RISK FACTORS
The securities offered pursuant to this prospectus are speculative and involve a high degree of risk. You should carefully consider the following risk factors and the other information included herein before investing in our shares of common stock. If any of the following risks occurs, our business, financial condition and operating results could be materially and adversely affected. In that case, the trading price of our shares of common stock could decline, and you could lose all of your investment.
Risk
Related to our Company
Our business, exploration results and financial condition are subject to various risks and uncertainties, including, without limitation, those set forth below, any one of which could cause a material reduction in the value of our company or our ability to raise capital or cause our ability to be in accordance with our current business plan to vary materially and adversely from recent results or from our anticipated future results. An investment in our securities is highly speculative and involves an extremely high degree of risk. Therefore, you should thoroughly consider the risk factors discussed below and elsewhere in this prospectus before purchasing our securities. You should understand that you may lose all or part of your investment. No person should consider investing who cannot afford to lose their entire investment or who is in any significant way dependent upon the funds that they are investing. The risk factors contained herein are not meant to be exhaustive.
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We are an exploration stage company with limited operating history.
We are an exploration stage company with no operating history in the mineral exploration field. These two factors make it impossible to reliably predict future growth and operating results. Accordingly, we are subject to all the risks and uncertainties which are characteristic of a relatively new business enterprise, including the substantial problems, expenses and other difficulties typically encountered in the course of its business, in addition to normal business risks. We face a high risk of business failure because we have commenced extremely limited business operations and have no revenues. We were organized in 2006, have not earned any revenues as of the date of this prospectus and have had only losses since our inception related to the drilling and exploration of Handcamp. We expect to continue to incur losses well into the future. There is no history upon which to base any assumption as to the likelihood that our business will be successful, and there can be no assurance that we will be able to raise sufficient capital to begin operations, that we will generate significant operating revenues in the future or that we will ever be able to achieve profitable operations in the future. We face all of the risks commonly encountered by other businesses that lack an established operating history, including, but not limited to, the need for additional capital and personnel, and intense competition.
W
e do not expect to generate revenues in the foreseeable future.
We are now an exploration stage company; therefore, we anticipate that we will continue to incur increased operating expenses into the foreseeable future without realizing any revenues. Consequently, we expect to incur significant losses into the foreseeable future. If we are unable to raise additional funding, we will not be able to continue our operations.
We are an exploration stage company.
We are an exploration stage company and face a high risk of business failure because of the unique difficulties and uncertainties inherent in mineral exploration ventures. Potential investors should be aware of the difficulties normally encountered by mineral exploration companies and the high rate of failure of such companies. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays that could be encountered in connection with our planned exploration and drilling. These potential problems include, but are not limited to, unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. Additional expenditures related to exploration may not result in the discovery of additional mineralized material. 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 mineralized material, we may decide to abandon the properties and claim we have and acquire new concessions for new exploration or terminate our activities all together. The acquisition of additional concessions will be dependent upon us possessing capital resources at that time in order to purchase and/or maintain such concessions. If no funding is available, we may be forced to cease our operations.
An integral part of our proposed business plan involves exploration activities and acquisitions but we do not currently have the resources to complete them.
We currently do not have resources to complete our exploration activities or to fund acquisitions. While our strategy formerly included conducting Phase II and Phase III of our exploration program with respect to the Handcamp property and exploration activities with respect to the other properties we have acquired, we have since our acquisition of Global Gold determined to concentrate our efforts on the Ekom Eya property in Ghana. We believe that additional expenditures in the approximate aggregate amount of $7.3 million will be required in order to fully develop and begin operations on the Ekom Eya property. However, we continue to conduct limited operations on our Handcamp property and have postponed rather than cancelled our plans with respect to Handcamp and the other Properties located in Newfoundland. We will require additional funds beyond the $7.3 million referred to above to commence exploration activities with respect to our other Properties. To date, we have no available sources of financing.
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To date, we have funded such activities by the issuance of our stock which has caused dilution to our current shareholders. We will require additional funding to pursue our plan of operations. We have no current acquisition agreements and/or understandings to effect any acquisitions. However, we may consider making acquisitions in the future. Any such acquisitions may include other gold, copper and other properties that our management believes to be potentially significant as well as necessary in order for our company to reach our goal of becoming a gold producer.
There may be future dilution of our common stock and current shareholders will experience immediate dilution.
If we sell additional equity or convertible debt securities, those sales could result in additional dilution to our shareholders. Our recent acquisitions of properties involved the issuance of a substantial number of shares of our common stock. Future issuances of common stock as consideration for future acquisitions will cause such shareholders to suffer dilution.
Our success will depend upon our ability to successfully and timely explore and mine gold, copper and other minerals
.
The mining business is subject to substantial risks, including, but not limited to, the ability to identify and locate and then mine the gold, copper and other minerals. Further, if we are successful in locating and identifying the gold, copper and other minerals, our ability to mine the materials will be subject to a number of known and unknown additional risks, including, but not limited to, available labor, compliance with local laws and the ability to obtain financing on favorable terms. These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent the start and/or the completion of exploration and mining activities once undertaken, any one of which could have a material adverse effect on our companys financial condition and results of operations.
Kenneth Stead and the other members of our board of directors may have faced a conflict of interest in connection with our acquisition of Handcamp and other properties, and the purchase price may not accurately have reflected the value of Handcamp or the other properties that we purchased.
Kenneth Stead is our chief executive officer and a member of our board of directors. In addition, Mr. Stead is the president, a member of the board of directors and a controlling shareholder of Kat Exploration, Inc., our parent company. The price that we paid as well as the other terms of the acquisition agreement providing for our acquisition of Handcamp and the acquisition of Rusty Ridge, Colliers, North Lucky (to which we no longer have any rights) and South Lucky were determined solely by Mr. Stead based upon his belief of the fair value of each property. There was no fairness opinion issued, nor was there a special committee of independent directors formed to evaluate the fairness of the transaction, whether to or on behalf of the shareholders of either our company or our parent company. Because Mr. Stead acted and negotiated on behalf of both entities, he may have had a conflict of interest with regard to the value of the properties as well as on his belief of the fair value of the shares of our common stock that we issued to our parent company in our acquisition of the properties. As a result, we cannot assure you that the acquisition of the properties was fair either to our company, our parent company and/or their respective shareholders.
Our relationship with our parent company may lead to a conflict of interest for our management even after completion of the Spin-Off.
Kat Exploration, our parent company, presently owns approximately 64% of the shares of our common stock; as a result, our parent company exercises control of our company. In addition, there are significant similarities between the two entities personnel in that two of our four board members (Messrs. Ken and Timothy Stead) are also board members of our parent company. At present, therefore, if a conflict between the best interests of our parent company and our company should arise, our parent company would be able to determine the outcome of any such conflict without regard to the best interests of our minority shareholders.
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Subsequent to the Spin-Off, however, our parent company will only own 34,525,306 shares of our common stock, or approximately 7.4% of our shares. In addition, of the 261,474,694 shares of our common stock to be spun off, 83,360,325 of such shares, or approximately 17.9%, will be received by officers and directors of our parent company. These individuals (Messrs. Ken and Timothy Stead) are also officers and directors of our company. As a result, while our parent company and its executive officers and directors will be able to exercise less control of our company than they can now, they will still beneficially own approximately 25.8% of our shares.
Consequently, to the extent a conflict of interest were to arise between our company on the one hand and that of our parent company and its executive officers on the other hand, Messrs. Stead and our parent company would still be able to exert substantial influence over the outcome of any such conflict. We cannot assure you that our parent company and its executive officers and directors would act in our and our shareholders best interests even after the Spin-Off.
Our auditors have expressed a going concern opinion.
We have no established source of revenues, have incurred losses since inception, have a working capital deficit and are in need of capital to grow our operations so that we can become profitable. Accordingly, the opinion of our auditors for the years ended December 31, 2011 and December 31, 2010 is qualified and subject to uncertainty as to whether we will be able to continue as a going concern. This may negatively impact our ability to obtain additional funding that we may require or to do so on terms attractive to us and may negatively impact the market price of our stock.
We will require additional capital to pursue our business plan; if we are unable to raise sufficient capital to meet our needs, we may be required to cease operations.
We have no material revenues, income and/or assets (other than Handcamp, the other Properties and the Ekom Eya property) and have cumulative losses from inception through September 30, 2012 of approximately $148,735,680. We have financed our operations since inception through private placements of our securities as well as capital contributions from our parent company. We will need to obtain additional financing to, among other things, fund any future exploration, mining and drilling projects that we attempt to undertake and for general working capital purposes. Any additional equity financing may be dilutive to our shareholders and any such additional equity securities may have rights, preferences or privileges that are senior to those of the common stock. Debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. We cannot assure you that additional funds will be available when and if needed from any source or, if available, will be available on terms that are acceptable to us. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. Our ability to obtain needed financing may be impaired by such factors as the condition of the capital markets, our capital structure, the exploration stage of our company, the lack of a market for our shares of common stock, and our lack of profitability, all of which could impact the availability or cost of future financings. If we are unable to raise capital or sufficient capital to meet our needs, we may be required to cease operations. In addition, and as is also disclosed in our financial statements, these matters raise substantial doubt about our ability to continue as a going concern.
We are heavily dependent on our management and a loss of any member of our management, particularly Mr. Kenneth Stead, would be severely detrimental to our prospects.
We have a very limited management and number of employees. We are highly dependent on all members of our management, in particular Mr. Kenneth Stead. Our future performance will be substantially dependent on the continued services of our management and the ability to retain and motivate them. The loss of the services of any of our officers or directors, particularly those of Mr. Stead, would materially and adversely affect our business and operations. If he were to resign, there is no guarantee that we could replace him with qualified individuals in a timely or economic manner, if at all. At the present time, we do not maintain any key-man life insurance policies.
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Defective title to our assets could have a material adverse effect on our exploration and exploitation activities.
There are uncertainties as to title matters in the mining industry. We believe we have good title to our assets; however, any defects in such titles that cause us to lose our rights in these mineral properties would seriously jeopardize our planned business operations. We have investigated our rights to explore, exploit and develop our assets in manners consistent with industry practice and, to the best of our knowledge, those rights are in good standing. However, we cannot guarantee that the title to or our rights to explore, exploit and develop our assets will not be challenged by third parties or governmental agencies. In addition, there can be no assurance that our assets are not subject to prior unregistered agreements, transfers or claims. Our title may be affected by undetected defects. Any such defects could have a material adverse effect on us.
In the event of a dispute regarding title to our assets in foreign countries or any facet of our operations, it would likely be necessary for us to resolve the dispute in a foreign country, where we would be faced with unfamiliar laws and procedures. The resolution of disputes in foreign countries as well as in the U.S. can be costly and time consuming, similar to the situation in the United States. However, in a foreign country, we face the additional burden of understanding unfamiliar laws and procedures. We may not be entitled to a jury trial, as we might be in the United States. Further, to litigate in a foreign country, we would be faced with the necessity of hiring lawyers and other professionals who are familiar with the foreign laws. For these reasons, we may incur unforeseen losses if we are forced to resolve a dispute in a foreign country.
