UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of FEBRUARY, 2006.
Commission File Number: 0-30390
ROCHESTER RESOURCES LTD
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(Translation of registrant's name into English)
#1305 - 1090 West Georgia Street, Vancouver, British Columbia, V6E 3V7, Canada
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F: FORM 20-F [X] FORM 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): _______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): _______
Indicate by check mark whether the registrant by furnishing the information
contained in this Form, is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
YES [ ] NO [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3- 2(b): 82-_____________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
ROCHESTER RESOURCES LTD
Date: February 23, 2006 /s/ Douglas Good
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Doug Good,
President
ROCHESTER RESOURCES LTD.
SUITE 400 - 535 HOWE STREET
VANCOUVER, BRITISH COLUMBIA
CANADA V6C 2Z4
WEBSITE ADDRESS: WWW.ROCHESTERRESOURCESLTD.COM
ANNUAL INFORMATION FORM
February 20, 2006
ROCHESTER RESOURCES LTD.
(the "Company")
ANNUAL INFORMATION FORM
(the "AIF")
TABLE OF CONTENTS
PRELIMINARY NOTES..............................................................3
FINANCIAL STATEMENTS AND MD&A...............................................3
EFFECTIVE DATE OF INFORMATION...............................................3
CURRENCY AND EXCHANGE RATES.................................................3
FORWARD-LOOKING STATEMENTS..................................................3
CORPORATE STRUCTURE............................................................4
NAME, ADDRESS AND INCORPORATION.............................................4
INTERCORPORATE RELATIONSHIPS................................................4
GENERAL DEVELOPMENT OF THE BUSINESS............................................4
THREE YEAR HISTORY: SIGNIFICANT ACQUISITIONS/DISPOSITIONS...................4
THREE YEAR HISTORY OF EQUITY FINANCINGS.....................................5
NARRATIVE DESCRIPTION OF THE BUSINESS..........................................6
GENERAL ....................................................................6
SUMMARY OF MINA REAL PROPERTY...............................................6
SPECIALIZED SKILL AND KNOWLEDGE.............................................9
COMPETITIVE CONDITIONS......................................................9
ENVIRONMENTAL PROTECTION....................................................9
EMPLOYEES...................................................................9
BANKRUPTCY..................................................................9
RISK FACTORS...................................................................9
MINA REAL PROJECT - TECHNICAL INFORMATION.....................................14
DIVIDENDS.....................................................................17
CAPITAL STRUCTURE.............................................................17
MARKET FOR SECURITIES.........................................................17
DIRECTORS AND OFFICERS........................................................18
NAME, OCCUPATION AND SECURITY HOLDING......................................18
CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS...................19
CONFLICTS OF INTEREST......................................................20
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS....................20
REGISTRAR AND TRANSFER AGENT..................................................20
MATERIAL CONTRACTS............................................................20
INTERESTS OF EXPERTS..........................................................21
ADDITIONAL INFORMATION........................................................21
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PRELIMINARY NOTES
This AIF is prepared in accordance with Form 51-102F2 to National Instrument
51-102 as a disclosure document intended to provide material information about
the Company and its business at a point in time in the context of its historical
and possible future development. This disclosure is supplemented throughout the
year by subsequent continuous disclosure filings including news releases,
material change reports, business acquisition reports, financial statements and
management discussion and analysis.
FINANCIAL STATEMENTS AND MD&A
All financial information in this AIF is prepared in accordance with Canadian
generally accepted accounting principles ("GAAP"). The Company's fiscal year end
is May 31.
EFFECTIVE DATE OF INFORMATION
This AIF is dated February 15, 2006, and the information contained herein is
current as of such date, other than certain financial information which is
current as of May 31, 2005, being the date of the Company's most recently
audited financial year end and as of November 30, 2005 being the Company's most
recently completed interim period.
CURRENCY AND EXCHANGE RATES
All dollar amounts in this AIF are expressed in Canadian dollars unless United
States dollars are indicated.
FORWARD-LOOKING STATEMENTS
This AIF contains forward-looking statements concerning the Company's plans for
its properties and other matters. These statements relate to analyses and other
information that are based on forecasts of future results, estimates of amounts
not yet determinable and assumptions of management.
Statements that may include reserves and mineral resource estimates may also be
deemed to constitute forward-looking statements to the extent that they involve
estimates of the mineralization that will be encountered if the property is
developed, and in the case of mineral resources or mineral reserves, such
statements reflect the conclusion based on certain assumptions that the mineral
deposit can be economically exploited. Any statements that express or involve
discussions with respect to predictions, expectations, beliefs, plans,
projections, objectives, assumptions or future events or performance (often, but
not always, using words or phrases such as "expects" or "does not expect", "is
expected", "anticipates" or "does not anticipate", "plans", "estimates" or
"intends", or stating that certain actions, events or results "may", "could",
"would", "might" or "will" be taken, occur or be achieved) are not statements of
historical fact and may be "forward-looking statements." Forward-looking
statements are subject to a variety of risks and uncertainties which could cause
actual events or results to differ from those reflected in the forward-looking
statements.
Some of the important risks and uncertainties that could affect forward looking
statements are described in this AIF under "Narrative Description of Business -
Risk Factors". Should one or more of these risks and uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those described in forward-looking statements. Forward-looking
statements are made based on management's beliefs, estimates and opinions on the
date the statements are made and the Company undertakes no obligation to update
forward-looking statements if these beliefs, estimates and opinions or other
circumstances should change. Investors are cautioned against attributing undue
certainty to forward-looking statements.
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CORPORATE STRUCTURE
NAME, ADDRESS AND INCORPORATION
The Company was incorporated under the laws of the Province of British Columbia
on September 7, 1989, as No. 207 Sail View Ventures Ltd. and was inactive until
July 15, 1994 when it changed its name to Hilton Petroleum Ltd. On June 18,
1997, the Company increased its authorized capital from 20,000,000 common shares
without par value to 100,000,000 common shares without par value.
On April 1, 1999, pursuant to an agreement (the "Arrangement Agreement") dated
February 5, 1999, the Company completed a merger with Stanford Oil & Gas Ltd.
("Stanford"), a public company with common management. Under the terms of the
Arrangement Agreement, Stanford became a wholly-owned subsidiary of the Company.
On April 1, 1999 the Company was continued into the Yukon Territory, and
increased its authorized capital from 100,000,000 common shares without par
value to an unlimited number of common shares without par value. On December 30,
2002, the Company completed a consolidation of its share capital on a
one-new-for-ten-old basis. On March 2, 2004 the Company changed its name from
Hilton Petroleum Ltd. to Hilton Resources Ltd. The Business Corporations Act
(British Columbia) (the "New Act"), which superseded the Company Act (British
Columbia), came into force on March 29, 2004 and on November 18, 2004, after
obtaining shareholder approval, the Company altered its Notice of Articles and
adopted new Articles that take advantage of certain business flexibilities
available under the New Act. Effective November 23, 2004, the Company continued
its jurisdiction out of the Yukon Territory and into British Columbia. On August
25, 2005, the Company completed a consolidation of its share capital on a
one-new-for-ten-old basis and changed its name from Hilton Resources Ltd. to
Rochester Resources Ltd.
The Company is a reporting issuer in British Columbia, Alberta and Saskatchewan.
The Company trades on the TSX Venture Exchange ("TSXV") under the symbol "RCT"
and on the Over the Counter Bulletin ("OTCBB") under the symbol "RCTFF". The
Company's securities are also registered under the United States Securities Act
of 1934.
The office and principal business address of the Company is Suite 400 - 535 Howe
Street, Vancouver, British Columbia, Canada V6C 2Z4. The registered and records
office of the Company is Suite 1305, 1090 West Georgia Street, Vancouver,
British Columbia, Canada V6E 3V7.
