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 OCTOBER, 2006.
Commission File Number: 0-30390
ROCHESTER RESOURCES LTD
- --------------------------------------------------------------------------------
(Translation of registrant's name into English)
#1305 - 1090 West Georgia Street, Vancouver, British Columbia, V6E 3V7, Canada
- --------------------------------------------------------------------------------
(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: October 30, 2006 /s/ Douglas Good
----------------------------- -------------------------------------
Doug Good,
President
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ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
AUGUST 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
- --------------------------------------------------------------------------------
MANAGEMENT'S COMMENTS ON UNAUDITED
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements of
Rochester Resources Ltd. for the three months ended August 31, 2006, have been
prepared by and are the responsibility of the Company's management. These
statements have not been reviewed by the Company's external auditors.
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED BALANCE SHEETS
(UNAUDITED - PREPARED BY MANAGEMENT)
AUGUST 31, MAY 31,
2006 2006
$ $
ASSETS
CURRENT ASSETS
Cash 3,401,164 3,657,676
Amounts receivable 302,911 80,022
Prepaid expenses and deposits 11,250 12,825
------------ ------------
3,715,325 3,750,523
PROPERTY, PLANT AND EQUIPMENT (Note 3) 2,815,703 1,183,993
OTHER ASSETS - 37,040
------------ ------------
6,531,028 4,971,556
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 120,048 214,447
------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 4) 77,671,585 75,890,208
CONTRIBUTED SURPLUS (Note 6) 617,284 608,284
DEFICIT (71,877,889) (71,741,383)
------------ ------------
6,410,980 4,757,109
------------ ------------
6,531,028 4,971,556
============ ============
NATURE OF OPERATIONS (Note 1)
SUBSEQUENT EVENTS (Note 10)
APPROVED BY THE BOARD
/s/ DOUG GOOD , Director
- ------------------
/s/ WILLIAM LEE , Director
- ------------------
The accompanying notes are an integral part of these interim
consolidated financial statements.
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE THREE MONTHS ENDED AUGUST 31
(UNAUDITED - PREPARED BY MANAGEMENT)
2006 2005
$ $
EXPENSES
Accounting and administration 17,645 14,250
Amortization 5,400 357
Corporate development 7,425 -
Investor relations 19,850 3,000
Legal 103 950
Management fees 19,500 7,000
Office 5,905 1,143
Professional fees 14,326 6,045
Regulatory 1,475 2,250
Rent 2,400 -
Salaries and benefits 6,411 -
Shareholder costs 1,339 2,707
Stock-based compensation (Note 5) 9,000 -
Transfer agent 3,436 4,475
Travel 7,322 299
------------ ------------
121,537 42,476
------------ ------------
LOSS BEFORE OTHER ITEMS (121,537) (42,476)
------------ ------------
OTHER ITEMS
Gain on sale of other assets - 40,980
Interest income 24,270 3,191
Foreign exchange loss (39,239) (4,088)
------------ ------------
(14,969) 40,083
------------ ------------
NET LOSS FOR THE PERIOD (136,506) (2,393)
DEFICIT - BEGINNING OF PERIOD (71,741,383) (71,000,128)
------------ ------------
DEFICIT - END OF PERIOD (71,877,889) (71,002,521)
============ ============
BASIC AND DILUTED LOSS PER SHARE $(0.01) $(0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 11,993,291 2,230,735
============ ============
The accompanying notes are an integral part of these interim
consolidated financial statements.
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31,
(UNAUDITED - PREPARED BY MANAGEMENT)
2006 2005
$ $
CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net loss for the period (136,506) (2,393)
Adjustment for items not involving cash
Amortization 5,400 357
Gain on sale of other assets - (40,980)
Stock-based compensation 9,000 -
------------ ------------
(122,106) (43,016)
(Increase) decrease in amounts receivable (222,889) 289
Decrease in prepaid expenses and deposits 1,575 1,669
Decrease in accounts payable and
accrued liabilities (94,399) (10,123)
------------ ------------
(437,819) (51,181)
------------ ------------
FINANCING ACTIVITIES
Issuance of common shares 1,800,000 -
Share issue costs (18,623) -
------------ ------------
1,781,377 -
------------ ------------
INVESTING ACTIVITIES
Property, plant and equipment additions (1,600,070) -
Proceeds from sale of other assets - 47,280
------------ ------------
(1,600,070) 47,280
------------ ------------
DECREASE IN CASH FOR THE PERIOD (256,512) (3,901)
CASH - BEGINNING OF PERIOD 3,657,676 227,589
------------ ------------
CASH - END OF PERIOD 3,401,164 223,688
============ ============
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid in cash - -
============ ============
Income taxes paid in cash - -
============ ============
The accompanying notes are an integral part of these interim
consolidated financial statements.
