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 JANUARY, 2007.
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: January 29, 2007 /s/ Douglas Good
----------------------------- -------------------------------------
Doug Good,
Chairman
- --------------------------------------------------------------------------------
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
NOVEMBER 30, 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 six months ended November 30, 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)
NOVEMBER 30, MAY 31,
2006 2006
$ $
ASSETS
CURRENT ASSETS
Cash 1,453,976 3,657,676
Amounts receivable (Note 3) 574,810 80,022
Prepaid expenses and deposits 24,977 12,825
------------ ------------
2,053,763 3,750,523
PROPERTY, PLANT AND EQUIPMENT (Note 4) 5,712,148 1,183,993
OTHER ASSETS - 37,040
------------ ------------
7,765,911 4,971,556
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 154,987 214,447
------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 5) 78,872,873 75,890,208
SHARE SUBSCRIPTIONS RECEIVED (Note 11) 252,949 -
CONTRIBUTED SURPLUS (Note 7) 1,007,036 608,284
DEFICIT (72,521,934) (71,741,383)
------------ ------------
7,610,924 4,757,109
------------ ------------
7,765,911 4,971,556
============ ============
NATURE OF OPERATIONS (Note 1)
SUBSEQUENT EVENTS (Note 11)
APPROVED BY THE BOARD
/s/ ALFREDO PARRA , Director
- ---------------------
/s/ DOUG GOOD , 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
(UNAUDITED - PREPARED BY MANAGEMENT)
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
---------------------------- ----------------------------
2006 2005 2006 2005
$ $ $ $
EXPENSES
Accounting and administration 23,920 16,740 41,565 30,990
Amortization 6,121 357 11,521 714
Audit 9,407 2,517 9,407 2,517
Corporate development 43,981 - 51,406 -
Investor relations 15,058 - 34,908 3,000
Legal 3,437 2,424 3,540 3,374
Management fees 19,500 13,833 39,000 20,833
Office 10,693 5,631 16,598 6,774
Professional fees 12,970 - 27,296 6,045
Regulatory 8,113 4,542 9,588 6,792
Rent 2,700 - 5,100 -
Salaries and benefits 6,411 - 12,822 -
Shareholder costs 3,498 2,611 4,837 5,318
Stock-based compensation (Note 6) 450,000 61,420 459,000 61,420
Transfer agent 4,174 5,417 7,610 9,892
Travel 20,928 3,000 28,250 3,299
------------ ------------ ------------ ------------
640,911 118,492 762,448 160,968
------------ ------------ ------------ ------------
LOSS BEFORE OTHER ITEMS (640,911) (118,492) (762,448) (160,968)
------------ ------------ ------------ ------------
OTHER ITEMS
Interest and other income 12,131 633 36,401 3,824
Foreign exchange (15,265) 2,364 (54,504) (1,724)
Write-off of receivable - (20,000) - (20,000)
Gain on sale of other assets - - - 40,980
------------ ------------ ------------ ------------
(3,134) (17,003) (18,103) 23,080
------------ ------------ ------------ ------------
NET LOSS FOR THE PERIOD (644,045) (135,495) (780,551) (137,888)
DEFICIT - BEGINNING OF PERIOD (71,877,889) (71,002,521) (71,741,383) (71,000,128)
------------ ------------ ------------ ------------
DEFICIT - END OF PERIOD (72,521,934) (71,138,016) (72,521,934) (71,138,016)
============ ============ ============ ============
BASIC AND DILUTED LOSS PER SHARE $(0.05) $(0.06) $(0.06) $(0.06)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 13,680,654 2,230,735 12,733,363 2,230,868
============ ============ ============ ============
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
(UNAUDITED - PREPARED BY MANAGEMENT)
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
---------------------------- ----------------------------
2006 2005 2006 2005
$ $ $ $
CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net loss for the period (644,045) (135,495) (780,551) (137,888)
Adjustment for items not involving cash
Amortization 6,121 357 11,521 714
Stock-based compensation 450,000 61,420 459,000 61,420
Gain on sale of other assets - - - (40,980)
------------ ------------ ------------ ------------
