UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934 OF A FOREIGN CORPORATION
LEADER MINING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Commission File no _______________
Alberta, Canada (N/A)
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 Fifth Avenue, S.W., Suite 530, Calgary, Alberta T2POL6
(Address of principal executive offices) (Zip Code)
(403) 234-7501
Registrant's telephone number, including area code
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class to be so registered: None
Name of each exchange on which each class is to be registered: None
Securities to be registered pursuant to Section 12(g) of the Act:
Title of class
Common Unlimited Shares of Common Stock
A total of 16,826,065 shares of common stock of Registrant were issued and
outstanding as of May 20, 1999. No other classes were issued and outstanding.
Indicated by check mark whether the Registrant (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
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
The Registrant has not been required to file reports, but has filed reports
under Section 13(2)(b) as a foreign company.
Indicate by check mark which financial statement item the Registrant has elected
to follow: Item 17 __X__ Item 18 ______
TABLE OF CONTENTS
PART I
Page
Item 1. Description of Business......................................5
Item 2. Description of Property.....................................12
Item 3. Legal Proceedings...........................................18
Item 4. Security Ownership of Certain Beneficial Owners
and Management (Control of Registrant)......................20
Item 5. Nature of Trading Market
Market Price of and Dividends on
Registrants Common Equity and
Related Stockholder matters.................................21
Item 6. Exchange Controls and Other Limitations Affecting Security
Holders.....................................................22
Item 7. Taxation....................................................22
Item 8. Selected Financial Information..............................24
Item 9. Management Discussion and Analysis..........................28
of Financial Condition and Results of Operations
Item 10. Directors and Executive Officers ...........................31
Item 11. Compensation of Officers and Directors......................33
Item 12. Options to Purchase Securities from Registration or
Subsidiaries................................................35
Item 13. Interest of Management in Certain Transactions..............36
Item 14. Description of Securities to be registered..................37
Item 15. Defaults upon Senior Securities.............................37
Item 16. Changes in Securities, Changes in Security for Registered
Securities..................................................38
Item 17. Financial Statements........................................38
Item 18. Financial Statements (Not applicable) ......................38
Item 19. Financial Statements, Exhibits, and Supplementary Data .....39
Exhibit Index......................................49
Signatures.........................................42
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) The Company
Leader Mining International Inc. ("Leader", "Company" or "Registrant") was
incorporated on June 22, 1987 as Durga Resources Ltd. ("Durga"), under the
Business Companys Act (Alberta). By a Certificate of Amalgamation dated
March 31, 1993 Durga amalgamated with Durvada Resources Ltd. and resulted in new
Durga Resources Ltd. By a Certificate of Amendment dated September 24, 1993,
Durga changed its name to Leader Mining Company ("LMC"). By a Certificate of
Amendment dated July 18, 1994. It consolidated its shares (reverse split) in
1994 by one for five shares. LMC changed its name to the Leader Mining
International Inc.
The Registrant was listed on the Alberta Stock Exchange on December 18, 1987.
Leader is extraprovincially registered in the Province of Saskatchewan by a
Certificate of Registration dated November 21, 1996, under The Business
Corporations Act (Saskatchewan) and in the Province of Manitoba by a Certificate
of Registration dated November 20, 1996, under The Business Corporations Act
(Manitoba).
The registered office of the Company in Alberta is at 1600, 407 - 2nd Street
S. W., Calgary, Alberta, T2P 2Y3. The head office and records office of the
Corporation is at 530, 400-5th Avenue S. W., Calgary, Alberta, T2P 0L6.
The Company is a reporting company in the Province of British Columbia and
in the Province of Alberta. The Corporation's shares are listed and posted for
trading on the Alberta Stock Exchange (ASE) under the symbol "LMN" and quoted on
National Quotation Bureau "Pink Sheets."
The Company was formed by Mr. Yashvir (Jasi) Nikhanj, the current President and
a director, to pursue the principal business of exploration, and development of
gold, silver and base metals projects.
From 1987 to 1994, the Company was engaged in mineral exploration for gold,
copper, zinc and diamonds in the Northwest Territories and Saskatchewan, Canada.
The Company was also exploring for gold in the state of Nevada. The Company had
minimal capitalization during such period, and its activities were very limited.
The Company's strategy with respect to its mineral exploration related
activities is to identify geological areas in which the Company may invest or
participate in non-producing or producing mineral prospects or joint ventures
for development, and where the company may acquire prospects for mineral
exploration through staking claims
During the last five (5) fiscal years, the Company conducted
exploration activities on certain mineral prospects as follows:
Voisey's Bay; Labrador, Canada, 1998
Approximately $55,000 expended for land acquisition and prospecting and ground
geophysics to explore for magnetic segregation nickel deposits.
Ariel Resources Ltd.; Costa Rica, 1998
Approximately $250,000 expended to perform due diligence and
technical feasibility studies to ascertain the viability of corporate
merger.
Nighthawk Lake; Ontario, Canada, 1996-1998
Approximately $275,000 expended for land acquisition and
prospecting; ground geophysics; and diamond drilling to test potential
gold targets.
Bristol; Ontario, Canada, 1996-1997
Approximately $125,000 expended for land acquisition and
prospecting; ground geophysics; and diamond drilling to test potential
gold targets.
Steephill Lake; Saskatchewan Canada, 1997
Approximately $300,000 expended for land acquisition and
prospecting; airborne geophysics; and diamond drilling to test
potential base metal targets in volcanogenic massive sulphide (VMS).
Nettogami Lake; Ontario, Canada, 1996
Approximately $1,278,000 expended on land acquisition and
prospecting, airborne and ground geophysics, and diamond drilling to
test potential sedimentary exhalitive (Sed Ex) base metal targets.
Merendon Mining Corporation; Honduras, 1996
Approximately $750,000 expended for land acquisition, due
diligence, and technical studies to ascertain the attractiveness of
venture participation.
Blower Investments AVV and Condor Resources AVV; Peru, 1996
Approximately $430,000 expended for land acquisition, due
diligence, and technical studies to ascertain the attractiveness of
venture participation.
Rioux Lake; Saskatchewan, Canada, 1994-1995
Approximately $50,000 expended for geological and geochemical
surveys to identify polymetallic base metal potential.
Candle Lake; Saskatchewan, Canada, 1994
Prospective diamond claims acquired.
The Company hires third-party companies to conduct drilling, testing, and to
provide services and evaluation on a negotiated contract basis, except that a
company, Nikhanj and Associates Geo Consulting, owned by the Company's President
and largest shareholder, Y.S. (Jasi) Nikjanj provides management, geological,
and exploration consulting services to the Company for $10,000 per month.
The Company is not carrying any reserve values of any prospects due to the lack
of any measurable reserves.
(b) Current Business
The focus of the Company is to find, delineate, and exploit mineral deposits in
under explored terrain within jurisdictions that are politically stable and
actively pursue mineral exploration and development. The Company currently has
two major prospects, which are the Knife Lake Project (located in Saskatchewan,
Canada) and the Karmel Diamond Project (located in the Republic of South
Africa).
As of December 31, 1998, the Company has spent $7.3 million (Canadian) exploring
for base and precious metals within the Scimitar Complex of northeastern
Saskatchewan and delineating the Knife Lake copper deposit. Over the next three
years expenditure of an additional $3.3 million (Canadian) is anticipated for
geological reconnaissance ground geophysics, drilling, and development
engineering.
As of March 31, 1999, the Company has spent $0.185 million (Canadian) exploring
the Karmel Diamond Project for diamonds. The Company can earn a 75% working
interest in the project by spending an additional $1.315 million (Canadian) over
the next 3 years.
The Company is always searching for high quality grass roots exploration
opportunities, which can be acquired at low cost. Identification of targets of
opportunity represent the Company's focus for growth, and annual expenditures of
$0.25 million (Canadian) are anticipated for evaluation, acquisition, and
initial testing of new projects.
Corporate overhead is held to a minimum. Expenditure for office rent, office
supplies, travel, and administration are expected to continue at the current
level of $0.7 million (Canadian) per year.
A summary of the Company's proposed expenditures is presented below:
CORPORATE EXPLORATION BUDGETS
($Canadian x 1000)
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Fiscal year, March 31 2000 2001 2002 Total
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Knife Lake Project
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Geological Reconnaissance 300 100 50 450
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Geophysics 300 100 50 450
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Drilling 500 800 700 2000
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Engineering 100 300 400
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Sub-Total 1,100 1,100 1,100 3,300
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Karmel Project
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Geological Reconnaissance 70 30 30 130
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Drilling 150 100 50 300
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Sampling 70 300 100 470
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Engineering 25 70 320 415
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Sub-Total 315 500 500 1,315
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Opportunity Targets 250 250 250 750
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Overhand and Administration 700 700 700 2,100
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Grand Total (CAN $) 2,365 2,550 2,500 7,465
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
The Company's current business plan is in mineral exploration including foreign
mineral joint ventures, in Canada and South Africa. The Company has determined
that it must build an asset base through grass roots exploration; and
acquisition by exchange of stock for other mineral companies, leases, and
mineral prospects for exploration or development if the opportunity arises. The
Company believes that debt will rarely be desirable to acquire any prospect or
company. The Company may acquire other assets by exchange of stock or cash.
The Company has not established, and does not intend to formally establish,
criteria for the selection or evaluation of mineral prospects or participations.
When a prospect is located which in management's opinion, holds potential for
the Company, an attempt will be made to secure an option, or lease, in the
prospects. Shareholder approval will not be sought for prospect acquisitions.
Therefore, shareholders will be dependent upon the judgment of management in
selecting prospects (see "Management"). If such an interest is acquired, the
Company will then expend funds for preliminary exploration and testing of the
prospect to determine the feasibility of production of such prospect. Based on
the results of such preliminary testing, the Company will decide, without
shareholder approval, whether to acquire or abandon the prospect. A prospect or
interest may be acquired by outright purchase; by earning an interest through
participation with other companies; or by exchange of the shares for leases or
interests in prospects.
The Company may expend funds to rework, explore or test any prospects
its acquires to determine the economic production feasibility of such prospects.
The Company will rely on its own management and outside consultants engaged for
specific work on a limited basis, prospect by prospect, to provide competent
evaluation and recommendations concerning prospects or interests in prospects to
be considered for acquisition or exploration. The Company has agreements with
several third party companies for providing specific limited services related to
prospects, such as mapping, geochemical, sampling, or drilling. Based upon the
results of such exploration and tests, as interpreted by management, the Company
will then determine whether such prospects should be acquired, explored further,
sold or leased to a third party, held for possible later development or
abandoned; or whether development to production should be attempted by the
Company either by itself or through joint venture or other business arrangements
with other companies or entities.
The Company may agree to assign rights in certain prospects to be explored to
the general or managing partner of a partnership or joint venture, which thereby
becomes the owner of the working interest in the prospect. The Company may also
agree to supervise and manage all activities on the prospect and to obtain,
through subcontractors, all necessary related services and equipment. The
Company actively reviews prospects for putting together exploration or
development joint ventures.
Parents and Subsidiaries
Parent
LEADER MINING INTERNATIONAL, INC.
Subsidiaries
None.
The Company's principal areas of exploration are described herein below under
"Description of Properties."
RISK FACTORS
Risks of Exploration and Development
Resource exploration and development is a speculative business and involves a
high degree of risk. The marketability of natural resources which may be
acquired or discovered by the Company will be affected by numerous factors
beyond its control. These factors include commodity price and currency
volatility, the proximity and capacity of natural resource markets and
processing equipment, and government regulations and changes thereto, including
regulations relating to prices, taxes, royalties, land tenure, importing and
exporting of minerals and environmental protection. In addition, few mineral
exploration properties become commercially viable mines, nor can there be any
assurances that exploration work carried out by the Company will be successful.
The exact effect of these factors cannot be accurately predicted, but the
combination of these factors may result in the Company not receiving an adequate
return on invested capital.
Recovery of Reserves
In carrying on its mineral exploration and development activities, the Company
may rely upon calculations as to potential ore reserves and corresponding ore
grades on the Company's prospects which by their nature are not exact. Until ore
is actually mined and processed, ore reserves and ore grades must be considered
as estimates only. The quantity of economic reserves will also vary depending on
mineral prices which have historically been highly cyclical and dependent upon
numerous factors beyond the Company's control including changes in investment
trends and international monetary systems, political events and changes in the
supply and demand for minerals on public and private markets. Any material
changes in reserves, ore grades or stripping ratios will affect the economic
viability of any prospects which might be developed. Further, short term
operating factors relating to the prospect development, including a need for
orderly development the processing of new or different ore grades may affect
profitability in any particular accounting period. There can be no assurance
that mineral recoveries or other mineral recoveries in small scale laboratory
tests will be duplicated under on site conditions or during production.
Fluctuation of Mineral Prices
The Company's mining operations if any are ever undertaken will be subject to
the normal risks of mining and profits are subject to fluctuations in mineral
prices, in particular the market price of the mineral to be sought in
production. The price of minerals has fluctuated widely in recent years and is
affected by numerous factors beyond the Company's control including
international economic and political trends, expectations of inflation, interest
rates, global or regional consumptive patterns, speculative activities and
increased production due to new mine developments and improved mining and
production methods. The effect of these factors on the price of minerals cannot
be accurately predicted.
