UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
[ ] 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
For the fiscal year ended May 31, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to __________
OR
[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE No.0001313974
GRANDVIEW GOLD INC.
(Exact name of Registrant as specified in its charter)
GRANDVIEW GOLD INC.
(Translation of Registrant's name into English)
Province of Ontario, Canada
(Jurisdiction of incorporation or organization)
360 Bay Street, Suite 500, Toronto, Ontario M5H 2V6, Canada
(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 |
| | (Title of Class) |
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:19,086,892
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [ X ]
If this report is an annual or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes [ X ] No [ ]
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 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 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
| Large accelerated filer [ ] | Accelerated filer [ ] | Non-accelerated filer [ X ] |
Indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 [ X ] Item 18 [ ]
If this is an annual report indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [ X ]
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TABLE OF CONTENTS
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GLOSSARY
Following is a glossary of terms used throughout this Registration Statement.
| Assay | a precise and accurate analysis of the metal contents in an ore or rock sample |
| | |
| cut-off grade | deemed grade of mineralization, established by reference to economic factors, above which material is considered ore and below which is considered waste. |
| | |
| development stage | includes all companies engaged in the preparation of an established commercially mineable deposit (reserves) for its extraction which are not in the production stage. |
| | |
| dilution | the contamination of ore with barren wall rock; this means that in extracting ore, rock is also extracted, which contains a lesser amount of the mineral than the ore, effectively reducing the grade of the ore. |
| | |
| exploration stage | All companies engaged in the search for mineral deposits (reserves) which are not in either the development or production stage. |
| | |
| feasibility study | a detailed report assessing the feasibility, economics and engineering of placing a mineral deposit into commercial production. |
| | |
| gold deposit | means a mineral deposit mineralized with gold. |
| | |
| inferred mineral resource | that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings, and drill holes. |
| | |
| lode mining | mining of gold bearing rocks, typically in the form of veins or stockworks |
| | |
| mineral resource | a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such grade or quality that it has reasonable prospects of economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. |
| | |
| ore | a naturally occurring rock or material from which minerals, such as gold, can be extracted at a profit; a determination of whether a mineral deposit contains ore is often made by a feasibility study. |
| | |
| ounce or oz. | a troy ounce or 20 pennyweights or 480 grains or 31.103 grams |
| | |
| patented mining claim | a claim to which a patent has been obtained from the government by compliance with laws relating to such claims. |
| | |
| prospect | an area prospective for economic minerals based on geological, geophysical, geochemical and other criteria |
| | |
| probable (indicated) reserves | Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measure) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation. |
| | |
| proven (measured) reserves | Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. |
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| Reserve | that part of a mineral deposit, which could be economically and legally extracted or produced at the time of the reserve determination. Reserves are customarily stated in terms of "ore" when dealing with metalliferous minerals such as gold or silver |
| | |
| reverse circulation drill | a large machine that produces a continuous chip sample of the rock or material being drilled |
| | |
| shaft | a vertical or inclined tunnel in an underground mine driven downward from surface |
| | |
| Ton | short ton (2,000 pounds). |
| | |
| tonne | metric tonne (2,204.6 pounds). |
| | |
| trenching | the surface excavation of a linear trench to expose mineralization for sampling |
For ease of reference, the following conversion factors are provided:
| 1 mile (mi) | = 1.609 kilometres (km) | 2,204 pounds (lbs) | = 1 tonne |
| 1 yard (yd) | = 0.9144 meter (m) | 2,000 pounds/1 short ton | = 0.907 tonne |
| 1 acre | = 0.405 hectare (ha) | 1 troy ounce | = 31.103 grams |
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PART I
| ITEM 1: | Identity of Directors, Senior Management and Advisors |
Not Applicable.
| ITEM 2: | Offer Statistics and Expected Timetable |
Not Applicable.
Unless expressed otherwise, all dollar amounts in this Annual Report are expressed in Canadian dollars. The following tables set forth the exchange rates for one Canadian dollar expressed in terms of one U.S. dollar for the fiscal years ended May 31, 2002 through May 31, 2006, and for the period June 1, 2006 through November 30, 2006.
YEAR ENDED
MAY 31 |
AVERAGE |
| 2002 | 0.6389 |
| 2003 | 0.6587 |
| 2004 | 0.7447 |
| 2005 | 0.7937 |
| 2006 | 0.8581 |
| MONTH | LOW | HIGH | AVERAGE |
| June 2006 | 0.8902 | 0.9090 | 0.8969 |
| July 2006 | 0.8990 | 0.8760 | 0.8843 |
| August 2006 | 0.8840 | 0.9037 | 0.9037 |
| September 2006 | 0.8872 | 0.9048 | 0.8968 |
| October 2006 | 0.8784 | 0.8965 | 0.8907 |
| November 2006 | 0.8715 | 0.8869 | 0.8762 |
The exchange rates are based upon 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. At December 13, 2006, one Canadian dollar, as quoted by Reuters and other sources at 4 P.M. Eastern Time for New York foreign exchange selling rates (for bank transactions of at least $1,000,000), equalled $0.8644 in U.S. dollars. (Source: The Wall Street Journal)
| A. | Selected Financial Data |
Following is selected financial data of the Company, expressed in Canadian dollars, for the fiscal years ended May 31, 2006, 2005, 2004, 2003, and 2002 (audited), and the three month periods ended August 31, 2006 and 2005 (unaudited) which were prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”), which differ substantially from United States generally accepted accounting principles “(US GAAP”). Reference is made to Note 15 to the audited financial statements for the period ended May 31, 2006 inItem 17. Financial Statements for a description of the differences between Canadian and United States generally accepted accounting principles, and how these differences could affect the Company’s financial statements.
The selected financial data should be read in conjunction with the financial statements and other financial information included elsewhere in the Registration Statement.
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Table No. 1:Selected Financial Data
(CAD$)
| Three Months
Ended
Aug. 31, 2006
(unaudited) | Three Months
Ended
Aug. 31, 2005
(unaudited) |
Year Ended
May 31, 2006
(audited) |
Year Ended
May 31, 2005
(audited) |
Year Ended
May 31, 2004
(audited) |
CANADIAN GAAP
Revenue
Income (Loss) for the Period
Basic Earning (Loss) Per Share
Dividends Per Share
Period-end Shares
Cash
Working Capital
Mineral Properties
Long-term Debt
Capital Stock
Shareholders’ Equity
Total Assets |
Nil
($914,200)
($0.05)
Nil
19,086,892
$2,343,105
$2,463,012
$4,424,092
Nil
$9,543,301
$6,887,104
$7,211,013 |
Nil
($255,905)
($0.02)
Nil
13,950,598
$2,386,005
$2,198,566
$888,889
Nil
$7,142,938
$3,087,455
$3,334,646 |
Nil
($1,003,216)
(($0.07)
Nil
19,086,892
$3,802,800
$3,813,975
$3,415,766
Nil
$9,543,301
$7,229,741
$7,651,243 |
Nil
($1,485,564)
($0.14)
Nil
11,851,494
$244,067
$151,475
$659,236
Nil
$4,781,750
$810,711
$943,727 |
Nil
$1,058
0.00
Nil
3,270,998
$1
($56,594)
$562
Nil
$3,378,444
($56,032)
$10,819 |
US GAAP
Net Income (Loss)
Income (Loss) Per Share
Mineral Property Rights
Shareholders’ Equity
Total Assets |
($1,756,364)
($0.09)
$1,384,725
$3,847,737
$4,171,646 |
($485,558)
($0.04)
Nil
$2,198,566
$2,445,757 |
($3,673,388)
($0.25)
$1,218,563
$5,032,538
$5,454,040 |
($1,743,463)
($0.20)
$400,775
$552,250
$685,266 |
$21,292
$0.00
Nil
($56,594)
$10,257 |
| B. | Capitalization and Indebtedness |
| | |
| Not Applicable. |
| |
| C. | Reasons For The Offer and Use Of Proceeds |
| | |
| Not Applicable. |
| |
| D. | Risk Factors |
The business of the Company entails significant risks, and an investment in the Shares should be considered highly speculative for a variety of reasons. An investment in the Shares should only be undertaken by persons who have sufficient financial resources to enable them to assume such risks. In addition to the usual risks associated with investment in a business, the following is a general description of significant risk factors, which should be considered.
We Have No Ongoing Mining Operations, None of our Mineral Properties Contain a Known Commercially Mineable Mineral Deposit, We Have Never Received Any Revenues From Mining Operations, and Our Chances of Reaching the Development Stage on Any of our Properties is Remote.Since our inception, we have never engaged in any mining operations and the Company has not generated any revenues from mining operations. Our activities have been limited to the highly speculative business of acquiring and exploring properties in the hope that commercial quantities of gold will be discovered. At the present time, none of our properties contain a known commercially mineable mineral deposit. We believe that the probability of our reaching the development stage on any of our properties is remote for a number of reasons. The exploration for and development of mineral deposits involves significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result in substantial rewards, few properties, which are explored,
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are ultimately developed into producing mines. Major expenses may be required to locate and establish mineral reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site. Whether a mineral deposit will be commercially viable depends on a number of factors, including, but not limited to the following: the particular attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices, which are highly cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. Because exploration properties rarely become producing mines, investors must be prepared for the possibility that we will be unsuccessful and that they could lose their entire investment.
In the remote possibility that we place any of our properties into production, of which there can be no assurance, we would face numerous risks associated with mining operations. These risks include adverse environmental conditions, industrial accidents, labour disputes, unusual or unexpected geological conditions, ground or slope failures, cave-ins, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods and earthquakes, and the inability to maintain the infrastructure for our production activities. Mining and mining exploration is risky, presenting potentially dangerous conditions for workers. Large, heavy equipment and machinery is used and toxic substances are utilized and encountered in exploration, extraction, and processing. Misuse and accidents could result in serious injury and death to personnel. Such events could be caused by numerous factors including faulty equipment, unsafe practices, explosions, fires, natural phenomenon (such as lightening, mudslides, cave-ins, etc.), which may be impossible to avoid and protect against. In the event of any such misuse, accidents or natural disasters, personnel could be injured and killed, and mining operations suspended or terminated. In addition, any future development activities, of which there can be no assurance, would depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supply are important factors, which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could make it very difficult, it not impossible, to engage in any development activities and force us to incur expenses that we had not planned on spending.
Because We Have No Revenue Producing Operations, We are Dependent Upon Our Ability to Raise Funds In Order to Stay In Business.Since inception, the Company has not generated any revenues from mining operations. As of August 31, 2006, the Company had an accumulated deficit of approximately $6.9 million. With limited cash resources, it will be necessary in the near and over the long term to raise substantial funds from external sources to (i) maintain our interest in the Pony Creek/Elliott Dome Property and its Canadian properties, (ii) to acquire, explore, and if warranted, develop other mineral properties, (iii) to participate in other projects and (iv) to provide sufficient cash to fund operations. There is no assurance that we will be able to raise the funds on acceptable terms, or at all. If we do not raise these funds, we would be unable to pursue our planned business operations and investors could lose their investment. If we are able to raise these funds, it is likely that investors will experience dilution of their interests, which could result in a decrease in the value of their Shares.
If We Do Not Make Substantial Payments Over the Next Year, We Could Lose Our Right to Acquire a 60% Interest in the Pony Creek/Elliott Dome Property.In order to acquire our 60% interest in the Pony Creek/Elliott Dome Property, we were required to spend up to $1.5 million US by July 31, 2006 on exploration of the property (this condition has been met), with an additional $2 million US due by August 31, 2007, if certain conditions are not met. Reference is made toItem 4D. Information on the Company: Property, Plants and Equipment, for a description of the Company’s obligations regarding its acquisition of a 60% interest in the Pony Creek/Elliott Dome Property from Mill City.At the present time, the Company does the Company have the necessary funds to pay for the exploration programs due by August 31, 2007. In the event the Company is unable to pay for the required exploration programs, it would forfeit its interest in the property, including any funds previously paid.
We Could Lose our Interest in the Pony Creek/Elliott Dome Property if Mill City Defaults on its Obligations.In 2004, we acquired from Mill City International Corporation (“Mill City”) an option to acquire a 60% interest in the Pony Creek/Elliott Dome Property, located in Elko County, Nevada. Mill City, in turn, acquired the Pony Creek/Elliott Dome Property in 2003 from Mr. Carl Pescio (“Pescio”). If Mill City defaults on its purchase obligations to Pescio, and such defaults are not cured, title to the claims would revert to Pescio. In such event, the Company’s option to acquire a 60% interest in the property could lapse, notwithstanding that the Company has fulfilled all of its obligations under its agreement with Pescio and Mill City. Reference is made toItem 4D.
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Information on the Company: Property, Plants and Equipment, for a description of the Company’s obligations regarding its acquisition of a 60% interest in the Pony Creek/Elliott Dome Property from Mill City.
We Could Lose our Interest in the Rocky Ridge Property if Harvest Gold Corporation Defaults on its Obligations.In November 2006 we acquired from Harvest Gold Corporation (“Harvest Gold”) an option to acquire a 70% in the Rocky Ridge Property, located in the Lac du Bonnet Mining District in Manitoba. Previously, in November 2006 Harvest Gold, in turn, acquired its option to acquire a 100% interest in the Rocky Ridge Property, which option requires it to make certain payments to Kuran and issue Kuran up to 500,000 of Harvest Gold’s shares of common stock. If Harvest Gold defaults on its obligations to Kuran, and such defaults are not cured, Harvest Gold’s option to acquire a 100% in the Rocky Ridge Property would lapse and all interest in the claims would revert to Kuran. In such event, the Company’s option to acquire a 70% interest in the property could lapse, notwithstanding that the Company has fulfilled all of its obligations under its agreement with Harvest Gold. Reference is made toItem 4D. Information on the Company: Property, Plants and Equipment, for a description of the Company’s obligations regarding its acquisition of a 70% interest in the Rocky Ridge Property.
Title To Our Mining Properties Has Not Been Verified so Such Properties may be Subject to Prior Unregistered Liens, Agreements, Transfers or Claims, and may be Affected by Undetected Defects.Although the title to the properties in which the Company holds interests were reviewed by or on behalf of us, and title opinions were delivered to us, no assurances can be given that there are no title defects affecting such properties. Our ability to ensure that we have obtained secure claim to individual mineral properties or mining concessions may be severely constrained. The Company has not conducted surveys of the claims in which it holds direct or indirect interests; therefore, the precise area and location of such claims may be in doubt. Accordingly, the properties may be subject to prior unregistered liens, agreements, transfers or claims, including native land claims, and title may be affected by, among other things, undetected defects. In addition, the Company may be unable to operate its properties as permitted or to enforce its rights with respect to its properties.
The Value of our Mineral Properties is Dependent Upon Commodity Prices Which Can Fluctuate Widely. The price of our Shares, our financial results and exploration, development and mining activities may in the future be significantly adversely affected by declines in the price of gold, copper, or other minerals. Gold and other mineral prices fluctuate widely and are affected by numerous factors beyond the Company’s control such as the sale or purchase of such commodities by various central banks and financial institutions, interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and demand, and the political and economic conditions of major gold or other mineral-producing countries throughout the world. The prices of gold or other minerals have fluctuated widely in recent years, and future serious price declines could cause continued exploration of our properties to be impracticable. Depending on the price of gold or other minerals, in the remote possibility that any of our properties enter commercial production, cash flow from such mining operations may not be sufficient and the Company could be forced to discontinue production and may lose its interest in, or may be forced to sell, some of its properties. Future production from the Company’s mining properties is dependent on gold or other mineral prices that are adequate to make these properties economic.
In addition to adversely affecting the Company’s reserve estimates, its ability to obtain financing, and its financial condition, declining commodity prices can impact operations by requiring a reassessment of the feasibility, and operational requirements, of a particular project. Such a reassessment may be the result of a management decision or may be required under financing arrangements related to a particular project. Even if the project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays or may interrupt operations until the reassessment can be completed.
We Are Not Engaged in Mining Operations; In the Event We Engage in Mining Operations in the Future, We Would Face Substantial Regulation Which Would be Very Costly to Comply With.We are not engaged in any mining operations at the present time and there can be no assurance we will ever engage in any mining operations in the future. All of our current activities are exploratory in nature. If our exploration activities uncover a commercially mineable mineral deposit, of which there can be no assurance, we plan to take the necessary steps to commence mining operations. Mining operations in the United States and Canada are subject to federal, provincial and local laws relating to the protection of the environment, including laws regulating the removal of natural resources from the ground and the discharge of materials into the environment. Mining operations are also subject to
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federal, provincial and local laws, which seek to maintain health and safety standards by regulating the design and use of mining methods and equipment. Various permits from government bodies are required for mining operations to be conducted; no assurance can be given that such permits will be received. No assurance can be given that environmental standards imposed by federal, provincial or local authorities will not be changed with material adverse effect on the Company's activities. Moreover, compliance with such laws may cause substantial delays and require capital outlays in excess of those anticipated, thus causing an adverse effect on the Company. Additionally, the Company may be subject to liability for pollution or other environmental damage, which it may elect not to insure against due to prohibitive premium costs and other reasons.
Exchange Rate and Interest Rate Fluctuations May Increase the Company’s Costs.Exchange rate fluctuations may affect the costs that the Company incurs in its exploration activities. Gold and other minerals are generally sold in U.S. dollars. Since the Company principally raises funds in Canadian dollars, and the Company’s costs are incurred principally in US dollars, the appreciation of the U.S dollar against the Canadian dollar can increase the cost of gold and other mineral exploration and production in Canadian dollar terms.
In the event interest rates rise, liabilities of the Company tied to interest rates may rise, increasing the Company’s borrowing and operating costs. Additionally, a general rise in interest rates could adversely affect the Company’s ability to secure equity financing.
There is a Risk that we will be Unable to Compete for Mineral Properties, Investment Funds and Technical Expertise. Significant and increasing competition exists for the limited number of gold and other precious metal acquisition opportunities available in North, South and Central America and elsewhere in the world. As a result of this competition, some of which is with large, established mining companies with substantially greater financial and technical resources than us, we may be unable to acquire additional attractive precious metal mining properties on terms we consider acceptable. Moreover, this competition makes it more difficult for us to attract and retain mining experts, and to secure financing for our operations. Accordingly, there can be no assurance that our exploration and acquisition programs will be successful or result in any commercial mining operations.
We Do Not Have Insurance; We Will Not Be Able to Insure Against All Possible Risks. The Company’s business is subject to a number of risks and hazards generally, including adverse environmental conditions, industrial accidents, labour disputes, unusual or unexpected geological conditions, ground or slope failures, cave-ins, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result in damage to mineral properties or production facilities, personal injury or death, environmental damage to the Company’s properties or the properties of others, delays, monetary losses and possible legal liability. If any such catastrophic event occurs, investors could lose their entire investment. Although the Company intends to obtain insurance to protect against certain risks in such amounts as it considers to be reasonable, it does not have any insurance at the present time. If and when insurance is obtained, of which there can be no assurance, the insurance will not cover all the potential risks associated with a mining Company’s operations. Moreover, the Company may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to the Company or to other companies in the mining industry on acceptable terms. The Company might also become subject to liability for pollution or other hazards which may not be insured against or which the Company may elect not to insure against because of premium costs or other reasons. Losses from these events may cause the Company to incur significant costs that could have a material adverse effect upon its financial performance and results of operations. Should a catastrophic event arise, investors could lose their entire investment.
Adverse Government Policies and Environmental Risks Could Harm Our Business; The Amount of Capital Necessary to Meet All Environmental Regulations Associated with Our Exploration Programs Could Be In An Amount Great Enough to Force the Company to Cease Operations. Reference is made to “Item 4.Information on the Company. B.Business Overview.” for a discussion of the regulatory issues facing the Company. The current and anticipated future operations of the Company, including further exploration activities require permits from various U.S. governmental authorities. Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, mine safety and other matters. We may not be able to obtain all necessary licenses and permits required to carry out
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exploration at, and developments of, our projects. Unfavourable amendments to current laws, regulations and permits governing operations and activities of resource exploration 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.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions there under, 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 or remedial actions. Parties engaged in resource exploration 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. Large increases in capital expenditures resulting from any of the above factors could force the Company to cease operations.
