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the Securities Exchange Act of 1934 (Amendment No. 1)
o | No fee required. |
þ | Fee computed on table below per Exchange ActRules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: Coral Gold Resources Ltd. common shares; Nevada Pacific Gold Ltd. common shares; Tone Resources Limited common shares; and White Knight Resources Ltd. common shares. |
(2) | Aggregate number of securities to which transaction applies: 185,936,789(1) |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange ActRule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): 0.63 of an exchangeable share of US Gold Canadian Acquisition Corporation for each Coral Gold Resources Ltd. common share; 0.23 of an exchangeable share of US Gold Canadian Acquisition Corporation for each Nevada Pacific Gold Ltd. common share; 0.26 of an exchangeable share of US Gold Canadian Acquisition Corporation for each Tone Resources Limited common share; and 0.35 of an exchangeable share of US Gold Canadian Acquisition Corporation for each White Knight Resources Ltd. common share. |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
þ | Check box if any part of the fee is offset as provided by Exchange ActRule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: Registration StatementNo. 333-133726(3) |
(3) | Filing Party: |
(4) | Date Filed: |
(1) | This amount is comprised of the following: 7,833,994, the number of issued and outstanding common shares of Coral Gold Resources Ltd. on a fully-diluted basis, as of December 4, 2006, based on information provided by Coral Gold Resources Ltd. to U.S. Gold Corporation on December 4, 2006; 87,395,171, the number of issued and outstanding common shares of Nevada Pacific Gold Ltd. on a fully-diluted basis, as of December 4, 2006, based on information provided by Nevada Pacific Gold Ltd. to U.S. Gold Corporation on December 4, 2006; 24,702,652, the number of issued and outstanding common shares of Tone Resources Limited on a fully-diluted basis, as of December 4, 2006, based on information provided by Tone Resources Limited to U.S. Gold Corporation on December 4, 2006; and 66,004,972, the number of issued and outstanding common shares of White Knight Resources Ltd. on a fully-diluted basis, as of December 4, 2006, based on information provided by White Knight Resources Ltd. to U.S. Gold Corporation on December 4, 2006. |
(2) | This total represents $5.71, the average of the high and low sales price of common stock of U.S. Gold Corporation into which the exchangeable share of US Gold Canadian Acquisition Corporation are exchangeable, on the AMEX on December 11, 2006, multiplied by 57,280,772, the maximum total number of exchangeable shares of US Gold Canadian Acquisition Corporation that could be issued in the exchange offers described herein. |
(3) | Pursuant toRule 0-11(a)(2), $10,452.55 of the fee required to be paid in connection with the filing of this proxy statement is being reduced by the fee paid in connection with the registration statement onForm S-4 (Registration No. 333-138233) filed by U.S. Gold Corporation and US Gold Canadian Acquisition Corporation on October 26, 2006, which fee was offset pursuant to Rule 457(p) by a portion of the registration fee associated with a registration statement onForm S-4 (RegistrationNo. 333-133726) originally filed on May 2, 2006 by US Gold Holdings Corporation and U.S. Gold Corporation, or the prior registration statement. The remaining $24,549.17 of the fee required to be paid in connection with the filing of this proxy statement is being offset by a portion of the registration fee associated with the prior registration statement. This reduces the unused portion of the registration fee for the prior registration statement to $29,073.64. |
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2201 Kipling Street, Suite 100
Lakewood, Colorado80215-1545
• | 0.63 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Coral Gold; | |
• | 0.23 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Nevada Pacific; | |
• | 0.26 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Tone Resources; and | |
• | 0.35 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of White Knight. |
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2201 Kipling Street, Suite 100
Lakewood, Colorado80215-1545
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STRUCTURE OF THE PROPOSED ACQUISITIONS | 58 | |||
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SELECTED HISTORICAL FINANCIAL DATA OF U.S. GOLD | 69 | |||
SELECTED HISTORICAL FINANCIAL DATA OF THE TARGET COMPANIES | 70 | |||
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SELECTED UNAUDITEDPRO FORMACONSOLIDATED FINANCIAL DATA | 77 | |||
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COMPARATIVE PER SHARE INFORMATION | 83 | |||
COMPARATIVE MARKET DATA | 88 | |||
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION | 89 | |||
CURRENCY EXCHANGE RATES | 90 | |||
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON | 91 | |||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 93 | |||
NO DISSENTERS’ OR APPRAISAL RIGHTS | 95 | |||
YEAR 2007 SHAREHOLDER PROPOSALS | 95 |
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• | decisions of foreign countries and banks within those countries; | |
• | technological changes in the mining industry; | |
• | the level of demand for our products; |
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• | changes in our business strategy; | |
• | interpretation of drill hole results and the geology, grade and continuity of mineralization; | |
• | the uncertainty of reserve estimates and timing of development expenditures; | |
• | unexpected changes in business and economic conditions; | |
• | changes in interest rates and currency exchange rates; | |
• | timing and amount of production; | |
• | changes in mining, processing and overhead costs; | |
• | access and availability of materials, equipment, supplies, labor and supervision, power and water; | |
• | results of current and future exploration activities; | |
• | results of pending and future feasibility studies; | |
• | local and community impacts and issues; | |
• | accidents and labor disputes; and | |
• | commodity price fluctuations. |
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Q: | When is the special meeting? |
A: | Our special meeting will be held on January [ • ], 2007 at [ • ], local time, at [ • ]. |
Q: | What matters will be considered at the special meeting? | |
A: | At the special meeting, shareholders will be asked to: |
• approve an amendment to U.S. Gold’s Articles of Incorporation that removes provisions related to corporate opportunities to allow your board of directors to adopt and maintain an updated corporate opportunity policy; |
• approve amendments to U.S. Gold’s Articles of Incorporation that update the Articles of Incorporation by replacing vague and outdated references to statutory provisions with references to current statutory provisions; |
• approve an amendment to U.S. Gold’s Articles of Incorporation that creates a new class of U.S. Gold stock comprised of one share of preferred stock, designated as Series A Special Voting Preferred Stock, no par value, to be issued in connection with the Proposed Acquisitions and for the purposes further described in this proxy statement; |
• approve the issuance of up to 5,182,187 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Coral Gold; |
• approve the issuance of up to 21,105,934 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Nevada Pacific; |
• approve the issuance of up to 6,743,825 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Tone Resources; | ||
• approve the issuance of up to 24,256,827 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of White Knight; |
• approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve and adopt any of Proposals 1 through 7; and |
• take action on any other business that may properly come before the meeting. | ||
Q: | Why are you asking shareholders to approve the amendment to U.S. Gold’s Articles of Incorporation creating preferred stock? |
A: | U.S. Gold’s Articles of Incorporation currently authorize only common stock for issuance by U.S. Gold. U.S. Gold proposes to undertake four separate offers to purchase whereby it will offer to acquire all of the outstanding common shares of the Target Companies in exchange for exchangeable shares of Canadian Exchange Co. The exchangeable shares are intended to provide their holders with rights which are correlative to holders of shares of U.S. Gold’s common stock. To accomplish this objective, U.S. Gold will authorize and issue to the exchange and voting trustee one share of Series A Special Voting Preferred Stock, which will entitle the trustee to the number of votes with respect to any matter properly submitted to a vote of the holders of U.S. Gold common stock equal to the number of exchangeable shares of Canadian Exchange Co. outstanding at the time of the vote, as more fully described in “Structure of the Proposed Acquisitions — The Voting and Exchange Trust Agreement” beginning on page 65, and in the proposed amendment to the Articles of Incorporation, shown inAnnex A to this proxy statement. An amendment to U.S. Gold’s Articles of Incorporation is necessary in order to authorize this new class of special voting stock. See “Proposal 3 — Amendment to Articles of Incorporation to Create and |
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Designate a New Class of Preferred Stock” beginning on page 28. In connection with this amendment and the other amendments described below to the Articles of Incorporation, we will restate our Articles of Incorporation to consolidate the amendments approved at the special meeting and previous amendments approved by our shareholders and our board of directors. |
Q: | Why are you asking shareholders to approve the amendments to U.S. Gold’s Articles of Incorporation to remove the corporate opportunities provisions from the Articles of Incorporation and to update references to statutory provisions? |
A: | The corporate opportunities provisions in the Articles of Incorporation govern the conduct of directors, officers and managers in respect of business opportunities that are made available to those individuals. Your board of directors believes that the amendment to remove the corporate opportunities provisions from the Articles of Incorporation is necessary to allow your board to maintain an updated corporate opportunity policy without seeking shareholder approval in the future. The amendment to update vague and outdated references to statutory provisions is being proposed simply to keep our Articles of Incorporation up to date. Because these amendments cannot be made without shareholder approval, we are seeking shareholder approval of these amendments at the special meeting. See “Proposal 1 — Amendment to Articles of Incorporation to Remove Corporate Opportunities Provisions” and “Proposal 2 — Amendments to Articles of Incorporation to Update Outdated Statutory References” beginning on pages 22 and 27, respectively. In connection with these amendments to the Articles of Incorporation and the amendment relating to the creation of preferred stock described above, we will restate our Articles of Incorporation to consolidate the amendments approved at the special meeting and previous amendments approved by our shareholders and our board of directors. |
Q: | Why are you asking the shareholders to approve in connection with the Proposed Acquisitions the issuance of exchangeable shares of Canadian Exchange Co. and the issuance of shares of U.S. Gold common stock issuable upon exchange of the exchangeable shares? |
A: | Our Common Stock is listed on the American Stock Exchange (AMEX). Section 712 of the AMEX Company Guide requires shareholder approval before the issuance of shares of common stock or securities convertible into or exercisable for shares of common stock as consideration for the acquisition of the stock of another company where the present or potential issuance of common stock, or securities convertible into common stock, could result in an increase in outstanding common shares of 20% or more, or when any individual director, officer or substantial shareholder of the acquiring company has a 5% or greater interest (or when such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction and the present or potential issuance of common stock, or securities convertible into common stock, could result in an increase in outstanding common shares of the acquiring company of 5% or more. Because the shares of Canadian Exchange Co. that we expect to issue in the proposed acquisitions of the Target Companies are exchangeable, upon the terms and conditions described herein, into 54,560,735 shares of U.S. Gold, which represents approximately 109% of the shares of U.S. Gold that are currently issued and outstanding, the AMEX listing standards require that holders of U.S. Gold common stock approve the issuance, in connection with the Proposed Acquisitions, of exchangeable shares of Canadian Exchange Co. and an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares. Further, because Robert R. McEwen, our Chairman and Chief Executive Officer and our largest shareholder, holds greater than 5% of the outstanding common shares of each of the Target Companies as of the date of this proxy statement, the AMEX listing standards require us to obtain shareholder approval of the issuances. See Proposal 4 through Proposal 7 beginning on page 29. |
Q: | How many shares of U.S. Gold common stock will be issued if the Proposed Acquisitions are completed? |
A: | No shares of U.S. Gold common stock will be issued initially upon the consummation of the Proposed Acquisitions. However, if we complete all of the Proposed Acquisitions and acquire all of the outstanding common shares of all four Target Companies, we currently estimate that in the future we would issue a total of approximately 54,560,735 shares of our common stock to shareholders of the Target Companies upon exchange of the exchangeable shares of Canadian Exchange Co. As of the date of this proxy statement, we have approximately 50,046,755 shares of common stock issued and outstanding, options and warrants to purchase up to 11,280,000 shares of common stock, and 5,000,000 shares reserved for issuance pursuant to our Non-Qualified Stock Option and Stock Grant Plan, out of 250,000,000 shares of common stock currently |
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authorized under U.S. Gold’s current Articles of Incorporation. Accordingly, U.S. Gold has adequate shares of its common stock authorized and available for issuance in the Proposed Acquisitions without needing to authorize additional shares of U.S. Gold common stock. | ||
Q: | What will happen to my ownership percentage in U.S. Gold? | |
A: | In connection with the Proposed Acquisitions, Canadian Exchange Co. will issue exchangeable shares to the shareholders of the Target Companies that we acquire. Your ownership percentage in U.S. Gold will be reduced when the exchangeable shares are exchanged into shares of U.S. Gold common stock. Holders of exchangeable shares, so long as such shares are outstanding, will have the option to exchange their exchangeable shares for shares of common stock of U.S. Gold at any time, will have their exchangeable shares automatically exchanged for shares of common stock of U.S. Gold in the event of a liquidation of U.S. Gold, and will have the right to receive dividends equivalent to dividends paid to holders of common stock of U.S. Gold, among other rights. | |
Q: | What will happen to my voting power in U.S. Gold? | |
A: | If any of the Proposed Acquisitions is completed, U.S. Gold would issue to the voting and exchange trustee, under the voting and exchange trust agreement, one share of Series A Special Voting Preferred Stock to be held by the trustee for the benefit of the registered holders of the exchangeable shares of Canadian Exchange Co. The share of Series A Special Voting Preferred Stock would be entitled to a number of votes equal to the number of outstanding exchangeable shares of Canadian Exchange Co. (other than those owned by U.S. Gold or its subsidiaries), and, except as otherwise required by law or by U.S. Gold’s Articles of Incorporation, the holders of U.S. Gold common stock and the holder of the Series A Special Voting Preferred Stock would vote together as a single class on all matters properly submitted to a vote of the shareholders of U.S. Gold, including the election of directors. If any of the Proposed Acquisitions is completed, the voting power of the existing U.S. Gold shareholders, excluding any current U.S. Gold shareholders who will acquire shares of U.S. Gold for their shares of the Target Companies, will be reduced by an amount proportionate to the number of shares issued in such acquisition or acquisitions. If all of the Proposed Acquisitions are completed, existing U.S. Gold shareholders, excluding any current U.S. Gold shareholders who will acquire shares of U.S. Gold for their shares of the Target Companies, would hold shares representing, in the aggregate, less than 50% of the number of votes required to be cast on any matter submitted to a vote of the shareholders of U.S. Gold, including the election of directors. | |
Q: | Is U.S. Gold common stock listed on a stock exchange? |
A: | Shares of U.S. Gold common stock are currently listed on the Toronto Stock Exchange (TSX), under the symbol “UXG” and on the AMEX under the symbol “UXG.” |
Q: | Are Canadian Exchange Co.’s exchangeable shares listed on a stock exchange? |
A: | The exchangeable shares of Canadian Exchange Co. are not currently listed on a securities exchange. It is a condition to our offers to purchase the outstanding shares of the Target Companies that the exchangeable shares be listed on the TSX. We intend to take all necessary steps to list the exchangeable shares on the TSX. |
Q: | What impact will the Proposed Acquisitions have on U.S. Gold’s business? | |
A: | We believe our business will expand as a result of the Proposed Acquisitions. The U.S. Gold board of directors believes that the Target Companies are desirable because each of them is exploring in the Cortez Trend in Nevada and owns and operates exploration properties that are adjacent to or near U.S. Gold’s Tonkin Springs property and because the acquisition of any or all of them would result in U.S. Gold having a larger position in the Cortez Trend, an expanded exploration program, a stronger combined cash position, reduced costs, an increased market capitalization enhancing trading liquidity, better market focus and additional technical expertise. If we complete all four of the Proposed Acquisitions, our land position in Nevada would increase by approximately 344% to approximately 160 square miles, and we would acquire exploration property in Mexico. | |
Q: | Do U.S. Gold’s directors support the Proposals and the Proposed Acquisitions? |
A: | Our board of directors, by unanimous vote (other than the vote of Robert R. McEwen, who abstained from voting on Proposals 4, 5, 6 and 7 because of his ownership interest in each of the Target Companies) approved each of the proposals and the commencement of the offers to purchase the outstanding shares of the Target |
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Companies. Our board of directors recommends that you vote “FOR” each of the proposals. In addition, on March 6, 2006, Mr. McEwen announced that in his capacity as Chairman, Chief Executive Officer and a shareholder of U.S Gold, and as a shareholder of White Knight, he intended to support the proposal of U.S. Gold to acquire each of the Target Companies. On March 7, 2006, Mr. McEwen announced that in his capacity as a shareholder of Coral Gold, he intended to support the proposal of U.S. Gold to acquire each of the Target Companies. |
When considering the recommendation of our board of directors with respect to the amendment of our Articles of Incorporation, the issuance of exchangeable shares of Canadian Exchange Co. and the issuance of U.S. Gold common stock upon exchange of the exchangeable shares, you should be aware that certain of our directors and executive officers may have interests in the Proposed Acquisitions that may be different from, or in addition to, the interests of U.S. Gold shareholders generally. Specifically, Mr. McEwen, who serves as our Chairman and Chief Executive Officer and is also our largest shareholder, owns securities in each of the four Target Companies. For a more detailed description of these interests, see “The Proposed Acquisitions — Background of the Proposed Acquisitions” on page 42. |
Q: | What percentage of the outstanding shares of U.S. Gold do directors and executive officers hold? |
A: | As of December 7, 2006, directors and executive officers of U.S. Gold and their affiliates beneficially owned approximately 25.5% of our issued and outstanding shares of common stock entitled to vote at the special meeting. Assuming all four of the Proposed Acquisitions are completed and that all of the shareholders of the Target Companies tender their shares, if Mr. McEwen exercises all of his outstanding warrants and options to purchase shares of the Target Companies and of our common stock, we expect that Mr. McEwen will own approximately 23,282,849 shares of our common stock or approximately 20% of the outstanding shares of our common stock on a fully-diluted basis. |
Q: | Who is entitled to attend and vote at the meeting? |
A: | Any holder of record of U.S. Gold common stock at the close of business on December 29, 2006, the record date, is entitled to attend and vote at the meeting. On the record date, U.S. Gold had [ • ] shares of common stock outstanding. |
Q: | What will constitute a quorum at the meeting? | |
A: | Holders of one-third of our common stock issued, outstanding and entitled to vote on the record date must be present at the meeting, either in person or by proxy, to establish a quorum. Proxies that we receive that are marked “abstain” will be considered present at the meeting for purposes of establishing a quorum. | |
Q: | Do I need to attend the special meeting in person? | |
A: | No. It is not necessary for you to attend the meeting to vote your shares, although we invite you to attend. | |
Q: | How do I cast my vote? | |
A: | After carefully reading and considering the information contained and incorporated by reference in this proxy statement, you can vote in any one of the following ways: | |
• by signing and returning the proxy card in the enclosed postage pre-paid envelope; | ||
• on the Internet by following the instructions on the enclosed proxy card; or | ||
• by attending the special meeting and voting in person. | ||
Shares of U.S. Gold common stock represented by properly executed proxies received before the special meeting will be voted at the special meeting in the manner specified on the proxies. Physical proxies that are properly executed and timely submitted but which do not contain specific voting instructions will be voted “FOR” each of the proposals presented at the special meeting. | ||
Q: | May I change my vote after I have mailed my signed proxy card? | |
A: | You may change your vote at any time before your shares are voted at the special meeting. This proxy statement contains instructions on how to change your vote. If you have instructed your broker to vote your shares, you must follow directions received from your broker to change those instructions. |
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Q: | If my shares are held in “street name” by my broker, will my broker vote my shares for me? | |
A: | Your broker will vote your shares only if you provide your broker with instructions on how to vote. You should instruct your broker to vote your shares, following the directions provided by your broker. If you fail to instruct your broker on any of the proposals to be considered at the special meeting, your shares will not be voted with respect to such matter. Abstentions and broker non-votes will not be counted for purposes of determining whether a proposal has been approved. | |
Q: | What vote is required to approve the proposals? |
A: | All of the proposals require the affirmative vote of a majority of the votes cast at the special meeting. Abstentions and broker non-votes will have no effect on the outcome of any of the proposals voted at the meeting. |
Q: | Am I entitled to vote on the Proposed Acquisitions? |
A: | No. However, although we are not asking for your vote directly on the Proposed Acquisitions, we are asking you to vote to approve the amendment of U.S. Gold’s Articles of Incorporation, the issuances of exchangeable shares of Canadian Exchange Co., the issuance of shares of U.S. Gold common stock issuable upon exchange of the exchangeable shares and such other matters as may be brought before the meeting in connection with the Proposed Acquisitions. A vote against Proposal 3 would have the effect of preventing us from completing the Proposed Acquisitions as currently contemplated. Further, because each of the acquisitions described in Proposals 4, 5, 6 and 7 is conditioned upon the approval of the proposal authorizing the issuance of shares in connection with that acquisition, if U.S. Gold shareholders do not approve any of Proposals 4, 5, 6 and 7 U.S. Gold will not complete the acquisition described in the proposal or proposals not approved. |
Q: | Do I have dissenters’ (or appraisal) rights? | |
A: | No. Holders of U.S. Gold common stock do not have dissenters’ rights under Colorado law in connection with any of the matters to be acted on at the special meeting. | |
Q: | Whom do I contact if I have questions about the special meeting? | |
A: | You may contact our information agent at: |
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Purpose of the Special Meeting | To present proposals for the approval by U.S. Gold shareholders of the following: |
Proposal 1 | To approve an amendment to U.S. Gold’s Articles of Incorporation that removes provisions related to corporate opportunities to allow your board of directors to adopt and maintain an updated corporate opportunity policy. The full text of the Amended and Restated Articles of Incorporation showing the proposed amendments to the Articles of Incorporation is attached asAnnex A to this proxy statement. For additional information, see “Proposal 1 — Amendment to Articles of Incorporation to Remove Corporate Opportunities Provisions” beginning on page 22. |
Proposal 2 | To approve amendments to U.S. Gold’s Articles of Incorporation that update the Articles of Incorporation by replacing vague and outdated references to statutory provisions with references to current statutory provisions. The full text of the Amended and Restated Articles of Incorporation showing the proposed amendments to the Articles of Incorporation is attached asAnnex A to this proxy statement. For additional information, see “Proposal 2 — Amendments to Articles of Incorporation to Update Outdated Statutory References” beginning on page 27. |
Proposal 3 | To approve an amendment to U.S. Gold’s Articles of Incorporation that creates a new class of U.S. Gold stock comprised of one share of preferred stock, designated as Series A Special Voting Preferred Stock, no par value, to be issued in connection with the Proposed Acquisitions and for the purposes further described in this proxy statement. The full text of the Amended and Restated Articles of Incorporation showing the proposed amendments to the Articles of Incorporation is attached asAnnex A to this proxy statement. For additional information, see “Proposal 3 — Amendment to Articles of Incorporation to Create and Designate a New Class of Preferred Stock” beginning on page 28. |
Proposal 4 | To approve the issuance of up to 5,182,187 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Coral Gold. For additional information, see “Proposal 4 — Issuance of Stock in Connection with the Acquisition of Coral Gold” beginning on page 29. |
Proposal 5 | To approve the issuance of up to 21,105,934 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Nevada Pacific. For additional |
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information, see “Proposal 5 — Issuance of Stock in Connection with the Acquisition of Nevada Pacific” beginning on page 31. |
Proposal 6 | To approve the issuance of up to 6,743,825 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Tone Resources. For additional information, see “Proposal 6 — Issuance of Stock in Connection with the Acquisition of Tone Resources” beginning on page 32. |
Proposal 7 | To approve the issuance of up to 24,256,827 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of White Knight. For additional information, see “Proposal 7 — Issuance of Stock in Connection with the Acquisition of White Knight” beginning on page 33. |
Proposal 8 | To approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve and adopt any of Proposals 1 through 5. For additional information, see “Proposal 8 — Adjournment or Postponement of the Special Meeting to Solicit Additional Proxies” beginning on page 34. |
Conditions to the Effectiveness of the Proposals | If approved by the shareholders, Proposals 1, 2, 3 and 8 shall be effective regardless of the outcome of the other proposals. Proposals 4, 5, 6 and 7 shall be effective only if the U.S. Gold shareholders approve the amendment to our Articles of Incorporation related to the creation of preferred stock. For additional information, see “The Special Meeting — Conditions to the Proposals” on page 20. |
Votes Required | Each proposal requires the affirmative vote of a majority of the votes cast at the special meeting. As of the record date, U.S. Gold’s officers and directors own approximately [ • ]% of the U.S. Gold common stock outstanding and entitled to vote. See “The Special Meeting — Votes Required” beginning on page 20. |
No Dissenters’ or Appraisal Rights | Under Colorado law, holders of U.S. Gold common stock are not entitled to dissenters’ rights of appraisal in connection with any of the matters to be acted upon at the special meeting. For additional information, see “No Dissenters’ or Appraisal Rights” on page 95. |
Voting | U.S. Gold shareholders may vote by mail, telephone or the Internet, each in the manner described in the accompanying proxy card, or by voting in person at the special meeting. Additional information about voting and other procedures relevant to the special meeting is set forth in “The Special Meeting” beginning on page 19. |
Additional Information | Additional information regarding each proposal is set forth in “Proposal 1 — Amendment to Articles of Incorporation to Remove Corporate Opportunities Provisions” beginning on page 22, “Proposal 2 — Amendments to Articles of Incorporation to Update Outdated Statutory References” beginning on page 27, “Proposal 3 — Amendment to Articles of Incorporation to Create and Designate a |
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New Class of Preferred Stock” beginning on page 28, “Proposal 4 — Issuance of Stock in Connection with the Acquisition of Coral Gold” beginning on page 29, “Proposal 5 — Issuance of Stock in Connection with the Acquisition of Nevada Pacific” beginning on page 31, “Proposal 6 — Issuance of Stock in Connection with the Acquisition of Tone Resources” beginning on page 32, “Proposal 7 — Issuance of Stock in Connection with the Acquisition of White Knight” beginning on page 33, and “Proposal 8 — Adjournment or Postponement of the Special Meeting to Solicit Additional Proxies” beginning on page 34. |
Reasons for the Proposed Acquisitions | U.S. Gold’s board of directors believes that the Target Companies are desirable because each of them is exploring in the Cortez Trend in Nevada and owns and operates exploration properties that are adjacent to or near U.S. Gold’s Tonkin Springs property and because following completion of the Proposed Acquisitions or the acquisition of any one or more of the Target Companies, U.S. Gold would have: | |
• a larger land position in the Cortez Trend; | ||
• an expanded exploration program; | ||
• a stronger combined cash position; | ||
• reduced costs; | ||
• an increased market capitalization enhancing trading liquidity in the common stock of the combined company; | ||
• better market focus; and | ||
• additional technical expertise. |
For a more detailed discussion of the advantages to U.S. Gold shareholders that U.S. Gold believes would result from the Proposed Acquisitions, see “The Proposed Acquisitions — Reasons for the Proposed Acquisitions” on page 35. |
Target Companies | Coral Gold. Coral Gold is a natural resource company based in Vancouver, British Columbia primarily engaged in the exploration and development of natural resource properties. Coral Gold’s principal business activities are the exploration of certain mineral properties located in Nevada and California. Since Coral Gold’s 2002 fiscal year, Coral Gold has made aggregate principal expenditures of Cdn$4,616,090 on the Robertson mining claims in Nevada. We intend to offer to purchase all of the outstanding shares of Coral Gold on the basis of 0.63 of an exchangeable share for each common share of Coral Gold. Coral Gold’s common shares are listed on the TSX-V under the symbol “CGR-V” and on theOver-the-Counter Bulletin Board, or OTCBB, under the symbol “CGREF.” |
Nevada Pacific. Nevada Pacific owns an exploratory property portfolio covering approximately 890 square miles of mineral rights in Mexico, including the Magistral Gold Mine, ten properties in Nevada and one in Utah. The Nevada property portfolio covers approximately 85 square miles, including portions of two significant gold producing regions: the Battle Mountain/Eureka Trend/Cortez Trend and the |
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Carlin Trend. We intend to offer to purchase all of the outstanding shares of Nevada Pacific on the basis of 0.23 of an exchangeable share for each common share of Nevada Pacific. Nevada Pacific’s common shares are listed on the TSX-V under the symbol “NPG-V.” | ||
Tone Resources. Tone Resources is an exploration stage company based in Vancouver, British Columbia, engaged in the acquisition and exploration of mineral properties primarily located on the major gold trend in the north-central region of Nevada. Tone Resources is focused on gold and holds substantially all interests in eight properties in Elko, Eureka, Lander, and Pershing counties in Nevada. Tone Resources holds 410 mining claims in Nevada. All of Tone Resource’s properties are located near infrastructure facilities of currently producing gold mines. We intend to offer to purchase all of the outstanding shares of Tone Resources on the basis of 0.26 of an exchangeable share for each common share of Tone Resources. Tone Resources’ common shares are listed on the TSX-V under the symbol “TNS-V” and quoted on the Pink Sheets under the symbol “TONRF.” | ||
White Knight. White Knight is engaged in the acquisition and exploration of precious metals properties, primarily gold. In 1993, White Knight began to acquire gold exploration properties in Nevada and has focused solely on exploration and operation of properties in Nevada since that time. Currently, White Knight’s efforts are exploratory in nature in each of the 18 Nevada properties where it holds an interest. White Knight continues to investigate for projects to acquire in Nevada. We intend to offer to purchase all of the outstanding shares of White Knight on the basis of 0.35 of an exchangeable share for each common share of White Knight. White Knight’s common shares are listed on the TSX-V under the symbol “WKR-V.” | ||
Effecting the Proposed Acquisitions | U.S. Gold and Canadian Exchange Co. propose to acquire each of the Target Companies through an offer to purchase all outstanding common shares of each of the Target Companies in exchange for exchangeable shares of Canadian Exchange Co. Each of the offers to purchase is separate and completion of each offer is not subject to completion of any of the other offers to purchase. Following the completion, satisfaction or waiver of the applicable conditions of the offers to purchase, U.S. Gold and Canadian Exchange Co. plan to acquire any common shares of each of the Target Companies not purchased pursuant to the offers to purchase through a statutory plan of arrangement or similar transaction providing for a mandatory exchange of all remaining outstanding common shares of the Target Company for additional exchangeable shares of Canadian Exchange Co., which we expect we would structure so that warrants to purchase the Target Company’s common shares would be exchanged for warrants to purchase exchangeable shares of Canadian Exchange Co. and U.S. Gold would assume or adopt the Target Company stock option plan so that options under that plan would be exercisable for shares of common stock of U.S. Gold. |
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The Offers to Purchase | U.S. Gold and Canadian Exchange Co. intend to offer to purchase all outstanding common shares of each of the Target Companies for the following consideration: | |
• 0.63 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Coral Gold; | ||
• 0.23 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Nevada Pacific; | ||
• 0.26 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Tone Resources; and | ||
• 0.35 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of White Knight. |
Effect of the Proposed Acquisitions on U.S. GoldShareholders | Assuming that all of the Proposed Acquisitions are completed and that all of the exchangeable shares issued in the Proposed Acquisitions are exchanged for shares of U.S. Gold common stock, current U.S. Gold shareholders would hold approximately 52% of U.S. Gold’s outstanding common stock on an undiluted basis, and approximately 53% of U.S. Gold’s outstanding common stock on a fully diluted basis, current shareholders of the four Target Companies would hold, in the aggregate, approximately 48% of U.S. Gold’s outstanding common stock on an undiluted basis, and approximately 47% of U.S. Gold’s outstanding common stock on a fully diluted basis, and Robert R. McEwen would own approximately 20% of U.S. Gold’s outstanding common stock on an undiluted basis and approximately 20% of U.S. Gold’s common stock on a fully diluted basis. For more information, see “The Proposed Acquisitions — Shares to Be Issued” and “Structure of the Proposed Acquisitions — Effect of the Proposed Acquisitions on U.S. Gold Shareholders” on pages 38 and 68, respectively. |
Pro FormaFinancial Information | Pro formafinancial information for (1) each of the Proposed Acquisitions separately, and (2) all of the Proposed Acquisitions presented on a combined basis, is included inAnnex F to this proxy statement. For selectedpro formaconsolidated financial information, see “Selected UnauditedPro FormaConsolidated Financial Data” on page 77. |
Opinion of Financial Advisor | On March 2, 2006, the board of directors of U.S. Gold established a special committee to evaluate the terms of the Proposed Acquisitions and the process of determining those terms. On March 27, 2006, the special committee of the board of directors of U.S. Gold retained Wellington West Capital Markets Inc., or Wellington West, to provide financial advice and assistance to the special committee including providing its opinion as to the fairness of the consideration offered under the offers to purchase, from a financial point of view, to U.S. Gold and its shareholders. Wellington West prepared and provided such an opinion as of April 6, 2006 and as of December 11, 2006. Based upon and subject to the matters described in its fairness opinion dated December 11, 2006, Wellington West concluded that, as at the date of its opinion, the consideration offered under the offers to purchase is fair, from a financial point of view, to U.S. Gold and its shareholders. For additional information, see “The Proposed |
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Acquisitions — Opinion of U.S. Gold Financial Advisor” beginning on page 46 and the full text of the fairness opinion included inAnnex H to this proxy statement. |
Risk Factors | There are certain risks associated with the Proposed Acquisitions and related matters as described in “Risk Factors” beginning on page 14. U.S. Gold shareholders should consider these risks in determining how to vote on the proposals to be brought before the special meeting. Additional risk factors are described in some of the documents incorporated by reference into this proxy statement. | |
Conditions to the Proposed Acquisitions | U.S. Gold’s and Canadian Exchange Co.’s obligation to complete the offers to purchase for each of the Target Companies is subject to various conditions. Included among these are conditions that: | |
• there shall have been properly deposited and not withdrawn that number of shares of the relevant Target Company that constitutes at least the greater of (i) 66-2/3% of the outstanding common shares of that Target Company, calculated on a fully diluted basis or (ii) 80% of the issued and outstanding common shares of that Target Company; | ||
• each of the Target Companies shall not have entered into or effectuated any other agreement or transaction with any person or entity having the effect of impairing U.S. Gold’s or Canadian Exchange Co.’s ability to acquire such Target Company or otherwise diminishing the expected economic value to U.S. Gold and Canadian Exchange Co. of the acquisition of such Target Company including, but not limited to, any material issuance of new securities of the Target Company, the declaration of any extraordinary dividend, the disposition of any material assets, the adoption of a shareholder rights plan or any other transaction not in the ordinary course of the Target Company’s business; |
• the additional shares of common stock of U.S. Gold issuable upon exchange of the exchangeable shares offered under this offer shall have been approved for listing on the TSX and AMEX, and the exchangeable shares shall have been approved for listing on the TSX; |
• U.S. Gold’s shareholders shall have approved Proposal 3; and |
• with respect to each offer to purchase described in Proposals 4, 5, 6, and 7, U.S. Gold shareholders shall have approved the issuance of shares related to that offer to purchase as described in Proposal 4, 5, 6 or 7, as applicable. |
For additional information on the conditions to the offers to purchase, see “The Proposed Acquisitions — Conditions to the Proposed Acquisitions” beginning on page 39. |
Additional Information | Additional information regarding the Proposed Acquisitions is set forth in “The Proposed Acquisitions” beginning on page 35. |
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• | Canadian Exchange Co., as the majority shareholder of the Target Company and our wholly-owned subsidiary, may owe fiduciary duties to the minority shareholders of the Target Company, whose interests may diverge from the interests of U.S. Gold and Canadian Exchange Co.; and | |
• | Canadian Exchange Co. may not have access to cash flow generated by the Target Company, except to the extent it is distributed to all the Target Company shareholders proportionately in the form of dividends. |
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REMOVE CORPORATE OPPORTUNITIES PROVISIONS
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New Policy Adopted in | Provisions in | |||
February 2006 | Articles of Incorporation | |||
To whom does the policy apply? | Directors and officers of U.S. Gold as well as an Affiliate (as defined) of directors and officers of U.S. Gold. | Officers, directors and other members of management of U.S. Gold. | ||
What business opportunities are “Corporate Opportunities” which are not available to those subject to the policy? | Opportunities that relate to a specific business opportunity (a) in which U.S. Gold has a legal interest or a legitimate expectancy interest, (b) previously identified as an opportunity by resolution of the board of directors, or (c) involve the acquisition of or participation in 10% or more in a Core Business (as defined), in relation to which the board of directors passes a resolution declaring that U.S. Gold is ready, able and desires to pursue, and that U.S. Gold pursues within the time periods specified in the policy. | Any opportunity in which U.S. Gold has expressed an interest as determined by the board of directors and evidenced in the minutes of a meeting of the board of directors, unless such an opportunity is disclosed to the board of directors, made available to U.S. Gold and the board of directors rejects the opportunity. | ||
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New Policy Adopted in | Provisions in | |||
February 2006 | Articles of Incorporation | |||
Right of First Offer | If the disinterested directors consider and reject, or fail to timely pursue, a corporate opportunity then the person covered by the policy may engage in the activity, but must offer U.S. Gold the opportunity, pursuant to the process provided in the policy, to purchase any interest which the person proposes to sell relating to such opportunity on the same terms and conditions as the proposed sale if the opportunity is located within a designated area. | None. | ||
Survival Post-Employment | Certain aspects of the policy remain effective for six months after the time an officer or director of U.S. Gold leaves U.S. Gold for any reason. | None. | ||
Amendment | The policy may be changed or repealed by resolution of the board of directors. | Any change requires the approval of the holders holding at least 50% of the shares of common stock of U.S. Gold voting at a properly held meeting of shareholders at which a quorum is present. |
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STATUTORY REFERENCES
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WITH THE ACQUISITION OF CORAL GOLD
• | Up to approximately 4,519,606 exchangeable shares of Canadian Exchange Co. to be issued either as payment for common shares of the Coral Gold tendered in the offers to purchase or pursuant to subsequent acquisition transactions and approximately 4,519,606 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares; and |
• | Up to approximately 662,581 exchangeable shares of Canadian Exchange Co. issuable upon exercise of outstanding warrants and options to purchase common shares of Coral Gold that are assumed or otherwise become exercisable for exchangeable shares of Canadian Exchange Co. in connection with or following the completion of the offers to purchase and the subsequent acquisition transactions and approximately 662,581 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares or pursuant to validly exercised options that we assume in connection with a subsequent acquisition transaction. |
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WITH THE ACQUISITION OF NEVADA PACIFIC
• | Up to approximately 17,041,488 exchangeable shares of Canadian Exchange Co. to be issued either as payment for common shares of the Nevada Pacific tendered in the offers to purchase or pursuant to subsequent acquisition transactions and approximately 17,041,488 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares; and |
• | Up to approximately 4,519,606 exchangeable shares of Canadian Exchange Co. issuable upon exercise of outstanding warrants and options to purchase common shares of Nevada Pacific that are assumed or otherwise become exercisable for exchangeable shares of Canadian Exchange Co. in connection with or following the completion of the offers to purchase and the subsequent acquisition transactions and approximately 4,519,606 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares or pursuant to validly exercised options that we assume in connection with a subsequent acquisition transaction. |
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WITH THE ACQUISITION OF TONE RESOURCES
• | Up to approximately 5,500,723 exchangeable shares of Canadian Exchange Co. to be issued either as payment for common shares of the Tone Resources tendered in the offers to purchase or pursuant to subsequent acquisition transactions and approximately 5,500,723 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares; and |
• | Up to approximately 1,243,102 exchangeable shares of Canadian Exchange Co. issuable upon exercise of outstanding warrants and options to purchase common shares of Tone Resources that are assumed or otherwise become exercisable for exchangeable shares of Canadian Exchange Co. in connection with or following the completion of the offers to purchase and the subsequent acquisition transactions and approximately 1,243,102 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares or pursuant to validly exercised options that we assume in connection with a subsequent acquisition transaction. |
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WITH THE ACQUISITION OF WHITE KNIGHT
• | Up to approximately 21,842,352 exchangeable shares of Canadian Exchange Co. to be issued either as payment for common shares of the White Knight tendered in the offers to purchase or pursuant to subsequent acquisition transactions and approximately 21,842,352 million shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares; and |
• | Up to approximately 2,414,475 exchangeable shares of Canadian Exchange Co. issuable upon exercise of outstanding warrants and options to purchase common shares of White Knight that are assumed or otherwise become exercisable for exchangeable shares of Canadian Exchange Co. in connection with or following the completion of the offers to purchase and the subsequent acquisition transactions and approximately 2,414,475 shares of common stock of U.S. Gold to be issued upon exchange of such exchangeable shares or pursuant to validly exercised options that we assume in connection with a subsequent acquisition transaction. |
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SPECIAL MEETING TO SOLICIT ADDITIONAL PROXIES
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• | A larger land position within the Cortez Trend and a larger exploration program. U.S. Gold holds a 100% interest in the Tonkin Springs exploration gold property in Eureka County, Nevada, subject to paramount title in the United States. This property consists of approximately 36 square miles of unpatented lode mining claims and millsite claims located on the Battle Mountain-Eureka Trend, approximately 45 miles northwest of the town of Eureka, in north-central Nevada. Upon successful completion of the Proposed Acquisitions, U.S. Gold’s land position would increase by approximately 344% to approximately 160 square miles. Over the next two years, U.S. Gold has planned 400,000 feet of exploration drilling on its Tonkin Springs property at a cost of $30 million. If the Proposed Acquisitions are successfully completed, U.S. Gold intends to aggressively explore the properties of Nevada Pacific, Coral Gold, Tone Resources and White Knight over the next two years to coincide with its exploration program at its Tonkin Springs property. | |
• | A stronger cash position and reduced costs. On February 22, 2006, U.S. Gold completed a private placement of 16,700,000 subscription receipts, with gross proceeds to us of $75,150,000. Of the intermediate exploration companies currently exploring for gold in Nevada, U.S. Gold has one of the strongest cash positions. Successful completion of one or more of the Proposed Acquisitions will also give U.S. Gold access to any additional cash resources of the Target Companies acquired. Due to the strategic locations in Nevada of the assets of each of Nevada Pacific, Coral Gold, Tone Resources and White Knight and the elimination of redundant fees and costs, U.S. Gold and Canadian Exchange Co. expect that U.S. Gold would realize lower total costs than if each company were to remain a separate entity. |
• | Enhanced trading liquidity and better market focus. U.S. Gold and Canadian Exchange Co. expect that the successful completion of the Proposed Acquisitions would result in increased market capitalization and trading liquidity of the combined company, resulting in better market focus. Because of the increased market capitalization and liquidity of the combined company, U.S. Gold and Canadian Exchange Co. expect that the combined company will have greater access to equity and debt capital markets than U.S. Gold currently does, and greater appeal to institutional investors. It is a condition to the offers to purchase that the exchangeable shares shall have been approved for listing on the TSX and we expect that our shares of common stock will continue to be traded on the TSX and AMEX. U.S. Gold and Canadian Exchange Co. expect that the enhanced access to the equity and debt capital markets resulting from the Proposed Acquisitions would provide management of the combined company greater flexibility to execute its business plan under various financial market conditions. |
• | Additional technical expertise. U.S. Gold and Canadian Exchange Co. believe that one or more of Nevada Pacific, Coral Gold, Tone Resources and White Knight has quality employees with good technical expertise. U.S. Gold and Canadian Exchange Co. hope to retain at least some of these key employees following the successful completion of the Proposed Acquisitions to assist in U.S. Gold’s business and operations going forward. |
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• | 0.63 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Coral Gold; | |
• | 0.23 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Nevada Pacific; | |
• | 0.26 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Tone Resources; and | |
• | 0.35 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of White Knight. |
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Total | Total | |||||||||||||||||||
U.S. Gold | U.S. Gold | Percentage | ||||||||||||||||||
U.S. Gold | Shares Giving | Shares Giving | of | Percentage of | ||||||||||||||||
Shares Issuable | Effect to | Effect to | Outstanding | Fully Diluted | ||||||||||||||||
per Share | Proposed | Proposed | U.S. Gold | U.S. Gold | ||||||||||||||||
of Target | Acquisitions | Acquisitions | Shares Held | Shares Held | ||||||||||||||||
Company | (outstanding) | (fully diluted) | (1) | (1) | ||||||||||||||||
Existing U.S. Gold Shareholders | — | 50,046,755 | 61,326,755 | 51.8 | % | 52.9 | % | |||||||||||||
White Knight | 0.35 | 20,802,240 | 23,101,740 | 21.5 | % | 20.0 | % | |||||||||||||
Nevada Pacific | 0.23 | 16,229,989 | 20,100,889 | 16.8 | % | 17.3 | % | |||||||||||||
Coral Gold | 0.63 | 4,304,387 | 4,935,416 | 4.5 | % | 4.3 | % | |||||||||||||
Tone Resources | 0.26 | 5,238,784 | 6,422,690 | 5.4 | % | 5.5 | % | |||||||||||||
Total for all Target Companies | — | 46,575,401 | 54,560,735 | 48.2 | % | 47.1 | % | |||||||||||||
Total for U.S. Gold and all Target Companies | — | 96,622,156 | 115,887,490 | 100.00 | % | 100.00 | % |
(1) | Securities of the Target Companies held by Robert R. McEwen that would be exchangeable into exchangeable shares of Canadian Exchange Co. in the Proposed Acquisitions are included in the Target Company ownership percentages. |
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U.S. Gold | Coral Gold | Nevada Pacific | Tone Resources | White Knight | ||||||||||||||||
Trading Range | $ | 0.35 - $10.05 | $ | 0.80 - $5.37 | $ | 0.30 - $1.85 | $ | 0.15 - $2.09 | $ | 0.38 - $2.69 | ||||||||||
Average Price | $ | 2.71 | $ | 2.32 | $ | 0.85 | $ | 0.74 | $ | 1.10 | ||||||||||
Current Bid | n/a | $ | 3.44 | $ | 1.28 | $ | 1.44 | $ | 1.91 |
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Period Before March 3, 2006 | Coral Gold | Nevada Pacific | Tone Resources | White Knight | ||||||||||||
1-Day | 25 | % | 25 | % | 25 | % | 25 | % | ||||||||
30-Day Average | 19 | % | 44 | % | 85 | % | 38 | % | ||||||||
90-Day Average | 35 | % | 80 | % | 121 | % | 31 | % | ||||||||
180-Day Average | 51 | % | 87 | % | 143 | % | 53 | % | ||||||||
1-Year Average | 54 | % | 86 | % | 139 | % | 57 | % | ||||||||
3-Year Average(1) | 44 | % | 69 | % | 180 | % | 109 | % |
(1) | In the case of Tone Resources, the average was calculated from the commencement of trading on May 16, 2003, |
• | AngloGold Ashanti Ltd. |
• | Barrick Gold Corp. |
• | Compañía de Minas Buenaventura |
• | Gold Fields (SA) |
• | Goldcorp Inc. |
• | Harmony Gold Mining Company Limited |
• | Newmont Mining Corporation |
• | Agnico Agnico-Eagle Mines Ltd. |
• | Bema Gold Corporation |
• | Centerra Gold Inc. |
• | Eldorado Gold Corp. |
• | Golden Star Resources Ltd. |
• | Hecla Mining Company |
• | IAMGOLD Corporation |
• | Kinross Gold Corporation |
• | Meridian Gold Inc. |
• | Randgold Resources Ltd. |
• | Yamana Gold Inc. |
• | Alamos Gold Inc. |
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• | Apollo Gold Corporation |
• | Aurizon Mines Ltd. |
• | Claude Resources Inc. |
• | Crystallex International Corporation |
• | Cumberland Resources Ltd. |
• | Gabriel Resources Ltd. |
• | Glencairn Gold Corporation |
• | Greystar Resources Ltd. |
• | High River Gold Mines Ltd. |
• | Minefinders Corporation |
• | Nevsun Resources Ltd. |
• | New Gold Inc. |
• | Northgate Minerals Corporation |
• | Queenstake Resources Ltd. |
• | Richmont Mines Inc. |
• | Rio Narcea Gold Mines Ltd. |
• | Viceroy Exploration Ltd. |
Senior Average | Intermediate Average | Junior Average | ||||||||||||||||||||||
Selected Multiples | Range | Mean | Range | Mean | Range | Mean | ||||||||||||||||||
EV/Oz — P&P Reserves | $ | 121 - $533 | $ | 238 | $ | 182 - $1,352 | $ | 487 | $ | 76 - $697 | $ | 287 | ||||||||||||
EV/Oz — MI Resources | $ | 32 - $401 | $ | 151 | $ | 86 - $546 | $ | 241 | $ | 37 - $697 | $ | 155 | ||||||||||||
EV/Oz — MI+I Resources | $ | 13 - $253 | $ | 118 | $ | 65 - $456 | $ | 186 | $ | 22 - $259 | $ | 97 | ||||||||||||
Price/NAV | 1.4x - 2.0 | x | 1.7 | x | 1.1x - 1.9 | x | 1.5 | x | 0.3x - 1.7 | x | 0.9x | |||||||||||||