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED AUGUST 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
1. NATURE OF OPERATIONS
The Company is engaged in the acquisition, exploration and development
of mineral interests in Mexico. The Company is currently constructing
the cyanidation processing plant and related infrastructure at the Mina
Real Property located in Nayarit State, Mexico. Completion of the
facility is scheduled for late November 2006.
The amount shown as mineral interests and deferred exploration
represents net costs to date, less amounts written off, and do not
necessarily represent present or future values. The recoverability of
these amounts and any additional amounts required to place these
properties into commercial production are dependent upon certain
factors. These factors include the existence of ore deposits sufficient
for commercial production and the Company's ability to obtain the
required additional financing necessary to develop its mineral
properties.
The Company is a pre-production stage company engaged in the
acquisition, exploration, and development of mineral interests and,
accordingly, does not have any revenues. As at August 31, 2006, the
Company had working capital of $3,595,277. While the Company believes
that it has sufficient financial resources to meet the balance of its
current funding commitment for its 51% interest in the Mina Real
Project, with the proposed acquisition of the remaining 49% interest,
the Company will not have sufficient resources to accommodate the
increase in this commitment, to complete construction of the mill
facility and provide adequate working capital for start-up operations.
In addition, exploration and development activities may change due to
ongoing results and recommendations which may entail significant
funding or exploration commitments. As a result, the Company will be
required to obtain additional financing. The Company has relied solely
on equity financing to raise the requisite financial resources. While
it has been successful in the past, there can be no assurance that the
Company will be successful in raising future financing should the need
arise.
2. SIGNIFICANT ACCOUNTING POLICIES
These interim consolidated financial statements of the Company have
been prepared by management in accordance with Canadian generally
accepted accounting principles ("Canadian GAAP"). The preparation of
financial statements in conformity with Canadian GAAP requires
management to make estimates and assumptions that affect the amounts
reported in the interim consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.
The interim consolidated financial statements have, in management's
opinion, been properly prepared using careful judgement with reasonable
limits of materiality. These interim consolidated financial statements
should be read in conjunction with the most recent annual consolidated
financial statements. The significant accounting policies follow that
of the most recently reported annual financial statements.
3. PROPERTY, PLANT AND EQUIPMENT
-------------------------------------------- ------------
AUGUST 31, 2006 MAY 31, 2006
-------------------------------------------- ------------
ACCUMULATED NET BOOK NET BOOK
COST AMORTIZATION VALUE VALUE
$ $ $ $
Motor vehicles 65,522 5,527 59,995 52,921
Office equipment 4,356 237 4,119 2,420
Capital works in progress 1,487,579 - 1,487,579 -
Mineral interests and deferred exploration 1,264,010 - 1,264,010 1,128,652
------------ ------------ ------------ ------------
2,821,467 5,764 2,815,703 1,183,993
============ ============ ============ ============
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED AUGUST 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
3. PROPERTY, PLANT AND EQUIPMENT (continued)
Capital works in progress consists primarily of equipment and
infrastructure for the Company's Mina Real Project.
In January 2006, the Company entered into an option agreement with, ALB
Holdings Ltd. ("ALB") a private British Columbia company to acquire up
to a 51% interest in the Mina Real Property located in Tepic, Mexico.
The Mina Real Property comprises of four concessions covering
approximately 3,400 hectares. Under the agreement the Company made an
option payment of US $110,000 and issued 250,000 common shares, at a
fair value of $337,500. The Company can earn its interests, as follows:
i) an initial 20% interest on funding the initial US $750,000 on
exploration expenditures;
ii) a further 20% interest on funding a further US $750,000 on
exploration expenditures; and
iii)a further 11% interest on payment of US $900,000, at the minimum
rate of US $75,000 per month, commencing July 1, 2006, with
each payment vesting at 0.9166% interest.
As at August 31, 2006, the Company has funded the requisite US $1.5
million and made payments totalling US $150,000, earning an approximate
41.83% interest in the Mina Real Property. Subsequent to August 31,
2006, the Company and ALB entered into an agreement whereby the Company
can acquire a 100% interest in the Mina Real Property, as described in
Note 10(a).