Competition
The Company competes with major mining companies and other smaller natural
resources companies in the acquisition, exploration, financing and development
of new properties and projects. Some of these companies are more experienced,
larger and better capitalised than the Company. The Company's competitive
position will depend upon its ability to successfully and economically explore,
acquire and develop new and existing mineral resource properties or projects.
Factors which allow producers to remain competitive in the market over the long
term are the quality and size of the ore body, if any, cost of production, and
proximity to market. Because of the number of companies and variables involved,
no individual or group of producers can be pointed to as being in direct
competition with the Company.
Capitalisation and Commercial Viability
The Company has limited financial resources and there is no assurance that
additional funding would be available to the Company for further exploration or
development of its properties or to fulfil its obligations under any applicable
agreements. Although the Company has been successful in the past in obtaining
financing through the sale of equity securities, there can be no assurance that
the Company will be able to obtain adequate financing in the future or that the
terms of such financing will be favourable. Failure to obtain such additional
financing could result in delay or indefinite postponement of further
exploration and development of the Company's prospects with the possible loss of
exploration or exploitation permits.
The commercial viability of production on a particular prospect will be affected
by factors that are beyond the Company's control, including the particular
attributes of the deposit, the fluctuation in mineral prices, the costs of
constructing and operating a mine, processing facilities, the availability of
economic sources of energy, government regulations including regulations
relating to prices, royalties, restrictions on production, quotas on exportation
of minerals, as well as the costs of protection of the environment and
agricultural lands.
It is impossible to assess with certainty the impact of these factors.
Uninsurable Risks
Mining operations generally involve a high degree of risk. Hazards such as
unusual or unexpected formations, power outages, labour disruptions, flooding,
explosions, cave-ins, landslides, inability to obtain suitable or adequate
machinery equipment or labour and other risks are involved. The Company may
become subject to liability for pollution, cave-ins or hazards against which it
cannot insure or against which it may elect not to insure. The payment of such
liabilities may have a material, adverse effect on the Company's financial
position.
Compliance with Governmental Regulations
The Company's exploration and mining operations are subject to mining, health,
labour and environmental regulations, changes in which could result in
additional expenses and capital expenditures, availability of capital,
competition, reserve uncertainty, potential conflicts of interest, title risks,
dilution and restrictions and delays in operations, the extent of which cannot
be predicted.
Conflicts of Interest
Certain of the directors and officers of the Company are also directors,
officers and shareholders of certain other companies engaged in natural resource
exploration and development and conflicts of interest may arise.
ITEM 2: DESCRIPTION OF PROPERTIES
The Company owns no properties. It has mineral prospects which consist of mining
claims or contractual exploration agreements which may be evolved to development
if the Company so decides. For all purposes in this description, Registrant is
referred to as "Leader."
Knife Lake Prospect, Saskatchewan, Canada
Location and History
The Knife Lake Prospect is located in northeastern Saskatchewan close to the
Manitoba border. Knife Lake itself is located in the southeastern portion of the
project area at latitude 55 degrees 54' N and longitude 102 degrees 43' W. The
project is operated from a well-equipped bush camp on Knife Lake, 136-km
north-northwest of Flin Flon, Manitoba (approximate population 7,600) and 180 km
northeast of La Ronge, Saskatchewan. The property, whose NTS reference is
63-M-15E, can be found on the Gilbert Lake, 63M15 claim map, available from
Saskatchewan Energy, Mines and Resources in Regina.
Leader holds, or has a right to earn subject to NSR payments, a 100 percent
interest in all of the claims and mining leases comprising the Knife Lake
Project, except for the eleven Consolidated Pine Channel Gold Corp.
claims. On these claims, Leader can earn up to a 90 percent interest.
Leader is the operator in all the option agreements covering all claims in the
project area. It is currently proceeding with, or making preparations for,
exploration it has planned or is required to do under the option agreements. All
the field exploration, on all mineral lands in which Leader has, or is earning,
an interest and which are described in this summary is carried out for Leader by
its own field staff or contractors directly under its control.
The Knife Lake prospect, optioned by Leader from CopperQuest in March, 1996,
initially consisted of mining lease ML 5269. It is 648 ha in size and covers the
known copper showing and soil geochemistry anomaly as well as the projected
strike extents. During 1996 and 1997, additional claims were staked by the
Company and optioned from consolidated Pine Channel Gold Corporation. Net
Smelter Royalties become payable if and when commercial production occurs from
the claims. Such royalties shall be payable to either CopperQuest or
Consolidated Pine Channel Gold Corporation in accordance with the land
ownership.
Leader Mining, anticipating the potential of this area, developed a strong land
position, conducted numerous geophysical surveys and collected extensive
geological data. The data sets consist of two airborne surveys, a regional
gravity survey, extensive drilling and mapping with accompanying
lithogeochemical sampling. To further evaluate the area, it was necessary to
synthesize Leader's geophysical data and known geology with the aim to identify
areas on the property with the highest potential to host various Volcanogenic
Massive Sulphide (VMS) style sulphide deposits.
At Knife Lake, Leader now owns or controls 109 mining claims and 1 mining lease
with a total land area of approximately 95,144 hectares. The claims are held
directly by Leader or by private individuals and other companies, which have
leased the prospect to Leader. This list of claims is attached as Table 1.
Mineral exploration and production in the Flin Flon Mining area has been active
for 80 years. Only recently has new geological modeling recognized that the
favorable Amisk Volcanics extend to the north from the Flin Flon Domain and
includes the former Hanson, Glennie, Scimitar and Kissenew Domains. These
domains have been explored intermittently by Hudson Bay Mining, Noranda, and
Cominco. With the current geological understanding, these volcanic domains are
highly prospective for VMS style mineralization. Leader's Knife Lake
Volcanogenic Massive Sulphide (VMS) Deposit conforms well within the context of
the newly defined model for the Flin Flon-Glennie Domain. Recent government
mapping has shown the Knife Lake property to lie within the newly recognized
Flin Flon-Glennie Lake Domain, which hosts the Flin Flon/Snow Lake VMS deposits.
The claims have received little mineral exploration and have no production
history, but appear to be an extension of the volcanic terrain which hosts the
base metal mineralization of the prolific Flin Flon mining area. The Amisk
Volcanics in Flin Flon are host to significant amounts of Volcanogenic Massive
Sulphide style, base metal mineralization.
Since 1968, prospecting and mapping in the area of Knife Lake and Scimitar Lake
has resulted in the discovery of several copper occurrences. The largest and
most significant of these occurrences is the Knife Lake copper-gold deposit. The
mineralization is located on the west side of the Knife Lake, less than 100
metres west of the shoreline, in the southern portion of Leader's property.
Infrastructure on the Knife Lake property is limited to the bush camp and winter
road access. Water for mineral processing and other needs is available in
abundance in the project area. The Island Falls hydroelectric power generating
station is located on the Churchill River at Sandy Bay. This station was
constructed to provide power to the town of Flin Flon. However, in the mid
1990's, the Government of Saskatchewan constructed a new high-tension power line
to deliver the power to the uranium mines of the Athabasca Basin in northern
Saskatchewan and all of the station's power output is now devoted to this
purpose. The transmission line comes within 20km of the southwestern corner of
the Knife Lake property.
While the Sandy Bay-Flin Flon has been explored for base and precious metals at
various times over the past 80 years, the earliest records of work in the
immediate area of Knife Lake are dated October 1968. From 1968, through 1972,
Straus Exploration conducted extensive exploration work, consisting of
horizontal loop, vertical loop and Turam EM ground geophysical surveys, ground
magnetometer surveys, geochemical soil sampling, geological mapping, trenching,
sampling and diamond drilling, over a gossanous copper-gold showing on the
western shore of Knife Lake. Approximately 4.7 square km of grid was
geologically mapped at a scale of 1:6,000 over the copper prospect area. A
slightly smaller area was covered by geochemical and geophysical surveys. D.E.
Pearson, as part of his 1971 mapping project, mapped in detail a portion of the
grid on a scale of 1:7,200. A diamond drill program consisting of 87 holes (2
Winkie and 85 XT sized core), totaling approximately 8,484m, was completed. As a
result of the exploration work, a mining lease was taken out, covering the
copper showing and surrounding geochemical anomaly.
Hudson Bay Exploration and Development, the wholly-owned exploration division of
Hudson Bay Mining and Smelting, conducted a regional airborne EM survey in 1980
and 1982. During 1989 and 1990 Cominco performed line cutting, geological and
geochemical surveys, on property approximately 2 km north of Knife Lake. Results
of these programs are not available.
The Knife Lake copper showing remained inactive until early 1989 when
CopperQuest was formed. CopperQuest commissioned Standing Geophysics Ltd.
(Standing) to re-establish Staus' grid over the copper prospect and to conduct
horizontal-loop EM and proton magnetometer surveys. Standing Geophysics
completed 77.6 line-km of magnetic surveying and 101 line-km of EM surveying in
February 1989. In completing the EM surveying, Standing used different cable
lengths (coil separations) over the copper prospect in an attempt to locate
areas where the copper mineralization may have been thickened due to folding.
Three such areas were located and recommended for diamond drilling. In addition,
three other conductive zones were identified outside of the immediate copper
prospect area. A total of 1,829m of drilling in 24 holes, was recommended but
never carried out.
In March 1996, Leader Mining acquired the mining leases, after entering into an
agreement with CopperQuest. Leader has access to the CopperQuest, and most of
the Straus, exploration data. A summary of Leader's expenditures on the prospect
is presented below:
- --------------------------------------------------------------------------------------------------------------------
Summary of Exploration Expenditures (June 1996 to December 1998)
- ---------------------------------------- ------------------------------------- -------------------------------------
Prospecting and 1,172 man days $342,600
Geological Mapping
- ---------------------------------------- ------------------------------------- -------------------------------------
Line Cutting 313 line km $119,400
- --------------------- ------------------ ------------------------------------- -------------------------------------
Geophysics Airborne 12,689 line km $753,700
- --------------------- ------------------ ------------------------------------- -------------------------------------
Ground 427 line km $243,300
- --------------------- ------------------ ------------------------------------- -------------------------------------
Geochem Soil 2,374 $23,300
- --------------------- ------------------ ------------------------------------- -------------------------------------
Assay 8597 (588 whole rock) $164,200
- ---------------------------------------- ------------------------------------- -------------------------------------
Trenching 180m3 $48,400
- ---------------------------------------- ------------------------------------- -------------------------------------
Drilling 30,866 m $2,960,500
- ---------------------------------------- ------------------------------------- -------------------------------------
Other (staking, logistics, $2,656,200
transportation)
- --------------------------------------------------------------------------------------------------------------------
TOTAL = $7,311,000
- --------------------------------------------------------------------------------------------------------------------
The Knife Lake Deposit is interpreted by the Company to be a remobilized
fraction of a larger primary VMS deposit. It is hosted within an altered
pegmatite, high in Na, K, Sr, and Ba which geochemistry has shown is derived
from alkali rich sedimentary rocks. To date, a total of 26,397 metres of diamond
drilling among 308 drill holes have been completed on the Knife Lake Deposit and
a digital geological model has been constructed. The mineralization is outlined
over a distance of 4,300 metres and to a depth of 100 metres. Internal
Geological modeling has generated sufficient indications to cause the Company to
continue exploration work.
GEOLOGICAL DESCRIPTION
Knife Lake lies within the Scimitar Complex, a structural domain within what is
generally known as the Churchill Structural Province of the Canadian Shield. The
Churchill Province is lower Proterozoic (Aphebian) in age. The Scimitar Complex
is highly deformed, multiple-folded terrain dominated by middle to upper
amphibolite facies, hornblende-biotite plagioclase-quartz gneisses of generally
intermediate composition and gneissic felsic intrusives. The lithologies have
been divided into gneissic granodiorites and subordinate metavolcanic and
metasedimentary rocks. Mafic volcanics and meta-gabbros are less common, but
present. The lithologies frequently exhibit pegmatitic textures due to partial
melting of up to 30 percent of the rock, in the case of ampholite metamorphic
grade. Original sedimentary and/or volcanic textures and structures, other than
gross lithologic layering, are rare.
Another prospective area is the boundary between geophysics distinguished rock
units A&B, which hosts the Linda-McCullum copper showing that has similarities
to the "Cypress" type hosted VMS model; a thick succession of mafic to
intermediate volcanics with isolated, linear conductive horizons at the "top" of
the sequence. This horizon has potential in light of the recent ophiolitic
models.
In all, fourteen primary target areas are identified which exhibit typical VMS
geophysical/geological signatures (conductivity with favorable magnetics and
geology). Numerous additional targets exist, located along boundaries and other
favorable geological horizons. At some point these will have to under go further
investigation.
The copper-gold mineralization occurs in, and adjacent to, an apparently
stratabound, "green pegmatite." This pegmatite lies on the contact between a
pink footwall gneiss, believed to be a metasediment, and a hanging wall package
comprised of tholeiitic amphibolies, believed to be a sequence of meta-volcanics
and meta-volcaniclastic sediments. This sequence terminates both southeast and
northwest of Knife Lake, but is repeated 4 kilometres to the east of Scimitar
Lake, where two other copper showings are known. The "green pegmatite" is a
relatively fine- to medium-grained, milky green, pegmatoidal felsic gneiss
composed of various proportions of green plagioclase, K-feldspar, biotite and
amphibole.