(187,924) (73,718) (310,030) (116,734)
(Increase) decrease in amounts receivable (271,899) 19,819 (494,788) 20,108
(Increase) decrease in prepaid expenses
and deposits (13,727) 7,725 (12,152) 9,394
Increase (decrease) in accounts payable
and accrued liabilities 34,939 (3,086) (59,460) (13,209)
------------ ------------ ------------ ------------
(438,611) (49,260) (876,430) (100,441)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of common shares 1,141,040 16,800 2,941,040 16,800
Share subscriptions received 252,949 - 252,949 -
Share issue costs - - (18,623) -
------------ ------------ ------------ ------------
1,393,989 16,800 3,175,366 16,800
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Property, plant and equipment additions (2,902,566) - (4,502,636) -
Proceeds from sale of other assets - - - 47,280
------------ ------------ ------------ ------------
(2,902,566) - (4,502,636) 47,280
------------ ------------ ------------ ------------
DECREASE IN CASH FOR THE PERIOD (1,947,188) (32,460) (2,203,700) (36,361)
CASH - BEGINNING OF PERIOD 3,401,164 223,688 3,657,676 227,589
------------ ------------ ------------ ------------
CASH - END OF PERIOD 1,453,976 191,228 1,453,976 191,228
============ ============ ============ ============
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 SIX MONTHS ENDED NOVEMBER 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
1. NATURE OF OPERATIONS
The Company is engaged in the acquisition, exploration and development
of its mineral property interests in Mexico. As at the end of December
2006, the Company has completed construction of the cyanidation
processing plant and related infrastructure at the Mina Real Property
located in Nayarit State, Mexico. Milling operations commenced in
January 2007.
As at November 30, 2006, the Company had working capital of $1,898,776.
In addition, as described in Note 11, the Company has completed and
arranged further equity financings. The Company believes that it has
sufficient financial resources to meet the commitments required on the
purchase of ALB Holdings Ltd. ("ALB"), completion of the mine facility,
planned increase in the capacity of the mill facility and to provide
adequate working capital for start-up operations. The Company also
plans to conduct a significant exploration and development program. As
a result, the Company may 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. AMOUNTS RECEIVABLE
NOVEMBER 30, MAY 31,
2006 2006
$ $
IVA tax receivable 516,589 42,447
Other receivable 58,221 37,575
------------ ------------
574,810 80,022
============ ============
4. PROPERTY, PLANT AND EQUIPMENT
-------------------------------------------- ------------
NOVEMBER 30, 2006 MAY 31, 2006
-------------------------------------------- ------------
ACCUMULATED NET BOOK NET BOOK
COST AMORTIZATION VALUE VALUE
$ $ $ $
Motor vehicles 65,522 11,396 54,126 52,921
Office equipment 11,421 489 10,932 2,420
Capital works in progress 4,286,445 - 4,286,445 -
Mineral interests and deferred exploration 1,360,645 - 1,360,645 1,128,652
------------ ------------ ------------ ------------
5,724,033 11,885 5,712,148 1,183,993
============ ============ ============ ============
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
4. PROPERTY, PLANT AND EQUIPMENT (continued)
Capital works in progress consists primarily of construction costs on
the cyanidation processing plant and related infrastructure for the
Company's Mina Real Project.
In January 2006, the Company entered into an option agreement with, 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 could earn its interests, as follows:
i) an initial 20% interest on funding the initial US $750,000;
ii) a further 20% interest on funding a further US $750,000; 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.
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 also 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.
On December 1, 2006, the Company completed the acquisition of ALB and
issued 10,500,000 common shares.
