Certain statements contained in this Form 10-KSB constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities
Exchange Act of 1934 (the “Exchange Act”). These statements, identified
by words such as “plan”, "anticipate," "believe," "estimate," "should,"
"expect" and similar expressions, include our expectations and objectives regarding
our future financial position, operating results and business strategy. These
statements reflect the current views of management with respect to future events
and are subject to risks, uncertainties and other factors that may cause our
actual results, performance or achievements, or industry results, to be materially
different from those described in the forward-looking statements. Such risks
and uncertainties include those set forth under the caption "Management's Discussion
and Analysis or Plan of Operation" and elsewhere in this Form 10-KSB. We do
not intend to update the forward-looking information to reflect actual results
or changes in the factors affecting such forward-looking information. We advise
you to carefully review the reports and documents we file from time to time
with the Securities and Exchange Commission (“SEC”), particularly
our Quarterly Reports on Form 10-QSB and our Current Reports on Form 8-K.
As used in this Annual Report, the terms "we", "us", "our",
and “our company” mean Liberty Star Gold Corp. unless otherwise indicated.
All dollar amounts in this Annual Report are in U.S. dollars unless otherwise
stated.
ITEM 1. DESCRIPTION OF BUSINESS.
OVERVIEW
We are engaged in the acquisition and exploration of mineral
properties in the State of Alaska. We are currently actively engaged in exploration
activities on 981 mineral claims, spanning 237 square miles in the Iliamna region
of southwestern Alaska (the “Alaska Claims”). Our plan of operations
for the next twelve months is to continue development, mining and exploration
activities on the Alaska Claims. We are also seeking financing to enable us
to conduct the initial surveys and preliminary drill testing pursuant to the
planned exploration program on the Alaska Claims.
We plan to carry out exploration work on the Alaska Claims
in order to ascertain whether the claims possess commercially viable deposits
of gold, copper and molybdenum. We are presently undertaking an aeromagnetic
geophysical survey on the Alaska Claims, and intend to continue our exploration
program this spring with commencement of a preliminary drill program beginning
during the summer field season. No commercially viable mineral deposits or reserves
have been identified on the Alaska Claims to date. We cannot provide any assurance
to investors that our exploration activities will discover any commercially
viable mineral deposit on the Alaska Claims.
The Alaska Claims are held by our wholly owned subsidiary,
Big Chunk Corp. (“Big Chunk”). We acquired Big Chunk on February 3,
2004 through a merger transaction, as described below under “Merger with
Liberty Star Nevada.”
To date, we have not generated any revenues and we remain
in the exploration stage. Our ability to pursue our business plan and generate
revenues is subject to our ability to achieve additional financing, of which
there is no assurance.
CORPORATE ORGANIZATION
We were incorporated as “Titanium Intelligence, Inc.”
on August 20, 2001 under the Laws of the State of Nevada.
We completed a change to our authorized capital effective
January 6, 2004. Our authorized capital was increased from 25,000,000 shares
of common stock to 200,000,000 shares of common stock. Concurrent with this
increase to our authorized capital, each previously issued and outstanding share
of our common stock was exchanged for eight shares of our common stock. As a
result, the number of shares of our common stock issued and outstanding increased
from 2,500,000 shares to 20,000,000 shares.
We completed the acquisition of Liberty Star Gold Corp., a
Nevada corporation (“Liberty Star Nevada”) on February 3, 2004. On
February 5, 2004 we changed our name from “Titanium Intelligence, Inc.”
to “Liberty Star Gold Corp.” to reflect the change in the nature of
our business operations and the acquisition of Liberty Star Nevada.
We conduct our mineral exploration activities in Alaska through
our wholly owned subsidiary, Big Chunk Corp., an Alaska Corporation. Big Chunk
Corp was incorporated in the State of Alaska in December, 2003.
