U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 20-F
-------------------------
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934.
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSACTION PERIOD FROM ______________ TO
___________________
Commission File Number 0-15688
CORAL GOLD CORP.
(Exact name of Registrant as specified in its charter)
A CORPORATION FORMED UNDER THE LAWS OF BRITISH COLUMBIA, CANADA
(Jurisdiction of Incorporation or Organization)
455 Granville Street, Suite 400
Vancouver, British Columbia V6C 1T1
Canada
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
NONE
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares, no par value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: NONE
The number of outstanding Common Shares as of January 31, 2004 was 43,616,855.
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X]Yes [ ]No
Indicate by check mark which financial statement item the Company has elected to
follow.
Item 17 [X] Item 18 [ ]
(Applicable only to issuers involved in bankruptcy proceedings during the past
five years)
Indicate by check mark whether the Company has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. NOT APPLICABLE
TABLE OF CONTENTS
Item Page
- ---- ----
GLOSSARY OF TECHNICAL TERMS..................................................1
Forward-Looking Statements...................................................6
Item 1. Identity of Directors, Senior Management and Advisors............6
Offer Statistics and Expected Timetable..........................6
Item 3. Key Information..................................................6
A. Selected Financial Data..........................................6
B. Capitalization and Indebtedness..................................8
C. Reasons for the Offer and Use of Proceeds........................8
D. Risk Factors.....................................................8
Item 4. Information on the Company......................................10
A. History and Development of the Company..........................10
B. Business Overview...............................................10
Plan of Operations..............................................12
Competition.....................................................13
Environmental Regulations.......................................13
C. Organizational Structure........................................13
D. Property, Plant and Equipment...................................14
Robertson Mining Claims, Nevada, U.S.A..........................14
Property Description and Location......................................14
Environmental Liabilities..............................................15
Permitting.............................................................16
Accessibility, Climate, Local Resources, Infrastructure, and
Physiography..........................................................16
History and Exploration................................................17
Geological Setting.....................................................19
Deposit Types and Mineralization.......................................21
Drilling...............................................................24
Sampling and Analysis..................................................27
Security of Samples....................................................28
Mineral Resource Estimates.............................................30
Proposed Exploration...................................................33
Recommendations........................................................36
Carve-Out Claims, Nevada, U.S.A.................................37
Norma Sass and Ruf Claims, Nevada, U.S.A........................38
JDN Claims, Nevada, U.S.A.......................................39
C-Eagle Claims, Nevada, U.S.A...................................39
Ludlow Property, California, U.S.A..............................39
Item 5. Operating and Financial Review and Prospects....................40
A. Operating Results...............................................40
B. Liquidity and Capital Resources.................................45
C. Research and Development, Patents and Licenses, etc.............46
D. Trend Information...............................................46
Item 6. Directors, Senior Management and Employees......................46
A. Directors and Senior Management.................................46
B. Compensation....................................................47
C. Board Practices.................................................48
D. Employees.......................................................52
E. Share Ownership.................................................52
OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR.53
AGGREGATE OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES..........................53
Item 7. Major Shareholders and Related Party Transactions...............54
A. Major Shareholders..............................................54
B. Related Party Transactions......................................54
C. Interest of Experts and Counsel.................................55
Item 8. Financial Information...........................................55
A. Consolidated Statements and Other Financial Information.........55
B. Significant Changes.............................................55
Item 9. The Offering and Listing........................................55
A. Price History of Stock..........................................55
B. Plan of Distribution............................................57
C. Markets.........................................................57
D. Selling Shareholders............................................57
E. Dilution........................................................57
F. Expenses of the Issue...........................................57
Item 10. Additional Information..........................................58
A. Share Capital...................................................58
B. Memorandum and Articles of Association..........................58
C. Material Contracts..............................................59
D. Exchange Controls...............................................59
E. Taxation........................................................60
F. Expenses of the Issue...........................................64
G. Dividends and Paying Agents.....................................64
H. Documents on Display............................................65
I. Subsidiary Information..........................................65
Item 11. Quantitative and Qualitative Disclosures About Market Risk......65
Item 12. Description of Securities Other than Equity Securities..........65
Item 13. Defaults, Dividend Arrearages and Delinquencies.................65
Item 14. Material Modifications to the Rights of Security Holders and
Use of Proceeds.................................................65
Item 15. Controls and Procedures.........................................65
Item 16. [Reserved]......................................................65
Item 16A. Audit Committee Financial Report................................65
Item 16B. Code of Ethics..................................................66
Item 16C. Principal Accountant Fees and Services..........................66
Item 16D. Exemptions from the Listing Standards for Audit Committees......67
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers......................................................67
Item 17. Financial Statements............................................67
Item 18. Financial Statements............................................67
Item 19. Exhibits........................................................67
Exhibits
Certification of Principal Executive Officer..............................12.1
Certification of Principal Financial Officer..............................12.2
Certification 906.........................................................13.0
GLOSSARY OF TECHNICAL TERMS
AA Atomic absorption spectrometry, a scientific
test for the presence of elements in a sample.
alteration Usually referring to chemical reactions in
a rock mass resulting from the passage of
hydrothermal fluids.
anomalous A value, or values, in which the amplitude is
statistically between that of a low contrast
anomaly and a high contrast anomaly in a given
data set.
anomaly Any concentration of metal noticeably above or
below the average background concentration.
As The elemental symbol for arsenic.
assay An analysis to determine the presence, absence
or quantity of one or more components.
Au The elemental symbol for gold.
background Traces of elements found in sediments, soils,
and plant material that are unrelated to any
mineralization and which come from the
weathering of the natural constituents of the
rocks.
Bi The elemental symbol for bismuth.
chalcedony Very fine crystalline quartz which may be
massive or banded (agate).
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.
Cu The elemental symbol for copper.
cubic metres or m3 A metric measurement of volume, being a cube one
metre in length on each side.
DDH Diamond drill hole.
diamondiferous gravels Gravels yielding diamonds.
dolomite A mineral consisting of a calcium magnesium
carbonate found in crystals and extensive beds
as a compact limestone.
drift An underground passage, approximately
horizontal, often along a mineralized zone.
dyke A tabular body of igneous rock that has been
injected while molten into a fissure.
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.
Fe The elemental symbol for iron.
Ft Feet.
grab sample A sample of selected rock chips collected at
random from within a restricted area of
interest.
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.
gram A small metric unit of weight nearly equal to
one cubic centimetre of water at its maximum
density, and equal to one thousandth of a
kilogram.
Hg The elemental symbol for mercury.
HLEM Horizontal loop electromagnetic survey, a form
of geophysical survey used in the exploration
for minerals.
hectare or ha An area totalling 10,000 square metres.
highly anomalous An anomaly which is 50 to 100 times average
background, i.e. it is statistically much
greater in amplitude.
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.
ICP Induced coupled plasma spectrophotometry, a
scientific test that determines the presence of
elements from their lightwaves.
IP Induced polarization survey, a form of
geophysical survey used in the exploration for
minerals.
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
planning 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 the
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 upon limited information
and sampling gathered through appropriate
techniques from locations such as outcrops,
trenches, pits, workings and drill holes.
Confidence in the estimate is insufficient to
allow the meaningful application of technical
and economic parameters or to enable an
evaluation of economic viability worthy of
public disclosure.
intrusive A rock mass formed below earth's surface from
magma which has intruded into a pre-existing
rock mass.
karst topography An irregular topography characterized
by sinkholes, caverns and lack of surface
streams because an underlying carbonate
formation has been riddled with underground
drainage channels that capture the surface
streams.
kilometres or km Metric measurement of distance equal to 1,000
metres (or 0.6214 miles).
laterite A residual product of rock decay that is
red in colour and has a high content in the
oxides of iron and hydroxide of aluminum.
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 estimates 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 grade and continuity.
Mesozoic From the Greek words "meso" (middle) and "zoe"
(life), meaning the time of middle life on Earth
about 250 to 65 million years ago. It followed
the Paleozoic era (time of ancient life) and
preceded the Cenozoic era (time of recent life),
and encompasses the Triassic, Jurassic and
Cretaceous periods.
mill A facility for processing ore to concentrate and
recover valuable minerals.
milligram A very small metric unit of weight equal to one
thousandth of a gram.
mineral reserve A mineral reserve is the economically mineable
part of a Measured or Indicated 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 the
reporting, that economic extraction can be
justified. A mineral reserve includes diluting
materials and allowances for losses that may
occur when the material is mined. Mineral
resources are sub-divided in order of increasing
confidence into "probable" and "proven" mineral
reserves. A probable mineral reserve has a lower
level of confidence than a proven mineral
reserve. The term "mineral reserve" does not
necessarily signify that extraction facilities
are in place or operative or that all
governmental approvals have been received. It
does signify that there are reasonable
expectations of such approvals.
mineral resource The estimated quantity and grade of
mineralization that is of potential economic
merit. A resource estimate does not require
specific mining, metallurgical, environmental,
price and cost data, but the nature and
continuity or mineralization must be
understood. Mineral resources are sub-divided
in order of increasing geological confidence
into "inferred", "indicated", and "measured"
categories. An inferred mineral resources has a
lower level of confidence than that applied
to an indicated mineral resource. An indicated
mineral resource has a higher level of
confidence than an inferred mineral resource,
but has a lower level of confidence than a
measured mineral resource. A mineral
resource is a concentration or occurrence of
natural, solid, inorganic or fossilized
organic material in or on the Earth's crust in
such form and quantity and of such grade or
quality that it has reasonable prospects for
economic extraction.
mineralization Usually implies minerals of value occurring in
rocks.
Mo The elemental symbol for molybdenum.
Mn The elemental symbol for manganese.
net smelter or NSR royalty Payment of a percentage of net mining profits
after deducting applicable smelter charges.
Ni The elemental symbol for nickel.
ore A natural aggregated of one or more minerals
which may be mined and sold at a profit, or
from which some part may be profitably
separated.
outcrop An exposure of rock at the earth's surface.
overburden A general term for any material covering or
obscuring rocks from view.
oz/t Troy ounces/ton.
Pb The elemental symbol for lead.
porphyry Rock type with mixed crystal sizes, i.e.
containing larger crystals of one or more
minerals.
possible or inferred ore Term used to described ore where the
mineralization is believed to exist on the
basis of some geological information, but the
size, shape, grade, and tonnage are a matter of
speculation.
ppm or parts per million A unit of measurement which is 1000 times larger
than parts per billion (i.e. ppb); 1 ppm
is equivalent to 1000 ppb, and is also
equivalent to 1 gram/tonne.
prefeasibility study and Each mean a comprehensive study of the viability
preliminary feasibility study of a mineral project that has advanced to a
stage where mining method, in the case of
underground mining, or the pit configuration,
in the case of open pit mining, as been
established, and which, if an effective method
of mineral processing has been determined,
includes a financial analysis based on
reasonable assumptions of technical,
engineering, operating, economic factors, and
the 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.
probable mineral reserve A probable mineral reserve is the economically
mineable part of an indicated, and in some
circumstances, a measured mineral resource
demonstrated by at least a prefeasibility 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.
propylitic A rock alteration assemblage comprising calcite,
epidote, chlorite, pyrite and other minerals,
found typically in the periphery of a
hydrothermal system.
proven mineral reserve A proven mineral reserve is the economically
mineable part of a measured mineral resource
demonstrated by at least a prefeasibility
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 is
justified. The term should be restricted to
that part of the deposit where production
planning is taking place and for which any
variation in the estimate would not
significantly affect potential economic
viability.
pyrrhotite A bronze coloured mineral of metallic lustre
that consists of ferrous sulphide and is
attracted by a magnet.
pyrite Iron sulphide mineral.
quartz Silica or SiO2, a common constituent of veins,
especially those containing gold and silver
mineralization.
ROM Abbreviation for "run of mine", which refers to
low-grade "ore" that can only be mined if it
undergoes minimal processing, otherwise it would
be uneconomic (not ore).
RVC Reverse circulation diamond drilling.
reef A geological formation or mineral within
defined boundaries separating it from the
adjoining rocks.
Sb The elemental symbol for antimony (stibium).
silicification Replacement of the constituent of a rock by
quartz.
test pits Shallow holes dug at spots along the strike
of any mineralization or, if it is disseminated,
anywhere in the area where the shallow holes
might reach mineralized bedrock.
ton Imperial measurement of weight equivalent to
2,000 pounds.
tonne Metric measurement of weight equivalent to 1,000
kilograms (or 2,204.6 pounds).
tuff A rock comprised of fine fragments and ash
particles ejected from a volcanic vent.
veins The mineral deposits that are found filling
openings in rocks created by faults or
replacing rocks on either side of faults.
Zn The elemental symbol for zinc.
Forward-Looking Statements
The following discussion contains forward-looking statements regarding
events and financial trends, which may affect the future operating results and
financial position of Coral Gold Corp. (the "Company", or alternatively,
"Coral"). Such statements are subject to risks and uncertainties that could
cause the Company's actual results and financial position to differ materially
from those anticipated in the forward-looking statements. These factors include,
but are not limited to, the factors set forth in the sections entitled "Risk
Factors" in Item 3.D. and "Operating and Financial Review and Prospects" at Item
5.
Part I
Item 1. Identity of Directors, Senior Management and Advisors
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A. Selected Financial Data
The selected historical financial information presented in the table below
for each of the years ended January 31, 2004, 2003, 2002, 2001, and 2000, is
derived from the audited consolidated financial statements of the Company. The
audited consolidated financial statements and notes for each of the years in the
three year period ended January 31, 2004, 2003 and 2002 are included in this
Annual Report. The selected historical financial information for the years ended
January 31, 2001 and 2000, presented in the table below are derived from
financial statements of the Company that are not included in this Annual Report.
The selected financial information presented below should be read in conjunction
with the Company's financial statements and the notes thereto (Item 17) and the
Operating and Financial Review and Prospects (Item 5) included elsewhere in this
Annual Report.
The selected financial data has been prepared in accordance with Canadian
Generally Accepted Accounting Principles ("Canadian GAAP"). The consolidated
financial statements included in Item 17 in this filing are also prepared under
Canadian GAAP. Included within these consolidated financial statements in Note
14 is a reconciliation between Canadian and U.S. GAAP which differ in respect to
the recording of the foreign exchange (gains) and losses, deferred exploration
expenditures and recognition of compensation expense upon the issuance of stock
options.
In this Annual Report, all dollars are expressed in Canadian dollars unless
otherwise stated.
Canadian GAAP At January 31
-------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Operations
- ----------
Revenue $ Nil $ Nil $ Nil $ Nil $ Nil
Expense
General and Administrative 640,502 538,893 244,071 260,433 475,763
Net Income (Loss) (753,596) (755,999) (1,128,401) (471,458) (484,920)
Net Income (Loss) Per Share (0.03) (0.03) (0.05) (0.02) (0.03)
Balance Sheet
Working Capital $ 2,601,586 $ 43,181 $ 336,598 $ 393,554 $ 662,350
Total Assets 10,967,000 8,888,094 6,564,304 7,030,494 7,183,346
Liabilities 161,095 387,499 259,095 78,884 32,778
Shareholders' Equity 10,805,905 8,500,595 6,305,209 6,951,610 7,150,568
U.S. GAAP At January 31
-------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Operations
- ----------
Revenue $ Nil $ Nil $ Nil $ Nil $ Nil
Expense
General and Administrative 640,502 538,893 244,071 260,433 475,763
Deferred Exploration
Expenditures (420,054) (1,351,302) (196,909) (281,238) (309,509)
Stock Based Compensation
Expense - (600,000) - - -
Write-down of Mineral Properties 4,968 - 805,385 206,898 -
Net Income (Loss) (1,009,052) (2,077,539) (1,191,541) (577,882) (756,526)
Net Income (Loss) Per Share (0.03) (0.07) (0.06) (0.03) (0.03)
Balance Sheet
- -------------
Working Capital 2,601,586 88,587 336,598 393,554 662,350
Total Assets 4,284,565 2,576,198 1,489,234 2,082,314 2,349,341
Liabilities 161,095 387,499 259,095 78,884 32,778
Shareholders' Equity 4,123,470 2,188,699 1,230,139 2,003,430 2,316,563
Exchange Rates
The following table sets forth information as to the period end, average,
the high and the low exchange rate for Canadian Dollars and U.S. Dollars for the
periods indicated based on the noon buying rate in New York City for cable
transfers in Canadian Dollars as certified for customs purposes by the Federal
Reserve Bank of New York (Canadian dollar = US$1).
Year Ended:
January 31 Average Period End High Low
---------- ------- ---------- ---- ---
2000 1.4855 1.4995 1.5600 1.4350
2001 1.5487 1.5925 1.6023 1.4933
2002 1.5704 1.5800 1.6128 1.5108
2003 1.4008 1.2923 1.5750 1.2923
2004 1.3803 1.3248 1.5797 1.2712
The following table sets forth the high and low exchange rate for the past
six months. As of July 21, 2004, the exchange rate was CN$1.3242 for each US$1.
Month High Low
----- ---- ---
January 2004 $1.3340 $1.2690
February 2004 $1.3442 $1.3108
March 2004 $1.3480 $1.3080
April 2004 $1.3711 $1.3095
May 2004 $1.3970 $1.3580
June 2004 $1.3772 $1.3407
B. Capitalization and Indebtedness
Not Applicable.
C. Reasons for the Offer and Use of Proceeds
Not Applicable.
D. Risk Factors
In addition to the other information presented in this Annual Report, the
following should be considered carefully in evaluating the Company and its
business. This Annual Report contains forward-looking statements that involve
risk and uncertainties. The Company's actual results may differ materially from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed below
and elsewhere in this Annual Report.
We Have Incurred Net Losses Since Our Inception and Expect Losses to
Continue. We have not been profitable since our inception. For the fiscal year
ended January 31, 2004, we had a net loss of $753,596 and an accumulated deficit
on January 31, 2004 of $19,632,053. The Company has not generated revenues from
operations during fiscal year 2004 and does not expect to generate revenues from
operations until one or more of its properties are placed in production. There
is no assurance that any of the Company's properties will be placed in
production or that the Company's operations will be profitable in the future.
The Mining industry is highly speculative and involves substantial risks.
Even when mining is conducted on properties known to contain significant
quantities of ore deposits it is generally accepted in the mining industry that
most exploration projects do not result in the discovery of mineable deposits of
ore in a commercially economical manner. There may be limited availability of
water, which is essential to milling operations, and interruptions may be caused
by adverse weather conditions. Operations are subject to a variety of existing
laws and regulations relating to exploration and development, permitting
procedures, safety precautions, property reclamation, employee health and
safety, air quality standards, pollution and other environmental protection
controls. Mining activities are subject to substantial operating hazards, some
of which are not insurable or may not be insured for economic reasons.
The commercial quantities of ores cannot be accurately predicted. Whether
an ore body will be commercially viable depends on a number of factors including
the particular attributes of the deposit such as size, grade and proximity to
infrastructure, as well as mineral prices and government regulations, including
regulations relating to prices, taxes, royalties, land tenure, land use,
importing and exporting of minerals and environmental protection. The exact
effect of these factors cannot be accurately predicted, but the combination of
these factors may result in a mineral deposit being unprofitable.
There are no assurances that we can produce minerals on a commercially
viable basis. The Company's ability to generate revenues and profits is expected
to occur through exploration of its existing properties as well as through
acquisitions of interests in new properties. Substantial expenditures will be
incurred in an attempt to establish the economic feasibility of mining
operations by identifying mineral deposits and establishing ore reserves through
drilling and other techniques, developing metallurgical processes to extract
metals from ore, designing facilities and planning mining operations. The
economic feasibility of a project depends on numerous factors, including the
cost of mining and production facilities required to extract the desired
minerals, the total mineral deposits that can be mined using a given facility,
the proximity of the mineral deposits to a user of the minerals, and the market
price of the minerals at the time of sale. There is no assurance that existing
or future exploration programs or acquisitions will result in the identification
of deposits that can be mined profitably.
Mining operations and exploration activities are subject to various
federal, state and local laws and regulations. Laws and regulation govern the
development, mining, production, importing and exporting of minerals; taxes;
labor standards; occupational health; waste disposal; protection of the
environment; mine safety; toxic substances; and other matters. In many cases,
licenses and permits are required to conduct mining operations. Amendments to
current laws and regulations governing operations and activities of mining
companies or more stringent implementation thereof could have a substantial
adverse impact on the Company. Applicable laws and regulations will require the
Company to make certain capital and operating expenditures to initiate new
operations. Under certain circumstances, the Company may be required to close an
operation once it is started until a particular problem is remedied or to
undertake other remedial actions.
Market price is highly speculative. The market price of metals is highly
speculative and volatile. Instability in metal prices may affect the interest in
mining properties and the development of and production of such properties.
During the past year the price of gold has substantially decreased. If the
decline in gold prices continues, this may adversely affect the Company's
ability to raise capital to explore for existing and new mineral properties.
Penny stock rules may make it more difficult to trade the Company's common
shares. The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price, as defined, less than US$5.00 per share or an exercise price of less than
US$5.00 per share, subject to certain exceptions. Our securities may be covered
by the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors such as, institutions with assets in excess of US$5,000,000
or an individual with net worth in excess of US$1,000,000 or annual income
exceeding US$200,000 or US$300,000 jointly with his or her spouse. For
transactions covered by this rule, the broker-dealers must make a special
suitability determination for the purchase and receive the purchaser's written
agreement of the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell our securities and also affect the
ability of our investors to sell their shares in the secondary market.
Item 4. Information on the Company
A. History and Development of the Company
The Company was organized under The Company Act of the Province of British
Columbia, Canada on January 22, 1981 under the name of Coral Energy Corporation,
which name was changed to Coral Energy Corporation on March 3, 1982, and
subsequently to Coral Gold Corp. on September 9, 1987. The principal executive
office of the Company is located at 455 Granville Street, Suite 400, Vancouver,
British Columbia V6C 1T1, and its telephone number is 604-682-3701.
B. Business Overview
The Company's principal business activities are the exploration and
development of mineral properties. The Company is in the process of exploring
and developing its mineral properties and has not yet determined whether its
mineral properties contain ore reserves that are economically recoverable. The
recoverability of amounts shown for mineral properties is dependent upon the
discovery of economically recoverable ore reserves in its mineral properties,
the ability of the Company to obtain the necessary financing to complete
development, confirmation of the Company's interest in the underlying mineral
claims and leases and upon future profitable production or sufficient proceeds
from the disposition of its mineral properties.
The Company is continually investigating new exploration opportunities, and
mineral exploration is carried out on properties identified by management of the
Company as having favorable exploration potential. Interests in such properties
are acquired in various ways. In some cases, the Company, through its own
efforts, stake mineral claims or acquires exploration permits. In other cases
the Company acquires interest in mineral properties from third parties. An
acquisition from a third party is typically made by way of an option agreement,
which requires the Company to make specific option payments and to incur a
specified amount of exploration expenditures on the property within a given time
in order to earn an interest in the property. Most option agreements provide
that once the Company has made the required option payments and incurred the
specified exploration expenditures, the parties will enter into a joint venture
requiring each party to contribute towards future exploration and development
costs, based on its percentage interest in the property, or suffer dilution of
its interest.
The Company advances its projects to varying degrees by prospecting,
mapping, geophysics and drilling. Once a property is determined to have limited
exploration potential, the property is abandoned or sold. In cases where
exploration work on the property reaches a stage where the expense and risk of
further exploration and development are too high, the Company may seek a third
party to earn an interest by furthering the development. Optioning a property to
a third party allows the Company to retain an interest in further exploration
and development while limiting its obligation to commit large amount of capital
to any one project. The mineral exploration business is high risk and most
exploration projects will not become mines.
The Company's mining claims are located in the states of Nevada and
California in the United States. The Company's present principal exploration
activities have been focused on the Robertson Mining Claims located in Crescent
Valley, Nevada.
Robertson Mining Claims
- -----------------------
During fiscal year ended January 31, 1999, the Company entered into an
option agreement dated October 8, 1998 with Placer Dome U.S. Inc. ("Placer")
respecting the Robertson Mining Claims (the "Option Agreement"), wherein Placer
acquired the option to earn up to a 70% interest in the Robertson Mining Claims,
and also agreed to post security by means of a financial guarantee on a
US$2,050,000 reclamation bond on a portion of the Robertson Mining Claims (the
"Reclamation Bond"). The Option Agreement was later assigned by Placer to the
Cortez Joint Venture, dba Cortez Gold Mines (a joint venture owned by Placer and
Kennecott) ("Cortez"). Pursuant to the terms of the Option Agreement, when
Cortez elected to terminate the Option Agreement effective December 30, 1999,
the Company was then required to post its own security for the Reclamation Bond
and obtain a full release of Placer's guarantee not later than 18 months after
the effective date of termination. In order to satisfy its obligations under the
Option Agreement, the Company spent a large portion of fiscal year 2003
conducting reclamation on the Robertson Mining Claims to reduce the Reclamation
Bond that Placer had guaranteed for the Company. The Company was able to obtain
a release of Placer's guarantee by conducting sufficient reclamation work to
reduce the bonding requirement, and by raising sufficient funds to provide
satisfactory alternative security of the Reclamation Bond. The Reclamation Bond
was reduced to US$786,100 during the fiscal year ended 2003, for which the
Company posted cash. In fiscal year ended 2004, with more reclamation work
having been completed and accounted for, the Reclamation Bond was further
reduced to US$406,000. The cost to the Company to conduct the reclamation,
prepare updated reclamation plan, and other associated costs was approximately
US$500,000.
Norma Sass and Ruf Claims
- -------------------------
Upon the termination of the Option Agreement and Cortez's release and
quitclaim, the Company held a 100% interest in the Norma Sass and Ruf Claims,
located in Nevada, which in prior fiscal years, was grouped with and formed a
portion of the Robertson Mining Claims (see: "D. Property, Plant and Equipment,
Norma Sass and Ruf Claims" at p. 36 below). Effective December 31, 1999, the
Company and Levon Resources Ltd. entered into a Fourth Amending Agreement
whereby Levon could earn an undivided 50% interest in the Norma Sass and Ruf
Claims upon completion of certain terms. This agreement was further amended
effective December 31, 2001 (but signed on October 3, 2002), whereby Levon was
transferred a 33-1/3% interest in the Company's interests in the Norma Sass and
Ruf claims, in consideration of 300,000 common shares of Levon previously issued
to the Company and the prior payment of $350,294 for exploration work or cah in
lieu. The Company currently owns a 66-2/3% interest in the Norma Sass and Ruf
claims (subject to certain royalties to underlying property owners, as described
below), following the execution of the December 2001 Fifth Amending Agreement
with Levon.
On December 4, 2002, the Company granted an option to acquire 33-1/3%
interest the Company's interests in the Norma Sass and Ruf Claims to
Goldfranchise Corporation ("Goldfranchise"). In order to earn the interest,
Goldfranchise must:
(a) Pay the Company US$38,391.50, which has been received by the
Company;
(b) Incur a minimum of US$300,000 in exploration work on the Norma
Sass and Ruf Claims, of which US$100,000 had to be incurred on
or before December 4, 2003, and the balance of US$200,000
incurred on or before December 4, 2004; and
(c) Pay the Company 33-1/3% of all annual land fees, taxes,
advance royalties required to keep the claims in good
standing, until Goldfranchise has exercised the option.
