406 | $ 2,490,196 |
Statements of Stockholders’ Equity and Deficit
Common Stock | Share Subscriptions and Special Warrants | Additional Paid-in Capital | Total Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total | ||||
Number of Shares | Amount | ||||||||
Stockholders’ equity (deficiency) under Canadian GAAP at August 31, 2003 | 13,048,058 | $ 28,746,977 | 679,054 | 18,400 | (29,189,345) | - | 255,086 | ||
Foreign currency translation adjustment | - | - | - | - | (1,549) | 1,549 | - | ||
Deferred exploration property costs | - | - | - | - | (757,087) | - | (757,087) | ||
Amortization | - | - | - | - | (1,278) | - | (1,278) | ||
Stockholders’ equity (deficiency) under U.S. GAAP at August 31, 2003 | 13,048,058 | $ 28,746,977 | 679,054 | 18,400 | (29,949,259) | 1,549 | (503,279) | ||
128
TOURNIGAN GOLD CORPORATION AND SUBSIDIARIES
(an Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
Years ended August 31, 2005, 2004, and 2003
20. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(cont’d…)
Common Stock | Share Subscriptions and Special Warrants | Additional Paid-in Capital | Total Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total | |||||
Number of Shares | Amount | |||||||||
Stockholders’ equity (deficiency) under Canadian GAAP at August 31, 2004 | 50,456,653 | $ 40,533,481 | - | 646,682 | (31,508,364) | - | 9,671,799 | |||
Foreign currency translation adjustment | - | - | - | - | 7,981 | (7,981) | - | |||
Deferred exploration property costs | - | - | - | - | (3,225,440) | - | (3,225,440) | |||
Amortization | - | - | - | - | (6,241) | - | (6,241) | |||
Stock-based compensation | - | (35,771) | - | (545,729) | 581,500 | - | - | |||
Agent’s compensation (issue cost) | - | 82,553 | - | (82,553) | - | - | - | |||
Stockholders’ equity (deficiency) under U.S. GAAP at August 31, 2004 | 50,456,653 | $ 40,580,263 | $ - | $ 18,400 | $(34,150,564) | $ (7,981) | $6,440,118 | |||
Stockholders’ equity (deficiency) under Canadian GAAP at August 31, 2005 | 67,826,513 | $ 46,559,522 | - | 1,013,021 | (34,385,758) | - | 13,186,785 | |||
Subscriptions receivable | - | (2,000,000) | - | - | - | - | (2,000,000) | |||
Foreign currency translation adjustment | - | - | - | - | 22,786 | (22,786) | - | |||
Write down of marketable securities | - | - | - | - | 22,500 | (22,500) | ||||
Deferred exploration property costs | - | - | - | - | (6,602,983) | - | (6,602,983) | |||
Amortization | - | - | - | - | (10,625) | - | (10,625) | |||
Stock-based compensation | - | (90,457) | - | (912,068) | 1,002,525 | - | - | |||
Agents compensation (issue cost) | - | 82,553 | (82,553) | - | - | - | ||||
Stockholders’ equity (deficiency) under U.S. GAAP at August 31, 2005 | 67,826,513 | $44,551,618 | $ - | $ 18,400 | $(39,951,555) | $ (45,286) | $4,573,177 | |||
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SIGNATURE PAGE
Pursuant to the requirements of Section 12g of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this 20-F Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Tournigan Gold Corporation -- SEC File Number 000-50486
Registrant
Dated: February 28, 2006 By/s/ James Walchuck
James Walchuck,
President/Chief Executive Officer/Director
Dated: February 28, 2006 By/s/ Hein Poulus
Hein Poulus, Chairman/Director
Dated: February 28, 2006 By/s/ Robert Nowell
Robert Nowell, Chief Financial Officer
130