PRIOR INTERNET TEXTILE TRADE CENTER WEBSITE BUSINESS
From inception to January, 2004, we were a development stage
company focused primarily on developing an Internet textile trade centre website
to facilitate the trade of textile products manufactured in China. Parts of
our website at http://www.titanium-intelligence.com commenced operation on April
2, 2002. Our board of directors completed a review and evaluation of our textile
trade centre website business in December, 2003. Based on this review and evaluation,
our board of directors determined in January 2004 to discontinue our textile
trade center website operations and to become an exploration stage company engaged
in the acquisition and exploration of mineral properties through the acquisition
of Liberty Star Nevada. In connection with this determination, we entered into
a termination agreement effective January 30, 2004 whereby the membership agreement
between us and Zhejiang Weilain Group Company dated March 28, 2002 was terminated
by agreement.
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MERGER WITH LIBERTY STAR NEVADA
On January 19, 2004, we entered into an Agreement and Plan
of Merger with Liberty Star Nevada, Liberty Star Acquisition Corp. (“Liberty
Star Acquisition”), our former wholly owned subsidiary, Alaska Star Minerals
LLC (“Alaska Star”), and the beneficial owners of Alaska Star, namely,
James Briscoe and Paul Matysek (the “Merger Agreement”).
Alaska Star Minerals is an Arizona limited liability company
that is owned equally by James Briscoe and Paul Matysek.
Liberty Star Nevada was incorporated on January 14, 2004 under
the laws of the State of Nevada. Liberty Star Nevada was owned by Alaska Star
prior to the merger. Liberty Star Nevada was the owner of Big Chunk prior to
the merger.
Liberty Star Acquisition was incorporated under the laws of
the State of Nevada on January 14, 2004. Liberty Star Acquisition was our wholly
owned subsidiary and was incorporated for the purpose of completing the merger
with Liberty Star Nevada under the Merger Agreement.
The Merger Agreement provided for the merger of Liberty Star
Nevada and Liberty Star Acquisition, with Liberty Star Acquisition being the
surviving corporation. The merger was completed effective February 3, 2004,
with Liberty Star Acquisition as the surviving corporation. On closing of the
merger, we issued 17,500,000 shares of our common stock to Alaska Star as the
sole shareholder of Liberty Star Nevada. As a result of this issuance, the number
of outstanding shares of our common stock was increased from 20,000,000 shares
to 37,500,000 shares. Big Chunk became our wholly owned subsidiary upon completion
of the merger.
Subsequent to the merger, we merged with Liberty Star Acquisition
through a parent/ subsidiary merger completed pursuant to NRS 92A.180. This
parent/ subsidiary merger was completed effective February 5, 2004. We changed
our corporate name to “Liberty Star Gold Corp.” effective February
5, 2004 concurrent with this parent/ subsidiary merger with Liberty Star Acquisition.
As a condition to the closing of the merger, we agreed to
appoint James Briscoe and Jon Young as members of our board of directors on
closing, and Chen (Jason) Wu and Paulo Martins agreed to tender their respective
resignations as directors in connection with closing of the merger. James Briscoe
and Jon Young were appointed as members of our board of directors on February
3, 2004. John Guilbert was appointed as one of our directors subsequent to the
merger on February 5, 2004.
THE ALASKA CLAIMS
Acquisition of the Alaska Claims
We hold a 100% interest in the Alaska Claims through our wholly
owned subsidiary Big Chunk Corp. The Alaska Claims were staked on behalf of
Big Chunk by an independent contractor in December, 2003.
We paid the applicable rental fees required by Alaskan mining
regulations for the staking of the property, which extends the Alaska Claims
for a two year period from the staking of the claims. Annual assessment work
of $400 per ¼ section must also be performed by us in order to keep the
claims in good standing. We are currently conducting a detailed aeromagnetic
geophysical survey at cost of approximately $200,000. The costs of the survey
will be applied to meet a portion of the applicable annual work assessment requirements
to keep the property in good standing. The cost of additional geotechnical studies
leading up to any drilling operations conducted by us will also be applied to
any annual work assessment requirements.
