ITEM 1. DESCRIPTION OF BUSINESS
White Mountain Titanium Corporation was incorporated under the laws of the State of Nevada on April 24, 1998. From approximately 2000 until 2004, we had no business operations and no source of generating revenues. We were a non-reporting shell company between 2000 and February 2004 when we entered into a reverse acquisition with GreatWall Minerals, Ltd., an Idaho corporation. In February 2004 we merged with GreatWall which had had an on-going interest in the natural resources sector in Chile for several years and in 2003 had entered into an agreement to acquire a core holding of Cerro Blanco mining concessions through its 100% owned Chilean subsidiary, Compania Minera Rutile Resources Limitada. In September 2005 we completed the purchase of these mining concessions.
The mining concessions now consist of 33 registered mining exploitation concessions, and 5 exploration concessions, over approximately 8,225 hectares located approximately 39 kilometers west of the City of Vallenar in the Atacama, or Region III, geographic region of northern Chile. We are in the exploration stage, which means we are engaged in the search for mineral deposits or reserves which could be economically and legally extracted or produced. We are conducting a drilling campaign and pre-feasibility work in preparation for a feasibility study to determine whether the concessions contain commercially viable ore reserves. If we are successful in obtaining a feasibility study which supports commercially viable ore reserves, we intend to exploit the concessions and to produce titanium dioxide concentrate through conventional open pit mining and minerals processing. Our business plan is to explore solely for titanium deposits or reserves on the Cerro Blanco mining concessions. If this exploration program is unsuccessful, we will be unable to continue operations.
We have produced no revenues, have achieved losses since inception, have no operations, and currently rely upon the sale of our securities to fund our operations. We estimate the cost to take the Cerro Blanco project to the point of commissioning a final engineering feasibility study at approximately $3,408,000. This figure excludes general and administrative expenses. As of December 31, 2007, our cash position was $2,678,652. We currently do not have sufficient capital to complete this plan and estimate that we will require additional financing to do so.
Over the next twelve to twenty-four months we have two principal objectives: to advance the project towards a final engineering feasibility level and to secure off-take contracts for the planned rutile concentrate output. We also continue to investigate the commercial viability of producing a feldspar co-product. The feldspar could find applications in the glass and ceramics industries.
Titanium Industry and Market Overview
Overview
Titanium is the ninth most abundant element, making up about 0.6% of the earth's crust. Titanium occurs primarily in the minerals anatase, brookite, ilmenite, leucoxene, perovskite, rutile, and sphene. Of these minerals, only rutile, ilmenite and leucoxene, an alternation product of ilmenite, have significant economic importance. Both rutile and ilmenite are chemically processed to produce both titanium dioxide pigment and titanium metal.
Approximately 95% of titanium is consumed in the form of titanium dioxide concentrate, primarily as a white pigment in paints, paper, and plastics. Titanium dioxide pigment is characterized by its purity, refractive index, particle size, and surface properties. The superiority of titanium dioxide as a white pigment is due mainly to its high refractive index and resulting light-scattering ability, which impart excellent hiding power and brightness.
Titanium metal is well known for its corrosion resistance, high strength-to-weight ratio, and high melting point. Accordingly, titanium metal is used in sectors, such as the aerospace and chemicals industries, where such considerations are extremely important.
Our business is currently focused on the mining concessions which constitute the Cerro Blanco property. These concessions host a hard rock rutile deposit as opposed to ilmenite laden mineral sands deposits held by most of our competitors. Rutile generally has higher percentages of titanium oxide.
Industry Background
The bulk of the world's titanium is used as the metal oxide, titanium dioxide (TiO2). The chemically processed titanium ore, whether rutile or ilmenite based, is turned into pure titanium dioxide and used as a brilliant white pigment which imparts whiteness and opacity to paint, plastics, paper and other products. The use of titanium dioxide as a color carrier has grown over the last 40 years, since the use of white lead based paints was banned throughout the world for health reasons. Titanium dioxide is chemically inert, which gives it excellent color retention. It is thermally stable, with a melting point at 1,668 degrees Celcius, which makes it suitable for use in paints and products that are designed to withstand high temperatures. About 5% of the world's titanium is used as the metal, due to its exceptional properties. It has the highest strength to weight ratio of any metal; is as strong as steel but 45% lighter. The most noted chemical property of titanium is its excellent resistance to corrosion; it is almost as resistant as platinum, capable of withstanding attack by acids, moist chlorine gas, and by common salt solutions.