At the present time we are unable to pay any dividends.
We have not paid any cash dividends and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We anticipate that earnings, if any, which may be generated from operations will be used to finance our continued operations. Investors who anticipate the immediate need of cash dividends from their investment should refrain from purchasing any of our securities.
We may be exposed to risks relating to our disclosure controls and procedures and may need to incur significant costs to comply with applicable requirements.
Based on the evaluation done by our management at September 30, 2012, management concluded that our disclosure controls and procedures were ineffective in that we could not assure that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the Commissions rules and forms and communicated to management so as to allow timely decisions regarding required disclosures. Our disclosure controls and procedures are primarily adversely affected by the lack of experience within our company in complying with the requirements of a publicly reporting entity; specifically, management concluded that we have insufficient personnel resources with sufficient technical accounting expertise within our accounting function. We are seeking to engage experienced professionals to augment our financial staff to address issues of timeliness and completeness in financial reporting when preparing SEC filings. No assurances can be given that we will be able to adequately remediate existing deficiencies in our disclosure controls and procedures. Although we believe that these corrective steps will enable our management to conclude that our disclosure controls and procedures are effective when all of the additional financial staff positions are filled and other remediation plans are implemented, we cannot assure you that this will be sufficient.
We may be unable to maintain an effective system of internal control over financial reporting, and as a result we may be unable to accurately report our financial results
.
Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems. If we fail to maintain an effective system of internal control over financial reporting, we could experience delays or inaccuracies in our reporting of financial information, or non-compliance with the Commission, reporting and other regulatory requirements. This could subject us to regulatory scrutiny and result in a loss of public confidence in our management, which could, among other things, cause our stock price to drop.
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Our parent company publicized a record date that was subsequently withdrawn in favor of a later record date. Investors who sold shares between these two dates will not receive any shares in the Spin-Off, and could pursue litigation against our parent company.
On June 25, 2010, our parent company issued a press release which stated, among other items, that a record date of July 16, 2010 had been established for the distribution of restricted shares of our common stock to its shareholders. Our parent company subsequently withdrew the record date referred to above and established it as December 21, 2011. This date was first publicly disseminated in the registration statement of which this prospectus forms a part filed with the SEC on April 13, 2012.
It is possible that certain people who purchased shares of common stock of our parent company and sold the shares after the announced but subsequently withdrawn record date of July 16, 2010 would initiate legal proceedings against our parent company and may even attempt to implicate our company in any such litigation. While we cannot predict the eventual outcome of any such litigation, if initiated, any such litigation would in all likelihood at minimum divert managements attention and resources and could thereby harm our business and financial condition. In the event that litigation is brought against us or our parent company, we would defend ourselves vigorously.
You may not be able to enforce your claims in Canada or Ghana
While our company is a Nevada corporation, virtually all our assets are located in Newfoundland, Canada and Ghana. We cannot assure you that a court located in Canada or Ghana would not deem the enforcement of foreign judgments requiring our company to make payments outside of Canada or Ghana, as applicable, to be contrary to policy and/or unenforceable in Canada or Ghana, as applicable.
All of our officers and directors reside outside of the United States which could make it difficult to enforce potential civil liabilities and judgments.
Kenneth Stead, our president and chief executive officer, is a resident of Canada, and all our assets are located outside the United States. As a result, it may be impossible for investors to effect service of process within the United States upon such persons or enforce in the United States against such persons judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of United States federal securities laws or state securities laws.
Risks Related to our Industry
The mining industry is highly competitive.
Competition in the mining industry is extremely intense in all aspects, including but not limited to raising investment capital for exploration and obtaining qualified managerial and technical employees. We are an insignificant participant in the mining industry due to our limited financial and personnel resources. Our competition includes large established mining companies, with substantial capabilities and with greater financial and technical resources than we have, as well as the myriad of other exploration stage companies. As a result of this competition, we may be unable to attract the necessary funding or qualified personnel. If we are unable to successfully compete for funding or for qualified personnel, our mining activities may be slowed, suspended or terminated, any of which would have a material adverse effect on our ability to continue operations.
The exploration and mining business is subject to a number of risks outside of
our control.
The exploration and mining industry is highly cyclical by nature and dependent on the price of gold, copper and other minerals and future market conditions are uncertain. Factors beyond our control can adversely affect our proposed business, both in Canada and in Ghana. Factors that could adversely affect the price of gold and other minerals, most of which will be beyond our control, include but are not limited to:
Unfavorable interest rates and increases in inflation;
Changes in national, regional and local economic conditions;
Cost overruns, inclement weather, and labor and material shortages;
The impact of present or future legislation, zoning laws and other regulations;
availability, delays and costs associated with obtaining permits, approvals or licenses necessary to develop Ekom Eya, Handcamp and the other Properties;
Increases in taxes or fees;
Changing and conflicting local laws and other regulatory requirements, particularly in Ghana; and
Available labor and negotiations with unions.
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The speculative price of gold, copper and other minerals may adversely impact commercialization efforts.
Exploration and production is highly speculative and involves numerous natural risks that may not be overcome by knowledge and experience. In particular, even if we are successful in mining gold and other deposits, for which no assurances can be given, the commercialization will be dependent upon the existing market price for gold and other minerals, among other factors. The market price of gold and other minerals has historically been unpredictable, and subject to wide fluctuations. The decline in the price of gold and other minerals could render a discovered property uneconomic for unpredictable periods of time.
Environmental and other risks could have a material adverse impact on our business.
Mining activities pose certain environmental risks, as well as personal injury risks. While we will attempt to manage our risks, one or more incidents of environmental damage or personal injury resulting from our mining activities could have a material adverse impact on our business. If we become subject to onerous government regulations or other legal uncertainties, our business would likely be negatively affected. The government regulates the environmental impacts of mining operations and requires, under certain circumstances, certain environmental permits, work permits, posting of bonds, and the performance of remediation work for any physical or other disturbance to the land or the environment. We may incur significant costs and expenses in complying with such governmental regulations. Depending on market conditions and the options available to us, we may attempt to enter into a joint venture with an operating company or permit an operating company to undertake exploration work. We may also consider seeking equity or debt financing (including borrowing from commercial lenders).
Increased insurance risk could negatively affect our business.
Insurance and surety companies may take actions that could negatively affect our proposed business, including increasing insurance premiums, requiring higher self-insured retentions and deductibles, requiring additional collateral or covenants on surety bonds, reducing limits, restricting coverage, imposing exclusions, and refusing to underwrite certain risks and classes of business. Any of these would adversely affect our ability in the future to obtain appropriate insurance coverage at reasonable costs which would have a material adverse effect on our business.
Our operations are subject to permitting requirements.
Our operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations. Our operations, including but not limited to any exploitation program, require permits from the Canadian provincial governments. We may be unable to obtain these permits in a timely manner, on reasonable terms, or at all. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits, our timetable and business plan for exploration and/or exploitation, may be materially and adversely affected.
We may experience supply and equipment shortages.
We may not be able to purchase all of the supplies and materials we need to continue our mining activities due to shortage of funds, lack of availability or other reasons. This could cause us to delay or suspend operations. Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies, such as explosives, and certain equipment, such as bulldozers, drilling equipment and excavators, that we might need to conduct our mining activities. If we cannot find the supplies and equipment we need, we may have to suspend our operations until we do find the supplies and equipment we need. If we are unable to find the supplies in Ghana or Canada but can find them in another location, the cost will increase significantly, as will the time to deliver them.
There are risks inherent in doing business in foreign countries.
All of our properties not located in Newfoundland, Canada are situated in Ghana. Risks of doing business in a foreign country such as Ghana could materially and adversely affect our results of operations and financial condition. We face risks normally associated with doing business in a foreign country. These risks include, but are not limited to:
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Labor disputes;
Invalidity of governmental orders;
Property disputes;
Changes to existing laws or policies relating to the mining industry that increase our costs;
Unpredictable changes in or application of taxation regulations;
Delays in obtaining or the inability to obtain necessary governmental permits;
Governmental seizure of land or mining concessions;
Limitations on ownership;
Weaker intellectual property protections;
The absence of trade agreements;
Import and export regulations, including restrictions on the export of gold and other minerals;
Foreign exchange controls and limitations on the repatriation of earnings;
Political and economic instability; and
War, civil war, acts of terrorism or other hostilities.
The occurrence of one or more of these events or a change in existing policy could have a material adverse effect on our cash flows, earnings, results of operations, and financial condition. These risks may limit or disrupt our operations, restrict the movement of funds, impair contract rights, or result in the taking of property by nationalization or expropriation without fair compensation.
We are subject to Canadian governmental regulations that may limit
our operations, increase our expenses or subject us to liability.
According to our Canadian legal counsel, our Canadian operations are subject to Canadian laws, ordinances and regulations regarding, among other things:
Environmental matters, including the presence of hazardous or toxic substances;
Land preservation;
Health and safety; and
Zoning, land use and other entitlements.
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In developing any project in Canada, we may be required to obtain the approval of numerous Canadian governmental authorities (and others) regulating matters such as:
Installation of utility services such as gas, electric, water and waste disposal;
Permitted land uses; and
The design, methods and materials used in the exploration and mining for gold, copper and other minerals.
We may not now or in the future be in compliance with all regulatory requirements. If we are not in compliance with these regulatory requirements, we will be subject to penalties or forced to incur significant expenses to cure any noncompliance. In addition, some of the land that we could in the future acquire if we will at such time have the requisite resources and ability, may not have received planning approvals or entitlements necessary for planned or future development. Failure to obtain entitlements necessary for development on a timely basis or to the extent desired would adversely affect our business, results of operations, financial condition and future prospects.
We have limited financial resources which prevents us from securing our mining concessions in Ghana from bandits and other detrimental threats, particularly during the rainy season when we have minimal exploration activities.
We do not have the financial resources to adequately protect our Ghanaian mining concessions from potential claim jumping and other threats to the betterment of our concessions predominantly due to the respective land size of these concessions. The minerals commission in Ghana does not police or enforce the propriety of these concessions. It is the sole responsibility of the concession owner.
Significant unauthorized mining or other unauthorized activities may result in our inability to develop any commercially viable resources in Ghana.
Limitations on Ghana economic market reforms may discourage foreign investment in Ghanaian businesses
.
The value of investments in Ghana mining concession businesses could be adversely affected by political, economic and social uncertainties in Ghana.
Any material change in policy by the government of Ghana could adversely affect investments in our business operations
.
As a developing nation, Ghana's economy is more volatile than that of developed Western industrial economies. There are significant differences between Ghana and the United States, Canada or a Western European country in such respects as structure, level of development, capital reinvestment, legal recourse, resource allocation and self-sufficiency.