Description of Property and Location of Alaska Claims
The Alaska Claims consist of 981 mineral claims, spanning
237 square miles in the Iliamna region of southwestern Alaska, located on the
north side of the Cook Inlet, approximately 300 miles (500 km) southwest of
the city of Anchorage, Alaska. The property lies about 20 to 40 miles north
of Lake Iliamna, and 15 to 30 miles northwest of the village of the same name.
The only access to the Alaska Claims and the
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general area is by snowmobile in the winter, helicopter during
any time of the year, or by foot. However, there is a major road being planned
to access the adjacent Pebble porphyry gold-copper-molybdenum planned open pit
mine. This road will be built by the State of Alaska in order to promote production
from the nearby Pebble Deposit. When that road is complete, the Alaska Claims
may be accessible from the end of this road. However, the property will remain
largely accessible only by foot, snowmobile or helicopter year round.
Geology of the Alaska Claims
Basement or pre-intrusive rocks in the Alaska Claims area
include Triassic to Cretaceous sediments ranging from limestone to shales, sandstone
and conglomerate as well as volcanoclastic units. These units have been intruded
by a variety of intrusives ranging in age from Upper Cretaceous to Tertiary.
Included are quartz monzonite, granodiorite, quartz diorite and porphyrtic granodiorite
intrusive types. These rocks are thought to be contemporaneous with metallic
mineral emplacement and alteration. Post mineral cover rocks include Tertiary
volcanics of basaltic, andesitic and rhyolitic composition. These post mineral
cover rocks include flows and flow breccias as well as pyroclastic tuffs. Thin
alluvium of various types cover low areas.
Mineralization is expected to be disseminated in intrusive
rocks in typical porphyry manner. Higher-grade skarn replacements in limestones
as well as in hornfelsed clastic rocks are expected. Large breccia features,
perhaps pipes, have been described in the area and may provide loci for high-grade
mineralization.
Exploration History of the Alaska Claims
Development of geologic and geophysical information has been
continuous since late September of 2003. Consultation with experts on this type
of deposit has been continuous including world recognized experts including
Dr. John M. Guilbert, the co-Author of the “Porphyry Copper Model”
type of mineralization which comprise these targets, Dr. George Davis, structural
geologist, Mr. Jan Klein, geophysicist and Mr. Phillip St. George, geologist.
Dr. John M. Guilbert is one of our directors. Mr. St George was the discoverer
of the Pebble Deposit and Mr. Klein was the geophysicist who worked with him.
All of these geoscientists believe the exploration model on which our targeting
and exploration of the Alaska Claims is based is valid and are now working on
our Technical Advisory Board or are working as consultants for the project.
However, we have not yet completed any formal geological report on the Alaska
Claims to date.
Present Condition of the Alaska Claims and History of Operations
Prior to the completion of our aeromagnetic survey of the
Alaska Claims, there has not been any exploration or development activity on
the Alaska Claims. The Alaska Claims are adjacent to the Pebble porphyry gold-copper-molybdenum
mineral deposit and alteration zone. Mineralized material located on adjoining
property may not be located under our property.
The property covered by the Alaska Claims is undeveloped and
does not contain any open-pit or underground mines. There is no mining plant
or equipment located on property covered by the Alaska Claims. Currently, there
is no power supply to the property covered by the Alaska Claims.
Exploration on the Alaska Claims is in the beginning stages.
The Alaska Claims are located in a remote area of southwestern Alaska where
limited exploration and development activity has occurred. The area is largely
covered by glacial debris, soil, tundra and in some areas, post mineral volcanics.
Little geologic, geochemical or geophysical data is available, and that which
is available is of a general nature and of low quality.
Planned Exploration Program
We are presently undertaking the exploration program described
below in order to assess whether large disseminated gold-copper-molybdenum porphyry
mineral zones are located on the property. These are expected to be near surface
and only thinly covered. Experienced porphyry geologists will execute these
programs. We have formed a technical advisory board headed by Dr. John M. Guilbert,
one of our directors, to provide advice and expertise on specifics of our exploration
program.