INTERCORPORATE RELATIONSHIPS
The Company currently has no subsidiaries. In connection with the exercise of
its option to acquire an interest in the Mina Real property in Mexico as more
particularly described herein, the Company will acquire an interest in Mina Real
Mexico S.A. de C.V. ("Mina Real"), a private Mexican company formed to hold the
Mina Real property.
GENERAL DEVELOPMENT OF THE BUSINESS
THREE YEAR HISTORY: SIGNIFICANT ACQUISITIONS/DISPOSITIONS
The Company was historically engaged in the business of acquiring leasehold
interests in petroleum and natural gas rights, and the exploration for and
development, production and sale of petroleum and natural gas in the continental
United States. From 1998 to 2002, the majority of the Company's financial
resources and attention had been focused on two petroleum and natural gas
projects - the East Lost Hills project ("ELH") and the San Joaquin Joint Venture
("SJJV"), both located in Southern California near Bakersfield.
The Company's involvement in the ELH prospect and SJJV ended in 2003, despite
initially positive results, when subsequent drill programs were unsuccessful. In
light of the results and uncertainties pertaining to any further activities at
East Lost Hills by the joint venture, the Company determined that it would no
longer provide further funding to two wholly owned subsidiaries, Hilton
Petroleum, Inc. and STB Energy Inc. (collectively the "Petroleum Subsidiaries"),
which effectively ended the Company's participation in petroleum and natural gas
operations. The Company's remaining $5.4 million net investment in the Petroleum
Subsidiaries was written off in fiscal 2003 and the Company ceased to record the
activities of the Petroleum Subsidiaries.
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During fiscal 2003, the Company funded, on a reduced basis, the research,
development and marketing of proprietary software programs using artificial
intelligence. These activities were unsuccessful in developing a marketable
product and the project was dropped.
On October 7, 2003 the Company announced that it had finalized a heads of
agreement with Minera San Jorge S.A. de C.V. ("MSJ"), a private Mexican company
at arms-length to the Company, for an option to acquire a 60% interest in the El
Nayar project comprising approximately 6,722 hectares in the central SE part of
the state of Nayarit, Mexico. The terms of the agreement allowed for a due
diligence period during which the Company conducted initial exploration programs
to assess the merits of the properties and conducted further legal due diligence
regarding land tenure and environmental concerns or liabilities.
On June 15, 2005, the Company announced it had no further work planned for the
El Nayar project in Nayarit, Mexico. Although the property was still considered
to have some residual exploration potential, it did not meet the Company's
objective of providing near-term production. The Company made this decision
after completing an exploration program which demonstrated that the observed
mineralization on the property took the form of steep narrow veins which would
negatively impact on underground mining and milling costs.
On November 25, 2005, the Company announced the appointment of Douglas Good as
director, President and Chief Executive Officer of the Company followed by the
appointment of Gil Leathley as a director on January 17, 2006. Mr. Good has an
extensive background in providing strategic planning, corporate restructuring,
finance and senior management services to a range of companies in the start-up
and early development phase, and has a strong background in commercial banking
and leasing. Mr. Leathley has worked in the mining industry since 1962. He has
held various senior positions with major mining companies, and since 2000, has
been an independent consultant to several senior and junior mining companies.
On January 8, 2006, the Company entered into an option agreement (hereinafter
the "Mina Real Option Agreement") with an arm's-length private company, to
acquire up to a 51% interest in a gold/silver project comprising approximately
3,400 hectares of mineral properties located near the capital city of Tepic, in
the state of Nayarit, Mexico (the "Mina Real Property"). A verbal six-month
lock-up agreement is in place to allow discussions regarding the purchase of an
option on the remaining 49% interest. Conditional on making initial payments of
US$110,000 (paid) and the issuance of 250,000 common shares (not yet paid), the
Company will earn the following interests in the Mina Real Property:
- an initial 20% interest on funding the first US$750,000 towards the
2006 work program;
- a further 20% interest on funding the second US$750,000 towards the
2006 work program; and
- a further 11% interest on payment of US$900,000 at the minimum rate of
US$75,000 per month commencing mid-2006, with each payment vesting a
0.9166% interest.
On February 6, 2006 the TSX Venture Exchange accepted for filing the Mina Real
Option Agreement and the Company is in the process of closing the transaction. A
detailed overview of this project is contained in the section of this AIF headed
"Narrative Description of Business - SUMMARY OF MINA REAL PROPERTY".
THREE YEAR HISTORY OF EQUITY FINANCINGS
The Company has financed its operations through funds raised in private
placements of common shares or units (consisting of common shares and warrants
exercisable for common shares), shares issues in settlement of debt and shares
issued upon the exercise of options and warrants. The following table summarizes
the funds raised from private placements and debt settlements over the three
year history:
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WARRANTS
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COMMON EXERCISE
DESCRIPTION OF UNITS PRICE SHARES NUMBER PRICE
DATE ISSUANCE (NOTE 1) (NOTE 1) (NOTE 1) (NOTE 1) (NOTE 1) TERM
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06/12/2002 Debt Settlement n/a $70.88 87,615 n/a n/a n/a
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05/31/2003 Settlement of Interest n/a $1.23 34,325 n/a n/a n/a
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08/31/2003 Settlement of Interest n/a $0.77 55,207 n/a n/a n/a
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11/25/2003 Private Placement 403,000 $1.00 403,000 403,000 $1.40 2 years
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01/24/2004 Debt Settlement n/a $3.28 623,384 n/a n/a n/a
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01/24/2004 Settlement of Interest n/a $2.58 8,830 n/a n/a n/a
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02/19/2004 Private Placement 67,500 $2.00 67,500 67,500 $2.60 1 year
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03/04/2004 Private Placement 142,500 $2.30 142,500 142,500 $3.10 2 years
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03/31/2005 Private Placement 355,000 $1.00 355,000 177,500 $1.50 First Yr
$2.00 Second Yr
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01/16/2006 Private Placement 5,000,000 $0.50 5,000,000 2,500,000 $0.65 2 year
(Note 2)
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(1) Numbers and dollar amounts have been adjusted to reflect the 10:1
consolidations of the Company's share capital which took place on December
30, 2002 and August 25, 2005.
(2) As agent for the brokered portion of the private placement, Canaccord
Capital Corporation was paid a cash commission of 10% of the gross proceeds
raised, Agent's Warrants equal to 5% of the number of units sold by
Canaccord and a corporate finance fee of 25,000 common shares. All of the
securities issued have a hold period expiring on May 17, 2006.
In addition, the Company raised $12,000 from the exercise of warrants and
options since the beginning of Fiscal 2006 ($3,000 in Fiscal 2005; $49,000 in
Fiscal 2004).
NARRATIVE DESCRIPTION OF THE BUSINESS
GENERAL
The Company is a development-stage company that is in the business of acquiring,
exploring and developing mineral resource properties, principally gold and
silver properties in Mexico. Properties under consideration for acquisition must
meet the Company's criteria for near term production and must also hold
significant exploration potential.
In January 2006, the Company acquired an interest in the gold/silver Mina Real
Property, which the Company intends to focus its exploration and development
activities on during 2006. The Company acquired an interest in this property as
it meets the Company's criteria for near term production. The Company expects
that this property can be brought into production in the very near term, subject
to the results from its initial work program.
SUMMARY OF MINA REAL PROPERTY
The following information pertaining to the Mina Real Property is based, in
part, upon a technical report dated January 22, 2006 entitled "The Mina Real
Gold-Silver Property" (the "Technical Report") prepared by Mr. Victor Jaramillo,
M.Sc.(A), P.Geo, the Company's "Qualified Person" for the purposes of NI 43-101.