The table below gives a summary of distribution and end uses on an industry by industry basis for TiO2.
U.S. Distribution of TiO2 pigment shipments by industry: 2006 ------------------------------------------------------------- Industry Percent ------------------- ------- Paint and Coatings 57.1% Plastics and Rubber 26.3% Paper 12.6% Other* 4%
* Includes agricultural, building materials, ceramics, coated fabrics and textiles, cosmetics, food, paper and printing ink
The table below gives a broad picture of principal uses for titanium dioxide.
Uses of Titanium Dioxide ------------------------ Industry Use ----------------- --- Paints & Pigments Paints, coatings, lacquer, varnishes, to whiten and opacity polymer binder systems, to provide coating and hiding power, and to protect paints from UV radiation and yellowing of the color in sunlight.
Plastics To ensure high whiteness and color intensity, and increase plastic impact strength in such items as window sections, garden furniture, household objects, plastic components for the automotive industry.
Paper Additive to whiten and opacity the paper.
Cosmetics Protection against UV radiation in high factor sun creams; to give high brightness and opacity in toothpaste and soaps.
Food High brightness and opacity in foods and food packaging.
Pharmaceuticals High chemical purity titanium dioxide is used as a carrier and to ensure brightness and opacity.
Printing Inks Protection against fading and color deterioration.
Other Titanium dioxide is used in chemical catalysts, wood preservation, rubber, ceramics, glass, electroceramics, welding fluxes, and high temperature metallurgical processes.
In 2004, an expanding world economy and industrial growth in China led to strong demand for titanium mineral concentrates, titanium metal and titanium dioxide (TiO2) pigment. Gross production of titanium mineral concentrates (ilmenite and rutile) rose from 5.0 million tonnes in 2004 to an estimated 5.4 million tonnes in 2006. During the same period, published prices for high grade rutile have held up at $500 - $750 per tonne, depending on grade.
The following table sets forth the estimated world reserves of titanium minerals based upon global resources of titanium minerals.
World Reserves of Ilmenite and Rutile ('000t TiO2) -------------------------------------------------- Country Ilmenite Rutile ------- -------- ------ Australia 130,000 19,000 Canada 31,000 - India 85,000 7,400 Norway 37,000 - South Africa 63,000 8,300 Ukraine 5,900 2,500 US 6,000 400 Other 15,000 8,100
Source: U.S. Geological Survey, Mineral Commodity Summaries, January 12, 2007, found online at http://minerals.usgs.gov/minerals/pubs/mcs/2007/mcs2007.pdf.
Titanium Pigment Production
Mining of titanium minerals is usually performed using surface methods like dredging and dry mining and gravity spirals. Ilmenite is often processed to produce a synthetic rutile.
The most widely used processes available for the manufacture of titanium dioxide pigment are the sulphate and chloride processes. Commercially manufactured titanium dioxide pigment is available as either anatase-type or rutile-type, categorized according to its crystalline form, regardless of whether it is made from the mineral rutile. Anatase pigment is currently made by sulphate producers only, while rutile pigment is made by both the chloride and the sulphate processes. The decision to use one process instead of the other is based on numerous factors, including raw material availability, freight, and waste disposal costs.
Anatase and rutile pigments, while both are white, have different properties and thus have different end-uses. For example, rutile pigment is less reactive with the binders in paint when exposed to sunlight than is the anatase pigment and is preferred for use in outdoor paint. Anatase pigment has a bluer tone than rutile, is somewhat softer, and is used mainly in indoor paints and in paper manufacturing. Depending on the manner in which it is produced and subsequently finished, TiO2 pigment can exhibit a range of functional properties, including dispersion, durability, opacity, and tinting.
In the chloride process, rutile is converted to TiCl4 by chlorination in the presence of petroleum coke. TiCl4 is oxidized with air or oxygen at about 900 degrees Celcius, and the resulting TiO2 is calcined to remove residual chlorine and any hydrochloric acid that may have formed in the reaction. Aluminum chloride is added to the TiCl4 to assure that virtually all the titanium is oxidized into the rutile crystal structure. The process is conceptually simple but poses a number of significant chemical engineering problems because of the highly corrosive nature of chlorine, chlorine oxides and titanium tetrachloride at temperatures of 900 degrees Celcius or higher.