Price/Earnings — 2006E | 8.2x - 41.1 | x | 25.2 | x | 18.5x - 49.7 | x | 34.2 | x | 5.2x - 92.3 | x | 40.7x | |||||||||||||
Price/Earnings — 2007E | 9.3x - 25.0 | x | 18.7 | x | 12.1x - 56.9 | x | 23.7 | x | 3.5x - 80.3 | x | 15.3x | |||||||||||||
Price/Cash Flow — 2006E | 7.1x - 54.0 | x | 18.5 | x | 13.7x - 62.8 | x | 26.8 | x | 4.0x - 26.4 | x | 15.3x | |||||||||||||
Price/Cash Flow — 2007E | 7.7x - 14.6 | x | 11.3 | x | 5.9x - 31.1 | x | 15.0 | x | 2.6x - 51.6 | x | 11.6x |
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Premium | Premium | Premium | ||||||||||||
to 30 Day | to 10 Day | to Pre | ||||||||||||
Acquiror | Target | VWAP | VWAP | Announcement | ||||||||||
Kinross Gold Corp. | Bema Gold Corp. | 34.6 | % | 34.3 | % | 22.4 | % | |||||||
Barrick Gold Corp. | Nova Gold Corp. | 29.8 | % | 34.4 | % | 33.2 | % | |||||||
IAMGOLD Corp. | Cambior Inc. | 30.9 | % | 25.8 | % | 31.6 | % | |||||||
Goldcorp Inc. | Glamis Gold Ltd. | 39.0 | % | 37.7 | % | 34.5 | % | |||||||
Yamana Gold Inc. | Viceroy Explorations Ltd. | 25.5 | % | 17.7 | % | 25.4 | % | |||||||
Barrick Gold Corp. | Pioneer Metals Corp. | 57.1 | % | 53.7 | % | 49.3 | % | |||||||
Gammon Lake Resources Inc. | Mexgold Resources Inc. | 13.8 | % | 4.2 | % | 21.3 | % | |||||||
Glamis Gold Ltd. | Western Silver Corp. | 42.6 | % | 38.5 | % | 27.0 | % | |||||||
Yamana Gold Inc. | Desert Sun Mining Corp. | 33.3 | % | 31.5 | % | 19.0 | % | |||||||
IAMGOLD Corp. | Gallery Gold Ltd. | 41.0 | % | 29.0 | % | 24.0 | % | |||||||
Goldcorp Inc. | Virginia Gold Mines Inc. | 53.0 | % | 43.0 | % | 34.0 | % | |||||||
Yamana Gold Inc. | RNC Gold Inc. | 21.0 | % | 19.0 | % | 5.0 | % | |||||||
Gold Fields Ltd. | Bolivar Gold Corp. | 42.0 | % | 29.0 | % | 19.0 | % | |||||||
Barrick Gold Corp. | Placer Dome Inc. | 33.0 | % | 37.0 | % | 35.0 | % | |||||||
Crew Gold Corp. | Guinor Gold Corp. | 21.0 | % | 10.0 | % | 3.0 | % | |||||||
Golden Star Resources Ltd. | St. Jude Resources Ltd. | 44.4 | % | 28.4 | % | 29.2 | % | |||||||
Eldorado Gold Corp. | Afcan Mining Corp. | 21.9 | % | 16.1 | % | 25.7 | % | |||||||
High River Gold | Jilbey Gold Exploration | |||||||||||||
Mines Ltd. | Ltd. | 56.3 | % | 38.7 | % | 29.1 | % | |||||||
Agnico-Eagle Mines Ltd. | Riddarhyttan Resources AB | 25.0 | % | 25.6 | % | 27.1 | % | |||||||
Glamis Gold Ltd. | Goldcorp Inc. | 27.2 | % | 29.4 | % | 29.1 | % | |||||||
Goldcorp Inc. | Wheaton River Minerals Ltd. | 4.3 | % | 7.8 | % | 14.1 | % | |||||||
Rio Narcea Gold Mines Ltd. | Defiance Mining Corp. | 44.1 | % | 44.7 | % | 35.9 | % | |||||||
Coeur D’Alene Mines Corp. | Wheaton River Minerals Ltd. | 49.7 | % | 46.7 | % | 40.3 | % | |||||||
Golden Star Resources Ltd. | IAMGOLD Corp. | 16.9 | % | 18.0 | % | 14.1 | % | |||||||
IAMGOLD Corp. | Wheaton River Minerals Ltd. | 31.6 | % | 24.8 | % | 24.8 | % | |||||||
Deep Resources Ltd. | Emperor Mines Ltd. | 40.5 | % | 51.1 | % | 47.2 | % | |||||||
MMC Norilsk Nickel Group | Gold Fields Ltd. | −3.4 | % | −1.2 | % | −5.0 | % | |||||||
Cambior Inc. | Ariane Gold Corp. | 36.9 | % | 36.1 | % | 33.3 | % |
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Premium | Premium | Premium | ||||||||||||
to 30 Day | to 10 Day | to Pre | ||||||||||||
Acquiror | Target | VWAP | VWAP | Announcement | ||||||||||
Wheaton River Minerals Ltd. | Miranda Mining Corp. | 167.5 | % | 107.5 | % | 64.4 | % | |||||||
Anglogold Corp. | Ashanti-Goldfields Co Ltd. | 47.3 | % | 42.3 | % | 41.6 | % | |||||||
IAMGOLD Corp. | Repadre Capital Corp. | 9.5 | % | 17.3 | % | 16.2 | % | |||||||
Kinross Gold Corp. | TVX Gold Inc./Echo Bay Mines Ltd. | 25.6 | % | 5.3 | % | 10.3 | % | |||||||
Placer Dome Inc. | AurionGold Ltd. | 54.2 | % | 42.6 | % | 27.1 | % | |||||||
Glamis Gold Ltd. | Francisco Gold Corp. | 58.8 | % | 45.1 | % | 42.2 | % | |||||||
Meridian Gold Ltd. | Brancote Holdings Plc | 68.3 | % | 17.7 | % | 6.4 | % | |||||||
Newmont Mining Corp. | Franco-Nevada Mining Corp. | 27.4 | % | 25.6 | % | 21.9 | % | |||||||
Homestake Gold of | ||||||||||||||
Barrick Gold Corp. | Australia | 21.9 | % | 25.9 | % | 31.0 | % | |||||||
Battle Mountain Gold | ||||||||||||||
Newmont Mining Corp. | Exploration Corp. | 14.9 | % | 17.0 | % | 26.1 | % |
All Selected Companies | Target Companies (at March 3, 2006) | |||||||||||||||||||||||
Share Price Premium | Range | Mean | Coral Gold | White Knight | Nevada Pacific | Tone Resources | ||||||||||||||||||
To 30 Day VWAP | 4.3%-68.3% | 34.6 | % | 18.7 | % | 38.3 | % | 43.9 | % | 85.0 | % | |||||||||||||
To 10 Day VWAP | 4.2%-53.7% | 29.2 | % | 19.9 | % | 31.7 | % | 55.8 | % | 68.3 | % | |||||||||||||
To Pre-Announcement | 3.0%-49.3% | 26.6 | % | 25.0 | % | 25.0 | % | 25.0 | % | 25.0 | % |
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180-Day Average | 90-Day Average | 30-Day Average | Last Business Day | |||||||||||||||||
(Prior to | (Prior to | (Prior to | Prior to | Current | ||||||||||||||||
Exchange Ratios | Announcement) | Announcement) | Announcement) | Announcement | December 8th | |||||||||||||||
Coral Gold | 0.62 | 0.69 | 0.59 | 0.51 | 0.63 | |||||||||||||||
Nevada Pacific | 0.20 | 0.19 | 0.17 | 0.19 | 0.20 | |||||||||||||||
Tone Resources | 0.13 | 0.16 | 0.15 | 0.21 | 0.24 | |||||||||||||||
White Knight | 0.47 | 0.35 | 0.28 | 0.28 | 0.30 |
180-Day Average | 90-Day Average | 30-Day Average | Last Business Day | |||||||||||||||||
Exchange Ratio | (Prior to | (Prior to | (Prior to | Prior to | Current | |||||||||||||||
Premium | Announcement) | Announcement) | Announcement) | Announcement | December 8th | |||||||||||||||
Coral Gold | 3 | % | −8 | % | 8 | % | 25 | % | 1 | % | ||||||||||
Nevada Pacific | 17 | % | 21 | % | 37 | % | 25 | % | 17 | % | ||||||||||
Tone Resources | 104 | % | 64 | % | 77 | % | 25 | % | 10 | % | ||||||||||
White Knight | -25 | % | −1 | % | 27 | % | 25 | % | 16 | % |
• | Atna Resources Ltd. |
• | Bravo Venture Group Inc. |
• | CMQ Resources Inc. |
• | Duncan Park Holdings Corp. |
• | J-Pacific Gold Inc. |
• | Klondex Mines Ltd. |
• | Metallic Ventures Gold Inc. |
• | Mill City Gold Corp. |
• | Minterra Resource Group |
• | Miranda Gold Corp. |
• | Staccato Gold Resources Ltd. |
• | Victoria Resources Corp. |
• | X-Cal Resources Ltd. |
• | Market Capitalization |
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• | Enterprise Value |
• | Multiple of Enterprise Value to Estimated Acreage |
• | Multiple of Enterprise Value to Appraised Value |
All Selected Companies | (As at December 8, 2006) | |||||||||||||||||||||||
Range | Mean | Coral Gold | White Knight | Nevada Pacific | Tone Resources | |||||||||||||||||||
Market Capitalization | $ | 8.8 - $96.2 | $ | 43.8 | $ | 33.5 | $ | 125.4 | $ | 110.1 | $ | 37.3 | ||||||||||||
Enterprise Value | $ | 7.3 - $82.5 | $ | 38.0 | $ | 29.5 | $ | 112.7 | $ | 106.0 | $ | 36.0 | ||||||||||||
EV to Estimated Acreage(1) | $ | 540 - $4,214 | $ | 1,662 | $ | 3,954 | $ | 1,567 | $ | 1,980 | $ | 3,899 | ||||||||||||
EV to Appraised Value(1) | 1.0x - 17.4x | 4.8x | 2.3x | 8.7x | 12.4x | 18.0x | ||||||||||||||||||
(1) | EV for Target Companies based on bid values |
U.S. Gold | U.S. Gold – Pro Forma | |||||||
U.S. Gold Shares Outstanding (mm) | 50.0 | 96.7 | ||||||
U.S. Gold Shares Outstanding (F.D.) (mm) | 61.3 | 116.7 |
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U.S. Gold | U.S. Gold – Pro Forma | |||||||
Share Price ($US) | $ | 5.46 | $ | 5.46 | ||||
Market Capitalization (US$mm) | $ | 273 | $ | 528 | ||||
Market Capitalization (F.D.) (US$mm) | $ | 334 | $ | 637 | ||||
Net Cash (US$mm) | $ | 58 | $ | 77 | ||||
Fully Diluted Net Cash (US$mm) | $ | 146 | $ | 188 | ||||
Enterprise Value | $ | 215 | $ | 451 | ||||
Enterprise Value (Fully Diluted) | $ | 189 | $ | 449 | ||||
Total Acres (000’s) | 23.0 | 165.3 | ||||||
Acres in Cortez Trend (000’s) | 23.0 | 134.2 | ||||||
Acres per million FD US Gold Share | 376 | 3,047 | ||||||
Cortez Acres per million FD US Gold Share | 376 | 2,381 | ||||||
% Ownership of US Gold (Fully Diluted) | 100.0 | % | 52.5 | % |
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• | pay any dividends on common shares or any other shares of Canadian Exchange Co. ranking junior to the exchangeable shares, other than stock dividends payable in common shares or any such other shares of Canadian Exchange Co. ranking junior to the exchangeable shares, as the case may be; | |
• | redeem or purchase or make any capital distribution in respect of common shares or any other shares of Canadian Exchange Co. ranking junior to the exchangeable shares; | |
• | redeem or purchase any other shares of Canadian Exchange Co. ranking equally with the exchangeable shares with respect to the payment of dividends or the distribution of assets in the event of the liquidation, dissolution or winding up of Canadian Exchange Co., whether voluntary or involuntary, or any other distribution of the assets of Canadian Exchange Co. among its shareholders for the purpose of winding up its affairs; or | |
• | issue any shares of stock other than exchangeable shares and any other shares not ranking superior to the exchangeable shares, |
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Nine Months Ended | Fiscal Year Ended | |||||||||||||||||||||||||||
September 30, | December 31, | |||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||||
($ In thousands except share data) | ||||||||||||||||||||||||||||
Operating data | ||||||||||||||||||||||||||||
Other income | $ | 1,884 | $ | 1,038 | $ | 1,052 | $ | 39 | $ | 636 | $ | 56 | $ | 560 | ||||||||||||||
Net loss from operations before cumulative-effect gain on accounting change | $ | (63,985 | ) | (2,346 | ) | $ | (2,991 | ) | $ | (794 | ) | $ | (1,027 | ) | (1,375 | ) | $ | (136 | ) | |||||||||
Net loss | $ | (63,985 | ) | $ | (2,346 | ) | $ | (2,991 | ) | $ | (794 | ) | $ | (623 | ) | $ | (1,375 | ) | $ | (136 | ) | |||||||
Basic and diluted loss per share | $ | (1.76 | ) | $ | (0.10 | ) | $ | (0.12 | ) | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.09 | ) | $ | (0.01 | ) | |||||||
Weighted average shares | 36,366,608 | 23,495,593 | 25,931,172 | 20,028,173 | 17,696,098 | 15,334,157 | 14,011,400 | |||||||||||||||||||||
Balance sheet data | ||||||||||||||||||||||||||||
Cash, cash equivalents and short term investments | $ | 60,641 | $ | 1,351 | $ | 678 | $ | 75 | $ | 198 | $ | 4 | $ | 72 | ||||||||||||||
Inventories | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Property, plant and equipment | 593 | 14 | 53 | 104 | 8 | 15 | 25 | |||||||||||||||||||||
Other assets | 6,217 | 3,740 | 4,810 | 1,256 | 1,595 | 3,455 | 3,406 | |||||||||||||||||||||
Total assets | $ | 67,451 | $ | 5,105 | $ | 5,541 | $ | 1,435 | $ | 1,801 | $ | 3,474 | $ | 3,503 | ||||||||||||||
Current liabilities | $ | 4,235 | $ | 120 | $ | 1,791 | $ | 35 | $ | 80 | $ | 434 | $ | 29 | ||||||||||||||
Long-term obligations | 9 | 0 | 16 | 570 | 545 | 545 | 420 | |||||||||||||||||||||
Other long-term liabilities and deferred gain | 2,842 | 1,807 | 1,201 | 0 | 0 | 1,826 | 1,826 | |||||||||||||||||||||
Shareholders’ equity | 60,365 | 3,178 | 2,533 | 830 | 1,176 | 669 | 1,228 | |||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 67,451 | $ | 5,105 | $ | 5,541 | $ | 1,435 | $ | 1,801 | $ | 3,474 | $ | 3,503 | ||||||||||||||
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THE TARGET COMPANIES
Six Months Ended | Fiscal Year Ended January 31, | |||||||||||||||||||||||||||||||||||||||
July 31, | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||||||||||||||||
(Cdn$ in thousands except share data)(*) | 2006 | 2005 | 2006 | 2006 | Restated(1) | 2005 | Restated(1) | 2004 | Restated(1) | Restated(1) | ||||||||||||||||||||||||||||||
Canadian | Canadian | Canadian | U.S. | Canadian | U.S. | Canadian | U.S. | Canadian | Canadian | |||||||||||||||||||||||||||||||
GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | |||||||||||||||||||||||||||||||
Operating data | ||||||||||||||||||||||||||||||||||||||||
Other revenue | $ | 71 | $ | 6 | $ | 20 | $ | 20 | $ | 34 | $ | 34 | $ | 15 | $ | 15 | $ | 11 | $ | 1 | ||||||||||||||||||||
Net loss | $ | (587 | ) | $ | (330 | ) | $ | (3,067 | ) | $ | (3,652 | ) | $ | (879 | ) | $ | (1,777 | ) | $ | (754 | ) | $ | (1,169 | ) | $ | (756 | ) | $ | (1,128 | ) | ||||||||||
Basic and diluted loss per share | $ | (0.09 | ) | $ | (0.07 | ) | $ | (0.64 | ) | $ | (0.76 | ) | $ | (0.19 | ) | $ | (0.38 | ) | $ | (0.20 | ) | $ | (0.32 | ) | $ | (0.27 | ) | $ | (0.54 | ) | ||||||||||
Balance sheet data | ||||||||||||||||||||||||||||||||||||||||
Cash, cash equivalents and short term investments | $ | 3,975 | $ | 970 | $ | 663 | $ | 663 | $ | 1,472 | $ | 1,472 | $ | 2,567 | $ | 2,567 | $ | 393 | $ | 154 | ||||||||||||||||||||
Inventories | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
Property, plant and equipment | 3 | 4 | 4 | 4 | 5 | 5 | 6 | 6 | 4 | 0 | ||||||||||||||||||||||||||||||
Mineral properties and deferred exploration costs | 10,633 | 8,758 | 10,096 | 1,038 | 8,472 | 0 | 7,574 | 0 | 7,159 | 5,877 | ||||||||||||||||||||||||||||||
Other assets | 660 | 770 | 623 | 615 | 789 | 794 | 749 | 1,641 | 1,332 | 533 | ||||||||||||||||||||||||||||||
Total assets | $ | 15,271 | $ | 10,502 | $ | 11,386 | $ | 2,320 | $ | 10,738 | $ | 2,271 | $ | 10,896 | $ | 4,214 | $ | 8,888 | $ | 6,564 | ||||||||||||||||||||
Current liabilities | $ | 437 | $ | 208 | $ | 759 | $ | 759 | $ | 163 | $ | 163 | $ | 161 | $ | 161 | $ | 387 | $ | 260 | ||||||||||||||||||||
Long-term obligations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
Other long-term liabilities | 1,475 | 0 | 1,475 | 1,475 | 318 | 318 | 318 | 318 | 318 | 217 | ||||||||||||||||||||||||||||||
Shareholders’ equity | $ | 13,359 | $ | 10,294 | $ | 9,152 | $ | 86 | $ | 10,257 | $ | 1,790 | $ | 10,417 | $ | 3,735 | $ | 8,183 | $ | 6,087 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 15,271 | $ | 10,502 | $ | 11,386 | $ | 2,320 | $ | 10,738 | $ | 2,271 | $ | 10,896 | $ | 4,214 | $ | 8,888 | $ | 6,564 |
(1) | See Note 2 of Coral Gold’s Financial Statements included in Annex B to this proxy statement. |
(*) | Coral Gold’s balance sheets and annual and interim operating data for the fiscal years and the six month periods reflected above have been expressed in Canadian dollars only. The information presented here is derived from the financial statements of Coral Gold and may be translated into United States dollars using the Canadian dollar exchange rate at January 31, 2002 in respect of the balance sheet at January 31, 2002, the Canadian dollar exchange rate at January 31, 2003 in respect of the balance sheet at January 31, 2003, the Canadian dollar exchange rate at January 31, 2004 in respect of the balance sheet at January 31, 2004, the Canadian dollar exchange rate at January 31, 2005 in respect of the balance sheet at January 31, 2005, the Canadian dollar exchange rate at January 31, 2006 in respect of the balance sheet at January 31, 2006, the Canadian dollar exchange rate at July 31, 2005 in respect of the balance sheet at July 31, 2005 and the Canadian dollar exchange rate at July 31, 2006 in respect of the balance sheet at July 31, 2006. The operating data for each of the fiscal years ended January 31, 2002, 2003, 2004, 2005 and 2006, and for each of the six month periods ended July 31, 2005 and 2006 may be translated into United States dollars using the Canadian dollar average exchange rate for each of the fiscal years, or six month periods then ended using the Canadian dollar average exchange rate for each of the fiscal years, or six month periods then ended, as applicable. The |
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exchange rates that may be used for the conversion of Canadian dollars to United States dollars in the summary selected historical financial data of Coral Gold above are set forth immediately below. |
Cdn$ | ||||
January 31, 2002 | $ | 1.5915 | ||
January 31, 2003 | 1.5286 | |||
January 31, 2004 | 1.3265 | |||
January 31, 2005 | 1.2396 | |||
January 31, 2006 | 1.1436 | |||
July 31, 2005 | 1.2257 | |||
July 31, 2006 | 1.1309 | |||
Average for the period February 1, 2001 to January 31, 2002 | 1.5318 | |||
Average for the period February 1, 2002 to January 31, 2003 | 1.5658 | |||
Average for the period February 1, 2003 to January 31, 2004 | 1.3805 | |||
Average for the period February 1, 2004 to January 31, 2005 | 1.2960 | |||
Average for the period February 1, 2005 to January 31, 2006 | 1.2061 | |||
Average for the period February 1, 2005 to July 31, 2005 | 1.2348 | |||
Average for the period February 1, 2006 to July 31, 2006 | 1.1336 |
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Three | ||||||||||||||||||||||||||||||||||||||||
Months | ||||||||||||||||||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||||||||||||||||||
September 30, | For the Years Ended June 30 | |||||||||||||||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2006 | 2005 | 2005 | 2004 | 2004 | 2003 | 2002 | |||||||||||||||||||||||||||||||
(Canadian | U.S. | (Canadian | U.S. | (Canadian | U.S. | (Canadian | (Canadian | |||||||||||||||||||||||||||||||||
GAAP) | GAAP | GAAP) | GAAP | GAAP) | GAAP(1) | GAAP) | GAAP) | |||||||||||||||||||||||||||||||||
Operating data | ||||||||||||||||||||||||||||||||||||||||
Gold sales revenue | $ | 753 | $ | 2,186 | $ | 6,649 | $ | 6,649 | $ | 5,175 | $ | 8,091 | $ | — | $ | 2,654 | $ | — | $ | — | ||||||||||||||||||||
Mine operating earnings (loss) | $ | (48 | ) | $ | (1,141 | ) | (2,371 | ) | $ | (2,189 | ) | 838 | $ | (3,243 | ) | $ | — | $ | (758 | ) | $ | — | $ | — | ||||||||||||||||
Net income (loss) | $ | (748 | ) | $ | (1,597 | ) | $ | (5,021 | ) | $ | (6,395 | ) | $ | (2,382 | ) | $ | (7,114 | ) | $ | (1,937 | ) | $ | (3,663 | ) | $ | (1,092 | ) | $ | (440 | ) | ||||||||||
Basic and diluted earnings (loss) per share | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.08 | ) | $ | (0.11 | ) | $ | (0.05 | ) | $ | (0.14 | ) | $ | (0.06 | ) | $ | (0.12 | ) | $ | (0.06 | ) | $ | (0.03 | ) | ||||||||||
Balance sheet data | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 3,545 | $ | 356 | $ | 3,660 | $ | 3,660 | $ | 957 | $ | 957 | $ | 598 | $ | 88 | $ | 923 | ||||||||||||||||||||||
Inventories | 463 | 3,171 | 394 | 394 | 4,527 | 4,373 | 2,448 | — | — | |||||||||||||||||||||||||||||||
Property, plant and equipment | 13,205 | 13,305 | 13,306 | 8,648 | 13,389 | 8,704 | 10,560 | 11 | 14 | |||||||||||||||||||||||||||||||
Mineral properties | 5,508 | 3,647 | 4,662 | — | 3,106 | — | 2,455 | 1,487 | 1,413 | |||||||||||||||||||||||||||||||
Other assets | 587 | 443 | 517 | 517 | 590 | 590 | 786 | 95 | 188 | |||||||||||||||||||||||||||||||
Total assets | $ | 23,308 | $ | 20,922 | $ | 22,539 | $ | 13,219 | $ | 22,569 | $ | 14,624 | $ | 16,847 | $ | 1,681 | $ | 2,538 | ||||||||||||||||||||||
Total current liabilities | $ | 1,014 | $ | 1,493 | $ | 1,195 | $ | 1,195 | $ | 1,783 | $ | 1,783 | $ | 5,211 | $ | 96 | $ | 171 | ||||||||||||||||||||||
Total long-term liabilities | 1,740 | 1,777 | 1,797 | 1,797 | $ | 1,742 | 1,742 | 1,632 | — | — | ||||||||||||||||||||||||||||||
Shareholders’ equity | 20,554 | 17,652 | $ | 19,547 | 10,227 | $ | 19,044 | 11,099 | $ | 10,004 | $ | 1,585 | $ | 2,367 | ||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 23,308 | $ | 20,922 | $ | 22,539 | $ | 13,219 | $ | 22,569 | $ | 14,624 | $ | 16,847 | $ | 1,681 | $ | 2,538 | ||||||||||||||||||||||
(1) | Balance sheet information under U.S. GAAP as at June 30, 2004 is not available. |
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(Cdn$ in thousands except | Fiscal Year Ended August 31, | |||||||||||||||||||||||||||||||
per share data)(*) | 2006 | 2006 | 2005 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||||
Canadian | U.S. | Canadian | U.S. | Canadian | U.S. | Canadian | Canadian | |||||||||||||||||||||||||
GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | |||||||||||||||||||||||||
Operating data | ||||||||||||||||||||||||||||||||
Other revenue | $ | 7 | $ | 7 | $ | 1 | $ | 1 | $ | 1 | $ | 1 | $ | 3 | $ | 0 | ||||||||||||||||
Net loss | (1,084 | ) | (1,289 | ) | (856 | ) | (1,075 | ) | (1,083 | ) | (1,539 | ) | (438 | ) | (129 | ) | ||||||||||||||||
Basic and diluted loss per share | $ | (0.06 | ) | $ | (0.08 | ) | $ | (0.06 | ) | $ | (0.08 | ) | $ | (0.09 | ) | $ | (0.13 | ) | $ | (0.07 | ) | $ | (0.03 | ) | ||||||||
Balance sheet data | ||||||||||||||||||||||||||||||||
Cash, cash equivalents and short term investments | $ | 1,247 | $ | 1,247 | $ | 5 | $ | 5 | $ | 373 | $ | 373 | $ | 290 | $ | 153 | ||||||||||||||||
Inventories | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Property, plant and equipment | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Mineral properties and deferred exploration costs | 1,329 | 0 | 1,124 | 0 | 906 | 0 | 450 | 102 | ||||||||||||||||||||||||
Other assets | 53 | 53 | 44 | 44 | 57 | 57 | 67 | 69 | ||||||||||||||||||||||||
Total assets | $ | 2,629 | $ | 1,300 | $ | 1,173 | $ | 49 | $ | 1,336 | $ | 430 | $ | 807 | $ | 324 | ||||||||||||||||
Current liabilities | $ | 101 | $ | 101 | $ | 129 | $ | 129 | $ | 42 | $ | 42 | $ | 79 | $ | 6 | ||||||||||||||||
Long-term obligations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Other long-term liabilities | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Shareholders’ equity | $ | 2,528 | $ | 1,199 | $ | 1,044 | $ | (80 | ) | $ | 1,293 | $ | 388 | $ | 728 | $ | 318 | |||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,629 | $ | 1,300 | $ | 1,173 | $ | 49 | $ | 1,336 | $ | 430 | $ | 807 | $ | 324 |
(*) | Tone Resources’ balance sheets and annual and interim operating data for the fiscal years reflected above have been expressed in Canadian dollars only. The information presented here is derived from the financial statements of Tone Resources and may be translated into United States dollars using the Canadian dollar exchange rate at August 31, 2002 in respect of the balance sheet at August 31, 2002, the Canadian dollar exchange rate at August 31, 2003 in respect of the balance sheet at August 31, 2003, the Canadian dollar exchange rate at August 31, 2004 in respect of the balance sheet at August 31, 2004, the Canadian dollar exchange rate at August 31, 2005 in respect of the balance sheet at August 31, 2005 and the Canadian dollar exchange rate at August 31, 2006 in respect of the balance sheet at August 31, 2006. The operating data for each of the fiscal years ended August 31, 2002, 2003, 2004, 2005 and 2006 may be translated into United States dollars using the Canadian dollar average exchange rate for each of the fiscal years then ended using the Canadian dollar average exchange rate for |
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each of the fiscal years then ended, as applicable. The exchange rates that may be used for the conversion of Canadian dollars to United States dollars in the summary selected historical financial data of Tone Resources above are set forth immediately below. |
Cdn$ | ||||
August 31, 2002 | $ | 1.5585 | ||
August 31, 2003 | 1.3850 | |||
August 31, 2004 | 1.3166 | |||
August 31, 2005 | 1.1893 | |||
August 31, 2006 | 1.1066 | |||
Average for the period September 1, 2001 to August 31, 2002 | 1.5724 | |||
Average for the period September 1, 2002 to August 31, 2003 | 1.4808 | |||
Average for the period September 1, 2003 to August 31, 2004 | 1.3317 | |||
Average for the period September 1, 2004 to August 31, 2005 | 1.2323 | |||
Average for the period September 1, 2005 to August 31, 2006 | 1.1474 |
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Fiscal Quarter Ended | ||||||||||||||||||||||||||||||||||||||||
(Cdn$ in thousands, | September 30, | Fiscal Year Ended June 30, | ||||||||||||||||||||||||||||||||||||||
except per share data)(*) | 2006 | 2005 | 2006 | 2006 | 2005 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||||||||||
Canadian | Canadian | Canadian | U.S. | Canadian | U.S. | Canadian | U.S. | Canadian | Canadian | |||||||||||||||||||||||||||||||
GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | GAAP | |||||||||||||||||||||||||||||||
Operating data | ||||||||||||||||||||||||||||||||||||||||
Other revenue | $ | 129 | $ | 29 | $ | 442 | $ | 442 | $ | 262 | $ | 262 | $ | 98 | $ | 98 | $ | 8 | $ | 24 | ||||||||||||||||||||
Net loss | (180 | ) | (302 | ) | (3,307 | ) | (5,833 | ) | (1,063 | ) | (2,423 | ) | (1,664 | ) | (2,448 | ) | (358 | ) | (1,679 | ) | ||||||||||||||||||||
Basic and diluted loss per share | $ | (0.003 | ) | $ | (0.005 | ) | $ | (0.06 | ) | $ | (0.10 | ) | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.06 | ) | ||||||||||
Balance sheet data | ||||||||||||||||||||||||||||||||||||||||
Cash, cash equivalents and short term investments | $ | 12,674 | $ | 16,294 | $ | 13,505 | $ | 13,554 | $ | 11,178 | $ | 11,214 | $ | 9,846 | $ | 9,846 | $ | 133 | $ | 509 | ||||||||||||||||||||
Inventories | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
Property, plant and equipment | 1,062 | 149 | 931 | 931 | 139 | 139 | 86 | 86 | 7 | 9 | ||||||||||||||||||||||||||||||
Mineral properties and deferred exploration costs | 7,069 | 4,805 | 6,664 | 767 | 3,965 | 617 | 2,487 | 534 | 1,611 | 1,367 | ||||||||||||||||||||||||||||||
Other assets | 420 | 502 | 402 | 402 | 415 | 415 | 301 | 301 | 161 | 249 | ||||||||||||||||||||||||||||||
Total assets | $ | 21,225 | $ | 21,790 | $ | 21,502 | $ | 15,654 | $ | 15,697 | $ | 12,385 | $ | 12,720 | $ | 10,767 | $ | 1,912 | $ | 2,134 | ||||||||||||||||||||
Current liabilities | $ | 273 | $ | 309 | $ | 433 | $ | 433 | $ | 180 | $ | 180 | $ | 130 | $ | 130 | $ | 234 | $ | 140 | ||||||||||||||||||||
Long-term obligations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
Other long-term liabilities | 166 | 0 | 166 | 166 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
Shareholders’ equity | 20,786 | 21,481 | 20,903 | 15,055 | 15,517 | 12,205 | 12,590 | 10,637 | 1,678 | 1,994 | ||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 21,225 | $ | 21,790 | $ | 21,502 | $ | 15,654 | $ | 15,697 | $ | 12,385 | $ | 12,720 | $ | 10,767 | $ | 1,912 | $ | 2,134 |
(*) | White Knight’s publicly filed balance sheets and annual and interim operating data for the fiscal years reflected above have been expressed in Canadian dollars only. The information presented here is derived from the financial statements of White Knight and may be translated into United States dollars using the Canadian dollar exchange rate at June 30, 2002 in respect of the balance sheet at June 30, 2002, the Canadian dollar exchange rate at June 30, 2003 in respect of the balance sheet at June 30, 2003, the Canadian dollar exchange rate at June 30, 2004 in respect of the balance sheet at June 30, 2004, the Canadian dollar exchange rate at June 30, 2005 in respect of the balance sheet at June 30, 2005, the Canadian dollar exchange rate at June 30, 2006 in respect of the balance sheet at June 30, 2006, the Canadian dollar exchange rate at September 30, 2005 in respect of the balance sheet at September 30, 2005, and the Canadian dollar exchange rate at September 30, 2006 in respect of the balance sheet at September 30, 2006. The operating data for each of the fiscal years ended June 30, 2002, 2003, 2004, 2005 and 2006, and the three month periods ended September 30, 2005 and September 30, 2006 may be translated into United States dollars using the Canadian dollar average exchange rate for each of the fiscal years or three month periods then ended using the Canadian dollar average exchange rate for each of the fiscal years then ended, as applicable. The exchange rates that may be used for the |
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conversion of Canadian dollars to United States dollars in the selected historical financial data of White Knight above are set forth immediately below. |
Cdn$ | ||||
June 30, 2002 | $ | 1.5190 | ||
June 30, 2003 | 1.3558 | |||
June 30, 2004 | 1.3407 | |||
June 30, 2005 | 1.2256 | |||
June 30, 2006 | 1.1150 | |||
September 30, 2005 | 1.1607 | |||
September 30, 2006 | 1.1151 | |||
Average for the period July 1, 2001 to June 30, 2002 | 1.5686 | |||
Average for the period July 1, 2002 to June 30, 2003 | 1.5100 | |||
Average for the period July 1, 2003 to June 30, 2004 | 1.3439 | |||
Average for the period July 1, 2004 to June 30, 2005 | 1.2499 | |||
Average for the period July 1, 2005 to June 30, 2006 | 1.1627 | |||
Average for the period July 1, 2005 to September 30, 2005 | 1.2014 | |||
Average for the period July 1, 2006 to September 30, 2006 | 1.2111 |
76
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77
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U.S. Gold and Coral Gold | ||||||||
Summary Selected UnauditedPro Forma | ||||||||
Consolidated Financial Data | ||||||||
Year Ended | Nine Months Ended | |||||||
December 31, | September 30, | |||||||
U.S. GAAP | 2005 | 2006 | ||||||
($ In thousands except per share data) | ||||||||
Operating data | ||||||||
Other income | $ | 1,049 | $ | 1,978 | ||||
Net loss from operations before cumulative-effect gain on accounting change | $ | (4,430 | ) | $ | (67,234 | ) | ||
Net loss | $ | (4,430 | ) | $ | (67,234 | ) | ||
Basic and diluted loss per share | $ | (0.15 | ) | $ | (1.66 | ) | ||
Weighted average shares | 30,187,112 | 40,622,548 | ||||||
Balance sheet data | ||||||||
Cash, cash equivalents and short term investments | $ | 64,139 | ||||||
Inventories | 0 | |||||||
Property, plant and equipment | 596 | |||||||
Mineral properties and deferred exploration costs | 33,049 | |||||||
Other assets | 6,803 | |||||||
Total assets | $ | 104,587 | ||||||
Current liabilities | $ | 4,820 | ||||||
Long-term obligations | 9 | |||||||
Other long-term liabilities and deferred gain | 11,211 | |||||||
Shareholders’ equity | 88,547 | |||||||
Total liabilities and shareholders’ equity | $ | 104,587 |
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U.S. Gold and Nevada Pacific | ||||||||
Summary Selected UnauditedPro Forma | ||||||||
Consolidated Financial Data | ||||||||
Year Ended | Nine Months Ended | |||||||
December 31, | September 30, | |||||||
U.S. GAAP | 2005 | 2006 | ||||||
($ In thousands except per share data) | ||||||||
Operating data | ||||||||
Mining revenue | $ | 8,881 | $ | 3,696 | ||||
Other income | $ | 1,168 | $ | 1,994 | ||||
Net loss from operations before cumulative-effect gain on accounting change | $ | (7,607 | ) | $ | (68,970 | ) | ||
Net loss | $ | (7,607 | ) | $ | (68,970 | ) | ||
Basic and diluted loss per share | $ | (0.18 | ) | $ | (1.31 | ) | ||
Weighted average shares | 42,161,161 | 52,596,597 | ||||||
Balance sheet data | ||||||||
Cash, cash equivalents and short term investments | $ | 64,186 | ||||||
Inventories | 463 | |||||||
Property, plant and equipment | 9,140 | |||||||
Mineral properties and deferred exploration costs | 130,340 | |||||||
Other assets | 6,805 | |||||||
Total assets | $ | 210,934 | ||||||
Current liabilities | $ | 6,043 | ||||||
Long-term obligations | 9 | |||||||
Other long-term liabilities and deferred gain | 33,255 | |||||||
Shareholders’ equity | 171,627 | |||||||
Total liabilities and shareholders’ equity | $ | 210,934 |
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U.S. Gold and Tone Resources | ||||||||
Summary Selected UnauditedPro Forma | ||||||||
Consolidated Financial Data | ||||||||
Year Ended | Nine Months Ended | |||||||
December 31, | September 30, | |||||||
U.S. GAAP | 2005 | 2006 | ||||||
($ In thousands except per share data) | ||||||||
Operating data | ||||||||
Other income | $ | 1,051 | $ | 1,885 | ||||
Net loss from operations before cumulative-effect gain on accounting change | $ | (3,693 | ) | $ | (64,989 | ) | ||
Net loss | $ | (3,693 | ) | $ | (64,989 | ) | ||
Basic and diluted loss per share | $ | (0.12 | ) | $ | 1.56 | |||
Weighted average shares | 31,119,276 | 41,554,712 | ||||||
Balance sheet data | ||||||||
Cash, cash equivalents and short term investments | $ | 61,764 | ||||||
Inventories | 0 | |||||||
Property, plant and equipment | 593 | |||||||
Mineral properties and deferred exploration costs | 46,113 | |||||||
Other assets | 6,265 | |||||||
Total assets | $ | 114,735 | ||||||
Current liabilities | $ | 4,589 | ||||||
Long-term obligations | 9 | |||||||
Other long-term liabilities and deferred gain | 12,987 | |||||||
Shareholders’ equity | 97,150 | |||||||
Total liabilities and shareholders’ equity | $ | 114,735 |
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U.S. Gold and White Knight | ||||||||
Summary Selected UnauditedPro Forma | ||||||||
Consolidated Financial Data | ||||||||
Year Ended | Nine Months Ended | |||||||
December 31, | September 30, | |||||||
U.S. GAAP | 2005 | 2006 | ||||||
($ In thousands except per share data) | ||||||||
Operating data | ||||||||
Other income | $ | 1,400 | $ | 2,201 | ||||
Net loss from operations before cumulative-effect gain on accounting change | $ | (5,648 | ) | $ | (67,448 | ) | ||
Net loss | $ | (5,648 | ) | $ | (67,448 | ) | ||
Basic and diluted loss per share | $ | (0.12 | ) | $ | (1.18 | ) | ||
Weighted average shares | 46,715,912 | 57,151,348 | ||||||
Balance sheet data | ||||||||
Cash, cash equivalents and short term investments | — | $ | 72,101 | |||||
Inventories | 0 | |||||||
Property, plant and equipment | 1,549 | |||||||
Mineral properties and deferred exploration costs | 153,655 | |||||||
Other assets | 6,594 | |||||||
Total assets | $ | 233,899 | ||||||
Current liabilities | $ | 5,420 | ||||||
Long-term debt | 9 | |||||||
Other long-term liabilities and deferred gain | 36,639 | |||||||
Shareholders’ equity | 191,831 | |||||||
Total liabilities and shareholders’ equity | $ | 233,899 |
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Summary Selected UnauditedPro Forma | ||||||||
Consolidated Supplementary Financial Data | ||||||||
for U.S. Gold and White Knight, Coral Gold, | ||||||||
Nevada Pacific and Tone Resources | ||||||||
Year Ended | Nine Months Ended | |||||||
December 31, | September 30, | |||||||
U.S. GAAP | 2005 | 2006 | ||||||
($ In thousands except per share data) | ||||||||
Operating data | ||||||||
Mining revenue | $ | 8,881 | $ | 3,696 | ||||
Other income | $ | 1,511 | $ | 2,346 | ||||
Net loss from operations before cumulative-effect gain on accounting change | $ | (12,407 | ) | $ | (76,685 | ) | ||
Net loss | $ | (12,407 | ) | $ | (76,685 | ) | ||
Basic and diluted loss per share | $ | (0.17 | ) | $ | (0.93 | ) | ||
Weighted average shares | 72,389,945 | 82,823,581 | ||||||
Balance sheet data | ||||||||
Cash, cash equivalents and short term investments | $ | 80,266 | ||||||
Inventories | 463 | |||||||
Property, plant and equipment | 10,099 | |||||||
Mineral properties and deferred exploration costs | 363,158 | |||||||
Other assets | 7,814 | |||||||
Total assets | $ | 461,800 | ||||||
Current liabilities | $ | 8,169 | ||||||
Long-term debt | 9 | |||||||
Other long-term liabilities and deferred gain | 85,563 | |||||||
Shareholders’ equity | 368,059 | |||||||
Total liabilities and shareholders’ equity | $ | 461,800 |
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• | U.S. Gold and each of the Target Companies separately on a historical basis; | |
• | U.S. Gold and each of the Target Companies separately on an equivalent unauditedpro formacondensed combined basis; and | |
• | U.S. Gold and all of the Target Companies combined on an equivalent unauditedpro formacondensed combined basis. |
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Nine Months Ended | Year Ended | |||||||
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
U.S. Gold — Historical | ||||||||
Historical per common share: | ||||||||
Income per basic share | $ | (1.76 | ) | $ | (0.12 | ) | ||
Income per diluted share | $ | (1.76 | ) | $ | (0.12 | ) | ||
Dividends declared | $ | 0 | $ | 0 | ||||
Book value per share | $ | 1.21 | $ | 0.08 |
Six Months Ended | Year Ended | |||||||
July 31, | January 31, | |||||||
2006 | 2006 | |||||||
Coral Gold — Historical (Canadian GAAP and Cdn$) | ||||||||
Historical per common share: | ||||||||
Income per basic share | $ | (0.09 | ) | $ | (0.64 | ) | ||
Income per diluted share | $ | (0.09 | ) | $ | (0.64 | ) | ||
Dividends declared | $ | 0 | $ | 0 | ||||
Book value per share | $ | 1.98 | $ | 1.79 |
Six Months Ended | Year Ended | |||||||
July 31, | January 31, | |||||||
2006 | 2006 | |||||||
Coral Gold — Historical (U.S. GAAP and Cdn$) | ||||||||
Historical per common share: | ||||||||
Income per basic share | $ | (0.17 | ) | $ | (0.76 | ) | ||
Income per diluted share | $ | (0.17 | ) | $ | (0.76 | ) | ||
Dividends declared | $ | 0 | $ | 0 | ||||
Book value per share | $ | 0.56 | $ | 0.02 |
Nine Months Ended | Year Ended | |||||||
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
UnauditedPro formaCondensed Combined | ||||||||
U.S. Gold and Coral Gold (U.S. GAAP) | ||||||||
Unauditedpro formacondensed combined per common share of U.S. Gold: | ||||||||
Income per basic share | $ | (1.66 | ) | $ | (0.15 | ) | ||
Income per diluted share | $ | (1.66 | ) | $ | (0.15 | ) | ||
Dividends declared | $ | 0 | $ | 0 | ||||
Book value per share | $ | 1.63 | $ | — |
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Three Months Ended | Year Ended | |||||||
September 30, | June 30, | |||||||
2006 | 2006 | |||||||
Nevada Pacific — Historical (Canadian GAAP) | ||||||||
Historical per common share: | ||||||||
Income per basic share | $ | (0.01 | ) | $ | (0.08 | ) | ||
Income per diluted share | $ | (0.01 | ) | $ | (0.08 | ) | ||
Dividends declared | $ | 0 | $ | 0 | ||||
Book value per share | $ | 0.29 | $ | 0.28 |
Three Months Ended | Year Ended | |||||||
September 30, 2006 | June 30, 2006 | |||||||
Nevada Pacific — Historical (U.S. GAAP) | ||||||||
Historical per common share: | ||||||||
Income per basic share | $ | (0.02 | ) | $ | (0.08 | ) | ||
Income per diluted share | $ | (0.02 | ) | $ | (0.08 | ) | ||
Dividends declared | $ | 0 | $ | 0 | ||||
Book value per share | $ | 0.15 | $ | 0.16 |
Nine Months Ended | Year Ended | |||||||
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
UnauditedPro formaCondensed Combined | ||||||||
U.S. Gold and Nevada Pacific (U.S. GAAP) | ||||||||
Unauditedpro formacondensed combined per common share of U.S. Gold: | ||||||||
Income per basic share | $ | (1.31 | ) | $ | (0.18 | ) | ||
Income per diluted share | $ | (1.31 | ) | $ | (0.18 | ) | ||
Dividends declared | $ | 0 | $ | 0 | ||||
Book value per share | $ | 2.59 | $ | — |
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Year Ended | ||||||||
August 31, | ||||||||
2006 | ||||||||
Tone Resources — Historical (Canadian GAAP and Cdn$) | ||||||||
Historical per common share: | ||||||||
Income per basic share | $ | (0.06 | ) | |||||
Income per diluted share | $ | (0.06 | ) | |||||
Dividends declared | $ | 0 | ||||||
Book value per share | $ | 0.13 |
Year Ended | ||||||||
August 31, | ||||||||
2006 | ||||||||
Tone Resources — Historical (U.S. GAAP and Cdn$) | ||||||||
Historical per common share: | ||||||||
Income per basic share | $ | (0.08 | ) | |||||
Income per diluted share | $ | (0.08 | ) | |||||
Dividends declared | $ | 0 | ||||||
Book value per share | $ | 0.06 |
Nine Months Ended | Year Ended | |||||||
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
UnauditedPro formaCondensed Combined | ||||||||
U.S. Gold and Tone Resources (U.S. GAAP) | ||||||||
Unauditedpro formacondensed combined per common share of U.S. Gold: | ||||||||
Income per basic share | $ | (1.56 | ) | $ | (0.12 | ) | ||
Income per diluted share | $ | (1.56 | ) | $ | (0.12 | ) | ||
Dividends declared | $ | 0 | $ | 0 | ||||
Book value per share | $ | 1.76 | $ | — |
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Three Months Ended | Year Ended | |||||||
September 30, | June 30, | |||||||
2006 | 2006 | |||||||
White Knight — Historical (Canadian GAAP and Cdn$) | ||||||||
Historical per common share: | ||||||||
Income per basic share | (0.003 | ) | $ | (0.06 | ) | |||
Income per diluted share | (0.003 | ) | $ | (0.06 | ) | |||
Dividends declared | 0 | $ | 0 | |||||
Book value per share | 0.35 | $ | 0.35 |
Three Months Ended | Year Ended | |||||||
September 30, | June 30, | |||||||
2006 | 2006 | |||||||
White Knight - Historical (U.S. GAAP and Cdn$) | ||||||||
Historical per common share: | ||||||||
Income per basic share | $ | (0.01 | ) | $ | (0.10 | ) | ||
Income per diluted share | $ | (0.01 | ) | $ | (0.10 | ) | ||
Dividends declared | $ | 0 | $ | 0 | ||||
Book value per share | $ | 0.25 | $ | 0.25 |
Nine Months Ended | Year Ended | |||||||
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
UnauditedPro formaCondensed Combined | ||||||||
U.S. Gold and White Knight (U.S. GAAP) | ||||||||
Unauditedpro formacondensed combined per common share of U.S. Gold: | ||||||||
Income per basic share | $ | (1.18 | ) | $ | (0.12 | ) | ||
Income per diluted share | $ | (1.18 | ) | $ | (0.12 | ) | ||
Dividends declared | $ | 0 | $ | 0 | ||||
Book value per share | $ | 2.71 | $ | — |
Nine Months Ended | Year Ended | |||||||
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
UnauditedPro formaCondensed Combined | ||||||||
U.S. Gold and White Knight, Coral Gold, Tone | ||||||||
Resources and Nevada Pacific (U.S. GAAP) | ||||||||
Unauditedpro formacondensed combined per common share of U.S. Gold: | ||||||||
Income per basic share | $ | (0.93 | ) | $ | (0.17 | ) | ||
Income per diluted share | $ | (0.93 | ) | $ | (0.17 | ) | ||
Dividends declared | $ | 0 | $ | 0 | ||||
Book value per share | $ | 3.82 | $ | — |
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Over-the-Counter | ||||||||||||||||
TSX-V or TSX | Bulletin Board | |||||||||||||||
March 3, | December 4, | March 3, | December 4, | |||||||||||||
Issuer | 2006 | 2006 | 2006 | 2006 | ||||||||||||
(Cdn$) | ($) | |||||||||||||||
Coral Gold | 3.25 | 3.80 | 2.85 | 3.34 | ||||||||||||
Nevada Pacific | 1.20 | 1.20 | — | — | ||||||||||||
Tone Resources | 1.35 | 1.45 | — | — | ||||||||||||
U.S. Gold | — | 5.83 | 5.65 | 5.14 | ||||||||||||
White Knight | 1.77 | 1.79 | — | — |
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U.S. Gold | U.S. Gold | Tone Resources | Nevada Pacific | White Knight | Coral Gold | Coral Gold | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTCBB | TSX | TSX-V | TSX-V | TSX-V | OTCBB(1) | TSX-V(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Avg. | Avg. | Avg. | Avg. | Avg. | Avg. | Avg. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Daily | Daily | Daily | Daily | Daily | Daily | Daily | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
High | Low | Volume | High | Low | Volume | High | Low | Volume | High | Low | Volume | High | Low | Volume | High | Low | Volume | High | Low | Volume | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
($) | (Cdn$) | (Cdn$) | (Cdn$) | (Cdn$) | ($) | (Cdn$) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2004 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31 | 1.85 | 0.81 | 77,486 | — | — | — | 0.61 | 0.30 | 19,253 | 1.60 | 0.92 | 213,531 | 0.92 | 0.55 | 89,475 | 0.42 | 0.22 | 6,053 | 0.55 | 0.29 | 9,757 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30 | 1.06 | 0.61 | 42,638 | — | — | — | 0.65 | 0.38 | 16,580 | 1.50 | 0.85 | 70,741 | 1.61 | 0.50 | 238,603 | 0.29 | 0.13 | 4,149 | 0.36 | 0.19 | 6,338 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
September 30 | 0.75 | 0.40 | 44,432 | — | — | — | 0.45 | 0.28 | 21,772 | 1.12 | 0.83 | 95,818 | 1.49 | 0.87 | 190,026 | 1.30 | 0.14 | 6,042 | 1.70 | 0.19 | 10,517 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31 | 0.57 | 0.40 | 24,155 | — | — | — | 0.75 | 0.35 | 22,280 | 1.11 | 0.74 | 139,839 | 1.20 | 0.70 | 114,153 | 1.60 | 0.90 | 8,748 | 1.95 | 1.12 | 7,381 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31 | 0.44 | 0.37 | 44,061 | — | — | — | 0.60 | 0.35 | 12,503 | 0.96 | 0.75 | 102,858 | 0.93 | 0.60 | 74,462 | 2.00 | 0.92 | 5,807 | 2.40 | 1.12 | 6,743 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30 | 0.60 | 0.30 | 24,751 | — | — | — | 0.45 | 0.32 | 12,121 | 0.96 | 0.51 | 71,957 | 0.92 | 0.55 | 28,696 | 1.49 | 1.06 | 3,112 | 1.89 | 1.31 | 2,480 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
September 30 | 2.82 | 0.35 | 304,298 | — | — | — | 0.41 | 0.25 | 15,459 | 0.91 | 0.55 | 151,524 | �� | 1.80 | 0.85 | 319,662 | 1.78 | 1.08 | 5,874 | 2.10 | 1.31 | 6,079 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31 | 3.96 | 1.94 | 243,627 | — | — | — | 0.97 | 1.18 | 53,800 | 0.90 | 0.34 | 392,056 | 2.10 | 1.31 | 158,204 | 3.63 | 0.76 | 19,001 | 4.17 | .090 | 17,600 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31 | 9.09 | 3.48 | 276,535 | — | — | — | 2.13 | 1.25 | 108,710 | 1.65 | 0.81 | 351,113 | 2.39 | 1.40 | 260,589 | 5.45 | 2.61 | 31,020 | 6.34 | 3.06 | 20,318 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30 | 10.30 | 5.75 | 310,081 | — | — | — | 2.39 | 1.18 | 72,195 | 2.10 | 1.00 | 281,621 | 3.10 | 1.66 | 234,505 | 5.96 | 2.55 | 19,630 | 6.99 | 2.87 | 16,125 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
September 30 | 9.20 | 3.95 | 242,550 | 7.50 | 4.48 | 18,005 | 1.90 | 1.01 | 32,351 | 1.51 | 0.94 | 88,052 | 2.45 | 1.46 | 82,446 | 4.05 | 2.75 | 6,482 | 4.29 | 3.08 | 11,362 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Through December 4 | 5.45 | 4.05 | 327,518 | 6.40 | 4.61 | 22,553 | 1.48 | 1.03 | 15,256 | 1.25 | 0.89 | 67,607 | 1.90 | 1.39 | 59,436 | 3.48 | 2.51 | 4,489 | 3.96 | 3.02 | 9,653 |
(1) | Coral Gold effected a1-for-10 stock split on September 14, 2004. |
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Nine Months | ||||||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||||||
September 30, | Year Ended December 31, | |||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||||
(Cdn$) | ||||||||||||||||||||||||||||
High rate during year | $ | — | $ | — | $ | 1.2703 | $ | 1.3970 | $ | 1.5750 | $ | 1.6128 | $ | 1.5849 | ||||||||||||||
Low rate during year | — | — | 1.1560 | 1.1775 | 1.2923 | 1.5108 | 1.4933 | |||||||||||||||||||||
Rate at end of period | 1.1151 | 1.1607 | 1.1656 | 1.2034 | 1.2923 | 1.5800 | 1.5925 | |||||||||||||||||||||
Average rate for period | 1.1324 | 1.2237 | 1.2083 | 1.2984 | 1.3916 | 1.5702 | 1.5519 |
High | Low | |||||||
(Cdn$) | ||||||||
June 2006 | $ | 1.1240 | $ | 1.0991 | ||||
July 2006 | 1.1514 | 1.1112 | ||||||
August 2006 | 1.1312 | 1.1078 | ||||||
September 2006 | 1.1272 | 1.1056 | ||||||
October 2006 | 1.1384 | 1.1154 | ||||||
November 2006 | 1.1474 | 1.1275 | ||||||
December 1, 2006 to December 4, 2006 | 1.1454 | 1.1445 |
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• | 9,552,427 common shares of White Knight, which, based on information provided to us by White Knight, means that Mr. McEwen beneficially owns approximately 16% of its outstanding common shares as of December 4, 2006; |
• | 12,500,000 common shares of Nevada Pacific and warrants exercisable to acquire 12,500,000 common shares of Nevada Pacific, which, based on information provided to us by Nevada Pacific, means that Mr. McEwen beneficially owns approximately 30% of its outstanding common shares as of December 4, 2006; |
• | 1,250,000 common shares of Coral Gold, which, based on information provided to us by Coral Gold, means that Mr. McEwen beneficially owns approximately 18% of its outstanding common shares as of December 4, 2006; and |
• | 2,500,000 common shares of Tone Resources and warrants to acquire 2,500,000 common shares of Tone Resources, which, based on information provided to us by Tone Resources, means that Mr. McEwen beneficially owns approximately 22% of its outstanding common shares as of December 4, 2006. |
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Shares Beneficially Owned | ||||||||
Name and Address of Beneficial Owner | Number | Percentage | ||||||
Robert R. McEwen(1) | 12,100,500 | (2) | 24.0 | % | ||||
Peter Bojtos(1) | 148,333 | (3) | * | |||||
Declan Costelloe(1) | 38,333 | (3) | * | |||||
Michele L. Ashby(1) | 33,333 | (8) | * | |||||
Leanne M. Baker(1) | 33,333 | (3) | * | |||||
Ann S. Carpenter(1) | 166,666 | (5) | * | |||||
William F. Pass(1) | 413,741 | (4) | * | |||||
NovaGold Resources, Inc.(6) | 5,374,544 | 10.7 | % | |||||
P.O. Box 24, Suite 2300 200 Granville Street Vancouver, British Columbia V6C 1S4, Canada | ||||||||
FMR Corp. & Edward C. Johnson 3d(7) | 6,770,800 | 13.0 | % | |||||
82 Devonshire Street Boston, MA 02109 | ||||||||
All officers and directors as a group (seven individuals) | 12,934,239 | (2)(3)(5) | 25.5 | % |
* | Less than one percent. | |
(1) | Officer or Director. | |
(2) | Includes 333,500 shares of common stock issuable upon warrants that are immediately exercisable. | |
(3) | Includes 33,333 shares underlying stock options which may become exercisable within 60 days of the date of this proxy statement. |
(4) | Includes 26,666 shares underlying stock options which may become exercisable within 60 days of the date of this proxy statement. |
(5) | Includes 166,666 shares underlying options of which 100,000 are immediately exercisable and 66,666 may become exercisable within 60 days of the date of this proxy statement. | |
(6) | As reported in a Schedule 13D filed with the SEC on August 3, 2005. |
(7) | As reported in a Schedule 13G filed with the SEC on November 13, 2006. |
(8) | Includes 23,333 shares underlying stock options which may become exercisable within 60 days of the date of this proxy statement. |
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95
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• | U.S. Gold’s Annual Report onForm 10-KSB for the fiscal years ended December 31, 2005 filed with the SEC on April 7, 2006; |
• | U.S. Gold’s Quarterly Report onForm 10-QSB for the quarterly period ended September 30, 2006 filed with the SEC on November 14, 2006; and |
• | U.S. Gold’s Current Reports onForm 8-K filed with the SEC on February 27, March 6, March 31, May 1, June 30, July 6, July 7, July 25, August 8, August 9, August 29, September 6, October 20, November 28, November 30, and December 7, 2006. |
U.S. Gold Corporation
2201 Kipling Street, Suite 1000
Lakewood, Colorado80215-1545
303-238-1438
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Legend: | ||
Changes not being voted upon by shareholders: | ||
Insertion | ||
Changes being voted upon by shareholders: | ||
Insertion | ||
OF
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A-2
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A-4
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717 Seventeenth Street Denver, Colorado 80202 | ||
One 717 Seventeenth Street Denver, Colorado 80202 | ||
717 Seventeenth Street Denver, Colorado 80202 |
INCORPORATOR
717 Seventeenth Street Denver, Colorado 80202 |
A-5
Table of Contents
• | 6,832,360 Coral Gold common shares issued and outstanding; |
• | 213,134 Coral Gold common shares issuable upon exercise of outstanding warrants; and |
• | 788,500 Coral Gold common shares issuable upon exercise of outstanding options. |
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B-2
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B-3
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B-4
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B-5
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B-6
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B-7
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Number of | Cash Buyout | Production | Advance Royalty | |||||||||||||
Company/Date | Claims | of Lease | Royalty | Payment | ||||||||||||
Tenabo Gold Mining Co. | 13 | $ | 2M | 8% NSR | * | $ | 12,000/yr | |||||||||
Nov. 30, 1975 | ||||||||||||||||
Fannie Komp | 76 | $ | 1M | 5% GSR | * | $ | 24,000/yr | |||||||||
Sept. 16, 1986 | ||||||||||||||||
Florence Johnson | 16 | $ | 50,000 | 5% GSR | ** | $ | 1,800/yr | |||||||||
Nov. 5, 1986 | ||||||||||||||||
Northern Nevada Au, Inc. | 12 | $ | 0.3M | 4% GSR | ** | $ | 9,600/yr | |||||||||
Sept. 30, 1986 | ||||||||||||||||
Albany Gold Corp. (Geomex) | All | $ | 1.25M | 3% NSR | * | None/yr | ||||||||||
Mauzy, et al | 36 | $ | 0.75M | 2% NSR | * | $ | 14,400/yr | |||||||||
Apr. 21, 1989 |
* | NSR: Net Smelter Return |
** | NSR: Gross Smelter Return |
B-8
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B-9
Table of Contents
Number and Type of | ||||||||
Company | Date of Activity | Holes Drilled | Drill Footage(ft) | Target | ||||
Superior Oil | 1968 — 70 | 92 Conv. Rotary | c. 32,000 | Gold Pan | ||||
Placer Development | 1973 — 74 | 23 Conv. Rotary | c. 3,500 | none | ||||
Teck Corporation | 1977 | none | none | none | ||||
Aaron Mining Ltd. | 1977 | 7 Conv. Rotary | c.300 | Gold Quartz | ||||
E & B Exploration Ltd. | 1980 — 81 | 148 Rev. Circlulation | 30,807 | Gold Pan | ||||
Totals | 270 | 66,607 |
B-10
Table of Contents
Native gold | Native silver | Electrum | Pyrite | |||
Pyrrhotite | Marcasite | Arsenopyrite | Stibnite | |||
Chalcopyrite | Sphalerite | Galena | Bournonite | |||
Acanthite | Loellingite | Gersdorffite | Tetradymite | |||
Petzite | Hessite | Hedleyite | Tellurobismuthite | |||
Altaite | Tetrhedrite | Bornite | Chalcocite | |||
Covellite | Digenite | Native copper | Cuprite | |||
Chysocolla | Azurite | Goethite | Magnetite | |||
Hematite | Illmenite | Scorodite |
B-11
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Measured Mineral Resources | Indicated Mineral Resources | Total Measured and Indicated | Inferred Mineral Resources | |||||||||||||||||||||||||||||||||||||||||||||
Short | Gold | Short | Gold | Short | Gold | Contained | Short | Gold | Contained | |||||||||||||||||||||||||||||||||||||||
tons | Grade | Contained | tons | Grade | Contained | tons | Grade | ozs | Tons | Grade | ozs | |||||||||||||||||||||||||||||||||||||
Zone | (000s) | (oz/ton) | ozs (000s) | (000s) | (oz/ton) | ozs (000s) | (000s) | (oz/ton) | (000s) | (000s) | (oz/ton) | (000s) | ||||||||||||||||||||||||||||||||||||
Porphyry(1) | 10,600 | 0.020 | 212 | 2,100 | 0.018 | 37 | 12,700 | 0.020 | 249 | |||||||||||||||||||||||||||||||||||||||
39A/Gold Pan(2) | 10,200 | 0.044 | 450 | 10,200 | 0.044 | 450 | 4,900 | 0.039 | 192 | |||||||||||||||||||||||||||||||||||||||
Altenburg Hill(1) | 3,500 | 0.018 | 63 | |||||||||||||||||||||||||||||||||||||||||||||
Distal Target(3) | 1,008 | 0.178 | 179 | |||||||||||||||||||||||||||||||||||||||||||||
Total | 10,600 | 0.020 | 212 | 12,300 | 0.040 | 487 | 22,900 | 0.031 | 699 | 9,408 | 0.046 | 434 |
(1) | Calculated using a 0.010 oz Au/t cutoff grade. |
(2) | Calculated using a 0.015 oz Au/t cutoff grade. |
(3) | Calculated using a 0.05 oz Au/t cutoff grade. |
B-12
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Hole No. | Depth From (ft) | To (ft) | Width (ft) | Gold Grade (oz/ton) | ||||||||||||
CR06-6 | 710 | 745 | 35 | 0.021 | ||||||||||||
including | 770 | 860 | 90 | 0.027 | ||||||||||||
CR06-8 | 310 | 345 | 35 | 0.046 | ||||||||||||
470 | 505 | 35 | 0.011 | |||||||||||||
615 | 740 | 125 | 0.083 | |||||||||||||
including | 685 | 735 | 50 | 0.149 | ||||||||||||
CR06-11 | 700 | 715 | 15 | 0.032 | ||||||||||||
745 | 805 | 60 | 0.027 | |||||||||||||
880 | 890 | 10 | 0.072 | |||||||||||||
CR06-12 | 410 | 465 | 45 | 0.017 | ||||||||||||
610 | 645 | 35 | 0.046 | |||||||||||||
including | 610 | 615 | 5 | 0.210 |
Hole No. | Depth From (ft) | To (ft) | Thickness (ft) | Gold Grade (oz/ton) | ||||||||||||
CR06-10 | 405 | 450 | 45 | 0.043 | ||||||||||||
520 | 535 | 15 | 0.027 | |||||||||||||
605 | 620 | 15 | 0.053 | |||||||||||||
CR06-13 | 90 | 125 | 35 | * | 0.025 | |||||||||||
300 | 365 | 65 | 0.022 | |||||||||||||
395 | 420 | 25 | 0.028 | |||||||||||||
485 | 520 | 35 | 0.032 | |||||||||||||
595 | 640 | 45 | 0.034 | |||||||||||||
CR06-14 | 105 | 115 | 10 | 0.075 | ||||||||||||
565 | 630 | 65 | 0.067 | |||||||||||||
CR06-15 | 630 | 650 | 20 | 0.041 | ||||||||||||
665 | 700(TD | ) | 35 | 0.082 |
* | Oxide mineralization; grade/thickness calculated using 0.01 oz Au/t cutoff grade. |
B-13
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B-16
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Six Months Ended | ||||||||||||||||||||||||||||
July 31 | Year Ended January 31, | |||||||||||||||||||||||||||
Operations | 2006 | 2005 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
General and Administrative | $ | 655,705 | $ | 329,443 | $ | 2,301,983 | $ | 866,085 | $ | 640,502 | $ | 538,893 | $ | 244,071 | ||||||||||||||
Net Income (Loss) | (586,683 | ) | 330,286 | (3,067,474 | ) | (878,819 | ) | (753,596 | ) | (755,999 | ) | (1,128,401 | ) | |||||||||||||||
Net Income (Loss) Per Share | (0.09 | ) | (0.07 | ) | (0.64 | ) | (0.19 | ) | (0.20 | ) | (0.27 | ) | (0.54 | ) | ||||||||||||||
Weighted Average Number of Shares Issued | 6,425,173 | 4,650,030 | 4,789,881 | 4,629,892 | 3,686,398 | 2,805,433 | 2,095,913 |
As at July 31 | As at January 31, | |||||||||||||||||||||||||||
Balance Sheet | 2006 | 2005 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||||
(Unaudited) | Restated(1) | Restated(1) | Restated(1) | Restated(1) | ||||||||||||||||||||||||
Working Capital | $ | 3,703,767 | $ | 863,870 | $ | 36,519 | $ | 1,400,605 | $ | 2,601,586 | $ | (14,178 | ) | $ | 356,553 | |||||||||||||
Total Assets | 15,270,553 | 10,501,557 | 11,385,912 | 10,737,683 | 10,896,355 | 8,888,094 | 6,564,304 | |||||||||||||||||||||
Liabilities | 1,911,918 | 525,204 | 2,233,748 | 480,289 | 479,095 | 705,499 | 477,095 | |||||||||||||||||||||
Shareholders’ Equity | 13,358,635 | 9,976,353 | 9,152,164 | 10,257,394 | 10,417,260 | 8,182,595 | 6,087,209 |
(1) | See Note 2 of Coral Gold’s Financial Statements included in this Annex B. |
B-17
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Reconciliation of Canadian GAAP to U.S. GAAP | ||||||||||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||||||
July 31 | Year Ended January 31, | |||||||||||||||||||||||||||
U.S. GAAP Operations | 2006 | 2005 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
Loss for year under Canadian GAAP | $ | (586,683 | ) | $ | (330,286 | ) | $ | (3,067,474 | ) | $ | (878,819 | ) | $ | (753,596 | ) | $ | (755,999 | ) | $ | (1,128,401 | ) | |||||||
Adjustments: | ||||||||||||||||||||||||||||
Deferred exploration expenditures | (537,376 | ) | (285,811 | ) | (584,880 | ) | (897,908 | ) | (420,054 | ) | (1,351,302 | ) | (196,909 | ) | ||||||||||||||
Stock based compensation | — | — | — | — | — | (60,000 | ) | — | ||||||||||||||||||||
Writedown of deferred exploration expenditures | — | — | — | — | 4,968 | 10,389 | 70,019 | |||||||||||||||||||||