A detailed aeromagnetic geophysical survey on the Alaska Claims
was started in January 10, 2003 and is approximately eighty percent complete
as of March 29,2004 The cost of the phase four exploration program is
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anticipated to be approximately $200,000, not including consulting
fees. This low-level fixed wing topographically draped survey covered six magnetic
lines per square mile of the Alaska Claims property. The survey covers about
1,402 square miles with 18,099 kilometres (about 11,247 miles) of flight line
on the property, and is supervised by an experienced geophysicist who was involved
in the original geophysical work on the adjacent property.
Concurrent with the geophysical survey a detailed GIS (Geographic
Information Systems) computer data map including all geotechnical components
of the area currently known is being prepared. After the completion of the aeromagnetic
survey, the results will be superimposed on the GIS Computer Map and the results
interpreted along with the other geologic details. Further, aeromagnetic details
associated with other known mineralized calderas are being compiled for comparison
purposes.
After geophysical and geologic analysis of the detailed aeromagnetic
survey data along with geology has been made additional exploration work will
be planned based on the results of the survey. The extent of the next steps
in our exploration program will be dependent on the results and conclusions
of the initial steps of our exploration program. However, we believe that additional
geophysics surveys and geochemical surveys of several types will be required
once the initial survey is completed. We also anticipate proceeding with geological
mapping of the Alaska Claims once the initial survey is completed. This mapping
will include the use of moderate resolution multispectral satellite imagery
(ASTER) as well as very high-resolution Ikonos or Quick Bird satellite imagery.
After interpretation of this imagery in the computer laboratory, field ground
geologic “truthing” and detailed geologic and alteration mapping will
be done by highly experienced porphyry deposit specialists. Targets for drilling
will be evaluated and drilled later in the field season.
The expenditures to be made by us in the exploration of our
mineral claims may not result in the discovery of mineral deposits. Problems
such as unusual or unexpected formations and other conditions are involved in
mineral exploration and often result in unsuccessful exploration efforts. If
the results of exploration do not reveal viable commercial mineralization, we
may decide to abandon our claims and acquire new claims for new exploration.
The acquisition of additional claims will be dependent upon our possessing capital
resources at the time in order to purchase such claims. If no funding is available,
we may be forced to abandon our operations.
Our exploration plan for the Alaska Claims, together with the status of each activity and its estimated cost, is summarized below:
|
Stage
|
Activity
|
Status
|
Cost
|
|
Phase I
|
Concept – Initial Research, Land ownership status, geologic
research, claim staking & filing & fee payment, aeromagnetic survey
design and execution, exploration program design & budget, contract
awards, field preparation.
|
All tasks are completed except for the aeromagnetic survey
which is 80% complete as of the filing of this document, and the final budget
and field prep.
|
$527,000
|
|
Phase II
|
Magnetic survey interpretation, field exploration ground work
including geology, geochemistry, IP electrical ground geophysics, drill
program design & drilling of 2,000 meters.
|
Magnetic survey interpretation is underway as of the date
of this report. Ground field work is anticipated to start May 15, 2004 or
what ever time snow has melted off the surface.
|
$2,723,000
(1)
|
|
Phase III
|
Data compilation, interpretation, planning for field season
2005, final report and recommendations
|
This will take place after demobilization of the drill rig
sometime in early-October to early-November. The final report will be submitted
by the first week in January, 2005 or earlier.
|
$200,000
|
|
|
|
Total Cost
|
$3,450,000
|
|
(1)
|
The cost of our planned drilling program will be
dependent on the scope of drilling program recommended after analysis
of the results of our initial exploration activities. As the scope of
any recommended drilling program is not yet known, the actual cost to
be incurred on the drilling program may vary significantly from this estimate.
|
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Our expenditures on our planned aeromagnetic geophysical survey
is budgeted at approximately $200,000. Budgeting for the remainder of the currently
planned fieldwork is still in process. It is estimated that approximately $3,450,000
will be expended over the next twelve months by us to fund our exploration program
and working capital requirements, subject to our ability to obtain additional
financing and the results of the initial exploration program undertaken by us
on the property.