The Technical Report is incorporated herein by reference and the full text is
available on SEDAR at www.sedar.com.
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The Mina Real Property is located in the state of Nayarit, Mexico, on the
Pacific coast approximately 50 kilometers southeast from the city of Tepic and
within the Santa Maria del Oro District, State of Nayarit, Mexico. It comprises
four mineral claims that total approximately 3,377.33 hectares. The mineral
rights to 2,387 hectares of these concessions are currently owned by a Mexican
company "Desarrollos Mineros de Occidente" (DMO), a subsidiary of ALB Holdings
Ltd. ("ALB"), a Canadian private company at arms length to the Company. DMO
intends to transfer these concessions to Mina Real, a new recently incorporated
Mexican corporation formed to hold the Mina Real Property. Mina Real holds two
adjoining claims totaling an additional 990 hectares. The surface rights to
these properties are held mainly by local farmers, and therefore negotiations
are required in order to gain access to the property in order to build roads,
drill pads, and dig trenches.
The Mina Real Property is an advanced property on which the owner has spent over
US$3 million to fund the initial high-risk exploration and development costs,
including over 1,500 meters of mine development, involving five separate drifts
at different elevations ranging from the 1140 meter elevation to the 1260 meter
elevation as set out in the following diagram of the underground workings:
[GRAPHIC OMITTED][GRAPHIC OMITTED]
Omitted Graphic is a drawing of the the Mina Real Property looking NE showing
Levels 1115 through Level 1260 and location of Diamond Drill Hole F022-03
In April through June of 2005, approximately 4,400 tonnes of gold-silver bearing
quartz material was mined from the aforenoted segment of the Florida Vein
structure.
Access is good to the mine location through 2.5 kilometers of recently developed
road with water and power sources close to the proposed site for construction of
an initial milling operation capable of processing 200-300 tonnes per day.
To date four veins have been identified on the Mina Real Property. The Florida
quartz veins 1, 2 and 3 and the Tajos Cuates vein. Other veins are known to
exist but require exploration mapping and sampling. Initial development at the
property consists of five portals ranging from 20 to 50 meters apart at
different elevations of the Florida vein system.
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Recent geological field work, such as geological mapping, limited trenching and
drill core examination, indicate that the Florida Vein system may have good
continuity to the northwest for at least another kilometer from the mine area
and may have a vertical continuity of over 250 meters, as observed from surface
outcrop to the bottom lowermost developed adit. Though there has been limited
diamond drilling on the property one hole, F2-03, was drilled through the lower
levels of the area designated by the above workings diagram. All three veins
were intersected at elevations below the lowermost development adits with
intersections ranging in width from 1.1 to 2.5 meters with grades of 0.52 g/t Au
and 93.54 g/t Ag in the first vein, 12.73 g/t Au and 172 g/t Ag in the second
vein and 5.50 g/t Au and 171 g/t Ag in the third vein.
As part of its due diligence at the Mina Real Property, Mr. Jaramillo, the
author of the Technical Report, has taken 51 chip vein samples, 1 grab sample, 4
duplicates, 3 blanks and 6 standards. Also, 20 pulp samples were assayed. Some
highlights of the underground chip vein samples taken include:
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SAMPLE NO. VEIN WIDTH GOLD SILVER DESCRIPTION
(m) (g/t) (g/t)
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387322 Florida 3 1.00 8.4 226 Quartz Vein Level 260
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387324 Florida 3 0.98 9.62 67.2 Quartz Vein Level 260
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387325 Florida 3 1.07 11.5 123 Quartz Vein Level 260
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387334 Florida 2 0.70 2.44 848 Quartz Vein Level 210
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387339 Florida 3 2.10 9.61 202 Quartz Vein Level 160
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387342 Florida 3 1.30 14.25 260 Quartz Vein Level 160
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387362 Florida 2 1.55 6.27 501 Quartz Vein Level 185
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387367 Florida 2 1.10 14.55 336 Quartz Vein Level 185
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387369 Florida 3 1.60 9.15 119 Quartz Vein Level 185
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387393 Florida 3 0.80 16.80 115 Quartz Vein Level 140
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387397 Florida 3 1.13 4.66 723 Quartz Vein Level 140
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387398 Tajo Cuates 1.70 2.77 1330 Quartz Vein 1 - Main adit
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A vein system called Tajos Cuates, located just south of the Florida Veins, has
also been visited and sampled by the Company's qualified person. The vein where
sampled has a true width of 1.70 meters and is composed of fractured quartz and
concentrations of limonite and manganese oxides. The vein appears to be a large
zone of secondary enrichment. The assay returned 2.77 g/t Au and 1,330 g/t Ag.
The Mina Real Property has no mineral resources or mineral reserves which are
compliant with the reporting requirements of National Instrument 43-101
The following surface and underground exploration program at an estimated cost
of US$1.68 million was recommended by Mr. Jaramillo:
- geological mapping, trenching sampling
- access road and drill pad construction
- 1,600 meters of HQ3 diamond drilling on selected targets
- 3,000 meters in exploration development (drifting)
Subject to availability of funds, the Company intends to proceed with the
program recommended in the Technical Report, and with further development of the
Mina Real Property.
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SPECIALIZED SKILL AND KNOWLEDGE
The Company requires the services of professional geologists as well as skilled
mining and milling personnel. There is significant and increasing competition
among the Company and other resource companies for the recruitment and retention
of such qualified personnel.
COMPETITIVE CONDITIONS
The Company competes with other resource companies for the acquisition of
mineral properties. There is significant and increasing competition for a
limited number of resource acquisition opportunities and as a result, the
Company may be unable to acquire attractive resource properties on terms it
considers acceptable. The Company competes with many other companies that have
substantially greater financial resources than the Company.
ENVIRONMENTAL PROTECTION
The Company currently conducts its exploration and development activities in
Mexico. Such activities are subject to various laws, rules and regulations
governing the protection of the environment. All of the Company's activities are
in compliance in all material respects with applicable environmental
legislation.
EMPLOYEES
The Company has one employee, namely the Company's President, Douglas Good. Mina
Real, Mexico has nine full time employees including its President, who has an
extensive background in mining and a PhD from the Colorado School of Mines, and
an on-site geologist. The Company engages independent contractors and
consultants from time to time to supply work on specific properties and for
administrative and accounting services as required.
BANKRUPTCY
There has been no bankruptcy, receivership or similar proceedings against the
Company or any of its subsidiaries, or any voluntary bankruptcy, receivership or
similar proceedings by the Company or its subsidiary within the three most
recently completed financial years and up to the date of this AIF.
RISK FACTORS
The financing and exploration and development of any of the Company's properties
is subject to a number of factors including commodity prices, laws and
regulations, political conditions, currency fluctuations, hiring qualified
people and obtaining necessary services in jurisdictions where the Company
operates. The current trends relating to these factors are favorable but could
change at any time and negatively affect the company's operations and business.