Writedown of mineral property acquisition costs | — | — | — | — | — | 700,000 | ||||||||||||||||||||||
Change in unrealized (gain) loss of marketable securities | — | — | — | — | — | 22,686 | 96,488 | |||||||||||||||||||||
Proceeds of interest deposed of | — | — | — | — | — | 56,681 | — | |||||||||||||||||||||
Net loss for the year under U.S. GAAP | (1,124,059 | ) | (616,097 | ) | (3,652,354 | ) | (1,776,727 | ) | (1,168,682 | ) | (2,075,545 | ) | (458,803 | ) | ||||||||||||||
Income (loss) per share under U.S. GAAP | (0.17 | ) | (0.14 | ) | (0.76 | ) | (0.38 | ) | (0.32 | ) | (0.74 | ) | (0.22 | ) |
As at July 31 | As at January 31, | |||||||||||||||||||||||||||
Balance Sheet | 2006 | 2005 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||||
(Unaudited) | Restated(1) | Restated(1) | Restated(1) | Restated(1) | ||||||||||||||||||||||||
Total assets under Canadian GAAP | $ | 15,270,553 | $ | 10,501,557 | $ | 11,385,912 | $ | 10,737,683 | $ | 10,896,355 | $ | 8,888,094 | $ | 6,564,304 | ||||||||||||||
Adjustments | (9,588,800 | ) | (8,005,267 | ) | (9,065,945 | ) | (8,466,484 | ) | (6,682,435 | ) | (6,311,896 | ) | (5,075,070 | ) | ||||||||||||||
Total assets under US GAAP | 5,681,753 | 2,496,290 | 2,319,967 | 2,271,199 | 4,213,920 | 2,576,198 | 1,489,234 | |||||||||||||||||||||
Total equity under Canadian GAAP | 13,358,635 | 10,294,353 | 9,152,164 | 10,257,394 | 10,417,260 | 8,182,595 | 6,087,209 | |||||||||||||||||||||
Adjustments | (9,588,800 | ) | (8,005,267 | ) | (9,065,945 | ) | (8,466,484 | ) | (6,682,435 | ) | (6,311,896 | ) | (5,075,070 | ) | ||||||||||||||
Total equity under US GAAP | 3,769,835 | 2,289,086 | 86,219 | 1,790,910 | 3,734,825 | 1,870,699 | 1,012,139 |
(1) | See Note 2 of Coral Gold’s Financial Statements included in this Annex B. |
B-18
Table of Contents
July 31, | July 31, | January 31, | January 31, | January 31, | ||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2004 | ||||||||||||||||
(Unaudited) | (Unaudited) | Restated | Restated | |||||||||||||||||
Loss before other items | $ | (655,705 | ) | $ | (329,443 | ) | $ | (2,301,983 | ) | $ | (866,085 | ) | $ | (640,502 | ) | |||||
Loss for the period | (586,683 | ) | (330,286 | ) | (3,067,474 | ) | (878,819 | ) | (753,596 | ) | ||||||||||
Loss per share | (0.09 | ) | (0.07 | ) | (0.64 | ) | (0.19 | ) | (0.20 | ) | ||||||||||
Total assets | 15,270,553 | 10,501,557 | 11,385,912 | 10,737,683 | 10,896,355 | |||||||||||||||
Total liabilities | 1,911,918 | 525,204 | 2,233,748 | 480,289 | 479,095 | |||||||||||||||
Working capital | 3,703,767 | 863,870 | 36,519 | 1,400,605 | 2,601,586 |
B-19
Table of Contents
2006 | 2006 | 2006 | 2005 | 2005 | 2005 | 2005 | 2004 | |||||||||||||||||||||||||
Jul. 31 | Apr. 30 | Jan. 31 | Oct. 31 | Jul. 31 | Apr. 30 | Jan. 31 | Oct. 31 | |||||||||||||||||||||||||
Period ended | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | ||||||||||||||||||||||||
Cdn$ | ||||||||||||||||||||||||||||||||
Loss for the period | (363,147 | ) | (223,536 | ) | (2,568,935 | ) | (168,253 | ) | (149,817 | ) | (180,467 | ) | (472,890 | ) | (195,850 | ) | ||||||||||||||||
Loss per share | (0.05 | ) | (0.04 | ) | (0.51 | ) | (0.03 | ) | (0.03 | ) | (0.04 | ) | (0.10 | ) | (0.04 | ) | ||||||||||||||||
Total assets | 15,270,553 | 15,458,354 | 11,385,912 | 10,804,393 | 10,501,557 | 10,591,164 | 10,749,628 | 10,730,245 | ||||||||||||||||||||||||
B-20
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B-21
Table of Contents
B-22
Table of Contents
More than | ||||||||||||||||||||
Total | < 1 year | 1-3 years | 3-5 years | 5 years | ||||||||||||||||
Investor relations contract (Cdn$) | 24,000 | 24,000 | — | — | — | |||||||||||||||
Site restoration liability (Cdn$) | 16,000 | — | 16,000 | — | — | |||||||||||||||
Total (Cdn$) | 40,000 | 24,000 | 16,000 | — | — |
B-23
Table of Contents
GLOSSARY OF TECHNICAL TERMS | ||
Au | The elemental symbol for gold. | |
chalcopyrite | Copper sulphide mineral. | |
Chert | A rock resembling flint and consisting essentially of crypto-crystalline quartz or fibrous chalcedony. | |
cretaceous | The geologic period extending from 135 million to 65 million years ago. | |
epidote | Calcium, aluminum, iron silicate mineral commonly occurring in hydrothermally altered carbonate-bearing rocks. | |
fault | A fracture in a rock where there has been displacement of the two sides. | |
grade | The concentration of each ore metal in a rock sample, usually given as weight percent. Where extremely low concentrations are involved, the concentration may be given in grams per tonne (g/t or gpt) or ounces per ton (oz/t). The grade of an ore deposit is calculated, often using sophisticated statistical procedures, as an average of the grades of a very large number of samples collected from throughout the deposit. | |
GSR | Payment of a percentage of gross mining profits commonly known as gross smelter return royalty. | |
hydrothermal | Hot fluids, usually mainly water, in the earth’s crust which may carry metals and other compounds in solution to the site of ore deposition or wall rock alteration. | |
intrusive | A rock mass formed below earth’s surface from magma which has intruded into a pre-existing rock mass. | |
lode claim | A mining claim on an area containing a known vein or lode. | |
mineralization | Usually implies minerals of value occurring in rocks. | |
net smelter or NSR Royalty | Payment of a percentage of net mining profits after deducting applicable smelter charges. | |
placer claim | A mining claim located upon gravel or ground whose mineral contents are extracted by the use of water, by sluicing, hydraulicking, etc. | |
porphyry | Rock type with mixed crystal sizes, i.e. containing larger crystals of one or more minerals | |
pyrite | Iron sulphide mineral. | |
pyrrhotite | A bronze coloured mineral of metallic lustre that consists of ferrous sulphide and is attracted by a magnet. | |
quartz | Silica or SiO2, a common constituent of veins, especially those containing gold and silver mineralization. | |
silification | A process of fossilization whereby the original organic components of an organism are replaced by silica, as quartz, chalcedony, or opal. | |
sulfidation | In conditioning a flotation pulp, addition of soluble alkaline sulfides in aqueous solution to produce a sulfide-metal layer on an oxidized ore surface. | |
veins | The mineral deposits that are found filling openings in rocks created by faults or replacing rocks on either side of faults. |
B-24
Table of Contents
• | A final or bankable feasibility study is required to meet the requirements to designate reserves. |
• | A historic three year average price must be used in any reserve or cash flow analysis to designate reserves. |
• | To qualify as a reserve, the primary environmental analysis should be submitted to governmental authorities. |
Mineral reserve | The economically mineable part of a measured or indicated mineral resource demonstrated by a preliminary feasibility study. The study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that might occur when the material is mined. Mineral reserves are categorized on the basis of the degree of confidence in the estimate of the quantity and grade of the deposit: | |
Proven mineral reserve | For the part of a deposit which is being mined, or which is being developed and for which there is a detailed mining plan, the estimated quantity and grade or quality of that part of a measured mineral resource for which the size, configuration and grade or quality and distribution of values are so well established, and for which economic viability has been demonstrated by adequate information on engineering, operating, economic and other relevant factors, so that there is the highest degree of confidence in the estimate. | |
Probable mineral reserve | The estimated quantity and grade or quality of that part of an indicated mineral resource for which economic viability has been demonstrated by adequate information on engineering, operating, economic and other relevant factors, at a confidence level which would serve as a basis for decisions on major expenditures. The degree of assurance, although lower than that for proven mineral reserves, is high enough to assume continuity between points of observation. | |
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 a grade or quality that it has reasonable prospects for 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. |
B-25
Table of Contents
Measured mineral resource | Part of a mineral resource for which a quantity grade or quality, density, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. | |
Indicated mineral resource | Part of a mineral resource for which quantity grade or quality, density, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. | |
Inferred mineral resource | Part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling 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. |
B-26
Table of Contents
Multiply Metric | ||||||
Metric Measurement | U.S. Equivalent | Figure by: | ||||
Hectares | Acres | 2.471 | ||||
Meters | Feet (ft.) | 3.281 | ||||
Kilometers (km) | Miles | 0.621 | ||||
Tons | Tons (2000 pounds) | 1.102 | ||||
Grams/tonne | Ounces (troy/tonne) | 0.029 |
B-27
Table of Contents
January 31, 2006, 2005 and 2004
(In Canadian Dollars)
B-28
Table of Contents
B-30 | ||||
B-31 | ||||
B-32 | ||||
B-33 | ||||
B-34 | ||||
B-35 |
B-29
Table of Contents
B-30
Table of Contents
Consolidated Balance Sheets
January 31, 2006 and 2005
2006 | 2005 | |||||||
Restated | ||||||||
(Note 2) | ||||||||
(In Canadian Dollars) | ||||||||
ASSETS | ||||||||
Current | ||||||||
Cash and cash equivalents | $ | 663,071 | $ | 1,472,146 | ||||
Advances receivable (note 13(a)) | 62,358 | 78,101 | ||||||
Prepaid expenses | 69,856 | 12,647 | ||||||
795,285 | 1,562,894 | |||||||
Investment securities(note 5) | 147,408 | 129,934 | ||||||
Loan receivable(note 13(g)) | 83,000 | 50,000 | ||||||
Equipment(note 6) | 3,634 | 4,543 | ||||||
Mineral properties(note 7) | 10,095,609 | 8,472,255 | ||||||
Reclamation deposit(note 8) | 260,976 | 518,057 | ||||||
$ | 11,385,912 | $ | 10,737,683 | |||||
LIABILITIES | ||||||||
Current | ||||||||
Accounts payable and accrued liabilities (note 13(h)) | $ | 696,810 | $ | 85,937 | ||||
Advances payable to related parties (note 13(b)) | 61,956 | 76,352 | ||||||
758,766 | 162,289 | |||||||
Site restoration obligation(note 14) | 16,000 | — | ||||||
Future income tax liability(notes 3 and 15) | 1,448,662 | 318,000 | ||||||
Non-controlling interest | 10,320 | — | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Subscriptions received in advance(note 9) | 60,000 | — | ||||||
Share subscriptions receivable | — | (11,945 | ) | |||||
Share capital(note 10) | 31,560,337 | 30,754,678 | ||||||
Contributed surplus(note 11) | 1,428,173 | 343,533 | ||||||
Deficit | (23,896,346 | ) | (20,828,872 | ) | ||||
9,152,164 | 10,257,394 | |||||||
$ | 11,385,912 | $ | 10,737,683 | |||||
Commitments(note 12) | ||||
Approved by the Directors: | /s/ Matthew Wayrynen | /s/ Louis Wolfin | ||
Matthew Wayrynen | Louis Wolfin |
B-31
Table of Contents
For the Period | ||||||||||||||||
January 22, | ||||||||||||||||
1981 | ||||||||||||||||
(Inception) to | ||||||||||||||||
January 31, | ||||||||||||||||
2006 | 2006 | 2005 | 2004 | |||||||||||||
Restated | Restated | |||||||||||||||
(Note 2) | (Note 2) | |||||||||||||||
(In Canadian Dollars) | ||||||||||||||||
Revenue | ||||||||||||||||
Sales | $ | 2,176,079 | $ | — | $ | — | $ | — | ||||||||
Cost of Sales | (5,383,348 | ) | — | — | — | |||||||||||
(3,207,269 | ) | — | — | — | ||||||||||||
Expenses | ||||||||||||||||
Administrative services | 1,058,598 | — | — | — | ||||||||||||
Amortization | 2,728 | 909 | 1,136 | 684 | ||||||||||||
Consulting fees (note 13(c)) | 227,528 | 40,603 | 41,480 | 29,262 | ||||||||||||
Directors fees (note 13(e)) | 75,763 | 12,000 | 14,000 | 24,000 | ||||||||||||
Investor relations and shareholder Information | 1,901,480 | 85,283 | 74,075 | 143,217 | ||||||||||||
Legal and accounting | 2,599,764 | 208,314 | 74,308 | 80,571 | ||||||||||||
Listing and filing fees | 137,275 | 17,532 | 20,428 | 43,626 | ||||||||||||
Management fees (note 13(d)) | 354,500 | 105,000 | 75,000 | 90,000 | ||||||||||||
Office and miscellaneous | 2,036,612 | 82,007 | 93,910 | 118,872 | ||||||||||||
Salaries and benefits | 921,759 | 625,351 | 79,929 | 55,437 | ||||||||||||
Stock-based compensation | 1,399,633 | 1,056,100 | 343,533 | — | ||||||||||||
Transfer agent fees | 52,056 | 9,124 | 12,470 | 11,437 | ||||||||||||
Travel | 931,194 | 59,760 | 35,816 | 43,396 | ||||||||||||
11,698,890 | 2,301,983 | 866,085 | 640,502 | |||||||||||||
Loss before the following | (14,906,159 | ) | (2,301,983 | ) | (866,085 | ) | (640,502 | ) | ||||||||
Other items | ||||||||||||||||
Interest income | 854,290 | 20,454 | 33,786 | 15,184 | ||||||||||||
Foreign exchange gain (loss) | (251,286 | ) | (20,401 | ) | (46,520 | ) | (140,623 | ) | ||||||||
Gain realized on disposition of option on property | 143,552 | — | — | — | ||||||||||||
Gain on sale of investment | 17,692 | — | — | — | ||||||||||||
Recovery (writedown) of advances receivable | (348,323 | ) | 12,467 | — | 36,320 | |||||||||||
Financing costs | (341,006 | ) | — | — | — | |||||||||||
Writedown of investment securities | (809,828 | ) | — | — | (19,007 | ) | ||||||||||
Loss on equipment disposals | (32,784 | ) | — | — | — | |||||||||||
Writedown of equipment | (16,335 | ) | — | — | — | |||||||||||
Writedown of mineral properties | (7,110,148 | ) | — | — | (4,968 | ) | ||||||||||
Loss for the year before future income taxes and non-controlling interest (balance carried forward) | $ | (22,800,335 | ) | $ | (2,289,463 | ) | $ | (878,819 | ) | $ | (753,596 | ) | ||||
Loss for the year before future income taxes and non-controlling interest (balance carried forward) | $ | (22,800,335 | ) | $ | (2,289,463 | ) | $ | (878,819 | ) | $ | (753,596 | ) | ||||
Future income tax expense(note 15) | 1,096,000 | 778,000 | — | — | ||||||||||||
Non-controlling interest loss | 11 | 11 | — | — | ||||||||||||
Loss for the period | $ | (23,896,346 | ) | (3,067,474 | ) | (878,819 | ) | (753,596 | ) | |||||||
Deficit,beginning of the period | (20,828,872 | ) | (19,950,053 | ) | (19,196,457 | ) | ||||||||||
Deficit,end of the period | $ | (23,896,346 | ) | $ | (20,828,872 | ) | $ | (19,950,053 | ) | |||||||
Basic and diluted: | ||||||||||||||||
Loss per share | $ | (0.64 | ) | $ | (0.19 | ) | $ | (0.20 | ) | |||||||
Weighted average number of common shares outstanding | 4,789,881 | 4,629,892 | 3,686,398 | |||||||||||||
B-32
Table of Contents
For the Period | ||||||||||||||||
January 22, | ||||||||||||||||
1981 | ||||||||||||||||
(Inception) to | ||||||||||||||||
January 31, | ||||||||||||||||
2006 | 2006 | 2005 | 2004 | |||||||||||||
Restated | ||||||||||||||||
(Note 2) | ||||||||||||||||
(In Canadian Dollars) | ||||||||||||||||
Cash flows from (used in) operating activities | ||||||||||||||||
Loss for the period | $ | (23,896,346 | ) | $ | (3,067,474 | ) | $ | (878,819 | ) | $ | (753,596 | ) | ||||
Adjustments for items not involving cash: | ||||||||||||||||
— amortization | 2,728 | 909 | 1,136 | 684 | ||||||||||||
— writedown of equipment | 16,335 | — | — | — | ||||||||||||
— stock based compensation | 1,399,633 | 1,056,100 | 343,533 | — | ||||||||||||
— non-controlling interest | 11 | 11 | — | — | ||||||||||||
— future income tax expense | 1,096,000 | 778,000 | — | — | ||||||||||||
— writedown of investment securities | 809,828 | — | — | 19,007 | ||||||||||||
— writedown of mineral properties | 7,110,148 | — | — | 4,968 | ||||||||||||
— writedown of advances receivable | 348,323 | 12,467 | — | (36,320 | ) | |||||||||||
— loss on equipment disposals | 32,784 | — | — | — | ||||||||||||
— gain on sales of investments | (17,692 | ) | — | — | — | |||||||||||
— gain realized on disposition of option on property | (143,552 | ) | — | — | — | |||||||||||
Change in non-cash working capital: | ||||||||||||||||
— (increase) decrease in advances receivable | (410,681 | ) | 3,276 | (21,556 | ) | (19,258 | ) | |||||||||
— (increase) decrease prepaid expenses | (69,856 | ) | (57,209 | ) | (1,671 | ) | (10,976 | ) | ||||||||
— investment securities | (119,174 | ) | — | — | — | |||||||||||
— increase (decrease) in accounts payable and accrued liabilities | 696,810 | 610,873 | 7,590 | (152,419 | ) | |||||||||||
— (decrease) increase in advances payable | 61,956 | (14,396 | ) | (6,397 | ) | (73,985 | ) | |||||||||
(13,082,745 | ) | (677,443 | ) | (556,184 | ) | (1,021,895 | ) | |||||||||
Cash flows from (used in) investing activities | ||||||||||||||||
Mineral properties acquisition and exploration expenditures incurred | (16,023,742 | ) | (584,880 | ) | (897,908 | ) | (420,054 | ) | ||||||||
Acquisition of Marcus Corporation | (14,498 | ) | (14,498 | ) | — | — | ||||||||||
Proceeds on sale of equipment | 92,732 | — | — | — | ||||||||||||
Loan receivable | (83,000 | ) | (33,000 | ) | (50,000 | ) | — | |||||||||
Purchase of equipment | (145,485 | ) | — | — | (2,943 | ) | ||||||||||
Purchase of investments | (939,776 | ) | (17,474 | ) | — | — | ||||||||||
Advances receivable recovered | — | — | — | 36,320 | ||||||||||||
Decrease (increase) in reclamation deposit amounts | (260,976 | ) | 257,081 | 33,662 | 651,433 | |||||||||||
(17,374,745 | ) | (392,771 | ) | (914,246 | ) | 264,756 | ||||||||||
Cash flows from financing activities | ||||||||||||||||
Subscriptions received in advance | 60,000 | 60,000 | — | 791,720 | ||||||||||||
Cash from share subscriptions receivable | — | 11,945 | 58,700 | — | ||||||||||||
Issuance of shares for cash, net | 31,031,432 | 189,194 | 316,720 | 2,196,541 | ||||||||||||
31,091,432 | 261,139 | 375,420 | 2,988,261 | |||||||||||||
Net increase (decrease) in cash and cash equivalents | 633,942 | (809,075 | ) | (1,095,010 | ) | 2,231,122 | ||||||||||
Cash and cash equivalents,beginning of year | 29,129 | 1,472,146 | 2,567,156 | 336,034 | ||||||||||||
Cash and cash equivalents,end of year | $ | 663,071 | $ | 663,071 | $ | 1,472,146 | $ | 2,567,156 | ||||||||
Cash Paid during the Year for: | 2006 | 2005 | 2004 | |||||||||
Interest | $ | 40 | $ | 145 | $ | 730 | ||||||
Income taxes | — | — | — | |||||||||
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Table of Contents
Proceeds of | ||||||||||||||||
Acquisition | Exploration | Interest | ||||||||||||||
Cost | Expenditures | Disposed of | Total | |||||||||||||
(In Canadian Dollars) | ||||||||||||||||
Robertson Property(note 7(a) (i) and 7(a)(iii)) | ||||||||||||||||
Balance, January 31, 2004 | $ | 801,956 | $ | 8,675,800 | $ | (1,937,625 | ) | $ | 7,540,131 | |||||||
2005 transactions, net | — | 890,292 | — | 890,292 | ||||||||||||
Balance, January 31, 2005 | 801,956 | 9,566,092 | (1,937,625 | ) | 8,430,423 | |||||||||||
2006 transactions, net | — | 1,623,354 | — | 1,623,354 | ||||||||||||
Balance, January 31, 2006 | $ | 801,956 | $ | 11,189,446 | $ | (1,937,625 | ) | $ | 10,053,777 | |||||||
Ruf and Norma Sass Properties(note 7(a)(ii)) | ||||||||||||||||
Balance, January 31, 2004 | $ | — | $ | 73,514 | $ | (39,301 | ) | $ | 34,213 | |||||||
2005 transactions, net | — | 7,616 | — | 7,616 | ||||||||||||
Balance, January 31, 2005 | — | 81,130 | (39,301 | ) | 41,829 | |||||||||||
2006 transactions, net | — | — | — | — | ||||||||||||
Balance, January 31, 2006 | $ | — | $ | 81,130 | $ | (39,301 | ) | $ | 41,829 | |||||||
Eagle Property(note 7(b)) | ||||||||||||||||
Balance, January 31, 2004, 2005 and 2006 | $ | 1 | $ | — | $ | — | $ | 1 | ||||||||
Ludlow Property(note 7(c)) | ||||||||||||||||
Balance, January 31, 2004, 2005 and 2006 | $ | 1 | $ | — | $ | — | $ | 1 | ||||||||
JDN Property(note 7(d)) | ||||||||||||||||
Balance, January 31, 2004, 2005 and 2006 | $ | 1 | $ | — | $ | — | $ | 1 | ||||||||
Total Properties | $ | 801,959 | $ | 11,270,576 | $ | (1,976,926 | ) | $ | 10,095,609 | |||||||
B-34
Table of Contents
1. | Nature of Business and Going Concern |
2. | Prior Period Adjustment |
3. | Marcus Corporation Acquisition |
Cash | $ | 1,494 | ||
Mineral Properties | 1,022,231 | |||
Future Income taxes | (352,662 | ) | ||
Non-controlling interest | (10,066 | ) | ||
$ | 660,997 | |||
4. | Significant Accounting Policies |
(a) | Basis of Consolidation |
B-35
Table of Contents
(b) | Mineral Properties |
(c) | Investment Securities |
(d) | Fair Value of Financial Instruments |
(e) | Foreign Currency Translation |
B-36
Table of Contents
(f) | Use of Estimates |
(g) | Impairment of Long-term Assets |
(h) | Equipment |
Computer hardware | 20 | % | ||
Equipment | 20 | % |
(i) | Cash and Cash Equivalents |
2006 | 2005 | |||||||
Cash | $ | 663,071 | $ | 122,146 | ||||
Cash equivalents | — | 1,350,000 | ||||||
$ | 663,071 | $ | 1,472,146 | |||||
(j) | Loss per Share |
(k) | Income Taxes |
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Table of Contents
(l) | Asset Retirement Obligation |
(m) | Stock-Based Compensation |
5. | Investment Securities |
2006 | 2005 | |||||||
Levon Resources Ltd. | ||||||||
967,571 common shares (2005 — 967,571) | $ | 77,117 | $ | 77,117 | ||||
Mill Bay Ventures Inc. (formerly First International Metals Corp.) | ||||||||
518,731 common shares (2005 — 324,565) | 70,291 | 52,817 | ||||||
$ | 147,408 | $ | 129,934 | |||||
6. | Equipment |
2006 | ||||||||||||
Accumulated | Net Book | |||||||||||
Cost | Amortization | Value | ||||||||||
Computer hardware | $ | 5,926 | $ | 2,536 | $ | 3,390 | ||||||
Equipment | 436 | 192 | 244 | |||||||||
$ | 6,362 | $ | 2,728 | $ | 3,634 | |||||||
B-38
Table of Contents
2005 | ||||||||||||
Accumulated | Net Book | |||||||||||
Cost | Amortization | Value | ||||||||||
Computer hardware | $ | 5,926 | $ | 1,688 | $ | 4,238 | ||||||
Equipment | 436 | 131 | 305 | |||||||||
$ | 6,362 | $ | 1,819 | $ | 4,543 | |||||||
7. | Mineral Properties |
(a) | Robertson Property |
b) | Incur minimum expenditures on the property in the amount of US $300,000, of which $100,000 on or before December 4, 2003, and the balance of $200,000 on or before December 4, 2004; and | |
c) | Pay to Coral 331/3% of all land fees, taxes, advance royalties required to keep the claims in good standing. |
B-39
Table of Contents
Advance | ||||||||||
Royalty | ||||||||||
Date | (US$) | Minimum Work | ||||||||
Execution of the Agreement | December 30, 2004 | $ | 25,000 | — | ||||||
First Anniversary | December 30, 2005 | $ | 30,000 | 13,000 ft of drilling | ||||||
Second Anniversary | December 30, 2006 | $ | 50,000 | 15,000 ft of drilling | ||||||
Third Anniversary | December 30, 2007 | $ | 75,000 | 17,000 ft of drilling | ||||||
Fourth Anniversary | December 30, 2008 | $ | 75,000 | — | ||||||
Fifth Anniversary | December 30, 2009 | $ | 150,000 | — |
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Table of Contents
(b) | Eagle Property |
(c) | Ludlow Property |
(d) | JDN Property |
8. | Reclamation Deposit |
9. | Subscriptions Received in Advance |
10. | Share Capital |
B-41
Table of Contents
Shares | Amount | Deficit | ||||||||||
Balance, January 31, 2003 | 3,470,993 | $ | 27,379,052 | $ | (19,196,457 | ) | ||||||
2004 share issuances for cash: | ||||||||||||
Private placements | 721,882 | 1,897,068 | ||||||||||
Exercise of warrants | 149,310 | 357,368 | ||||||||||
Exercise of stock options | 19,500 | 48,750 | ||||||||||
Share issuance costs | — | (36,000 | ) | |||||||||
2004 loss | (753,596 | ) | ||||||||||
Balance, January 31, 2004 | 4,361,685 | 29,646,238 | (19,950,053 | ) | ||||||||
2005 share issuances for cash: | ||||||||||||
Private placements | 255,220 | 1,039,464 | ||||||||||
Exercise of warrants | 1,600 | 4,960 | ||||||||||
Exercise of stock options | 30,400 | 76,000 | ||||||||||
Share issuance costs | (11,984 | ) | ||||||||||
2005 loss | (878,819 | ) | ||||||||||
Balance, January 31, 2005 | 4,648,905 | 30,754,678 | (20,828,872 | ) | ||||||||
2006 share issuances for cash: | ||||||||||||
Exercise of warrants | 9,397 | 25,944 | ||||||||||
Exercise of stock options | 102,500 | 174,250 | ||||||||||
Shares returned to treasury | (2,500 | ) | (11,000 | ) | ||||||||
Fair value of stock options exercised | — | 87,560 | ||||||||||
Shares issued for Marcus Corp purchase | 347,964 | 528,905 | ||||||||||
2006 loss | (3,067,474 | ) | ||||||||||
Balance, January 31, 2006 | 5,106,266 | $ | 31,560,337 | $ | (23,896,346 | ) | ||||||
Number of Shares | Exercise Price | Expiry Date | ||||||
300,400 | $ | 1.70 | December 1, 2009 | |||||
32,500 | $ | 1.70 | April 12, 2010 | |||||
365,000 | $ | 3.55 | December 12, 2010 |
B-42
Table of Contents
Weighted | ||||||||
Average | ||||||||
Number | Exercise | |||||||
of Shares | Price | |||||||
Balance outstanding, January 31, 2003 | 202,750 | $ | 2.50 | |||||
2004 — Cancelled | (10,000 | ) | 2.50 | |||||
2004 — Exercised | (19,500 | ) | 2.50 | |||||
Balance outstanding, January 31, 2004 | 173,250 | 2.50 | ||||||
2005 — Granted | 412,900 | 1.70 | ||||||
2005 — Cancelled | (20,250 | ) | 1.71 | |||||
2005 — Exercised | (30,400 | ) | 2.50 | |||||
Balance outstanding, January 31, 2005 | 535,500 | 1.91 | ||||||
2006 — Granted | 407,500 | 3.36 | ||||||
2006 — Expired | (142,600 | ) | 2.50 | |||||
2006 — Exercised | (102,500 | ) | 1.70 | |||||
Balance outstanding, January 31, 2006 | 697,900 | $ | 2.67 | |||||
Number of Shares | Exercise Price | Expiry Date | ||||||
104,380 | $ | 4.80 | February 16, 2006 | |||||
148,340 | $ | 5.50 | February 17, 2006 | |||||
391,900 | $ | 3.10 | October 12, 2006 | |||||
200,000 | $ | 3.60 | November 17, 2006 | |||||
100,000 | $ | 3.90 | December 19, 2006 | |||||
171,078 | $ | 2.00 | September 15, 2007 | |||||
1,115,698 | ||||||||
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Table of Contents
11. | Contributed Surplus |
2006 | 2005 | |||||||
Balance, beginning of the year | $ | 343,533 | $ | — | ||||
Stock-based compensation expense | 1,056,100 | 343,533 | ||||||
Warrants issued on acquisition of Marcus Corporation | 116,100 | — | ||||||
Fair value of stock options exercised | (87,560 | ) | — | |||||
$ | 1,428,173 | $ | 343,533 | |||||
12. | Commitments |
13. | Related Party Transactions |
B-44
Table of Contents
14. | Site Restoration Obligation |
15. | Income Taxes |
2006 | 2005 | 2004 | ||||||||||
Restated | Restated | |||||||||||
(Note 2) | (Note 2) | |||||||||||
Loss before taxes | $ | (2,289,463 | ) | $ | (878,819 | ) | $ | (753,596 | ) | |||
Income tax rate | 34.75 | % | 35.62 | % | 35.62 | % | ||||||
Income tax recovery at the statutory rate | 795,474 | 313,035 | 268,431 | |||||||||
Permanent differences | (354,610 | ) | (166,879 | ) | (49,269 | ) | ||||||
Expiration of losses | (1,018,575 | ) | (158,065 | ) | (285,593 | ) | ||||||
Share issuance costs | — | 4,269 | 12,823 | |||||||||
Changes in income tax rates | (95,008 | ) | (185 | ) | (498 | ) | ||||||
Foreign exchange differences | 86,719 | 19,125 | 48,807 | |||||||||
Change in the valuation allowance | (192,000 | ) | (11,300 | ) | 5,299 | |||||||
Net future income tax recovery (expense) | $ | (778,000 | ) | $ | — | $ | — | |||||
2006 | 2005 | |||||||
Restated | ||||||||
(Note 2) | ||||||||
Future income assets: | ||||||||
Non-capital loss carry-forwards | $ | 2,758,000 | $ | 3,351,000 | ||||
Resource interests | 775,000 | 809,000 | ||||||
Other | 112,338 | 141,000 | ||||||
3,645,338 | 4,301,000 | |||||||
Less: valuation allowance | (2,181,000 | ) | (1,989,000 | ) | ||||
Net future income tax asset | $ | 1,464,338 | $ | 2,312,000 | ||||
Future income tax liability: | ||||||||
Resource interests | (2,913,000 | ) | (2,630,000 | ) | ||||
Net future income tax liability | $ | (1,448,662 | ) | $ | (318,000 | ) | ||
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Table of Contents
2007 | $ | 420,000 | ||
2008 | 243,000 | |||
2009 | 231,000 | |||
2010 | 527,000 | |||
2011 | 627,000 | |||
2015 | 522,000 | |||
2016 | 1,228,000 | |||
$ | 3,798,000 | |||
16. | Segmented Information |
2006 | ||||||||||||
Canada | USA | Total | ||||||||||
Current assets | $ | 695,738 | $ | 99,547 | $ | 795,285 | ||||||
Investment in securities | 74,833 | 72,575 | 147,408 | |||||||||
Loan Receivable | 83,000 | — | 83,000 | |||||||||
Equipment | 3,634 | — | 3,634 | |||||||||
Mineral properties | — | 10,095,609 | 10,095,609 | |||||||||
Reclamation deposit | — | 260,976 | 260,976 | |||||||||
$ | 857,205 | $ | 10,528,707 | $ | 11,385,912 | |||||||
2005 | ||||||||||||
Canada | USA | Total | ||||||||||
Current assets | $ | 1,511,905 | $ | 50,989 | $ | 1,562,894 | ||||||
Investment in securities | 57,359 | 72,575 | 129,934 | |||||||||
Loan Receivable | 50,000 | — | 50,000 | |||||||||
Equipment | 4,543 | — | 4,543 | |||||||||
Mineral properties | — | 8,472,255 | 8,472,255 | |||||||||
Reclamation deposit | — | 518,057 | 518,057 | |||||||||
$ | 1,623,807 | $ | 9,113,876 | $ | 10,737,683 | |||||||
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Table of Contents
17. | Subsequent Events |
18. | Differences Between Canadian And United States Generally Accepted Accounting Principles (Canadian GAAP And U.S. GAAP) |
(a) | Reconciliation of Consolidated Balance Sheet items: |
2006 | 2005 | |||||||
Restated | ||||||||
(Note 2) | ||||||||
Total assets per CDN GAAP | $ | 11,385,912 | $ | 10,737,683 | ||||
Mineral properties (note 18(h)) | (9,057,135 | ) | (8,472,255 | ) | ||||
Investment securities | (8,810 | ) | 5,771 | |||||
Total assets per US GAAP | $ | 2,319,967 | $ | 2,271,199 | ||||
Total liabilities per US/CDN GAAP | $ | 2,233,748 | $ | 450,289 | ||||
2006 | 2005 | 2004 | ||||||||||
Restated | Restated | |||||||||||
(Note 2) | (Note 2) | |||||||||||
Deficit end of year per CDN GAAP | $ | (23,896,346 | ) | $ | (20,828,872 | ) | $ | (19,950,053 | ) | |||
Stock compensation expense | (60,000 | ) | (60,000 | ) | (60,000 | ) | ||||||
Deferred exploration expenditures, net | (9,057,135 | ) | (8,472,255 | ) | (7,574,347 | ) | ||||||
Deficit end of year per US GAAP | $ | (33,013,481 | ) | $ | (29,361,127 | ) | $ | (27,584,400 | ) | |||
B-47
Table of Contents
(b) | Reconciliation of Consolidated Statement of Income items: |
Year Ended | Year Ended | Year Ended | ||||||||||
January 31, | January 31, | January 31, | ||||||||||
2006 | 2005 | 2004 | ||||||||||
Restated | ||||||||||||
(Note 2) | ||||||||||||
Net loss for the year per CDN GAAP | $ | (3,067,474 | ) | $ | (878,819 | ) | $ | (753,596 | ) | |||
Deferred exploration expenditures | (584,880 | ) | (897,908 | ) | (420,054 | ) | ||||||
Writedown of deferred exploration expenditures | — | — | 4,968 | |||||||||
Net loss for the year per U.S. GAAP | $ | (3,652,354 | ) | $ | (1,776,727 | ) | $ | (1,168,682 | ) | |||
Unrealized gain (loss) on investment securities | (14,581 | ) | 5,771 | — | ||||||||
Net comprehensive loss for the year per U.S. GAAP | $ | (3,696,935 | ) | $ | (1,770,956 | ) | $ | (1,168,682 | ) | |||
(c) | Loss Per Share U.S. GAAP |
Year Ended | Year Ended | Year Ended | ||||||||||
January 31, | January 31, | January 31, | ||||||||||
2006 | 2005 | 2004 | ||||||||||
Loss Per Share | ||||||||||||
— basic and diluted | $ | (0.76 | ) | $ | (0.38 | ) | $ | (0.32 | ) | |||
(d) | Comprehensive Income |
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Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||||||
Compre- | Compre- | Total | ||||||||||||||||||||||||||||||||||
Share Capital | Additional | hensive | hensive | Share- | ||||||||||||||||||||||||||||||||
Number of | Share | Paid in | Income | Income | holders’ | |||||||||||||||||||||||||||||||
Shares | Amount | Subscriptions | Warrants | Capital | (Loss) | Deficit | (Loss) | Equity | ||||||||||||||||||||||||||||
Restated | Restated | |||||||||||||||||||||||||||||||||||
(Note 2) | ||||||||||||||||||||||||||||||||||||
Balance forward, January 31, 2003 | 3,470,994 | $ | 27,379,052 | $ | — | $ | — | $ | 60,000 | $ | (26,415,718 | ) | $ | — | $ | 1,023,334 | ||||||||||||||||||||
Share subscriptions | — | — | 791,720 | — | — | — | — | — | 791,720 | |||||||||||||||||||||||||||
Issuance of shares (see Note 10(b)) | 890,691 | 2,267,186 | — | — | — | — | — | — | 2,267,186 | |||||||||||||||||||||||||||
Components of comprehensive income: | ||||||||||||||||||||||||||||||||||||
— net income (loss) | — | — | — | — | — | (1,168,682 | ) | (1,168,682 | ) | — | (1,168,682 | ) | ||||||||||||||||||||||||
$ | (1,168,682 | ) | ||||||||||||||||||||||||||||||||||
Balance, January 31, 2004 | 4,361,685 | $ | 29,646,238 | $ | 791,720 | $ | — | $ | 60,000 | $ | (27,584,400 | ) | $ | — | $ | 2,913,558 | ||||||||||||||||||||
Balance forward, January 31, 2004 | 4,361,685 | $ | 29,646,238 | $ | 791,720 | $ | — | $ | 60,000 | $ | (27,584,400 | ) | $ | — | $ | 2,913,558 | ||||||||||||||||||||
Share subscriptions | — | — | (791,720 | ) | — | — | — | — | — | (791,720 | ) | |||||||||||||||||||||||||
Issuance of shares (see Note 10(b)) | 287,220 | 1,108,440 | (11,945 | ) | — | — | — | — | — | 1,096,495 | ||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 343,533 | — | — | — | 343,533 | |||||||||||||||||||||||||||
Components of comprehensive income: | ||||||||||||||||||||||||||||||||||||
— net income (loss) | — | — | — | — | — | (1,776,727 | ) | (1,776,727 | ) | — | (1,776,727 | ) | ||||||||||||||||||||||||
— change in unrealized gain (loss) of marketable securities | — | — | — | — | — | 5,771 | — | 5,771 | 5,771 | |||||||||||||||||||||||||||
$ | (1,770,956 | ) | ||||||||||||||||||||||||||||||||||
Balance, January 31, 2005 | 4,648,905 | $ | 30,754,678 | $ | (11,945 | ) | $ | — | $ | 403,533 | $ | (29,361,127 | ) | $ | 5,771 | $ | 1,790,910 | |||||||||||||||||||
Share subscriptions | — | — | 71,945 | — | — | — | — | — | 71,945 | |||||||||||||||||||||||||||
Issuance of shares (see Note 10(b)) | 457,361 | 805,659 | — | 116,100 | — | — | — | — | 921,759 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 1,056,100 | — | — | — | 1,056,100 | |||||||||||||||||||||||||||
Fair value of stock option exercises | — | — | — | — | (87,560 | ) | — | — | — | (87,560 | ) | |||||||||||||||||||||||||
Components of Comprehensive income: | ||||||||||||||||||||||||||||||||||||
— net income (loss) | — | — | — | — | — | (3,652,354 | ) | (3,652,354 | ) | — | (3,652,354 | ) | ||||||||||||||||||||||||
— change in unrealized gain (loss) of marketable securities | — | — | — | — | — | (14,581 | ) | — | (14,581 | ) | (14,581 | ) | ||||||||||||||||||||||||
$ | (3,696,935 | ) | ||||||||||||||||||||||||||||||||||
Balance, January 31, 2006 | 5,106,266 | $ | 31,560,337 | $ | 60,000 | $ | 116,100 | $ | 1,372,073 | $ | (33,013,481 | ) | $ | (8,810 | ) | $ | 86,219 | |||||||||||||||||||
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Table of Contents
(e) | Supplemental Financial Information |
2006 | 2005 | 2004 | ||||||||||
Cash provided by (used in) operating activities per CDN GAAP | $ | (677,443 | ) | $ | (556,184 | ) | $ | (1,021,895 | ) | |||
Deferred exploration expenditures | (584,880 | ) | (897,908 | ) | (420,054 | ) | ||||||
Cash provided by (used in) operating activities per US GAAP | $ | (1,262,323 | ) | $ | (1,454,092 | ) | $ | (1,441,949 | ) | |||
2006 | 2005 | 2004 | ||||||||||
Cash provided by (used in) investing activities per CDN GAAP | $ | (392,771 | ) | $ | (914,246 | ) | $ | 264,756 | ||||
Deferred exploration expenditures | 584,880 | 897,908 | 420,054 | |||||||||
Cash provided by (used in) investing activities per US GAAP | $ | 192,109 | $ | (16,338 | ) | $ | 684,810 | |||||
(f) | Additional Disclosure Required by U.S. GAAP |
(g) | Additional Disclosure Required by SEC |
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Table of Contents
(h) | Deferred Exploration Expenditures |
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Table of Contents
July 31, | January 31, | |||||||
2006 | 2006 | |||||||
ASSETS | ||||||||
Current | ||||||||
Cash and cash equivalents | $ | 3,974,850 | $ | 663,071 | ||||
Advances receivable (note 7(b)) | 71,854 | 62,358 | ||||||
Interest receivable | 12,585 | — | ||||||
Prepaid expenses | 81,417 | 69,856 | ||||||
4,140,706 | 795,285 | |||||||
Investment securities | 147,408 | 147,408 | ||||||
Loan receivable(note 7(f)) | 83,000 | 83,000 | ||||||
Equipment | 3,272 | 3,634 | ||||||
Mineral properties(note 5) | 10,632,985 | 10,095,609 | ||||||
Reclamation deposit | 263,182 | 260,976 | ||||||
$ | 15,270,553 | $ | 11,385,912 | |||||
LIABILITIES | ||||||||
Current | ||||||||
Accounts payable and accrued liabilities (note 7(d)) | $ | 390,902 | $ | 696,810 | ||||
Advances payable (note 7(c)) | 46,037 | 61,956 | ||||||
436,939 | 758,766 | |||||||
Site restoration obligation | 16,000 | 16,000 | ||||||
Future income tax liability | 1,448,662 | 1,448,662 | ||||||
Non-controlling interest | 10,317 | 10,320 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Subscriptions received in advance | — | 60,000 | ||||||
Share capital(note 6) | 36,413,491 | 31,560,337 | ||||||
Contributed surplus | 1,428,173 | 1,428,173 | ||||||
Deficit | (24,483,029 | ) | (23,896,346 | ) | ||||
13,358,635 | 9,152,164 | |||||||
$ | 15,270,553 | $ | 11,385,912 | |||||
/s/ Louis Wolfin | Director | /s/ Gary Robertson | Director |
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Table of Contents
Consolidated Balance Sheets
(In Canadian Dollars)
(Prepared by Management)
July 31, | January 31, | |||||||
2006 | 2006 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current | ||||||||
Cash and cash equivalents | $ | 3,974,850 | $ | 663,071 | ||||
Advances receivable (note 8(b)) | 71,854 | 62,358 | ||||||
Interest receivable | 12,585 | — | ||||||
Prepaid expenses | 81,417 | 69,856 | ||||||
4,140,706 | 795,285 | |||||||
Investment securities | 147,408 | 147,408 | ||||||
Loan receivable(note 8(e)) | 83,000 | 83,000 | ||||||
Equipment | 3,272 | 3,634 | ||||||
Mineral properties(note 6) | 10,632,985 | 10,095,609 | ||||||
Reclamation deposit | 263,182 | 260,976 | ||||||
$ | 15,270,553 | $ | 11,385,912 | |||||
LIABILITIES | ||||||||
Current | ||||||||
Accounts payable and accrued liabilities (note 8(d)) | $ | 390,902 | $ | 696,810 | ||||
Advances payable (note 8(c)) | 46,037 | 61,956 | ||||||
436,939 | 758,766 | |||||||
Site restoration obligation | 16,000 | 16,000 | ||||||
Future income tax liability | 1,448,662 | 1,448,662 | ||||||
Non-controlling interest | 10,317 | 10,320 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Subscriptions received in advance | — | 60,000 | ||||||
Share capital(note 7) | 36,413,491 | 31,560,337 | ||||||
Contributed surplus | 1,428,173 | 1,428,173 | ||||||
Deficit | (24,483,029 | ) | (23,896,346 | ) | ||||
13,358,635 | 9,152,164 | |||||||
$ | 15,270,553 | $ | 11,385,912 | |||||
/s/ Louis Wolfin | Director | /s/ Gary Robertson | Director |
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Table of Contents
Consolidated Interim Statements of Operations and Deficit
(In Canadian Dollars)
(Unaudited — Prepared by Management)
For the Period | ||||||||||||||||||||
January 22, 1981 | Three Months Ended | Six Months Ended | ||||||||||||||||||
(Inception) to | July 31, | July 31, | ||||||||||||||||||
July 31, 2006 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||||
Revenue | ||||||||||||||||||||
Sales | $ | 2,176,079 | $ | — | $ | — | $ | — | $ | — | ||||||||||
Cost of sales | (5,383,348 | ) | — | — | — | — | ||||||||||||||
(3,207,269 | ) | — | — | — | — | |||||||||||||||
Expenses | ||||||||||||||||||||
Administrative services | 1,058,598 | — | — | — | — | |||||||||||||||
Amortization | 3,090 | 181 | 159 | 362 | 443 | |||||||||||||||
Consulting fees | 319,828 | 57,500 | 10,020 | 92,300 | 20,020 | |||||||||||||||
Directors fees | 125,763 | — | — | 50,000 | — | |||||||||||||||
Investor relations and shareholder information | 1,970,552 | 53,669 | 23,089 | 69,072 | 39,426 | |||||||||||||||
Legal and accounting | 2,825,232 | 188,356 | 14,922 | 225,468 | 51,612 | |||||||||||||||
Listing and filing fees | 168,686 | 2,440 | 4,381 | 31,411 | 7,581 | |||||||||||||||
Management fees | 414,975 | 32,800 | 22,500 | 60,475 | 45,000 | |||||||||||||||
Office and miscellaneous | 2,076,839 | 18,458 | 17,137 | 40,227 | 34,921 | |||||||||||||||
Salaries and benefits | 958,962 | 18,071 | 25,614 | 37,203 | 49,735 | |||||||||||||||
Stock-based compensation | 1,399,633 | — | — | — | 36,400 | |||||||||||||||
Transfer agent fees | 62,600 | 6,844 | 3,136 | 10,544 | 4,890 | |||||||||||||||
Travel | 969,837 | 27,325 | 17,498 | 38,643 | 39,415 | |||||||||||||||
12,354,595 | 405,644 | 138,456 | 655,705 | 329,443 | ||||||||||||||||
Operating loss | (15,561,864 | ) | (405,644 | ) | (138,456 | ) | (655,705 | ) | (329,443 | ) | ||||||||||
Other items | ||||||||||||||||||||
Interest income | 925,258 | 43,930 | 2,461 | 70,968 | 5,897 | |||||||||||||||
Recovery of bad debt | (344,859 | ) | 3,464 | — | 3,464 | — | ||||||||||||||
Foreign exchange gain (loss) | (256,699 | ) | (4,897 | ) | (13,822 | ) | (5,413 | ) | (6,740 | ) | ||||||||||
Gain realized on disposition of option on property | 143,552 | — | — | — | — | |||||||||||||||
Gain on sale of investment | 17,692 | — | — | — | — | |||||||||||||||
Financing costs | (341,006 | ) | — | — | — | — | ||||||||||||||
Writedown of investment securities | (809,828 | ) | — | — | — | — | ||||||||||||||
Loss on equipment disposals | (32,784 | ) | — | — | — | — | ||||||||||||||
Writedown of equipment | (16,335 | ) | — | — | — | — | ||||||||||||||
Writedown of mineral properties | (7,110,148 | ) | — | — | — | — | ||||||||||||||
Loss for the period before future income taxes and non-controlling interest | $ | (23,387,021 | ) | $ | (363,147 | ) | $ | (149,817 | ) | $ | (586,686 | ) | $ | (330,286 | ) | |||||
Future income tax expense | (1,096,000 | ) | — | — | — | — | ||||||||||||||
Non-controlling interest gain | (8 | ) | — | — | 3 | — | ||||||||||||||
Loss for the period (balance carried forward) | $ | (24,483,029 | ) | $ | (363,147 | ) | $ | (149,817 | ) | $ | (586,683 | ) | $ | (330,286 | ) | |||||
Deficit,beginning of period | (24,119,882 | ) | (21,009,341 | ) | (23,896,346 | ) | (20,828,872 | ) | ||||||||||||
Deficit,end of period | $ | (24,483,029 | ) | $ | (21,159,158 | ) | $ | (24,483,029 | ) | $ | (21,159,158 | ) | ||||||||
Loss per share | $ | (0.05 | ) | $ | (0.03 | ) | $ | (0.09 | ) | $ | (0.07 | ) | ||||||||
Weighted average number of common shares outstanding | 6,719,932 | 4,651,155 | 6,425,173 | 4,650,030 | ||||||||||||||||
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Table of Contents
Consolidated Interim Statements of Cash Flows
(In Canadian Dollars)
(Unaudited — Prepared by Management)
For the period | ||||||||||||||||||||
January 22, 1981 | Three Months Ended | Six Months Ended | ||||||||||||||||||
(inception) to | July 31, | July 31, | ||||||||||||||||||
July 31, 2006 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||||
Cash flows from (used in) operating activities | ||||||||||||||||||||
Loss for the year | $ | (24,483,029 | ) | $ | (363,147 | ) | $ | (149,817 | ) | $ | (586,683 | ) | $ | (330,286 | ) | |||||
Adjustments for items not involving cash: | ||||||||||||||||||||
— amortization | 3,090 | 181 | 159 | 362 | 443 | |||||||||||||||
— stock based compensation | 1,399,633 | — | — | — | 36,400 | |||||||||||||||
— non-controlling interest | 8 | — | — | (3 | ) | — | ||||||||||||||
— writedown of equipment | 16,335 | — | — | — | — | |||||||||||||||
— future income tax expense | 1,096,000 | — | — | — | — | |||||||||||||||
— writedown of investment securities | 809,828 | — | — | — | — | |||||||||||||||
— writedown of mineral properties | 7,110,148 | — | — | — | — | |||||||||||||||
— writedown of advances receivable | 348,323 | — | — | — | — | |||||||||||||||
— loss on equipment disposals | 32,784 | — | — | — | — | |||||||||||||||
— gain on sales of investments | (17,692 | ) | — | — | — | — | ||||||||||||||
— gain realized on disposition of option on property | (143,552 | ) | — | — | — | — | ||||||||||||||
(13,828,124 | ) | (362,966 | ) | (149,658 | ) | (586,324 | ) | (293,443 | ) | |||||||||||
Change in non-cash working capital: | ||||||||||||||||||||
— increase (decrease) in advances receivable | (420,177 | ) | (19,172 | ) | (7,779 | ) | (9,496 | ) | 4,378 | |||||||||||
— increase in interest receivable | (12,585 | ) | (12,585 | ) | — | (12,585 | ) | — | ||||||||||||
— increase (decrease) prepaid expenses | (81,417 | ) | (3,370 | ) | (18,457 | ) | (11,561 | ) | (15,090 | ) | ||||||||||
— investment securities | (119,174 | ) | — | — | — | — | ||||||||||||||
— increase (decrease) in accounts payable and accrued liabilities | 390,902 | 17,289 | 59,673 | (305,908 | ) | 51,220 | ||||||||||||||
— decrease (increase) in advances payable | 46,037 | (34,692 | ) | (363 | ) | (15,919 | ) | (6,305 | ) | |||||||||||
(14,024,538 | ) | (415,496 | ) | (116,584 | ) | (941,793 | ) | (259,240 | ) | |||||||||||
Cash flows from (used in) investing activities | ||||||||||||||||||||
Mineral properties acquisition and exploration expenditures incurred | (16,561,118 | ) | (413,977 | ) | (206,753 | ) | (537,376 | ) | (285,811 | ) | ||||||||||
Acquisition of Marcus Corporation | (14,498 | ) | — | — | — | — | ||||||||||||||
Proceeds on sale of equipment | 92,732 | — | — | — | — | |||||||||||||||
Loan receivable | (83,000 | ) | — | — | — | (33,000 | ) | |||||||||||||
Purchase of equipment | (145,485 | ) | — | — | — | — | ||||||||||||||
Purchase of investments | (939,776 | ) | — | — | — | — | ||||||||||||||
Decrease (increase) in reclamation deposit amounts | (263,182 | ) | (2,206 | ) | 12,702 | (2,206 | ) | 5,315 | ||||||||||||
(17,914,327 | ) | (416,183 | ) | (194,051 | ) | (539,582 | ) | (313,496 | ) | |||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Subscriptions received in advance | 60,000 | — | — | — | — | |||||||||||||||
Issuance of shares for cash, net | 35,824,586 | 192,749 | 11,900 | 4,793,154 | 12,845 | |||||||||||||||
35,884,586 | 192,749 | 11,900 | 4,793,154 | 12,845 | ||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 3,945,721 | (638,930 | ) | (298,735 | ) | 3,311,779 | (559,891 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | 29,129 | 4,613,780 | 1,210,990 | 663,071 | 1,472,146 | |||||||||||||||
Cash and cash equivalents, end of period | $ | 3,974,850 | $ | 3,974,850 | $ | 912,255 | $ | 3,974,850 | $ | 912,255 | ||||||||||
Supplementary disclosure of cash flow information: | ||||||||||||||||||||
Cash paid during the period for: | ||||||||||||||||||||
Interest | $ | — | $ | 40 | $ | — | $ | 40 | ||||||||||||
Income taxes | — | — | — | — |
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Table of Contents
Notes to Consolidated Interim Financial Statements
July 31, 2006
(In Canadian Dollars)
(Unaudited — Prepared by Management)
1. | Nature of Business and Going Concern |
2. | Prior Period Adjustment |
3. | Basis of Presentation |
4. | Basis of Consolidation |
5. | Comparative Figures |
B-56
Table of Contents
6. | Mineral Properties |
Balance,beginning of period | $ | 10,095,609 | ||||||
Robertson Property | ||||||||
Assays | $ | 48,950 | ||||||
Consulting | 172,140 | |||||||
Drilling | 240,671 | |||||||
Field supplies and other | 4,999 | |||||||
Lease payments | 53,300 | |||||||
Reclamation | 9,376 | |||||||
Water analysis | 481 | |||||||
Total expenditures for Robertson Property | 537,376 | |||||||
Balance,end of period | $ | 10,632,985 | ||||||
7. | Share Capital |
(a) | Authorized Unlimited common shares without par value |
(b) | Issued |
2006 | 2005 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Balance,January 31, | 5,106,266 | $ | 31,560,337 | 4,648,905 | $ | 30,754,678 | ||||||||||
Private placements | 1,500,000 | 4,500,000 | — | — | ||||||||||||
Exercise of warrants | 58,212 | 160,064 | — | — | ||||||||||||
Exercise of stock options | 14,500 | 28,350 | — | — | ||||||||||||
Warrants returned to treasury | (2,000 | ) | (11,000 | ) | — | — | ||||||||||
Share issuance costs | — | (17,009 | ) | — | — | |||||||||||
Balance,April 30, | 6,676,978 | $ | 36,220,742 | 4,648,905 | $ | 30,754,678 | ||||||||||
Exercise of warrants | 67,232 | 173,624 | — | — | ||||||||||||
Exercise of stock options | 11,250 | 19,125 | 7,000 | 11,900 | ||||||||||||
Cancelled shares | — | — | (2,500 | ) | (11,000 | ) | ||||||||||
Balance,July 31, | 6,755,460 | $ | 36,413,491 | 4,653,405 | $ | 30,755,578 | ||||||||||
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Table of Contents
(c) | Share Purchase Warrants |
Number of | ||||
Underlying | ||||
Shares | ||||
Balance,January 31, 2006 | 1,115,698 | |||
Granted | — | |||
Exercised | (58,212 | ) | ||
Returned to treasury | 2,000 | |||
Expired | (252,720 | ) | ||
Balance,April 30, 2006 | 806,766 | |||
Granted | — | |||
Exercised | (67,232 | ) | ||
Balance,July 31, 2006 | 739,534 | |||
Number of | ||||||||
Underlying | ||||||||
Shares | Exercise Price | Expiry Date | ||||||
333,900 | $ | 3.10 | October 12, 2006 | |||||
192,500 | $ | 3.60 | November 17, 2006 | |||||
100,000 | $ | 3.90 | December 19, 2006 | |||||
113,134 | $ | 2.00 | September 15, 2007 | |||||
739,534 | ||||||||
(d) | Stock Options |
Number | Weighted Average | |||||||
of Options | Exercise Price | |||||||
Balance,January 31, 2006 | 697,900 | $ | 2.67 | |||||
Exercised | (14,500 | ) | $ | 1.96 | ||||
Balance,April 30, 2006 | 683,400 | $ | 2.68 | |||||
Exercised | (11,250 | ) | $ | 1.70 | ||||
Balance,July 31, 2006 | 672,150 | $ | 2.70 | |||||
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Table of Contents
Weighted Average | ||||||||||||
Remaining | ||||||||||||
Number | Contractual | Weighted Average | ||||||||||
Exercise Price | Outstanding | Life (yr) | Exercise Price | |||||||||
$1.70 | 309,150 | 3.37 | $ | 1.70 | ||||||||
$3.55 | 363,000 | 4.37 | $ | 3.55 | ||||||||
8. | Related Party Transactions |
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Table of Contents
9. | Commitment |
10. | Subsequent Events |
11. | Segmented Information |
July 31, 2006 | ||||||||||||
Canada | USA | Total | ||||||||||
Current assets | $ | 4,043,391 | $ | 97,315 | $ | 4,140,706 | ||||||
Investment in securities | 74,833 | 72,575 | 147,408 | |||||||||
Loan receivable | 83,000 | — | 83,000 | |||||||||
Equipment | 3,272 | — | 3,272 | |||||||||
Mineral properties | — | 10,632,985 | 10,632,985 | |||||||||
Reclamation deposit | — | 263,182 | 263,182 | |||||||||
$ | 4,204,496 | $ | 11,066,057 | $ | 15,270,553 | |||||||
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January 31, 2006 | ||||||||||||
Canada | USA | Total | ||||||||||
Current assets | $ | 695,738 | $ | 99,547 | $ | 795,285 | ||||||
Investment in securities | 74,833 | 72,575 | 147,408 | |||||||||
Loan receivable | 83,000 | — | 83,000 | |||||||||
Equipment | 3,634 | — | 3,634 | |||||||||
Mineral properties | — | 10,095,609 | 10,095,609 | |||||||||
Reclamation deposit | — | 260,976 | $ | 260,976 | ||||||||
$ | 857,205 | $ | 10,528,707 | $ | 11,385,912 | |||||||
12. | Differences Between Canadian (“CDN”) and United States (“US”) GAAP |
(a) | Reconciliation of Consolidated Balance Sheet items: |
July 31, | January 31, | |||||||
2006 | 2006 | |||||||
Total assets per CDN GAAP | $ | 15,270,553 | $ | 11,385,912 | ||||
Mineral properties | (9,594,511 | ) | (9,057,135 | ) | ||||
Investment securities | 5,711 | (8,810 | ) | |||||
Total assets per US GAAP | $ | 5,681,753 | $ | 2,319,967 | ||||
Total liabilities per CDN and US GAAP | $ | 1,911,918 | $ | 2,233,748 | ||||
July 31, | January 31, | |||||||
2006 | 2006 | |||||||
Deficit end of period per CDN GAAP | $ | (24,483,029 | ) | $ | (23,896,346 | ) | ||
Stock compensation expense | (60,000 | ) | (60,000 | ) | ||||
Deferred exploration expenditures, net | (9,594,511 | ) | (9,057,135 | ) | ||||
Deficit end of period per US GAAP | $ | (34,137,540 | ) | $ | (33,013,481 | ) | ||
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(b) | Reconciliation of Consolidated Statement of Income items: |
Six Months Ended | ||||||||||||||||
Three Months Ended July 31, | July 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Net loss for the period per CDN GAAP | $ | (363,147 | ) | $ | (149,817 | ) | $ | (586,683 | ) | $ | (330,286 | ) | ||||
Deferred exploration expenditures | (413,977 | ) | (206,753 | ) | (537,376 | ) | (285,811 | ) | ||||||||
Net loss for the period under US GAAP | (777,124 | ) | (356,570 | ) | (1,124,059 | ) | (616,097 | ) | ||||||||
Unrealized gain (loss) on investment securities | (151,721 | ) | (24,189 | ) | 14,521 | (54,931 | ) | |||||||||
Net comprehensive loss for the period per US GAAP | $ | (928,845 | ) | $ | (380,759 | ) | $ | (1,109,538 | ) | $ | (671,028 | ) | ||||
Loss per share under US GAAP — basic and diluted | $ | (0.14 | ) | $ | (0.08 | ) | $ | (0.17 | ) | $ | (0.14 | ) | ||||
(c) | Comprehensive Income |
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Total | ||||||||||||||||||||||||||||||||||||
Accumulated | Other | |||||||||||||||||||||||||||||||||||
Share Capital | Additional | Comprehensive | Deficit | Other | Holders’ | |||||||||||||||||||||||||||||||
Number of | Share | Paid In | Income | Restated | Comprehensive | Equity | ||||||||||||||||||||||||||||||
Shares | Amount | Subscriptions | Warrants | Capital | (Loss) | (Note 2) | Income (Loss) | Restated | ||||||||||||||||||||||||||||
Balance forward, January 31, 2004 | 4,361,685 | $ | 29,646,238 | $ | 791,720 | $ | — | $ | 60,000 | $ | (27,584,400 | ) | $ | — | $ | 2,913,558 | ||||||||||||||||||||
Share subscriptions | — | — | (791,720 | ) | — | — | — | — | — | (791,720 | ) | |||||||||||||||||||||||||
Issuance of shares (see Note 7(b)) | 287,220 | 1,108,440 | (11,945 | ) | — | — | — | — | — | 1,096,495 | ||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 343,533 | — | — | — | 343,533 | |||||||||||||||||||||||||||
Components of comprehensive income: | ||||||||||||||||||||||||||||||||||||
— net income (loss) | — | — | — | — | — | (1,776,727 | ) | (1,776,727 | ) | — | (1,776,727 | ) | ||||||||||||||||||||||||
— change in unrealized gain (loss) of marketable securities | — | — | — | — | — | 5,771 | — | 5,771 | 5,771 | |||||||||||||||||||||||||||
$ | (1,770,956 | ) | ||||||||||||||||||||||||||||||||||
Balance, January 31, 2005 | 4,648,905 | $ | 30,754,678 | $ | (11,945 | ) | $ | — | $ | 403,533 | $ | (29,361,127 | ) | $ | 5,771 | $ | 1,790,910 | |||||||||||||||||||
Share subscriptions | — | — | 71,945 | — | — | — | — | 71,945 | ||||||||||||||||||||||||||||
Issuance of shares (see Note 7(b)) | 457,361 | 805,659 | — | 116,100 | — | — | — | — | 921,759 | |||||||||||||||||||||||||||
Stock-based compensation expense | 1,056,100 | 1,056,100 | ||||||||||||||||||||||||||||||||||
Components of Comprehensive income: | ||||||||||||||||||||||||||||||||||||
— net income (loss) | — | — | — | — | (3,652,354 | ) | (3,652,354 | ) | — | (3,652,354 | ) | |||||||||||||||||||||||||
— change in unrealized gain (loss) of marketable securities | — | — | — | — | (14,581 | ) | — | (14,581 | ) | (14,581 | ) | |||||||||||||||||||||||||
$ | (3,666,935 | ) | ||||||||||||||||||||||||||||||||||
Balance, January 31, 2006 | 5,106,266 | $ | 31,560,337 | $ | 60,000 | $ | 116,100 | $ | 1,372,073 | $ | (33,013,481 | ) | $ | (8,810 | ) | $ | 86,219 | |||||||||||||||||||
Share subscriptions | — | — | (60,000 | ) | — | — | — | — | (60,000 | ) | ||||||||||||||||||||||||||
Issuance of shares (see Note 7(b)) | 1,649,194 | 4,853,154 | — | — | — | — | — | — | 4,853,154 | |||||||||||||||||||||||||||
Components of Comprehensive income: | ||||||||||||||||||||||||||||||||||||
— net income (loss) | — | — | — | — | (1,124,059 | ) | (1,124,059 | ) | — | (1,124,059 | ) | |||||||||||||||||||||||||
— change in unrealized gain (loss) of investment securities | — | — | — | — | (14,521 | ) | — | (14,521 | ) | (14,521 | ) | |||||||||||||||||||||||||
$ | (1,109,538 | ) | ||||||||||||||||||||||||||||||||||
Balance, July 31, 2006 | 6,755,460 | $ | 36,413,491 | $ | — | $ | 116,100 | $ | 1,372,073 | $ | (34,137,540 | ) | $ | (5,711 | ) | $ | 3,769,835 | |||||||||||||||||||
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(d) | Supplemental Financial Information |
Three Months Ended July 31, | Six Months Ended July 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Cash Flows from Operating Activities | ||||||||||||||||
Cash used in operating activities per CDN GAAP | $ | (415,496 | ) | $ | (116,584 | ) | $ | (941,793 | ) | $ | (259,240 | ) | ||||
Deferred exploration expenditures | (413,977 | ) | (206,753 | ) | (537,376 | ) | (285,811 | ) | ||||||||
Cash used in operating activities per US GAAP | $ | (829,473 | ) | $ | (323,337 | ) | $ | (1,479,169 | ) | $ | (545,051 | ) | ||||
Cash Flows from Investing Activities | ||||||||||||||||
Cash used in investing activities per CDN GAAP | $ | (416,183 | ) | $ | (194,051 | ) | $ | (539,582 | ) | $ | (313,496 | ) | ||||
Deferred exploration expenditures | 413,977 | 206,753 | 537,376 | 285,811 | ||||||||||||
Cash provided by (used in) investing activities per US GAAP | $ | (2,206 | ) | $ | 12,702 | $ | (2,206 | ) | $ | (27,685 | ) | |||||
Cash provided by financing activities per CDN and US GAAP | $ | 192,749 | $ | 11,900 | $ | 4,793,154 | $ | 12,845 | ||||||||
(d) | Additional Disclosure Required by US GAAP |
(e) | Additional Disclosure Required by SEC |
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(f) | Deferred Exploration Expenditures |
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• | 70,565,171 common shares; |
• | 4,130,000 common share purchase options; and |
• | 12,700,000 share purchase warrants. |
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Nevada Pacific Gold Ltd.
Magisttral Gold Mine
Mineral Resource Summary (0.40 g/t Au cutoff grade) July 2006
Measured | Indicated | Measured + Indicated | ||||||||||||||||||||||||||||||||||
Resource Area | Tonnes (x1000) | Au (g/t) | Cont. Au Oz. | Tonnes (x1000) | Au (g/t) | Cont. Au Oz. | Tonnes (x1000) | Au (g/t) | Cont. Au Oz. | |||||||||||||||||||||||||||
Samaniego/San Rafael | 4,699 | 2.09 | 315,665 | 1,378 | 1.79 | 79,290 | 6,077 | 2.02 | 394,955 | |||||||||||||||||||||||||||
Sagrado Corazón | 862 | 1.28 | 35,528 | 170 | 0.94 | 5,144 | 1,032 | 1.22 | 40,672 | |||||||||||||||||||||||||||
Luptia/Central | 1,245 | 1.55 | 61,937 | 832 | 1.36 | 36,305 | 2,077 | 1.47 | 98,242 | |||||||||||||||||||||||||||
Magistral Mill Tailings | 118 | 1.89 | 7,147 | — | — | — | 118 | 1.89 | 7,147 | |||||||||||||||||||||||||||
Total | 6,924 | 1.89 | 420,277 | 2,380 | 1.58 | 120,739 | 9,304 | 1.81 | 541,016 | |||||||||||||||||||||||||||
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Nevada Pacific Gold, Ltd.