Bralorne Property
- -----------------
During fiscal year 1999, the Company acquired an option to purchase a 25%
interest in certain mineral properties located in the Lillooet Mining Division,
British Columbia, subject to a joint venture agreement between Bralorne Pioneer
Gold Mines Ltd., and Avino Silver & Gold Mines Ltd. ("Joint Venture"). To
exercise the option, the Company paid $500,000 and was required to (i) pay
$200,000 by each October 17th, 1999 through 2003, (ii) pay $250,000 by October
17, 2004, and (iii) assume $700,000 of the Joint Venture liability and
contribute 25% of all future costs related to the Bralorne Property. The Company
made the first installment payment of $200,000 for October 1999. By an amendment
dated October 16, 2000, the 2000 payment was extended to August 31, 2001, which
the Company failed to make, and as of fiscal year ended 2002, the Company
decided to abandon the option.
Plan of Operations
Mining Activities
- -----------------
All of the properties and interest in which the Company owns are in the
exploration stage only, and the Company does not have an operating mine or
conduct any mining activities. Mineral exploration and development involves a
high degree of risk and few properties, which are explored, are ultimately
developed into producing mines. There is no assurance that the Company's mineral
exploration activities will result in any discoveries of commercial bodies of
ore. The long-term profitability of the Company's operations will be in part
directly related to the cost and success of its exploration programs, which may
be affected by a number of factors beyond the control of the Company.
Exploration and Business Development
- ------------------------------------
The Company's exploration and business development activities are focused
on gold. In the United States, the Company's major exploration and business
development project is the Robertson Mining Claims. During the fiscal year 2003,
the Company focused on reclamation on the Robertson Mining Claims, including
reclaiming the bone yard, removing old buildings, and filling drill holes. In
addition, in November 2002, the Company conducted a drilling program on the
Carve-Out Claims of the Robertson Mining Claims (see: "D. Property, Plant and
Equipment, Carve-Out Claims" at p. 32 below). Mr. Robert McCusker, P.Geol.,
former Senior Geologist for Amax Gold Mines ("Amax"), supervised the 7,315-foot
drill program and reported that the drilling was focused on two areas: follow-up
drilling in the immediate vicinity of existing drill hole 97401 and a series of
close-spaced offset holes near PR-380. No significant mineralization was
encountered.
The Company spent approximately $500,000 on reclamation, exploration and
development in fiscal year 2004 on the Robertson Mining Claims.
Mineral exploration and development involve a high degree of risk and few
properties are ultimately developed into producing mines. There is no assurance
that the Company's future exploration and development activities will result in
any discoveries of commercial bodies of ore. Whether an ore body will be
commercially viable depends on a number of factors including the particular
attributes of the deposit, such as size, grade and proximity to infrastructure,
as well as mineral prices and government regulations, including regulations
relating to prices, taxes, royalties, land tenure, land use, importing and
exporting of minerals and environmental protection. The exact effect of these
factors cannot be accurately predicted, but the combination of these factors may
result in a mineral deposit being unprofitable.
Competition
The mining industry in which the Company is engaged is in general, highly
competitive. Competitors include well-capitalized mining companies, independent
mining companies and other companies having financial and other resources far
greater than those of the Company. The companies compete with other mining
companies in connection with the acquisition of gold and other precious metal
properties. In general, properties with a higher grade of recoverable mineral
and/or which are more readily minable afford the owners a competitive advantage
in that the cost of production of the final mineral product is lower. Thus, a
degree of competition exists between those engaged in the mining industries to
acquire the most valuable properties. As a result, the Company may eventually be
unable to acquire attractive gold mining properties.
Dependence on Customers and Suppliers
The Company is not dependent upon a single or few customers or supplier for
revenues or its operations.
Environmental Regulations
The Company's exploration and mining programs in Nevada and California are
subject to state and federal regulations regarding environmental considerations.
All operations involving the exploration for the production of minerals are
subject to existing laws and regulations relating to exploration procedures,
safety precautions, employee health and safety, air quality standards, pollution
of streams and fresh water sources, odor, noise, dust and other environmental
protection controls adopted by federal, state and local governmental authorities
as well as the rights of adjoining property owners. The Company may be required
to prepare and present to federal, state or local authorities data pertaining to
the effect or impact that any proposed exploration for or production of minerals
may have upon the environment. All requirements imposed by any such authorities
may be costly, time consuming and may delay commencement or continuation of
exploration or production operations. Future legislation may significantly
emphasize the protection of the environment, and, as a consequence, the
activities of the Company may be more closely regulated to further the cause of
environmental protection. Such legislation, as well as further interpretation of
existing laws in the United States, may require substantial increases in
equipment and operating costs to the Company and delays, interruptions, or a
termination of operations, the extent of which cannot be predicted.
Environmental problems known to exist at this time in the United States may not
be in compliance with regulations that may come into existence in the future.
This may have a substantial impact upon the capital expenditures required of the
Company in order to deal with such problem and could substantially reduce
earnings. At the present time, the Company's mining operations in Nevada and
California are in compliance with all known environmental requirements.
C. Organizational Structure
The Company has two wholly-owned subsidiaries, Coral Energy Corporation of
California, a California corporation which holds title to the Company's
California real property, and Coral Resources, Inc., a Nevada corporation, which
holds title to the Company's mining claims located in Nevada.
D. Property, Plant and Equipment
Nevada and California, United States
Cautionary Note to United States Investors. As a British Columbia corporation,
the Company is subject to certain rules and regulation issued by the British
Columbia Securities Commission ("BC Securities Commission"). The Company files
an Annual Information Form on Form 44-101F1 ("AIF") with the BC Securities
Commission via the System for Electronic Document Analysis and Retrieval
("SEDAR") for Canadian Securities Administrators. Under the AIF, the Company is
required to provide detail information regarding its properties including
mineralization, drilling, sampling and analysis, security of samples and mineral
resource and mineral reserve estimates. Further, the Company describes its
properties utilizing mining terminology such as "Measured Reserves" and
"Indicated Resources" that are required by Canadian regulations but are not
recognized by the United States Securities and Exchange Commission ("SEC"). For
clarification, the Company has no properties that contain reserves as defined by
the SEC and is providing the foregoing, in part, in order to meet its
requirements under National Instrument 44-101 promulgated by the BC Securities
Commission.
Robertson Mining Claims, Nevada, U.S.A.
The Robertson Mining Claims are located in Crescent Valley, Nevada on the
western flanks of the Shoshone Range, 28 miles to the southeast of Battle
Mountain, Nevada, which lies some 230 miles northeast of Reno, Nevada. The
Robertson Mining Claims comprise approximately 11,000 acres in the Bullion
Mining District, Lander County, Nevada, and currently include 724 patented and
unpatented lode mining claims. The Robertson Mining Claims are recorded under
three separate claims groups known as the (i) Core Claims (or "Robertson
Property"), Carve-Out Claims (or "Excluded Claims"), and (iii) the Norma Sass
and Ruf Claims, as described more particularly below.
These mining claims have been acquired over a period of several years from
different sources. The entire Robertson Mining Claims are subject to (i) a 3%
net smelter royalty to Geomex Development Eighth Partnership ("Geomex 8"), which
royalty shall cease at such time as the sum of US $1,250,000 has been paid to
Geomex 8, and (ii) subject to various mining leases requiring minimum annual
advanced royalties ranging from 2% to 10% of net smelter returns (see Table at
p. 14 below).
The Core Claims (referred to hereafter as the "Robertson Property") are the
subject of a technical report dated January 15, 2004 prepared by Robert T.
McCusker, P.Geol., entitled "Geological Report on the Robertson Property", in
accordance with the requirements of NI 43-101 (the "McCusker Report"). The
following information concerning the Robertson Property is excerpted from the
McCusker Report. The reader is referred to the entire text of the McCusker
Report, a copy of which is available under the Company's filings on SEDAR at
www.sedar.com.
Property Description and Location:
The Robertson Property is located in eastern Lander County, Nevada, on
public lands administered by the Bureau of Land Management (BLM). The property
is situated in Sections 2-10, 15-18, 20, 21, Township 28 North, Range 47 East
and Sections 26, 32 and 34, Township 29 North, Range 47 East, Mt. Diablo
Baseline & Meridian.
The Robertson Property consists of 428 unpatented federal lode, 94 placer
claims, nine patented lode claims and one unpatented mill site, covering over
4,500 acres. Two groups of claims totaling 82 claims are non-contiguous with the
core group of claims. The Company controls the surface and mineral tenures
within the project area through recorded title, or through mining lease and
mining lease with option to purchase agreements of the patented and unpatented
mining claims. The Company's wholly-owned subsidiary, Coral Resources, Inc., is
the owner of record with 100% interest in 343 claims and controls an additional
189 claims through a variety of mineral leases, as more particularly described
below.
In 2001, a Boundary Agreement between the Company and the Cortez Joint
Venture (Placer/Kennecott) resolved claim boundary overlaps and seniority issues
along the east and south sides of the Robertson claim block. This agreement
required both parties to amend and (or) abandon certain claims in order to
achieve the agreed upon boundary. This was completed during the 2002-2003
assessment year.
Approximately 189 of the 532 claims that comprise the Robertson Property
are controlled by the Company through six mining leases and option agreements.
The claims held by the Company under lease or option agreements require minimum
advance royalty payments and production royalties in the event of production.
Total annual payments for the various leases and minimum advance royalties are
US$67,800. A summary compilation of the terms of these agreements are presented
in the Table below:
MINING LEASE AND OPTION AGREEMENTS
Production Advance Royalty
Company/Date Number of Claims Option Pmt. Royalty Pmt.
- ---------------------------------------------------------------------------------------------------------
Tenabo Gold Mining Co. 13 $2M 8% NSR $12,000/yr
Nov. 30, 1975
Fannie Komp 76 $1M 5% NSR $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. All $1.25M 3% NSR None/yr
(Geomex)
Mauzy, et al 36 $0.75M 5% NSR $14,400/yr
Apr. 21, 1989
Marcus Corp. 36 $2.5M(cap) 10% NSR $6,000/yr
July 31, 1997
Annual federal rental fees of US$44,300, payable to the BLM, and Notice of
Intent to Hold Mining Claims have been filed for the 2003-2004 assessment year.
A complete listing of claims with Lander County book and page numbers, and BLM
serial numbers are presented in the Appendix to the McCusker Report.
Environmental Liabilities:
In 1988-89, the Company operated a small open pit gold mining operation and
heap leach facility on the Robertson Property. The resulting disturbances
include three small open pit mines, waste dumps, haul roads, drill roads, open
drill holes, and a 350,000 ton heap leach facility and related recovery plant.
In 1994, a reclamation plan was prepared by Amax and submitted to the Battle
Mountain office of the BLM. The cost to perform the reclamation of the Robertson
mine site was estimated at that time to be US$2 million. In 2001, the Company
began reclamation activities which were accelerated in 2002, with the
recontouring of waste dumps, reclamation of the leach pad, haul roads and the
filling of all open drill holes. As a result of this activity, in June 2003, the
BLM reduced the bonding requirements for the project to US$406,000. The Company
currently maintains a required performance bond with the Nevada State Office of
the BLM.
In March 2003, on behalf of the Company, SRK Consulting submitted a Final
Plan for Permanent Closure with the BLM and Nevada Division of Environmental
Protection (NDEP). The closure plan has been approved by both agencies.
Permitting:
In 2002, the Company submitted and was granted a five year renewal of Water
Pollution Control Permit (NEV60035) by the NDEP for the Robertson Property. In
addition, the Company continues to conduct reclamation activities under a Plan
of Operation (NV067688) approved in 1989 by the BLM.
Because no exploration activity has occurred on the Robertson Property
since 1999, and significant reclamation has occurred, any new exploration
activities that result in a surface disturbance will require submission and
approval of an Amendment to the Plan of Operation. Additionally, the National
Historic Preservation Act requires that all operators on public lands conduct an
archeological survey of the proposed sites of new disturbance. Much of the
Robertson Property has been previously cleared under various surveys conducted
by Amax. There are no known environmental or threaten and endangered species
issues at the Robertson Property that would provide grounds for denial of
approval of an Amended Plan of Operation.
Accessibility, Climate, Local Resources, Infrastructure, and Physiography:
The Robertson Property is 27 air miles southeast of Battle Mountain and 60
miles southwest of Elko, Nevada. From Battle Mountain, the county seat, the
property is reached by traveling 28 miles east on Interstate Highway 80, then 29
miles south on Nevada Highway 306 to the property turn off. The property is
reached by driving two miles west on a well maintained gravel road. A network of
unimproved dirt roads and tracks provide access to the remainder of the
property.
The Robertson Property is situated in the Tenabo sub-district of the
Bullion mining district, within a series of low foothills on the extreme eastern
flank of the Shoshone Mountains near the abandon town site of Tenabo. The
climate is arid to semi-arid, with high annual insolation, low annual
precipitation and large daily temperature fluctuations. Altitude on the project
varies from 5,000 ft to 6,281 ft above mean sea level. Vegetation is typical of
the Great Basin Desert Shrub Steppe, comprised of communities of large sage
brush, rabbit brush, Sandburg bluegrass and varieties of forbs. Average annual
precipitation at the site is less than 7 inches per year, mostly from winter
snowfall and sporadic summer afternoon thunderstorms. In the region, the average
maximum temperature is 63(Degree) F and the average minimum temperature is
30(Degree) F. Mid-winter day-time temperatures average 24(Degree) F and
mid-summer day-time temperatures average 90(Degree) F.
Land ownership within the Robertson Property project area consists of
federal surface and minerals within the Shoshone-Eureka Resource Area,
administered by the Battle Mountain District of the Bureau of Land Management.
According to the BLM, principal land uses within the project area are mining,
wildlife habitat and livestock grazing.
Water is currently supplied to the project by the "Komp" well (Permit No.
50683), located in Section 10, Township 28 North, Range 47 East. Use of the well
by the Company was granted as part of the "Fanny Komp" mining lease agreement.
In 1994, Amax filed two applications to appropriate ground water (Permit No.
59780 and 59781). The filings progressed to "ready-for-action" status at that
time, but were never approved because Amax subsequently withdrew from the
project.
A paved state highway provides access to within 2 miles of the property and
a major power line (120 kV) that currently provides electrical power to a nearby
operating mine crosses the east edge of the property. Surface rights at the
Robertson Property are sufficient to support a major mining operation.
Experienced mining personnel are available in the nearby communities of Elko and
Battle Mountain.
History and Exploration:
The Robertson Property is located in the Tenabo area, a sub-district of the
Bullion mining district. Historic lode mining in district dates from 1905 with a
total production of 20,000 oz of gold credited to the mines of the area (Stager,
1977). Placer gold was discovered in many of the dry washes in the Tenabo area
in 1916. Between 1937-39, a small dragline dredge and washing plant operated in
the district, and a dredge was reported by Humphrey to be operating in lower
Mill Gulch in 1945. Placer production is estimated to have yielded $25,000 worth
of gold and minor amounts scheelite (Johnson, 1973).
During the period 1966-70, a number of companies explored the district in
search of porphyry copper-style mineralization. In 1968, while drilling a series
of shallow rotary holes near the Gold Pan mine, Superior Oil discovered a small,
but relatively high-grade zone of gold at shallow depths in what is now known as
the Gold Pan Zone. However, with additional drilling, Superior quickly lost
interest in the district. They were soon followed by a number of mainly
Vancouver-based junior mining companies, including Placer Development (1974-75),
Teck Corporation (1977), Aaron Mining Ltd. (1975-86), and E & B Exploration Ltd.
(1980-81), all of whom sporadically explored the Tenabo area with limited
success. A summary of the drilling completed by these companies prior to the
Company's involvement (1986) is presented in the Table below:
Summary of Pre-Coral Drilling Activities at Robertson
Number and Type Drill
Company Date of Activity of Holes Drilled Footage(ft) Target
- ---------------------------------------------------------------------------------------------------------
Superior Oil 1968-70 92 Conv. Rotary c. 32,000 Gold Pan
Placer Dev. 1973-74 23 Conv. Rotary c. 3,500 none
Teck Corp. 1977 none none none
Aaron 1977 7 Conv. Rotary c.300 Gold Quartz
E & B Exploration 1980-81 148 RVC 30,807 Gold Pan
Totals 270 65,407
Modern open pit mining and heap leaching began as early as 1974, when Aaron
Mines, Ltd., initiated a pilot leach operation. Aaron placed about 15,000 tons
of oxide material mined from the "glory hole" and waste dumps of the Gold Quartz
mine on a small leach pad, from which 377 ounces of gold were recovered
(Stevenson & Assoc., 1977). During the period 1978-80, Aaron placed 38,400 tons
of ore on a second larger pad, from which they recovered 517 ounces of gold
(Sampson, 1988). Also during that period Aaron continued exploration and began
consolidating and acquiring claims in the district. In 1986, the Company
acquired Aaron's interest in the property and immediately began a series of
major drilling programs beginning in 1986 and continuing until 1989. Mining
operations commenced in 1988, but were suspended less than one year later.
During the operating life of the Robertson mine, approximately 350,000 tons of
low-grade material was placed on leach pads from which about 6,200 ounces of
gold were recovered.
During the period 1986 through 1989, the Company completed approximately
380 reverse circulation (RVC) drill holes and 7 diamond drill holes (DDH),
totaling about 109,377 ft. Much of this drilling was focused in four resources
areas; Gold Pan, Gold Quartz, Gold Quartz extension (also called Gold Quartz
West) and in the Triplet Gulch area. The purpose of this drilling was to
determine the limits and continuity of mineralization within these zones. Nearly
all of the RVC holes were drilled vertically to an average depth of about 300
ft.
During the later stages of the Company's exploration program, they
completed two "deep" RVC holes that reached depths of 1,400 ft and 1,810 ft,
respectively. In addition to resource definition, the Company also embarked on a
program of district-wide exploratory and follow-up drilling of numerous surface
anomalies.
In 1990, the Company and Amax Gold Exploration entered into an Amended and
Restated Option and Earn-In Agreement in which Amax could earn a 60% interest in
the Robertson Property by producing a bankable feasibility study. From 1990,
until they withdrew from the venture in 1996, Amax completed a district-wide
exploration program that included drilling 338 RVC holes and 62 DDH, totaling
over 176,000 ft.
During this time period, Amax discovered a number of mineralized zones
which comprised a low-grade, drill-indicated resource of over 1 million ounces
of gold. These resources are summarized below in the Table below:
Robertson Property Drill-Indicated Resources (1996)
Mineralized Million Grade Contained
Zones Short Tons (oz Au/t) Oz Gold
- -----------------------------------------------------------------------------------------------------
Altenburg Hill** 3.50 0.018 63,900
Porphyry Zone* 20.00 0.020 400,000
Gold Pan** 8.30 0.024 199,200
39A Zone 4.70 0.077 367,190
Total 36.5 0.028 1,030,290
Note: *Includes AGI proven+probable reserve 13,556,125 tons at an average
grade of 0.0188 (1994).
**Inferred mineral resources estimated by AGI (1996).
In 1994, Amax began close-spaced grid drilling of the Porphyry Zone
resource to define a mineable reserve to serve as a basis for completing a
bankable feasibility study (Amax, 1994). The resulting reserve of about 14
million tons averaging 0.019 and containing about 180,000 recoverable ounces of
Au, was deemed marginal at a gold price of US$400/oz. The historical mineral
resource and mineral reserve estimates cited in the Table and discussed above
are presented for the purpose of historical background only, and do not
represent defined mineral resources on the Robertson Property. In addition, the
classification of these historical mineral resources and reserves do not conform
to the categories of NI 43-101 and have not demonstrated economic viability. The
reader is referred to the section entitled "Mineral Resource Estimates" herein
for the current mineral resource estimates prepared in accordance with the
requirements of NI 43-101.
In 1998, Cortez Gold Mines (a joint venture owned by Placer and Kennecott)
entered into an Option and Earn-In Agreement with the Company in which Cortez
could earn a 70% interest in the Robertson Property by producing a bankable
feasibility study. The focus of their exploration was to expand the 39A Zone and
test a number of outlying targets. During 1999, Cortez completed 46 RVC drill
holes and a single mud rotary hole, totaling 57,000 ft. Of the thirteen holes
directed at expanding the 39A Zone, only two holes, 99401 (130 ft/0.05 oz Au/t)
and 99413 (80 ft/0.163 oz Au/t) encountered significant mineralization. This
drilling program did little to expand the resource. Of the remaining holes
drilled by Cortez, only two holes (99406 and 99419) encountered significant
mineralization. Both holes were designed to offset and (or) follow up existing
drill intersections and surface gold anomalies.
After completing this drilling program, Cortez declared its interest in
renegotiating the terms of the Option Agreement with the Company. When the
Company declined, Cortez subsequently terminated the Option Agreement on
December 30, 1999, and did not earn an interest in the Robertson Property.
Geological Setting:
North-central Nevada is within the Basin and Range physiographic province
of western North America. Published geological reports describing the regional
geology of the Tenabo district include Gilluly and Gates (1965), Wrucke (1974),
Wrucke and Armbrustmacher (1975), and Stewart (1980).
The geology of this region is dominated by a complex set of branching,
low-angle faults that are part of the Roberts Mountains thrust fault (RMTF).
Forming the upper plate of this regionally significant structure are a series of
thick, vertically stacked nappes of predominately dark-gray, fine-grained
siliceous sedimentary and lesser volcanic rocks of early to middle Paleozoic
age. During latest Devonian or earliest Mississippian time, these eugeosynclinal
rocks are postulated to have been transported eastward many tens of miles along
segments of the RMTF and structurally emplaced over a mostly carbonate sequence
of similar age that comprises the lower plate. While siliceous rocks of the
upper plate are widespread in the region, carbonate rocks of the lower plate are
comparatively rare and are exposed in a few "structural windows" such as the
nearby Gold Acres window. Many of the regions gold deposits, including Gold
Acres and Pipeline are within or near to structural windows of lower plate
carbonate rocks. The Gold Acres-Tenabo area lie along the Battle Mountain-Eureka
trend of mineral deposits.
Beginning in late Mesozoic age and continuing until middle Miocene time,
rocks of both the upper and lower plates of the RMTF were cut by episodic
high-angle faulting and associated igneous activity. Starting about 17 Ma,
regional extensional block faulting further modified the area, resulting in the
characteristic basin and range topography encountered in this part of Nevada.
Geologically, the Robertson Property consists of a series of relatively
flat-lying, vertically stacked thrust sheets that form part of the Roberts
Mountain allochthon, which in the district is composed of siliciclastic rocks of
Ordovician through Devonian age (Wrucke, 1974). The district is dominated by a
very thick sequence of middle to late Devonian Slaven Chert composed mainly of
argillite, chert, lesser siltstone and shale, and minor intermediate volcanic
rocks. Structurally overlying the Slaven Chert along the north and east sides of
the district are a sequence of rusty brown weathering siltstone, sandstone and
very minor limestone of the Silurian Elder Sandstone.
Intruding the thick Paleozoic sequence is an elliptical-shaped, composite
granodiorite stock (or lacolith) of Eocene age (McKee and Silberman, 1970). The
orientation of the principal axis of the stock is approximately east-west.
Associated with it are numerous dikes, sills and plugs that vary in composition
from diorite, the earliest known intrusion, to rhyolite, the latest. Most of the
identified gold resources, including the Porphyry, Gold Pan and 39A Zones, lie
along or near the northern contact of the composite stock. A series of narrow
and laterally continuous (up to 1,600 ft) intrusive "pebble" dikes extend
northward from the northern contact of the granodiorite stock. Near contacts
with the Tertiary intrusions, many of the sedimentary and volcanic rocks, and
early phases of the stock, have undergone significant thermal metamorphism,
intense recrystallization, bleaching and pervasive metasomatism. Many of these
rocks have been converted to layered sequences of biotite, "quartz" and
calc-silicate hornfels, marble, exoskarn and endoskarn.
Mineralization at the Robertson Property is strongly controlled by a system
of low and high-angle faults and related fracture zones. Less commonly,
brecciation associated with axial plane shear zones developed in isoclinal folds
are also important hosts for mineralization, locally. Although individual
structures host ore-grade gold, higher grades commonly occur where one or more
structures intersect.
Low-Angle Faults
Rocks of the district are cut by a myriad of low-angle thrust faults
associated with the emplacement of the Roberts Mountain allochthon. Reactivation
of these faults during emplacement of the Tenabo intrusive complex created an
important fracture system that, along with younger high-angle faults, strongly
control the distribution gold at Tenabo. A major low-angle fault is thought to
be the principal control of gold distribution in a broad area extending from
hole AT-1 westward to 99445, a distance of over 3,000 ft, and containing the
high-grade 39A Zone resource.
NW and East-West High-Angle Faults
In addition to the flat-lying thrust faults associated with the RMTF, rocks
of the district are broken and offset by series of NW-striking high-angle
faults. Many of these faults extend through the Eocene-age stock and are filled
locally by younger dikes. Gold mineralization appears closely associated with NW
faults. A less obvious, but important east-west fault system occurs along the
north side of the granodiorite stock and likely controlled emplacement of the
elliptical granodiorite stock as well as a later feldspar porphyry dike swarm.
Movement along this fault is suspected to be, at least in part, sinistral.
Within the Gold Pan zone, higher grade mineralization forms a series of en
echelon ore shoots that trend generally east-west and are thought to be
controlled by this fault zone.
NE High-Angle Faults/Dikes
A subtle NE-trending structural fabric is reflected mainly by a number of
dike-filled faults and the apparent control exerted on the distribution of gold
mineralization. In the Porphyry Zone, high-grade gold is commonly associated
with a series of sub-parallel, NE striking faults locally filled by granodiorite
and (or) igneous breccia dikes. In the 39A Zone, mineralization occurs at
intersecting NE- and NW-trending high-angle faults and a shallow NE dipping
shallow dipping (25(Degree)) fault zone.
Folds
Paleozoic rocks of the district are locally folded into small-scale
isoclinal folds that typically strike NNW and plunge 5(Degree) to 15(Degree) to
the NNW. This fold orientation is largely confined to the Devonian Slaven Chert.
Strong shearing and brecciation are often well developed along many fold axial
planes creating additional structural disruption in the rocks and sites for gold
deposition.
In contrast, a series of broad, NE-striking open folds are developed in a
nappe of Silurian Elder Sandstone along the northeast part of the property. This
variation in fold orientation suggests that these thrust sheets were emplaced
separately and from different directions. A similar broad anticlinal fold is
developed in the Porphyry Zone that is more or less coincident with
mineralization. This fold, which strikes N-S, is thought to have formed partly
in response to emplacement of a large diorite dike. Mineralization in this zone
is strongly controlled by faulting in the footwall of the dike. Any influence on
the localization of the mineralization by this fold is unclear.
As a result of late Tertiary Basin and Range block faulting, rocks along
the east side of the Northern Shoshone Range, including the Tenabo area, have
been tilted as much as 15(Degree) to 25(Degree) to the east (Gilluly and Gates,
1965). This post-mineral tilting resulted in the rotation of the large diorite
dike in the Porphyry zone, leading to the original interpretation that this
intrusion was a thick sill. The tabular mineralized zone associated with the
footwall of the diorite dike was also rotated eastward, resulting in a shallow
westward dip.