Actions by the central government of Ghana could have a significant adverse effect on economic conditions in the country as a whole and on the economic prospects for our operations. Changes in policy could result in imposition of restrictions on currency conversion, imports or the source of supplies, as well as new laws affecting joint ventures and foreign-owned enterprises doing business in Ghana. Accordingly, there can be no assurance that reforms to Ghana's economic systems will occur or that we will not be adversely affected by changes in its political, economic, and social conditions and by changes in policies of the government, such as changes in laws and regulations, measures which may be introduced to control inflation, changes in the rate or method of taxation, imposition of additional restrictions on currency conversion and remittance abroad, imposition of restrictions on mining concessions and reduction in tariff protection and other import restrictions.
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Uncertainties with respect to the legal system in Ghana could limit the legal protections available to you and us
.
We presently conduct substantially all of our business through our operating subsidiary Global Gold in Ghana. Global Gold is subject to laws and regulations applicable to foreign investments in Ghana and, in particular, laws applicable to foreign-invested enterprises. The legal system is based on written statutes, and prior court decisions may be cited for reference but may have limited precedential value. However, since the legal system continues to evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections available to you and us. In addition, any litigation in Ghana may be protracted and result in substantial costs and diversion of resources and management attention.
The legal system in Ghana is based on British common law, customary (traditional) law, and the 1992 constitution. Court hierarchy consists of the Supreme Court of Ghana (its highest court), courts of appeal, and high courts of justice. Beneath these bodies are circuit, magisterial, and traditional courts. Extrajudicial institutions include public tribunals. Since independence in 1957, courts have been relatively independent. Customary (traditional) law is a type of legal system that serves as the basis of, or has influenced, the present-day laws in approximately 40 countries - mostly in Africa, but some in the Pacific islands, Europe, and the Near East. Customary law is also referred to as "primitive law," "unwritten law," "indigenous law," and "folk law." There is no single history of customary law such as that found in Roman civil law, English common law, Islamic law, or the Napoleonic Civil Code. The earliest systems of law in human society were customary, and usually developed in small agrarian and hunter-gatherer communities. As the term implies, customary law is based upon the customs of a community. Common attributes of customary legal systems are that they are seldom written down, they embody an organized set of rules regulating social relations, and they are agreed upon by members of the community. Although such legal systems include sanctions for law infractions, resolution tends to be reconciliatory rather than punitive.
Restrictions under Ghana laws which may limit or restrict our ability to make dividends and other distributions from Ghana to Canada, where our principal offices are located, could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our businesses
.
Substantially all of our revenues for the foreseeable future, if any, will be earned in Ghana. Any limitations on our ability to transfer funds to Canada from Ghana could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.
Risks Related to our Shares of Common Stock
Our stock price may be volatile.
Our stock price may be volatile and as a result investors could lose all or part of their investment. In addition to volatility associated with over-the-counter securities in general, the value of any investment could decline due to the impact of any of the following factors upon the market price of our common stock:
·
Changes in the worldwide price for gold and other minerals;
·
Disappointing results from our exploration and drilling efforts;
·
Fluctuation in production costs that make mining uneconomical;
·
Unanticipated variations in grade and other geological problems;
·
Unusual or unexpected rock formations;
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·
Failure to reach commercial production or producing at lower rates than those targeted;
·
Decline in demand for our common stock;
·
Downward revisions in securities analysts
estimates or changes in general market conditions;
·
Investor perception of our industry or our company; and/or
·
General economic trends.
In addition, stock markets have experienced extreme price and volume fluctuations and the market price of securities has been highly volatile. These fluctuations are often unrelated to asset value and may have a material adverse effect on the market price of our common stock. As a result, investors may be unable to resell their shares at a fair price.
There is currently a limited trading market for our common stock and our stock experiences price fluctuations.
There is currently a limited market for our common stock and we can provide no assurance to investors that a more robust market will develop. If a more robust market for our common stock does not develop, our shareholders may not be able to resell the shares of our common stock they have purchased and they may lose all of their investment. Our stock is thinly traded and is therefore subject to significant fluctuations if the amount of trading increases significantly for a short period of time. Even one large trade could materially affect the price of the stock even though the status of our company remains unchanged.
The trading price of our common stock may be subject to wide fluctuations. Trading prices of our common stock may fluctuate in response to a number of factors, many of which will be beyond our control, including, without limitation, public announcements regarding our company, purchases or sales by existing shareholders, changes in government regulations, conditions in our market segment or changes in earnings estimates by analysts. These fluctuations may have a material adverse effect on the trading price of our common stock.
In addition, the stock market in general, and the market for mining companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. Market and industry factors may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a companys securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs and a diversion of managements attention and resources. In addition, we may not have complied in the past with federal and/or state securities laws and regulations, which could potentially result in litigation, penalties and/or fines, other substantial costs and expenses and a substantial diversion of managements attention and resources.
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Our shares of common stock are subject to the penny stock rules.
Our shares of common stock are subject to the Commissions penny stock rules. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the Commission which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customers account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customers confirmation. In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchasers written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for the shares. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares may find it more difficult to sell their securities.
As an issuer of penny stock, the protection provided by the federal securities laws relating to forward-looking statements does not apply to us and as a result we could be subject to legal action.
Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are a penny stock, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.
We may not be able to achieve secondary trading of our shares of common stock in certain states because our shares of common stock are not listed for trading on a national securities exchange.
Because our shares of common stock are not listed for trading on a national securities exchange, our shares of common stock are subject to the securities laws of the various states and jurisdictions of the U.S. in addition to federal securities laws. This regulation covers any primary offering we might attempt and all secondary trading by our shareholders. If we fail to take appropriate steps to register our shares of common stock or qualify for exemptions for our shares of common stock in certain states or jurisdictions of the U.S., the investors in those jurisdictions where we have not taken such steps may not be allowed to purchase our shares of common stock or those who presently hold our shares of common stock may not be able to resell their shares without substantial effort and expense. These restrictions and potential costs could be significant burdens on our shareholders.
We are authorized to issue up to 500,000,000 shares of our common stock and 5,000,000 shares of our preferred stock, the issuance of which could, among other things, reduce the proportionate ownership interests of current shareholders; in addition, we issued 457,000,000 shares of our common stock in connection with acquisitions.
Our board of directors has the ability, without seeking shareholder approval, to issue additional shares of our common stock in the future for such consideration as our board of directors may consider sufficient. The issuance of additional shares of common stock and/or preferred stock in the future would reduce the proportionate ownership and voting power of the shares of our common stock held by our existing shareholders. In addition, we issued 296,000,000 shares of our common stock to our parent company when we purchased Handcamp and the other Properties and an additional 161,000,000 shares of our common stock when we acquired Global Gold. These issuances significantly diluted the ownership interest of our present shareholders.
Further, our board of directors is empowered, without shareholder approval, to issue shares of our preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock. In the event of such an issuance, the shares of preferred stock could be used as a method of discouraging, delaying or preventing a change in control of our company, which could thereby prevent our shareholders from receiving the maximum value for their shares.
22
The concentration of ownership of our
shares of common stock with insiders and their affiliates is likely to limit the ability of other shareholders to influence corporate matters.
Approximately 64% of our issued and outstanding shares of common stock are owned and controlled by our parent company and under the indirect control of Mr. Kenneth Stead as a result of his control over our parent company. Consequently, Mr. Stead has the ability to exercise control over all matters requiring approval by our shareholders, including but not limited to, the election of directors and approval of significant corporate transactions, such as our acquisition of Handcamp, the other Properties and the Ekom Eya property. This concentration of ownership may also have the effect of delaying or preventing a change in control of our company that might be viewed as beneficial by other shareholders or discouraging a potential acquirer from making an offer to our shareholders to purchase their shares of our common stock in order to gain control of our company. While the distribution by our parent company of our shares of common stock to its own shareholders would lessen Mr. Steads control of our company, he and other affiliates of our company and our parent company would remain in control of our company. In addition, the distribution would not increase your current percentage ownership of our company unless you owned shares of our parent company on the Record Date.
Risks Related to the Spin-Off
The market value of the shares of our common stock received in the Spin-Off may decline.
After the Spin-Off is completed, holders of our parent company shares will hold common stock of both our company and our parent company. We cannot assure you that the public market for our common stock will be similar to the public market for the common stock of our parent company which, though illiquid, is considerably more liquid than is the market for our common stock. Ultimately, the value of our common stock will be determined in the trading markets and will be influenced by many factors, including our operations, the growth and continuation of our proposed business, investors expectations of our prospects, trends and uncertainties affecting the industry in which we operate, future issuances of our capital stock and general economic and other conditions. The market value of our common stock after the Spin-Off could be less than its market value before the Spin-Off. Further, the aggregate market price of our common stock and that of our parent company could be less than the present market value of either our common stock or the common stock of our parent company.
The Spin-Off may cause the trading price of our parent companys common stock to decline.
Following the Spin-Off, our parent company expects that its common stock will continue to be quoted and traded on the Pink Sheets under the symbol KATX. As a result of the Spin-Off, the trading price of our parent companys common stock may after its completion be substantially lower than its trading price immediately prior to the Spin-Off as our parent company will have surrendered ownership of our assets.
We may be unable to achieve some or all of the benefits that we expect to achieve from our separation from our parent company.
We may not be able to achieve the full strategic and financial benefits that we expect will result from our separation from our parent company or such benefits may be delayed or may not occur at all. For example, analysts and investors may not regard our corporate structure to be clearer and simpler than the current corporate structure or place a greater value on our company as a stand-alone company than on our businesses being a part of our parent company. As a result, in the future the aggregate market price of our parent companys common stock and our common stock as separate companies may be less than the market price per share of our parent companys common stock had the Spin-Off not occurred.
The Spin-Off may result in tax liability.
You may be required to pay income tax on the value of the shares of our common stock received in connection with the Spin-Off. The Spin-Off may be taxable to you as a dividend and/or as a capital gain, depending upon the extent of your basis in our parent company stock which you hold. You are advised to consult your own tax advisor as to the specific tax consequences of the Spin-Off. Shareholders are also encouraged to read Federal Income Tax Consequences of the Spin-Off and Federal Income Tax Consequences to Shareholders below, which contain important tax disclosures relating to the Spin-Off.
23
The lack of a broker or dealer to create or maintain a market in our stock could adversely impact the price and liquidity of our securities.
We have no agreement with any broker or dealer to act as a market maker for our common stock and we may not be successful in obtaining any market makers. Thus, no broker or dealer will have an incentive to make a market for our common stock. The lack of a market maker for our common stock could adversely influence the market for and price of our common stock, as well as your ability to dispose of, or to obtain accurate information about, and/or quotations as to the price of, our common stock.
