Our unaudited consolidated financial statements for the nine
months ended September 30, 2007, as set forth below, are included with this
Quarterly Report on Form 10-QSB:
Item
2.
Management's Discussion and Analysis or Plan of Operation.
Overview
We are engaged in the acquisition and exploration of mineral
properties in the State of Nevada and northern Mexico. Our plan of operations
for the next twelve months is to conduct exploration of our mineral properties
in the State of Nevada and Mexico.
We presently hold interests in three groups of mineral
properties in Nevada and one in northern Mexico, as described below:
Name of Property
|
Location
|
Hannah Property
|
Churchill County, Nevada
|
JDS Property
|
Eureka County, Nevada
|
Pine Grove Property
|
Lyon County, Nevada
|
La Bufa
|
State of Chihuahua, Mexico
|
Our specific exploration plan for three of our mineral
properties, the Hannah, the JDS and the La Bufa, together with information
regarding the location and access, history of operations, present condition and
geology of each of our properties, is presented in Item 2 of our Annual Report
on Form 10-KSB for the year ended December 31, 2006 under the heading
Description of Properties. A summary description of the Pine Grove Property is
included in this report. All of our exploration programs, except the Pine Grove
Property, are early stage in nature in that their completion will not result in
a determination that any of our properties contains commercially exploitable
quantities of mineralization. With respect to the Pine Grove Property, we
believe that extra drilling and exploration programs combined with the
completion of a feasibility study have the potential to assess whether or not a
reserve is present on this property.
Work Carried Out In the Third Quarter 2007
La Bufa
We had one senior professional geologist on site during the
month of June who carried out geological mapping on all rock outcrops and took a
series of rock samples at various spots on the property. A total of 133 samples
were collected and sent for assay at ALS Chemex. The assay results have been
reviewed and 15 drill locations have been plotted. We are planning to carry out
drilling before the end of the year or early in 2008. Vein and veinlet
structures were mapped as well.
During the third quarter, we engaged a consulting geologist to
prepare a full geological report on the property in accordance with Canadian NI
43-101 standards. The report was completed on October 19, 2007.
Based on the scope of exploration activities completed to date
on the La Bufa Property, a three phase exploration program is recommended by the
geological report. Because the southern La Bufa concession is at a more advanced
stage of exploration and drill targets have been identified, phase-1 would
consist of a core drilling program that could be initiated as soon as drill
contracts can be made, necessary permits
- 1 -
obtained and logistical support are in place. A core drilling
program of 15 holes averaging 400 meters each is recommended as phase-1 and is
considered the minimum required to give a reasonable chance for success.
Proposed sites have been identified and initial contact with surface owners has
been made in order to secure access permission. Surface owners in Guadalupe y
Calvo include private landowners and the city government. Preliminary
metallurgical studies should be included as part of the drilling program and
would include Bottle Roll Tests along with Thin Section and Polished section
investigations to determine basic mineralogy. Phase-2 would consist of a greatly
expanded core drilling program that would provide a geologic and assay database
of sufficient size and quality to be the basis for initial resource modeling.
This phase-2 program would require the drilling of 40-50 holes on approximately
25-meter centers. Initial site planning and land use issues would also be
addressed during this phase. The initiation of phase-2 program will be dependent
on successful results for phase-1.
The anticipated budget for the work program recommended by the
geological report on the La Bufa property is set out below:
Activity
|
Amount/Persons
|
Time Required
|
Amount
($US)
|
Phase 1: Drilling
|
|
|
|
Drilling
|
6,000 meters (15 holes at 400m)
|
90 days
|
480,000
|
Drilling Support
|
2 geologists, helpers, includes
travel and field expenses
|
90 days
|
100,000
|
Site Facilities
|
Equipment, Storage and
Consumables
|
120
|
50,000
|
Analytical
|
1,500 samples
|
90 days
|
40,000
|
Metallurgical
|
20 samples
|
90 days
|
15,000
|
Data Workup
|
1 geologist, 1GIS
|
60 days
|
40,000
|
Drilling Total
|
|
|
725,000
|
|
|
|
|
Phase 2: Drilling
|
16,000 meters (40 holes at 400m)
|
|
4,000,000
|
|
Amount includes all expenses
|
|
|
|
|
|
|
Total Phase 1, 2
|
|
|
4,725,000
|
Phase 2: District
|
|
|
|
Reconnaissance
|
1 geologist, 1 helper
|
60
|
45,000
|
Analytical
|
400 samples
|
|
10,000
|
Data Workup
|
1 geologist, 1 GIS
|
30
|
25,000
|
District Total
|
|
|
80,000
|
Total Phase 1, 2, 3
|
|
|
4,805,000
|
We have determined to proceed with phase one of this
recommended exploration program, subject to our achieving the requisite
financing. We do not have sufficient financing to undertake full exploration of
these mineral claims at present and there is no assurance that we will be able
to obtain the necessary financing.