Deposit Types and Mineralization:
Gold mineralization at the Robertson Property is both spatially and
temporally associated with the Eocene-age Tenabo intrusive complex. Gold
mineralization in the Porphyry Zone occurs at the contact between a
potassic-altered, fine-grained diorite and calc-silicate hornfels and skarnoid
units in the Elder Sandstone. These relationships suggest that this
mineralization represents a proximal Au-Ag (Cu) skarn system as defined by
Orris, et al (1987) and Ray, et al (1990). Gold in the Altenburg Hill and Gold
Pan zones occur in a similar proximal position in biotite and calc-silicate
hornfels at the faulted contact of the granodiorite stock, related dikes, sills,
and irregular diorite endoskarn bodies (Candee, 1996). The high-grade 39A Zone
is strongly controlled by intersecting high-angle fault zones developed in a
highly fractured layered sequence of retrograde-altered biotite, calc-silicate
hornfels and skarnoid. The mineralization is developed 800 ft to 1,000 ft from
the contact of the granodiorite stock and shares many mineralogical and
geochemical characteristics of "distal" gold skarns, as defined by Ray, et al,
(1990).
A series of persistent, but narrow flat-lying mineralized zones, situated
slightly outside the thermal metamorphic aureole of the stock are postulated to
represent a more distal position of the Tenabo Au-Ag (Cu) hornfels/skarn system.
This mineralization is hosted by silty carbonaceous shale and siltstone. Along
with the lack hornfels within these zones, gold mineralization is accompanied by
significant increases in mercury concentration, ranging between 1.3 ppm and 6.4
ppm. These relationships suggest that this "Carlin-like" mineralization may
represent a so-called "distal disseminated" system as defined by Cox (1992).
Also outside the metamorphic aureole are a series of locally mineralized,
NNW-striking moderate to high-angle faults marked by discontinuous 5-ft- to
+50-ft-thick, weakly to moderately silicified breccia zones. Surface rock chip
sampling and shallow RVC drilling of these breccia outcrops have returned
significant ore grade values. Many of the anomalous gold values from outcrop
sampling have not been followed up and at least three ore-grade gold drill
intercepts remain open along strike and down dip.
High-grade, east-west striking, quartz-sulfide + calcite veins and/or
silicified zones with strong quartz (silica)-sericite-(pyrite) alteration
envelopes, have been defined in the Gold Pan Zone and include a number of veins
in the Phoenix and Silver Safe mines. The highest grades (+0.5 oz Au/t) occur at
intersections with NW-striking faults and fracture zones. These veins and
silicified structural zones carry significant values in Au-Ag, As-Sb+Hg,
Cu-Pb-Zn.
Gold mineralization within the Tenabo intrusive complex exhibit
characteristic of a Au-Ag (Cu) hornfels/skarn system. Exploration at Robertson
will focus on expanding currently defined medium to high-grade resources, better
define the potential of the emerging large distal disseminated mineralization
and offset a number of drill intercepts in the NW-striking braided fault system.
To test the potential of the east-west striking high-grade Au-Ag, As-Sb+Hg,
Cu+Pb+Zn quartz-sulfide+calcite veins and silicified breccia zones, detailed
close-spaced drilling will be required.
The geological setting for these various deposit-types includes:
o Structural intersections of high-and low-angle faults,
o Replacement of relatively favorable lithologies for development of skarn,
o Late-stage quartz-sulfide+calcite "gash" veins within a strike-slip fault
environment,
o Proximity to the Tenabo stock for proximal and distal Au-Ag (Cu)
hornfels/skarn,
o Igneous dike-filled faults.
The Robertson Au-Ag (Cu) hornfels/skarn system contains a series of
mineralized zones spatially associated with an intermediate-composition
intrusive complex of late Eocene age. Gold occurs in highly fractured,
fine-grained siliciclastic sedimentary and lesser volcanic rocks at or near
contacts with intrusive rocks. Major fault zones controlled not only emplacement
of the Tenabo stock and later dike swarms, but also provided pathways as well as
sites of deposition for Au-Ag (Cu) mineralization. Numerous high-grade gold
values located along the margins of a NE-striking dike swarm and related fault
zones may represent feeder zones for the lower grade hornfels/skarn-type
mineralization. These feeder zones may also represent a viable exploration
target.
In northern Nevada, a number of Au-Ag (Cu) skarn systems have become
significant producing gold mines and several identified mineral resources remain
unexploited. Examples of deposits with similar geologic settings include
McCoy/Cove mine, Phoenix Project (Battle Mountain district), Buffalo Valley mine
and Redline prospect, all of which are on the Battle Mountain-Eureka trend.
The currently identified mineral resources occur in four zones localized
along the northern contact of the Tenabo stock, forming a general east-west
trend. These resources include the Porphyry, Gold Pan, Altenburg Hill and 39A
Zones. The Porphyry, Gold Pan and Altenburg Hill Zones occur in highly fractured
hornfels and skarn units at the contact of the granodiorite stock, whereas the
39A is localized at the intersection of two high-angle faults in
retrograde-altered hornfels.
Porphyry Zone
- -------------
In 1994, Amax defined a proven+probable+inferred "mineable reserve" in the
Porphyry Zone, using a 0.01 oz Au/t cutoff grade, that contained 14 million
short tons averaging 0.019 oz Au/t. These historical reserves are presented for
background informational purposes only, do not represent current mineral
reserves at the Robertson Property as defined under NI 43-101, and have not
demonstrated economic viability. More recently (McCusker, 2001) the zone was
redefined using a 0.02 oz Au/t cutoff grade which now forms a narrow tabular
zone along the east edge of the defined reserve. This new zone has a strike
length of approximately 1,100 ft north-south, dips 30(Degree) to 45(Degree) to
the west, varies from 60 ft to 125 ft thick and reaches 300 ft to 500 ft down
dip. Depth to the top mineralization varies from 5 ft to 30 ft in the south and
125 ft in the north.
39A Zone
- --------
The 39A zone is currently defined by 33 RVC holes and 4 diamond core holes,
totaling about 28,000 ft. Using a 0.02 oz Au/t cutoff grade, the 39A
mineralization forms a stratiform body roughly 1,400-ft-long in the principal
north-northeast fault direction and 900-ft-long in the secondary west-northwest
fault direction. Along these principal directions, mineralization averages about
150-ft-thick and 120-ft-wide. In the northeasterly direction, the zone plunges
18(Degree) to the north. In the west-northwest direction, the zone plunges
26(Degree) to the southeast. Depth to the top of mineralization varies from 300
ft at the south end of the zone to 605 ft at the extreme north end. Sections
A-A' and B-B' through the 39A Zone show the distribution of potential ore-grade
mineralization using 0.01 oz Au/t, 0.05 oz Au/t and 0.25 oz Au/t grade contours.
Gold Pan Zone
- -------------
Gold mineralization in the Gold Pan Zone is confined to series of high- and
low-angle faults forming a number of narrow tabular to lenticular zones oriented
generally to the northwest. Based on a 0.01 oz Au/t cutoff grade, the zone is
roughly 1,500-ft-long in an east-west direction, 500-ft-wide and at least
200-ft-thick. Higher grades (> 0.05 oz Au/t) form a series en echelon shoots and
veins aligned in an east-west direction and reaching 600-ft-long, 100-ft-wide
and 50-ft-thick (Candee, 1996). The depth to mineralization within the zone
ranges from 10 ft to 200 ft.
Altenburg Hill Zone
- -------------------
The low-grade Altenburg Hill resource occurs along the SE contact of the
Tenabo stock in highly fractured and folded hornfels and intrusive rocks. Higher
grade mineralization is controlled by series of WNW striking, SW dipping
high-angle faults. Mineralization extends from outcrop to as deep as 145 ft.
Mineralization encountered elsewhere on the Robertson Property is closely
associated with district-scale low- and high-angle faults.
Hydrothermal alteration forms a broadly concentric halo surrounding the
Tenabo stock and affecting certain rock units as far as 2,000 ft from the stock
contact. Alteration patterns in the district are complex due to intense
fracturing of the wall rocks, thin bedded nature and rapid compositional change
that characterize the sedimentary sequence. Gold-related alteration consist of
early-stage intrusion-related potassic, a later "retrograde" skarn(?) stage and
a late quartz (silica)-sericite-(pyrite) stage which appears to cut all earlier
phases.
Potassic Alteration
- -------------------
Early potassic alteration is widespread and strongly developed in early
phases of the intrusion, and is often spatially associated with gold
mineralization, particularly in the Porphyry Zone. In intrusive rocks, this
alteration assemblage is characterized by widespread fine-grained secondary
biotite replacing coarse-grained magmatic biotite, hornblende and pyroxene, and
as veinlets accompanied by adularia (Honea, 1994). Fine secondary biotite also
forms narrow envelopes surrounding quartz veinlets that cross-cutting early
calc-silicate and biotite hornfels, and certain phases of the stock. In several
localities, coarse-grained (> 5mm) adularia occurs as fracture fillings and as
cement in several pebble dikes. Potassic alteration is generally associated with
Au-Ag (Cu) mineralization having an overall Au to Ag ratio of about 1.5:1.
Retrograde Skarn
- ----------------
Gold mineralization in the 39A zone is localized at the structural
intersection of two high-angle faults and is hosted by strongly
retrograde-altered calc-silicate and biotite hornfels. This alteration consists
of dark green chlorite, pyrite, + actinolite, k-spar, and quartz which occur as
local replacements of fault breccia and certain lithologies, and as strongly
developed fracture filling. Accompanying local replacement by chlorite are 8-50
percent fine sulfides, including pyrite-marcasite-pyrrhotite, arsenopyrite, and
chalcopyrite. This alteration is characterized by Au to Ag ratios of less than
1:1.
Late Stage Quartz (Silica)-Sericite-(Pyrite)
- --------------------------------------------
The youngest (?) gold-related alteration consists of narrow envelopes of
quartz (silica)-sericite-(pyrite) surrounding quartz-sulfide +calcite veins and
zones of fine-grained "jasperoidal" silicification carrying Au-Ag, arsenopyrite,
tetrahedrite-tennantite, stibnite, galena, sphalerite and chalcopyrite. The age
of the Q-S-(Py) alteration and related mineralization is indicated from its
relationship with a series of intensely Q-S-(Py)-altered, post-mineral dikes
that cut proximal Au-Ag (Cu) skarn-type mineralization in the 39A and Porphyry
Zones. Locally, Au-Ag, As-Sb+Hg, Cu+Pb+Zn veins cut and are hosted by the same
post-skarn dikes.
Drilling:
The Robertson Property has had a long and varied drilling history during
which time at least 1,100 drill holes totaling 408,000 ft have been completed.
About 16 percent of the total footage drilled occurred prior to the Company's
involvement in the property. As a result, much of the documentation regarding
the early drilling programs is no longer available. What remains available is a
digital compilation produced by Amax in the early 1990's, that includes collar
coordinates in local mine and UTM grid systems, elevation in feet, assay
interval, and gold assay value. The sources of this information were manual
compilations by Coral and Amax taken from driller's logs, assay reports and
assay certificates. In most cases no geologic logs were available.
The drilling methods employed by some early explorers are unknown (e.g.
Aaron) or are not precisely known. It is known that the Superior and Placer
Development drilling programs employed both conventional rotary drilling methods
and "percussion" drilling methods. Conventional "open hole" rotary methods
produce generally unreliable results because of chronic contamination problems
and poor sampling technique. Except where twin RVC or DDH have verified the
original assays, much of the early results were not used in resource
evaluations. The Table below provides a summary of drilling in the district by
companies known to have operated there since about 1968:
Robertson Property Drilling Summary
Down Hole Footage Ave Hole Depth
Company Number of Holes Drilling Method Survey Collar Survey Drilled (ft) (ft)
- ----------------------------------------------------------------------------------------------------------------------
Superior 92 Conv. Rtry no yes c.32,000 348
Placer Dev. 23 Conv. Rtry no yes c.3,200 150
Aaron N/A Percission no some <1,000 8-10
E & B Expl. 148 RVC no yes 30,800 200
"Percussion"
Coral 380 RVC no yes 105,877 278
7 DDH yes 3,500 500
Amax 338 RVC yes yes 141,700 420
62 DDH yes yes 34,300 553
Cortez 47 RVC yes yes 57,000 1,021
Total: 1,097 408,377 372
The E & B Exploration drilling is described in various reports by J. DeLeen
(1980 and 1981) as "percussion", but it is believed to have been reverse
circulation. Except for the Amax digital compilation, the only remaining record
of the E & B drilling is a complete set of drill cuttings retained for each
sample interval. In addition, approximately 20 chip boards have also been
preserved. The cuttings are stored on site in 20-compartment plastic chip trays
identified by hole number and footage. E & B routinely sampled the drill holes
on even 5-ft intervals. Of the 148 "percussion" holes drilled by E & B, the
majority were 200 ft or less in depth and all were drilled vertical.
In 1987, the Company developed a local north-south, east-west survey grid
consisting of surveyed triangulation stations. All of the pre-Coral drill
collars located in the field were subsequently tied to the local grid. Elevation
control was determined from the USGS "Tenabo" bench mark (5,164.1 ft) situated
at the east edge of the local survey grid.
Documentation of the Company's RVC and core drilling is no longer
available. At the time of the Amax compilation (c.1991-92), the Company's
drilling records were well organized and complete, and included driller's logs,
sample interval, and assay report. Of the 380 RVC holes drilled by Company, the
majority were less than 250-ft-deep and fewer than 20 holes were inclined. Very
few holes had geologic logs. Except for the Amax digital compilation, the only
record remaining of the Company drilling is a complete set of drill cuttings
retained for each RVC sample interval. The cuttings are stored on site in
20-compartment plastic chip trays identified by hole number and footage.
Sampling was routinely done on even 5-ft-intervals over the length of the hole,
including overburden. All drill collars were surveyed and tied to the local
grid. No down-hole surveys were done on the Company's RVC holes.
The majority of the Company's RVC drilling was completed by two local
drilling contractors: Eklund Drilling Company of Elko, NV and Rimrock Drilling
also of Elko. The 7 core holes were drilled by Coates Drilling of Delta, B.C.,
Canada.
The methodology of the Amax RVC drilling is well documented. Amax completed
342 RVC holes, AT-1 through AT-341, totaling nearly 142,000 ft. Over 90 percent
of the RVC holes were drilled vertical to depths ranging from 400 ft to 2,600 ft
(AT-3). Overburden depths varied from none to 60 ft. Where thin overburden was
encountered, a minimum of 10 ft of steel surface casing was installed. In deeper
overburden, 20 ft to 40 ft of steel casing was installed. Drill hole diameter
averaged 5.5 inches and samples were collected on even 5-ft interval starting at
the overburden-bedrock interface. Most RVC holes drilled to depths of <1,000 ft,
were completed using conventional down-the-hole hammer bits with conventional
cross over assembly. Holes exceeding 1,000 ft feet were completed using standard
tricone bits. All RVC hole exceeding a depth of 400 ft had down-hole surveys
using a multi-reading magnetic vertical deviation tool. Measured deflection in
deeper hole ranged up to 105 ft, but averaged about 55 ft and is not considered
serious. Surveys were conducted by Century Geophysics of Elko, NV. Prior
drilling experience indicate that hole less than 400 ft deep had negligible
deflection. Drill collars were surveyed and tied to the local grid system by
registered surveyors from Desert Mountain Surveying of Winnemucca, NV.
Character samples for each 5-ft assay interval were collected from the
reject port of the sample splitter and logged at the drill site. The drill
cuttings are stored in 20-compartment plastic chip trays and stored on site.
Geologic observations were recorded on standardized logging forms and included
percentage oxidation, primary and secondary lithology, alteration and
mineralization. The Amax drill logs are no longer in the possession of the
Company.
The drilling contractor for 90 percent of the holes was Eklund Drilling
Company of Elko, NV. The remaining holes were drilled by Lang Exploratory
Drilling of Salt Lake City, UT and Becker Drills of Denver, CO. All of the
contractors are well regarded and highly experienced.
Amax completed 62 DDH, CAT-1 through CAT-62, totaling over 34,000 ft. The
principal drilling contractor was Longyear Drilling of Dayton, NV, a well
respected drilling company, who generally preformed above industry standard. The
initial four core holes were completed by Tonto Drilling Company of Spokane, WA.
At that time, their performance on the project was considered substandard due to
their poor core recovery efforts.
Of the 62 DDH, 56 were drilled using HQ-diameter (2.5 inches) diamond
impregnated bits, 5-ft core barrels and wire-line method. Six holes were
inclined and nine were drilled using PQ-diameter (3.33 inches) tools in order to
collect samples for metallurgical testing (column leach tests). Core orientation
studies were attempted in four of the HQ core holes with only limited success.
All hole collars were surveyed and tied to the local grid coordinate system.
Down-the-surveys were completed on 90 percent of the core holes using a standard
single shot camera survey tool. Shots were taken at regular 100 ft intervals.
Core was retrieved from the drill site in standard waxed cardboard core
boxes (5 ft/box). Wooden blocks indicating footage were placed at the end of
each core run by the driller. Prior to logging, the core was measured and marked
into even 5-ft or less sample intervals. The percentage of core recovery was
determined and RQD data collected and recorded on a standardized form. The core
was cleaned of drilling mud and grease, and photographed. Detailed geologic
observations of the core were made using a standardized logging form. Key
observations included percent oxidation, primary and secondary lithology,
alteration, mineralization and structure. In addition, 15 secondary fields were
also visually estimated. Small lengths of representative core were collected at
regular intervals over the entire length of the holes as a visual record. The
"skeleton" core is stored on site in standard cardboard core boxes identified
with hole number and footage interval. Individual core is identified by hole
number and footage in permanent marker.
The Cortez drilling consisted of 47 RVC holes totaling 57,000 ft. The RVC
drilling contractor was Eklund Drilling Company of Elko, NV, a well respected
and experienced drilling company.
Of the 46 RVC holes 34 were drilled to a depth of between 1,000 ft to 2,000
ft and 12 were drilled to a depth of 500 ft to 900 ft. Twelve holes were
inclined from 52(Degree) to 62(Degree). All of the RVC holes had down-hole
surveys using a multi-reading magnetic vertical deviation tool. The surveys were
conducted by Silver State Surveys, Inc., of Elko, NV. None of the measured
deflection is considered serious.
Cortez routinely sampled the RVC holes at 10-ft intervals over the entire
length of the hole. No geologic logging was completed and no other details,
except assay resulted were provided. Character samples were collected for each
10-ft assay interval in 20-compartment plastic chip trays which are stored
off-site.
Sampling and Analysis:
The author of the McCusker Report has no first hand knowledge of the
sampling procedures employed during the exploratory drilling programs prior to
the Company, or the procedures used by the Company before the author's
involvement with the project on behalf of the Company in 2000. In addition, no
written documentation or description of the sampling procedures employed by
these companies was found in the Company's files. Also, it can not be assumed
that the sampling procedures used by these companies would meet industry
standards of today.
Additionally, the author of the McCusker Report has no first hand knowledge
of the sampling procedures employed by Cortez. No written documentation or
verbal description of the sampling procedures used at the Robertson Property was
provided by Cortez. However, it can be assumed that Cortez employed the same or
similar sampling protocol on this project as is used at their nearby mining
operation, and that it meets current industry standards.
The sampling procedures employed by Amax during its RVC and core drilling
programs are well documented and, as Senior Project Geologist for Amax at the
Robertson property, the author of the McCusker Report also has first hand
knowledge of their sampling methodology. The sampling protocols used by Amax on
this project meet current industry standards.
The Amax RVC drilling procedures are described in detail in the 1994
feasibility study. Although this study described the specific sampling
procedures used in the Porphyry Zone, these same procedures were employed during
all phases of drilling. The majority of RVC holes were drilled using
truck-mounted Ingersoll-Rand TH-60, TH-70 and TH-100 drills (or equivalent) with
825-1,000 cfm/350 psi compressors. These drills employ air-cyclone sample
collection equipment that was industry standard at the time (1990-96). Standard
care was taken to minimize contamination during all part of sampling procedure.
In addition, an Amax geologist was at the drill site during all phases of the
drilling and sampling procedure.
During dry drilling conditions, drill cuttings were collected at even
5-ft intervals and split at the drill site using a Gilson-type sample splitter.
Samples were collected in large trays directly from the splitter and poured into
heavy canvas bags. Each bag was pre-labeled with the hole number and a unique
sample number that corresponds to a footage on the drill log and to a lab tag
number. The labeling was done with a permanent marker. Ideally, a 25 to 35 pound
sample was collected. The Gilson splitter and collection trays were cleaned with
compressed air between samples.
During wet drilling conditions, drill cuttings were spit on site using
a radial rotating wet splitter. When drilling wet, the heavy canvas sample bags
were attached directly to sample discharge outlet of the splitter. The wet
splitter was routinely cleaned with a high pressure water hose at the end of
every 20 ft rod change. In zones of high water volume, sample bags would fill
and overflow with water and fine-grained material. These "fines" were not
captured. Previous sampling studies by Amax of this material indicated that the
gold content was negligible in the overflow material. Prior to sealing the
sample bags, lab sample tags were inserted which had the same sample number as
written on the outside of the bag. The full sample bags were secured with a
16-gauge wire tie. Samples were laid out in numerical order and left at the
drill site until they were picked up by the assay lab.
During RVC sampling, "rig duplicate" samples were routinely collected
from the reject outlet of the splitter. These samples were used to assess the
effectiveness of the sampling procedure and were compared with the "original"
sample. Additionally, specially collected coarse barren material (<0.005 ppm Au)
were inserted into the sample sequence at pre-determined intervals to monitor
possible lab contamination and smearing of coarse gold on sample preparation
equipment. Once the samples were dry, all RVC samples were weighed at the lab.
The average dry weight for a 5-ft. sample was 35.2 pounds. Together with
observations at the drill site, monitoring sample weights provided data from
which sample recovery could be estimated.
Drill core was retrieved from the drill site and taken to a core
preparation facility, where it was measured and core recovery was determined for
each 5-ft assay interval. Individual assay intervals were marked by wooden
blocks. Core recovery averaged 92 percent. Only rarely were subsamples taken.
After cleaning, photographing and detailed logging, the entire unsplit, 5-ft
assay interval was placed in a pre-labeled heavy canvas bag. Using a permanent
marker, each bag was labeled with hole number and a unique sample number. A 2
inch to 3 inch reference sample with hole number and footage was taken from each
assay interval and stored on site.
Prior to sealing the sample bags, lab sample tags were inserted which had
the same sample number as written on the outside of the bag. The full sample
bags were secured with a 16-gauge wire tie. The samples remained in the prep
facility until they were picked by the assay lab. Specially collected coarse
barren material were inserted into the sample sequence at pre-determined
intervals to monitor possible lab contamination and smearing of coarse gold on
sample prep equipment. All core samples were weighed at the assay lab prior to
sample preparation. The average dry weight for a 5-ft sample was 24.8 pounds.
These data were used to monitor possible correlations between low sample weights
and high assay results, which might suggest up-grading of gold values.
Security of Samples:
The author of the McCusker Report has no first hand knowledge of the sample
preparation protocols, analytical methodology and sample security that were
employed at the Robertson Property by companies prior to the Company, or the
procedures used by the Company prior to the author's involvement in the project
on behalf of the Company in 2000. No written documentation or description of
these procedures was found in the Company's files. Further, it can not be
assumed that the sample preparation, analytical procedures and sample security
measures used by the early companies would meet industry standard of today.
The author of the McCusker Report has no first hand knowledge of the sample
preparation protocols, analytical procedures or sample security measures
employed by Cortez during their evaluation of the Robertson Property. It should
also be noted that no written or oral description of these procedures was
provided by Cortez. However, it may be assumed that the sample preparation,
analytical procedures and sample security used by Cortez on this project would
meet industry standards of today.
The sample preparation protocol, analytical procedures and sample
security measures employed by Amax during its RVC and core drilling programs are
well documented and, as Senior Project Geologist for Amax at the Robertson
Property, the author of the McCusker Report also has first hand knowledge of
these methodologies. The sample preparation protocols, analytical procedures and
sample security measures used by Amax on this project meet current industry
standard practices.
All RVC and core samples remained on the project site until they were
picked up by the analytical lab. No sample preparation occurred on-site. Access
to the samples prior to pick up by the lab by non-Amax or Coral personnel was
controlled during both daylight and night-time hours. While it is the opinion of
the author that no tampering with samples occurred during this period and,
within the context of the entire drilling program, large-scale tampering would
have been impossible to achieve.
During the period 1990-91 and 1993-94, Amax employed Monitor Geochemical
Laboratory, with sample prep and analytical facilities in Elko, NV, as its
principal analytical lab for the Robertson Property. In 1992, the principal
laboratory was Bondar-Clegg, with sample prep facilities in Reno, NV and
analytical laboratories in Vancouver, B.C. In 1993-94, during the Porphyry Zone
evaluation, Chemex Labs, Inc. was chosen as the secondary (umpire) lab and used
primarily to verify sample prep and check assaying.
The Amax sample preparation protocol was used at the Monitor, Bondar-Clegg
and Chemex sample prep facilities and is summarized below:
o Entire drill sample was dried in the sample bag and weighed;
o Entire 25-35 pound (11-16 kilograms) sample jaw-crushed to 95% -10
mesh;
o Crushed material reduced to 6 kilograms (13 pounds) with Jones-type
splitter;
o Reject material saved and stored at lab;
o Entire 6 kilogram subsample disk-pulverized to 95% -80 mesh;
o Pulverized material reduced to 350 gram with Jones-type splitter
o 350 gram subsample passed through rotary mill to 95% -200 mesh;
o nominal 350 gram pulp sample sent for analysis;
o Jaw crusher, rotary mill and pulverizer cleaned by passing barren
gravel and sand between samples; Jones splitter cleaned by compressed
air.
The gold assay procedure used at both Monitor and Bondar-Clegg facilities is
summarized below:
o Re-homogenization of the 350 gram pulp;
o One-assay ton (nominal 29.1 grams) weighed from 350 gram pulp;
o One-assay ton fire assay followed by bead digestion in aqua regia and
AA determination;
o All values exceeding 10 ppm gold are re-assayed using one-assay ton
with gravimetric finish.
During the Porphyry Zone evaluation, concern over the presence of "coarse"
gold prompted Amax to initiate "screen fire" analysis, considered the most
accurate assay method for assessing coarse gold. The evaluation consisted of 132
screen fire assays (about 1 percent of all sample in the Porphyry Zone). The
screen fire assay procedure employed at Monitor is summarized below:
o Split a 1 kilogram (2.2 pounds) subsample from the -10 mesh reject material;
o 1 kilogram subsample pulverized in ring and puck mill to nominal -150 mesh;
o Pulverized material weighed (weight recorded);
o Entire sample wet sieved through 150 mesh screen;
o Entire +150 mesh (oversize) collected, dried, weighed and fire assayed;
o Entire -150 mesh (undersize) collected, dried and a 2-assay ton split
(58.3 grams) fire assayed;
o Assay results of the two size fractions are combined by weighted averaging to
determine the reported assay.