DESCRIPTION OF OUR BUSINESS
Company Background
Our company, formerly known as Bella Viaggio, Inc., is an exploration stage company incorporated in the State of Nevada on June 6, 2007. On April 28, 2010, Kenneth Stead, an individual, acquired 2,043,333 shares of our common stock from Ronald A. Davis and Ronald G. Brigham for an aggregate purchase price of $275,272. Simultaneously therewith, Mr. Stead purchased an additional 220,667 shares of our common stock from eleven other shareholders of our company. Consequently, Mr. Stead paid an aggregate purchase price of $305,000 for the 2,264,000 shares of our common stock, which constituted approximately 85.6% of all shares of our common stock then issued and outstanding. The foregoing share acquisition resulted in a change in control of our company.
On June 4, 2010, pursuant to an acquisition agreement dated as of May 28, 2010 (the
Acquisition Agreement
) by and between our company and Kat Exploration, a company organized under the laws of Nevada, we acquired 100% of the mineral rights that Kat Exploration then held in and to Handcamp, a gold property located in the Province of Newfoundland and Labrador, Canada. We issued 161,000,000 shares of our common stock to Kat Exploration for the mineral rights that it had previously held in and to Handcamp. As a result of this transaction, we became virtually wholly owned by Kat Exploration and refer to it in this prospectus as our parent company.
As disclosed below under the heading
Our Canadian Business - Mineral Rights Acquisition - Province of Newfoundland and Labrador,
acquisition of mineral rights in the province of Newfoundland and Labrador (the
Province
) is by online map staking. Our parent company staked an aggregate of 97 claims to Handcamp. These claims, which form a part of four separate exploration licenses, constitute exclusive legal rights to explore for minerals on Handcamp and were conveyed by our parent company to us pursuant to the Acquisition Agreement. If we discover a mineral deposit on Handcamp, we would be entitled to convert the licenses into mining leases; we presently intend to convert any applicable licenses into leases if and when we discover any such deposits. However, no such conversion is permitted until a deposit is discovered. There can be no assurance that a mineral deposit will ever be discovered on Handcamp. At present, Handcamp is not known by us to contain any reserves.
Following our acquisition of Handcamp, we changed our business model to that of a mineral acquisition, exploration and development company focused primarily on gold properties. Our principal objective is to attempt to locate, mine for and sell mineral properties. On August 26, 2010 our name was changed to Kat Gold Holdings Corp.
On November 25, 2011, pursuant to an asset purchase agreement between our company and our parent company, we acquired 100% of the mineral rights that our parent company then held in and to Rusty Ridge, Colliers and South Lucky (each a
November Property
and collectively, the
November Properties
) located in the Province of Newfoundland and Labrador, Canada in exchange for 135,000,000 shares of our common stock. We sometimes refer to Handcamp and the November Properties collectively as the
Properties
. We also acquired a property called North Lucky, but no longer have any rights thereto. At present, none of our Properties, including Handcamp, is known by us to contain any reserves.
24
Below is a map that shows the location of each of these Properties on Newfoundland.
25
South Lucky and the Rusty Ridge properties are located in eastern Newfoundland on the Bonavista Peninsula. Colliers is also located in eastern Newfoundland but is situated on the Avalon Peninsula. Our companys economic interest in the November Properties is based on terrestrial sedimentary and volcanic rocks of the Avalon Zone, correlative to Africa, hosting sedimentary-hosted stratiform copper (SSC) or volcanic red bed copper (VRC) mineralization with the exception of Rusty Ridge, which has iron-oxide- copper-gold (IOCG) potential.
As of the date of this prospectus, we have not generated any revenues but we have incurred expenses related to the drilling and exploration of Handcamp. We have no material income and/or assets other than Handcamp, Rusty Ridge, Colliers, South Lucky and, as discussed below, the Ekom Eya property, and have cumulative losses from inception through September 30, 2012 of approximately $148,735,680.
On April 18, 2012, we executed asecurities purchase agreement (the
Purchase Agreement
) with Global Gold Incorporated, a corporation organized under the laws of the Province of British Columbia (
Global Gold
), and the shareholders of Global Gold (the
Sellers
), pursuant to which we acquired all of the issued and outstanding shares of the capital stock of Global Gold. The consideration that we paid (the
Purchase Price
) to the Sellers was an aggregate of one hundred sixty-one million (161,000,000) shares of our common stock, of which one hundred eighteen million, two hundred sixty-three thousand, one hundred fifty-eight (118,263,158) such shares payable to Thomas Brookes and Matthew Sullivan, the principals of Global Gold, were placed in escrow and will be released in accordance with the terms of an escrow agreement. We have determined to concentrate our efforts on our Ghanaian business, i.e., the operations conducted by Global Gold on the Ekom Eya property, which is described below.
Our common stock is eligible for quotation on the OTC QB. Our common stock remains quoted under the symbol BVIG. Our principal executive offices are located at 1149 Topsail Road, in the City of Mount Pearl, in the Province of Newfoundland and Labrador, Canada, A1N 5G2. Our telephone number is (709) 368-9223.
We have never declared bankruptcy, we have never been in receivership, and we have never been involved in any legal action or proceedings. Since our inception, we have not, other than as described below, made any significant purchases or sales of assets, nor have we been involved in any mergers, acquisitions or consolidations and we have no subsidiaries. Our fiscal year end is December 31.
We are a publicly traded mining company with exploration properties in Canada and Ghana. We intend to pursue a combination of prospective mineral exploration properties as well as gold concessions with proven gold reserves capable of production within a short period of time.
Our primary goal is to obtain a high-quality portfolio of creditable mining and mineral exploration properties ranging from advanced to revenue producing projects, each of which would be deemed to have superior potential for mineable ore bodies. Commodities of interest are precious and base metals with particular emphasis on gold, silver and copper.
Implementation of this plan has already begun through the acquisition of such projects as the Ekom Eya gold deposit located in the Bibiani Gold Belt, Ghana Africa, along with the Handcamp Property, a gold and base metals exploration property in central Newfoundland, Canada, a region known for its world-class mineral deposits and offshore oil reserves, as well as the other Properties.
26
Our Ghanaian Business
Ownership
On January 13, 2012, Global Gold, Inc., a Ghana corporation and wholly owned subsidiary of Global Gold (
GGI Ghana
), executed an agreement with the Ekom Eya Cooperative, a cooperative association registered under the laws of Ghana (
Ekom Eya
), pursuant to which GGI Ghana would undertake all operations and costs associated with the mining of the Ekom Eya property. In exchange, GGI Ghana would provide Ekom Eya with a 15% royalty of gross revenue resulting from the operations. GGI Ghana also pledged 1% of its profits towards the development of the local communities. At present, Ekom Eya is not known by us to contain any reserves.
The 2006 Minerals and Mining Act in Ghana provide a range of available fixed and renewable mineral rights. Mining concessions are governed by mining leases granted by the Ghanaian government. Licenses are awarded for different time periods, and have different renewal clauses. The license for the Ekom Eya concession is for renewable periods of 5 years, with the most recent 5 year renewal occurring on April 4, 2012 and lasting until April 2017.
This license held by the Ekom Eya may be revoked at any time by the Ghanaian government where the licensee has contravened or failed to comply with any of the terms and conditions of the Minerals and Mining Act, 2006 (Act 703). Ekom Eya is responsible for paying an annual fee of GH¢50,000 Ghana Cedis (approximately $26,000 USD as of September 25, 2012) payable annually. Ekom Eya is responsible for paying an annual fee of GH¢50,000 Ghana Cedis (approximately $26,000 USD as of September 25, 2012) payable annually. Ekom Eya has, and is responsible for paying, an outstanding loan of GH¢209,137.50 (approximately $110,000 USD as of September 25, 2012) to the Ghanaian government before January 2, 2013.
Our Managing Director in Ghana is Thomas Brookes. For more than 30 years, Mr. Brookes has been involved in the exploration and extraction of natural resources from drilling for oil and natural gas in Canadas high arctic to prospecting for gold in northwest British Columbia and the Yukon Territory as the president of Virgin Gold Inc.
Location
The concession consists of an approximate area of 24.98 acres lying to the North of Latitude 6° 29
'
00"; and to the South of Latitude 6
°
30
'
10"; East of Longitude 2° 18' 26"; and to the West of Longitude 2° 18
"
08" in the Bibiani-Anhwiaso-Bekwai District of Western Region of the Republic of Ghana. The site is located in Western Ghana, 250 kilometers North-West of Accra. The Ekom Eya concession is accessible by road through the Bibiani mine site via the village of Lineso Donkoto and is approximately 7 kilometers to the north of Bibiani Township.
27
Location of the Ekom Eya Property - A marks the location of the Ekom Eya Operations
The Ekom Eya Small Scale Permit is located about 800 meters north of the northern boundary of the Bibiani mine concession. It is 3.5 kilometers from the Bibiani plant site, is accessible by road through the Bibiani mine site via the village of Lineso Donkoto and is approximately 7 kilometers to the north of Bibiani Township.
The area around the shaft is fairly flat. To the north there is a gentle slope down towards the Pamunu River, with an area a few hundred meters to the north of the shaft becoming rather swampy during the rainy season.
The Pamunu River and its tributaries form the drainage system, with the Pamunu a semi-perennial river as it can sometimes dry up during March - April.
Maximum and minimum height recorded in the vicinity is 400 meters and 200 meters above mean sea level, respectively.
28
Location of the Ekom Eya Property
29
Geology
The concession falls within the Sefwi-Bibiani Greenstone Belt in contact with metasediments comprising phyllites, greywackes and tuffs. The rock successions have been metamorphosed to greenschist facies and tight isoclinal and over turned folds are present on small scales. Dips are generally steep between 50°-55°E in the northern section and dips between 70°-90°E in the southern section. The general strike is N-NNE.
Historical Drill Program
In March 1998, a 23 hole drilling program of 2,091 meters was conducted. The holes were pre-collared by 50-65 meters of RC drilling and were completed by 15-30 meters diamond drilling (NQ). The holes were aimed at the interface of transition to sulphides, but a few deeper holes were drilled as well.
Substantial core losses were reported and assay results were rather nominal. It appears that the mineralized zone shoots away from the old stopes pinch and often nearly totally disappear, leaving a thin graphitic shear as only indication of the continuation of the reef.
Soil Sampling.
More than 10,000 meters of lines were cut and sampled at 30 meter intervals. Several modest anomalies were revealed.
30
Mobile Metal Ion special sampling was carried out over the Ahyireso soil anomaly just to the north of the Pamunu River during 1999. A total of about 100 samples were sent to Canada for this analytical technique.
Recent Work
The Bibiani North mineralized zone strikes virtually north-south. Artisanal workings into the near surface sub rock delineate the mineralized zone over a distance of approximately 600 meters, which consist of up to 10 meters of thick quartz veins in carbonaceous and graphitic schists or phyllites. The host rocks are often mineralized with disseminated lower gold grades, which increase the overall widths of the mineralized zone to approximately 12 meters.