Recent whole rock geochemistry work by Leader's consultants indicates that there
are at least two major groups of rocks present in the Knife Lake copper deposit.
The first group comprises the pink "footwall gneiss" and the "green pegmatite"
(high Na, K, Sr, Ba). These were determined to be alkali-rich sedimentary rocks
and pegmatites, which also contained elevated phosphorous and titanium contents,
suggesting sedimentary rocks derived from alkalic/shoshonitc source material.
The four samples of the "green pegmatite," which hosts the Knife Lake copper
mineralization, have a composition similar to the pink gneiss, indicating that
they are derived from the footwall gneisses.
The second group includes tholeiitc (iron-rich) volcanic derived rocks such as
amphibolites and quartz-feldspar +garnet+biotite schists (high, Fe, low Na, K,
Sr, Ba) which constitute the hanging wall of the deposit. Of the twelve whole
rock samples analyzed, five were determined to be, in part, highly altered
volcanic rocks of rhyolitic, dioritic, and basaltic/gabboric composition. One of
the samples came from a strongly altered chloritic- to cunningtonite-rich zone,
whose strong iron and magnesium enrichment and sodium depletion is typical of
VMS-type, footwall alteration.
The mineralization itself is comprised of pyrrhotite, chalcopyrite, and pyrite,
with minor amounts of sphalerite and rare native copper. No native gold is noted
but, since most of the gold is free milling, the gold must be present as small
grains adjacent to and intermixed with the sulphides. The sulphides occur as
disseminations or net-textured stringers within the pegmatoidal texture or as
large clots occasionally appearing at gangue-mineral grain boundaries. There is
little or no conspicuous wall rock alteration associated with the copper-gold
mineralization. A prominent gossan zone marks the surface expression of the
mineralization "green pegmatite."
Recent diamond drilling just south of the Knife Lake deposit discovered
extensive strong native silver mineralization within east-west and
northwest-southeast trending faults. Mineralization style and setting indicative
of late stage low temperature hydrothermal emplacement, which is superimposed on
the copper mineralization noted at Knife Lake.
KARMEL PROSPECT, ORANGE FREE STATE SOUTH AFRICA
The Karmel prospect is an exploration attempt to find a gem quality
diamond deposit. The area has not been previously explored with modern
exploration techniques. Leader has conducted an aerial magnetic survey and
limited ground testing and drilling to date. In the event gem quality diamonds
are not found in sufficient quantity, the project will be abandoned because
industrial diamonds are uneconomic to produce in a new mine.
The 7,500-ha Karmel property is located about 100 km east of the
agricultural community of Bloemfontein, near the Lesotho border. The terrain is
rolling farmland (currently an ostrich ranch) with an interspersion of rocky
kops (hillocks). Poplar Resources, Ltd. holds a 100% interest in the Karmel
Project through a wholly owned South African subsidiary, Karmel Diamond Holdings
(Pty.), under a three-year prospecting agreement which entails an annual payment
equivalent to about C$60,000; and an option to enter into a mineral lease
agreement, the mineral rights holders would have a 4% interest in pre-tax mine
operating profits.
Leader has entered into an Option/Joint Venture Agreement whereby
Leader may earn a 75% interest in the Karmel prospect by expending $500,00 (Cdn)
per year for three years in exploration costs. Upon expenditure of the required
amounts by Leader, if warranted, a joint venture between Leader and Karmel in
which Leader will own 75% interest and Karmel a 25% interest, Leader has
expended approximately $185,000 (Cdn) since January 1999 on exploration
expenses.
The project can be described as a complex kimberlite fissure system
with potential to host 8 km of fissure strike length, and a small previously
mined pipe and a potential blow. There are two east-west fissures exposed on the
property: the Southern Fissure where very limited small-scale mining was carried
out by an open cut, and the Dundee Fissure which is exposed 5 km to the east in
a creek bed. The Dundee fissure outcrop has a width of about 2 m and does not
appear to have been test sampled. A small pipe (known as the Carmel Pipe) was
mined by a farmer/landowner circa 1950 to a relatively shallow (yet to be
determined) depth, but typically very little information is available. To
management's knowledge, no geophysical surveying was carried out to trace the
strike extent of the known fissures or to attempt to identify new
fissures/blows/pipes on the property. Low-level, high-sensitivity, airborne
and/or ground magnetic surveying would entail only a nominal costs. Bulk
sampling of the known Southern and Dundee fissures could also be completed
easily with material possibly processed on site with a mobile hand plant.
Drilling off the depth extension of the Karmel pipe could also be an early
endeavor in this project.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently involved in only one contractual dispute, involving
legal proceedings, with a private Saskatchewan company, and the outcome of such
proceeding, if adverse to the Company, would not be material and involves money
damages only less than $25,000.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (CONTROL
OF REGISTRANT)
(a) Beneficial owners of five percent (5) or greater, of the
Registrant's Common Stock and Warrants: No Preferred Stock is outstanding at the
date of this offering. The following sets forth information with respect to
ownership by holders of more than five percent (5%) of the Company's Common
Stock known by the Company based upon 16,826,065 shares outstanding at May 20,
1999.
- ------------------------ ---------------------------------- ----------------------------------- ----------------------
Title of Class Name Beneficial of Owner Amount and Nature of Beneficial Percent of Class
Ownership
- ------------------------ ---------------------------------- ----------------------------------- ----------------------
Common Stock Y.S. Jasi Nikhanj 1,500,000 Shares (1) 8.9%
320 Pumphill Cr. S.W. Calgary,
Alta T2V 4M1
- ------------------------ ---------------------------------- ----------------------------------- ----------------------
(1) Includes 207,000 shares owned by spouse, Aski Nikhanj.
b) The following sets forth information with respect to the Company's
Common Stock beneficially owned by each Officer and Director,
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Title of Class Name Beneficial of Owner Amount and Nature of Beneficial Percent of Class
Ownership
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Y.S. Jasi Nikhanj (1) Pres/Dir. 1,500,000 shares (1) 8.9%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Ueli Schurch Dir. 500,000 shares 3.0%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Manish Bindal Dir 80,000 shares (2) 0.4%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Roland Kesselring V.P. 590,000 shares (3) 3.5%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Raymond Lai V.P. 285,000 shares (4) 1.6%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Total amount owned by officers and directors as a group.
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Title of Class Name Beneficial of Owner Amount and Nature of Beneficial Percent of Class
Ownership
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Directors 2,080,000 shares 12.35%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Officers 2,375,000 shares 14.1%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Combined 2,955,000 17.6%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
(1) Includes 207,000 shares owned by spouse, Aski Nikhanj.
(2) Includes 50,000 shares owned by spouse SehraBindal.
(3) Includes 590,000 shares owned by spouse Manuela Kesselring.
(4) Includes 195,000 shares owned by spouse, Amond Lai.
ITEM 5. (a) MARKET PRICE OF AND DIVIDENDS ON REGISTRANTS COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is listed and traded on the Alberta Stock
Exchange and is quoted in the National Quotation Bureau "Pink Sheets" when
trades are made. The following table sets forth high and low closing prices of
the Company's common stock for the three (3) years ended March 31, 1999, 1998,
1997, and for 1996 on the Alberta Stock Exchange as follows:
Closing
(Canadian $)
High Low
1999
First Quarter 1.19 0.50
1998
First Quarter 5.10 3.40
Second Quarter 4.00 2.95
Third Quarter 3.15 0.54
Fourth Quarter 0.85 0.30
1997
First Quarter 9.45 4.00
Second Quarter 7.45 5.25
Third Quarter 6.20 2.80
Fourth Quarter 3.85 3.30
1996
First Quarter 6.56 0.47
Second Quarter 8.10 4.51
Third Quarter 5.60 3.55
Fourth Quarter 5.25 3.50
The Company has been unable to obtain a reliable history of pink sheet activity.
(b) As of May 20, 1999, the Company had an estimated 900 shareholders of record
of the common stock, including those held in brokerage accounts in "street
name."
(c) No dividends on outstanding common stock have been paid within the last two
fiscal years, and interim periods. The Company does not anticipate or intend
upon paying dividends for the foreseeable future.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
There are currently no limitations imposed by Canadian federal or provincial
laws on the rights of non-resident or foreign owners of Canadian securities to
hold or vote the securities held. There are also no such limitations imposed by
the Company's articles and bylaws with respect to the common shares of the
Company.
Under the Investment Canada Act, the acquisition of certain "businesses" by
"non-Canadians" or "Americans" are subject to review by Investment Canada, a
federal agency, and will not be allowed unless they are found likely to be of
"net benefit" to Canada. An acquisition will be reviewable by Investment Canada
only if the value of the assets of the Canadian business being acquired is CDN
$5 million or more in the case of a "direct" acquisition or CDN $50 million or
more in the case of an "indirect" acquisition. Under the Free Trade Agreement
between Canada and the United States, an acquisition by an American is
reviewable only if it involves the direct acquisition of a Canadian business
with assets of CDN $160 million or more. If the foregoing thresholds are not
reached, the acquisition of a Canadian business by a non-Canadian will not be
subject to review unless it relates to Canada's cultural heritage or national
identity. Even if the transaction is not reviewable, a non-Canadian must still
give notice to Investment Canada of the acquisition of a Canadian business
within 30 days after its completion.
ITEM 7. TAXATION
Certain Canadian Federal Income Tax Considerations
The following summarizes the principal Canadian federal income tax
considerations applicable to the holding and disposition of a common share by a
holder (the "Holder") of one or more common shares who is resident in the United
States of America and holds the common share as capital property. This summary
is based on the current provisions of the Income Tax Act (Canada) (the "Tax
Act"), the regulations thereunder and all amendments to the Tax Act publicly
proposed by the government of Canada to the date hereof. It is assumed that each
such amendment will be enacted as proposed and there is no other relevant change
in any governing law, although no assurance can be given in these respects.
Every Holder is liable to pay a withholding tax on every dividend that is or is
deemed to be paid or credited to him on his common shares. Under the
Canada-United States Income Tax Convention (1980) (the "Treaty"), the rate of
withholding tax is 10% of the gross amount of the dividend where the Holder is a
company that owns at least 10% of the voting stock of the Company and
beneficially owns the dividend, and 15% in any other case. A Protocol amending
the Treaty was ratified by the representatives of the Canadian and United States
governments. Effective in December, 1995 one of the amendments in the Protocol
reduces the 10% withholding rate on dividends to 6% in 1996 and 5% in 1997.
Under the Tax Act, a Holder will not be subject to Canadian tax on any capital
gain realised on an actual or deemed disposition of a common share, including a
deemed disposition at death, provided that he did not hold the common share as
capital property used in carrying on a business in Canada, and that neither he
nor persons with whom he did not deal at arm's length, alone or together, owned
25% or more of the issued shares of any class of the Company at any time in the
five years immediately preceding the disposition.
A Holder who otherwise would be liable for Canadian tax in respect of a capital
gain realised on an actual or deemed disposition of a common share will be
relieved under the Treaty from such liability unless
(1) the common share formed part of the business property of a
permanent establishment in Canada that the Holder had within the twelve-month
period preceding the disposition; or (1) the common share formed part of the
business property of a permanent establishment in Canada that the Holder had
within the twelve-month period preceding the disposition; or(1) the common share
formed part of the business property of a permanent establishment in Canada that
the Holder had within the twelve-month period preceding the disposition; or(1)
the common share formed part of the business property of a permanent
establishment in Canada that the Holder had within the twelve-month period
preceding the disposition; or(1) the common share formed part of the business
property of a permanent establishment in Canada that the Holder had within the
twelve-month period preceding the disposition; or(1) the common share formed
part of the business property of a permanent establishment in Canada that the
Holder had within the twelve-month period preceding the disposition; or
(2) the Holder
(a) was resident in Canada for 120 months during any 20-year period
preceding the disposition, and
(b) was resident in Canada at any time during the 10 years immediately
preceding the disposition, and
(c) owned the common share when he ceased to be a resident of Canada
ITEM 8. SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from the accompanying
audited financial statements of the Company to September 30, 1997. Financial
statements of the Company included elsewhere herein should be read in
conjunction with those financial statements and the footnotes thereto. The
financial statements have been prepared in accordance with Canadian generally
accepted accounting principles ("GAAP"). For United States GAAP reconciliation,
see attached financial statements and notes. Reference should also be made to
Item 9 Management's Discussion and Analysis of Financial Conditions and Results
of Operations."
