January 13, 2006
via U.S. Mail
Raymond De Motte
President and Chief Executive Officer
Sterling Mining Company
2201 Government Way, Suite E
Couer d`Alene ID 83814
Re: Sterling Mining Company
Registration Statement on Form 10
File No. 0-51669
Filed December 14, 2005
Dear Mr. De Motte:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. The Form 10 registration statement will become automatically
effective 60 days from the date of the first filing or on February
12, 2006. See Section 12(g)(1) of the Securities Exchange Act of
1934. Upon effectiveness, you will become subject to the
reporting
requirements of the Securities Exchange Act of 1934, even if we
have
not cleared all comments. As this is a voluntary filing, you may
withdraw the filing so that it does not become effective in a
deficient form. Please contact us if you need to discuss this
alternative.
2. In your amendment to the registration statement, include
information as up to date as possible. We refer you to General
Instruction C (b) of Form 10, which states that "[U]nless
otherwise
stated, the information required shall be given as of a date
reasonably close to the date of the filing of the registration
statement." In this regard, please update the bid prices of your
stock as disclosed on page 46. Additionally, update the table of
contractual obligations on page 12 to reflect obligations incurred
with regard to lease payments through the end of the fiscal year
ended December 31, 2005.
Item 1. Business, page 3
3. You state that you operate in two segments on page 78. As
required by Item 101(b) of Regulation S-K, provide the financial
information required for each segment.
4. Consistent with the requirements of Item 101 of Regulation S-K,
further supplement your disclosure to ensure that all material
information about your business in included in the registration
statement. For example, Item 101 requires a description of the
business performed within the past five years. To the extent that
there were no operations or marginal operations prior to 2003,
clearly state this in your disclosure. Further, no reference is
made
to whether your business is seasonal and the impact to your
operations caused by seasonality. Also, although you have
provided
disclosure regarding competition, your disclosure lacks the detail
required by Item 101(c) (1) (x) with respect to a description of
competition in the specific areas in which you operate and your
relative position vis- a- vis such competitors. For example, it
would appear that the relative competitive force of a principal
mining company in the Coeur d`Alene region, such as Coeur d`Alene
Mining Company, would be material to an understanding of the
competition you face, yet no such discussion is included. Please
revise your disclosure and ensure that you provide all of the
information required by Item 1 of Form 10 and Item 101 of
Regulation
S-K.
5. We direct you to Item 101(e) of Regulation S-K. Please
disclose
your website address.
Item 1.A. Risk Factors, page 6
6. Most of your risk factors could apply to any company in any
industry. Even those that are exploration specific are very
generic.
You should only cite risks that are particularly relevant to you
and
your disclosure should make clear how the risks impact you
specifically. Delete "boilerplate" risks and explain how the
others
impact you.
7. Please group your related risk factors together under
classified
headings such as risks related to your industry and risks related
to
your company.
8. Revise the headings of your risk factors so that they concisely
convey the principal risk to your operations and financial
condition
resulting from the risk you are describing. As written, many of
your
risk factor subheadings state a fact about your business without
describing the risk associated with that fact. For example, the
risk
factor heading on page 6 in which you reference that fact that
"[t]he
Company will need to obtain additional capital to fund
operations",
fails to delineate the consequences to your operations should you
fail to receive such funding. Please revise.
9. Please add a risk factor that addresses the fact that your
auditors have issued a going concern opinion.
"We have a limited operating history...," page 6
10. The risk factor heading fails to convey that you have had a
history of net losses. Further, your "limited operating history"
implies that you are relatively newly formed which is contrary to
the
fact that your company was formed and operating since 1903.
Please
revise or advise.
"The Company has minimal assets and has minimal revenue...," page
6
11. The import of this heading and the discussion that follows
should
be contextualized by referencing that you were formed in 1903.
Disclose also that your cumulative revenues from 1903 (inception)
to
December 31, 2004 were only $161,274.
"We may lose rights to properties ...," page 6
12. Delineate the dollar amount of payments you made during fiscal
2004 and fiscal 2005 and specify or provide a cross reference to
disclosure found in the contractual obligations table and the
anticipated dollar amount of expenditures associated with the
maintenance of your various leases.
"If we complete additional equity financings...,," page 10
13. On page 91, you disclose management`s belief that "significant
and imminent" private placements of stock will be necessary to
generate sufficient capital for operations, yet your risk factor
discussion fails to convey the imminence or likelihood of such
transactions. Such information is material to an investor`s
understanding of your business and the risks involved. Please
revise
the risk factor so that you also emphasize that equity financings
are
very likely given management`s objectives and the company`s
capital
requirements.