Magistral Gold Mine
Mineral Reserve Estimate
Internal | ||||||||||||||||||||||||||||||||
Pit Gold | ||||||||||||||||||||||||||||||||
Cutoff | Gold | Contained | Contained | Strip | ||||||||||||||||||||||||||||
Grade | Grade | Gold | Gold Troy | Ratio | ||||||||||||||||||||||||||||
Mine Area | (g/t) | Ore Tonnes | (g/t) | (grams) | Ounces | Waste Tonnes | Total Tonnes | w:o | ||||||||||||||||||||||||
Samaniego Hill | 0.96 | |||||||||||||||||||||||||||||||
Proven | 1,065,000 | 3.99 | 4,251,000 | 137,000 | ||||||||||||||||||||||||||||
Probable | 272,000 | 3.79 | 1,032,000 | 33,000 | ||||||||||||||||||||||||||||
Subtotal | 1,337,000 | 3.95 | 5,283,000 | 170,000 | 17,420,000 | 18,757,000 | 13.0 | |||||||||||||||||||||||||
Samaniego Hill-Tailings | 0.80 | |||||||||||||||||||||||||||||||
Proven | 88,000 | 1.99 | 175,000 | 6,000 | 2,338 | 90,338 | 0.03 | |||||||||||||||||||||||||
Probable | ||||||||||||||||||||||||||||||||
Subtotal | 88,000 | 1.99 | 175,000 | 6,000 | 2,338 | 90,338 | ||||||||||||||||||||||||||
Sagrado Corazón | 0.82 | |||||||||||||||||||||||||||||||
Proven | 385,000 | 2.06 | 793,000 | 25,000 | ||||||||||||||||||||||||||||
Probable | 59,000 | 1.47 | 88,000 | 3,000 | ||||||||||||||||||||||||||||
Subtotal | 444,000 | 1.98 | 881,000 | 28,000 | 1,039,000 | 1,483,000 | 2.3 | |||||||||||||||||||||||||
Lupita | 0.80 | |||||||||||||||||||||||||||||||
Proven | 700,000 | 2.39 | 1,671,000 | 54,000 | ||||||||||||||||||||||||||||
Probable | 454,000 | 2.15 | 975,000 | 31,000 | ||||||||||||||||||||||||||||
Subtotal | 1,154,000 | 2.29 | 2,646,000 | 85,000 | 6,031,000 | 7,185,000 | 5.2 | |||||||||||||||||||||||||
Totals | ||||||||||||||||||||||||||||||||
Proven | 2,238,000 | 3.08 | 6,890,000 | 222,000 | ||||||||||||||||||||||||||||
Probable | 785,000 | 2.67 | 2,095,000 | 67,000 | ||||||||||||||||||||||||||||
All Categories | 3,023,000 | 2.97 | 8,985,000 | 289,000 | 24,492,338 | 27,515,338 | 8.1 | |||||||||||||||||||||||||
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Nevada Pacific Gold Ltd. — Other Property Locations (Nevada)
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Drill Hole | Interval | Thickness | Gold (opt) | Silver (opt) | Arsenic (ppm) | Antimony (ppm) | ||||||||||||||||||
BMXR06-01 | NSA | NSA | NSA | NSA | NSA | |||||||||||||||||||
BMXR06-02 | 445 ´-450 ´ | 5 feet | 0.027 | NSA | NSA | NSA | ||||||||||||||||||
BMXR06-03 | 15 ´-20 ´ | 5 feet | 0.016 | NSA | NSA | NSA | ||||||||||||||||||
BMXR06-04 | 110 ´-175 ´ | 65 feet | 0.031 | 1.83 | 7,236 | 130 | ||||||||||||||||||
including | 110 ´-120 ´ | 10 feet | 0.072 | 6.51 | 10,000 | 53.2 | ||||||||||||||||||
including | 150 ´-160 ´ | 10 feet | 0.05 | 1.07 | 10,000 | 320 | ||||||||||||||||||
205 ´-215 ´ | 10 feet | 0.036 | 0 | 10,000 | 44.2 | |||||||||||||||||||
BMXR06-05 | NSA | NSA | NSA | NSA | NSA | |||||||||||||||||||
BMXR06-06 | 30 ´-40 ´ | 10 feet | 0.022 | NSA | 2,230 | 15.8 | ||||||||||||||||||
BMXR06-07 | NSA | NSA | NSA | NSA | NSA | |||||||||||||||||||
BMXR06-08 | 200 ´-215 ´ | 15 feet | 0.01 | NSA | NSA | NSA | ||||||||||||||||||
320 ´-325 ´ | 5 feet | 0.015 | NSA | NSA | NSA |
* | NSA — no significant assays |
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For the Years Ended June 30 | ||||||||||||||||||||||||||||
Three Months | ||||||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||||||
September 30, | ||||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
Gold sales revenue | $ | 752,590 | $ | 6,649,300 | $ | 5,175,235 | $ | — | $ | — | $ | — | ||||||||||||||||
Mine operating earnings (loss) | (48,105 | ) | (2,370,544 | ) | 838,070 | — | — | |||||||||||||||||||||
Net income (loss) | (747,935 | ) | (5,020,542 | ) | (2,381,658 | ) | (1,936,547 | ) | (1,092,306 | ) | ||||||||||||||||||
Basic and diluted earnings (loss) per share | (0.01 | ) | (0.08 | ) | (0.05 | ) | (0.06 | ) | (0.06 | ) | ||||||||||||||||||
Total assets | 23,308,162 | 22,538,567 | 22,569,326 | 16,847,019 | 1,681,421 | |||||||||||||||||||||||
Total long-term liabilities | 1,740,440 | 1,797,209 | 1,742,484 | 1,631,704 | — | |||||||||||||||||||||||
Cash dividends declared | — | — | — | — | — | — |
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For the Years Ended June 30 | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Gold sales revenue | $ | 6,649,300 | $ | 5,175,235 | $ | — | ||||||
Mine operating earnings (loss) | $ | (2,370,544 | ) | $ | 838,070 | $ | — | |||||
Net income (loss) | $ | (5,020,542 | ) | $ | (2,381,658 | ) | $ | (1,936,547 | ) | |||
Basic and diluted EPS | $ | (0.08 | ) | $ | (0.05 | ) | $ | (0.06 | ) | |||
Total assets | $ | 22,538,567 | $ | 22,569,326 | $ | 16,847,019 | ||||||
Total long-term liabilities | $ | 1,797,209 | $ | 1,742,484 | $ | 1,631,704 | ||||||
Cash dividends declared | $ | Nil | $ | Nil | $ | Nil |
Q4 2006 | Q3 2006 | Q2 2006 | Q1 2006 | |||||||||||||
Gold sales revenue | $ | 1,553,673 | $ | 1,389,694 | $ | 1,520,420 | $ | 2,185,513 | ||||||||
Mine operating earnings (loss) | (173,392 | ) | (540,282 | ) | (516,185 | ) | (1,140,685 | ) | ||||||||
Net income (loss) | (1,167,562 | ) | (1,222,450 | ) | (1,033,586 | ) | (1,596,944 | ) | ||||||||
Basic and diluted EPS | (0.01 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | ||||||||
Total assets | 22,538,567 | 20,927,743 | 21,767,522 | 20,921,546 | ||||||||||||
Total long-term liabilities | 1,797,209 | 1,765,923 | 1,749,534 | 1,776,780 | ||||||||||||
Cash dividends declared | Nil | Nil | Nil | Nil |
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Q4 2005 | Q3 2005 | Q2 2005 | Q1 2005 | |||||||||||||
Gold sales revenue | $ | 3,120,218 | $ | 2,055,017 | $ | — | $ | — | ||||||||
Mine operating earnings (loss) | 545,556 | 292,514 | — | — | ||||||||||||
Net income (loss) | (328,116 | ) | (349,690 | ) | (1,176,755 | ) | (727,097 | ) | ||||||||
Basic and diluted EPS | 0.00 | (0.01 | ) | (0.02 | ) | (0.02 | ) | |||||||||
Total assets | 22,569,326 | 22,352,494 | 22,359,902 | 18,959,179 | ||||||||||||
Total long-term liabilities | 1,742,484 | 1,708,716 | 1,680,991 | 1,653,711 | ||||||||||||
Cash dividends declared | Nil | Nil | Nil | Nil |
2006 | ||||||||||||||||
Q4 | Q3 | Q2 | Q1 | |||||||||||||
Ore tonnes mined | — | — | 53,571 | |||||||||||||
Grade (grams/tonne) | — | — | 1.34 | |||||||||||||
Ounces mined | — | — | 2,313 | |||||||||||||
Waste tonnes | — | — | 408,014 | |||||||||||||
Total tonnes | — | — | 461,585 | |||||||||||||
Strip ratio | — | — | 7.6 | |||||||||||||
Tonnes/Ounce | — | — | 200 | |||||||||||||
Gold Ounces Produced | 2,069 | 2,793 | 2,805 | 4,965 |
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2005 | ||||||||||||||||
Q4 | Q3 | Q2 | Q1 | |||||||||||||
Ore tonnes mined | 290,134 | 206,296 | 115,307 | 129,030 | ||||||||||||
Grade (grams/tonne) | 2.0 | 2.0 | 1.6 | 1.4 | ||||||||||||
Ounces mined | 18,785 | 13,177 | 5,751 | 5,786 | ||||||||||||
Waste tonnes | 960,867 | 1,092,900 | 1,312,696 | 826,679 | ||||||||||||
Total tonnes | 1,251,001 | 1,299,196 | 1,428,003 | 955,709 | ||||||||||||
Strip ratio | 3.3 | 5.3 | 11.4 | 6.4 | ||||||||||||
Tonnes/Ounce | 67 | 99 | 248 | 165 | ||||||||||||
Gold Ounces Produced | 7,016 | 5,108 | 3,860 | 3,205 |
For the | ||||||||||||||||||||
Year Ended | For the Three Months Ended | |||||||||||||||||||
June 30 | June 30 | March 31 | Dec. 31 | Sept. 30 | ||||||||||||||||
2006 | 2006 | 2006 | 2005 | 2005 | ||||||||||||||||
(In thousands, except per ounce amounts) | ||||||||||||||||||||
Cost of sales per financial statements | $ | 7,903 | $ | 1,571 | $ | 1,655 | $ | 1,763 | $2,914 | |||||||||||
Non-cash adjustments | (116 | ) | (29 | ) | (29 | ) | (29 | ) | (29 | ) | ||||||||||
Cash operating costs | 7,787 | 1,542 | 1,626 | 1,734 | 2,885 | |||||||||||||||
Royalty expense | 382 | 85 | 87 | 89 | 121 | |||||||||||||||
Total cash costs | 8,169 | 1,627 | 1,713 | 1,823 | 3,006 | |||||||||||||||
Depreciation, depletion and accretion | 851 | 102 | 216 | 213 | 320 | |||||||||||||||
Total production costs | 9,020 | 1,729 | 1,929 | 2,036 | 3,326 | |||||||||||||||
Divided by gold ounces sold | 13,288 | 2,604 | 2,465 | 3,160 | 5,059 | |||||||||||||||
Cash operating costs per ounce | $ | 586 | $ | 592 | $ | 659 | $ | 549 | * | $ 570 | ||||||||||
Total cash cost per ounce | $ | 615 | $ | 625 | $ | 695 | $ | 577 | $ 594 | |||||||||||
Total production cost per ounce | $ | 679 | $ | 664 | $ | 782 | $ | 644 | $ 657 |
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Six Months Ended | Three Months Ended | Three Months Ended | ||||||||||
June 30/05 | June 30/05 | March 31/05 | ||||||||||
(In thousands, except per ounce amounts) | ||||||||||||
Cost of sales per financial statements | $ | 3,347 | $ | 1,997 | $ | 1,350 | ||||||
Non-cash adjustments | (45 | ) | (23 | ) | (22 | ) | ||||||
Cash operating costs | 3,302 | 1,974 | 1,328 | |||||||||
Royalty expense | 262 | 161 | 101 | |||||||||
Total cash costs | 3,564 | 2,135 | $ | 1,429 | ||||||||
Depreciation, depletion and accretion | 772 | 439 | 333 | |||||||||
Total production costs | 4,336 | 2,574 | $ | 1,762 | ||||||||
Divided by gold ounces sold | 12,069 | 7,259 | 4,810 | |||||||||
Cash operating costs per ounce | $ | 274 | $ | 272 | $ | 276 | ||||||
Total cash cost per ounce | $ | 295 | $ | 294 | $ | 297 | ||||||
Total production cost per ounce | $ | 359 | $ | 355 | $ | 366 |
* | Cash operating costs per ounce for the three months ended September 30, 2005 include a one time severance cost of $62 per ounce |
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Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Exploration salaries & wages | $ | 123,166 | $ | 72,728 | $ | 307,810 | $ | 262,988 | ||||||||
Land holding costs | 68,676 | 22,472 | 447,443 | 421,038 | ||||||||||||
Surveying | 13,394 | 6,843 | 14,399 | 52,526 | ||||||||||||
Environmental | — | 6,714 | — | 8,410 | ||||||||||||
Geology | 4,221 | 23,370 | 46,938 | 79,258 | ||||||||||||
Surface geochemistry | 42,824 | 42,953 | 61,391 | 125,387 | ||||||||||||
Geophysics | 10,824 | 111,136 | 29,774 | 113,636 | ||||||||||||
Road work & trenching | 40,382 | 32,352 | 69,619 | 84,796 | ||||||||||||
Drilling | 378,869 | 264,283 | 685,012 | 305,263 | ||||||||||||
Other | 1,786 | 20,224 | 19,042 | 40,100 | ||||||||||||
Total expenditures | $ | 684,142 | $ | 603,075 | $ | 1,681,428 | $ | 1,493,402 | ||||||||
June 30 | June 30 | |||||||
2006 | 2005 | |||||||
Limousine Butte | $ | 747,385 | $ | 744,425 | ||||
South Carlin Project | 541,628 | 532,012 | ||||||
Keystone | 341,666 | 243,760 | ||||||
BMX | 209,744 | 32,114 | ||||||
Cornerstone (Pat Canyon) | 510,086 | 129,985 | ||||||
Timber Creek | 476,086 | 153,005 | ||||||
Other Nevada Properties | 673,181 | 570,069 | ||||||
Mexican Properties | 1,162,029 | 700,987 | ||||||
$ | 4,661,805 | $ | 3,106,357 | |||||
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For the Years Ended June 30 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Gold sales revenue | $ | 5,175,235 | $ | — | $ | — | ||||||
Net income (loss) | $ | (2,381,658 | ) | $ | (1,936,547 | ) | $ | (1,092,306 | ) | |||
Basic and diluted EPS | $ | (0.05 | ) | $ | (0.06 | ) | $ | (0.06 | ) | |||
Total assets | $ | 22,569,326 | $ | 16,847,019 | $ | 1,681,421 | ||||||
Total long-term liabilities | $ | 1,742,484 | $ | 1,631,704 | Nil | |||||||
Cash dividends declared | Nil | Nil | Nil |
Q4 2005 | Q3 2005 | Q2 2005 | Q1 2005 | |||||||||||||
Gold sales revenue | $ | 3,120,218 | $ | 2,055,017 | $ | — | $ | — | ||||||||
Net income (loss) | $ | (128,116 | ) | $ | (349,690 | ) | $ | (1,176,755 | ) | $ | (727,097 | ) | ||||
Basic and diluted EPS | $ | 0.00 | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) | |||||
Total assets | $ | 22,569,326 | $ | 22,352,494 | $ | 22,359,902 | $ | 18,959,179 | ||||||||
Total long-term liabilities | $ | 1,742,484 | $ | 1,708,716 | $ | 1,680,991 | $ | 1,653,711 | ||||||||
Cash dividends declared | Nil | Nil | Nil | Nil |
Q4 2004 | Q3 2004 | Q2 2004 | Q1 2004 | |||||||||||||
Gold sales revenue | $ | — | $ | — | $ | — | $ | — | ||||||||
Net income (loss) | $ | (708,559 | ) | $ | (866,927 | ) | $ | (229,384 | ) | $ | (131,677 | ) | ||||
Basic and diluted EPS | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
Total assets | $ | 16,847,019 | $ | 16,236,542 | $ | 3,894,488 | $ | 3,266,225 | ||||||||
Total long-term liabilities | $ | 1,631,704 | $ | 1,623,533 | Nil | Nil | ||||||||||
Cash dividends declared | Nil | Nil | Nil | Nil |
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2005 | 2004 | |||||||||||||||||||||||
Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | |||||||||||||||||||
Ore tonnes mined | 290,134 | 206,296 | 115,307 | 129,030 | 158,508 | 129,503 | ||||||||||||||||||
Grade (grams/tonne) | 2.0 | 2.0 | 1.6 | 1.4 | 1.2 | 1.3 | ||||||||||||||||||
Ounces mined | 18,785 | 13,177 | 5,751 | 5,786 | 5,893 | 5,247 | ||||||||||||||||||
Waste tonnes | 960,867 | 1,092,900 | 1,312,696 | 826,679 | 1,093,847 | 594,527 | ||||||||||||||||||
Total tonnes | 1,251,001 | 1,299,196 | 1,428,003 | 955,709 | 1,252,355 | 724,030 | ||||||||||||||||||
Strip ratio | 3.3 | 5.3 | 11.4 | 6.4 | 6.9 | 4.6 | ||||||||||||||||||
Tonnes/Ounce | 67 | 99 | 248 | 165 | 213 | 138 | ||||||||||||||||||
Gold Ounces Produced | 7,016 | 5,108 | 3,860 | 3,205 | 4,150 | 3,028 |
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Six Months Ended | Three Months Ended | Three Months Ended | ||||||||||
June 30/05 | June 30/05 | March 31/05 | ||||||||||
(In thousands, except per ounce amounts) | ||||||||||||
Cost of sales per financial statements | $ | 3,347 | $ | 1,997 | $ | 1,350 | ||||||
Non-cash adjustments | (45 | ) | (23 | ) | (22 | ) | ||||||
Cash operating costs | 3,302 | 1,974 | 1,328 | |||||||||
Royalty expense | 262 | 161 | 101 | |||||||||
Total cash costs | 3,564 | 2,135 | $ | 1,429 | ||||||||
Depreciation, depletion and accretion | 772 | 439 | 333 | |||||||||
Total production costs | 4,336 | 2,574 | $ | 1,762 | ||||||||
Divided by gold ounces sold | 12,069 | 7,259 | 4,810 | |||||||||
Cash operating costs per ounce | $ | 274 | $ | 272 | $ | 276 | ||||||
Total cash cost per ounce | $ | 295 | $ | 294 | $ | 297 | ||||||
Total production cost per ounce | $ | 359 | $ | 355 | $ | 366 |
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Three Months Ended June 30, | Year Ended June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Exploration salaries & wages | $ | 72,728 | $ | 76,666 | $ | 262,988 | $ | 194,778 | ||||||||
Land holding costs | 22,472 | 170,721 | 421,038 | 420,334 | ||||||||||||
Surveying | 6,843 | 22,485 | 52,526 | 47,615 | ||||||||||||
Environmental | 6,714 | 4,951 | 8,410 | 19,516 | ||||||||||||
Geology | 23,370 | 38,440 | 79,258 | 212,419 | ||||||||||||
Surface geochemistry | 42,953 | 11,795 | 125,387 | 35,263 | ||||||||||||
Geophysics | 111,136 | 12,000 | 113,636 | 71,935 | ||||||||||||
Road work & trenching | 32,352 | 5,668 | 84,796 | 13,109 | ||||||||||||
Drilling | 264,283 | 307,191 | 305,263 | 544,380 | ||||||||||||
Other | 20,224 | 8,959 | 40,100 | 32,282 | ||||||||||||
Total expenditures | $ | 603,075 | $ | 658,876 | $ | 1,493,402 | $ | 1,591,631 | ||||||||
June 30 | June 30 | |||||||
2005 | 2004 | |||||||
Limousine Butte | $ | 744,425 | $ | 732,555 | ||||
South Carlin Project | 532,012 | 522,396 | ||||||
Keystone | 243,760 | 225,003 | ||||||
BMX | 32,114 | 21,629 | ||||||
Amador Canyon | — | 420,890 | ||||||
Other Nevada Properties | 853,059 | 364,516 | ||||||
Mexican Properties | 700,987 | 168,145 | ||||||
$ | 3,106,357 | $ | 2,455,134 | |||||
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Q1 2007 | Q4 2006 | Q3 2006 | Q2 2006 | |||||||||||||
Gold sales revenue | $ | 752,590 | $ | 1,553,673 | $ | 1,389,694 | $ | 1,520,420 | ||||||||
Mine operating earnings (loss) | (48,105 | ) | (173,392 | ) | (540,282 | ) | (516,185 | ) | ||||||||
Net income (loss) | (747,935 | ) | (1,167,562 | ) | (1,222,450 | ) | (1,033,586 | ) | ||||||||
Basic and diluted EPS | (0.01 | ) | (0.01 | ) | (0.02 | ) | (0.02 | ) | ||||||||
Total assets | 23,308,162 | 22,538,567 | 20,927,743 | 21,767,522 | ||||||||||||
Total long-term liabilities | 1,740,440 | 1,797,209 | 1,765,923 | 1,749,534 | ||||||||||||
Cash dividends declared | Nil | Nil | Nil | Nil |
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Q1 2006 | Q4 2005 | Q3 2005 | ||||||||||||||
Q2 2005 | ||||||||||||||||
Gold sales revenue | $ | 2,185,513 | $ | 3,120,218 | $ | 2,055,017 | $ | — | ||||||||
Mine operating earnings (loss) | (1,140,685 | ) | 545,556 | 292,514 | — | |||||||||||
Net income (loss) | (1,596,944 | ) | (328,116 | ) | (349,690 | ) | (1,176,755 | ) | ||||||||
Basic and diluted EPS | (0.03 | ) | 0.00 | (0.01 | ) | (0.02 | ) | |||||||||
Total assets | 20,921,546 | 22,569,326 | 22,352,494 | 22,359,902 | ||||||||||||
Total long-term liabilities | 1,776,780 | 1,742,484 | 1,708,716 | 1,680,991 | ||||||||||||
Cash dividends declared | Nil | Nil | Nil | Nil |
2007 | 2006 | |||||||||||||||||||
Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||
Ore tonnes mined | — | — | — | — | 53,571 | |||||||||||||||
Grade (grams/tonne) | — | — | — | — | 1.34 | |||||||||||||||
Ounces mined | — | — | — | — | 2,313 | |||||||||||||||
Waste tonnes | — | — | — | — | 408,014 | |||||||||||||||
Total tonnes | — | — | — | — | 461,585 | |||||||||||||||
Strip ratio | — | — | — | — | 7.6 | |||||||||||||||
Tonnes/Ounce | — | — | — | — | 200 | |||||||||||||||
Gold Ounces Produced | 1,336 | 2,069 | 2,793 | 2,805 | 4,965 |
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For the three months ended | ||||||||||||||||
Sept. 30/06 | June 30/06 | Mar. 31/06 | Dec. 31/05 | |||||||||||||
(in thousands, except per ounce amounts) | ||||||||||||||||
Cost of sales per financial statements | $ | 742 | $ | 1,571 | $ | 1,655 | $ | 1,763 | ||||||||
Non-cash adjustments | (30 | ) | (29 | ) | (29 | ) | (29 | ) | ||||||||
Cash operating costs | 712 | 1,542 | 1,626 | 1,734 | ||||||||||||
Royalty expense | 47 | 85 | 87 | 89 | ||||||||||||
Total cash costs | 759 | 1,627 | 1,713 | 1,823 | ||||||||||||
Depreciation, depletion and accretion | 42 | 102 | 216 | 213 | ||||||||||||
Total production costs | 801 | 1,729 | 1,929 | 2,036 | ||||||||||||
Divided by gold ounces sold | 1,210 | 2,604 | 2,465 | 3,160 | ||||||||||||
Cash operating costs per ounce | $ | 588 | $ | 592 | $ | 659 | $ | 549 | ||||||||
Total cash cost per ounce | $ | 627 | $ | 625 | $ | 695 | $ | 577 | ||||||||
Total production cost per ounce | $ | 662 | $ | 664 | $ | 782 | $ | 644 |
For the three months ended | ||||||||||||
Sept. 30/05 | June 30/05 | March 31/05 | ||||||||||
(in thousands, except per ounce amounts) | ||||||||||||
Cost of sales per financial statements | $ | 2,914 | $ | 1,997 | $ | 1,350 | ||||||
Non-cash adjustments | (29 | ) | (23 | ) | (22 | ) | ||||||
Cash operating costs | 2,885 | 1,974 | 1,328 | |||||||||
Royalty expense | 121 | 161 | 101 | |||||||||
Total cash costs | 3,006 | 2,135 | $ | 1,429 | ||||||||
Depreciation, depletion and accretion | 320 | 439 | 333 | |||||||||
Total production costs | 3,326 | 2,574 | $ | 1,762 | ||||||||
Divided by gold ounces sold | 5,059 | 7,259 | 4,810 | |||||||||
Cash operating costs per ounce | *$570 | $ | 272 | $ | 276 | |||||||
Total cash cost per ounce | $ | 594 | $ | 294 | $ | 297 | ||||||
Total production cost per ounce | $ | 657 | $ | 355 | $ | 366 |
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* | Cash operating costs per ounce for the three months ended September 30, 2005 include a one time severance cost of $62 per ounce |
Three Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Exploration salaries & wages | $ | 111,811 | $ | 70,143 | ||||
Land holding costs | 589,361 | 194,449 | ||||||
Surveying | — | 990 | ||||||
Geology | 845 | 607 | ||||||
Surface geochemistry | 55,196 | 5,901 | ||||||
Road work & trenching | 42,306 | 18,619 | ||||||
Drilling | 95,939 | 294,872 | ||||||
Other | 1,472 | 7,207 | ||||||
Total expenditures | $ | 896,930 | $ | 592,788 | ||||
Sept. 30 | June 30 | |||||||
2006 | 2006 | |||||||
Limousine Butte | $ | 877,017 | $ | 747,385 | ||||
South Carlin Project | 551,244 | 541,628 | ||||||
Keystone | 393,392 | 341,666 | ||||||
BMX | 257,957 | 209,744 | ||||||
Cornerstone (Pat Canyon) | 549,366 | 510,086 | ||||||
Timber Creek | 517,609 | 476,086 | ||||||
Other Nevada Properties | 724,727 | 673,181 | ||||||
Mexican Properties | 1,636,695 | 1,162,029 | ||||||
$ | 5,508,007 | $ | 4,661,805 | |||||
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• | the CSZ in the area of trench #1 and trench #6, which contained gold values of 180” of 0.041 opt (ounce per ton), including 30” of 0.204 opt) and 205” of 0.012 opt, including 75” of 0.021 opt., respectively |
• | the contact of the sediments and volcanics where gold values up to 0.291 opt are found in silicified ribs and jasperoid outcrops exposed in the area of volcanic cover |
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• | 70,565,171 common shares |
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• | 3,080,000 common share purchase options with a weighted average exercise price of $1.01 CDN expiring at various dates until June 1, 2016 |
• | 12,700,000 share purchase warrants at a weighted average price of $0.50 CDN expiring at between December 14, 2007 and May 11, 2008. |
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“alluvial” | Consisting of unconsolidated or poorly consolidated gravels |
“anomaly” | A geological feature, especially in the subsurface, distinguished by geological, geophysical or geochemical means, which is different from the general surroundings and is often of potential economic value |
“Au” | Gold |
“breccia” | A coarse-grained clastic rock, composed of angular broken rock fragments |
“carbonate” | A rock consisting of carbonate minerals, such as limestone or dolomite |
“Carlin-style” | Mineralization related to deposit types found on the Carlin Trend, Nevada |
“deposit” | A mineralized body which has been physically delineated by sufficient drilling, trenching,and/or underground work, and found to contain a sufficient average grade of metal or metals to warrant further explorationand/or development expenditures. Such a deposit does not qualify as a commercially mineable ore body or as containing reserves or ore, unless final, legal, technical and economic factors are resolved |
“dissemination” | Said of a mineral deposit (esp. of metals) in which the desired minerals occur as scattered particles in the rock |
“distal zonation” | Zonation of metals away from the source instrusive |
“down-dip” | A direction downwards and parallel to the dip of a structure or rock unit |
“EM survey” | An electro-magnetic survey |
“fault” | A fracture or a fracture zone in crustal rocks along which there has been displacement of the two sides relative to one another parallel to the fracture. The displacement may be a few inches or many miles long |
“flat quartz veins” | Quartz veins horizontal to the earth’s surface |
“floating cones” | Used to determine the economics of a deposit, determines the economic value of the rock in the ground |
“g/t” | Grams per metric tonne |
“geophysical survey” | The use of one or more geophysical methods such as electrical, gravity or magnetic to determine the physical properties of the rock |
“geotechnical drilling” | Drilling method used to help understand the engineering characteristics of the rock |
“granodiorite” | A coarse grained rock intermediate in composition between a quartz diorite and a quartz monzonite |
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“Havallah Formation” | Pennsylvanian to Permian age rocks consisting of sandstone, limestone, cherts and quartzites found near Battle Mountain, Nevada |
“hornfelsed” | Fine grained rock formed by contact metamorphism near an intrusive contact |
“horst bounding faults” | Outward dipping faults that form an up-thrown block of rock |
“hydrothermal” | Pertaining to the deposition or formation by magmatic hot water |
“intervals” | A preset selection of units or subdivisions |
“intrusive” | An igneous rock formed by magma |
“IP survey” | An Induced Polarization geophysical survey |
“jasperoid” | A dense, siliceous rock in which quartz has replaced the carbonate minerals of limestone or dolomite; a silicified limestone |
“Jory member” | A coarse pebbly sandstone member of the Havallah Formation |
“leach pad” | A pad onto which ore is placed for leaching by cyanide |
“metallurgical testing” | Testing rock or ore for its mineral content |
“mineralization” | The concentration of metals and their chemical compounds within a body of rock |
“net smelter returns royalty” | A phrase used to describe a royalty payment made by a producer of metals based on gross metal production from a property, less deduction of certain limited costs including smelting, refining, transportation and insurance costs (often payable by delivery in kind of a percentage of the metal produced) |
“opt” | Ounces per tonne |
“ore” | A natural aggregate of one or more minerals which, at a specified time and place, may be mined and sold at a profit or from which some part may be profitably separated |
“pathfinder elements” | A relatively mobile element that serves as an indicator or mineralization |
“pediment” | The gravel covered portion between a mountain range and a valley |
“pole-dipole” | An electronic array in which one current electrode is placed at infinity while one current electrode and two potential electrodes in close proximity are moved across the area to be tested |
“porphyry” | An igneous rock of any composition that contains conspicuous phenocrysts in a fine-grained groundmass; a porphyritic igneous rock |
“ppb” | Parts per billion |
“ppm” | Parts per million |
“quartzites” | Metamorphosed sandstone |
“reverse circulationdrilling” | The circulation of bit-coolant and cuttings-removal liquids, drilling fluid, mud, air or gas down the borehole outside the drill rods and upward inside the drill rods |
“sedimentary” | Pertaining to or containing sediment; e.g., sedimentary deposit or a sedimentary complex |
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“silicification” | The introduction of, or replacement by, silica, generally resulting in the formation of fine-grained quartz, chalcedony, or opal, which may fill pores and replace existing minerals |
“skarn” | Lime-bearing silicates, of any geological age, derived from nearly pure limestone and dolomite with the introduction of large amounts of Si, Al, Fe and Mg and usually formed near an intrusive contact. “Endoskarn” refers to skarns developed within the intrusive, “exoskarn” refers to skarns developed outside the intrusive contact |
“stockwork” | A three dimensional network of closely spaced planar to irregular veinlets |
“stopes” | An underground excavation formed by the extraction of ore |
“strata” | A sheet like body or layer of sedimentary rock visually separable from other layers above and below |
“sulfide” | A mineral compound characterized by the linkage of sulfur with a metal |
“tailings” | The washed or milled portion of ore that is uneconomic |
“VLF survey” | Very low frequency survey |
“waste stripping” | The removal of waste rock in an open pit mine |
• | A final or bankable feasibility study is required to meet the requirements to designate reserves. |
• | A historic three year average price must be used in any reserve or cash flow analysis to designate reserves. |
• | To qualify as a reserve, the primary environmental analysis should be submitted to governmental authorities. |
Mineral Reserve | The economically mineable part of a measured or indicated mineral resource demonstrated by a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that might occur when the material is mined. |
Proven Mineral Reserve | The economically mineable part of a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining processing, |
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metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified. |
Probable Mineral Reserve | The economically mineable part of an indicated, and in some circumstances, a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. |
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 a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted form specific geological evidence and knowledge. |
Measured Mineral Resource | That part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. |
Indicated Mineral Resource | That part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. |
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 limited sampling 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. |
Preliminary Feasibility Study | A comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has determined, and includes a financial analysis based on reasonable assumptions of technical, engineering, legal, operating, and economic factors and evaluation of other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be classified as a mineral reserve. |
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Metric Measurement | U.S. Equivalent | Multiply Metric Figure by: | ||||||
Hectares | Acres | 2.471 | ||||||
Meters | Feet (ft.) | 3.281 | ||||||
Kilometers (km) | Miles | 0.621 | ||||||
Tonnes | Tons (2000 pounds) | 1.102 | ||||||
Grams/tonne | Ounces (troy/tonne) | 0.029 |
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/s/ David Hottman | /s/ W.R. (Bill) Franklin | |
David Hottman, | W. R. (Bill) Franklin, | |
President & Chief Executive Officer | Chief Financial Officer | |
September 28, 2006 | September 28, 2006 |
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2006 | 2005 | |||||||
(Expressed in US Dollars) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 3,659,738 | $ | 957,251 | ||||
Accounts receivable | 180,697 | 273,165 | ||||||
Product inventory and stockpiled ore (Note 4) | 109,074 | 4,112,633 | ||||||
Supplies inventory | 285,152 | 414,366 | ||||||
Prepaid expenses | 239,424 | 223,372 | ||||||
4,474,085 | 5,980,787 | |||||||
Property, plant and equipment (Note 5) | 13,306,314 | 13,388,954 | ||||||
Mineral properties (Note 6) | 4,661,805 | 3,106,357 | ||||||
Reclamation bonds | 96,363 | 93,228 | ||||||
$ | 22,538,567 | $ | 22,569,326 | |||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 1,194,495 | $ | 1,783,277 | ||||
1,194,495 | 1,783,277 | |||||||
Other liabilities | 112,397 | 175,217 | ||||||
Asset retirement obligation (Note 7) | 1,684,812 | 1,567,267 | ||||||
1,797,209 | 1,742,484 | |||||||
SHAREHOLDERS’ EQUITY | ||||||||
Share capital (Note 8) | 30,955,143 | 25,920,223 | ||||||
Contributed capital (Note 9) | 1,490,594 | 1,001,674 | ||||||
Deficit | (12,898,874 | ) | (7,878,332 | ) | ||||
19,546,863 | 19,043,565 | |||||||
$ | 22,538,567 | $ | 22,569,326 | |||||
Nature of operations and Going Concern (Note 1) | ||||||||
Commitments (Note 15) | ||||||||
Subsequent Events (Note 18) |
/s/ Michael Beley | /s/ Gary Nordin | |
Michael Beley, | Gary Nordin, | |
Director | Director |
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2006 | 2005 | 2004 | ||||||||||
(Expressed in US Dollars) | ||||||||||||
GOLD SALES | $ | 6,649,300 | $ | 5,175,235 | $ | — | ||||||
COST OF SALES | 7,903,654 | 3,347,153 | — | |||||||||
DEPRECIATION AND DEPLETION | 734,618 | 727,815 | — | |||||||||
ROYALTIES | 381,572 | 262,197 | — | |||||||||
9,019,844 | 4,337,165 | — | ||||||||||
EARNINGS (LOSS) FROM MINING OPERATIONS | (2,370,544 | ) | 838,070 | — | ||||||||
EXPENSES AND OTHER INCOME | ||||||||||||
General and administrative | 1,944,511 | 2,084,400 | 1,538,190 | |||||||||
Interest and financing costs | — | 22,378 | 1,159 | |||||||||
Stock-based compensation | 611,572 | 559,963 | 39,120 | |||||||||
Foreign exchange losses | 36,904 | 115,796 | 117,226 | |||||||||
Other income | (57,349 | ) | (37,942 | ) | (89,433 | ) | ||||||
2,535,638 | 2,744,595 | 1,606,262 | ||||||||||
LOSS BEFORE THE UNDERNOTED ITEMS | 4,906,182 | 1,906,525 | 1,606,262 | |||||||||
Write-down of mineral properties | 114,360 | 630,332 | 330,285 | |||||||||
Gain on disposal of mining equipment | — | (155,199 | ) | — | ||||||||
— | ||||||||||||
LOSS FOR THE YEAR | $ | 5,020,542 | $ | 2,381,658 | $ | 1,936,547 | ||||||
Basic and diluted loss per share | $ | 0.08 | $ | 0.05 | $ | 0.06 | ||||||
Weighted average number of shares outstanding | 60,304,369 | 51,295,350 | 30,305,758 | |||||||||
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2006 | 2005 | 2004 | ||||||||||
(Expressed in US Dollars) | ||||||||||||
DEFICIT, Beginning of year | ||||||||||||
As previously reported | $ | 7,878,332 | $ | 5,209,298 | $ | 3,272,751 | ||||||
Change in accounting policy (Note 2 — Stock Compensation) | — | 287,376 | — | |||||||||
As restated | 7,878,332 | 5,496,674 | 3,272,751 | |||||||||
Loss for the year | 5,020,542 | 2,381,658 | 1,936,547 | |||||||||
DEFICIT, End of year | $ | 12,898,874 | $ | 7,878,332 | $ | 5,209,298 | ||||||
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2006 | 2005 | 2004 | ||||||||||
(Expressed in US Dollars) | ||||||||||||
CASH PROVIDED BY (USED FOR) OPERATIONS | ||||||||||||
Loss for the period | $ | (5,020,542 | ) | $ | (2,381,658 | ) | $ | (1,936,547 | ) | |||
Items not affecting cash | ||||||||||||
Depreciation, depletion & amortization | 758,435 | 750,867 | 15,978 | |||||||||
Accretion of asset retirement obligation | 117,545 | 44,540 | — | |||||||||
Stock based compensation | 611,572 | 559,963 | 39,120 | |||||||||
Write-off of mineral properties | 114,360 | 630,332 | 330,285 | |||||||||
Gain on disposal of mining equipment | — | (155,199 | ) | — | ||||||||
Severance expense | (27,820 | ) | 61,106 | — | ||||||||
(3,446,450 | ) | (490,049 | ) | (1,551,164 | ) | |||||||
Changes in non-cash working capital items (Note 12) | 2,970,312 | (4,357,410 | ) | 720,590 | ||||||||
(476,138 | ) | (4,847,459 | ) | (830,574 | ) | |||||||
INVESTING ACTIVITIES | ||||||||||||
Property, plant and equipment | (25,700 | ) | (3,987,643 | ) | (1,889,409 | ) | ||||||
Proceeds from disposal of equipment | — | 200,199 | — | |||||||||
Acquisition of Pangea Resources Inc (Note 3) | — | — | (4,323,753 | ) | ||||||||
Reclamation bonds | (3,135 | ) | (45,256 | ) | (47,972 | ) | ||||||
Expenditures on mineral properties, net of recoveries | (1,704,808 | ) | (1,321,555 | ) | (1,223,327 | ) | ||||||
(1,733,643 | ) | (5,154,255 | ) | (7,484,461 | ) | |||||||
FINANCING ACTIVITIES | ||||||||||||
Common shares issued: | ||||||||||||
On private placements | 4,541,507 | 10,262,635 | 7,871,295 | |||||||||
On warrant conversion | 93,952 | 591,200 | 920,243 | |||||||||
On option exercise | 369,826 | 200,020 | 343,933 | |||||||||
Share issue costs and finder’s fees | (93,017 | ) | (692,741 | ) | (310,303 | ) | ||||||
4,912,268 | 10,361,114 | 8,825,168 | ||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 2,702,487 | 359,400 | 510,133 | |||||||||
CASH AND CASH EQUIVALENTS,Beginning of year | 957,251 | 597,851 | 87,718 | |||||||||
CASH AND CASH EQUIVALENTS, End of year | $ | 3,659,738 | $ | 957,251 | $ | 597,851 | ||||||
Supplementary information on non-cash transactions | ||||||||||||
Shares issued and applied to notes payable (Note 3) | $ | — | $ | 500,000 | $ | — | ||||||
Warrants issued to Underwriter (Note 9) | $ | — | $ | 131,020 | $ | — |
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South | Other | |||||||||||||||||||||||||||||||||||
Limousine | Carlin | Timber | Nevada | Mexican | ||||||||||||||||||||||||||||||||
Butte | Project | Keystone | BMX | Cornerstone | Creek | Properties | Properties | Total | ||||||||||||||||||||||||||||
(Expressed in US Dollars) | ||||||||||||||||||||||||||||||||||||
Total as at June 30, 2003 | $ | 473,912 | $ | 756,611 | $ | 117,277 | $ | 11,215 | $ | — | $ | 40,061 | $ | 88,016 | $ | — | $ | 1,487,092 | ||||||||||||||||||
Exploration salaries & wages | 45,833 | 2,927 | 26,025 | 9,728 | 1,612 | 2,255 | 87,527 | 18,871 | 194,778 | |||||||||||||||||||||||||||
Land holding costs | 45,900 | 7,864 | 52,434 | 97,306 | 10,049 | 37,547 | 82,836 | 86,398 | 420,334 | |||||||||||||||||||||||||||
Surveying | — | — | 9,480 | 3,689 | — | 4,461 | 18,413 | 11,572 | 47,615 | |||||||||||||||||||||||||||
Environmental | 225 | — | 14 | 2,847 | — | — | 16,430 | — | 19,516 | |||||||||||||||||||||||||||
Geology | 3,952 | 190 | 2,119 | 34,949 | 23 | 677 | 135,474 | 35,035 | 212,419 | |||||||||||||||||||||||||||
Surface geochemistry | 1,564 | — | 643 | 16,906 | — | 3,354 | 3,290 | 9,506 | 35,263 | |||||||||||||||||||||||||||
Geophysics | — | — | 15,835 | 2,000 | — | 6,000 | 48,100 | — | 71,935 | |||||||||||||||||||||||||||
Road work & trenching | 3,788 | — | — | 3,653 | — | — | 5,668 | — | 13,109 | |||||||||||||||||||||||||||
Drilling | 153,386 | — | — | 126,218 | — | — | 264,776 | — | 544,380 | |||||||||||||||||||||||||||
Other | 3,995 | — | 1,176 | 6,422 | — | 403 | 13,523 | 6,763 | 32,282 | |||||||||||||||||||||||||||
Total expenditures | 258,643 | 10,981 | 107,726 | 303,718 | 11,684 | 54,697 | 676,037 | 168,145 | 1,591,631 | |||||||||||||||||||||||||||
Cost recoveries | — | — | — | (293,304 | ) | — | — | — | — | (293,304 | ) | |||||||||||||||||||||||||
Property write-offs | — | (245,196 | ) | — | — | — | — | (85,089 | ) | — | (330,285 | ) | ||||||||||||||||||||||||
Total as at June 30, 2004 | 732,555 | 522,396 | 225,003 | 21,629 | 11,684 | 94,758 | 678,964 | 168,145 | 2,455,134 | |||||||||||||||||||||||||||
Exploration salaries & wages | 10,650 | — | 14,734 | 2,855 | 40,824 | 14,825 | 155,136 | 23,964 | 262,988 | |||||||||||||||||||||||||||
Land holding costs | 56,678 | 9,616 | 68,312 | 74,662 | 32,772 | 37,704 | 84,217 | 57,077 | 421,038 | |||||||||||||||||||||||||||
Surveying | — | — | 4,028 | 6,145 | 11,638 | 7 | 23,980 | 6,728 | 52,526 | |||||||||||||||||||||||||||
Environmental | — | — | — | — | 4 | 8 | 8,398 | — | 8,410 | |||||||||||||||||||||||||||
Geology | 22 | — | 497 | 3,450 | 5,148 | 2,353 | 14,181 | 53,607 | 79,258 | |||||||||||||||||||||||||||
Surface geochemistry | — | — | 4,446 | — | 27,893 | — | 11,666 | 81,382 | 125,387 | |||||||||||||||||||||||||||
Geophysics | — | — | — | — | — | 3,350 | 52,550 | 57,736 | 113,636 | |||||||||||||||||||||||||||
Road work & trenching | — | — | — | — | — | — | 23,169 | 61,627 | 84,796 | |||||||||||||||||||||||||||
Drilling | 1,020 | — | 5,460 | — | 22 | — | 148,140 | 150,621 | 305,263 | |||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | 40,100 | 40,100 | |||||||||||||||||||||||||||
Total expenditures | 68,370 | 9,616 | 97,477 | 87,112 | 118,301 | 58,247 | 521,437 | 532,842 | 1,493,402 | |||||||||||||||||||||||||||
Cost recoveries | (56,500 | ) | — | (78,720 | ) | (76,627 | ) | — | — | — | — | (211,847 | ) | |||||||||||||||||||||||
Property write-offs | — | — | — | — | — | — | (630,332 | ) | — | (630,332 | ) | |||||||||||||||||||||||||
Total as at June 30, 2005 | 744,425 | 532,012 | 243,760 | 32,114 | 129,985 | 153,005 | 570,069 | 700,987 | 3,106,357 | |||||||||||||||||||||||||||
Exploration salaries & wages | 2,960 | — | 17,782 | 15,505 | 53,181 | 18,132 | 93,121 | 107,129 | 307,810 | |||||||||||||||||||||||||||
Land holding costs | — | 9,639 | 20 | 80,587 | 43,009 | 48,151 | 58,234 | 207,803 | 447,443 | |||||||||||||||||||||||||||
Surveying | — | — | — | — | 991 | 6,716 | 4,966 | 1,726 | 14,399 | |||||||||||||||||||||||||||
Geology | — | — | — | 1,226 | 212 | 666 | 1,453 | 43,381 | 46,938 | |||||||||||||||||||||||||||
Surface geochemistry | — | — | — | — | 2,199 | — | 3,962 | 55,230 | 61,391 | |||||||||||||||||||||||||||
Geophysics | — | — | — | — | — | 5,300 | 18,950 | 5,524 | 29,774 | |||||||||||||||||||||||||||
Road work & trenching | — | — | — | 9,110 | 31,880 | 7,200 | 222 | 21,207 | 69,619 | |||||||||||||||||||||||||||
Drilling | — | — | 91,724 | 71,202 | 248,629 | 236,916 | 36,541 | — | 685,012 | |||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | 19,042 | 19,042 | |||||||||||||||||||||||||||
Total expenditures | 2,960 | 9,639 | 109,526 | 177,630 | 380,101 | 323,081 | 217,449 | 461,042 | 1,681,428 | |||||||||||||||||||||||||||
Cost recoveries | — | — | (11,620 | ) | — | — | — | — | — | (11,620 | ) | |||||||||||||||||||||||||
Property write-offs | — | (23 | ) | — | — | — | — | (114,337 | ) | — | (114,360 | ) | ||||||||||||||||||||||||
Total as at June 30, 2006 | $ | 747,385 | $ | 541,628 | $ | 341,666 | $ | 209,744 | $ | 510,086 | $ | 476,086 | $ | 673,181 | $ | 1,162,029 | $ | 4,661,805 | ||||||||||||||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended June 30th 2006 and 2005
(expressed in US Dollars)
1. | Nature of Operations and Going Concern |
2. | Significant Accounting Policies |
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• | monetary items are translated at the rate of exchange in effect at the balance sheet date, | |
• | non-monetary items are translated at the historical exchange rates, | |
• | revenue and expense items are translated at the average rate for the period, except for items for which amortization is charged, and | |
• | foreign currency translation gains and losses are included in operations. |
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3. | Acquisition of Pangea Resources Inc. |
4. | Product inventory and stockpiled ore |
June 30 | June 30 | |||||||
2006 | 2005 | |||||||
Stockpiled ore | $ | — | $ | 3,788,972 | ||||
Gold dore | 109,074 | 323,661 | ||||||
$ | 109,074 | $ | 4,112,633 | |||||
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5. | Property, plant and equipment |
June 30 | June 30 | June 30 | ||||||||||
2006 | 2005 | 2004 | ||||||||||
Magistral Gold Mine | ||||||||||||
Plant and equipment | $ | 2,760,526 | $ | 2,760,526 | $ | 1,841,972 | ||||||
Property and deferred costs | 10,245,081 | 10,240,243 | 7,172,689 | |||||||||
Asset retirement obligation asset | 1,477,593 | 1,477,593 | 1,477,593 | |||||||||
Accumulated amortization and depletion | (1,220,546 | ) | (1,136,023 | ) | — | |||||||
13,262,654 | 13,342,339 | 10,492,254 | ||||||||||
Other equipment | 136,776 | 115,914 | 114,245 | |||||||||
Accumulated amortization | (93,116 | ) | (69,299 | ) | (46,247 | ) | ||||||
43,660 | 46,615 | 67,998 | ||||||||||
$ | 13,306,314 | $ | 13,388,954 | $ | 10,560,252 | |||||||
6. | Mineral Properties |
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7. | Asset retirement obligation |
2006 | 2005 | 2004 | ||||||||||
Asset retirement obligation — beginning of year | $ | 1,567,267 | $ | 1,477,593 | $ | — | ||||||
Obligations incurred during the year | — | — | 1,477,593 | |||||||||
Accretion expense | 117,545 | 89,674 | — | |||||||||
Asset retirement obligation — end of year | $ | 1,684,812 | $ | 1,567,267 | $ | 1,477,593 | ||||||
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8. | Share capital |
Issued and Outstanding | Number of Shares | Amount | ||||||
Balance as at June 30, 2003 | 20,142,503 | $ | 4,857,823 | |||||
Private Placements | 13,821,352 | 7,849,847 | ||||||
On acquisition of Pangea Resources Inc. | 2,000,000 | 1,491,333 | ||||||
On exercise of warrants | 2,394,998 | 920,243 | ||||||
On exercise of options | 775,000 | 343,933 | ||||||
Finder’s fee | 80,000 | 21,448 | ||||||
Share issue costs | — | (310,303 | ) | |||||
Balance as at June 30, 2004 | 39,213,853 | $ | 15,174,324 | |||||
Private Placements | 5,533,655 | 4,091,285 | ||||||
Underwritten offering | 7,586,712 | 6,171,350 | ||||||
Issued for payment on note payable | 669,485 | 500,000 | ||||||
On exercise of warrants | 1,723,801 | 591,200 | ||||||
On exercise of options | 715,000 | 200,020 | ||||||
Fair value of options exercised | — | 15,805 | ||||||
Finder’s fee | — | (681,734 | ) | |||||
Share issue costs | — | (142,027 | ) | |||||
Balance as at June 30, 2005 | 55,442,506 | $ | 25,920,223 | |||||
Private Placement — (i) | 12,500,000 | 4,431,286 | ||||||
Private Placement — (ii) | 200,000 | 110,221 | ||||||
On exercise of warrants | 89,515 | 93,952 | ||||||
On exercise of options | 740,000 | 369,826 | ||||||
Fair value of options exercised | — | 122,652 | ||||||
Share issue costs | — | (93,017 | ) | |||||
Balance as at June 30, 2006 | 68,972,021 | $ | 30,955,143 | |||||
(i) | On December 9, 2005, the Company announced that it had entered into an agreement with Mr. Robert McEwen to issue 12,500,000 units at a price of $0.40 CDN per unit for aggregate proceeds of $5,000,000 CDN. Each unit consisted of one common share and one common share purchase warrant with each warrant exercisable to acquire one common share of the Company at an exercise price of $0.50 CDN for a term of two years. As a result of the private placement, Mr. McEwen holds approximately 18.2% of the outstanding shares of the Company and, in event of the exercise of all the warrants, Mr. McEwen will hold approximately 30.8% of the outstanding common shares of the Company. In accordance with the rules of the TSX Venture Exchange, as this constitutes a “change in control”, the placement closed in two tranches. The first tranche, consisting of 6,921,213 units was completed on December 14, 2005. The second tranche for the balance of the units was conditional upon receiving shareholder approval. The Company called an extraordinary general meeting of the shareholders on January 23, 2006 and the shareholders approved the transaction, which was completed on May 11, 2006. The shares and warrants comprising the units and the shares underlying such warrants are subject to a four-month hold period. No finder’s fees are payable on this placement. |
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(ii) | On January 13, 2006, the Company issued 200,000 units to an officer of the Company. Each unit was issued at a price of $0.64 CDN for gross proceeds of $128,000 CDN. Each unit is comprised of one common share of the Company and one share purchase warrant with each purchase warrant entitling the holder to purchase one common share of the Company at $0.80 CDN until January 13, 2008. The shares and warrants comprising the units and the shares underlying such warrants are subject to a four-month hold period. No finder’s fees were paid on this issue. |
2004 | ||||
Loss for the year as reported | $ | 1,936,547 | ||
Stock option expense | 278,002 | |||
Pro forma net loss | $ | 2,214,549 | ||
Loss per share — basic and diluted | ||||
As reported | $ | 0.06 | ||
Pro forma | $ | 0.07 | ||
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2006 | 2005 | 2004 | ||||
Risk free interest rate | 3.4 to 4% | 4% | 4% | |||
Expected life | 1 to 3 years | 1 to 3 years | 3 years | |||
Expected volatility | 55% to 77% | 55% to 77 % | 85% to 97% | |||
Dividend yield rate | nil | nil | nil |
June 30, 2006 | June 30, 2005 | June 30, 2004 | ||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||
Number | Average | Number | Average | Number | Average | |||||||||||||||||||
of Shares | Exercise Price | of Shares | Exercise Price | of Shares | Exercise Price | |||||||||||||||||||
Outstanding at beginning of year | 3,328,500 | $ | 0.86 CDN | 2,965,000 | $ | 0.69 CDN | 1,925,000 | $ | 0.43 CDN | |||||||||||||||
Granted(i) (ii) (iii) | 1,712,500 | $ | 1.05 CDN | 1,223,500 | $ | 1.00 CDN | 1,825,000 | $ | 0.91 CDN | |||||||||||||||
Exercised | (740,000 | ) | $ | 0.57 CDN | (715,000 | ) | $ | 0.34 CDN | (775,000 | ) | $ | 0.58 CDN | ||||||||||||
Forfeited | (461,000 | ) | $ | 0.94 CDN | (145,000 | ) | $ | 1.01 CDN | (10,000 | ) | $ | 0.61 CDN | ||||||||||||
Outstanding at end of the year | 3,840,000 | $ | 0.99 CDN | 3,328,500 | $ | 0.86 CDN | 2,965,000 | $ | 0.69 CDN | |||||||||||||||
Options exercisable at the end of the year | 2,263,750 | $ | 0.95 CDN | 1,782,125 | $ | 0.74 CDN | 1,355,000 | $ | 0.38 CDN | |||||||||||||||
(i) | On August 30, 2005 the Company granted to consultants 50,000 stock options with an exercise price of $0.80 CDN. These options have a term of one year and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.16 per option at grant date. | |
(ii) | On March 2, 2006 the Company granted to directors, employees and consultants 1,462,500 stock options with an exercise price of $0.99 CDN. These options have a term of ten years and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.45 per option at grant date. | |
(iii) | On June 1, 2006 the Company granted to a director 200,000 stock options with an exercise price of $1.54 CDN. These options have a term of ten years and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.66 per option at grant date. |
Weighted- | Weighted- | |||||||||||
Number | Average | Average | ||||||||||
Outstanding | Life Remaining | Exercise Price | ||||||||||
Range of Exercise Prices ($) | at June 30, 2006 | (Years) | ($) | |||||||||
0.53 - 1.00 CDN | 3,095,000 | 7.59 | 0.90 CDN | |||||||||
1.01 - 1.54 CDN | 745,000 | 8.28 | 1.36 CDN | |||||||||
Total | 3,840,000 | 7.72 | 0.99 CDN | |||||||||
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June 30, 2006 | June 30, 2005 | June 30, 2004 | ||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||
Number | Average | Number | Average | Number | Average | |||||||||||||||||||
of Warrants | Exercise Price | of Warrants | Exercise Price | of Warrants | Exercise Price | |||||||||||||||||||
Outstanding at beginning of the year | 6,420,841 | $ | 1.19 CDN | 5,255,676 | $ | 1.05 CDN | 699,998 | $ | 0.65 CDN | |||||||||||||||
Granted | 12,700,000 | $ | 0.50 CDN | 6,420,841 | $ | 1.19 CDN | 6,950,676 | $ | 0.91 CDN | |||||||||||||||
Exercised | (89,515 | ) | $ | 1.20 CDN | (1,723,801 | ) | $ | 0.45 CDN | (2,394,998 | ) | $ | 0.51 CDN | ||||||||||||
Expired | (4,324,426 | ) | $ | 1.18 CDN | (3,531,875 | ) | $ | 1.35 CDN | — | — | ||||||||||||||
Outstanding at end of the year | 14,706,900 | $ | 0.60 CDN | 6,420,841 | $ | 1.19 CDN | 5,255,676 | $ | 1.05 CDN | |||||||||||||||
Number | Exercise Price | Expiry Date | ||||
1,874,400 | $1.20 CDN | August 17, 2006 (iv) | ||||
132,500 | $1.20 CDN | September 22, 2006 (iv) | ||||
6,921,213 | $0.50 CDN | December 14, 2007 | ||||
200,000 | $0.80 CDN | January 13, 2008 | ||||
5,578,787 | $0.50 CDN | May 11, 2008 | ||||
14,706,900 | ||||||
(iv) | On August 9, 2005 these warrants were extended by an additional twelve months. The original expiry date for the 1,936,900 warrants was August 17, 2005 and for the 159,515 was September 22, 2005. (See note 18) |
9. | Contributed capital |
2006 | 2005 | 2004 | ||||||||||
Contributed capital — beginning of year | $ | 1,001,674 | $ | 39,120 | $ | — | ||||||
Retained earning adjustment (See Note 2) | — | 287,376 | — | |||||||||
Fair value of share purchase options vesting during year | 611,572 | 559,963 | 39,120 | |||||||||
Fair value of underwriter’s warrants issued during year | — | 131,020 | — | |||||||||
Fair value of share purchase options exercised during year | (122,652 | ) | (15,805 | ) | — | |||||||
Contributed capital — end of year | $ | 1,490,594 | $ | 1,001,674 | $ | 39,120 | ||||||
10. | Related party transactions |
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11. | Financial Instruments |
12. | Supplemental cash flow information |
2006 | 2005 | 2004 | ||||||||||
Changes in non-cash working capital | ||||||||||||
Accounts receivable | $ | 92,468 | $ | 238,376 | $ | 90,069 | ||||||
Product inventory and stockpiled ore | 3,353,464 | (1,452,205 | ) | (139,417 | ) | |||||||
Supplies inventory | 129,214 | (218,344 | ) | (21,709 | ) | |||||||
Prepaid expenses | (16,052 | ) | 2,655 | (184,570 | ) | |||||||
Accounts payable and accrued liabilities | (588,782 | ) | (427,892 | ) | 976,217 | |||||||
Note payable | — | (2,500,000 | ) | — | ||||||||
$ | 2,970,312 | $ | (4,357,410 | ) | $ | 720,590 | ||||||
13. | Segmented information |
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Gold Mining | ||||||||||||||||
Corporate | Exploration | & Exploration | ||||||||||||||
(Canada) | (U. S.) | (Mexico) | Total | |||||||||||||
($) | ($) | ($) | ($) | |||||||||||||
Property, plant and equipment | ||||||||||||||||
June 30, 2006 | 29,610 | 14,050 | 13,262,654 | 13,306,314 | ||||||||||||
June 30, 2005 | 38,590 | 8,025 | 13,342,339 | 13,388,954 | ||||||||||||
June 30, 2004 | 56,203 | 11,795 | 10,492,254 | 10,560,252 | ||||||||||||
Property, plant and equipment: | ||||||||||||||||
expenditures | ||||||||||||||||
June 30, 2006 | 9,492 | 11,370 | 4,838 | 25,700 | ||||||||||||
June 30, 2005 | 769 | 900 | 3,985,974 | 3,987,643 | ||||||||||||
June 30, 2004 | 61,125 | 11,458 | 10,492,254 | 10,564,837 | ||||||||||||
Mineral Properties | ||||||||||||||||
June 30, 2006 | — | 3,499,776 | 1,162,029 | 4,661,805 | ||||||||||||
June 30, 2005 | — | 2,405,370 | 700,987 | 3,106,357 | ||||||||||||
June 30, 2004 | — | 2,286,989 | 168,145 | 2,455,134 | ||||||||||||
Mineral Properties: expenditures | ||||||||||||||||
June 30, 2006 | — | 1,243,766 | 461,042 | 1,704,808 | ||||||||||||