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
5. SHARE CAPITAL
Authorized: Unlimited common shares without par value
---------------------------- ----------------------------
Issued: NOVEMBER 30, 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 927,000 1,056,600 2,557,000 1,671,050
Exercise of options 157,000 84,440 - -
Exercise of agent's option - - 150,000 75,000
Reallocation from contributed surplus
relating to the exercise of options - 60,248 - -
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
------------ ------------ ------------ ------------
3,084,000 3,001,288 9,007,000 5,446,550
Less: share issue costs - (18,623) - (526,655)
------------ ------------ ------------ ------------
3,084,000 2,982,665 9,007,000 4,919,895
------------ ------------ ------------ ------------
Balance, end of period 14,321,735 78,872,873 11,237,735 75,890,208
============ ============ ============ ============
(a) During the six months ended November 30, 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 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 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 $18,623 of legal and
associated filing fees relating to the private placement.
(b) A summary of the number of common shares reserved pursuant to
the Company's outstanding warrants at November 30, 2006 and
2005 and the changes for the six 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 - -
Exercised (927,000) 1.14 (12,000) 1.40
Expired - (352,000) 1.40
------------ ------------
Balance, end of period 2,355,000 1.06 324,500 2.20
============ ============
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
5. SHARE CAPITAL (continued)
The following table summarizes information about the number of
common shares reserved pursuant to the Company's outstanding
and exercisable warrants at November 30, 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 1,073,000 May 3, 2008
1.15/1.30 1,100,000 July 28, 2007 / 2008
-----------
2,355,000
===========
(c) See also Note 11.
6. 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 six months ended November 30, 2006, the Company granted
650,000 (2005 - 220,000) stock options to the Company's directors,
employees and consultants and recorded compensation expense of $450,000
(2005 - $61,420) on these stock options and $9,000 (2005 - $nil) on
stock options which vested during the period.
The fair value of stock options granted to directors, employees and
consultants is estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions used for the grants
made during the periods:
2006 2005
Risk-free interest rate 3.96% 3.26%
Estimated volatility 103% 125%
Expected life 5 years 1.5 years
Expected dividend yield 0% 0%
The weighted average fair value of stock options granted during the
period to the Company's directors, employees and consultants was $0.90
(2005 - $0.28) per share .
Option-pricing models require the use of estimates and assumptions
including the expected volatility. Changes in the underlying
assumptions can materially affect the fair value estimates and,
therefore, existing models do not necessarily provide reliable measure
of the fair value of the Company's stock options.
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
6. STOCK OPTIONS AND STOCK-BASED COMPENSATION (continued)
A summary of the Company's outstanding stock options at November 30,
2006 and 2005 and the changes for the six months ending on those dates
is as follows:
---------------------------- ----------------------------
2006 2005
---------------------------- ----------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
OPTIONS EXERCISE OPTIONS EXERCISE
OUTSTANDING PRICE OUTSTANDING PRICE
$ $
Balance, beginning of period 720,000 0.62 217,500 1.30
Granted 650,000 1.02 220,000 0.50
Exercised (157,000) 0.54 - -
Cancelled (100,000) 0.80 (217,500) 1.30
------------ ------------
Balance, end of period 1,113,000 0.85 220,000 0.50
============ ============
The following table summarizes information about the stock options
outstanding and exercisable at November 30, 2006:
NUMBER NUMBER EXERCISE
OUTSTANDING EXERCISABLE PRICE EXPIRY DATE
$
50,000 50,000 0.80 December 23, 2006
112,500 112,500 0.50 November 10, 2008
300,500 300,500 0.62 January 17, 2009
150,000 - 1.40 November 24, 2009
500,000 500,000 0.90 September 5, 2011
----------- -----------
1,113,000 963,000
=========== ===========
7. CONTRIBUTED SURPLUS
The Company's contributed surplus as November 30, 2006 and 2005 and the
changes for the six 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 6) 459,000 61,420
Stock options exercised (60,248) -
------------ ------------
Balance, end of period 1,007,036 347,545
============ ============
8. RELATED PARTY TRANSACTIONS
During the six months ended November 30, 2006, the Company incurred:
i) a total of $69,746 (2005 - $54,823) for accounting and
administration, management and professional fees by directors
and officers of the Company; and
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
8. RELATED PARTY TRANSACTIONS (continued)
ii) $15,000 (2005 - $nil) for professional fees provided by a
private company controlled by a director of the Company. This
amount was capitalized to mineral interests.