Our cash on hand as of December 31, 2003 was $16,820. Subsequent
to December 31, 2003, we completed a private placement financing of $1,000,000
of which $313,070 was applied to repay indebtedness incurred to stake the Alaska
claims and carry our initial exploration activities. We believe that our current
resources are sufficient to conduct the initial phases of our exploration program.
However, we will require additional financing in order to proceed with any additional
work beyond the initial phases of our exploration program, including our planned
drilling program. No additional work aside from the completion of the initial
phases of the exploration program are planned at this time.
We plan to engage Avalon Development Corp. as the prime exploration
contractor who will be used for certain technical activities in connection with
our exploration program. We also plan to establish an exploration base camp
in the small town of Iliamna in rental living facilities in connection with
our ongoing exploration activities. Drill core will be stored in sun and weatherproofed
polyethylene core boxes and metal racks designed for the purpose. Rental for
such facilities is expected to cost from $2,000 to $4,000 per year.
Compliance with Government Regulation
We will be required to comply with all regulations, rules
and directives of governmental authorities and agencies applicable to the exploration
of minerals in the State of Alaska.
We have paid the applicable rental fees required by Alaskan
mining regulations for the staking of the property, which extends the Alaska
Claims for a two year period from the staking of the claims. Annual assessment
work of $400 per ¼ section must also be performed by us in order to keep
the claims in good standing or a total of $379,200 must be paid to maintain
the claims in good standing. We are currently conducting a detailed aeromagnetic
geophysical survey and associated work at cost of approximately $200,000. The
costs of the survey will be used to meet a portion of applicable annual work
assessment requirements. Additional geotechnical studies and drilling that we
plan to complete may be applied towards maintaining the claims in good standing
for future years.
In order to proceed with any drilling program, we will have
to apply to the Alaska Department of Natural Resources, the Alaska Department
of Conservation and the US Corps of Engineers. The permitting process is anticipated
to take approximately 6 weeks and would be done through contractors based in
Anchorage. The permit fees are anticipated to be in under $1,000 in total. The
cost of contractors assisting with the permitting process is estimated to be
approximately $15,000. The permitting process will be targeted to commence early
in the field season with the objective of obtaining drilling permits for those
locations identified for prospective drilling as a result of our initial exploration.
Additional approvals and authorizations may be required from
other government agencies, depending upon the nature and scope of the proposed
exploration program. The amount of these costs is not known at this time as
we do not know the size, quality of any resource or reserve at this time, it
is impossible to assess the impact of any capital expenditures on earnings or
our competitive position.
Competition
We are a junior mineral resource exploration company engaged
in the business of mineral exploration. We compete with other junior mineral
resource exploration companies for financing from a limited number of investors
that are prepared to make investments in junior mineral resource exploration
companies. The presence of competing junior mineral resource exploration companies
may impact on our ability to raise additional capital in order to fund our property
acquisitions and exploration programs if investors are of the view that investments
in competitors are more attractive based on the merit of the mineral properties
under investigation and the price of the investment offered to investors.
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We also compete for mineral properties of merit with other
junior exploration companies. Competition could reduce the availability of properties
of merit or increase the cost of acquiring additional mineral properties.
Many of the junior resource exploration companies with whom
we compete have greater financial and technical resources than we do. Accordingly,
these competitors may be able to spend greater amounts on acquisitions of properties
of merit and on exploration of their properties. In addition, they may be able
to afford greater geological expertise in the targeting and exploration of resource
properties. This competition could result in our competitors having resource
properties of greater quality and interest to prospective investors who may
finance additional exploration and to senior exploration companies that may
purchase resource properties or enter into joint venture agreements with junior
exploration companies. This competition could adversely impact on our ability
to finance property acquisitions and further exploration.
Employees
We have no employees as of the date of this Annual Report.
We anticipate that we will rely on the contracting of independent consultants
during our exploration stage, rather than hiring employees.
Research and Development Expenditures
We have not incurred any research or development expenditures during our last two fiscal years.