The most current exploration work on the site was carried out by Central African Gold Limited in 2007 when some 3,441 meters of RC drilling was completed. Main targets were the mineralized zones below the 4
th
level to avoid the old workings concentrated above the 4
th
level where substantial highly mineralized wallrocks and pillar supports were left by earlier mining.
Some 400 meters of the total was expended on an eastern zone located over 200 meters from the main area of interest.
Reasonable intersections were encountered during this drilling. Cumulative intersected widths total 67 meters with an overall average width of 4.79 meters.
Quartz veins, sheared graphitic phyllites and quartz stockworks make up the geology of the mineralized zones. Quartz porphyry was also associated with mineralization in several instances. Sulphides such as pyrite, arsenopyrite, pyrrhotite and chalcopyrite occur with the gold and the schistose host rocks exhibit carbonate alteration.
|
|
|
|
|
|
|
|
|
| |
BH
|
Collar Information
|
Depth (m)
|
Intersection
|
Geology
|
ID
|
East
|
North
|
Azim
(Mag)
|
Dip
|
R/C
|
From
|
To
|
Length
|
Lithology
|
%Qtz
total
|
BH18
|
10,834.
|
9,837.31
|
269
|
-50
|
201
|
173.0
|
179.0
|
6.00
|
Sheared Phyllite
|
5
|
BH 19
|
10,788.
|
9,902.84
|
269
|
-50
|
201
|
163.0
|
165.0
|
2.00
|
Sheared Phyllite
|
1
|
BH 20
|
10,742.
|
9,968.37
|
269
|
-50
|
201
|
159.0
|
165.0
|
6.00
|
Sheared Phyllite
|
1
|
BH 09
|
10,611.
|
9,876.60
|
269
|
-50
|
40
|
|
|
0.00
|
|
|
BH 12
|
11,155.
|
9,378.58
|
269
|
-50
|
200
|
|
|
0.00
|
|
|
BH 11
|
11,201.
|
9,313.05
|
269
|
-50
|
201
|
|
|
0.00
|
|
|
BH 10
|
11,136.
|
9,267.16
|
269
|
-50
|
174
|
|
|
0.00
|
|
|
BH 01
|
9,282.2
|
8,627.92
|
322
|
-50
|
151
|
151.0
|
157.0
|
6.00
|
Phyllite/Qtz
|
30
|
31
|
|
|
|
|
|
|
|
|
| |
BH
|
Collar Information
|
Depth (m)
|
Intersection
|
Geology
|
ID
|
East
|
North
|
Azim
(Mag)
|
Dip
|
R/C
|
From
|
To
|
Length
|
Lithology
|
%Qtz
total
|
BH 23a
|
11,167.
|
9,968.00
|
274
|
-50
|
101
|
174.0
|
176.0
|
2.00
|
|
|
BH 22a
|
11,178.
|
9,808.39
|
325
|
-50
|
150
|
172.0
|
176.0
|
4.00
|
Phyllite/Qtz
|
|
BH 21a
|
11,121.
|
9,659.02
|
325
|
-50
|
150
|
164.0
|
172.0
|
8.0
|
Qtz vein /Phyllite
|
|
BH 14
|
11,018.
|
9,575.18
|
269
|
-50
|
201
|
163.0
|
165.0
|
2.00
|
Phyllite/Dyke
|
20
|
BH 13
|
11,064.
|
9,509.65
|
269
|
-50
|
201
|
|
|
0.00
|
|
|
BH 15
|
10,972.
|
9,640.71
|
269
|
-50
|
201
|
159.0
|
171.0
|
12.00
|
Sheared Phyllite/Qtz
|
40
|
BH 16
|
10,926.
|
9,640.71
|
269
|
-50
|
198
|
157.0
|
160.0
|
3.00
|
Sheared Phyllite/Qtz
|
5
|
BH 17
|
10,880.
|
9,771.77
|
269
|
-50
|
198
|
170.0
|
172.0
|
2.00
|
Phyllite/Dyke
|
1
|
BH 23
|
10,649.
|
10,123.7
|
270
|
-50
|
198
|
148.0
|
150.0
|
2.00
|
Sheared Phyllite/Qtz
|
10
|
|
|
|
|
|
|
174.0
|
176.0
|
2.00
|
Sheared Phyllite/Qtz
|
5
|
BH 22
|
10,682.
|
10,074.0
|
270
|
-50
|
198
|
152.0
|
156.0
|
4.00
|
Graphitic Phyllite
|
3
|
|
|
|
|
|
|
168.0
|
176.0
|
8.00
|
Qtz vein
|
70
|
BH 21
|
10,716.
|
10,024.2
|
270
|
-50
|
198
|
164.00
|
172.00
|
8.00
|
Phyllite/Qtz
|
10
|
BH 24
|
9,282.2
|
8,657.92
|
270
|
-50
|
178
|
168.00
|
172.00
|
4.00
|
Porphyry/Qtz
|
3
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
3,441
|
|
|
|
|
|
32
Bibiani North Boreholes Summary
The drill hole plan view with intersections indicate gold mineralized trend is in a north-south direction along almost the entire 600 meter length of the permit.
Concession History
The mineralized zone was discovered by the Gold Coast Selection Trust in 1933 when it was excavating a trench in the vicinity of an auriferous quartz float.
In 1964, International Gold Resources (
IGR
) obtained the rights to explore the area. A blanket soil geochem was carried out and striking soil anomalies occurred over the Ekom Eya property. However, an airborne geophysical survey carried out failed to identify a mineralized zone.
33
In 1996, Ashanti Goldfields (
AGC
) took over IGR and concentrated on operating the Main Bibiani open pit. However, AGBL, a subsidiary of AGC, was brought on board to delineate any economic mineralization within the Bibiani North License area. AGBL carried out sampling of the old mine waste dump located just north of the old shaft in 1997.
Tailings of the old mine were deposited in a wide shallow valley lying to the east of the ore trend. This valley drains north-easterly into the semi perennial Pamunu River. Soil sampling indicated that tailings might have been washed into the Pamunu River and it is estimated that about 60,000 tons can be retrieved.
AGBL pursued a 23-hole drilling program in 1998. The holes were pre-collared by 50-65 meters of reverse circulation drilling and were completed by 15-30 meters diamond drilling. The holes were aimed at the interface of transition to sulphides, but a few deeper holes were drilled as well.
The Bibiani North mineralized zone strikes virtually north-south. A distance of approximately 600 meters is marked by artisanal workings into the near surface sub rock which consist of up to 10 meters of thick quartz veins in carbonaceous and graphitic schists or phyllites.
Current Operations
Two submersible pumps are in use for dewatering the old shaft sunk by the Gold Coast Selection Trust in 1937 to enable future mining to take place.
Operational Rollout
We are seeking up to $7.3 million in financing to purchase equipment and for working capital to launch the Ekom Eya mining operation project. This will provide capital to begin production as well as assess and implement the working on the balance of Ekom Eya Mining Operation's deposit. Please see the section entitled
Managements Discussion and Analysis of Operations -- Plan of Operations
for a more complete description.
Our budget, assuming the requisite financing is raised, would allow us to go into production on the tailings & waste dump as well as locate & purchase good equipment to be used for processing the main mineralized zone at launch. There is an expected 6 month wait time between placing the order of the In-line leach reactor (made by Gekko in Australia) and receiving the equipment. In the interim, we intend to use a CIL reactor and additional equipment (sourced in Africa) to work the tailings & waste dump. Processing of the tailings & waste pile will occur within 3 months of raising capital and then shifted to the main ore body as further equipment arrives and is set up. The mining equipment to be acquired includes (i) heavy equipment, such as bulldozers and excavators, (ii) crushing and grinding equipment, (iii) gravity recovery equipment, (iv) assorted vehicles, (v) generators, (vi) pumps, and (vii) a camp. There is road access directly to the property as is municipal electric power.
Expenditures to date on the concession are $136,994. The cost of historical drilling and other testing on the property by previous concession owners, while substantial, is unknown.
34
Ghana Overview
The Republic of Ghana hosts one of the worlds largest gold operations in Obuasi, near Accra, and is Africas second-largest producer and exporter of gold after South Africa. The nations mining industry is dominated by foreign entities and its mining portfolio also consists of diamonds, manganese and bauxite. The basic law governing the mining industry is the Minerals and Mining Act 2006 (Act 703), which grants the president the power to grant mining rights. According to data from the Ghana Chamber of Mines, Ghana's gold output increased by 4% to 2.6 million ounces in 2008. Gold accounts for approximately 90% of Ghana's income from minerals. According to The Statesmans web site, the value of the mining industry is expected to increase from US $1.03bn in 2008 to US $3.14bn in 2013. We believe that the Ghanaian mining industry has a promising future based largely on its untapped mining potential and stable government along with a reasonable tax regime. In its newly released Ghana Mining Report Q108, Business Monitor International forecasts the mining industry to register an average growth of over 4% per annum over the period from 2008 to 2012.
Ghana in 1957 became the first sub-Saharan country in colonial Africa to gain its independence. It has a population of approximately 24 million people, an unemployment rate of approximately 11% (2000 estimate) and is a constitutional democracy. Well-endowed with natural resources, Ghana has roughly twice the per capita output of the poorest countries in West Africa according to the CIA World Factbook.
The Republic of Ghana is located on the coast of West Africa (Southern portion), and has been well known for its gold deposits since the 15
th
century. The tradition of gold mining has continued today, with a large number of mines operating in the countrys famous gold belts. Relative to its neighboring countries, Ghana is a stable country with a strong democracy. Ghana is ranked quite highly in international freedom and prosperity indices.
Ghana is an English-speaking constitutional democracy that has enjoyed peace and stability since its Constitution was passed in 1992. It is dedicated to a multi-party democracy and is considered one of the most stable governments on the continent. This has contributed to GDP growth (5.5% real growth in 2007), improved Foreign Direct Investment (according to the IMF, Foreign Investment grew from US$155M in 2000 to US$450M in 2006), and improved poverty rates (fallen from 52% in 1992 to 28% in 2006). Given Ghanas history of gold production (Ghana was at one time known as the Gold Coast), the government is accustomed to dealing with resource companies and has created a mining-friendly environment.
Ghana boasts a readily-available work force with experienced miners and a tropical climate that provides favorable year-round mining conditions. As a testament to the favorable work environment, Ghana is host to many of the major gold producers including Newmont and Goldfields and Mid-tiers such as Redback.
Our Canadian Business
Handcamp
On June 4, 2010, we acquired 100% of the mineral rights that our parent company then held in and to Handcamp. Handcamp is located approximately 20 miles north of Badger, central Newfoundland and 6 miles northeast of an abandoned copper mine. Abandoned logging roads run through Handcamp, which we believe will allow for accessibility and mobility of heavy equipment.
