ITEM 1. BUSINESS.
GENERAL
We were incorporated on April 28, 2006 under the laws of the State of Nevada. On April 13, 2009 we amended our Articles of Incorporation by increasing our issued and authorized common stock on a three-for-one basis. Accordingly, our authorized capital of common stock increased from 100,000,000 shares, par value of $0.001 per share, to 300,000,000 shares, par value of $0.001 per share.
Our business plan is to assemble a portfolio of mineral properties with gold potential and to engage in the exploration and development of these properties. We currently own a 100% interest in our lead mineral project called the “Clisbako Property” and also in a property that we refer to as the “Texada Gold Property." We also have options to acquire: (i) a 100% interest in the “Golden Snow Project," the “Fish Project” and the “CPG Project;" (ii) an 85% interest in the “Manado Gold Property;” and (iii) a 100% interest in the “June Claims.” Our mineral properties are described in detail below.
We anticipate that we will be focusing our resources on the exploration of the Clisbako Property, the Golden Snow Project and the exercising of our option of the Manado Gold Property due to their potential and current state of development.
We are actively reviewing other gold potential mineral properties for future acquisition.
RECENT CORPORATE DEVELOPMENTS
Since the filing of our Quarterly Report on Form 10-Q for the quarter ended August 31, 2009, we experienced the following corporate developments:
1.
On January 19, 2010, we entered into the Manado Agreement. See “Manado Gold Property” below.
2.
On January 21, 2010, we entered into a second extension agreement (the "Second Extension Agreement") with Bako Resources Inc. See “Clisbako Property” below.
3.
On January 21, 2010, we announced that our directors have approved proceeding with an exploration program including the drilling of the main targets on the Clisbako Property.
4.
On February 5, 2010, we entered into the June Agreement. See “June Claims” below.
5.
On March 15, 2010, we entered into a third extension agreement dated for reference February 15, 2009 with Bako Resources Inc. See “Clisbako Property” below.
CLISBAKO PROPERTY
Our main mineral property is the “Clisbako Property,” which we own a 100% interest. The Clisbako Property covers an area of approximately 3,388 hectares and is located in the Interior Plateau Region of north central British Columbia. It is composed of ten contiguous mineral claims, situated within the Cariboo Mining Division. The claims are situated approximately 80 miles west of Quesnel, British Columbia
Description of Property
Our acquisition of the Clisbako Property was completed under the terms of a purchase agreement dated December 16, 2008 with Bako Resources Inc. (“Bako”). Under the terms of the purchase agreement, we issued to Bako 2,000,000 pre-split (6,000,000 post-split) shares and a promissory note in the amount of $56,600 (CDN $70,000 translated to US$65,913 as at November 30, 2009) payable on June 30, 2009. On July 23, 2009, we entered into an extension agreement with Bako to extend the due date of the promissory to December 31, 2009. In consideration of the extension, we issued 60,000 shares of our common stock to Bako. On January 21, 2010, we entered into a second extension agreement with Bako, whereby Bako agreed to extend the due date of a non-interest bearing promissory note in the amount of CDN $70,000 payable to Bako from December 31, 2009 to February 15, 2010. In consideration of the extension, we issued to Bako 10,000 shares of our common stock. On March 15, 2010, we entered into a third extension agreement dated for reference February 15, 2009, with Bako, whereby Bako agreed to extend the due date of a non-interest bearing promissory note in the amount of CDN $65,000 payable to Bako from December 31, 2009 to June 30, 2010. In consideration of the extension, we agreed to pay CDN $5,000 of the promissory note and issue to Bako 20,000 shares of our common stock
The Clisbako Property covers approximately 3,388 hectares. The mineral claims making up the Clisbako Property are recorded with the Ministry of Energy, Mines and Petroleum Resources (the “Ministry of Mines”) as follows:
The Province of British Columbia owns the land covered by the Clisbako Property. To our knowledge, there are no aboriginal land claims that might affect our title to the Clisbako Property or the Province’s title of the property.
In order to maintain the Clisbako Property in good standing, we must complete minimum exploration work on the Clisbako Property and file confirmation of the completion of the work with the Ministry of Mines. In lieu of completing this work, we may pay a fee equal to the minimum exploration work that must be performed with the Ministry of Mines. The completion of mineral exploration work or payment in lieu of exploration work in any year will extend the existence of our mineral claims for one additional year. The minimum exploration work that must be performed and/or the fee for keeping our claims current is equal to $8.00 CDN (approximately $7.57 US) per hectare. As our mineral claims are in good standing until October 29, 2010, we will be required to complete minimum exploration work or pay a minimum fee of CDN$27,104 (approximately US$25,632) on or before October 29, 2010 and each year thereafter in order to keep the Clisbako Property current. If we fail to complete the minimum required amount of exploration work or fail to make a payment in lieu of this exploration work, our mineral claims will lapse and we will lose all interest in our mineral claims.
Location, Access, Climate and Physiography
The Clisbako Property is located in the Interior Plateau Region of north central British Columbia. It is composed of ten contiguous mineral claims, situated within the Cariboo Mining Division. The claims are situated approximately 80 miles west of Quesnel, British Columbia.
Access to the property is by paved highway west from Quesnel to Nazko, then 30 miles southwest by gravel Forest Service Roads (“FSR”). The 4200 FSR crosses the northern portion of the Clisbako Property and branch roads and logging tracks provide access to much of the rest of the property.
The climate of the area is characteristically dry. Average annual temperature is approximately 2° C, with average summer highs in July and August of 14° C and January winter lows averaging -13° C. Average annual precipitation is approximately 440 millimeters, with an estimated 40% falling as snow. The majority of rainfall occurs between June and August.
The claims cover a wide variety of terrain, from swampy meadows to forested upland slopes. Elevations range from 1,250 meters along the Clisbako River to over 1,500 meters to the west. A significant portion of the property has been logged by clearcut methods. Forest cover is typical of the region, consisting of lodgepole pine, with local stands of black spruce, fir and birch along drainages. Timber harvesting has occurred with numerous cut blocks scattered throughout the claim area. Swampy meadow lands in the eastern and north-eastern portions of the property that form the headwaters of the Clisbako River system are saturated for much of the year but dry out in late summer. These areas are sparsely treed.
Property History
Historical work to date on the Clisbako Property has outlined eight main zones, as currently identified, of epithermal mineralization and alteration referred to as the North, Central, South, West Lake, Obvious, West Lake Boulder, Gore and Bari zones. Historical records indicate that soil geochemical surveys and geophysical surveys have been conducted over several grids on the property, and a total of 34 diamond drill holes have been completed. The bulk of the work has been concentrated within a 2 kilometer by 4 kilometer north trending corridor in the centre of the project area. Prior to 1989, there is no recorded work on the Clisbako Property.
Eighty Eight Resources Ltd.: 1989 - 1991 - In 1989, a regional reconnaissance exploration program was conducted within the Nechako Basin by Eighty Eight Resources Ltd. Epithermal quartz float collected on the property returned weakly to moderately anomalous gold, silver and arsenic values. Subsequent work traced these samples to their source and led to the discovery of several extensive areas of epithermal silicification and argillic alteration in 1990.
A property consisting of 15 contiguous claims (Clisbako 1-15) covering 7,500 hectares was staked by Eighty-Eight Resources Ltd. to cover these areas. Dawson Geological Consultants Ltd. were contracted to complete a compass and flag grid covering the 4 main mineralized zones (North, Boulder, Central and South Zones). Crews collected 1,320 soil samples from grids covering the mineralized areas, and a total of 253 rock samples were collected from areas of epithermal silicification as well as from mineralized float believed to be locally derived. Geological mapping was also completed.
Minnova Inc.: 1991- 1992 - The property was subsequently optioned to Minnova Inc., and five more claims (Clisbako 16-20) were added to the property in April, 1991, following a compilation of data and reinterpretation of the 1990 field work. Minnova then proceeded to fly an airborne magnetic and electromagnetic survey over the entire property. Grid line spacing over the pre-existing grid was tightened to 100 meters line spacing and grid lines were extended 1 kilometer to the west. The entire gridded area was geologically mapped and sampled, the results of which delineated the Gore and Pond epithermal alteration zones. A total of 18 trenches were excavated covering 5 mineralized zones (North, South, Central, Discovery and Trail Zones), all of which were mapped in detail and sampled. Based on the results of these programs a 19 hole NQ drill program was completed totaling 3,024 meters. This included 11 holes in the North Zone, 7 holes in the South Zone and 1 diamond drill hole in the Central Zone. The program confirmed the presence of widespread anomalous gold concentrations but failed to delineate any zones of economic significance.
In June, 1992, a total of seventeen 2-post claims were added on the claim group, presumably to ensure that there were no internal fractions between the Clisbako 4 & 13, 7 & 14, 5 & 10 and 8 & 10 claims. Minnova conducted a gradient array IP geophysical survey over 17 partial grid lines covering those zones identified to date in the central portion of the property. An additional 7 trenches were completed in the West Lake, Gore, West Pit and Central Zones. An 11 hole, 1,358 meter NQ drill program was conducted to evaluate the results of the gradient array IP survey and extensions to zones identified in 1991. Although the drilling intersected extensive widths of strong epithermal alteration in each target area, no significant precious metal values were detected. Nonetheless, indicator elements such as mercury, arsenic and tin were strongly anomalous throughout, indicating that the system as a whole has a classic epithermal signature.
Phelps Dodge: 1994 - 1996 - After the expiration of Minnova’s option, Phelps Dodge examined the property and subsequently optioned it in the fall of 1994. Phelps Dodge, through Fox Geological Services Inc., carried out a 22 line kilometer soil geochemical sampling program in 1994. Thick glacial till cover in the project area effectively masks any bedrock leaching and the soil survey failed to define zones of epithermal alteration.
Fox Geological was retained again to conduct a combined rock and soil geochemistry program, IP geophysical survey, geological mapping and a diamond drilling program during the 1995 field season. The 1995 program focused on developing new targets in relatively under explored parts of the property and further evaluating known zones of mineralization with limited historical work.
Fox Geological Services completed 36 miles of gridding west of Camp Lake to the western claim boundary. Mapping and prospecting on the grid generated 339 rock samples of bedrock and float, returning values from trace to 9760 ppb gold. This sample was collected from a cluster of weakly quartz veined feldspar phyric rhyolite float boulders within a discrete dispersion train in till. The bedrock source of these boulders has not been discovered.
Soil geochemical surveys totaling 22 line kilometers covered the western and central portions of the claim group along one kilometer spaced lines with detailed coverage in the Gore and Bari zones resulting in 677 soil samples. Anomalous gold results were usually isolated, one sample occurrences, but anomalous arsenic values outlined a prominent 2000 meter by 800 meter north trending zone which coincided with several new zones of quartz veining outlined by prospecting. Additional follow-up was recommended in the Bari 1 and 2 zones.
The IP survey consisted of a total of 17.8 line kilometers. Two different arrays were utilized: a reconnaissance style survey with electrodes spaced 75 meters apart along road lines and a detailed survey with 150 meter electrode spacing over two established grid lines. The wider separations failed to detect any anomalous readings that were not detected using shorter separations.
A total of 700.9 meters of NQ2 diamond drilling in 4 drill holes was conducted on the West Lake boulder train and the Obvious Zone. Drilling failed to encounter economic concentrations of gold with results similar to those obtained from the North and South Zones.
Phelps Dodge noticed in 1995 that several extensive intervals of Minnova’s drill core had not been sampled, and undertook to split, sample and assay these intervals. A total of 708.5 meters of diamond drill core from the Minnova program was sampled in the fall of 1995, returning elevated sub-economic results for gold, arsenic and tin in sections from holes 91-04 and 92-22.
A short 4 day field program was completed in 1996 consisting of geological mapping and sampling in the Bari Zone area. A total of 24 rock samples were submitted for analysis with the best results reporting 294 ppb gold. Most samples over 50 ppb gold were from boulder float. Elevated arsenic amounts up to 5194 ppm were returned. As with the high gold results, the majority of the elevated arsenic results are from boulder float samples.
Although a large gold bearing epithermal system had been outlined in the central claim area covering approximately 20 square kilometers, gold tenors are generally very low, rarely exceeding 500 ppb.
Goodall (Global Geological): 1996 - 2003 - The Bako 1 to 16 claims were subsequently staked by Geoff Goodall, P. Geo. in 1996 to cover previously identified zones of alteration and mineralization. A prospecting program was conducted on the Bako 1 to 5 mineral claims in the spring of 2002. These claims cover eight zones of hydrothermal alteration typified by pronounced bleaching of the host felsic volcanics and are characterized by intense argillic alteration accompanied by multi-stage intense quartz veining, weak to strong silicification, and/or hydrothermal brecciation. The work program consisted of prospecting traverses and rock geochemical sampling of areas adjacent to and within previously discovered zones of alteration. A total of fifty-two rock samples were collected. A strong correlation was shown to exist between anomalous gold values and anomalous silver values. Samples with anomalous concentrations of antimony also had anomalous levels of arsenic, and mercury was weakly anomalous.
Bard Ventures: 2003 - 2004 - The property was optioned to Bard Ventures in late 2003 and Global Geological Services established two geophysical grids over the Discovery and Brooks Zones totaling 24.5 line kilometers. Previous mapping and sampling programs within these areas uncovered concentrations of quartz rich boulder float with grab samples indicated anomalous gold values.
Regional Geology
The Clisbako property is located in the northern part of the Chilcotin Plateau. Specifically, it is situated in the south central part of the Anahim Volcanic Belt along an east-west trend defined by three peralkaline shield volcano complexes (Rainbow Range, Ilgachuz Range, Itcha Range) that comprise the western part of the belt. The oldest rocks exposed in the Chilcotin Plateau area are Pennsylvanian to Permian age Cache Creek Group sedimentary rocks. These are overlain by upper Triassic to lower Jurassic Takla Group andesite-basalt flows, tuffs and breccias and associated clastic rocks. Predominant in the northern portion of the Chilcotin Plateau are andesite flows and breccias, and sedimentary rocks of the mid-Jurassic Hazelton Group. This sequence is unconformably overlain by the upper Cretaceous, Paleocene, Eocene and possibly Oligocene rocks of the Ootsa Lake Group. This latter Group is comprised of rhyolitic to dacitic tuffs, flows and breccias with minor amounts of andesite, basalt, conglomerate and tuffaceous shale.
A sequence of Eocene to Miocene andesite, dacite and rhyolite volcanics of the Endako Group and Pliocene to Pleistocene Chilcotin Group vesicular andesite and basalt flows, breccias and cinder cones conformably overlie the Ootsa Lake Group. Pleistocene to recent till, gravel and sand infill drainages basins and locally form eskers and moraines up to 100 meters thick. Phelps Dodge compiled a detailed regional geology synopsis of the area as part of the work they conducted.