As at November 30, 2006, $5,939 (2005 - $3,333) remained outstanding to
companies related to directors of the Company, and has been included in
accounts payable and accrued liabilities.
9. SEGMENTED INFORMATION
The Company operates in one industry segment, the acquisition,
exploration and development of mineral interests. The Company's mineral
operations are located in Mexico and its corporate assets are located
in Canada.
--------------------------------------------
NOVEMBER 30, 2006
--------------------------------------------
IDENTIFIABLE NET
ASSETS REVENUES LOSS
$ $ $
Mineral operations(Mexico) 6,659,905 - (19,647)
Corporate (Canada) 1,106,006 36,401 (760,904)
------------ ------------ ------------
7,765,911 36,401 (780,551)
============ ============ ============
--------------------------------------------
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)
============ ============ ============
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of financial instruments at November 30, 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 November 30,
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 SIX MONTHS ENDED NOVEMBER 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
11. SUBSEQUENT EVENTS
Subsequent to November 30, 2006, the Company:
(i) completed a non-brokered private placement for 700,456 units
at a price of $1.15 per unit for gross proceeds of $805,524.
Each unit is comprised of one common share and one share
purchase warrant. Each warrant entitles the holder to purchase
one additional common share at an exercise price of $1.40 per
share on or before December 11, 2008. After June 30, 2007, the
warrants are subject to a forced conversion provision once the
Company's common shares trade in excess of $2.30 per share for
45 consecutive trading days. As at November 30, 2006, the
Company had received $252,949 in share subscriptions on
account of the private placement;
(ii) announced a private placement of up to 1,200,000 units at a
price of $1.85 per unit, for gross proceeds of up to
$2,220,000. Each unit will be comprised of one common share
and one-half share purchase warrant. Each full warrant will
entitle the holder to purchase an additional common share at a
price of $2.25 per share for a period of one year;
(iii) issued 528,280 common shares on the exercises of stock options
and warrants for gross proceeds totalling $441,644; and
(iv) see Note 4.
SCHEDULE I
ROCHESTER RESOURCES LTD.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED SCHEDULE OF
MINERAL OPERATIONS AND DEFERRED EXPLORATION
SIX MONTHS
ENDED YEAR ENDED
NOVEMBER 30, 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 277,236 149,084
Issuance of common shares - 337,500
------------ ------------
277,236 486,584
------------ ------------
BALANCE - END OF PERIOD 1,360,645 1,128,652
============ ============
ROCHESTER RESOURCES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2006
BACKGROUND
This discussion and analysis of financial position and results of operation is
prepared as at January 25, 2007 and should be read in conjunction with the
interim consolidated financial statements and accompanying notes for the six
months ended November 30, 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 .
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.
COMPANY OVERVIEW
The Company is currently a junior mining company actively engaged in the
exploration and development of its Mina Real Property, comprising 7,400 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 completed the construction of a cyanidation
processing plant at the end of December 2006. Initial milling operations
commenced in January 2007.
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.
CHANGES TO THE BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
On January 9, 2007, Dr. Alfredo Parra was appointed as President and CEO of the
Company, replacing Mr. Douglas Good, who moves to Chairman of the Board. In
addition to retaining his position as Chief Financial Officer, Mr. Good
continues to be responsible for corporate development and public market related
activities. Dr. Parra has an extensive background in mining exploration and
operations, including senior management level positions with major Mexican based
corporations.
On January 19, 2007, the Company appointed Messrs. Joseph M. Keane of Tucson
Arizona, and Lindsay R. Bottomer, of Vancouver, BC, to the board of directors.
They replace Messrs. Carter and Lee who submitted their resignations to take
effect concurrent with these new appointments.