- 2 -
The Pine Grove
We are the owner of 90 unpatented contiguous lode claims which
cover approximately 1860 acres which are included within the Pine Grove project
. These claims are located in section 36, T10N, R25E, sections 31 and 32, T10N,
R26E, and sections 5 and 6, T9N, R25E, Lyon County, Nevada. We staked and
recorded these mineral claims. Additionally, we have secured the rights to
certain other mineral claims overlapping the Pine Grove project through
acquisitions from third parties, as described below.
Pursuant to an agreement dated July 13, 2007, we entered into
a mining lease with the Wheeler Mining Company, the owner of the claims comprising
the Wheeler patent and the Wheeler Millsite patent claims described in the table
and map below. This lease has a 15 year term, with an option to extend the lease
for each subsequent year that the underlying claims are in commercial production.
The terms of this agreement include advance royalty payments of $10,000 in the
first year, and $30,000 per year in subsequent years, along with a sliding scale
net smelter return royalty ranging from 3% at a gold price of $450 to 7% at
a gold price of $701. Under the terms of this agreement, we are obligated to
deliver a feasibility study within 24 months.
Pursuant to an agreement dated July 30, 2007, we purchased from
Harold Votipka the Harvest lode claim, the Winter Harvest lode claim, and the
Harvest fraction lode claim, described in the table and map below. The purchase
price was $12,000 and includes a 5% royalty on production.
Pursuant to an agreement dated August 1, 2007, we entered into
a mining lease option with Lyon Grove LLC, the owner of the claims comprising
the Wilson patent claim described in the table and map below. This lease has
a 15 year term, and can be extended for ten additional 1 year terms at our option
on the condition that we are conducting exploration, development or mining activities
on the property. Lyon Grove LLC also has the option to require us to purchase
their entire interest in the property (except for the royalty, described below)
for the purchase price of $1,000. The terms of this agreement include advance
royalty payments of $10,000 in the first year, and $25,000 per year in subsequent
years, along with a sliding scale net smelter return royalty ranging from 3%
at a gold price of $450 to 7% at a gold price of $701. This agreement includes
a 6 square mile area of interest that includes a 5% net smelter royalty payment
on any new claims put into production.
The mineral claims comprising the Pine Grove project are
summarized below:
List of Mineral Claims Pine Grove Project
Claim Name
|
BLM Serial #
|
Type
|
Area-acres
|
LG1 to LG60 (90 claims)
|
NMC0960776 - NMC0960865
|
Unpatented
|
1859.504
|
CONTAINS
|
Wheeler Patent
Wheeler Millsite
|
|
Patented
Patented
|
73.705
4.989
|
Wilson Patent
|
|
Patented
|
33.781
|
Harvest Lode
Winter Harvest
Harvest Fraction
|
NMC793071
NMC800355
NMC800356
|
Unpatented
Unpatented
Unpatented
|
20.66
20.66
20.66
|
The property area has had production from the mid 1860s to
about 1915. It has been reported that approximately 240,000 ounces at a grade of
1.36 opt were mined over this period. In the early 1990s Teck Resources Ltd
drilled 185 holes on the Wilson and Wheeler properties. In 2006 Lincoln began to
acquire control of the properties in this area.
- 3 -
During the third quarter, we engaged a consulting geologist to
prepare a full technical report on the property in accordance with Canadian NI
43-101 standards. The report was completed on September 28, 2007. Based on the
information compiled to date, the technical report concluded that the Pine Grove
project appears to offer significant potential for re-activating a historical
mining district. The technical report further concluded and recommended that,
before a decision can be made, additional data collection and verification is
warranted and additional exploration and resource modelling work is recommended,
as follows:
Exploration
-
Twinning of selected holes in the Teck database that showed the best
intersections in order to confirm the grades and mineral intersections
represented in the model.
-
Additional drilling for resource definition drilling at the margins of the
deposit.
-
Regional drilling to test other targets in the region where it appears that
historical mining may have taken place outside of the Wilson and Wheeler
deposits.