Selected Financial Information - reconciled to US GAAP(in Cdn $)
Income Statement Data: 1998 ($) 1997 ($)
- ---------------------- -------- --------
Interest 152,132 28,702
Total Revenue 152,132 28,702
------- ------
General & Administrative Expenses 1,358,156 640,625
Exploration Costs Written Off 5,167,641 4,835,171
Amortization 27,082 12,182
Other Expenses 92,420 0
Loss for the Period (6,493,167) (5,459,276)
----------- -----------
Loss per Share (0.47) (0.50)
------ ------
Weighted Average Shares Outstanding 13,911,958 10,924,623
---------- ----------
Balance Sheet Data:
Current Assets 3,011,601 6,729,786
Capital Assets 155,645 68,834
Mineral Properties & Deferred Exploration Costs 219,000 308,000
Total Assets 3,386,246 7,106,620
--------- ---------
Current Liabilities 1,820,664 1,117,428
Due to Related Parties 8,553 231,243
Capital Stock 21,834,820 18,614,083
Deficit (20,277,791) (12,856,134)
Total Equity & Liabilities 3,386,246 7,106,620
--------- ---------
Loss for the period and deficit as determined in accordance with Canadian GAAP
differ from those determined in accordance with U.S. GAAP, due principally to
the deferral under Canadian GAAP of exploration costs and the exclusion of
compensation expense arising from the issue of options at a discount from their
fair value. Under U.S. GAAP the exploration costs would have been expensed when
incurred, and the compensation expense would have been recorded.
Selected Financial Information for 5 Years (in Cdn$)
Fiscal Year Ended March 31st
1996 1997 1998 1995 1994
---- ---- ----- ----- ----
Interest 152,132 28,702 0 0 0
Other 0 0 0 27,445 0
- - - ------ -
Total Revenue 152,132 28,702 0 27,445 0
------- ------ - ------ -
General & Administrative Expenses 1,358,156 640,625 367,437 234,960 0
Exploration Costs Written Off 561,500 1,506,392 0 1,306,276 1,148,222
Amortization 27,082 12182 1,465 0 0
Other Expenses 92,420 0 100,000 0 0
Loss for the Period (1,887,026) (2,130,497) (468,902) (1,148,222)
----------- ----------- --------- -----------
(1,513,791)
Loss per Share (0.14) (0.20) (0.08) (0.47) (0.43)
------ ------ ------ ------ ------
Weighted average shares outstanding 13,911,958 10,924,623 5,961,296 3,213,527 2,670,284
---------- ---------- --------- --------- ---------
Balance Sheet Data:
Current Assets 3,011,601 6,729,786 1,510,715 11,438 50,642
Capital Assets 155,645 68,834 28,326 18,1542 18,940
Mineral Properties & Deferred 8,957,965 4,440,824 1,065,975 185,328 1,506,5680
--------- --------- --------- ------- ----------
Exploration Costs
Total Assets 12,125,211 11,239,444 2,605,016 214,920 1,576,150
---------- ---------- --------- ------- ---------
Current Liabilities 1,820,664 1,117,428 338,189 41,074 330,886
Due to Related Parties 8,553 231,243 207,346 490,013 647,521
Long Term Liabilities 0 0 0 62,500 33,458
Capital Stock 19,265,652 16,973,405 7,011,616 4,104,566 3,533,727
Deficit (8,969,658) (7,082,632) (4,952,135) (2,969,442)
----------- ----------- ----------- -----------
(4,483,233)
Total Equity & Liabilities 12,125,211 11,239,444 2,605,016 214,920 1,576,150
---------- ---------- --------- ------- ---------
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND CHANGES
IN FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has no primary income source at this time. Funding for the Company's
operation is mainly from private placements, options and warrant exercise. The
following chart summarizes all the funding raised in the past 5 years.
RESULTS OF OPERATIONS
The Company has no primary income source at this time. All working capital is
obtained from equity financing such as private placements, options and warrants
exercising. The revenue reported in FY 1998 and FY 1997 is from interest earned
from working capital invested in secured short-term money markets. The major
expenditure for the Company is acquiring mineral properties and conducting
exploration programs on those properties. These exploration expenditures are
capitalized as intangible assets. If no economical mineral resource is found on
a certain property after an extensive exploration program, the capitalized value
is written off as an expense in the income statement. The Company also does not
have any long-term debt. The only liability of the Company is accounts payable
incurred during its on-going exploration operations. The amounts due to related
parties are mainly funds advanced from the Directors and Officers to the Company
when the Company is short in funding. Such debt is non interest bearing and has
no fixed terms of repayment.
CHANGES IN FINANCIAL CONDITION AS AT MARCH 31, 1998
At year-end 1998 the Company's assets increased to $12,125,211 compared to
$11,239,444 at the end of 1997. The increase was a result of increased
expenditures for the acquisition and exploration of the Knife Lake Project in
Canada.
The liabilities of the Company, nearly all of which are current liabilities,
also increased significantly as a result of increased expenditures for prospect
exploration. At year-end 1998, current liabilities were $1,820,664, an increase
of 63% over the 1997 year end liabilities of $1,117,428.
The Company's deficit at year-end 1998 was $8,969,658, an increase of 27% over
the 1997 deficit of $7,082,632. The deficit will continue to increase as a
result of the Company's continuing effort to explore for economical mineral
resources. Consequently, additional funding from equity financing is essential
for the Company to continue its exploration efforts until it has found one or
more economical mineral resources in its mineral properties.
Comparison of Results of Operation for the Fiscal Years Ended March 31, 1998 and
1997
The Company had no operating revenue in either 1998 or 1997 except interest
income from working capital invested in secured short-term money markets.
The Company incurred operating expenses, most of which are Exploration
expenditures, totaling $5,078,641 in 1998 as compared to $4,881,241 in 1997.
Exploration Costs Written Off were $561,500 in 1998 a decrease of $944,892 from
$1,506,392 in 1997. The Company had a decrease in operating losses to $1,887,026
in 1998 from $2,130,497 in 1997.
The other major item in the operating expenses is General and Administrative
costs which increased in 1998 to $1,358,156 from $640,625 in 1997. The increase
is mainly due to additional legal expenses pertaining to several legal
proceedings against the Company, increase in advertising and promotional
expenses, travel expenses and costs pertaining to private placement activities.
The per-share loss amounted to $0.17 in 1998 as compared to $0.20 in 1997.
Comparison of Results of Operations for Fiscal Years Ended March 31, 1997 and
1996
During the fiscal year ended March 31, 1997, the Company realized a net loss on
operations of $2,130,497 ($0.20/share) compared to $468,902 ($0.08/share) for
the fiscal year ended March 31, 1996. The large loss in 1997 was as a result of
a $1,506,392 write off of Exploration Costs incurred in mineral properties
abandoned by the Company.
Exploration expenditure in 1997 was $4,881,241, an increase of $3,815,266 from
$1,065,975 in 1996,as the Company secured enough funding to finance several
exploration projects.
General and Administrative expenses were $640,625 in 1997 compared to $368,902
in 1996. The increase of $271,723 is mainly due to the increase in exploration
activities in 1997 which resulted in more employees being hired and more
traveling and advertising and promotional expenses.
Results of Operations for the Nine Month Period Ended December 31, 1998 as
Compared to the Same Period Ended December 31, 1997
For the nine-month periods ended December 31, 1998 and 1997 the Company had no
operating revenue. The Company had interest income in the period ended December
31, 1998 of $43,497 as compared to $69,146 in 1997.
The Company incurred operating expenses for the nine-month period of $462,621 in
1998 and $607,900 in 1997. The net loss from operations for the nine-month
period was $419,124 in 1998 and $538,754 in 1997. The decrease in losses was due
to a decrease in exploration costs incurred on the Knife Lake prospect.
LIQUIDITY AND CAPITAL RESOURCES
The principal sources of funding for the Company's operation in the
past 5 years have been issuance of securities for cash and as consideration for
certain acquisitions, exercise of director and employee stock options and loans
from directors and officers.
The following chart summarizes all capital funding raised in the past
five years.
FUNDING SUMMARY
FROM APRIL 1995 TO MARCH 99
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Year Total Shares Issued Share Price Total Amount
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1995 Private Placement 1,150,000 $1.65 $1,900,000
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Exercise of Options 543,000 $0.47 $255,750
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1995 Total 1,693,000 $1.27 $2,155,750
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1996 Private Placement 1,000,000 $3.90 $3,900,000
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Flow Through 425,000 $4.70 $1,997,500
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Exercise of Options 628,000 $2.63 $1,652,200
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Exercise of Warrants 950,000 $1.58 $1,502,500
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1996 Total 3,003,000 $3.01 $9,052,200
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1997 Private Placement 1,288,000 $3.90 $5,023,200
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Private Placement 472,000 $4.55 $2,147,600
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Exercise of Options 195,000 $3.90 $760,500
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Exercise of Warrants 75,000 $4.12 $309,000
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1997 Total 2,030,000 $4.06 $8,240,300
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1998 Private Placement 260,000 $3.40 $884,000
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1998 Total 260,000 $3.40 $884,000
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1999 Private Placement 2,000,000 $0.35 $700,000
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
(up to March) Exercise of Options 687,000 $0.43 $295,410
-------------
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1999 Total 2,687,000 $0.37 $995,410
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
The principal uncertainty that could affect the Company's liquidity is
the Capital Markets interest or lack thereof in Mining Industry which is beyond
the control of the Company.
On a short term basis, the Company is planning to raise $1 million in
1999 through private placements and the exercise of options and warrants which
is expected to cover all its 1999 exploration programs in Knife Lake, Canada and
Karmel Project, S. Africa. There is no assurance that funds will be raised.
On a long-term basis, the Company does not have any assured certain
source of additional working capital and the continuation of operations is
subject to its ability to raise more equity money and its success in the
exploration of the Knife Lake and Karmel Projects.
Impact of the Year 2000
The year 2000 issue arises from computer systems using two digit date fields
rather that four to refer to a particular year. This means that a computer
system might not properly recognize "00" as the Year 2000, but instead as the
Year 1900, which could result in operational and financial disruption, and
possibly systems failures. The Company is taking appropriate steps to identify
and remediate the Year 2000 issue before the end of 1999, and does not expect
the costs of these efforts to be material. The Company does not believe that
there will be an adverse effect on its business, operating results or financial
position as a result of the Year 2000 Issue. However, there can be no assurance
that the Year 2000 readiness efforts by the Company's suppliers and business
partners will be successful, therefore it remains uncertain to what extent, if
any, the Company may be affected.
ITEM 10. DIRECTORS AND OFFICERS OF THE COMPANY
The names, residences, terms, and periods of service within the past
five years of each of the directors and executive officers of the Company are as
follows:
Position
Name and Within Period of Service
Residence the Company Term
Present Occupations and
Yashvir (Jasi) Nikhanj 1,2 President and Director Annual 1987 to date
Calgary, Alberta
Ulrich Schurch1 Director Annual 1996 to date
Switzerland
Manish Bindal 2 Secretary and director Annual 1996 to date
Calgary, Alberta
Raymond Lai1 Vice president Finance Annual 1996 to date
Calgary, Alberta
Roland Kesselring 2 Vice president Annual 1997
Switzerland Corporate Affairs
1 Member of the audit committee.
2 Member of Nomination and Compensation Committee.
Mr. Nikhanj, age 53, has been President and director of the Registrant since
1987. He obtained a Bachelor of Science in Geology from Ranchi University,
Bikar, India in 1968. He received a MSc in Earth Sciences from Massachusetts
Institute of Technology in 1970 and a MSc in Applied Geology from McGill
University in 1972. He also has been President and principal shareholder of
Nikhanj and Associates Consulting of Calgary, Canada since 1975.
Mr. Schurch, age 37, is a director of the Registrant. He received a Commercial
Diploma as a banker in 1981 in Switzerland. In 1993, he received a "Diplomaster"
betribsokonom BVS" in Switzerland at St. Grallen. From 1992 to 1996, he was Vice
President and a partner at Moscom Finary in Zurich, Switzerland. From 1996 to
1998, he was President and Partner of Schwich Asset Management BmDH, St Gallen,
Switzerland. From 1998 to date he has been with Credit Swisse Zurich as a
Portfolio Manager - Special Mandates.
Mr. Bindal, age 35, is a director and General Counsel to the Company. Mr. Bindal
received a Bachelor of Science in 1984 and a Bachelor of Law in 1987 from
Kurukashetra University in India. From August 1987 to May 1991 Mr. Bindal was
engaged in private practice of law at Chandigarh, India. From May 1991 to
September 1994 Mr. Bindal was a law student in Calgary, Canada. He was employed
as a student-at-law at the firm of Howard Mackie, Nova Corp. and Alberta
Securities Commission from October 1994 to October 1995. He has been in private
law practice since November, 1995. Other than the Registrant, Mr. Bindal has
been a director of Canex Energy, Inc. and Aspen Energy Corp., both oil and gas
companies listed on the Albert Stock Exchange.
Mr. Lai, age 48, is Vice President of Finance and Administration for the
Registrant and has been since 1995. Mr. Lai received his B.Sc. degree in 1971
from the University of Calgary. He became a Certified Management Accountant in
1979. From 1993 to 1995, Mr. Lai was controller of Mission Packaging, Inc. in
Calgary.
Mr. Kesselring, age 36, is V.P Corporate Affairs - Europe since 1996. He
completed Banking School in Switzerland in 1982. He is CEO of Mascon Finance,
Ltd. of Ermatingen, Switzerland and has been since 1995 a Managing Director.
From April 1992 to 1995, he was a Managing Director at the institutional sales
desk of Swiss Bank Corp. Zurich, Switzerland.
The directors of the Company are elected by the shareholders at each annual
general meeting and typically hold office until the next annual general meeting
at which time they may be re-elected or replaced. Casual vacancies on the board
are filled by the remaining directors and the persons filling those vacancies
hold office until the next annual general meeting at which time they may be
re-elected or replaced. The senior officers are appointed by the board and hold
office indefinitely at the pleasure of the board.