One 50-yard wide mineralized zone lies within a strata-bound (rock layers) structurally complex zone which lies near a major east-directed thrust within the Roberts Arm Group (volcanic rocks) and is reflected in folding, shearing (fracturing) and mylonite (fine-grained, compact rock) development. Superimposed on the volcanogenic sulfide mineralization is epigenetic (formed after the rocks were laid down) disseminated gold mineralization. We believe that the optimal sulfide mineralization is associated with sericite schist (rocks formed under high temperature and pressure) with veinlets and dissemination (finely spread minerals) having been traced over a strike length of almost a mile.
35
Handcamp consists of 2 contiguous claim blocks totaling 97 claims, for an area of 2,400 hectares (24 square kilometers). It is located less than 2,000 m east of the Trans Canada Highway (TCH), about 15 kilometers south of South Brook, a small community situated near the south end of Halls Bay along the north coast of Newfoundland, Canada (See
Figure 1
). Driving time from St. Johns, the capital of Newfoundland, to Handcamp is approximately 6 hours. A regional airport is located at Deer Lake 115 kilometers west along the Trans Canada Highway. Gravel roads provide access to Handcamp from the highway (See
Figure 2
). An electrical transmission line parallels the Trans Canada Highway and passes within 1,500m of Handcamp.
Ownership
Mineral rights to Handcamp that we hold currently include licenses 017308M and 011745M. License number, location, license status, work deadlines and exploration expenditure requirements are summarized in
Table I
and shown on
Figure 2
.
Please see the section entitled
Mineral Rights Acquisition - Province of Newfoundland and Labrador
for information on the acquisition of mineral rights and a description of staking procedures and assessment requirements for exploration licenses in the Province.
Table I: Handcamp Claims
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
License
|
|
Location
|
|
Status
|
|
# Claims
|
|
Stake Date
|
|
Work Due
|
|
Required
Expenses*
|
Mapsheets
|
017308M
|
|
Rocky Pond
|
|
ISSUED
|
|
86
|
|
19/01/2010
|
|
19/04/2011
|
|
$
|
17,200.00
|
12H/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
011745M
|
|
Rocky Pond
|
|
ISSUED
|
|
11
|
|
31/12/2003
|
|
04/04/2011
|
|
$
|
2,200.00
|
12H/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
97
|
|
|
|
|
|
$
|
45,200
|
|
*Government filing fees
Renewal date for claim
017308m
is 18/02/2015
Renewal date for claim
011745m
is 02/02/2014
36
Figure 1: Location of the Handcamp Property
Geology
Handcamp occurs in the Lower to Middle Ordovician (476 to 473 million years before present) Roberts Arm Group (the Group), a steeply dipping west to northwest facing sequence of dominantly submarine volcanic and related sedimentary rocks (See
Figure 2
). The Group is overlain by the younger Springdale Group consisting of sub-aerially deposited volcanic rocks and terrestrial sedimentary rocks. The volcanic and sedimentary rocks are intruded by younger granitic rocks.
Rocks exposed near Handcamp are predominantly dark greenish-grey to reddish-brown and black mafic volcanic rocks accompanied by lesser felsic volcanic rocks and locally interlayers of chert and fine grained sedimentary rocks. The rocks trend roughly east-northeast at an azimuth of about 20° and typically dip to the west.
Mineralization at Handcamp consists of pyrite (iron sulfide) and sphalerite (zinc sulfide) with minor galena (lead sulfide) and chalcopyrite (copper-iron sulfide), minerals which are associated with elevated concentrations of gold, silver, lead and zinc. The gold- and silver-bearing sulfide mineralization on Handcamp occurs in patches, lenses, veinlets and disseminations hosted by a 30 to 50 meter thick sequence of altered fine grained sedimentary rocks, red and white chert and altered felsic and chloritized, silicified mafic tuff. The mineralized zone has been traced for approximately 1,200 meters and is approximately 50m wide. The zone has been intersected to a vertical depth of approximately 185 meters. At present, Handcamp is not known by us to contain any reserves.
37
Figure 2: Handcamp Claims
38
Previous Exploration
The area in which Handcamp is located has had a sporadic history of exploration and development since discovery of the Handcamp gold and base metal prospect in 1928. Trenching was carried out on the prospect in 1930 and six short drill holes were completed in 1941. Orenada Mines Ltd. conducted a short 14-hole drilling program on the prospect in 1956. Geophysical surveys including magnetic and electromagnetic surveys were conducted on Handcamp between 1956 and 1977. From 1977 to 1979 Falconbridge Ltd. carried out geological, geochemical and geophysical surveys in the prospect area followed up by trenching and a nine-hole diamond drilling program. During 1982, US Borax Ltd. and Pacific Coast Mines Inc. carried out an induced polarization geophysical survey and subsequently a seven drill hole approximately 684 meter drilling program.
Results of the previous exploration returned generally encouraging results that prompted our parent company to option Handcamp in 2006 from certain prospectors. At that time, our parent company established an approximately 2 kilometers by 2 kilometers exploration grid centered on Handcamp. Soil sampling on the grid revealed elevated concentrations of gold, copper and zinc related to the main structure on Handcamp as well in an area on the west side of the grid along a chain of small ponds. Several rock samples collected in the area also returned elevated gold. Handcamp was returned to the vendors in 2007. A high resolution airborne magnetic survey completed by the Geological Survey of Canada in 2008 revealed the presence of northeast-trending magnetic structures, one of which coincides with the location of Handcamp.
Current Exploration
During 2009, our parent company once again optioned Handcamp from the prospectors. Exploration completed by us and our parent company during 2010 included two induced polarization geophysical surveys, trenching and diamond drilling, the latter focusing on the northeast trending structure that includes Handcamp. Induced polarization surveys, especially the chargeability measurements, are useful for detecting conductive minerals such as pyrite (iron sulfide) or chalcopyrite (copper-iron sulfide) disseminated in rocks below the surface.
Results of the induced polarization survey carried out on the exploration grid established in 2006 successfully traced the mineralized structure containing Handcamp along a length of approximately 1,200 meters (See
Figure 3
). Other induced polarization chargeability anomalies were detected parallel to that containing Handcamp, including one that coincides with elevated gold and copper concentrations in soil samples near the chain of small lakes on the west side of the exploration grid. On the southern portion of the surveyed area, the suspected mineralized zone on Handcamp appears to bifurcate, or split into two structures.
Trenches were completed on induced polarization targets along this suspected mineralized zone to verify the presence of mineralization. The trenches locally exposed mineralization that contained elevated gold, silver lead and zinc concentrations along a length of approximately 600 meters with widths of up to 20 meters. A total of 1,640 meters of diamond drilling in 12 drill holes was completed as part of the 2010 exploration program on Handcamp.
Eleven of the holes were located in three fences spaced at approximately 250 to 300 meter intervals, the central fence located near Handcamp. The 12
th
hole was located about 600m south of Handcamp and was drilled to test the southern extension of the induced polarization anomaly. All of the drill holes successfully intersected alteration and mineralization associated with Handcamp. Estimated true widths of the mineralized zone intersected vary from 15 to 50m. The structure was tested to a vertical depth of 185 meters, or approximately 135 meters below intersections completed during previous drilling by US Borax and Falconbridge along Handcamp. Anomalous values of gold, silver, lead and zinc were intersected in all of the holes.
39
We have completed line-cutting to further test the mineralization and during Phase II, if and when implemented, we intend to conduct soil sampling, geological mapping, prospecting, IP surveys and diamond drilling.However, we will not be able to conduct any follow up programs until we receive additional financing.
Figure 3:
Handcamp IP anomalies and outline of gold-in-soil anomalies, pink areas show areas underlain by rocks that are highly chargeable i.e. probably contain elevated amounts of disseminated metallic minerals such as pyrite (iron sulfide) and/or chalcopyrite (copper-iron sulfide). The areas outlined in white/blue lines show areas that have elevated concentrations of gold in the soil. North is toward the top of the map parallel to the vertical lines.
Phase I Exploration Expenditures
Details of expenditures related to Phase I exploration aggregating approximately $391,022 are presented in
Table II
below.
Table II: Handcamp Property, Phase I Exploration: Expenditure Summary
Expenses incurred during Phase I exploration including IP, trenching and drilling on Handcamp in 2011 on mineral license 011745M.
40
|
| |
Salaries and Related Costs
|
$
|
80,813.22
|
|
|
|
Geophysics
|
$
|
27,120.00
|
|
|
|
Onsite Facilities/Supplied Labor
|
$
|
7,320.00
|
|
|
|
Geological and Related Consultants
|
$
|
49,696.40
|
|
|
|
Trenching
|
$
|
14,345.00
|
|
|
|
Drilling
|
$
|
|
|
|
|
Field Expenses
|
$
|
130,627.93
|
|
|
|
Transportation
|
$
|
19,906.39
|
|
|
|
Analytical
|
$
|
7,314.92
|
|
|
|
Compilation of Previous Data and Information
|
$
|
4,110.00
|
|
|
|
Total Phase I Expenditures
|
$
|
391,022.28
|
Phase II
We have not yet began work on any other phase of our program The objectives of the next phase of exploration are: (i) to test for further extension of mineralization related to the Handcamp mineralized zone; (ii) to drill test other targets already identified in the area; and (iii) to potentially identify new targets as a result of geophysical, geological and geochemical surveys to be carried out on extensions of the existing grid. We have completed 73kilometers of line-cutting in preparation for the commencement of Phase II, which will include soil sampling, geological mapping, prospecting, IP surveys and diamond drilling (See
Figure 4
). However, we have not yet begun Phase II pending receipt of sufficient financing. Soil sampling is expected to be completed on the extended grid in an effort to locate exploration targets for follow-up exploration. An induced polarization survey will be completed as a priority along with follow-up prospecting and geological mapping on targets identified by the geophysical and geochemical surveys. Further trenching may be required in local areas to facilitate mapping. An enhanced drilling program (3,000m) is also planned that will include testing mineralization to the south where it appears to improve, as well as other targets identified from results of the geophysical and geochemical surveys already completed. It will also include holes to the north and west contingent on additional targets that may be identified by the induced polarization and soil geochemical surveys.
Further exploration beyond Phase II is contingent upon positive results from that phase. If warranted, a multi-phase exploration program will be carried out with the initiation of each new phase being contingent on positive results from the previous phase. Continued positive results from the multi-phase exploration program would lead ultimately to a third party pre-feasibility study and production decision.
Expenditures of approximately $4.4 million are anticipated to be required to complete Phase II and Phase III, where implementation of Phase III will be contingent on the success of Phase II. We believe that additional expenditures in the approximate aggregate amount of $6.5 million will be required in order to advance a mineral deposit or deposits on Handcamp, if any, to the stage of the completed pre-feasibility study referred to above. Should any of the exploration phases prove unsuccessful at Handcamp, any financing raised for the execution of the work could be redirected to other projects such as the November Properties.
