Commitments and Contingencies | 6 Months Ended |
Dec. 31, 2013 |
Commitments and Contingencies [Text Block] | ' |
14 | Commitments and Contingencies | |
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On August 1, 2006, the Company acquired the Pansy Lee Project from Anglo Gold Mining Inc. in exchange for 1,850,000 Common Shares pursuant to an Asset Purchase Agreement dated August 1, 2006 (the “Pansy Lee Purchase Agreement”). Pursuant to the Pansy Lee Purchase Agreement, a 2% net smelter royalty pertains to 8 of the 30 claims in this project. In the event that any one or more of the 8 claims becomes a producing claim, our revenue is subject to a 2% net smelter return royalty where net smelter returns are based upon gross revenue less deductions as provided in the Pansy Lee Purchase Agreement. |
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The Company obtained 25 mineral claims (the “Option Claims”), located in Elko County, Nevada pursuant to an option agreement (the “Option Agreement”) dated as of May 1, 2008 (the “Date of Closing”) with Nevada Eagle Resources, LLC and Steve Sutherland (together, the “Optionees”). The provisions of the Option Agreement included, among others, payments of specified annual amounts ranging from $10,000 to $80,000 by the Company to the Optionees over a period of ten years. Effective June 1, 2010, the Company and the Optionees agreed to terminate the Company’s interests in the Option Claims pursuant to (1) payment by the Company of $8,750 to each of the Optionees, (2) performance by the Company of such reclamation and remediation as required to discharge the surface management bond posted by the Company pursuant to a Notice of Intent filed with the BLM prior to undertaking exploration activity on the Option Claims, and (3) conveyance by the Company to Nevada Eagle Resources, LLC of the 124 mineral claims staked by the Company after the Date of Closing that are within the Area of Interest described in the Option Agreement. As of December 31, 2013, the undertakings described in (1) and (3) above have been completed and the reclamation and remediation described in (2) above are in progress. The 25 Option Claims together with 124 mineral claims staked by the Company have been referred to by the Company as the “Medicine Claim Group.” |
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On December 8, 2008 IMC US entered into a Mineral Rights Lease Agreement (the “Edgar Lease Agreement”) with the Earl Edgar Mineral Trust (“Edgar”) to lease certain mineral rights in Elko County, Nevada described below (the “Edgar Property”). The term of the Edgar Lease Agreement was ten years. The rent was paid each year on January 1st. $1.00 per net acre was paid upon execution of the Edgar Lease Agreement. On January 1 of each year commencing in 2010 and extending for so long as the Edgar Lease Agreement is in effect, IMC US was obligated to make the following payments: |
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| 2010 | $1.00 per net acre |
| 2011 | $2.00 per net acre |
| 2012 | $2.00 per net acre |
| 2013 | $3.00 per net acre |
| 2014 | $3.00 per net acre |
| 2015 | $4.00 per net acre |
| 2016 | $4.00 per net acre |
| 2017 | $5.00 per net acre in each year for the duration of the Edgar Lease Agreement. |
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The Edgar Lease Agreement covered 100% of the mineral rights on 1,120 acres of the Edgar Property (“Property A”) and 50% of the mineral rights on 6,720 acres of the Edgar Property (“Property B”). Edgar was entitled to receive a royalty of $0.50 per ton for material mined and removed from Property A and $0.25 per ton for material mined and removed from Property B during the term of the Edgar Lease Agreement and any renewal thereof. |
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On April 9, 2009, the Company and Edgar entered into an Amendment to the Edgar Lease Agreement (the “Amendment”), effective as of December 8, 2008. The Amendment provided for Standard Steam LLC to carry out exploration for geothermal energy sources on the Edgar Property after obtaining the written consent of the Company. The Amendment also provided for other cooperation with Standard Steam LLC regarding mineral rights on Property B of the Edgar Property. |
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On November 6, 2013 the Edgar Lease Agreement was terminated by the Company. |
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On November 30, 2009, IMC US entered into a Mineral Rights Agreement with Perdriau Investment Corp. (“Perdriau”) to purchase 50% of the mineral rights, including all easements, rights of way and appurtenant rights of any type that run with the mineral rights in certain sections of Elko County, Nevada (the “Perdriau Property”). The purchase price was $10 per net acre. IMC US purchased 340 net acres for a total purchase price of $3,400. Perdriau will be entitled to receive a royalty of $0.25 per ton for material mined and removed from the Perdriau Property. Material mined and stored on the Perdriau Property or adjacent property for reclamation purposes will not be subject to any royalty. Material removed from the Perdriau Property for the purposes of testing or bulk sampling, provided it does not exceed 50,000 tons, will also not be subject to any royalty. The royalty will be calculated and paid within 45 days after the end of each calendar quarter. |