The Company has, in the past, conducted business in the petroleum and natural
gas industry and computer software industry. As of the date of this AIF, the
Company no longer is active in these industries, and instead currently conducts
mineral exploration activities. The following is a brief discussion of those
distinctive or special characteristics of the Company's operations and industry
which may have a material impact on, or constitute risk factors in respect of
the Company's future financial performance:
THE COMPANY'S PROPERTIES ARE LOCATED IN MEXICO AND ARE SUBJECT TO CHANGES IN
POLITICAL CONDITIONS AND REGULATIONS
In the past, Mexico has been subject to political instability, changes and
uncertainties, which may cause changes to existing governmental regulations
affecting mineral exploration and mining activities. The Company's operations
and properties are subject to a variety of governmental regulations including,
among others: regulations promulgated by SEMARNAP, Mexico's environmental
protection agency; the Mexican Mining Law; and the regulations of the Comision
National del Aqua with respect to water rights. The Company's mineral
-9-
exploration and any future mining activities in Mexico may be adversely affected
in varying degrees by changing government regulations relating to the mining
industry or shifts in political conditions that increase the costs related to
the Company activities or maintaining its properties. Operations may also be
affected in varying degrees by government regulations with respect to
restrictions on production, price controls, export controls, income taxes,
expropriation of property, environmental legislation and mine safety. The
Company does not carry political risk insurance.
In addition, the Company's properties may be affected by government regulations
and treaties, as well as by laws and policies of Canada affecting foreign trade,
investment and taxation. In addition, it may be difficult to enforce judgments
obtained in Canadian courts against assets located outside of Canada.
THE BUSINESS OF EXPLORATION FOR MINERALS AND MINING INVOLVES A HIGH DEGREE OF
RISK, AS FEW PROPERTIES THAT ARE EXPLORED ARE ULTIMATELY DEVELOPED INTO
PRODUCING MINES
Continued exploration of the Company's project depends on satisfactory
exploration results. Mineral exploration involves a high degree of risk and few
properties which are explored are ultimately developed into producing mines. The
long-term profitability of the Company's operations will be, in part, directly
related to the cost and success of its exploration programs, which may be
affected by a number of factors beyond the Company's control.
Operations in which the Company has a direct or indirect interest will be
subject to all the hazards and risks normally incidental to exploration for gold
("Au"), silver ("Ag") and other metals, any of which could result in work
stoppages, damage to property, and possible environmental damage. Substantial
expenditures are required to establish ore reserves through drilling, to develop
metallurgical processes to extract the metal from the ore and, in the case of
new properties, to develop the mining and processing facilities and
infrastructure at any site chosen for mining. Although substantial benefits may
be derived from the discovery of a major mineral deposit, the Company may not be
able to raise sufficient funds for development. The economics of developing
gold, silver and other mineral properties is affected by many factors including
the cost of operations, variations in the grade of ore mined, fluctuations in
metal markets, costs of processing equipment and such other factors as
government regulations, including regulations relating to royalties, allowable
production, importing and exporting of minerals and environmental protection.
Unusual or unexpected formations, formation pressures, fires, power outages,
labour disruptions, flooding, explorations, cave-ins, landslides and the
inability to obtain suitable adequate machinery, equipment or labour are other
risks involved in the operation of mines and the conduct of exploration
programs.
The Company does not have producing mines at this time. Properties on which
mineral reserves are not found will have to be discarded causing the Company to
write each respective property off thus sustaining a loss.
NO ASSURANCE CAN BE GIVEN REGARDING THE COMMERCIAL VIABILITY OF MINERAL DEPOSITS
No assurance can be given that any particular level of recovery of minerals will
in fact be realized or will ever qualify as a commercially mineable (or viable)
deposit which can be legally and economically exploited. In addition, the grade
of mineralization ultimately mined may differ from that indicated by the mining
and processing of bulk samples or drilling results, and such differences could
be material. Production can be affected by such factors as permitting
regulations and requirements, weather, environmental factors, unforeseen
technical difficulties, unusual or unexpected geological formations, inaccurate
or incorrect geologic, metallurgical or engineering work, and work
interruptions, among other things. Short term factors, such as the need for
orderly development of deposits or the processing of new or different grades,
may have an adverse effect on mining operations or the results of operations.
There can be no assurance that minerals recovered in small scale laboratory
tests will be duplicated in large scale tests under on-site conditions or in
production scale operations. Material changes in reserves or resources, grades,
stripping ratios or recovery rates may affect the economic viability of
projects.
The Company has engaged expert independent technical consultants to advise it
with respect to the potential of its various mineral property interests and
project engineering, among other things. The Company believes that those experts
are competent and that they have carried out their work in accordance with all
internationally recognized industry standards. However, if the work conducted by
those experts is ultimately found to be incorrect or inadequate in any material
respect, the Company may experience delays and increased costs in developing its
properties.
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THE COMPANY MAY NOT HAVE PROPER TITLE TO ITS PROPERTIES AND, AS A RESULT, MAY
INCUR SIGNIFICANT EXPENSES TO OBTAIN PROPER TITLE, OR MAY HAVE TO ABANDON ANY
SUCH PROPERTY.
The Company has under option mineral claims or concessions which constitute the
Company's property holdings. The ownership and validity of mining claims and
concessions are often uncertain and may be contested. In those jurisdictions
where the Company has property interests, the Company makes a search of mining
records in accordance with mining industry practices to confirm that it has
acquired satisfactory title to its properties but does not obtain title
insurance with respect to such properties. The possibility exists that title to
one or more of its concessions, particularly title to undeveloped claims, might
be defective because of errors or omissions in the chain of title, including
defects in conveyances and defects in locating or maintaining such claims, or
concessions. The boundaries of some of the Company's property interests have not
been surveyed and, therefore, the precise location and area of these mining
properties may be in doubt. The Company is not aware of challenges to the
location or area of its unpatented mining claims. The Company does not have
title to the surface rights to the Mina Real Property. The surface rights to the
property are mostly held by local farmers. The Company will need to enter into
agreements with the holders of the title to the surface rights in order to
obtain such surface rights to the property. There can be no assurance that these
surface rights will be secured on terms acceptable to the Company.
MEXICO IS A DEVELOPING COUNTRY AND OBTAINING FINANCING OR FINDING OR HIRING
QUALIFIED PEOPLE OR OBTAINING ALL NECESSARY SERVICES FOR THE COMPANY'S
OPERATIONS IN MEXICO MAY BE DIFFICULT
The Company's principal project is located in Mexico, which is a developing
country, and it may be difficult for the Company to obtain necessary financing
for its planned exploration or development activities in Mexico. The Company
also plans to hire some of its employees or consultants in Mexico to assist the
Company to conduct its operations in accordance with local laws in Mexico. The
Company also plans to purchase certain supplies and retain the services of
various companies in Mexico to meet its future business plans. It may be
difficult to find or hire qualified people in the mining industry who are
situated in Mexico or to obtain all of the necessary services or expertise in
Mexico or to conduct operations on its projects at reasonable rates. If
qualified people and services or expertise cannot be obtained in Mexico, the
Company may need to seek and obtain those services from people located outside
of Mexico which will require work permits and compliance with applicable laws
and could result in delays and higher costs to the Company to conduct its
operations in Mexico.
THE COMPANY'S ACTIVITIES ARE SUBJECT TO ENVIRONMENTAL REGULATIONS
The operations of the Company are subject to environmental regulations
promulgated by government agencies from time to time. Specifically, the
Company's activities are subject to regulation by SEMARNAP, the environmental
protection agency of Mexico. Regulations require that an environmental impact
statement, known in Mexico as a Manifesto Impacto Ambiental, be prepared by a
third-party contractor for submission to SEMARNAP. Studies required to support
the Manifesto Impacto Ambiental include a detailed analysis of the following
areas: soil, water, vegetation, wildlife, cultural resources and socio-economic
impacts. The Company must also provide proof of local community support for a
project to gain final Manifesto Impacto Ambiental approval. Environmental
legislation provides for restrictions and prohibitions on spills, releases or
emissions of various substances produced in association with certain mining
industry operations, such as seepage from tailings disposal areas, which would
result in environmental pollution. A breach of such legislation may result in
imposition of fines and penalties. In addition, certain types of operations
require the submission and approval of environmental impact assessments.