The Clisbako property is dominantly underlain by felsic volcanics and volcaniclastics of Eocene age that are referred to informally as the Clisbako Volcanics. The Clisbako Volcanics underlie a large, regionally circular area within which a wide variety of assemblages of the Clisbako Volcanics occur. This area appears to be a distinct basin of volcanic deposition and is referred to as the Clisbako Caldera Complex. The age of the complex is Early to Middle Eocene, based on Potassium-Argon age dates and palynology. Chemically similar volcanics, also of Eocene age, to the north in the Nechako River map area are referred to as the Ootsa Lake Group (for the felsic members) and the Endako Group (for the basic and intermediate members).
Volcanic, subvolcanic and volcaniclastic rocks within the Clisbako Caldera Complex range in composition from basalt to rhyolite and include a wide variety of textural types and facies assemblages. Dacites, rhyodacites and rhyolites are the most common compositional types, with andesites and basalts subordinate. Passive eruptive sequences of flows and domes are the most abundant volcanic assemblages with explosive pyroclastics more common towards its west central parts. Associated with both the passive and explosive assemblages is a highly variable assemblage of lahars, fanglomerates, coarse and fine-grained fluvial assemblages and locally, chemically deposited siliceous sinters that have been interpreted as parts of a moat facies. Chemical analysis of these volcanics shows them to be potassium-rich and may be classified as belonging to the high-potash calcalkaline magma series.
Passive eruptive sequences of flows and domes are the most abundant volcanic assemblages. Explosive pyroclastics occur throughout the Caldera Complex, but are most common towards its west-central parts. Intimate with both the passive and explosive volcanic assemblages is a highly variable assemblage of lahars and fanglomerates, coarse and fine-grained fluvial assemblages and locally, chemically deposited siliceous sinters that comprise volcaniclastic sediments that are here interpreted as parts of a "moat" facies. Rock units of the moat facies from recessive assemblages and are very poorly exposed. The distribution of these three facies assemblages within the caldera suggests the presence of a number of separate basins within the larger caldera structure.
In the north and northeastern parts of the complex, aphyric and biotite phyric rhyolite and rhyodacite flows and flow domes are common. In the north part of the area a lahar-moat facies containing boulder breccia, conglomerate, sandstones and lacustrine siltstone with opaline sinters is associated with mainly flow and flowdome units of andesite and dacite composition. The south eastern part of the caldera complex is underlain by platy fractured, generally aphyric to weakly augite phyric dacite and andesite, with local areas of basalt and minor suggestions of the presence of a lacustrine moat facies. The southwestern part of the caldera is underlain mainly by dacitic, andesite and subordinate biotite phyric flow units, with local areas to the north of biotitequartz phyric rhyolite flow and pyroclastics. Here, the lahar-lacustrine-siliceous sinter moat assemblage occupies a large area in the central part of this southwestern sector.
The central and northwestern parts of the Clisbako Caldera complex, underlying the Clisbako, Baez and Bako claim blocks, are underlain by a bimodal suite of volcanics. Here, the dominant facies is an assemblage of aphyric to weakly to moderately augite and feldspar phyric dacite flows with local intercalations of polylithic volcaniclastics, volcanogenic breccia and fluvial clastics. The subordinate volcanic assemblage in this central and western sector comprises varieties of variably quartz, biotite, hornblende, plagioclase and sanidine phyric felsic volcanics that includes explosive ash flow tuffs, subvolcanic intrusions and breccias. Moat facies assemblages, including siliceous sinters have been noted in this area proximal to the felsic volcanic assemblages to the immediate northeast of this west-central facies, and the presence of boulders in float train suggests its presence within the area.
Property Geology
The Clisbako Property area is one of very low relief that has been extensively glaciated. Glaciation advanced from the south-southwest, covering the area with a variable thickness of till. Outcrop is very limited within the project area and bedrock exposure is likely under 1%. The best exposures are found on rounded, hummocky ridge crests and are dominated by platy to massive dacites and rhyodacites. Outcrop is also exposed in incised outwash channels and in logging slashes. The more recessive and easily weathered rock assemblages such as the moat facies and clay-argillic alteration assemblages are poorly represented in natural exposures, although their distribution has been somewhat enhanced by logging slashes and road cuts.
Contacts were not observed between major units and very rarely seen between beds. All age relationships between stratigraphic elements are deductive. In addition, no zone of definitive faulting could be documented by the presence of natural and man-made exposures, with the exception of trenching in the North Zone. There, the zone is very strongly faulted, marked by clay gouge, kaolinized zones and shattered rock and serves to suggest that faulting is an important, if mostly hidden, structural element.
Dacitic flow units underlie much of the terrain in the central and western parts of the Clisbako claim area. Rhyolite assemblage fragmental units underlie the low lying slopes to the north and east. These rocks are in turn overlain by Miocene basalts along the Clisbako River valley. Most units strike northerly and dip gently east although dip reversals are common.
Exploration work to date has focused on an area roughly two kilometers by four kilometers in size. Rocks in this area consist of rhyolitic flows, tuffs and breccias interbedded with dacite and amydgaloidal andesite flows and associated pyroclastic rocks. These are tilted and block-faulted and fill a north-trending, shallow, graben and local depositional basins.
The stratigraphic and subvolcanic lithologies that underlie the Clisbako claims can be subdivided into three separate assemblages consisting of, in probable chronological order, a dacitic facies, a rhyolite facies and a basalt-andesite assemblage. These east-dipping strata are disrupted by north-trending faults near Mount Dent and at Camp Lake on the Clisbako claims. Fluvial and lacustrine (moat facies) volcaniclastic sediments form portions of all three assemblages. The most extensive and probably oldest volcanic facies is represented by a suite of dacitic flows that are typically aphanitic to sparsely porphyritic with fine-grained augite phenocrysts. Locally interbedded with the volcanics of the Dacite Assemblage are variable thicknesses of clastic rocks that range from sharpstone conglomerate-fanglomerate to laminated fluvial fine-grained sandstone composed of detritus derived directly from the dacite flows.
Rhyolites of the felsic facies assemblage lie in a north-south trending band through the central part of the claim block. This assemblage has been interpreted as one of the centers of felsic volcanism within the Clisbako Caldera Complex. Volcanic and subvolcanic members of this facies include ash flow tuffs, flows, breccias, dykes and domes (plugs) and are composed of variations of plagioclase, biotite, quartz, hornblende and sanidine phenocrysts. It is distinguished from the dacite assemblage by the presence of common hydrous minerals biotite and hornblende. Associated spatially and compositionally with rhyolites of the felsic assemblage are volcaniclastics of a moat facies, including ash tuffs, siltstone, sandstone, conglomerate and siliceous sinters.
Overlying the Clisbako Formation is a 30 to 50 meter thick basalt-andesite facies, the youngest unit. This is comprised of olivine basalt flows and locally abundant pyroclastic rocks and has been correlated with the Miocene Endako Group. It appears in the extreme northeast portion of the claim block.
North to north-northeast striking faults are the most prominent structures on the property. They dip moderately to steeply east and west (40° to 80°) and are responsible for extensive block faulting of the Clisbako Formation. Measured offsets range from a few meters to about 200 meters. Epithermal alteration is hosted by several of these faults.
Faulting has caused considerable rotation of the volcanic sequence, resulting in highly variable dips. For example, on the west part of the grid, units of the Dacite member dip steeply to vertically while at the North Zone bedding is nearly flat lying.
A shallow graben is defined by the north trending faults in the grid area. Epithermal style alteration at the North, Central, South, Gore and West Lake zones occur along these structures. The easternmost fault, the East Boundary Fault, hosts epithermal alteration intermittently over a length of 2 kilometers. The South, Trail and Central Zones occur along this structure.
Other structures include northwest and northeast trending linears which form conspicuous drainage patterns in the northeast claim area. They have no measurable offset and their significance is uncertain.
Several occurrences of epithermal-style alteration are known in the east part of the property. They are all similar in style.
The zones are characterized by wide haloes of pervasive argillic alteration occurring in the hanging wall of the graben faults. Extensive stockworks of quartz, pyrite (+ marcasite) veinlets occur throughout the argillic zones. Overall sulphide content averages about 0.5% .
Stockworks grade into areas of pervasive silicification close to the faults. These commonly contain irregular shaped bodies of hydrothermal breccia and banded veins.
Argillic alteration occurs up to 100 meters into the hanging wall of the source structures. In zones where several parallel structures occur close together, such as at the North Zone, the argillic zones coalesce. Silicification is more restricted, occurring as 1 to 25 meter wide zones along fault planes. Narrow subparallel silicified zones also occur in the footwall of the host structures.
Footwall alteration is less intense than the hanging wall alteration. Argillic alteration is typical, however at some locations weak propylitization consisting mostly of chlorite and calcite veinlets is developed.
Alteration is well developed in a variety of host rocks. At the North, West Lake and Central zones alteration occurs in rhyolites and crystal tuffs. At the South Zone, the strongest alteration is hosted by amygdaloidal andesite.
Mineralization
Mineralization at Clisbako consists of epithermal silica stockworks and breccias developed on north-striking faults. Previous operators have outlined eight zones of hydrothermal alteration on the property. These zones are associated with rocks of the felsic assemblage, grading outward into rocks of the dacite assemblage. The zones are referred to as the Bari, Brooks, Gore, Discovery, Obvious, West Lake, South and North zones. The alteration zones are typified by pronounced bleaching of the host felsic volcanics and are characterized by intense argillic alteration accompanied by multi-stage intense quartz veining, weak to strong silicification, and/or hydrothermal brecciation. Locally, early argillic alteration is almost completely overprinted and masked by later successive stages of silicification.
It has been suggested that the hydrothermal alteration and mineralization were developed along complex steeply dipping north to north-east trending fault structures which were formed during the development of the Clisbako Caldera. However, within the claim area the alteration zones appear to be controlled by a series of closely spaced subparallel small-scale faults, rather than a single major structure. The rocks between the individual small-scale faults are highly fractured, intensely hydrothermally altered and flooded with a pervasive stockwork of quartz veinlets.
The various mineralized zones and prospects, along with boulders in glacial dispersion trains, are composed of quartz veined volcanic rocks. Vein textures include massive fine to medium grained quartz, banded chalcedony, stockworks of comb-textured quartz and drusy vugs. Calcite occurs in very small amounts and as fracture coatings and as replacement of alkali feldspars in propylitically altered rock. Quartz veins are varied and have been described as; stockwork, druzy, massive, sugary, stringers, blue/black, chalcedonic, banded, comb quartz in open space fillings, crustiform, or brecciated. Some of the veins show quartz pseudomorphs after coarse bladed calcite, evidence of boiling.
The argillic zones contain an average of less than 0.5% sulfide mineralization, but in the silicified zones the sulfide content may reach 5% over narrow widths. Low sulphide concentrations are typical of an acid-sulphate epithermal system.
Pyrite is the dominant sulphide and typically is very fine grained. In this form it most commonly occurs as disseminations in dark gray to blue-black chalcedonic quartz, is disseminated in the matrices of siliceous hydrothermal breccias, or fills quartz lined cavities. Coarse-grained pyrite is locally associated with marcasite and arsenopyrite. Pyragerite has been identified south of Clisbako Lake, within the North Zone, and may be the main silver bearing mineral. Barite has been observed at several localities.
Alteration fringing the siliceous lodes and breccias is dominantly argillic, generally widespread and locally intense. It consists of illite and montmorillonite replacement of plagioclase feldspar phenocrysts and the ground mass, with minor sericitization of hornblende and biotite phenocrysts. Mineralized zones generally comprise an inner zone of silicious breccia and quartz stockworks lying on or within controlling fault structures and a wide distal zone of argillic alteration that may extend up to 150 meters or more out from the silica core zone. Propylitic alteration is pervasive and comprises fine disseminated and fracture controlled chlorite which imparts a pale green color to the rocks. It is accompanied by variable amounts of calcite along fractures and as replacement of alkali feldspar. Potassic alteration as measured by alkali feldspar staining of rocks is variable. In only one occurrence has potassium feldspar been observed within a vein. Gold grades are elevated close to the inner silicified zone while the argillic envelope is usually barren. The various zones explored are described in detail below.
The North zone lies in a down-faulted block of feldspar (+/- quartz) phyric rhyolite flows and tuffs and dacite flows and pyroclastic breccias south of Camp Lake. It is exposed in a gully in which trench excavations have exposed argillic-altered rocks over 300 meters. It has a well defined east boundary marked by a fault. The west boundary is poorly constrained and is probably continuous with the West Lake Zone.
Alteration associated with north-striking faults consists of extensive silicification, quartz and pyrite stockworks, banded epithermal veins and siliceous breccia. These zones contain elevated precious metal and pathfinder element values. Argillic alteration is most pronounced distal from the siliceous zones. Barren quartz stockworks are common in the argillic zone.
The Central zone is a stockwork lying along the same fault structure that hosts the South zone. Quartz-clay alteration is similar to that at the North zone, with extensive quartz stockworks and pervasive argillic alteration occurring in a flow-banded dacite. The zone is narrow and probably connects with the North Zone to the north.
Four trenches have been excavated on the Discovery zone across two narrow, hydrothermal breccias. The best gold grades (133 to 421 ppb gold) were obtained from a two meter wide zone of quartz stockworks, white, vuggy quartz veins and hydrothermal breccia. The matrix consists of a bluish-grey clay gouge. The wallrock, which consists of flow banded dacite, is moderately silicified up to four meters away from the breccia. The highest gold tenor (421 ppb) was obtained from the most intensely altered material. A second less altered breccia, consists of black, sulphidic quartz fragments in a moderate to strongly argillized dacite host. This interval was only weakly mineralized (102 ppb gold), however a sulphide-rich interval was enriched in arsenic (2,930 ppb).
The South Zone is typified by a large area of silicification and hydrothermal breccia. The main outcrop area, in a small creek at the south end of the property, consists of a zone of hydrothermal breccia, veins and stockworks over an outcrop area of 150 meters and has been traced by drilling for some 300 meters.
The zone shows evidence of multiple stages of silicification indicated by cross cutting relationships and clast types within hydrothermal breccia veins. The hanging wall is strongly bleached and variably silicified in which a strongly developed stockwork of pyritic veinlets are cut by irregular veins of dark grey, banded chalcedony. One such vein was traced continuously for 22 meters. It was from these veins that the best assays were obtained by Minnova. The highest tenor was 3,300 ppb gold over a two-meter sample.
Despite the intense alteration, silicification and breccia development, precious metal and pathfinder element concentrations are low. The highest gold concentrations occur in sulphide-rich hydrothermal breccias and zones of banded grey chalcedony. Minnova drilled ten holes in the South zone area in 1991 and 1992. Most holes returned low grade to barren zones of siliceous breccia. The best hole, DOH 92-30 returned 2.0 meters of 228 ppb gold.