Management May Be Subject to Conflicts of Interest Due to Affiliations with Other Resource Companies.Because some of our directors and officers have private mining interests and also serve as officers and/or directors of other public mining companies, their personal interests are continually in conflict with the interests of the Company. Situations will arise where these persons are presented with mining opportunities, which may be desirable for the Company, as well as other companies in which they have an interest, to pursue. There can be no assurance that the Company will be able to pursue such opportunities because of our officers and directors’ conflicts. In addition to competition for suitable mining opportunities, the Company competes with these other companies for investment capital, and technical resources, including consulting geologists, metallurgists, engineers and others. Similarly, there can be no assurance that the Company will be able to obtain necessary investment capital and technical resources because of our officers and directors’ conflicts. Such conflict of interests are permitted under Canadian regulations and will continue to subject the Company to the continuing risk that it may be unable to acquire certain mining opportunities, investment capital and the necessary technical resources because of competing personal interests of some of our officers and directors.
Our Management May Not Be Subject to U.S. Legal Process Making it Very Difficult for Investors to Sue in the United States. The enforcement by investors of civil liabilities under the United States federal securities laws may be adversely affected by the fact that all of our officers and directors are neither citizens nor residents of the United States. There can be no assurance that (a) U.S. stockholders will be able to effect service of process within the United States upon such persons, (b) U.S. stockholders will be able to enforce, in United States courts, judgments against such persons obtained in such courts predicated upon the civil liability provisions of United States federal securities laws, (c) appropriate foreign courts would enforce judgments of United States courts obtained in actions against such persons predicated upon the civil liability provisions of the federal securities laws, and (d) the appropriate foreign courts would enforce, in original actions, liabilities against such persons predicated solely upon the United States federal securities laws.
However, U.S. laws would generally be enforced by a Canadian court provided that those laws are not contrary to Canadian public policy, are not foreign penal laws or laws that deal with taxation or the taking of property by a foreign government and provided that they are in compliance with applicable Canadian legislation regarding the limitation of actions. Also, a Canadian court would generally recognize a judgment obtained in a U.S. Court except, for example:
(a) Where the U.S. court, where the judgment was rendered, had no jurisdiction according to applicable Canadian law;
(b) The judgment was subject to ordinary remedy (appeal, judicial review and any other judicial proceeding which renders the judgment not final, conclusive or enforceable under the laws of the applicable state) or not final, conclusive or enforceable under the laws of the applicable state;
(c) The judgment was obtained by fraud or in any manner contrary to natural justice or rendered in contravention of fundamental principles of procedure;
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(d) A dispute between the same parties, based on the same subject matter has given rise to a judgment rendered in a Canadian court or has been decided in a third country and the judgment meets the necessary conditions for recognition in a Canadian court;
(e) The outcome of the judgment of the U.S. court was inconsistent with Canadian public policy;
(f) The judgment enforces obligations arising from foreign penal laws or laws that deal with taxation or the taking of property by a foreign government; or
(g) There has not been compliance with applicable Canadian law dealing with the limitation of actions.
Gold Prices are Volatile and Could Decline in which case Our Properties May Not be Economically Viable. Gold prices fluctuate so that there is no assurance, even if substantial quantities of gold are discovered, that our properties will, in the future, prove to be economically viable. The prices of precious and base metals fluctuate on a daily basis and have experienced volatile and significant price movements over short periods of time. Prices are affected by numerous factors beyond our control, including international economic and political trends, expectations of inflation, currency exchange fluctuations (specifically, the U.S. dollar relative to other currencies), interest rates, central bank transactions, world supply for precious and base metals, international investments, monetary systems, and global or regional consumption patterns (such as the development of gold coin programs), speculative activities and increased worldwide production due to improved mining and production methods. The effect of these factors cannot be accurately predicted, and the combination of these factors may result in us not receiving adequate returns on invested capital or the investments retaining their respective values. There is no assurance that the price of gold (and of other precious and base metals) will be high enough so that our properties, assuming that we ever discover substantial quantities of gold, could be mined at a profit.
There is a Risk that Our Rights to Conduct Mining Explorations and Operations Could be Challenged by Third Parties Claiming Rights to Our Properties. We do not insure against third party actions claiming rights to explore and mine our properties. Accordingly, in the event that such a claim is made against us or our properties, our activities could be adversely affected. The costs of defending our title could be very time consuming and expensive with no guarantee that we would win. If such a claim is made, it may become difficult or impossible to either continue operations, if any, on the property being challenged and secure investment funds.
Our Stock will be a Penny Stock which Imposes Significant Restrictions on Broker-Dealers Recommending the Stock For Purchase. Securities and Exchange Commission (SEC) regulations define "penny stock" to include common stock that has a market price of less than $5.00 per share, subject to certain exceptions. These regulations include the following requirements: broker-dealers must deliver, prior to the transaction, a disclosure schedule prepared by the SEC relating to the penny stock market; broker-dealers must disclose the commissions payable to the broker-dealer and its registered representative; broker-dealers must disclose current quotations for the securities; if a broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealers presumed control over the market; and a broker-dealer must furnish its customers with monthly statements disclosing recent price information for all penny stocks held in the customer s account and information on the limited market in penny stocks. Additional sales practice requirements are imposed on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and must have received the purchaser’s written consent to the transaction prior to sale. If our Shares become subject to these penny stock rules these disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the Shares, if such trading market should ever develop, of which there can be no assurance. Accordingly, this may result in a lack of liquidity in the Shares and investors may be unable to sell their Shares at prices considered reasonable by them.
Our Stock Price Could be Volatile Causing Investors to Suffer Significant Losses If the Shares are Depressed or Illiquid when an Investor Desires to Sell his Shares.The market price of a publicly- traded stock, especially that of a mining exploration Company such as ours, is affected by many variables in addition to those directly related to exploration successes or failures. Such factors include the general condition of markets for mining exploration stocks, the strength of the economy generally, the availability of alternative investments, and the breadth of the public market for the stock. The market price of our Shares on the CNQ Exchange in Canada has been, and is likely
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to continue to be, volatile. Therefore, investors could suffer significant losses if our Shares are depressed or illiquid when an investor desires to sell Shares.
We Do Not Plan to Pay Any Dividends in the Foreseeable Future. The Company has never paid a dividend and it is unlikely that the Company will declare or pay a dividend until warranted based upon the factors outlined below. The declaration, amount and date of distribution of any dividends in the future will be decided by the Board of Directors from time-to-time, based upon, and subject to, the Company’s earnings, financial requirements and other conditions prevailing at the time.
The Company has Only One Full-Time Service Provider; Our Chief Financial Officer does not Work for us Full-time.The Company’s only full-time service provider is Paul Sarjeant, who is its President and Chief Executive Officer. Our Chief Financial Officer, Ernest Cleave, only works for us on a part-time basis, spending approximately 30 hours per month on the Company’s business. The loss of Mr. Sarjeant, for any reason, or our inability to attract and retain additional highly skilled employees, may adversely affect our business and future operations. We do not carry key-man insurance on any members of our management.
In the Event Mr. Paul Sarjeant, our President and Chief Executive Officer Leaves the Company, Grandview would be Adversely Affected.In the event that Mr. Paul Sarjeant, our President and Chief Executive Officer, ceases to be employed by the Company, we would be materially and adversely affected. We are heavily dependent upon him. In the event his employment ceases, there is no assurance that a suitable replacement could be employed. The Company has no key-man life insurance or written consulting agreements with the Senior Officers or Directors.
Future Sales of Common Shares by Existing Shareholders Could Cause the Price of our Shares to Decline. Sales of a large number of our Shares in the public markets, or the potential for such sales, could decrease the trading price of the Shares and could impair the Company’s ability to raise capital through future sales of Shares. The Company has previously issued Shares at effective prices per share, which are lower than what the Company’s Shares currently trade at. Accordingly, certain shareholders of the Company have an investment profit in the Shares that they may seek to liquidate. These sales of our Shares could cause the price of our Shares to decline.
Control by Principal Stockholders, Officers and Directors Could Adversely Affect Grandview Stockholders Because Such Persons Acting Together have the Ability to Control Substantially All Matters Submitted to Grandview Stockholders for Approval. The Company’s Senior Management, Directors and greater-than-five-percent stockholders (and their affiliates), acting together, have the ability to control substantially all matters submitted to Grandview 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 Grandview, 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.
Dilution Through Exercise of Employee/Director/Consultant Options Could Adversely Affect Grandview Stockholders Through the Dilution of their Interests.Because the success of the Company is highly dependent upon its respective employees, the Company has granted to some or all of its Directors, consultants, and sole employee options to purchase common-voting shares as non-cash incentives. To the extent that significant numbers of such options may be exercised, the interests of the other stockholders of the Company may be diluted.
If Grandview is Characterized as a Passive Foreign Investment Company, its U.S. Shareholders may Suffer Adverse Tax Consequences.As more fully described below in “Item 10.E.4 –United States Taxation” if for any taxable year our passive income, or our assets which produce (or are held for the production of) passive income, exceed specified levels, we may be characterized as a passive foreign investment company for U.S. federal income tax purposes. This characterization could result in adverse U.S. tax consequences, including higher tax rates, to our U.S. shareholders. The issues relating to passive foreign companies are very complex and unfamiliar to most people. U.S. shareholders should consult with their own U.S. tax advisors with respect to the U.S. tax consequences of investing in our Shares.
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As a "foreign private issuer”, Grandview is Exempt from the Section 14 Proxy Rules and Section 16 of the 1934 Securities Act, Possibly Resulting in Shareholders Having Less Complete and Timely Data. 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-voting shares by insiders may result in shareholders having less data than would be provided for United States issuers, not exempt from such statues.
| ITEM 4: | Information on the Company |
| A. | History and Development of the Company |
Grandview Gold Inc. (the “Company”) was originally incorporated under the Corporation Act of Ontario on November 23, 1945 as Loisan Red Lake Gold Mines Limited. Grandview was primarily engaged in the mineral exploration and resource sector up to April 27, 1987, when trading of the Company’s securities was ceased by the Ontario Securities Commission, and the Company remained primarily inactive until November 1998. At that time, the Company decided to invest in the common shares of Navitrak International, a company involved in high-technology products involving global positioning systems (GPS). During the next three years, Grandview found this initiative to be unfavorable and spent the period between November 2001 and November 2003 re-evaluating the prospects of re-entering the mineral exploration and mining sector.
A Province of Ontario Articles of Amendment was filed on November 6, 1979, changing the name to Grandview Energy Resources Incorporated. On September 22, 1983, a second Article of Amendment changed the Company’s name to Consolidated Grandview Inc.
Consolidated Grandview Inc. (the predecessor of Grandview Gold Inc.) was issued a temporary cease trade order by the Ontario Securities Commission on April 16, 1987, which was subsequently extended by a Cease Trade Order (CTO) issued by the OSC on April 29, 1987. The CTO was issued because the Company failed to file financial statements in accordance with the required timing deadlines. At the time of the CTO, the common shares of the Company were quoted on the Over-the-Counter Automated Quotation System, a predecessor of the Canadian Dealer Network (“CDN”). Subsequent to the CTO, the Company remained more or less inactive until recently.
During 1998, the Company shifted its business focus from mineral exploration to operating as a merchant bank with a business plan to acquire significant equity in high technology companies with prospects for exceptional growth. At the time, the Company’s management team was better suited toward this type of initiative. In November 1998 an initial investment was carried out with Navitrak International Corporation (“Navitrak”), a public company whose common shares were quoted on the Canadian Dealing Network (“CDN”).
On November 2, 2000, the cease trade order referenced above was lifted and on February 4, 2003 the cease trade order was re-issued for late filing of financial statements. During this same period, the Company determined that the initiative to invest in high technology companies was unfavourable, as much of the technology industry became mired in a well-documented ‘tech burst’ that bottomed out in late 2001.As such, the Company decided to reinstate the original business mandate and build a team focussed on mineral exploration and development.
During 2003, the Company attracted a new management team including a new board of directors and prepared to seek out a viable exploration property beyond its existing patented mining claims located in the Red Lake Mining Area of northwestern Ontario. The Company also addressed all outstanding financial matters and prepared to submit a request to the OSC to lift the existing cease trade order.
The cease trade order was lifted on May 6, 2004 and subsequently, on July 6, 2004, the Company filed Articles of Amendment changing its corporate name to Grandview Gold Inc.
The Company’s executive office is located at:
330 Bay Street, Suite 820
Toronto, Ontario, M5H 2S8
Canada
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Its registered and records office is located at Suite 500, 360 Bay Street, Toronto, Ontario, Canada. Its telephone number is (416) 486-3444.
The Company has financed its operations through the financings listed in the table shown below.
Table No. 2:Financings
| Fiscal Year | Nature of Issuance | Number of Shares | Capital Raised |
| July 22, 2004 | Private Placement(1) | 120,000 | $120,000 |
| August 23, 2004 | Private Placement(1) | 150,000 | $150,000 |
| September 30, 2004 | Private Placement(1) | 175,000 | $175,000 |
| December 23, 2004 | Private Placement(2) | 1,005,000 | $1,005,000 |
| August 31, 2005 | Private Placement(3) | 2,099,104 | $2,623,880 |
| September 15, 2005 | Private Placement(3) | 590,320 | $737,900 |
| October 19, 2005 | Private Placement(3) | 400,000 | $500,000 |
| March 27, 2006 | Private Placement(4) | 3,985,974 | $4,384,571 |
Notes:
| | (1) | Units sold as 1 common share for $1.00/share. No commissions were paid. |
| | | |
| | (2) | Each unit consisted of 1 common share and ½ share purchase warrant. The units were sold for $1.00/unit. Each whole share purchase warrant is convertible to one common share at an exercise price of $1.50 until December 23, 2005. Commission was paid in the form of 100,000 warrants exercisable at $1.15 until December 23, 2005. |
| | | |
| | (3) | A total placement, raising $3,861,780 was completed in three closings in August, September and October of 2005. The 3 tranches were made up of two different unit offerings. 1,469,424 units were sold for $1.25/unit, each unit comprised of one common share and ½ share purchase warrant, each whole purchase warrant exercisable at an exercise price of $1.75/warrant for up to 12 months. The remainder of the placement was made up of 1,620,000 Flow Through units sold at $1.25/unit. Commission was paid at 8% of the gross proceeds and 308,942 warrants exercisable at $1.25 for 12 months. |
| | | |
| | (4) | Units comprised of one common share and one half warrant exercisable into one additional common share at an exercise price of $1.75 per share. The units were sold at a price of $1.10 per unit, raising gross proceeds of $4,384,571. |
The Company does not have an agent in the United States.
Capital Expenditures
The table below shows historical capital expenditures
| Fiscal Year | Expenditures |
| Fiscal 2001 | $0 |
| Fiscal 2002 | $0 |
| Fiscal 2003 | $0 |
| Fiscal 2004 | $562 |
| Fiscal 2005 | $658,674 |
| Fiscal 2006 | $2,756,530 |
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General
The Company is engaged in the exploration and, if warranted, development of mineral properties in Nevada and Canada. The Company is an exploration stage company and is not engaged in any mining operations, and there can be no assurance it will ever engage in mining operations. To date, its only mining interests are (i) an option to acquire a 60% interest in the Pony Creek Property and Elliott Dome Property, both located in Elko, County, Nevada, (ii) an option to acquire a 51% interest in the Dixie Lake Property, located in the Red Lake Mining District, Ontario, Canada (iii) a 100% interest in eleven mining claims located in Manitoba, Canada, (iv) a 100% interest in eight mining claims located in Red Lake, Ontario, Canada (the “Red Lake Property”), (v) an option to acquire a 50% interest in the Gem Property, a property consisting of seven claims covering 1,594 hectares, located near Rice Lake, in Manitoba (the “Gem Property”), and (vi) ) an option to acquire a 70% interest in the Rocky Ridge property in the Lac du Bonnet Mining District in Manitoba.
The Pony Creek Property and Elliott Dome Property are collectively referred to as the “Pony Creek/Elliott Dome Property.” The Company is concentrating most of its resources on exploration of the Pony/Creek Elliott Dome Property and the Dixie Lake Property. In addition, on July 12, 2005 the Company signed a Letter of Intent with Goldcorp Inc. (“Goldcorp”), a company listed on the New York Stock Exchange and Toronto Stock Exchange, pursuant to which Goldcorp could earn a 60% interest in the Red Lake Property by incurring $100,000 of exploration expenditures within 18 months of the parties entering into a formal option agreement and joint venture agreement. Reference is made toItem 4D. Information on the Company: Property, Plant and Equipment - Red Lake Property, Ontario, for a discussion of the Letter of Intent and the proposed option and joint venture between the Company and Goldcorp. In addition, on September 30, 2005 the Company signed an Option Agreement with Marum Resources Inc. (“Marum”) granting the Company the right to acquire a 50% interest in the Gem Property, a property located near Manitoba, Canada, by incurring $250,000 in exploration expenditures on the property by September 30, 2007. Reference is made toItem 4D. Information on the Company: Property, Plant and Equipment –Gem Property, Manitoba, for a discussion of the Option Agreement with Marum. On November 23, 2006 the Company entered into an option agreement with Harvest Gold Corporation pursuant to which the Company can acquire up to a 70% interest in the Rocky Ridge gold property in the Lac du Bonnet Mining District in Manitoba. Reference is made toItem 4D. Information on the Company: Property, Plant and Equipment – Rocky Ridge Property, Manitoba, for a discussion of the Option Agreement with Harvest Gold Corporation.
There is no known commercially mineable mineral deposit on any of these properties, and there can be no assurance that a commercially mineable mineral deposit exists on any of these properties.
Our business is highly speculative. We are exploring for base and precious metals. Ore is rock-containing particles of a particular mineral (and possibly other minerals which can be recovered and sold), which rock can be legally extracted, and then processed to recover the minerals, which can be sold at a profit.
Although mineral exploration is a time consuming and expensive process with no assurance of success, the process is straightforward. First, we acquire the rights to enable us to explore for, and if warranted, extract and remove ore so that it can be refined and sold on the open market to dealers. Second, we explore for precious and base metals by examining the soil, rocks on the surface, and by drilling into the ground to retrieve underground rock samples, which can then be analyzed. This work is undertaken in staged programs, with each successive stage built upon the information gained in prior stages.
If exploration programs discover what appears to be an area, which may be able to be profitably mined, we will focus our activities on determining whether that is feasible, while at the same time continuing the exploratory activities to further delineate the location and size of this potential ore body.
____________________________
1See Glossary on pages iii-iv for terms used throughout this Annual Report.
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Things that will be analyzed by us in making a determination of whether we have a deposit, which can be feasibly mined at a profit, include:
(1) the amount of mineralization, which has been established, and the likelihood of increasing the size of the mineralized deposit through additional drilling;
(2) the expected mining dilution;
(3) the expected recovery rates in processing;
(4) the cost of mining the deposit;
(5) the cost of processing the ore to separate the gold from the host rocks, including refining the precious or base metals;
(6) the costs to construct, maintain, and operate mining and processing activities;
(7) other costs associated with operations including permit and reclamation costs upon cessation of operations;
(8) the costs of capital;
(9) the costs involved in acquiring and maintaining the property; and
(10) the price of the precious or base minerals. For example, the price of one ounce of gold for the years 2000-2005 ranged from a low of $271 U.S. in 2001, to a high of $537.50 U.S. in 2005. At December 15, 2006, the closing price of gold was $623.75 U.S. per ounce.2Our analysis will rely upon the estimates the plans of geologists mining engineers, metallurgists and others.
If we determine that we have a feasible mining project, we will consider pursuing alternative courses of action, including:
- seeking to sell the deposit or the Company to third parties;
- entering into a joint venture with larger mining company to mine the deposit; or
- placing the property into production ourselves.
There can be no assurance, that we will discover any precious or base metals, establish the feasibility of mining a deposit, or, if warranted, develop a property to production and maintain production activities, either alone or as a joint venture participant. Furthermore, there can be no assurance that we would be able to sell either the deposit or the Company on acceptable terms, or at all, enter into such a joint venture on acceptable terms, or be able to place a property into production ourselves. If we do enter actual mining operations, which is unlikely in the near future, our operations will be subject to various factors and risks generally affecting the mining industry, many of which are beyond our control. These include the price of precious or base metals declining, the possibility that a change in laws respecting the environment could make operations unfeasible, or our ability to conduct mining operations could be adversely affected by government regulation. Reference is made toItem 3D. Key Information: Risk Factors.
