NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS | 6 Months Ended |
Jun. 30, 2014 |
Accounting Policies [Abstract] | ' |
NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS | ' |
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1. NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS |
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Geovic Mining Corp. (the “Company”) is incorporated under the laws of the state of Delaware. The Company owns 100% of the shares of Geovic, Ltd. (“Geovic”), a company that has been in the exploratory stage since its inception on November 16, 1994. The Company is an exploration stage company that is identifying mineral properties through its subsidiaries. As an exploration stage entity we would require further technical analysis and financing in order to bring our properties into development. |
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As at June 30, 2014 our common stock was traded on the Toronto Stock Exchange (“TSX”) under the symbol GMC.TO. The Company’s shares were delisted from the TSX at the close of business on July 25, 2014 and commenced trading on the NEX, a separate trading board of the TSX Venture Exchange at the open of business on July 28, 2014 under the symbol “GMC.H”. Our common stock is also traded on the over-the-counter bulletin board (“OTC-BB”) under the symbol: “GVCM”. |
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Geovic is engaged in the business of exploring for cobalt, nickel and related minerals through its majority-owned (60.5%) subsidiary, Geovic Cameroon, PLC (“GeoCam”), a financially dependent public limited company duly organized and incorporated under the laws of the Republic of Cameroon. |
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The Company is also engaged in the worldwide exploration of energy and mineral resources directly or indirectly through its ownership of Geovic Energy Corp. and Geovic Mineral Sands Corp., formed in 2007 and 2009, respectively, under the laws of the State of Colorado, and Geovic France SAS, formed in December 2008 under the laws of France, and Geovic Nouvelle-Calédonie SAS, formed in March 2009 under the laws of New Caledonia, and Geovic PNG Limited, formed in May 2012 under the laws of Papua New Guinea. |
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As an exploration stage company, we have a history of losses, deficits and negative operating cash flows and will continue to incur losses in the future. We continue to evaluate our cash position and cash utilization. Our ability to access additional financing will be critical to our financial condition as we attempt to obtain proceeds from the sale, joint venture, farm-out, or similar-type transaction involving one or more of our exploration prospects, the most significant of which is our 60.5% ownership stake in the Nkamouna Project in Cameroon. Based on the estimated capital and start-up costs of the Nkamouna Project, we presently do not have sufficient capital resources available to meet anticipated equity requirements. Our ability to raise additional capital for this purpose would depend on a number of factors, many of which would result in significant dilution of our current stockholders. Consequently, we have been proactively pursuing a strategic investment which, if successful, would result in our selling some or all of our interest in the Nkamouna Project to a third party. |
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On July 23, 2013 the Company announced that it had agreed to the terms and conditions of a Definitive Agreement (“DA”) with Jiangxi Rare Metals Tungsten Holdings Group Company Ltd (“JXTC”) of Nanchang, Jiangxi Province, China. JXTC is a state owned large-scale industrial enterprise with significant mining and industrial operations in cobalt, copper, tungsten, and other rare metals. The terms and conditions of the DA were agreed amongst JXTC, Societe Nationale d’Investissement du Cameroun (“SNI”), the National Investment Corporation of Cameroon that owns or represents 39.5% of GeoCam, the Company, Geovic Ltd. and GeoCam. |
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The transaction contemplated by the DA establishes JXTC’s intent to acquire 60.5% of the existing shares of GeoCam pursuant to the execution of a share purchase agreement between JXTC and the Company, which is expected to be subject to a variety of conditions and approvals, many of which are outside the control of the Company. There is no assurance that this agreement will be finalized or that the transaction contemplated therein will be completed. This proposed transaction would result in the complete disposition of the Company’s interest in GeoCam and the Nkamouna Project. In addition to acquiring 60.5% interest in GeoCam, JXTC would also secure 100% of the mixed cobalt-nickel sulphide product to be produced by the Nkamouna Project. |
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The DA expired on March 31, 2014 and as at that date the parties had not entered into a share purchase agreement. The parties to the DA are working on an extension of the agreement to a future date. There can be no assurance that an extension of the DA will be agreed to among the parties to the DA, that a share purchase agreement will ultimately be entered into or that the transactions contemplated therein will be completed. |
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We have been closely monitoring our fixed and variable costs and have restricted such costs to those expenses that are necessary to complete activities related to securing a strategic investment for the Nkamouna Project, to identify opportunities to generate cash from our existing exploration properties and to obtain additional sources of working capital in support of such activities. Management and the Board of Directors have implemented a number of cash conservation strategies for the Company and GeoCam. We have deferred payment of certain expenses and salaries in agreement with the counterparties as disclosed in Note 6. The Company has delayed payment of liabilities and has accrued, but been unable to fully pay GeoCam payroll and related benefits of approximately $0.2 million for the months of April to July 2014. As of the date of filing these liabilities remain outstanding. Due to the delayed payment of these liabilities the Company may be charged penalties in Cameroon, the amount of which cannot be currently estimated. |