Two zones were identified by IP surveys southwest of Camp Lake, the West Lake and West Pit Zones. The West Pit is a 200-metre long chargeability high centered on line 416N at 285+00E. It has been traced intermittently as far south as line 400N. Trenching in 1992 failed to reach bedrock. Subcrop and overburden contains abundant bright yellow clay along with fragments of silicified rock and vein quartz. The West Lake zone, immediately west of the North zone, consists of a coincident chargeability and resistivity high with a strike length of about 300 meters. Trenching on the West Lake zone exposed a quartz stockwork zone containing three-meter wide banded and bladed, pyritic, quartz-chalcedony veins. The best chip samples across the altered zone returned 8.5 g/t gold over one meter from one of the veins.
Minnova drilled six holes in the West Lake-West Pit area in 1992 to follow-up trenching and induced polarization surveys. The best hole, 92-27, returned 135 ppb gold over an interval of 2.0 meters.
The Obvious Zone is located along the 4200 Forest Service Road approximately 2 kilometers north of the North Zone at Camp Lake, and was discovered by prospecting the excavated ditches adjacent to the road. Float boulders of quartz veins and silicified feldspar phyric rhyolite tuffs are present within till and subcrop. The best grab sample returned 156 ppb gold with elevated arsenic. The Obvious Zone was drill tested by hole 236-34.
The West Lake Boulder Train is located along a reclaimed logging access road along the west shore of Camp Lake. The boulder dispersion train comprises angular float blocks up to 50 cm in size in till along a tightly confined, north trending dispersion train over 600 meters in length. Float blocks include massive fine grained quartz, silica breccias and quartz stockworks. The best grab sample returned 1528 ppb gold. This zone was drill tested by 3 drill holes, 236-31, 236-32, and 236-33.
The Gore Zone is located approximately 1.5 kilometers southwest of the North Zone on the eastern slope of the ridge rising to the west of Camp Lake. The Zone comprises north trending massive silica breccias and quartz vein stockworks within dacite flows and rhyolite tuffs and is exposed over an area of 500 meters by 50 meters. Bedrock and float boulder sampling returned low gold values ranging from trace to 315 ppb.
The Bari Zone comprises two separate silica breccia bodies and several float and subcrop occurrences centered about 2.5 kilometers due west of the North Zone. Local lithologies include propylitically altered dacite flows and a 50 meter thick pyroclastic breccia unit with variably silicified angular clasts. Two separate zones, the Bari 1 and Bari 2 zones are partially exposed through a thin cover of till and comprise north-trending zones of hydrothermal breccia up to five meters thick. Accessory minerals include arsenopyrite and barite and possible sulphosalts indicated by an unusual grass green colored weathering. The peak gold value is 239 ppb from the Bari 1 and 466 ppb gold from the Bari 2. Both zones are within a large arsenic soil anomaly which extends for 2 kilometers from L 406N to L 426N.
Detailed sampling in 1996 failed to enhance the prospect with best results from outcrop reporting a high of 68 ppb Gold. High arsenic values of up to 5194 ppm were returned from float boulders.
Prospecting and rock geochemical sampling on the Bari Zone in 2002 has confirmed the existence of epithermal style gold and silver mineralization within an argillically altered and quartz veined felsic volcanic assemblage. More than 80% of the 52 rock samples returned anomalous values for gold, silver, arsenic, tin, mercury, molybdenum or barium. The highest values were 770 ppb gold, 56.6 ppm silver, 8330 ppm arsenic, 346 ppm tin and 7 ppm mercury. These results were returned from dark gray or blue-black colored veins with or without banding, or from silicified zones that displayed several stages of brecciation. Local development of intense brecciation suggests repeated sealing and fracturing permitting hydrothermal fluids to repeatedly permeate the system.
Current Exploration Activités
James Chapman, P. Geo. and P. Eng., and Willie Kushner, B.Sc. Geo., our consulting geologists, concluded that a strong potential for mineralization on the property lies within structurally controlled features at depth.
Our consulting geologists recommend a three-phase continuing exploration program be undertaken on the property to determine the prime localities of mineralization on which to focus concentrated exploration.
The three-phase program and its approximate estimated costs consist of the following:
Subject to obtaining sufficient financing, Phase I of our exploration program is intended to be commenced in the summer of 2010. If we are able to obtain financing, Phase I of our exploration program on the Clisbako Property will involve soil geochemical surveys, prospecting, mapping and geophysics in order to define the Bari 1 and Bari 2 zones.
MANADO GOLD PROPERTY
On January 19, 2010, we entered into an agreement with Agus Abidin dated for reference November 2, 2009 (the “Manado Agreement”) to acquire an option to earn up to an 85% interest in the Manado Gold Property. Under the terms of the Manado Agreement, we have agreed to pay $35,000 to the owners of the Manado Gold Property (the “Owners”) for the exclusive right for 90 days to formalize an agreement (the “Acquisition Agreement”) to earn up to an 85% undivided interest in the Manado Gold Property. After the 90 day period, we may elect to exercise our option to enter into the Acquisition Agreement and will have 30 days to finalize the terms of the formal Acquisition Agreement. On January 21, 2010, we entered into an extension agreement with Agus Abidin whereby the parties agreed to extend the due diligence period to March 31, 2010.
Under the terms of the proposed Acquisition Agreement, we will be able to earn an interest in the Manado Gold Property by making cash payments, issuing shares and completing work programs at various stages. We will be able to acquire:
(a)
an initial 10% interest in the Manado Gold Property by paying $90,000 and issuing 150,000 shares of our common stock to the Owners on execution of the Acquisition Agreement, and completing a mineral exploration program at a cost of not less than $250,000 prior to the first anniversary of the Acquisition Agreement;
(b)
an additional 15% interest in the Manado Gold Property by paying $100,000 and issuing 300,000 shares of our common stock to the Owners on the first anniversary of the Acquisition Agreement, and completing a mineral exploration program at a cost of not less than $500,000 prior to the second anniversary of the Acquisition Agreement;
(c)
an additional 26% interest in the Manado Gold Property by paying $200,000 and issuing 500,000 shares of our common stock to the Owner on the second anniversary of the Acquisition Agreement, and completing a mineral exploration program at a cost of not less than $1,000,000 prior to the third anniversary of the Acquisition Agreement; and
(d)
an additional 34% interest in the Manado Gold Property by completing a scoping study.
If we acquire an 85% interest in the Manado Gold Property under the proposed Acquisition Agreement, we will be responsible for the costs of any feasibility studies and, if warranted, placing the Manado Gold Property into commercial production. In addition, we will have an option to acquire the remaining 15% interest in the Manado Gold Property by paying the Owners $5,000,000.
Additional terms of the proposed Acquisition Agreement include, among other things, that we will be responsible for all costs in maintaining the Manado Gold Property in good standing, and we will have the right to terminate the Acquisition Agreement on 60 days notice. If the proposed Acquisition Agreement is terminated, we will be entitled to retain the interest in the property we earned as of the termination date.
During the Due Diligence Period, the Owner of the Manado Gold Property is prohibited from negotiating with or entering into an agreement with any third party in connection with the disposition or any other encumbrance of it its interest in the Manado Gold Property.
There is no assurance that we will exercise our option to enter into the formal Acquisition Agreement, or that we will be able to earn any interest in the Manado Gold Property.
Description of the Property
The Manado Gold Property is comprised of four contiguous mining tenements called “Bagkit Limpoga Jaya”, “Hakian Wellem Rumansi”, “Ratak Mining”, and “Manembo Mineral” which cover an area of approximately 300 hectares.
Location, Access and Physiography
The Manado Gold Property is located 50 miles south of Manado in northern Sulawesi, Indonesia. It is accessible by 3 miles of partly paved all-weather road from Ratatotok, a village along the coastal national highway, which in turn is accessible by 60 miles of paved road from Manado. The city of Manado is a major commercial center served by local and international flights as well as ocean-going vessels.
Property History
In 1981, PT Newmont Minahasa Raya, an Indonesian subsidiary of Newmont Gold Company of Denver, commenced the exploration of their contract of work (“COW”) concession. The exploration program led to the discovery of several small gold deposits. The largest of the deposits known as the Mesel together with other smaller satellite deposits was placed into production in 1996. Due to deteriorating relations with the local people and government, Newmont was forced to cease mining operations in 2002 but continued milling ore stockpile up to 2004. PT Newmont produced a total 2 million grams of gold mainly from the Mesel open pit.
Newmont also identified three zones that my contain gold mineralization, which are called Limpoga, Pasolo and Nona Hoa. These zones were defined by the drilling of some 273 boreholes. Although detailed engineering and economic studies were completed, no mining in any one of the three zones was actually carried out. After the departure of Newmont, all three zones were subsequently included in tenements acquired by local companies in Manado.
Newmont drilled a total of 6,457 meters at the Limpoga zone between 1989 to 1999. In particular, 92 closely-spaced (40 meters) diamond drill holes were drilled between 1989 to 1993. In late 1998, Newmont completed an additional 1,695 meters of closed spaced (20 meters) diamond drill holes. In 1999, Newmont also drilled 19 Reverse Circular (“RC”) holes for a total of 1,064 meters at the Limpoga zone. This large amount of high density drilling provided the data points for detailed engineering, which included geotechnical, bulk density, permeability and metallurgical tests. The historical drilling of Newmont indicated 196,000 tons of mineralized material at an estimated grade of 7.99 g/t at the Limpoga zone.
Regional Geology
Recent exploration has highlighted North Sulawesi as a significant gold province located within a series of spatially overlapping Tertiary volcanic arcs. In the western ensialic portion, rhyodacitic volcanics overlie quartzo-feldspathic metamorphic basement. In contrast, the central and eastern ensimatic areas comprise marine basaltic basement overlain by andesitic volcanic, the centres of which have migrated progressively eastwards from the Early Miocene until the present day.
Property Geology
Located on the Manado Gold Property is a massive karsted basal limestone unit overlain by a volcanogenic sediment which is a reworked tuff. This sediment is commonly calcareous at is base and shows slump and bedding textures. The bedding dips from 15-60o to the north. Intruding this sequence is the Limpgoa andesite. The andesite is porphyritic and invariably altered to an assemblage of chlorite+ carbonate. Porphyroblasts of hornblende and feldspar occur in a fine grained matrix. Petrographic studies indicate this rock to be a tonalite. A sequence of andesite tuffs, flowing overlying the reworked tuff to the east is most likely volcanic equivalents of the Limpoga andesite. Unconformably overlying all the previous units is a series of volcaniclastic rocks. This unit comprises of volcanic conglomerate, breccia and, in places flows. The rocks are mostly of andesitic composition with minor porphyritic hornblende dacite.
Eluvial deposits of quartz and clay sit on the karsted limestone surface. There deposits are interpreted to be erosional remnants of silicificied cavefill sediments mostly in the footwall of the LP fault zone.
The east northeast - west southwest trending Limpoga Lambak fault is the main structural feature of the Limpogo zone. This fault dips 60° to the north and exploits the unconformity separating volcanistic rock to the north from the andesite, limestone and reworked tuff to the south. The LP fault is a splay off the Limpoga-Lambak fault. This fault dips from 45-60° to the north and is the main control of gold mineralization. The fault is manifested as a fault breccia. Clasts of subangular to angular silicified, argillised tuff and limestone.
Elsewhere in the immediate area, low sulphidation gold veins occur such as those in the Nona Hoa and Pasolo zones. Both styles of mineralization are hosted in Miocene carbonate rocks occurring in a northeasterly graben. Visible gold is characteristic of the three zones.
Mineralization
The rock types that host gold are quartz boulder and clay sediments which comprise 30% of the Limpoga deposit, brecciated fault zone material, limestone and reworked tuff. The formations at Mesel are hosted in silicified, decalcified and dolomitized carbonates developed at intersecting east-west and north-west faults.
The mineralized areas of the Mesel and Libongan zones are hosted in Miocene volcaniclastics and sediments occurring either as disseminations or as veins. The extensively occurring limestone, which may contain anomalous gold mineralization, presents an excellent potential for the development of a large bulk mineable gold deposit.
In this region, the following gold mineralization categories are recognized: gold copper porphyries; gold and metal breccias; and high and low sulphidation ephithermal systems.
Current Exploration Activities
We plan to conduct due diligence as soon as practicable pursuant to the Manado Agreement. Our due diligence period does not expire until March 31, 2010. Upon satisfactory due diligence and subject to entering into a formal option agreement, we plan to commence an initial exploration program of approximately $250,000 in order to confirm results of the previous exploration work on the mineralized zones.
GOLDEN SNOW PROJECT, FISH PROJECT AND CPG PROJECT
One May 29, 2009 we acquired an option for a 100% undivided interest (the “Nevada Option Agreement”) in certain mineral properties known as the Golden Snow Project in Eureka County, Nevada, the Fish Project in Esmeralda County, Nevada and the CPG Project in Mineral County, Nevada (collectively, the “Eureka Optioned Properties”). Our acquisition of the option was completed pursuant to the terms and conditions of an assignment agreement (the “Assignment Agreement”) dated May 29, 2009 with Portal Resources Ltd. (“PRL”) and Portal Resources US Inc.’s (the “Assignor”). Under the terms of the Assignment Agreement, the Assignor assigned all of its rights and interest in the an option agreement (the “Option Agreement”) dated August 28, 2008 among the Assignor, Claremont Nevada Mines LLC (“Claremont”), Scoonover Exploration LLC (“Scoonover”) and JR Exploration LLC (“JR”). In consideration of the assignment, we issued 150,000 shares of common stock to PRL.
In order to maintain and exercise the Nevada Option Agreement, we will be required to:
Upon our exercising of the Nevada Option Agreement, Claremont, Scoonover and JR will collectively reserve a 3% net smelter royalty on the Eureka Optioned Properties. We may purchase up to 2% of the royalty for $500,000 per 1% of the royalty.
Of the Golden Snow Project, the Fish Project and the CPG Project we have decided to focus our resources on the exploration of the Golden Snow Project due to its potential and current state of development.
Golden Snow Project
Description of Property
The Golden Snow Project consists of 114 unpatented mining claims covering approximately 3.5 square miles eight miles southwest of Eureka, Nevada. The titles to the property will expire on September 1, 2010 if we do not renew our claim.
Location, Access, and Physiography
The Golden Snow Project is contiguous to the southern end of Staccato Gold’s Lookout Mountain property, which has identified several mineralized areas. The property is located in Eureka County, Nevada and is situated near several existing gold mines. Eight miles north of the Golden Snow Project is the East Archimedes Gold Mine where Barrick Gold Corporation is currently mining a Carlin-type sediment hosted gold deposit. The Golden Snow Project is also contiguous to the southern end of Staccato Gold's South Eureka property, where Staccato has identified several mineralized areas.
Property History
Early exploration in the Eureka Mining District commenced in the 1860’s with the development of small mines throughout the district. Prior to the 1950’s, the Eureka Mining District is believed to have produced an estimated $122 million of gold, silver, copper, lead and zinc.