Item 2. Financial Information, page 10
Selected Financial Data, page 10
14. Please disclose selected financial data for 2001 and 2000.
Refer
to Item 301 of Regulation S-B.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 11
15. Much of the disclosure required by Item 303 is absent from the
disclosure. Please provide a section that delineates your results
of
operations for the fiscal financial periods included in the
registration statement. The narrative should at a minimum,
provide
clarification to investors of changes in your revenues and costs
from
period to period by focusing on the principal drivers of revenues
and
the reason for cost changes from period to period. In addition,
you
should provide a discussion of your liquidity for the relevant
periods covered in the discussion. We may have further comments.
16. Please indicate in the disclosure the relevance to an investor
of
your classification as a "junior stage" company.
17. Please enhance your discussion and analysis of liquidity and
capital resources to address the following:
* Prospective information regarding your needs for capital,
including
discussion of your future minimum exploration requirements at your
mineral properties;
* Your sources of cash, including your note payable outstanding as
of
December 31, 2004 with a balance of $160,000; and
* Your practice of issuing common stock at a discount from listed
market prices.
Critical Accounting Policies and Estimates, page 12
18. You indicate several accounting policies as being significant.
Please revise your disclosure to include only those policies you
consider to be critical. For those policies you deem to be
critical,
expand your disclosures to address the material implications of
the
uncertainties that are associated with the methods, assumptions
and
estimates underlying your critical accounting measurements.
Specifically, you should provide the following:
(a) An analysis of the uncertainties involved in applying the
principle and the variability that is reasonably likely to result
from its application.
(b) An analysis of how you arrived at the measure and how
accurate
the estimate or underlying assumptions have been in the past.
(c) An analysis of your specific sensitivity to change based on
outcomes that are reasonably likely to occur and have a material
effect.
Please refer to FRC Section 501.14 for further guidance.
Note Regarding Forward-Looking Statements, page 15
19. Given that your stock is deemed a "penny stock" as defined by
Rule 3a51-1 of the Securities Exchange Act of 1934, please remove
all
references to the Private Securities Litigation Reform Act of 1995
as
the safe harbors contained in that Act are not available to you.
Item 3. Properties, page 16
Coeur d`Alene Mining District, page 16
Overview, page 16
20. We note disclosure that states that your geologists "believe
that
the district can produce much more silver." Provide us with the
basis for their belief and delineate in the disclosure objective,
verifiable material supportive of such a statement. Otherwise,
remove the statement from the disclosure.
21. Please disclose when your mineral property leases expire. In
addition, please disclose the duration and effect of all licenses
that you currently hold with respect to your property interests.
Item 5. Directors and Executive Officers, page 42
Directors and Officers, page 42
22. Consistent with the requirements of Item 401 of Regulation S-
K,
please provide complete biographical sketches for each named
individual for the past five years. Specify the month and year
during which positions were held.
23. You indicate in your risk factor discussion that due to
positions
held by certain of your officers and directors that conflicts of
interests may arise. Disclose in the revised biographies, the
percentage of time spent by any of your executive officers who
hold
positions in other companies.
Item 6. Executive Compensation, page 44
24. Please include a footnote to the compensation table that
delineates what "[a]ll other compensation" is comprised of.
Item 7. Certain Relationships and Related Transactions, page 45
25. Include the information contained in the financial statements
at
Note 7 with regard to your related party transactions.
Additionally,
supplement the disclosure to address whether the terms of such
transactions were on terms that you would have received had you
entered into such transactions with an unaffiliated third party.
Revise your disclosure accordingly.
Financial Statements, page 55
26. We note on page 20 that you anticipate an estimated mine
remediation and reclamation cost of $10 million upon closure of
the
Sunshine Mine. Please tell us how you considered SFAS 143 in
determining whether to record an asset retirement obligation for
the
cost to close the Sunshine Mine.
Consolidated Financial Statements for the Nine Months Ended
September
30, 2005 and 2004, page 56
Note 10 - Common Stock Warrants, page 77
27. Please disclose the assumptions you made in determining the
fair
value of the warrants issued during the nine months ended
September
30, 2005.