41
Figure 4: Handcamp grid expansion
42
November Properties
South Lucky and the Rusty Ridge properties are located in eastern Newfoundland on the Bonavista Peninsula. Colliers is also located in eastern Newfoundland but is situated on the Avalon Peninsula. Our companys economic interest in the November Properties is based on terrestrial sedimentary and volcanic rocks of the Avalon Zone, correlative to Africa, hosting sedimentary-hosted stratiform copper (SSC) or volcanic red bed copper (VRC) mineralization with the exception of Rusty Ridge, which has iron-oxide- copper-gold (IOCG) potential.
Rusty Ridge Property
Our companys interest in the Rusty Ridge property centers upon Iron-Oxide-Copper-Gold (IOCG) potential. The primary target is an interpreted mineralized deep-seated gravity/magnetic body hosted by a plutonic entity intruding volcanic rocks. Our parent company undertook a technical review and a proposal for a diamond drilling program for implementation in 2010. The Rusty Ridge property is approximately 2,100 hectares in size, situated on Crown land in proximity to the community of Bunyans Cove, Bonavista Peninsula. Mineral Exploration License Nos. 015991M and 016773M, aggregating 53 claims, are both in good standing. At present, the Rusty Ridge Property is not known by us to contain any reserves.
Colliers Property
The targeted exploration of this Property is volcanic red bed copper (VRC) similar to deposits found in Michigan. The Colliers Property is approximately 500 hectares in size and is situated on Crown land in proximity to the communities of Colliers and Conception Harbour, Avalon Peninsula. Mineral Exploration License No. 011706M, aggregating 20 claims, is in good standing. We believe that the Colliers Property has been unexplored for at least 150 years. Our parent company staked the property in 2006 for its VRC potential associated with chalcopyrite, bornite and malachite mineralization located in a 27 meter deep shaft sunk in the 1850s. At present, the Collier's Property is not known by us to contain any reserves.
South Lucky Property
The targeted exploration of this Property is also sediment-hosted stratiform copper. The South Lucky Property is approximately 150 hectares in size and is situated on Crown land, north of the community of Port Rexton, Bonavista Peninsula. Mineral Exploration License No. 015995M, aggregating 6 claims, is in good standing. At present, the South Lucky Property is not known by us to contain any reserves.
Quality Assurance/Quality Control
.
All of the work completed during the exploration by our parent company and ourselves during 2011 was supervised by a professionally qualified on-site geologist unless stated otherwise. The geologist was present during all of the trenching and related interval chip and channel sampling. The drill core was logged in a secure facility in South Brook. All samples were submitted to Eastern Analytical Ltd where they were analyzed by Fire Assay for gold and for various other elements by 11 and 30 element ICP. Every 20
th
sample pulp (30 samples) and a suite of 10 samples that returned high gold analysis were obtained from Eastern and sent to Accurassay Ltd. in Gambo, Newfoundland, a different company, as a check on the results to conform to QA/QC protocols consistent with NI 43-101. Work was completed in 2011 under the supervision of Jim Weick and Wayne Pickett, both qualified professional geologists (P.Geo.) registered with the Professional Engineers and Geoscientists of Newfoundland and Labrador (PEG-NL).
Glossary of Certain Terms
Felsic rock
High content of silicon, with predominance of quartz, alkali feldspar and/or feldspathoids: the felsic minerals; these rocks (e.g., granite, rhyolite) are usually light colored, and have low density.
Mafic rock
Lesser content of silicon relative to felsic rocks, with predominance of mafic minerals pyroxenes, olivines and calcic plagioclase; these rocks (e.g., basalt and gabbro) are usually dark colored, and have a higher density than felsic rocks.
43
Tuff
A rock composed of compacted volcanic ash varying in size from fine sand to coarse gravel; at Handcamp the tuffs were probably deposited subaqueously.
Chlorite
A generally green or black secondary mineral (Mg, Fe, Al) 6(Si, Al) 4O10 (OH) 8, often formed by metamorphic or hydrothermal alteration of primary dark rock minerals, resembles mica.
Chloritization
The introduction of, production of, replacement by, or conversion into chlorite.
Silicification
To become converted into or impregnated with silica.
Induced polarization (IP)
Induced polarization (IP) is a geophysical imaging technique used to identify subsurface materials, such as disseminated conductive minerals like pyrite (iron sulfide). The method is similar to electrical resistivity tomography, in that an electric current is induced into the subsurface through two electrodes, and voltage is monitored through two other electrodes.
Time domain IP methods measure the voltage decay or chargeability over a specified time interval after the induced voltage is removed. The integrated voltage is used as the measurement.
Frequency domain IP methods use alternating currents (AC) to induce electric charges in the subsurface, and the apparent resistivity is measured at different AC frequencies.
Electromagnetic survey (EM)
Measurement of the apparent resistivity of the sub-surface by recording the response of a secondary electrical field induced by the pulsing of a current through a fixed or mobile loop. Used in mineral exploration to detect conductive materials such as massive sulfides, graphite-rich rocks are also detected by EM surveys.
Magnetic survey
When carrying out a magnetic survey, airborne or ground magnetometers are used to search for magnetic anomalies in the Earths magnetic field. The anomalies are an indication of concentrations of magnetic minerals such as magnetite, pyrrhotite and ilmenite in the Earths crust. The survey is useful in differentiating different rocks types that have different concentrations of magnetic minerals as well as detecting concentrations of magnetic minerals such as pyrrhotite (iron sulfide) that may be associated with other minerals of economic interest such as chalcopyrite (copper iron sulfide), sphalerite (zinc sulfide) and/or galena (lead sulfide).
44
Mineral Rights Acquisition - Province of Newfoundland and Labrador
General
Acquisition of mineral rights in the Province is done by online map staking through its Mineral Rights Administration System, known as MIRIAD. In order to stake claims, one must be at least 19 years of age or a corporation, and must be registered with the Mineral Claims Recorders Office. A prospectors license is not required to stake claims or conduct mineral exploration in the Province. Our parent company staked an aggregate of 149 claims to Handcamp, though we presently have rights to no more than 97 of these. These claims, which form a part of four separate exploration licenses, constitute exclusive legal rights to explore for minerals on Handcamp and were conveyed by our parent company to us pursuant to the acquisition agreement. If we discover a mineral deposit on Handcamp, we would be entitled to convert the license into a mining lease; we presently intend to convert any applicable licenses into leases if and when we discover any such deposits. However, no such conversion is permitted until a deposit is discovered. The licenses are issued for a minimum of five years. However, we cannot assure you that a mineral deposit will ever be discovered on Handcamp.
Land Tenure
A mineral license gives the licensee the exclusive right to explore for minerals in, on or under the area of land described in the license. A mineral exploration license is issued for a five-year term and may be renewed and held for a maximum of twenty years, provided the required annual assessment work is completed, reported and accepted by the Department of Natural Resources of the Province, and the renewal fees area paid. A license holder has the right to convert any part of the mineral license to a mining lease provided all provisions of Section 31 of the Mineral Act of the Province are met.
Fees
The cost to stake a claim is $60: this includes a $10/claim recording fee and a $50/claim security deposit. The security deposit is refundable upon submission and acceptance of the first-years assessment report. The required annual assessment work increases from year to year as outlined below:
|
|
| |
Year
|
Dollar amount per claim
|
First
|
$
|
200
|
Second
|
$
|
250
|
Third
|
$
|
300
|
Fourth
|
$
|
350
|
Fifth
|
$
|
400
|
Sixth through Tenth inclusive
|
$
|
600
|
Eleventh through Fifteenth inclusive
|
$
|
900
|
Sixteenth through Twentieth inclusive
|
$
|
1,200
|
|
|
|
Renewal Fees
|
|
|
Fifth Year
|
$
|
25
|
Tenth Year
|
$
|
50
|
Fifteenth Year
|
$
|
100
|
Business Strategy
Our business strategy includes attempting to stake, explore and develop new properties in geologically promising areas and to continue making acquisitions of select properties that have been identified as economically attractive, technically and geologically sound and have significant upside potential.
45
We intend, subject to obtaining the requisite financing, to build our business through the exploration and development of the existing Handcamp property as well as our South Lucky and Rusty Ridge properties, though as noted elsewhere in this prospectus we are currently concentrating on our Ekom Eya property. Our strategy is to diversify our revenue sources by combining the secure and reliable revenue source of producing gold properties with the potential of gold exploration projects. However, we will not be able to implement our strategy without additional financing. We plan to explore and stake new gold properties, acquire development stage gold exploration properties, carry out exploration programs on the acquired properties, and develop any viable gold producing properties we discover, acquire and are able to pursue, assuming that we are able to raise the requisite financing for such activities.
Our search for producing gold properties has been directed towards small and medium-sized gold companies and properties. For purposes of our initial acquisitions, if any, we are seeking lower risk property interests. In building our portfolio of gold properties, we intend, subject to obtaining the requisite financing, to explore and stake new gold properties, acquire active gold producing properties as well as development stage gold properties. As we continue to develop our portfolio of interests, we will search for properties that have the following qualities:
·
At least developmental drilling exploration potential in proven producing areas and highly promising areas;
·
Significant additional production capacity in existing gold producing properties;
·
Further developmental potential; and
·
Those where we will have the ability to assume operatorship of existing gold producing properties.
Our ultimate objective is to sell any mineral properties that we have been able to develop to a major mining company, or to enter into joint ventures with it. We expect that such a company, should the opportunity arise, will in all likelihood make the decision whether to enter into a joint venture or to purchase a property in its discretion.
Our management hopes to develop relationships with certain major mining companies that could assist us in implementing our business plan; however, we cannot assure you that any such relationships will ever materialize. Management expects that the price of each property will be determined by the anticipated amount and value of minerals it contains. If our management is able to acquire a pool of gold assets, we expect that we would attempt to sell them to a major mining company that would then bring Handcamp into production.
We believe that the stage at which the interest of a major mining company is likely to be elicited is very subjective and subject to numerous facts and circumstances that we cannot presently predict with any significant confidence. However, we do believe that such companies have in the past become interested in a mining property based solely on the discovery of one promising drill hole having, in the opinion of such mining company, significant potential to contain substantial economic value.
Irrespective of any interest shown by such a company, if any, we do not anticipate that our own activities will extend beyond conducting a preliminary feasibility study, where such study is defined as having (i) established that a particular mining project appears viable, and (ii) concluded that an effective method of mineral processing can be adopted and is reasonably likely, in the reasonable opinion of a qualified person, to lead to the determination that all or a part of the mineral resource can be classified as a mineral reserve.
The Business of our Parent Company
The business of our parent company is very similar to our own. Our parent company conducts virtually identical operations as we do.
46
Seasonal Access
The exploration for and development of gold properties in Canada depends on access to areas where exploration and operations are to be conducted. Seasonal weather variations, including frost and snow, affect access in certain areas. Accordingly, seasonal variations in weather patterns affect the ability to explore and access certain properties during certain times of the year.
Seasonality has limited effect on our operations in Ghana.