Environmental legislation is evolving in a manner which means stricter
standards, and enforcement, fines and penalties for non-compliance are more
stringent. Environmental assessments of proposed projects carry a heightened
degree of responsibility for companies and directors, officers and employees.
The cost of compliance with changes in governmental regulations has a potential
to reduce the profitability of operations.
-11-
AMENDMENTS TO CURRENT LAWS, REGULATIONS AND PERMITS GOVERNING ACTIVITIES OF
MINERAL EXPLORATION COMPANIES OR MORE STRINGENT IMPLEMENTATION THEREOF COULD
REQUIRE INCREASES IN EXPLORATION EXPENDITURES, OR REQUIRE DELAYS IN EXPLORATION
OR ABANDONMENT OF NEW MINERAL PROPERTIES
Compliance with new requirements could impose costs on the Company in the
future, the materiality of which cannot reasonably be predicted at this time.
Any change in the applicable laws or regulations could have an adverse effect on
any mining project which the Company might undertake. Also, the Company may
require additional permits for its future operations, which may or may not be
obtainable on reasonable terms.
THE VOLATILITY OF THE PRICE OF GOLD AND SILVER COULD HAVE AN IMPACT ON THE
COMPANY'S FUTURE OPERATIONS
The commercial feasibility of the Company's properties and its ability to raise
funding to conduct its planned exploration projects is dependent on the price of
gold, silver and other precious metals. The price of gold and silver may also
have a significant influence on the market price of the Company's common shares
and the value of the Company's properties. A reduction in the price of gold or
silver may prevent the Company's properties from being economically mined or
result in the write-off of assets whose value is impaired as a result of low
metal prices.
THE COMPANY HAS LIMITED FINANCIAL RESOURCES AND IF THE COMPANY IS UNABLE TO
SECURE ADDITIONAL FUNDING AND/OR IF THE COMPANY'S EXPLORATION PROGRAMS ARE
UNSUCCESSFUL, THE COMPANY MAY FAIL.
The Company's options in unproved mineral claims are without a known body of
commercial ore and the proposed programs are an exploratory search for ore. The
Company is presently carrying out exploration and development work with the
objective of establishing an economic body of ore. If the Company's exploration
programs are successful, additional funds will be required for the development
of an economic ore body and to place it into commercial production. The only
sources of future funds presently available to the Company are the sale of
equity capital, the exercise of warrants and options or the offering by the
Company of an interest in the mineral claim to be earned to another party or
parties. If the Company is unable to secure additional funding, the Company may
lose its interest in one or more of its mineral claims and/or may be required to
cease operations.
BECAUSE THE COMPANY HAS LIMITED FINANCIAL RESOURCES AND HAS NOT GENERATED ANY
REVENUE FROM ITS OPERATIONS, AN INVESTMENT IN THE COMPANY'S COMMON SHARES MAY BE
WORTHLESS.
The Company has limited financial resources, has a history of losses, has no
immediate source of operating cash flow and has not generated any revenues from
its existing mineral interests. Any further additional equity financing
undertaken by the Company would cause dilution to its shareholders.
THE PRICE OF THE COMPANY'S COMMON SHARES IS SUBJECT TO MARKET FLUCTUATIONS AND
VOLATILITY WHICH MAY NOT BE RELATED TO THE COMPANY'S OPERATIONS AND SUCH
FLUCTUATIONS MAY IMPACT THE COMPANY'S ABILITY TO COMPLETE EQUITY FINANCINGS.
In recent years, the securities markets in Canada have experienced a high level
of price and volume volatility, and the market price of securities of many
companies, particularly junior natural resources exploration companies, have
experienced wide fluctuations in price which have not necessarily been related
to the operating performance, underlying asset values or prospects of such
companies. In particular, the per share price of the Company's common shares
fluctuated from a high of $0.90 to a low of $0.30 during the 12-month period
ending January 31, 2006. Continued price fluctuations will have a significant
impact on the Company's ability to complete equity financings.
THE COMPANY'S OPERATION IN MEXICO SUBJECTS THE COMPANY TO FOREIGN CURRENCY
FLUCTUATIONS WHICH MAY INCREASE THE COMPANY'S EXPENSES AND, IN THE EVENT THE
COMPANY ACHIEVES PROFITABILITY, REDUCE THE COMPANY'S PROFITABILITY
The Company's operation in Mexico makes it subject to foreign currency
fluctuation and such fluctuation may adversely affect the Company's financial
position and results. The Canadian dollar varies under market conditions. The
Company maintains its cash and cash equivalent amounts primarily in Canadian and
U.S. denominated currencies. The currency exchange rate between U.S. dollars and
Canadian dollars fluctuated between US$0.7872 and US$0.8690 for one Canadian
dollar during 2005. The Company does not currently engage in hedging activities.
-12-
THE COMPANY IS DEPENDENT ON KEY PERSONNEL AND THE ABSENCE OF ANY OF THESE
INDIVIDUALS COULD RESULT IN A SIGNIFICANTLY NEGATIVE EFFECT ON THE COMPANY
The Company strongly depends on the business and technical expertise of its
management and key personnel. There is little possibility that this dependence
will decrease in the near term. As the Company's operations expand, additional
general management resources will be required, especially if the Company
encounters risks that are inherent in doing business in foreign countries. The
Company is dependent, in particular, on Douglas Good, the President and CEO of
the Company, the experience and expertise of its board of directors and advisory
committee, and the expertise and experience of Mr. Alfred Parra, the President
of Mina Real. The Company does not maintain key-man life insurance on any
personnel. If the services of the Company's management and key personnel were
lost, it could have a material adverse effect on future operations.
THE COMPANY IS IN COMPETITION WITH OTHER MINING COMPANIES THAT HAVE GREATER
RESOURCES AND EXPERIENCE
The mineral exploration and development business is intensely competitive, and
the Company competes with other exploration and mining companies, many of which
have greater resources and experience. Competition in the precious metals mining
industry is primarily for mineral rich properties which can be developed and
produced economically; the technical expertise to find, develop, and produce
such properties; the labour to operate the properties; and the capital for the
purpose of financing development of such properties. Many competitors not only
explore for and mine precious metals, but conduct refining and marketing
operations on a world- wide basis and some of these companies have much greater
financial and technical resources than the Company. Such competition may result
in the Company being unable to acquire desired properties, recruit or retain
qualified employees or acquire the capital necessary to fund its operations and
develop its properties. The Company's inability to compete with other mining
companies for these mineral deposits could have a material adverse effect on the
Company's results of operation and business.
THE COMPANY MAY INCUR LIABILITY FOR CERTAIN RISKS AGAINST WHICH THE COMPANY DOES
NOT HAVE INSURANCE, WHICH COULD REDUCE OR ELIMINATE ANY FUTURE PROFITABILITY AND
NEGATIVELY IMPACT THE PRICE OF THE COMPANY'S SHARES.
In the course of exploration of mineral concessions, certain risks, and in
particular, unexpected or unusual geological operating conditions including rock
bursts, cave-ins, fires, flooding and earthquakes may occur. It is not always
possible to fully insure against such risks and the Company may decide not to
take out insurance against such risks as a result of high premiums or other
reasons. Should such liabilities arise, they could reduce or eliminate any
future profitability and result in increasing costs and a decline in the value
of the securities of the Company
CONFLICTS OF INTEREST MAY ARISE AMONG THE MEMBERS OF OUR BOARD OF DIRECTORS AND
SUCH CONFLICTS MAY CAUSE THE COMPANY TO ENTER INTO TRANSACTIONS ON TERMS WHICH
ARE NOT BENEFICIAL TO THE COMPANY
Certain of the Company's directors are also directors, officers or shareholders
of other companies that are engaged in the business of acquiring, developing and
exploiting natural resource properties. Such associations may give rise to
conflicts of interest from time to time. Such a conflict poses the risk that the
Company may enter into a transaction on terms which place the Company in a worse
position than if no conflict existed. The directors and officers of the Company
are aware of the existence of laws governing accountability of directors and
officers for corporate opportunity and requiring disclosures by directors of
conflicts of interest and the Company will rely upon such laws in respect of any
directors' and officers' conflicts of interest or in respect of any breaches of
duty by any of its directors or officers.