4. SHARE CAPITAL
Authorized: Unlimited common shares without par value
---------------------------- ----------------------------
Issued: AUGUST 31, 2006 MAY 31, 2006
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
$ $
Balance, beginning of period 11,237,735 75,890,208 2,230,735 70,970,313
------------ ------------ ------------ ------------
Issued during the period
For cash
Private placements 2,000,000 1,800,000 6,000,000 3,220,000
Exercise of warrants - - 2,557,000 1,671,050
Exercise of agent's option - - 150,000 75,000
Reallocation from contributed surplus
relating to the exercise of agent's
option and related warrants - - - 112,500
For corporate finance fees - - 50,000 30,500
For mineral interests - - 250,000 337,500
------------ ------------ ------------ ------------
2,000,000 1,800,000 9,007,000 5,446,550
Less: share issue costs - (18,623) - (526,655)
------------ ------------ ------------ ------------
2,000,000 1,781,377 9,007,000 4,919,895
------------ ------------ ------------ ------------
Balance, end of period 13,237,735 77,671,585 11,237,735 75,890,208
============ ============ ============ ============
(a) During the three months ended August 31, 2006 the Company
completed a non-brokered private placement for 2,000,000 units
at a price of $0.90 per unit for gross proceeds of $1,800,000.
Each unit comprised of one common share and one transferable
share purchase warrant. Each warrant entitles the holder to
purchase one additional common share at an exercise price of
$1.15 per share on or
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED AUGUST 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
5. SHARE CAPITAL (continued)
before July 28, 2007 and $1.30 per share on or before July 28,
2008. The warrants are subject to a forced conversion
provision which comes into effect once the Company's common
shares trade at 150% or more per share of the exercise price
of the warrants for a period of 45 consecutive trading days.
The Company incurred share issue costs of $18,623 relating to
the private placement.
(b) A summary of the number of common shares reserved pursuant to
the Company's outstanding warrants at August 31, 2006 and 2005
and the changes for the three months ending on those dates is
as follows:
---------------------------- -----------------------------
2006 2005
---------------------------- -----------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE
$ $
Balance, beginning of period 1,282,000 0.97 688,500 1.91
Issued 2,000,000 1.15 - -
------------ ------------
Balance, end of period 3,282,000 1.08 688,500 1.91
============ ============
The following table summarizes information about the warrants
outstanding and exercisable at August 31, 2006:
EXERCISE
PRICE NUMBER EXPIRY DATE
$
2.00 122,000 February 2, 2007
2.00 37,500 February 7, 2007
2.00 22,500 March 29, 2007
0.80 1,100,000 May 3, 2008
1.15/1.30 2,000,000 July 28, 2007 / 2008
----------
3,282,000
==========
(c) See also Note 10.
5. STOCK OPTIONS AND STOCK-BASED COMPENSATION
The Company has established a rolling stock option plan (the "Plan"),
in which the maximum number of common shares which can be reserved for
issuance under the Plan is 10% of the issued and outstanding shares of
the Company. The exercise price of the options is set at the Company's
closing share price on the day before the grant date, less allowable
discounts in accordance with the policies of the TSX Venture Exchange.
The options have a maximum term of five years.
During the three months ended August 31, 2006 , the Company recorded
compensation expense of $9,000 on stock options which vested during the
period.
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED AUGUST 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
5. STOCK OPTIONS AND STOCK-BASED COMPENSATION (continued)
A summary of the Company's outstanding stock options at August 31, 2006
and 2005 and the changes for the three months ending on those dates is
as follows:
---------------------------- ----------------------------
2006 2005
---------------------------- ----------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
OPTIONS EXERCISE OPTIONS EXERCISE
OUTSTANDING PRICE OUTSTANDING PRICE
$ $
Balance, beginning and end of period 720,000 0.62 217,500 1.30
============ ============
The following table summarizes information about the stock options
outstanding and exercisable at August 31, 2006:
NUMBER NUMBER EXERCISE
OUTSTANDING EXERCISABLE PRICE EXPIRY DATE
$
22,000 22,000 0.50 January 4, 2007
150,000 50,000 0.80 August 21, 2007
198,000 198,000 0.50 November 10, 2008
350,000 350,000 0.62 January 17, 2009
------------ -----------
720,000 620,000
============ ===========
See also Note 10(b).
6. CONTRIBUTED SURPLUS
The Company's contributed surplus as August 31, 2006 and 2005 and the
changes for the three months ending on those dates is presented below:
2006 2005
$ $
Balance, beginning of period 608,284 286,125
Stock-based compensation on stock
options (Note 5) 9,000 -
------------ ------------
Balance, end of period 617,284 286,125
============ ============
7. RELATED PARTY TRANSACTIONS
During the three months ended August 31, 2006, the Company incurred:
i) a total of $34,996 (2005 - $21,250) for accounting and
administration, management and professional fees by directors
and officers of the Company; and
ii) $15,000 for professional fees provided by a private company
controlled by a director of the Company. This amount was
capitalized to mineral interests.