Resource Modeling
-
A geological model needs to be constructed for both deposits, based on
drill logs and mapping, in order to better constrain the block model
-
A re-evaluation of the variography taking into account the geological model
-
A structural model to better define the margins to the deposits, since they
appear to be structurally bound.
-
Re-kriging of the block model using a variety of kriging methods.
-
Re-evaluation of the constraints used for classification of the resources.
At this stage, the project should be re-assessed and a decision
made as to whether to advance the property to a pre-feasibility or feasibility
study.
The cost of the above program is estimated at $500,000 of which
$400,000 is for the site work, and $100,000 is needed for the resource model
update. There is no assurance that further exploration will result in a final
evaluation that a commercially viable mineral deposit exists on this mineral
property. We anticipate that we will require additional financing in order to
pursue full property exploration. We do not have sufficient financing to
undertake full exploration of these mineral claims at present and there is no
assurance that we will be able to obtain the necessary financing.
Hannah
We did not complete any exploration work on the Hannah property
in the third quarter of 2007. We have shown the property to a number of
interested parties for a possible joint venture. Property payments to the State
of Nevada have been made and the yearly option payments to the claim owner have
also been completed. A joint venture partner is being sought.
JDS
In mid-2006, we signed a Letter of Intent to Joint Venture our
JDS gold property in the Cortez Trend, Nevada with Golden Odyssey Mining Inc.
which now has an option to earn up to 75% of the property by conducting 6,000 ft
of drilling and additional work. Golden Odyssey began drilling its first hole on
the
- 4 -
property in April 2007. Unfortunately the hole was lost in the
pediment at depth and the hole was not able to be completed; it did not reach
its target. Golden Odyssey is looking for a more powerful drill to carry on with
the drilling. We have given notice to Golden Odyssey that if it does not carry
out a drill program before the end of the year it will have forfeited the
property for non-performance.
Exploration Stage Properties
All of our projects noted above are at the exploration stage
and there is no assurance that any of these mining properties contain a
commercially viable ore body. We plan to undertake further exploration of these
properties. We anticipate that we will require additional financing in order to
pursue full property exploration. We do not have sufficient financing to
undertake full exploration of our mineral claims at present and there is no
assurance that we will be able to obtain the necessary financing.
Furthermore there is no assurance that a commercially viable
mineral deposit exists on any of these mineral properties. Additional
exploration beyond the scope of our planned exploration activities will be
required before a final evaluation as to the economic and legal feasibility of
mining of any of the properties is determined.
Plan of Operations
Our plan of operations for the next twelve months is to
continue with the exploration of our Nevada and Mexican. Our planned exploration
expenditures for the next twelve months on our Nevada and Mexican mineral
properties, together with amounts due to maintain our interest in these claims,
are summarized as follows:
Name of Property
|
Planned
Exploration
Expenditures
|
Amounts of
Claims
Maintenance Due
|
Amount of Property
Payment
Due
|
Total
|
Exploration of Hannah
Property, Nevada
|
$5,000
|
$6,000
|
$12,000
|
$23,000
|
Exploration of JDS
Property, Nevada
|
$5,000(1)
Being carried out
by Golden
Odyssey
|
$Nil (1)
|
$Nil (1)
|
$5,000 (1)
|
Exploration of La Bufa
Property, Mexico
|
$725,000
|
$7,000
|
$10,000
|
$742,000
|
Exploration of Pine
Grove Property,
Nevada
|
$500,000
|
$15,000
|
$20,000
|
$535,000
|
Administration
Nevada
|
$165,000
|
-
|
-
|
$165,000
|
Administration
Vancouver
|
$450,000
|
-
|
-
|
$450,000
|
Total
|
$1,850,000
|
$28,000
|
$42,000
|
$1,920,000
|
(1)
The exploration expenditures are to be undertaken and paid for by Golden Odyssey
pursuant to the letter of intent to joint venture the property with Golden
Odyssey. If Golden Odyssey determines to return the property to us prior to the
time when the property payments and/or maintenance payments are due, then we
will be obligated to make the annual claim maintenance payments to the BLM and
local counties required to keep the property in good standing.
- 5 -
Our general and administrative expenses will consist primarily
of professional fees for the audit and legal work relating to our regulatory
filings throughout the year, as well as transfer agent fees, management fees,
investor relations and general office expenses.