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On January 15, 2010, the Company entered into a Property Lease Agreement with Eugene M. Hammond (the “Hammond Lease”) for surface rights on 80 acres in Elko County, Nevada (the “Hammond Surface Rights”). The term of the Hammond Lease was five years and the annual rent was $500. The Company was responsible for the payment of all real estate taxes on the Hammond Surface Rights. During the term of the Hammond Lease, the Company had the exclusive right to conduct exploration and development work on the Hammond Surface Rights. The results of all drilling and exploration are the property of the Company. The Company was responsible for any environmental damage caused by the Company and any reclamation costs required as a result of drilling and testing. The Company had an option to purchase the property covered by the Hammond Lease for $15,000, less the amount paid in rent during the term of the Hammond Lease. |
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On December 18, 2013 the Hammond Lease was terminated by the Company. |
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On January 15, 2010, IMC US entered into a Mineral Rights Agreement with Eugene M. Hammond (the “Hammond Mineral Rights Agreement”) pursuant to which the Company purchased a 25% interest in any and all minerals extracted from 160 acres (the “Hammond Mineral Rights Property”) covered by the Hammond Mineral Rights Agreement. The purchase price was $400. In addition, Eugene M. Hammond is entitled to receive a royalty of $0.125 per ton on material mined and removed from the Hammond Mineral Rights Property. The Hammond Mineral Rights Agreement does not cover petroleum. |
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Effective July 1, 2010, the Company entered into an employment agreement with an individual to provide business and administrative services. The employment agreement has a term of one year and is automatically renewable thereafter. Either party may terminate the employment agreement upon 60 days notice. According to the terms of the employment agreement as amended effective March 1, 2012, the Company will pay the individual no less than $8,333 per month and reimburse related business expenses. |
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Effective July 1, 2010, the Company entered into an employment agreement with an individual to provide receptionist and administrative services at its Reno, Nevada corporate headquarters. The employment agreement has a term of one year and is automatically renewable thereafter. Either party may terminate the employment agreement upon 30 days notice. Pursuant to this employment agreement, the Company will pay no less than $51,000 per year for such services. |
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On February 25, 2011, SRC entered into an option and joint venture agreement (the “IMMI Option Agreement”) with International Millennium Mining Inc. (“IMMI”), a wholly owned subsidiary of International Millennium Mining Corp. (“IMMC”), to sell an 85% interest in SRC’s NL Extension Project (the “NL Project”) for total consideration of $350,000 and 1,925,000 shares of IMMC’s common stock (the “Consideration”). The NL Project consists of 18 mineral claims located in Esmeralda County, Nevada, approximately 6 miles southwest of Silver Peak, Nevada on Highway 47. Under the terms of the IMMI Option Agreement, the Consideration is payable over a five-year period that ends on September 15, 2015, with IMMI’s interest in the NL Project vesting at the end of such period. In the event of early termination, IMMI is not entitled to the return of Consideration previously paid to SRC. If the NL Project is determined to be economically feasible, based upon criteria contained in the IMMI Option Agreement, SRC will be required to fund its portion of an operating budget proposed by IMMI in order to retain its 15% interest in the NL Project and to acquire a 15% interest in IMMI’s Nivloc Mine Project (the NL Project and the Nivloc Mine Project, collectively, the “IMMI Project”). In the event that SRC decides not to fund its portion of the budget, its 15% interest would be forfeited, but SRC would be entitled to a 2% net smelter return royalty if and when the IMMI Project enters the production phase. Upon funding of the operating budget and SRC’s acquisition of a 15% interest in the IMMI Project, SRC and IMMI would enter into a joint venture agreement. |
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Effective February 29, 2012, SRC entered into a mineral lease agreement (the “Gumaskas Agreement”) with Joseph W Gumaskas (“Gumaskas”) to lease a patented claim covering approximately 10 acres (the “Claim”) in Mineral County, Nevada. Unless terminated earlier by SRC, the term of the Gumaskas Agreement is ten years and will automatically renew on the same terms and conditions for additional five-year periods. The Gumaskas Agreement requires SRC to pay Gumaskas advance minimum royalty payments of $500 annually. In the event that the Claim becomes a producing claim, SRC will pay Gumaskas a 3% royalty based upon gross revenue less deductions as permitted by the Gumaskas Agreement. SRC may terminate the Gumaskas Agreement at any time by giving 60 days advance written notice to Gumaskas. |