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED AUGUST 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
7. RELATED PARTY TRANSACTIONS (continued)
As at August 31, 2006, $25,996 (2005 - $1,596) remained outstanding to
companies related to directors of the Company, and has been included in
accounts payable and accrued liabilities.
8. SEGMENTED INFORMATION
The Company operates in one industry segment, the exploration of
unproven mineral interests. The Company's current unproven mineral
interests are located in Mexico and its corporate assets are located in
Canada.
------------------------------------------
AUGUST 31, 2006
------------------------------------------
IDENTIFIABLE NET
ASSETS REVENUES LOSS
$ $ $
Mineral operations - Mexico 3,377,810 - (3,462)
Corporate - Canada 3,153,218 24,270 (133,044)
----------- ----------- -----------
6,531,028 24,270 (136,506)
=========== =========== ===========
------------------------------------------
MAY 31, 2006
------------------------------------------
IDENTIFIABLE NET
ASSETS REVENUES LOSS
$ $ $
Mineral operations - Mexico 1,337,075 - (12,091)
Corporate - Canada 3,634,481 36,566 (729,164)
----------- ----------- -----------
4,971,556 36,566 (741,255)
=========== =========== ===========
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of financial instruments at August 31, 2006, were
estimated based on relevant market information and the nature and terms
of financial instruments. Management is not aware of any factors which
would significantly affect the estimated fair market amounts, however,
such amounts have not been comprehensively revalued for purposes of
these financial statements. Disclosure subsequent to the balance sheet
dates and estimates of fair value at dates subsequent to August 31,
2006, may differ significantly from that presented.
Fair value approximates the amounts reflected in the financial
statements for cash, amounts receivable and accounts payable and
accrued liabilities.
The Company may be subject to currency risk due to the fluctuations of
exchange rates between the Canadian dollar and other foreign
currencies. However, the Company is not subject to significant interest
and credit risks arising from these instruments.
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED AUGUST 31, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
10. SUBSEQUENT EVENTS
(a) Subsequent to August 31, 2006, the Company made a US $75,000
payment for a further 0.9166% interest in the Mina Real
Property and provided funding for the construction of the
plant.
On October 19, 2006, the Company and ALB completed
negotiations and ALB agreed to waive the requirement for any
further payments and the Company was deemed to have fully
earned its 51% interest in the Mina Real Property. In
addition, the Company has agreed to acquire 100% of the
outstanding capital of ALB in exchange for the issuance of
10,500,000 common shares of the Company. ALB's sole asset is
its 49% equity interest in the Mina Real Property and the only
liability of ALB is an underlying obligation of US $2 million
and a 1% net smelter return royalty on the Mina Real Property.
Closing of the agreement is subject to completion of formal
documentation and receipt of TSXV approval.
(b) On September 5, 2006, the Company granted 500,000 stock
options to directors, consultants and employees at $0.90 per
common shares to expire on or before September 5, 2011.
SCHEDULE I
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED SCHEDULE OF
MINERAL PROPERTIES AND DEFERRED EXPLORATION
THREE MONTHS
ENDED YEAR ENDED
AUGUST 31, MAY 31,
2006 2006
$ $
BALANCE - BEGINNING OF PERIOD 1,128,652 -
------------ ------------
EXPLORATION COSTS DURING THE PERIOD
Assays 3,087 -
Camp costs - 27,642
Consulting - 339,189
Equipment rental - 7,416
Exploration office - 44,843
Fuel - 2,238
Geological 15,000 -
Repairs and maintenance - 1,619
Salaries - 156,928
Supplies - 52,283
Travel - 1,437
Vehicles - 8,473
------------ ------------
18,087 642,068
Reclassification to capital works in progress (63,330) -
------------ ------------
(45,243) 642,068
------------ ------------
ACQUISITION COSTS
Option payments and other 180,601 149,084
Issuance of common shares - 337,500
------------ ------------
180,601 486,584
------------ ------------
BALANCE - END OF PERIOD 1,264,010 1,128,652
============ ============
ROCHESTER RESOURCES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED AUGUST 31, 2006
BACKGROUND
This discussion and analysis of financial position and results of operation is
prepared as at October 30, 2006 and should be read in conjunction with the
interim consolidated financial statements and accompanying notes for the three
months ended August 31, 2006 of Rochester Resources Ltd. (the "Company"). Those
financial statements have been prepared in accordance with Canadian generally
accepted accounting principles ("Canadian GAAP"). Except as otherwise disclosed,
all dollar figures included therein and in the following management discussion
and analysis ("MD&A") are quoted in Canadian dollars. Additional information
relevant to the Company's activities, can be found on SEDAR at WWW.SEDAR.COM .