Since the 1960s disseminated gold deposits have been explored for in the Eureka Mining District. Located north of the Golden Snow Property are historical producing mines including 112,000 ounces of gold at the Windfall Mine and 17,700 ounces of gold at the Lookout Mountain Mine.
In 1992, Homestake Mining conducted an exploration program that resulted in the discovery of the West Archimedes gold deposit. By 2002, a total of 670,000 ounces of gold were produced from this deposit. In 2003, additional exploration work was conducted on the West Archimedes deposit which allowed for an increase in the mineralized zone.
Geology
Many of the sediment-hosted gold deposits in Nevada appear to have developed at or near platform margin/basin margin sites where mineralization is found to be disseminated along the “low-stands” or karsted zone separated different stratigraphic units. The Golden Snow Project is positioned along this major platform margin that extends northwards to Cortez Hills, Pipeline and beyond. Future study of the location of these platform margins may result in the discovery of additional world-class gold deposits in Nevada.
Based on a cross section showing the location of mineralization at Lookout Mountain, gold mineralization has come up along the host margin where Devonian age rocks are in contract with the Cambrian age rocks. The mineralization is not only found within the feeder fault, but it is also disseminated out along these “low-stand zones” which are commonly the break between different rock formations. Another example of the same host margin mineralization can be seen in a cross section of the mineralization at Lone Tree. This mineralization is similar to Lookout mountain section except that it lies on the western edge of a of a horst block. Mineralization has also been discovered along the Wayne Zone Fault, which forms the western edge of the horst, and spreads out along favorable host rocks. Both styles of mineralization appear to potentially exist at the Golden Snow Project.
The feeder fault for mineralization at Lookout Mountain is the Ratto Ridge Fault which has been interpreted to lie on the west side of the major horst block.
The geology of the Golden Snow Project has been interpreted to consist of Devonian age rocks striking north/south and trending southward under pediment cover. It has also been interpreted that the Cambrian section is possibly in fault contact with the Devonian section. Both rock types are favorable host rocks for Carlin-style mineralization throughout Nevada, especially in the Eureka Area.
The following sets out the geological units exposed on the Golden Snow Project:
Bay State Dolomite - The Bay State Dolomite is a massive dark grey to black to purplish dolomite which is reported to be 600-850 feet thick in the Eureka Area. The lower portion of this unit is made up of irregular bedded light-grey, dolomite sandstone. The upper portion is in gradational contact with the overlying Devils Gate Limestone.
Sentinel Mountain Dolomite - The Sentinel Mountain Dolomite gradationally overlies Oxyoke Canyon . It is composed of alternating, thick-bedded, coarse-grained, light-gray dolomite and motted, finely laminated, chocolate brown dolomites with a strong petroliferous odor when broken. It ranges in thickness from 410 feet to 600 feet.
Oxyoke Canyon - The Oxyoke is predominantly light gray to brown weathering, fine to medium-grained, quartz sandstone with a dolomatic matrix. It ranges in thickness of less than 20 feet up to 400 feet thick throughout the Eureka Area.
Sadler Ranch - The Sadler Ranch locally has been divided up into an upper and lower dolomite and a middle crinoidal dolomite. The lower dolomite is a medium to thick-bedded, very finely grained, light gray to yellowish-gray dolomite. The middle crinoidal dolomite is a light to medium-gray, poorly bedded, laminated to cross-laminated, crinoidal packstone with thin lenses of mudstone and packstone. The upper dolomite is a medium to thick-bedded, very fine-grained, light-gray laminated dolomite. The thickness of this unit varies from 90 feet to 450 feet.
McColley Canyon/Bartine Member - The McColley Canyon is dominantly a medium to thick bedded gray limestone with interbedded light brown-gray fossiliferous and organic-rich dolomite. The Bartine is composed of thin to medium-bedded, medium-gray, fine grained limestone and yellowish argillaceous limestone with abundant brachiopods. Some people combine these units whereas others map them as separate units. These rocks vary from 330 feet to 650 feet thick.
Beacon Peak Dolomite - This unit is a massive, light gray to brown, finely laminated dolomite, with local thin beds of finely laminated dolomite and thin lenses of well rounded, quartz-rich sandstones with a dolomitic matrix. The average thickness is 328 feet.
Mineralization
Two major target zones exist on the Golden Snow Project. These primary targets would be eastern and western boundary of the horst block. Both the eastern and western edge extends for over 15,000 feet as shown by gravity geophysics. Only drill hole ELP-8 drilled close enough to the eastern edge of the gravity high to test for possible mineralization. The remaining holes were either far to east and out into the abyss, or too far west of the eastern horst fault and on top of the gravity high.
A magnetic survey run over the eastern portion of the claim block shows a magnetic high and has been interpreted to be an intrusive as opposed to volcanics. This area is also a potential favorable target area for gold and base-metal mineralization.
Numerous anomalous zones with large, coherent clusters of anomalous gold, arsenic, antimony, mercury, lead and barite have been identified on the Golden Snow Project. The majority of the anomalies appear to be located in the northeastern and eastern and eastern portion of the claim block because of surface or near surface bedrock. These values are probably related to mineralization associated with the buried intrusive. Anomalous arsenic, antimony and mercury are present in the area of the Ratto Fault. Since these minerals are usually formed distal to gold in Carlin-style systems the geochemistry may indicate gold mineralization at depth.
Current Exploration Activities
Subject to obtaining sufficient financing, in the summer of 2010, we plan to retain a consulting geologist to conduct a review of the Golden Snow Project in order to recommend an exploration program. Once our consulting geologist has provided us with their findings, we will determine whether to proceed with an exploration program on these properties.
Fish Project
The Fish Project is situated within the Walker Lane Mineral Belt, Lone Mountain District, Esmeralda County, Nevada and is located approximately 12 miles west of the historic mining town of Tonopah, Nevada. The Fish Project consists of 58 unpatented lode mining claims and is 492 hectares or 1.9 square miles.
The Fish Project is a skarn-manto gold, silver and base metal prospect.
Previous rock chip sampling on the Fish Project returned the following results: gold values ranging from less than 0.002 ounces per ton, to 0.307 ounces per ton; silver values ranging from less than 0.01 ounces per ton, to 32 ounces per ton; zinc values ranging from 0.01% to 32.8%; and lead values ranging from less than 0.01% to 16.4%
Atlas minerals previously conducted drilling on quartz veining in the northern portion of the property. However, their drilling program did not detect any significant mineralization.
Previous drilling by Atlas Minerals has focused on the quartz veining in the northern portion of the property. No significant mineralization was encountered.
Three targets have been identified on the Fish Project. The first target contains a small iron skarn gossan within white crystalline limestone adjacent to a felsic dyke trending 130º and dipping vertical. The mineralization zone may have originated from a hidden porphyry copper intrusion. There is the potential for hidden skarns associated with lobes of granodiorite.
The second target consists of numerous shafts trending 300º. The minor dykes and vuggy quartz veining occurs within bluish limestones trending 305/85W to 345/80W. Small skarn pods occur within the limestone and adjacent to dykes.
The third target consists of white fine grained silicified limestone with dark gray-blue bands (siltstones?) containing minor pyrite and galena. Previous exploration on the third target has returned values up to 0.293 opt gold, 4.58 opt silver and 6.6% zinc. Directly to the east of the pit containing the auriferous shear is a west dipping thrust. The area underlying this thrust has not been tested and may represent a good target since the thrust and associated shear structures could be a good conduit for mineralizing fluids.
The Fish Project currently represents an early stage exploration property. Due to the potential of the Golden Snow Project, we have deprioritized the implementation of an exploration program on this property.
CPG Project
The CPG Project consists of 44 unpatented mining claims covering approximately 1.3 square miles within Mineral County, Nevada. The CPG Project is located in Eureka County, Nevada and is situated near several existing gold mines. Approximately 10 miles north of the CPG Project Kennecott's now closed Denton-Rawhide Mine produced 1.4 million ounces of gold and 10 million ounces of silver between 1990 and 2004.
The area of interest is contained along the southern and western boundary of the Copper Mountain. A Jurassic age quartz monazite has intruded limestones and caused skarnification and deposition of principally copper mineralization. The skarn mineralization is pod-like and occurs adjacent to hornblende quartz feldspar porphyry dikes trending approximately east-west.
The CPG Project hosts an early stage porphyry and skarn type copper-gold-molybdenum prospect. Previous rock sampling on the property returned the following results: gold values ranging from less than 0.001 ounces per ton, to 0.036 ounces per ton; silver values ranging from less than 0.0031 ounces per ton, to 0.75 ounces per ton; copper values ranging from 0.005% to 13.65%; and molybdenum values ranging from less than 0.005% to 0.012% .
The CPG Project is an early stage exploration property. Due to the potential of the Golden Snow Project, we have deprioritized the implementation of an exploration program on this property.
JUNE CLAIMS
On February 5, 2010, we entered into an option agreement to acquire the June Mineral Claims (the "June Claims") in the Alberni Mining Division of the Province of British Columbia.
Under the terms of the option agreement (the “June Option Agreement”), we can acquire a 100% undivided interest in the property, subject to a royalty of 2% of net smelter returns, by paying $43,000 and issuing 300,000 common shares in stages over a three year period as follows:
(a)
paying the Optionor US $3,000 on execution of the June Option Agreement, which payment has been made;
(b)
paying the Optionor US $10,000 on or before May 6, 2010;
(c)
paying the Optionor US $10,000 and issuing 100,000 shares of the Optionee’s common stock on or before February 5, 2011;
(d)
paying the Optionor US $10,000 and issuing 100,000 shares of the Optionee’s common stock on or before the February 5, 2012; and
(e)
paying the Optionor US $10,000 and issuing 100,000 shares of the Optionee’s common stock on or before February 5, 2013.
The agreement is an option only and we may determine at any time not to proceed in which case we would not be liable to issue any shares or pay any funds beyond the amounts due at the time we provide notice that we are not proceeding. There is no assurance that we will exercise this option.
The June Claims cover an area of approximately 250 acres located 5.5 miles southeast of Gold River, British Columbia. The elevation of the claim varies from seal level on the west side of Matchlee Bay, rising to about 2,000 feet to the west. Elevation of the main showing is about 500 feet. The topography in general is very rough.
Location, Access, and Physiography
The property is about 5.5 miles by deep water southeast of the dock and pulp mill at Gold River, B.C. on the west coast of Vancouver Island. Gold River is a town with full facilities. It is connected by 57 miles of paved road to B.C. Highway 19 at Campbell River. It is an additional 8 miles of paved road to the dock and pulp mill at Muchalat Inlet. A boat is necessary for travel from Gold River to the property, unless flying in with amphibious aircraft.
Timber in the area of the main showing was logged off several years ago and the steep access road to the showings is growing in with brush and trees. An additional logging road has bisected the property since the former exploration work was conducted and it opens up a relatively large area for exploration. It would accommodate trail bikes, four-wheel drive vehicles, or dune buggies.
Water is available from creeks on the property.
Property History
The history of the property goes back at least to 1939 when the property was staked by the June Group. It consisted of 8 claims and 3 fractions. It was transferred the same year by bill of sale to William Sloan of Zeballos, who was the trustee for the Burman River Gold Mines Syndicate, Vancouver.
In 1946, a geologist with the BC Department of Mines took 31 samples from the property for assay. The samples assayed in a range from trace to 16 oz. per ton of gold and 22 oz. per ton silver, with the average of the 31 samples being over one ounce gold per ton and five ounces silver per ton. A number of the assays also contained copper, lead and zinc.
A small sampling program by an independent geologist in 1977 confirmed the existence of the same suite of mineralization on the property. In 1977, two samples taken across a vein exposed in workings on the property returned the following values:
Sample No. Au oz/t Ag oz/t Cu % Pb % Zn %
0.672 6.73
4.68
0.70
0.33
0.226 8.62
5.91
0.65
0.19
Geology
The geology of the property consists of altered andesitic volcanics, in close proximity to the limestone, granodiorite, basalt, and feldspar porphyry. The contact with the granodiorite is about 700 feet south of the main showing and, where observed, running in a west-northwest direction.
On the property is a well-defined shear-zone, from a few inches to 6 feet wide, that has been exposed in open-cuts and in the adit for a distance of 120 feet and is reported to have been found in a small pit about 220 feet farther east of the adit and may be the eastward continuation of the main vein-shear. At the western end of the exposure the shear is strongly silicified over width’s ranging from 1 foot to 6 feet and consists of finely-grained dark-grey quartz mineralized with pyrrhotite, chalcopyrite, and small amounts of galena and magnetite. A few narrow stringers of white, later quartz cut the silicified shear. In the eastern end, mainly in the adit, although the silicified width is less, being from 3 to 14 inches, the silicification is more intense and results in a well-defined lens of quartz that contains a few whisps of unreplaced andesite and, around and extending from them, streaks of massive sulphide.
Mineralization
The metallic minerals seen in polished sections under the microscopic area in order of abundance: Chalcopyrite, magnetite, and chalcopyrite with smaller amounts of arsenopyrite, pyrrhotite, pyrite, sphalerite, galena, and, closely associated with the galena, a sliver-bismuth, sulphide, tentatively identified by polarization, etch reactions, and compositions as matildite. Magnetite is abundant in some sections, and a few grains of sphalerite were seen in the chalcopyrite. The magnetite, arsenopyrite, pyrrhotite, and pyrite are all strongly fractured and replaced by chalcopyrite and galena. The matildite occurs in small blades in the galena. No free gold was seen in any sections studied but those sections containing abundant magnetite, arsenopyrite, and chalcopyrite assayed highest in gold.
A quartz vein, strike north 48 degrees west and dip vertical, and referred to as No. 4 vein, is found about 500 feet east of the adit. This vein consists of 5 to 6 inches of quartz and follows a strong shear, 6 inches wide, in andesite. It has intermittently stripped for 50 feet.
A strong shear, strike north 85° west and dip 75° south, has been opened by an open-cut at the beach, on the north side of the mouth of June Creek. This cut, 12 feet wide at the mouth, has been driven westerly on the shear, horizontally for 8 feet and the upward on a slope of 55° for 12 feet. The shear has an over-all width of 4 feet, but the strongest shearing is confined to a 4-inch width close to the hanging wall. Short gashes of solid pyrite up to ½ inch thick and of sphalerite up to 1 foot long by 3 inches thick are found in the shear. Quartz is restricted to a few hair-like stringers.
The road building for the logging operation opened up and exposed a strip diagonally across much of the claim group. The rock exposed is dense, aphanitic to fine grained dark green-black and tentatively classified as basalt. It is cut by a lighter grey-green aphanitic rock with poorly developed light grey feldspar phenocrysts. It is referred to as felsite porphyry. The felsite porphyry gives slightly lower magnetometer readings than the surrounding basalt.
The rock in the tunnel area is slightly lighter in color and has been classified as andesite. Limestone and granodiorite have been found to the west and southwest and have given high readings on the total heavy metals geochemical field test. A pyrite zone with some zinc value was discovered by the prospectors on the north bank of June Creek between stations 64 and 65.