Mr. Keane is a Registered Professional Metallurgical Engineer and since the
mid-1980's has been President of KD Engineering Co. Inc. and Metcon Research
Inc., both of Tucson, Arizona. Since mid-2006 he has been a special advisor to
Rochester. Mr. Keane has over 40 years experience specializing in process design
development, engineering supervision, equipment and instrument selection and has
conducted numerous feasibility studies for the mineral processing and pollution
abatement industries. He has been a consultant to a unit of the World Bank
(International Finance Corporation) for mineral processing projects in Mexico,
Peru, Tajikistan, China, Mali, Uzbekistan, Ghana, and Tanzania. Mr. Keane has
also directed feasibility studies and/or provided direction for a wide variety
of mining projects in Chile, Peru, Indonesia, Mexico, Panama, Mongolia, Canada
and the United States. He is a co-inventor of US Patent on copper recovery and
- 1 -
has developed standardized test methodologies that have been adopted by the
mining industry. Mr. Keane recently was a consultant to INCO and has been an
expert witness in a number of legal matters regarding base and precious metals
projects worldwide. He is currently a director of Norsemont Mining Inc.
Mr. Bottomer is a Professional Geoscientist with over 30 years experience in
mineral exploration and mine development worldwide. He was President and CEO of
Southern Rio Resources Ltd. (now Silver Quest Resources Ltd.) from July 2001 to
November 2005 and remains a Director. He is a Director of five other public
companies and has held senior positions with Prime Explorations (Pezim Group)
from 1989-1994 and Echo Bay Mines Ltd. from 1994-1997. From 1998-2000 he was
President of the BC & Yukon Chamber of Mines, and is currently serving a third
two-year term as an elected councilor of the Association of Professional
Engineers and Geoscientists of British Columbia. He is currently a Director and
Vice President Corporate Development of Entree Gold Inc.
The above appointments combined with the mining backgrounds of Dr. Alfredo
Parra, and existing director Mr. Gil Leathley, provide a strong base of
expertise in the fields of metallurgy, mining, milling and exploration and will
be able to provide sound strategic direction to the future development and
operational activities of the Company.
PROPERTY UPDATE
MINA REAL PROJECT OVERVIEW
Effective December 1, 2006, the balance of the 49% interest in the Mina Real
Property was 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 which currently stands at US
$1.775 million to an ex-partner and a 1% net smelter royalty obligation on its
interest in the Mina Real Project.
The following is a summary overview of the achievement since the Company first
acquired a right to earn an interest in the Mina Real Project in January 2006:
FLORIDA MINE:
o Complete about 1,500 additional meters of development mining at the
Florida Mine Site
o Upgraded access road to mine site
o Development of concrete portals to mine entrances
o Mined and stockpiled about 17,000 tonnes of mineralized material
o Completed approximately one kilometer of road access from the Florida
mine site to the high-grade Tajos Cuates vein structures
INFRASTRUCTURE DEVELOPMENT:
o Completed construction and establishment of field offices and base
camp for mining and exploration
o Completed on-site housing for mill management and employees
o Established an on-site assay lab
o Constructed approximately 3.5 kilometers of new roadway from base camp
to mill site
o Upgraded segments of main access road to base camp
o Established corporate offices in Tepic, Mexico
MILL CONSTRUCTION:
o Obtained all environmental approval and permitting for mill and
tailings pond
o Power lines to mill site upgraded to handle well in excess of 300
tonnes/day capacity
o Completed site preparation, civil works and construction of 200
tonnes/day conventional mill
o Completed construction of tailings pond with a ten year capacity
The crushing and grinding section of the mill is now operating at its initial
design capacity and feeding the cyanide plant at the rate of 200 tonnes/day. The
mill is expected to remain at this level until mid-2007, when an increase in
capacity to 300 tonnes/day is contemplated. The modular design of the mill
should allow for the planned increase in capacity to be implemented at a cost of
under US$300,000.
By mid-2006 five different vein structures had been identified that outcrop for
more than three kilometres within the Mina Real concessions. The mill is
currently being fed from development mining on three parallel vein structures
- 2 -
known as Florida 1, 2 and 3 which have over 3,000 metres of drift development
work completed by the end of 2006. This development area comprises an estimated
average of about 250 metres of vein structure laterally and an estimated depth
of over 250 metres. 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.