Prior to commencing any exploration activities in any of the State of Nevada, the Province of Manitoba, or the Province of Ontario, the Company or the party intending to carry out a work program on a mineral property is required to apply to the appropriate local government agencies for a number of permits or licenses related to mineral exploration activities. These permits or licenses include water and surface use permits, occupation permits, fire permits, and timber permits. Prior to being issued the various permits or licenses, the applicant must file a detailed work plan with the applicable government agency. Permits are issued on the basis of the work plan submitted and approved by the governing agency. Additional work on a given mineral property or a significant change in the nature of the work to be completed would require an amendment to the original permit or license.
As part of the permit or licensing requirements, the applicant is required to post an environmental reclamation bond in respect to the work to be carried out on the mineral property. The amount of such bond is
____________________________
2Source: Kitco: Past Historical London Fix
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determined by the amount and nature of the work proposed by the applicant. The amount of a bond may also be increased with increased levels of development on the property.
The Company has or will make application to the appropriate agencies for permits and licenses relating to those properties upon which the Company intends to carry out work during the 2006 and 2007exploration seasons. For those mineral properties in which the Company has an interest but is not the operator of the work programs, application for the required permits and licenses and the posting of the reclamation bonds will be made by the party entitled to carry out exploration work on the property. The Corporation believes that it is currently in compliance with all applicable environmental laws and regulations in the State of Nevada and the Provinces of Manitoba and Ontario.
| C. | Organizational Structure |
| | |
| The Company has no subsidiaries. |
| |
| D. | Property, Plants and Equipment |
| | |
| General |
To date, the Company’s only mining interests are (i) an option to acquire a 60% interest in the Pony Creek Property and Elliott Dome Property, both located in Nevada, (ii) an option to acquire a 51% interest in the Dixie Lake Property, Red Lake Mining Division, Ontario (iii) a 100% interest in eleven mining claims located in Bissett, Manitoba, Canada (iv) a 100% interest in eight mining claims located in Red Lake, Ontario, Canada., (v) an option to acquire a 50% interest in the Gem Property, a property located near Manitoba, Canada, and (vi) an option to acquire a 70% interest in the Rocky Ridge property in the Lac du Bonnet Mining District in Manitoba.
The Pony Creek Property and Elliott Dome Property are collectively referred to as the “Pony Creek/Elliott Dome Property.” Though the Company is concentrating most of its resources on exploration of the Pony/Creek Elliott Dome Property, the Company is required to spend a minimum of $300,000 on exploration of the Dixie Lake Property by July 2007, pay $75,000 to the optionee of the Dixie Lake by July 2007, incur $250,000 of exploration expenditures on the Gem Property by September 30, 2007, has budgeted $50,000 over the next twelve months for exploration of the property in Bissett, Manitoba, Canada, and is required to make payments totalling $85,000 by November 1, 2008 and incur exploration expenditures of at least $600,000 by December 31 2008 to exercise its option to acquire a 70% in the Rocky Ridge Property.
There can be no assurance that a commercially mineable mineral deposit exists on any of these properties.
Pony Creek/Elliott Dome Property, Elko County, Nevada
The Company originally acquired its option to acquire a 60% interest in the Pony Creek/Elliott Property pursuant to a Letter Agreement among Mill City International Corporation (“Mill City”), the Company, and Mr. Carl A. Pescio (“Pescio”) dated July 15, 2004, as amended December 3, 2004 (the “Letter Agreement”). The Letter Agreement has since been superseded by a formal Option Agreement between the Company and Mill City dated April 13, 2005 (the “Option Agreement”). The Pony Creek/Elliott Property currently consists of 895 unpatented lode mining claims, each about 20 acres in size, totalling approximately 18,495 acres (7,485 hectares).
The Company believes the Pony Creek/Elliott Property has the potential for a commercial gold deposit. However, the property does not contain a known commercially mineable mineral deposit, otherwise referred to as “ore.”
Mill City acquired a 100% interest in the Pony Creek/Elliott Property pursuant to agreements with Pescio dated June 1, 2003 and August 28, 2003, as amended May 15, 2004, August 2, 2004, and December 17, 2004 and further expanded the project to its current size through additional staking. To acquire its interest, Mill City (i) paid Pescio $60,000 US, (ii) issued Pescio 200,000 of its common shares, and (iii) granted Pescio a net smelter return royalty (“NSR”) of 4%, which has subsequently been reduced to a 3% NSR.
In addition, Mill City is required to make the following advance royalty payments to Pescio:
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| Year | Amount |
| June 1, 2004 | $45,000 (paid) |
| June 1, 2005 | $75,000 (paid) |
| June 1, 2006 | $100,000 (paid) |
| June 1, 2007 | $150,000 |
| June 1, 2008 | $200,000 |
| And every June 1 thereafter until the property goes into commercial production |
The amendment to the Option Agreement dated December 3, 2004 states that Grandview has now assumed all payment obligations to Pescio and all work commitments under the Option Agreement, in place of Mill City.
Mill City is also required to pay annual rentals to the Bureau of Land Management of $100 per claim on or before September 1 of each year and $8.50 per claim to the Elko County Recorder on or before November 1 of each year. For 2004, rental payments on the original 319 claims totalled approximately $42,000 US, while the rental payments on the additional 359 claims acquired through staking totalled approximately $72,000 US. No other rental payments are outstanding at this time. Work commitments under the Option Agreement required $500,000 US in work expenditures by July 30, 2005, which was completed.
Agreement with Mill City International Corporation
Pursuant to the Option Agreement, the Company was granted an option to acquire from Mill City a 60% interest in the Pony Creek/Elliott Dome Property, located in the Elko County, Nevada. In consideration of Mill City granting it the option, on August 10, 2004 the Corporation issued Mill City 400,000 of its common shares. To exercise it option to acquire the 60% interest, the Corporation is required to incur expenditures on the Pony Creek/Elliott Dome Property of at least $3,500,000 by August 31, 2007 as follows:
1. By July 31, 2005, the Company was required to make or cause to be made exploration expenditures of $500,000 US, which was completed.
2. By July 31, 2006, the Company was required to make or cause to be made exploration expenditures of $1,000,000 US, which was completed.
3. Mill City will be required to carry out at least 5,000 feet of drilling on the property within three years followed by a yearly commitment of 7,500 feet until completion of a bankable feasibility study report. After completion of 2,000 feet of the initial 5,000 foot commitment on the property, the parties may agree that all or a portion of the remaining 3,000 feet of drilling maybe drilled on one or more of any other five (5) properties subject to similar agreements entered into between Mill City and Pescio as of the date hereof. Excess footage drilled on the property in any year can be carried forward to subsequent years and the drilling commitment on any of the other five (5) properties may be extended for a period not to exceed eighteen (18) months Mill City shall pay Pescio $10.00 per foot committed to and not drilled within the applicable time period referred to above.
If the Company makes the required $3,500,000 US in expenditures, it will be deemed to have earned its 60% interest in the Pony Creek/Elliott Dome Property. The date upon which the Company earns the 60% interest is referred to as the Vesting Date.
Within 90 days of the Vesting Date the Company will be required to prepare and provide to Mill City a proposed exploration program and budget. Mill City will then have 60 days to elect to either:
1. convert its 40% interest in the Pony Creek/Elliott Dome Property into a 20% carried interest whereby:
a. Mill City shall have a carried non-assessable 20% interest in the property up until the time a bankable feasibility study, as defined in the Joint Venture Agreement to be entered into between the Company and Mill City, set forth in Schedule C to the Option Agreement, has been completed by the Company and shall not be required to contribute 20% of the costs of any exploration or related costs on the property;
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b. Mill City shall have all of the other rights and benefits relating to its 20% interest in the property; or
2. accept the proposed exploration program and budget at which time the Company and Mill City will be deemed to have formed a joint venture for exploration of the Pony Creek/Elliott Dome Property, with the Company the Operator of such joint venture. The terms of such joint venture are set forth in Schedule C to the Option Agreement.
If the Company does not provide Mill City with a proposed exploration program and budget within 90 days of the Vesting Date, then Mill City may provide to the Company its own proposed exploration program and budget.
Unless the Company approves Mill City’s exploration program and budget and elects within 60 days of receiving it from Mill City to be the program’s operator, Mill City will be entitled to become operator for the project.
If Mill City elects to convert its 40% interest in the Pony Creek/Elliott Dome Property into a 20% carried interest, then upon completion of a bankable feasibility study Mill City’s 20% carried interest shall be converted into a 20% participating interest, requiring Mill City to pay for 20% of the costs of the joint venture.
In the event either the Company or Mill City fails to make any required payments pursuant to their obligations under their joint venture, such party’s interest in the joint venture would be reduced.
Information Regarding Pony Creek/Elliott Dome Property
The following information regarding the Pony Creek/Elliott Dome Property’s location, access, history, planned exploration activities, and related topics are summarized from a report titled “Evaluation of the Gold Resource on the Pony Creek Property, Larrabee Mining District, Elko County, Nevada for Mill City International Corporation,” prepared by R. H. Russell, M.Sc., Licensed Geologist (“Russell”), and dated March 18, 2004 (the “Russell Report”). There is no known commercially mineable mineral deposit on the Pony Creek/Elliott Dome Property.
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Figure 1. Pony Creek Project
Property Description and Location
The Pony Creek/Elliott Dome property is comprised of a total of 895 unpatented lode mining claims located across the crest of the southern part of the Pinyon Range at elevations ranging from 6,600 feet to about 8,000 feet. The Pony Creek property is located in the Larrabee mining district of Elko County, Nevada in the southern half of the Carlin Trend, 28 miles southeast of the town of Carlin. Access to the claims from the west is by traveling the Indian Pony road off State Highway 278 or from the east via the Red Rock Ranch road off a junction with State Highway 228. Thereafter, travel to the property is primarily on graded, gravel roads.
The image below shows the location relative to the City of Carlin, Nevada.
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Figure 2. Road Access to Pony Creek/Elliot Dome
Other than scattered prospect pits, no mine workings, tailings ponds, or waste dumps are located on the claims.
According to the Russell Report, prior to the commencement of any surface disturbance, Mill City must obtain documents from the Bureau of Land Management office in Elko, Nevada, which permit activities such as trenching, drilling, or construction of new roads. Mill City will also be required to post a reclamation bond prior to performing any surface disturbance; however, no Environmental Impact Statement is needed to conduct work on the claims.
Accessibility, Climate, Local Resources, and Infrastructure
Most of the property is comprised of dry, sagebrush, and grass-covered hills with a few juniper and pinyon pines. The temperatures are cool to cold during the winter, with occasional moderate snowfalls, and are warm during the summer with cool nights. The area is fairly dry, with infrequent rains during the summer. Total annual precipitation is about 9 inches per year, mostly as snow during the winter months. The climate is favourable for year-round mining and exploration may be done from May through November after which road access is limited by snow during the winter and mud in the spring. Conditions are highly variable from year to year.
According to the Russell Report, a highly trained mining-industrial workforce is available at Carlin and Elko, and throughout north-central Nevada. Power for a modem mill can be brought in from the vicinity of Elko, but ranch power is available only a few miles away. Water is not available on the surface, but was encountered in most of the reverse circulation drill holes. The claims carry with them the surface rights for mining and no local residents are present. Although the area is hilly, sufficient flat areas are present in the property area for potential processing plant sites, tailings storage areas, waste disposal areas and leach pads.
Geology
According to the Russell Report, the Pony Creek/Elliot Dome Project lies within the southern extension of the Carlin Trend, along the axis of Pinyon Range Anticline, paralleling the crest of the Pinyon Range.
The Mississippian Webb Formation underlies the majority of the property. The Mississippian Webb Formation is the primary host for gold deposits in the South Pinyon Range and is described at the Rain, South Bullion and Trout Creek deposits as consisting primarily of siliceous mudstone and calcareous siltstone. According
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to Russell, the Webb Formation is an excellent host for disseminated gold deposits. Presently, the Webb Formation remains untested at the Pony Creek/Elliot Dome Project. Middle to upper Devonian carbonate rocks through Permian clastic sedimentary are exposed at surface through the Pony Creek/Elliott Dome Property. This sill-like body, which has intruded the Palaeozoic aged sedimentary rocks along the axis of the Pinyon Range Anticline, is composed of two lobes and contains rocks that have been variously described as rhyolite, felsite or felsic porphyry. Older, Tertiary sedimentary rocks of Palaeocene to Eocene age, composed of conglomerate, sandstone, siltstone and limestone are found to the northeast of the Pony Creek/Elliot Dome Property.
The Pony Creek/Elliot Dome Property lies in the southern extension of the Carlin Trend. The Rain deposit, currently owned by Newmont, is located in the northern part of the Pinyon Range and is the southernmost mine on the Carlin Trend. In addition to the Pony Creek/Elliot Dome Project, several other deposits occur within the Pinyon Range and Railroad, South Bullion, Trout Creek, Emigrant, NW Rain, Tess and Saddle, all of which are current or past producing projects. Most of the gold associated with the Rain properties is located in siliceous mudstones and calcareous siltstones of the host rock known as the Mississippian Webb Formation, a geologic feature also common to the Pony Creek/Elliot Dome Property. The Company believes that this is the best potential host rock in the region for the discovery of a Rain-type gold deposit. As such, an exploration model based on the Rain properties has been introduced for use on the property, which outlines exploration for viable targets within the rocks of the unexplored Mississippian Webb Formation.
History of Exploration on the Pony Creek/Elliott Dome Property
According to the Russell Report, mineral exploration in southwest Elko County has been occurring since the late 1850s when various prospectors, on their way to the California gold fields, passed through Nevada. In 1869, silver, gold, copper, lead and zinc were discovered 13 miles to the north of the Pony Creek/Elliot Dome Project in the Railroad mining district. This district was worked heavily for copper, lead and silver through the late 19th century and into the early 20th century, with an estimated $4.7 million US in lead, copper, silver, gold and zinc being produced between 1869 and 1968.
In 1980, during a search for additional gold deposits along the Carlin Trend, Newmont completed a regional stream sediment sampling program, which returned anomalous gold and arsenic on what is now the Pony Creek Property. Newmont subsequently staked 100 claims to cover the prospect during the same year and added a further 80 claims in 1982 to cover additional ground in the area.
According to the Russell Report, between 1981 and 1989 Newmont completed over 50,000 feet of drilling. Based upon this drilling Newmont believed there was significant gold mineralization on the property. Newmont continued to explore the Pony Creek Property up until 1990 when it entered into a joint venture agreement with Westmont Mining, Inc.
According to the Russell Report, since 1980, approximately $5.0 million US has been spent on exploration of the Pony Creek/Elliot Dome Property, during which time a number of different companies have completed exploration and development work on the property. A summary of the work conducted during this time is provided below:
Table No. 3:Historical work conducted on the Pony Creek/Elliot Dome Property since 1980
| Year | Corporation | Drilling | Additional Work Completed |
1980
| Newmont
| None
| Stream sediment sampling program identified anomalous Au and As 100 claims located |
1981-
1989
| Newmont
| 110 RC Holes
(49,346 ft.)
2 Core Holes
(1,834 ft.)
| Aeromagnetic survey, soil geochemistry and drilling in the Pot Holes and Bowl areas.
80 additional claims staked.
Review and compilation of property data. Completion of soil sampling and mapping. |
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| Year | Corporation | Drilling | Additional Work Completed |
1990-
1992
| Newmont-
Westmont JV
| 31 RC Holes
(15,085 ft.)
| Property optioned by Westmont.
JV formed with Westmont as the operator.
Soil geochemistry and drilling completed on north and west edges of
claim block, IP work started. |
1993
| Ramrod (Quest)
| None
| Westmont acquired by Ramrod Gold (later Quest) who took over as
project operator. |
1994-
1995
| Quest-Uranerz
JV
| 15 RC Holes
(12,530 ft.)
| Quest enters into JV with Uranerz as operator. Completion of 19.2
line miles Of IP, ground magnetics, mapping and surveying.
Extensive soil geochemistry, drilling on northeastern part of
Property. |
| 1996 | Quest | None | Data compilation and analysis. |
1997-
1998
| Quest-Barrick
JV
| RC Holes
(3,185 ft.)
| Quest purchases remainder of Newmont’s Interest for US$50,000.
JV with Barrick signed. Geophysical target drilled with 4 holes. JV
Terminated July 1998. |
1999-
2000
| Homestake
| 5 RC Holes
(5,982 ft.)
| Quest acquired by Standard Mining and Property abandoned. Mr.
Carl Pescio acquires Pony Creek Property and options it to
Homestake. 5 RC holes drilled. |
2001-
2003 | Nevada Contact
| 8 RC Holes
(7,835 ft.) | Nevada Contact options Property from Mr. Pescio. Drills 8 RC holes
before terminating agreement. |
2003
| Mill City
| None
| Mill City acquires Pony Creek Property from Mr. Pescio in July
2003. |
2004
| Mill City-GGI
JV | None
| Mill City enters into JV agreement with GGI.
|
2005
| Grandview Gold
| 2 core holes
(2,014 feet) | Geochemical survey, compilation.
|
2006
| Grandview Gold
| 7 core holes
(12,414 feet) | Geophysics, geological mapping, geochemistry and data
compilation. |
Mineral Resource Estimates
According to the Russell Report, a total of 175 drill holes, totalling 95,511 feet had been drilled on the Pony Creek/Elliott Dome Property to March 2004, with results known from all but seven of the holes. Of those 167 drill holes, for which information is available, 88 drill holes (50.3%) have gold intercepts of at least 5.0 feet grading 0.010 ounces of gold per ton.
The primary goal of most of the previous exploration programs on the Pony Creek/Elliott Dome Property was to develop an open pit gold deposit. As a result, 92.5% of the gold intercepts at a cut-off grade of 0.015 ounces of gold per ton are within 500 feet of the surface.
The following tables summarizes the resource estimates prepared for the Pony Creek/Elliott Dome Property, which are based upon an analysis of the assay data resulting from the drilling conducted on the property in the past.
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF MEASURED AND
INDICATED RESOURCES
This section uses the term “indicated resources.” We advise U.S. investors that while those terms are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. U.S. investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves.
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Indicated Resources:
| Resources | Tons | Grade (oz/ton) | Gold Ounces |
| Indicated | 1,124,000 | 0.058 | 65,000 |
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF INFERRED
RESOURCES
This section uses the term “inferred resources.” We advise U.S. investors that while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. “Inferred resources” have a great uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or prefeasibility studies, except in rare cases. U.S. investors are cautioned not to assume that part or all of an inferred resource exists, or is economically and legally mineable.
Inferred Resources:
| Resources | Tons | Grade (oz/ton) | Gold Ounces |
| Inferred | 32,409,000 | 0.044 | 1,426,000 |
According to the Russell Report, the Indicated Resource estimate was prepared by Newmont relatively early on in their drilling program. The Inferred Resource estimates were based on 151 drill holes drilled within the area of resource potential, an area roughly 2.4 miles long by 2,000 feet wide on the southern end and 4,800 feet wide on the northern end, centrally located within the Pony Creek Property.
In September 2003, Mill City completed a technical report on the Pony Creek/Elliott Dome Property that included details of a proposed new drilling program. According to the Russell Report, the September 2003 report concluded that continued evaluation of the shallow, known gold mineralization on the property was warranted, as well as the further exploration for deeper, higher-grade gold mineralization. The report also recommended and outlined a two-phase drilling program totalling 20,000 feet at an estimated cost of $481,000. The Company believes that the recommended drilling program has an excellent chance of discovering a significant, commercial gold deposit on the Pony Creek/Elliott Dome Property, and, ultimately, has excellent potential for development as an open pit gold deposit. However, at the present time, there is no known commercially mineable mineral deposit on the Pony Creek/Elliott Dome Property, and there can be no assurance that one will ever exist.
To date, no mineral production has been recorded from the Pony Creek Property and no workings larger than a few small prospect pits are known from the area.