The Company has no specific internal policy governing conflicts of interest.
-13-
COMPANY SHAREHOLDERS WILL EXPERIENCE DILUTION FROM THE EXERCISE OF STOCK OPTIONS
The Company may in the future grant to some or all of its directors, officers,
insiders and key employees additional options to purchase the Company's common
shares as non-cash incentives to those employees. Such options may be granted at
exercise prices equal to market prices, or at prices as allowable under the
policies of the TSX Venture, when the public market is depressed. To the extent
that significant numbers of such options may be granted and exercised, the
interests of then existing shareholders of the Company will be subject to
additional dilution.
THE COMPANY DOES NOT PAY DIVIDENDS ON ITS COMMON SHARES; THEREFORE, INVESTORS
SEEKING DIVIDEND INCOME SHOULD NOT PURCHASE THE COMMON SHARES
The Company has never declared or paid cash dividends on its common shares and
does not anticipate doing so in the foreseeable future. Additionally, the
determination as to the declaration of dividends is within the discretion of the
Company's Board of Directors, which may never declare cash dividends on the
Company's common stock. Investors cannot expect to receive a dividend on the
Company's common shares in the foreseeable future, if at all.
LACK OF LIQUIDITY
Persons purchasing shares of the Company may not be able to easily sell their
shares.
MINA REAL PROJECT - TECHNICAL INFORMATION
At the request of the Company, Victor Jaramillo, P.Geo., has prepared a
technical report on the Mina Real Property, entitled THE MINA REAL GOLD-SILVER
PROPERTY TECHNICAL REPORT, (SANTA MARIA DEL ORO DISTRICT), STATE OF NAYARIT,
MEXICO (the "Technical Report"), dated January 22, 2006. The Technical Report is
incorporated herein by reference and is available on SEDAR at www.sedar.com.
The following summary is reproduced from the Technical Report.
SUMMARY
Victor A. Jaramillo, M.Sc.A., P.Geo., a geological consultant, was retained by
Rochester Resources Ltd. in October 2005 with the terms of reference for this
assignment consisting of undertaking a geological and sampling due diligence
program on the Mina Real Gold- Silver Property in the state of Nayarit, Mexico,
followed by a technical 43-101 compliant report.
Between October 5 and 6, 2005 the author was on site at the Mina Real Property
area, and completed a site geological field inspection. Later on, from October
11 to the 19th, the author returned to the mine area to inspect and sample the
quartz gold-silver veins along 4 different drifts (levels). Finally, during
November to early December drill core was examined, the Tajos Cuates Vein and
the Florida Vein in level 1,140 were sampled. During this time limited surface
geological mapping and trenching was completed. Background information, such as
old reports and maps concerning the property were also reviewed.
The Property comprises 4 claims that total approximately 3,377.33 hectares. It
is owned by a Mexican company "Desarrollos Mineros de Occidente" (DMO), a
subsidiary of ALB Holdings Ltd. a Canadian private company.
[SEE "GENERAL DEVELOPMENT OF THE BUSINESS - THREE YEAR HISTORY: SIGNIFICANT
ACQUISITIONS/DISPOSITIONS" FOR SUMMARY OF TERMS OF MINA REAL OPTION AGREEMENT.]
The Mina Real Gold-Silver Property is located in the state of Nayarit, Mexico,
on the Pacific coast approximately 50 kilometers southeast from the city of
Tepic and within the Santa Maria del Oro District, State of Nayarit, Mexico.
Access to the property is from the city of Tepic via Highway 15, the main
north-south route along the West Coast of Mexico, to Crucero La Lobera (40 km),
then 10 km by paved road to the town of Santa Maria Del Oro. From Santa Maria,
approximately 22 km by gravel road the Mine area is reached.
-14-
The mineralized structures form part of a low sulphidation epithermal
gold-silver system which is composed of quartz veins that trend NW-SE. The width
of the veins varies from 0.40 to over 2.0 meters wide. They are structurally
controlled by a set of parallel faults and at places are displaced by NE
trending post-mineral faults. Some vein segments contain elevated gold and
silver values, mainly due to secondary enrichment.
The host rock are dacite flows which show silicification and quartz veinlets in
the wall rocks adjacent to the quartz veins. The silicified edges to the veins
are narrow, generally 1 to 2 meters on each side of the veins.
To date 4 veins have been identified. The Florida quartz veins 1 to 3 and the
Tajos Cuates vein. Other veins are known to exist but require exploration
mapping and sampling.
In early 2003 Minas de San Luis, S.A. de C.V. ("Luismin") drilled two core holes
in order to explore the continuity of the Florida Veins to the NW and at depth.
Drill hole DDH F1-03 was to test the vein continuity to the NW, but it did not
reach the required depth due to technical difficulties and poor recoveries.
Subsequent investigation revealed that this drill hole required at least another
50 meters of drilling as the veins have been faulted further west. See Figure 3
below (page 13 of Technical Report).
Drill hole F2-03 was to test vein continuity and grade at depth. Three veins
were intercepted:
1. The first quartz vein was intercepted from 112.45 to 114.85 meters (2.40
meters long). Recovery for this vein was < 50% and gave 0.52 g/t Au and
93.54 g/t Ag.
2. The second quartz vein was intercepted from 132.90 to 134.00 meters (1.10
meters long). Recovery for this vein was approximately 69% and gave 12.73
g/t Au and 172 g/t Ag.
3. The third quartz vein was intercepted from 135.90 to 138.40 meters (2.50
meters long). Recovery for this vein was approximately 36% and gave 5.50
g/t Au and 171 g/t Ag.
Geological field work, such as geological mapping, limited trenching and drill
core examination, indicates that the Florida Vein system may have good
continuity to the northwest for at least another kilometer from the mine area.
Also, recent geological work has shown that the veins at this time appear to
have a vertical continuity of over 250 meters, as observed from surface outcrop
to the bottom lowermost developed adit.
As a result of the writer's most recent mine visit (November-December, 2005) a
better understanding of the mineralized quartz gold-silver veins at Mina Real
has been achieved. Their continuity along strike is good, and the veins appear
to have a vertical continuity of at least 250 meters. In places the veins reach
a true thickness of over 2 meters wide.
A Vein system called Tajos Cuates south of the Florida Veins, was also visited
and three samples were taken by the writer. The main vein has a true width of
1.70 meters and is composed of fractured quartz and concentrations of limonite
and manganese oxides. It appears to be a large zone of secondary enrichment. It
returned 2.77 g/t gold and 1,330 g/t silver. Other recently completed work was
sampling the Florida Veins in level 140.