In the sulphate process, ilmenite or titanium slag is reacted with sulfuric acid. Titanium hydroxide is then precipitated by hydrolysis, filtered and calcined. This is a process involving approximately 20 separate processing steps. Because sulphate technology is predominantly a batch process, it is possible to operate one part of a sulphate process plant while another part is shut down for maintenance. To some extent, stocks of intermediate reaction products can be allowed to build up, awaiting further processing downstream at some later time. It is also possible that a sulphate process plant can be run at 60-80% capacity utilisation fairly easily if necessary, simply by switching off one or more of its calciners.
Synthetic rutile is formed by removing the iron content from ilmenite, thereby concentrating the titanium dioxide content to at least 90%. In this way, ilmenites can be upgraded to chloride route feedstocks and used as a substitute for rutile.
For 2004, U.S. consumption of ilmenite and titaniferous slag was more than three times that of both natural and synthetic rutile.
Demand for Titanium Pigment
An assessment of U.S. Geological Survey historical data (Titanium Minerals Handbook, 1970-2005) shows that world demand for titanium dioxide pigments showed practically unbroken annual growth from 1.6 million tons (Mt) in 1970 to 3.9Mt in 2000. It declined to 3.7Mt in 2001 but rebounded to around 4Mt in 2002, with sales increasing by around 6.6% and a further rise of 3.2% in 2003. World consumption of titanium dioxide pigment was estimated to be 4.6 million metric tons in 2004, an 8% increase compared with consumption in 2003. According to the U.S. Geological Survey Mineral Industry Surveys, titanium mill product shipments in 2004 were approximately 19,300 metric tons and in 2005 were approximately 23,800 metric tons, a 23% increase compared with the shipments in the previous year.
Titanium Dioxide Prices
The 2006 year end published price range for bagged rutile mineral concentrates was US$570 to US$700 per metric ton, a moderate increase compared with that of 2005. Year end prices of ilmenite concentrate ranged from US$75 to US$85 per ton for 2006, and there has been no change in 2005.
As capacity utilization rates for TiO2 pigment plants rose, 2006 year end published prices for anatase and rutile grade pigment increased moderately compared with those of 2005. The U.S. Department of Labor, Bureau of
Labor Statistics producer price index for TiO2 pigment increased to 148.9 in December 2004 from 146.1 in December 2003.
Competition
Once in production we will compete with a number of existing titanium dioxide concentrate producers, including Iluka Resources Inc., Richards Bay Iron and Titanium Pty. Ltd., QIT-Fer et Titane Inc., and Titania A/S as well as other projects proposed for development. Each of the existing producers has an operating history as well as proven reserves and resources; however the majority of their collective production is in the form of ilmenite or synthetic rutile, not rutile.
Management believes that the location of the Cerro Blanco property may provide a significant advantage in competing with other producers of titanium. In addition to good road transport links, power and water, a port facility capable of handling 70,000 ton ships is available at Huasco 30 kilometers northwest of the Cerro Blanco property. The property also lies close to a fully operational rail track, and if necessary, a spur line could be run into the property linking it directly to port facilities at Huasco.
In order to be competitive, we will be required to meet buyers' specifications, including particle size, concentration levels, calcium and impurities. Management believes metallurgical tests to date have demonstrated that the rutile mineralization at the Cerro Blanco concessions can be concentrated to an acceptable level to buyers. Results received in November 2006 of metallurgical mapping studies of the Cerro Blanco rutile deposit, which were based on 15 different samples selected from a recent RC drilling campaign, indicate that a high grade rutile product with low levels of calcium and other impurities can be produced from a range of ore types. The results also highlighted ore types that would present process problems. We are using the results of these studies as a basis for further geological assessment of certain areas of Cerro Blanco. Metallurgical test work also showed that the incorporation of a gravity pre-concentration stage in the process flow sheet would reduce the amount of material passing from the crushing to the milling stage. At the same time the head grade of ore going to the flotation section could be almost doubled. Management believes that such a process improvement could have a significant effect on the overall capital requirement of the project. An earlier report indicated that ore from Cerro Blanco, in addition to high grade rutile, could also yield a sodium and potassium feldspar co-product. Feldspar is used extensively in the glass and ceramics industries and management is examining the commercial possibilities for such a product.
Management does not currently have any customers for any rutile titanium which it may produce. We anticipate that the concentrate would be transported by ship which makes the location of the mining concessions near a port advantageous. Notwithstanding this, management will need to evaluate shipping rates and transit times when it obtains potential customers to determine whether existing prices for titanium would make sales to such customers economically viable.