During evaluation of the Porphyry Zone resource, cyanide soluble gold and
copper analyses were routinely performed on all samples with FA/AA gold values >
0.01 oz Au/t (over 2,100 samples). The cyanide soluble analytical procedure
consisted of leaching 10 grams of -200 mesh pulp material in a flask for 24
hours in a 100 ml solution of one gram/liter NaCN solution. The leach solution
was analyzed for gold and copper by atomic absorption spectrometry.
In order to assess the Monitor and Bondar-Clegg sample prep and analytical
performance, Amax developed a QA/QC program consisting of submitting "blind"
coarse blank material (3.5 %), rig duplicates (4 %) and Amax prepared standard
pulps (9.3 %) into the sample stream. All reference materials were pre-numbered
in sequence with the drill samples and submitted blind to the labs without
unique identifiers. Standard pulps were chosen to match as closely as possible
the oxidation state, expected grade and sulfide content of the accompanying
drill samples.
Over 900 samples, representing coarse reject material and pulps, were
randomly selected for sample preparation and gold assay determinations by
Chemex. These materials were shipped by the primary lab. Sample prep and
analytical procedure used by the secondary lab were same as those used by the
primary lab facilities.
Data verification was undertaken by Amax during evaluation of the Porphyry
Zone resource. MRDI (Mineral Resource Development, Inc., of San Mateo, CA) was
responsible for verification of Amax's methodology used to verify the quality of
analytical data used in their evaluation at the Robertson Property. It was the
opinion of MRDI that the methodology used is appropriate in the context of the
evaluation being considered and that the work preformed by Amax meets or exceeds
industry standards.
Mineral Resource Estimates
Resource estimates have been completed on four of the identified
mineralized zones on the Robertson Property. The earliest resource estimate was
made in 1988 by Mintec Inc., using various cutoff grades for the Gold Pan Zone.
An estimate of the 39A Zone resource was made by Amax in 1993, based on about
21,000 ft of drilling in 25 holes and using a 0.02 oz Au/t cutoff grade. In
1994, Amax and MRDI jointly completed a resource estimate for the Porphyry Zone
as part of a feasibility study. This study concluded that a proven + probable
mineral reserve was present, but was deemed "marginal" at the current gold
price.
In 1996, after completing grid and in-fill drilling in the Gold Pan and
Altenburg Hill zones, Amax completed resources estimates for these mineralized
zones using a 0.01 oz Au/t cut off grade. Results of these studies indicated
that while a low-grade indicated resource was present, it did not represent a
potential "mineable reserve which is of interest to Amax" (Candee, 1996).
In 2001, the previous resource estimates for the Porphyry and 39A were
reviewed and revised using higher cutoff grades. The re-examination of the
Porphyry zone was prompted by the recognition that at least one-half of the gold
endowment was contained in a series of smaller but higher grade zones confined
to an area along east edge of the deposit. Since the time that the 1993 resource
estimate was made for the 39A Zone, at least 8 additional RVC drill holes and 2
additional diamond core holes have been completed, providing better definition
of the margins of mineralization and a more accurate resource estimate.
The resource estimates used in this Annual Report are based in part on the
previous work and, in some cases, rely entirely on the original studies.
Estimates used for the Porphyry and 39A Zones are from McCusker (2001), whereas
the estimates for the Gold Pan and Altenburg Hill resources rely on the Mintec
and Amax studies.
The 1994 Amax/MRDI reserve was estimated using both multiple indicator
(MIK) and ordinary kriging methods. In order to prevent over estimating certain
higher grade portions of the resource, these areas were manually constrained and
estimated separately using ordinary kriging. The two estimates were later
combined mathematically to yield ore-grades and tons for the block model. A
block size of 50 ft x 50 ft x 20 ft was chosen to approximate one-half the drill
spacing. Two-dimensional correlograms were developed for the plan view (XY) and
east-west cross section (XZ) planes, which indicated a northeast strike
(N20(Degree)E) and westerly dip (30(Degree)W) to the mineralization. A maximum
search distance of 140 ft was used in the northeast direction, parallel to the
planar grade zones, and minimum distance of 60 ft in the perpendicular distance.
This study identified an is-situ proven + probable mineral reserve of 13,556,125
short tons of ore at an average grade of 0.0188 oz Au/t. This reserve was
estimated from a "global resources of 21,551,424 short tons of mineralized
material with an average grade of 0.0196 oz Au/t. These historical reserves and
resources cited above are presented for the purpose of providing the historical
record only and are not intended to represent current mineral reserves or
resources on the Robertson Property as defined under NI 43-101 (which are
however set out in the Table below), and have not demonstrated economic
viability.
The 2001 estimate of the Porphyry and 39A resources are based on nearest
neighbor polygonal interpolation using 20-foot-bench plan maps with 20 ft
composite assays values and a 0.02 oz Au/t cutoff grade. The polygons are
constrained by the 0.02 oz Au/t grade zone boundary. Polygon boundaries were
derived from cross sectional interpretations of the distribution of
mineralization between drill hole intercepts. In all cases, the boundaries are
constrained by geology and structure. Tonnage factor used for these zones is
12.2 cu ft/ton. Results of the Porphyry and 39A resource estimates are shown in
the Table below.
The Mintec study of the Gold Pan resource utilized inverse distance cubed
weighting and an alternative nearest neighbor interpolation of 25 ft x 25 ft x
10 ft blocks. Variography was preformed on the composite assay data. Most of the
variograms were inconclusive without using log-transformed data. Search
distances were estimated to be 150 ft along an azimuth of 110(Degree) and 125 ft
at 20(Degree) of azimuth. The presence of high-grade (>0.25 oz Au/t) composite
samples required limiting their influence within their respective block. The
only geologic input used in this model was the partial definition of the
oxide/sulfide boundary. Mintec produced a series of resource estimates using
variable cutoff grades for oxide and sulfide mineralization, including the 0.02
oz Au/t cutoff which is shown in the Table below. A comparison of the 1988
Mintec estimate using a 0.012 oz Au/t cutoff grade and the 1996 Amax study using
a 0.01 oz Au/t cutoff, are in excellent agreement.
The various resource estimates for the four mineralized zones are tabulated
in the Table below. For reasons of geological confidence, all of the listed
resources have been placed in the indicated mineral resource category, as
defined by NI 43-101 and NI 43-101CP. No economic considerations were applied to
any of the studies cited in the Table.
In addition to the indicated resources listed above, a series of
exploration targets containing a potentially large tonnage (>10 million short
tons) of low grade (<0.02 oz Au/t) mineralization are present on the Robertson
Property. The occurrence of this mineralized material is inferred from past
drilling of the resources cited in the Table below, and result mainly from
applying higher cut-off grades (0.02 oz Au/t) to define the current indicated
resources. Much of this material occurs immediately above or slightly offset
from the indicated resources, and would have to be stripped prior to any future
open pit mining operation. This low-grade material may provide potential ROM
that could significantly reduce the cost of stripping. It should also be noted
that the size and grade of this mineralization is currently not well defined and
will require additional exploration to assess its overall potential.
No attempt has been made to assess the mineability of any of the indicated
resources listed in the Table below. The 3.5 million ton indicated resource
portion of the larger Porphyry Zone was subject to a 1994 feasibility study that
included detailed drilling, engineering and metallurgical studies as a heap
leach operation. All of the remaining resources have had at least limited
preliminary metallurgical evaluation and economic studies as a low-grade heap
leach option.
Robertson Property Indicated Resource Estimate (2001)
Cutoff Grade Million Short Au Grade Contained
Zone (oz Au/t) Tons Ore (oz/ton) (oz of Au)
- -------------------------------------------------------------------------------------------------------
39A 0.02 2.80 0.101 282,800
39A* 0.05 1.54 0.130 200,000
Porphyry 0.02 3.95 0.040 158,000
Gold Pan** 0.02 2.97 0.038 112,900
Altenburg Hill 0.02 1.25 0.024 30,000
Total: 10.97 0.053 583,700
*Note 39A resource estimate at 0.05 oz Au/t cutoff not used in total
calculation.
**From Mintec Inc., 1988 estimate; includes oxide+sulfide material.
The 1994 Amax/MRDI resources estimate for the Porphyry Zone defined a
mineral reserve using a 0.01 oz Au/t cutoff grade and a gold price of $400/oz.
In order to reduce overall mining and processing costs for the project, this
study employed used mining and crushing equipment, and existing off-site
infrastructure (e.g. recovery plant and assay lab). At the current (2004) gold
price of $410/oz, the 1994 study should be used with caution. The presence of
secondary Cu sulfides and oxides has caused some metallurgical concerns and may
contribute to higher that expected cyanide consumption.
Proposed Exploration
Exploration of the Robertson Property has resulted in the discovery of
nearly 11 Mt of indicated resources having an average grade of about 0.053 oz
Au/t. Of the four defined resources, the 39A, Porphyry and Gold Pan Zones have
potential for containing additional gold resources. The AT-3 "distal
disseminated" Au-Ag target is currently defined by only five drill holes over an
area of roughly 1,500 ft by 1,000 ft. Outside the main district, surface
sampling and exploratory drilling have defined an emerging zone of gold
mineralization occurring within a NW-striking braided fault system. An en
echelon vein/fracture system striking approximately east-west and containing the
gold-bearing veins and (or) breccias at the Phoenix, Standard, Silver Safe and
Blue Rock mines, as well as numerous other unnamed mine workings, represent a
high-grade target that has been largely untested.
39A Zone
- --------
The Cortez exploration of the 39A Zone focused on discovering extensions
along an apparent northeast-southwest orientation. However, recent detailed
analysis of this mineralized zone indicates a more complex geometry which the
Cortez drilling did not completely test. As defined by grade contours plotted on
the 5,200 ft through 5,160 ft mid-bench level plan maps, the trend of high-grade
gold in holes AT-64 (75 ft/0.154 oz Au/t) and 99413 (60 ft/0.210 oz Au/t)
remains completely open to the SW. Significant tonnage of additional moderate-
to high-grade mineralization could be defined in this area.
Of greater potential significance for expanding the 39A Zone, is an
emerging east-west zone of high-grade gold that remains untested to the west.
This potential is evident from the grade contours on the 5,080 ft through 4,840
mid-bench level plan maps. Drill holes AT-56 (80 ft/0.110 oz Au/t), AT-57 (160
ft/0.101 oz Au/t) and CAT-5 (80 ft/0.144 oz Au/t), along with AT-35 (10 ft/0.328
oz Au/t), define the current west edge of the 39A Zone. No drilling has been
done in this area. Additional tonnage of moderate- to high-grade gold could be
defined in this area. Additional in-fill drilling of the 39A Zone may also
provide better definition and possible expansion of the higher grade portions of
the resource.
Porphyry Zone
- -------------
In 1996, Amax drilled a series of shallow holes along the northeast edge of
the Porphyry Zone, where significant mineralization was encounter, but not
followed up. Hole AT-261 cut 10 ft averaging 0.180 oz Au/t, beginning at 440 ft.
This intercept is likely related to locally dike-filled, NE-striking fault zones
that may represent one of several high-grade feeder zones. A number of
high-grade (>0.2 oz Au/t) drill intercepts, associated with the margins of
granodiorite, igneous breccia dikes/sills, and faults could represent a viable
underground reserve. Many of these same higher grade zones occur within the
smaller indicated Porphyry Zone resource (3.95 million tons/0.04 oz Au/t), as
defined by the 0.02 oz Au/t cutoff. Underground access from a possible pit
bottom could allow mining of these high-grade features starting from the pit
face. This could lower the costs for underground mining operations.
Gold Pan Zone
- -------------
A series of high-grade (>0.25 oz Au/t) drill intercepts in the Gold Pan
Zone appear to define two distinct veins and (or) shear zones striking generally
east-west and dipping steeply southward. The northern-most "vein" is poorly
constrained by only three holes, AT-1, AT-25 and AT-308. These holes may define
a vein having a minimum strike length of 600 ft and possible down dip extent of
800 ft. A second suspected vein/shear zone is defined by 10 vertical RVC drill
holes and three core holes, including two inclined holes. As currently defined,
this south "vein" zone has a strike length of 900 ft and extends down dip at
least 300 ft. The highest gold grades along this structure occur at an
intersection with a NW-striking mineralized fault. Both "vein" zones remain open
along strike and down dip. In addition to the two main structures, splays of
both veins also contain significant gold values and may also provide opportunity
to expand the high-grade resources of the Gold Pan Zone.
Note that some of the early T-series holes used to define the south "vein"
were drilled using conventional rotary methods. Down-hole contamination may have
contributed to one or more of the multiple intercepts reported for these holes.
Also of concern is the fact that most of the drilling used to define the
near-vertical vein zones is from vertical RVC holes.
Distal Disseminated Target
- --------------------------
In 1990, Amax embarked on a deep drilling program that included holes AT-1
through AT-3. These holes are located 2,000 ft apart and were designed to test
for the presence of lower plate carbonate rocks. While all three holes failed to
reach the lower plate, holes AT-1 and AT-3 encountered similar mineralized zones
with nearly the same grade, thickness and at roughly the same depth in their
respective holes. The recognition that these widely separated intercepts could
possibly represent a single large zone ultimately led to the discovery of the
39A Zone. The AT-3 intercept consisted of 75 ft averaging 0.061 oz Au/t, from
845 ft, followed by 50 ft averaging 0.02 oz Au/t, from 940 ft, and 20 ft
averaging 0.082 oz Au/t at 1,120 ft. In 1999, Cortez drilled offset hole 99406
approximately 250 ft southeast of AT-3, which intersected 40 ft averaging 0.041
oz Au/t, beginning at 770 ft, followed by 110 ft averaging 0.036 oz Au/t,
starting at 880 ft. A second offset hole (99445) was collared 1,000 ft northwest
of, and 200 ft above AT-3, and drilled to a depth of 1,500 ft. The hole cut a
series of scattered narrow zones with generally low values, but at a depth of
1,070 ft, the hole encountered a 30-ft-thick zone that averaged 0.092 oz Au/t.
After removing the 200 ft of additional elevation from hole 99445, the
"normalized" depth of the intercept is about 870 ft, very nearly the same as in
holes AT-3 and 99406.
These results, along with results from three other RVC holes in the area
indicate the presence of a persistent, low-angle mineralized zone with
potentially very large dimensions. Evidence from this wide spaced drilling
suggests that the low-angle structural zone that controls the "distal" target is
the same structure that is host to the 39A Zone mineralization further to the
east. Based on the 39A "model", it is critical that the high-angle "feeder"
systems be identified where it intersects the low-angle structure. It is the
intersection of high-angle structural zones with this prominent low-angle
structure where high-grade mineralization will be encountered.
Lander Ranch Target
- -------------------
In 1999, Cortez drilled a single 1,500-ft-deep angle RVC hole (99419) on
the Lander Ranch claims located at the north end of the main Robertson claim
block. The hole was sited in an area where significant gold values were returned
from surface rock chip samples along a set of intersecting and gold-bearing,
high-angle structures. The surface sampling returned gold values ranging from
0.002 to 0.071 oz Au/t, accompanied by arsenic values up to 5,770 ppm, antimony
values up to 887 ppm and mercury values exceeding 10 ppm. The drill hole was
aimed at the plunging intersection of these faults (Hebert, 2000). Beginning at
1,140 ft, the hole intersected a 60-ft-thick zone averaging 0.051 oz Au/t and
second 110-ft-thick intercept averaging 0.037 oz Au/t, from 1,270 ft. This
intercept may represent the deep expression of the ore-grade surface samples,
indicating a significant depth extent of over 1,000 ft to this mineralization.
No follow-up drilling has been done in this area.
The Cortez intercept was made at the north end of a complex,
north-northwest- striking "braided" fault system that extends southward over one
mile to the main Tenabo district. In 1989 (?), Gold Fields completed a limited
drilling program that included several shallow angle RVC holes across a number
of the braided fault segments. Three of the holes encountered ore-grade gold
values ranging from 0.028 oz Au/t to 0.068 oz Au/t at relatively shallow depths
(<300 ft). Together with the Cortez intercept, this drilling indicates that the
"braided" fault system represents a high quality exploration target that could
add substantial resources.
East-West Vein System
- ---------------------
An en echelon vein/fracture system extending at least 3,000 ft along strike
in an east-west direction is located a few hundred feet south of the glory hole
of the old Gold Quartz mine. The location of the vein system is shown on Figure
16.1. The vein/fracture system is defined by a series of sub-parallel comby
quartz-sulfide+calcite veins and silicified fault breccia exposed in numerous
prospect pits, shafts and adits. Individual veins and breccia zones dip
30(Degree) to 62(Degree) to the south, vary from 1- to 15-ft thick, but average
about 2.5-ft-thick and are traceable along strike for at least 400 ft. The veins
and silicified breccia zones are surrounded by narrow envelopes of intense
sericite-silica+clay-pyrite alteration. This intense alteration grades rapidly
into a more disseminated sericite-dominated alteration, particularly surrounding
veins developed in the granodiorite stock.
Rock chip and dump samples from this area consistently returned ore-grade
Au-Ag values. Of 20 surface samples taken, the average Au value is 6.33 ppm
(0.185 oz Au/t) and Ag value is >50 ppm (>1.46 oz Au/t). The average gold values
include 4 samples exceeding 10 ppm and 14 samples exceeding 50 ppm Ag. Over
limit assays for Au (>10 ppm) and Ag (>50 ppm) on these samples were not
preformed. Trace elements and base metal concentrations in these samples reach
highly anomalous levels. The average value for arsenic exceeds 10,000 ppm (above
the upper limit of detection), 2,443 ppm for antimony, 3.7 for mercury, 1,312
ppm for copper, 7,826 ppm for lead, and 2,871 ppm for zinc.
The geochemistry, together with the sericite-dominated alteration indicates
that the vein system is part of the late stage Au-Ag mineralization recognized
on the Robertson Property. Currently, no detailed geologic mapping or sampling
exists and no exploratory drilling aimed specifically at the vein-breccia
targets has been conducted. A number of small mines, including the Phoenix mine,
reported minor production from workings along several of these veins. According
to Humphrey (1945), the Phoenix produced several hundred tons of ore having an
average grade of 0.51 oz Au/t and 2.5 oz Ag/t. While past production is small,
it does provide evidence that ore-grade gold is hosted, at least locally, by
these veins.
Additional Exploration Targets
- ------------------------------
The majority of holes drilled on the Robertson Property contain one or more
intervals of gold mineralization, including many that are not part of the drill
defined resources. Many of these intercepts remain untested by offset drilling,
which together with a number of additional geologic targets, add to the
potential of the Robertson Property, as for example:
Ruf Claims and Lower Triplet Gulch
- ----------------------------------
The Ruf claims were originally "carved out" of the larger Robertson Mining
Claim group and returned to the Company. In 1995, Levon Resources completed a 6
hole RVC program (RF-95-1 through 6), totaling 3,000 ft, on the RUF claims near
the mouth of Triplet Gulch. The drilling tested a strong NW-oriented
EM/resistivity anomaly which was interpreted as a sulfide-filled fault zone. The
drilling returned three narrow intervals containing low-grade gold values that
reach up to 40-ft-thick averaging 0.018 oz Au/t, from 185 ft (Sampson, 1995). A
follow-up program of detailed ground geophysics and drilling should be
considered for this shallow pediment-covered area.
Conceptual Target
- -----------------
A more speculative conceptual target also exists on the Robertson Property.
The granodiorite intrusion that lies at the center of the district is generally
referred to as a "stock". However, based on both geologic and regional
geophysical evidence (aeromagnetic and gravity), the Tenabo stock appears to be
a flat topped, "rootless" intrusion, perhaps dismembered by low-angle faults or,
more likely a partly lacolithic body. Either interpretation provides an
interesting target concept that may be analogous to the role played by the
Goldstrike stock on the Carlin Trend (Leonardson and Rahn, 1996). There, a
number of major sills provided nearly impermeable barriers to gold-bearing
fluids, resulting in the deposition of high-grade gold in the immediate footwall
rocks of the sills. If the Tenabo "stock" is indeed a lacolith or dismembered
stock, then a similar geologic environment with significant gold could exist,
particularly along the northern contact. This contact has undergone recurrent
east-west faulting, including possible strike slip movement, emplacement a
series of highly sericite-pyrite-altered, east-west striking dikes, and is host
to significant gold mineralization. It is possible that this mineralization
represents only the upper part of a larger mineralized system localized at the
base of the Tenabo "lacolith". Defining the nature of this contact could be
resolved using a variety of cost-effective geophysical techniques. If justified,
deep drilling of this contact should be considered.
Recommendations:
The McCusker Report recommends a drilling program aimed at expanding known
resources and testing the highest priority exploration targets is recommended
for the Robertson Property. A program of relatively close-spaced vertical and
angle RVC holes directed at expanding the 39A and Porphyry Zones, and defining
the high-grade veins in the Gold Pan Zone. Exploration of the "distal
disseminated" target and Lander Ranch claims are highest priority and should be
explored by a series of moderately deep vertical and shallow angle RVC holes. A
detailed work program and budget are presented in the Table below:
Recommended Work Program and Budget
Target Work Program Cost in US$
39A 6 Vertical RVC holes 500-800 ft deep 62,100
Porphyry Zone 2 vertical RVC holes 500 ft deep 12,400
Gold Pan Zone 4 angle RCV holes 600 ft deep 24,800
Distal Dissem. 4 vertical RVC holes 1,000-1,200 ft deep 82,800
Lander Ranch 4 angle RVC holes 600 ft deep 33,100
2 angle RVC holes 1,500 ft deep* 49,700*
Assaying: sample prep + assaying
approx. 3,700 samples @$10.50 38,600
Geologist: 2.5 man months 22,000
Total: 18,400 ft of RVC drilling* 325,500
*Optional follow-up drilling
It also recommended that the Company undertake preliminary resource
estimates using higher cutoff grades (0.02 and 0.05 oz Au/t), and study various
mining and processing options using the existing drill hole database and
metallurgical studies. Mining options should include the viability of a combined
open pit/underground mine for the 39A Zone in which the shallow southern part of
the resource is mined by open pit and provides immediate underground access to
deeper higher grade mineralization from adits in the pit bottom. Other options
should include the feasibility of milling/agitation leaching of lower grade
material (>0.02 oz Au/t) to achieve +90 percent recovery and (or) the use of
floatation to recover by-product Cu.
There is no underground or surface plant or equipment located on the
Robertson Property.
Carve-Out Claims, Nevada, U.S.A.
- --------------------------------
Under the terms of an Exploration and Mining Venture Agreement dated July
11, 1997, Placer holds an undivided 61% interest, and the Company has a 39%
interest carried to production in the Carve-Out Claims.
In November 2002, the Company conducted a drilling program on the Carve-Out
Claims. Mr. Robert McCusker, P.Geol., former Senior Geologist for Amax,
supervised the 7,315-foot drill program and reported that the drilling was
focused on two areas: follow-up drilling in the immediate vicinity of existing
drill hole 97401, and a series of close-spaced offset holes near PR-380.
In 1997, Cortez Gold Mines completed hole 97401 to a depth of 3,000 feet in
the immediate footwall of the structural projection of the Pipeline fault, which
intersected 20 feet averaging 0.051 oz Au/t starting at 1,160 feet. The Company
offset the intercept in hole 97401 with three 1,350 - 1,500 feet deep reverse
circulation holes, which encountered scattered narrow (20- ft-thick) intervals
of weakly anomalous gold values (5 ppb to 80 ppb) in the upper 400 feet of these
holes. Below 400 ft, Au values remain mostly below the lower limits of detection
of 5 ppb. Shallow offset drilling conducted by Cortez in 1998, intersected 70 ft
of ore-grade mineralization in hole PR-380 that averaged 0.067 oz Au/t, starting
at 260 feet. Existing near-by drill holes (six reverse circulation holes)
returned only scattered anomalous gold values, including 20 ft averaging 0.012
oz Au/t in PR-382. The Company offset the intercept in PR-380 with three
close-spaced, 1,000-ft-deep reverse circulation drill holes in order to define
the extent of higher grade gold. The drilling encountered a series of closely
spaces, sub-horizontal zones of weakly to strongly anomalous gold values ranging
from 5 ppb to 440 ppb (0.012 oz Au/t) in the upper 500 ft of the holes. The
zones vary from 20-ft to 110- feet thick and define at least three district
mineralized horizons that may be laterally continuous to at least 600 ft. The
mineralization is confined to variably silicified and decalcified, silty
micritic limestone strata of the Devonian Wenban Limestone, which has also
undergone locally strong bedding-parallel shearing and "carbon enrichment". Gold
values >30ppb (approximately 0.001 oz Au/t) defined a north to north-northeast
trending mineralized zone, which extends at least 600 ft north of PR-380.
Results from the offset drilling in the vicinity of hole 97401 indicate
that rocks forming immediate footwall of the Pipeline fault, along the east edge
of the Carve-out Claims of the Robertson Mining Claims, are mainly unaltered and
less favorable non-calcareous sedimentary rocks that greatly reduce the
potential for discovery of Carlin-style mineralization in this area. In the
PR-380 area, offset drilling confined the higher-grade portion of the resource
to a small area of the claims. This drilling, together with the past Cortez
efforts, have defined at least three sub-horizontal zones containing anomalous
gold values ranging from 30 to 440 ppb that included the higher grade values in
BG-2 and PR-380. Structural controls for the higher grade is unclear, but the
mineralized envelope, although low-grade, remains open for expansion and
possible discovery of additional higher grade resources.
There is no underground or surface plant or equipment located on the
Carve-out Claims, nor any known body of commercial ore.
Norma Sass and Ruf Claims, Nevada, U.S.A.
- -----------------------------------------
The Company currently owns a 66-2/3% interest in the Norma Sass and Ruf
Claims, which originally were a part of the Carved-Out Claims, after an option
agreement with Levon Resources Ltd. ("Levon) was amended on October 3, 2002
transferring to Levon a 33-1/3 interest in the Norma Sass and Ruf Claims. Levon
is a British Columbia company also engaged in the exploration of precious
minerals and has four (4) directors in common to the Company.
On December 4, 2002, the Company granted an option to acquire a 33-1/3%
interest in the Norma Sass and Ruf Claims to Goldfranchise Corporation
("Goldfranchise"). In order to earn the interest, Goldfranchise must:
(a) Pay the Company US$38,391.50, which has been received by the
Company;
(b) Incur a minimum of US$300,000 in exploration work on the Norma
Sass and Ruf Claims, of which US$100,000 had to be incurred on
or before December 4, 2003, and the balance of US$200,000
incurred on or before December 4, 2004; and
(c) Pay the Company 33-1/3% of all annual land fees, taxes,
advance royalties required to keep the claims in good
standing, until Goldfranchise has exercised the option.
There is no underground or surface plant or equipment located on the Norma
Sass and Ruf Claims, nor any known body of commercial ore.
JDN Claims, Nevada, U.S.A. (formerly known as the JD Mining Claim)
On December 16, 1986, the Company acquired six mining claims on 550 acres
of land near Crescent Valley (Lander County), Nevada for US $10,000. The Company
located an additional 28 unpatented lode mining claims covering some 30 acres in
May 1996 and acquired a 100% interest by staking the "JDN Claims". The JDN
Claims are located approximately three miles north of the Robertson Mining
Claims. In 1987, geological mapping was conducted. In fiscal year 1994, the
Company optioned a 50% interest in the JDN claims to Mill Bay Ventures Inc.,
formerly First International Metals Corp. ("Mill Bay"), a company with two (2)
directors in common to the Company, for $10,000 and an initial installment of
50,000 shares of common shares of Mill Bay. On February 5, 1997, Mill Bay
exercised the option by issuing to the Company an additional 50,000 common
shares and completion of specified exploration work.