We had cash of $286,215 and working capital of $138,480 as of
September 30, 2007. An amount of $100,000 is included as a current liability,
which is a debt payable to a shareholder who loaned $200,000 to the Company
on startup. Half of the amount plus interest has been repaid. Based on our planned
expenditures and our working capital deficit, we will require a minimum of approximately
$1,800,000 to proceed with our minimum plan of operations over the next twelve
months. This includes payback of the $100,000. We will require additional financing
in order to pursue our exploration programs beyond the preliminary exploration
programs for our mineral properties that are outlined above.
During the twelve month period following the date of this
quarterly report, we anticipate that we will not generate any revenue.
Accordingly as noted in the above paragraph we will be required to obtain
additional financing in order to continue our plan of operations. We believe
that debt financing will not be an alternative for funding additional phases of
exploration as we do not have tangible assets to secure any debt financing. We
anticipate that additional funding will be in the form of equity financing from
the sale of our common stock and we cannot provide investors with any assurance
that we will be able to raise sufficient funds from the sale of our common stock
to fund our exploration programs. In the absence of such financing, we will not
be able to continue exploration of our mineral claims. Even if we are successful
in obtaining equity financing to fund our exploration programs, there is no
assurance that we will obtain the funding necessary to pursue any advanced
exploration of our mineral claims following the completion of preliminary
exploration. If we do not continue to obtain additional financing, we will be
forced to abandon our properties and our plan of operations.
As we have done in the past, we may consider entering into
joint venture arrangements to provide the required funding to pursue drilling
and advanced exploration of our mineral claims. Even if we determined to pursue
a joint venture partner, there is no assurance that any third party would enter
into a joint venture agreement with us in order to fund exploration of our
mineral claims. If we entered into a joint venture arrangement, we would likely
have to assign a percentage of our interest in our mineral claims to the joint
venture partner.
Our exploration plans will be continually evaluated and
modified as exploration results become available. Modifications to our plans
will be based on many factors, including: results of exploration, assessment of
data, weather conditions, exploration costs, the price of gold and available
capital. Further, the extent of our exploration programs that we undertake will
be dependent upon the amount of financing available to us.
Planned Exploration Activities
La Bufa Property
We plan to proceed with phase one of the exploration program
recommended by the geological report that we obtained on the La Bufa Property,
as described above.
The Pine Grove Property
We plan to proceed with the exploration program recommended by
the technical report that we obtained on the Pine Grove Property, as described
above.
Hannah Property
- 6 -
We have determined that follow up drilling is warranted on the
Hannah Property based on the results of the initial eleven hole drilling program
that we completed on the Hannah Property. We continue to talk to various
potential joint venture candidates to take on the work noted below to earn-in to
the property. If we do not find a joint venture partner this work will have to
wait until we can afford to do it ourselves.
If we are successful in finding a joint venture partner, we
anticipate our plan of exploration for the Hannah Property will be as follows:
Description of Phase of
Exploration
|
Description of
Exploration Work Required
|
Acquire Joint Venture Partner
|
Execute an Exploration Agreement
with Option to Joint Venture with a potential joint venture partner (a JV
Partner)
|
Exploration Trenching
|
JV Partner conducts trenching
across target with an excavator
|
Phase 2 Drilling
|
JV Partner drills 5 to 10 angle
reverse circulation drill holes
|
Bottle Roll Metallurgical Tests
|
JV Partner conducts metallurgical
tests on select drill cuttings
|
Data Evaluation
|
Evaluate results
|
The anticipated timetable and estimated budget for completion
for each stage of exploration is as follows:
Stage of Exploration
|
Anticipated Timetable for
Completion
|
Estimated Cost of
Completion
|
Acquire Joint Venture Partner
|
4
th
Quarter
|
$3,000
|
Exploration Trenching
|
4
th
Quarter
|
$0 (Partners Cost)
|
Phase 2 Drilling
|
2
nd
Quarter 2008
|
$0 (Partners Cost)
|
Bottle-Roll Metallurgical Tests
|
3
rd
Quarter 2008
|
$0 (Partners Cost)
|
Data Evaluation
|
3
rd
Quarter 2008
|
$2,000
|
All significant work is expected to be conducted by a joint
venture partner using qualified contractors.