The southwest station 65 at the south edge of the creed was a large to light green skarn zone containing a black, platy, magnetic mineral, probably pyrrhotite. Further west along the creek to the falls is massive limestone. Many parts of the creek are in a canyon and can only be fully explored at periods of low water.
TEXADA GOLD PROPERTY
We have also staked and acquired a 100% interest in a property called the “Texada Gold Property." The property is less than one mile north of the Town of GIllies Bay. The Texada Gold Property is comprised of five mineral claims and is located on Texada Island, British Columbia. The largest island in the Strait of Georgia lies 68 miles west-northwest of Vancouver and is accessible by car and ferry either directly by Powell River on the mainland or circuitously through the Town of Comox on Vancouver Island. Air service upon request is available on certain scheduled flights from Vancouver to Powell River.
The property is centered at 49° 42’ 30” north latitude (UTM 5507050 N) and 124° 29’ 30” west longitude (UTM392500 E) on N.T.S. mapsheets 092F/09W and 092F/10E. Road access to and within the property is good. The gravel Central Road and the paved GIllies Bay - Vananda highway cross the northeastern and southwestern boundaries respectively. Old logging roads traversable by 4-wheel drive vehicles and other trails suitable for foot access only provide access to most of the property.
The mineral claims making up the Texada Gold Property are recorded with the Ministry of Mines as follows:
Tenure No.
Claim Name Area (Ha) Expiry
TEXADA GOLD
188.04
June 10, 2010
TEXADA GOLD 2 83.60
June 10, 2010
TEXADA GOLD 3 20.89
June 10, 2010
TEXADA GOLD 4 250.80
June 10, 2010
TEXADA GOLD 5 167.15
June 10, 2010
The topographic relief on the property ranges from 50 meters above sea level on the southwest to approximately 220 meters on the east boundary which is on the southwest flank of Mount Pocahontas. The property is characterized by northwesterly trending rocky ridges that are typically 50 meters above intervening gullies which commonly contain small streams or swamps. The forest cover is mostly second or third growth Douglas-fir, arbutus and jackpine on the fairly sparse ridges and cedar, spruce, hemlock, balsam, and poplar in the lower elevations. Thick underbrush together with abundant deadfall and logging remnants characterize the valleys.
The island is within the “Sunshine Coast” area of British Columbia and features mild winters and moderate, dry summers. Consequently, all aspects of surface exploration may be carried out year round. Drinking water for the two towns on the island is provided by two dammed lakes. One of them, Cranby lake is less than one mile from west of the property. Water for diamond drilling as available from the many creeks and swamps on the property.
Subject to obtaining sufficient financing, in the summer of 2010, we plan to get a consulting geologist to conduct a review of this property in order to recommend an exploration program. Once our consulting geologist has provided us with their findings we will determine whether to proceed with an exploration program on this property.
COMPLIANCE WITH GOVERNMENT REGULATION
British Columbia Regulations
We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in the Province of British Columbia. The main agency that governs the exploration of minerals in the Province of British Columbia, Canada, is the Ministry of Mines. The Ministry of Mines manages the development of British Columbia’s mineral resources, and implements policies and programs respecting their development while protecting the environment. In addition, the Ministry of Mines regulates and inspects the exploration and mineral production industries in British Columbia to protect workers, the public and the environment.
The material legislation applicable to us is the Mineral Tenure Act, administered by the Mineral Titles Branch of the Ministry of Mines, and the Mines Act, as well as the Health, Safety and Reclamation Code and the Mineral Exploration Code. The Mineral Tenure Act and its regulations govern the procedures involved in the location, recording and maintenance of mineral titles in British Columbia. The Mineral Tenure Act also governs the issuance of leases which are long term entitlements to minerals.
All mineral exploration activities carried out on a mineral claim or mining lease in British Columbia must be in compliance with the Mines Act. The Mines Act applies to all mines during exploration, development, construction, production, closure, reclamation and abandonment. It outlines the powers of the Chief Inspector of Mines, to inspect mines, the procedures for obtaining permits to commence work in, on or about a mine and other procedures to be observed at a mine. Additionally, the provisions of the Health, Safety and Reclamation Code for mines in British Columbia contain standards for employment, occupational health and safety, accident investigation, work place conditions, protective equipment, training programs, and site supervision. Also, the Mineral Exploration Code contains standards for exploration activities including construction and maintenance, site preparation, drilling, trenching and work in and about a water body.
Additional approvals and authorizations may be required from other government agencies, depending upon the nature and scope of the proposed exploration program. If the exploration activities require the falling of timber, then either a free use permit or a license to cut must be issued by the Ministry of Forests. Items such as waste approvals may be required from the Ministry of Environment, Lands and Parks if the proposed exploration activities are significantly large enough to warrant them. Waste approvals refer to the disposal of rock materials removed from the earth which must be reclaimed. An environmental impact statement may be required.
In order to maintain our mineral claims in good standing, we must complete exploration work on the mineral claims and file confirmation of the completion of work on the mineral claims with the applicable mining recording office of the Ministry of Mines. In the Province of British Columbia, the recorded holder of a mineral claim is required to perform a minimum amount of exploration work on a claim or make payment in the equivalent sum in lieu of work. The fee is CDN $4.00 (approximately US$3.78) in the first three years and CDN$8.00 (approximately US$7.67) in subsequent years. There is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program. The completion of mineral exploration work or payment in lieu of exploration work in any year will extend the existence of our mineral claims for one additional year. If we fail to complete the minimum required amount of exploration work or fail to make a payment in lieu of this exploration work, then our mineral claims will lapse, and we will lose all interest that we have in our mineral claims.
Nevada Regulations
Exploration and development activities are all subject to stringent national, state and local regulations. All permits for exploration and testing must be obtained through the local Bureau of Land Management (“BLM”) offices of the Department of Interior in the State of Nevada. The granting of permits requires detailed applications and filing of a bond to cover the reclamation of areas of exploration. From time to time, an archaeological clearance may need to be obtained prior to proceeding with any exploration programs.We plan to secure all necessary permits for any future exploration.
We have to apply for and receive permits from the BLM to conduct drilling activities on BLM administered lands. Mining operations are regulated by the Mine and Safety Health Administration (“MSHA”). MSHA inspectors periodically visit projects to monitor health and safety for the workers, and to inspect equipment and installations for code requirements. Workers must have completed MSHA safety training and must take refresher courses annually when working on a project. A safety officer for the project should also on site. Other regulatory requirements monitor the following:
(i)
Explosives and explosives handling.
(ii)
Use and occupancy of site structures associated with mining.
(iii)
Hazardous materials and waste disposal.
(iv)
State Historic site preservation.
(v)
Archaeological and paleontological finds associated with mining.
We believe that we are in compliance with all laws and plan to continue to comply with the laws in the future. We believe that compliance with the laws will not adversely affect its business operations. There is however no assurance that any change in government regulation in the future will not adversely affect our business operations.
Each year we must pay a maintenance fee of $140 per claim to the Nevada State Office of the Bureau of Land Management and on September 1 of each year we must file an affidavit and Notice of Intent to Hold the claims in Mineral County. With respect to the Golden Snow Project, Fish Project and CPG Project, we have paid the required maintenance fees and filed the affidavits required in order to extend the claims to August 31, 2010.
Indonesia Regulations
Exploration and development activities are subject to the rules and regulation of the Indonesian ministry of Energy and Mineral Resources. Under current Indonesian law, a domestic entity may acquire a license through a Kuasa Pertanbangan (“KP”). The KP grants exclusive mineral rights to the holder for specified minerals and defined mineral activities. There are several types of KP including, but not limited to, general survey KP, exploration KP, exploitation KP, process and refining KP and transportation and marketing KP.
In order for a foreign entity to carry out mineral activities in Indonesia it must acquire a contract of work (“CoW”) the CoW sets out in detail the rights and obligations of the foreign entity with respect to the exploration, development, and operation of the mineral property.
Indonesian regulations also set for requirements with respect to land remediation, water use and discharge, exploration of the mined material, mine safety and use of explosives.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
We will have to sustain the cost of reclamation and environmental remediation for all exploration work undertaken. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the recommended work program. Because there is presently no information on the size, tenor, or quality of any resource or reserve at this time, it is impossible to assess the impact of any capital expenditures on earnings, our competitive position or us in the event that a potentially economic deposit is discovered.
Prior to undertaking mineral exploration activities, we must make application for a permit, if we anticipate disturbing land. A permit is issued after review of a complete and satisfactory application. We do not anticipate any difficulties in obtaining a permit, if needed. If we enter the production phase, the cost of complying with permit and regulatory environment laws will be greater because the impact on the project area is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage. Examples of regulatory requirements include:
(i)
Water discharge will have to meet drinking water standards;
(ii)
Dust generation will have to be minimal or otherwise re-mediated;
(iii)
Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation;
(iv)
An assessment of all material to be left on the surface will need to be environmentally benign;
(v)
Ground water will have to be monitored for any potential contaminants;
(vi)
The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and
(vii)
There will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species.
COMPETITION
We are an exploration stage company. We compete with other mineral resource exploration and development companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration and development companies with whom we compete have greater financial and technical resources than we do. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties.
RESEARCH AND DEVELOPMENT EXPENDITURES
We have not incurred any research expenditures since our incorporation.
EMPLOYEES
We have no employees other than our sole executive officer and directors. We conduct our business largely through consultants.
ITEM 1A.
ITEM 1A. RISK FACTORS.
The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.
If we do not obtain additional financing, our business will fail.
As of November 30, 2009, we had $3,711 cash on hand and a working capital deficit of $360,987. Our plan of operation calls for significant expenses in connection with the exploration and development of our mineral properties, particularly the Clisbako Property, and to meet our obligations under our option agreements to acquire: (i) the Golden Snow Project, Fish Project and CPG Project; (ii) the Manado Gold Property; and (iii) the June Claims. There is no guarantee that we will to exercise these options or that in the event we do exercise any of these options, that the acquisition(s) will in fact occur.
On May 1, 2009, our Board of Directors approved a private placement offering of up to 3,000,000 units (the “Units”) at a price of $0.20 per Unit for gross proceeds of up to $600,000. Each Unit is comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase an additional share of our common stock for a period of one year following the date of issuance at an exercise price equal to $0.30 per share. This offering of Units will be made to investors who are not “U.S. Persons” as defined in Regulation S. As of November 30, 2009, we had received proceeds of $18,860 under this offering, but have not issued any securities. There are no assurances that any units will be sold under this offering.
Obtaining financing would be subject to a number of factors outside of our control, including market conditions and additional costs and expenses that might exceed current estimates. These factors may make the timing, amount, terms or conditions of financing unavailable to us in which case we will be unable to complete our plan of operation on our mineral properties and to meet our obligations under our option agreements.
We have yet to earn revenue and our ability to sustain our operations is dependent on our ability to raise financing. As a result, our accountants believe there is substantial doubt about our ability to continue as a going concern.
We have a cumulative net loss of $643,115 for the period from our inception on April 28, 2006 to November 30, 2009, and have no revenues to date. Our future is dependent upon our ability to obtain financing. Our auditors have expressed substantial doubt about our ability to continue as a going concern given our accumulated losses. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital, we will not be able to complete our business plan. As a result, we may have to liquidate our business and investors may lose their investment. Investors should consider our former auditor's comments when determining if an investment in us is suitable.
Because of the unique difficulties and uncertainties inherent in mineral exploration ventures, we face a high risk of business failure.
Investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.
We have no known mineral reserves and if we cannot find any, we will have to cease operations.
We have no mineral reserves. If we do not find a mineral reserve containing gold or if we cannot explore the mineral reserve, either because we do not have the money to do it or because it will not be economically feasible to do it, we will have to cease operations and you will lose your investment. Mineral exploration, particularly for gold, is highly speculative. It involves many risks and is often non-productive. Even if we are able to find mineral reserves on our properties, our production capability is subject to further risks including:
Costs of bringing the property into production including exploration work, preparation of production feasibility studies, and construction of production facilities, all of which we have not budgeted for;
Availability and costs of financing;
Ongoing costs of production; and
Environmental compliance regulations and restraints.
The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the lack of milling facilities and processing equipment near our mineral properties, and such other factors as government regulations, including regulations relating to allowable production, importing and exporting of minerals, and environmental protection.
Given the above noted risks, the chances of finding reserves on our mineral properties are remote and funds expended on exploration will likely be lost.
Even if we discover proven reserves of precious metals on our mineral properties, we may not be able to successfully commence commercial production.
Our mineral properties do not contain any known bodies of ore. If our exploration programs are successful in discovering proven reserves on our mineral properties, we will require additional funds in order to place the mineral properties into commercial production. The expenditures to be made by us in the exploration of mineral properties in all probability will be lost as it is an extremely remote possibility that the mineral claims will contain proven reserves. If our exploration programs are successful in discovering proven reserves, we will require additional funds in order to place the mineral properties into commercial production. The funds required for commercial mineral production can range from several millions to hundreds of millions. We currently do not have sufficient funds to place our mineral claims into commercial production.
Obtaining additional financing would be subject to a number of factors, including the market price for gold and the costs of exploring for or mining these materials. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us. Because we will need additional financing to fund our exploration activities there is substantial doubt about our ability to continue as a going concern. At this time, there is a risk that we will not be able to obtain such financing as and when needed.
We face significant competition in the mineral exploration industry.
We compete with other mining and exploration companies possessing greater financial resources and technical facilities than we do in connection with the acquisition of mineral exploration claims and leases on precious metal prospects and in connection with the recruitment and retention of qualified personnel. There is significant competition for precious metals and, as a result, we may be unable to acquire an interest in attractive mineral exploration properties on terms we consider acceptable on a continuing basis.
There is no assurance that we will be able to exercise our options to acquire the Manado Gold Property, the Eureka Optioned Properties and the June Claims.
In order to exercise our options to acquire the Manado Gold Property, Eureka Optioned Properties and June Claims, we are required to make a series of cash payments and meet the annual claim maintenance fees. In order to meet these payments we will need to obtain substantial financing. If we are unable to meet these payments, we will lose our options to acquire these properties.
We may be unable to conduct exploration activities due to foreign regulations.
We may have trouble obtaining any necessary permits, and complying with foreign mining law to do our inexperience. We may be prohibited by mining laws in Indonesia from conducting due diligence or any other activity on the Manado Gold Property. We have not conducted any research into the property, mining, or other applicable laws regarding the Manado Gold Property.
Because our sole executive officer does not have formal training specific to the technicalities of mineral exploration, there is a higher risk that our business will fail.
Richard W. Donaldson, our sole executive officer, does not have any formal training as a geologist or in the technical aspects of managing a mineral exploration company. With the exception of Bryan H. Wilson, a director, our management may not be fully aware of the specific requirements related to working within this industry. As such, the loss of Mr. Wilson’s services could cause irreparable harm to our operations, earnings, and ultimate financial success could suffer irreparable harm due to management's lack of experience in this industry.