June 30, 2005 | — | 788,713 | 532,842 | 1,321,555 | ||||||||||||
June 30, 2004 | — | 1,055,182 | 168,145 | 1,223,327 | ||||||||||||
Net income (loss) for the year ended | ||||||||||||||||
June 30, 2006 | (2,327,532 | ) | (314,215 | ) | (2,378,795 | ) | (5,020,542 | ) | ||||||||
June 30, 2005 | (2,529,225 | ) | (834,873 | ) | 982,440 | (2,381,658 | ) | |||||||||
June 30, 2004 | (1,475,170 | ) | (461,377 | ) | — | (1,936,547 | ) | |||||||||
Gold revenues for the year ended | ||||||||||||||||
June 30, 2006 | — | — | 6,649,300 | 6,649,300 | ||||||||||||
June 30, 2005 | — | — | 5,175,235 | 5,175,235 | ||||||||||||
June 30, 2004 | — | — | — | — | ||||||||||||
Depreciation, depletion and amortization for the year ended | ||||||||||||||||
June 30, 2006 | 18,472 | 5,345 | 734,618 | 758,435 | ||||||||||||
June 30, 2005 | 18,382 | 4,670 | 1,136,023 | 1,159,075 | ||||||||||||
June 30, 2004 | 12,633 | 3,345 | — | 15,978 |
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14. | Income Taxes |
2006 | 2005 | 2004 | ||||||||||
Loss before income taxes | $ | (5,020,542 | ) | $ | (2,381,658 | ) | $ | (1,936,547 | ) | |||
Canadian federal and provincial income tax rates | 34.12 | % | 35.62 | % | 37.62 | % | ||||||
Expected income taxes (recovery) | (1,713,009 | ) | (848,347 | ) | (728,529 | ) | ||||||
Non-deductible (deductible) expenses for tax purposes | 571,904 | 291,156 | 20,438 | |||||||||
Foreign exchange | (32,940 | ) | 109,249 | 84,417 | ||||||||
Foreign income subject to different tax rates | 6,880 | (50,656 | ) | (12,099 | ) | |||||||
Valuation allowance | 1,167,165 | 498,598 | 635,773 | |||||||||
Income tax expense | $ | — | $ | — | $ | — | ||||||
2006 | 2005 | 2004 | ||||||||||
Future income tax assets | ||||||||||||
Tax losses | $ | 8,344,447 | $ | 6,763,379 | $ | 4,550,213 | ||||||
Mineral property expenditures | 240,561 | 176,871 | 149,388 | |||||||||
Other temporary differences | 474,112 | 243,850 | 65,372 | |||||||||
Future income tax assets before valuation allowance | 8,922,607 | 7,184,100 | 4,764,973 | |||||||||
Less: valuation allowance | (8,922,607 | ) | (7,184,100 | ) | (4,764,973 | ) | ||||||
Net future income tax assets | $ | — | $ | — | $ | — | ||||||
15. | Commitments |
2008 — $67,881
16. | Environmental |
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17. | Differences Between Canadian and United States Generally Accepted Accounting Principles |
Balance | Balance | |||||||||||
CDN GAAP | Adjustments | U.S. GAAP | ||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 3,659,738 | $ | $ | 3,659,738 | |||||||
Accounts receivable | 180,697 | 180,697 | ||||||||||
Product inventory and stockpiled ore | 109,074 | 109,074 | ||||||||||
Supplies inventory | 285,152 | 285,152 | ||||||||||
Prepaid expenses | 239,424 | 239,424 | ||||||||||
4,474,085 | — | 4,474,085 | ||||||||||
Property, plant and equipment[a] | 13,306,314 | (4,657,846 | ) | 8,648,468 | ||||||||
Mineral properties[a] | 4,661,805 | (4,661,805 | ) | — | ||||||||
Reclamation bonds | 96,363 | 96,363 | ||||||||||
$ | 22,538,567 | $ | (9,319,651 | ) | $ | 13,218,916 | ||||||
LIABILITIES | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable and accrued liabilities | $ | 1,194,495 | $ | $ | 1,194,495 | |||||||
1,194,495 | 1,194,495 | |||||||||||
Other liabilities | 112,397 | 112,397 | ||||||||||
Asset retirement obligation | 1,684,812 | 1,684,812 | ||||||||||
1,797,209 | — | 1,797,209 | ||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
Share Capital | 30,955,143 | 30,955,143 | ||||||||||
Contributed capital[b] | 1,490,594 | (287,376 | ) | 1,203,218 | ||||||||
Deficit[a][b] | (12,898,874 | ) | (9,032,275 | ) | (21,931,149 | ) | ||||||
19,546,863 | (9,319,651 | ) | 10,227,212 | |||||||||
$ | 22,538,567 | $ | (9,319,651 | ) | $ | 13,218,916 | ||||||
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Balance | Balance | |||||||||||
CDN GAAP | Adjustments | U.S. GAAP | ||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 957,251 | $ | $ | 957,251 | |||||||
Accounts receivable | 273,165 | 273,165 | ||||||||||
Product inventory and stockpiled ore[a] | 4,112,633 | (154,743 | ) | 3,957,890 | ||||||||
Supplies inventory | 414,366 | 414,366 | ||||||||||
Prepaid expenses | 223,372 | 223,372 | ||||||||||
5,980,787 | (154,743 | ) | 5,826,044 | |||||||||
Property, plant and equipment[a] | 13,388,954 | (4,684,518 | ) | 8,704,436 | ||||||||
Mineral properties[a] | 3,106,357 | (3,106,357 | ) | — | ||||||||
Reclamation bonds | 93,228 | 93,228 | ||||||||||
$ | 22,569,326 | $ | (7,945,618 | ) | $ | 14,623,708 | ||||||
LIABILITIES | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable and accrued liabilities | $ | 1,783,277 | $ | $ | 1,783,277 | |||||||
1,783,277 | — | 1,783,277 | ||||||||||
Other liabilities | 175,217 | 175,217 | ||||||||||
Asset retirement obligation | 1,567,267 | 1,567,267 | ||||||||||
1,742,484 | — | 1,742,484 | ||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
Share Capital | 25,920,223 | 25,920,223 | ||||||||||
Contributed capital[b] | 1,001,674 | (287,376 | ) | 714,298 | ||||||||
Deficit[a][b] | (7,878,332 | ) | (7,658,242 | ) | (15,536,574 | ) | ||||||
19,043,565 | (7,945,618 | ) | 11,097,947 | |||||||||
$ | 22,569,326 | $ | (7,945,618 | ) | $ | 14,623,708 | ||||||
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CDN | US | |||||||||||||||
GAAP | Adjustments | GAAP | ||||||||||||||
GOLD SALES[a] | $ | 6,649,300 | $ | — | $ | 6,649,300 | ||||||||||
COST OF SALES[a] | 7,903,654 | 55,251 | 7,958,905 | |||||||||||||
DEPRECIATION AND DEPLETION[a] | 734,618 | (236,666 | ) | 497,952 | ||||||||||||
ROYALTIES[a] | 381,572 | — | 381,572 | |||||||||||||
9,019,844 | (181,415 | ) | 8,838,429 | |||||||||||||
LOSS FROM MINING OPERATIONS | (2,370,544 | ) | (181,415 | ) | (2,189,129 | ) | ||||||||||
EXPENSES AND OTHER INCOME | ||||||||||||||||
General and administrative | 1,944,511 | 1,944,511 | ||||||||||||||
Interest and financing costs | — | — | ||||||||||||||
Stock-based compensation | 611,572 | 611,572 | ||||||||||||||
Foreign exchange losses | 36,904 | 36,904 | ||||||||||||||
Other income | (57,349 | ) | (57,349 | ) | ||||||||||||
Write-down of mineral properties[a] | 114,360 | (114,360 | ) | — | ||||||||||||
Exploration cost[a] | — | 1,669,808 | 1,669,808 | |||||||||||||
2,649,998 | 1,555,448 | 4,205,446 | ||||||||||||||
LOSS FOR THE YEAR | $ | 5,020,542 | $ | 1,374,033 | $ | 6,394,575 | ||||||||||
Basic and diluted loss per share | $ | 0.08 | $ | 0.11 | ||||||||||||
Weighted average number of common shares outstanding | 60,304,369 | 60,304,369 |
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CDN | US | |||||||||||
GAAP | Adjustments | GAAP | ||||||||||
GOLD SALES[a] | $ | 5,175,235 | $ | 2,915,992 | $ | 8,091,227 | ||||||
COST OF SALES[a] | 3,347,153 | 6,582,479 | 9,929,632 | |||||||||
DEPRECIATION AND DEPLETION [a] | 727,815 | 149,657 | 877,472 | |||||||||
ROYALTIES[a] | 262,197 | 264,729 | 526,926 | |||||||||
GAIN ON DISPOSAL OF MINING EQUIPMENT | — | (155,199 | ) | (155,199 | ) | |||||||
4,337,165 | 6,841,666 | 11,178,830 | ||||||||||
EARNINGS (LOSS) FROM MINING OPERATIONS | 838,070 | (3,925,674 | ) | (3,087,604 | ) | |||||||
EXPENSES AND OTHER INCOME | ||||||||||||
General and administrative | 2,084,400 | 2,084,400 | ||||||||||
Interest and financing costs | 22,378 | 22,378 | ||||||||||
Stock-based compensation | 559,963 | 559,963 | ||||||||||
Foreign exchange losses | 115,796 | 115,796 | ||||||||||
Other income | (37,942 | ) | (37,942 | ) | ||||||||
Write-down of mineral properties[a] | 630,332 | (630,332 | ) | — | ||||||||
Exploration cost[a] | — | 1,281,555 | 1,281,555 | |||||||||
Gain on disposal of mining equipment | (155,199 | ) | 155,199 | |||||||||
3,219,728 | 806,422 | 4,206,150 | ||||||||||
LOSS FOR THE YEAR | $ | 2,381,658 | $ | 4,732,096 | $ | 7,113,754 | ||||||
Basic and diluted loss per share | $ | 0.05 | $ | 0.14 | ||||||||
Weighted average number of common shares outstanding | 51,295,350 | 51,295,350 |
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CDN | US | |||||||||||
GAAP | Adjustments | GAAP | ||||||||||
GOLD SALES[a] | $ | — | $ | 2,654,492 | $ | 2,654,492 | ||||||
COST OF SALES[a] | — | 3,145,048 | 3,145,048 | |||||||||
DEPRECIATION AND DEPLETION[a] | — | 202,809 | 202,809 | |||||||||
ROYALTIES[a] | — | 65,023 | 65,023 | |||||||||
— | 3,412,880 | 3,412,880 | ||||||||||
LOSS FROM MINING OPERATIONS | — | (758,388 | ) | (758,388 | ) | |||||||
EXPENSES AND OTHER INCOME | ||||||||||||
General and administrative | 1,538,190 | 1,538,190 | ||||||||||
Interest and financing costs | 1,159 | 1,159 | ||||||||||
Stock-based compensation | 39,120 | 39,120 | ||||||||||
Foreign exchange losses | 117,226 | 117,226 | ||||||||||
Other income | (89,433 | ) | (89,433 | ) | ||||||||
Write-down of mineral properties[a] | 330,285 | (330,285 | ) | — | ||||||||
Exploration cost[a] | — | 1,298,327 | 1,298,327 | |||||||||
1,936,547 | 968,042 | 2,904,589 | ||||||||||
LOSS FOR THE YEAR | $ | 1,936,547 | $ | 1,726,430 | $ | 3,662,977 | ||||||
Basic and diluted loss per share | $ | 0.06 | $ | 0.12 | ||||||||
Weighted average number of common shares outstanding | 30,305,758 | 30,305,758 |
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CDN | US | |||||||||||
GAAP | Adjustments | GAAP | ||||||||||
CASH PROVIDED BY (USED FOR) OPERATIONS | ||||||||||||
Loss for the period[a] | $ | (5,020,542 | ) | $ | (1,374,033 | ) | $ | (6,394,575 | ) | |||
Items not affecting cash | ||||||||||||
Depreciation, depletion & amortization[a] | 758,435 | (236,666 | ) | 521,769 | ||||||||
Accretion of asset retirement obligation[a] | 117,545 | 117,545 | ||||||||||
Stock based compensation | 611,572 | 611,572 | ||||||||||
Write-off of mineral properties[a] | 114,360 | (149,360 | ) | (35,000 | ) | |||||||
Severance expenses | (27,820 | ) | (27,820 | ) | ||||||||
Changes in non-cash working capital items[a] | 2,970,312 | 55,251 | 3,025,563 | |||||||||
(476,138 | ) | (1,704,808 | ) | (2,180,946 | ) | |||||||
INVESTING ACTIVITIES | ||||||||||||
Property, plant and equipment[a] | (25,700 | ) | — | (25,700 | ) | |||||||
Proceeds from disposal of equipment | — | — | ||||||||||
Reclamation deposits | (3,135 | ) | (3,135 | ) | ||||||||
Expenditures on mineral properties, net of recoveries[a] | (1,704,808 | ) | 1,704,808 | — | ||||||||
(1,733,643 | ) | 1,704,808 | (28,835 | ) | ||||||||
FINANCING ACTIVITIES | ||||||||||||
Common shares issued: | ||||||||||||
On private placements | 4,541,507 | 4,541,507 | ||||||||||
On warrant conversion | 93,952 | 93,952 | ||||||||||
On option exercise | 369,826 | 369,826 | ||||||||||
Share issue costs and finder’s fees | (93,017 | ) | (93,017 | ) | ||||||||
4,912,268 | — | 4,912,268 | ||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 2,702,487 | — | 2,702,487 | |||||||||
CASH AND CASH EQUIVALENTS, beginning of year | 957,251 | 957,251 | ||||||||||
CASH AND CASH EQUIVALENTS, end of year | $ | 3,659,738 | $ | — | $ | 3,659,738 | ||||||
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CDN | US | |||||||||||
GAAP | Adjustments | GAAP | ||||||||||
CASH PROVIDED BY (USED FOR) OPERATIONS | ||||||||||||
Loss for the period[a] | $ | (2,381,658 | ) | $ | (4,732,096 | ) | $ | (7,113,754 | ) | |||
Items not affecting cash | ||||||||||||
Depreciation, depletion & amortization[a] | 750,867 | 149,657 | 900,524 | |||||||||
Accretion of asset retirement obligation[a] | 44,540 | 45,134 | 89,674 | |||||||||
Stock based compensation | 559,963 | 559,963 | ||||||||||
Write-off of mineral properties[a] | 630,332 | (670,332 | ) | (40,000 | ) | |||||||
Gain on disposal of property, plant & equipment | (155,199 | ) | (155,199 | ) | ||||||||
Severance expenses | 61,106 | 61,106 | ||||||||||
Changes in non-cash working capital items[a] | (4,357,410 | ) | 872,580 | (3,484,830 | ) | |||||||
(4,847,459 | ) | (4,335,057 | ) | (9,182,516 | ) | |||||||
INVESTING ACTIVITIES | ||||||||||||
Property, plant and equipment[a] | (3,987,643 | ) | 3,013,502 | (974,141 | ) | |||||||
Proceeds from disposal of equipment | 200,199 | 200,199 | ||||||||||
Reclamation deposits | (45,256 | ) | (45,256 | ) | ||||||||
Expenditures on mineral properties, net of recoveries[a] | (1,321,555 | ) | 1,321,555 | — | ||||||||
(5,154,255 | ) | 4,335,057 | (819,198 | ) | ||||||||
FINANCING ACTIVITIES | ||||||||||||
Common shares issued: | ||||||||||||
On private placements | 10,262,635 | 10,262,635 | ||||||||||
On warrant conversion | 591,200 | 591,200 | ||||||||||
On option exercise | 200,020 | 200,020 | ||||||||||
Share issue costs and finder’s fees | (692,741 | ) | (692,741 | ) | ||||||||
10,361,114 | — | 10,361,114 | ||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 359,400 | — | 359,400 | |||||||||
CASH AND CASH EQUIVALENTS, beginning of year | 597,851 | 597,851 | ||||||||||
CASH AND CASH EQUIVALENTS, end of year | $ | 957,251 | $ | — | $ | 957,251 | ||||||
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CDN | US | |||||||||||
GAAP | Adjustments | GAAP | ||||||||||
CASH PROVIDED BY (USED FOR) OPERATIONS | ||||||||||||
Loss for the period[a] | $ | (1,936,547 | ) | $ | (1,726,430 | ) | $ | (3,662,977 | ) | |||
Items not affecting cash | ||||||||||||
Depreciation, depletion & amortization[a] | 15,978 | 202,809 | 218,787 | |||||||||
Stock based compensation | 39,120 | 39,120 | ||||||||||
Write-off of mineral properties[a] | 330,285 | (255,285 | ) | 75,000 | ||||||||
Severance expenses[a] | 17,478 | 17,478 | ||||||||||
Changes in non-cash working capital items[a] | 720,590 | (964,479 | ) | (243,889 | ) | |||||||
(830,574 | ) | (2,725,907 | ) | (3,556,481 | ) | |||||||
INVESTING ACTIVITIES | ||||||||||||
Property, plant and equipment[a] | (1,889,409 | ) | 1,502,580 | (386,829 | ) | |||||||
Acquistion of Pangea Resources Inc. | (4,323,753 | ) | (4,323,753 | ) | ||||||||
Reclamation deposits | (47,972 | ) | (47,972 | ) | ||||||||
Expenditures on mineral properties, net of recoveries[a] | (1,223,327 | ) | 1,223,327 | — | ||||||||
(7,484,461 | ) | 2,725,907 | (4,758,554 | ) | ||||||||
FINANCING ACTIVITIES | ||||||||||||
Common shares issued: | ||||||||||||
On private placements | 7,871,295 | 7,871,295 | ||||||||||
On warrant conversion | 920,243 | 920,243 | ||||||||||
On option exercise | 343,933 | 343,933 | ||||||||||
Share issue costs and finder’s fees | (310,303 | ) | (310,303 | ) | ||||||||
8,825,168 | — | 8,825,168 | ||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 510,133 | — | 510,133 | |||||||||
CASH AND CASH EQUIVALENTS, beginning of year | 87,718 | 87,718 | ||||||||||
CASH AND CASH EQUIVALENTS, end of year | $ | 597,851 | $ | — | $ | 597,851 | ||||||
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C-96
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18. | Subsequent Events |
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Three Months Ended September 30, 2006
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September 30, | June 30, | |||||||
2006 | 2006 | |||||||
(Expressed in US Dollars) | ||||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 3,544,851 | $ | 3,659,738 | ||||
Accounts receivable | 208,377 | 180,697 | ||||||
Product inventory (Note 3) | 204,217 | 109,074 | ||||||
Supplies inventory | 259,138 | 285,152 | ||||||
Prepaid expenses | 281,892 | 239,424 | ||||||
4,498,475 | 4,474,085 | |||||||
Property, plant and equipment (Note 4) | 13,205,317 | 13,306,314 | ||||||
Mineral properties | 5,508,007 | 4,661,805 | ||||||
Reclamation bonds | 96,363 | 96,363 | ||||||
$ | 23,308,162 | $ | 22,538,567 | |||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 1,013,414 | $ | 1,194,495 | ||||
1,013,414 | 1,194,495 | |||||||
Other liabilities | 109,350 | 112,397 | ||||||
Asset retirement obligation (Note 5) | 1,631,090 | 1,684,812 | ||||||
1,740,440 | 1,797,209 | |||||||
SHAREHOLDERS’ EQUITY | ||||||||
Share capital (Note 6) | 32,619,378 | 30,955,143 | ||||||
Contributed surplus | 1,581,739 | 1,490,594 | ||||||
Deficit | (13,646,809 | ) | (12,898,874 | ) | ||||
20,554,308 | 19,546,863 | |||||||
$ | 23,308,162 | $ | 22,538,567 | |||||
Nature of operations and Going Concern (Note 1) | ||||||||
Commitments (Note 9) |
/s/ Michael Beley | /s/ Gary Nordin | |
Michael Beley, | Gary Nordin, | |
Director | Director |
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2006 | 2005 | |||||||
(Expressed in US Dollars) | ||||||||
(Unaudited) | ||||||||
GOLD SALES | $ | 752,590 | $ | 2,185,513 | ||||
COST OF SALES | 742,400 | 2,913,885 | ||||||
DEPRECIATION AND DEPLETION | 11,572 | 290,984 | ||||||
ROYALTIES | 46,723 | 121,329 | ||||||
800,695 | 3,326,198 | |||||||
LOSS FROM MINING OPERATIONS | 48,105 | 1,140,685 | ||||||
EXPENSES AND OTHER INCOME | ||||||||
General and administrative | 550,271 | 367,703 | ||||||
Stock-based compensation | 134,564 | 55,440 | ||||||
Foreign exchange (gain) loss | 398 | (6,471 | ) | |||||
Other income | (36,131 | ) | (870 | ) | ||||
649,102 | 415,802 | |||||||
LOSS BEFORE THE UNDERNOTED ITEMS | 697,207 | 1,556,487 | ||||||
Write-down of mineral properties | 50,728 | 40,457 | ||||||
LOSS FOR THE PERIOD | $ | 747,935 | $ | 1,596,944 | ||||
Basic and diluted loss per share | $ | 0.01 | $ | 0.03 | ||||
Weighted average number of shares outstanding | 69,777,263 | 55,471,673 | ||||||
For the three months ended September 30th
2006 | 2005 | |||||||
(Expressed in US Dollars) | ||||||||
Unaudited | ||||||||
DEFICIT, Beginning of the period | $ | 12,898,874 | $ | 7,878,332 | ||||
Loss for the period | 747,935 | 1,596,944 | ||||||
DEFICIT, End of the period | $ | 13,646,809 | $ | 9,475,276 | ||||
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2006 | 2005 | |||||||
(Expressed in US Dollars) | ||||||||
(Unaudited) | ||||||||
CASH PROVIDED BY (USED FOR) OPERATIONS | ||||||||
Loss for the period | $ | (747,935 | ) | $ | (1,596,944 | ) | ||
Items not affecting cash Depreciation, depletion & amortization | 17,255 | 296,394 | ||||||
Accretion of asset retirement obligation | 30,020 | 29,386 | ||||||
Stock based compensation | 134,564 | 55,440 | ||||||
Write-down of mineral properties | 50,728 | 40,457 | ||||||
Severance expense | (3,047 | ) | 14,910 | |||||
(518,415 | ) | (1,160,357 | ) | |||||
Changes in non-cash working capital items (Note 8) | (418,763 | ) | 1,004,603 | |||||
(937,178 | ) | (155,754 | ) | |||||
INVESTING ACTIVITIES | ||||||||
Property, plant and equipment | — | (3,945 | ) | |||||
Expenditures on mineral properties, net of recoveries | (798,525 | ) | (591,168 | ) | ||||
(798,525 | ) | (595,113 | ) | |||||
FINANCING ACTIVITIES | ||||||||
Common shares issued: | ||||||||
On warrant conversion | 1,521,768 | — | ||||||
On option exercise | 99,635 | 53,550 | ||||||
Shares subscribed | — | 99,157 | ||||||
Share issue costs and finder’s fees | (587 | ) | (2,730 | ) | ||||
1,620,816 | 149,977 | |||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (114,887 | ) | (600,890 | ) | ||||
CASH AND CASH EQUIVALENTS,Beginning of the year | 3,659,738 | 957,251 | ||||||
CASH AND CASH EQUIVALENTS, End of the period | $ | 3,544,851 | $ | 356,361 | ||||
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South | Other | |||||||||||||||||||||||||||||||||||
Limousine | Carlin | Timber | Nevada | Mexican | ||||||||||||||||||||||||||||||||
Butte | Project | Keystone | BMX | Cornerstone | Creek | Properties | Properties | Total | ||||||||||||||||||||||||||||
(Expressed in US Dollars) | ||||||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||||
Total as at June 30, 2005 | $ | 744,425 | $ | 532,012 | $ | 243,760 | $ | 32,114 | $ | 129,985 | $ | 153,005 | $ | 570,069 | $ | 700,987 | $ | 3,106,357 | ||||||||||||||||||
Exploration salaries & wages | 2,960 | — | 17,782 | 15,505 | 53,181 | 18,132 | 93,121 | 107,129 | 307,810 | |||||||||||||||||||||||||||
Land holding costs | — | 9,639 | 20 | 80,587 | 43,009 | 48,151 | 58,234 | 207,803 | 447,443 | |||||||||||||||||||||||||||
Surveying | — | — | — | — | 991 | 6,716 | 4,966 | 1,726 | 14,399 | |||||||||||||||||||||||||||
Geology | — | — | — | 1,226 | 212 | 666 | 1,453 | 43,381 | 46,938 | |||||||||||||||||||||||||||
Surface geochemistry | — | — | — | — | 2,199 | — | 3,962 | 55,230 | 61,391 | |||||||||||||||||||||||||||
Geophysics | — | — | — | — | — | 5,300 | 18,950 | 5,524 | 29,774 | |||||||||||||||||||||||||||
Road work & trenching | — | — | — | 9,110 | 31,880 | 7,200 | 222 | 21,207 | 69,619 | |||||||||||||||||||||||||||
Drilling | — | — | 91,724 | 71,202 | 248,629 | 236,916 | 36,541 | — | 685,012 | |||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | 19,042 | 19,042 | |||||||||||||||||||||||||||
Total expenditures | 2,960 | 9,639 | 109,526 | 177,630 | 380,101 | 323,081 | 217,449 | 461,042 | 1,681,428 | |||||||||||||||||||||||||||
Cost recoveries | — | — | (11,620 | ) | — | — | — | — | — | (11,620 | ) | |||||||||||||||||||||||||
Property write-offs | — | (23 | ) | — | — | — | — | (114,337 | ) | — | (114,360 | ) | ||||||||||||||||||||||||
Total as at June 30, 2006 | 747,385 | 541,628 | 341,666 | 209,744 | 510,086 | 476,086 | 673,181 | 1,162,029 | 4,661,805 | |||||||||||||||||||||||||||
Exploration salaries & wages | — | — | 2,067 | 146 | 3,822 | — | 18,266 | 87,510 | 111,811 | |||||||||||||||||||||||||||
Land holding costs | 129,632 | 9,616 | 49,552 | 64,712 | 20,830 | 41,523 | 58,900 | 214,596 | 589,361 | |||||||||||||||||||||||||||
Surveying | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Geology | — | — | 107 | — | — | — | 528 | 210 | 845 | |||||||||||||||||||||||||||
Surface geochemistry | — | — | — | — | 207 | — | — | 54,989 | 55,196 | |||||||||||||||||||||||||||
Geophysics | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Road work & trenching | — | — | — | — | — | — | — | 42,306 | 42,306 | |||||||||||||||||||||||||||
Drilling | — | — | — | 7,935 | 14,421 | — | — | 73,583 | 95,939 | |||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | 1,472 | 1,472 | |||||||||||||||||||||||||||
Total expenditures | 129,632 | 9,616 | 51,726 | 72,793 | 39,280 | 41,523 | 77,694 | 474,666 | 896,930 | |||||||||||||||||||||||||||
Property write-offs | — | — | — | (24,580 | ) | — | — | (26,148 | ) | — | (50,728 | ) | ||||||||||||||||||||||||
Total as at Sept. 30, 2006 | $ | 877,017 | $ | 551,244 | $ | 393,392 | $ | 257,957 | $ | 549,366 | $ | 517,609 | $ | 724,727 | $ | 1,636,695 | $ | 5,508,007 | ||||||||||||||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30th 2006
(Unaudited — expressed in US Dollars unless otherwise noted)
1. | Nature of Operations and Going Concern |
2. | Significant Accounting Policies |
3. | Product inventory |
September 30 | June 30 | |||||||
2006 | 2006 | |||||||
Gold ore | $ | 204,217 | $ | 109,074 | ||||
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4. | Property, plant and equipment |
September 30 | June 30 | |||||||
2006 | 2006 | |||||||
Magistral Gold Mine | ||||||||
Plant and equipment | $ | 2,760,526 | $ | 2,760,526 | ||||
Property and deferred costs | 10,245,081 | 10,245,081 | ||||||
Asset retirement obligation asset | 1,393,851 | 1,477,593 | ||||||
Accumulated amortization and depletion | (1,232,118 | ) | (1,220,546 | ) | ||||
13,167,340 | 13,262,654 | |||||||
Other equipment | 136,776 | 136,776 | ||||||
Accumulated amortization | (98,799 | ) | (93,116 | ) | ||||
37,977 | 43,660 | |||||||
$ | 13,205,317 | $ | 13,306,314 | |||||
5. | Asset retirement obligation |
September 30, | June 30, | |||||||
2006 | 2006 | |||||||
Asset retirement obligation — beginning of year | $ | 1,684,812 | $ | 1,567,267 | ||||
Obligations incurred during the period | — | — | ||||||
Accretion expense | 30,020 | 117,545 | ||||||
Revisions in estimated cash flows | (83,742 | ) | — | |||||
Asset retirement obligation — end of period | $ | 1,631,090 | $ | 1,684,812 | ||||
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6. | Share capital |
Number | ||||||||
Issued and outstanding | of Shares | Amount | ||||||
Balance as at June 30, 2005 | 55,442,506 | $ | 25,920,223 | |||||
Private Placement | 12,500,000 | 4,431,286 | ||||||
Private Placement | 200,000 | 110,221 | ||||||
On exercise of warrants | 89,515 | 93,952 | ||||||
On exercise of options | 740,000 | 369,826 | ||||||
Fair value of options exercised | — | 122,652 | ||||||
Share issue costs | — | (93,017 | ) | |||||
Balance as at June 30, 2006 | 68,972,021 | 30,955,143 | ||||||
On exercise of warrants | 1,418,150 | 1,521,768 | ||||||
On exercise of options | 175,000 | 99,635 | ||||||
Fair value of options exercised | — | 43,419 | ||||||
Share issue costs | — | (587 | ) | |||||
Balance as at September 30, 2006 | 70,565,171 | $ | 32,619,378 | |||||
Three Months Ended | Year Ended | |||||||||||||||
September 30, 2006 | June 30, 2006 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Number | Average | Number | Average | |||||||||||||
of Shares | Exercise Price | of Shares | Exercise Price | |||||||||||||
Outstanding at beginning of period | 3,840,000 | $ | 0.99 CDN | 3,328,500 | $ | 0.86 CDN | ||||||||||
Granted | — | 1,712,500 | $ | 1.05 CDN | ||||||||||||
Exercised | (175,000 | ) | $ | 0.64 CDN | (740,000 | ) | $ | 0.57 CDN | ||||||||
Forfeited | (585,000 | ) | $ | 1.04 CDN | (461,000 | ) | $ | 0.94 CDN | ||||||||
Outstanding at end of the period | 3,080,000 | $ | 1.01 CDN | 3,840,000 | $ | 0.99 CDN | ||||||||||
Options exercisable at the end of the period | 2,159,375 | $ | 0.97 CDN | 2,263,750 | $ | 0.95 CDN | ||||||||||
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Weighted-Average | Weighted-Average | |||||||||||
Number Outstanding | Life Remaining | Exercise Price | ||||||||||
Range of Exercise Prices ($) | at September 30, 2006 | (Years) | ($) | |||||||||
0.53 - 1.00 CDN | 2,445,000 | 7.40 | 0.91 CDN | |||||||||
1.01 - 1.54 CDN | 635,000 | 8.14 | 1.39 CDN | |||||||||
Total | 3,080,000 | 7.56 | 1.01 CDN | |||||||||
Three Months Ended | Year Ended | |||||||||||||||
September 30, 2006 | June 30, 2006 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Number | Average | Number | Average | |||||||||||||
of Warrants | Exercise Price | of Warrants | Exercise Price | |||||||||||||
Outstanding at beginning of year | 14,706,900 | $ | 0.60 CDN | 6,420,841 | $ | 1.19 CDN | ||||||||||
Granted | — | 12,700,000 | $ | 0.50 CDN | ||||||||||||
Exercised | (1,418,150 | ) | $ | 1.20 CDN | (89,515 | ) | $ | 1.20 CDN | ||||||||
Expired | (588,750 | ) | $ | 1.20 CDN | (4,324,426 | ) | $ | 1.18 CDN | ||||||||
Outstanding at end of the period | 12,700,000 | $ | 0.50 CDN | 14,706,900 | $ | 0.60 CDN | ||||||||||
Number | Exercise Price | Expiry Date | ||||
6,921,213 | $ | 0.50 CDN | December 14, 2007 | |||
200,000 | $ | 0.80 CDN | January 13, 2008 | |||
5,578,787 | $ | 0.50 CDN | May 11, 2008 | |||
12,700,000 | ||||||
7. | Related party transactions |
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8. | Supplemental cash flow information |
For the Three Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Changes in non-cash working capital | ||||||||
Accounts receivable | $ | (27,680 | ) | $ | 116,617 | |||
Product inventory and stockpiled ore | (95,143 | ) | 1,037,989 | |||||
Supplies inventory | 26,014 | 109,953 | ||||||
Prepaid expenses | (42,468 | ) | 30,593 | |||||
Accounts payable and accrued liabilities | (279,486 | ) | (290,549 | ) | ||||
$ | (418,763 | ) | $ | 1,004,603 | ||||
9. | Commitments |
2007 — $76,366 | 2008 — $67,881 |
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10. | Segmented information |
Gold Mining | ||||||||||||||||
Corporate | Exploration | & Exploration | ||||||||||||||
(Canada) | (U. S.) | (Mexico) | Total | |||||||||||||
($) | ($) | ($) | ($) | |||||||||||||
Property, plant and equipment | ||||||||||||||||
September 30, 2006 | 25,298 | 12,679 | 13,167,340 | 13,205,317 | ||||||||||||
June 30, 2006 | 29,610 | 14,050 | 13,262,654 | 13,306,314 | ||||||||||||
Property, plant and equipment: expenditures For the three months ended | ||||||||||||||||
September 30, 2006 | — | — | — | — | ||||||||||||
September 30, 2005 | 3,945 | — | — | 3,945 | ||||||||||||
Mineral Properties | ||||||||||||||||
September 30, 2006 | — | 3,871,312 | 1,636,695 | 5,508,007 | ||||||||||||
June 30, 2006 | — | 3,499,776 | 1,162,029 | 4,661,805 | ||||||||||||
Mineral Properties: expenditures for the three months ended | ||||||||||||||||
September 30, 2006 | — | 422,264 | 474,666 | 896,930 | ||||||||||||
September 30, 2005 | — | 566,261 | 24,907 | 591,168 | ||||||||||||
Net income (loss) for the three months ended | ||||||||||||||||
September 30, 2006 | (603,076 | ) | (96,754 | ) | (48,105 | ) | (747,935 | ) | ||||||||
September 30, 2005 | (369,350 | ) | (86,909 | ) | (1,140,685 | ) | (1,596,944 | ) | ||||||||
Gold revenues for the three months ended | ||||||||||||||||
September 30, 2006 | — | — | 752,590 | 752,590 | ||||||||||||
September 30, 2005 | — | — | 2,185,513 | 2,185,513 | ||||||||||||
Depreciation, depletion and amortization for the three months ended | ||||||||||||||||
September 30, 2006 | 4,312 | 1,371 | 11,572 | 17,255 | ||||||||||||
September 30, 2005 | 4,445 | 965 | 290,984 | 296,394 |
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11. | Differences Between Canadian and United States Generally Accepted Accounting Principles |
Balance | Balance | |||||||||||
CDN GAAP | Adjustments | U.S. GAAP | ||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 3,544,851 | $ | $ | 3,544,851 | |||||||
Accounts receivable | 208,377 | 208,377 | ||||||||||
Product inventory and stockpiled ore | 204,217 | 204,217 | ||||||||||
Supplies inventory | 259,138 | 259,138 | ||||||||||
Prepaid expenses | 281,892 | 281,892 | ||||||||||
4,498,475 | — | 4,498,475 | ||||||||||
Property, plant and equipment[a] | 13,205,317 | (4,657,846 | ) | 8,547,471 | ||||||||
Mineral properties[a] | 5,508,007 | (5,508,007 | ) | — | ||||||||
Reclamation bonds | 96,363 | 96,363 | ||||||||||
$ | 23,308,162 | $ | (10,165,853 | ) | $ | 13,142,309 | ||||||
LIABILITIES | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable and accrued liabilities | $ | 1,013,414 | $ | $ | 1,013,414 | |||||||
1,013,414 | 1,013,414 | |||||||||||
Other liabilities | 109,350 | 109,350 | ||||||||||
Asset retirement obligation | 1,631,090 | 1,631,090 | ||||||||||
1,740,440 | — | 1,740,440 | ||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
Share Capital | 32,619,378 | 32,619,378 | ||||||||||
Contributed surplus[b] | 1,581,739 | (225,535 | ) | 1,356,204 | ||||||||
Deficit[a][b] | (13,646,809 | ) | (9,940,318 | ) | (23,587,127 | ) | ||||||
20,554,308 | (10,165,853 | ) | 10,388,455 | |||||||||
$ | 23,308,162 | $ | (10,165,853 | ) | $ | 13,142,309 | ||||||
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Balance | Balance | |||||||||||
CDN GAAP | Adjustments | U.S. GAAP | ||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 3,659,738 | $ | $ | 3,659,738 | |||||||
Accounts receivable | 180,697 | 180,697 | ||||||||||
Product inventory and stockpiled ore | 109,074 | 109,074 | ||||||||||
Supplies inventory | 285,152 | 285,152 | ||||||||||
Prepaid expenses | 239,424 | 239,424 | ||||||||||
4,474,085 | — | 4,474,085 | ||||||||||
Property, plant and equipment[a] | 13,306,314 | (4,657,846 | ) | 8,648,468 | ||||||||
Mineral properties[a] | 4,661,805 | (4,661,805 | ) | — | ||||||||
Reclamation bonds | 96,363 | 96,363 | ||||||||||
$ | 22,538,567 | $ | (9,319,651 | ) | $ | 13,218,916 | ||||||
LIABILITIES | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable and accrued liabilities | $ | 1,194,495 | $ | $ | 1,194,495 | |||||||
1,194,495 | 1,194,495 | |||||||||||
Other liabilities | 112,397 | 112,397 | ||||||||||
Asset retirement obligation | 1,684,812 | 1,684,812 | ||||||||||
1,797,209 | — | 1,797,209 | ||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
Share Capital | 30,955,143 | 30,955,143 | ||||||||||
Contributed surplus[b] | 1,490,594 | (287,376 | ) | 1,203,218 | ||||||||
Deficit[a][b] | (12,898,874 | ) | (9,032,275 | ) | (21,931,149 | ) | ||||||
19,546,863 | (9,319,651 | ) | 10,227,212 | |||||||||
$ | 22,538,567 | $ | (9,319,651 | ) | $ | 13,218,916 | ||||||
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CDN | US | |||||||||||
GAAP | Adjustments | GAAP | ||||||||||
GOLD SALES[a] | $ | 752,590 | $ | — | $ | 752,590 | ||||||
COST OF SALES[a] | 742,400 | — | 742,400 | |||||||||
DEPRECIATION AND DEPLETION[a] | 11,572 | — | 11,572 | |||||||||
ROYALTIES[a] | 46,723 | — | 46,723 | |||||||||
800,695 | — | 800,695 | ||||||||||
LOSS FROM MINING OPERATIONS | (48,105 | ) | — | (48,105 | ) | |||||||
EXPENSES AND OTHER INCOME | ||||||||||||
General and administrative | 550,271 | 550,271 | ||||||||||
Stock-based compensation | 134,564 | 61,841 | 196,405 | |||||||||
Foreign exchange loss | 398 | 398 | ||||||||||
Other income | (36,131 | ) | (36,131 | ) | ||||||||
Write-down of mineral properties[a] | 50,728 | (50,728 | ) | — | ||||||||
Exploration cost[a] | — | 896,930 | 896,930 | |||||||||
699,830 | 908,043 | 1,655,978 | ||||||||||
LOSS FOR THE PERIOD | $ | 747,935 | $ | 908,043 | $ | 1,655,978 | ||||||
Basic and diluted loss per share | $ | 0.01 | $ | 0.02 | ||||||||
Weighted average number of common shares outstanding | 69,777,263 | 69,777,263 |
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CDN | US | |||||||||||
GAAP | Adjustments | GAAP | ||||||||||
GOLD SALES[a] | $ | 2,185,513 | $ | — | $ | 2,185,513 | ||||||
COST OF SALES[a] | 2,913,885 | (150,546 | ) | 2,763,339 | ||||||||
DEPRECIATION AND DEPLETION[a] | 290,984 | (93,725 | ) | 197,259 | ||||||||
ROYALTIES[a] | 121,329 | �� | 121,329 | |||||||||
3,326,198 | (244,271 | ) | 3,081,927 | |||||||||
LOSS FROM MINING OPERATIONS | 1,140,685 | (244,271 | ) | 896,414 | ||||||||
EXPENSES AND OTHER INCOME | ||||||||||||
General and administrative | 367,703 | 367,703 | ||||||||||
Stock-based compensation | 55,440 | 55,440 | ||||||||||
Foreign exchange (gain) loss | (6,471 | ) | (6,471 | ) | ||||||||
Other income | (870 | ) | (870 | ) | ||||||||
Write-down of mineral properties[a] | 40,457 | (40,457 | ) | — | ||||||||
Exploration cost[a] | — | 581,168 | 581,168 | |||||||||
456,259 | 540,711 | 996,970 | ||||||||||
LOSS FOR THE PERIOD | $ | 1,596,944 | $ | 296,440 | $ | 1,893,384 | ||||||
Basic and diluted loss per share | $ | 0.03 | $ | 0.03 | ||||||||
Weighted average number of common shares outstanding | 55,471,673 | 55,471,673 |
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CDN | US | |||||||||||
GAAP | Adjustments | GAAP | ||||||||||
CASH PROVIDED BY (USED FOR) OPERATIONS | ||||||||||||
Loss for the period[a] | $ | (747,935 | ) | $ | (908,043 | ) | $ | (1,655,978 | ) | |||
Items not affecting cash | ||||||||||||
Depreciation, depletion & amortization[a] | 17,255 | — | 17,255 | |||||||||
Accretion of asset retirement obligation[a] | 30,020 | 30,020 | ||||||||||
Stock based compensation | 134,564 | 61,841 | 196,405 | |||||||||
Write-down of mineral properties[a] | 50,728 | (50,728 | ) | — | ||||||||
Severance expenses | (3,047 | ) | (3,047 | ) | ||||||||
Changes in non-cash working capital items[a] | (418,763 | ) | 98,405 | (418,763 | ) | |||||||
(937,178 | ) | (798,525 | ) | (1,735,703 | ) | |||||||
INVESTING ACTIVITIES | ||||||||||||
Expenditures on mineral properties, net of recoveries[a] | (798,525 | ) | 798,525 | — | ||||||||
(798,525 | ) | 798,525 | — | |||||||||
FINANCING ACTIVITIES | ||||||||||||
Common shares issued: | ||||||||||||
On warrant conversion | 1,521,768 | 1,521,768 | ||||||||||
On option exercise | 99,635 | 99,635 | ||||||||||
Share issue costs and finder’s fees | (587 | ) | (587 | ) | ||||||||
1,620,816 | — | 1,620,816 | ||||||||||
DECREASE IN CASH AND CASH EQUIVALENTS | (114,887 | ) | — | (114,887 | ) | |||||||
CASH AND CASH EQUIVALENTS, beginning of period | 3,659,738 | 3,659,738 | ||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 3,544,851 | $ | — | $ | 3,544,851 | ||||||
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CDN | US | |||||||||||
GAAP | Adjustments | GAAP | ||||||||||
CASH PROVIDED BY (USED FOR) OPERATIONS | ||||||||||||
Loss for the period[a] | $ | (1,596,944 | ) | $ | (296,440 | ) | $ | (1,893,384 | ) | |||
Items not affecting cash Depreciation, depletion & amortization[a] | 296,394 | (93,725 | ) | 202,669 | ||||||||
Accretion of asset retirement obligation[a] | 29,386 | — | 29,386 | |||||||||
Stock based compensation | 55,440 | 55,440 | ||||||||||
Write-down of mineral properties[a] | 40,457 | (50,457 | ) | (10,000 | ) | |||||||
Severance expenses | 14,910 | 14,910 | ||||||||||
Changes in non-cash working capital items[a] | 1,004,603 | (150,546 | ) | 854,057 | ||||||||
(155,754 | ) | (591,168 | ) | (746,922 | ) | |||||||
INVESTING ACTIVITIES | ||||||||||||
Property, plant and equipment[a] | (3,945 | ) | — | (3,945 | ) | |||||||
Expenditures on mineral properties, net of recoveries[a] | (591,168 | ) | 591,168 | — | ||||||||
(595,113 | ) | 591,168 | (3,945 | ) | ||||||||
FINANCING ACTIVITIES | ||||||||||||
Common shares issued: | ||||||||||||
On option exercise | 53,550 | 53,550 | ||||||||||
Shares subscribed | 99,157 | 99,157 | ||||||||||
Share issue costs and finder’s fees | (2,730 | ) | (2,730 | ) | ||||||||
149,977 | — | 149,977 | ||||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (600,890 | ) | — | (600,890 | ) | |||||||
CASH AND CASH EQUIVALENTS, beginning of period | 957,251 | 957,251 | ||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 356,361 | $ | — | $ | 356,361 | ||||||
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Exercise | ||||||||||
Number | Price | Expiry Date | ||||||||
(Cdn$) | ||||||||||
1,104,000 | 0.50 | May 16, 2008 | ||||||||
50,000 | 0.50 | June 9, 2008 | ||||||||
12,500 | 0.50 | July 21, 2008 | ||||||||
100,000 | 0.50 | November 14, 2008 | ||||||||
12,000 | 0.30 | September 2, 2009 | ||||||||
122,732 | 0.50 | February 1, 2010 | ||||||||
96,000 | 0.40 | July 26, 2010 | ||||||||
40,000 | 0.20 | November 18, 2010 | ||||||||
25,000 | 0.35 | December 1, 2010 | ||||||||
1,562,232 | ||||||||||
Exercise | ||||||||||
Number | Price | Expiry Date | ||||||||
(Cdn$) | ||||||||||
10,000 | 0.75 | July 5, 2006 | ||||||||
41,175 | 0.60 — 0.80 | November 26, 2006 | ||||||||
25,000 | 0.60 — 0.80 | December 14, 2006 | ||||||||
2,405,000 | 0.25 | December 19, 2007 | ||||||||
730,000 | 0.25 | March 3, 2008 | ||||||||
3,186,175 | ||||||||||
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D-7
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D-8
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Fiscal Year Ended August 31, | ||||||||||||||||
2006 | 2005 | 2004 | 2003 | |||||||||||||
Working capital (deficiency) | $ | 1,165,577 | $ | (114,930 | ) | $ | 349,922 | $ | 242,924 | |||||||
Mineral property costs | 1,329,076 | 1,124,298 | 905,596 | 449,726 | ||||||||||||
Total assets | 2,629,052 | 1,173,017 | 1,335,652 | 807,399 | ||||||||||||
Net loss | (1,083,737 | ) | (855,799 | ) | (1,082,680 | ) | (437,698 | ) | ||||||||
Deficit | (3,588,896 | ) | (2,505,159 | ) | (1,649,360 | ) | (566,680 | ) | ||||||||
Net loss per common share | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.09 | ) | $ | (0.07 | ) |
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D-10
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D-11
Table of Contents
Year Ended August 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | |||||||||||||||||
Loss before other items | $ | (1,083,596 | ) | $ | (756,176 | ) | $ | (1,076,443 | ) | $ | (436,196 | ) | ||||||||
Net Loss for the period | (1,083,737 | ) | (855,799 | ) | (1,082,680 | ) | (437,698 | ) | ||||||||||||
Loss per share | (0.06 | ) | (0.06 | ) | (0.09 | ) | (0.07 | ) | ||||||||||||
Total assets | 2,629,052 | 1,173,017 | 1,335,652 | 807,399 | ||||||||||||||||
Total liabilities | 101,061 | 129,065 | 42,269 | 79,784 | ||||||||||||||||
Working capital (deficiency) | 1,165,577 | (114,930 | ) | 349,922 | 242,924 | |||||||||||||||
Mineral property acquisitions | — | 27,913 | 54,480 | 40,204 | ||||||||||||||||
Claims maintenance | 97,106 | 112,729 | 107,721 | 84,659 | ||||||||||||||||
Exploration expenditures | 107,672 | 130,499 | 320,236 | 208,296 |
D-12
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D-13
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D-14
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D-15
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D-16
Table of Contents
Aug 31 | May 31 | Feb 28 | Nov 30 | Aug 31 | May 31 | Feb 28 | Nov 30 | |||||||||||||||||||||||||
2006 | 2006 | 2006 | 2005 | 2005 | 2005 | 2005 | 2004 | |||||||||||||||||||||||||
Property costs | ||||||||||||||||||||||||||||||||
Claims acquisition and maintenance | $ | 73,182 | $ | — | $ | 11,593 | $ | 12,331 | $ | 15,758 | $ | 7,831 | $ | 10,878 | $ | 82,505 | ||||||||||||||||
Exploration expenditures | 1,059 | 37,328 | 68,334 | 951 | — | 1,303 | 13,188 | 116,008 | ||||||||||||||||||||||||
$ | 74,241 | $ | 37,328 | $ | 79,927 | $ | 13,282 | $ | 15,758 | $ | 9,134 | $ | 24,066 | $ | 198,513 | |||||||||||||||||
Administration and other | ||||||||||||||||||||||||||||||||
Accounting and legal | $ | 103,872 | $ | 165,614 | $ | 74,077 | $ | 30,099 | $ | 32,504 | $ | 26,028 | $ | 27,811 | $ | 8,657 | ||||||||||||||||
Management, IR and consulting fees | 83,326 | 93,772 | 59,362 | 86,940 | 73,643 | 47,156 | 54,346 | 56,437 | ||||||||||||||||||||||||
Advertising, promotion and travel | 74,121 | 19,482 | 57,133 | 2,927 | 5,581 | 26,303 | 13,112 | 22,581 | ||||||||||||||||||||||||
All other costs | 6,259 | 23,397 | 39,084 | 14,960 | 104,474 | 19,705 | 20,502 | 36,550 | ||||||||||||||||||||||||
$ | 267,578 | $ | 302,265 | $ | 229,656 | $ | 134,926 | $ | 214,202 | $ | 119,192 | $ | 115,771 | $ | 124,225 | |||||||||||||||||
Stock-based compensation | $ | 25,442 | $ | 36,627 | $ | 44,371 | $ | 42,872 | $ | 121,525 | $ | 48,945 | $ | 71,310 | $ | 40,629 | ||||||||||||||||
Mr. Scott Baxter | $ | 6,500 per month | President | |||
Mr. David Mathewson | $ | 6,500 per month | Former Vice-president exploration |
D-17
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D-18
Table of Contents
As | The element symbol for arsenic. |
Au | The element symbol for gold. |
Bedrock | Solid rock underlying loose and unconsolidated soils and gravel. |
Breccia | An angular fragmental rock often mineralized, and in the case of gold, favorable for gold deposition. |
Colluvium | Surface material covering bedrock that consists of soil, gravel and any other size rock fragments. |
Decarbonatization | Removal of carbonate. |
Dolomitization | Introduction of dolomite. |
D-19
Table of Contents
Epithermal | Low temperature environments in the earth’s crust where mineralization, specifically gold, may occur. |
Fault | Break along which movement of two juxtaposed blocks of rock has occurred. |
Float | Loose unconsolidated broken rock in soil material. |
Hydrothermal | Hot water conditions in the earth’s crust that may cause mineralization. |
Jasperoid | A rock consisting essentially of cryptocrystalline or chalcedonic silica. |
Llode claim | Generally a 1500 ft x 600 ft, 20 acre parcel, staked with 5 posts to secure ownership of certain minerals, including gold, below the surface. |
Lower plate | A section of rocks, usually comprised of carbonate materials, that are conducive to gold mineralization. |
Mesothermal | Medium temperature environment in the earth’s crust where mineralization may occur. |
Mineralization | The process of converting or being converted into another mineral, as a metal and, or sulfide. |
Oxidation | Conversion to oxide minerals. |
Oxide | The property of being in the form of an oxide mineral, in the case of gold material favorable for gold leaching. |
Pathfinder element | An element in common association with gold, such as arsenic, mercury, antimony, and zinc. |
ppm | Parts per million. |
Section | Generally a 1 mile by one mile area comprised of a total of 640 acres of land. |
Silicification | Introduction of silica. |
Skarn | Rocks that were comprised of pure to nearly pure limestone that have undergone a mineralization change through thermal processes to calcium and magnesium-bearing siliceous minerals. |
Stratigraphic unit | Unit consisting of stratified mainly sedimentary rocks. |
Sulfidation | Introduction of sulfides. |
Upper plate | A section of rocks, usually non-prospective, that may overly prospective lower-plate rock units below. |
D-20
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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 a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted form specific geological evidence and knowledge. |
Measured Mineral Resource | That part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. |
Indicated Mineral Resource | That part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. |
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 limited sampling 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. |
Preliminary Feasibility Study | A comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has determined, and includes a financial analysis based on reasonable assumptions of technical, engineering, legal, operating, and economic factors and evaluation of other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be classified as a mineral reserve. |
D-21
Table of Contents
Metric Measurement | U.S. Equivalent | Multiply Metric Figure by: | ||||||
Hectares | Acres | 2.471 | ||||||
Meters | Feet (ft.) | 3.281 | ||||||
Kilometers (km) | Miles | 0.621 | ||||||
Tonnes | Tons (2000 pounds) | 1.102 | ||||||
Grams/tonne | Ounces (troy/tonne) | 0.029 |
D-22
Table of Contents
(An Exploration Stage Company)
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2006 and 2005
(Stated in Canadian Dollars)
D-23
Table of Contents
A Partnership Of Incorporated Professionals | Amisano Hanson |
Vancouver, Canada | /s/ AMISANO HANSON | |||||||
November 8, 2006 except as to Note 9(f) | Chartered Accountants | |||||||
which is as of November 24, 2006 |
Vancouver, Canada | /s/ AMISANO HANSON | |||||||
November 8, 2006 except as to Note 9(f) | Chartered Accountants | |||||||
which is as of November 24, 2006 |
750 WEST PENDER STREET, SUITE 604 | TELEPHONE: | 604-689-0188 | ||||||
VANCOUVER CANADA | FACSIMILE: | 604-689-9773 | ||||||
V6C 2T7 | E-MAIL: | amishan@telus.net |
D-24
Table of Contents
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
August 31, 2006 and 2005
2006 | 2005 | |||||||||||
(Stated in Canadian Dollars) | ||||||||||||
ASSETS | ||||||||||||
Current | ||||||||||||
Cash and cash equivalents | $ | 1,247,413 | $ | 5,069 | ||||||||
GST recoverable | 12,409 | 6,508 | ||||||||||
Prepaid expenses and advances | 6,816 | 2,558 | ||||||||||
1,266,638 | 14,135 | |||||||||||
Reclamation bonds — Note 3 | 33,338 | 34,584 | ||||||||||
Mineral property costs — Notes 4 and 6 and Schedule 1 | 1,329,076 | 1,124,298 | ||||||||||
$ | 2,629,052 | $ | 1,173,017 | |||||||||
LIABILITIES | ||||||||||||
Current | ||||||||||||
Accounts payable | $ | 56,229 | $ | 51,861 | ||||||||
Due to related parties — Note 6 | 44,832 | 77,204 | ||||||||||
101,061 | 129,065 | |||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||
Share capital — Notes 5, 6, 7, 9 and 10 | 5,683,895 | 2,927,262 | ||||||||||
Share subscriptions — Note 9(b) | 7,500 | — | ||||||||||
Contributed surplus — Note 5 | 425,492 | 621,849 | ||||||||||
Deficit | (3,588,896 | ) | (2,505,159 | ) | ||||||||
2,527,991 | 1,043,952 | |||||||||||
$ | 2,629,052 | $ | 1,173,017 | |||||||||
Nature and Continuance of Operations — Note 1 | ||||||||||||
Commitments — Notes 4, 5 and 9 | ||||||||||||
Subsequent Events — Note 9 |
D-25
Table of Contents
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF LOSS
for the years ended August 31, 2006, 2005 and 2004
and for the period October 31, 2001 (Date of Inception) to August 31, 2006
October 31, | ||||||||||||||||
2001 (Date of | ||||||||||||||||
Inception) to | ||||||||||||||||
August 31, | ||||||||||||||||
2006 | 2005 | 2004 | 2006 | |||||||||||||
(Stated in Canadian Dollars) | ||||||||||||||||
General and administrative expenses | ||||||||||||||||
Accounting and audit fees — Note 6 | $ | 170,242 | $ | 35,808 | $ | 62,012 | $ | 332,025 | ||||||||
Advertising and promotion | 68,935 | 32,937 | 28,174 | 143,537 | ||||||||||||
Consulting fees | 75,000 | — | — | 82,747 | ||||||||||||
Filing fees | 20,802 | 16,769 | 29,450 | 75,785 | ||||||||||||
Finance fees | — | 10,000 | — | 10,000 | ||||||||||||
Investor relations | 93,500 | 68,000 | 79,435 | 254,435 | ||||||||||||
Legal fees — Note 6 | 203,420 | 59,192 | 179,391 | 491,900 | ||||||||||||
Management fees — Note 6 | 154,900 | 151,581 | 181,036 | 742,382 | ||||||||||||
Office and miscellaneous | 9,575 | 13,334 | 14,971 | 58,992 | ||||||||||||
Rent — Note 6 | 15,000 | 15,000 | 15,000 | 67,665 | ||||||||||||
Stock-based compensation — Note 6 | 149,312 | 282,409 | 368,313 | 807,972 | ||||||||||||
Secretarial — Note 6 | 11,060 | 11,389 | 13,462 | 49,206 | ||||||||||||
Telephone | 13,055 | 13,679 | 16,046 | 61,736 | ||||||||||||
Transfer agent fees | 14,067 | 8,213 | 6,912 | 33,428 | ||||||||||||
Travel | 84,728 | 37,865 | 82,241 | 270,109 | ||||||||||||
Loss before other items | (1,083,596 | ) | (756,176 | ) | (1,076,443 | ) | (3,481,919 | ) | ||||||||
Other items | ||||||||||||||||
Foreign exchange loss | (7,591 | ) | (17,389 | ) | (7,440 | ) | (37,041 | ) | ||||||||
Interest income | 7,450 | 535 | 1,203 | 12,833 | ||||||||||||
Write-off of mineral property costs — Note 4 | — | (82,769 | ) | — | (82,769 | ) | ||||||||||
Net loss for the period | $ | (1,083,737 | ) | $ | (855,799 | ) | $ | (1,082,680 | ) | $ | (3,588,896 | ) | ||||
Basic and diluted loss per share | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.09 | ) | |||||||
Weighted average number of shares outstanding | 16,977,183 | 13,168,002 | 11,478,821 | |||||||||||||
D-26
Table of Contents
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended August 31, 2006, 2005 and 2004
and for the period October 31, 2001 (Date of Inception) to August 31, 2006
October 31, | ||||||||||||||||
2001 (Date of | ||||||||||||||||
Inception) to | ||||||||||||||||
August 31, | ||||||||||||||||
2006 | 2005 | 2004 | 2006 | |||||||||||||
(Stated in Canadian Dollars) | ||||||||||||||||
Operating Activities | ||||||||||||||||
Net loss for the period | $ | (1,083,737 | ) | $ | (855,799 | ) | $ | (1,082,680 | ) | $ | (3,588,896 | ) | ||||
Add items not affecting cash: | ||||||||||||||||
Stock-based compensation | 149,312 | 282,409 | 368,313 | 807,972 | ||||||||||||
Write-off of mineral property costs | 82,769 | — | 82,769 | |||||||||||||
Changes in non-cash working capital accounts: | ||||||||||||||||
GST recoverable | (5,901 | ) | (3,797 | ) | 11,305 | (12,409 | ) | |||||||||
Prepaid expenses and advances | (4,258 | ) | 13,162 | 2,275 | (6,816 | ) | ||||||||||
Accounts payable | 4,368 | 71,921 | (43,132 | ) | 106,173 | |||||||||||
Due to related parties | (32,372 | ) | 65,819 | 5,617 | 44,832 | |||||||||||
(972,588 | ) | (343,516 | ) | (738,302 | ) | (2,566,375 | ) | |||||||||
Financing Activities | ||||||||||||||||
Share subscriptions | 7,500 | — | — | 7,500 | ||||||||||||
Common shares issued | 2,410,964 | 220,015 | 1,280,135 | 5,197,471 | ||||||||||||
2,418,464 | 220,015 | 1,280,135 | 5,204,971 | |||||||||||||
Investing Activities | ||||||||||||||||
Increase (decrease) in reclamation bonds | 1,246 | 3,281 | (2,900 | ) | (33,338 | ) | ||||||||||
Mineral property costs | (204,778 | ) | (247,471 | ) | (455,870 | ) | (1,357,845 | ) | ||||||||
(203,532 | ) | (244,190 | ) | (458,770 | ) | (1,391,183 | ) | |||||||||
Increase (decrease) in cash during the period | 1,242,344 | (367,691 | ) | 83,063 | 1,247,413 | |||||||||||
Cash and cash equivalents, beginning of the period | 5,069 | 372,760 | 289,697 | — | ||||||||||||
Cash and cash equivalents, end of the period | $ | 1,247,413 | $ | 5,069 | $ | 372,760 | $ | 1,247,413 | ||||||||
Supplemental disclosure of cash flow information | ||||||||||||||||
Cash paid for: | ||||||||||||||||
Interest | $ | — | $ | — | $ | — | ||||||||||
Income taxes | $ | — | $ | — | $ | — | ||||||||||
Cash and cash equivalents are comprised of: | ||||||||||||||||
Cash | $ | 541,050 | $ | 5,069 | $ | 372,760 | ||||||||||
Term deposits | 706,363 | — | — | |||||||||||||
$ | 1,247,413 | $ | 5,069 | $ | 372,060 | |||||||||||
Non-cash Transactions — Note 7 |
D-27
Table of Contents
(An Exploration Stage Company)
for the period October 31, 2001 (Date of Inception) to August 31, 2006
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Number of | Special | Share | Contributed | |||||||||||||||||||||||||||
Common Shares | Amount | Warrants | Subscriptions | Surplus | Deficit | Total | ||||||||||||||||||||||||
(Stated in Canadian Dollars) | ||||||||||||||||||||||||||||||
Balance, October 31, 2001 | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