Access to the JDN Claims from Elko, Nevada, a regional mining supply
center, is via Highways 80 and 306, a distance of approximately 102 kilometers
to the community of Crescent Valley and then an additional 18 kilometers on a
gravel access road from the community of Crescent Valley. A four-wheel drive
vehicle is usually necessary to access all roads on the property. As of fiscal
year 2001, the Company has written down the JDN Claims to a nominal value. There
is no underground or surface plant or equipment located on the JDN Claims, nor
any known body of commercial ore.
C-Eagle Claims, Nevada, U.S.A.
In 1987, the Company acquired a 100% interest in the C-Eagle Claims. The
C-Eagle Claims consist of 15 lode mineral claims, and are located at Corral
Canyon, in Lander County, Nevada, approximately 16 kilometers north-northwest of
Placer's Cortez gold mine and comprises a total of approximately 646 acres. The
C-Eagle Claims are approximately three miles west of Crescent Valley, Nevada,
and approximately 18 miles southeast of Battle Mountain, Nevada. Access to the
C-Eagle Claims from Elko, Nevada, a regional mining supply center, is via
Highways 80 and 306, a distance of approximately 90 kilometers and then an
additional 13 kilometers on a gravel access road from the community of Crescent
Valley. A four-wheel drive vehicle is usually necessary to access all roads on
the property.
The C-Eagle Claims are subject to a 3% net smelter royalty to Geomex
Development Eighth Partnership ("Geomex 8"), which royalty shall cease at such
time as the sum of US $1,250,000 has been paid to Geomex 8.
In fiscal year 1994, the Company optioned a 50% interest in these claims to
Levon for $10,000 and 100,000 Levon common shares. During 1996, Levon exercised
its option and holds a 50% interest in the C-Eagle Claims with the Company.
During fiscal year 2000, no substantial work at the C-Eagle Claims was conducted
and as of fiscal year 2001, the Company has written down the C-Eagle Claims to a
nominal value. There is no underground or surface plant or equipment on the
C-Eagle Claims, nor any known body of commercial ore.
Ludlow Property, California, U.S.A.
The Company owns certain mining property consisting of approximately 128
acres in San Bernardino County, California (the "Ludlow Property"). The purchase
price for the Ludlow Property was $28,187 and as of January 31, 2000, the
Company has expended $36,885 on exploration costs. The property is located
approximately six miles south of Ludlow, California, and is readily accessible
by dirt road from Ludlow. Ludlow lies at the western junction of U.S. Highway 40
and Route 66. Old wagon roads allow any part of the property to be reached by an
easy walk. The Ludlow property has previously been explored as evidenced by
trenches, pits and shallow shafts and adits. The only recorded data relating to
previous exploration applies to the Baghdad-Chase Mine which lies approximately
2 kilometers to the south of the Ludlow Property.
There has been no underground exploration or development work done on the
claims by the Company other than geochemical soil sampling and, to the Company's
knowledge, there is no record of the previous work carried out on the claims as
indicated by the evidence of trenches, pits and shallow shafts and adits that
are located thereon. No exploration work has been performed on the property for
the past five fiscal years. In order to keep the mining title to the Ludlow
Property in good standing, the Company is required to pay property taxes. As of
fiscal year 2001, the Company has written down the Ludlow Property to a nominal
value. There is no surface or underground plant or equipment on the Ludlow
Property, nor any known body of commercial ore.
Item 5. Operating and Financial Review and Prospects
This discussion and analysis of the operating results and the financial
position of the Company for the years ended January 31, 2003 and 2004, and
should be read in conjunction with the consolidated financial statements and the
related notes attached hereto.
A. Operating Results
The principal business of the Company has been the acquisition and
exploration of precious mineral properties and, where warranted, developing and
mining such properties, particularly those judged by the Company to be
potentially valuable for gold. The Company's mining claims are located in the
states of Nevada and California in the United States. None of the Company's
mineral properties are in production and the Company has received no revenues.
Overview
The 2004 fiscal year commenced with Coral announcing the preliminary
results from the 2003 exploratory drill program conducted on the Excluded Claims
(also known as the "Carve-out" claims). This program, confined to a very small
area of the Tenabo property under joint venture with Cortez Gold Mines (Placer
Dome 60%, Kennecott 40%), was aimed primarily at confirming inferred geological
structural projections related to the nearby Pipeline gold deposit. The results
provided key information for the proposed upcoming exploration program.
Much like the 2003 fiscal year, during the first two quarters the Company
focused on reducing the cash reclamation bond posted on the 100% Robertson owned
property. Further reclamation was conducted on the property and by the end of
the second quarter the cash bond was reduced by US $380,100 (approximately Cdn
$635,000) from US $786,100 to US $406,000. The Company is working with the
Bureau of Land Management and the United States Department of Interior in
efforts to further reduced the bond.
During the second/third quarters, after assessing the exploration data on
the 100% owned Robertson property, the Board approved a drill program to include
a minimum of 10,000 feet. However, prior to the commencement of the program, an
unexpected random review by British Columbia Securities Commission of Coral's
continuous disclosure documents resulted in the immediate need for the Company
to prepare a new technical report in compliance with NI 43-101 to update the
historical technical reports prepared prior to 1999 on the Robertson property.
This resulted in certain on-going issues being put on hold including the
drilling program and equity financings of approximately $1,030,000.
In order to expedite the Report, the Company pulled Robert McCusker, P.
Geo., off the drill program to prepare the Report, thus postponing the program.
The Report was completed in February 2004. In Management's opinion, Mr. McCusker
was the best qualified person to prepare the Report because he was the Senior
Geologist for Amax Explorations Inc., where a large portion of the historical
data was obtained.
April 2004 was the earliest the Company could contract drill because the
exploration area had become very active and drillers were in high demand. The
drilling program was to expand the 39A Zone resource and evaluate the potential
depth extent of the high-grade structural zones in the Gold Pan resource area. A
recent reinterpretation of previous drilling conducted by Amax Gold and Cortez
Gold Mines on the 39A Zone, suggested the potential for significantly expanding
that resource to the west and southwest.
The 2004 drilling program consisted of 10 reverse-circulation (RC) drill
holes, CR04-1 through CR04-10, totaling 6,560 ft that ranged from 485- ft to
800- ft-deep. Eight of the RC holes were directed at the 39A Zone expansion and
two holes were aimed at assessing the depth extent of the east-west striking
high- grade structural zones in the Gold Pan resource area.
All of the holes encountered strongly anomalous gold values and a summary
of assay results are presented below. The 2004 drilling resulted in a modest
increase to the 39A resource and provided a better definition of the western
margin of the 39A Zone mineralization. A series of step-out holes (CR04-3
through CR04-7) indicate that the expansion of low to moderate grade gold to the
west is limited to about 100 ft. However, drilling along the east side of the
39A Zone (CR04-8) expanded not only low to moderate grade mineralization, but
also high-grade gold (30 ft averaging 0.229 oz Au/t, from 675 ft) over 100 ft to
the east and north from previous drill intersections. This portion of the 39A
Zone remains open for minor expansion both to the east and north. For the
complete and detailed assay results please visit www.sedar.com.
Of the five holes, CR04-3 through CR04-7, drilled along the suspected
westward extension of the 39A Zone, all encountered at least narrow low-grade
gold intercepts and two holes, CR04-5 and CR04-7 cut significant intervals,
including 15 ft averaging 0.15 oz Au/t starting at 35 ft and a 150 ft intercept
averaging 0.032 oz Au/t, from 510 ft, respectively.
Results from a single step-out hole, CR04-8, drilled along the east side of
the 39A Zone intersected a 195- ft-thick interval that averaged 0.059 oz Au/t,
from 575 ft, including 80 ft averaging 0.111 oz Au/t, starting at 630 ft. Also
included within this interval is a 30 ft zone averaging 0.229 oz Au/t, starting
at 675 ft.
Results from drilling the projection of the of the 39A Zone to the
southwest were inconclusive because the two holes, CR04-1 and CR04-2,
encountered a post- mineral, quartz- feldspar porphyry dike over critical
portions in their respective holes. Although the drilling did not test the
projected intervals in the footwall of the dike, the potential extension of
high-grade mineralization in the southwest direction has not been excluded.
Drilling in the Gold Pan Zone appears to have successfully extended
mineralization to a depth of at least 500 ft in hole CR04-9. The hole
encountered a series of mineralized zones beginning at 50 ft, and continuing to
a depth of 720 ft.
Selected Annual Information
The following are highlights of financial data on the Company for the most
recently completed three financial years:
Jan. 31, 2004 Jan. 31, 2003 Jan. 31, 2002
- ---------------------------------------------------------------------------------------------
Loss before extraordinary items $(625,318) $(527,967) $(242,931)
Net Loss $(753,596) $(755,999) $(1,128,401)
Loss Per Share $(0.03) $(0.03) $(0.05)
Total Assets 10,967,000 $8,888,094 $6,564,304
Total Liabilities $161,095 $387,499 $259,095
Working Capital (Deficiency) $2,601,586 $43,181 $336,598
During the year ended January 31, 2004, the Company incurred a net loss of
$753,596 or $0.03 per share (2003 - a net loss of $755,999 or $0.03; 2002 - a
net loss of $1,128,401 or per share of $0.05). The Company recorded a loss in
foreign exchange $140,623 relating to advances to the Company's US subsidiary,
Coral Resources Inc. which holds the Company's Robertson Property. Investments
were written down by $19,007 to reflect the current market value of the 400,000
common shares the Company holds in Levon Resources Ltd. These shares were
acquired over several years pursuant to the terms of an option the Company
granted to Levon on the Ruff and Norma Sass Property. An amount of $4,968
incurred on miscellaneous properties to keep them in good standing was also
expensed. A recovery of $36,320 was recorded against an allowance set-up in 2002
for an outstanding debt. The Company incurred corporate and administrative
expenses of $640,502 compared to 2003 of $538,893.
Administrative Expenses for the fiscal year ended January 31, 2004
increased by 18.5% or $101,609, when compared to the 2003 fiscal year. During
the year, legal fees declined by approximately $30,024 from $110,595 to $80,571
as a result of the Company doing more corporate filings in-house. Investor
relations and shareholder information increased by $41,603 from $101,614 in 2003
to $143,217 in 2004 as a result of the more aggressive approach the Company took
to public awareness by running internet banner ads, reconstruction of the
Company's web-site and preparing promotional material. Listing and filing fees
increased by $23,262 as a result of the increase in both the volume of filings
made by the Company during the year and the increased fees charged by the
regulatory bodies for filing such documents. Salaries and office services and
supplies increased by $59,548 from $155,445 to $174,999 due to an increase in
support staff and up-grading office equipment leases.
Summary of Quarterly Results
2004 2003 2003 2003 2003 2002 2002 2002
Period ended Jan. 31 Oct. 31 Jul. 31 Apr. 30 Jan. 31 Oct. 30 Jul. 31 Apr. 31
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q3
- ----------------------------------------------------------------------------------------------------------------------------------
Total Revenue - - - - - - - -
Income (loss)
before
extraordinary
items $(113,732) $(225,643) $(142,747) $(143,196) ($50,094) $(159,398) $(162,263) $(56,212)
Basic loss per
share $(0.03) $(0.01) $(0.00) $(0.00) $(0.03) $(0.01) $(0.01) $(0.01)
- ---------------- ------------- -------------- --------------- --------------- ------------ ------------- ------------ ------------
Net Income
(loss) $(121,187) $(298,913) $(123,892) $(211,604) ($359,025) $(159,398) $(162,263) $(75,313)
Basic per Share $(0.03) $(0.01) $(0.00) $(0.00) $(0.03) $(0.01) $(0.01) $(0.01)
Disclosure for Venture Issuers without Significant Revenue
The Company does not have revenues. The following table is a breakdown of
the material components listed for the three most recently completed financial
years:
Year Ended Year Ended Year Ended
Jan 31, 2004 Jan. 31, 2003 Jan. 31, 2002
- ---------------------------------------------------------------------------------------------
Capitalized exploration and
development costs $420,054 $1,185,090 $196,909
Expensed research & development
costs $4,968 $10,389 $805,385
Deferred development costs $- $- $-
General & Administration costs $640,502 $538,893 $244,071
Material costs, whether capitalized,
deferred or expensed, not referred to
in above $128,277 $228,032 $885,470
Commitments
In an effort to reduce overhead costs, the Company entered into a
cost-sharing agreement dated October 1, 1997 to reimburse a related party for
20% of its overhead expenses, to reimburse 100% of its out-of-pocket expenses
incurred on behalf of the company, and to pay a 10% fee based on the total
overhead and corporate expenses referred to above. The agreement may be
terminated with one-month notice by either party. During the year, a total of
$107,393 was charged to operations in relation to the cost sharing agreement.
Results of Operations
- ---------------------
The Company reports a net loss of $753,595 or $0.03 per share for the year
ended January 31, 2004 compared to a net loss of $755,999 or $0.03 per share for
the corresponding year in 2003. The Company had no operating revenues, but
recognized interest income of $15,184 compared to $10,926. The increase is due
to a consistently higher interest bearing bank balance this year compared to
last year.
The Company recorded a loss in foreign exchange of $140,306 compared to as
gain of $1,994 in 2003. $0 was charged to operations to recognize revenue
received under the option agreements on the Norma Sass and Ruf Claims. The
Company recorded a recovery of $36,320 against an allowance set up in 2002 for
an outstanding receivable. Marketable securities were written down by $19,007 to
reflect the current market value at January 31, 2004.
During fiscal year ended January 31, 2004, the Company had operating
expenses of $640,502 compared to $538,893 for the fiscal year ended January 31,
2003. An increase in the year of $101,609 or approximately 18.5% was primarily
due to the increase of management and consulting fees as a result of the
Company's increased fund raising and marketing activities.
Management fees of $90,000 for 2004 relate to a management contract with
the President of the Company for $90,000 per annum of the administration of the
day-to-day operations and activities of the Company and fee for 2003 $54,500.
Consulting fees of $22,500 for 2004 relate to a consulting contract with the
Vice President of the Company for financial advice. Consulting fees for 2003
were $29,622.
Directors' fees increased from $11,500 in 2003 to $24,000 in 2004. The
Chairman of the Board receives $12,000 per annum for his contribution to the
Company. In September 2002, the Company adopted a policy whereby directors would
be compensated $500 for each Directors Meeting they attend to cover their time
and expenses.
Investor relations and shareholder information has increased from $101,614
in 2003 to $143,217 in 2004. The Company took a much more aggressive approach to
promoting the awareness of the Company to broaden the shareholder base.
Legal and accounting has decreased from $110,595 in 2003 to $80,571 in
2004. The Company was able to decrease expenses by completing some work in
house.
Auditing fees have remained consistent with last year averaging $25,000.
Due to the re-newed focus on corporate governance in both the U.S and Canada,
legal and accounting advice was sought more often by directors, officers and the
in-house staff through the year on issues such as the Robertson reclamation bond
issue, corporate governance and U.S. regulations. Listing and filing fees
increased by $23,262 and transfer agent fees have increased by $184 compared to
the expense in 2003.
The increased financing activity through the 2004 fiscal year increased the
filing fees and the transfer agent fees. Travel has decreased from $53,991 to
$43,396 as the Company has become more selective in which trade shows the
Company attended and participated in.
Inflation
- ---------
Historically, inflation has not affected the Company's business in the
current locations where it is doing business and the Company does not expect it
to affect the Company's operations in the future.
B. Liquidity and Capital Resources
At this time, the Company has no operating revenues, and does not
anticipate any operating revenues until the Company is able to find, acquire,
place in production and operate a resource property. Historically, the Company
has raised funds through equity financing and the exercise of options and
warrants to fund its operations.
The market price of natural resources is highly speculative and volatile.
Instability in prices may affect the interest in resource properties and the
development of and production from such properties. This may adversely affect
the Company's ability to raise capital to acquire and explore resource
properties. At January 31, 2004, the Company has working capital of $2,601,586.
The Company feels it has sufficient working capital to meet its current
obligations and operating expenses.
Investor Relations
- ------------------
The Company has an investor relations contract with The Haft Group, Inc. a
public relations company headquartered and based in New York City. The Company
agreed to retain the Group at a fee of US $3,000 per month, plus reimbursement
of out-of-pocket expense, and a reasonable finder's fee of the total dollar
value raised for introducing the company to any sources of financing. The
Agreement is for an initial four month period, and will automatically renew and
continue in full force and effect on a month to month basis, unless terminated
by either party. Mr. Haft was a partner and principal of two NYSE member firms,
which have since merged with other entities. His business career also includes
serving as senior vice president of public relations for Warner Communications.
This contract completed on January 2004.
Subsequent Events
- -----------------
Subsequent to January 31, 2004, the Company closed the following
placements:
a) a non-brokered private placement involving the issuing of 1,000,000
common shares at a price of $0.36 and 1,000,000 share purchase warrants with the
right to purchase one (1) common share for each warrant issued at a price of
$0.48 for a two-year period and;
b) a non-brokered private placement involving the issuing of 1,500,000
common shares at a price of $0.44 and 1,500,000 share purchase warrants with the
right to purchase one (1) common share for each warrant issued at a price of
$0.55 for a two-year period.
At this time, the Company has no operating revenues, and does not
anticipate any operating revenues until the Company is able to find, acquire,
place in production and operate a profitable mining property. Historically, the
Company has raised funds through equity financing and the exercise of options
and warrants to fund its operations.
C. Research and Development, Patents and Licenses, etc.
Not Applicable.
D. Trend Information
No known trend.
E. Off-balance sheet arrangements
None.
F. Tabular disclosure of contractual obligations
None.
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management
The following is a list of the Company's directors and officers as of
fiscal year ended January 31, 2004. The directors were elected by the Company's
shareholders on July 22, 2004.
Name Position Held Principal Occupation Director Since
- ---- ------------- -------------------- --------------
Lloyd Andrews Chairman and Director Chairman and Director of September 1997
Berkley Resources Inc.,
Bralorne Pioneer Gold Mines
Ltd. and the Company
Matt Wayrynen(1) President (CEO) and Director President and Director of the June 2002
Company; Vice President
Operations and Director of
Bralorne-Pioneer Gold Mines
Ltd.; President and Director
of Berkley Resources Inc. and
one other reporting company
Chris Sampson Vice President Exploration Director and Vice President February 1996
and Director Exploration of the Company;
Professional
Engineer;
Director of
other reporting
issuers (public
mining
companies).
Louis Wolfin Director and Former Director of the Company; June 1990
President and CEO Director and former CEO of
Bralorne-Pioneer Gold Mines
Ltd.; Director of three other
reporting issuers
Ernest Calvert Director Director of Coral; Director of June 1990
three other reporting issuers
(public mining companies).
Dr. Joseph H. Cohen Director Director of the Company; May 2001
Corporate Consultant
William Glasier Director Director of the Company; August 1990
Director of four other
reporting issuers (public
mining companies).
Florian Riedl-Riedenstein Director Director of the Company; March 1994
Director of one other public
mining company; Independent
Financial Consultant
David Wolfin(2) Director Director of the Company; Vice September 1997
President Finance and Director
of Bralorne-Pioneer Gold Mines
Ltd.; Public Relations
consultant; President of Gray
Rock Resources Ltd.. and two
other public reporting issuers
Robert Schilling Director Director of the Company; June 2001
Self-employed Business
Consultant.
(1) Mr. Matt Wayrynen is the son-in-law of Mr. Louis Wolfin.
(2) Mr. David Wolfin is the son of Mr. Louis Wolfin.
B. Compensation
The following table sets forth particulars concerning the compensation of
the named executive officers as defined in Form 51-904F B.C. Securities Act and
Rules for the Company's fiscal year ended January 31, 2004.
At the end of the Company's most recently completed financial year, the
Company had one Named Executive Officer, Matt Wayrynen, the Company's President
(CEO).
Summary Compensation Table
--------------------------
Annual Compensation Long-Term Compensation Awards
------------------- ------------------------------
Securities Restricted
Bonus for Other Annual Under Shares/Units All Other
Name/Principal Salary(1) the Year Compensation Options/SARs Awarded Compensation
------ -------- ------------ ------- ------------
Position Year $ $ $ Granted (#)(2) $ $
- -------- ---- -----------
Matt Wayrynen, 2004 90,000 - - 400,000 - -
President (CEO) 2003 84,500 - - 400,000 - -
2001 - - 500,000 - -
5,000(3)- -
(1) No employee earned in excess of $100,000.
(2) Represents total Common Shares under options as of the end of the fiscal
year.
(3) Represents one month of remuneration.
Termination of Employment, Changes in Responsibilities and Employment Contracts
There is no employment contract between the Company or its subsidiaries and
the named executive officer and the Company has no compensatory plan or
arrangement with respect to the named executive officer in the event of the
resignation, retirement or any other termination of the named executive
officer's employment with the Company and its subsidiaries or in the event of a
change of control of the Company or its subsidiaries or in the event of a change
in the named executive officer's responsibilities following a change in control,
where in respect of the named executive officer the value of such compensation
exceeds $100,000.
C. Board Practices
The board of directors is comprised of 10 directors. The size and
experience of the board is important for providing the Company with effective
governance in the mining industry. The board's mandate and responsibilities can
be effectively and efficiently administered at is current size. The chairman of
the board is not a member of management. The board has functioned, and is of the
view that it can continue to function, independently of management as required.
At the Annual General Meeting, held on July 18, 2004, the shareholders elected
Lloyd Andrews, Matt Wayrynen, Louis Wolfin, Chris Sampson, Ernest A.W. Calvert,
Dr. Joseph H. Cohen, William Glasier, Florian Riedl-Riedenstein, Robert
Schilling and David Wolfin as directors. Subsequent to the annual meeting, Mr.
Schilling and Cohen have resigned.
The board has considered the relationships of each director to Coral and
considers four of the ten directors to be "unrelated" (Messrs. Andrews,
Schilling, Cohen and Sampson). "Unrelated director" as the term is defined in
the TSX Company Manual, means a director who is independent of management and
free from any interest and any business or other relationship which could
reasonably be perceived to materially interfere with the director's ability to
act with a view to the best interest of the Company, other than interest and
relationships arising solely from shareholdings.
Three of the directors who are considered related (Messrs. David Wolfin,
Louis Wolfin and Matt Wayrynen) are related by family. Three other directors
considered related (Calvert, Glasier, Riedl-Riedenstein) are on the board of
directors of Levon Resources Ltd, a company with which the Company has a joint
venture on the Norma Sass and Ruf Claims in Nevada.
The board has addressed the related directorship issues and intends, given
a transitional period, to eventually be comprised of a majority of unrelated
directors. Procedures are in place to allow the board to function independently.
At the present time the board has experienced directors that have made a
significant contribution to the Company's success, and are satisfied that it is
not constrained in its access to information, in its deliberations or in its
ability to satisfy the mandate established by law to supervise the business and
affairs of the Company. The Company's chairman and independent directors meet in
the absence of managing directors. Committees meet independent of management and
other directors. Committees appoint a chairman from their number who presides
over the committee meetings.
Mandate of the Board of Directors, its Committees and Management
The role of the board is to oversee the conduct of the Company's business,
including the supervision of management, and determining the Company's strategy.
Management is responsible for the Company's day to day operations, including
proposing its strategic direction and presenting budgets and business plans to
the board of directions for consideration and approval. The strategic plan takes
into account, among other things, the opportunities and risks of the Company's
business. Management provides the board with periodic assessments as to those
risks and the implementation of the Company's systems to manage those risks. The
board reviews the personnel needs of the Company from time to time, have
particular regard to succession issues relating to senior management. Management
is responsible for the training and development of personnel. The board assesses
how effectively the Company communicates with shareholders, but has not adopted
a formal communications policy. Through the audit committee, and in conjunction
with its auditors, the board assesses the adequacy of the Company's internal
control and management information systems. The board looks to management to
keep it informed of all significant developments relating to or effecting the
Company's operations. Major financings, acquisitions, dispositions and
investments are subject to board approval. A formal mandate for the board of
directors and the chief executive officer has not been considered necessary
since the relative allocation of responsibility is well understood by both
management and the board.
The board has established that they will meet at a minimum of every three
months, unless additional meetings are required. The board and committee's may
take action at these regular held meetings or at a meeting by conference call or
by written consent.
The board has created four committees, all of which have the mandates set
out below.
Committees
Corporate Governance and Nominating Committee
The corporate governance and nominating committees assist the board in
establishing the Company's corporate governance policies and practices
generally, identifying individuals qualified to become members of the board,
reviewing the composition and functioning of the board and its committees and
making recommendations to the board of directors as appropriate. When
considering nominees to the board the committee's mandate requires that it
consider the current composition of the board and give consideration to
candidates having experience in the industry, life experience and background.
The committee is also responsible for the Company's corporate governance
guidelines. The committee may retain legal or other advisors.
The corporate governance and nominating Committee consist of three
directors (Messrs. Lloyd Andrews, William Glasier, and Chris Sampson). Messrs.
Sampson and Andrews are the unrelated directors. It is intended that this
committee will eventually be comprise solely of unrelated/independent directors.
Audit Committee
The audit committee assists the board in its oversight of the Company's
financial statements and other related public disclosures, the Company's
compliance with legal and regulatory requirements relating to financial
reporting, the external auditors, qualifications and independence and the
performance of the internal audit function and the external auditors. The
committee has direct communications channels with the Company's auditors. The
committee reviews the Company's financial statements and related management's
discussion and analysis of financial and operating results. The committee can
retain legal, accounting or other advisors.
The audit committee consists of three related directors (Messrs. David
Wolfin, Matt Wayrynen and William Glasier) all of whom are financially literate,
and Mr. William Glasier has accounting or related financial expertise.
"Financially literate" means the ability to read and understand a balance sheet,
an income statement, and a cash flow statement. "Accounting or related financial
expertise" means the ability to analyze and interpret a full set of financial
statements, including the notes attached thereto, in accordance with Canadian
generally accepted accounting principles.
It is intended that this committee eventually will be comprised solely of
unrelated directors.
The board has adopted a charter for the audit committee which is reviewed
annually and sets out the role and oversight responsibilities of the audit
committee with respect to:
- its relationship with and expectation of the external auditors,
including the establishment of the independence of the external
auditor and the approval of any non-audit mandates of the external
auditor;
- determination of which non-audit services the external auditor is
prohibited from providing;
- the engagement, evaluation, remuneration, and termination of the
external auditors;
- appropriate funding for the payment of the auditor's compensation and
for any advisors retained by the audit committee;
- its relationship with and expectation of the internal auditor;
- its oversight of internal control;
- disclosure of financial and related information; and
- any other matter that the audit committee feels is important to its
mandate or that which the board chooses to delegate to it.