Within the five years proceeding the date of this filing document, none of the
directors, officers or promoters of the Company have been a director, officer or
promoter of other reporting companies other than as follows:
Mr. Bindal has been a director of Canex Energy, Inc. and Aspen Energy
Corp., both oil and gas companies listed on the Alberta Stock Exchange,
since 1996.
No director, officer or promoter of the Company has, within the ten years
preceding the date of this filing document, been the subject of any penalties or
sanctions by a court or securities regulatory authority relating to trading in
securities, the promotion, formation or management of a publicly-traded company
or involving theft or fraud, other than as follows:
In 1996, Mr. Nikhanj entered into a Settlement Agreement and
Understanding with the Alberta Securities Commission because he had not
timely filed insider reports for purchases and sales of shares in
Leader Mining International with the Alberta Securities Commission. The
Settlement resulting in a $5,000 penalty and the Agreement to be
diligent in complying with the responsibility to report trades.
There are no understandings or arrangements pursuant to which any
officers or director was selected or appointed to such position.
(b) Identification of Certain Significant Employees.
There are no employees other than the executive officers disclosed
above who make, or are expected to make, significant contributions to the
business of the Company, the disclosure of which would be material.
(c) Family Relationships. Spouses of Yashvir (Jasi) Nikhanj and Raymond
Lai are currently employed on a part time basis with the Company in
non-executive positions.
ITEM 11. COMPENSATION OF OFFICERS AND DIRECTORS
(a) Cash Compensation.
Compensation paid by the Company for all services provided
during the fiscal year ended December 31, 1998, (1) to each of the Company's
five most highly compensated executive officers whose cash compensation exceeded
$30,000 and (2) to all officers as a group is set forth below under directors.
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Awards
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
Name and Principal Year Salary ($) Bonus ($) Other Annual Restricted Stock Securities Underlying
Position Compensation ($) Award(s)($) Options/SARs(#)
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
Y.S. Jasi Nikhanj 1998 0 0 120,000 (1) 0 250,000 shares
President and Director
----------- -------------- ------------ ----------------------- ------------------ ======================
1997 0 0 120,000 (1) 0 355,000 shares
----------- -------------- ------------ ----------------------- ------------------ ======================
1996 0 0 120,000 (1) 0 0
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
Manish Bindal 1998 0 0 37,200 (2) 0 50,000 shares
Secretary and Director
----------- -------------- ------------ ----------------------- ------------------ ======================
1997 0 0 37,200 (2) 0 25,000 shares
----------- -------------- ------------ ----------------------- ------------------ ======================
1996 0 0 37,200 (2) 0 0
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
Raymond Lai 1998 60,000 0 0 0 50,000 shares
V.P. Finance &
Administration
----------- -------------- ------------ ----------------------- ------------------ ======================
1997 60,000 0 0 0 25,000 shares
----------- -------------- ------------ ----------------------- ------------------ ======================
1996 36,000 0 0 0 0
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
Roland Kesselring 1998 0 0 0 50,000 shares 75,000 shares
V.P. Corporate
Affairs-Europe
----------- -------------- ------------ ----------------------- ------------------ ======================
1997 0 0 0 $175,000 175,000 shares
=========== ============== ============ ======================= ================== ======================
1996 0 0 0 0 0
========================== =========== ============== ============ ======================= ================== ======================
(1) Paid as consulting fees to Nikhanj and Associates Geoconsulting.
(2) Paid as legal fees for services.
(b) Compensation Pursuant to Plans.
None.
(c) Other Compensation.
None. No stock appreciation rights or warrants exist to management
(d) Compensation of Directors.
Each member of the Board of Directors of the Company receives
$500.00 plus reasonable outside travel expenses for each Board meeting he
attends and for each Committee meeting he attends during the fiscal year.
Directors who are also officers of the Company receive no compensation for
services as a director.
Compensation paid by the Company for all services provided during
the fiscal year ended December 31, 1998, (1) to each of the Company's directors
whose cash compensation exceeded $30,000 and (2) to all directors as a group is
set forth below:
DIRECTOR'S COMPENSATION FOR LAST FISCAL YEAR
(Except for compensation of Officers who are also Directors whose Compensation
is listed in Summary Compensation Table of Executives)
Cash Compensation Security Grants
======================= --------------------- ------------------ --------------------- ----------------- =========================
Name Number of Securities
Annual Retainer Meeting Fees Consulting Fees/ Number of Underlying Options/SARs
Fees ($) ($) Other Fees ($) Shares (#) (#)
======================= --------------------- ------------------ --------------------- ----------------- =========================
A. Director 0 0 0 60,000 320,000 shares
Ulrich Schurch
======================= --------------------- ------------------ --------------------- ----------------- =========================
B. Director 0 0 0 0 0
Y.S. Nikhanj
- ----------------------- --------------------- ------------------ --------------------- ----------------- -------------------------
C. Director 0 0 0 0 0
Manish Bindal
- ----------------------- --------------------- ------------------ --------------------- ----------------- -------------------------
(e) Termination of Employment and Change of Control Arrangements.
None
(f) Stock Option Plan
The Company has adopted a stock option plan covering officers,
consultants, key employees. The plan is administered by the Board of Directors
and is limited to 10% of the total outstanding shares, in the aggregate, except
if approval is granted by the Alberta Stock Exchange (the "Exchange). Option
prices shall not be lower than the market price of the shares on the date of
grant of the option less the maximum discount permitted under the By-Laws and
policies of the Alberta Stock Exchange. The options may be granted by the Board
under provisions which may be established by the Board of Directors from time to
time. The options may not be granted for an exercise period of more than five
years.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT
Stock Options
The Company has, from time to time, granted stock options to purchase common
shares to its directors and employees. The options have been granted on various
terms resulting from negotiation between the Company and such persons and the
exercise price per share was based on the average trading price of the Company's
shares pursuant to the policies of the Alberta Stock Exchange (the "Exchange").
The exercise price for all options currently issued by the Company is equal to
or in excess of the market price of the Company's stock at the date of issuance
less the maximum discount permitted under the by-laws and polices of The Alberta
Stock Exchange (or any stock exchange on which the Shares are then listed). The
options are non-assignable and have been granted as incentives and not in lieu
of any compensation for services. As at May 15, 1999 the Company has granted
outstanding options to its directors and employees to purchase an aggregate of
1,675,000 common shares as follows:
Share Price Amount
- ------------------------------------------ ---------------------- ------------------------- ------------------------
Outstanding Options 475,000 $0.43 $204,250
- ------------------------------------------ ---------------------- ------------------------- ------------------------
250,000 $0.35 $87,500
- ------------------------------------------ ---------------------- ------------------------- ------------------------
950,000 $0.50 $475,000
- ------------------------------------------ ---------------------- ------------------------- ------------------------
Total Options 1,675,000 $766,750
- ------------------------------------------ ---------------------- ------------------------- ------------------------
- ------------------------------------------ ---------------------- ------------------------- ------------------------
Outstanding Warrants 1,000,000 $0.45 $450,000
- ------------------------------------------ ---------------------- ------------------------- ------------------------
Total Options & Warrants 2,675,000 $1,216,750
- ------------------------------------------ ---------------------- ------------------------- ------------------------
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
The directors, senior officers, holders of greater than 10% of the common shares
of the Company and any associate or affiliate of such persons of the Company
have no other interest in any material transactions in which the Company has
participated in the preceding year or intends to participate in at this time,
except as follows:
a) Y.S. (Jasi) Nikhanj, President and a Director, has a consulting
Agreement through his company, Nikhanj and Associates Geo
Consulting, by which he provides his services as President and
Director to manage the Company and exploration and development of
prospects for the Company for a fee of $10,000 per month. Mr.
Nikhanj is not paid a salary or other compensation as an officer
or Director. In 1998, $13,500 was paid as bonuses.
b) The Company advanced the President $348,225 as a short-term loan.
Interest was charged on the loan at bank prime plus one percent.
These advances were repaid in full during the year.
c) Directors received 117,000 shares during the year in settlement of
performance bonuses (1997 - cash payments $257,250 and 5,000
shares). These bonuses were approved by the Board of Directors.
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
The Company is authorized to issue an unlimited number of Common
Shares without nominal or par value, and an unlimited number of
Preferred Shares, issuable in series, of which, as at the date hereof,
14,131,565 Common Shares and no Preferred Shares are issued and
outstanding as fully-paid and non-assessable.
Common Shares
The holders of Common Shares are entitled to dividends if, as and when
declared by the directors, to one (1) vote per share at meetings of the
holders of Common Shares of the Company and, upon liquidation, to
receive such assets of the Company as are distributable to the
holders of the Common Shares. All of the Common Shares to be
outstanding upon completion of this offering will be fully-paid and
non-assessable.
Preferred Shares
The Preferred Shares may be issued from time to time in one or more
series. each series consisting of a number of Preferred Shares as
determined by the board of directors of the Company who may also fix
the designation, rights, privileges, restrictions and conditions
attaching to the shares of each series of Preferred Shares. There are
no Preferred Shares issued and outstanding.
The Preferred Shares of each series shall, with respect to payment of
dividends and distribution of assets in the event of liquidation,
dissolution or winding-up of the Company, whether voluntary or
involuntary, or any other distribution of the assets of the Company
among its shareholders for the purpose of winding-up its affairs, rank
on a parity with the Preferred Shares of every other series and shall
be entitled to preference over the Common Shares and the shares of any
other class ranking junior to the Preferred Shares.
Transfer Agent
The transfer agent for the company shares is Montreal Trust, 600,
530-8th Avenue SW, Calgary, Alberta T2P3S8 (403) 267-6872.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
There have been no defaults by the Company upon Senior Securities
during the fiscal year 1995 to date of this registration statement.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES
There have been no changes in securities or changes in security for
registered securities to date of this registration statement other than
a one for four consolidation of common shares in 1994.
PART IV
ITEM 17. FINANCIAL STATEMENTS
The following documents are filed as a part of this report:
1) Financial Statements: (See Financial Exhibits Index below
and Financial Exhibits furnished as Pages F-1 through F-20).
2) Financial Statement Schedules: None
ITEM 18. NOT APPLICABLE.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
a) INDEX TO FINANCIAL STATEMENTS
AND SUPPORTING SCHEDULES
Page
Reports of Independent Public Accountants F-2
I. Financial Statements:
Consolidated Balance Sheets at March 31,
1997, 1998 and Dec. 31, 1998 (unaudited) F-3
Consolidated Statements of Loss & Deficit for
the period ended March 31, 1996, 1997, 1998,
and Dec. 31, 1998 (unaudited) F-4
Statement of Cash Flows for the period ended
March 31, 1996, 1997, 1998, and Dec. 31, 1998
(unaudited) F-5 - F-6
Notes to Consolidated Financial Statements F-7 - F-19
INDEX
SK EXHIBITS
Page
1.0 None
2.0 None
3.1 Certificate of Incorporation - 48
Articles of Incorporation of Durga
Resources, Ltd 48
3.2 Articles of Amalgamation March 31, 1993 53
3.3 Statutory Declaration March 31, 1993 56
3.4 Articles of Amendment September 24, 1993 58
3.5 Articles of Amendment July 18, 1994 60
3.6 Articles of Amendment July 25, 1994 62
3.7 Certificate of Dissolution September 1, 1996 64
3.8 Certificate of Revival September 17, 1996 66
3.9 Certificate of Amendment July 25 1994 68
3.10 Certificate of Amendment -July 18, 1994
to Leader Mining International, Inc. 70
3.11 Certificate of Amendment September 24, 1993 72
3.12 Certificate of Amendment Amalgamation
March 31, 1993 74
3.13 Articles of Revival September 16, 1996 76
3.14 Bylaws #1 79
3.15 Bylaws #2 97
10.1 Knife Lake Agreement (Copper Quest, Inc.
& Leader Mining) P
10.2 Knife Lake Agreement (Consolidated Pine
Channel Gold Corp. and Leader Mining) P
10.3 Renewal of Mineral Lease ML 5269 P
10.4 Optional/Joint Venture Agreement (Reader Mining
and Karmel
Diamond Holdings, LTD and Poplar Resources, Ltd.) P
19.1 Stock Option Plan 100
(P) Documents which fall under the Hardship Exemption Rule 202 (Reg.
S-T) for filing in paper format with Form SE.
C) SUPPLEMENTAL INFORMATION
Table 1 Leases in Saskatchewan
Table 2 Schedule of Lease Area South Africa
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DATED: June 24, 1999
LEADER MINING INTERNATIONAL, INC.
By: Y.S. Nikhanj
------------------------------
President
Directors:
/s/ Manish Bindal
---------------------------------
Secretary and Director
/s/ Ulrich Schurch
---------------------------------
Director
/s/ Y.S. Nikhanj
---------------------------------
Director
/s/ Raymond Lai
---------------------------------
Vice President of Finance
/s/ Roland Kesselring
---------------------------------
Vice President of Corporate Affairs
Leader Mining International Inc.