For cash: | ||||||||||||||||||||||||||||||
Issuance of founders shares | — at $0.0001 | 5,000,000 | 500 | — | — | — | — | 500 | ||||||||||||||||||||||
Issuance of special warrants | — at $0.15 | — | — | 446,611 | — | — | — | 446,611 | ||||||||||||||||||||||
Net loss for the period | — | — | — | — | — | (128,982 | ) | (128,982 | ) | |||||||||||||||||||||
Balance, August 31, 2002 | 5,000,000 | 500 | 446,611 | — | — | (128,982 | ) | 318,129 | ||||||||||||||||||||||
For cash: | ||||||||||||||||||||||||||||||
Initial public offering | — at $0.50 | 1,532,700 | 766,350 | — | — | — | — | 766,350 | ||||||||||||||||||||||
Issuance of special warrants | — at $0.15 | — | — | 31,426 | — | — | — | 31,426 | ||||||||||||||||||||||
— at $0.50 | — | — | 231,347 | — | — | — | 231,347 | |||||||||||||||||||||||
Less: share issue costs — Note 6 | — | (189,877 | ) | — | — | — | — | (189,877 | ) | |||||||||||||||||||||
Conversion of special warrants | 3,649,606 | 709,384 | (709,384 | ) | — | — | — | — | ||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 7,938 | — | 7,938 | |||||||||||||||||||||||
Net loss for the year | — | — | — | — | — | (437,698 | ) | (437,698 | ) | |||||||||||||||||||||
Balance, August 31, 2003 | 10,182,306 | 1,286,357 | — | — | 7,938 | (566,680 | ) | 727,615 | ||||||||||||||||||||||
For cash: | ||||||||||||||||||||||||||||||
Pursuant to private placements | — at $0.47 | 1,081,670 | 508,385 | — | — | — | — | 508,385 | ||||||||||||||||||||||
— at $0.50 | 1,543,500 | 771,750 | — | — | — | — | 771,750 | |||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 368,313 | — | 368,313 | |||||||||||||||||||||||
Net loss for the year | — | — | — | — | — | (1,082,680 | ) | (1,082,680 | ) | |||||||||||||||||||||
Balance, August 31, 2004 | 12,807,476 | 2,566,492 | — | — | 376,251 | (1,649,360 | ) | 1,293,383 | ||||||||||||||||||||||
For cash: | ||||||||||||||||||||||||||||||
Pursuant to private placements | — at $0.40 | 175,412 | 70,165 | — | — | — | — | 70,165 | ||||||||||||||||||||||
— at $0.40 | 250,000 | 100,000 | — | — | — | — | 100,000 | |||||||||||||||||||||||
Pursuant to exercise of options | — at $0.30 | 67,500 | 20,250 | — | — | — | — | 20,250 | ||||||||||||||||||||||
— at $0.50 | 59,200 | 29,600 | — | — | — | — | 29,600 | |||||||||||||||||||||||
Shares for debt | — at $0.45 | 110,986 | 49,944 | — | — | — | — | 49,944 | ||||||||||||||||||||||
Mineral property costs | — at $0.45 | 120,000 | 54,000 | — | — | — | — | 54,000 | ||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 282,409 | — | 282,409 | |||||||||||||||||||||||
Stock based compensation charge on stock options exercised | — | 36,811 | — | — | (36,811 | ) | — | — | ||||||||||||||||||||||
Net loss for the year | — | — | — | — | — | (855,799 | ) | (855,799 | ) | |||||||||||||||||||||
Balance, August 31, 2005 | 13,590,574 | 2,927,262 | — | — | 621,849 | (2,505,159 | ) | 1,043,952 | ||||||||||||||||||||||
For cash: | ||||||||||||||||||||||||||||||
Pursuant to private placements | — at $0.20 | 3,300,000 | 660,000 | — | — | — | — | 660,000 | ||||||||||||||||||||||
Pursuant to exercise of options | — at $0.20 | 60,000 | 12,000 | — | — | — | — | 12,000 | ||||||||||||||||||||||
— at $0.30 | 309,499 | 92,850 | — | — | — | — | 92,850 | |||||||||||||||||||||||
— at $0.35 | 25,000 | 8,750 | — | — | — | — | 8,750 | |||||||||||||||||||||||
— at $0.40 | 115,000 | 46,000 | — | — | — | — | 46,000 | |||||||||||||||||||||||
— at $0.50 | 705,800 | 352,900 | — | — | — | — | 352,900 | |||||||||||||||||||||||
Pursuant to exercise of warrants | — at $0.25 | 165,000 | 41,250 | — | — | — | — | 41,250 | ||||||||||||||||||||||
— at $0.50 | 158,341 | 79,170 | — | — | — | — | 79,170 | |||||||||||||||||||||||
— at $0.60 | 171,531 | 102,919 | — | — | — | — | 102,919 | |||||||||||||||||||||||
— at $0.75 | 1,353,500 | 1,015,125 | — | — | — | — | 1,015,125 | |||||||||||||||||||||||
Share subscriptions | — | — | — | 7,500 | — | — | 7,500 | |||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 149,312 | — | 149,312 | |||||||||||||||||||||||
Stock based compensation charge on stock options exercised | — | 345,669 | — | — | (345,669 | ) | — | — | ||||||||||||||||||||||
Net loss for the year | — | — | — | — | — | (1,083,737 | ) | (1,083,737 | ) | |||||||||||||||||||||
Balance, August 31, 2006 | 19,954,245 | $ | 5,683,895 | $ | — | $ | 7,500 | $ | 425,492 | $ | (3,588,896 | ) | $ | 2,527,991 | ||||||||||||||||
D-28
Table of Contents
(An Exploration Stage Company)
CONSOLIDATED SCHEDULE OF MINERAL PROPERTY COSTS
for the years ended August 31, 2006 and 2005
South | Roberts | Battle | Gold | Big Antelope | ||||||||||||||||||||||||||||||||
Keystone | Creek | Kobeh | Kent Springs | Red Ridge | Mountain | Bar North | Springs | |||||||||||||||||||||||||||||
(Eureka) | (Eureka) | (Eureka) | (Pershing) | (Elko) | (Lander) | (Eureka) | (Lander) | Total | ||||||||||||||||||||||||||||
(Stated in Canadian Dollars) | ||||||||||||||||||||||||||||||||||||
Property acquisition and maintenance costs | ||||||||||||||||||||||||||||||||||||
Balance, August 31, 2005 | $ | 29,215 | $ | 60,894 | $ | 140,824 | $ | 8,759 | $ | 93,787 | $ | 61,818 | $ | 17,089 | $ | 12,956 | $ | 425,342 | ||||||||||||||||||
Claims maintenance — Note 6 | 5,031 | 9,703 | 23,898 | 1,796 | 35,473 | 13,478 | 3,414 | 4,313 | 97,106 | |||||||||||||||||||||||||||
Balance, August 31, 2006 | 34,246 | 70,597 | 164,722 | 10,555 | 129,260 | 75,296 | 20,503 | 17,269 | 522,448 | |||||||||||||||||||||||||||
Deferred exploration costs | ||||||||||||||||||||||||||||||||||||
Balance, August 31, 2005 | 13,766 | 88,848 | 191,259 | 125 | 260,624 | 130,286 | 13,209 | 839 | 698,956 | |||||||||||||||||||||||||||
Assaying | — | — | 4,461 | — | — | — | 6,555 | 374 | 11,390 | |||||||||||||||||||||||||||
Consulting fees | — | — | — | — | 853 | — | — | — | 853 | |||||||||||||||||||||||||||
Drilling | — | — | 27,217 | — | — | — | 60,532 | — | 87,749 | |||||||||||||||||||||||||||
Field costs | — | — | 1,576 | — | — | — | 6,104 | — | 7,680 | |||||||||||||||||||||||||||
Balance, August 31, 2006 | 13,766 | 88,848 | 224,513 | 125 | 261,477 | 130,286 | 86,400 | 839 | 806,628 | |||||||||||||||||||||||||||
Total | $ | 48,012 | $ | 159,445 | $ | 389,235 | $ | 10,680 | $ | 390,737 | $ | 205,582 | $ | 106,903 | $ | 18,482 | $ | 1,329,076 | ||||||||||||||||||
D-29
Table of Contents
(An Exploration Stage Company)
CONSOLIDATED SCHEDULE OF MINERAL PROPERTY COSTS
for the years ended August 31, 2006 and 2005
Big | Crescent | |||||||||||||||||||||||||||||||||||||||
South | Roberts | Kent | Battle | Gold Bar | Antelope | Valley | ||||||||||||||||||||||||||||||||||
Keystone | Creek | Kobeh | Springs | Red Ridge | Mountain | North | Springs | North | ||||||||||||||||||||||||||||||||
(Eureka) | (Eureka) | (Eureka) | (Pershing) | (Elko) | (Lander) | (Eureka) | (Lander) | (Eureka) | Total | |||||||||||||||||||||||||||||||
(Stated in Canadian Dollars) | ||||||||||||||||||||||||||||||||||||||||
Property acquisition and maintenance costs | ||||||||||||||||||||||||||||||||||||||||
Balance, August 31, 2004 | $ | 25,522 | $ | 53,772 | $ | 123,284 | $ | 7,440 | $ | 54,226 | $ | 51,927 | $ | 14,583 | $ | 6,385 | $ | — | $ | 337,139 | ||||||||||||||||||||
Cash | — | — | — | — | 4,243 | — | — | — | — | 4,243 | ||||||||||||||||||||||||||||||
Common shares — Note 6 | �� | — | — | — | — | — | — | — | 54,000 | 54,000 | ||||||||||||||||||||||||||||||
Claims maintenance — Note 6 | 3,693 | 7,122 | 17,540 | 1,319 | 39,561 | 9,891 | 2,506 | 6,571 | 28,769 | 116,972 | ||||||||||||||||||||||||||||||
Balance, August 31, 2005 | 29,215 | 60,894 | 140,824 | 8,759 | 93,787 | 61,818 | 17,089 | 12,956 | 82,769 | 508,111 | ||||||||||||||||||||||||||||||
Deferred exploration costs | ||||||||||||||||||||||||||||||||||||||||
Balance, August 31, 2004 | 13,766 | 88,848 | 191,259 | 125 | 143,538 | 130,286 | 525 | 110 | — | 568,457 | ||||||||||||||||||||||||||||||
Assaying | — | — | — | — | 17,062 | — | 4,884 | — | — | 21,946 | ||||||||||||||||||||||||||||||
Consulting fees | — | — | — | — | — | — | 5,754 | — | — | 5,754 | ||||||||||||||||||||||||||||||
Drilling | — | — | — | — | 87,196 | — | — | — | — | 87,196 | ||||||||||||||||||||||||||||||
Field costs | — | — | — | — | 4,760 | — | 2,046 | 729 | — | 7,535 | ||||||||||||||||||||||||||||||
Reclamation | — | — | — | — | 8,068 | — | — | — | — | 8,068 | ||||||||||||||||||||||||||||||
Balance, August 31, 2005 | 13,766 | 88,848 | 191,259 | 125 | 260,624 | 130,286 | 13,209 | 839 | — | 698,956 | ||||||||||||||||||||||||||||||
Write-off mineral property — Note 4 | — | — | — | — | — | — | — | — | (82,769 | ) | (82,769 | ) | ||||||||||||||||||||||||||||
Total | $ | 42,981 | $ | 149,742 | $ | 332,083 | $ | 8,884 | $ | 354,411 | $ | 192,104 | $ | 30,298 | $ | 13,795 | $ | — | $ | 1,124,298 | ||||||||||||||||||||
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Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 | Nature and Continuance of Operations |
Note 2 | Significant Accounting Policies |
D-31
Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
D-32
Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 3 | Reclamation Bonds |
Note 4 | Mineral Property Costs — Note 6 |
D-33
Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Red Ridge | ||||
August 31, 2003 | US$ 12,000 | (paid) | ||
August 31, 2004 | 12,000 | (paid) | ||
August 31, 2005 | 12,000 | (paid) | ||
August 31, 2006 | 20,000 | (paid) | ||
August 31, 2007 | 20,000 | (paid $10,000 subsequently) | ||
August 31, 2008 | 30,000 | |||
August 31, 2009 | 40,000 | |||
August 31, 2010 | 50,000 | |||
August 31, 2011 | 60,000 | |||
August 31, 2012 | 70,000 | |||
August 31, 2013 | 80,000 | |||
August 31, 2014 | 90,000 | |||
August 31, 2015 and each year thereafter | 100,000 |
Note 5 | Share Capital — Notes 6 and 9 |
November 16, 2005 | 771,000 | |||
May 16, 2006 | 771,000 | |||
1,542,000 | ||||
D-34
Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2006 | 2005 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Number | Exercise | Number | Exercise | |||||||||||||
of Shares | Price | of Shares | Price | |||||||||||||
Options outstanding, beginning of year | 2,673,032 | $ | 0.50 | 1,850,000 | $ | 0.50 | ||||||||||
Granted | 150,000 | $ | 0.25 | 1,099,732 | $ | 0.41 | ||||||||||
Exercised | (1,215,300 | ) | $ | 0.42 | (126,700 | ) | $ | 0.39 | ||||||||
Cancelled | (45,500 | ) | $ | 0.47 | (150,000 | ) | $ | 0.50 | ||||||||
Options outstanding, end of year | 1,562,232 | $ | 0.48 | 2,673,032 | $ | 0.50 | ||||||||||
Options exercisable, end of year | 1,475,732 | $ | 0.48 | 2,115,291 | $ | 0.50 | ||||||||||
Exercise | Expiry | |||||||
Number | Price | Date | ||||||
1,104,000 | $ | 0.50 | May 16, 2008 | |||||
50,000 | $ | 0.50 | June 09, 2008 | |||||
12,500 | $ | 0.50 | July 21, 2008 | |||||
100,000 | $ | 0.50 | November 14, 2008 | |||||
12,000 | $ | 0.30 | September 2, 2009 | |||||
122,732 | $ | 0.50 | February 1, 2010 | |||||
96,000 | $ | 0.40 | July 26, 2010 | |||||
40,000 | $ | 0.20 | November 18, 2010 | |||||
25,000 | $ | 0.35 | December 2, 2010 | |||||
1,562,232 | ||||||||
D-35
Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Years ended August 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Expected dividend yield | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
Expected volatility | 94.9 | % | 99.2 | % | 90.0 | % | ||||||
Risk-free interest rate | 2.0 | % | 2.0 | % | 2.0 | % | ||||||
Expected term in years | 5 years | 5 years | 5 years |
Years ended August 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Weighted average fair value | $ | 0.18 | $ | 0.29 | $ | 0.32 | ||||||
Total options granted | 150,000 | 1,099,732 | 550,000 | |||||||||
Total fair value of options granted | $ | 27,000 | $ | 314,972 | $ | 178,500 |
Exercise | ||||||
Number | Price | Expiry Date | ||||
10,000 | $0.75 | July 5, 2006 (Note 9(b)) | ||||
41,175 | $0.80 | November 26, 2006 (Note 9(f)) | ||||
2,405,000 | $0.25 | December 19, 2007 | ||||
730,000 | $0.25 | March 3, 2008 | ||||
3,186,175 | ||||||
D-36
Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 6 | Related Party Transactions — Notes 4, 5 and 9 |
October 31, | ||||||||||||||||
2001 (Date of | ||||||||||||||||
Inception) to | ||||||||||||||||
August 31, | ||||||||||||||||
2006 | 2005 | 2004 | 2006 | |||||||||||||
Accounting fees | $ | 98,157 | $ | 13,725 | $ | — | $ | 111,882 | ||||||||
Legal fees | 70,003 | 30,209 | 41,945 | 148,510 | ||||||||||||
Management fees | 154,900 | 151,581 | 181,036 | 742,382 | ||||||||||||
Mineral property acquisition costs | ||||||||||||||||
— common shares | — | 54,000 | — | 54,000 | ||||||||||||
— claims maintenance | — | 15,717 | — | 102,964 | ||||||||||||
Rent | 15,000 | 15,000 | 15,000 | 67,665 | ||||||||||||
Share issue costs | — | — | — | 74,275 | ||||||||||||
Stock-based compensation | 110,162 | 197,763 | 286,813 | 594,738 | ||||||||||||
Secretarial | 11,060 | 11,389 | 13,462 | 49,056 | ||||||||||||
$ | 459,282 | $ | 489,384 | $ | 538,256 | $ | 1,945,472 | |||||||||
Note 7 | Non-cash Transactions |
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Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 8 | Income Taxes |
2006 | 2005 | |||||||
Future income tax assets | ||||||||
Tax losses carried forward | $ | 1,365,779 | $ | 1,022,523 | ||||
Less: valuation allowance | (1,365,779 | ) | (1,022,523 | ) | ||||
$ | — | $ | — | |||||
United States | ||||||||||||
Canada | of America | Total | ||||||||||
2009 | $ | 100,542 | $ | — | $ | 100,542 | ||||||
2010 | 377,116 | — | 377,116 | |||||||||
2011 | 661,076 | — | 661,076 | |||||||||
2015 | 432,271 | — | 432,271 | |||||||||
2016 | 886,833 | — | 886,833 | |||||||||
2022 | — | 96,061 | 96,061 | |||||||||
2023 | — | 352,776 | 352,776 | |||||||||
2024 | — | 487,178 | 487,178 | |||||||||
2025 | — | 363,623 | 363,623 | |||||||||
2026 | — | 250,846 | 250,846 | |||||||||
$ | 2,457,838 | $ | 1,550,484 | $ | 4,008,322 | |||||||
Note 9 | Subsequent Events |
D-38
Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 10 | Offer to Purchase |
Note 11 | Differences Between Canadian and United States Accounting Principles |
D-39
Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2006 | 2005 | 2004 | ||||||||||
Net Loss and Loss Per Share | ||||||||||||
Net loss for the year per Canadian GAAP | $ | (1,083,737 | ) | $ | (855,799 | ) | $ | (1,082,680 | ) | |||
Write-off of mineral property costs | — | 82,769 | — | |||||||||
Mineral property costs | (204,778 | ) | (301,471 | ) | (455,870 | ) | ||||||
Net loss for the year per US GAAP | $ | (1,288,515 | ) | $ | (1,074,501 | ) | $ | (1,538,550 | ) | |||
Basic and diluted loss per share per US GAAP | $ | (0.08 | ) | $ | (0.08 | ) | $ | (0.13 | ) | |||
Total Assets and Liabilities | ||||||||||||
Total assets per Canadian GAAP | $ | 2,629,051 | $ | 1,173,017 | ||||||||
Mineral property costs | (1,329,076 | ) | (1,124,298 | ) | ||||||||
Total assets per US GAAP | $ | 1,299,975 | $ | 48,719 | ||||||||
Total liabilities per Canadian and US GAAP | $ | 101,061 | $ | 129,065 | ||||||||
Stockholders’ Equity | ||||||||||||
Deficit, end of the year, per Canadian GAAP | $ | (3,588,896 | ) | $ | (2,505,159 | ) | ||||||
Mineral property costs | (1,329,076 | ) | (1,124,298 | ) | ||||||||
Deficit, end of the year, per US GAAP | (4,917,972 | ) | (3,629,457 | ) | ||||||||
Capital stock per Canadian and US GAAP | 5,683,894 | 2,927,262 | ||||||||||
Share subscriptions per Canadian and US GAAP | 7,500 | — | ||||||||||
Contributed surplus per Canadian and US GAAP | 425,492 | 621,849 | ||||||||||
Stockholders’ equity (deficiency) per US GAAP | $ | 1,198,914 | $ | (80,346 | ) | |||||||
Statements of Cash Flows | ||||||||||||
Operating Activities per Canadian GAAP | $ | (972,588 | ) | $ | (343,516 | ) | $ | (738,302 | ) | |||
Mineral property costs | (204,778 | ) | (247,471 | ) | (455,870 | ) | ||||||
Operating Activities per US GAAP | $ | (1,177,366 | ) | $ | (590,987 | ) | $ | (1,194,172 | ) | |||
Financing Activities per Canadian and US GAAP | $ | 2,418,463 | $ | 220,015 | $ | 1,280,135 | ||||||
Investing Activities per Canadian GAAP | $ | (203,532 | ) | $ | (244,190 | ) | $ | (458,770 | ) | |||
Mineral property costs | 204,778 | 247,471 | 455,870 | |||||||||
Investing Activities per US GAAP | $ | 1,246 | $ | 3,281 | $ | (2,900 | ) | |||||
Note 12 | Comparative Figures |
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• | 59,384,972 White Knight common shares issued and outstanding as of September 30, 2006; |
• | 5,120,000 White Knight common shares issuable upon exercise of outstanding options as of September 30, 2006; and |
• | 1,500,000 White Knight common shares issuable upon exercise of outstanding warrants as of September 30, 2006. |
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• | CUN Minerals, Inc., incorporated in Nevada, 100% directly owned by White Knight. |
• | White Knight Gold (U.S.) Inc., incorporated in Delaware, 100% directly owned by White Knight. |
• | Quito Gold Corporation, incorporated in Nevada, 100% directly owned by White Knight. |
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Expenditure | Minimum Work | |||
Due Date | Expenditures ($) | |||
March 25, 2004 | 100,000 | |||
March 25, 2005 | 300,000 | |||
March 25, 2006 | 600,000 | |||
March 25, 2007 | 1,000,000 | |||
Total | 2,000,000 |
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Drill Hole | From (feet) | To (feet) | Interval (feet) | Gold (ounces per ton) | ||||||||||||
SC 9257 | 255 | 320 | 65 | 0.055 | ||||||||||||
SC 9202 | 110 | 145 | 35 | 0.096 | ||||||||||||
SC 9203 | 55 | 115 | 60 | 0.052 | ||||||||||||
SC 9210 | 30 | 130 | 100 | 0.049 | ||||||||||||
SC 55 | 105 | 145 | 40 | 0.050 | ||||||||||||
SC 30 | 100 | 145 | 45 | 0.063 | ||||||||||||
SC 27 | 185 | 210 | 25 | 0.083 |
Drill Hole | From (feet) | To (feet) | Interval (feet) | Gold (ounces per ton) | ||||||||||||
SC 9014 | 60 | 85 | 25 | 0.066 | ||||||||||||
SC 9239 | 50 | 75 | 25 | 0.054 | ||||||||||||
SC 9213 | 20 | 30 | 10 | 0.063 |
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Cash Option | Common Share | |||||||||||
Payment Due Date | Payments ($) | Issuances | ||||||||||
Initial Payment | 1,000 (paid | ) | None | |||||||||
February 1, 2003 | 1,000 (paid | ) | 20,000 (issued) | |||||||||
February 1, 2004 | 2,000 (paid | ) | 20,000 (issued) | |||||||||
February 1, 2005 | 2,000 (paid | ) | 20,000 (issued) | |||||||||
February 1, 2006 | 3,000 (paid | ) | 20,000 (issued) | |||||||||
February 1, 2007 and each year thereafter | 5,000 | None |
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Drill Hole | From (feet) | To (feet) | Interval (feet) | Gold (ounces per ton) | ||||||||||||
114-29 | 55 | 135 | 80 | 0.047 | ||||||||||||
114-34 | 60 | 165 | 105 | 0.021 | ||||||||||||
114-36 | 145 | 205 | 60 | 0.044 |
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Drill Hole | From (feet) | To (feet) | Interval (feet) | Gold (ounces per ton) | ||||||||||||
33-578 | 230 | 265 | 35 | 0.215 | ||||||||||||
33-570 | 280 | 310 | 30 | 0.209 | ||||||||||||
33-5 | 270 | 275 | 5 | 0.371 | ||||||||||||
33-321 | 290 | 330 | 40 | 0.264 | ||||||||||||
33-719 | 250 | 310 | 60 | 0.209 |
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Gold Pick Deposit | Gold Ridge North Deposit | Totals | |||||||||||||||||||||||||||||||||
Cutoff Grade | Tons | Grade | Tons | Grade | Tons | Grade | |||||||||||||||||||||||||||||
Mineralization Type | Oz Au/t | 000’s | Oz Au/t | 000’s | Oz Au/t | 000’s | Oz Au/t | ||||||||||||||||||||||||||||
Oxide | 0.01 | 4,738 | 0.039 | 1,108 | 0.034 | 5,846 | 0.038 | ||||||||||||||||||||||||||||
Carbonaceous | 0.01 | 1,954 | 0.049 | 74 | 0.037 | 2,028 | 0.049 | ||||||||||||||||||||||||||||
Totals | 0.01 | 6,692 | 0.042 | 1,182 | 0.034 | 7,874 | 0.041 | ||||||||||||||||||||||||||||
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Drill Hole | From (feet) | To (feet) | Interval (feet) | Gold (ounces per ton) | ||||||||||||
92-41 | 75 | 145 | 70 | 0.058 | ||||||||||||
SS-26 | 80 | 165 | 85 | 0.060 | ||||||||||||
SS-19 | 70 | 160 | 90 | 0.057 | ||||||||||||
SS-27 | 30 | 155 | 125 | 0.037 | ||||||||||||
92-53 | 100 | 200 | 100 | 0.035 |
Drill Hole | From (feet) | To (feet) | Interval (feet) | Gold (ounces per ton) | ||||||||||||
SS-51 | 200 | 220 | 20 | 0.019 | ||||||||||||
101-1 | 5 | 30 | 25 | 0.014 | ||||||||||||
SS-10 | 290 | 300 | 10 | 0.038 | ||||||||||||
PDSS-27 | 315 | 355 | 30 | 0.012 |
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Cash Option | Common Share | |||||||
Payment Due Date | Payments ($) | Issuances | ||||||
Initial Payment | 2,000(paid | ) | 20,000(issued) | |||||
February 1, 2003 | 2,000(paid | ) | 20,000(issued) | |||||
February 1, 2004 | 3,000(paid | ) | 20,000(issued) | |||||
February 1, 2005 | 3,000(paid | ) | 20,000(issued) | |||||
February 1, 2006 | 4,000(paid | ) | 20,000(issued) | |||||
February 1, 2007 and each year thereafter | 7,000 | None |
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Three Months Ended September 30 | Year Ended June 30 | |||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(Cdn$) | ||||||||||||||||||||||||||||
Revenue (in thousands) | $ | 129 | $ | 29 | $ | 442 | $ | 262 | $ | 98 | $ | 8 | $ | 24 | ||||||||||||||
Net Loss (in thousands) | (180 | ) | (302 | ) | (3,307 | ) | (1,063 | ) | (1,664 | ) | (357 | ) | (1,679 | ) | ||||||||||||||
Net Loss Per Share | $ | (0.003 | ) | $ | (0.005 | ) | (0.06 | ) | (0.02 | ) | (0.04 | ) | (0.01 | ) | (0.06 | ) | ||||||||||||
Dividends Per Share | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Weighted Avg. Shares (in thousands of shares) | 59,385 | 57,658 | 58,855 | 53,091 | 39,038 | 28,958 | 26,578 |
As at September 30 | As at June 30 | |||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(In thousands of Cdn$) | ||||||||||||||||||||||||||||
Working Capital | 12,582 | 16,253 | 13,239 | 11,216 | 9,805 | (87 | ) | 384 | ||||||||||||||||||||
Mineral Property Interests | 2,809 | 2,671 | 2,800 | 2,456 | 1,754 | 1,105 | 959 | |||||||||||||||||||||
Deferred Exploration Costs | 4,260 | 2,134 | 3,864 | 1,509 | 733 | 506 | 408 | |||||||||||||||||||||
Long-Term Debt | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Shareholders’ Equity | 20,786 | 21,481 | 20,902 | 15,517 | 12,590 | 1,678 | 1,994 | |||||||||||||||||||||
Total Assets | 21,225 | 21,790 | 21,502 | 15,697 | 12,720 | 1,912 | 2,134 |
Three Months Ended September 30 | Year Ended June 30 | |||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(In thousands of Cdn$) | ||||||||||||||||||||||||||||
Loss Per Share | (0.02 | ) | (0.02 | ) | (0.10 | ) | (0.05 | ) | (0.06 | ) | (0.02 | ) | (0.03 | ) | ||||||||||||||
Shareholders’ Equity (in thousands) | 14,555 | 20,737 | 15,054 | 12,205 | 10,637 | 66 | 627 |
As at September 30 | As at June 30 | |||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(In thousands of Cdn$) | ||||||||||||||||||||||||||||
Mineral Property Interests | 779 | 645 | 767 | 616 | 534 | 0 | 0 | |||||||||||||||||||||
Deferred Exploration Costs | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Total Assets | 14,994 | 17,663 | 15,654 | 12,385 | 10,767 | 300 | 767 |
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Type of Cost | 2007 | 2008 | 2009 | |||||||||
Leases | $ | 79,438 | $ | 85,379 | $ | 90,469 | ||||||
BLM Fees | $ | 444,750 | $ | 444,750 | $ | 444,750 | ||||||
County Fees | $ | 30,243 | $ | 30,243 | $ | 30,243 |
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Current | Government Body | $ Amount | Cdn$ Amount | |||||||||
Property | Status | Holding the Bond | of Bond | of Bond | ||||||||
Cottonwood | Exploration | Nevada Division of Minerals | $ | 30,885 | $ | — | ||||||
Gold Bar Horst | Exploration | Nevada Division of Minerals | 7,586 | — | ||||||||
Gold Pick | Exploration | Nevada Division of Minerals | 8,698 | — | ||||||||
Hunter | Exploration | Nevada Division of Minerals | 2,613 | — | ||||||||
Patty (Indian Ranch) | Exploration | BLM | 77,600 | — | ||||||||
McClusky Pass | Exploration | BLM, Nevada Division of Minerals | 2,114 | — | ||||||||
New Pass | Exploration | BLM | 5,982 | — | ||||||||
Slaven Canyon | Exploration | BLM | 12,997 | |||||||||
Unallocated Nevada | Exploration | BLM | 53,421 | — | ||||||||
Quito | Dropped | US Forest Service | 5,000 | — | ||||||||
Lookout | Dropped | B.C. Minister of Finance | — | 3,500 | ||||||||
MGM | Dropped | B.C. Minister of Finance | — | 2,000 |
Adit | A horizontal or nearly horizontal tunnel made for exploration or mining with one opening. |
Alluvial | Material deposited by the action of running water. |
Alteration | Any change in the mineral composition of a rock brought about by physical or chemical means. |
Argillization | Alteration of the rock which produces clay minerals. |
Audiomagnetotelluric | Geophysical technique which measures variations in the earth’s own electromagnetic field. |
Au | Gold. |
Barite | Barium sulphate. |
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Basalt | A general term for dark-colored mafic igneous rocks, commonly extrusive but locally intrusive. |
Bioclastic Turbidites | Submarine debris flows. |
Breccia | A rock in which angular fragments are surrounded by a mass of fine-grained matrix. |
Carbonate | A sediment formed by the organic or inorganic precipitation from aqueous solution of carbonates of calcium, magnesium, or iron; e.g., limestone and dolomite. |
Chert | A hard, dense, sedimentary rock, consisting primarily of cryptocrystaline quartz. |
CSAMT | Controlled Source Audio Magnetotelluric — geophysical method which measures the decay of an induced electromagnetic field. |
Devonian | Geologic era 360 million years to 410 million years. |
Dolomite | A carbonate sedimentary rock consisting of carbonate and magnesium. Often associated with and interbedded with limestone. |
Embayment | Indentation in the profile of a coastline. |
Facies | Environment in which a certain sedimentary rock unit is deposited. |
Felsic | Intrusive or volcanic rock with a high silica content. |
g/t | Grams per metric tonne. |
Greenstone | Metamorphosed intermediate to basic volcanics. |
Hematite | An oxide of iron, and one of iron’s most common ore minerals. |
Horst | A relatively uplifted rock unit or block that is bounded by faults on its long sides. |
Hydrothermal | The products or the actions of heated waters in a rock mass such as a mineral deposit precipitating from a hot solution. |
Induced Polarization | Geophysical exploration method which measures decay of an induced charge. |
Jasperoid | A dense, usually gray, siliceous rock which contains quartz instead of limestone or dolomite. |
Karsting | The development of large open spaces (caves) by the process of solution collapse. This usually takes place in limestones or other calcium carbonate rich rocks. |
Lower-plate | Generally refers to the eastern assemblage of northeastern Nevada. |
Magnetotelluric Survey | An electromagnetic survey in which natural electric and magnetic fields are measured. |
Miocene | Geologic era 23.7 Million years to 6.2 million years. |
Micritic | Fine-grained carbonate rock. |
Opt | Ounces per ton. |
Paleozoic | Geologic era 570 million years to 245 million years. |
Pod | A roughly cylindrically-shaped body of ore that decreases at the ends. |
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Table of Contents
Quarternary | The period of Earth’s history from about 2 million years ago to the present; also, the rocks and deposits of that age. |
Rhyolite | A group of extrusive igneous rocks, typically porphyritic and commonly exhibiting flow texture, with phenocrysts of quartz and alkali feldspar in a glassy to cryptocrystalline groundmass; also, any rock in that group; the extrusive equivalent of granite. |
Sediments | Solid fragmental material that originates from weathering of rocks and is transported or deposited by air, water, or ice, or that accumulates by other natural agents, such as chemical precipitation from solution or secretion by organisms, and that forms in layers on the Earth’s surface at ordinary temperatures in a loose, unconsolidated form; e.g., sand, gravel, silt, mud, alluvium. |
Siliclastic | Sedimentary rock with a high silica content. |
Siltstone | An indurated silt having the texture and composition of shale but lacking its fine lamination or fissility; a massive mudstone in which the silt predominates over clay. |
Tertiary | Geologic era 57 million years to recent. |
Upper-plate | Generally refers to the western assemblage of northeastern Nevada. |
• | A final or bankable feasibility study is required to meet the requirements to designate reserves. |
• | A historic three year average price must be used in any reserve or cash flow analysis to designate reserves. |
• | To qualify as a reserve, the primary environmental analysis should be submitted to governmental authorities. |
Mineral Reserve | The economically mineable part of a measured or indicated mineral resource demonstrated by a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that might occur when the material is mined. |
Proven Mineral Reserve | The economically mineable part of a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining processing, metallurgical, economic, and |
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Table of Contents
other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified. |
Probable Mineral Reserve | The economically mineable part of an indicated, and in some circumstances, a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. |
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 a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted form specific geological evidence and knowledge. |
Measured Mineral Resource | That part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. |
Indicated Mineral Resource | That part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. |
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 limited sampling 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. |
Preliminary Feasibility Study | A comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has determined, and includes a financial analysis based on reasonable assumptions of technical, engineering, legal, operating, and economic factors and evaluation of other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be classified as a mineral reserve. |
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Metric Measurement | U.S. Equivalent | Multiply Metric Figure by: | ||||
Hectares | Acres | 2.471 | ||||
Meters | Feet (ft.) | 3.281 | ||||
Kilometers (km) | Miles | 0.621 | ||||
Tonnes | Tons (2000 pounds) | 1.102 | ||||
Grams/tonne | Ounces (troy/tonne) | 0.029 |
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(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JUNE 30, 2006
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-U.S. REPORTING DIFFERENCE
E-43
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(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
As at June 30 | ||||||||
2006 | 2005 | |||||||
(Expressed in Canadian Dollars) | ||||||||
ASSETS | ||||||||
Current | ||||||||
Cash | $ | 11,397,885 | $ | 282,459 | ||||
Temporary investments (Note 3) | 2,107,699 | 10,895,443 | ||||||
Receivables (net of allowance — $NIL; 2005 — $NIL) | 117,490 | 176,164 | ||||||
Prepaid expenses | 49,370 | 41,974 | ||||||
Total current assets | 13,672,444 | 11,396,040 | ||||||
Mineral property interests(Note 4) | 2,799,619 | 2,456,147 | ||||||
Deferred exploration costs(Note 5) | 3,864,359 | 1,508,878 | ||||||
Equipment(Note 6) | 930,853 | 139,118 | ||||||
Restricted reclamation bonds(Note 12) | 234,783 | 196,692 | ||||||
Total assets | $ | 21,502,058 | $ | 15,696,875 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current | ||||||||
Accounts payable and accrued liabilities | $ | 315,515 | $ | 161,831 | ||||
Due to related parties (Note 7) | 118,002 | 17,754 | ||||||
Total current liabilities | 433,517 | 179,585 | ||||||
Asset retirement obligation(Note 8) | 165,985 | |||||||
Total Liabilities | 599,502 | 179,585 | ||||||
Shareholders’ equity | ||||||||
Capital stock (Note 9) | ||||||||
Authorized: unlimited common shares without par value | ||||||||
Issued and outstanding 59,384,972 (2005 — 54,089,386) | 33,630,385 | 26,844,701 | ||||||
Contributed surplus | 3,153,572 | 1,246,525 | ||||||
Deficit accumulated during the exploration stage | (15,881,401 | ) | (12,573,936 | ) | ||||
Total shareholders’ equity | 20,902,556 | 15,517,290 | ||||||
Total liabilities and shareholders’ equity | $ | 21,502,058 | $ | 15,696,875 | ||||
Nature and continuance of operations(Note 1) | ||||||||
Commitments(Note 14) | ||||||||
On behalf of the Board: |
Director | Director | |||||
/s/ John M. Leask | /s/ Megan Cameron-Jones | |||||
John M. Leask | Megan Cameron-Jones |
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(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30 | ||||||||||||||||
Cumulative | ||||||||||||||||
Amounts from | ||||||||||||||||
Inception on | ||||||||||||||||
December 18, 1986 | ||||||||||||||||
to June 30, 2006 | 2006 | 2005 | 2004 | |||||||||||||
(Expressed in Canadian Dollars) | ||||||||||||||||
ADMINISTRATION COSTS | ||||||||||||||||
Amortization | $ | 220,145 | $ | 34,051 | $ | 30,546 | $ | 13,893 | ||||||||
Audit | 255,423 | 116,362 | 48,696 | 10,950 | ||||||||||||
Bank charges and interest | 26,349 | 7,464 | 5,762 | 1,520 | ||||||||||||
Consulting | 1,283,627 | 123,809 | 116,588 | 82,540 | ||||||||||||
Consulting — stock-based compensation (Note 9) | 3,263,846 | 2,275,298 | 148,543 | 840,005 | ||||||||||||
Investor relations and shareholder information | 665,974 | 175,427 | 123,189 | 52,889 | ||||||||||||
Legal | 641,631 | 120,155 | 26,958 | 23,196 | ||||||||||||
Management fees — related party (Note 7) | 1,437,910 | 264,000 | 264,000 | 210,000 | ||||||||||||
Office and miscellaneous | 753,670 | 96,089 | 85,068 | 56,201 | ||||||||||||
Rent | 338,199 | 56,497 | 54,873 | 28,300 | ||||||||||||
Telephone | 204,215 | 21,183 | 16,444 | 8,898 | ||||||||||||
Transfer agent and listing fees | 305,597 | 43,589 | 31,029 | 55,506 | ||||||||||||
Travel and entertainment | 505,337 | 108,044 | 69,132 | 52,569 | ||||||||||||
Wages and benefits | 831,071 | 130,998 | 79,918 | 31,863 | ||||||||||||
Loss before other items | (10,732,994 | ) | (3,572,966 | ) | (1,100,746 | ) | (1,468,330 | ) | ||||||||
OTHER ITEMS | ||||||||||||||||
Write-off of deferred exploration costs (Note 5) | (3,560,589 | ) | (143,783 | ) | (194,598 | ) | (241,549 | ) | ||||||||
Interest income | 1,295,734 | 442,036 | 261,600 | 97,920 | ||||||||||||
Option payments received (net) | 633,519 | |||||||||||||||
Write-off of mineral property interests | (3,814,257 | ) | ||||||||||||||
Gain (loss) on foreign exchange | 125,574 | (11,574 | ) | (60,377 | ) | (9,299 | ) | |||||||||
Gain (loss) on disposal of temporary investments | 166,591 | (23,927 | ) | |||||||||||||
Unrealized recovery (loss) on temporary investments (Note 3) | (8,846 | ) | 2,749 | 31,404 | (42,999 | ) | ||||||||||
Gain (loss) on disposal of equipment | 13,867 | (757 | ) | |||||||||||||
(5,148,407 | ) | 265,501 | 37,272 | (195,927 | ) | |||||||||||
Loss for the period | $ | (15,881,401 | ) | $ | (3,307,465 | ) | $ | (1,063,474 | ) | $ | (1,664,257 | ) | ||||
Basic and diluted loss per common share | $ | (0.06 | ) | $ | (0.02 | ) | $ | (0.04 | ) | |||||||
Weighted average number of common shares outstanding | 58,855,176 | 53,091,304 | 39,038,472 | |||||||||||||
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Deficit | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
During the | ||||||||||||||||||||||||
Number of | Contributed | Exploration | ||||||||||||||||||||||
Shares | Price | Amount | Surplus | Stage | Total | |||||||||||||||||||
(Expressed in Canadian Dollars) | ||||||||||||||||||||||||
Balance, June 30, 1986 | $ | $ | $ | $ | $ | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Incorporation | 1 | |||||||||||||||||||||||
Initial offering | 201,200 | 0.13 | 26,300 | 26,300 | ||||||||||||||||||||
Loss for the period | (17,325 | ) | (17,325 | ) | ||||||||||||||||||||
Balance, June 30, 1987 | 201,201 | 26,300 | (17,325 | ) | 8,975 | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Initial offering | 1,176,400 | 0.12 | 138,100 | 138,100 | ||||||||||||||||||||
Loss for the year | (49,793 | ) | (49,793 | ) | ||||||||||||||||||||
Balance, June 30, 1988 | 1,377,601 | 164,400 | (67,118 | ) | 97,282 | |||||||||||||||||||
Loss for the year | (44,166 | ) | (44,166 | ) | ||||||||||||||||||||
Balance, June 30, 1989 | 1,377,601 | 164,400 | (111,284 | ) | 53,116 | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 150,000 | 0.46 | 68,499 | 68,499 | ||||||||||||||||||||
Exercise of stock options | 332,680 | 0.40 | 133,072 | 133,072 | ||||||||||||||||||||
Private placement | 350,000 | 0.40 | 140,000 | 140,000 | ||||||||||||||||||||
Private placement | 250,000 | 0.50 | 125,000 | 125,000 | ||||||||||||||||||||
Flow-through private placement | 279,905 | 0.54 | 150,100 | 150,100 | ||||||||||||||||||||
Exercise of agent’s warrants | 105,000 | 0.40 | 42,000 | 42,000 | ||||||||||||||||||||
Private placement expenses | (30,000 | ) | (30,000 | ) | ||||||||||||||||||||
Loss for the year | (282,410 | ) | (282,410 | ) | ||||||||||||||||||||
Balance, June 30, 1990 | 2,845,186 | 793,071 | (393,694 | ) | 399,377 | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Exercise of stock options | 50,000 | 0.90 | 45,000 | 45,000 | ||||||||||||||||||||
Exercise of stock options | 262,250 | 0.28 | 73,430 | 73,430 | ||||||||||||||||||||
Private placement | 600,000 | 0.15 | 90,000 | 90,000 | ||||||||||||||||||||
Private placement | 263,158 | 0.95 | 250,000 | 250,000 | ||||||||||||||||||||
Flow-through private placement | 286,666 | 0.15 | 43,000 | 43,000 | ||||||||||||||||||||
Loss for the year | (119,275 | ) | (119,275 | ) | ||||||||||||||||||||
Balance, June 30, 1991 | 4,307,260 | $ | 1,294,501 | $ | $ | (512,969 | ) | $ | 781,532 | |||||||||||||||
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Deficit | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
During the | ||||||||||||||||||||||||
Number of | Contributed | Exploration | ||||||||||||||||||||||
Shares | Price | Amount | Surplus | Stage | Total | |||||||||||||||||||
(Expressed in Canadian Dollars) | ||||||||||||||||||||||||
Balance, June 30, 1991 | 4,307,260 | $ | $ | 1,294,501 | $ | $ | (512,969 | ) | $ | 781,532 | ||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 100,000 | 0.29 | 29,000 | 29,000 | ||||||||||||||||||||
Exercise of stock options | 245,000 | 0.15 | 36,750 | 36,750 | ||||||||||||||||||||
Debt settlement | 114,308 | 0.53 | 60,869 | 60,869 | ||||||||||||||||||||
Private placement | 55,555 | 0.18 | 10,000 | 10,000 | ||||||||||||||||||||
Finder’s fee | 9,000 | 0.33 | 2,970 | 2,970 | ||||||||||||||||||||
Private placement | 300,000 | 0.33 | 99,000 | 99,000 | ||||||||||||||||||||
Private placement | 122,222 | 0.45 | 55,000 | 55,000 | ||||||||||||||||||||
Exercise of warrants | 460,000 | 0.20 | 92,000 | 92,000 | ||||||||||||||||||||
Exercise of warrants | 75,000 | 0.33 | 24,750 | 24,750 | ||||||||||||||||||||
Loss for the year | (164,398 | ) | (164,398 | ) | ||||||||||||||||||||
Balance, June 30, 1992 | 5,788,345 | 1,704,840 | (677,367 | ) | 1,027,473 | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 250,000 | 0.20 | 50,000 | 50,000 | ||||||||||||||||||||
Exercise of stock options | 189,999 | 0.15 | 28,500 | 28,500 | ||||||||||||||||||||
Exercise of stock options | 395,000 | 0.20 | 79,000 | 79,000 | ||||||||||||||||||||
Private placement | 500,000 | 0.40 | 200,000 | 200,000 | ||||||||||||||||||||
Private placement | 20,000 | 0.45 | 9,000 | 9,000 | ||||||||||||||||||||
Private placement | 28,000 | 0.50 | 14,000 | 14,000 | ||||||||||||||||||||
Loss for the year | (115,290 | ) | (115,290 | ) | ||||||||||||||||||||
Balance, June 30, 1993 | 7,171,344 | 2,085,340 | (792,657 | ) | 1,292,683 | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 190,000 | 0.24 | 46,000 | 46,000 | ||||||||||||||||||||
Exercise of stock options | 15,000 | 0.15 | 2,250 | 2,250 | ||||||||||||||||||||
Exercise of stock options | 132,000 | 0.21 | 27,720 | 27,720 | ||||||||||||||||||||
Private placement | 600,000 | 0.15 | 90,000 | 90,000 | ||||||||||||||||||||
Private placement | 300,000 | 0.23 | 67,500 | 67,500 | ||||||||||||||||||||
Loss for the year | (1,051,873 | ) | (1,051,873 | ) | ||||||||||||||||||||
Balance, June 30, 1994 | 8,408,344 | 2,318,810 | (1,844,530 | ) | 474,280 |
E-47
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Deficit | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
During the | ||||||||||||||||||||||||
Number of | Contributed | Exploration | ||||||||||||||||||||||
Shares | Price | Amount | Surplus | Stage | Total | |||||||||||||||||||
(Expressed in Canadian Dollars) | ||||||||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 70,000 | $ | 0.17 | $ | 11,900 | $ | 11,900 | |||||||||||||||||
Loss for the year | (84,711 | ) | (84,711 | ) | ||||||||||||||||||||
Balance, June 30, 1995 | 8,478,344 | 2,330,710 | (1,929,241 | ) | 401,469 | |||||||||||||||||||
Balance, June 30, 1995 | 8,478,344 | 2,330,710 | (1,929,241 | ) | 401,469 | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 130,000 | 0.50 | 65,000 | 65,000 | ||||||||||||||||||||
Exercise of stock options | 4,000 | 0.62 | 2,480 | 2,480 | ||||||||||||||||||||
Exercise of stock options | 580,000 | 0.22 | 127,600 | 127,600 | ||||||||||||||||||||
Exercise of stock options | 265,000 | 0.30 | 79,500 | 79,500 | ||||||||||||||||||||
Private placement | 650,000 | 0.30 | 195,000 | 195,000 | ||||||||||||||||||||
Private placement | 1,800,000 | 0.15 | 270,000 | 270,000 | ||||||||||||||||||||
Private placement | 500,000 | 0.46 | 230,000 | 230,000 | ||||||||||||||||||||
Private placement | 2,000,000 | 0.68 | 1,360,000 | 1,360,000 | ||||||||||||||||||||
Exercise of warrants | 10,000 | 0.30 | 3,000 | 3,000 | ||||||||||||||||||||
Exercise of warrants | 600,000 | 0.17 | 102,000 | 102,000 | ||||||||||||||||||||
Exercise of warrants | 300,000 | 0.26 | 78,000 | 78,000 | ||||||||||||||||||||
Loss for the year | (288,538 | ) | (288,538 | ) | ||||||||||||||||||||
Balance, June 30, 1996 | 15,317,344 | 4,843,290 | (2,217,779 | ) | 2,625,511 | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Exercise of stock options | 205,000 | 0.78 | 159,900 | 159,900 | ||||||||||||||||||||
Exercise of stock options | 9,500 | 0.62 | 5,890 | 5,890 | ||||||||||||||||||||
Private placement | 100,000 | 1.40 | 140,000 | 140,000 | ||||||||||||||||||||
Private placement | 3,600,000 | 1.00 | 3,600,000 | 3,600,000 | ||||||||||||||||||||
Exercise of warrants | 470,000 | 0.30 | 141,000 | 141,000 | ||||||||||||||||||||
Exercise of warrants | 225,000 | 0.15 | 33,750 | 33,750 | ||||||||||||||||||||
Exercise of warrants | 500,000 | 0.46 | 230,000 | 230,000 | ||||||||||||||||||||
Loss for the year | (477,124 | ) | (477,124 | ) | ||||||||||||||||||||
Balance, June 30, 1997 | 20,426,844 | 9,153,830 | (2,694,903 | ) | 6,458,927 | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 70,000 | 1.32 | 92,700 | 92,700 | ||||||||||||||||||||
Exercise of warrants | 1,575,000 | 0.17 | 267,750 | 267,750 | ||||||||||||||||||||
Loss for the year | (1,063,932 | ) | (1,063,932 | ) | ||||||||||||||||||||
Balance, June 30, 1998 | 22,071,844 | 9,514,280 | (3,758,835 | ) | 5,755,445 |
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Table of Contents
Deficit | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
During the | ||||||||||||||||||||||||
Number of | Contributed | Exploration | ||||||||||||||||||||||
Shares | Price | Amount | Surplus | Stage | Total | |||||||||||||||||||
(Expressed in Canadian Dollars) | ||||||||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Private placement | 3,708,132 | $ | 0.38 | $ | 1,409,090 | $ | $ | $ | 1,409,090 | |||||||||||||||
Mineral property interests | 70,000 | 0.41 | 28,500 | 28,500 | ||||||||||||||||||||
Management bonus | 500,000 | 0.30 | 150,000 | 150,000 | ||||||||||||||||||||
Loss for the year | (2,173,417 | ) | (2,173,417 | ) | ||||||||||||||||||||
Balance, June 30, 1999 | 26,349,976 | 11,101,870 | (5,932,252 | ) | 5,169,618 | |||||||||||||||||||
Balance, June 30, 1999 | 26,349,976 | 11,101,870 | (5,932,252 | ) | 5,169,618 | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 170,000 | 0.27 | 46,300 | 46,300 | ||||||||||||||||||||
Loss for the year | (1,234,438 | ) | (1,234,438 | ) | ||||||||||||||||||||
Balance, June 30, 2000 | 26,519,976 | 11,148,170 | (7,166,690 | ) | 3,981,480 | |||||||||||||||||||
Loss for the year | (642,586 | ) | (642,586 | ) | ||||||||||||||||||||
Balance, June 30, 2001 | 26,519,976 | 11,148,170 | (7,809,276 | ) | 3,338,894 | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 20,000 | 0.20 | 4,000 | 4,000 | ||||||||||||||||||||
Exercise of stock options | 300,000 | 0.10 | 30,000 | 30,000 | ||||||||||||||||||||
Private placement | 1,764,706 | 0.17 | 300,000 | 300,000 | ||||||||||||||||||||
Finder’s fee | 176,470 | |||||||||||||||||||||||
Loss for the year | (1,679,183 | ) | (1,679,183 | ) | ||||||||||||||||||||
Balance, June 30, 2002 | 28,781,152 | 11,482,170 | (9,488,459 | ) | 1,993,711 | |||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 40,000 | 0.20 | 8,000 | 8,000 | ||||||||||||||||||||
Exercise of stock options | 337,500 | 0.10 | 33,750 | 33,750 | ||||||||||||||||||||
Loss for the year | (357,746 | ) | (357,746 | ) | ||||||||||||||||||||
Balance, June 30, 2003 | 29,158,652 | 11,523,920 | (9,846,205 | ) | 1,677,715 |
E-49
Table of Contents
Deficit | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
During the | ||||||||||||||||||||||||
Number of | Contributed | Exploration | ||||||||||||||||||||||
Shares | Price | Amount | Surplus | Stage | Total | |||||||||||||||||||
(Expressed in Canadian Dollars) | ||||||||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 40,000 | $ | 0.78 | $ | 31,200 | $ | $ | $ | 31,200 | |||||||||||||||
Exercise of stock options | 1,712,500 | 0.10 | 171,250 | 171,250 | ||||||||||||||||||||
Exercise of stock options | 422,000 | 0.23 | 97,060 | 97,060 | ||||||||||||||||||||
Private placement | 2,500,000 | 0.40 | 1,000,000 | 1,000,000 | ||||||||||||||||||||
Finder’s fee | 125,000 | |||||||||||||||||||||||
Private placement | 7,764,704 | 0.85 | 6,599,998 | 6,599,998 | ||||||||||||||||||||
Private placement | 2,222,222 | 0.90 | 2,000,000 | 2,000,000 | ||||||||||||||||||||
Exercise of warrants | 3,708,132 | 0.44 | 1,631,578 | 1,631,578 | ||||||||||||||||||||
Exercise of warrants | 1,941,176 | 0.25 | 485,294 | 485,294 | ||||||||||||||||||||
Exercise of warrants | 435,000 | 0.60 | 261,000 | 261,000 | ||||||||||||||||||||
Private placement expenses | (896,428 | ) | 355,906 | (540,522 | ) | |||||||||||||||||||
Stock-based compensation | 840,005 | 840,005 | ||||||||||||||||||||||
Loss for the year | (1,664,257 | ) | (1,664,257 | ) | ||||||||||||||||||||
Balance, June 30, 2004 | 50,029,386 | 22,904,872 | 1,195,911 | (11,510,462 | ) | 12,590,321 | ||||||||||||||||||
Balance, June 30, 2004 | 50,029,386 | 22,904,872 | 1,195,911 | (11,510,462 | ) | 12,590,321 | ||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 40,000 | 0.71 | 28,400 | 28,400 | ||||||||||||||||||||
Exercise of stock options (Note 9) | 230,000 | 0.30 | 120,125 | 120,125 | ||||||||||||||||||||
Exercise of warrants (Note 9) | 1,965,000 | 0.60 | 1,179,000 | 1,179,000 | ||||||||||||||||||||
Exercise of broker’s warrants (Note 9) | 325,000 | 0.60 | 242,304 | 242,304 | ||||||||||||||||||||
Private placement | 1,500,000 | 1.58 | 2,370,000 | 2,370,000 | ||||||||||||||||||||
Stock-based compensation | 148,543 | 148,543 | ||||||||||||||||||||||
Less: Fair market value of stock options and broker’s warrants exercised | (97,929 | ) | (97,929 | ) | ||||||||||||||||||||
Loss for the year | (1,063,474 | ) | (1,063,474 | ) | ||||||||||||||||||||
Balance, June 30, 2005 | 54,089,386 | 26,844,701 | 1,246,525 | (12,573,936 | ) | 15,517,290 |
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Deficit | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
During the | ||||||||||||||||||||||||
Number of | Contributed | Exploration | ||||||||||||||||||||||
Shares | Price | Amount | Surplus | Stage | Total | |||||||||||||||||||
(Expressed in Canadian Dollars) | ||||||||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Mineral property interests | 40,000 | $ | 1.80 | $ | 72,000 | $ | $ | $ | 72,000 | |||||||||||||||
Exercise of stock options (Note 9) | 315,000 | 0.54 | 298,384 | 298,384 | ||||||||||||||||||||
Exercise of warrants (Note 9) | 4,397,057 | 1.25 | 5,496,321 | 5,496,321 | ||||||||||||||||||||
Exercise of broker’s warrants (Note 9) | 543,529 | 1.25 | 918,979 | 918,979 | ||||||||||||||||||||
Stock-based compensation | 2,275,298 | 2,275,298 | ||||||||||||||||||||||
Less: Fair market value of stock options and broker’s warrants exercised | (368,251 | ) | (368,251 | ) | ||||||||||||||||||||
Loss for the year | (3,307,465 | ) | (3,307,465 | ) | ||||||||||||||||||||
Balance, June 30, 2006 | 59,384,972 | $ | 33,630,385 | $ | 3,153,572 | $ | (15,881,401 | ) | $ | 20,902,556 | ||||||||||||||
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Year Ended June 30 | ||||||||||||||||
Cumulative | ||||||||||||||||
Amounts from | ||||||||||||||||
Inception on | ||||||||||||||||
December 18, | ||||||||||||||||
1986 to | ||||||||||||||||
June 30, | ||||||||||||||||
2006 | 2006 | 2005 | 2004 | |||||||||||||
(Expressed in Canadian Dollars) | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||
Loss for the period | $ | (15,881,401 | ) | $ | (3,307,465 | ) | $ | (1,063,474 | ) | $ | (1,664,257 | ) | ||||
Items not affecting cash: | ||||||||||||||||
Amortization | 220,145 | 34,051 | 30,546 | 13,893 | ||||||||||||
Write-off of mineral property interests | 3,814,257 | |||||||||||||||
Write-off of deferred exploration costs | 3,560,589 | 143,783 | 194,598 | 241,549 | ||||||||||||
Loss (gain) on disposal of equipment | (13,867 | ) | 757 | |||||||||||||
Stock-based compensation | 3,263,846 | 2,275,298 | 148,543 | 840,005 | ||||||||||||
Unrealized loss (recovery) on temporary investments | 8,846 | (2,749 | ) | (31,404 | ) | 42,999 | ||||||||||
Loss (gain) on disposal of investments | (166,591 | ) | 23,927 | |||||||||||||
Shares issued for management bonus | 150,000 | |||||||||||||||
Changes in non-cash working capital items: | ||||||||||||||||
Decrease (increase) in receivables | (117,490 | ) | 58,674 | (103,457 | ) | (70,608 | ) | |||||||||
Increase in prepaid expenses | (49,370 | ) | (7,396 | ) | (26,214 | ) | (4,374 | ) | ||||||||
Increase (decrease) in accounts payable and accrued liabilities | 298,409 | 75,709 | (51,640 | ) | 12,714 | |||||||||||
Increase (decrease) in due to related parties | 118,002 | 100,248 | (52,616 | ) | (153,168 | ) | ||||||||||
Net cash used in operating activities | (4,794,625 | ) | (605,920 | ) | (954,361 | ) | (741,247 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||
Issuance of capital stock | 32,724,773 | 6,345,433 | 3,813,500 | 11,705,658 | ||||||||||||
Net cash provided by financing activities | 32,724,773 | 6,345,433 | 3,813,500 | 11,705,658 | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||||
Acquisition of mineral property interests | (6,046,712 | ) | (288,777 | ) | (673,373 | ) | (611,213 | ) | ||||||||
Deferred exploration costs | (7,339,341 | ) | (2,413,657 | ) | (816,648 | ) | (442,661 | ) | ||||||||
Restricted reclamation bond refunded (posted) | (228,453 | ) | (31,761 | ) | 15,547 | (65,252 | ) | |||||||||
Acquisition (disposal) of temporary investments (net) | (1,909,954 | ) | 8,806,566 | (3,413,215 | ) | (7,493,823 | ) | |||||||||
Proceeds from disposal of equipment | 58,141 | 1,968 | ||||||||||||||
Acquisition of equipment | (1,065,944 | ) | (696,458 | ) | (86,486 | ) | (89,321 | ) | ||||||||
Net cash provided by (used in) investing activities | (16,532,263 | ) | 5,375,913 | (4,972,207 | ) | (8,702,270 | ) | |||||||||
Increase (decrease) in cash during the period | 11,397,885 | 11,115,426 | (2,113,068 | ) | 2,262,141 | |||||||||||
Cash, beginning of period | 282,459 | 2,395,527 | 133,386 | |||||||||||||
Cash, end of period | $ | 11,397,885 | $ | 11,397,885 | $ | 282,459 | $ | 2,395,527 | ||||||||
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. | NATURE AND CONTINUANCE OF OPERATIONS |
2006 | 2005 | |||||||
Working capital | $ | 13,238,927 | $ | 11,216,455 | ||||
Deficit | (15,881,401 | ) | (12,573,936 | ) |
2. | SIGNIFICANT ACCOUNTING POLICIES |
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CUN Minerals Inc.
Quito Gold Corp.