COMPANY OVERVIEW
The Company is currently a junior mineral exploration company actively engaged
in the acquisition, exploration and development of the Mina Real Property,
comprising 3,400 hectares of gold/silver mineral concessions located in the
State of Nayarit, Mexico. Nayarit is located in the Sierra Madre Occidental
range, the largest epithermal precious metal region in the world, which hosts
the majority of Mexico's gold and silver deposits. The Company is constructing a
cyanidation processing plant with a start-up capacity of at least 200
tonnes/day, expected to be in operation in late November 2006.
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",
the Frankfurt Stock Exchange Open Market under the trading Symbol "R5I" and on
the Over the Counter Bulletin ("OTCBB") under the symbol "RCTFF". The Company is
also registered with the U.S. Securities and Exchange Commission ("SEC") as a
foreign private issuer under the Securities Act of 1934.
FORWARD LOOKING STATEMENTS
Certain information included in this discussion may constitute forward-looking
statements. Forward-looking statements are based on current expectations and
entail various risks and uncertainties. These risks and uncertainties could
cause or contribute to actual results that are materially different than those
expressed or implied. The Company disclaims any obligation or intention to
update or revise any forward-looking statement, whether as a result of new
information, future events, or otherwise.
PROPERTY UPDATE
On January 8, 2006, the Company entered into an initial option agreement with
ALB Holdings Ltd. ("ALB") to acquire up to a 51% interest in the Mina Real
gold/silver property comprising approximately 3,400 hectares located near Tepic,
Nayarit, Mexico. Pursuant to the option agreement, the Company paid an initial
payment of US $110,000 and issued 250,000 common shares to ALB entitling it to
earn a 40% in the Mina Real Property upon payment of US$1.5 million towards the
2006 work program.
The Company has advanced the US $1.5 million under its 2006 Work Program
commitment and earned the initial 40% interest in the Mina Real Property. On
October 19, 2006, the Company and ALB completed negotiations and ALB agreed to
waive the requirement for any further payments and the Company was deemed to
have fully earned its 51% interest in the Mina Real Property. The balance of the
49% interest in the Mina Real Property will be acquired though the issuance of
10,500,000 common shares in exchange for all of the outstanding shares of ALB.
The sole asset of ALB is its 49% equity interest in Mina Real Mexico SA de CV
("Mina Real Mexico") and the only liability of ALB is an underlying obligation
of US $2 million to an ex-partner and a 1% net smelter royalty obligation on its
interest in the Mina Real Project.
In May 2006, the Company commenced Phase 1 of the 2006 Work Program. This was
completed in August 2006. To date five different vein structures have been
-1-
identified that outcrop for more than three kilometres within the Mina Real
concessions. Development mining is currently taking place on three parallel vein
structures known as Florida 1, 2 and 3 which had about 1,500 metres of drift
development work completed prior to the commencement of the 2006 Work Program.
This development area comprises an estimated average of about 250 metres of vein
structure laterally and an estimated depth of over 250 metres. An intrusion has
been identified north-west of the current Florida mine development followed by a
continuous outcropping of the Florida vein system for about 1.1 kilometres more
to the north-west.
The initial mine development plan for 2006 was to develop the Florida triple
vein structure south-east of the intrusion on levels 1140, 1160, 1185 and 1210
which equates to an area averaging over 125 metres vertically and 225 metres
laterally.
Phase 1 of the 2006 Work Program was to continue the excavation of Levels 1140,
1160 and 1185 of Florida 3 until the underground drift reached the projected
intrusion that intersects the ore horizon on the NW portion of the mineralized
structure. To date, the 2006 Work Program has resulted in the excavation of
Levels 1185, 1160 and 1140 of Florida 3 in mineralized rock over a length of 457
metres as indicated by channel samples taken approximately every two metres.
Independent assay results received on 290 metres of the 457 metres of channel
samples have averaged 12.10 grams/tonne of gold and 232.25 grams/tonne of silver
and a width of 1.09 metres. An additional 263 metres has been developed in waste
rock to prepare for ventilation, ore transportation and to cross a fault
bringing the total to 720 metres of development mining completed so far in 2006.
Assay results from Level 1185 channel samples produced an average grade of 16.6
grams/tonne of gold and 445 grams/tonne of silver and an average width of 1.08
metres over 80 of the 148 metres developed in mineralized rock. Level 1160, some
25 metres below, was excavated this year for a length of 223 metres in
mineralized rock averaging 10.78 grams/tonne of gold and 137 grams/tonne of
silver and 1.14 metres in width over the 140 metres independently assayed to
date. Level 1140 located approximately 20 metres below Level 1160, has been
excavated a total of 86 metres in mineralized rock with assay results received
to date on 70 metres averaging 9.6 grams/tonne of gold and 179 grams/tonne of
silver and 1.0 metre in width. Management is pleased with the fact that these
channel assay results approximately 50% higher than the grade of the previously
announced 2005 bulk sample of 4,400 tonnes which produced an average mill head
grade of 8.3 grams/tonne of gold and 165 grams/tonne of silver. A further 90-100
metres of development mining will be initiated shortly on Level 1140 of Florida
3.