Because the prices of metals fluctuate, if the price of metals for which we are exploring decreases below a specified level, it may no longer be profitable to explore for those metals and we will cease operations.
Prices of metals are determined by such factors as expectations for inflation, the strength of the United States dollar, global and regional supply and demand, and political and economic conditions and production costs in metals producing regions of the world. The aggregate effect of these factors on metal prices is impossible for us to predict. In addition, the prices of precious metals are sometimes subject to rapid short-term and/or prolonged changes because of speculative activities. The current demand for and supply of these metals affect the metal prices, but not necessarily in the same manner as current supply and demand affect the prices of other commodities. The supply of these metals primarily consists of new production from mining. If the prices of the metals are, for a substantial period, below our foreseeable cost of production, we could cease operations and investors could lose their entire investment.
We may conduct further offerings in the future in which case investors’ shareholdings will be diluted.
We are currently offering units (common stock and share purchase warrant) for gross proceeds of up to $600,000. Since our inception, we have relied on such equity sales of our common stock to fund our operations. We may conduct further equity offerings in the future to finance our current projects or to finance subsequent projects that we decide to undertake. If common stock is issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, the interests of existing shareholders will be diluted.
The quotation price of our common stock may be volatile, with the result that an investor may not be able to sell any shares acquired at a price equal to or greater than the price paid by the investor.
Our common shares are quoted on the OTC Bulletin Board under the symbol "PNGM.” Companies quoted on the OTC Bulletin Board have traditionally experienced extreme price and volume fluctuations. In addition, our stock price may be adversely affected by factors that are unrelated or disproportionate to our operating performance. Market fluctuations, as well as general economic, political and market conditions such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock. As a result of this potential volatility and potential lack of a trading market, an investor may not be able to sell any of our common stock that they acquire at a price equal or greater than the price paid by the investor.
Because our stock is a penny stock, shareholders will be more limited in their ability to sell their stock.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. Because our securities constitute “penny stocks” within the meaning of the rules, the rules apply to us and to our securities. The rules may further affect the ability of owners of shares to sell our securities in any market that might develop for them. As long as the trading price of our common stock is less than $5.00 per share, the common stock will be subject to Rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that:
1.
contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
2.
contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws;
3.
contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;
4.
contains a toll-free telephone number for inquiries on disciplinary actions;
5.
defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and
6.
contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.
ITEM 2.
ITEM 2. PROPERTIES.
We rent office space at 1200 Dupont Street, Suite 2J, Bellingham, WA 98225, consisting of approximately 144 square feet, at a cost of $337 per month. This rental is on a month-to-month basis without a formal contract.
Our mineral properties are discussed in detail above under the heading “Item 1. Business”.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any other legal proceedings and, to our knowledge; no other legal proceedings are pending, threatened or contemplated.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our shares of common stock originally commenced trading on the OTC Bulletin Board under the symbol “PGRM” on July 11, 2007. Our symbol was changed to "PNGM" upon completion of a 3-for-1 stock split of our authorized and issued common stock effective April 13, 2009.
The high and low bid information for our common stock for the years ended November 30, 2009 and 2008 as reported by the OTC Bulletin Board were:
The above quotations have been adjusted to reflect the 3-for-1 stock split effected April 13, 2009. Quotations provided by the OTCBB reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.
Holders of Our Common Stock
As of March 15, 2010, there are 54,247,144 shares of our common stock issued and outstanding held of record by 24 registered stockholders. We believe that a number of stockholders hold stock on deposit with their brokers or investment bankers registered in the name of stock depositories.
Dividends
We have not declared any dividends on our common stock since our inception on April 28, 2006. There are no dividend restrictions that limit our ability to pay dividends on our common stock in our Articles of Incorporation or Bylaws. Our governing statute, Chapter 78 of the Nevada Revised Statutes (the “NRS”), does provide limitations on our ability to declare dividends. Section 78.288 of Chapter 78 of the NRS prohibits us from declaring dividends where, after giving effect to the distribution of the dividend:
(a)
we would not be able to pay our debts as they become due in the usual course of business; or
(b)
our total assets would be less than the sum of our total liabilities plus the amount that would be needed, if we were to be dissolved at the time of distribution, to satisfy the preferential rights upon dissolution of stockholders who may have preferential rights and whose preferential rights are superior to those receiving the distribution (except as otherwise specifically allowed by our Articles of Incorporation).
Recent Sales of Unregistered Securities
All unregistered sales of our equity securities made during the fiscal year ended November 30, 2009 have been previously reported in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
PLAN OF OPERATION
Over the next twelve months, our plan of operation is to conduct exploration work on each of our mineral properties, subject to obtaining financing.
Clisbako Property
Our plan of operation for the Clisbako Property is to implement Phase I of our exploration program on the Clisbako Property in order to assess whether it possesses mineral reserves capable of commercial extraction. We have not, nor has any predecessor, identified any commercially exploitable reserves on the Clisbako Property.
Subject to obtaining sufficient financing, Phase I of our exploration program is intended to be commenced in the summer of 2010. If we are able to obtain financing, Phase I of our exploration program on the Clisbako Property will involve soil geochemical surveys, prospecting, mapping and geophysics in order to define the Bari 1 and Bari 2 zones. We anticipate that Phase I will cost approximately CDN $122,000 ($117,851). There is no assurance that we will be able to acquire such financing.
Manado Gold Property
We plan to conduct due diligence as soon as practicable pursuant to the Manado Agreement. Our due diligence period does not expire until March 31, 2010. Upon satisfactory due diligence and subject to entering into a formal option agreement, we plan to commence an initial exploration program of approximately $250,000 in order to confirm results of the previous exploration work on the mineralized zones.
Golden Snow Project, Fish Project, CPG Project, June Claims and Texada Gold Property
Subject to obtaining sufficient financing, in the summer of 2010, we plan to retain a consulting geologist to conduct a review of these properties in order to recommend an exploration program to be conducted in fall 2010 or early 2011. Once our consulting geologist has provided us with their findings, we will determine whether to proceed with an exploration program on these properties.
During the next twelve months, we will be required to make a number of payments in order to maintain our options to acquire the Golden Snow Project, Fish Project, CPG Project. Under the terms of our options to acquire the Golden Snow Project, Fish Project, CPG Project and June Claims, in order to keep them in good standing, we are required to pay to Claremont: (i) an option payment of $15,000 by August 28, 2010; and (ii) the Bureau of Land Management maintenance and claim fees of approximately $32,088 by September 1, 2010. If we are unable to make the payments to Claremont, the Bureau of Land Management or pay the annual maintenance claim fees, we will lose our interest in the Golden Snow Project, Fish Project and CPG Project. Under the terms of the option agreement to acquire the June Claims, we are required to pay US $10,000 on or before May 6, 2011.
These agreements are options only and we may determine at any time not to proceed in which case we would not be liable to issue any shares or pay any funds beyond the amounts due at the time we provide notice that we are not proceeding. There is no assurance that we will exercise this option.
As at November 30, 2009, we had $3,711 cash on hand. Accordingly, we have insufficient cash on hand to proceed with our exploration on the Clisbako Property, conduct due diligence of the Manado Gold Property, satisfy the option payments to acquire the Golden Snow Project, Fish Project and CPG Project, and meet our ongoing operating costs. There is no assurance that we will be able to acquire such financing on terms that are acceptable to us, or at all. As such we will require substantial financing in order to meet our obligations.
RESULTS OF OPERATIONS
Revenue
We have not earned any revenues to date. We do not anticipate earning revenues until such time as we enter into commercial production of our mineral properties. We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources on our properties, or if such deposits are discovered, that we will enter into further substantial exploration programs.
Expenses
The major components of our expenses for the years ended November 30, 2009 and 2008 are outlined in the table below:
Our operating expenses during the year ended November 30, 2009 totaled $375,580 compared with $139,039 during the year ended November 30, 2008. The increase in our operating expenses was primarily a result of increased bank charges and interest, finance charges, management fees, mineral property exploration costs and professional fees.
Management fees relate to fees paid or accrued to the directors of Magellan Acquisition Corp., our wholly owned Nevada subsidiary.
Mineral property exploration costs primarily relate to fees incurred in connection with maintaining our option on the Golden Snow Project, the Fish Project, CPG Project, Manado Gold Property and June Claims, and maintaining our Clisbako Property and Texada Property in good standing.
The additional professional fees during the year ended November 30, 2009 primarily relate to costs incurred in connection with our acquisition of our optioned properties, and meeting our ongoing reporting requirements under the Exchange Act.
Finance fees during the year ended November 30, 2009 primarily relate to amortization of the discount resulting from the allocation of proceeds to the warrants and the intrinsic value beneficial conversion feature.
We anticipate our operating expenses will increase if we implement our exploration program on our mineral properties.
LIQUIDITY AND CAPITAL RESOURCES
The increase in our working capital deficit at November 30, 2009 from our year ended November 30, 2008 is a result of the fact that: (i) accounts payable increased due to our lack of capital to meet ongoing expenditures; (ii) we recorded a payable of $65,913 (CDN $70,000) in connection with our acquisition of the Clisbako Property; and (iii) we recorded $18,860 as unit subscriptions received as we have not issued these securities as at November 30, 2009.
During the year ended November 30, 2009, we issued 55 units for total proceeds of $137,500. Each unit is comprised of a $2,500, 10% convertible note and 10,000 share purchase warrants. Upon issuance of the 55 units, we terminated the offering. We received proceeds of $67,500 during the year ended November 30, 2008 and the remaining $70,000 during the year ended November 30, 2009. During the year ended November 30, 2009, no amounts of principal or accrued interest were converted into shares of the Company’s common stock.
On August 6, 2008, we entered into a letter of intent with Magellan Copper and Gold plc (“Magellan”) pursuant to which we intended to acquire Magellan Resources Pte Ltd. and St. Anthony Resources Pte Ltd. (collectively, the “Magellan Singapore Subsidiaries”). In connection with the Letter of Intent, we advanced an aggregate of $110,367 to Magellan (the “Advances”). However, on December 17, 2008, we relinquished any rights that we may have had to acquire the Magellan Singapore Subsidiaries pursuant to the terms of a purchase agreement dated for reference as of December 15, 2008 with Solfotara, Magellan and Magellan Acquisition Corp. (“MAC”), our wholly owned subsidiary. Under the terms of this purchase agreement, Solfotara issued 250,000 of its shares (the “Shares”) to MAC and agreed to repay the Advances to MAC as follows: (i) $20,000 within three days of signing the agreement (which amount has been paid); (ii) $30,000 on April 15, 2009 (which amount has been paid); and (iii) $50,000 on June 15, 2009 (which amount has been paid). In consideration of the Shares and the above payments, we relinquished any rights that we may have had to acquire Magellan Singapore Subsidiaries and assigned to Solfotara our right to be repaid the Advances. The total value attributed to the common stock received from Solfotara was $10,367, or approximately $0.04 per share.
Financing Requirements
As at November 30, 2009, we had $3,711 cash on hand. Currently, we do not have sufficient financial resources to complete our plan of operation for the next twelve months. We have not earned any revenues to date and we do not anticipate earning revenues in the near future. As such, our ability to complete our plan of operation is dependent upon our ability to obtain substantial financing in the near term. Any future financing that we obtain is expected to be in the form of sales of our equity securities. If we are successful in completing any equity financings, of which there is no assurance, our existing shareholders will experience a dilution of their interest in our company. There is a substantial doubt that we will be able to obtain financing in an amount that is sufficient to enable us to complete our proposed plan of operation. If we are not successful in raising sufficient financing, we will not be able to complete our plan of operation. We do not have any specific alternatives to our current plan of operation and have not planned for any such contingency. If we are not successful in raising sufficient financing, our business may fail and our shareholders may lose all or part of their investment.
On May 1, 2009, our Board of Directors approved a private placement offering of up to 3,000,000 units (the “Private Placement Units”) at a price of $0.20 per Private Placement Unit for gross proceeds of up to $600,000. Each Private Placement Unit is comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase an additional share of our common stock for a period of one year following the date of issuance at an exercise price equal to $0.30 per share. This offering of Private Placement Units will be made to investors who are not “U.S. Persons” as defined in Regulation S of the Securities Act. As of November 30, 2009, we had received proceeds of $18,860 under this offering, but have not issued any securities. There are no assurances that any Private Placement Units will be sold under this offering.
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain.
We have identified certain accounting policies, described below, that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in the notes to our audited financial statements included under Item 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Consolidated Financial Statements:
Audited consolidated financial statements as of November 30, 2009, including:
PENGRAM CORPORATION
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
DAVIDSON & COMPANY LLP
A Partnership of Incorporated Professionals
Chartered Accountants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Pengram Corporation
We have audited the accompanying consolidated balance sheet of Pengram Corporation (the “Company”) as of November 30, 2009, and the related consolidated statements of operations, cash flows and stockholders equity (deficiency) for the year ended November 30, 2009 and for the period from inception on April 28, 2006 to November 30, 2009. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of November 30, 2009, and the results of its operations and its cash flows for the year ended November 30, 2009 and for the period from inception on April 28, 2006 to November 30, 2009 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has experienced recurring losses from operations since inception, has a working capital deficit, and has a deficit accumulated during the exploration stage. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
“DAVIDSON & COMPANY LLP”
Vancouver, Canada Chartered Accountants
March 15, 2010
1200 - 609 Granville Street P.O. Box 10372, Pacific Centre, Vancouver, B.C., Canada V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
To the Board of Directors and Stockholders of
Pengram Corporation
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheet of Pengram Corporation as of November 30, 2008, and the related statements of operations, stockholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pengram Corporation as of November 30, 2008 and the results of its operations, stockholders equity and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has no revenues, limited resources and a large accumulated deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans are also discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BehlerMick PS
BehlerMick PS
Spokane, Washington
March 11, 2009
PENGRAM CORPORATION
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Stated in U.S. Dollars)
The accompanying notes are an integral part of these consolidated financial statements.
PENGRAM CORPORATION
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)
The accompanying notes are an integral part of these consolidated financial statements.
PENGRAM CORPORATION
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)
The accompanying notes are an integral part of these consolidated financial statements.
PENGRAM CORPORATION
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
PERIOD FROM INCEPTION APRIL 28, 2006 TO NOVEMBER 30,
(Stated in U.S. Dollars)
The accompanying notes are an integral part of these consolidated financial statements.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS
Consolidated Financial Statements
These consolidated financial statements include the accounts of Pengram Corporation (“the Company”) and its wholly owned subsidiaries, Magellan Acquisition Corp. (Nevada) (“MAC”) and Clisbako Minerals Inc. (British Columbia) (“CMI”). All intercompany balances have been eliminated.
Organization
The Company was incorporated in the State of Nevada, U.S.A., on April 28, 2006. The Company’s principal executive offices are in Bellingham, Washington, U.S.A. The Company’s year end is November 30.