The results from surface exploration indicate that the Florida vein system
extends to the NW and SE of the current Florida mine workings. Additional work
is required to confirm the full extent of the vein systems and whether the
outcroppings that have been identified for over two kilometers, both to the NW
and SE of the current mine site, are in fact a continuation of the existing
Florida vein structure or additional parallel structures.
The 2006 Work Program continued the excavation in five levels 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, independent
assays of channel samples taken every two metres on 775 metres of development
mining produced an average grade of 12.1 grams/tonne of gold and 209 grams/tonne
of silver. The average vein width was about 1.1 metres. Management is pleased
with the fact that these channel assay results were significantly 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.
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 immediately to the NW of the
intrusion, these facts support management's contention that this high-grade vein
structure continues for a yet undertermined distance on the NW side of the
intrusive.
As at the beginning of 2007, a total of about 17,000 tonnes of mineralized
material had been mined and stockpiled in preparation for the commencement of
milling operations. Mining costs per tonne of mill feed will vary depending on
the percentage of development mining that is represented by drift development
versus stoping. The Company currently utilizes the services of two contract
mining companies and expects to add one additional mining contractor in the near
future. Based on an anticipated drift development/stoping ratio of 60:40 and
current contracts in place, it is anticipated that mining and trucking costs
will be under US $50 per tonne.
Based on independent metallurgical test results, mill recovery rates for gold
are anticipated to average approximately 95%. Silver recovery is expected to
reach 90% once a small additional sulphidation circuit is added to deal with the
occurrence of elevated levels of manganese. Milling costs are not expected to
exceed US $25 per tonne of processed material. Delivery of the first production
of gold and silver precipitate to the refinery for processing is expected to
take place during the last week of January 2007.
Dr. Alfredo Parra, the Company's President, 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 initial strategic objective was to bring the Mina Real Project to
production status by 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 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.
- 3 -
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 NOV 30 AUG 31 MAY 31 FEB 28 NOV 30 AUG 31 MAY 31 FEB 28
$ $ $ $ $ $ $ $
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OPERATIONS:
Revenues Nil Nil Nil Nil Nil Nil Nil Nil
Expenses (640,911) (121,537) (237,338) (343,844) (118,492) (42,476) (62,813) (162,968)
Other items (3,134) (14,969) (22,415) 230 (17,003) 40,083 (718,338) 10,216
Net income (loss) (644,045) (136,506) (259,753) (343,614) (135,495) (2,393) (781,151) (152,752)
Basic and diluted
income (loss) per share (0.05) (0.01) (0.06) (0.07) (0.06) (0.00) (0.40) (0.08)
Dividends per share Nil Nil Nil Nil Nil Nil Nil Nil
BALANCE SHEET:
Working capital 1,898,776 3,595,277 3,536,076 2,098,783 192,592 249,510 245,246 313,811
Total assets 7,765,911 6,531,028 4,971,556 2,338,844 214,439 274,800 287,316 1,060,962
Total long-term liabilities Nil Nil Nil Nil Nil Nil Nil Nil
----------------------- ------------------------------------------------- -----------------------
RESULTS OF OPERATIONS
During the six months ended November 30, 2006 (the "2006 period") the Company
recorded a loss of $780,551 ($0.06 per share) compared to a loss of $137,888
($0.06 per share) for the six months ended November 30, 2005 (the "2005
period"), an increase in loss of $642,663. 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 and the recording of non-cash stock-based
compensation on $459,000.