Phase 2 of the 2006 Work Program is underway and the plan is to duplicate the
development work carried out in Levels 1185, 1160 and 1140 of Florida 3 into
Florida 2 and 1. A short-hole underground diamond drill program will form part
of the Phase 2 exploration development of Florida veins 1 and 2 due to the close
proximity of these two parallel vein structures.
Completion of Phase 2 would allow the mine engineers to develop a mining
strategy to feed the 200 tonne/day mill from this explored area of Florida 1, 2
and 3. As indicated in earlier reports this segment of the Florida vein system
has been tested for continuity and grade at depth. In 2003, drill hole F2-03
intercepted the three Florida veins at about 50 metres below Level 1140. The
average length of the drill intersections was 2 metres and the grades ranged
from 0.52 - 12.73 grams/tonne of gold and 93.5 - 172 grams/tonne of silver. The
host rock in this structure appears competent which should result in reasonable
mine operating costs and efficient ore extraction.
On October 30, 2006, the Company announced that an additional 213 metres of
development mining has produced results that are consistent with the
significantly higher gold and silver grades previously reported over 290 meters.
Ninety channel samples taken over 185 metres of development mining in Levels 215
and 140 averaged 13.3 grams/tonne of gold and 271 grams/tonne of silver and a
width of 1.13 metres. In addition, ten channel samples taken over 28 metres of a
raise that cuts vertically Level 215, 185 and 140 drifts averaged 13.4
grams/tonne of gold and 92 grams/tonne of silver and a width of 0.77 metres. Of
additional importance is the consistency of the grade up to the confirmed
intrusive to the NW and the indication that the grade increases with depth. When
combined with the results of surface sampling to the NW of the intrusion, these
results support management's contention that this high grade vein structure
continues for a kilometer or more on the NW side of the intrusive.
Site preparation for a conventional cyanidation processing plant and related
infrastructure is substantially completed and the extensive concrete pad system
being constructed to accommodate the various components of the mill is
completed. About 3.5 kilometres of new roadway including bridge workings have
been constructed between the base camp and the mill site. Power is available to
the site and the local power company is proceeding with an upgrade of the power
lines to the mill site to accommodate power demands in excess of a 300 tonne/day
milling operation.
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Firm contracts for the purchase and delivery of key components of the mill have
been placed with suppliers with deliveries in process. The plant is scheduled
for completion by late November of 2006 and will have an initial start-up
capacity of 200 tonnes/day and a design that can be easily upgraded to at least
300 tonnes/day.
Dr. Alfredo Parra, the President of Mina Real Mexico S.A de C.V., is the
Company's in-house Qualified Person and QP Member of the Mining and
Metallurgical Society of America with special expertise in Mining. Dr. Parra has
reviewed the technical information contained herein. Channel samples reported
were assayed by a combination of two certified and independent laboratories, ALS
Chemex of North Vancouver, BC and SGS of Lakefield, Ontario. The Company has not
conducted an independent feasibility study on the Mina Real Project, which may
increase the risk that the planned operations are not economically viable. The
board has relied on the work of management, an outside consultant and the
project management in Mexico, who have extensive experience in similar size
projects from the construction and operational perspective.
The Company's primary strategic objective is to bring the Mina Real Project to
production status before the end of 2006. The Florida mine development plan is
on target and the results to date, as indicated above, reinforces managements'
view that sufficient mineralized feed is available to provide initial support
for a 200 tonne/day mill. The material produced from the ongoing excavations is
being stockpiled as initial mill feed and is estimated to reach about 6,000
tonnes by the commencement of milling operations. Tests will be carried out on
this stockpile to determine if screening out some oversize material could
increase the grade of the remaining mineralized mill feed. In addition, the
channel samples from the drift development completed so far in 2006 indicate
there could be some ability to selectively mine higher than average grade during
the start-up months of the mill.
The longer term objective is to become a major "niche market" gold/silver
producer. Management believes that this key property, when combined with its
experienced Mexican based management team, has the potential to produce a
long-term revenue stream which should set the stage for the development of a
series of similar size mining and milling operations in the region.