Exploration Stage Activities
The Company has been in the exploration stage since its formation and has not yet realized any revenues from its planned operations. The Company was formed for the purpose of acquiring exploration and development stage natural resource properties. The Company has not commenced business operations. The Company is an exploration stage company as defined in the Securities and Exchange Commission (“S.E.C.”) Industry Guide No. 7.
Forward Stock Split
During the year ended November 30, 2009, the Company completed a three-for-one forward stock split of its common stock. The Company’s authorized common stock was increased from 100,000,000 shares with a par value of $0.001 per share to 300,000,000 shares with a par value of $0.001. Share and per share dates (except par value) for the periods presented have been adjusted to reflect the effects of this stock split.
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS (Continued)
Going Concern (Continued)
As shown in the accompanying financial statements, the Company has incurred a net loss of $643,115 for the period from April 28, 2006 (inception) to November 30, 2009, and has no revenues. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its natural resource properties. Management has plans to seek additional capital through a private placement and public offering of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgement.
The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:
a) Organization and Start-up Costs
Costs of start up activities, including organizational and incorporation costs, are expensed as incurred.
b) Exploration Stage Enterprise
The Company’s financial statements are prepared using the accrual method of accounting. Until such properties are acquired and developed, the Company will continue to prepare its financial statements and related disclosures in accordance with entities in the exploration stage.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
c) Mineral Property Interests
The Company is an exploration stage mining company and has not yet realized any revenue from its operations. It is primarily engaged in the acquisition, exploration and development of mining properties. Exploration costs are expensed as incurred regardless of the stage of development or existence of reserves. Costs of acquisition are capitalized subject to impairment testing when facts and circumstances indicate impairment may exist.
The Company regularly performs evaluations of any investment in mineral properties to assess the recoverability and/or the residual value of its investments in these assets. All long-lived assets are reviewed for impairment whenever events or circumstances change which indicate the carrying amount of an asset may not be recoverable.
Management periodically reviews the carrying value of its investments in mineral leases and claims with internal and external mining related professionals. A decision to abandon, reduce or expand a specific project is based upon many factors including general and specific assessments of mineral deposits, anticipated future mineral prices, anticipated future costs of exploring, developing and operating a producing mine, the expiration term and ongoing expenses of maintaining mineral properties and the general likelihood that the Company will continue exploration on such project. The Company does not set a pre-determined holding period for properties with unproven deposits, however, properties which have not demonstrated suitable metal concentrations at the conclusion of each phase of an exploration program are re-evaluated to determine if future exploration is warranted, whether there has been any impairment in value and that their carrying values are appropriate.
If an area of interest is abandoned or it is determined that its carrying value cannot be supported by future production or sale, the related costs are charged against operations in the year of abandonment or determination of value. The amounts recorded as mineral leases and claims represent costs to date and do not necessarily reflect present or future values.
The Company’s exploration activities are subject to various laws and regulations governing the protection of the environment. These laws are continually changing, generally becoming more restrictive. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
c) Mineral Property Interests (Continued)
The accumulated costs of properties that are developed on the stage of commercial production will be amortized to operations through unit-of-production depletion.
d) Cash
Cash consists primarily of cash on deposit.
e) Marketable Securities
The Company has designated its marketable securities, comprised of common shares not yet listed on a recognized stock exchange, as held-for-trading securities and reports them at an estimated fair value (see Note 2(p)). The amounts by which future market values of these securities will differ from recorded cost will represent unrealized gains and losses and will be recognized in the Company’s consolidated statement of operations. All realized gains and losses will be recognized in the net income (loss) in the period of disposition.
f) Computer Equipment
Computer equipment is recorded at cost and will be depreciated over an estimated useful life of three years on a straight-line basis.
g) Financial Instruments
The Company’s financial instruments include cash, marketable securities, accounts payable and accrued liabilities, amounts due to related parties, amount due to shareholder, promissory note payable, promissory notes payable to related parties, loan payable and convertible notes. All such instruments are carried at cost, which, due to the short maturity of these financial instruments, approximate fair value at November 30, 2009.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
h) Foreign Currency Translation
The Company’s functional currency is the US dollar. Transactions in foreign currency are translated into U.S. dollars as follows:
i) monetary items are translated at the exchange rate prevailing at the balance sheet date;
ii) non-monetary items are translated at the historical exchange rate;
iii) revenue and expense items are translated at the average rate in effect during the applicable accounting period.
i) Use of Estimates
The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Actual results may differ from the estimates.
j) Basic and Diluted Loss Per Share
Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
The following outstanding convertible notes, stock options, and share purchase warrants were excluded from the diluted EPS computation as their effect would have been anti- dilutive:
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
k) Income Taxes
The Company uses an asset and liability approach for financial accounting and reporting on income taxes. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.
l) Impairment of Long-Lived Assets
The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. In such cases, the amount of the impairment is determined based on the relative fair values of the impaired assets. The Company tests the recoverability of the assets whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.
m) Asset Retirement Obligations
An asset retirement obligation (“ARO”) is a legal obligation associated with the retirement of a tangible long-lived asset and is recognized as a liability in the period which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated asset.
The cost of the tangible asset, including the initially recognized ARO, is depleted, such that the cost of the ARO is recognized over the useful life of the asset. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash flows, discounted at the Company’s credit-adjusted risk-free interest rate. To date, no significant asset retirement obligation exists due to the early stage of exploration. Accordingly, no liability has been recorded.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
n) Share-based Compensation
The Company accounts for stock-based compensation under the provisions of FASB Accounting Standards Codification (“ASC”) 718, Stock Compensation, which requires the recognition of the fair value of stock-based compensation. Under the fair value recognition provisions for ASC 718, stock-based compensation cost is estimated at the grant date based on the fair value of the awards expected to vest and recognized as expense ratably over the requisite service period of the award. The Company has used the Black-Scholes valuation model to estimate fair value of its stock-based awards which requires various judgmental assumptions including estimating stock price volatility and expected life. The Company’s computation of expected volatility is based on a combination of historical and market-based volatility. In addition, the Company considers many factors when estimating expected life, including types of awards and historical experience. If any of the assumptions used in the Black-Scholes valuation model change significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718 and the conclusions reached by ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505-50.
o) Environmental Protection and Reclamation Costs
The operations of the Company have been, and may in the future be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restorations costs. Both the likelihood of new regulations and their overall effect upon the Company may vary from region to region and are not predictable.
Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against statements of operations as incurred or capitalized and amortized depending upon their future economic benefits. The Company does not currently anticipate any material capital expenditures for environmental control facilities because its property holding is at an early stage of exploration.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
p) Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market.
The Company uses a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The Company measured their marketable securities using Level 3 fair value assumptions as at November 30, 2009. The fair value of the common shares received (see Note 11) was determined as the difference between the Company’s cash advances paid and the cash advances to be recovered from Solfotara Minerals Corp. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the year ended November 30, 2009.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
p) Fair Value of Financial Instruments (Continued)
The following table presents information about the Company’s financial instruments that have been measured at fair value as of November 30, 2009, and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair values:
q) Comparative Figures
Certain comparative figures have been reclassified to conform with the current year’s presentation.
r) Recent Accounting Pronouncements
In February 2010, FASB issued ASU 2010-09 Subsequent Event (Topic 855) Amendments to Certain Recognition and Disclosure Requirements. ASU 2010-09 removes the requirement for an SEC filer to disclose a date in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of GAAP. All of the amendments in ASU 2010-09 are effective upon issuance of the final ASU, except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The Company adopted ASU 2010- 09 in February 2010 and did not disclose the date the financial statements are available to be issued.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
r) Recent Accounting Pronouncements (Continued)
In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements, amending ASC 820. ASU 2010-06 requires entities to provide new disclosures and clarify existing disclosures relating to fair value measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2010- 06, but does not expect its adoption to have a material impact on the Company’s financial position or results of operations.
In October 2009, the FASB issued ASU 2009-13, Revenue Recognition (Topic 605), Multiple-Deliverable Revenue Arrangements amending ASC 605. ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. ASU 2009-13 eliminates the residual method of revenue allocation and requires revenue to be allocated using the relative selling price method. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company is currently evaluating the impact of ASU 2009-13, but does not expect its adoption to have a material impact on the Company’s financial position or results of operations.
In June, 2009, the FASB issued Update No. 2009-01, The FASB Accounting Standards CodificationTM (“ASC”) as the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. This guidance is set forth in Topic 105 (“ASC 105”). Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. This statement is effective for financial statements issued for fiscal years and interim periods ending after September 15, 2009, which, for the Company, is the fiscal year ending November 30, 2009. The adoption of this statement did not have a material effect on its financial results.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
r) Recent Accounting Pronouncements (Continued)
In May, 2009, the FASB issued ASC 855, Subsequent Events. The new standard is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This statement is effective for financial statements issued for interim or annual financial periods ending after June 15, 2009, which, for the Company, was the interim period ending August 31, 2009. The Company has evaluated subsequent events through to March 15, 2010. The adoption of ASC 855 did not have a material effect to the Company’s current practice.
3. COMPUTER EQUIPMENT
4. MINERAL PROPERTY AND ACQUISITION COSTS
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
The fair value of the warrants issued in connection with the private placement during the year ended November 30, 2008 was measured at the award date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield of 0%; average risk free interest rate of 4.90%; expected volatility of 162% and a term of 0.75 years. Of the total proceeds, $35,700 was allocated to share purchase warrants.
The fair value of the warrants issued during the year ended November 30, 2009 was measured as disclosed in Note 8.
c) Stock Options
As at November 30, 2009, the Company does not have an incentive stock option plan.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
8. CONVERTIBLE NOTES
On April 30, 2009, the Company issued 55, $2,500 Convertible Notes (the “notes”) in the aggregate amount of $137,500 due and payable on or before October 31, 2010, with interest charged at the rate of 10% per annum payable annually. Attached to the Notes were 550,000 share purchase warrants (10,000 attached to each of the 55 notes). Each warrant entitles the holder to purchase three shares of the Company’s common stock for a period expiring one year from the date of issuance of the notes at an exercise price of $0.25 ($0.083 per share). At the election of the holder, the notes and interest accrued thereon are convertible into such number of shares of the Company’s common stock as shall be equal to the principal amount of the convertible note to be converted divided by $0.05. Conversion of the notes does not affect the warrants.
During the year ended November 30, 2008, the Company had received $67,500 towards the convertible notes offering. During the year end November 30, 2009, the Company received the remaining $70,000 towards this offering.
The Company has allocated the proceeds received between the notes and the detachable warrants on a relative fair value basis. The fair value of the warrants was estimated using the Black-Scholes option pricing model at the date of issue with the following weighted average assumptions: expected dividend yield of 0%; average risk free interest rate of 0.63%; expected volatility of 229% and a term of 1.0 year. The fair value of the notes was estimated by multiplying the number of shares that would result from an immediate exercise of the conversion option, by the market price on the date of issue. The relative fair values of the notes and the warrants determine the debt discount attributable to the warrants. The result was $47,479 of the proceeds being allocated to the warrants and $90,021 being allocated to the notes. The resulting discount on the notes is amortized over the term of the notes to maturity such that, in the absence of any conversions, the carrying value of the notes at maturity would be equal to the face amount of $137,500. In the event of a conversion of any or all of the face amount of the notes, the proportionate amount of the unamortized discount as of the date of conversion is immediately charged to operations.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
8. CONVERTIBLE NOTES (Continued)
In accordance with the provisions of ASC 470 - 20, the Company determines the intrinsic value of the beneficial conversion feature on the notes by comparing the market price of the Company’s common stock at issuance of the notes to the effective conversion price of the notes, as determined by dividing the proceeds allocated to the notes by the number of shares that would result from an immediate exercise of the conversion option. The initial beneficial conversion feature was determined to be $734,250; however, in accordance with the provisions of ASC 470 - 20, it is limited to the proceeds allocated to the notes, being $90,021. This beneficial conversion feature is recorded as an immediate charge to additional paid-in capital and a further discount on the convertible note carrying value. This further discount is amortized over the term of the notes to maturity. In the event of a conversion of any, or all of, the face amount of the notes, the proportionate amount of the unamortized beneficial conversion feature as of the date of conversion is immediately charged to operations.
During the year ended November 30, 2009, the Company recorded as finance charges, $18,515 of amortization of the discount resulting from the allocation of proceeds to the warrants and a further $35,104 of the intrinsic value of the beneficial conversion feature, leaving total unamortized amounts of $83,881.
During the year ended November 30, 2009, no amounts of principal or accrued interest were converted into shares of the Company’s common stock.
9. UNIT AND SHARE SUBSCRIPTIONS RECEIVED IN ADVANCE
a) Unit subscriptions received
During the year ended November 30, 2009, the Company received $18,860 in advance of a private placement. Under the terms of the financing, a total of 94,300 units will be issued at a price of $0.20 per unit. Each unit will consist of one common share and one share purchase warrant, each whole warrant entitling the holder thereof to purchase an additional common share at a price of $0.30 for a period of one year. Due to the provision in the subscription agreements that the subscription funds will constitute non- interest bearing demand loans to the Company in the event the subscriptions are not accepted by the Company, the Company classified the unit subscriptions received in advance as current liabilities.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
10. RELATED PARTY TRANSACTIONS
During the year ended November 30, 2009, the Company paid management fees for services performed in the amount of $Nil (2008 - $2,800) to a former director and paid or accrued a total of $36,000 (2008 - $9,000) to the board of directors of MAC.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
14. INCOME TAX
a) Income Tax Provision
The provision for income taxes differs from the result which would be obtained by applying the statutory income tax rate of 34% (2008 - 34%) to income before income taxes. The difference results from the following items:
b) Significant components of the Company’s deferred income tax assets are as follows:
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
14. INCOME TAX (Continued)
c) The Company has incurred operating losses of approximately $582,000 which, if unutilized, will expire in 2029. Subject to certain restrictions, the Company has mineral property and exploration expenditures of $501,000 available to reduce future taxable income. Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been offset by a valuation allowance. The following table lists the fiscal year in which the loss was incurred and the expiration date of the operating loss carry forwards:
15. SUBSEQUENT EVENTS
Other than as disclosed elsewhere in these consolidated financial statements, the Company had the following events occurring subsequent to the year ended November 30, 2009:
On January 19, 2010, the Company entered into an option agreement dated for reference November 2, 2009 (the “Agreement”) to acquire interests in four mineral claims (collectively referred to as the “Manado Gold claims”) in the Lobongan District of Northern Sulawesi, Indonesia.
In consideration of $35,000 (subsequently paid) to be paid on execution of this Agreement, the Company has been granted an exclusive right, for a period of 90 days (to January 31, 2010) from the date of execution of this Agreement (the “Due Diligence Period”) to enter into an acquisition agreement (the “Acquisition Agreement”) to acquire up to an 85% undivided interest in the Manado Gold claims. At any time prior to the expiration of the Due Diligence Period, the Company may elect, by notice in writing, to exercise its option to enter into the Acquisition Agreement.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
15. SUBSEQUENT EVENTS (Continued)
The Acquisition Agreement shall provide for the earning of interests by the Company in the Manado Gold claims by making cash payments, stock issuances and completing work programs as follows:
d) An additional 34% interest on completion of a scoping study on the claims.