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Vehicles and technical equipment | 30 | % | ||
Office equipment | 20 | % |
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3. | TEMPORARY INVESTMENTS |
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
4. | MINERAL PROPERTY INTERESTS |
Balance at | Balance at | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2005 | Additions | Recovery | 2006 | |||||||||||||
Nevada Properties | ||||||||||||||||
Benmark | $ | 61,163 | $ | 19,955 | $ | $ | 81,118 | |||||||||
Celt | 283,867 | 1,052 | 284,919 | |||||||||||||
Cottonwood | 93,403 | 66,811 | 160,214 | |||||||||||||
Fye Canyon | 173,778 | 47 | 173,825 | |||||||||||||
Gold Bar Horst | 120,828 | 28,409 | 149,237 | |||||||||||||
Gold Pick | 19,555 | 5,001 | 24,556 | |||||||||||||
Goldstone | 22,684 | 9,625 | 32,309 | |||||||||||||
Hunter | 88,788 | 48,103 | 136,891 | |||||||||||||
Ian | 18,930 | 12,387 | 31,317 | |||||||||||||
Knolls | 58,154 | 27,948 | 86,102 | |||||||||||||
McClusky Pass | 96,737 | 37,723 | 134,460 | |||||||||||||
New Pass | 419,727 | 1,062 | (1,057 | ) | 419,732 | |||||||||||
Pat Canyon | 81,163 | 27,634 | 108,797 | |||||||||||||
Patty (formerly Indian Ranch) | 108,402 | 108,402 | ||||||||||||||
Slaven Canyon | 254,556 | 110,871 | 365,427 | |||||||||||||
South Cabin Creek | 34,349 | 13,040 | 47,389 | |||||||||||||
Squaw Creek | 377,471 | 1,498 | (108,708 | ) | 270,261 | |||||||||||
Tonkin Summit | 100,788 | 28,875 | 129,663 | |||||||||||||
Other | 41,804 | 13,196 | 55,000 | |||||||||||||
Total Nevada Properties | $ | 2,456,147 | $ | 453,237 | $ | (109,765 | ) | $ | 2,799,619 | |||||||
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Balance at | Balance at | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2004 | Additions | Recovery | 2005 | |||||||||||||
Nevada Properties | ||||||||||||||||
Benmark | $ | 24,922 | $ | 36,241 | $ | $ | 61,163 | |||||||||
Celt | 106,057 | 194,427 | (16,617 | ) | 283,867 | |||||||||||
Cottonwood | 58,016 | 35,387 | 93,403 | |||||||||||||
Fye Canyon | 119,889 | 57,559 | (3,670 | ) | 173,778 | |||||||||||
Gold Bar Horst | 82,543 | 38,285 | 120,828 | |||||||||||||
Gold Pick | 10,811 | 8,744 | 19,555 | |||||||||||||
Goldstone | 19,846 | 2,838 | 22,684 | |||||||||||||
Hunter | 62,830 | 25,958 | 88,788 | |||||||||||||
Ian | 18,930 | 18,930 | ||||||||||||||
Knolls | 58,154 | 58,154 | ||||||||||||||
McClusky Pass | 56,194 | 40,543 | 96,737 | |||||||||||||
New Pass | 402,981 | 17,888 | (1,142 | ) | 419,727 | |||||||||||
Pat Canyon | 34,965 | 46,198 | 81,163 | |||||||||||||
Patty (formerly Indian Ranch) | 108,402 | 108,402 | ||||||||||||||
Slaven Canyon | 163,314 | 91,242 | 254,556 | |||||||||||||
South Cabin Creek | 17,426 | 16,923 | 34,349 | |||||||||||||
Squaw Creek | 426,563 | 25,511 | (74,603 | ) | 377,471 | |||||||||||
Tonkin Summit | 59,615 | 41,173 | 100,788 | |||||||||||||
Other | 41,804 | 41,804 | ||||||||||||||
Total Nevada Properties | $ | 1,754,374 | $ | 797,805 | $ | (96,032 | ) | $ | 2,456,147 | |||||||
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Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Balance at | Balance at | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2003 | Additions | Recovery | 2004 | |||||||||||||
Nevada Properties | ||||||||||||||||
Benmark | $ | $ | 24,922 | $ | $ | 24,922 | ||||||||||
Celt | 106,057 | 106,057 | ||||||||||||||
Cottonwood | 30,692 | 27,324 | 58,016 | |||||||||||||
Fye Canyon | 119,889 | 119,889 | ||||||||||||||
Gold Bar Horst | 61,700 | 20,843 | 82,543 | |||||||||||||
Gold Pick | 8,202 | 2,609 | 10,811 | |||||||||||||
Goldstone | 19,846 | 19,846 | ||||||||||||||
Hunter | 36,203 | 26,627 | 62,830 | |||||||||||||
McClusky Pass | 400 | 55,794 | 56,194 | |||||||||||||
New Pass | 387,381 | 15,600 | 402,981 | |||||||||||||
Pat Canyon | 34,965 | 34,965 | ||||||||||||||
Patty (formerly Indian Ranch) | 108,402 | 108,402 | ||||||||||||||
Slaven Canyon | 54,177 | 109,137 | 163,314 | |||||||||||||
South Cabin Creek | 13,052 | 4,374 | 17,426 | |||||||||||||
Squaw Creek | 404,550 | 22,013 | 426,563 | |||||||||||||
Tonkin Summit | 59,615 | 59,615 | ||||||||||||||
Total Nevada Properties | $ | 1,104,759 | $ | 649,615 | $ | $ | 1,754,374 | |||||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5. | DEFERRED EXPLORATION COSTS |
Balance at | Balance at | |||||||||||
June 30, | June 30, | |||||||||||
By Type of Cost | 2005 | Additions | 2006 | |||||||||
Assays | $ | 713,694 | $ | 170,016 | $ | 883,710 | ||||||
Consulting | 2,875,000 | 573,571 | 3,448,571 | |||||||||
Drafting and report preparation | 431,177 | 12,385 | 443,562 | |||||||||
Drilling | 3,103,814 | 1,474,859 | 4,578,673 | |||||||||
Field operations | 847,547 | 151,922 | 999,469 | |||||||||
Reclamation | 191,795 | 176,375 | 368,170 | |||||||||
Recording | 80,079 | 80,079 | ||||||||||
Supervision | 374,039 | 17,668 | 391,707 | |||||||||
Surveys | 740,154 | 70,595 | 810,749 | |||||||||
Trenching and site preparation | 397,332 | 75,376 | 472,708 | |||||||||
Recovery | (4,998,875 | ) | (223,503 | ) | (5,222,378 | ) | ||||||
Write-off | (3,246,878 | ) | (143,783 | ) | (3,390,661 | ) | ||||||
Total | $ | 1,508,878 | $ | 2,355,481 | $ | 3,864,359 | ||||||
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Balance at | Balance at | |||||||||||
June 30, | June 30, | |||||||||||
By Type of Cost | 2004 | Additions | 2005 | |||||||||
Assays | $ | 681,131 | $ | 32,563 | $ | 713,694 | ||||||
Consulting | 2,577,377 | 297,623 | 2,875,000 | |||||||||
Drafting and report preparation | 416,202 | 14,975 | 431,177 | |||||||||
Drilling | 2,753,845 | 349,969 | 3,103,814 | |||||||||
Field operations | 771,641 | 75,906 | 847,547 | |||||||||
Reclamation | 179,489 | 12,306 | 191,795 | |||||||||
Recording | 80,079 | 80,079 | ||||||||||
Supervision | 356,723 | 17,316 | 374,039 | |||||||||
Surveys | 497,305 | 242,849 | 740,154 | |||||||||
Trenching and site preparation | 368,921 | 28,411 | 397,332 | |||||||||
Recovery | (4,897,361 | ) | (101,514 | ) | (4,998,875 | ) | ||||||
Write-off | (3,052,280 | ) | (194,598 | ) | (3,246,878 | ) | ||||||
Total | $ | 733,072 | $ | 775,806 | $ | 1,508,878 | ||||||
Balance at | Balance at | |||||||||||
June 30, | June 30, | |||||||||||
By Type of Cost | 2003 | Additions | 2004 | |||||||||
Assays | $ | 680,604 | $ | 527 | $ | 681,131 | ||||||
Consulting | 2,342,159 | 235,218 | 2,577,377 | |||||||||
Drafting and report preparation | 393,336 | 22,866 | 416,202 | |||||||||
Drilling | 2,753,845 | 2,753,845 | ||||||||||
Field operations | 739,812 | 31,829 | 771,641 | |||||||||
Reclamation | 178,609 | 880 | 179,489 | |||||||||
Recording | 80,079 | 80,079 | ||||||||||
Supervision | 356,177 | 546 | 356,723 | |||||||||
Surveys | 320,921 | 176,384 | 497,305 | |||||||||
Trenching and site preparation | 368,921 | 368,921 | ||||||||||
Recovery | (4,897,361 | ) | (4,897,361 | ) | ||||||||
Write-off | (2,810,731 | ) | (241,549 | ) | (3,052,280 | ) | ||||||
Total | $ | 506,371 | $ | 226,701 | $ | 733,072 | ||||||
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Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Balance at | Balance at | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
By Property | 2005 | Additions | Recoveries | Write-offs | 2006 | |||||||||||||||
Nevada Properties | ||||||||||||||||||||
Benmark | $ | 6,743 | $ | 25,388 | $ | $ | $ | 32,131 | ||||||||||||
Celt | 70,920 | 4,729 | (58,144 | ) | 17,505 | |||||||||||||||
Cottonwood | 105,702 | 351,546 | 457,248 | |||||||||||||||||
Fye Canyon | 78,139 | 816 | (58,144 | ) | 20,811 | |||||||||||||||
Gold Bar Horst | 54,943 | 92,504 | 147,447 | |||||||||||||||||
Gold Pick | 75,290 | 389,571 | 464,861 | |||||||||||||||||
Goldstone | 3,864 | 3,864 | ||||||||||||||||||
Hunter | 24,926 | 9,260 | 34,186 | |||||||||||||||||
Ian | 625 | 625 | ||||||||||||||||||
Knolls | 9,636 | 11,723 | 21,359 | |||||||||||||||||
McClusky Pass | 71,157 | 458,007 | 529,164 | |||||||||||||||||
New Pass | 162,063 | 9,301 | (107,215 | ) | 64,149 | |||||||||||||||
Pat Canyon | 22,846 | 22,846 | ||||||||||||||||||
Patty (formerly Indian Ranch) | 24,223 | 92,487 | 116,710 | |||||||||||||||||
Slaven Canyon | 730,729 | 1,075,530 | 1,806,259 | |||||||||||||||||
South Cabin Creek | 34,106 | 4,539 | 38,645 | |||||||||||||||||
Tonkin Summit | 32,966 | 53,583 | 86,549 | |||||||||||||||||
General exploration | 143,783 | (143,783 | ) | |||||||||||||||||
Total Nevada Properties | $ | 1,508,878 | $ | 2,722,767 | $ | (223,503 | ) | $ | (143,783 | ) | $ | 3,864,359 | ||||||||
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Table of Contents
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Balance at | Balance at | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
By Property | 2004 | Additions | Recoveries | Write-offs | 2005 | |||||||||||||||
Nevada Properties | ||||||||||||||||||||
Benmark | $ | 2,091 | $ | 4,652 | $ | $ | $ | 6,743 | ||||||||||||
Celt | 24,295 | 46,625 | 70,920 | |||||||||||||||||
Cottonwood | 30,807 | 74,895 | 105,702 | |||||||||||||||||
Fye Canyon | 31,495 | 46,644 | 78,139 | |||||||||||||||||
Gold Bar Horst | 40,975 | 13,968 | 54,943 | |||||||||||||||||
Gold Pick | 60,933 | 14,357 | 75,290 | |||||||||||||||||
Goldstone | 2,920 | 944 | 3,864 | |||||||||||||||||
Hunter | 23,028 | 1,898 | 24,926 | |||||||||||||||||
Ian | 625 | 625 | ||||||||||||||||||
Knolls | 9,636 | 9,636 | ||||||||||||||||||
McClusky Pass | 21,506 | 49,651 | 71,157 | |||||||||||||||||
New Pass | 237,246 | 11,919 | (87,102 | ) | 162,063 | |||||||||||||||
Pat Canyon | 13,007 | 9,839 | 22,846 | |||||||||||||||||
Patty (formerly Indian Ranch) | 12,395 | 11,828 | 24,223 | |||||||||||||||||
Slaven Canyon | 199,521 | 531,208 | 730,729 | |||||||||||||||||
South Cabin Creek | 26,322 | 7,784 | 34,106 | |||||||||||||||||
Squaw Creek | 2,227 | 12,185 | (14,412 | ) | ||||||||||||||||
Tonkin Summit | 4,304 | 28,662 | 32,966 | |||||||||||||||||
General exploration | 194,598 | (194,598 | ) | |||||||||||||||||
Total Nevada Properties | $ | 733,072 | $ | 1,071,918 | $ | (101,514 | ) | $ | (194,598 | ) | $ | 1,508,878 | ||||||||
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Balance at | Balance at | |||||||||||||||
June 30, | June 30, | |||||||||||||||
By Property | 2003 | Additions | Write-offs | 2004 | ||||||||||||
Nevada Properties | ||||||||||||||||
Benmark | $ | $ | 2,091 | $ | $ | 2,091 | ||||||||||
Celt | 24,295 | 24,295 | ||||||||||||||
Cottonwood | 30,807 | 30,807 | ||||||||||||||
Fye Canyon | 31,495 | 31,495 | ||||||||||||||
Gold Bar Horst | 40,975 | 40,975 | ||||||||||||||
Gold Pick | 47,939 | 12,994 | 60,933 | |||||||||||||
Goldstone | 2,920 | 2,920 | ||||||||||||||
Hunter | 23,028 | 23,028 | ||||||||||||||
McClusky Pass | 7,266 | 14,240 | 21,506 | |||||||||||||
New Pass | 229,959 | 7,287 | 237,246 | |||||||||||||
Pat Canyon | 13,007 | 13,007 | ||||||||||||||
Patty (formerly Indian Ranch) | 10,099 | 2,296 | 12,395 | |||||||||||||
Slaven Canyon | 88,532 | 110,989 | 199,521 | |||||||||||||
South Cabin Creek | 26,322 | 26,322 | ||||||||||||||
Squaw Creek | 1,444 | 783 | 2,227 | |||||||||||||
Tonkin Summit | 4,304 | 4,304 | ||||||||||||||
General exploration | 241,549 | (241,549 | ) | |||||||||||||
Total Nevada Properties | $ | 506,371 | $ | 468,250 | $ | (241,549 | ) | $ | 733,072 | |||||||
6. | EQUIPMENT |
2006 | 2005 | |||||||||||||||||||||||
Accumulated | Net Book | Accumulated | Net Book | |||||||||||||||||||||
Cost | Amortization | Value | Cost | Amortization | Value | |||||||||||||||||||
Vehicles | $ | 93,552 | $ | 40,476 | $ | 53,076 | $ | 76,745 | $ | 24,156 | $ | 52,589 | ||||||||||||
Technical equipment | 847,526 | 20,602 | 826,924 | 41,041 | 14,221 | 26,820 | ||||||||||||||||||
Office equipment | 79,378 | 28,525 | 50,853 | 76,884 | 17,175 | 59,709 | ||||||||||||||||||
$ | 1,020,456 | $ | 89,603 | $ | 930,853 | $ | 194,670 | $ | 55,552 | $ | 139,118 | |||||||||||||
7. | RELATED PARTY TRANSACTIONS |
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2007 | $ | 324,000 | ||
2008 | 162,000 | |||
$ | 486,000 | |||
8. | ASSET RETIREMENT OBLIGATION |
2006 | 2005 | |||||||
Asset retirement obligation | $ | 165,985 | $ | |||||
9. | CAPITAL STOCK |
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Number | Exercise | |||||||
of Options | Price | Expiry Date | ||||||
755,500 | $ | 0.23 | January 23, 2008 | |||||
2,074,500 | 0.41 | September 23, 2008 | ||||||
150,000 | 0.75 | March 1, 2009 | ||||||
50,000 | 0.85 | March 21, 2010 | ||||||
40,000 | 0.67 | April 6, 2010 | ||||||
50,000 | 1.50 | October 19, 2010 | ||||||
2,000,000 | 1.91 | January 10, 2011 | ||||||
5,120,000 | ||||||||
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Weighted | ||||||||
Average | ||||||||
Number | Exercise | |||||||
of Options | Price | |||||||
Balance, June 30, 2003 | 3,075,000 | $ | 0.15 | |||||
Options granted | 2,724,500 | 0.51 | ||||||
Options exercised | (2,134,500 | ) | 0.13 | |||||
Balance, June 30, 2004 | 3,665,000 | 0.43 | ||||||
Options granted | 150,000 | 0.73 | ||||||
Options expired/cancelled | (200,000 | ) | 1.25 | |||||
Options exercised | (230,000 | ) | 0.30 | |||||
Balance, June 30, 2005 | 3,385,000 | 0.41 | ||||||
Options granted | 2,050,000 | 1.90 | ||||||
Options exercised | (315,000 | ) | 0.54 | |||||
Balance, June 30, 2006 | 5,120,000 | $ | 1.00 | |||||
Number of options currently exercisable | 4,920,000 | $ | 0.96 | |||||
Weighted average fair value of options granted during the year | 2004 | $ | 0.39 | |||||
2005 | 0.56 | |||||||
2006 | 1.16 | |||||||
2006 | 2005 | 2004 | ||||
Weighted average risk-free interest rate | 3.9% | 3.7% | 4.2% | |||
Expected life of options and warrants | 5 years | 5 years | 1 year-5 years | |||
Weighted average annualized volatility | 71% | 101% | 118% | |||
Dividend | 0.00% | 0.00% | 0.00% |
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Number | Exercise | |||||||||||
of Warrants | Price | Expiry Date | ||||||||||
Balance, June 30, 2003 | 5,649,308 | |||||||||||
Warrants exercised | (3,708,132 | ) | $ | 0.44 | November 18, 2003 | |||||||
Warrants exercised | (1,941,176 | ) | 0.25 | June 27, 2004 | ||||||||
Warrants granted | 200,000 | 0.60 | October 24, 2004 | |||||||||
Warrants granted | 2,625,000 | 0.60 | August 3, 2004 | |||||||||
Warrants exercised | (435,000 | ) | 0.60 | August 3, 2004 | ||||||||
Warrants granted | 7,719,998 | 1.25 | July 29, 2005 | |||||||||
Warrants granted | 588,235 | 1.25 | August 3, 2005 | |||||||||
Warrants granted | 1,266,666 | 1.25 | June 25, 2005 | |||||||||
Balance, June 30, 2004 | 11,964,899 | |||||||||||
Warrants exercised | (2,290,000 | ) | 0.60 | August 3, 2004 | ||||||||
Warrants expired | (100,000 | ) | 0.60 | August 3, 2004 | ||||||||
Warrants expired | (1,266,666 | ) | 1.25 | June 25, 2005 | ||||||||
Warrants granted | 1,500,000 | 2.50 | December 20, 2006 | |||||||||
Balance, June 30, 2005 | 9,808,233 | |||||||||||
Warrants exercised | (4,352,351 | ) | 1.25 | July 29, 2005 | ||||||||
Warrants exercised | (588,235 | ) | 1.25 | August 3, 2005 | ||||||||
Warrants expired | (3,367,647 | ) | 1.25 | July 29, 2005 | ||||||||
Balance, June 30, 2006 | 1,500,000 | |||||||||||
Number | Exercise | |||||||
of Warrants | Price | Expiry Date | ||||||
1,500,000 | $ | 2.50 | December 20, 2006 |
10. | INCOME TAXES |
2006 | 2005 | 2004 | ||||||||||
Loss before income tax recovery | $ | (3,307,465 | ) | $ | (1,063,474 | ) | $ | (1,664,257 | ) | |||
Expected income tax recovery | $ | (1,227,731 | ) | $ | (378,597 | ) | $ | (618,241 | ) | |||
Non-deductible expenses | 1,144,086 | 14,884 | 315,842 | |||||||||
Differences in foreign tax rates | 13,135 | 32,371 | 1,810 | |||||||||
Tax loss benefit not recognized for book purposes | 70,510 | 331,342 | 300,589 | |||||||||
Actual income tax recovery | $ | NIL | $ | NIL | $ | NIL | ||||||
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2006 | 2005 | 2004 | ||||||||||
Net operating loss carry forwards | $ | 2,413,320 | $ | 2,338,680 | $ | 2,517,008 | ||||||
Mineral properties and other assets | 681,280 | 590,427 | 618,517 | |||||||||
Share issuance costs | 80,257 | 117,590 | 158,213 | |||||||||
3,174,857 | 3,046,697 | 3,293,738 | ||||||||||
Less: valuation allowances | (3,174,857 | ) | (3,046,697 | ) | (3,293,738 | ) | ||||||
Net future tax assets | $ | NIL | $ | NIL | $ | NIL | ||||||
11. | SEGMENTED INFORMATION |
Mineral | ||||||||||||||||
Property | ||||||||||||||||
Interests and | ||||||||||||||||
Deferred | ||||||||||||||||
Total | Exploration | Other | ||||||||||||||
Assets | Equipment | Costs | Assets | |||||||||||||
June 30, 2006 | ||||||||||||||||
Canada | $ | 13,637,654 | $ | 24,639 | $ | $ | 13,613,015 | |||||||||
United States | 7,864,404 | 906,214 | 6,663,978 | 294,212 | ||||||||||||
$ | 21,502,058 | $ | 930,853 | $ | 6,663,978 | $ | 13,907,227 | |||||||||
June 30, 2005 | ||||||||||||||||
Canada | $ | 11,377,473 | $ | 30,799 | $ | $ | 11,346,674 | |||||||||
United States | 4,319,402 | 108,319 | 3,965,025 | 246,058 | ||||||||||||
$ | 15,696,875 | $ | 139,118 | $ | 3,965,025 | $ | 11,592,732 | |||||||||
2006 | 2005 | 2004 | ||||||||||
Loss before other items: | ||||||||||||
Canada | $ | 3,338,256 | $ | 893,992 | $ | 1,366,939 | ||||||
United States | 234,710 | 206,754 | 101,391 | |||||||||
$ | 3,572,966 | $ | 1,100,746 | $ | 1,468,330 | |||||||
12. | RESTRICTED RECLAMATION BONDS |
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
13. | SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS |
14. | COMMITMENTS |
2007 | $ | 38,295 | ||
2008 | 22,500 | |||
$ | 60,795 | |||
15. | FINANCIAL INSTRUMENTS |
16. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES |
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2006 | 2005 | |||||||||||||||||||||||
Balance, | Balance, | Balance, | Balance, | |||||||||||||||||||||
Canadian | United States | Canadian | United States | |||||||||||||||||||||
GAAP | Adjustments | GAAP | GAAP | Adjustments | GAAP | |||||||||||||||||||
Temporary investments | $ | 2,107,699 | $ | 48,282 | $ | 2,155,981 | $ | 10,895,443 | $ | 36,224 | $ | 10,931,667 | ||||||||||||
Other current assets | 11,564,745 | 11,564,745 | 500,597 | 500,597 | ||||||||||||||||||||
Mineral property interests | 2,799,619 | (2,032,127 | ) | 767,492 | 2,456,147 | (1,839,607 | ) | 616,540 | ||||||||||||||||
Deferred exploration costs | 3,864,359 | (3,864,359 | ) | 1,508,878 | (1,508,878 | ) | ||||||||||||||||||
Equipment | 930,853 | 930,853 | 139,118 | 139,118 | ||||||||||||||||||||
Restricted reclamation bonds | 234,783 | 234,783 | 196,692 | 196,692 | ||||||||||||||||||||
$ | 21,502,058 | $ | (5,848,204 | ) | $ | 15,653,854 | $ | 15,696,875 | $ | (3,312,261 | ) | $ | 12,384,614 | |||||||||||
Current liabilities | $ | 433,517 | $ | $ | 433,517 | $ | 179,585 | $ | $ | 179,585 | ||||||||||||||
Asset retirement obligation | 165,985 | 165,985 | ||||||||||||||||||||||
Shareholders’ equity | 20,902,556 | (5,848,204 | ) | 15,054,352 | 15,517,290 | (3,312,261 | ) | 12,205,029 | ||||||||||||||||
$ | 21,502,058 | $ | (5,848,204 | ) | $ | 15,653,854 | $ | 15,696,875 | $ | (3,312,261 | ) | $ | 12,384,614 | |||||||||||
Cumulative | ||||||||||||||||
Amounts from | ||||||||||||||||
Inception on | ||||||||||||||||
December 18, 1986 | ||||||||||||||||
to June 30, 2006 | 2006 | 2005 | 2004 | |||||||||||||
Loss for the period, Canadian GAAP | $ | (15,881,401 | ) | $ | (3,307,465 | ) | $ | (1,063,474 | ) | $ | (1,664,257 | ) | ||||
Adjustments: | ||||||||||||||||
Mineral property interests | (2,032,127 | ) | (192,520 | ) | (619,497 | ) | (556,945 | ) | ||||||||
Deferred exploration costs | (3,864,359 | ) | (2,355,481 | ) | (775,806 | ) | (226,701 | ) | ||||||||
Increase in temporary investments | 48,282 | 22,634 | 36,224 | |||||||||||||
Loss for the period, United States GAAP | $ | (21,723,605 | ) | $ | (5,832,832 | ) | $ | (2,422,553 | ) | $ | (2,447,903 | ) | ||||
Basic and diluted loss per share, United States GAAP | $ | (0.10 | ) | $ | (0.05 | ) | $ | (0.06 | ) | |||||||
Weighted average number of common shares outstanding, United States GAAP | 58,855,176 | 53,091,304 | 39,038,472 | |||||||||||||
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(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cumulative Amounts | ||||||||||||||||
from Inception on | ||||||||||||||||
December 18, 1986 | ||||||||||||||||
to June 30, 2006 | 2006 | 2005 | 2004 | |||||||||||||
Cash flows used in operating activities, Canadian GAAP | $ | (4,794,625 | ) | $ | (605,920 | ) | $ | (954,361 | ) | $ | (741,247 | ) | ||||
Acquisition of mineral property interests | (5,449,802 | ) | (209,852 | ) | (619,497 | ) | (556,945 | ) | ||||||||
Deferred exploration costs | (7,339,941 | ) | (2,413,657 | ) | (816,648 | ) | (442,661 | ) | ||||||||
Acquisition (disposal) of temporary investments (net) | (1,909,954 | ) | 8,806,566 | (3,413,215 | ) | (7,493,823 | ) | |||||||||
Cash flows provided by (used in) operating activities, United States GAAP | (19,494,322 | ) | 5,577,137 | (5,803,721 | ) | (9,234,676 | ) | |||||||||
Cash flows provided by financing activities, Canadian GAAP and United States GAAP | 32,724,773 | 6,345,433 | 3,813,500 | 11,705,658 | ||||||||||||
Cash flows provided by (used in) investing activities, Canadian GAAP | (16,532,263 | ) | 5,375,913 | (4,972,207 | ) | (8,702,270 | ) | |||||||||
Acquisition of mineral property interests | 5,449,802 | 209,852 | 619,497 | 556,945 | ||||||||||||
Deferred exploration costs | 7,339,941 | 2,413,657 | 816,648 | 442,661 | ||||||||||||
Acquisition (disposal) of temporary investments (net) | 1,909,954 | (8,806,566 | ) | 3,413,215 | 7,493,823 | |||||||||||
Cash flows used in investing activities, United States GAAP | (1,832,566 | ) | (807,144 | ) | (122,847 | ) | (208,841 | ) | ||||||||
Increase (decrease) in cash during the period | 11,397,885 | 11,115,426 | (2,113,068 | ) | 2,262,141 | |||||||||||
Cash, beginning of period | 282,459 | 2,395,527 | 133,386 | |||||||||||||
Cash, end of period | $ | 11,397,885 | $ | 11,397,885 | $ | 282,459 | $ | 2,395,527 | ||||||||
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E-77
Table of Contents
(An Exploration Stage Company)
September 30, | June 30, | |||||||
2006 | 2006 | |||||||
(Expressed in Canadian Dollars) | ||||||||
ASSETS | ||||||||
Current | ||||||||
Cash | $ | 10,515,376 | $ | 11,397,885 | ||||
Temporary investments | 2,158,804 | 2,107,699 | ||||||
Receivables (net of allowance — $Nil; June 30, 2006 — $NIL) | 133,333 | 117,490 | ||||||
Prepaid expenses | 48,111 | 49,370 | ||||||
Total Current Assets | 12,855,624 | 13,672,444 | ||||||
Mineral property interests(Note 3) | 2,809,295 | 2,799,619 | ||||||
Deferred exploration costs(Note 4) | 4,259,830 | 3,864,359 | ||||||
Restricted reclamation bonds(Note 8) | 238,081 | 234,783 | ||||||
Equipment | 1,062,166 | 930,853 | ||||||
Total Assets | $ | 21,224,996 | $ | 21,502,058 | ||||
LIABILITIES | ||||||||
Current | ||||||||
Accounts payable and accrued liabilities | $ | 172,704 | $ | 315,515 | ||||
Due to related parties (Note 6) | 100,529 | 118,002 | ||||||
Total current liabilities | 273,233 | 433,517 | ||||||
Asset retirement obligation | 165,985 | 165,985 | ||||||
Total Liabilities | 439,218 | 599,502 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Capital stock (Note 5) | ||||||||
Authorized: unlimited common shares without par value | ||||||||
Issued and outstanding 59,384,972 (June 30/06 — 59,384,972) | 33,630,385 | 33,630,385 | ||||||
Contributed surplus | 3,217,240 | 3,153,572 | ||||||
Deficit accumulated during the exploration stage | (16,061,847 | ) | (15,881,401 | ) | ||||
Total Shareholders’ Equity | 20,785,778 | 20,902,556 | ||||||
Total liabilities and shareholders’ equity | $ | 21,224,996 | $ | 21,502,058 |
Approved by the Board: | ||
Director: | Director: | |
/s/ John M. Leask John M. Leask, P.Eng | /s/ Megan Cameron-Jones Megan Cameron-Jones |
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Cumulative | ||||||||||||||||||||
Amounts from | ||||||||||||||||||||
Inception on | ||||||||||||||||||||
December 18, 1986 | 2006 | 2005 | ||||||||||||||||||
to | Quarter | Year | Quarter | Year | ||||||||||||||||
September 30, 2006 | to Date | to Date | to Date | to Date | ||||||||||||||||
(Expressed in Canadian Dollars) | ||||||||||||||||||||
EXPENSES | ||||||||||||||||||||
Amortization | $ | 228,500 | $ | 8,355 | $ | 8,355 | $ | 8,657 | $ | 8,657 | ||||||||||
Audit | 285,423 | 30,000 | 30,000 | |||||||||||||||||
Bank charges & interest | 26,649 | 300 | 300 | 1,863 | 1,863 | |||||||||||||||
Consulting | 1,311,525 | 27,898 | 27,898 | 30,995 | 30,995 | |||||||||||||||
Consulting — stock-based compensation | 3,327,514 | 63,668 | 63,668 | 26,766 | 26,766 | |||||||||||||||
Investor relations & shareholder info | 688,476 | 22,502 | 22,502 | 29,616 | 29,616 | |||||||||||||||
Legal | 644,541 | 2,910 | 2,910 | 8,962 | 8,962 | |||||||||||||||
Management fees | 1,503,910 | 66,000 | 66,000 | 66,000 | 66,000 | |||||||||||||||
Office & miscellaneous | 769,764 | 16,094 | 16,094 | 26,999 | 26,999 | |||||||||||||||
Rent | 352,068 | 13,869 | 13,869 | 13,394 | 13,394 | |||||||||||||||
Telephone | 209,047 | 4,832 | 4,832 | 5,896 | 5,896 | |||||||||||||||
Transfer agent & listing fees | 307,267 | 1,670 | 1,670 | 4,630 | 4,630 | |||||||||||||||
Travel & entertainment | 517,216 | 11,879 | 11,879 | 38,384 | 38,384 | |||||||||||||||
Wages & benefits | 851,251 | 20,180 | 20,180 | 22,544 | 22,544 | |||||||||||||||
LOSS BEFORE UNDER-NOTED ITEMS | (11,023,151 | ) | (290,157 | ) | (290,157 | ) | (284,706 | ) | (284,706 | ) | ||||||||||
Interest income | 1,424,929 | 129,195 | 129,195 | 28,877 | 28,877 | |||||||||||||||
Gain (loss) on foreign exchange | 127,506 | 1,932 | 1,932 | (21,434 | ) | (21,434 | ) | |||||||||||||
Option payments received (net) | 633,519 | 13,617 | 13,617 | |||||||||||||||||
Gain on disposal of equipment | 13,867 | |||||||||||||||||||
Unrealized recovery (loss) on temporary investments | (10,296 | ) | (1,450 | ) | (1,450 | ) | 301 | 301 | ||||||||||||
Gain on disposal of temporary investments | 166,591 | |||||||||||||||||||
Write-off of deferred exploration costs | (3,580,555 | ) | (19,966 | ) | (19,966 | ) | (38,712 | ) | (38,712 | ) | ||||||||||
Write-off of mineral property interests | (3,814,257 | ) | ||||||||||||||||||
LOSS FOR THE PERIOD | $ | (16,061,847 | ) | $ | (180,446 | ) | $ | (180,446 | ) | $ | (302,057 | ) | $ | (302,057 | ) | |||||
Loss per common share | $ | (0.003 | ) | $ | (0.003 | ) | $ | (0.005 | ) | $ | (0.005 | ) | ||||||||
Weighted average number of common shares outstanding | 59,384,972 | 59,384,972 | 57,658,497 | 57,658,497 |
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(An Exploration Stage Company)
Number of | Contributed | |||||||||||||||||||||||
Shares | Price | Amount | Surplus | Deficit | Total | |||||||||||||||||||
(Expressed in Canadian Dollars) | ||||||||||||||||||||||||
Balance, June 30, 2006 | 59,384,972 | $ | $ | 33,630,385 | $ | 3,153,572 | $ | (15,881,401 | ) | $ | 20,902,556 | |||||||||||||
Stock-based compensation | 63,668 | 63,668 | ||||||||||||||||||||||
Loss for the period | (180,446 | ) | (180,446 | ) | ||||||||||||||||||||
Balance, September 30, 2006 | 59,384,972 | $ | 33,630,385 | $ | 3,217,240 | $ | (16,061,847 | ) | $ | 20,785,778 | ||||||||||||||
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(An Exploration Stage Company)
Cumulative | ||||||||||||||||||||
Amounts from | ||||||||||||||||||||
Inception on | ||||||||||||||||||||
December 18, | 2006 | 2005 | ||||||||||||||||||
1986 to | Quarter | Year | Quarter | Year | ||||||||||||||||
September 30, 2006 | to Date | to Date | to Date | to Date | ||||||||||||||||
(Expressed in Canadian Dollars) | ||||||||||||||||||||
Cash Flows from Operating Activities | ||||||||||||||||||||
Loss for the period | $ | (16,061,847 | ) | $ | (180,446 | ) | $ | (180,446 | ) | $ | (302,057 | ) | $ | (302,057 | ) | |||||
Items not affecting cash: | ||||||||||||||||||||
Amortization | 228,500 | 8,355 | 8,355 | 8,657 | 8,657 | |||||||||||||||
Write-off of deferred exploration costs | 3,580,555 | 19,966 | 19,966 | 38,712 | 38,712 | |||||||||||||||
Write-off of mineral property interests | 3,814,257 | |||||||||||||||||||
Stock-based compensation | 3,327,514 | 63,668 | 63,668 | 26,766 | 26,766 | |||||||||||||||
Gain on disposal of equipment | (13,867 | ) | ||||||||||||||||||
Unrealized (recovery) loss on temporary investments | 10,296 | 1,450 | 1,450 | |||||||||||||||||
Loss (gain) on disposal of investments | (166,591 | ) | ||||||||||||||||||
Shares issued for management bonus | 150,000 | |||||||||||||||||||
Changes in non-cash working capital | ||||||||||||||||||||
Decrease (increase) in prepaid exp. | (48,111 | ) | 1,259 | 1,259 | 17,581 | 17,581 | ||||||||||||||
Increase in receivables | (133,333 | ) | (15,843 | ) | (15,843 | ) | (264,958 | ) | (264,958 | ) | ||||||||||
Increase (decrease) in accounts payable & accr. liabilities | 359,287 | (17,097 | ) | (17,097 | ) | (158,753 | ) | (158,753 | ) | |||||||||||
Increase (decrease) in due to related parties | 100,529 | (17,473 | ) | (17,473 | ) | 92,353 | 92,353 | |||||||||||||
Net cash used in operating activities | (4,852,811 | ) | (136,161 | ) | (136,161 | ) | (541,699 | ) | (541,699 | ) | ||||||||||
Cash Flows from Financing Activities | ||||||||||||||||||||
Issuance of capital stock | 32,724,773 | 6,238,933 | 6,238,933 | |||||||||||||||||
Net cash provided by financing activities | 32,724,773 | 6,238,933 | 6,238,933 | |||||||||||||||||
Cash Flows from Investing Activities | ||||||||||||||||||||
Acquisition of mineral property interests | (6,083,105 | ) | (33,698 | ) | (33,698 | ) | (148,344 | ) | (148,344 | ) | ||||||||||
Deferred exploration costs | (7,725,155 | ) | (446,192 | ) | (446,192 | ) | (402,276 | ) | (402,276 | ) | ||||||||||
Restricted reclamation bond posted | (244,411 | ) | (9,628 | ) | (9,628 | ) | (12,224 | ) | (12,224 | ) | ||||||||||
Acquisition of temporary investments (net) | (1,922,509 | ) | (12,555 | ) | (12,555 | ) | (4,660,392 | ) | (4,660,392 | ) | ||||||||||
Proceeds from disposal of equipment | 58,141 | |||||||||||||||||||
Acquisition of equipment | (1,439,547 | ) | (244,275 | ) | (244,275 | ) | (18,263 | ) | (18,263 | ) | ||||||||||
Net cash used in investing activities | (17,356,586 | ) | (746,348 | ) | (746,348 | ) | (5,241,499 | ) | (5,241,499 | ) | ||||||||||
Increase (decrease) in cash during the period | 10,515,376 | (882,509 | ) | (882,509 | ) | 455,735 | 455,735 | |||||||||||||
Cash, beginning of period | 11,397,885 | 11,397,885 | 282,459 | 282,459 | ||||||||||||||||
Cash, end of period | $ | 10,515,376 | $ | 10,515,376 | $ | 10,515,376 | $ | 738,194 | $ | 738,194 |
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(An Exploration Stage Company)
1. | NATURE AND CONTINUANCE OF OPERATIONS |
September 30, | June 30, | |||||||
2006 | 2006 | |||||||
Working capital | $ | 12,582,391 | $ | 13,238,927 | ||||
Deficit | (16,061,847 | ) | (15,881,401 | ) | ||||
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
E-82
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3. | MINERAL PROPERTY INTERESTS |
Balance at | Balance at | |||||||||||||||
June 30, 2006 | Additions | Recovery | September 30, 2006 | |||||||||||||
Nevada Properties | ||||||||||||||||
Benmark | $ | 81,118 | $ | 14,022 | $ | $ | 95,140 | |||||||||
Celt | 284,919 | 284,919 | ||||||||||||||
Cottonwood | 160,214 | 15,844 | 176,058 | |||||||||||||
Fye Canyon | 173,825 | 1,503 | 175,328 | |||||||||||||
Gold Bar Horst | 149,237 | 25,659 | 174,896 | |||||||||||||
Gold Pick | 24,556 | 3,786 | 28,342 | |||||||||||||
Goldstone | 32,309 | 8,694 | 41,003 | |||||||||||||
Hunter | 136,891 | 6,730 | 143,621 | |||||||||||||
Ian | 31,317 | 7,852 | 39,169 | |||||||||||||
Knolls | 86,102 | 25,239 | 111,341 | |||||||||||||
McClusky Pass | 134,460 | 34,073 | 168,533 | |||||||||||||
New Pass | 419,732 | 15,003 | (111,069 | ) | 323,666 | |||||||||||
Pat Canyon | 108,797 | 24,958 | 133,755 | |||||||||||||
Patty | 108,402 | 108,402 | ||||||||||||||
Slaven Canyon | 365,427 | 47,822 | 413,249 | |||||||||||||
South Cabin Creek | 47,389 | 11,778 | 59,167 | |||||||||||||
Squaw Creek | 270,261 | 21,172 | (181,388 | ) | 110,045 | |||||||||||
Tonkin Summit | 129,663 | 26,080 | 155,743 | |||||||||||||
Other | 55,000 | 11,918 | 66,918 | |||||||||||||
Total Nevada Properties | $ | 2,799,619 | $ | 302,133 | $ | (292,457 | ) | $ | 2,809,295 | |||||||
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4. | DEFERRED EXPLORATION COSTS |
Balance at | Balance at | |||||||||||||||
June 30, | September 30, | |||||||||||||||
By Type of Cost | 2006 | Additions | 2006 | |||||||||||||
Assays | $ | 883,710 | $ | 22,286 | $ | 905,996 | ||||||||||
Consulting | 3,448,571 | 116,739 | 3,565,310 | |||||||||||||
Drafting and report preparation | 443,562 | 764 | 444,326 | |||||||||||||
Drilling | 4,578,673 | 277,352 | 4,856,025 | |||||||||||||
Field operations | 999,469 | 39,657 | 1,039,126 | |||||||||||||
Reclamation | 368,170 | 2,260 | 370,430 | |||||||||||||
Recording | 80,079 | 80,079 | ||||||||||||||
Supervision | 391,707 | 3,787 | 395,494 | |||||||||||||
Surveys | 810,749 | 12,261 | 823,010 | |||||||||||||
Trenching and site preparation | 472,708 | 4,480 | 477,188 | |||||||||||||
Recovery | (5,222,378 | ) | (64,149 | ) | (5,286,527 | ) | ||||||||||
Write-off | (3,390,661 | ) | (19,966 | ) | (3,410,627 | ) | ||||||||||
Total | $ | 3,864,359 | $ | 395,471 | $ | 4,259,830 | ||||||||||
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Balance at | Balance at | |||||||||||||||||||
June 30, | September 30, | |||||||||||||||||||
By Property | 2006 | Additions | Recoveries | Write-offs | 2006 | |||||||||||||||
Nevada Properties | ||||||||||||||||||||
Benmark | $ | 32,131 | $ | $ | $ | $ | 32,131 | |||||||||||||
Celt | 17,505 | 17,505 | ||||||||||||||||||
Cottonwood | 457,248 | 51,942 | 509,190 | |||||||||||||||||
Fye Canyon | 20,811 | 917 | 21,728 | |||||||||||||||||
Gold Bar Horst | 147,447 | 320,728 | 468,175 | |||||||||||||||||
Gold Pick | 464,861 | 10,936 | 475,797 | |||||||||||||||||
Goldstone | 3,864 | 20,425 | 24,289 | |||||||||||||||||
Hunter | 34,186 | 38,996 | 73,182 | |||||||||||||||||
Ian | 625 | 4,137 | 4,762 | |||||||||||||||||
Knolls | 21,359 | 21,359 | ||||||||||||||||||
McClusky Pass | 529,164 | 4,226 | 533,390 | |||||||||||||||||
New Pass | 64,149 | (64,149 | ) | |||||||||||||||||
Pat Canyon | 22,846 | 22,846 | ||||||||||||||||||
Patty | 116,710 | 1,373 | 118,083 | |||||||||||||||||
Slaven Canyon | 1,806,259 | 5,940 | 1,812,199 | |||||||||||||||||
South Cabin Creek | 38,645 | 38,645 | ||||||||||||||||||
Tonkin Summit | 86,549 | 86,549 | ||||||||||||||||||
General exploration | 19,966 | (19,966 | ) | |||||||||||||||||
Total Nevada Properties | $ | 3,864,359 | $ | 479,586 | $ | (64,149 | ) | $ | (19,966 | ) | $ | 4,259,830 | ||||||||
5. | CAPITAL STOCK |
Number | Exercise | |||||
of Warrants | Price | Expiry Date | ||||
1,500,000 | $ | 2.50 | December 20, 2006 | |||
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Number | Exercise | |||||
of Shares | Price | Expiry Date | ||||
755,500 | $ | 0.23 | January 23, 2008 | |||
2,074,500 | 0.41 | September 23, 2008 | ||||
150,000 | 0.75 | March 1, 2009 | ||||
50,000 | 0.85 | March 21, 2010 | ||||
40,000 | 0.67 | April 6, 2010 | ||||
50,000 | 1.50 | October 19, 2010 | ||||
2,000,000 | 1.91 | January 10, 2011 | ||||
5,120,000 | ||||||
Weighted | ||||||||||||
Average | ||||||||||||
Number | Exercise | |||||||||||
of Options | Price | |||||||||||
Balance, June 30, 2006 | 5,120,000 | $ | 1.00 | |||||||||
Balance, September 30, 2006 | 5,120,000 | 1.00 | ||||||||||
Number of options currently exercisable | 5,007,500 | $ | 0.98 | |||||||||
6. | RELATED PARTY TRANSACTIONS |
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7. | SEGMENTED INFORMATION |
Mineral | ||||||||||||||||
Property | ||||||||||||||||
Interests and | ||||||||||||||||
Deferred | ||||||||||||||||
Total | Exploration | Other | ||||||||||||||
Assets | Equipment | Costs | Assets | |||||||||||||
September 30, 2006 | ||||||||||||||||
Canada | $ | 12,818,078 | $ | 23,092 | $ | $ | 12,794,986 | |||||||||
United States | 8,406,918 | 1,039,074 | 7,069,125 | 298,719 | ||||||||||||
$ | 21,224,996 | $ | 1,062,166 | $ | 7,069,125 | $ | 13,093,705 | |||||||||
June 30, 2006 | ||||||||||||||||
Canada | $ | 13,637,654 | $ | 24,639 | $ | $ | 13,613,015 | |||||||||
United States | 7,864,404 | 906,214 | 6,663,978 | 294,212 | ||||||||||||
$ | 21,502,058 | $ | 930,853 | $ | 6,663,978 | $ | 13,907,227 | |||||||||
2006 | 2005 | |||||||||||||||
Quarter | Year | Quarter | Year | |||||||||||||
to Date | to Date | to Date | to Date | |||||||||||||
Loss before other items: | ||||||||||||||||
Canada | $ | 247,138 | $ | 247,138 | $ | 237,383 | $ | 237,383 | ||||||||
United States | 43,019 | 43,019 | 47,323 | 47,323 | ||||||||||||
$ | 290,157 | $ | 290,157 | $ | 284,706 | $ | 284,706 | |||||||||
8. | RESTRICTED RECLAMATION BONDS |
9. | SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS |
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10. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES |
September 30, 2006 | June 30, 2006 | |||||||||||||||||||||||
Balance, | Balance, | Balance, | Balance, | |||||||||||||||||||||
Canadian | United States | Canadian | United States | |||||||||||||||||||||
GAAP | Adjustments | GAAP | GAAP | Adjustments | GAAP | |||||||||||||||||||
Temporary investments | $ | 2,158,804 | $ | 58,762 | $ | 2,217,566 | $ | 2,107,699 | $ | 48,282 | $ | 2,155,981 | ||||||||||||
Other current assets | 10,696,820 | 10,696,820 | 11,564,745 | 11,564,745 | ||||||||||||||||||||
Mineral property interests | 2,809,295 | (2,030,156 | ) | 779,139 | 2,799,619 | (2,032,127 | ) | 767,492 | ||||||||||||||||
Deferred exploration costs | 4,259,830 | (4,259,830 | ) | 3,864,359 | (3,864,359 | ) | ||||||||||||||||||
Equipment | 1,062,166 | 1,062,166 | 930,853 | 930,853 | ||||||||||||||||||||
Restricted reclamation bonds | 238,081 | 238,081 | 234,783 | 234,783 | ||||||||||||||||||||
$ | 21,224,996 | $ | (6,231,224 | ) | $ | 14,993,772 | $ | 21,502,058 | $ | (5,848,204 | ) | $ | 15,653,854 | |||||||||||
Current liabilities | $ | 273,233 | $ | $ | 273,233 | $ | 433,517 | $ | $ | 433,517 | ||||||||||||||
Asset retirement obligation | 165,985 | 165,985 | 165,985 | 165,985 | ||||||||||||||||||||
Shareholders’ equity | 20,785,778 | (6,231,224 | ) | 14,554,554 | 20,902,556 | (5,848,204 | ) | 15,054,352 | ||||||||||||||||
$ | 21,224,996 | $ | (6,231,224 | ) | $ | 14,993,772 | $ | 21,502,058 | $ | (5,848,204 | ) | $ | 15,653,854 | |||||||||||
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Cumulative | ||||||||||||
Amounts from | ||||||||||||
Inception on | Three Month | Three Month | ||||||||||
December 18, 1986 to | Period Ended | Period Ended | ||||||||||
September 30, 2006 | September 30, 2006 | September 30, 2005 | ||||||||||
Loss for the period, Canadian GAAP | $ | (16,061,847 | ) | $ | (180,446 | ) | $ | (302,057 | ) | |||
Adjustments: | ||||||||||||
Mineral property interests | (2,030,156 | ) | 1,971 | (119,672 | ) | |||||||
Deferred exploration costs | (4,259,830 | ) | (395,471 | ) | (624,679 | ) | ||||||
Increase in temporary investments | 58,762 | 10,480 | 841 | |||||||||
Loss for the period, United States GAAP | $ | (22,293,071 | ) | $ | (563,466 | ) | $ | (1,045,567 | ) | |||
Basic and diluted loss per share, United States GAAP | $ | (0.01 | ) | $ | (0.02 | ) | ||||||
Weighted average number of common shares outstanding, United States GAAP | 59,384,972 | 57,658,497 | ||||||||||
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Cumulative | ||||||||||||
Amounts from | ||||||||||||
Inception on | Three Month | Three Month | ||||||||||
December 18, 1986 to | Period Ended | Period Ended | ||||||||||
September 30, 2006 | September 30, 2006 | September 30, 2005 | ||||||||||
Cash flows used in operating activities, Canadian GAAP | $ | (4,852,811 | ) | $ | (136,161 | ) | $ | (541,699 | ) | |||
Acquisition of mineral property interests | (5,474,566 | ) | (19,356 | ) | (119,672 | ) | ||||||
Deferred exploration costs | (7,725,155 | ) | (446,192 | ) | (402,276 | ) | ||||||
Disposal (acquisition) of temporary investments | (1,922,509 | ) | (12,555 | ) | (4,660,392 | ) | ||||||
Cash flows used in operating activities, United States GAAP | (19,975,041 | ) | (614,264 | ) | (5,724,039 | ) | ||||||
Cash flows provided by financing activities, Canadian GAAP and United States GAAP | 32,724,773 | 6,238,933 | ||||||||||
Cash flows used in investing activities, Canadian GAAP | (17,356,586 | ) | (746,348 | ) | (5,241,499 | ) | ||||||
Acquisition of mineral property interests | 5,474,566 | 19,356 | 119,672 | |||||||||
Deferred exploration costs | 7,725,155 | 446,192 | 402,276 | |||||||||
Acquisition of temporary investments | 1,922,509 | 12,555 | 4,660,392 | |||||||||
Cash flows used in investing activities, United States GAAP | (2,234,356 | ) | (268,245 | ) | (59,159 | ) | ||||||
Increase (decrease) in cash during the period | 10,515,376 | (882,509 | ) | 455,735 | ||||||||
Cash, beginning of period | 11,397,885 | 282,459 | ||||||||||
Cash, end of period | $ | 10,515,376 | $ | 10,515,376 | $ | 738,194 | ||||||
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11. | SUBSEQUENT EVENTS |
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AND EACH OF THE TARGET COMPANIES INDIVIDUALLY, AND U.S. GOLD
AND ALL OF THE TARGET COMPANIES
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Pro Forma | ||||||||||||||||||||||||||||
Coral Gold | Coral Gold | Consolidated | ||||||||||||||||||||||||||
U.S. Gold | Resources Ltd. | US GAAP | Resources Ltd. | Transaction | U.S. Gold | |||||||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Adjustments | Notes | Corporation | |||||||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Current | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 60,641,189 | $ | 3,497,868 | $ | 3,497,868 | $ | 64,139,057 | ||||||||||||||||||||
Accounts receivable | 51,369 | 74,307 | 74,307 | 125,676 | ||||||||||||||||||||||||
Other current assets — prepaid expenses | 52,359 | 71,647 | 71,647 | 124,006 | ||||||||||||||||||||||||
Total current assets | 60,744,917 | 3,643,822 | 3,643,822 | 64,388,739 | ||||||||||||||||||||||||
Property and equipment, net | 592,690 | 2,879 | 2,879 | 595,569 | ||||||||||||||||||||||||
Mineral property interests | — | 9,357,027 | $ | (8,443,170 | ) | 2(i) | 913,857 | 913,857 | ||||||||||||||||||||
Acquired mineral property interests | — | — | — | $ | 32,135,277 | 3&4(a) | 32,135,277 | |||||||||||||||||||||
Restrictive time deposits for reclamation bonding | 3,102,696 | 231,600 | 231,600 | 3,334,296 | ||||||||||||||||||||||||
Long-lived asset — asset retirement | 2,231,036 | — | — | 2,231,036 | ||||||||||||||||||||||||
Other assets: | ||||||||||||||||||||||||||||
Inactive milling equipment | 777,819 | — | — | 777,819 | ||||||||||||||||||||||||
Other assets | 2,125 | 202,759 | 5,026 | 2(ii) | 207,785 | 209,910 | ||||||||||||||||||||||
Total other assets | 779,944 | 202,759 | 5,026 | 207,785 | — | 987,729 | ||||||||||||||||||||||
TOTAL ASSETS | $ | 67,451,283 | $ | 13,438,087 | $ | (8,438,144 | ) | $ | 4,999,943 | $ | 32,135,277 | $ | 104,586,503 | |||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||
Current | ||||||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 3,850,333 | $ | 343,994 | $ | 343,994 | $ | 201,427 | 3&4(b) | $ | 4,395,754 | |||||||||||||||||
Installment purchase contracts | 24,177 | — | — | 24,177 | ||||||||||||||||||||||||
Advances payable | — | 40,513 | 40,513 | 40,513 | ||||||||||||||||||||||||
Retirement obligation (reclamation activities) | 360,054 | — | — | 360,054 | ||||||||||||||||||||||||
Total current liabilities | 4,234,564 | 384,507 | 384,507 | 201,427 | 4,820,498 | |||||||||||||||||||||||
Installment purchase contracts, long-term | 9,260 | — | — | 9,260 | ||||||||||||||||||||||||
Retirement obligation | 2,769,673 | — | — | 2,769,673 | ||||||||||||||||||||||||
Future income tax liability | — | 1,274,823 | 1,274,823 | 7,069,135 | 3&4(c) | 8,343,958 | ||||||||||||||||||||||
Other permit obligations | 72,511 | — | — | 72,511 | ||||||||||||||||||||||||
Other liabilities | — | 23,159 | 23,159 | 23,159 | ||||||||||||||||||||||||
Total liabilities | 7,086,008 | 1,682,489 | 1,682,489 | 7,270,562 | 16,039,059 | |||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||
Capital stock | 162,620,797 | 31,053,630 | 31,053,630 | (31,053,630 | ) | 4(d) | 187,730,843 | |||||||||||||||||||||
25,110,046 | 3 | |||||||||||||||||||||||||||
Options and warrants | — | — | — | 3,072,123 | 3 | 3,072,123 | ||||||||||||||||||||||
Other equity accounts | — | 1,582,015 | $ | 57,826 | 2(iii) | 1,639,841 | (1,639,841 | ) | 4(d) | — | ||||||||||||||||||
Deficit | (102,255,522 | ) | (20,880,047 | ) | (8,495,970 | ) | 2(iii) | (29,376,017 | ) | 29,376,017 | 4(d) | (102,255,522 | ) | |||||||||||||||
Total shareholders’ equity | 60,365,275 | 11,755,598 | (8,438,144 | ) | 3,317,454 | 24,864,715 | 88,547,444 | |||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 67,451,283 | $ | 13,438,087 | $ | (8,438,144 | ) | $ | 4,999,943 | $ | 32,135,277 | $ | 104,586,503 | |||||||||||||||
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Pro Forma | ||||||||||||||||||||||
Coral Gold | Coral Gold | Consolidated | ||||||||||||||||||||
U.S. Gold | Resources Ltd. | US GAAP | Resources Ltd. | U.S. Gold | ||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Corporation | |||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||
OTHER INCOME (EXPENSES) | �� | |||||||||||||||||||||
Interest and other items | $ | 1,884,025 | $ | 85,595 | $ | 85,595 | $ | 1,969,620 | ||||||||||||||
Gain (loss) on foreign exchange | — | 8,657 | 8,657 | 8,657 | ||||||||||||||||||
Total other income | 1,884,025 | 94,252 | 94,252 | 1,978,277 | ||||||||||||||||||
COSTS AND EXPENSES | ||||||||||||||||||||||
General and administrative | 2,751,570 | 2,162,237 | 2,162,237 | 4,913,807 | ||||||||||||||||||
Proposed acquisitions | 4,348,190 | — | — | 4,348,190 | ||||||||||||||||||
Property holding costs | 1,626,488 | — | — | 1,626,488 | ||||||||||||||||||
Exploration costs | 4,375,095 | — | $ | 503,611 | 2(i) | 503,611 | 4,878,706 | |||||||||||||||
Interest | 5,880 | — | — | 5,880 | ||||||||||||||||||
Stock option expense | 840,857 | — | — | 840,857 | ||||||||||||||||||
Accretion of asset retirement obligation | 206,051 | — | — | 206,051 | ||||||||||||||||||
Change in value of derivatives | 51,680,304 | — | — | 51,680,304 | ||||||||||||||||||
Depreciation | 35,012 | 542 | 542 | 35,554 | ||||||||||||||||||
Total costs and expenses | 65,869,447 | 2,162,779 | 503,611 | 2,666,390 | 68,535,837 | |||||||||||||||||
Loss before income taxes | (63,985,422 | ) | (2,068,527 | ) | (503,611 | ) | (2,572,138 | ) | (66,557,560 | ) | ||||||||||||
Provision for future income taxes | — | 676,860 | 676,860 | 676,860 | ||||||||||||||||||
Provision for income taxes | — | — | — | — | — | |||||||||||||||||
NET LOSS | $ | (63,985,422 | ) | $ | (2,745,387 | ) | $ | (503,611 | ) | $ | (3,248,998 | ) | $ | (67,234,420 | ) | |||||||
Basic and diluted net loss per share (Note 6) | $ | (1.76 | ) | $ | (1.66 | ) | ||||||||||||||||
Weighted average number of shares outstanding — basic and diluted (Note 6) | 36,366,608 | 40,622,548 | ||||||||||||||||||||
F-3
Table of Contents
Pro Forma | ||||||||||||||||||||||
Coral Gold | Coral Gold | Consolidated | ||||||||||||||||||||
U.S. Gold | Resources Ltd. | US GAAP | Resources Ltd. | U.S. Gold | ||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Corporation | |||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||
Earnest money forfeited | $ | 200,000 | $ | 200,000 | ||||||||||||||||||
Interest and other items | 32,032 | $ | 15,270 | $ | 15,270 | 47,302 | ||||||||||||||||
Management fee | 330,000 | — | — | 330,000 | ||||||||||||||||||
Realized gain from disposition of shares | 520,428 | — | — | 520,428 | ||||||||||||||||||
Gain (loss) on sale of assets | (29,982 | ) | (3,296 | ) | (3,296 | ) | (33,278 | ) | ||||||||||||||
Gain (loss) on foreign exchange | — | (15,576 | ) | (15,576 | ) | (15,576 | ) | |||||||||||||||
Total other income | 1,052,478 | (3,602 | ) | (3,602 | ) | 1,048,876 | ||||||||||||||||
COSTS AND EXPENSES | ||||||||||||||||||||||
General and administrative | 2,745,418 | 792,205 | 792,205 | 3,537,623 | ||||||||||||||||||
Write-off of purchase price receivable | 182,748 | — | — | 182,748 | ||||||||||||||||||
Property holding costs | 761,081 | — | — | 761,081 | ||||||||||||||||||
Equity share of subsidiary loss | 58,888 | — | — | 58,888 | ||||||||||||||||||
Realization reserve — stock | 168,960 | — | — | 168,960 | ||||||||||||||||||
Interest | 3,011 | — | — | 3,011 | ||||||||||||||||||
Accretion of asset retirement obligation | 110,243 | — | — | 110,243 | ||||||||||||||||||
Exploration costs | — | — | $ | 642,993 | 2(i) | 642,993 | 642,993 | |||||||||||||||
Depreciation | 12,850 | 764 | 764 | 13,614 | ||||||||||||||||||
Total costs and expenses | 4,043,199 | 792,969 | 642,993 | 1,435,962 | 5,479,161 | |||||||||||||||||
Loss before income taxes | (2,990,721 | ) | (796,571 | ) | (642,993 | ) | (1,439,564 | ) | (4,430,285 | ) | ||||||||||||
Provision for income taxes | — | — | — | — | — | |||||||||||||||||
NET LOSS | $ | (2,990,721 | ) | $ | (796,571 | ) | $ | (642,993 | ) | $ | (1,439,564 | ) | $ | (4,430,285 | ) | |||||||
Basic and diluted net loss per share (Note 6) | $ | (0.12 | ) | $ | (0.15 | ) | ||||||||||||||||
Weighted average number of shares outstanding — basic and diluted (Note 6) | 25,931,172 | 30,187,112 | ||||||||||||||||||||
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NOTES TO THE UNAUDITEDPRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars unless otherwise stated)
September 30, 2006 and December 31, 2005
(Unaudited)
1. | Basis of presentation |
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As at July 31, 2006 | 0.88 | |||
Average for the nine months ended July 31, 2006 | 0.87 | |||
Average for the twelve months ended October 31, 2005 | 0.82 |
2. | Reconciliation to United States Generally Accepted Accounting Principles |
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3. | Business acquisition |
Risk-free interest rate | 5% | |||
Dividend yield | N/A | |||
Volatility factor | 102% | |||
Expected life — options | 4 years | |||
Remaining period to expiry date — warrants (weighted average) | 7 months |
F-7
Table of Contents
Purchase price: | ||||
Shares issued on acquisition | $ | 25,110,046 | ||
Options | 1,947,891 | |||
Warrants | 1,124,232 | |||
Acquisition costs (estimated) | 201,427 | |||
$ | 28,383,596 | |||
Net assets acquired: | ||||
Cash and cash equivalents | $ | 3,497,868 | ||
Accounts receivable | 74,307 | |||
Other current assets — prepaid expenses | 71,647 | |||
Property and equipment, net | 2,879 | |||
Mineral property interests | 913,857 | |||
Restrictive time deposits for reclamation bonding | 231,600 | |||
Other assets | 207,785 | |||
Accounts payable and accrued liabilities | (343,994 | ) | ||
Advances payable | (40,513 | ) | ||
Future income tax liability | (1,274,823 | ) | ||
Other liabilities | (23,159 | ) | ||
Future income tax payable on acquisition | (7,069,135 | ) | ||
Acquired mineral property interests | 32,135,277 | |||
$ | 28,383,596 | |||
4. | Pro forma assumptions and adjustments |
F-8
Table of Contents
5. | Pro forma share capital |
Number of | ||||||||
shares | Amount | |||||||
Issued common shares of U.S. Gold | 49,996,755 | $ | 162,620,797 | |||||
Shares issued for acquisition of Coral Gold | 4,255,940 | 25,110,046 | ||||||
Pro forma balance | 54,252,695 | $ | 187,730,843 | |||||
6. | Pro forma loss per share |
Nine Months Ended | Year Ended | |||||||
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
(Shares or US dollars) | ||||||||
Actual weighted average number of U.S. Gold common shares outstanding | 36,366,608 | 25,931,172 | ||||||
Assumed number of U.S. Gold common shares issued to Coral Gold shareholders | 4,255,940 | 4,255,940 | ||||||
Pro forma weighted average number of U.S. Gold common shares outstanding | 40,622,548 | 30,187,112 | ||||||
Pro forma net loss | $ | (67,234,420 | ) | $ | (4,430,285 | ) | ||
Pro forma adjusted basic loss per share | $ | (1.66 | ) | $ | (0.15 | ) |
F-9
Table of Contents
As Reported | ||||||||||||||||||||||||||||
Nevada | Nevada | Pro Forma | ||||||||||||||||||||||||||
Pacific | Pacific | Consolidated | ||||||||||||||||||||||||||
U.S. Gold | Gold Ltd. | US GAAP | Gold Ltd. | Transaction | U.S. Gold | |||||||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Adjustments | Notes | Corporation | |||||||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Current | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 60,641,189 | $ | 3,544,851 | $ | 3,544,851 | $ | 64,186,040 | ||||||||||||||||||||
Accounts receivable | 51,369 | 208,377 | 208,377 | 259,746 | ||||||||||||||||||||||||
Product inventory and stockpiled ore | — | 204,217 | 204,217 | 204,217 | ||||||||||||||||||||||||
Supplies inventory | — | 259,138 | 259,138 | 259,138 | ||||||||||||||||||||||||
Other current assets — prepaid expenses | 52,359 | 281,892 | 281,892 | 334,251 | ||||||||||||||||||||||||
Total current assets | 60,744,917 | 4,498,475 | 4,498,475 | 65,243,392 | ||||||||||||||||||||||||
Property and equipment, net | 592,690 | 13,205,317 | $ | (4,657,846 | ) | 2(i) | 8,547,471 | 9,140,161 | ||||||||||||||||||||
Mineral property interests | — | 5,508,007 | (5,508,007 | ) | 2(ii) | — | — | |||||||||||||||||||||
Acquired mineral property interests | — | — | — | $ | 130,340,465 | 3&4(a) | 130,340,465 | |||||||||||||||||||||
Restrictive time deposits for reclamation bonding | 3,102,696 | 96,363 | 96,363 | 3,199,059 | ||||||||||||||||||||||||
Long-lived asset — asset retirement | 2,231,036 | — | — | 2,231,036 | ||||||||||||||||||||||||
Other assets: | ||||||||||||||||||||||||||||
Inactive milling equipment | 777,819 | — | — | 777,819 | ||||||||||||||||||||||||
Other assets | 2,125 | — | — | 2,125 | ||||||||||||||||||||||||
Total other assets | 779,944 | — | — | — | — | 779,944 | ||||||||||||||||||||||
TOTAL ASSETS | $ | 67,451,283 | $ | 23,308,162 | $ | (10,165,853 | ) | $ | 13,142,309 | $ | 130,340,465 | $ | 210,934,057 | |||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||
Current | ||||||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 3,850,333 | $ | 1,013,414 | $ | 1,013,414 | $ | 795,221 | 3&4(b) | $ | 5,658,968 | |||||||||||||||||
Installment purchase contracts | 24,177 | — | — | 24,177 | ||||||||||||||||||||||||
Retirement obligation (reclamation activities) | 360,054 | — | — | 360,054 | ||||||||||||||||||||||||
Total current liabilities | 4,234,564 | 1,013,414 | 1,013,414 | 795,221 | 6,043,199 | |||||||||||||||||||||||