Consolidated Financial Statements
For the three years ended March 31, 1998, 1997 and 1996
(expressed in Canadian dollars)
F-1
Auditors' Report
To the Shareholders of Leader Mining International Inc.
We have audited the consolidated balance sheets of Leader Mining International
Inc. as at March 31, 1998 and 1997 and the consolidated statements of loss and
deficit and cash flows for the three years ended March 31, 1998, 1997 and 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada. 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 present fairly, in all
material respects, the financial position of the Company as at March 31, 1998
and 1997 and the results of its operations and its cash flows for the three
years then ended in accordance with accounting principles generally accepted in
Canada.
/s/ Coopers & Lybrand
Chartered Accountants
Calgary, Alberta, Canada
June 12, 1998, except for note 7(b)
which is of July 7, 1998
F-2
Leader Mining International, Inc.
Consolidated Balance Sheets
(expressed in Canadian dollars)
December 31, March 31, March 31,
1998 1998 1997
$ $ $
(Unaudited)
Assets
Current assets
Cash and short-term deposits 388,818 2,724,319 6,250,389
Accounts receivable 10,314 15,214 3,214
Goods and Services Tax receivable 12,982 136,662 196,700
Subscription receivable 136,500
Deposits and prepaid expenses 349,574 135,406 142,983
------------------- ------------------ ------------------
761,688 3,011,601 6,729,786
Capital assets (note 3) 157,816 155,645 68,834
Mineral properties and deferred exploration costs (note 4)
9,548,034 8,957,965 4,440,824
------------------- ------------------ ------------------
10,467,538 12,125,211 11,239,444
------------------- ------------------ ------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 73,094 1,820,664 1,117,428
Due to related parties (note 5) 112,764 8,553 231,243
------------------- ------------------ ------------------
185,858 1,829,217 1,348,671
------------------- ------------------ ------------------
Shareholders' Equity
Capital stock (note 6) 19,670,462 19,265,652 16,973,405
Deficit (9,388,782) (8,969,658) (7,082,632)
------------------- ------------------ ------------------
10,281,680 10,295,994 9,890,773
------------------- ------------------ ------------------
10,467,538 12,125,211 11,239,444
------------------- ------------------ ------------------
Commitments and contingencies (note 7)
Subsequent events (note 10)
The accompanying notes are an integral part of these financial statements
F-3
Leader Mining International, Inc.
Consolidated Statements of Loss and Deficit
(expressed in Canadian dollars)
Nine months
ended Year ended
------------------ ----------------- ------------- -----------
December 31, March 31, March 31, March 31,
1998 1998 1997 1996
$ $ $ $
(Unaudited)
Revenue
Interest 43,497 152,132 28,702 -
------------------ ----------------- ----------------- -----------------
Expenses
General and administrative 462,621 1,358,156 640,618 367,437
Exploration costs written off (note 4) - 561,500 1,506,392 -
Provision for site restoration and abandonment
costs - 68,250 - 100,000
Amortization - 27,082 12,189 1,465
Loss on disposal of capital assets - 24,170 - -
------------------ ----------------- ----------------- -----------------
462,621 2,039,158 2,159,199 468,902
------------------ ----------------- ----------------- -----------------
Net loss for the period 419,124 1,887,026 2,130,497 468,902
Deficit - Beginning of period 8,969,658 7,082,632 4,952,135 4,483,233
------------------ ----------------- ----------------- -----------------
Deficit - End of period 9,388,782 8,969,658 7,082,632 4,952,135
------------------ ----------------- ----------------- -----------------
Loss per share 0.03 0.14 0.20 0.08
------------------ ----------------- ----------------- -----------------
The accompanying notes are an integral part of these financial statements
F-4
Leader Mining International, Inc.
Consolidated Statements of Cash Flows
(expressed in Canadian dollars)
Nine months
ended Year ended
------------------ ----------------- -------------- -------------
December 31, March 31, March 31, March 31,
1998 1998 1997 1996
$ $ $ $
(Unaudited)
Cash provided by (used in)
Operating activities
Net loss for the period (419,124) (1,887,026) (2,130,497) (468,902)
Items not affecting cash -
Exploration costs written off - 561,500 1,506,392 -
Amortization - 27,082 12,189 1,465
Loss on disposal of capital assets - 24,170 - -
Provision for site restoration and
abandonment costs - 68,250 - 100,000
Employee bonuses paid in shares (111,300) 529,500 18,500 15,050
------------------ ----------------- ----------------- -----------------
(530,424) (676,524) (593,416) (352,387)
Change in non-cash working capital balances (note
11) (1,608,158) 690,601 606,032 945,906
------------------ ----------------- ----------------- -----------------
(2,138,582) 14,077 12,616 593,519
------------------ ----------------- ----------------- -----------------
Financing activities
Issuance of common shares, net of issue costs 291,110 1,636,998 10,721,305 1,870,750
Net payments made from (to) related parties 104,211 (222,690) 23,897 (282,667)
Repayment of convertible promissory notes - - - (62,500)
------------------ ----------------- ----------------- -----------------
395,321 1,414,308 10,745,202 1,525,583
------------------ ----------------- ----------------- -----------------
Investing activities
Mineral properties and deferred exploration costs (590,069) (4,816,392) (5,685,757) (867,653)
Purchase of capital assets (2,171) (145,163) (52,697) (24,631)
Proceeds on disposal of capital assets - 7,100 - -
------------------ ----------------- ----------------- -----------------
(592,240) (4,954,455) (5,738,454) (892,284)
------------------ ----------------- ----------------- -----------------
Increase (decrease) in cash (2,335,501) (3,526,070) 5,019,364 1,226,818
Cash and short-term deposits - Beginning of period
2,724,319 6,250,389 1,231,025 4,207
------------------ ----------------- ----------------- -----------------
Cash and short-term deposits - End of period
388,818 2,724,319 6,250,389 1,231,025
------------------ ----------------- ----------------- -----------------
F-5
Leader Mining International, Inc.
Consolidated Statements of Cash Flows
(expressed in Canadian dollars)
Non-cash financing activities
Issue of shares for
Finders' fees 262,249 61,250
Property acquisition - - 35,000 -
------------------ ----------------- ----------------- -----------------
- 262,249 96,250 -
------------------ ----------------- ----------------- -----------------
Non-cash investing activities
Exploration expenditures - (262,249) (96,250) -
------------------ ----------------- ----------------- -----------------
The accompanying notes are an integral part of these financial statements
F-6
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
(expressed in Canadian dollars)
1. Nature of operations
The Company is in the process of exploring its mineral properties and has
not yet determined whether these properties contain ore reserves that are
economically recoverable. The recoverability of amounts shown for mineral
properties and deferred exploration costs is dependent upon the existence
of economically recoverable reserves, securing and maintaining title and
beneficial interest in the property, the ability of the Company to obtain
necessary financing to complete the development, and upon future
profitable production or proceeds from disposition of the mineral
properties. The amounts shown as mineral properties and deferred
exploration costs represent net costs to date, less amounts written-off
and do not necessarily represent present or future values.
2. Significant accounting policies
Interim financial statements
The financial information as of and for the nine months ended December 31,
1998 is unaudited, but in the opinion of management, reflects all
adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of such information.
Accounting principles
These consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP").
These principles conform, in all material respects applicable to the
Company, with accounting principles generally accepted in the United
States ("US GAAP") except as described in note 12.
Basis of presentation
These consolidated financial statements include the results of the
Company's wholly owned United States inactive subsidiaries, Durvada
Resources Inc. and Durga Resources Inc.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those reported.
Mineral properties and deferred exploration costs
Acquisition and exploration costs relating to mineral properties are
deferred until the properties are brought into production, at which time
they are amortized on a unit of production basis, or until the properties
are abandoned or sold or management determines that a mineral property is
no longer economically viable, at which time the deferred costs are
written-off.
F-7
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
(expressed in Canadian dollars)
2. Significant accounting policies (cont'd)
Cash
Cash and short-term deposits mature within 90 days of the original date of
acquisition. In order to limit its exposure, the Company deposits its
funds with large financial institutions.
Capital assets
Capital assets are recorded at cost. Amortization is provided on a
declining balance basis based on the estimated useful life of the assets
at the following annual rates:
Computer equipment 30%
Furniture and fixtures 20%
Vehicle 30%
Camp equipment 20%
Field office building 4%
Subscriptions receivable
Subscriptions receivable from employees, officers or directors of the
Company are recorded as assets of the Company when collectibility of the
receivable is reasonably assured. When collectibility is not reasonably
assured, the amount receivable is offset against issued share capital.
Subscriptions receivable from third parties are offset against issued
share capital.
Foreign currency translation
The Company follows the temporal method of translation whereby all
monetary assets and liabilities denominated in a foreign currency are
translated into Canadian dollars at the rate of exchange in effect at the
balance sheet date. Non-monetary assets and exploration expenditures are
translated at the rates prevailing when they are acquired or incurred.
Per share information
Loss per share has been calculated using the weighted average method.
F-8
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
(expressed in Canadian dollars)
3. Capital assets
December 31,
1998
(Unaudited)
------------------------------------------------------------
Accumulated
Cost amortization Net
$ $ $
Computer equipment 38,424 13,324 25,100
Vehicle 21,843 11,140 10,703
Furniture and fixtures 31,299 18,471 12,828
Camp equipment 8,600 3,095 5,505
Field office building 108,000 4,320 103,680
------------------- ------------------ -------------------
208,166 50,350 157,816
------------------- ------------------ -------------------
March 31, 1998
----------------------------------------------------------------
Accumulated
Cost amortization Net
$ $ $
Computer equipment 38,424 13,324 25,100
Vehicle 21,843 11,140 10,703
Furniture and fixtures 29,128 18,471 10,657
Camp equipment 8,600 3,095 5,505
Field office building 108,000 4,320 103,680
------------------- ------------------ ------------------
205,995 50,350 155,645
------------------- ------------------ ------------------
March 31, 1997
----------------------------------------------------------------
Accumulated
Cost amortization Net
$ $ $
Computer equipment 7,678 2,569 5,109
Vehicle 21,843 6,552 15,291
Furniture and fixtures 22,713 15,807 6,906
Camp equipment 43,248 1,720 41,528
------------------- ------------------ ------------------
95,482 26,648 68,834
------------------- ------------------ ------------------
F-9
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
(expressed in Canadian dollars)
4. Mineral properties and deferred exploration costs
December 31, March 31, March 31,
1998 1998 1997
$ $ $
(Unaudited)
(a) Balance - Beginning of period 8,957,965 4,440,824 1,065,975
Expenditures capitalized in the period -
Acquisition of mineral properties 25,000 70,000 219,000
Exploration costs 565,069 5,008,641 5,563,007
Tax effect of flow-through shares (note
6(c)) - - (900,766)
------------------- ------------------ ------------------
590,069 5,078,641 4,881,241
Less: Exploration costs written off - (561,500) (1,506,392)
------------------- ------------------ ------------------
590,069 4,517,141 3,374,849
------------------- ------------------ ------------------
Balance - End of period 9,548,034 8,957,965 4,440,824
=================== ================== ==================
(b) The breakdown of mineral properties and deferred exploration costs by
property is as follows:
December 31,
1998
(Unaudited)
---------------------------------------------------------------
Deferred
Mineral exploration
properties costs Total
$ $ $
Knife Lake, Saskatchewan 85,000 7,658,585 7,743,585
Nettogami Lake, Ontario 65,000 1,277,978 1,342,978
Cody Township, Ontario 224,354 224,354
Other 94,000 143,117 237,117
------------------ ------------------ -------------------
244,000 9,304,034 9,548,034
------------------ ------------------ -------------------
F-10
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
(expressed in Canadian dollars)
4. Mineral properties and deferred exploration costs (cont'd)
March 31, 1998
----------------------------------------------------------------
Deferred
Mineral exploration
properties costs Total
$ $ $
Knife Lake, Saskatchewan 85,000 7,093,516 7,178,516
Nettogami Lake, Ontario 65,000 1,277,978 1,342,978
Cody Township, Ontario 224,354 224,354
Other 69,000 143,117 212,117
------------------- ------------------ ------------------
219,000 8,738,965 8,957,965
------------------- ------------------ ------------------
March 31, 1997
----------------------------------------------------------------
Deferred
Mineral exploration
properties costs Total
$ $ $
Knife Lake, Saskatchewan 30,000 2,709,763 2,739,763
Nettogami Lake, Ontario 65,000 1,199,546 1,264,546
Nighthawk Lake, Ontario 149,000 52,928 201,928
Other 64,000 170,587 234,587
------------------- ------------------ ------------------
308,000 4,132,824 4,440,824
------------------- ------------------ ------------------
(c) During fiscal year 1998, the Company wrote off $561,000 (1997 -
$137,930) of exploration costs relating to properties on which no
further exploration activities are planned.
(d) In March, 1998, to consolidate a strategic land position in Voisey
Bay, Labrador, the Company entered into three separate agreements to
acquire interests in certain mineral claims. To acquire these
interests, the Company must make total cash payments of $45,000 and
incur a total of up to $2,750,000 over the next four years.
(e) During fiscal year 1998, the Company capitalized $94,500 (1997 -
$120,000) of geological consulting services.