Compensation Committee
The compensation committee assists the board in monitoring, reviewing and
approving compensation policies and administering the Company's share
compensation plans. The committee is responsible for reviewing and making
recommendations to the board with respect to director and senior management
compensation. When granting stock options, the committee determines the number
of shares covered by each grant and the terms and conditions of the option,
subject to the terms of the plan, and the approval of the board. The committee
may consider changes to the remuneration of directors, which may be appropriate
from time to time. The committee may retain legal or other advisors to assist
it.
The committee consists of two unrelated directors (Messrs. Andrews and
Sampson) and one related director (Mr. William Glasier). It is intended that the
compensation committee will eventually be comprised solely of unrelated
directors.
Management Committee
The management committee, between board meetings, may exercise all the
powers of the board except those powers specially reserved by law to the board
of directors. The committee was created to administer the day to day operations
of the Company but does not supplant the board of directors when considering
significant issues facing the Company.
The committee is comprised of two related directors (Messrs. Wayrynen and
Louis Wolfin) and one unrelated director (Mr. L. Andrews). The board believes
that it is desirable for the majority of the management committee to be related
to the Company. The members are required to be available on a daily basis, and
hourly if the need arises, to deal with significant issues. All action approved
by the management committee is subsequently brought to the attention of the full
board of directors.
Compensation of Directors
The directors of the Company have not been paid fees or other cash
compensation in their capacity as directors. The compensation committee has
adopted a policy which compensates all directors $500 for each board meeting
attended by the director for the time and costs associated with attending the
meeting. The Company has no arrangements, standard or otherwise, pursuant to
which its current directors are compensated by the Company or its subsidiaries
for their services in their capacity as directors, or for committee
participation, or involvement in special assignments during the most recently
completed financial year, except that directors may be reimbursed for actual
expenses reasonably incurred in connection with the performance of their duties
as directors and certain directors may be compensated for services as
consultants or experts. Incentive stock options, however, have been granted to
non-named executive officer, directors and other insiders of the Company and are
outstanding to purchase an aggregate 1,830,000 shares of the Company as follows:
Exercise Price
Name of Per Share
Optionee No. of Shares Date of Grant Expiry Date
- --------------------------------------------------------------------------------------------------------------
Non-Named Executive
Officer/Directors
Lloyd Andrews 250,000 $0.25 April 11, 2002 September 5, 2005
Lloyd Andrews 50,000 $0.25 September 5, 2000 September 5, 2005
Louis Wolfin 500,000 $0.25 September 5, 2000 September 5, 2005
Robert Schilling 100,000 $0.25 September 5, 2000 September 5, 2005
F. Riedl-Riedenstein 75,000 $0.25 September 5, 2000 September 5, 2005
Ernest Calvert 50,000 $0.25 September 5, 2000 September 5, 2005
William Glasier 50,000 $0.25 September 5, 2000 September 5, 2005
Joseph Cohen 50,000 $0.25 September 5, 2000 September 5, 2005
Chris Sampson 50,000 $0.25 September 5, 2000 September 5, 2005
Andrea Regnier 30,000 $0.25 September 5, 2000 September 5, 2005
David Wolfin 70,000 $0.25 September 5, 2000 September 5, 2005
Other Insiders
Nil
D. Employees
The Company has three part-time employees, one located in Nevada, United
States, and two located in Canada.
E. Share Ownership
The following table sets for the share ownership of the directors and
officers of the Company as of June 20, 2004.
Name of Beneficial Owner Number of Shares Percent
------------------------ ---------------- -------
Matt Wayrynen 2,397 *
Louis Wolfin 1,541,018 4.4%
Chris Sampson 71,000 *
Ernest Calvert 0 *
Lloyd Andrews 209,000 *
Dr. Joseph H. Cohen 0 *
Name of Beneficial Owner Number of Shares Percent
------------------------ ---------------- -------
William Glasier 146,200 *
Florian Riedl-Riedenstein 75,000 *
David Wolfin 1,000 *
Robert Schilling 5,000 *
* Less than one percent
OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
Summary Options Table
Market Value of
Securities % of Total Options Securities
Name of Executive Under Granted to Executive or underlying Options
Officer Option Employees in base Price on Date of Grant
Granted Financial Year ($/Security) ($/Security) Expiration Date
- ---------------------------------------------------------------------------------------------------------------------
Matt Wayrynen 500,000 66.66% $0.25 $0.25 September 5, 2005
Lloyd Andrews 250,000 33.33% $0.25 $0.25 September 5, 2005
AGGREGATE OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
Unexercised Options at Value of Unexercised
January 31, 2004 In-the-Money Options at
January 31, 2004
----------------------------------------------------------------
Common Shares
Acquired on
Exercise Aggregate
Name Value Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------
Matt Wayrynen - $42,000 400,000 - $108,000 -
Lloyd Andrews - - 300,000 - $81,000 -
Robert Schilling - - 50,000 - $13,500 -
F. Riedl-
Riedenstein - - 50,000 - $13,500 -
Ernest Calvert - - 50,000 - $13,500 -
William Glasier - - 50,000 - $13,500 -
Joseph Cohen - - 50,000 - $13,500 -
Chris Sampson - - 50,000 - $13,500 -
Louis Wolfin - - 500,000 - $135,000 -
David Wolfin 30,000 $5,400 70,000 - $18,900 -
Andrea Regnier 20,000 $9,000 30,000 - $8,100 -
Item 7. Major Shareholders and Related Party Transactions
A. Major Shareholders
As far as it is known to the Company, it is not directly or indirectly
owned or controlled by any other corporation or by the Canadian Government, or
any foreign government.
As of June 20, 2004, the Company knows of no person who owned more than
five (5%) of the outstanding shares of each class of the Company's voting
securities. The following tables set forth the total shares owned by the
officers and directors as a group as of June 20, 2004:
Number of Shares of Percent of
Name Common Stock Owned Class
---- ------------------- ----------
All Officers and Directors as a Group
(8 persons) 2,050,615 5.91%
B. Related Party Transactions
In June 1990, the Company entered into an agreement with Oniva
International Services Corp. ("Oniva"). Pursuant to the agreement, the Company
paid Oniva for providing administrative, accounting and shareholder relation
services, an amount equal to twenty percent (20%) of Oniva's overhead expenses
and 100% of the actual expenditures paid by Oniva on behalf of the Company. On
October 1, 1997, Oniva and the Company entered into a new administrative
services contract whereby Oniva will provide general office administrative and
secretarial services, provide booking services; meet with the Company's
professional representatives; provide shareholder relation services; and provide
interim or bridge financing provided that Oniva's financial condition, as
determined by Oniva in its sole discretion, allows for such financing. For its
services, the Company shall pay Oniva 20% of Oniva's office overhead expenses,
100% of Oniva's out-of-pocket expenses, and a fee equal to 10% of the total sum
paid by the Company to Oniva. The administrative services contract had an
initial term of one year and is automatically renewed unless terminated by the
Company by giving one-month notice prior to the expiration date. Oniva has four
shares issued in trust with Messrs. Wolfin and Calvert on behalf of the Company
and three other companies. Messrs. Wolfin and Calvert are the only directors of
Oniva. For fiscal years 2004, 2003 and 2002, the Company paid Oniva an aggregate
of $107,393, $63,192 and $35,191, respectively.
Under a Management Consulting Agreement dated February 1, 1996, between the
Company and Frobisher Securities Inc., a private company controlled by the
director and former president of the Company, Louis Wolfin, the Company pays
Frobisher a remuneration of $5,000 per month plus out of pocket expenses. On
March 31, 2002, the agreement was terminated.
On April 1, 2002, the Company entered into a Consulting Agreement with Wear
Wolfin Designs Ltd. ("Wear Wolfin") pursuant to which the Company has agreed to
pay Wear Wolfin $5,000 per month for a term of three (3) years. On September 1,
2002, this agreement was amended to provide for $90,000 per annum. Wear Wolfin
is a non-reporting British Columbia company controlled by the family of Matt
Wayrynen, the president and director of the Company. The agreement may be
terminated by either party on 30 days notice. For fiscal year 2004, the Company
paid Wear Wolfin an aggregate of $90,000.
As of January 31, 2004, the Company was owed $28,003 (compared to $33,003
in 2003) from companies with common directors and management.
The Company also uses the services provided by a private company owned by
the secretary of the Company which charges the Company for office premises,
accounting, general corporate and administrative services.
Also during the year the Board approved payment of $2,500 to a private
company, Inter-mark Capital Ltd., controlled by a Director for financial
consulting.
C. Interest of Experts and Counsel.
Not Applicable.
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information
The following financial statements of the Company are attached to this
Annual Report:
o Auditors Report.
o Consolidated Balance Sheet for years ended January 31, 2004, 2003 and
2002.
o Consolidated Statement of Operations and Deficit for the years ended
January 31, 2004, 2003 and 2002.
o Consolidated Statement of Cash flows for the years January 31, 2004,
2003 and 2002.
o Consolidated Statement of Mineral Properties for the years January 31,
2004, 2003 and 2002.
o Notes to Consolidated Financial Statements for the years January 31,
2004, 2003 and 2002.
Dividend Policy
- ---------------
The Company has never paid any dividends and does not intend to in the near
future.
B. Significant Changes
None.
Item 9. The Offering and Listing
A. Price History of Stock
The Common stock of the Company is listed on the TSX Venture Exchange under
the symbol "CLH.V" and in the United States on the National Association of
Securities Dealers OTC Bulletin Board, under the symbol CLHVF.
As of June 30, 2004, there were 335 record holders in the United States
holding 15.28% of the Company's outstanding common stock representing
approximately 83.75% of the total shareholders. The Company's Common stock is
issued in registered form and the percentage of shares reported to be held by
record holders in the United States is taken from the records of the Pacific
Corporate Trust Company in the City of Vancouver, the registrar and transfer
agent for the common stock.
The high and low prices expressed in Canadian dollars on the TSX Venture
Exchange for the Company' common stock and the high and low prices expressed in
United States dollars quoted on the OTC Bulletin Board for the last six months,
subsequent period, and for each quarter for the last two fiscal years.
TSX Venture
Exchange OTC Bulletin Board
(Canadian Dollars) (United States Dollars)
Last Six Months High Low High Low
- --------------- ---- --- ---- ---
June 2004 .35 .29 .27 .17
May 2004 .30 .26 .22 .19
April 2004 .36 .25 .26 .20
March 2004 .37 .29 .29 .22
February 2004 .43 .34 .33 .25
January 2004 .55 .385 .42 .27
Subsequent Period
- -----------------
First Quarter ended April 30, 2004 .43 .25 .33 .20
2002-2003 High Low High Low
- --------- ---- --- ---- ---
Fourth Quarter ended January 31, 2004 .68 .17 .48 .10
Third Quarter ended October 31, 2003 .27 .15 .20 .09
Second Quarter ended July 31, 2003 .44 .19 .33 .13
First Quarter ended April 30, 2003 .33 .14 .24 .09
2003-2004 High Low High Low
- --------- ---- --- ---- ---
Fourth Quarter ended January 31, 2004 .61 .33 .45 .23
Third Quarter ended October 31, 2003 .40 .29 .30 .215
TSX Venture
Exchange OTC Bulletin Board
(Canadian Dollars) (United States Dollars)
Second Quarter ended July 31, 2003 .38 .21 .28 .165
First Quarter ended April 30, 2003 .41 .25 .28 .17
Last Five Fiscal Years High Low High Low
- ----------------------
2004 Annual .61 .25 .45 .20
2003 Annual .68 .14 .48 .09
2002 Annual .38 .12 .25 .08
2001 Annual .39 .13 .30 .08
2000 Annual 1.25 .23 * *
* Unable to obtain information during this period.
B. Plan of Distribution
Not Applicable.
C. Markets
The Company's common stock is listed in TSX Venture Exchange under the
symbol "CLH.V" and in the United States on the National Association of
Securities Dealers OTC Bulletin Board under the symbol "CLHVF."
D. Selling Shareholders
Not Applicable.
E. Dilution
Not Applicable.
F. Expenses of the Issue.
Not Applicable.
Item 10. Additional Information
A. Share Capital
The Company has 100,000,000 common shares authorized, without par value, of
which 43,616,855 shares were issued and outstanding as of January 31, 2004.
Each of the common shares has equal dividend, liquidation and voting
rights. Voters of the common shares are entitled to one vote per share on all
matters that may be brought before them. Holders of the common shares are
entitled to receive dividends when declared by the Board from funds legally
available therefore. The common shares are not redeemable, have no conversion
rights and carry no pre-emptive or other rights to subscribe for additional
shares. The outstanding common shares are fully paid and non-assessable.
B. Memorandum and Articles of Association
Coral Gold Corp. was incorporated on January 22, 1981 under the Company Act
of the Province of British Columbia, which changed its name to Coral Energy
Corporation on March 3, 1982. On September 9, 1987, Coral Energy Corporation
changed its name to the Coral Gold Corp.
Common Shares
All issued and outstanding common shares are fully paid and non-assessable.
Each holder of record of common shares is entitled to one vote for each common
share so held on all matters requiring a vote of shareholders, including the
election of directors. The holders of common shares will be entitled to
dividends on a pro-rata basis, if and when as declared by the board of
directors. There are no preferences, conversion rights, preemptive rights,
subscription rights, or restrictions or transfers attached to the common shares.
In the event of liquidation, dissolution, or winding up of the Company, the
holders of common shares are entitled to participate in the assets of the
Company available for distribution after satisfaction of the claims of
creditors.
Powers and Duties of Directors
The directors shall manage or supervise the management of the affairs and
business of the Company and shall have authority to exercise all such powers of
the Company as are not, by the Company Act or by the Memorandum or the Article,
required to be exercised by the Company in a general meeting.
Directors will serve as such until the next annual meeting. In general, a
director who is, in any way, directly or indirectly interested in an existing or
proposed contract or transaction with the Company whereby a duty or interest
might be created to conflict with his duty or interest director, shall declare
the nature and extent of his interest in such contract or transaction or the
conflict or potential conflict with his duty and interest as a director. Such
director shall not vote in respect of any such contract or transaction with the
Company in which he is interested and if he shall do so, his vote shall note be
counted, but he shall be counted in the quorum present at the meeting at which
such vote is taken. However, notwithstanding the foregoing, directors shall have
the right to vote on determining the remuneration of the directors.
The directors may from time to time on behalf of the Company: (a) borrow
money in such manner and amount from such sources and upon such terms and
conditions as they think fit; (b) issue bonds, debentures and other debt
obligations; or (c) mortgage, charge or give other security on the whole or any
part of the property and assets of the Company.
The majority of the directors of the Company must be persons ordinarily
resident in Canada and one director of the Company must be ordinarily resident
in British Columbia and be of the full age of 18 years. There is no minimum
share ownership to be a Director. No person shall be a Director of the Company
who is not capable of managing their own affairs; is an undischarged bankrupt;
convicted of an offense in connection with the promotion, formation or
management of a corporation or involved in fraud within the last five years; or
a person that has had a registration in any capacity under the "BC Securities"
or the BC Mortgage Brokers Act" canceled within the last five years.
Shareholders
An annual general meeting shall be held once in every calendar year at such
time and place as may be determined by the directors. A quorum at an annual
general meeting and special meeting shall be two shareholders or one or more
proxy holder representing two shareholders, or one shareholder and a proxy
holder representing another shareholder. There is no limitation imposed by the
laws of Canada or by the charter or other constituent documents of the Company
on the right of a non-resident to hold or vote the common shares, other than as
provided in the Investment Canada Act, (the "Investment Act") discussed below
under "Item 10. Additional Information, D. Exchange Controls."
In accordance with British Columbia law, directors shall be elected by an
"ordinary resolution" which means (a) a resolution passed by the shareholders of
the Company in general meeting by a simple majority of the votes cast in person
or by proxy, or (b) a resolution that has been submitted to the shareholders of
the Company who would have been entitled to vote on it in person or by proxy at
a general meeting of the Company and that has been consented to in writing by
such shareholders of the Company holding shares carrying not less than 3/4 of
the votes entitled to be cast on it.
Under British Columbia law certain items such as an amendment to the
Company's articles or entering into a merger, requires approval by a special
resolution which shall mean (a) a resolution passed by a majority of not less
than 3/4 of the votes cast by the shareholders of the Company who, being
entitled to do so, vote in person or by proxy at a general meeting of the
company (b) a resolution consented to in writing by every shareholder of the
Company who would have been entitled to vote in person or by proxy at a general
meeting of the Company, and a resolution so consented to is deemed to be a
special resolution passed at a general meeting of the Company.
C. Material Contracts
None.
D. Exchange Controls
There is no law, governmental decree or regulation in Canada that restricts
the export or import of capital or affects the remittance of dividends, interest
or other payments to a non-resident holder of common shares other than
withholding tax requirements. Any such remittances to United States residents
are subject to withholding tax. See "Taxation."
There is no limitation imposed by the laws of Canada or by the charter or
other constituent documents of the Company on the right of a non-resident to
hold or vote the common shares, other than as provided in the Investment Act.
The following discussion summarizes the principal features of the Investment Act
for a non-resident who proposes to acquire the common shares.
The Investment Act generally prohibits implementation of a reviewable
investment by an individual, government or agency thereof, corporation,
partnership, trust or joint venture (each an "entity") that is not a "Canadian"
as defined in the Investment Act (a "non-Canadian"), unless after review, the
Director of Investments appointed by the minister responsible for the Investment
Act is satisfied that the investment is likely to be of net benefit to Canada.
An investment in the common shares by a non-Canadian other than a "WTO Investor"
(as that term is defined by the Investment Act, and which term includes entities
which are nationals of or are controlled by nationals of member states of the
World Trade Organization) when the Company was not controlled by a WTO Investor,
would be reviewable under the Investment Act if it was an investment to acquire
control of the Company and the value of the assets of the Company, as determined
in accordance with the regulations promulgated under the Investment Act, equals
or exceeds $5 million for direct acquisition and over $50 million for indirect
acquisition, or if an order for review was made by the federal cabinet on the
grounds that the investment related to Canada's cultural heritage or national
identity, regardless of the value of the assets of the Company. An investment in
the common shares by a WTO Investor, or by a non-Canadian when the Company was
controlled by a WTO Investor, would be reviewable under the Investment Act if it
was an investment to acquire control of the Company and the value of the assets
of the Company, as determined in accordance with the regulations promulgated
under the Investment Act was not less than a specified amount, which for 2004 is
any amount in excess of $137 million. A non-Canadian would acquire control of
the Company for the purposes of the Investment Act if the non-Canadian acquired
a majority of the common shares. The acquisition of one third or more, but less
than a majority of the common shares would be presumed to be an acquisition of
control of the Company unless it could be established that, on the acquisition,
the Company was not controlled in fact by the acquirer through the ownership of
the common shares.
Certain transactions relating to the common shares would be exempt from the
Investment Act, including: (a) an acquisition of the common shares by a person
in the ordinary course of that person's business as a trader or dealer in
securities; (b) an acquisition of control of the Company in connection with the
realization of security granted for a loan or other financial assistance and not
for a purpose related to the provisions of the Investment Act; and (c) an
acquisition of control of the Company by reason of an amalgamation, merger,
consolidation or corporate reorganization following which the ultimate direct or
indirect control in fact of the Company, through the ownership of the common
shares, remained unchanged.
E. Taxation
Canadian Federal Income Tax Consequences
The following summarizes the principal Canadian federal income tax
consequences applicable to the holding and disposition of common shares in the
capital of the Company by a United States resident, and who holds common shares
solely as capital property (a "U.S. Holder"). This summary is based on the
current provisions of the Income Tax Act (Canada) (the "Tax Act"), the
regulations thereunder, all amendments thereto publicly proposed by the
government of Canada, the published administrative practices of Revenue Canada,
Customs, Excise and Taxation, and on the current provisions of the Canada-United
States Income Tax Convention, 1980, as amended (the "Treaty"). Except as
otherwise expressly provided, this summary does not take into account any
provincial, territorial or foreign (including without limitation, any U.S.) tax
law or treaty. It has been assumed that all currently proposed amendments will
be enacted substantially as proposed and that there is no other relevant change
in any governing law or practice, although no assurance can be given in these
respects.
Each U.S. Holder is advised to obtain tax and legal advice applicable to
such U.S. Holder's particular circumstances.
Every U.S. Holder is liable to pay a Canadian withholding tax on every
dividend that is or is deemed to be paid or credited to the U.S. Holder on the
U.S. Holder's common shares. The statutory rate of withholding tax is 25% of the
gross amount of the dividend paid. The Treaty reduces the statutory rate with
respect to dividends paid to a U.S. Holder for the purposes of the Treaty. Where
applicable, the general rate of withholding tax under the Treaty is 15% of the
gross amount of the dividend, but if the U.S. Holder is a company that owns at
least 10% of the voting stock of the Company and beneficially owns the dividend,
the rate of withholding tax is 5% for dividends paid or credited after 1996 to
such corporate U.S. Holder. The Company is required to withhold the applicable
tax from the dividend payable to the U.S. Holder, and to remit the tax to the
Receiver General of Canada for the account of the U. S. Holder.
Pursuant to the Tax Act, a U.S. Holder will not be subject to Canadian
capital gains tax on any capital gain realized on an actual or deemed
disposition of a common share, including a deemed disposition on death, provided
that the U.S. Holder did not hold the common share as capital property used in
carrying on a business in Canada, and that neither the U. S. Holder nor persons
with whom the U.S. Holder did not deal a arms length (alone or together) owned
or had the right or an option to acquire 25% or more of the issued shares of any
class of the Company at any time in the five years immediately preceding the
disposition.
United States Federal Income Tax Consequences
Passive Foreign Investment Company.
The Company believes that it is a passive foreign investment company
("PFIC") for United States federal income tax purposes with respect to a United
States Investor. The Company will be a PFIC with respect to a United States
Investor if, for any taxable year in which such United States Investor held the
Company's shares, either (i) at least 75 % of the gross income of the Company
for the taxable year is passive income, or (ii) at least 50% of the Company's
assets are attributable to assets that produce or are held for the production of
passive income. In each case, the Company must take into account a pro rata
share of the income and the assets of any company in which the Company owns,
directly or indirectly, 25% or more of the stock by value (the "look-through"
rules). Passive income generally includes dividends, interest, royalties, rents
(other than rents and royalties derived from the active conduct of a trade or
business and not derived from a related person), annuities, and gains from
assets that produce passive income. As a publicly traded corporation, the
Company would apply the 50% asset test based on the value of the Company's
assets.
Because the Company believes it qualifies as a PFIC, unless a United States
Investor who owns shares in the Company (i) elects (a section 1295 election) to
have the Company treated as a "qualified electing fund" (a "QEF") (described
below), or (ii) marks the stock to market (described below), the following rules
apply:
1. Distributions made by the Company during a taxable year to a United
States Investor who owns shares in the Company that are an "excess distribution"
(defined generally as the excess of the amount received with respect to the
shares in any taxable year over 125% of the average received in the shorter of
either the three previous years or such United States Investor's holding period
before the taxable year) must be allocated ratably to each day of such
shareholder's holding period. The amount allocated to the current taxable year
and to years when the corporation was not a PFIC must be included as ordinary
income in the shareholder's gross income for the year of distribution. The
remainder is not included in gross income but the shareholder must pay a
deferred tax on that portion. The deferred tax amount, in general, is the amount
of tax that would have been owed if the allocated amount had been included in
income in the earlier year, plus interest. The interest charge is at the rate
applicable to deficiencies in income taxes.
2. The entire amount of any gain realized upon the sale or other
disposition of the shares will be treated as an excess distribution made in the
year of sale or other disposition and as a consequence will be treated as
ordinary income and, to the extent allocated to years prior to the year of sale
or disposition, will be subject to the interest charge described above.
A shareholder that makes a section 1295 election will be currently taxable
on his or her pro rata share of the Company's ordinary earnings and net capital
gain (at ordinary income and capital gains rates, respectively) for each taxable
year of the Company, regardless of whether or not distributions were received.
The shareholder's basis in his or her shares will be increased to reflect taxed
but undistributed income. Distributions of income that had previously been taxed
will result in a corresponding reduction of basis in the shares and will not be
taxed again as a distribution to the shareholder.
A shareholder may make a section 1295 election with respect to a PFIC for
any taxable year of the shareholder (shareholder's election year). A section
1295 election is effective for the shareholder's election year and all
subsequent taxable years of the shareholder. Procedures exist for both
retroactive elections and filing of protective statements. Once a section 1295
election is made it remains in effect, although not applicable, during those
years that the Company is not a PFIC. Therefore, if the Company re-qualifies as
a PFIC, the section 1295 election previously made is still valid and the
shareholder is required to satisfy the requirements of that election. Once a
shareholder makes a section 1295 election, the shareholder may revoke the
election only with the consent of the Commissioner.
If the shareholder makes the section 1295 election for the first tax year
of the Company as a PFIC that is included in the shareholder's holding period,
the PFIC qualifies as a pedigreed QEF with respect to the shareholder. If a QEF
is an unpedigreed QEF with respect to the shareholder, the shareholder is
subject to both the non-QEF and QEF regimes. Certain elections are available
which enable shareholders to convert an unpedigreed QEF into a pedigreed QEF
thereby avoiding such dual application.
A shareholder making the section 1295 election must make the election on or
before the due date, as extended, for filing the shareholder's income tax return
for the first taxable year to which the election will apply. A shareholder must
make a section 1295 election by completing Form 8621; attaching said Form to its
federal income tax return; and reflecting in the Form the information provided
in the PFIC Annual Information Statement or if the shareholder calculated the
financial information, a statement to that effect. The PFIC Annual Information
Statement must include the shareholder's pro rata shares of the ordinary
earnings and net capital gain of the PFIC for the PFIC's taxable year or
information that will enable the shareholder to calculate its pro rata shares.
In addition, the PFIC Annual Information Statement must contain information
about distributions to shareholders and a statement that the PFIC will permit
the shareholder to inspect and copy its permanent books of account, records, and
other documents of the PFIC necessary to determine that the ordinary earnings
and net capital gain of the PFIC have been calculated according to federal
income tax accounting principles. A shareholder may also obtain the books,
records and other documents of the foreign corporation necessary for the
shareholder to determine the correct earnings and profits and net capital gain
of the PFIC according to federal income tax principles and calculate the
shareholder's pro rata shares of the PFIC's ordinary earnings and net capital
gain. In that case, the PFIC must include a statement in its PFIC Annual
Information Statement that it has permitted the shareholder to examine the
PFIC's books of account, records, and other documents necessary for the
shareholder to calculate the amounts of ordinary earnings and net capital gain.
A shareholder that makes a Section 1295 election with respect to a PFIC held
directly or indirectly, for each taxable year to which the Section 1295 election
applies, must comply with the foregoing submissions.
Because the Company's stock is "marketable" under section 1296(e), a U.S.
Investor may elect to mark the stock to market each year. In general, a PFIC
shareholder who elects under section 1296 to mark the marketable stock of a PFIC
includes in income each year an amount equal to the excess, if any, of the fair
market value of the PFIC stock as of the close of the taxable year over the
shareholder's adjusted basis in such stock. A shareholder is also generally
allowed a deduction for the excess, if any, of the adjusted basis of the PFIC
stock over the fair market value as of the close of the taxable year. Deductions
under this rule, however, are allowable only to the extent of any net mark to
market gains with respect to the stock included by the shareholder for prior
taxable years. While the interest charge regime under the PFIC rules generally
does not apply to distributions from and dispositions of stock of a PFIC where
the U.S. Investor has marked to market, coordination rules for limited
application will apply in the case of a U.S. Investor that marks to market PFIC
stock later than the beginning of the shareholder's holding period for the PFIC
stock.