Exploration Program for 2005-2006
During 2005-2006, the Company completed the first phase of the exploration program recommended in the Russell Report. The Russell Report recommended an exploration consisting of drilling between 5 and 10 holes, totalling approximately 10,000 feet. The Company completed a diamond drilling program consisting of 7 holes, totalling approximately 12,400 feet. The drill program encountered gold mineralization in some of the holes. The Company is currently evaluating the results of this program to determine the next phase of its exploration on the Pony Creek/Elliott Dome Property. Depending upon its conclusions regarding its first phase exploration program, the Company has tentatively budgeted a follow-drilling program costing of approximately $235,000.
In the event the two-phase drilling program is successful, of which there can be no assurance, Russell recommended that an extensive program of development drilling be conducted. Russell recommended that approximately 150 holes be drilled at an estimated cost of $4.5 million.
Grandview contracted the services of Watts, Griffis and McOuat, a geological consulting firm out of Toronto Ontario, Canada, as well as Matrix Geo-Technologies Inc. from Toronto, who provided geophysical
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surveying and consulting. Carlin Trend Mining Services (“Carlin Trend”) out of Nevada provided GPS grid and mapping, along with drilling work crews. Mr. David Knight, M.Sc, P.G. and a director of Carlin Trend, supervised the drilling program.
On July 12, 2006 the Company entered into a Field Management Agreement with Carlin Trend pursuant to which Carlin Trend agreed to provide the following services: (i) general field management services; (ii) supplying and overseeing all geological support staff activities; (iii) coordinating all geophysical, geochem service activities; (iv) monitoring ongoing drilling programs; (v) supervising core-cutting, logging and sample preparation; and (vi) supervising property geo-mapping activities. In July 2006, the Company paid Carlin Trend an advance of $98,920 U.S. for the above services: (i) general field management charge – two months at $10,000 U.S. per month, not to exceed 516 hours per year or 43 hours per month - $20,000 U.S; (ii) one field drilling & supervision geologist – two months at $520 U.S. per day and working 25 days per months - $26,000 U.S.; (iii) geological technicians charge -$240.00 U.S. per day for two technicians each, working 25 days per month, and three technicians each working 10 days per month - $38,400 U.S.; and (v) field transportation and mileage advance charge - $290.40 U.S. per day for two months - $14,520 U.S. This contract is still in effect and the Company anticipates the contract continuing into the foreseeable future.
In addition to providing the above services, in July 2006 the Company paid Carlin Trend an additional $95,000 U.S. covering anticipated invoiced amounts from sub-contractors Carlin Trend in the initial 60 days of the Field Management Agreement. These amounts were projected to be: (i) pre-drilling program: activation labs –processing test - $35,000 U.S.; (ii) pre-drilling program: Pony Creek Property: access road repair test - $25,000 U.S.; (iii) pre-drilling: geophysics, IP/Resistivity, gravity crews - $7,500 U.S.; and (iv) Rick Russell - additional consulting - $1,500 U.S. Carlin Trend has continued to pay contractors invoices for work at Pony Creek and has paid for, on behalf of the Company, a total of approximately US$2,212,000 which includes such expenses as: US$1,106,270 for drilling, US$884,761 for geophysics, US$42,297 on assays, and other expenses including road repairs, land administration costs, and general field expenditures.
Mr. Ray Pecoskie, the President of the Company until July 13, 2006, originally oversaw the exploration activities on the Company’s behalf. Mr. Michael Hitch, the interim president of the Company from July 13, 2006 until November 1, 2006, oversaw the exploration on the Company’s behalf during that time. The current president of the Company, Mr. Paul Sarjeant, a member of the Professional Engineers and Geoscientists of British Columbia, will over-see the activities of these outside consultants going forward.
The Company paid for the Phase 1 from its working capital. In the event the Company intends to conduct the second phase of the exploration program in accordance to the recommendations in the Russell Report, the Company intends to pay the Phase 2 drilling program from its working capital.
There is no known commercially mineable mineral deposit on the Pony Creek/Elliott Dome Property.
Dixie Lake Property, Red Lake Mining Division, Ontario
Pursuant to an agreement dated August 26, 2005 (“Option Agreement”) with Fronteer Development Group Inc. (“Fronteer”), the Company was granted an option to acquire a 51% interest in 117 claim units in 51 unpatented mineral claims located in the Red Lake Mining Division, Ontario (the “Dixie Lake Property”). In order to earn the option the Company is required (i) to incur exploration expenditures on the Dixie Lake Property of at least $300,000 on or before July 11, 2006, which it did, and (ii) make the following cash payments to Mr. Peter English (“English”), the individual who in 2002 originally granted Fronteer an option to acquire the Dixie Lake Property: (a) $10,000 on signing the Option Agreement, (b) $25,000 on or before July 11, 2006, which it did, and (iii) $40,000 on or before July 11, 2007. There is no known commercially mineable mineral deposit on the Dixie Lake Property.
Background
In December 2002, English granted Fronteer an option to acquire a 100% interest in the Dixie Lake Property. The amount of consideration Fronteer had to pay English to exercise the option depended upon whether the property was deemed to be a “Property of Merit,” as defined under Canadian regulations. Property of Merit
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means a property that would qualify as a sufficiently advanced property for purposes of Fronteer’s listing on the TSX Venture Exchange in Canada.
If the Dixie Lake Property was deemed to be a Property of Merit, Fronteer could exercise the option by (i) paying English a total of $80,000 in staged payments covering four years from December 2002, and (ii) issuing English a total of 200,000 shares of its common stock within 36 months of December 2002. If the Dixie Lake Property was not deemed to be a Property of Merit, Fronteer could exercise the option by (i) paying English a total of $80,000 in staged payments over four years from the date the TSX Venture Exchange notified Fronteer that the Dixie Lake Property did not qualify as a Property of Merit, and (ii) issuing English a total of 190,000 shares of its common stock within 48 months of being notified that the property did not qualify as a Property of Merit. The Dixie Lake Property was deemed to be a Property of Merit on July 11, 2003, allowing Fronteer to become listed on the TSX.
In the event the Dixie Lake Property goes into commercial production, of which there can be no assurance, English will be entitled to a Net Smelter Return royalty of 2%, which can be reduced to a 1% Net Smelter Return by the payment to English of $1,000,000.
In connection with its acquisition of the option on the Dixie Lake Property, the Company issued 160,000 Shares to McKeena Gold Inc., a Canadian corporation, as a finder’s fee.
On September 22, 2003 Fronteer entered into an agreement with Alberta Star Development Corp. (“Alberta Star”) pursuant to which Fronteer granted Alberta Star an option to acquire a 50% interest in the Dixie Lake Property. Through November 30, 2004 Alberta Star reported that it had (i) spent approximately $1,517,000 on exploration of the Dixie Lake Property, (ii) paid Fronteer $35,000, and (iii) issued Fronteer 150,000 shares of its common stock. On July 10, 2005 Alberta Star notified Fronteer that it would not be proceeding with the Dixie Lake Property. Alberta Star has not disclosed its reason for declining their option.
Grandview Gold – Fronteer Option Agreement
Under the terms of the Option Agreement with Fronteer the Company can acquire a 51% interest in the Dixie Lake Property by (i) incurring $300,000 in exploration expenditures by July 11, 2006, which it completed, and (ii) paying English a total of $75,000 by July 11, 2007 and by Fronteer fulfilling its remaining obligations to (i) issue to English 20,000 of it shares upon the signing of the Option Agreement with the Company, and (ii) issuing to English 20,000 shares of its common stock by July 11, 2006, which it did. Upon the fulfillment of all of these conditions, the Company will have exercised the option and acquired a 51% interest in the Dixie Lake Property. At such time the Company and Fronteer will be deemed to have formed a joint venture for the further exploration and, if warranted, of which there can be no assurance, the development of the property.
The Company will be the operator of the exploration programs on the Dixie Lake Property and it will be the Company’s responsibility to prepare a proposed exploration program and budget for the property.
Upon the formation of the joint venture, the Company will be deemed to have contributed $2,000,000 in exploration funds, and Fronteer will be deemed to have contributed $1,921,569. The Company’s interest in the joint venture will be 51% and Fronteer’s will be 49%. Accordingly, the Company will be responsible for providing 51% of all exploration funds and Fronteer’s funding obligations will be 49%.
If either the Company or Fronteer elects not to contribute their full amount under a proposed exploration program, such party’s interest in the joint venture will be reduced proportionately, according to a formula set forth in the Option Agreement. If either party’s participating interest falls below 10%, then that party’s interest will automatically be converted into a 10% net profit royalty.
Property Description and Location
The Dixie Lake Property is located in Northwestern Ontario approximately 24 kilometres from the town of Red Lake. The property covers approximately 1,872 hectares and consists of 117 mineral claim units in 51 claims, in the Red Lake Mining Division. Management believes that all of the claims are in good standing. It is believed
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that neither Fronteer nor English owns the surface rights to the claims and that in order to retain the mineral rights, assessment work must be submitted. In order to maintain its interests in the claims a total of approximately $46,000 must be spent over the next four years.
*NOTE: For all claims requiring renewal, the Company will update those claims for an additional twelve-month period prior to the renewal date.
Figure 3. Access to Dixie Lake
Figure 4. Dixie Lake Claims Map
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Accessibility, Climate, Local Resources, and Infrastructure
The property is located approximately 24 kilometres southeast of the town of Red Lake Ontario, directly east of Dixie Lake, between Dixie Lake and Rice Lake, south of Highway 105. The property straddles Dixie Creek.
Access to the property is via Highway 105, then four kilometres to the southwest along Tucyk Road. Several old logging roads from Tucyk Road provide direct access to much of the property. The main power lines to Red Lake are located one kilometre north of the property. The town of Red Lake is a well- established mining center where supplies, support services and experienced mining personnel are readily available.
The area’s climate ranges from - -40 degrees Celsius in the winter to 40 degrees Celsius in the summer. The annual precipitation averages 634 millimetres, with approximately 455 millimetres falling as rain in the summer, and the remainder falling as snow in the winter.
Geology
Limited bedrock on the property makes comprehensive geological mapping very difficult. Accordingly, most of the property is poorly mapped. Bedrock is exposed mainly along Dixie Creek and on several low hills in the area. Due to the adverse field conditions on the property, including the prevalence of deep silts and clay deposits, Management believes it is unrealistic to learn more about the area’s lithological make-up from geological mapping.
The Dixie Lake Property lies within a regional east-west trending belt of metavolvanic and metasedimentary rocks which are bounded by intrusive batholiths. The property is dominated by a central package of higher magnetic response, which is comprised of mafic volcanic flows and tuffs with intercaleated iron formation, argillite, and local felsic volcanics. Magnetic patterns reflect the underlying formations: analysis of the central area indicates the presence of iron and pyrrhotitic argillite, while analysis of other areas show a lower magnetic response. There is no known commercially mineable mineral deposit on the Dixie Lake Property.
History
According to various reports Management of the Company has reviewed, there has been much exploration in the general area of the Dixie Lake Property going back to the 1940s. Numerous companies have conducted drilling, geophysical surveys, trenching, sampling, prospecting, geological mapping, and related exploration activities in areas near the Dixie Lake Property. However, it is unclear from these reports what work was done on the claims comprising the Dixie Lake Property, and what work was done on claims in the general, surrounding area. Management does not believe that any gold has ever been recovered from any claims on the Dixie Lake Property and there is no known commercially mineable mineral deposit on the property.
Alberta Star conducted exploration on the Dixie Lake Property from 2003 through 2004 pursuant to its option agreement with Fronteer. Alberta Star has publicly reported that it drilled 22 holes over a total of 6,594 meters, completed a ground magnetometer survey, and collected soil samples for analysis. Alberta Star has disclosed that its exploration encountered some gold mineralization, in small amounts. However, no feasibility study has been conducted on the property and there is no known commercially mineable mineral deposit on the Dixie Lake Property.
2005 and 2006 Exploration Programs
In 2005, the Company completed a 16-hole drilling program, covering 2,765 feet, at a cost of $425,000, on the Dixie Lake Property. The drilling encountered gold mineralization so the Company retained SRK Consulting to review the work that was completed and to recommend an exploration program for 2006. Following the work conducted by SRK, the Company revised its exploration program.
For the Spring 2006 drill program a total of five drill holes, covering 1,030 meters was completed. Although initial plans called for a larger drill program, because of difficulties resulting from the timing of the program and associated difficulties with the spring run-off, certain targets could not be drilled. In addition, access across Dixie Creek to the some of the planned targets was hampered by ground conditions and the close of the only
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bridge crossing permitting access to the property. Finally, the Company concluded for environmental reasons the drilling should be suspended until early summer.
The Company has not completed its interpretation of the spring 2006 drill program results. Upon its completion of its review the Company will determine what, if any, exploration it will plan for the Dixie Lake Property.
There is no known commercially mineable mineral deposit on the Dixie Lake Property.
Bissett Gold Camp, Manitoba
The Company acquired its interest in the Bissett Gold Camp on April 1, 2005. The property consists of eleven claims, totalling 234 hectares. The 11 claims are located in the central area of the Bissett Gold Camp situated near the Manitoba/Ontario provincial border and approximately 240 kilometres northeast of Winnipeg. While the Company hopes to find gold on this property, there is no known commercially mineable mineral deposit on this property, and there can be no assurance that a commercially mineable mineral deposit exists on this property.
Agreement with Wildcat Exploration Ltd. (the “Vendor”)
On April 1, 2005, the Company entered into a purchase and sale agreement (the “Agreement”) with Wildcat Exploration Ltd. (“Wildcat”), for 11 mineral dispositions (the “Property”) totalling 234 hectares on claims within Bissett Gold Camp, located in the Province of Manitoba, Canada. Pursuant to the terms of the Agreement
1. Wildcat agreed to sell to the Company, and the Company agreed to purchase the Property effective April 1, 2005.
2. The purchase price is one hundred thousand dollars ($100,000.00) and seventy thousand (70,000) common shares of the Company, which shall be free trading as of October 1, 2005.
3. $60,000 was paid April 1, 2005, following receipt of a duly executed Quit Claim by Wildcat and together with transfers of the Property in form registerable in the Mining Recorder’s Office in Winnipeg, Manitoba, Canada. The balance of $40,000 was paid April 29, 2005. Refer to Item 19: Exhibits 3.6 Agreement for Purchase and Sale Among Grandview Gold Inc. and Wildcat Exploration Ltd. dated effective April 1, 2005.
Property Description and Location
The Bissett Gold Camp is located on the Rice Lake greenstone belt, near the Manitoba/Ontario border and approximately 240 kilometres northeast of Winnipeg, and approximately 90 kilometres west of the Company’s Red Lake property interests.
Figure 5. General Location of Bissett, Manitoba
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Accessibility, Climate, Local Resources, and Infrastructure
The area was covered by the most recent continental glaciers, which scoured the property and exposed many rock outcrops throughout the property. The vegetation is deciduous: birch, poplar mixed with tamarack, spruce and jack pine.
The access to the property is by driving a car or truck along Provincial Highway 304 and simply parking anywhere along the side of the road. The mining town of Bissett is located less than 10 km from nine of the eleven mining claims.
The weather, climate and seasons should not significantly affect the length of the operating season on this property because the terrain is flat and all-weather-road accessible.
Three of the 11 claims acquired, the Packsack Claim, Claim #W46039 and W46040, have existing mine shafts. A modern mill at the nearby San Antonio Gold mine is due to go back into production this fall.
At this time, the property does not contain a known commercially mineral deposit.
Geology
The property is located in the Rice Lake greenstone belt, a region in south-eastern Manitoba known as the Superior Province. The Superior Province is a terrain of large granitic masses separated by greenstone belts, which consists of rocks and volcanic of sedimentary origin. Rice Lake is an Archean lode gold mining area.
History of Exploration on the Bissett Gold Camp
The property contains two patented mining claims, namely the Clappelou and Packsack claims. Gold mineralization on the Packsack claim was first discovered and explored in 1919 and subsequently held by Packsack Mines Limited during the period 1934-1937. Significant gold mineralization was discovered; a mining lease was obtained and a shaft was sunk down to the 525-foot level. Additional mine shafts were sunk and gold mineralization was discovered on Claims # W46039 and W46040.
Exploration Program
The Company completed an airborne geophysical survey over a large region covering most of the property. At this time the Company is evaluating the data it received from the survey to determine what exploration it wants to conduct on the property.
There is no known commercially mineable mineral deposit on this property and there can be no assurance that a commercially mineable mineral deposit exists on this property.
The Company is required to make certain payments to complete the transfer of mining claims, and to keep the claims in good standing.
Land Transfer, Licenses and Property Taxes.
| Fee Description | Amount | Schedule |
| Mineral Disposition Transfer Fee | $110.00 | One-time (completed) |
| Prospecting License Application Fee | 200.00 | One-time (completed) |
| Property Taxes | 3,272.50(1) | Annually |
Note:
(1) The annual fee for property taxes may change, subject to local property tax fluctuations.
Reference is made to Item 10C. Material Contracts: 6) Agreement for Purchase and Sale Among Grandview Gold Inc. and Wildcat Exploration Ltd. dated effective April 1, 2005; and Item 19: Exhibits: 3.6
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Agreement for Purchase and Sale Among Grandview Gold Inc. and Wildcat Exploration Ltd. dated effective April 1, 2005.
Red Lake Property, Ontario
The Company currently holds a 100% interest in eight mining claims covering approximately 60 hectares in the Red Lake Area, District of Kenora, in northwestern Ontario (the “Red Lake Property”). The Red Lake area currently hosts two high-grade, world-class gold mines, Goldcorp’s Red Lake Mine and Placer Dome’s Campbell Gold Mine. However, there can be no assurance a commercially mineable mineral deposit exists on this property.
The Company has not undertaken any exploration activities on these claims to date. On July 12, 2005 the Company entered into a Letter of Intent with Goldcorp Inc. (“Goldcorp”), a company traded on the New York Stock Exchange and Toronto Stock Exchange, to enter into an option and joint venture agreement. Under the terms of the Letter of Intent, which is subject to the negotiation and execution of a formal option and joint venture agreement between the parties, of which there can be no assurance, Goldcorp can earn a 60% in the Red Lake Property by incurring exploration expenditures of $100,000 within 18 months of the parties entering into a formal option and joint venture agreement. Goldcorp will be the operator of the exploration program during this initial period.
Upon Goldcorp earning a 60% interest in the Red Lake Property the parties will form a joint venture to continue exploration and, if warranted, development of the Red Lake Property. The Letter of Intent contemplates that the joint venture would have an initial valuation of $166,000, with Goldcorp owning a 60% interest, and the Company owning a 40% interest. Goldcorp would continue to act as operator of all exploration programs on the property. It is further contemplated that any joint venture agreement entered into between the parties would include standard dilution clauses for ongoing expenditures. In the event a joint venture is formed and at any time either party’s interest in the joint venture is diluted to a 10% interest, that party’s interest would convert to a 1% net smelter royalty, which could be purchased by the other party at any time for $500,000. This property has no known commercially mineable mineral deposit.
There are no requirements by the Company to make additional payments or filings to keep these claims in good standing as they are held under patents.
Gem Property, Manitoba
Pursuant to an Option Agreement dated September 30, 2005 (“September 30, 2005 Option Agreement”) between the Company and Marum Resources Inc. (“Marum”) the Company was granted an option to acquire a 50% interest in the Gem Property, a property consisting of seven claims covering 1,594 hectares, located near Rice Lake, in Manitoba (the “Gem Property”). To acquire the 50% interest, the Company is required to incur a total of $250,000 in exploration expenditures on the Gem Property by September 30, 2007, $125,000 of was required to be incurred by September 30, 2006. The Company did not incur the required expenditures by September 30, 2006, but pursuant to an amendment to the September 30, 2005 Option Agreement, the parties agreed that the Company could fulfill its obligations by incurring a total of $250,000 exploration expenditures by September 30, 2007. In addition, the exploration work was required to include a high-resolution aeromagnetic survey with a maximum 50 meter line spacing to be completed by March 31, 2006, which was done. The Company is also required to file with the Canadian government all assessment work required to keep the Gem Property in good standing.
Upon the Company completing the total of $250,000 in exploration work and filing all the required assessment work, the Company will be deemed to have earned a 50% interest in the Gem Property. The Company will be the operator of all exploration work on the Gem Property until such time as it earns its 50% interest in the property. After earning a 50% interest in the property, the Company and Marum intend to enter into an industry standard joint venture agreement.
There is no known commercially mineable mineral deposit on the Gem Property.