(f) In February 1997, the Company signed an agreement to acquire a 90%
interest in mineral claims at Pistol Lake, near Knife Lake,
Saskatchewan, for 10,000 shares and $1,500,000 in exploration
expenditures, of which $150,000 must be spent in the first year. The
Company met the $150,000 commitment in fiscal 1997.
(g) During fiscal year 1997, the Company invested $1,092,303 in a gold
exploration company to facilitate the acquisition of mineral
properties in Peru and Honduras and incurred $276,159 of exploration
expenditures in Peru. However, due diligence and exploration results
determined that the properties were not economically viable and the
properties were subsequently abandoned. The exploration costs and
investment were written off in fiscal year 1997 and the Company is
commencing legal action to recover these amounts.
F-11
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
(expressed in Canadian dollars)
5. Related party transactions
(a) Due to related parties
December 31, March 31, March 31,
1998 1998 1997
$ $ $
(Unaudited)
(i) The Company's president and his wife 108,266 4,055 226,745
(ii) Other shareholders, directors 4,498 4,498 4,498
------------------- ------------------ ------------------
112,764 8,553 231,243
------------------- ------------------ ------------------
The shareholders' loans have no fixed terms of repayment, are
non-interest bearing and are unsecured.
(b) Transactions in the year
During fiscal year 1998, the following transactions were conducted
with related parties:
(i) The Company advanced the President $348,225 as a short-term
loan. Interest was charged on the loan at bank prime plus one
percent. These advances were repaid in full during the year.
(ii) A director's law firm was paid $40,422 for legal
services provided during the year (1997 - $41,850).
(iii) A company owned by the president charged $135,000
(1997 - $120,000) for geological consulting services provided
during the year.
(iv) Directors received 117,000 shares during the year in
settlement of performance bonuses (1997 - cash payment $257,250
and 5,000 shares). These bonuses were approved by the Board of
Directors.
During fiscal year 1997, the following transactions occurred:
(i) The President and his wife made additional non-interest
bearing cash advances to the Company, assumed Company debts and
made expenditures on behalf of the Company totalling $282,203.
The expenditures included certain mining options acquired on
behalf of the Company (note 4) for total non-cash consideration
valued at $134,000. These options were transferred to the
Company at cost. In addition, the President secured the services
of a consulting geologist on behalf of the Company for non-cash
consideration valued at $75,000. The Company repaid the
President and his wife a total of $458,306 in 1997.
(ii) The president sold a mobile home, previously used in the
Company's operations, to Durvada Resources Inc. for proceeds of
$34,648, which equalled the balance of the mortgage owed by the
President on the mobile home.
F-12
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
(expressed in Canadian dollars)
6. Capital stock
(a) Authorized -
The authorized share capital of the Company is comprised of an
unlimited number of common and preferred shares.
(b) Common shares issued
Changes in the Company's outstanding common share capital are
summarized as follows:
Number of Amount
shares $
Balance - March 31, 1995 4,818,370 4,104,566
------------------ ------------------
Shares issued -
Exercise of options 543,000 255,750
Employee bonuses 17,500 15,050
For settlement of liabilities 3,127,500 911,250
Private placements for cash 1,150,000 1,900,000
------------------ ------------------
4,838,000 3,082,050
------------------ ------------------
9,656,370 7,186,616
Less: Subscriptions receivable (50,000) (175,000)
------------------ ------------------
Balance - March 31, 1996 9,606,370 7,011,616
------------------ ------------------
Shares issued -
Subscriptions received 50,000 175,000
Exercise of options 628,000 1,652,200
Exercise of warrants 1,025,000 1,811,500
Employee bonus 5,000 18,500
Acquisition of mineral claims 100,000 35,000
Finder's fee 47,115 61,250
Flow-through shares (note 6(c)) 425,000 1,997,500
Private placements for cash 1,362,000 5,543,790
------------------ ------------------
3,642,115 11,294,740
------------------ ------------------
13,248,485 18,306,356
Add: Flow-through warrant issue proceeds - 21,250
Less: Subscriptions receivable (35,256) (137,500)
Share issue costs - (315,935)
Tax effect on flow-through shares (note 6(c)) - (900,766)
------------------ ------------------
Balance - March 31, 1997 13,213,229 16,973,405
------------------ ------------------
Shares issued -
Subscriptions received 35,256 137,500
Exercise of options 85,000 331,500
Director and employee bonuses 157,000 529,500
Private placement for cash 500,000 1,889,500
F-13
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31,
1998 is unaudited
(expressed in Candian dollars)
Finders fees 66,080 262,249
------------------ ------------------
843,336 3,150,249
------------------ ------------------
14,056,565 20,123,654
Less: Share issue costs - (858,002)
------------------ ------------------
Balance - March 31, 1998 14,056,565 19,265,652
Shares issued -
Director and employee bonus shares cancelled (157,000) (529,500)
Director and employee bonus shares reissued 157,000 418,200
Exercise of options 677,000 291,110
Legal settlement for Blower & Condor 75,000 225,000
------------------ ------------------
14,808,565 19,670,462
------------------ ------------------
The weighted average number of shares outstanding for the nine months
ended December 31, 1998 was 14,081,383 (unaudited) and for the year
ended March 31, 1998 was 13,911,958 (1997 - 10,924,623; 1996 -
5,961,296).
(c) Flow-through shares
Pursuant to the issuance of flow-through shares, the Company spent
$1,997,500 on qualifying expenditures in fiscal year 1997, the tax
effects of which were renounced to the investors.
(d) Share options
The Company has a stock option plan for the officers, directors and
employees. Up to 10% of the issued and outstanding shares are
reserved for issuance. The number of stock options outstanding at the
year-end were as follows:
Number of options
------------------- ------------------ -------------------
December 31, March 31, March 31,
1998 1998 1997
(Unaudited)
Balance - Beginning of period 1,357,000 847,000 965,000
Granted in the period 250,000 810,000 1,150,000
Exercised in the period (677,000) (85,000) (628,000)
Expired / cancelled in the period (90,000) (215,000) (640,000)
------------------- ------------------ -------------------
Balance - End of period 840,000 1,357,000 847,000
------------------- ------------------ -------------------
F-14
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
(expressed in Canadian dollars)
6. Capital stock (cont'd)
The options outstanding at December 31, 1998 expire as follows:
Number of
options
(Unaudited)
Exercise at $0.43 expiring July, 1999 325,000
Exercise at $0.43 expiring October, 2000 265,000
Exercise at $0.35 expiring November, 2001 250,000
-------
840,000
=======
(e) Share warrants
The number of share warrants issued during the year in conjunction
with the private share placements and outstanding at the year-end
were as follows:
Number of
warrants
-------------------- ------------------ ------------------
December 31, March 31, March 31,
1998 1998 1997
(Unaudited)
Balance - Beginning of period 130,000 637,500 950,000
Granted in the period 322,000 712,500
Exercised in the period (1,025,000)
Expired in the period (130,000) (829,500)
-------------------- ------------------ ------------------
Balance - End of period - 130,000 637,500
-------------------- ------------------ ------------------
The 130,000 warrants are exercisable at $5.00 by March 31, 1999.
7. Commitments and contingencies
(a) The Company has signed a lease for office premises at $24,000 per
annum for five years commencing August 1, 1996.
(b) On July 5, 1994, the Nevada Division of Environmental Protection
issued a Finding of Alleged Violation and Order relating to
environmental problems of certain of Durga Resources Inc.'s (a United
States subsidiary corporation which has no assets and is inactive)
Nevada optioned mining claims. On July 14, 1995, the United States
Department of the Interior Bureau of Land Management, issued a Notice
of Noncompliance regarding environmental problems on the same claims.
Exploration activities on these claims ceased in 1995. According to
the Nevada authorities, Durga Resources Inc. is liable for the costs
of mill site restoration. During 1998, the Company developed a
Reclamation Plan for the clean up of the Nevada site. This plan has
been agreed with the Nevada authorities and a provision for the cost
of this clean up has been made in the 1998 financial statements.
F-15
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
(expressed in Canadian dollars)
7. Commitments and contingencies (cont'd)
Clean-up on the site was completed in June, 1998 and the site has been
inspected by officials from the Nevada Division of Environmental
Protection. In August, 1998 the Notice of Noncompliance was cancelled with
Leader having no further financial obligations.
8. Income taxes
The Company has Canadian resource deductions including undepreciated
capital costs of approximately $10,100,000 which may be carried forward
indefinitely in the prescribed manner to reduce taxable income in future
years, and Canadian non-capital tax losses of approximately $3,035,000.
The non-capital tax losses expire as follows:
Year of Loss Amount Available Until
1992 137,000 1999
1993 169,000 2000
1994 289,000 2001
1995 164,000 2002
1996 320,000 2003
1997 674,000 2004
1998 1,282,000 2005
$3,035,000
==========
In addition, the Company has United States net operating losses available
to be carried forward for 15 years commencing in 1989, of approximately
$1,865,000.
The potential income tax benefit associated with the above non-capital
losses have not been recorded in these financial statements.
Differences between income taxes calculated at Canadian statutory rates
and the income tax provision are as follows:
Nine months
ended
December 31,
1998 March 31, March 31,
(Unaudited) 1998 1997
$ $ $
Income taxes at Canadian statutory rates 188,600 849,000 959,000
Tax effect of losses which have not been
recorded (188,600) (849,000) (959,000)
Balance - End of period - - -
-------------------- ------------------ ------------------
F-16
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
(expressed in Canadian dollars)
9. Financial instruments
The Company's financial instruments recognized in the balance sheet
consist of cash and short-term deposits, accounts receivable, goods and
services tax receivable, subscription receivable, accounts payable and
accrued liabilities and amounts due to related parties. The fair values of
all financial instruments approximate their carrying values due to their
short-term maturity.
10.Subsequent events
(a) On April 27, 1998, the Company reached an agreement with Blower
Investment A.V.V. and Condor Resources A.V.V. to settle outstanding
matters regarding a former investment in mineral properties in Peru
through the issue of 75,000 shares of the Company. A liability of
$251,250 has been recorded in the 1998 financial statements with
respect to this settlement.
(b) On May 28, 1998 the Company signed a letter of intent to acquire
all the outstanding shares of Ariel Resources Ltd. ("Ariel"), a
company with mining operations in Costa Rica, in exchange for shares
of the Company. Ariel shares will be converted into Leader shares at
a ratio of 12.42:1. The Company will provide an initial cash
injection to Ariel of US $2.5 million. After completing certain due
diligence, the Company decided not to pursue this opportunity.
11.Changes in non-cash working capital balances
December 31, March 31, March 31, March 31, 1996
1998 1998 1997 $
$ $ $
(Unaudited)
Operating activities
Accounts receivable 4,900 (12,000) (3,214) 7,231
Goods and Services Tax receivable 123,680 60,038 (170,302) (26,398)
Deposits and prepaid expenses (214,168) 7,577 309 (143,292)
Accounts payable and accrued liabilities (1,354,320) 634,986 779,239 1,108,365
---------------------------------------------------------------------------
(1,439,908) 690,601 606,032 945,906
---------------------------------------------------------------------------
F-17
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
(expressed in Canadian dollars)
12. Differences between Canadian and U.S. generally accepted accounting
principles
Significant differences between Canadian GAAP and U.S. GAAP which would
have an effect on these consolidated financial statements are as follows:
(a) Adjustment to net loss
Nine months
ended
December 31, March 31, March 31, March 31, 1996
1998 1998 1997 $
$ $ $
(Unaudited)
-------------------------------------------------------------------------
Loss for the year following Canadian GAAP
(419,124) (1,887,026) (2,130,497) (468,902)
Deferred exploration costs (i) (565,069) (4,606,141) (3,328,779) (718,717)
Tax effect of flow-through shares (ii) - - 900,766 -
-------------------------------------------------------------------------
Stock based compensation (iii) (157,070) (928,490) (823,550) (732,100)
-------------------------------------------------------------------------
Loss for the year following U.S. GAAP (1,141,263) (7,421,657) (6,282,826) (1,919,719)
-------------------------------------------------------------------------
Loss per share under U.S. GAAP (0.08) (0.53) (0.58) (0.32)
-------------------------------------------------------------------------
(i) For U.S. GAAP exploration costs, related to projects are
charged to expense as incurred. As such, the majority of costs
charged to exploration costs written off under Canadian GAAP
would have been charged to earnings in prior periods under U.S.
GAP. Property acquisition costs are capitalized for both
Canadian and U.S. GAAP.
(ii) For U.S. GAAP, the tax effect of flow-through shares is
recorded as income. For Canadian GAAP, the tax effect is
recorded as a reduction of deferred exploration costs.
(iii) For U.S. GAAP, subscriptions receivable are recorded as a
reduction in share capital.
(iv) Under U.S. GAAP, a grant of stock options to acquire shares
at a price below the fair market value of the shares, at the
time of the grant, is compensatory under APB No. 25 and is
accounted for as compensation expense. This has the effect of
increasing capital stock and deficit under U.S. GAAP.