Note 12 - Segment Reporting, page 78
28. We note that began operating in two business segments during
2004. As such, please provide the disclosures required by SFAS
131
in your interim and year-end financial statements.
Consolidated Financial Statements for the Years Ended December 31,
2004, 2003, and 2002, page 79
Report of Independent Registered Public Accounting Firm, page 79
29. We note that your auditor`s report does not cover your
inception
to date period as presented in your Consolidated Statements of
Operations and Comprehensive Loss and Consolidated Statements of
Cash
Flows, which is not been labeled as unaudited. Tell us whether
you
intended to have the cumulative information audited. Please
contact
us prior to filing your amendment to discuss the audit reporting
requirements that you should consider.
Consolidated Statements of Operations and Comprehensive Loss, page
81
30. Please present your stock compensation and professional
services
expenses based upon the function of the expense. In other words,
please allocate them to exploration expense, general and
administrative expense, cost of revenues, or other caption, as
appropriate.
Consolidated Statement of Stockholders` Equity, page 82
31. Please revise your Consolidated Statement of Changes in
Shareholders` Equity to include financial information since the
date
of inception, to comply with paragraph 11(d) of SFAS 7.
32. We note that your statement of cash flows for the year ended
December 31, 2003, indicated that you paid expenses with warrants
in
the amount of $87,390. We do not see any corresponding amounts
related to this warrant issuance on your consolidated statements
of
stockholders` equity. Please reconcile for us where you have
recorded this warrant issuance in your consolidated statement of
stockholders` equity.
Consolidated Statements of Cash Flows, page 85
33. Please remove the subtotal after "loss allocated to minority
interest".
Notes to Consolidated Financial Statements, page 87
Note 2 - Summary of Significant Accounting Policies, page 87
34. Please disclose the method used to account for treasury stock
and
the number of shares of treasury stock held as of each period end.
Refer to paragraph 13 of APB 6 for further guidance.
Earnings Per Share, page 90
35. Please disclose the number of warrants and options that could
potentially dilute basic EPS in the future that were not included
in
the computation of diluted EPS because to do so would have been
antidilutive. Refer to paragraph 40.c. of SFAS 128 for further
guidance.
Foreign Currency Translation, page 91
36. It appears that you have used the U.S. dollar as the
functional
currency for your Mexican subsidiary based on your policy footnote
and the fact that you do not present any comprehensive income
related
to translation of foreign currencies. Please tell us why you have
adopted the U.S. dollar as your Mexican subsidiary`s functional
currency and not the Mexican peso. Refer to paragraphs 5 to 10
and
Appendix A of SFAS 52 for further guidance.
Stock-Based Compensation, page 94
37. We note that you recognize stock-based compensation costs over
the service period and that you recognized the entire estimated
fair
value for options awarded in 2004 and 2003 in the year the options
were granted. Please expand your footnotes to disclose (a)
whether
the options were granted to employees or non-employees; (b) a
description of the services received; and (c) a description of the
period in which the services were received.
Note 3 - Marketable Securities and Investments, page 94
38. Please record your other investments, which consist of options
and warrants of other companies, at fair market value. Refer to
paragraph 17 of SFAS 133. Additionally, please disclose how you
determined their fair market values.
Engineering Comments
General
39. Insert a small-scale map showing the location, access and
infrastructure related to the property. Note that SEC`s EDGAR
program now accepts digital maps, so please include these maps in
any
future amendments that are uploaded to EDGAR. It is relatively
easy
to include automatic links at the appropriate locations within the
document to GIF or JPEG files, which will allow the figures and/or
diagrams to appear in the right location when the document is
viewed
on the Internet. For more information, please consult the EDGAR
manual, and if addition assistance is required, please call Filer
Support at 202-942-8900. Otherwise, provide the map to the staff
for
review.
40. As a US incorporated company, only proven and probable
reserves
may be disclosed as defined by Industry Guide 7. Resources,
weather
measured, indicated, or inferred are not permitted. Please modify
your filing and website accordingly.
Future Information and Reports, page 6
41. The public reference facilities are now located in Room 1580,
100
F Street, N.E., Washington D.C. 20549. Please make the
appropriate
changes within the filing.
Coeur D`Alene Mining District, page 16
42. For the property, provide the disclosures required by Industry
Guide 7 (b). In particular, provide:
* The location, means of access to the property, and
transportation
from the properties.
* Any conditions that must be met in order to obtain or retain
title
to the properties.
* A brief description of the rock formations and mineralization of
existing or potential economic significance on the properties.