Markets
We are currently in the exploration stage and have not generated revenues. We are not producing gold, nor do we have any customers. The availability of a ready market and the prices obtained for gold produced depend on many factors, including the extent of domestic production and imports of gold, the proximity and capacity of other gold properties, fluctuating demand for gold, the marketing of competitive metals, and the effects of governmental regulation on production and sales.
Competition
The strength of commodity prices has resulted in significantly increased industry operating cash flows and has led to increased exploration activity. This strength has increased competition for undeveloped lands, skilled personnel, access to drilling and other equipment, and access to processing and gathering facilities, all of which may cause drilling and operating costs to increase. Virtually all of our competitors are larger than we are and have substantially greater financial and marketing resources. In addition, virtually all of our competitors may be able to secure products and services from vendors on more favorable terms.
Government Regulation
Our operations will be subject to various types of regulation at the Canadian and United States federal, state, provincial and local levels, as well as regulations in Ghana. Such regulation includes: (i) requiring permits for drilling; (ii) implementing environmental impact practices; (iii) submitting notification and receiving permits relating to the presence, use and release of certain materials incidental to exploration and production operations; and (iv) regulating the location of exploration, the method of exploration, the use, transportation, storage and disposal of fluids and materials used in connection with exploration and production activities, surface usage and the restoration of properties upon which exploration and production occur and the transporting of production.
Our operations, if any, will also be subject to various conservation matters, including the regulation of the location, size and production rate of gold properties. The effect of these regulations may limit the rate at which gold may be extracted from certain properties and the areas which we may access at one time.
Operations on properties in which we have or may acquire an interest are subject to extensive Ghanaian, Canadian and United States federal, provincial, state and local environmental laws that regulate the discharge or disposal of materials or substances into the environment, restoration of properties and otherwise are intended to protect the environment. Numerous governmental agencies issue rules and regulations to implement and enforce such laws, which are often difficult and costly to comply with and which carry substantial administrative, civil and criminal penalties and in some cases injunctive relief for failure to comply.
Some laws, rules and regulations relating to the protection of the environment may, in certain circumstances, impose strict liability for environmental contamination. These laws render a person or company liable for environmental and natural resource damages, cleanup costs and restoration costs. Other laws, rules and regulations may require the rate of gold production to be below the economically optimal rate or may even prohibit exploration or production activities in environmentally sensitive areas. In addition, provincial and state laws often require some form of remedial action, such as closure of inactive pits and restorative measures.
We have received and are in possession of all the licenses, grants and other governmental approvals required for us to operate our business. Our cost of obtaining such governmental approvals is immaterial at the present time.
47
Employees
We currently have 4 employees, consisting of two secretaries and two prospectors in addition to the individuals acting as officers as set forth hereinafter. None of such individuals is covered by a collective bargaining agreement or employment agreement. We have not experienced a strike or other adverse work stoppage due to organized labor.
Property
Our principal executive offices are located at 1149 Topsail Road, in the City of Mount Pearl, in the Province of Newfoundland and Labrador, Canada, A1N 5G2. In 2010 we acquired 100% of the mineral rights in and to Handcamp, a gold property located in the Province of Newfoundland and Labrador, Canada. Our telephone number is (709) 368-9223. South Lucky and the Rusty Ridge properties are located in eastern Newfoundland on the Bonavista Peninsula. Colliers is also located in eastern Newfoundland but is situated on the Avalon Peninsula. The Ekom Eya property is located in the Bibiani Gold Belt of Ghana.
Legal Proceedings
From time to time we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of business. We are not currently involved in legal proceedings that we believe could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations.
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The names of our officers and directors as of the date hereof, as well as certain information about them, are set forth below. Unless otherwise noted, all our offers and directors were appointed on September 10, 2010.
|
| |
Name
|
Age
|
Position(s)
|
Kenneth Stead
|
56
|
President, Chief Executive Officer and Director
|
Timothy R. Stead
|
43
|
Chief Operating Officer and Director
|
Thomas Brookes
|
69
|
Vice President and Managing Director of the Ekom Eya Mine Division and Director
|
Matthew Sullivan
|
39
|
Assistant Vice President of the Ekom Eya Mine Division, Chief Financial Officer and Director
|
Kenneth Stead
Mr. Stead is a co-founder of Kat Exploration, our parent company, and has been its president since its incorporation in December of 2005. Mr. Stead worked directly in the mining industry from the early to late 70s, where he first started with the Iron Ore Company of Canada and worked for Noranda at its Nanasivik mine in Stratacona Sound, northern Baffin Island. In the early 1980s, Mr. Stead worked in the oil fields of Alberta, afterwards returning to Newfoundland where he set up his own construction company from 1985 to 1995. In 1997, Mr. Stead became a co-founder of Cornerstone Resources Inc., a junior mining company now trading on the TSX-V (CGP) until he resigned in 2004. Mr. Stead devotes approximately 30 hours per week to our parent company as well as to other professional pursuits and 20 hours per week to our company
.
Mr. Stead brings to the Board significant operational experience in the mining industry. His prior business experience, along with his tenure at our company, gives him a broad and extensive understanding of our operations and the proper role and function of the board of directors. In addition, his background allows him to bring to the board of directors extensive knowledge about our industry.
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Timothy R. Stead
Mr. Stead is a co-founder of our parent company and has been its vice president of field operations since inception. Mr. Stead completed a prospectors training course in 2000, a time when working in the field for Cornerstone Resources Inc. He has years of experience in working with sediment-hosted copper on the eastern portion of the province of Newfoundland. Mr. Stead has acquired experience and knowledge of massive sulfide deposits as well as gold, and is presently overseeing a work program on one of our parent companys gold properties. As the Vice President of Field Operations of our parent company in addition to his above referenced capacity with our company, Mr. Stead devotes approximately 35 hours per week to our parent company as well as to other professional pursuits and 20 hours per week to our company.
Mr. Stead brings to the Board significant operational experience in the mining industry. His prior business experience, along with his tenure at our company, gives him a broad and extensive understanding of our operations and the proper role and function of the board of directors. In addition, his background allows him to bring to the board of directors extensive knowledge about our industry.
Thomas Brookes
Mr. Brookes was appointed to his current positions on April 18, 2012. Mr. Brookes has been involved in the exploration and extraction of natural resources for more than thirty years. His past experience ranges from drilling for oil and natural gas in the Canadian High Arctic to many years prospecting for gold in Northwest British Columbia and the Yukon Territory. Prior to its acquisition by us, since June of 2011 Mr. Brookes was the Chief Executive Officer of Global Gold, a mining exploration company that secured the operating rights to the Ekom Eya mining concession. From January 2000 through the present, Mr. Brookes has also served as the Chief Executive Officer of Virgin Gold, Inc., a business offering contracting and drilling services based in Inuvik, NWT.
Mr. Brookes brings to the Board significant operational experience in the mining industry. His prior business experience, along with his tenure at our company, gives him a broad and extensive understanding of our operations and the proper role and function of the board of directors. In addition, his background allows him to bring to the board of directors extensive knowledge about our industry.
Matthew Sullivan
Mr. Sullivan was appointed to his current positions on April 18, 2012, except that he became our Chief Financial Officer on May 4, 2012. Mr. Sullivan has worked with a wide variety of well-established ventures and early stage companies in strategic and business operations with a focus on venture capital and business analysis. Mr. Sullivan was the Chief Financial Officer of Global Gold since June 2011 prior to being acquired by us. He has also been the principal of Sullivan & Associates Ltd., a financial consulting firm, since January 2000, and the Chief Operating Officer of Asana International, a global consumer health products company, since October 2011. From May 2007 through February 2012, Mr. Sullivan owned Vandenblumes Cleaning Ltd. and Whiterock Cleaning Inc., two businesses that offer residential and commercial cleaning services throughout Metro Vancouver.
Mr. Sullivan brings to the Board significant operational experience in the mining industry. His prior business experience, along with his tenure at our company, gives him a broad and extensive understanding of our operations and the proper role and function of the board of directors. In addition, his background allows him to bring to the board of directors extensive knowledge about our industry.
All of our directors hold their positions on the Board until our next annual meeting of shareholders and until their successors have been qualified after being elected or appointed. Officers serve at the discretion of the Board.
Family Relationships
Messrs. Kenneth Stead and Timothy Stead are brothers; other than the foregoing, there are no family relationships among the members of board of directors or management. There is no arrangement or understanding between or among our executive officers and directors pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the current members of the board of directors.
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Involvement in Certain Legal Proceedings
Except as set forth herein, to our best knowledge, no officer, director or 5% or greater shareholder of our company has, during the last ten years: (i) been convicted in or is currently subject to a pending a criminal proceeding; (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to any federal or state securities or banking laws including, without limitation, in any way limiting involvement in any business activity, or finding any violation with respect to such law, nor (iii) has any bankruptcy petition been filed by or against the business of which such person was an executive officer or a general partner, whether at the time of the bankruptcy or for the two years prior thereto. To our knowledge, no director, officer or other affiliate of our company, and no record or beneficial owner of more than five percent (5%) of our securities, or any associate of any such director, officer or other affiliate or security holder is a party adverse to us or has a material interest adverse to us in reference to pending litigation.
Election of Directors and Officers
Holders of shares of our common stock are entitled to one (1) vote for each share held on all matters submitted to a vote of the shareholders, including the election of directors. Cumulative voting with respect to the election of directors is not permitted.
Our directors are elected at the annual meeting of the shareholders or at a special meeting called for that purpose. Each director shall hold office until the next annual meeting of shareholders or until the directors successor is elected and qualified. If a vacancy occurs on the our board of directors, including a vacancy resulting from an increase in the number of directors, then the shareholders may fill the vacancy at the next annual meeting or at a special meeting called for the purpose, or our board of directors may fill such vacancy.
The Purchase Agreement whereby we acquired Global Gold provides that each of Kenneth Stead, Timothy Stead, Thomas Brookes and Matthew Sullivan will vote their shares of our common stock in favor of each other as directors so long as the parties maintain an ownership interest of at least five percent (5%) of our outstanding common stock and until the earlier of (i) October 18, 2013 if we have not received revenues of at least One Million Dollars ($1,000,000) from the production of the Ekom Eya property by then; or (ii) April 18, 2015.
Board Committees
Our board of directors has no separate committees; however, we intend to establish an audit committee in the future. Our board of directors acts as our compensation committee. We are not a listed company under SEC rules and we are, therefore, not required to have a compensation committee comprised of independent directors.
Director Independence
Our board of directors has determined that none of our directors is independent as defined under the rules of the NYSE Amex Equities Company Guide (although our shares of common stock are not listed on the NYSE Amex or any other national securities exchange).
Audit Committee Financial Expert
We have not made a determination as to whether any of our directors would qualify as an audit committee financial expert.
Code of Ethics
We have adopted a Code of Ethics applicable to our principal executive officer, principal financial officer, principal accounting officer and controller.
Stock Option Plans
We have not adopted any stock option plans for our executives.
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