Subsidiaries
Other than Big Chunk Corp., our wholly owned Alaska subsidiary, we have no subsidiaries.
Patents and Trademarks
We do not own, either legally or beneficially, any patent or trademark.
RISK FACTORS
An investment in our common stock involves a high degree of
risk. You should carefully consider the risks described below and the other
information in this Annual Report before investing in our common stock. If any
of the following risks occur, our business, operating results and financial
condition could be seriously harmed. The trading price of our common stock could
decline due to any of these risks, and you may lose all or part of your investment.
We have yet to attain profitable operations and because
we will need additional financing to fund our extensive exploration activities,
our accountants believe there is substantial doubt about our ability to continue
as a going concern
We have incurred a net loss of $129,097 for the period from
August 20, 2001 (inception) to December 31, 2003, and have no revenue to date.
As of December 31, 2003, we had cash in the amount of $16,820. We believe that
our current resources are sufficient to conduct the initial phase of our exploration
program. However, we will require additional financing in order to proceed with
any additional work beyond the initial phase of our exploration program, including
our planned drilling program. No additional work aside from the completion of
our proposed exploration program is planned at this time. We will also require
additional financing if the costs of the exploration of our mineral claims are
greater than anticipated. We will also require additional financing to sustain
our business operations if we are not successful in earning revenues. We currently
do not have any arrangements for financing and we may not be able to obtain
financing when required. Our future is dependent upon our ability to obtain
financing and upon future profitable operations from the development of our
mineral claims.
Because of the unique difficulties and uncertainties inherent
in mineral exploration ventures, we face a high risk of business failure
Potential investors should be aware of the difficulties normally
encountered by new mineral exploration companies and the high rate of failure
of such enterprises. The likelihood of success must be considered in
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light of the problems, expenses, difficulties, complications
and delays encountered in connection with the exploration of the mineral properties
that we plan to undertake. These potential problems include, but are not limited
to, unanticipated problems relating to exploration, and additional costs and
expenses that may exceed current estimates. The expenditures to be made by us
in the exploration of the mineral claim may not result in the discovery of mineral
deposits. Problems such as unusual or unexpected formations and other conditions
are involved in mineral exploration and often result in unsuccessful exploration
efforts. If the results of our exploration do not reveal viable commercial mineralization,
we may decide to abandon our claim and acquire new claims for new exploration.
The acquisition of additional claims will be dependent upon us possessing capital
resources at the time in order to purchase such claims. If no funding is available,
we may be forced to abandon our operations.
Because of the speculative nature of exploration of mineral
properties, there is no assurance that our exploration activities will result
in the discovery of new commercially exploitable quantities of minerals or that
the amount of our proven and probable reserves will increase as a result of
new exploration.
We plan to continue exploration on our Alaska mineral properties.
The search for valuable minerals as a business is extremely risky. We can provide
investors with no assurance that additional exploration on our properties will
establish that additional commercially exploitable reserves of gold exist on
our properties. Problems such as unusual or unexpected geological formations
or other variable conditions are involved in exploration and often result in
exploration efforts being unsuccessful. The additional potential problems include,
but are not limited to, unanticipated problems relating to exploration and attendant
additional costs and expenses that may exceed current estimates. These risks
may result in us being unable to establish the presence of additional commercial
quantities of ore on our mineral claims with the result that our ability to
fund future exploration activities may be impeded.
Because we anticipate our operating expenses will increase
prior to our earning revenues, we may never achieve profitability
Prior to completion of our exploration stage, we anticipate
that we will incur increased operating expenses without realizing any revenues.
We therefore expect to incur significant losses into the foreseeable future.
We recognize that if we are unable to generate significant revenues from the
exploration of our mineral claims, we will not be able to earn profits or continue
operations. There is no history upon which to base any assumption as to the
likelihood that we will prove successful, and we can provide no assurance that
we will generate any revenues or ever achieve profitability. If we are unsuccessful
in addressing these risks, our business will most likely fail.