SELECTED FINANCIAL DATA
The following selected financial information is derived from the unaudited
interim consolidated financial statements of the Company prepared in accordance
with Canadian GAAP.
---------- ------------------------------------------------- ------------------------------------
FISCAL
2007 FISCAL 2006 FISCAL 2005
---------- ------------------------------------------------- ------------------------------------
THREE MONTH PERIODS ENDING AUG 31 MAY 31 FEB 28 NOV 30 AUG 31 MAY 31 FEB 28 NOV 30
$ $ $ $ $ $ $ $
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OPERATIONS:
Revenues Nil Nil Nil Nil Nil Nil Nil Nil
Expenses (121,537) (237,338) (343,844) (118,492) (42,476) (62,813) (162,968) (129,420)
Other items (14,969) (22,415) 230 (17,003) 40,083 (718,338) 10,216 (20,034)
Net income (loss) (136,506) (259,753) (343,614) (135,495) (2,393) (781,151) (152,752) (149,454)
Basic and diluted
income (loss) per share (0.01) (0.06) (0.07) (0.06) (0.00) (0.40) (0.08) (0.08)
Dividends per share Nil Nil Nil Nil Nil Nil Nil Nil
BALANCE SHEET:
Working capital 3,595,277 3,536,076 2,098,783 192,592 249,510 245,246 313,811 235,799
Total assets 6,531,028 4,971,556 2,338,844 214,439 274,800 287,316 1,060,962 783,112
Total long-term liabilities Nil Nil Nil Nil Nil Nil Nil Nil
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
RESULTS OF OPERATIONS
During the three months ended August 31, 2006 (the "2006 period") the Company
recorded a loss of $136,506 ($0.01 per share) compared to a loss of $2,393
($0.00 per share) for the three months ended August 31, 2005 (the "2005
period"), an increase in loss of $134,113. The increase in loss in the 2006
period compared to the 2005 period is primarily attributed to an increase in
activities in the 2006 period.
General and administrative expenses of $121,537 were reported in the 2006
period, an increase of $79,061, from $42,476 in the 2005 period. Specific
expenses of note during the 2006 period and 2005 period are as follows:
- during the 2006 period, the Company incurred accounting, management and
administrative fees of $17,645 (2005 - $14,250);
-3-
- during the 2006 period, the Company incurred professional fees of
$14,326 (2005 - $6,045) of which $9,496 was paid to senior executives
and officers;
- during the 2006 period, the Company paid $6,411 in salaries and
benefits to the President's spouse and $19,500 in management fees to
the President of the Company;
- during the 2006 period the Company incurred corporate development
expenses of $7,425 for ongoing market awareness and promotional
campaign;
- effective February 28, 2006, the Company entered into an agreement with
Accent Marketing Limited to provide market awareness and investor
relation activities in Europe. During the 2006 period, the Company
incurred $19,850;
- the Company recorded $9,000 for non-cash stock-based compensation on
the vesting of stock options during the 2006 period, and
- during the 2006 period, the Company incurred travel expenses of $7,322
for ongoing mine site visits to Mexico.
As the Company is in the pre-production stage, it has no revenue. Interest
income is generated from cash held with the Company's financial institution.
During the 2006 period, the Company reported interest income of $24,270 as
compared to $3,191 the 2005 period. The increase is attributed to higher levels
of cash held during the 2006 period.
During the 2006 period the Company incurred $18,087 on exploration activities,
$180,601 for option payments, and $1,100,726 for site preparation and
construction of the mill facility on the Mina Real Property. Exploration
activities conducted in the 2006 period are described in "Exploration Projects"
in this MD&A.
During the 2006 period, the Company completed a private placement for 2,000,000
million units at $0.90 per unit for gross proceeds of $1.8 million.
FINANCIAL CONDITION / CAPITAL RESOURCES
As at August 31, 2006, the Company had working capital of $3,595,277. While the
Company believes that it has sufficient financial resources to meet the balance
of its current funding commitment for its 51% interest in the Mina Real Project,
with the proposed acquisition of the remaining 49% interest, the Company will
not have sufficient resources to accommodate the increase in this commitment, to
complete construction of the mill facility and provide adequate working capital
for start-up operations. In addition, exploration and development activities may
change due to ongoing results and recommendations which may entail significant
funding or exploration commitments. As a result, the Company will be required to
obtain additional financing. The Company has relied solely on equity financing
to raise the requisite financial resources. While it has been successful in the
past, there can be no assurance that the Company will be successful in raising
future financing should the need arise.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
PROPOSED TRANSACTIONS
The Company has no proposed transactions.
CRITICAL ACCOUNTING ESTIMATES
A detailed summary of all the Company's significant accounting policies is
included in Note 2 to the May 31, 2006 audited consolidated financial
statements.