The writer has taken 51 chip vein samples, one grab sample, 4 duplicates, 3
blanks and 6 standards. Also, 20 pulp samples provided by DMO were assayed. All
the samples taken are part of the due diligence work done by the writer at Mina
Real. These sample results are only indicative and confirm that there is gold in
the veins. Some highlights of the underground chip vein samples taken include:
- --------------------------------------------------------------------------------
SAMPLE NO. VEIN WIDTH GOLD SILVER DESCRIPTION
(m) (g/t) (g/t)
- --------------------------------------------------------------------------------
387322 Florida 3 1.00 8.4 226 Quartz Vein Level 260
387324 Florida 3 0.98 9.62 67.2 Quartz Vein Level 260
387325 Florida 3 1.07 11.5 123 Quartz Vein Level 260
387334 Florida 2 0.70 2.44 848 Quartz Vein Level 210
-15-
- --------------------------------------------------------------------------------
SAMPLE NO. VEIN WIDTH GOLD SILVER DESCRIPTION
(m) (g/t) (g/t)
- --------------------------------------------------------------------------------
387339 Florida 3 2.10 9.61 202 Quartz Vein Level 160
387342 Florida 3 1.30 14.25 260 Quartz Vein Level 160
387362 Florida 2 1.55 6.27 501 Quartz Vein Level 185
387367 Florida 2 1.10 14.55 336 Quartz Vein Level 185
387369 Florida 3 1.60 9.15 119 Quartz Vein Level 185
387393 Florida 3 0.80 16.8 115 Quartz Vein Level 140
387397 Florida 3 1.13 4.66 723 Quartz Vein Level 140
387398 Tajo Cuates 1.70 2.77 1330 Quartz Vein 1 - Main adit
- --------------------------------------------------------------------------------
The geological potential on the Florida Vein system and at the Tajos Cuates
Veins is excellent. Continuation of an exploration program consisting of both
surface and underground work is strongly recommended. There are several other
identified veins in outcrop that need to be mapped and explored.
The author has reviewed and worked in several similar style mineral deposits,
and through this, has gained the expertise to give a fair evaluation of the
nature and distribution of the mineralization on this property. In the author's
professional opinion, the property discussed in this report is of merit and is
worth securing an interest in.
A surface and underground exploration program on the Mina Real property is
highly recommended as follows: (timing 8 months)
- Geological mapping (1:1000), trenching, and geochemical multi-element
sampling
- Access road and drill pad construction
- 1,600 meters of HQ3 diamond drilling on selected targets
- 3,000 meters in exploration development (drifting)
TOTAL COST = US $ 1,679,260
PROJECT DESCRIPTION AND LOCATION
Details may be found on pages 7 and 8 of the Technical Report.
ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
Details may be found on pages 9 through 12 of the Technical Report.
HISTORY
Details may be found on page 12 of the Technical Report.
GEOLOGICAL SETTING
Details may be found on pages 12 through 15 of the Technical Report.
EXPLORATION
Details may be found on pages 21 through 25 of the Technical Report.
-16-
MINERALIZATION
Details may be found on pages 16 through 21 of the Technical Report.
DRILLING
Details may be found on pages 25 through 27 of the Technical Report.
SAMPLING AND ANALYSIS; SECURITY OF SAMPLES
Details may be found on pages 27 through 32 of the Technical Report.
MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES
The Mina Real Property has no mineral resources or mineral reserves which are
compliant with the reporting requirements National Instrument 43-101. Further
details may be found on page 34 of the Technical Report.
EXPLORATION AND DEVELOPMENT
Details may be found on page 21 of the Technical Report.
DIVIDENDS
The Company has not paid any dividends since the date of its incorporation and
has no present intention of paying dividends on its common shares. The Company
anticipates that it will retain all future earnings and other cash resources for
the future operation and development of its business. Payment of any future
dividends will be at the discretion of the Company's board of directors, after
taking into account many factors, including the Company's operating results,
financial condition and current and anticipated cash needs.
CAPITAL STRUCTURE
The Company's authorized capital consists of one class of common shares without
par value (the "Common Shares"). The Company is authorized to issue an unlimited
number of Common Shares. Each Common Share is entitled to one vote. As at
January 31, 2006, there were 7,267,735 Common Shares issued and outstanding.
All of the Company's Common Shares are of the same class and rank equally as to
voting rights, dividends and participation in assets of the Company on
winding-up or dissolution. There are no pre-emptive rights or conversion rights,
and no provisions for redemption or purchase for cancellation, surrender, or
sinking or purchase funds, except that the Company's articles provide that the
Company may, if authorized by a resolution of the directors, purchase or
otherwise acquire any of its shares at the price and upon the terms specified in
such resolution and subject to the BUSINESS CORPORATIONS ACT (British Columbia).
Provisions as to creation, modification, amendment or variation of such rights
or such provisions are contained in the BUSINESS CORPORATIONS ACT (British
Columbia).
MARKET FOR SECURITIES
The Company is a reporting issuer in British Columbia, Alberta and Saskatchewan.
The Company trades on the TSX Venture Exchange ("TSX-V") under the symbol "RCT"
and on the Over the Counter Bulletin ("OTCBB") under the symbol "RCTFF". The
Company's securities are also registered under the United States Securities Act
of 1934.
The following table sets out the monthly high, low and average trading prices
and monthly total volume of trade of the Common Shares of the Company on the
TSX-V for the financial year ended May 31, 2005 and up to the date of this AIF
adjusted to reflect the 10 for 1 share consolidation completed on August 25,
2005. Prior to August 25, 2005, the Company traded on the TSX-V under the symbol
"HPM" and under its previous name, Hilton Resources Ltd.
-17-
- --------------------------------------------------------------------------------
MONTH HIGH LOW AVG CLOSE VOLUME
- --------------------------------------------------------------------------------
June 2004 $ 1.40 $ 1.00 $ 1.10 35,464
July 2004 $ 1.60 $ 0.90 $ 1.20 45,962
August 2004 $ 1.40 $ 1.10 $ 1.20 122,763
September 2004 $ 1.60 $ 1.30 $ 1.40 32,966
October 2004 $ 1.50 $ 1.20 $ 1.30 27,470
November 2004 $ 1.50 $ 1.20 $ 1.30 44,174
December 2004 $ 1.50 $ 1.20 $ 1.30 21,696
January 2005 $ 1.80 $ 1.30 $ 1.50 77,325
February 2005 $ 1.90 $ 1.40 $ 1.60 92,262
March 2005 $ 1.50 $ 1.20 $ 1.30 61,978
April 2005 $ 1.40 $ 0.70 $ 1.10 35,478
May 2005 $ 1.00 $ 0.80 $ 0.80 11,878
June 2005 $ 1.00 $ 0.50 $ 0.70 97,051
July 2005 $ 0.60 $ 0.30 $ 0.40 71,747
August 2005 $ 0.45 $ 0.30 $ 0.41 50,710
September 2005 $ 0.80 $ 0.46 $ 0.56 38,111
October 2005 $ 0.67 $ 0.60 $ 0.62 29,323
November 2005 $ 0.69 $ 0.47 $ 0.57 47,391
December 2005 $ 0.89 $ 0.52 $ 0.69 176,761
January 2006 $ 0.90 $ 0.66 $ 0.80 173,795
- --------------------------------------------------------------------------------
Source: TSX Venture Exchange
DIRECTORS AND OFFICERS
NAME, OCCUPATION AND SECURITY HOLDING
The name and place of residence, positions held with the Company and principal
occupation of each director and executive officer of the Company within the five
preceding years from the date of this AIF are as follows:
- ---------------------------------------------------------------------------------------------------------------------
NAME, POSITION AND PRINCIPAL OCCUPATIONS TERM AS A NUMBER
PLACE OF RESIDENCE(1) DURING THE PAST 5 YEARS(1) DIRECTOR OF SHARES(2)
- ---------------------------------------------------------------------------------------------------------------------
DOUGLAS GOOD(3) Corporate director and executive of various Since Nov. 25, 100,000
President and Chief Executive public and private companies in the 2005
Officer, Chief Financial Officer healthcare, software, mining and automotive
and Director industries.