Upon the Company earning an 85% interest as outlined above, the vendor shall be carried and shall not be obligated to pay their proportionate share of the costs to complete a feasibility study and to place the claims into commercial production. On completion of the feasibility study, the Company shall have the option to acquire the remaining 15% interest for a cash payment of $5,000,000.
On January 21, 2010, the Company and the vendor agreed to extend the Due Diligence Period from January 31, 2010 to March 31, 2010.
PENGRAM CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2009 AND 2008
(Stated in U.S. Dollars)
15. SUBSEQUENT EVENTS (Continued)
On February 5, 2010, the Company entered into an option agreement to acquire an undivided 100% interest in a series of mineral claims (collectively known as the “June 1- 4 Claims”) situated in the Alberni Mining Division of British Columbia, Canada. Consideration for the claims is as follows:
a) Payment of $3,000 due on February 5, 2010 (paid);
b) Payment of $10,000 due on or before May 6, 2010;
c) Payment of $10,000 and issuance of 100,000 shares of the Company’s common stock due on or before February 5, 2011;
d) Payment of $10,000 and issuance of 100,000 shares of the Company’s common stock due on or before February 5, 2012;
e) Payment of $10,000 and issuance of 100,000 shares of the Company’s common stock due on or before February 5, 2013.
The Company entered into a promissory note agreement whereby it borrowed $75,000 from an arm’s length party. The note bears interest at 10% per annum, is unsecured and repayable on demand.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On June 18, 2009, we dismissed Williams & Webster, P.S. (“Williams & Webster”)(now known as BehlerMick, P.S), as our independent public accountants. Our Board of Directors approved the dismissal of Williams & Webster. On the same date, we appointed Davidson & Company LLP, Chartered Accountants, ("Davidson") as our new independent registered public accounting firm. Our Board of Directors approved the engagement of Davidson.
Williams & Webster’s reports on our financial statements for the years ended November 30, 2008 and 2007 did not contain an adverse opinion or disclaimer of opinion, nor were they modified or qualified as to uncertainty, audit scope or accounting principles with the exception of a statement regarding the uncertainty of our ability to continue as a going concern.
There have been no disagreements during the fiscal years ended November 30, 2008 and 2007 and the subsequent interim period up to and including the date of dismissal between Pengram and Williams & Webster on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of Williams & Webster, would have caused them to make reference to the subject matter of the disagreement in connection with Williams & Webster’s report for the financial statements for the past year and any subsequent interim period up to and including to the date of Williams & Webster’s dismissal.
ITEM 9AT. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
In connection with the preparation of this Annual Report on Form 10-K, an evaluation was carried out by the Company's management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")) as of November 30, 2009. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Company's management concluded, as of the end of the period covered by this report, that the Company's disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Securities and Exchange Commission's rules and forms.
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is a process, under the supervision of the Chief Executive Officer and the Chief Financial Officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company's assets;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
The Company's management conducted an assessment of the effectiveness of the Company's internal control over financial reporting as of November 30, 2009, based on criteria established in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). As a result of this assessment, management identified a material weakness in internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness identified is described below.
1.
Certain entity level controls establishing a “tone at the top” were considered material weaknesses. As of November 30, 2009, the Company did not have an audit committee. There is no policy on fraud. A whistleblower policy is not necessary given the small size of the organization.
2.
Due to the significant number and magnitude of out-of-period adjustments identified during the year- end closing process, management has concluded that the controls over the period-end financial reporting process were not operating effectively. A material weakness in the period-end financial reporting process could result in us not being able to meet our regulatory filing deadlines and, if not remediated, has the potential to cause a material misstatement or to miss a filing deadline in the future. Management override of existing controls is possible given the small size of the organization and lack of personnel.
3.
There is no system in place to review and monitor internal control over financial reporting. The Company maintains an insufficient complement of personnel to carry out ongoing monitoring responsibilities and ensure effective internal control over financial reporting.
As a result of the material weakness in internal control over financial reporting described above, the Company's management has concluded that, as of November 30, 2009, the Company's internal control over financial reporting was not effective based on the criteria in Internal Control - Integrated Framework issued by COSO.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15 (f) under the Exchange Act) during our quarter ended November 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the effectiveness of controls and procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that the our controls and procedures will prevent all potential errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
On March 15, 2010, we entered into a third extension agreement dated for reference February 15, 2010 (the "Third Extension Agreement") with Bako Resources Inc. ("Bako") whereby Bako agreed to extend the due date of a non-interest bearing promissory note in the amount of CDN $65,000 payable to Bako from February 15, 2010 to June 30, 2010. In consideration of the extension, we agreed to pay CDN $5,000 of the Promissory Note and issue to Bako 20,000 shares of our common stock. These shares were issued pursuant to Regulation S promulgated under the Securities Act on the basis of representations provided by Bako that it is not a “U.S. Person” as that term is defined in Regulation S of the Securities Act.
The promissory note was initially issued as part consideration for our acquisition of the Clisbako Property under the terms of the purchase agreement dated December 16, 2008 between Bako and us.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
The following table sets forth the names, ages and positions of our officers and directors as of the date hereof:
Set forth below is a brief description of the background and business experience of our executive officer and directors:
Richard W. Donaldson was appointed as our Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and as a member of our Board of Directors on May 2, 2008. Mr. Donaldson is a self employed business consultant, involved in corporate management reorganizations, mergers and acquisitions for over 25 years. Mr. Donaldson is a former director and officer of numerous private and public companies, including Noront Resources Ltd., Aiviv Ventures Inc., Cherokee Minerals Corp., Canzona Minerals, Inc. and Renox Creek Petroleum Corp.
Bryan H. Wilson was appointed as a member of our Board of Directors on December 19, 2008. Mr. Wilson obtained a Bachelor of Science from the University of Waterloo in 1975. He has worked in the fields of mining exploration and development for 18 years and financial services for 12 years. He has filled various roles such as Mining Analyst for C.M Oliver and Dominick & Dominick Securities Inc. and as a Corporate Finance Specialist for Thames Capital. Since September 2008, Mr. Wilson has served as a Director, Exploration Business Development of Centerra Gold (CG - TSX), a company engaged in the acquisition, development, and production of gold properties in Central Asia, the former Soviet Union and emerging markets. Mr. Wilson previously served as President and CEO of Gee-Ten Ventures Inc. from February 2008 to February 2010. Since September 1999, Mr. Wilson has acted as a director of Spider Resources Inc. (SPQ-TSX.V), a junior exploration company, and was the CEO and president of Spider Resources Inc. from June 2003 to June 2005. In addition, Mr. Wilson has served as a member of the board of directors for Canyon Copper Corp (CNYC - OTCBB) (formerly, Aberdene Mines Ltd.), a company engaged in the acquisition of mineral projects since April 2006 and was the President and Treasurer of Canyon Copper Corp. from May 2006 to November 2007.
In addition to the companies above, Mr. Wilson also acted as CEO, President and Director of Vencan Gold Corp. (now known as Red Pine Exploration Inc. (RPX - TSX.V)), a company engaged in the exploration of various gold projects, from April 2003 to September 2005. Mr. Wilson also served as President, CEO and Director of St. Genevieve Resources Ltd. (SGVL-CNSX, STGIF-OTCBB), a mining exploration and development company, from January 2003 to March 2008.
Term of Office
Members of our board of directors are appointed to hold office until the next annual meeting of our stockholders or until his or her successor is elected and qualified, or until he or she resigns or is removed in accordance with the provisions of the Nevada Revised Statutes. Our officers are appointed by our board of directors and hold office until removed by the board.
Significant Employees
We have no significant employees other than our sole executive officer and our directors.
Committees of the Board of Directors
Our board of directors does not maintain a separately-designated standing audit committee. As a result, our entire board of directors acts as our audit committee. Neither Mr. Donaldson nor Mr. Wilson meets the definition of an “audit committee financial expert.” We believe that the cost related to appointing a financial expert to our board of directors at this time is prohibitive.
We presently do not have a compensation committee, nominating committee, an executive committee of our board of directors, stock plan committee or any other committees.
Code of Ethics
We adopted a Code of Ethics applicable to our directors and officers, which is a “code of ethics” as defined by applicable rules of the SEC. Our Code of Ethics is attached as an exhibit to our Annual Report on Form 10-KSB for the fiscal year ended November 30, 2007, filed on March 6, 2008. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our directors and officers, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a Current Report on Form 8-K filed with the SEC.
Compliance with Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our equity securities (collectively, the “Reporting Persons”), to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulation to furnish us with copies of all forms they file pursuant to Section 16(a). Based on our review of the copies of such forms received by us, we believe that during the year ended November 30, 2009, the following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act:
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth total compensation paid to or earned by our named executive officers as that term is defined in Item 402(m)(2) of Regulation S-K, during our fiscal years ended November 30, 2009 and 2008:
Notes:
(1)
Mr. Donaldson was appointed as our CEO, CFO, President, Secretary, Treasurer and Director on May 2, 2008. Commencing September 1, 2008, we accrued $1,000 per month for Mr. Donaldson acting as a director of Magellan Acquisition Corp. (“MAC”), our wholly owned subsidiary.
(2)
Mr. Archibald serves as a director of MAC. Commencing September 1, 2008, we have paid or accrued $1,000 per month for Mr. Archibald acting as a director of MAC.
(3)
Mr. Ryan serves as a director of MAC. Commencing September 1, 2008, we have paid $1,000 per month for Mr. Ryan acting as a director of MAC.
(4)
Mr. Hoing resigned as our President, Secretary, Treasurer and Director on May 2, 2008.
Outstanding Equity Awards At Fiscal Year-End
We have not issued any outstanding equity awards since our inception.
Compensation of Directors
During the year ended November 30, 2009, we did not pay or accrue any compensation to Mr. Wilson, a member of our Board of Directors.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
EQUITY COMPENSATION PLANS
We have no equity compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of March 15, 2010 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) each of our directors, (iii) each of our named executive officers; and (iv) officers and directors as a group. Unless otherwise indicated, the shareholder listed possesses sole voting and investment power with respect to the shares shown.
(1)
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on March 15, 2010. As of March 15, 2010, there were 54,247,144 shares of our common stock issued and outstanding.
(2)
On July 9, 2009, Mr. Wilson entered into an option agreement dated July 9, 2009 with Mr. Donaldson, our sole executive officer, pursuant to which Mr. Donaldson granted an option to Mr. Wilson to acquire 1,000,000 shares of our common stock at a price of $0.05 per share until July 31, 2012.
Change In Control
We are not aware of any arrangement that might result in a change in control in the future.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Certain Relationships and Related Transactions
Except as disclosed below, none of the following persons has, in the last two fiscal years, had any material interest, director or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
(a)
any director or officer;
(b)
any proposed nominee for election as a director;
(c)
any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our common stock;
(d)
any promoters; or
(e)
any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary.
On December 16, 2008, we entered into a purchase agreement (the “Purchase Agreement”) with Bako Resources Inc. (“Bako”), a British Columbia company that is a holder of more than five percent (5%) of our common stock. Under the terms of the Purchase Agreement, our wholly owned British Columbian subsidiary, Clisbako Minerals Inc., acquired a 100% interest in ten mineral claims located 80 miles west of Quesnel, British Columbia, Canada (the “Clisbako Property”). In consideration of the Clisbako Property we issued to Bako 2,000,000 pre-split shares (6,000,000 post-split shares) of our common stock and a non-interest bearing promissory note in the amount of CDN $70,000 payable on June 30, 2009. On July 23, 2009, we entered into an extension agreement with Bako to extend the due date of the promissory to December 31, 2009. In consideration of the extension, we issued 60,000 post-split shares of our common stock to Bako. On January 21, 2010, we entered into a second extension agreement with Bako, whereby Bako agreed to extend the due date of a non-interest bearing promissory note in the amount of CDN $70,000 payable to Bako from December 31, 2009 to February 15, 2010. In consideration of the extension, we issued to Bako 10,000 post-split shares of our common stock. On March 15, 2010, we entered into a third extension agreement dated for reference February 15, 2009 with Bako whereby Bako agreed to extend the due date of a non-interest bearing promissory note to June 30, 2010. In consideration of the extension, we agreed to pay CDN $5,000 of the promissory note and issue to Bako 20,000 shares of our common stock.
As at November 30, 2009, we were indebted to Kahala Financial Corp., a company controlled by Mr. Donaldson, our sole executive officer and director, in the principal amount of $20,000. The loan is unsecured and bears an interest at a rate of 10% per annum and is due on demand. As at November 30, 2009, a total of $3,901 of interest has accrued in respect of the above loan.
Director Independence
Our common stock is quoted on the OTC Bulletin Board interdealer quotation system, which does not have director independence requirements. Under NASDAQ Rule 5605(a)(2), a director is not considered to be independent if he or she is also or has been an executive officer or employee of the corporation. In applying the definition, we have determined that Bryan H. Wilson is our sole independent director. Mr. Donaldson does not qualify as an independent member of our Board of Directors.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The aggregate fees billed for the two most recently completed fiscal years for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal periods were as follows:
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
The following exhibits are either provided with this Annual Report or are incorporated herein by reference:
Notes:
(1) Previously filed as an exhibit to our Registration Statement on Form SB-2 filed on April 24, 2007.
(2) Previously filed as an exhibit to our Current Report on Form 8-K filed on December 26, 2007.
(3) Previously filed as an exhibit to our Annual Report on Form 10-KSB filed on March 6, 2008.
(4) Previously filed as an exhibit to our Current Report on Form 8-K filed on December 22, 2008.
(5) Previously filed as an exhibit to our Current Report on Form 8-K filed on April 17, 2009.
(6) Previously filed as an exhibit to our Current Report on Form 8-K filed on June 2, 2009.
(7) Previously filed as an exhibit to our Current Report on Form 8-K filed on July 27, 2009.
(8)
Previously filed as an exhibit to our Current Report on Form 8-K filed on January 21, 2010.
(9)
Previously filed as an exhibit to our Current Report on Form 8-K filed on January 26, 2010.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PENGRAM CORPORATION
Date: March 15, 2010
By: /s/ Richard W. Donaldson
RICHARD W. DONALDSON
Chief Executive Officer, Chief Financial Officer,
President, Secretary, Treasurer,
(Principal Executive Officer
and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: March 15, 2010
By: /s/ Richard W. Donaldson
RICHARD W. DONALDSON
Chief Executive Officer, Chief Financial Officer,
President, Secretary, Treasurer,
(Principal Executive Officer
and Principal Accounting Officer)
Director
Date: March 15, 2010
By: /s/ Bryan H. Wilson
BRYAN H. WILSON
Director