Special rules apply with respect to the calculation of the amount of the
foreign tax credit with respect to excess distributions by a PFIC or inclusions
under a QEF.
Controlled Foreign Corporations.
Sections 951 through 964 and Section 1248 of the Code relate to controlled
foreign corporations ("CFCs"). A foreign corporation that qualifies as a CFC
will not be treated as a PFIC with respect to a shareholder during the portion
of the shareholder's holding period after December 31, 1997, during which the
shareholder is a 10% United States shareholder and the corporation is a CFC. The
PFIC provisions continue to apply in the case of PFIC that is also a CFC with
respect to shareholders that are less than 10% United States shareholders.
The 10% United States shareholders of a CFC are subject to current U.S. tax
on their pro rata shares of certain income of the CFC and their pro rata shares
of the CFC's earnings invested in certain U.S. property. The effect is that the
CFC provisions may impute some portion of such a corporation's undistributed
income to certain shareholders on a current basis and convert into dividend
income some portion of gains on dispositions of stock, which would otherwise
qualify for capital gains treatment.
The Company does not believe that it will be a CFC. It is possible that the
Company could become a CFC in the future. Even if the Company were classified as
a CFC in a future year, however, the CFC rules referred to above would apply
only with respect to 10% shareholders.
Personal Holding Company/Foreign Personal Holding Company/Foreign Investment
Company.
A corporation will be classified as a personal holding company (a "PHC") if
at any time during the last half of a tax year (i) five or fewer individuals
(without regard to their citizenship or residence) directly or indirectly or by
attribution own more than 50% in value of the corporation's stock and (ii) at
least 60% of its ordinary gross income, as specially adjusted, consists of
personal holding company income (defined generally to include dividends,
interest, royalties, rents and certain other types of passive income). A PHC is
subject to a United States federal income tax of 39.6% on its undistributed
personal holding company income (generally limited, in the case of a foreign
corporation, to United States source income).
A corporation will be classified as a foreign personal holding company (an
"FPHC") and not a PHC if at any time during a tax year (i) five or fewer
individual United States citizens or residents directly or indirectly or by
attribution own more than 50% of the total combined voting power or value of the
corporation's stock and (ii) at least 60% of its gross income consists of
foreign personal holding company income (defined generally to include dividends,
interest, royalties, rents and certain other types of passive income). Each
United States shareholder in a FPHC is required to include in gross income, as a
dividend, an allocable share of the FPHC's undistributed foreign personal
holding company income (generally the taxable income of the FPHC, as specially
adjusted).
A corporation will be classified as a foreign investment company (an "FIC")
if for any taxable year it (i) is registered under the Investment Company Act of
1940, as amended, as a management company or share investment trust or is
engaged primarily in the business of investing or trading in securities or
commodities (or any interest therein) and (ii) 50% or more of the value or the
total combined voting power of all the corporation's stock is owned directly or
indirectly (including stock owned through the application of attribution rules)
by United States persons. In general, unless an FIC elects to distribute 90% or
more of its taxable income (determined under United States tax principles as
specially adjusted) to its shareholders, gain on the sale or exchange of FIC
stock is treated as ordinary income (rather than capital gain) to the extent of
such shareholder's ratable share of the corporation's earnings and profits for
the period during which such stock was held.
The Company believes that it is not and will not be a PHC, FPHC or FIC.
However, no assurance can be given as to the Company's future status.
U.S. Information Reporting and Backup Withholding.
Dividends are generally subject to the information reporting requirements
of the Code. Dividends may be subject to backup withholding at the rate of 31%
unless the holder provides a taxpayer identification number on a properly
completed Form W-9 or otherwise establishes an exemption.
The amount of any backup withholding will not constitute additional tax and
will be allowed as a credit against the United States Investor's federal income
tax liability.
Filing of Information Returns.
Under a number of circumstances, a United States Investor acquiring shares
of the Company may be required to file an information return. In particular, any
United States Investor who becomes the owner, directly or indirectly, of 10% or
more of the shares of the Company will be required to file such a return. Other
filing requirements may apply, and United States Investors should consult their
own tax advisors concerning these requirements.
F. Expenses of the Issue
Not Applicable.
G. Dividends and Paying Agents
Not Applicable.
H. Documents on Display
The Company files annual reports and furnishes other information with the
Securities and Exchange Commission. You may read and copy any document that we
file at the Commission's Public Reference Room at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 or by accessing the Commission's website
(http://www.sec.gov).
Copies of the Company's material contracts are kept in the Company's
administrative headquarters.
I. Subsidiary Information
Not Applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Because the Company is a small business issuer, this section is
inapplicable.
Item 12. Description of Securities Other than Equity Securities
Not Applicable.
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Part II
Item 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds
None.
Item 15. Controls and Procedures
The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's chief
executive officer along with the Company's principal financial officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the Company's chief executive officer along with the Company's principal
financial officer concluded that the Company's disclosure controls and
procedures as of the end of the fiscal year covered by this Form 20-F are
effective in timely alerting them to material information relating to the
Company required to be included in this Form 20-F.
Item 16. [Reserved]
Item 16A. Audit Committee Financial Report
The Board of Directors determined that Mr. William Glasier is qualified as
an Audit Committee Financial Expert. Mr. William Glasier is independent as
determined by the NASD listing standards.
Item 16B. Code of Ethics
The Company has not adopted a code of ethics. The President is forming a
committee to advise on the content of the code prior to presentation to the
Board for adoption.
Item 16C. Principal Accountant Fees and Services
The independent auditor for the last two fiscal years was Ellis Foster,
Chartered Accountants.
Audit Fees
The aggregate fees billed by Ellis Foster for professional services
rendered for the audit of the Company's annual financial statements on Form 20-F
for the fiscal year ended January 31, 2003 was $20,763 and January 31, 2004 was
$19,945.
Audit-Related Fees
The aggregate fees billed for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
or review of the Company's financial statements for the year ended January 31,
2003 were nil and January 31, 2004 was nil.
Tax Fees
The aggregate fees billed for tax compliance, tax advice and tax planning
rendered by our independent auditors for the fiscal year ended January 31, 2003
was $1,650 and January 31, 2004 was $1,300. The services comprising these fees
include compliance service with respect to Canadian filings and lend assistance
to U.S. tax preparers.
All Other Fees
The aggregate fees billed for all other professional services rendered by
the Company's independent auditors for the fiscal year ended January 31, 2003
was $3,900 and January 31, 2004 was $250.
The Audit Committee approved 100% of the fees paid to the principal
accountant for audit-related, tax and other fees in the fiscal year 2004. The
Audit Committee pre-approves all non-audit services to be performed by the
auditor in accordance with the Audit Committee Charter. The percentage of hours
expended on the principal accountant's engagement to audit the Company's
financial statements for the most recent fiscal year that were attributed to
work performed by persons other than the principal accountant's full-time,
permanent employees was 0%.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
None.
Part III
Item 17. Financial Statements
The following Financial Statements pertaining to the Company are filed as
part of this annual report:
Auditors' Report..........................................F-1
Consolidated Balance Sheets...............................F-2
Consolidated Statement of Operations......................F-3
Consolidated Statement of Cash Flows......................F-4
Consolidated Statements of Mineral Properties.............F-5
Notes to Financial Statements.............................F-7 thru F-30
Item 18. Financial Statements
See Item 17.
Item 19. Exhibits
Exhibit Number Name
- -------------- -----
1.1 Memorandum of Coral Gold Corp.*
1.2. Articles of Coral Gold Corp.*
12.1 Certification of the Principal Executive Officer under the
Sarbanes-Oxley Act
12.2 Certification of the Principal Financial Officer under the
Sarbanes-Oxley Act
13 Certificate under section 906.
- ---------------------------
* Previously filed.
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.
Dated: August 11, 2004 CORAL GOLD CORP.
By: /s/ Matt Wayrynen
-------------------------------------
Matt Wayrynen, Chief Executive Officer
CORAL GOLD CORP.
Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
Index
-----
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations and Deficit
Consolidated Statements of Cash Flows
Consolidated Statements of Mineral Properties
Notes to Consolidated Financial Statements
ELLIS FOSTER
CHARTERED ACCOUNTANTS
1650 West 1st Avenue
Vancouver, BC Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 714-5916
Website: www.ellisfoster.com
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
CORAL GOLD CORP.
We have audited the consolidated balance sheets and the consolidated statements
of mineral properties of Coral Gold Corp. ("the Company") as at January 31,
2004, 2003 and 2002 and the consolidated statements of operations and deficit
and cash flows for each of the years then ended. These consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada and the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements presented fairly, in all
material respects, the consolidated financial position of the company as at
January 31, 2004, 2003 and 2002 and the results of its operations and its cash
flows for each of the years then ended in accordance with Canadian generally
accepted accounting principles. Differences between Canadian and United States
generally accepted accounting principles affecting the determination of
shareholders' equity at January 31, 2004, 2003 and 2002 and the determination of
net loss for each of the years in the three-year period ended January 31, 2003
are summarized in note 14.
Vancouver, Canada "ELLIS FOSTER"
May 11, 2004 Chartered Accountants
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-U.S. REPORTING CONFLICT
In the United States of America, reporting standards for auditors require the
addition of an explanatory paragraph (following the opinion paragraph) when the
financial statements are affected by significant uncertainties such as that
referred to in the attached consolidated balance sheets as at January 31, 2004,
2003 and 2002 and described in note 1 to the financial statements. Furthermore,
U.S. reporting standards require auditors to provide an explanatory paragraph
outlining the changes in accounting principles that have been implemented in the
consolidated financial statements.
Our report to the shareholders dated May 11, 2004 is expressed in accordance
with Canadian reporting standards which do not permit a reference to such an
uncertainty nor is it permissible to outline changes in accounting principles in
the independent auditors' report when these issues are adequately disclosed
elsewhere in the financial statements.
Vancouver, Canada "ELLIS FOSTER"
May 11, 2004 Chartered Accountants
EF A partnership of incorporated professionals
An independently owned and operated member of Moore Stephens North America Inc.,
a member of Moore Stephens International Limited
- members in principal cities throughout the world
CORAL GOLD CORP.
Consolidated Balance Sheets
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- ----------------------------------------------------------------------------------------------------------------------------
2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 2,567,156 $ 336,034 $ 73,629
Advances receivable 56,545 37,287 440,519
Marketable securities 57,359 57,359 80,045
Prepaid expenses 10,976 - 1,500
Share subscriptions receivable 70,645 - -
- ----------------------------------------------------------------------------------------------------------------------------
Total current assets 2,762,681 430,680 595,693
Investment securities (note 4) 72,575 91,582 91,582
Equipment (note 5) 5,678 3,419 -
Mineral properties (note 6) 7,574,347 7,159,261 5,877,029
Reclamation deposit (note 7) 551,719 1,203,152 -
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $ 10,967,000 $ 8,888,094 $ 6,564,304
============================================================================================================================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 78,347 $ 230,766 $ 37,250
Advances payable 82,748 156,733 121,845
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 161,095 387,499 159,095
- ----------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Subscriptions received in advance (note 8) 791,720 - 100,000
Share capital (note 9) 29,646,238 27,379,052 24,427,667
Deficit (note 9) (19,632,053) (18,878,457) (18,122,458)
- ----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 10,805,905 8,500,595 6,405,209
- ----------------------------------------------------------------------------------------------------------------------------
Commitment (note 10)
Total liabilities and shareholders' equity $ 10,967,000 $ 8,888,094 $ 6,564,304
============================================================================================================================
The accompanying notes form an integral part of these financial statements.
CORAL GOLD CORP.
Consolidated Statements of Operations and Deficit
Years Ended January 31, 2004, 2003, and 2002
(In Canadian Dollars)
- ------------------------------------------------------------------------------------------------------------------------------
2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------
Revenue
Interest income $ 15,184 $ 10,926 $ 1,140
- ------------------------------------------------------------------------------------------------------------------------------
Expenses
Consulting fees 29,262 29,622 64,663
Directors fees 24,000 11,500 -
Investor relations and shareholder information 143,217 101,614 20,769
Legal and accounting 80,571 110,595 32,721
Listing and filing fees 43,626 20,364 2,968
Management fees 90,000 84,500 -
Office and miscellaneous 119,556 70,209 69,145
Salaries and benefits 55,437 45,245 36,711
Transfer agent fees 11,437 11,253 7,772
Travel 43,396 53,991 9,322
- ------------------------------------------------------------------------------------------------------------------------------
640,502 538,893 244,071
- ------------------------------------------------------------------------------------------------------------------------------
Operating loss (625,318) (527,967) (242,931)
Other items
Foreign exchange gain (loss) (140,623) 1,994 32,738
Gain realized on disposition of
option on property - 155,823 -
Recovery (writedown) of advances receivable 36,320 (352,774) -
Writedown of equipment - - (16,335)
Writedown of investment (19,007) - -
Writedown of mineral properties (4,968) (10,389) (805,385)
Writedown of marketable securities - (22,686) (96,488)
- ------------------------------------------------------------------------------------------------------------------------------
Loss for the year (753,596) (755,999) (1,128,401)
Deficit, beginning of year (18,878,457) (18,122,458) (16,994,057)
- ------------------------------------------------------------------------------------------------------------------------------
Deficit, end of year $ (19,632,053) $ (18,878,457) $ (18,122,458)
==============================================================================================================================
Basic and diluted:
Loss per share $ (0.03) $ (0.03) $ (0.05)
==============================================================================================================================
Weighted average number of
common shares outstanding 36,863,984 28,054,334 20,959,133
==============================================================================================================================
The accompanying notes form an integral part of these financial statements.
CORAL GOLD CORP.
Consolidated Statements of Cash Flows
Years Ended January 31, 2004, 2003, and 2002
(In Canadian Dollars)
- ------------------------------------------------------------------------------------------------------------------------------
2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from (used in)
operating activities
Loss for the year $ (753,596) $ (755,999) $ (1,128,401)
Adjustments for items not involving cash:
- amortization 684 - -
- writedown of equipment - - 16,335
- writedown of investment 19,007 - -
- writedown of mineral properties 4,968 10,389 805,385
- writedown of marketable securities - 22,686 96,488
- writedown (recovery) of advances receivable (36,320) 352,774 -
- gain realized on disposition of
option on property - (155,823) -
- ------------------------------------------------------------------------------------------------------------------------------
(765,257) (525,973) (210,193)
Change in non-cash working capital:
- (increase) decrease in advances receivable (19,258) 50,458 (168,781)
- (increase) decrease in prepaid expenses (10,976) 1,500 (1,500)
- increase in share subscription receivable (70,645) - -
- increase (decrease) in accounts payable
and accrued liabilities (152,419) 193,516 (26,370)
- increase (decrease) in advances payable (73,985) 34,888 106,581
- increase (decrease) in subscription received
in advance 791,720 (100,000) 100,000
- ------------------------------------------------------------------------------------------------------------------------------
(300,820) (345,611) (200,263)
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) investing activities
Mineral properties acquisition and
exploration expenditures (420,054) (1,195,479) (232,275)
Proceeds from sale of mineral
property interest - 58,681 -
Purchase of equipment (2,943) (3,419) -
Advances receivable recovered 36,320 - -
Reclamation deposit 651,433 (1,203,152) -
- ------------------------------------------------------------------------------------------------------------------------------
264,756 (2,343,369) (232,275)
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Issuance of shares for cash, net 2,267,186 2,951,385 482,000
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 2,231,122 262,405 49,462
Cash and cash equivalents,
beginning of year 336,034 73,629 24,167
- ------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of year $ 2,567,156 $ 336,034 $ 73,629
==============================================================================================================================
The accompanying notes form an integral part of these financial statements.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
1. Nature of Business and Going Concern
These financial statements have been prepared on a going-concern basis,
which assumes that the Company will be able to realize its assets and
discharge its liabilities in the normal course of business in the
foreseeable future. The Company is in the process of exploring its mineral
interests and has not yet determined whether these properties contain ore
reserves that are economically recoverable. The continued operations of the
Company and the recoverability of mineral property costs is dependent upon
the discovery of economically recoverable mineral reserves, the ability of
the Company to obtain necessary financing to complete the development and
upon future profitable production.
The Company has incurred recurring operating losses which requires
additional funds to meet its obligations and maintain its operations.
Management's plan in this regard is to raise equity financing as required.
The Company is in the business of exploration of mineral properties and has
not generated any operating revenues to date.
2. Change in Accounting Policy
During the fourth quarter of fiscal year 2004, the Company adopted the
Canadian Institute of Chartered Accountants Handbook, Section 3870 ("CICA
3870"), Stock-based compensation and other stock-based payments, which
establishes new standards for the recognition, measurement and disclosure
of stock-based compensation and other stock-based payments made in exchange
for goods and services. Section 3870 sets out a fair value based method of
accounting that is required for all stock-based transactions. Under the
recommendation, direct awards of stock granted to employees and directors
are recorded at fair value on the date of grant and the associated expense
is amortized over the vesting period.
Section 3870 provides alternative methods of transition for the adoption of
the fair value method and, as permitted, the Company has elected
prospective application and the fair value based method of accounting is
adopted for all types of award previously not accounted for at fair value.
The change of accounting policy has no cumulative effect on the prior year
financial statements. Also, there was no impact in the first three (3)
quarters of fiscal year 2004 as a result of the accounting policy change.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
3. Significant Accounting Policies
The financial statements of the Company have been prepared in accordance
with Canadian generally accepted accounting principles, within reasonable
limits of materiality and within the framework of the significant
accounting policies summarized below.
(a) Basis of Consolidation
These consolidated financial statements includes the accounts of the
Company and its wholly-owned subsidiaries, Coral Resources, Inc. and Coral
Energy Corporation of California. Significant inter-company accounts and
transactions have been eliminated.
These consolidated financial statements are prepared in accordance with
Canadian generally accepted accounting principles and all figures are in
Canadian dollars unless otherwise stated. Canadian generally accepted
accounting principles differ in certain respects from accounting principles
generally accepted in the United States. The significant differences and
the approximate related effect on the consolidated financial statements are
set forth in Note 14.
(b) Marketable Securities
Marketable securities are valued at the lower of cost and net realizable
value.
(c) Mineral Properties
The Company is in the exploration stage and defers all expenditures related
to its mineral properties until such time as the properties are put into
commercial production, sold or abandoned. Under this method, all amounts
shown as mineral properties represent costs incurred to date less amounts
amortized and/or written off and do not necessarily represent present or
future values.
If the properties are put into commercial production, the expenditures will
be depleted based upon the proven reserves available. If the properties are
sold or abandoned, the expenditures will be charged to operations. The
Company does not accrue the estimated future costs of maintaining in good
standing its mineral properties.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
3. Significant Accounting Policies (continued)
(c) Mineral Properties (continued)
In the event that reserves are determined, the carrying values of
mineral interests, on a property-by-property basis, will be
reviewed by management at least annually to determine if they
have become impaired. If impairment is deemed to exist, the
mineral property will be written down to its net recoverable
value. The ultimate recoverability of the amounts capitalized for
the mineral properties is dependent upon the delineation of
economically recoverable ore reserves, the Company's ability to
obtain the necessary financing to complete their development and
realize profitable production or proceeds from the disposition
thereof. Management's estimates of recoverability of the
Company's investment in various projects have been based on
current conditions. However, it is reasonably possible that
changes could occur in the near term which could adversely affect
management's estimates and may result in future writedowns of
capitalized property carrying values.
Management has determine each property to be a cost centre.
(d) Investment Securities
The investments in Mill Bay Ventures Inc. (formerly First
International Metals Corp.) and Levon Resources Ltd. are carried
at cost. They will be written down to their net realizable value
if and when it has been determined that a permanent impairment to
their value has occurred.
(e) Fair Value of Financial Instruments
The respective carrying value of certain on-balance-sheet
financial instruments approximated their fair values. These
financial instruments include cash and cash equivalents, advances
receivable, share subscriptions receivable, accounts payable and
accrued liabilities, subscriptions received in advance and
advances payable. Fair values were assumed to approximate
carrying values for these financial instruments, except where
noted, since they are short term in nature and their carrying
amounts approximate fair values or they are receivable or payable
on demand. Management is of the opinion that the Company is not
exposed to significant interest, credit or currency risks arising
from these financial instruments.
(f) Foreign Currency Translations
Assets and liabilities denominated in foreign currencies are
translated into Canadian dollars at exchange rates in effect at
the balance sheet date for monetary items and at exchange rates
prevailing at the transaction dates for non-monetary items.
Revenues and expenses are translated at the average exchange
rates prevailing during the year except for amortization, which
is translated at historical exchange rates. Gains and losses on
translations are included as income for the year.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
3. Significant Accounting Policies (continued)
(g) Use of Estimates
The preparation of financial statements in conformity with
Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses
during the period. Actual results may differ from those
estimates.
(h) Impairment of Long-term Assets
The Company re-evaluates the recoverability of long-term assets,
including equipment, mineral properties, and investment
securities, based upon estimates using factors such as future
asset utilization, business climate and future undiscounted cash
flows expected to result from the use of the related assets or be
realized on sale. The Company's policy is to writedown assets to
their net recoverable amount in the period when it is determined
that the carrying amount of the asset is not likely to be
recovered.
(i) Earnings (Loss) per Share
Diluted earnings per share amounts are calculated giving effect
to the potential dilution that would occur if securities or other
contracts to issue common shares were exercised or converted to
common shares. The treasury stock method is used to determine the
dilutive effect of stock options and other dilutive instruments.
The treasury stock method assumes that proceeds received from the
exercise of stock options and warrants are used to repurchase
common shares at the prevailing market rate.
Basic earnings per share is computed using the weighted average
number of common shares outstanding during the year.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
3. Significant Accounting Policies (continued)
(j) Income Taxes
Income taxes are accounted for using the asset and liability
method pursuant to Section 3465, Income Taxes, of The Handbook of
the Canadian Institute of Chartered Accountants. Future taxes are
recognized for the tax consequences of "temporary differences" by
applying enacted or substantively enacted statutory tax rates
applicable to future years to differences between the financial
statement carrying amounts and the tax basis of existing assets
and liabilities. The effect on deferred taxes for a change in tax
rates is recognized in income in the period that includes the
date of enactment or substantive enactment. In addition, Section
3465 requires the recognition of future tax benefits to the
extent that realization of such benefits is more likely than not.
In the year 2000, the Company changed its policy for accounting
for income taxes by adopting the provision of CICA Handbook
Section 3465, Income Taxes.
The adoption of Section 3465 did not impact amounts reported in
the prior period.
(k) Flow-Through Shares
The Company finances a portion of its exploration programs with
flow-through common share issues. Income tax deductions relating
to these expenditures are claimable only by the investors.
Proceeds from common shares issued pursuant to flow-through
financings are credited to capital stock.
(l) Intangible Assets
Effective February 1, 2002, the Company adopted the
recommendations of the CICA Handbook, Section 3062, Goodwill and
Other Intangible Assets, prospectively. Under the recommendation,
a recognized intangible asset should be amortized over its useful
life to an enterprise unless the life is determined to be
indefinite. An intangible asset with an indefinite life will not
be amortized but will be tested for impairment annually, or more
frequently if events or changes in circumstances indicate that
the asset might be impaired.
The impairment test will consist of a comparison of the fair
value of the intangible asset with its carrying amount. When the
carrying amount of the intangible asset exceeds its fair value,
an impairment loss will be recognized in an amount equal to the
excess and charged to operations.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
4. Investment Securities
-----------------------------------------------------------------------------------------------------------
2004 2003 2002
-----------------------------------------------------------------------------------------------------------
Levon Resources Ltd.
400,000 common shares $ 60,089 $ 79,096 $ 79,096
Mill Bay Ventures Inc.
(formerly First International Metals Corp.)
72,495 common shares 12,486 12,486 12,486
-----------------------------------------------------------------------------------------------------------
$ 72,575 $ 91,582 $ 91,582
===========================================================================================================
Levon Resources Ltd. and Mill Bay Ventures Inc. (formerly First International Metals Corp.) are related to
the Company by way of common management and directors.
5. Equipment
----------------------------------------------------------------------------------------------------------
2004 2003 2002
------------------------------------------- ------------- -----------
Cost Accumulated Net Book Net Book Net Book
Amortization Value Value Value
-----------------------------------------------------------------------------------------------------------
Computer hardware $5,926 $ 684 $5,242 $3,419 $ -
Equipment 436 - 436 - -
-----------------------------------------------------------------------------------------------------------
$ 684 $3,419 $ -
===========================================================================================================
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
6. Mineral Properties
(a) Robertson Property
The Company has certain interests in 724 patented and unpatented
load mining claims located in the Bullion Mining District, Lander
County, Nevada, subject to NSR's ranging from 4% to 10%, and
which certain leases provide for advance royalty payments. The
Robertson group is recorded under three separate claims groups
known as the Core Claims (100% owned), the Carve-out Claims (39%
carried interest) and the Norma Sass/Ruff Claims (66.67% owned).
(i) Carve-out Claims - 39% carried interest
By an Agreement dated May 16, 1996, the Company granted Amax
Gold Exploration Inc. ("Amax") an option to purchase a 51%
interest in 200 claims. Amax exercised the option by paying
twice the amount the Company had incurred in exploration
expenditures on the property. Under the terms of the
Agreement, the Company could elect to have the 51% of its
interest reverted to a 39% carried interest.
The Carve-out Claims Option Agreement was assignable by
either party. On September 13, 1995, the Company optioned
50% of its interest in 54 claims (subsequent known as the
Ruff/Sass Claims - see Note 6(a)(ii)) to Levon Resources
Ltd., and on March 24, 1997 Amax assigned it's Option to
Placer Dome Inc. On July 11, 1997, Placer exercised its
right to acquire a 51% interest in the claims by making a
payment to the Company of US $615,359. Pursuant to the terms
under the option agreement, the parties entered into an
Exploration and Mining Venture Agreement dated July 11,
1997, and the Company exercised its right to have Placer
advance the Company's share of venture costs from inception
of the Venture to commencement of commercial production in
exchange for an additional undivided 10% interest in the
properties.
(ii) Ruff/Norma Sass - 66.67% owned
By an Option Agreement dated September 13, 1995 as amendment
the Company had granted Levon Resources Ltd. ("Levon"), a
company related by common directors, an option to purchase a
50% interest in 54 claims known as the Ruff/Sass Claims. On
December 31, 2002, the Agreement was amended whereby Levon
earned a 33.33% interest in the claims by the issuance to
the Company of 300,000 common shares in Levon (received
during previous fiscal years) and incurring $350,294 in
exploration on the Property (incurred during prior years).
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
6. Mineral Properties (continued)
(a) Robertson Property (continued)
(ii) Ruff/Norma Sass - 66.67% owned (continued)
By an Option Agreement dated December 4, 2002 the Company
granted Goldfranchise Corporation ("Goldfranchise") an
Option to acquire a 33 1/3% interest in the Ruff/Norma Sass
claims. In order to earn the interest, Goldfranchise must:
a) Pay to Coral US$38,391.50;
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.
c) Pay to Coral 33 1/3% of all land fees, taxes, advance
royalties required to keep the claims in good
standing.