F-18
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
Information as at and for the period ended December 31, 1998 is unaudited
12. Differences between Canadian and U.S. generally accepted accounting
principles (cont'd)
(b) Adjustments to balance sheet
Nine months
ended March 31, March 31,
December 1998 1997
31, $ $
1998
$
(Unaudited)
--------------------------------------------------------------------------------------
Canadian U.S. GAAP Canadian U.S. GAAP Canadian U.S. GAAP
GAAP GAAP GAAP
Subscription receivable - - - - 136,500 -
(a)(ii)
Mineral properties & deferred
exploration costs (a)(i) 9,548,034 244,000 8,957,965 219,000 4,440,824 308,000
& (iii)
Capital stock 19,670,462 22,396,700 19,265,652 21,834,820 16,973,405 18,614,083
Deficit (9,388,782) (21,419,054) (8,969,658) (20,277,791) (7,082,632) (12,856,134)
(c) Shareholders' equity
Under U.S. GAAP, shareholders' equity would be as follows:
Nine months
ended
December 31, March 31, March 31,
1998 (Unaudited) 1998 1997
-----------------------------------------------------------------
Under Canadian GAAP 10,281,680 10,295,994 9,890,773
US GAAP adjustment to net loss
Current (722,139) (5,534,631) (4,152,329)
Cumulative (8,738,965) (4,132,824) (804,045)
US GAAP adjustment to capital stock (a)(ii)
- - (136,500)
(a)(iv) 157,070 928,490 823,550
-------------------- ------------------ ------------------
Balance - End of period 977,646 1,557,029 5,621,449
==================== ================== ==================
(d) Income taxes
Under U.S. GAAP, the company would be required to initially recognize
an income tax asset arising from the benefit of losses carried
forward. This asset has been reduced to $nil through the application
of a valuation allowance of $3,035,000.
(e) Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which standardizes the accounting for derivative
instruments. SFAS 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. The effective date was
subsequently changed to all fiscal quarters of all fiscal years
beginning after June 15, 2000 (unaudited). Adopting this standard
will not have a significant impact on the company's consolidated
financial position, results of operations or cash flows.
F-19
TABLE 1
Table 1: Leader's Mineral Claims over the Knife Lake - McCullum Lake
Area within the Scimitar Complex.
Disposition Hectares Owner Percent Owned Date Protected to NTS Ref
Number
S-102637 100 Leader Mining 100% 26-Feb-99 64 D 3
S-102638 250 Leader Mining 100% 26-Feb-99 64 D 3
S-105562 1800 Leader Mining 100% 12-Jun-99 64 D 3
S-105563 86 Leader Mining 100% 6-Oct-99 64 D 3
S-105564 531 Leader Mining 100% 21-Oct-99 64 D 3
S-105565 1030 Leader Mining 100% 22-Oct-99 64 D 3
S-105566 1361 Leader Mining 100% 27-Oct-99 64 D 3
S-105567 2839 Leader Mining 100% 27-Oct-99 64 D 3
CBS-6828 840 Leader Mining 100% 27-Jan-99 63-M-14
CBS-6829 700 Leader Mining 100% 28-Jan-99 63-M-14
CBS-6830 900 Leader Mining 100% 28-Jan-99 63-M-14
CBS-8400 1600 Leader Mining 100% 12-Jun-99 63-M-14 &
63-M-14
CBS-8387 806 Leader Mining 100% 4-Mar-99 63-M-14 & 64-D03
S-105580 4264 Leader Mining 100% 11-Apr-99 63-M-14,
63-M-15,
64-D-02 &
64-D-03
CBS-2128 1100 Leader Mining 100% 10-Feb-99 63-M-15
CBS-3187 437 Copperquest 100% 18-Oct-98 63-M-15
CBS-3188 699 Copperquest 100% 18-Oct-98 63-M-15
CBS-3189 1117 Copperquest 100% 18-Oct-98 63-M-15
CBS-3190 515 Copperquest 100% 18-Oct-98 63-M-15
CBS-3223 100 Copperquest 100% 18-Oct-98 63-M-15
CBS-3224 312 Copperquest 100% 18-Oct-98 63-M-15
CBS-3225 210 Copperquest 100% 1-Aug-98 63-M-15
CBS-3226 225 Copperquest 100% 1-Aug-98 63-M-15
CBS-6822 950 Leader Mining 100% 17-Jan-99 63-M-15
CBS-6823 600 Leader Mining 100% 17-Jan-99 63-M-15
CBS-6831 672 Leader Mining 100% 10-Feb-99 63-M-15
CBS-6832 1185 Leader Mining 100% 10-Feb-99 63-M-15
CBS-6833 408 Leader Mining 100% 10-Feb-99 63-M-15
CBS-6834 900 Leader Mining 100% 31-Jan-99 63-M-15
CBS-6835 1275 Leader Mining 100% 31-Jan-99 63-M-15
CBS-8392 954 Leader Mining 100% 26-Feb-99 63-M-15
CBS-8393 225 Leader Mining 100% 26-Feb-99 63-M-15
CBS-8399 225 Leader Mining 100% 12-Jun-99 63-M-15
ML-5269 648 Leader Mining 100% 8-Oct-99 63-M-15
S-90909 250 Copperquest 100% 18-Oct-99 63-M-15
S-909010 150 Copperquest 100% 18-Oct-99 63-M-15
S-90911 428 Leader Mining 100% 10-Feb-99 63-M-15
S-92754 790 Leader Mining 100% 20-Feb-99 63-M-15
S-92755 1450 Leader Mining 100% 4-Feb-99 63-M-15
S-95890 1100 Leader Mining 100% 31-Jan-99 63-M-15
S-96198 940 Leader Mining 100% 7-Feb-99 63-M-15
S-99066 40 Con.Pine Channel 100% 23-Jan-99 63-M-15
S-102633 1000 Leader Mining 100% 19-Feb-99 63-M-15
S-102634 1250 Leader Mining 100% 19-Feb-99 63-M-15
S-102635 800 Leader Mining 100% 26-Feb-99 63-M-15
S-102636 150 Leader Mining 100% 24-Feb-99 63-M-15
S-104837 875 Con.Pine Channel 100% 14-Dec-98 63-M-15
S-104995 1575 Con.Pine Channel 100% 20-Feb-99 63-M-15
S-105168 420 Con.Pine Channel 100% 20-Feb-99 63-M-15
S-105169 144 Con.Pine Channel 100% 20-Feb-99 63-M-15
S-105170 200 Con.Pine Channel 100% 20-Feb-99 63-M-15
S-105556 135 Leader Mining 100% 6-Jun-99 63-M-15
S-105557 1625 Leader Mining 100% 6-Jun-99 63-M-15
S-105570 782 Leader Mining 100% 17-Mar-99 63-M-15
S-105571 215 Leader Mining 100% 17-Mar-99 63-M-15
S-105581 538 Leader Mining 100% 28-Oct-99 63-M-15
S-105581 248 Leader Mining 100% 28-Oct-99 63-M-15
S-105613 1560 Leader Mining 100% 9-Mar-00 63-M-15
S-105614 999 Leader Mining 100% 28-Oct-99 63-M-15
S-105615 900 Leader Mining 100% 9-Mar-00 63-M-15
S-105616 280 Leader Mining 100% 20-Mar-00 63-M-15
S-105996 1036 Leader Mining 100% 1-Apr-00 63-M-15
S-105997 335 Leader Mining 100% 1-Apr-00 63-M-15
S-106002 454 Leader Mining 100% 20-Mar-00 63-M-15
CBS-8391 615 Leader Mining 100% 4-Mar-99 63-M-15
S-105555 2515 Leader Mining 100% 10-Mar-99 64-D-02
CBS-6825 100 Leader Mining 100% 10-Mar-99 64-D-02
CBS-6827 1000 Leader Mining 100% 13-Mar-99 64-D-02
CBS-6935 1650 Leader Mining 100% 17-Mar-99 64-D-02
CBS-8388 300 Leader Mining 100% 4-Mar-99 64-D-02
CBS-8390 1500 Leader Mining 100% 4-Mar-99 64-D-02
CBA-8394 225 Leader Mining 100% 26-Feb-99 64-D-02
CBS-8395 100 Leader Mining 100% Feb 29, 99 64-D-02
CBS-8396 225 Leader Mining 100% 26-Feb-99 64-D-02
CBS-8397 100 Leader Mining 100% Feb 29, 99 64-D-02
CBS-8401 600 Leader Mining 100% 10-Mar-99 64-D-02
CBS-8402 825 Leader Mining 100% 10-Mar-99 64-D-02
CBS-8403 1192 Leader Mining 100% 10-Mar-99 64-D-02
S-99064 76 Co.Pine Channel 100% 23-Jan-99 64-D-02
S-99065 24 Co.Pine Channel 100% 23-Jan-99 64-D-02
S-104835 150 Con.Pine Channel 100% 20-Feb-99 64-D-02
S-104836 270 Con.Pine Channel 100% 20-Feb-99 64-D-02
S-104996 620 Con.Pine Channel 100% 14-Dec-98 64-D-02
S-105175 125 Con.Pine Channel 100% 20-Feb-98 64-D-02
S-105553 3910 Leader Mining 100% 4-Jun-99 64-D-02
S-105554 400 Leader Mining 100% 6-Jun-99 64-D-02
S-105560 900 Leader Mining 100% 12-Jun-99 64-D-02
S-105572 1023 Leader Mining 100% 17-Mar-99 64-D-02
S-105573 3420 Leader Mining 100% 24-Mar-99 64-D-02
S-105574 1025 Leader Mining 100% 27-Mar-99 64-D-02
S-105575 3698 Leader Mining 100% 24-Mar-99 64-D-02
S-105576 233 Leader Mining 100% 27-Mar-99 64-D-02
S-105577 28 Leader Mining 100% 27-Mar-99 64-D-02
S-105578 113 Leader Mining 100% 27-Mar-99 64-D-02
S-105579 2382 Leader Mining 100% 11-Apr-99 64-D-02
CBS-8389 2065 Leader Mining 100% 4-Mar-99 64-D-02 & 64-D-03
S-102640 416 Leader Mining 100% 19-Feb-99 64-D-0- & 63-M-14
CBS-6826 1000 Leader Mining 100% 13-Mar-99 64-D-02
S-102641 225 Leader Mining 100% 26-Feb-99 64-D-03
S-102642 100 Leader Mining 100% 26-Feb-99 64-D-03
S-105580 4264 Leader Mining 100% 11-Apr-99 64-M-14,
64-M-14,
64-M-15,
63-D-02, & 63-D-03
S-10569 2269 Leader Mining 100% 17-Mar-99 63-M-15 & 64-D-02
CBS-6824 700 Leader Mining 100% 10-Mar-99 64-D-02
CBS-3144 413 Leader Mining 100% 14-Jul-99 64-D-02
CBS-8398 300 Leader Mining 100% 12-Jun-99 64-D-01 & 64-D-02
S-105558 825 Leader Mining 100% 6-Jun-99 63-M-15 & 64-D-02
S-105559 225 Leader Mining 100% 6-Jun-99 63-M-15 & 63-M-15
S-105561 300 Leader Mining 100% 12-Jun-99 64-D-03
CBS-8400 1600 Leader Mining 100% 12-Jun-99 63-M-14 & 63-M-15
S-102639 265 Leader Mining 100% 26-Feb-99 64-D-03
Total 95144 ha
TABLE 2
Table 2: Bothma Farms Comprising the Karmel Diamond Project
Property Description In Extent Title Deed Nr.
The farm Grootkoip No. 240, Division 300.0289 Hectares T15434/96
Ladybrand.
Subdivision 1 of the farm Blaauwkrantz 256.9596 Hectares T15434/96
No. 796, Division Ladybrand
The Remainder of the farm Klipnek No. 156.5812 Hectares T15434/96
92, Division Ladybrand
The farm Inkerman No. 703, Division 390.8927 Hectares T1733/97
Ladybrand
The farm Alma No. 157, Division 140.6496 Hectares T1733/97
Ladybrand
The Remainder of the farm Balaclave 119.9145 Hectares T14868/93
16, Division Ladybrand
Subdivision 2 of the farm Gilboa 467, 119.9145 Hectares T5592/89
Division Ladybrand
The farm Belmont 932, Division 190.7952 Hectares T14867/93
Ladybrand
The farm Burgerslaagte 664, Division 214.0131 Hectares T5591/1989
Ladybrand
The Farm Dundee No. 58, Division 1350.2484 Hectares T13918/88
Ladybrand
The Remainder of the Farm Padlangs No. 134.7724 Hectares T1617/1997
239, Division Ladybrand
The Remaining Portion of the Farm 342.6128 Hectares T3025/1989
Bethel 17, Division Ladybrand
An undivided half shares of the farm 390.8927 Hectares T1454/1958
Crimea No. 51, Division Ladybrand
An undivided half shares of the farm 390.8927 Hectares T1453/1958
Crimea No. 51, Division Ladybrand
A Portion Known as Mynplass No. 931 of 334 Morgen 75 Vierkante Roede T1103/1958
the farm Karmel No. 93, Division
Ladybrand
The farm Haarlem No. 704, Division 390.8927 Hectares T677/1959
Ladybrand
A Portion known as Elim No. 906 of the 600 Morgen T1280/1956
farm Bethel No. 17, Division Ladybrand
Subdivision 3 of the farm Gilboa No. 140 Morgen T7818/1964
467, Division Ladybrand
Subdivision 1 of the farm Weltevreden 305.8132 Morgen T2000/1962
No. 145, Division Ladybrand