General and administrative expenses of $762,448 were reported in the 2006
period, an increase of $601,480, from $160,968 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 $41,565 (2005 - $30,990);
- during the 2006 period, the Company expensed professional fees
totalling $22,296 (2005 - $6,045) of which $18,546 was paid to
senior executives and officers;
- during the 2006 period, the Company paid $12,822 in salaries and
benefits to the President's spouse and $39,000 in management fees
to the President of the Company;
- during the 2006 period the Company incurred corporate development
expenses of $51,406 for ongoing market awareness and promotional
campaign and participation in an investment conference in
Frankfurt;
- 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 $33,508. The agreement was terminated on
November 23, 2006;
- the Company recorded $459,000 (2005 - $61,420) for non-cash
stock-based compensation on the granting of stock options during
the 2006 period,
- during the 2006 period, the Company incurred travel expenses of
$28,250 for ongoing mine site visits to Mexico and participation
in an investment conference in Frankfurt; and
- effective November 23, 2006, the Company entered into an agreement
with Empire Communications, Inc., to provide investor relations
services. During the 2006 period, the Company incurred $1,400.
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 and other income of
- 4 -
$36,401 as compared to $3,824 during 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,
$277,236 for option payments, and $4,207,313 for site preparation and
construction of the mill and mine 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 November 30, 2006, the Company had working capital of $1,898,776.
Subsequent to November 30, 2006, the Company completed an equity financing of
$805,524 and announced a further financing of up to $2,222,000. A further
$441,644 has been received from the exercise of stock options and warrants. The
Company anticipates that the additional financing will provide sufficient
resources to complete the mine facility and provide adequate working capital for
start-up operations. Further exploration and development activities, however,
may change due to ongoing results and recommendations which may entail
significant funding or exploration commitments. As a result, the Company may 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 acquisition of ALB was completed on December 1, 2006.
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.
TRANSACTIONS WITH RELATED PARTIES
During the six months ended November 30, 2006, the Company incurred:
i) a total of $69,746 (2005 - $54,823) 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 November 30, 2006, $5,939 (2005 - $3,333) 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.
- 5 -
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 $33,508. The
agreement was terminated on November 23, 2006.
Effective November 23, 2006, the Company entered into an agreement with Empire
Communications Inc., to provide investor relations services. The Company will
pay a monthly fee of $6,000 and issue 150,000 stock options at an exercise price
of $1.40 per share. The options vest on a quarterly basis over a twelve month
period. The agreement may be terminated with written 30 days notice.
OUTSTANDING SHARE DATA
The Company's authorized share capital is unlimited common shares without par
value. As at January 25, 2007, there were 26,059,721 issued and outstanding
common shares. In addition there were 2,562,000 stock options outstanding and
exercisable at exercise prices ranging from $0.50 to $1.85 per share and
2,693,926 warrants outstanding, with exercise prices ranging from $0.80 to $2.00
per share.
DISCLOSURE CONTROLS AND PROCEDURES
Management has designed disclosure controls and procedures, or has caused them
to be designed under its supervision, to provide reasonable assurance that
material information relating to the Company, is made known to management by
others within those entities, particularly during the period in which the annual
filings are being prepared. Management has also designed such internal control
over financial reporting, or caused it to be designed under management's
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and preparation of the financial statements for the six
months ended November 30, 2006 in accordance with Canadian Generally Accepted
Accounting Principles. There has been no change in the Company's disclosure
controls and procedures or in the Company's internal control over financial
reporting that occurred during the most recently completed quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
disclosure controls and procedures or internal control over financial reporting.
The Chief Executive Officer and Chief Financial Officer of the Company have
evaluated the effectiveness of the Company's disclosure controls and procedures
in place as at November 30, 2006. Based on this evaluation, the Chief Executive
Officer and Chief Financial Officer of the Company concluded that the design and
operations of these disclosure controls and procedures were effective.
- 6 -
FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS
I, Alfredo Parra, a Director and Chief Executive Officer of Rochester Resources
Ltd., 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 November 30, 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: January 29, 2007
/s/ ALFREDO PARRA
- ----------------------------------
Alfredo Parra,
Director & Chief Executive Officer
FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS
I, Douglas Good, a Director and Chairman 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 November 30, 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: January 29, 2007
/s/ DOUGLAS GOOD
- -------------------
Douglas Good,
Director & Chairman