(iii) Core claims - 100% owned
By an Option Agreement dated January 31, 1999 the Company
granted Placer Dome Inc. an option to acquire up to a 70%
interest in the entire Robertson Property's, 724 claims.
Under the terms of the Option, Placer guaranteed a
Reclamation Bond required to be posted by the Company for
previous exploration work on the Core Claims. The Option
Agreement terminated on December 31, 1999. The Company was
obligated under the terms of the Option to replace Placer's
guarantee. Subsequent to January 31, 2004, the Company
replaced the guarantee by posting a cash bond (note 7).
(b) Eagle Property
The Company holds a 50% interest in 45 lode mineral claims
located at Coral Canyon in Lander County, Nevada, USA. During the
year ended January 31, 2001, the Company decided to defer
exploration on the property and to reduce the carrying value to a
nominal amount.
(c) Ludlow Property
The Company owns a mineral property consisting of approximately
128 acres in the San Bernadino County, California, USA. During
the year ended January 31, 2001, the Company decided to defer
exploration on the property and to reduce the carrying value to a
nominal amount.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
6. Mineral Properties (continued)
(d) JDN Property
The Company holds a 50% interest in 34 lode mineral claims
located in Lander County, Nevada USA. The JDN claims are located
approximately three miles north of the Robertson Property. During
the year ended January 31, 2001, the Company decided to defer
exploration on the property and to reduce the carrying value to a
nominal amount.
(e) Bralorne Property
During 1999, the Company acquired an option to purchase a 25%
interest in certain mineral properties located in the Lillooet
Mining Division, Province of British Columbia, subject to a Joint
Venture Agreement. The optionor is a Company with common
directors. The properties consist of 115 Crown-granted mineral
claims, ten freehold parcels of land, five reverted Crown-granted
claims, four located mineral claims, and two placer leases, all
known as the Bralorne Property. To exercise the option, the
Company paid $500,000 cash and must pay $200,000 by October 17,
1999 (paid), $200,000 by August 31, 2001 (unpaid), $200,000 by
each October 17, 2002 and 2003, and $250,000 by October 17, 2004,
assume $700,000 of the Joint Venture liability, and contribute
25% of all future costs related to the Bralorne Property. During
the year ended January 31, 2002, the Company decided to abandon
the option.
Ownership in mineral properties involves certain inherent risks
due to the difficulties in determining the validity of certain
claims, as well as the potential for problems arising from the
frequently ambiguous conveyancing history characteristics of many
mineral interests. The Company has investigated ownership of its
mineral interests and, to the best of its knowledge, ownership of
its properties is in good standing.
7. Reclamation Deposit
Under the laws of the State of Nevada, the Company is required to have
a reclamation deposit which covers the cost to reclaim the ground
disturbed. The Company's obligation at January 31, 1999 had been
assumed by Placer as part of the Exploration and Development Option
Agreement [note 6(a)]. As the Agreement was terminated on December 31,
1999, the Company was required to post its own security to guarantee
performance under the Reclamation Bond.
During the year, a revised Reclamation Plan for the purposes of
reducing the performance bond was approved by the Bureau of Land
Management (the "Bureau"), reducing the required deposit to $551,719
(US$406,000).
Coral Resources Inc., as principal placed the funds in trust with a
fully secured standby letter of credit lodged as collateral in support
of the bond.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
8. Subscriptions Received in Advance
During 2004, the Company received $766,720 towards private placements
of 2,500,000 units. Each unit consisted of one common share and a
share purchase warrant entitling the investor to purchase an
additional common share in the Company at a price of $0.48 and $0.55,
respectively, on or before January 15, 2006 (notes 13(a) and 13(b)).
The Company has also received $25,000 towards the exercising of stock
options and the issuance of 100,000 common shares.
9. Share Capital and Deficit
Authorized: 50,000,000 common shares without par value.
Issued:
-----------------------------------------------------------------------------------------------------------
Shares Amount Deficit
-----------------------------------------------------------------------------------------------------------
Balance, January 31, 2001 20,018,100 $23,945,667 $(16,994,057)
2002 share issuances for cash:
Private placements 2,093,000 482,000 -
2002 loss - - (1,128,401)
----------------------------------------------------------------------------------------------------------
Balance, January 31, 2002 22,111,100 24,427,667 (18,122,458)
2003 share issuances for cash:
Private placements 8,297,396 2,078,178 -
Exercise of warrants 4,161,442 1,091,368 -
Exercise of stock options 140,000 35,000 -
Stock issuance costs - (253,161) -
2003 loss - - (755,999)
----------------------------------------------------------------------------------------------------------
Balance, January 31, 2003 34,709,938 27,379,052 (18,878,457)
2004 share issuances for cash:
Private placements 7,218,817 1,897,068 -
Exercise of warrants 1,493,100 357,368 -
Exercise of stock options 195,000 48,750 -
Share issuance costs - (36,000) -
2004 loss - - (753,596)
----------------------------------------------------------------------------------------------------------
Balance, January 31, 2004 43,616,855 $29,646,238 $(19,632,053)
==========================================================================================================
(a) At January 31, 2004, the following director and employee stock
options are outstanding enabling the holders to acquire
additional common shares as follows:
--------------------------------------------------------------------------------------------------
Number of Shares Exercise Price Expiry Date
--------------------------------------------------------------------------------------------------
1,732,500 $0.25 September 5, 2005
--------------------------------------------------------------------------------------------------
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
9. Share Capital and Deficit (continued)
(b) At January 31, 2004, the Company has outstanding share purchase
warrants enabling the holders to acquire additional common shares
as follows:
--------------------------------------------------------------------------------------------------
Number of Shares Exercise Price Expiry Date
--------------------------------------------------------------------------------------------------
3,648,854 $0.40 June 21, 2004
2,044,250 $0.36 November 17, 2005
1,029,567 $0.39 December 19, 2005
4,145,000 $0.31 October 12, 2005
------------------------------
==============================
The Company has granted founders, directors and certain
employees stock options. Stock option activity is summarized
as follows:
---------------------------------------------------------------------------------------------------
Average
Exercise
Number Price
of Shares (Cdn$)
---------------------------------------------------------------------------------------------------
Balance outstanding, January 31, 2001 1,317,500 $0.27
2002 -- Granted 65,000 0.25
-- Expired (105,000) 0.25
---------------------------------------------------------------------------------------------------
Balance outstanding, January 31, 2002 1,277,500 0.27
2003 - Granted 750,000 0.25
---------------------------------------------------------------------------------------------------
Balance outstanding, January 31, 2003 2,027,500 0.25
2004 - Cancelled (100,000) 0.25
2004 -- Exercised (195,000) 0.25
---------------------------------------------------------------------------------------------------
Balance outstanding, January 31, 2004 1,732,500 $0.25
===================================================================================================
---------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------------------------------- ----------------------------
Exercise Price Number Weighted Weighted Number Weighted
Average
Remaining Average Average
Contractual Exercise Exercise
Outstanding Life (yrs.) Price Exercisable Price
---------------------------------------------------------------------------------------------------
$0.25 1,732,500 0.60 $0.25 1,732,500 $0.25
===================================================================================================
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
10. Commitment
The Company entered into a cost-sharing agreement dated October 1,
1997 to reimburse a related party for 20% of its overhead expenses, to
reimburse 100% of its out-of-pocket expenses incurred on behalf of the
company, and to pay a 10% fee based on the total overhead and
corporate expenses referred to above. The agreement may be terminated
with one-month notice by either party.
A total of $107,393 (2003 - $63,192; 2002 - $35,191) was charged to
operations in relation to the cost sharing agreement.
11. Related Party Transactions
Related party transactions not disclosed elsewhere in the financial
statements are as follows:
(a) Advances receivable include $28,003 (2003 - $33,003; 2002 -
$415,156) due from companies and/or a joint venture with common
management and common directors.
(b) Consulting fees of $22,500 (2003 - $nil; 2002 - $60,000) were
paid to a company owned by a director.
(c) Management fees of $90,000 (2003 - $74,500; 2002 - $nil) were
paid to a company owned by a director.
(d) Directors' fees of $24,000 (2003 - $11,500; 2002 - $nil) were
paid to directors of the Company.
(e) An allowance in the amount of $209,840 has been accrued in
respect of advances made to a Company with common management.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
12. Income Taxes
The components of the future income tax assets are as follows:
-----------------------------------------------------------------------------------------------------------
2004 2003 2002
-----------------------------------------------------------------------------------------------------------
Future income assets:
Non-capital loss carry-forwards $ 2,877,000 $ 2,983,000 $ 3,099,000
Earned depletion base 82,000 77,000 81,000
Unused cumulative Canadian exploration
expenses 13,000 13,000 12,000
Unused cumulative Canadian development
expenses 813,000 764,000 805,000
-----------------------------------------------------------------------------------------------------------
Less: valuation allowance (3,785,000) (3,837,000) (3,997,000)
-----------------------------------------------------------------------------------------------------------
Net future income assets $ - $ - $ -
===========================================================================================================
The valuation allowance reflects the Company's estimate that the tax
assets, more likely than not, will not be realized.
At January 31, 2004, the Company had, for Canadian tax purposes,
operating losses aggregating approximately $2.640,000.
These losses are available to reduce taxable incomes earned by the
Canadian operations of future years and expire as follows:
----------------------------------------------------
2005 $ 422,000
2006 341,000
2007 400,000
2008 223,000
2009 211,000
2010 477,000
2011 566,000
----------------------------------------------------
$
====================================================
The net operating losses available to offset revenues of the US
operations are approximately US$3,300,000 and expire at various times
through 2016.
13. Subsequent Events
(a) Subsequent to January 31, 2004, the Company closed a non-brokered
private placement with the issuing of 1,000,000 common shares at
a price of $0.36 and 1,000,000 share purchase warrants with the
right to purchase one (1) common share for each warrant issued at
a price of $0.48 for a two-year period.
(b) Subsequent to January 31, 2004, the Company closed a non-brokered
private placement with the issuing of 1,500,000 common shares at
a price of $0.44 and 1,500,000 share purchase warrants with the
right to purchase one (1) common share for each warrant issued at
a price of $0.55 for a two-year period.
14. Differences Between Canadian And United States Generally Accepted
Accounting Principles (Canadian GAAP And U.S. GAAP)
These consolidated financial statements and the selected financial
data have been prepared under Canadian Generally Accepted Accounting
Principles ("Canadian GAAP").
For each year of presentation, the modifications necessary in order
for these consolidated financial statements to conform to U.S. GAAP
have been suitably provided as follows:
(a) Reconciliation of Consolidated Balance Sheet items:
o Reconciliation of Total Assets and Liabilities
--------------------------------------------------------------------------------------------------
2004 2003 2002
--------------------------------------------------------------------------------------------------
Total assets per CDN GAAP $ 10,967,000 $ 8,888,094 $ 6,564,304
Deferred exploration expenditures, net (6,772,388) (6,357,302) (5,075,070)
Unrealized loss on marketable
securities 70,946 45,406 -
Unrealized loss on investment
securities 19,007 - -
--------------------------------------------------------------------------------------------------
Total assets per US GAAP $ 4,284,565 $ 2,576,198 $ 1,489,234
==================================================================================================
Total liabilities per CDN GAAP $ 161,095 $ 387,499 $ 159,095
==================================================================================================
Total liabilities per US GAAP $ 161,095 $ 387,499 $ 159,095
==================================================================================================
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
(In Canadian Dollars)
- --------------------------------------------------------------------------------
14. Differences Between Canadian And United States Generally Accepted
Accounting Principles (Canadian GAAP And U.S. GAAP) (continued)
o Reconciliation of Deficit under U.S. GAAP
- --------------------------------------------------------------------------------------------------
2004 2003 2002
- --------------------------------------------------------------------------------------------------
Deficit end of year per CDN GAAP $ (19,632,053) $ (18,878,457) $ (18,122,458)
Stock compensation expense (60,000) (60,000) -
Deferred exploration expenditures, net (6,772,388)( (6,357,302) (5,075,070)
Unrealized foreign exchange (gain) loss 113,642 (26,981) (24,987)
Unrealized loss on marketable
securities 119,174 119,174 96,488
Unrealized loss on investment
securities 19,007 - -
- --------------------------------------------------------------------------------------------------
Deficit end of year per US GAAP $ (26,212,618) $ (25,203,566) $ (23,126,027)
==================================================================================================
(b) Reconciliation of Consolidated Statement of Income items:
Reconciliation of Net Loss under U.S. GAAP
Year ended Year ended Year ended
January 31, January 31, January 31,
2004 2003 2002
- --------------------------------------------------------------------------------------------------
Net loss for the year per CDN GAAP $ (753,596) $ (755,999) $ (1,128,401)
Deferred exploration expenditures (420,054) (1,351,302) (196,909)
Stock based compensation expense - (60,000) -
Writedown of deferred exploration
expenditures 4,968 10,389 70,019
Unrealized foreign exchange (gain)
loss 140,623 (1,994) (32,738)
Change in unrealized (gain) loss of
marketable securities - 22,686 96,488
Unrealized loss on investment security 19,007 - -
Proceeds of interest disposed of - 58,681 -
- --------------------------------------------------------------------------------------------------
Net loss for the year per U.S. GAAP $ (1,009,052) $ (2,077,539) $ (1,191,541)
==================================================================================================
(c) Loss Per Share U.S. GAAP
--------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
January 31, January 31, January 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share
- basic and diluted $ (0.03) $ (0.07) $ (0.06)
==================================================================================================
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
- ---------------------------------------------------------------------------------------------------------------------
(In Canadian Dollars)
14. Differences Between Canadian And United States Generally Accepted
Accounting Principles (Canadian GAAP And U.S. GAAP) (continued)
(d) Comprehensive Income
Statement of Financial Accounting Standards No. 130 requires the
reporting of comprehensive income in addition to net earnings.
Comprehensive income includes net income plus other comprehensive
income; specifically, all changes in equity of a company during a
period arising from non-owner sources.
Under US GAAP, a statement of changes in shareholders' equity and
comprehensive income in the following format would form a part of
the annual financial statement:
Consolidated Statement of Changes in Shareholders' Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Other
Share Capital Compre- Compre- Total
----------------------- Share Additional hensive Retained hensiv Share-
Number of Sub- Paid In Income Earnings Income holders'
Shares Amount scriptions Capital (Loss) (Deficit) (Loss) Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Balance forward,
January 31, 2001 20,018,100 $23,945,667 $ - $ - $ - $(21,934,486) $ (7,751) $2,003,430
Share subscriptions - - 100,000 - - - - 100,000
Issuance of shares
(see Note 9) 2,093,000 482,000 - - - - - 482,000
Components of
comprehensive income:
- net income (loss) - - - - (1,191,541) (1,191,541) - (1,191,541)
- change in
unrealized gain
(loss) of marketable
securities - - - - (96,488) - (96,488) (96,488)
- foreign currency gain
(loss) - - - - 32,738 - 32,738 32,738
- ------------------------------------------------------------------------------------------------------------------------------------
$(1,255,291)
============
Balance,
January 31, 2002 22,111,100 $24,427,667 $ 100,000 $ - $(23,126,027) $(71,501) $1,330,139
- ------------------------------------------------------------------------------------------------------------------------------------
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
- ---------------------------------------------------------------------------------------------------------------------
(In Canadian Dollars)
14. Differences Between Canadian And United States Generally Accepted
Accounting Principles (Canadian GAAP And U.S. GAAP) (continued)
(d) Comprehensive Income (continued)
Consolidated Statement of Changes in Shareholders' Equity (continued)
- --------------------------------------------------------- --------------------------------------------------------------------------
Accumulated
Other
Share Capital Compre- Compre- Total
----------------------- Share Additional hensive Retained hensive Share-
Number of Sub- Paid In Income Earnings Income holders'
Shares Amount scriptions Capital (Loss) (Deficit) (Loss) Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Balance forward,
January 31, 2002 22,111,100 $24,427,667 $ 100,000 $ - $ - $(23,126,027) $(71,501) $1,330,139
Share subscriptions - - (100,000) - - - - (100,000)
Issuance of shares
(see Note 9) 12,598,838 2,951,385 - - - - - 2,951,385
Stock-based
compensation expense - - - 60,000 - - - 60,000
Components of
Comprehensive income:
- - net income (loss) - - - - (2,077,539) (2,077,539) - (2,077,539)
- change in unrealized
gain (loss) of
marketable securities - - - - 22,720 - 22,720 22,720
- - foreign currency gain
(loss) - - - - 1,994 - 1,994 1,994
- ------------------------------------------------------------------------------------------------------------------------------------
$(1,897,002)
============
Balance,
January 31, 2003 34,709,938 27,379,052 - 60,000 (25,203,566) (46,787) $2,188,699
Share subscriptions - - 791,720 - - - 791,720
Issuance of shares
(see Note 9) 8,906,917 2,267,186 - - - - 2,267,186
Components of
comprehensive income:
- - net income (loss) - - - - (1,009,052) (1,009,052) - (1,009,052)
- - change in unrealized
gain (loss) of
marketable securities - - - - 25,540 - 25,540 25,540
- - foreign currency gain
(loss) - - - - (140,623) - (140,623) (140,623)
- ------------------------------------------------------------------------------------------------------------------------------------
$ (1,124,135)
=============
Balance,
January 31, 2004 43,616,855 $29,646,238 $791,720 $60,000 $(26,212,618) $(161,870) $4,123,470
====================================================================================================================================
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
- --------------------------------------------------------------------------------
(In Canadian Dollars)
14. Differences Between Canadian And United States Generally Accepted
Accounting Principles (Canadian GAAP And U.S. GAAP) (continued)
(e) Supplemental Financial Information
o Reconciliation of Cash Flows Under U.S. GAAP
Cash Flows from Operating Activities
---------------------------------------------------------------------------------------------------
2004 2003 2002
---------------------------------------------------------------------------------------------------
Cash provided by (used in) operating
activities per CDN GAAP $ (300,820) $ (345,611) $ (200,263)
Deferred exploration expenditures (420,054) (1,195,479) (96,909)
Proceeds of interest disposed of - 58,681 -
---------------------------------------------------------------------------------------------------
Cash provided by (used in) operating
activities per US GAAP $ (720,874) $ (1,482,409) $ (297,172)
===================================================================================================
Cash Flows from Investing Activities
---------------------------------------------------------------------------------------------------
2004 2003 2002
---------------------------------------------------------------------------------------------------
Cash provided by (used in) investing
activities per CDN GAAP $ 264,756 $ (2,343,369) $ (232,275)
Deferred exploration expenditures 420,054 1,195,479 96,909
Proceeds from sale of mineral interest - (58,681) -
---------------------------------------------------------------------------------------------------
Cash provided by (used in) investing
activities per US GAAP $ 684,810 $ (1,206,571) $ (135,366)
===================================================================================================
(f) Recent account pronouncements
In April 2003, FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities". This
Statement amends and clarifies financial accounting and reporting
for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to
as derivatives) and for hedging activities under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities".
This Statement is effective for contracts entered into or
modified after June 30, 2003. We do not expect the implementation
of SFAS No. 149 to have a material impact on these consolidated
financial statements.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
- --------------------------------------------------------------------------------
(In Canadian Dollars)
14. Differences Between Canadian And United States Generally Accepted
Accounting Principles (Canadian GAAP And U.S. GAAP) (continued)
(f) Recent account pronouncements (continued)
In May 2003, FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities
and Equity". This Statement establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that
an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). This
Statement is effective for financial instruments entered into or
modified after May 30, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15,
2003. We do not expect the implementation of SFAS No. 150 to have
a material impact on these consolidated financial statements.
In December 2003, FASB issued SFAS 132(R), a revision to SFAS No.
132, Employers' Disclosure About Pensions and Other
Postretirement Benefits. SFAS No. 132(R) requires additional
disclosures about the assets, obligations, cash flow and net
periodic benefit cost of defined benefit pension plans and other
defined benefit postretirement plans. SFAS No. 132(R) is
effective for financial statements with fiscal years ending after
December 15, 2003, with the exception of disclosure requirements
related to foreign plans and estimated future benefit payments
which are effective for fiscal years ending after June 15, 2004.
The adoption of SFAS No. 132(R) did not impact these consolidated
financial position or results of operations.
In a December 11, 2003 speech at the American Institute of
Certified Public Accountants, the Securities and Exchange
Commission ("SEC") expressed the opinion that rate-lock
commitments represent written put options, and therefore should
be valued as a liability. The SEC expressed that they expect
registrants to disclose the effect on the financial statement of
recognizing the rate-lock commitments as written put options, for
quarters commencing after March 15, 2004. Additionally, the SEC
recently issued Staff Accounting Bulletin No. 105 ("SAB No. 105")
which clarifies the SEC's position that the inclusion of cash
flows from servicing or ancillary income in the determination of
the fair value of interest rate lock commitments is not
appropriate. The Company has not yet determined the impact on the
financial statements of SAB No. 105, which must be implemented
for loan commitments entered into on or after April 1, 2004. The
Company is currently analyzing the impact of the SEC's position
and will, if required, account for its loan origination
commitments as presecribed.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
- --------------------------------------------------------------------------------
(In Canadian Dollars)
14. Differences Between Canadian And United States Generally Accepted
Accounting Principles (Canadian GAAP And U.S. GAAP) (continued)
(g) Stock options
In 1995 FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation", which contains a fair value-based method for
valuing stock-based compensation that entities may use. This
measures compensation cost at the grant date based on the fair
value of the award. Compensation is then recognized over the
service period, which is usually the vesting period. For U.S.
GAAP purposes management accounts for options under Accounting
Principles Board ("APB") No. 25 "Accounting for Stock Issued to
Employees", under which no compensation is recognized in
connection with options granted to employees and directors except
if options are granted at a strike price below fair value of the
underlying stock. If the alternative accounting-related
provisions of SFAS No. 123 had been adopted as of the beginning
of 1996, the effect on 2001 U.S. GAAP net loss per share would
have been immaterial.
In fiscal year 2002, the fair value of each option granted to
employees and directors has been estimated as of the date of
grant using the Black-Scholes option pricing model with the
following assumptions: risk-free interest rate of 3.5%; dividend
yield 0%; volatility of 80%; and 4.59 years of expected lives.
The weighted average fair value of options granted in 2002 is
$0.25.
In fiscal year 2003, the fair value of each option granted to
employees and directors has been estimated as of the date of
grant using the Black-Scholes option pricing model with the
following assumptions: risk-free interest rate of 3.5%; dividend
yield 0%; volatility of 98%; and 3.41 years of expected lives.
The weighted average fair value of options granted in 2003 is
$0.25.
Based on the computed option values and the number of the options
issued, had the Company recognized compensation expense, the
following would have been its effect on the Company's loss for
the 2003 year and loss per share:
--------------------------------------------------------------------------------------------------
2003 2002
--------------------------------------------------------------------------------------------------
Loss for the year:
- as reported $ (2,077,539) $ (1,191,541)
--------------------------------------------------------------------------------------------------
- pro-forma $ (2,131,393) $ (1,201,953)
--------------------------------------------------------------------------------------------------
Basic and diluted loss per share:
- as reported $ (0.07) $ (0.06)
--------------------------------------------------------------------------------------------------
- pro-forma $ (0.08) $ (0.06)
--------------------------------------------------------------------------------------------------
For the year 2004, there were no reportable differences
between the reported amounts and the pro-forma fair value
model.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
- --------------------------------------------------------------------------------
(In Canadian Dollars)
14. Differences Between Canadian And United States Generally Accepted
Accounting Principles (Canadian GAAP And U.S. GAAP) (continued)
(g) Stock options (continued)
In March 2000 the Financial Accounting Standards Board issued
"Interpretation #44, Accounting For Certain Transactions
Involving Stock Compensation" among other issues, this
interpretation clarifies:
o The definition of employee for purposes of applying opinion
25.
o The criteria for determining whether a plan qualifies as a
noncompensatory plan.
o The accounting consequence of various modifications of the
terms of a previously fixed stock option or award, and
o The accounting for an exchange of stock compensation awards
in a business combination.
In relation to (iii) the interpretation states, "if the
exercise price of a fixed stock option award is reduced, the
award shall be accounted for as a variable from the date of
the modification to the date the award is exercised, is
forfeited, or expires unexercised, the exercise price of an
option award has been reduced if the fair value of the
consideration required to be remitted pursuant to the
award's original terms".
(h) Foreign Exchange Adjustment
Under U.S. GAAP, foreign exchange (gains) and losses would be
excluded from the operating activities in the Statement of Cash
Flows and would be shown separately as "effect of exchange rate
changes on monetary items": 2004 - $(140,306); 2003 - $1,994;
2002 - $32,738.
(i) Statement of Cash Flow
o Supplemental Disclosure of Cash Flow Information
--------------------------------------------------------------------------------------------
Cash paid during the year for: 2004 2003 2002
--------------------------------------------------------------------------------------------
Interest $ 730 $ 1,315 $ 429
Income taxes $ - $ - $ -
--------------------------------------------------------------------------------------------
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
- --------------------------------------------------------------------------------
(In Canadian Dollars)
14. Differences Between Canadian And United States Generally Accepted
Accounting Principles (Canadian GAAP And U.S. GAAP) (continued)
(j) Additional Disclosure Required by U.S. GAAP
o Concentrations of Credit Risk
At January 31, 2004, 2003 and 2002, the Company had
approximately $nil, $nil and $nil, respectively, in cash
balances at financial institutions which were in excess of
the insured limits.
o Operations in a Foreign Country
The Company is subject to numerous factors relating to
conducting business in a foreign country (including, without
limitation, economic, political and currency risk), any of
which could have a significant impact on the Company's
operation.
The Company's U.S. subsidiaries, Coral Resources, Inc. and
Coral Energy Corporation of California are subject to U.S.
corporation tax on profits.
o Flow-through Shares
There is no material differences in accounting for
flow-through shares (note 2(l)).
(k) Additional Disclosure Required by SEC
The SEC requires that related party transactions be disclosed as
a separate line in the financial statements. Under this
requirement, the following related party transactions would have
been shown separately as related party balances in the financial
statements:
o Advances receivable include $28,003 (2003 - $33,003; 2002 -
$415,156) due from companies and/or a joint venture with
common management and common directors.
o Consulting fees of $nil (2003 - $nil; 2002 - $60,000) were
paid to a company owned by a director.
o Management fees of $90,000 (2003 - $74,500; 2002 - $nil)
were paid to a company owned by a director.
o An allowance in the amount of $209,840 has been accrued in
respect of advances made to a company with common
management.
o Investment securities and marketable securities would be
noted as a related party on the balance sheet.
CORAL GOLD CORP.
Notes to Consolidated Financial Statements
January 31, 2004, 2003 and 2002
- --------------------------------------------------------------------------------
(In Canadian Dollars)
14. Differences Between Canadian And United States Generally Accepted
Accounting Principles (Canadian GAAP and U.S. GAAP) (continued)
(l) Deferred Exploration Expenditures
The Company follows the policy of deferring all acquisition and
exploration costs relating to the mineral properties held. Under
US GAAP, the deferred exploration expenditures would have been
expensed in the year they were incurred (see note 14(a) to
14(e)).