* A description of any work completed on the properties and its`
present condition.
* The details as to modernization and physical condition of the
plant
and equipment, including subsurface improvements and equipment.
* Provide a description of equipment and other infrastructure
facilities.
* The current state of exploration of the property.
* The total cost of the property has incurred to date and planned
future costs.
* The source of power and water that can be utilized at the
property.
* If applicable, provide a clear statement that the property is
without known reserves and the proposed program is exploratory in
nature.
Refer to Industry Guide 7 (b) (1)-(5) for specific guidance.
Industry Guide 7 can be reviewed on the Internet at
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7.
43. You reference the Morning Star mine as the deepest silver mine
on
earth and state that silver mineralization extends to incredible
depths of up to 8,500 feet. Unless you can document these
statements
conclusively, remove them and avoid adjectives that overly
embellish
your statements.
Sunshine Property, page 17
44. Please remove the references to resources as found in the
second
paragraph and elsewhere in the filing. The term "resources" may
be
confused with resource estimates disclosed by Canadian registered
companies. Use terms such as "mineralization" that do not infer
any
economic viability.
Mineralogy, page 19
45. You reference the average lead grade of 2.57 percent in the
ore
reserves, but do not disclose the reserves of the Sunshine Mine.
If
there are reserves for the Sunshine mine disclose them completely
or
remove this implied reserve from the filing. Generally, reserves
should be based on the following:
* A "final" or "bankable" feasibility study is required to meet
the
requirements to designate reserves under Industry Guide 7.
* A historic three year average price is to be used in any reserve
or
cash flow analysis to designate reserves.
* To meet the "legal" part of the reserve definition, the primary
environmental analysis or document should have been submitted to
governmental authorities.
Revise your definitions accordingly.
The Barones Silver Tailings Project, page 28
46. Please describe these quantities and quality of mineral feed
according to Industry Guide 7 or remove these estimates from the
filing. Separate from this filing provide the feasibility study
which established the tailings estimate as a proven or probable
reserve.
Other Exploration Projects, page 32
47. Describe only geology, history, or exploration results that
are
directly related to the properties that the company has the right
to
explore or mine. Remove all references to mines, adjacent or
analogous properties, deposits, occurrences, or exploration
activities by other companies outside of the company`s properties
or
control. Otherwise this may allow investors to infer that the
property may have commercial mineralization, because of its
proximity
to these mines and properties. Remove information about mines,
prospects, or companies operating in or near to the property and
focus the disclosure only on the company`s property
Standard Creek Copper-Silver prospect, page 34,
48. As a general checklist, when reporting the results of sampling
and chemical analyses:
* Disclose only weighed-average sample analyses associated with a
measured length or a substantial volume.
* Eliminate all analyses from "grab" or "dump" samples, unless the
sample is of a substantial and disclosed weight.
* Eliminate all disclosure of the highest values or grades of
sample
sets.
* Eliminate grades disclosed as "up to" or "as high as."
* Eliminate statements containing grade and/or sample-width
ranges.
* Aggregated sample values from related locations should be
aggregated based on a weighted average of lengths of the samples.
* Generally, use tables to improve readability of sample and
drilling
data.
* Soil samples may be disclosed as a weighted average value over
an
area.
* Refrain from reporting single soil sample values.
* Convert all ppb quantities to ppm quantities for disclosure.
Revise the entire filing accordingly.
Glossary, page 37
49. Revise your definitions within the glossary, for the proven
and
probable ore, to distinguish your definitions from those as stated
by
Industry Guide 7.
Closing Comments
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has
access to all information you provide to the staff of the Division
of
Corporation Finance in our review of your filing or in response to
our comments on your filing.
You may contact Ryan Milne at (202) 551-3688 or April
Sifford,
Accounting Branch Chief at (202) 551-3684 if you have questions
regarding comments on the financial statements and related
matters.
Please contact George K. Schuler at (202) 551-3718 if you have
questions regarding the engineering comments. Please contact
Mellissa Campbell Duru at (202) 551-3757 with any other questions.
Sincerely,
H. Roger Schwall
Assistant Director
via facsimile
Mark Lehman, Esq.
Parsons, Bailey & Lattimer
(801) 536 6111
??
??
??
??
Mr. De Motte
Sterling Mining Company
January 13, 2006
page 12
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0405
DIVISION OF
CORPORATION FINANCE
MAIL STOP 04-05