JDS Property
The plan of exploration to be completed by Golden Odyssey
during 2007 involves the following:
Description of Phase of
Exploration
|
Description of
Exploration Work Required
|
Phase 1 Drilling
|
Golden Odyssey to drill 6,000 ft
of reverse-circulation drilling in various locations
|
Data Evaluation
|
Evaluate drill data
|
The anticipated timetable and budget for our share of work is
listed below:
- 7 -
Stage of Exploration
|
Anticipated Timetable for
Completion
|
Estimated Cost of
Completion
|
Phase 1 Drilling
|
4
th
Quarter 2007 1
st
Quarter 2008
|
$0 (Golden Odysseys Cost)
|
Data Evaluation
|
2
nd
Quarter 2008
|
$5,000
|
We have given notice to Golden Odyssey that if it does not
start a drill program before the end of 2007 then we will consider our option
agreement with them to be forfeited.
New Opportunities
We reviewed several prospective gold properties in Nevada and
Mexico during the first and second quarters of 2007 and completed the
acquisition of interests in the Pine Grove Property in the third quarter of
2007. We are also planning more site visits to evaluate prospective properties
both in Mexico and the western United States during the current quarter.
Results of Operations
Our results of operations for the nine months ended September
30, 2007 are presented below:
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine
|
|
|
|
September 25,
|
|
|
For the Three
|
|
|
For the
Three
|
|
|
For the Nine
|
|
|
Months
|
|
|
|
2003
|
|
|
Months
|
|
|
Months
|
|
|
Months
|
|
|
Ended
|
|
|
|
(Date of Inception)
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
September
|
|
|
|
September 30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
30,
|
|
|
|
2007
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
6,584
|
|
|
554
|
|
|
722
|
|
|
1,718
|
|
|
2,166
|
|
Foreign exchange loss (gain)
|
|
8,495
|
|
|
1,677
|
|
|
(1,018
|
)
|
|
2,662
|
|
|
991
|
|
General
and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Note 5(a))
|
|
2,886,008
|
|
|
354,917
|
|
|
28,181
|
|
|
448,606
|
|
|
147,813
|
|
Impairment of mineral
property costs
|
|
108,350
|
|
|
15,750
|
|
|
-
|
|
|
47,100
|
|
|
10,000
|
|
Mineral exploration
|
|
1,114,937
|
|
|
164,879
|
|
|
61,839
|
|
|
211,683
|
|
|
78,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
4,124,374
|
|
|
537,777
|
|
|
89,724
|
|
|
711,769
|
|
|
239,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
From Operations
|
|
(4,124,374
|
)
|
|
(537,777
|
)
|
|
(89,724
|
)
|
|
(711,769
|
)
|
|
(239,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable written
off
|
|
33,564
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Interest
income
|
|
13,941
|
|
|
1,837
|
|
|
1,040
|
|
|
2,936
|
|
|
1,963
|
|
Interest expense
|
|
(56,468
|
)
|
|
(2,989
|
)
|
|
(4,035
|
)
|
|
(8,747
|
)
|
|
(9,249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income (Expense)
|
|
(8,963
|
)
|
|
(1,152
|
)
|
|
(2,995
|
)
|
|
(5,811
|
)
|
|
(7,286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
(4,133,921
|
)
|
|
(538,929
|
)
|
|
(92,719
|
)
|
|
(717,580
|
)
|
|
(246,570
|
)
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Our net loss increased substantially for the nine month period
ended September 30, 2007 over the corresponding period in 2006. This increase
is attributable largely to our increased exploration and also our general and
administrative activities including stock-based compensation expense of $244,304
for stock options granted during the third quarter of 2007. We anticipate that,
if we are able to obtain additional financing, our expenses and net loss will
continue to increase throughout the current fiscal year in comparison with 2006
as a result of our planned exploration activities. We anticipate continued professional
fees as we comply with our obligations as a reporting company under the Securities
Exchange Act of 1934. We anticipate that we will not earn any revenues during
the current fiscal year or in the foreseeable future as we are presently engaged
in the exploration of our mineral properties.
Liquidity and Capital Resources
Our cash position at September 30, 2007 was $286,215 compared
to $21,961 as of December 31, 2006. We had working capital of $138,480 as of
September 30, 2007 compared to a working capital deficit of $130,363 as of
December 31, 2006.
Plan of Operations
We estimate that our total expenditures over the next twelve
months will be approximately $1,920,000 as outlined above under the heading
Plan of Operations. Based on our planned expenditures and our working capital
deficit, we will require a minimum of approximately $1,800,000 to proceed with
our plan of operations over the next twelve months, including the pay down of a
short term debt. In addition, we anticipate that we will require additional
financing in order to pursue our exploration programs beyond the preliminary
exploration programs for our mineral properties that are outlined above.