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Figure 6. Gem Property Claims Map
Rocky Ridge Property, Manitoba
Pursuant to an agreement dated November 23, 2006 with Harvest Gold Corporation (“Harvest Gold”) the Company acquired an option to earn up to a 70% interest in the Rocky Ridge Property, in the Lac du Bonnet Mining District in Manitoba. The Rocky Ridge Property consists of 7 claims, covering 2,767 acres.
In November 2006 Harvest Gold acquired its option to acquire a 100% interest in the Rocky Ridge Property from William Kuran (“Kuran”), the owner of the claims comprising the Rocky Ridge Property. In order for Harvest Gold to exercise its option and acquire a 100% in the Rocky Ridge Property, Harvest Gold is required to:
| | (a) | pay Kuran a total of $60,000 as follows: |
| | | i) | $15,000 upon the agreement being signed (done); |
| | | ii) | $20,000 on or before November 1, 2007; and |
| | | iii) | $25,000 on or before November 1, 2008; |
| | (b) | issue to Kuran a total of 500,000 of its shares of common stock of Harvest Gold (“Harvest Gold Shares”) as follows: |
| | | i) | 125,000 Harvest Gold Shares upon receipt of approval from the TSX Venture Exchange; |
| | | ii) | 175,000 Harvest Gold Shares on or before November 1, 2007; and |
| | | iii) | 200,000 Harvest Gold Shares on or before November 1, 2008. |
In addition, Harvest Gold granted Kuran a 3% Net Smelter Royalty (“NSR”) on the proceeds from the sale of any ore from the property. Harvest Gold has the right to purchase up to 2% of the NSR at a cost of $250,000 per each one percent of the NSR, for a total purchase price of 2% of the NSR of $500,000.
To exercise its option to acquire a 70% interest in the Rocky Ridge Property from Harvest Gold the Company is required to:
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| | (a) | pay Harvest a total of $85,000 as follows: |
| | | i) | $20,000 upon the November 23, 2006 Option Agreement being signed; |
| | | ii) | $30,000 on or before November 1, 2007; and |
| | | iii) | $35,000 on or before November 1, 2008; |
| | | |
| | (b) | issue to Harvest Gold a total of 225,000 of its Shares as follows: |
| | | i) | 50,000 Shares upon the agreement being signed; |
| | | ii) | 75,000 Shares on or before November 1, 2007; and |
| | | iii) | 100,000 Shares on or before November 1, 2008; and |
| | | |
| | (c) | incur a total of $600,000 in exploration on the property as follows: |
| | | i) | $250,000 on or before December 31, 2007; and |
| | | ii) | $350,000 on or before December 31, 2008. |
After the Company has made the required payments, share issuances, and incurred the required exploration expenditures, the Company will be deemed to have exercised the options and will own a 70% interest in the Rocky Ridge Property. At such time the Company and Harvest Gold will form a joint venture to explore the property with the Company owning a 70% interest in the joint venture and Harvest Gold owning a 30% interest. Prior to the time the Company earns a 70% interest in the Rocky Ridge Property Harvest Gold will be the operator of all exploration programs on the property. At such time, if ever, the Company exercises its option and acquires a 70% in the property, the Company will be the operator of all exploration programs on the property.
For the remainder of 2006 and for 2007 the Company intends to compile and evaluate the results of the historic drilling and the recent exploration drilling on the property, conduct diamond drilling to a depth of 100-200 meters to test the extent of known gold zones and previously un-sampled wall rock mineralization, and gather geochemical and geophysical data to identify additional drill targets. The anticipated cost of this work is $350,000.
In connection with its acquisition of the option to acquire a 70% interest in the Rocky Ridge Property, the Company paid a finders fee to an unaffiliated party of warrants to purchase 250,000 Shares at an exercise price of $1.00, exercisable for two years.
There is no known commercially mineable mineral deposit on the Rocky Ridge Property.
| ITEM 5: | Operating and Financial Review and Prospects |
The following is a discussion of the results of operations of the Company for the fiscal years ended May 31, 2006, 2005 and 2004 and the three month periods ended August 31, 2006 and August 31, 2005, and should be read in conjunction with the audited and unaudited financial statements of the Company for such periods, together with the accompanying notes, included elsewhere in this Annual Report. Unless indicated otherwise, all references herein are to Canadian dollars. Please seeItem 3. Key Information for exchange rate information for the Canadian dollar.
The Company’s financial statements were prepared in accordance with accounting principals generally accepted in Canada (“Canadian GAAP”). Unless otherwise stated, all amounts discussed herein are denominated in Canadian dollars. Please seeItem 3. Key Information for exchange rate information for the Canadian dollar. A summary of the differences in Canadian GAAP and those generally accepted in the United States (“US GAAP”) which affects the Company is contained in contained Note 15 to the audited financial statements for 2006 and Note 6 to the financial statements for the first quarter 2007.
In addition to historical information, the following discussion contains certain forward-looking statements within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical facts, included herein that address activities, events or developments that the Company expects or anticipates will or may occur in the near future, including future business strategy, goals, exploration programs or other such matters are forward-looking statements. When used in this discussion, the words “estimate”, “plan”, “anticipate”, “expect”,
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“intend”, “believe” and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company to be materially different from future results expressed or implied by such forward-looking statements. Such factors include, among others, risks related to joint venture operations, actual results of current or planned exploration activities, changes in project parameters as plans continue to be refined, unavailability of financing, fluctuations in precious metal prices and other such factors, including those discussed in “Risk Factors” and elsewhere in this Annual Report. Accordingly, the reader should not place undue reliance on forward-looking statements by the Company. Statements speak only as of the date on which they are made.
Overview
Grandview is a mineral exploration company focused on the acquisition and exploration of gold and other precious metal properties in the United States and Canada. At the present time none of the Company’s properties contain a known commercially mineable mineral deposit.
Through November 2006 the Company has acquired or maintained interests in six mining properties: (i) an option to acquire a 60% interest in the Pony Creek Property and Elliott Dome Property, both located in Elko, County, Nevada, (ii) an option to acquire a 51% interest in the Dixie Lake Property, Red Lake Mining Division, Ontario Canada (iii) a 100% interest in eleven mining claims centrally located in the Bissett Gold Camp in southeastern Manitoba, (iv) a 100% interest in eight mining claims located in Red Lake, Ontario, Canada, (v) an option to acquire a 50% interest in the Gem Property, located near Rice Lake, in Manitoba, Canada and, (vi) an option to acquire a 70% interest in the Rocky Ridge Property, located in Manitoba’s Lac du Bonnet Mining District, Canada.
The Pony Creek Property and Elliott Dome Property are collectively referred to as the “Pony Creek/Elliott Dome Property.” Though the Company is concentrating most of its resources on exploration of the Pony Creek/Elliott Dome Property, the Company is required to spend a minimum of $300,000 on exploration of the Dixie Lake Property by July 2007, pay $75,000 to the optionee of the Dixie Lake Property by July 2007, incur $250,000 of exploration expenditures on the Gem Property by September 30, 2007, and has budgeted $50,000 over the next twelve months for exploration of the property in Bissett, Manitoba, Canada.
There is no known commercially mineable mineral deposit on any of these properties, and there can be no assurance that a commercially mineable mineral deposit exists on any of these properties.
Pony Creek / Elliot Dome Property
The Pony Creek property is optioned to the Company by Mill City Gold Corp. Grandview Gold has an option to earn an undivided 60-per-cent interest in the Pony Creek property by incurring $3.5 million U.S. in resource exploration and development expenditures over a three-year period. Grandview has expended approximately $2.5 million U.S. to date and expects to complete the balance of its option agreement obligation with Mill City Gold during its 2006/2007 drilling program. These properties encompass 903 unpatented lode mining claims covering approximately 7,285 hectares and are located 28 miles southeast of Carlin, Nevada, USA, on the gold-producing Carlin Trend. Reference is made toItem 4D. Information on the Company: Property, Plant and Equipment for a discussion of the Company’s interest in this property.
Exploration costs of $869,992 were incurred during the first quarter 2007. Cumulative exploration costs incurred to date from inception of the exploration stage to August 31, 2006 is $2,751,574.
Dixie Lake Property
The Company and Fronteer Development Group have entered into an option agreement to allow Grandview to earn a 51% interest in the Dixie Lake Property, which is 25 km southeast of Red Lake, Ontario and 25 km south of Placer Dome’s Campbell mine and Goldcorp Inc.’s Red Lake mine. The Company can earn the 51% interest by incurring exploration expenditures of $300,000, assuming payments of $75,000 to the underlying property vendor, and issuing 160,000 shares of its Shares to a third party as a finder’s fee. This property comprises approximately 1,790 hectares in 50 claims. Reference is made toItem 4D. Information on the Company: Property, Plant and Equipment for a discussion of the Company’s interest in this property.
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Bissett Lake
The Company owns a 100% interest in 11 strategically located mining claims, comprising 234 hectares, located on the Rice Lake greenstone, approximately 240 km northeast of Winnipeg. Grandview intends to study existing drilling data and determine an exploration program, including a geophysical modeling survey to depths of 2,000 feet. Reference is made toItem 4D. Information on the Company: Property, Plant and Equipment for a discussion of the Company’s interest in this property.
Exploration costs of $42,226 were incurred during the first quarter 2007. Cumulative exploration costs incurred to date from inception of the exploration stage to August 31, 2006 is $501,607.
Red Lake Property
The Company owns a 100% interest in eight mining claims in southeast Dome Township covering approximately 60 hectares, 2.5 km from Goldcorp’s mine in Red Lake located in the District of Kenora in northwest Ontario. Grandview has signed a letter of intent to enter into an option and joint venture agreement with Goldcorp Inc., whereby Goldcorp will operate at the Company’s Red Lake Property and will fund exploration activities. Under the terms of the Letter of Intent, which is subject to the negotiation and execution of a formal option and joint venture agreement between the parties, of which there can be no assurance, Goldcorp may earn a 60% interest in the Red Lake Property by incurring expenditures of $100,000 within 18 months of signing the agreement.
Exploration costs of $96,108 were incurred during the first quarter 2007. Cumulative exploration costs incurred to date from inception of the exploration stage to August 31, 2006 is $1,170,911.
Gem Gold Property
The Company and Marum Resources Inc. have entered into an option agreement to jointly explore Marum’s wholly-owned Gem gold property, which consists of seven claims covering 1,594 hectares at the eastern end of Manitoba’s Rice Lake Greenstone Belt. Grandview can earn a 50% interest in the property. To acquire the 50% interest, the Company is required to incur a total of $250,000 in exploration expenditures on the Gem Property by September 30, 2007, $125,000 which must be incurred by September 30, 2006. In addition, the exploration work must include a high-resolution aeromagnetic survey with a maximum 50 meter line spacing to be completed by March 31, 2006. The Company is also required to file with the Canadian government all assessment work required to keep the Gem Property in good standing.
Upon the Company completing the total of $250,000 in exploration work and filing all the required assessment work, the Company will be deemed to have earned a 50% interest in the Gem Property. Reference is made toItem 4D. Information on the Company: Property, Plant and Equipment for a discussion of the Company’s interest in this property.
Rocky Ridge Property
The Company has entered into a formal option agreement with Harvest Gold Corp (“Harvest Gold”) during November 2006, relating to the acquisition of a 70 percent interest in the Rocky Ridge gold property in Manitoba’s Lac du Bonnet Mining District.
Under the terms of the agreement, the Company has an option to earn an undivided 70 percent interest in the Rocky Ridge property by incurring $600,000 in resource exploration and development expenditures, $85,000 in payments, and issuing 225,000 of its Shares, over a two-year period. The issue of the 225,000 shares is subject to receipt of all required regulatory approvals.
Private Placements
On August 31, 2005, September 15, 2005 and October 19, 2005, the Company completed a private placement offering in three tranches resulting in the placement of a total of 1,389,424 units, with each such unit being comprised of one common share and one half of one purchase warrant where each whole purchase warrant is
- 31 -
exercisable into one additional common share upon payment of $1.75, at the subscription price of $1.25 per unit and 1,620,000 flow through common shares at $1.25 per flow through common share for total gross proceeds of $3,761,780. The proceeds from the offering were used by the Company to fund its exploration programs on its Canadian and US properties and for general working capital. $2,025,000 ($1,863,000 after payment of 8% commissions) of these funds represents sales of “flow-through” shares. The proceeds from the sale of flow-through shares may only be spent on Canadian properties. Accordingly, the Company will be unable to utilize any of the proceeds from the sale of the flow-through shares on exploration of the Pony Creek/Elliott Dome Property.
On March 27, 2006, the Company completed a private placement offering of 3,985,974 units, with each such unit being comprised of one common share and one half of one purchase warrant where each whole purchase warrant is exercisable into one additional common share upon payment of $1.75, at the subscription price of $1.10 per unit for total gross proceeds of $4,384,571. The proceeds from the offering were used by Grandview to fund its exploration programs on its Canadian and US properties and for general working capital.
For the past three years the Company’s activities have concentrated on exploring the mining properties it has acquired and the mining properties in which it may earn an interest, as described above. The Company also successfully listed its Shares for public trading in Canada. During this time, no revenues were realized. The Company has funded operations during the period through the sale of its Shares.
Year ended May 31, 2006 compared with year ended May 31, 2005
Grandview incurred a lower net loss for 2006 of $1,003,216, compared with $1,485,564 for the corresponding period last year (2004 - $1,058 income), due primarily to the recognition of a future income tax recovery of $731,430 during 2006. The future income tax recovery and related future tax asset resulted from the carry-forward of non-capital losses, used to reduce the future income tax liability created by the renunciation of eligible flow-through expenditure under the Canada Revenue Agency flow-through program.
The beneficial impact of the future income tax recovery on the loss incurred during 2006 was offset by increased investor relations, business development and reporting issuer maintenance costs, increased professional fees and a significant increase in office and administration expenses. Total expenses for 2006 were $1,564,646, compared with $1,485,564 for the corresponding period last year (2004 - $84,809).
The Company also considered merger and acquisition proposals during 2006 that were deemed to not meet the Company’s minimum valuation requirements. Expenditure relating to these activities was $170,000 for 2006, compared with $ nil for the corresponding period last year (2004 - nil).
Management considers the loss incurred during the 2006 to be in reasonable proportion to the magnitude of its significantly increased expenditures on exploration activities at several North American properties.
Grandview’s asset base and financial condition improved significantly since the same period the previous year as a result of the Company raising capital through private placements and the capitalization of exploration expenditures.
| | Year Ended | Year Ended |
| | May 31, 2006 | May 31, 2005 |
| Revenue | $ 0 | | $ 0 | |
| Expenses | 1,564,646 | | 1,485,564 | |
| Net income (loss) | (1,003,216) | | (1,485,564) | |
| Net income (loss) per share | (0. | 07) | (0. | 14) |
| Cash flows from (used in) operating activities | (992,736) | | (645,360) | |
| Cash and cash equivalents, end of period | 3,802,800 | | 244,067 | |
| Assets | 7,651,243 | | 943,727 | |
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Year ended May 31, 2005 compared with year ended May 31, 2004
The Company incurred a net loss of $1,485,564 for 2005, compared with net income generated of $1,058 for 2004. The loss was due to new or substantially higher expenses related to: management services (2005; $262,863; 2004: nil), reporting as an issuer (2005: $234,108; 2004: $15,306), professional fees (2005: $172,089; 2004: 18,912), and stock option compensation (2005: $775,613; 2004: nil).
Three months ended August 31, 2006 compared with three months ended August 31, 2005 (unaudited)
Grandview incurred a net loss of $914,200 for the first quarter 2007, compared with $255,905 for the corresponding period last year, due predominantly to an increase of $450,272 in stock option compensation expense and an increase of $158,807 in professional fees.
Cash flows used in operating activities for the first quarter 2007 of $633,346 increased by $498,579 over the corresponding period last year due predominantly to increased investor relations, business development and reporting issuer maintenance costs, increased professional fees, and prepaid investor relations expenditure of $173,300 incurred during the first quarter 2007.
Grandview’s asset base has improved considerably since the corresponding period last year as a result of the capitalization of exploration expenditures.
| | Three Months Ended | Three Months Ended |
| | August 31, 2006 | August 31, 2005 |
| Revenue | $ 0 | | $ 0 | |
| Expenses | 928,995 | | 255,905 | |
| Loss | (914,200) | | (255,905) | |
| Loss per share | (0. | 05) | (0. | 02) |
| Cash flows used in operating activities | (633,346) | | (134,767) | |
| Cash and cash equivalents, end of period | 2,343,105 | | 2,386,005 | |
| Assets | 7,211,013 | | 3,334,646 | |
Summary of Quarterly Results, November 31, 2004 to August 31, 2006
The following tables set out financial performance highlights for the past eight quarters.
| | First | Fourth | Third | Second |
| | Quarter | Quarter | Quarter | Quarter |
| | Aug. 31, 2006 | May 31, 2006 | Feb. 29, 2006 | Nov. 30, 2005 |
| Revenue | $ 0 | | $ 0 | | $ 0 | | $ 0 | |
| Expenses | 928,995 | | 507,216 | | 476,368 | | 325,157 | |
| Net income (loss) | (914,200) | | 54,214 | | (476,368) | | (325,157) | |
| Net income (loss) per share | (0. | 05) | (0. | 00) | (0. | (03) | (0. | 02) |
| Cash flows from (used in) operating activities | (633,346) | | (438,508) | | (203,098) | | (216,363) | |
| Cash and cash equivalents, end of period | 2,343,105 | | 3,802,800 | | 1,118,828 | | 1,812,367 | |
| Assets | 7,211,013 | | 7,651,243 | | 4,176,311 | | 4,332,979 | |
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| | First
Quarter
Aug. 31, 2006 | Fourth
Quarter
May 31, 2006 | Third
Quarter
Feb. 29, 2006 | Second
Quarter
Nov. 30, 2005 |
| |
| |
| Revenue | $ 0 | | $ 0 | | $ 0 | | $ 0 | |
| Expenses (recovery) | 255,905 | | 641,467 | | 455,589 | | 339,897 | |
| Net income (loss) | (255,905) | | (641,467) | | (455,589) | | (339,897) | |
| Income (loss) per share | (0. | 02) | (0. | 07) | (0. | 04) | (0. | 03) |
| Cash flows from (used in) operating activities | (134,767) | | (161,400) | | (273,373) | | (130,520) | |
| Cash and cash equivalents, end of period | 2,386,005 | | 244,067 | | 582,862 | | 31,710 | |
| Assets | 3,334,646 | | 943,727 | | 813,810 | | 267,221 | |
| B. | Liquidity and Capital Resources |
For the next twelve months the Company believes it will require approximately $2,000,000 for its exploration and administrative expenses. It requires (i) $1,275,000 in funds to pay for (a) its exploration activities on the Mill Creek/Elliot Dome, Dixie Lake and Bissett Gold Camp properties, (b) expenses related to its option to acquire a 51% interest in the Dixie Lake Property, and (c) its obligations with the Gem Property, and (ii) an additional $725,000 to cover its general & administrative expenses. At August 31, 2006 the Company had approximately $2.3 million cash on hand. The Company plans to pay for these expenses from its working capital and the planned sale of its Shares. However, there can be no assurances the Company will be able to raise the necessary funds.
Since all of the Company’s interests are only at the exploration stage, the Company has no sources of revenue other than interest earned on its cash. The primary source of funding for the Company is the issue of equity capital.
The Company’s capital requirements in the future will be largely dependant upon the success of its various exploration programs. Until such time as a feasibility study is completed and a production decision is made with regard to one of the Company’s properties, it is expected that the only available source of future capital will be through the issuance of additional equity shares. The availability of equity capital, and the price at which additional equity could be issued, is dependent upon the success of the Company’s exploration activities, and upon the state of the capital markets generally. SeeItem 3D. Key Information: Risk Factors.
| C. | Research and Development, Patents and Licenses, Etc. |
During the last three fiscal years, the Company has not engaged in any research and development activities. Its activities have been focused on (i) raising funds through the sales of its Shares in various private placements, and (ii) negotiating agreements (a) with Mill City to acquire its option to acquire a 60% interest in the Pony Creek/Elliott Dome Property in Elko County, Nevada, (b) with Fronteer to acquire an option to acquire a 51% in the Dixie Lake Property, in the Red Lake Mining Division, Ontario (c) with Wildcat Exploration Ltd, to acquire eleven mining claims located in the Bissett Gold Camp, near Bissett, Manitoba, (d) with Marum Resources Inc. (“Marum”) to acquire a 50% interest in the Gem Property, a property consisting of seven claims covering 1,594 hectares, located near Rice Lake, in Manitoba, (e) with Goldcorp Inc., granting Goldcorp an option to a 60% in the Red Lake Property by incurring exploration expenditures of $100,000 within 18 months of the parties entering into a formal option and joint venture agreement, and (f) and acquired an option to acquire a 70% interest in the Rocky Ridge Property, located in the Lac du Bonnet Mining District in Manitoba, Canada.