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On May 15, 2012, SRC entered into an Exploration License with Option to Purchase (the “Buhrman Agreement”) with Ralph L. Buhrman and Jacqueline Buhrman (together, the “Owner”) for three patented claims, covering approximately 59 acres (the “Property”) situated in Mineral County, Nevada. Under the terms of the Buhrman Agreement, SRC was granted the exclusive right and option to enter and examine the Property (the “Exploration License”) in consideration of a $30,000 payment to the Owner (the License Payment”). During the term of the Exploration License, SRC has the exclusive right to undertake geological, geophysical, and geochemical examinations of the Property; to sample the Property by means of pits, trenches, and drilling; and to take bulk samples from the Property for the purpose of conducting metallurgical and leaching tests. However, SRC may not commence development or mining activities on the Property unless it exercises the Purchase Option as defined below. SRC will be responsible for reclamation of its pits, trenches, drill sites, and other such disturbances arising out of its activities on the Property. The Exploration License had an initial one-year term beginning on May 1, 2012 (the “Effective Date”) and ending on April 30, 2013. On April 30, 2013, SRC exercised its right to extend the Exploration License for an additional period of one year by making an additional License Payment of $30,000 to the Owner. SRC was also granted exclusive right and option to purchase the Owner’s ownership interest in the Property (the “Purchase Option”) for the sum of $90,000 less all License Payments previously made. SRC may exercise the Purchase Option at any time during the term of the Exploration License by giving written notice to the Owner. If SRC exercises the Purchase Option, SRC will also pay the Owner a two percent ( 2%) royalty based upon gross revenues less deductions as defined by the Buhrman Agreement, and SRC will also have the exclusive right and option to purchase such royalty at any time for the sum of $1,000,000 less any payments previously made by SRC to the Owner pursuant to such royalty. SRC may terminate the Buhrman Agreement at any time by giving 30 days’ notice in writing to the Owner. |
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Effective as of June 23, 2008, the Company appointed Mason Douglas as the President of the Company. Mr. Douglas is also a director of the Company. In connection with the appointment, the Company entered into a consulting services agreement with a Canadian corporation that is controlled by Mr. Douglas (the “Consulting Agreement”). The Consulting Agreement has a term of one year and is then automatically renewable. Either party may terminate the Consulting Agreement upon 90 days notice to the other party. According to the terms of the Consulting Agreement as amended effective March 1, 2012, the Company will pay a fee of $10,417 per month and reimburse related business expenses. The Consulting Agreement permits Mr. Douglas to fulfill his duties for the Company from his office in Canada. Mr. Douglas does not receive a salary from the Company. Effective October 1, 2012, the Company appointed Mr. Douglas to also serve as its Chief Executive Officer. In connection with this appointment, the Consulting Agreement was amended to increase the consulting fee to $155,000 annually, payable in 12 equal monthly installments. By mutual agreement between the Company and Mr. Douglas, effective as of March 1, 2013, the consulting fee was changed to an annual rate of $93,000, payable in 12 equal monthly installments. |
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On April 23, 2013, the Company received a summons from the United States District Court, District of Nevada, naming the Company as a co-defendant in a lawsuit filed by the U.S. Attorney on behalf of the BLM seeking reimbursement for the cost of putting out a fire that occurred on May 8, 2008, and other non-quantified damages. The fire damaged approximately 451 acres of land administered by the BLM near Dayton, Nevada. The lawsuit alleges that the cost of putting out the fire was approximately $510,000. The Company has denied any responsibility for the fire and notified its liability insurance carrier. The Company has not accrued any costs for this claim in its financial statements. |
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The Company has entered into operating leases for its office space and certain office furniture and equipment. Rent payments associated with those leases for the six-month periods ended December 31, 2013, and December 31, 2012, were $12,547 and $12,165, respectively. As of December 31, 2013, the Company’s estimated future minimum cash payments under non-cancelable operating leases for the years ending June 30, 2014, June 30, 2015, and June 30, 2016, are $10,647, $382, and $0, respectively. |
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Maintaining Claims in Good Standing |
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The Company is required to pay to the BLM on or before September 1 st of each year, a fee in the amount of $140 per mineral claim held by the Company. The total amount paid in August 2013, was $98,420 for 703 claims held by the Company at that date. The BLM fee for the 18 NL Project claims held by the Company was paid by IMMI pursuant to the IMMI Option Agreement described above. |
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The Company is also required to pay on or before November 1 st of each year, annual fees to counties in Nevada in which the claims are held. In October 2013, the Company paid $7,406 to six counties in Nevada for annual claims-related fees. |
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The Company also holds certain patented claims and leases other patented claims in Nevada. A patented claim is fee simple title to the property. Patented claims are subject to taxes assessed by the local community based on assessment rates set annually. |