If we are unable to achieve the necessary additional financing,
then we plan to reduce the amounts that we spend on our exploration activities
and administrative expenses in order to be within the amount of capital
resources that are available to us. Specifically, we anticipate that we would
defer drilling programs pending our obtaining additional financing.
Private Placement Financing
During our third quarter, we completed a private placement financing
for gross proceeds of $425,000 upon the issue of 4,250,000 units at $0.10 per
unit. We netted $410,000 after costs of $15,000 were deducted. Each unit was
comprised of one share of common stock and one share purchase warrant. Each
warrant entitles the investor to purchase one additional share of common stock
at a price of $0.15 per share for a two year period from the date of the issuance
of the warrants.
Outstanding Payable
We arranged for a $200,000 convertible note during the fiscal
year ended December 31, 2004. On September 15, 2005 we completed an agreement
whereby we repaid $100,000 of the convertible note along with $35,000 accrued
interest and agreed to repay the remaining $100,000 within sixty days. With the
completion of the first payment the convertible note was deemed to be repaid in
full. The remaining $100,000 owed will be repaid when funds are available.
Going Concern
We have not attained profitable operations and are dependent
upon obtaining financing to pursue any extensive exploration activities. For
these reasons our auditors stated in their report that they have substantial
doubt we will be able to continue as a going concern.
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Future Financings
We will require additional financing in order to proceed with
the exploration of our mineral properties. We plan to complete private placement
sales of our common stock in order to raise the funds necessary to pursue our
plan of operations and to fund our working capital deficit. Issuances of
additional shares will result in dilution to our existing shareholders. We
currently do not have any arrangements in place for the completion of any
private placement financings and there is no assurance that we will be
successful in completing any private placement financings.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.
Critical Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in
conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The Company regularly evaluates estimates and assumptions related to
the useful life and recoverability of long-lived assets, stock-based
compensation and deferred income tax asset valuation allowances. The Company
bases its estimates and assumptions on current facts, historical experience and
various other factors that it believes to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities and the accrual of costs and expenses that are
not readily apparent from other sources. The actual results experienced by the
Company may differ materially and adversely from the Companys estimates. To the
extent there are material differences between the estimates and actual results,
future results of operations will be affected.
Mineral Property Acquisition Payments and Exploration
Costs
We have been in the exploration stage since our formation on
September 25, 2003 and we have not yet realized any revenues from its planned
operations. We are primarily engaged in the acquisition and exploration of mining
properties. Mineral property exploration costs are expensed as incurred. Mineral
property acquisition costs are initially capitalized when incurred using the
guidance in EITF 04-02, “Whether Mineral Rights Are Tangible or Intangible
Assets”. We assess the carrying costs for impairment under SFAS No. 144,
“Accounting for Impairment or Disposal of Long Lived Assets” at
each fiscal quarter end. When it has been determined that a mineral property
can be economically developed as a result of establishing proven and probable
reserves, the costs then incurred to develop such property, are capitalized.
Such costs will be amortized using the units-of-production method over the estimated
life of the probable reserve. If mineral properties are subsequently abandoned
or impaired, any capitalized costs will be charged to operations.
Long-live Assets
In accordance with SFAS No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets”, we test long-lived assets or asset
groups for recoverability when events or changes in circumstances indicate that
our carrying amount may not be recoverable. Circumstances which could trigger
a review include, but are not limited to: significant decreases in the market
price of the asset; significant adverse changes in the business climate or legal
factors; accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of the asset; current period cash
flow or operating losses combined with a history of losses or a forecast of
continuing losses associated with the use of the asset; and current expectation
that the asset will more likely than not be sold or disposed significantly before
the end of its estimated useful life.
Recoverability is assessed based on the carrying amount of the
asset and its fair value which is generally determined based on the sum of the
undiscounted cash flows expected to result from the use and the eventual disposal
of the asset, as well as specific appraisal in certain instances. An impairment
loss is recognized when the carrying amount is not recoverable and exceeds fair
value.
Stock Based Compensation
We record stock-based compensation in accordance with SFAS No.
123R
Share Based Payments
, using the fair value method. We have not
issued any stock options since our inception. All transactions in which goods or
services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably
measurable. Equity instruments issued to employees and the cost of the services
received as consideration are measured and recognized based on the fair value of
the equity instruments issued.
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All transactions in which goods or services are the
consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair value of the
equity instrument issued, whichever is more reliably measurable. Equity
instruments issued to employees and the cost of the services received as
consideration are measured and recognized based on the fair value of the equity
instruments issued.