British Columbia, Canada
- ---------------------------------------------------------------------------------------------------------------------
WILLIAM LEE(3) Chartered Accountant; Chief Financial Officer Since Sept. 8, 32,650
Director of Jinshan Gold Mines Inc. January 2006 - 1995
British Columbia, Canada present; Business Analyst, Ivanhoe Energy
Inc. and Ivanhoe Mines Ltd., July 2004 -
December 2005; Chief Financial Officer, IMA
Exploration Inc. 1996 - April 2004.
- ---------------------------------------------------------------------------------------------------------------------
-18-
- ---------------------------------------------------------------------------------------------------------------------
NAME, POSITION AND PRINCIPAL OCCUPATIONS TERM AS A NUMBER
PLACE OF RESIDENCE(1) DURING THE PAST 5 YEARS(1) DIRECTOR OF SHARES(2)
- ---------------------------------------------------------------------------------------------------------------------
ANDREW CARTER(3) President of Tinka Resources Ltd. from Feb. Since Oct. 15, 35,000
Director 2003 to present. Businessman and independent 2003
British Columbia, Canada corporate consultant.
- ---------------------------------------------------------------------------------------------------------------------
GIL LEATHLEY Independent consultant to several senior and Since Jan. 17, 80,000
Director junior mining companies since 2000. 2006
British Columbia, Canada
- ---------------------------------------------------------------------------------------------------------------------
HARVEY LIM Chartered Accountant; Controller of Chase n/a 45,500
Corporate Secretary Management Ltd.
British Columbia, Canada
- ---------------------------------------------------------------------------------------------------------------------
(1) The information as to province or state of residence and principal
occupation, not being within the knowledge of the Company, has been
furnished by the respective directors and executive officers individually.
(2) The information as to shares beneficially owned or over which a director
or executive officer exercises control or direction, not being within the
knowledge of the Company, has been furnished by the respective directors
and executive officers individually as of January 31, 2006.
(3) Denotes member of Audit Committee.
The term of office of each director will expire at the next annual general
meeting of shareholders.
As at the date of this AIF, the Company's directors and officers, as a group,
beneficially own, directly or indirectly, or exercise control or direction over
a total of 300,650 Common Shares, representing approximately 4.1% of the issued
and outstanding Common Shares.
CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS
Except as described below, no director or officer of the Company or a
shareholder holding a sufficient number of Common Shares of the Company to
affect materially the control of the Company:
(a) is, as at the date of this AIF or has been, within the 10 years before
the date hereof, a director or executive director of any company
(including the Company), that while that person was acting in that
capacity:
(i) was the subject of a cease trade or similar order or an order
that denied the relevant company access to any exemption under
securities legislation, for a period of more than 30 consecutive
days;
(ii) was subject to an event that resulted, after the director or
executive officer ceased to be a director or executive officer,
in the company being the subject of a cease trade or similar
order or an order that denied the relevant company access to any
exemption under securities legislation, for a period of more than
30 consecutive days;
(iii) or within a year of that person ceasing to act in that capacity,
became bankrupt, made a proposal under any legislation relating
to bankruptcy or insolvency or was subject to or instituted any
proceedings, arrangement, compromise with creditors or had a
receiver, receiver manager or trustee appointed to hold its
assets; or
(b) has, within the 10 years before the date hereof, become bankrupt, made
a proposal under any legislation relating to bankruptcy or insolvency,
or become subject to or instituted any proceedings, arrangement or
compromise with creditors, or had a receiver, receiver manager or
trustee appointed to hold assets; or
-19-
(c) became bankrupt, made a proposal under any legislation relating to
bankruptcy or insolvency or has been subject to or instituted any
proceedings, arrangement or compromise with any creditors or had a
receiver, receiver manager or trustee appointed to hold the assets of
that corporation.
No director or officer of the Company or a shareholder holding a sufficient
number of common shares of the Company to affect materially the control of the
Company has been subject to:
(a) any penalties or sanctions imposed by a court relating to securities
legislation or by a securities regulatory authority or has entered
into a settlement agreement with a securities regulatory authority; or
(b) no other penalties or sanctions imposed by a court or regulatory body
that would likely be considered important to a reasonable investor in
making an investment decision.
In approximately 2002, Douglas Good was engaged as a Director and Officer of
ComWest Capital Corp. (formerly Dynasty Motorcar Corporation) ("ComWest") to
assist in the reorganization of ComWest's financial affairs. This financial
reorganization was made by way of a proposal under the Bankruptcy and Insolvency
Act (Canada) that was approved by the creditors and ultimately the Supreme Court
of British Columbia on September 25, 2002. The proposal was certified by the
trustee as being fully performed on February 18, 2003. Full particulars of this
matter can be found on SEDAR under "ComWest Capital Corp."
The foregoing, not being within the knowledge of the Company, has been furnished
by the respective directors, officers and shareholders holding a sufficient
number of securities of the Company to affect materially control of the Company.
CONFLICTS OF INTEREST
Certain directors and officers of the Company are also directors, officers or
shareholders of other companies that are similarly engaged in the business of
acquiring, developing and exploiting natural resource properties. These
associations to other public companies in the resource sector may give rise to
conflicts of interest from time to time. If a conflict of interest arises at a
meeting of the board of directors, any director in a conflict is required to
disclose his interest and abstain from voting on such matter.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other than as set forth herein and other than transactions carried out in the
ordinary course of business of the Company or any of its subsidiaries, none of
the directors or executive officers of the Company, any shareholder directly or
indirectly beneficially owning, or exercising control or direction over, shares
carrying more than 10% of the voting rights attached to the shares of the
Company, nor an associate or affiliate of any of the foregoing persons had since
May 31, 2004 (being the commencement of the Company's most recently completed
financial year) any material interest, direct or indirect, in any transactions
which materially affected or would materially affect the Company or any of its
subsidiaries.
REGISTRAR AND TRANSFER AGENT
The Company's registrar and transfer agent for the Common Shares is
Computershare Investor Services Inc. located at 510 Burrard Street, 2nd Floor,
Vancouver, British Columbia, Canada, V6C 3B9.
MATERIAL CONTRACTS
On January 8, 2006 the Company to entered into an option agreement with ALB
Holdings Ltd. whereby the Company can acquire a 51% interest in the Mina Real
Property concessions. Details of this agreement may be found above in this AIF
in the sections entitled "GENERAL DEVELOPMENT OF THE BUSINESS - THREE YEAR
HISTORY: SIGNIFICANT ACQUISITIONS AND DISPOSITIONS" and "GENERAL DEVELOPMENT OF
THE BUSINESS - SUMMARY OF MINA REAL PROPERTY".
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INTERESTS OF EXPERTS
Victor Jaramillo, M.Sc.(A), P.Geo., has prepared a technical report dated
January 22, 2006 on the Company's Mina Real Property and has provided consent to
the Company with respect to certain disclosure provided in this AIF. Mr.
Jaramillo does not own any Common Shares of the Company.
D&H Group LLP, Chartered Accountants are the auditors of the Company. To the
knowledge of the Company, the partners and employees of D&H Group LLP, Chartered
Accountants do not own any shares in the Company
ADDITIONAL INFORMATION
Additional information relating to the Company is available under the Company's
profile on the SEDAR website at www.sedar.com. Financial information relating to
the Company is provided in the Company's comparative consolidated financial
statements and management's discussion and analysis for the most recent fiscal
year.
Additional information, including directors and officers' remuneration and
indebtedness, principal holders of the Company's securities and securities
authorized for issuance under equity compensation plans, if applicable, is
contained in the Company's information circular dated October 19, 2005 for its
annual and special general meeting of shareholders that was held on November 17,
2005.
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