Not Applicable
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| E. | Off-Balance Sheet Arrangements |
The Company is not engaged in any off-balance sheet arrangements.
| F. | Tabular Disclosure of Contractual Obligations |
The Company’s only contractual obligations are in connection with its (i) option to acquire a 60% interest from Pony Creek/Elliott Dome Property in Elko County, Nevada, (ii) its option to acquire a 51% interest in the Dixie Lake Property, Red Lake Mining District, Ontario, Canada, (iii) its option to acquire a 50% interest in the Gem Property, located near Rice Lake, in Manitoba, Canada and (iv) its option to acquire a 70% interest in the Rocky Ridge Property, located in Manitoba’s Lac du Bonnet Mining District, Canada, as set forth in the following table:
| Payments Due by Period |
Payments Required to
Maintain Property Interests |
Total | Less than
One Year |
1-3 Years |
3-5 Years | More than
Five Years |
Required Exploration
Expenditures on Pony
Creek/Elliott Dome Property | $500,000 US
| $500,000 US
| $0
| $0
| $0
|
Advance Royalty Payments
Due to Pescio2 | $950,000 US
next 5 years |
$75,000 US(1)
| $325,000 US
| $550,000 US
| $200,000 US
per year |
Required Exploration
Expenditures on Dixie Lake
Property | $300,000 CAD
| $300,000 CAD
| $0
| $0
| $0
|
Payments to English for
Dixie Lake Property | $75,000 CAD
| $75,000 CAD
| $0
| $0
| $0
|
Required Exploration
Expenditures on Gem
Property | $250,000 CAD
| $250,000 CAD
| $0
| $0
| $0
|
Required Exploration
Expenditures on Rocky
Ridge Property | $600,000 CAD
| $ 0
| $600,000 CAD
| $0
| $0
|
Payments to Harvest Gold
Corp for Rocky Ridge
Property | $85,000 CAD
| $ 0
| $85,000 CAD
| $0
| $0
|
Total
| $1,310,000CAD
$1,450,000 US | $625,000 CAD
$575,000 US | $685,000 CAD
$325,000 US | $550,000 US
| $200,000 US
per year |
| | Note: |
| | (1) | The Company is required to make advance royalty payments to Pescio in connection with the |
| | | acquisition by Mill City of the Pony Creek/Elliott Dome Property. |
Reference is made toItem 4D. Information on the Company: Property, Plant and Equipment for a discussion of the above payment obligations.
| ITEM 6: | Directors, Senior Management, and Employees |
| A. | Directors and Senior Management |
Name |
Title |
Date of Birth | Date of First Election
or Appointment |
| Richard Brown | Chairman, Director | March 25, 1958 | March 26, 2004 |
| Paul Sarjeant | President and CEO | May 29, 1960 | November 1, 2006 |
| Michael Hitch | Chairman of the Board of Directors | November 16, 1962 | November 8, 2005 |
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Name |
Title |
Date of Birth | Date of First Election
or Appointment |
| Richard Brown | Director | March 25, 1958 | March 26, 2004 |
| Michael Dehn | VP Corporate Development | April 2, 1969 | August 01, 2005 |
| Ernest Cleave | Chief Financial Officer | Oct. 2, 1969 | January 6, 2006 |
| Ian Grant | Director | June 23, 1958 | March 26, 2004 |
| John Hogg | Director | July 11, 1945 | March 26, 2004 |
| Joel Strickland | Director | April 13, 1962 | December 20, 2004 |
| Michael Hitch | Director | Nov. 16, 1962 | November 8, 2005 |
| R. Ian Mitchell | Corporate Secretary | Oct. 25, 1977 | November 7, 2005 |
A brief education and relevant work history of our Directors and Management follows:
Richard Brown
Mr. Brown has been a partner with Osprey Capital (a private investment banking firm based in Toronto, Canada) since November 2001. Mr. Brown brings to the Company experience in public company administration, as he was previously chief financial officer of Navitrak International Company, a publicly traded company. Mr. Brown was responsible for all financial aspects of Navitrak, including raising over $6 million in equity, the negotiation of bank facilities, acquisitions and the development of their business strategy. Prior to Navitrak, Mr. Brown spent ten years with the Bank of Nova Scotia and Scotia Capital Markets in New York, acting as Vice President from 1992-1997. During this time he worked as a corporate lending officer and head of investment grade fixed income origination, focusing primarily on Canadian issuers accessing the U.S. capital markets. Mr. Brown holds a Masters degree in finance from the Daniels School of Business at the University of Denver and a BA in Economics from the University of Guelph. Mr. Brown currently spends a minimum of 12 hours per week on the affairs of the Company. Mr. Brown also holds the position of Director on the Boards of: Phoenician Holdings Corp. and Navitrak International Corp.
Paul Sarjeant, President, CEO
Mr. Sarjeant holds a B.Sc Honours, Geological Sciences, graduating from Queen's University in 1983, Mr. Sarjeant began his career with Echo Bay Mines Ltd as a project geologist working on projects in the NWT, Archean greenstone belts, Lupin Mine peripheral project, and skarn properties in BC and Ecuador. He ascended to Senior Geologist, International Exploration Group, responsible for project evaluation outside of North America, including precious and base metals projects in South America, East Africa, South East Asia, Russia, Mongolia, Australia, New Zealand and Europe. From 1993 until 1996, he was President and CEO of Auric Resources - a precious metals exploration company focused on Peru. From 1999 until his October, 2006 appointment to the office of President and CEO of Grandview Gold, Paul operated a securities business focused on strategic planning and investment analysis were he earned his CFP designation, as a certified financial planner Mr Sarjeant is also a member in good standing with the Association of Engineers and Geoscientists of British Columbia.
Michael A. Dehn, Vice President – Corporate Development
Mr. Dehn worked from 1994 through August 2005 at Goldcorp Inc. (“Goldcorp”), a Canadian company engaged in gold mining production in Canada and elsewhere. Mr. Dehn was most recently Senior Geologist for Goldcorp, and managed all of Goldcorp’s regional exploration programs in the Red Lake Gold Camp, Canada, since 1999. Mr. Dehn spends approximately 60% of his time on the Company’s affairs.
Ernest Cleave – Chief Financial Officer
Mr. Cleave currently serves as Managing Partner for Lannick Consulting and was recently responsible for leading the Sarbanes-Oxley compliance projects at NYSE/TSX listed Falconbridge Ltd. and Goldcorp Inc. Mr. Cleave directed corporate planning and analysis, treasury, internal control and regulatory compliance at Goldcorp Inc. from 2001 to 2005. From 1997 to 2001, he worked with Bata Limited in various financial roles, including Controller for Bata South Africa and Chief Financial Officer, Bata International – Africa region. Mr. Cleave serves, on a part-time basis, as Chief Financial Officer, of Gold Run Inc., a start-up gold exploration company, with
- 36 -
interests in Nevada. Mr. Cleave devotes approximately 30 hours per month each on his duties as chief financial officer of the Company and Gold Run Inc.
John M. Hogg, Certified Geologist
John M. Hogg holds a Bachelor of Science (B.Sc.) Special Honours in Geology from the University of London, 1966 and is a Fellow of the Geologists Society of London (FGS), 1969 as well as a Chartered Geologist (UK), 1990. Mr. Hogg brings over 35 years experience in mineral exploration, including 29 years in the Nevada, Great Basin Region. Mr. Hogg brings extensive experience in resource exploration and development activities with a number of public companies including supervision of High Desert Mineral Resources as Vice President of Exploration (1993-2004) which included supervision of High Desert’s involvement in Newmont Exploration Limited’s operations on the Newmont Gold & Barrick HD Joint Venture Property resulting in the discovery of over 4 million ounces of gold known as the West Leeville, Four Corners and Hardie Footwall deposits located on the Carlin Trend in Nevada. Mr. Hogg currently spends approximately 2-5 hours per week on the affairs of the Company. Mr. Hogg does not hold a position with any other boards at this time.
Ian Grant
Mr. Grant holds a B.A. from Queens University, Kingston Ontario in 1977 majoring in Economics and French and subsequently attended the Sorbonne (Paris IV). Mr. Grant is presently chairman of SeaBiscuit Capital Corporation, a privately held investment firm with holdings in both private and public companies. Mr. Grant was a director for Navitrak International and brings extensive experience in investing in public and private companies. Mr. Grant currently spends approximately of 5-10 hours per week on the affairs of the Company. Mr. Grant also holds the position of Director on the Boards of Ian S Grant Holdings Limited and Dyment Limited. He has been the President of Ian S Grant Holdings Limited since 1988.
Joel Strickland
Mr. Strickland is currently the Vice President, M&A of Navitrak International, an OTC publicly traded technology company based in Halifax, Nova Scotia, Canada. He has been with Navitrak since 2002. From 2000-2002, he was a consultant for Capital Partners Corp, a private investment banking firm in Toronto, Ontario, Canada. From 1996-1999 he was President of Innovadent Technologies, a technology company located in Newmarket, Ontario, Canada. A graduate of the University of Western Ontario Ivey School of Business, Mr. Strickland spent several years trading fixed income securities in Toronto and New York before shifting his focus to work with emerging companies. Mr. Strickland currently spends approximately 1-2 hours per week on the affairs of the Company. Mr. Strickland also holds the position of Director on the board of Navitrak International Corp in Canada and Navitrak Engineering Inc. in the US.
Michael Hitch- Director
Mr. Hitch is the Chief Operating Officer and Managing Director of Golden China Management. Golden China Management provides management services to Golden China Resources Corporation, a Toronto-based, Chinese company listed on the TSX-V. Golden China’s business focuses on exploration and development, operations/production and merchant banking within the rapidly developing precious metal mining industry in the Peoples’ Republic of China. During the past five years Mr. Hitch has held positions as a mining analyst for Clarus Securities Inc. and Octagon Capital Corporation, as well as Vice President Corporate Development of Ivanhoe Mines Ltd.
R. Ian Mitchell - Corporate Secretary
Mr. Mitchell is an associate with the law firm WeirFoulds LLP, counsel to the Company, and his practice has focused on securities law and corporate finance. Mr. Mitchell holds a Bachelors degree (Honours) in Commerce from Queen’s University as well as an L.L.B. from Dalhousie University.
The compensation for the Company’s executive officers for the fiscal year ended May 31, 2006 is as set out below:
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Name and Principal
Position |
Year | Annual Compensation | Long Term Compensation |
Salary ($) |
Bonus ($) | Other
Annual
Compen-
sation
($) | Securities
Under
Options
Granted
(#) | Restricted
Shares or
Restricted
Share Units
(#) |
All Other
Compensat
ion ($) |
Raymond Pecoskie,
President and CEO(3) | 2006
| 140,184(1)
| Nil
| 8,051.40
| Nil(2)
| Nil
| Nil
|
Ernest Cleave,
Chief Financial
Officer(4) | 2006
| 12,000
| Nil
| Nil
| 150,000
| Nil
| Nil
|
| | Notes: |
| | (1) | June 1, 2004, the Company entered into a management agreement with Global-Tek Business Development Inc. ("Global-Tek"), a company owned by Mr. Pecoskie, to provide management and consulting services to the Company in exchange for $11,682 per month. This contract was terminated on July 11, 2006 when the Company entered into a three-month contract for similar services on an interim basis. This contract has also been terminated. |
| | | |
| | (2) | 750,000 Options, vesting 25% quarterly and with a strike price of $1.00, were issued to Global-Tek on October 1, 2004. Global-Tek subsequently surrendered 375,000 of these options on July 11, 2006. |
| | | |
| | (3) | Raymond Pecoskie stepped down as president and CEO of the Company on July 11, 2006 at which point Mr. Michael Hitch assumed the role of interim-CEO. Paul Sarjeant was appointed to the position of CEO on November 1, 2006. Mr. Sarjeant receives $12,500 per month in salary, an additional $1,000 in office space allowance expense and $1,000 per month in a car allowance through my consulting company Doublewood Consulting. Mr. Sarjeant also received 500,000 options at an exercise price of $1.00 per Share, vesting immediately. |
| | | |
| | (4) | Ernest Cleave was retained to act as Chief Financial Officer of the Company on January 6, 2006. |
Long-Term Incentive, Retirement and Pension Plans
The Company does not have a long-term incentive plan or pension plan and does not provide retirement benefits to its employees.
No Termination Agreements for Executive Officers and Directors
The Company has no plans or arrangements that would result in the compensation of an executive officer or director in the event such person’s employment is terminated, as a result of either resignation, retirement, change of control, or change of responsibilities following a change in control.
Stock Option Plan
On March 26, 2004 the Company’s shareholders approved the establishment of a Stock Option Plan (the “Plan”) for the purpose of providing incentives to directors, officers, employees and consultants of the Company. At the Company’s Annual and Special Meeting of Shareholders held on November 30, 2006 the Company’s shareholders approved certain changes to the Company’s Stock Option Plan. As amended on November 30, 2006, the maximum number of Shares reserved for issue under the Plan cannot exceed 20% of the issued and outstanding Shares from time to time. The total number of Shares, which may be reserved for issuance in any 12-month period is subject to the following limitations:
a) the number of Shares reserved for issuance pursuant to options granted to insiders cannot exceed 20% of the Company's issued and outstanding Shares;
b) the grant to insiders, within any twelve-month period, of Options reserving for issuance a number of Shares cannot exceed in the aggregate 10% of the Company's issued and outstanding Shares;
c) the grant to any one individual, options reserving for issuance a number of Shares cannot exceed in the aggregate 5% of the Company's issued and outstanding Shares;
d) the grant to all persons engaged by the Company to provide Investor Relations Activities, of options reserving for issuance a number of Shares cannot exceed in the aggregate 1% of the Company's outstanding number of listed securities;
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e) the grant to any one consultant of options reserving for issuance a number of Shares cannot exceed in the aggregate 2% of the Company's issued and outstanding Shares.
The purpose of the Plan is to attract, retain and motivate directors, officers, employees and other service providers by providing them with the opportunity, through share options, to acquire a proprietary interest in the Company. The options are non-assignable and may be granted for a term not exceeding five years.
The Plan is currently administered by the Board of Directors (the “administrator”). Options may be granted to purchase Shares on such terms that the administrator of the Plan may determine within the limitations of the Plan and subject to the rules of applicable regulatory authorities. In determining the number of optioned Shares that may be granted to each optionee, consideration will be given to the optionee’s present and potential contribution to the success of the Company and to any applicable regulatory requirements.
Options may be granted under the Plan only to directors, officers, employees and other service providers subject to the rules and regulations of applicable regulatory authorities and any Canadian stock exchange upon which the Shares may be listed or may trade from time to time. The number of Shares reserved for issue to any one person pursuant to the Plan may not exceed 5% of the issued and outstanding Shares at the date of such grant.
The exercise price for options granted under the Plan may not be less than the “fair market value” of the Shares at the time of grant as determined by the administrator of the Plan but the TSX (or any other applicable stock exchange) for the ten trading days prior to the date of grant. Options are non-assignable and are exercisable for a period of up to five years from the date the option is granted (or up to ten years from the date of grant if permitted by applicable stock exchanges), subject to earlier termination after certain events such as the optionee’s cessation of service to the Company or death.
Each director is currently serving a one (1) year term, renewable at the annual shareholder meeting.
None of the Company’s directors have any service contracts.
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 Grandview’s audits, the Company’s internal accounting controls, and the professional services furnished by the independent auditors to the Company. The Audit Committee meets as required to review the annual and quarterly financial statements, matters relating to the securities commissions, investments and transactions that could adversely affect the well-being of the Corporation and management's recommendations regarding share issues of the Corporation. The Audit Committee also establishes and monitors procedures to reduce conflicts of interest and for reviewing audit and financial matters. Through meetings with external auditors and senior management, the Audit Committee discusses, among other things, the effectiveness of the internal control procedures established for the Corporation. At all times, at least one (1) audit committee member possesses accounting or related financial expertise, while the remaining members are, at minimum, possessed of significant experience in analyzing the financial condition of corporations. The board has adopted a charter for the audit committee which sets out the responsibilities of the committee and provides guidance to committee members as to their duties which charter is set forth as an Exhibit 5B.See Item 19. Exhibits. The Audit Committee of the Corporation currently consists of three (3) members: Richard Brown, Ian S. Grant and Joel Strickland.
In addition, the Company has a compensation committee. The Compensation Committee reviews compensation practices and management succession and approves the remuneration of the Company's senior executives, including the Chief Executive Officer. The Compensation Committee also monitors the integrity of management through periodic meetings with the Chief Executive Officer. The members of the Compensation Committee are Messrs. Richard Brown, Ian S. Grant, and Michael Hitch.
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The Company’s only employees are Mr. Paul Sarjeant, Mr. Michael Dehn, and Mr. Cleave. For further details of their respective agreements setting forth their responsibilities, compensation, and related issues, seeItem 10C. Material Contracts.
The following table outlines shows the shareholdings of the Directors and Senior Management, as at December 10, 2006.
Table No. 4:Shareholdings of Directors and Senior Management (at December 10, 2006)
Title of Class |
Name of Beneficial Owner | Amount and
Nature of
Beneficial
Ownership(1) |
Percent of
Class |
| Common | Paul Sarjeant | Nil | - |
| Common | Richard Brown | 5,000(2) | 0.02% |
| Common | Ian Grant | 126,000 | 0.66% |
| Common | John Hogg | Nil | - |
| Common | Joel Strickland | Nil | - |
| Common | Michael Dehn | Nil | - |
| Common | Ernest Cleave | Nil | |
| | | Notes: | |
| | | (1) | These amounts do not reflect (i) the 500,000 Shares, 150,000 Shares, 75,000 Shares, 75,000 Shares, 75,000 Shares, 150,000 Shares, and 150,000 Shares which can be acquired pursuant to the exercise of stock options by Messrs. Sarjeant, Brown, Grant, Hogg, Strickland, Dehn, and Cleave, respectively. |
| | | | |
| | | (2) | This amount does not include 350,000 Shares owned by Mr. Brown’s wife, who performs investor relations work for the Company. Mr. Brown disclaims beneficial ownership of the Shares owned by his wife. |
The following table sets forth the Company’s outstanding stock options as at December 10, 2006.
Table No. 5:Stock Options Outstanding (at December 10, 2006)
Name | Number of
Shares | Exercise
Price |
Expiration Date |
| Michael Hitch | 150,000 | $1.25 | January 6, 2011 |
| Ernest Cleave | 150,000 | $1.25 | January 6, 2011 |
| Sophie Tsementzis | 50,000 | $1.25 | January 6, 2008 |
| Richard Brown | 200,000 | $1.80 | April 3, 2011 |
| Michael Hitch | 100,000 | $1.80 | April 3, 2011 |
| Ian S. Grant | 150,000 | $1.80 | April 3, 2011 |
| Joel Strickland | 100,000 | $1.80 | April 3, 2011 |
| John Hogg | 50,000 | $1.80 | April 3, 2011 |
| Stephen Jakob | 100,000 | $1.10 | June 1, 2011 |
| Connect Capital Limited | 500,000 | $1.10 | January 11, 2008 |
| Protec Trading Inc. | 50,000 | $1.10 | July 11, 2007 |
| Ted Markowitz | 100,000 | $1.10 | July 11, 2007 |
| Paul T. Sarjeant | 500,000 | $1.00 | October 31, 2011 |
| D. Richard Brown | 150,000 | $1.00 | October 1, 2009 |
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Name | Number of
Shares | Exercise
Price |
Expiration Date |
| Ian Grant | 75,000 | $1.00 | October 1, 2009 |
| John Hogg | 75,000 | $1.00 | October 1, 2009 |
| Joel Strickland | 75,000 | $1.10 | December 20, 2009 |
| Michael Dehn | 150,000 | $1.25 | August 25, 2010 |
| ITEM 7: | Major Shareholders and Related Party Transactions |
At December 10, 2006, the Company had 19,086,892 Shares outstanding. At such date Gordon Cooper (“Cooper”) was the only person beneficially owning more than 5% of the Company’s outstanding Shares. At such date Cooper was the beneficial owner of 2,513,533 Shares, which represented 13.7% of the Company’s outstanding Shares. According to a Schedule 13Ds filed on August 3, 2005 and August 31, 2006 with the Securities and Exchange Commission, Cooper (i) owns 341,0000 Shares directly, (ii) owns an additional 217,333 Shares through his 1/3 interest in a partnership, Contact Partners (iii) is the beneficial owner of an additional 1,810,200 Shares pursuant to a voting trust agreement dated July 22, 2005, granting Cooper the sole right to vote and approve the transfer of such Shares and (iv) has an oral agreement with two individuals providing him with shared voting power over 295,000 Shares.