Because of the inherent dangers involved in mineral exploration,
there is a risk that we may incur liability or damages as we conduct our business
The search for valuable minerals involves numerous hazards.
As a result, we may become subject to liability for such hazards, including
pollution, cave-ins and other hazards against which we cannot insure or against
which we may elect not to insure. At the present time we have no coverage to
insure against these hazards. The payment of such liabilities may have a material
adverse effect on our financial position.
Because access to our mineral claim may be restricted by
inclement weather, we may be delayed in our exploration
Access to the Alaska Claims may be restricted through some
of the year due to weather in the area. As a result, any attempt to test or
explore the property is largely limited to the times when weather permits such
activities. These limitations can result in significant delays in exploration
efforts. Such delays can have a significant negative effect on our exploration
efforts.
As we undertake exploration of our mineral claim, we will
be subject to compliance with government regulation that may increase the anticipated
cost of our exploration program
There are several governmental regulations that materially
restrict mineral exploration. We will be subject to the laws of the State of
Alaska as we carry out our exploration program. We may be required to obtain
work permits, post bonds and perform remediation work for any physical disturbance
to the land in order to comply
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with these laws. While our planned exploration program budgets
for regulatory compliance, there is a risk that new regulations could increase
our costs of doing business and prevent us from carrying out our exploration
program.
If our exploration costs are higher than anticipated, then
our profitability will be adversely affected.
We are currently proceeding with exploration of our mineral
properties on the basis of estimated exploration costs. If our exploration costs
are greater than anticipated, then we will not be able to carry out all the
exploration of the Alaska Claims that we intend to carry out. Factors that could
cause exploration costs to increase are: adverse weather conditions, difficult
terrain and shortages of qualified personnel.
As we face intense competition in the mining industry,
we will have to compete with our competitors for financing and for qualified
managerial and technical employees.
The mining industry is intensely competitive in all of its
phases. Competition includes large established mining companies with substantial
capabilities and with greater financial and technical resources than we have.
As a result of this competition, we may be unable to acquire additional attractive
mining claims or financing on terms we consider acceptable. We also compete
with other mining companies in the recruitment and retention of qualified managerial
and technical employees. If we are unable to successfully compete for financing
or for qualified employees, our exploration and development programs may be
slowed down or suspended.
Our common stock is “penny stock”, with the result
that trading of our common stock in any secondary market may be impeded
The SEC has adopted rules that regulate broker-dealer practices
in connection with transactions in penny stocks. Penny stocks are generally
equity securities with a price of less than $5.00, other than securities registered
on certain national securities exchanges or quoted on the Nasdaq system, provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or system. The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized
risk disclosure document prepared by the Commission, that: (a) contains a description
of the nature and level of risk in the market for penny stocks in both public
offerings and secondary trading; (b) contains a description of the broker's
or dealer's duties to the customer and of the rights and remedies available
to the customer with respect to a violation to such duties or other requirements
of Securities' laws; (c) contains a brief, clear, narrative description of a
dealer market, including bid and ask prices for penny stocks and the significance
of the spread between the bid and ask price; (d) contains a toll-free telephone
number for inquiries on disciplinary actions; (e) defines significant terms
in the disclosure document or in the conduct of trading in penny stocks; and
(f) contains such other information and is in such form, including language,
type, size and format, as the Commission shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a
penny stock, the customer with: (a) bid and offer quotations for the penny stock;
(b) the compensation of the broker-dealer and its salesperson in the transaction;
(c) the number of shares to which such bid and ask prices apply, or other comparable
information relating to the depth and liquidity of the market for such stock;
and (d) a monthly account statements showing the market value of each penny
stock held in the customer's account. In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from those
rules; the broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the purchaser's
written acknowledgment of the receipt of a risk disclosure statement, a written
agreement to transactions involving penny stocks, and a signed and dated copy
of a written suitability statement. These disclosure requirements may have the
effect of reducing the trading activity in the secondary market for our stock
as it is subject to these penny stock rules. Therefore, stockholders may have
difficulty selling those securities.
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