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In May 2014 the Company received notification that GeoCam employees were threatening to strike as of May 15, 2014 unless all compensation arrears were been paid in their entirety and health insurance reinstated. As of the date of this filing no formal strike has taken place. The Company has also been unable to fully pay Geovic Mining Corp. payroll and related benefits of approximately $0.15 for the months of June and July 2014. Further, effective August 1, 2014 the Company laid off three non-executive employees. These employees have not been paid July 2014 payroll, related benefits and unused vacation pay. |
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As we are seeking to realize value for the Cameroonian assets, we have shifted the Company’s focus to a prospect generation and strategic investment business model. Since our position in GeoCam would likely be significantly diminished or completely eliminated through strategic investment, the future direction for the Company will be to identify new exploration prospects, minimally develop and prioritize existing and new prospects, and sell or joint venture further exploration and development of those prospects to others. The Company intends to take prospects to a level where they can be timely monetized through strategic investments by others who have the resources to complete advanced exploration, permitting and development. |
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Our consolidated unrestricted cash balance at June 30, 2014 was approximately $99. We are endeavoring to arrange financing which would allow us to continue work on our mineral projects and pay our transaction and other expenses. If we are unable to arrange adequate financing, we may seek to further reduce our operations while we continue efforts to monetize our investment in GeoCam, or we may cease operations which could include a bankruptcy filing. Unless we arrange additional financing, we expect to nearly exhaust our cash during August 2014. |
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During 2014 and 2013 the Company entered into note purchase agreements (each a “Note Purchase Agreement” and collectively the “Note Purchase Agreements”) with a number of parties, identified below, (each a “Purchaser”). Pursuant to the Note Purchase Agreements, the Company agreed to issue promissory notes (each a “Note” and collectively the “Notes”) to the Purchasers in the aggregate principal amount of $1,355 as at June 30, 2014 (December 31, 2013—$605) in consideration of the payment by each Purchaser of a purchase price equal to the principal amount of such Purchaser’s respective Note. |
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Each Note matures one year from the date of issuance at which time the outstanding principal amount of each Note and all accrued and unpaid interest thereon is due and payable by the Company. Interest accrues on the outstanding principal balance of each Note at the rate of 200% per annum on the Notes issued in 2013 and January 2014 and 300% per annum on the Notes issued from February to June 2014. |
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In June 2014 the Company issued an additional note in the principal amount of $25 under similar terms as noted above except at an interest rate of 150% and due in six months at December 31, 2014. |
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The Company may prepay each Note, in whole or in part and without penalty, at any time upon 30 calendar days’ prior written notice. The Company is required to prepay each Note, in whole and without penalty, within five business days following the consummation of any acquisition by JXTC or by any other entity of the Company’s 60.5% interest in GeoCam or the consummation of the acquisition of the Company by another company. The Notes contain events of default and other terms and conditions. |
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The following table summarizes the principal amounts of the Notes issued and outstanding as of June 30, 2014 and December 31, 2013 and identifies the parties to which the Notes have been issued: |
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| | June 30, | | | December 31, | |
2014 | 2013 |
Richard G. Buckovic | | $ | 130 | | | $ | 100 | |
Norman C. Rose | | | 30 | | | | 30 | |
M N Rose Shelter Credit Trust | | | 40 | | | | 40 | |
Paul D. Rose | | | 60 | | | | 60 | |
Dragon’s Fire Investments LLC | | | 275 | | | | 225 | |
Thorne Bush Investments LLC | | | 625 | | | | 150 | |
Airlie Road Investors LLC | | | 75 | | | | — | |
David/Bette McKibben | | | 50 | | | | — | |
John/Jean Anderson | | | 20 | | | | — | |
Bill Shaffer | | | 25 | | | | — | |
Decker JE Halstead, Revocable Living Trust | | | 25 | | | | — | |
Fintech Limited | | | 25 | | | | — | |
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Total Short-Term Debt Notes | | $ | 1,380 | | | $ | 605 | |
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The following table summarizes the maturity dates of the Notes issued and outstanding as of June 30, 2014 and December 31, 2013: |
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| | June 30, | | | December 31, | |
2014 | 2013 |
September 30, 2014 | | $ | 120 | | | $ | 120 | |
October 31, 2014 | | | 110 | | | | 110 | |
November 30, 2014 | | | 125 | | | | 125 | |
December 31, 2014 | | | 275 | | | | 250 | |
January 31, 2015 | | | 125 | | | | — | |
February 28, 2015 | | | 150 | | | | — | |
March 31, 2015 | | | 50 | | | | — | |
April 30, 2015 | | | 145 | | | | — | |
May 31, 2015 | | | 230 | | | | — | |
June 30, 2015 | | | 50 | | | | — | |
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Total Short-Term Debt Notes | | $ | 1,380 | | | $ | 605 | |
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Our near-term expenses could be greater than projected and we may be unable to generate additional proceeds through the sale of part or all of our interest in the Nkamouna Project to a strategic partner or future business transactions on our exploration prospects. We may not be successful in completing such a sale on a timely basis, or in entering into sale or joint venture transactions involving our other exploration prospects on acceptable terms. Further, possible transactions to raise additional capital through the issuance of equity may not be available and would be dilutive to our stockholders. If we are unable to obtain additional capital, we will need to seek to further curtail our operations, to the extent possible, in order to preserve working capital, which could materially harm our business and our ability to achieve cash flow in the future, and we may need to cease operations, which could include a bankruptcy filing. Unless we arrange additional financing, we expect to nearly exhaust our cash during August 2014. |