In 1998 Cooper became the sole beneficiary of Cocum Stiftung, a trust formed to invest in public companies (the “Trust”). In 2005 the Trust owned 2,252,997 Shares. In 2005 Cooper decided to dissolve the Trust due to maintenance costs and the Shares held by the Trust were distributed to Cooper’s relatives, friends, and business associates as follows:
| Name | Amount |
| John Esplen | 475,200 |
| Myrtle Cooper | 325,000 |
| Jennifer Cooper | 434,665 |
| Chris DeAngelis | 575,335 |
| Murray Cook | 442,797 |
On July 22, 2005, the persons listed directly above, other than Murray Cook, entered into a voting trust agreement with Cooper (i) granting Cooper the sole power to vote the 1,810,200 Shares owned by them, and (ii) providing that the Shares could not be transferred without Cooper’s prior written approval.
Cooper also has an oral agreement with an individual, John Belonzo, granting him shared voting power over Mr. Belonzo’s 145,000 Shares.
There has been no significant change in Cooper’s shareholdings during the past three years, although the form of some of Cooper’s shareholdings has changed. Originally, Cooper was the beneficial owner of 2,252,997 Shares owned by the Trust. Currently, he is the beneficial owner of 1,810,200 Shares previously held by the Trust, but now covered by the July 22, 2005 voting trust agreement.
At December 15, 2006, the Company had 98 U.S. holders of record, holding 764,053 common shares, which represented 4.0% of the Company’s outstanding Shares. At such date, there were no arrangements, the operation of which could result in a change of control. All shareholders have the same voting rights with respect to the Shares.
| B. | Related Party Transactions |
During the fiscal year ended May 31, 2006, no director, executive officer, person owning at least 5% of the Company’s outstanding Shares, or affiliate thereof, has or has had any material interest, directly or indirectly, in any transaction involving the Company since its incorporation, or in any proposed transaction involving the Company.
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The Company entered into the Management Services Agreement effective June 1, 2004, with Global-Tek Business Development Inc., a company wholly owned by Raymond Pecoskie, the Company’s president at the time, for management and administrative services. Under the terms of the agreement, the Company agreed to pay Global-Tek $11,682 Can. per month in exchange for management, leadership and strategic business development services. Additionally, Global-Tek was entitled to an option agreement with the Company to purchase up to 750,000 Shares, exercisable at $1.00 per share and vesting quarterly, commencing October 1, 2004 in four equal instalments of 187,500 Shares each. The Company had agreed to reimburse Global-Tek for any business-related expenses including travel, cell phone or Blackberry, an office space allowance of $490.00 per month, a monthly car allowance of $670.95/month and related automobile expenses. The Management Services Agreement was terminated by agreement between both parties in June 2006. 375,000 of the options were cancelled, and Global-Tek retains 375,000 options.
| C. | Interests of Experts and Counsel |
Not Applicable.
| ITEM 8: | Financial Information |
| A. | Consolidated Statements and Other Financial Information |
Reference is made toItem 17. Financial Statements for the financial statements included in this Registration Statement.
There are no legal proceedings of a material nature pending against the Company, or its subsidiaries. The Company is unaware of any legal proceedings known to be contemplated by any governmental authorities.
The Company has never paid a dividend and it is unlikely that the Company will declare or pay a dividend until warranted.
Subsequent to August 31, 2006, there have been no significant changes in the Company’s financial condition.
| ITEM 9: | The Offering and Listing. |
| A. | Offer and Listing Details |
The Company’s Shares are currently listed for trading on the TSX (Toronto Stock Exchange) under the trading symbol "GVX” and in the United States on the OTC Bulletin Board under the symbol “GVGDF”. Prior to April, 2006, the Company’s Shares were listed and posted for trading on the CNQ.
Following is information on the trading history of the Company’s Shares:
The low and high market prices for the Shares, on a quarterly basis, for the last two fiscal years and the six months beginning June 1, 2006, on the TSX Exchange and CNQ are as follows:
| TSX Exchange and CNQ |
| MONTH ANDYEAR | LOW | HIGH |
| September 1, 2004 – November 30, 2004(1) | 1.00 | 1.35 |
| December 1, 2004 – February 28, 2005(1) | 0.99 | 1.85 |
| March 1, 2005 – May 31, 2005(1) | 1.07 | 2.00 |
| June 1, 2005 – August 31, 2005(1) | 1.12 | 1.45 |
| September 1, 2005 – November 30, 2005(1) | 1.00 | 1.51 |
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| TSX Exchange and CNQ |
| MONTH ANDYEAR | LOW | HIGH |
| December 1, 2005 – February 28, 2006(1) | 0.90 | 1.35 |
| March 1, 2006 – May 31, 2006(2) | 0.85 | 2.05 |
| June 1, 2006 – August 31, 2006(2) | 0.78 | 1.25 |
| September 1, 2006 – November 30, 2006(2) | 0.64 | 1.12 |
| | Notes: |
| | (1) | Trading on the CNQ |
| | (2) | Trading on the TSX |
The Company’s Shares commenced traded on the OTC Bulletin Board on February 23, 2006. The low and high market prices for the Shares, on a quarterly basis, in U.S. dollars, on the OTC Bulletin Board, since February 23, 2006 are as follows:
| OTC Bulletin Board |
| MONTH ANDYEAR | LOW | HIGH |
| December 1, 2005 – February 28, 2006 | 1.095 | 1.250 |
| March 1, 2006 – May 31, 2006 | 0.600 | 1.600 |
| June 1, 2006 – August 31, 2006 | 0.600 | 1.050 |
| September 1, 2006 – November 30, 2006 | 0.521 | 0.892 |
The low and high market prices for the Shares on the TSX Exchange for the period June 1, 2006 to November 30, 2006, in Canadian dollars, are as follows:
| TSX EXCHANGE |
| DATE | LOW | HIGH |
| June 2006 | 0.78 | 1.25 |
| July 2006 | 0.95 | 1.25 |
| August 2006 | 1.04 | 1.25 |
| September 2006 | 0.73 | 1.12 |
| October 2006 | 0.67 | 0.86 |
| November 2006 | 0.64 | 0.97 |
The low and high market prices for the Shares on the OTC Bulletin Board for the period June 1, 2006 to November 30, 2006, in U.S. dollars, are as follows:
| OTC BULLETINBOARD |
| DATE | LOW | HIGH |
| June 2006 | 0.600 | 0.890 |
| July 2006 | 0.860 | 0.899 |
| August 2006 | 0.943 | 1.050 |
| September 2006 | 0.521 | 0.892 |
| October 2006 | 0.561 | 0.750 |
| November 2006 | 0.570 | 0.601 |
The closing prices of the Shares on the TSX on December 15, 2006 and the OTC Bulletin Board were $0.58Can. and $0.51 U.S., respectively.
B. | Plan of Distribution |
| | |
| Not applicable. |
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| C. | Markets |
| |
| See A. above |
| |
| D. | Selling Shareholders |
| |
| Not applicable. |
| E. | Dilution |
| | |
| Not applicable. |
| |
| F. | Expenses of the Issue |
| | |
| Not applicable. |
| ITEM 10: | Additional Information |
Not Applicable.
| B. | Memorandum and Articles of Association |
Reference is made to Amendment No. 2, to Registration Statement on Form 20-F, filed with the Securities and Exchange Commission on November 15, 2005).
The following material contracts have been entered into by the Company within the past two years:
1) Option Agreement dated April 13, 2005 on the Pony Creek/Elliot Dome properties with Mill City Gold Corp. (“Option Agreement”) relating to the Company’s option to earn up to a 60% interest in the Pony Creek/Elliot Dome Property. SeeItem 4D. History and Development of the Company: Property, Plant and Equipment.
2) Management Services Agreement dated June 1, 2004 between the Company and Global-Tek Business Development Inc., a company wholly owned by Raymond Pecoskie, for management and administrative services. Under the terms of the agreement, the Company agreed to pay Global-Tek in exchange for management, leadership and strategic business development services CAD$11,682 per month, payable on the 25th of each month. Additionally, Global-Tek was entitled to an option agreement with the Company to purchase up to 750,000 common shares, exercisable at $1.00 per share and vesting quarterly, commencing October 1, 2004 in four equal instalments of 187,500 common shares each. The Company agreed to reimburse Global-Tek for any business-related expenses including travel, cell phone or Blackberry, an office space allowance of $490.00 per month, a monthly car allowance of $670.95/month and related automobile expenses. This agreement was terminated in June 2006. SeeItem 6: Directors, Senior Management and Employees andItem 7. Major Shareholders and Related Party Transactions.
3) Consulting Agreement dated September 14, 2004 between the Company and Bay Street Connect Ltd. (“Bay”) whereby Bay would identify and attract potential investors. The agreement had a 6-month term with compensation to Bay of $4,000/month plus 100,000 stock options exercisable at an option price of $1.00 for five (5) years. This Agreement was terminated effective December 21, 2004 and 100,000 stock options were cancelled.
4) Agency agreement dated June 29, 2004 with IBK Capital Corp (“IBK”) whereby IBK would obtain for Grandview a private placement of up to 1,000,000 common shares at an offering price of $1.00 per share. In exchange for their services, Grandview would provide IBK a non-refundable work fee of $25,000, a 9% commission on the closing date, plus common share purchase warrants totalling a quantity equal to 10% of the total amount of the consideration divided by the price per share. This agreement expired December 29, 2004.
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5) Investor Relations agreement dated March 1, 2005 between the Company and Tangent Management Corp. for the purpose of developing and executing investor and public relations programs directed toward individual investors, analysts and institutional investors. The agreement has an initial three-month term, with compensation of $5,000 per month and 100,000 options at an exercise price of $1.65. 50,000 of the options have a term of six months and 50,000 have a term of twelve months. All 100,000 options are fully vested July 1, 2005. After 3 months, either party may cancel the agreement with one (1) day written notice.
6) Agreement for Purchase and Sale Among Grandview Gold Inc. and Wildcat Exploration Ltd. dated effective April 27, 2005 for the purpose of acquiring mineral dispositions (the “Property"). The Property consists of 11 claims totalling 234 hectares, registered in the Province of Manitoba, Canada. The purchase price for the property is $100,000 and 70,000 common shares of the Company.
7) Letter of Intent with Goldcorp Inc. (“Goldcorp”), dated July 20, 2005 granting Goldcorp an option to acquire a 60% in the Red Lake Property. SeeItem 4D. History and Development of the Company: Property, Plant and Equipment.
8) Option Agreement with Fronteer with Fronteer Development Group Inc. and the Company, effective dated as of October 18, 2005, relating to the Company’s option to acquire a 51% interest in the Dixie Lake Property, Red Lake, Ontario.SeeItem 4D. History and Development of the Company: Property, Plant and Equipment.
9) Investor Relations agreement dated September 1, 2005 between the Company and Renmark Financial Services (“Renmark”) for the purpose of developing and executing investor and public relations programs directed toward individual investors, analysts and institutional investors. The agreement is for a twelve-month period, starting September 1, 2005 and ending August 31, 2006. The Company may terminate the agreement anytime after February 28, 2006, by providing Renmark a 30-day written notice to the effect. Compensation is $5,000 per month from September 1, 2005 through February 28, 2006, and $7500 per month for the months March-August 2006. The Company also agrees to compensate for any reasonable expenses incurred by Renmark over the course of business, provided these expenses have been pre-approved by an authorized officer of The Company.
10) Memorandum of Agreement for Diamond Drilling Work dated September 12, 2005 between The Company and Rodren Drilling Ltd. (“Rodren”). Rodren has been contracted by the Company to conduct up to 2500 meters of diamond drilling on the Company’s Dixie Lake Property SeeItem 4D. History and Development of the Company: Property, Plant and Equipment. Work commenced in September 2005, and is scheduled to end in November 2005. The costs of this drilling program includes $20,000 for initial set-up and take down of Rodren’s drilling equipment and $50,000 as an advance payment against drilling. The advance payment will be taken off the final invoice.
11) Option Agreement dated September 30, 2005 between the Company and Marum Resources Inc. (“Marum”), as amended December 15, 2006, granting the Company an option to acquire a 50% interest in the Gem Property, a property consisting of seven claims covering 1,594 hectares, located near Rice Lake, in Manitoba. See Item 4D. History and Development of the Company: Property, Plant and Equipment.
12) Consulting Agreement dated August 1, 2005 with Michael A. Dehn (“Dehn”). The Company has entered into a Consulting Contract Agreement with Dehn, who was appointed in August 2005 as the Company’s Vice President of Corporate Development. Under the agreement Dehn’s receives $72,000 per year. In addition, Dehn was granted options to acquire 150,000 Shares, at an exercise price of $1.30 per Share, vesting quarterly over the initial year of the agreement. Dehn will also be entitled to an option to acquire 10,000 Shares, at an undetermined price, or $10,000 in cash, in the event the Company enters into a letter of intent with Golden Pocket Resources Ltd. and signed by Irwin Pauls. The Company has also agreed to reimburse Mr. Dehn for any business-related expenses including travel, cell phone or Blackberry, automobile parking and gas expense, a field vehicle lease allowance of $500 per month and a hardware and software lease expense of $1,800 amortized over 12 months. The agreement is for one year, to be automatically extended on a year-to-year basis, unless terminated by either party.
13) Finders Fee Agreement dated effective October 20, 2005 between the Company and McKenna Gold Inc. In connection with the Company’s acquisition of an option to acquire a 51% interest in the Dixie Lake
- 45 -
Property, Red Lake, Ontario, the Company issued 160,000 Shares to McKenna Gold Inc. as a finder’s fee. SeeItem 4D. History and Development of the Company: Property, Plant and Equipment.
14) Following the termination of its Management Services Agreement with Ray Pecoskie in June 2006, the Company entered into a consulting services agreement (the "Consulting Services Agreement") with Michael Hitch whereby Mr. Hitch agreed to serve as the Corporation's Chief Executive Officer. Under the terms of the Consulting services Agreement, the Corporation agreed to pay Mr. Hitch $6,250 Can. per month in exchange for management, leadership and strategic business development services. The Consulting Services Agreement had a three month term and expired on September 12, 2006.
15) The Company entered into a consulting agreement dated November 15, 2005 with Ernest M. Cleave, pursuant to which Mr. Cleave was appointed the Company’s Chief Financial Officer. Under this agreement Mr. Cleave receives $36,000 per year. In addition, Mr. Cleave was granted options to acquire 150,000 Shares, at an exercise price of $1.25 per share, vesting quarterly over the initial one year term of the agreement.
16) On July 11, 2006 the Company retained Connect Capital Limited (“CCL”) and Connect Corporate Communications Inc. (“CCCI” and collectively the “Connect Group”) to assist with invest and public relation services on behalf of the Company. CCL and CCCI each receive a monthly retainer of $10,000 US for an 18-month term subject to termination by the Company with 30 days written notice. The Company has also issued to CCL an option to purchase 500,000 Shares at an exercise price of $1.10 per Share for the term of the agreement.
17) On July 12, 2006 the Company entered into a Field Management Agreement with Carlin Trend Mining Services (“Carlin Trend”) pursuant to which the Company hired Carlin Trend, on a month-to-month basis, to oversee and conduct exploration work on the Pony Creek/Elliott Dome Property. SeeItem 4D. History and Development of the Company: Property, Plant and Equipment.
18) On July 11, 2006 the Company retained the services of Mr. Ted Markovitz as a capital markets consultant. Under the terms of the agreement, Mr. Markovitz has received an option to purchase 100,000 Shares at an exercise price of $1.10 per Share.
19) On November 23, 2006 the Company entered into an agreement with Harvest Gold Corporation pursuant to which the Company acquired an option to earn up to a 70% interest in the Rocky Ridge Property, in the Lac du Bonnet Mining District in Manitoba.See Item 4D. History and Development of the Company: Property, Plant and Equipment.
20) On October 31, 2006 the Company entered into a consulting agreement with Paul Sarjeant pursuant to which Mr. Sarjeant agreed to serve as the Company’s president and chief executive officer. SeeItem 6B. Directors, Senior Management and Employees - Compensation.
There are no laws, governmental decrees or regulations in Canada that restrict the export or import of capital or which affect the remittance of dividends, interest or other payments to non-resident holders of our shares, other than withholding tax requirements. Reference is made toItem 10E. Taxation.
There are no limitations under the laws of Canada or the Province of Ontario, or in our constituting documents, with respect to the right of non-resident or foreign owners to hold or vote Shares other than those imposed by theInvestment Canada Act.
TheInvestment Canada Act is a federal Canadian statute which regulates the acquisition of control of existing Canadian businesses and the establishment of new Canadian businesses by an individual, a government or entity that is a "non-Canadian" as that term is defined in theInvestment Canada Act.
Management of the Company believes that it is not currently a "non-Canadian" for purposes of theInvestment Canada Act. If the Company were to become a "non-Canadian" in the future, acquisitions of control of Canadian businesses by the Company would become subject to theInvestment Canada Act. Generally, the direct
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acquisition by a "non-Canadian" of an existing Canadian business with gross assets of $5,000,000 or more is reviewable under theInvestment Canada Act, with thresholds of $223 million and $237 million for transactions closing in 2003 and 2004, respectively, for "WTO investors" as defined under theInvestment Canada Act. If the Company were to become a “non-Canadian” in the future, Management believes the Company would likely become a “non-Canadian” which is a “WTO investor.” Generally, indirect acquisitions of existing Canadian businesses (with gross assets over certain threshold levels) are reviewable under theInvestment Canada Act, except in situations involving “WTO investors” where indirect acquisitions are generally not reviewable. In transactions involving Canadian businesses engaged in the production of uranium, providing financial services, providing transportation services or which are cultural businesses, the benefit of the higher “WTO investor” thresholds do not apply.
Acquisitions of businesses related to Canada's cultural heritage or national identity (regardless of the value of assets involved) may also be reviewable under theInvestment Canada Act. In addition, investments to establish new, unrelated businesses are not generally reviewable. An investment to establish a new business that is related to the non-Canadian's existing business in Canada is not notifiable under the Investment Canada Act unless such investment relates to Canada's cultural heritage or national identity.
Investments which are reviewable under theInvestment Canada Act are reviewed by the Minister, designated as being responsible for the administration of theInvestment Canada Act. Reviewable investments, generally, may not be implemented prior to the Minister’s determining that the investment is likely to be of "net benefit to Canada" based on the criteria set out in theInvestment Canada Act. Generally investments by non-Canadians consisting of the acquisition of control of Canadian businesses which acquisitions are otherwise non-reviewable or the establishment of new Canadian businesses require that a notice be given under theInvestment Canada Act in the prescribed form and manner.
Any proposed take-over of the Company by a “non-Canadian” would likely be subject only to the simple “notification” requirements of theInvestment Canada Act as in all likelihood that non-Canadian would be a “WTO investor” for purposes of theInvestment Canada Act. Generally, a “WTO investor” is an individual, other than a Canadian, who is a national of a country that is a member of the World Trade Organization. In the case of a person that is not an individual, a WTO investor is a person that generally, is ultimately controlled by individuals, other than Canadians, who are nationals of a WTO member. Currently there are 134 countries that are members of the WTO, including virtually all countries of the Western world. The Company would have to have an asset base of at least before the “reviewable” transaction provisions of theInvestment Canada Act became relevant for consideration by a third party non-Canadian acquirer, which is not a WTO investor.