Installment purchase contracts, long-term | 9,260 | — | — | 9,260 | ||||||||||||||||||||||||
Retirement obligation | 2,769,673 | 1,631,090 | 1,631,090 | 4,400,763 | ||||||||||||||||||||||||
Future income tax liability | — | — | — | 28,672,367 | 3&4(c) | 28,672,367 | ||||||||||||||||||||||
Other permit obligations | 72,511 | — | — | 72,511 | ||||||||||||||||||||||||
Other liabilities | — | 109,350 | 109,350 | 109,350 | ||||||||||||||||||||||||
Total liabilities | 7,086,008 | 2,753,854 | 2,753,854 | 29,467,588 | 39,307,450 | |||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||
Capital stock | 162,620,797 | 32,619,378 | 32,619,378 | (32,619,378 | ) | 4(d) | 258,377,732 | |||||||||||||||||||||
95,756,935 | 3 | |||||||||||||||||||||||||||
Options and warrants | — | — | — | 15,504,397 | 3 | 15,504,397 | ||||||||||||||||||||||
Other equity accounts | — | 1,581,739 | $ | (225,535 | ) | 2(iii) | 1,356,204 | (1,356,204 | ) | 4(d) | — | |||||||||||||||||
Deficit | (102,255,522 | ) | (13,646,809 | ) | (9,940,318 | ) | 2(iv) | (23,587,127 | ) | 23,587,127 | 4(d) | (102,255,522 | ) | |||||||||||||||
Total shareholders’ equity | 60,365,275 | 20,554,308 | (10,165,853 | ) | 10,388,455 | 100,872,877 | 171,626,607 | |||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 67,451,283 | $ | 23,308,162 | $ | (10,165,853 | ) | $ | 13,142,309 | $ | 130,340,465 | $ | 210,934,057 | |||||||||||||||
F-10
Table of Contents
As Reported | ||||||||||||||||||||||
Nevada | Nevada | Pro Forma | ||||||||||||||||||||
Pacific | Pacific | Consolidated | ||||||||||||||||||||
U.S. Gold | Gold Ltd. | US GAAP | Gold Ltd. | U.S. Gold | ||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Corporation | |||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||
SALES | $ | 3,695,957 | $ | 3,695,957 | $ | 3,695,957 | ||||||||||||||||
COST OF SALES | 3,969,075 | $ | 120,536 | 2(i) | 4,089,611 | 4,089,611 | ||||||||||||||||
DEPRECIATION AND DEPLETION | 270,912 | (83,543 | ) | 2(i) | 187,369 | 187,369 | ||||||||||||||||
ROYALTIES | 217,749 | 217,749 | 217,749 | |||||||||||||||||||
4,457,736 | 36,993 | 4,494,729 | 4,494,729 | |||||||||||||||||||
EARNINGS (LOSS) FROM MINING OPERATIONS | (761,779 | ) | (36,993 | ) | (798,772 | ) | (798,772 | ) | ||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||
Interest and other items | $ | 1,884,025 | 87,457 | 87,457 | 1,971,482 | |||||||||||||||||
Gain (loss) on foreign exchange | — | (37,552 | ) | (37,552 | ) | (37,552 | ) | |||||||||||||||
Total other income | 1,884,025 | 49,905 | — | 49,905 | 1,933,930 | |||||||||||||||||
COSTS AND EXPENSES | ||||||||||||||||||||||
General and administrative | 2,751,570 | 2,328,206 | 61,841 | 2(iii) | 2,390,047 | 5,141,617 | ||||||||||||||||
Proposed acquisitions | 4,348,190 | — | — | 4,348,190 | ||||||||||||||||||
Property holding costs | 1,626,488 | — | — | 1,626,488 | ||||||||||||||||||
Exploration costs | 4,375,095 | — | 1,845,430 | 2(ii) | 1,845,430 | 6,220,525 | ||||||||||||||||
Interest | 5,880 | — | — | 5,880 | ||||||||||||||||||
Stock option expense | 840,857 | — | — | 840,857 | ||||||||||||||||||
Accretion of asset retirement obligation | 206,051 | — | — | 206,051 | ||||||||||||||||||
Change in value of derivatives | 51,680,304 | — | — | 51,680,304 | ||||||||||||||||||
Write-down of mineral properties | — | 97,867 | (97,867 | ) | 2(ii) | — | — | |||||||||||||||
Depreciation | 35,012 | — | — | 35,012 | ||||||||||||||||||
Total costs and expenses | 65,869,447 | 2,426,073 | 1,809,404 | 4,235,477 | 70,104,924 | |||||||||||||||||
Loss before income taxes | (63,985,422 | ) | (3,137,947 | ) | (1,846,397 | ) | (4,984,344 | ) | (68,969,766 | ) | ||||||||||||
Provision for income taxes | — | — | — | — | — | |||||||||||||||||
NET LOSS | $ | (63,985,422 | ) | $ | (3,137,947 | ) | $ | (1,846,397 | ) | $ | (4,984,344 | ) | $ | (68,969,766 | ) | |||||||
Basic and diluted net loss per share (Note 6) | $ | (1.76 | ) | $ | (1.31 | ) | ||||||||||||||||
Weighted average number of shares outstanding — basic and diluted (Note 6) | 36,366,608 | 52,596,597 | ||||||||||||||||||||
F-11
Table of Contents
As Reported | ||||||||||||||||||||||
Nevada | Nevada | Pro Forma | ||||||||||||||||||||
Pacific | Pacific | Consolidated | ||||||||||||||||||||
U.S. Gold | Gold Ltd. | US GAAP | Gold Ltd. | U.S. Gold | ||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Corporation | |||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||
SALES | $ | 8,881,168 | $ | 8,881,168 | $ | 8,881,168 | ||||||||||||||||
COST OF SALES | 8,024,132 | $ | 396,305 | 2(i) | 8,420,437 | 8,420,437 | ||||||||||||||||
DEPRECIATION AND DEPLETION | 1,203,093 | (398,878 | ) | 2(i) | 804,215 | 804,215 | ||||||||||||||||
ROYALTIES | 472,743 | 472,743 | 472,743 | |||||||||||||||||||
9,699,968 | (2,573 | ) | 9,697,395 | 9,697,395 | ||||||||||||||||||
EARNINGS (LOSS) FROM MINING OPERATIONS | (818,800 | ) | 2,573 | (816,227 | ) | (816,227 | ) | |||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||
Earnest money forfeited | $ | 200,000 | — | — | 200,000 | |||||||||||||||||
Interest and other items | 32,032 | 27,205 | 27,205 | 59,237 | ||||||||||||||||||
Management fee | 330,000 | — | — | 330,000 | ||||||||||||||||||
Realized gain from disposition of shares | 520,428 | — | — | 520,428 | ||||||||||||||||||
Gain (loss) on sale of assets | (29,982 | ) | 155,199 | 155,199 | 125,217 | |||||||||||||||||
Gain (loss) on foreign exchange | — | (67,043 | ) | (67,043 | ) | (67,043 | ) | |||||||||||||||
Total other income | 1,052,478 | 115,361 | — | 115,361 | 1,167,839 | |||||||||||||||||
COSTS AND EXPENSES | ||||||||||||||||||||||
General and administrative | 2,745,418 | 2,272,941 | 2,272,941 | 5,018,359 | ||||||||||||||||||
Write-off of purchase price receivable | 182,748 | — | — | 182,748 | ||||||||||||||||||
Property holding costs | 761,081 | — | — | 761,081 | ||||||||||||||||||
Equity share of subsidiary loss | 58,888 | — | — | 58,888 | ||||||||||||||||||
Realization reserve — stock | 168,960 | — | — | 168,960 | ||||||||||||||||||
Interest | 3,011 | 246 | 246 | 3,257 | ||||||||||||||||||
Accretion of asset retirement obligation | 110,243 | — | — | 110,243 | ||||||||||||||||||
Exploration costs | — | — | 1,642,479 | 2(ii) | 1,642,479 | 1,642,479 | ||||||||||||||||
Write-down of mineral properties | — | 131,710 | (131,710 | ) | 2(ii) | — | — | |||||||||||||||
Depreciation | 12,850 | — | — | 12,850 | ||||||||||||||||||
Total costs and expenses | 4,043,199 | 2,404,897 | 1,510,769 | 3,915,666 | 7,958,865 | |||||||||||||||||
Loss before income taxes | (2,990,721 | ) | (3,108,336 | ) | (1,508,196 | ) | (4,616,532 | ) | (7,607,253 | ) | ||||||||||||
Provision for income taxes | — | — | — | — | — | |||||||||||||||||
NET LOSS | $ | (2,990,721 | ) | $ | (3,108,336 | ) | $ | (1,508,196 | ) | $ | (4,616,532 | ) | $ | (7,607,253 | ) | |||||||
Basic and diluted net loss per share (Note 6) | $ | (0.12 | ) | $ | (0.18 | ) | ||||||||||||||||
Weighted average number of shares outstanding — basic and diluted (Note 6) | 25,931,172 | 42,161,161 | ||||||||||||||||||||
F-12
Table of Contents
NOTES TO THE UNAUDITEDPRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars unless otherwise stated)
September 30, 2006 and December 31, 2005
(Unaudited)
1. | Basis of presentation |
F-13
Table of Contents
2. | Reconciliation to United States Generally Accepted Accounting Principles |
F-14
Table of Contents
F-15
Table of Contents
3. | Business acquisition |
Risk-free interest rate | 5% | |||
Dividend yield | N/A | |||
Volatility factor | 102% | |||
Expected life — options | 1-3 years | |||
Remaining period to expiry date — warrants (weighted average) | 17 months |
F-16
Table of Contents
Purchase price: | ||||
Shares issued on acquisition | $ | 95,756,935 | ||
Options | 2,684,128 | |||
Warrants | 12,820,269 | |||
Acquisition costs (estimated) | 795,221 | |||
$ | 112,056,553 | |||
Net assets acquired: | ||||
Cash and cash equivalents | $ | 3,544,851 | ||
Accounts receivable | 208,377 | |||
Product inventory and stockpiled ore | 204,217 | |||
Supplies inventory | 259,138 | |||
Other current assets — prepaid expenses | 281,892 | |||
Property, plant and equipment | 8,547,471 | |||
Reclamation bonds | 96,363 | |||
Accounts payable and accrued liabilities | (1,013,414 | ) | ||
Other liabilities | (109,350 | ) | ||
Asset retirement obligation | (1,631,090 | ) | ||
Future income tax liability | (28,672,367 | ) | ||
Acquired mineral property interests | 130,340,465 | |||
$ | 112,056,553 | |||
4. | Pro forma assumptions and adjustments |
5. | Pro forma share capital |
Number of | ||||||||
shares | Amount | |||||||
Issued common shares of U.S. Gold | 49,996,755 | $ | 162,620,797 | |||||
Shares issued for acquisition of Nevada | 16,229,989 | 95,756,935 | ||||||
Pro forma balance | 66,226,744 | $ | 258,377,732 | |||||
F-17
Table of Contents
6. | Pro forma loss per share |
Nine Months Ended | Year Ended | |||||||
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
(Shares or US dollars) | ||||||||
Actual weighted average number of U.S. Gold common shares outstanding | 36,366,608 | 25,931,172 | ||||||
Assumed number of U.S. Gold common shares issued to Nevada shareholders | 16,229,989 | 16,229,989 | ||||||
Pro forma weighted average number of U.S. Gold common shares outstanding | 52,596,597 | 42,161,161 | ||||||
Pro forma net loss | $ | (68,969,766 | ) | $ | (7,607,253 | ) | ||
Pro forma adjusted basic loss per share | $ | (1.31 | ) | $ | (0.18 | ) |
F-18
Table of Contents
As Reported | ||||||||||||||||||||||||||||||||
Tone | Tone | Pro Forma | ||||||||||||||||||||||||||||||
Resources | Resources | Consolidated | ||||||||||||||||||||||||||||||
U.S. Gold | Limited | US GAAP | Limited | Transaction | U.S. Gold | |||||||||||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Adjustments | Notes | Corporation | |||||||||||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||
Current | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 60,641,189 | $ | 1,122,672 | $ | 1,122,672 | $ | 61,763,861 | ||||||||||||||||||||||||
Accounts receivable | 51,369 | 11,168 | 11,168 | 62,537 | ||||||||||||||||||||||||||||
Other current assets - prepaid expenses | 52,359 | 6,134 | 6,134 | 58,493 | ||||||||||||||||||||||||||||
Total current assets | 60,744,917 | 1,139,974 | 1,139,974 | 61,884,891 | ||||||||||||||||||||||||||||
Property and equipment, net | 592,690 | — | — | 592,690 | ||||||||||||||||||||||||||||
Mineral property interests | — | 1,196,168 | $ | (1,196,168 | ) | 2 | (i) | — | — | |||||||||||||||||||||||
Acquired mineral property interests | — | — | — | $ | 46,113,410 | 3&4(a) | 46,113,410 | |||||||||||||||||||||||||
Restrictive time deposits for reclamation bonding | 3,102,696 | 30,004 | 30,004 | 3,132,700 | ||||||||||||||||||||||||||||
Long-lived asset — asset retirement | 2,231,036 | — | — | 2,231,036 | ||||||||||||||||||||||||||||
Other assets: | ||||||||||||||||||||||||||||||||
Inactive milling equipment | 777,819 | — | — | 777,819 | ||||||||||||||||||||||||||||
Other assets | 2,125 | — | — | 2,125 | ||||||||||||||||||||||||||||
Total other assets | 779,944 | — | — | — | — | 779,944 | ||||||||||||||||||||||||||
TOTAL ASSETS | $ | 67,451,283 | $ | 2,366,146 | $ | (1,196,168 | ) | $ | 1,169,978 | $ | 46,113,410 | $ | 114,734,671 | |||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||
Current | ||||||||||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 3,850,333 | $ | 50,606 | $ | 50,606 | $ | 263,722 | 3&4(b) | $ | 4,164,661 | |||||||||||||||||||||
Installment purchase contracts | 24,177 | — | — | 24,177 | ||||||||||||||||||||||||||||
Due to related parties | — | 40,349 | 40,349 | 40,349 | ||||||||||||||||||||||||||||
Retirement obligation (reclamation activities) | 360,054 | — | — | 360,054 | ||||||||||||||||||||||||||||
Total current liabilities | 4,234,564 | 90,955 | — | 90,955 | 263,722 | 4,589,241 | ||||||||||||||||||||||||||
Installment purchase contracts, long-term | 9,260 | — | — | 9,260 | ||||||||||||||||||||||||||||
Retirement obligation | 2,769,673 | — | — | 2,769,673 | ||||||||||||||||||||||||||||
Future income tax liability | — | — | — | 10,144,053 | 3&4(c) | 10,144,053 | ||||||||||||||||||||||||||
Other permit obligations | 72,511 | — | — | 72,511 | ||||||||||||||||||||||||||||
Total liabilities | 7,086,008 | 90,955 | — | 90,955 | 10,407,775 | 17,584,738 | ||||||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||
Capital stock | 162,620,797 | 4,913,218 | 4,913,218 | (4,913,218 | ) | 4(d) | 193,230,611 | |||||||||||||||||||||||||
30,609,814 | 3 | |||||||||||||||||||||||||||||||
Options and warrants | — | — | — | 6,174,844 | 3 | 6,174,844 | ||||||||||||||||||||||||||
Other equity accounts | — | 440,999 | 440,999 | (440,999 | ) | 4(d) | — | |||||||||||||||||||||||||
Deficit | (102,255,522 | ) | (3,079,026 | ) | $ | (1,196,168 | ) | 2(ii | ) | (4,275,194 | ) | 4,275,194 | 4(d) | (102,255,522 | ) | |||||||||||||||||
Total shareholders’ equity | 60,365,275 | 2,275,191 | (1,196,168 | ) | 1,079,023 | 35,705,635 | 97,149,933 | |||||||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 67,451,283 | $ | 2,366,146 | $ | (1,196,168 | ) | $ | 1,169,978 | $ | 46,113,410 | $ | 114,734,671 | |||||||||||||||||||
F-19
Table of Contents
As Reported | ||||||||||||||||||||||||
Tone | Tone | Pro Forma | ||||||||||||||||||||||
Resources | Resources | Consolidated | ||||||||||||||||||||||
U.S. Gold | Limited | US GAAP | Limited | U.S. Gold | ||||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Corporation | |||||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||||
Interest and other items | $ | 1,884,025 | $ | 6,556 | $ | 6,556 | $ | 1,890,581 | ||||||||||||||||
Gain (loss) on foreign exchange | — | (5,936 | ) | (5,936 | ) | (5,936 | ) | |||||||||||||||||
Total other income | 1,884,025 | 620 | 620 | 1,884,645 | ||||||||||||||||||||
COSTS AND EXPENSES | ||||||||||||||||||||||||
General and administrative | 2,751,570 | 835,573 | 835,573 | 3,587,143 | ||||||||||||||||||||
Proposed acquisitions | 4,348,190 | — | — | 4,348,190 | ||||||||||||||||||||
Property holding costs | 1,626,488 | — | — | 1,626,488 | ||||||||||||||||||||
Exploration costs | 4,375,095 | — | $ | 168,516 | 2(i) | 168,516 | 4,543,611 | |||||||||||||||||
Interest | 5,880 | — | — | 5,880 | ||||||||||||||||||||
Stock option expense | 840,857 | — | — | 840,857 | ||||||||||||||||||||
Accretion of asset retirement obligation | 206,051 | — | — | 206,051 | ||||||||||||||||||||
Change in value of derivatives | 51,680,304 | — | — | 51,680,304 | ||||||||||||||||||||
Depreciation | 35,012 | — | — | 35,012 | ||||||||||||||||||||
Total costs and expenses | 65,869,447 | 835,573 | 168,516 | 1,004,089 | 66,873,536 | |||||||||||||||||||
Loss before income taxes | (63,985,422 | ) | (834,953 | ) | (168,516 | ) | (1,003,469 | ) | (64,988,891 | ) | ||||||||||||||
Provision for income taxes | — | — | — | — | — | |||||||||||||||||||
NET LOSS | $ | (63,985,422 | ) | $ | (834,953 | ) | $ | (168,516 | ) | $ | (1,003,469 | ) | $ | (64,988,891 | ) | |||||||||
Basic and diluted net loss per share (Note 6) | $ | (1.76 | ) | $ | (1.56 | ) | ||||||||||||||||||
Weighted average number of shares outstanding — basic and diluted (Note 6) | 36,366,608 | 41,554,712 | ||||||||||||||||||||||
F-20
Table of Contents
As Reported | ||||||||||||||||||||||||
Tone | Pro Forma | |||||||||||||||||||||||
Resources | Tone Resources | Consolidated | ||||||||||||||||||||||
U.S. Gold | Limited | US GAAP | Limited | U.S. Gold | ||||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Corporation | |||||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||||
Earnest money forfeited | $ | 200,000 | $ | 200,000 | ||||||||||||||||||||
Interest and other items | 32,032 | $ | 439 | $ | 439 | 32,471 | ||||||||||||||||||
Management fee | 330,000 | — | — | 330,000 | ||||||||||||||||||||
Realized gain from disposition of shares | 520,428 | — | — | 520,428 | ||||||||||||||||||||
Gain (loss) on sale of assets | (29,982 | ) | — | — | (29,982 | ) | ||||||||||||||||||
Gain (loss) on foreign exchange | — | (1,723 | ) | (1,723 | ) | (1,723 | ) | |||||||||||||||||
Total other income | 1,052,478 | (1,284 | ) | (1,284 | ) | 1,051,194 | ||||||||||||||||||
COSTS AND EXPENSES | ||||||||||||||||||||||||
General and administrative | 2,745,418 | 608,059 | 608,059 | 3,353,477 | ||||||||||||||||||||
Write-off of purchase price receivable | 182,748 | — | — | 182,748 | ||||||||||||||||||||
Property holding costs | 761,081 | — | — | 761,081 | ||||||||||||||||||||
Equity share of subsidiary loss | 58,888 | — | — | 58,888 | ||||||||||||||||||||
Realization reserve — stock | 168,960 | — | — | 168,960 | ||||||||||||||||||||
Interest | 3,011 | — | — | 3,011 | ||||||||||||||||||||
Accretion of asset retirement obligation | 110,243 | — | — | 110,243 | ||||||||||||||||||||
Exploration costs | — | 67,871 | $ | 25,335 | 2(i) | 93,206 | 93,206 | |||||||||||||||||
Depreciation | 12,850 | — | — | 12,850 | ||||||||||||||||||||
Total costs and expenses | 4,043,199 | 675,930 | 25,335 | 701,265 | 4,744,464 | |||||||||||||||||||
Loss before income taxes | (2,990,721 | ) | (677,214 | ) | (25,335 | ) | (702,549 | ) | (3,693,270 | ) | ||||||||||||||
Provision for income taxes | — | — | — | — | — | |||||||||||||||||||
NET LOSS | $ | (2,990,721 | ) | $ | (677,214 | ) | $ | (25,335 | ) | $ | (702,549 | ) | $ | (3,693,270 | ) | |||||||||
Basic and diluted net loss per share (Note 6) | $ | (0.12 | ) | $ | (0.12 | ) | ||||||||||||||||||
Weighted average number of shares outstanding — basic and diluted (Note 6) | 25,931,172 | 31,119,276 | ||||||||||||||||||||||
F-21
Table of Contents
1. | Basis of presentation |
F-22
Table of Contents
As at August 31, 2006 | 0.90 | |||
Average for the nine months ended August 31, 2006 | 0.88 | |||
Average for the twelve months ended November 30, 2005 | 0.82 |
2. | Reconciliation to United States Generally Accepted Accounting Principles |
F-23
Table of Contents
3. | Business acquisition |
Risk-free interest rate | 5% | |||
Dividend yield | N/A | |||
Volatility factor | 102% | |||
Expected life — options | 2 years | |||
Remaining period to expiry date — warrants (weighted average) | 15 months |
F-24
Table of Contents
Purchase price: | ||||
Shares issued on acquisition | $ | 30,609,814 | ||
Options | 1,954,946 | |||
Warrants | 4,219,898 | |||
Acquisition costs (estimated) | 263,722 | |||
$ | 37,048,380 | |||
Net assets acquired: | ||||
Cash and cash equivalents | $ | 1,122,672 | ||
Accounts receivable | 11,168 | |||
Retainers and prepaid expenses | 6,134 | |||
Reclamation bond | 30,004 | |||
Accounts payable and accrued liabilities | (50,606 | ) | ||
Due to related parties | (40,349 | ) | ||
Future income tax liability | (10,144,053 | ) | ||
Acquired mineral property interests | 46,113,410 | |||
$ | 37,048,380 | |||
4. | Pro forma assumptions and adjustments |
5. | Pro forma share capital |
Number of | ||||||||
shares | Amount | |||||||
Issued common shares of U.S. Gold | 49,996,755 | $ | 162,620,797 | |||||
Shares issued for acquisition of Tone | 5,188,104 | 30,609,814 | ||||||
Pro forma balance | 55,184,859 | $ | 193,230,611 | |||||
F-25
Table of Contents
6. | Pro forma loss per share |
Nine Months Ended | Year Ended | |||||||
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
(Shares or US dollars) | ||||||||
Actual weighted average number of U.S. Gold common shares outstanding | 36,366,608 | 25,931,172 | ||||||
Assumed number of U.S. Gold common shares issued to Tone shareholders | 5,188,104 | 5,188,104 | ||||||
Pro forma weighted average number of U.S. Gold common shares outstanding | 41,554,712 | 31,119,276 | ||||||
Pro forma net loss | $ | (64,988,891 | ) | $ | (3,693,270 | ) | ||
Pro forma adjusted basic loss per share | $ | (1.56 | ) | $ | (0.12 | ) |
F-26
Table of Contents
As Reported | Pro Forma | |||||||||||||||||||||||||||
White Knight | White Knight | Consolidated | ||||||||||||||||||||||||||
U.S. Gold | Resources Ltd. | US GAAP | Resources Ltd. | Transaction | U.S. Gold | |||||||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Adjustments | Notes | Corporation | |||||||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Current | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 60,641,189 | $ | 9,463,838 | $ | 9,463,838 | $ | 70,105,027 | ||||||||||||||||||||
Temporary investments | — | 1,942,924 | $ | 52,886 | 2(i) | 1,995,810 | 1,995,810 | |||||||||||||||||||||
Accounts receivable | 51,369 | 120,000 | 120,000 | 171,369 | ||||||||||||||||||||||||
Other current assets — prepaid expenses | 52,359 | 43,300 | 43,300 | 95,659 | ||||||||||||||||||||||||
Total current assets | 60,744,917 | 11,570,062 | 52,886 | 11,622,948 | 72,367,865 | |||||||||||||||||||||||
Property and equipment, net | 592,690 | 955,949 | 955,949 | 1,548,639 | ||||||||||||||||||||||||
Mineral property interests | — | 2,528,366 | (1,827,140 | ) | 2(ii) | 701,226 | 701,226 | |||||||||||||||||||||
Deferred exploration costs | — | 3,833,847 | (3,833,847 | ) | 2(ii) | — | — | |||||||||||||||||||||
Acquired mineral property interests | — | — | — | $ | 152,953,289 | 3&4(a) | 152,953,289 | |||||||||||||||||||||
Restrictive time deposits for reclamation bonding | 3,102,696 | 214,273 | 214,273 | 3,316,969 | ||||||||||||||||||||||||
Long-lived asset — asset retirement | 2,231,036 | — | — | 2,231,036 | ||||||||||||||||||||||||
Other assets: | ||||||||||||||||||||||||||||
Inactive milling equipment | 777,819 | — | — | 777,819 | ||||||||||||||||||||||||
Other assets | 2,125 | — | — | 2,125 | ||||||||||||||||||||||||
Total other assets | 779,944 | — | — | — | 779,944 | |||||||||||||||||||||||
TOTAL ASSETS | $ | 67,451,283 | $ | 19,102,497 | $ | (5,608,101 | ) | $ | 13,494,396 | $ | 152,953,289 | $ | 233,898,968 | |||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||
Current | ||||||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 3,850,333 | $ | 155,434 | $ | 155,434 | $ | 939,630 | 3&4(b) | $ | 4,945,397 | |||||||||||||||||
Installment purchase contracts | 24,177 | — | — | 24,177 | ||||||||||||||||||||||||
Due to related parties | — | 90,476 | 90,476 | 90,476 | ||||||||||||||||||||||||
Retirement obligation (reclamation activities) | 360,054 | — | — | 360,054 | ||||||||||||||||||||||||
Total current liabilities | 4,234,564 | 245,910 | 245,910 | 939,630 | 5,420,104 | |||||||||||||||||||||||
Installment purchase contracts, long-term | 9,260 | — | — | 9,260 | ||||||||||||||||||||||||
Retirement obligation | 2,769,673 | 149,387 | 149,387 | 2,919,060 | ||||||||||||||||||||||||
Future income tax liability | — | — | — | 33,646,748 | 3&4(c) | 33,646,748 | ||||||||||||||||||||||
Other permit obligations | 72,511 | — | — | 72,511 | ||||||||||||||||||||||||
Total liabilities | 7,086,008 | 395,297 | 395,297 | 34,586,378 | 42,067,683 | |||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||
Capital stock | 162,620,797 | 28,926,147 | 28,926,147 | (28,926,147 | ) | 4(d) | 285,250,763 | |||||||||||||||||||||
122,629,966 | 3 | |||||||||||||||||||||||||||
Options and warrants | — | — | — | 8,836,044 | 3 | 8,836,044 | ||||||||||||||||||||||
Other equity accounts | — | 3,654,370 | 3,654,370 | (3,654,370 | ) | 4(d) | — | |||||||||||||||||||||
Deficit | (102,255,522 | ) | (13,873,317 | ) | $ | (5,608,101 | ) | 2(iii) | (19,481,418 | ) | 19,481,418 | 4(d) | (102,255,522 | ) | ||||||||||||||
Total shareholders’ equity | 60,365,275 | 18,707,200 | (5,608,101 | ) | 13,099,099 | 118,366,911 | 191,831,285 | |||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 67,451,283 | $ | 19,102,497 | $ | (5,608,101 | ) | $ | 13,494,396 | $ | 152,953,289 | $ | 233,898,968 | |||||||||||||||
F-27
Table of Contents
As Reported | Pro Forma | |||||||||||||||||||||
White Knight | White Knight | Consolidated | ||||||||||||||||||||
U.S. Gold | Resources Ltd. | US GAAP | Resources Ltd. | U.S. Gold | ||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Corporation | |||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||
Interest and other items | $ | 1,884,025 | $ | 303,755 | $ | 25,450 | 2(i) | $ | 329,205 | $ | 2,213,230 | |||||||||||
Gain (loss) on foreign exchange | — | (12,168 | ) | (12,168 | ) | (12,168 | ) | |||||||||||||||
Total other income | 1,884,025 | 291,587 | 25,450 | 317,037 | 2,201,062 | |||||||||||||||||
COSTS AND EXPENSES | ||||||||||||||||||||||
General and administrative | 2,751,570 | 2,819,871 | 2,819,871 | 5,571,441 | ||||||||||||||||||
Proposed acquisitions | 4,348,190 | — | — | 4,348,190 | ||||||||||||||||||
Property holding costs | 1,626,488 | — | — | 1,626,488 | ||||||||||||||||||
Exploration costs | 4,375,095 | 91,246 | 857,221 | 2(ii) | 948,467 | 5,323,562 | ||||||||||||||||
Interest | 5,880 | 3,959 | 3,959 | 9,839 | ||||||||||||||||||
Stock option expense | 840,857 | — | — | 840,857 | ||||||||||||||||||
Accretion of asset retirement obligation | 206,051 | — | — | 206,051 | ||||||||||||||||||
Change in value of derivatives | 51,680,304 | — | — | 51,680,304 | ||||||||||||||||||
Write-off (recovery) of mineral property costs | — | — | (14,780 | ) | 2(ii) | (14,780 | ) | (14,780 | ) | |||||||||||||
Depreciation | 35,012 | 22,169 | 22,169 | 57,181 | ||||||||||||||||||
Total costs and expenses | 65,869,447 | 2,937,245 | 842,441 | 3,779,686 | 69,649,133 | |||||||||||||||||
Loss before income taxes | (63,985,422 | ) | (2,645,658 | ) | (816,991 | ) | (3,462,649 | ) | (67,448,071 | ) | ||||||||||||
Provision for income taxes | — | — | — | — | — | |||||||||||||||||
NET LOSS | $ | (63,985,422 | ) | $ | (2,645,658 | ) | $ | (816,991 | ) | $ | (3,462,649 | ) | $ | (67,448,071 | ) | |||||||
Basic and diluted net loss per share (Note 6) | $ | (1.76 | ) | $ | (1.18 | ) | ||||||||||||||||
Weighted average number of shares outstanding — basic and diluted (Note 6) | 36,366,608 | 57,151,348 | ||||||||||||||||||||
F-28
Table of Contents
As Reported | Pro Forma | |||||||||||||||||||||
White Knight | White Knight | Consolidated | ||||||||||||||||||||
U.S. Gold | Resources Ltd. | US GAAP | Resources Ltd. | U.S. Gold | ||||||||||||||||||
Corporation | (Cdn GAAP) | Adjustments | Notes | (US GAAP) | Corporation | |||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||
Earnest money forfeited | $ | 200,000 | $ | 200,000 | ||||||||||||||||||
Interest and other items | 32,032 | $ | 294,563 | $ | 51,599 | 2(i) | $ | 346,162 | 378,194 | |||||||||||||
Management fee | 330,000 | — | — | 330,000 | ||||||||||||||||||
Realized gain from disposition of shares | 520,428 | — | — | 520,428 | ||||||||||||||||||
Gain (loss) on sale of assets | (29,982 | ) | — | — | (29,982 | ) | ||||||||||||||||
Gain (loss) on foreign exchange | — | 1,634 | 1,634 | 1,634 | ||||||||||||||||||
Total other income | 1,052,478 | 296,197 | 51,599 | 347,796 | 1,400,274 | |||||||||||||||||
COSTS AND EXPENSES | ||||||||||||||||||||||
General and administrative | 2,745,418 | 983,064 | 983,064 | 3,728,482 | ||||||||||||||||||
Write-off of purchase price receivable | 182,748 | — | — | 182,748 | ||||||||||||||||||
Property holding costs | 761,081 | — | — | 761,081 | ||||||||||||||||||
Equity share of subsidiary loss | 58,888 | — | — | 58,888 | ||||||||||||||||||
Realization reserve — stock | 168,960 | — | — | 168,960 | ||||||||||||||||||
Interest | 3,011 | 5,016 | 5,016 | 8,027 | ||||||||||||||||||
Accretion of asset retirement obligation | 110,243 | — | — | 110,243 | ||||||||||||||||||
Exploration costs | — | 107,296 | 1,692,739 | 2(ii) | 1,800,035 | 1,800,035 | ||||||||||||||||
Write-off of mineral property costs | — | — | 189,718 | 2(ii) | 189,718 | 189,718 | ||||||||||||||||
Depreciation | 12,850 | 27,329 | 27,329 | 40,179 | ||||||||||||||||||
Total costs and expenses | 4,043,199 | 1,122,705 | 1,882,457 | 3,005,162 | 7,048,361 | |||||||||||||||||
Loss before income taxes | (2,990,721 | ) | (826,508 | ) | (1,830,858 | ) | (2,657,366 | ) | (5,648,087 | ) | ||||||||||||
Provision for income taxes | — | — | — | — | — | |||||||||||||||||
NET LOSS | $ | (2,990,721 | ) | $ | (826,508 | ) | $ | (1,830,858 | ) | $ | (2,657,366 | ) | $ | (5,648,087 | ) | |||||||
Basic and diluted net loss per share (Note 6) | $ | (0.12 | ) | $ | (0.12 | ) | ||||||||||||||||
Weighted average number of shares outstanding — basic and diluted (Note 6) | 25,931,172 | 46,715,912 | ||||||||||||||||||||
F-29
Table of Contents
NOTES TO THE UNAUDITEDPRO FORMACONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars unless otherwise stated)
September 30, 2006 and December 31, 2005
(Unaudited)
1. | Basis of presentation |
F-30
Table of Contents
As at September 30, 2006 | 0.90 | |||
Average for the nine months ended September 30, 2006 | 0.88 | |||
Average for the twelve months ended December 31, 2005 | 0.83 |
2. | Reconciliation to United States Generally Accepted Accounting Principles |
F-31
Table of Contents
3. | Business acquisitions |
F-32
Table of Contents
Risk-free interest rate | 5% | |
Dividend yield | N/A | |
Volatility factor | 102% | |
Expected life — options | 3 years | |
Remaining period to expiry date — warrants (weighted average) | 3 months |
Purchase price: | ||||
Shares issued on acquisition | $ | 122,629,966 | ||
Options | 8,300,544 | |||
Warrants | 535,500 | |||
Acquisition costs (estimated) | 939,630 | |||
$ | 132,405,640 | |||
F-33
Table of Contents
Net assets acquired: | ||||
Cash and cash equivalents | $ | 9,463,838 | ||
Temporary investments | 1,995,810 | |||
Accounts receivable | 120,000 | |||
Other current assets — prepaid expenses | 43,300 | |||
Property and equipment, net | 955,949 | |||
Mineral property interests | 701,226 | |||
Restrictive time deposits for reclamation bonding | 214,273 | |||
Accounts payable and accrued liabilities | (155,434 | ) | ||
Due to related parties | (90,476 | ) | ||
Retirement obligation | (149,387 | ) | ||
Future income tax liability | (33,646,748 | ) | ||
Acquired mineral property interests | 152,953,289 | |||
$ | 132,405,640 | |||
4. | Pro forma assumptions and adjustments |
5. | Pro formashare capital |
Number of | ||||||||
shares | Amount | |||||||
Issued common shares of U.S. Gold | 49,996,755 | $ | 162,620,797 | |||||
Shares issued for acquisition of White Knight | 20,784,740 | 122,629,966 | ||||||
Pro forma balance | 70,781,495 | $ | 285,250,763 | |||||
F-34
Table of Contents
6. | Pro formaloss per share |
Nine Months | ||||||||
Ended | Year Ended | |||||||
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
(Shares or US dollars) | ||||||||
Actual weighted average number of U.S. Gold common shares outstanding | 36,366,608 | 25,931,172 | ||||||
Assumed number of U.S. Gold common shares issued to White Knight shareholders | 20,784,740 | 20,784,740 | ||||||
Pro forma weighted average number of U.S. Gold common shares outstanding | 57,151,348 | 46,715,912 | ||||||
Pro forma net loss | $ | (67,448,071 | ) | $ | (5,648,087 | ) | ||
Pro forma adjusted basic loss per share | $ | (1.18 | ) | $ | (0.12 | ) |
F-35
Table of Contents
Pro Forma | |||||||||||||||||||||||||||||||||||
U.S. GAAP | Consolidated | Pro Forma | |||||||||||||||||||||||||||||||||
As Reported | White Knight | Coral Gold | Tone | (before | Consolidated | ||||||||||||||||||||||||||||||
U.S. Gold | Resources | Nevada Pacific | Resources | Resources | transaction | Transaction | U.S. Gold | ||||||||||||||||||||||||||||
Corporation | Ltd. | Gold Ltd. | Ltd. | Limited | adjustments) | Adjustments | Notes | Corporation | |||||||||||||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | |||||||||||||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||||||||||
Current | |||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 60,641,189 | $ | 9,463,838 | $ | 3,544,851 | $ | 3,497,868 | $ | 1,122,672 | $ | 78,270,418 | $ | 78,270,418 | |||||||||||||||||||||
Temporary investments | — | 1,995,810 | — | — | — | 1,995,810 | 1,995,810 | ||||||||||||||||||||||||||||
Accounts receivable | 51,369 | 120,000 | 208,377 | 74,307 | 11,168 | 465,221 | 465,221 | ||||||||||||||||||||||||||||
Product inventory and stockpiled ore | — | — | 204,217 | — | — | 204,217 | 204,217 | ||||||||||||||||||||||||||||
Supplies inventory | — | — | 259,138 | — | — | 259,138 | 259,138 | ||||||||||||||||||||||||||||
Other current assets - prepaid expenses | 52,359 | 43,300 | 281,892 | 71,647 | 6,134 | 455,332 | 455,332 | ||||||||||||||||||||||||||||
Total current assets | 60,744,917 | 11,622,948 | 4,498,475 | 3,643,822 | 1,139,974 | 81,650,136 | 81,650,136 | ||||||||||||||||||||||||||||
Property and equipment, net | 592,690 | 955,949 | 8,547,471 | 2,879 | — | 10,098,989 | 10,098,989 | ||||||||||||||||||||||||||||
Mineral property interests | — | 701,226 | — | 913,857 | — | 1,615,083 | 1,615,083 | ||||||||||||||||||||||||||||
Acquired mineral property interests | — | — | — | — | — | — | $ | 361,542,441 | 3&4 | 361,542,441 | |||||||||||||||||||||||||
Restrictive time deposits for reclamation bonding | 3,102,696 | 214,273 | 96,363 | 231,600 | 30,004 | 3,674,936 | 3,674,936 | ||||||||||||||||||||||||||||
Long-lived asset — asset retirement | 2,231,036 | — | — | — | — | 2,231,036 | 2,231,036 | ||||||||||||||||||||||||||||
Other assets: | |||||||||||||||||||||||||||||||||||
Inactive milling equipment | 777,819 | — | — | — | — | 777,819 | 777,819 | ||||||||||||||||||||||||||||
Other assets | 2,125 | — | — | 207,785 | — | 209,910 | 209,910 | ||||||||||||||||||||||||||||
Total other assets | 779,944 | — | — | 207,785 | — | 987,729 | — | 987,729 | |||||||||||||||||||||||||||
TOTAL ASSETS | $ | 67,451,283 | $ | 13,494,396 | $ | 13,142,309 | $ | 4,999,943 | $ | 1,169,978 | $ | 100,257,909 | $ | 361,542,441 | $ | 461,800,350 | |||||||||||||||||||
LIABILITIES | |||||||||||||||||||||||||||||||||||
Current | |||||||||||||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 3,850,333 | $ | 155,434 | $ | 1,013,414 | $ | 343,994 | $ | 50,606 | $ | 5,413,781 | $ | 2,200,000 | 4 | $ | 7,613,781 | ||||||||||||||||||
Installment purchase contracts | 24,177 | — | — | — | — | 24,177 | 24,177 | ||||||||||||||||||||||||||||
Due to related parties | — | 90,476 | — | — | 40,349 | 130,825 | 130,825 | ||||||||||||||||||||||||||||
Advances payable | — | — | — | 40,513 | — | 40,513 | 40,513 | ||||||||||||||||||||||||||||
Retirement obligation (reclamation activities) | 360,054 | — | — | — | — | 360,054 | 360,054 | ||||||||||||||||||||||||||||
Total current liabilities | 4,234,564 | 245,910 | 1,013,414 | 384,507 | 90,955 | 5,969,350 | 2,200,000 | 8,169,350 | |||||||||||||||||||||||||||
Installment purchase contracts, long-term | 9,260 | — | — | — | — | 9,260 | 9,260 | ||||||||||||||||||||||||||||
Retirement obligation | 2,769,673 | 149,387 | 1,631,090 | — | — | 4,550,150 | 4,550,150 | ||||||||||||||||||||||||||||
Future income tax liability | — | — | — | 1,274,823 | — | 1,274,823 | 79,532,303 | 4 | 80,807,126 | ||||||||||||||||||||||||||
Other permit obligations | 72,511 | — | — | — | — | 72,511 | 72,511 | ||||||||||||||||||||||||||||
Other liabilities | — | — | 109,350 | 23,159 | — | 132,509 | 132,509 | ||||||||||||||||||||||||||||
Total liabilities | 7,086,008 | 395,297 | 2,753,854 | 1,682,489 | 90,955 | 12,008,603 | 81,732,303 | 93,740,906 | |||||||||||||||||||||||||||
SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||
Capital stock | 162,620,797 | 28,926,147 | 32,619,378 | 31,053,630 | 4,913,218 | 260,133,170 | (97,512,373 | ) | 4 | 436,727,558 | |||||||||||||||||||||||||
274,106,761 | 3 | ||||||||||||||||||||||||||||||||||
Options and warrants | — | — | — | — | — | — | 33,587,408 | 3 | 33,587,408 | ||||||||||||||||||||||||||
Other equity accounts | — | 3,654,370 | 1,356,204 | 1,639,841 | 440,999 | 7,091,414 | (7,091,414 | ) | 4 | — | |||||||||||||||||||||||||
Deficit | (102,255,522 | ) | (19,481,418 | ) | (23,587,127 | ) | (29,376,017 | ) | (4,275,194 | ) | (178,975,278 | ) | 76,719,756 | 4 | (102,255,522 | ) | |||||||||||||||||||
Total shareholders’ equity | 60,365,275 | 13,099,099 | 10,388,455 | 3,317,454 | 1,079,023 | 88,249,306 | 279,810,138 | 368,059,444 | |||||||||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 67,451,283 | $ | 13,494,396 | $ | 13,142,309 | $ | 4,999,943 | $ | 1,169,978 | $ | 100,257,909 | $ | 361,542,441 | $ | 461,800,350 | |||||||||||||||||||
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U.S. GAAP | Pro Forma | |||||||||||||||||||||||
As Reported | White Knight | Nevada | Coral Gold | Tone | Consolidated | |||||||||||||||||||
U.S. Gold | Resources | Pacific Gold | Resources | Resources | U.S. Gold | |||||||||||||||||||
Corporation | Ltd. | Ltd. | Ltd. | Limited | Corporation | |||||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||||
SALES | $ | 3,695,957 | $ | 3,695,957 | ||||||||||||||||||||
COST OF SALES | 4,089,611 | 4,089,611 | ||||||||||||||||||||||
DEPRECIATION AND DEPLETION | 187,369 | 187,369 | ||||||||||||||||||||||
ROYALTIES | 217,749 | 217,749 | ||||||||||||||||||||||
4,494,729 | 4,494,729 | |||||||||||||||||||||||
EARNINGS (LOSS) FROM MINING OPERATIONS | (798,772 | ) | (798,772 | ) | ||||||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||||
Interest and other items | $ | 1,884,025 | $ | 329,205 | 87,457 | $ | 85,595 | $ | 6,556 | 2,392,838 | ||||||||||||||
Gain (loss) on foreign exchange | — | (12,168 | ) | (37,552 | ) | 8,657 | (5,936 | ) | (46,999 | ) | ||||||||||||||
Total other income | 1,884,025 | 317,037 | 49,905 | 94,252 | 620 | 2,345,839 | ||||||||||||||||||
COSTS AND EXPENSES | ||||||||||||||||||||||||
General and administrative | 2,751,570 | 2,819,871 | 2,390,047 | 2,162,237 | 835,573 | 10,959,298 | ||||||||||||||||||
Proposed acquisitions | 4,348,190 | — | — | — | — | 4,348,190 | ||||||||||||||||||
Property holding costs | 1,626,488 | — | — | — | — | 1,626,488 | ||||||||||||||||||
Exploration costs | 4,375,095 | 948,467 | 1,845,430 | 503,611 | 168,516 | 7,841,119 | ||||||||||||||||||
Interest | 5,880 | 3,959 | — | — | — | 9,839 | ||||||||||||||||||
Stock option expense | 840,857 | — | — | — | — | 840,857 | ||||||||||||||||||
Accretion of asset retirement obligation | 206,051 | — | — | — | — | 206,051 | ||||||||||||||||||
Change in value of derivatives | 51,680,304 | — | — | — | — | 51,680,304 | ||||||||||||||||||
Write-off of mineral property costs | — | (14,780 | ) | — | — | — | (14,780 | ) | ||||||||||||||||
Depreciation | 35,012 | 22,169 | — | 542 | — | 57,723 | ||||||||||||||||||
Total costs and expenses | 65,869,447 | 3,779,686 | 4,235,477 | 2,666,390 | 1,004,089 | 77,555,089 | ||||||||||||||||||
Loss before income taxes | (63,985,422 | ) | (3,462,649 | ) | (4,984,344 | ) | (2,572,138 | ) | (1,003,469 | ) | (76,008,022 | ) | ||||||||||||
Provision for future income taxes | — | — | — | 676,860 | — | 676,860 | ||||||||||||||||||
Provision for income taxes | — | — | — | — | — | — | ||||||||||||||||||
NET LOSS | $ | (63,985,422 | ) | $ | (3,462,649 | ) | $ | (4,984,344 | ) | $ | (3,248,998 | ) | $ | (1,003,469 | ) | $ | (76,684,882 | ) | ||||||
Basic and diluted net loss per share (Note 6) | $ | (1.76 | ) | $ | (0.93 | ) | ||||||||||||||||||
Weighted average number of shares outstanding — basic and diluted (Note 6) | 36,366,608 | 82,825,381 | ||||||||||||||||||||||
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U.S. GAAP | Pro Forma | |||||||||||||||||||||||
As Reported | White Knight | Nevada | Coral Gold | Tone | Consolidated | |||||||||||||||||||
U.S. Gold | Resources | Pacific Gold | Resources | Resources | U.S. Gold | |||||||||||||||||||
Corporation | Ltd. | Ltd. | Ltd. | Limited | Corporation | |||||||||||||||||||
(Expressed in United States dollars unless otherwise stated) | ||||||||||||||||||||||||
SALES | $ | 8,881,168 | $ | 8,881,168 | ||||||||||||||||||||
COST OF SALES | 8,420,437 | 8,420,437 | ||||||||||||||||||||||
DEPRECIATION AND DEPLETION | 804,215 | 804,215 | ||||||||||||||||||||||
ROYALTIES | 472,743 | 472,743 | ||||||||||||||||||||||
9,697,395 | 9,697,395 | |||||||||||||||||||||||
EARNINGS (LOSS) FROM MINING OPERATIONS | (816,227 | ) | (816,227 | ) | ||||||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||||
Earnest money forfeited | $ | 200,000 | — | 200,000 | ||||||||||||||||||||
Interest and other items | 32,032 | $ | 346,162 | 27,205 | $ | 15,270 | $ | 439 | 421,108 | |||||||||||||||
Management fee | 330,000 | — | — | — | — | 330,000 | ||||||||||||||||||
Realized gain from disposition of shares | 520,428 | — | — | — | — | 520,428 | ||||||||||||||||||
Gain (loss) on sale of assets | (29,982 | ) | — | 155,199 | (3,296 | ) | — | 121,921 | ||||||||||||||||
Gain (loss) on foreign exchange | — | 1,634 | (67,043 | ) | (15,576 | ) | (1,723 | ) | (82,708 | ) | ||||||||||||||
Total other income | 1,052,478 | 347,796 | 115,361 | (3,602 | ) | (1,284 | ) | 1,510,749 | ||||||||||||||||
COSTS AND EXPENSES | ||||||||||||||||||||||||
General and administrative | 2,745,418 | 983,064 | 2,272,941 | 792,205 | 608,059 | 7,401,687 | ||||||||||||||||||
Write-off of purchase price receivable | 182,748 | — | — | — | — | 182,748 | ||||||||||||||||||
Property holding costs | 761,081 | — | — | — | — | 761,081 | ||||||||||||||||||
Equity share of subsidiary loss | 58,888 | — | — | — | — | 58,888 | ||||||||||||||||||
Realization reserve — stock | 168,960 | — | — | — | — | 168,960 | ||||||||||||||||||
Interest | 3,011 | 5,016 | 246 | — | — | 8,273 | ||||||||||||||||||
Accretion of asset retirement obligation | 110,243 | — | — | — | — | 110,243 | ||||||||||||||||||
Exploration costs | — | 1,800,035 | 1,642,479 | 642,993 | 93,206 | 4,178,713 | ||||||||||||||||||
Write-off of mineral property costs | — | 189,718 | — | — | — | 189,718 | ||||||||||||||||||
Depreciation | 12,850 | 27,329 | — | 764 | — | 40,943 | ||||||||||||||||||
Total costs and expenses | 4,043,199 | 3,005,162 | 3,915,666 | 1,435,962 | 701,265 | 13,101,254 | ||||||||||||||||||
Loss before income taxes | (2,990,721 | ) | (2,657,366 | ) | (4,616,532 | ) | (1,439,564 | ) | (702,549 | ) | (12,406,732 | ) | ||||||||||||
Provision for income taxes | — | — | — | — | — | — | ||||||||||||||||||
NET LOSS | $ | (2,990,721 | ) | $ | (2,657,366 | ) | $ | (4,616,532 | ) | $ | (1,439,564 | ) | $ | (702,549 | ) | $ | (12,406,732 | ) | ||||||
Basic and diluted net loss per share (Note 6) | $ | (0.12 | ) | $ | (0.17 | ) | ||||||||||||||||||
Weighted average number of shares outstanding — basic and diluted (Note 6) | 25,931,172 | 72,389,945 | ||||||||||||||||||||||
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Table of Contents
(Expressed in United States dollars unless otherwise stated)
September 30, 2006 and December 31, 2005
(Unaudited)
1. | Basis of presentation |
F-39
Table of Contents
2. | Summary of significant accounting policies |
3. | Business acquisitions |
F-40
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Risk-free interest rate | 5% | |
Dividend yield | N/A | |
Volatility factor | 102% | |
Expected life — options | 2-4 years | |
Remaining periods to expiration dates — warrants (weighted average) | 3-17 months |
4. | Pro forma assumptions and adjustments |
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White Knight | Nevada Pacific | Coral Gold | Tone Resources | |||||||||||||||||
Resources Ltd. | Gold Ltd. | Resources Ltd. | Limited | Total | ||||||||||||||||
Acquired mineral property interests | $ | 152,953,289 | $ | 130,340,465 | $ | 32,135,277 | $ | 46,113,410 | $ | 361,542,441 | ||||||||||
Accounts payable and accrued liabilities | $ | 939,630 | $ | 795,221 | $ | 201,427 | $ | 263,722 | $ | 2,200,000 | ||||||||||
Future income tax liability | 33,646,748 | 28,672,367 | 7,069,135 | 10,144,053 | 79,532,303 | |||||||||||||||
Capital stock reversal | (28,926,147 | ) | (32,619,378 | ) | (31,053,630 | ) | (4,913,218 | ) | (97,512,373 | ) | ||||||||||
USG shares issued | 122,629,966 | 95,756,935 | 25,110,046 | 30,609,814 | 274,106,761 | |||||||||||||||
Options and warrants issued | 8,836,044 | 15,504,397 | 3,072,123 | 6,174,844 | 33,587,408 | |||||||||||||||
Other equity accounts reversal | (3,654,370 | ) | (1,356,204 | ) | (1,639,841 | ) | (440,999 | ) | (7,091,414 | ) | ||||||||||
Deficit reversal | 19,481,418 | 23,587,127 | 29,376,017 | 4,275,194 | 76,719,756 | |||||||||||||||
$ | 152,953,289 | $ | 130,340,465 | $ | 32,135,277 | $ | 46,113,410 | $ | 361,542,441 | |||||||||||
5. | Pro forma share capital |
Number of | ||||||||
shares | Amount | |||||||
Issued common shares of U.S. Gold | 49,996,755 | $ | 162,620,797 | |||||
Shares issued for acquisitions of Targets | 46,458,773 | 274,106,761 | ||||||
Pro forma balance | 96,455,528 | $ | 436,727,558 | |||||
6. | Pro forma loss per share |
Nine months ended | Year ended | |||||||
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
(Shares or US dollars) | ||||||||
Actual weighted average number of U.S. Gold common shares outstanding | 36,366,608 | 25,931,172 | ||||||
Assumed number of U.S. Gold common shares issued to Targets | 46,458,773 | 46,458,773 | ||||||
Pro forma weighted average number of U.S. Gold common shares outstanding | 82,825,381 | 72,389,945 | ||||||
Pro forma net loss | $ | (76,684,882 | ) | $ | (12,406,732 | ) | ||
Pro forma adjusted basic loss per share | $ | (0.93 | ) | $ | (0.17 | ) | ||
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UNAUDITED FINANCIAL STATEMENTS OF
US GOLD CANADIAN ACQUISITION CORPORATION
Balance Sheet as of September 30, 2006 | G-2 | |||
Notes to Balance Sheet | G-3 |
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As of | ||||
September 30, 2006 | ||||
Assets | ||||
Current Assets: | ||||
Cash | $ | 1.00 | ||
Total current assets | $ | 1.00 | ||
Liabilities and Shareholder’s Equity | ||||
Liabilities | $ | — | ||
Shareholder’s equity Common shares, authorized — unlimited, issued and outstanding — 1 share | $ | 1.00 | ||
Total shareholder’s equity | $ | 1.00 | ||
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G-3
Table of Contents
• | 0.35 shares of U.S. Gold common stock for each outstanding common share of White Knight Resources Ltd. |
• | 0.23 shares of U.S. Gold common stock for each outstanding common share of Nevada Pacific Gold Ltd. |
• | 0.63 shares of U.S. Gold common stock for each outstanding common share of Coral Gold Resources Ltd. |
• | 0.26 shares of U.S. Gold common stock for each outstanding common share of Tone Resources Limited. |
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Table of Contents
1. | Audited financial statements of White Knight Resources Ltd. for the years ended June 30, 1997 through June 30, 2006;Form 20-F for the fiscal year ended June 30, 2006; unaudited quarterly financial statements for the first quarter ended September 30, 2006; |
2. | Audited financial statements of Coral Gold Resources Ltd. for the years ended January 31, 1997 through January 31, 2006;Form 20-F for the fiscal year ended January 31, 2006; unaudited quarterly financial statements for the second quarter ended July 31, 2006; |
3. | Audited financial statements of Tone Resources Ltd. for the years ended August 31, 2003, 2004, 2005 and 2006; |
4. | Audited financial statements of Nevada Pacific Gold Ltd. for the years ended June 30, 1998, through June 30, 2006; unaudited quarterly financial statements for the first quarter ended September 30, 2006; |
5. | Audited financial statements of U.S. Gold for the years ended December 31, 1995 through December 31, 2005; unaudited quarterly financials for the third quarter ended September 30, 2006; |
6. | Preliminary Proxy Statement of U.S. Gold dated October 26, 2006; |
7. | Form S-4, Related to U.S. Gold and US Gold Canadian Acquisition Corporation offer to purchase all of the outstanding common shares of Coral Gold Resources Ltd., dated November 13, 2006; |
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Table of Contents
8. | Form S-4A, Related to U.S. Gold and US Gold Canadian Acquisition Corporation offer to purchase all of the outstanding common shares of Nevada Pacific Gold Ltd., dated November 1, 2006; |
9. | Form S-4A, Related to U.S. Gold and US Gold Canadian Acquisition Corporation offer to purchase all of the outstanding common shares of Tone Resources Ltd., dated November 1, 2006; |
10. | Form S-4, Related to U.S. Gold Corporation and US Gold Canadian Acquisition Corporation offer to purchase all of the outstanding common shares of White Knight Resources Ltd., dated October 26, 2006; |
11. | Annual Information Form of Nevada Pacific Gold Ltd. dated February 24, 2005; |
12. | Annual Information Form of Nevada Pacific Gold Ltd. dated October 24, 2006; |
13. | Information Circular for Nevada Pacific Gold Ltd. Dated November 1, 2006; |
14. | Final Long Form Prospectus of Tone Resources Ltd. dated February 10, 2003; |
15. | 2005 annual report of Coral Gold Resources Ltd.; |
16. | Management Information Circular of Coral Gold Resources Ltd. dated May 6, 2005; |
17. | Management Information Circular of Nevada Pacific Gold Ltd. dated October 27, 2005; |
18. | Management Information Circular of Tone Resources Ltd. dated January 6, 2006; |
19. | Management Information Circular of White Knight Resources Ltd. dated October 24, 2005; |
20. | Technical Report on the Roberts Mountain Project, Roberts Mountain, Eureka County, Nevada USA prepared by Marvin A. Mitchell P.Eng, Mitchell Geological Services Inc, October 21, 2002; |
21. | Technical Report for the Slaven Canyon Property, Lander County, Nevada, USA prepared by Timothy D. Jefferson, P.G., and Arthur R. Leger, P.G., November 16, 2005; |
22. | Summary Report for the Celt Property, Eureka County, Nevada prepared by Ken Brook, RPG, Desert Ventures Inc., September 23, 2005; |
23. | Technical Report on the Cottonwood Property, Eureka County, Nevada, USA prepared by John M. Leask, P.Eng, July 11, 2005; |
24. | Summary Report for the McClusky-Tonkin Summit Property, Eureka County, Nevada prepared by Ken Brook, RPG, Desert Ventures Inc, September 22, 2005; |
25. | Technical Report on the Fye Canyon Property, Eureka County, Nevada prepared by John M. Leask, P.Eng., April 15, 2005; |
26. | NI 43-101 Technical Report on the New Pass Property, Churchill County, Nevada prepared by Paul A Pelke, California Registered Geologist, October 2004; |
27. | NI 43-101 Technical Report on the New Pass Property, Churchill County, Nevada prepared by Paul A Pelke, California Registered Geologist, October 2006; |
28. | Technical Report on the Indian Ranch Property, Eureka County, Nevada, USA prepared by John M. Leask, P.Eng., December 20, 2004; |
29. | Amended Technical Report for the Magistral Gold Project, Sinaloa State, Mexico, prepared by Pincock Allen & Holt, January 6, 2005; |
30. | Technical Report on the Tonkin Springs Project, Nevada, USA, May 2004; |
31. | Updated Technical Report on the Tonkin Springs Gold Property, Nevada, USA, June 2006; |
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Table of Contents
32. | Filings on the System for Electronic Disclosure by Insiders (SEDI) for Coral Gold Resources, Nevada Pacific Gold Ltd., Tone Resources, and White Knight Resources; |
33. | March 6, 2006 Corporate Presentation of U.S. Gold; |
34. | Spring 2006 Corporate Presentation of Nevada Pacific Gold Ltd.; |
35. | Press releases for U.S. Gold, White Knight Resources, Nevada Pacific Gold, Coral Gold Resources and Tone Resources since January 1, 2005; |
36. | Public information relating to the business, operations, financial performance and stock trading history of U.S. Gold, White Knight Resources, Nevada Pacific Gold, Coral Gold, Tone Resources and other selected public companies considered to be relevant; |
37. | Public information with respect to other transactions of a comparable nature considered to be relevant; |
38. | Public information regarding the industries in which U.S. Gold and the Companies operate; |
39. | Representations contained in a certificate addressed to us, dated as of the date hereof, from senior officers of U.S. Gold as to the completeness and accuracy of the information upon which the Fairness Opinion is based; and |
40. | Such other corporate, industry and financial market information, investigations and analyses as Wellington West considered necessary or appropriate in the circumstances. |
H-4
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H-5
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H-6
Table of Contents
January [•], 2007 Special Meeting of Shareholders
PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY “FOR” PROPOSALS 1, 2, 3, 4, 5, 6, 7 and 8.
MATTERS COVERED BY THIS PROXY.
• | Use the Internet to submit your proxy 24 hours a day, 7 days a week, until [•] (Mountain Time) on January [•], 2007. |
• | Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions to obtain your records and create an electronic ballot. |
1. | To approve an amendment to U.S. Gold’s Articles of Incorporation that removes provisions related to corporate opportunities to allow your board of directors to adopt and maintain an updated corporate opportunity policy. |
o FOR | o AGAINST | o ABSTAIN |
2. | To approve amendments to U.S. Gold’s Articles of Incorporation that update the Articles of Incorporation by replacing vague and outdated references to statutory provisions with references to current statutory provisions. |
o FOR | o AGAINST | o ABSTAIN |
3. | To approve an amendment to U.S. Gold’s Articles of Incorporation that creates a new class of U.S. Gold stock comprised of one share of preferred stock, designated as Series A Special Voting Preferred Stock, no par value, to be issued in connection with the Proposed Acquisitions and for the purposes further described in the proxy statement. |
o FOR | o AGAINST | o ABSTAIN |
4. | To approve the issuance of up to 5,182,187 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Coral Gold. |
o FOR | o AGAINST | o ABSTAIN |
5. | To approve the issuance of up to 21,105,934 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Nevada Pacific. |
o FOR | o AGAINST | o ABSTAIN |
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Table of Contents
6. | To approve the issuance of up to 6,743,825 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of Tone Resources. |
o FOR | o AGAINST | o ABSTAIN |
7. | To approve the issuance of up to 24,256,827 exchangeable shares of Canadian Exchange Co., and the issuance of an equivalent number of shares of common stock of U.S. Gold upon exchange of such exchangeable shares, in connection with the offer to purchase all of the outstanding common shares of White Knight. |
o FOR | o AGAINST | o ABSTAIN |
8. | To approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve and adopt any of Proposals 1 through 7. |
o FOR | o AGAINST | o ABSTAIN |
Address change? Mark Boxo Indicate changes below: | Please sign exactly as your name appears on this card. Joint owners should each sign personally. Corporation proxies should be signed in corporate name by an authorized officer. Executors, administrators, trustees or guardians should give their title when signing. | |||
Date: | ||||
Signature(s): | ||||
I-2