CHANGES IN ACCOUNTING POLICIES
The Company has no changes in accounting policies.
-4-
TRANSACTIONS WITH RELATED PARTIES
During the three months ended August 31, 2006, the Company incurred:
i) a total of $34,996 (2005 - $21,250) for accounting and administration,
management and professional fees by directors and officers of the
Company; and
ii) $15,000 for professional fees provided by a private company controlled
by a director of the Company. This amount was capitalized to mineral
interests.
As at August 31, 2006, $25,996 (2005 - $1,596) remained outstanding to companies
related to directors of the Company and has been included in accounts payable
and accrued liabilities.
RISKS AND UNCERTAINTIES
The Company competes with other mining companies, some of which have greater
financial resources and technical facilities, for the acquisition of mineral
concessions, claims and other interests, as well as for the recruitment and
retention of qualified employees.
The Company is in compliance in all material regulations applicable to its
exploration activities. Existing and possible future environmental legislation,
regulations and actions could cause additional expense, capital expenditures,
restrictions and delays in the activities of the Company, the extent of which
cannot be predicted. Before production can commence on any properties, the
Company must obtain regulatory and environmental approvals. There is no
assurance that such approvals can be obtained on a timely basis or at all. The
cost of compliance with changes in governmental regulations has the potential to
reduce the profitability of operations.
The Company's activities are conducted in Mexico. Consequently, the Company is
subject to certain risks, including currency fluctuations and possible political
or economic instability which may result in the impairment or loss of mining
title or other mineral rights, and mineral exploration and mining activities may
be affected in varying degrees by political stability and governmental
regulations relating to the mining industry.
INVESTOR RELATIONS ACTIVITIES
Effective February 28, 2006, the Company entered into an agreement with Accent
Marketing Limited ("Accent") to provide market awareness and investor relation
activities in Europe. During the 2006 period, the Company paid $19,850. The
Company has granted stock options to Accent to acquire 150,000 common shares at
a price of $0.80 per common share, expiring on August 21, 2007. The options vest
on a quarterly basis over an eighteen month period.
OUTSTANDING SHARE DATA
The Company's authorized share capital is unlimited common shares without par
value. As at October 30, 2006, there were 13,264,735 issued and outstanding
common shares. In addition there were 1,220,000 stock options outstanding and
exercisable at exercise prices ranging from $0.50 to $0.90 per share and
3,255,000 warrants outstanding, with exercise prices ranging from $0.80 to $2.00
per share.
-5-
FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS
I, Douglas Good, a Director and Chief Executive Officer of Rochester Resources
Ltd., and performing similar functions to that of a Chief Financial Officer,
certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of Rochester Resources Ltd. (the "Issuer")
for the interim period ending August 31, 2006;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings;
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the Issuer, as of the date and for the
periods presented in the interim filings;
4. The Issuer's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures and
internal control over financial reporting for the Issuer, and we have:
(a) designed such disclosure controls and procedures, or caused
them to be designed under our supervision, to provide
reasonable assurance that material information relating to the
Issuer, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which the interim filings are being prepared; and
(b) designed such internal control over financial reporting, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with the Issuer's GAAP; and
5. I have caused the Issuer to disclose in the interim MD&A any change in
the Issuer's internal control over financial reporting that occurred
during the Issuer's most recent interim period that has materially
affected, or is reasonably likely to materially affect, the Issuer's
internal control over financial reporting.
Date: October 30, 2006
/s/ DOUGLAS GOOD
- ----------------------------------
Douglas Good,
Director & Chief Executive Officer
FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS
I, Douglas Good, a Director and Chief Executive Officer of Rochester Resources
Ltd., and performing similar functions to that of a Chief Financial Officer,
certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of Rochester Resources Ltd. (the "Issuer")
for the interim period ending August 31, 2006;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings;
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the Issuer, as of the date and for the
periods presented in the interim filings;
4. The Issuer's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures and
internal control over financial reporting for the Issuer, and we have:
(a) designed such disclosure controls and procedures, or caused
them to be designed under our supervision, to provide
reasonable assurance that material information relating to the
Issuer, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which the interim filings are being prepared; and
(b) designed such internal control over financial reporting, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with the Issuer's GAAP; and
5. I have caused the Issuer to disclose in the interim MD&A any change in
the Issuer's internal control over financial reporting that occurred
during the Issuer's most recent interim period that has materially
affected, or is reasonably likely to materially affect, the Issuer's
internal control over financial reporting.
Date: October 30, 2006
/s/ DOUGLAS GOOD
- ----------------------------------
Douglas Good,
Director & Chief Executive Officer
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