Certain Canadian Federal Income Tax Consequences – General
The following is a brief summary of some of the principal Canadian federal income tax consequences to a holder of the common-voting 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 the Canada – 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.
Under the Act and the Treaty, a U.S. Holder of the common-voting 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. Reference is made to “Item 10E.4 – United States Taxation” for a more detailed discussion of the United States tax considerations relating to an investment in the Shares.
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Dividends
A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares. Under the Canada-U.S. Income Tax Convention (1980) as amended by the Protocols signed on 6/14/1983, 3/28/1984, 3/17/1995, and 7/29/1997 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%. If the Holder is a company that owns at least 10% of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.
Disposition of Common Shares
A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as defined by theTax Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at arm's length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the Company. The CNQ is a prescribed stock exchange under theTax Act. A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties, (b) the common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the disposition, or (c) the Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when he ceased to be resident in Canada.
A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include three quarters of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada. The Holder may, subject to certain limitations, deduct three-quarters of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.
United States Taxation
The following summary is a general discussion of the material United States Federal income tax considerations to US holders of our Shares under current law. It does not discuss all the tax consequences that may be relevant to particular holders in light of their circumstances or to holders subject to special rules, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of our shares is not effectively connected with the conduct of a trade or business in the United States, shareholders who acquired their stock through the exercise of employee stock options or otherwise as compensation, shareholders who hold their stock as ordinary assets and not capital assets and any other non-US holders.
The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. This discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation that, if enacted, could be applied, possibly on a retroactive basis, at any time. The following discussion is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of our shares and no opinion or representation with respect to the United States Federal income tax consequences to any such holder or prospective holder is made. Accordingly,
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holders and prospective holders of our shares should consult their own tax advisors about the Federal, state, local, estate and foreign tax consequences of purchasing, owning and disposing of our shares.
US Holders
As used herein, a “US Holder” includes a holder of shares of the Company who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, any entity that is taxable as a corporation for US tax purposes and any other person or entity whose ownership of our shares is effectively connected with the conduct of a trade or business in the United States. A US Holder does not include persons subject to special provisions of Federal income tax law, such as tax exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of our shares is not effectively connected with conduct or trade or business in the United States, shareholders who acquired their stock through the exercise of employee stock options or otherwise as compensation and shareholders who hold their stock as ordinary assets and not as capital assets.
Distributions on our Shares
US Holders receiving dividend distributions (including constructive dividends) with respect to our shares are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that we have current or accumulated earnings and profits as defined under US Federal tax law, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the US Holder’s United States Federal income tax liability or, alternatively, may be deducted in computing the US Holder’s United States Federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below). To the extent that distributions exceed our current or accumulated earnings and profits, they will be treated first as a return of capital up to the US Holder's adjusted basis in the shares and thereafter as gain from the sale or exchange of the shares. Preferential tax rates for net capital gains are applicable to a US Holder that is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a US Holder that is a corporation.
With effect from January 1, 2003, the United States reduced the maximum tax rate on certain qualifying dividend distributions to 15% (5% for certain US Holders). In order for dividends paid by foreign corporations to qualify for the reduced rates, (1) the foreign corporation must meet certain requirements, including that it not be classified as a foreign investment company or a passive foreign investment company for United States federal income tax purposes in either the taxable year of the distribution or the preceding taxable year, and (2) the US Holder must meet the required holding period. In order to meet the required holding period, the US Holder must hold our Common Shares for at least 60 days during the 120-day period beginning 60 days before the ex-dividend date.
Dividends paid on our shares will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A US Holder that is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from us (unless we qualify as a “foreign personal holding company” or a “passive foreign investment company”, as defined below) if such US Holder owns shares representing at least 10% of our voting power and value. The availability of this deduction is subject to several complex limitations that are beyond the scope of this discussion.
In the case of foreign currency received as a dividend that is not converted by the recipient into US dollars on the date of receipt, a US Holder will have a tax basis in the foreign currency equal to its US dollar value on the date of receipt. Generally, any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for US dollars, will be ordinary income or loss. However, for tax years after 1997, an individual whose realized foreign exchange gain does not exceed US $200 will not recognize that gain, to the extent that there are not expenses associated with the transaction that meet the requirement for deductibility as a trade or business expense (other than travel expenses in connection with a business trip or as an expense for the production of income).
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Foreign Tax Credit
A US Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of our shares may be entitled, at-the option of the US Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the US Holder during that year. There are significant and complex limitations that apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the US Holder’s United States Federal income tax liability that the US Holder's foreign source income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. There are further limitations on the foreign tax credit for certain types of income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income”, and certain other classifications of income. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and holders and prospective holders of our shares should consult their own tax advisors regarding their individual circumstances.
Disposition of our Shares
A US Holder will recognize a gain or loss upon the sale of our shares equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder's tax basis in our shares. This gain or loss will be a capital gain or loss if the shares are a capital asset in the hands of the US Holder, and will be a short-term or long-term capital gain or loss depending upon the holding period of the US Holder. Preferential tax rates for long-term gains are applicable to a U.S. Holder which is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.
Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Deductions for net capital losses are subject to significant limitations. Corporate capital losses (other than losses of corporations electing under Subchapter S or the Code) are deductible to the extent of capital gains. Non-corporate taxpayers may deduct net capital losses, whether short-term or long-term, up to US $3,000 a year (US $1,500 in the case of a married individual filing separately). For US Holders which are individuals, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For US Holders which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.
Other Considerations
In the following circumstances, the above sections of this discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of our shares:
Foreign Personal Holding Company
If at any time during a taxable year more than 50% of the total combined voting power or the total value of our outstanding shares is owned, directly or indirectly, by five or fewer individuals who are citizens or residents of the United States and 60% (50% in subsequent years) or more of our gross income for such year was derived from certain passive sources, we would be treated as a “foreign personal holding company”. In that event, US Holders that hold our shares (on the earlier of the last day of our tax year or the last date on which we were a foreign personal holding company) would be required to include in gross income for such year their allowable portions of such passive income to the extent we do not actually distribute such income.
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Foreign Investment Company
If 50% or more of the combined voting power or total value of our outstanding shares are held, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701 (a)(31)), and we are found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that we might be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a US Holder selling or exchanging our shares to be treated as ordinary income rather than capital gain.
Passive Foreign Investment Company
As a foreign corporation with US Holders, we could potentially be treated as a passive foreign investment company (“PFIC”), as defined in Section 1296 of the Code, if 75% or more of our gross income in a taxable year is passive income, or the average percentage of our assets (by value) during the taxable year which produce passive income or which are held for production of same is at least 50%. Passive income is generally defined to include gross income in the nature of dividends, interest, royalties, rents and annuities; excess of gains over losses from certain transactions in any commodities not arisinginter alia from a PFIC whose business is actively involved in such commodities; certain foreign currency gains; and other similar types of income. US Holders owning shares of a PFIC are subject to an additional tax and to an interest charge based on the value of deferral of tax for the period during which the shares of the PFIC are owned, in addition to treatment of any gain realized on the disposition of shares of the PFIC as ordinary income rather than as a capital gain. However, if the US Holder makes a timely election to treat a PFIC as a qualified electing fund (“QEF”) with respect to such shareholder's interest therein, the above-described rules generally will not apply. Instead, the electing US Holder would include annually in his gross income his pro rata share of the PFIC's ordinary earnings and any net capital gain regardless of whether such income or gain was actually distributed. A US Holder of a QEF can, however, elect to defer the payment of United States Federal income tax on such income inclusions. Special rules apply to US Holders who own their interests in a PFIC through intermediate entities or persons.
The IRS has issued proposed regulations that, subject to certain exceptions, would treat as taxable certain transfers of PFIC stock by a Non-Electing US Holder that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. Generally, in such cases, the basis of our shares in the hands of the transferee and the basis of any property received in the exchange for those shares would be increased by the amount of gain recognized. A US Holder who has made a timely QEF election (as discussed below) will not be taxed on certain transfers of PFIC stock, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. The transferee's basis in this case will depend on the manner of the transfer. The specific tax effect to the US Holder and the transferee may vary based on the manner in which our shares are transferred. Each US Holder should consult a tax advisor with respect to how the PFIC rules affect their tax situation.
Shareholder Election
These adverse tax consequences may be avoided, if the US Holder has elected to treat the PFIC as a qualified electing fund (a “QEF”) with respect to that US Holder effective for each of the PFIC's taxable years beginning on or after January 1, 1987, which include any portion of the US Holder’s holding period.
The procedure a US Holder must comply with in making an effective QEF election will depend on whether the year of election is the first year in the US Holder's holding period in which we are a PFIC. If the US Holder makes a QEF election in such first year (i.e. a timely QEF election), then the US Holder may make the QEF election by simply filing the appropriate documents at the time the US Holder files his tax return for such first year. If, however, we qualified as a PFIC in a prior year, then in addition to filing documents, the US Holder must generally recognize gain as if it had sold the QEF stock on the first day of the taxable year in which the QEF election is made, if (i) the US Holder holds stock in the PFIC on that day, and (ii) the US Holder can establish the fair market value of the PFIC stock on that day. The US Holder will treat that deemed sale transaction as a disposition of PFIC stock and will, thereafter, be subject to the rules described below applicable to US shareholders of a QEF.
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In general, US shareholders of a QEF are taxable currently on their pro rata share of the QEF’s ordinary income and net capital gain regardless of whether such income or gain was actually distributed. A US Holder of a QEF can, however, elect to defer the payment of United States Federal income tax on such income inclusions.
Mark to Market Election
Effective for tax years of US Holders beginning after December 31, 1997, US Holders who hold, actually or constructively, marketable stock of a foreign corporation that qualifies as a PFIC may elect to mark such stock to the market (a “mark-to-market election”). If such an election is made, such US Holder will not be subject to the special taxation rules of PFIC described above for the taxable years for which the mark-to-market election is made. A US Holder who makes such an election will include in income for the taxable year an amount equal to the excess, if any, of the fair market value of our shares as of the close of such tax year over such US Holder's adjusted basis in such shares. In addition, the US Holder is allowed a deduction for the lesser of (i) the excess, if any, of such US Holder's adjusted tax basis in the shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any of (A) the mark-to-market gains for our shares included by such US Holder for prior tax years, including any amount which would have been included for any prior year but for Section 1291 interest on tax deferral rules discussed above with respect to a US Holder, who has not made a timely QEF election during the year in which he holds (or is deemed to have held) our shares and we are a PFIC (“Non-Electing US Holder”), over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years. A US Holder's adjusted tax basis in our shares will be increased or decreased to reflect the amount included or deducted as a result of mark-to-market election. A mark-to-market election will apply to the tax year for which the election is made and to all later tax years, unless the PFIC stock ceases to be marketable or the IRS consents to the revocation of the election.
The PFIC and QEF election rules are complex. US Holders should consult a tax advisor regarding the availability and procedure for making the QEF election as well as the applicable method for recognizing gains or earnings and profits under the foregoing rules.
Controlled Foreign Corporation
If more than 50% of the voting power of all classes of stock or the total value of our stock is owned, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own 10% or more of the total combined voting power of all classes of our stock (“United States shareholder”), we could be treated as a “controlled foreign corporation” under Subpart F of the Code. This classification would cause many complex results including the required inclusion by such United States shareholders in income of their pro rata share of our “Subpart F income” (as specially defined by the Code). If we are both a PFIC and controlled foreign corporation, we will generally not be treated as a PFIC with respect to United States shareholders of the controlled foreign corporation. This rule generally will be effective for our taxable years ending with or within such taxable years of United States shareholders. In addition, under Section 1248 of the Code, a gain from the sale or exchange of shares by a US Holder who is or was a United States shareholder at any time during the five year period ending with the sale or exchange is treated as ordinary dividend income to the extent of our earnings and profits attributable to the stock sold or exchanged. Because of the complexity of Subpart F, and because it is not clear that Subpart F would apply to the US Holders of our shares, a more detailed review of these rules is outside of the scope of this discussion.
| F. | Dividends and Paying Agents |
| | |
| Not applicable. |
| |
| G. | Statements by Experts |
| | |
| Not Applicable. |
| |
| H. | Documents on Display |
Copies of the documents referred to in this document may be inspected during normal business hours, at the offices of WeirFoulds, LLP located at 1600 – 130 King Street West, Toronto, Ontario, M5X 1J5, Canada.
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Not applicable.
| ITEM 11: | Quantitative and Qualitative Disclosures about Market Risk |
Not applicable.
| ITEM 12: | Description of Securities other than Equity Securities |
Not Applicable.
PART II
| ITEM 13: | Defaults, Dividend Arrearages and Delinquencies |
None.
| ITEM 14: | Material Modifications to the Rights of Security Holders and Use of Proceeds |
None.
| ITEM 15: | Controls and Procedures |
The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.
The Company has evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end year covered by this report. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
| A. | Audit Committee Financial Expert |
The Company’s Chairman and independent, non-management directors serve as the Audit Committee. However, a financial expert, as defined under the SEC’s rules, does not serve on the Company’s Audit Committee. The Company believes that its Audit Committee is well equipped to address all financial matters of the Company since the Company’s Chief Financial Officer serves as an active financial advisor to the Audit Committee. In addition, at all times, at least one (1) audit committee member possesses accounting or related financial expertise, while the remaining members are, at minimum, possessed of significant experience in analyzing the financial condition of corporations.
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The Company does not currently have a code of ethics that applies to its senior executive officers. The Company hopes to work with its new chief executive officer, Paul Sarjeant, to formally adopt a code of ethics for its senior executive officers. The Company undertakes that it will file a copy of its Code of Ethics with the Securities and Exchange Commission and post the text of such Code of Ethics on the Company’s website.
| C. | Principal Accountant Fees and Services |
The following chart summarizes the aggregate fees billed by the Company’s external auditors for professional services rendered to the Company during the fiscal years ended May 31, 2006 and 2005 for audit and non-audit related services:
Type of Work | Year Ended
May 31, 2006 | Year Ended
May 31, 2005 |
| Audit fees(1) | 27,500 | 18,000 |
| Audit-related fees(2) | Nil | 17,800 |
| Tax fees | 2,500 | 2,000 |
| All other fees | 6,000 | 4,308 |
| Total | 36,000 | 42,108 |
Notes:
| | (1) | Aggregate fees billed for the Company’s annual financial statements and services normally provided by the auditor in connection with the Company’s statutory and regulatory filings. |
| | | |
| | (2) | Aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported as “Audit fees”, including: assistance with aspects of tax accounting, attest services not required by state or regulation and consultation regarding financial accounting and reporting standards. |
| D. | Exemptions From the Listing Standards for Audit Committees |
| |
| Not Applicable. |
| |
| E. | Purchases of Equity Services by the Issuer and Affiliated Purchasers |
| |
| None. |
PART III
| ITEM 17: | Financial Statements |
1) Balance Sheets of Grandview Gold Inc. as at May 31, 2006 and 2005 and Statements of Operations and Deficit and Cash Flows for each of the three years ended May 31, 2006, 2005, and 2004, reported on by McCarney Greenwood LLP, Chartered Accountants. These statements are prepared in accordance with Canadian generally accepted accounting principles, which differ in certain respects from United States generally accepted accounting principles. See Note 15 to the financial statements.
2) Unaudited Balance Sheet as at August 31, 2006, Statements of Operations and Deficit for the Three Months ended August 31, 2006 and 2005. Statements of Cash Flows for the Three Months ended August 31, 2006 and 2005.
| ITEM 18: | Financial Statements |
See Item 17. Financial Statements.
1) Balance Sheets of Grandview Gold Inc. as at May 31, 2006 and 2005 and Statements of Operations and Deficit and Cash Flows for each of the three years ended May 31, 2006, 2005 and 2004, reported on by McCarney Greenwood LLP, Chartered Accountants. These statements are prepared in accordance with Canadian generally accepted accounting principles, which differ in certain respects from United States generally accepted accounting principles. See Note 15 to the financial statements.
2) Unaudited Balance Sheet as at August 31, 2006, Statements of Operations and Deficit for the Three Months ended August 31, 2006 and 2005, and Statements of Cash Flows for the Three Months ended August 31, 2006 and 2005
(Reference is made to Registration Statement on Form 20-F, dated May 3, 2005, filed with the Securities and Exchange Commission on May 5, 2005, for exhibits 1, 2, and 3.A - 3.F. Reference is made to Amendment No. 1 to the Registration Statement on Form 20-F, dated August 17, 2005, filed with the Securities and Exchange Commission on August 18, 2005, for exhibits 5.A, and 5.B.Reference is made to Amendment No. 2 to the Registration Statement on Form 20-F, filed with the Securities and Exchange Commission on November 15, 2005, for exhibits 3.G through 3.N)
| 1. | Articles of Incorporation/Bylaws as currently in effect: |
| A. | Certificate of Incorporation, Loisan Red Lake Gold Mines Limited, November 23, 1945 |
| B. | Articles of Amendment dated September 22, 1983 |
| C. | Articles of Amendment dated April 9, 1987 |
| D. | Articles of Amendment dated July 6, 2004 |
| E. | By-laws of the Company dated January 14, 1987 |
| | | |
| 2. | Instruments defining the rights of holders of equity |
| | - Refer to Exhibit No. 1. |
| 3. | Material Contracts |
| A. | Option Agreement between Mill City Gold Corp. and Grandview Gold Inc. dated April 13, 2005. |
| B. | Management contract dated June 1, 2004 with Global-Tek Business Development Inc., a consulting company owned by the president Raymond Pecoskie. |
| C. | Consulting Agreement with Bay Street Connect Ltd. dated September 14, 2004 for consulting services to identify and attract potential investors. Termination letter dated December 21, 2004. |
| D. | Investor relations agreement dated June 29, 2004 with IBK Capital Corp for consulting services. |
| E. | Investor Relations agreement dated March 1, 2005, with Tangent Management Corp. |
| F. | Agreement for Purchase and Sale Among Grandview Gold Inc. and Wildcat Exploration Ltd. dated effective April 1, 2005. |
| G. | Letter of Intent with Goldcorp Inc. (“Goldcorp”), dated July 12, 2005 |
| H. | Option Agreement with Fronteer Development Group Inc. and the Company, dated as of August 26, 2005 |
| I. | Investor relations agreement dated September 1, 2005 with Renmark Financial Communications Inc. for consulting services. |
| J. | Memorandum of Agreement between the Company and Rodren Drilling Ltd. dated September 12, 2005 |
| K. | Option Agreement dated September 30, 2005 between the Company and Marum Resources Inc. |
| L. | Consulting Agreement dated August 1, 2005 between the Company and Michael A. Dehn. |
| M. | Finders Fee Agreement dated October 20, 2005 between the Company and McKeena Gold Inc. |
| N. | Letter Agreement dated September 8, 2005 with Mill City Gold Corp. amending Option Agreement between Mill City Gold Corp. and Grandview Gold Inc. dated April 13, 2005. |
| O. | Consulting Agreement dated November 15, 2006 between Ernest M. Cleave and the Company. |
| P. | Agreement dated July 11, 2006 between the Company and Connect Capital Limited. |
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| | Q. | Agreement dated July 11, 2006 between the Company and Ted Markovitz. |
| | R. | Option Agreement dated November 23, 2006 between the Company and Harvest Gold Corporation. |
| | S. | Consulting Agreement dated June 12, 2006 between the Company and Michael Hitch. |
| | T. | Consulting Agreement dated June 8, 2006 between the Company and Paul Sarjeant. |
| | U. | Consulting Agreement dated October 31, 2006 between the Company, Doublewood Consulting, and Paul Sarjeant. |
| | V. | Field Management Agreement dated July 12, 2006 between the Company and Carlin Trend Mining Services. |
| | W. | Amendment dated December 15, 2006 to Option Agreement dated September 30, 2005 between the Company and Marum Resources Inc. |
| | X. | Agreement dated July 11, 2006 between the Company and Connect Corporate Communications Inc. |
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SIGNATURES
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that is has duly caused and authorized the undersigned to sign this annual report on its behalf.
| | GRANDVIEW GOLD INC. |
| | | |
| Date: December 22, 2006 | By: | /s/ Paul Sarjeant |
| | | Paul Sarjeant |
| | | President |
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