Mining, particularly copper mining, is a significant industry in Chile. We will be competing with a number of existing mining companies, including the state-owned Codelco Copper Corporation, one of the world's largest copper producers, for qualified workers, supplies, and equipment. However, management believes Cerro Blanco has an attractive location and good infrastructure in an active mining region. The property is located at a low elevation, near the coast, with two nearby towns from which it will be able to draw manpower and supplies. Thus, we do not anticipate any significant logistic issues, no separate camps to construct, no inclement weather issues or other operating considerations which would increase the cost of mining and make us less competitive.
Government Compliance
Our exploration activities are subject to extensive national, regional, and local regulations in Chile. These statutes regulate the mining of and exploration for mineral properties, and also the possible effects of such activities upon the environment. Future legislation and regulations could cause additional expense, capital expenditures, restrictions and delays in the development of the Cerro Blanco property, the extent of which cannot be predicted. Also, permits from a variety of regulatory authorities are required for many aspects of mine operation and reclamation. In the context of environmental permitting, including the approval of reclamation plans, we must comply with known standards, existing laws and regulations that may entail greater or lesser costs and delays, depending on the nature of the activity to be permitted and how stringently the regulations are implemented by the permitting authority. We are not presently aware of any specific material environmental constraints affecting the Cerro Blanco property that would preclude its exploration, economic development, or operation.
Chile enacted provisions in its 1980 Constitution to stimulate the development of mining, while at the same time guaranteeing the property rights of both local and foreign investors. While the state owns all mineral resources,
exploration and exploitation of these resources is allowed via mining concessions, which are granted by the courts. A Constitutional Organic Law, enacted in 1982, sets out that certain rights and obligations may attach to concessions, such as the right to mortgage or transfer concessions and the entitlement of the holder to explore (pedimentos) as well as to exploit (mensuras). A concession is obtained by filing a claim and includes all minerals that may occur within the area covered by the concession. The holder of a concession also has the right to defend his interest against the state and third parties.
Mining claims in Chile are acquired in the following manner:
* Pedimento: A pedimento is an exploration claim precisely defined by coordinates with north south and east west boundaries. These may range in size from a minimum of 100 hectares to a maximum of 5000 hectares, with a maximum length to width ratio of 5:1. A pedimento is valid for a maximum period of two years, following which the claim may be reduced in size by at least 50%, and renewed for an additional two years, provided that no overlying claim has been staked. Claim taxes are due annually in the month of March; if the taxes on a pedimento are not paid by such time, the claim can be restored to good standing by paying double the annual claim tax by or before the beginning of the following year. In Chile, new pedimentos are permitted to overlap pre existing claims; however, the previously staked or underlying claim always takes precedence as long as the claim holder maintains his claim in good standing and converts the pedimento to a manifestacion within the initial two year period.
* Manifestacion: During the two year life of a pedimento, it may be converted at any time to a manifestacion. Once an application to this effect has been filed, the claim holder has 220 days to file a "Solicitud de Mensura" or "Request for Survey" with a court of competent jurisdiction, and notify surrounding claim holders of the application by publishing such request in the Official Mining Bulletin. This notifies surrounding claim holders, who may contest the claim if they believe their pre established rights are being encroached upon. The option also exists to file a manifestacion directly on open ground, without going through the pedimento filing process.
* Mensura: The claim must be surveyed by a government licensed surveyor within nine months of the approval of the "Request for Survey." During the survey any surrounding claim owners may be present, and once completed the survey documents are presented to the court and reviewed by SERNAGEOMIN, the National Mining Service. Assuming that all steps have been carried out correctly and all other necessary items are in order, the court then adjudicates the application and grants a permanent property right (a mensura), the equivalent to a "patented claim."
Each of the above stages of the acquisition of a mining claim in Chile requires the completion of several steps, including application, publication, inscription payments, notarization, tax payments, legal fees, "patente" payments, and extract publication, prior to the application being declared by the court as a new mineral property. Details of the full requirements of the claim staking process are documented in Chile's mining code. Most companies carrying on operations in Chile retain a mining claim specialist to carry out and review the claim staking process and ensure that their land position is kept secure.
In 1994 Chile adopted legislation establishing general environmental norms which must be followed in activities such as mining. This legislation requires us to prepare an environmental impact study which must include a description of the project and a plan for compliance with the applicable environmental legislation. It must also include base line studies containing the information relative to the current components of the existing environment in the area influenced by the project. Further, it must consider the construction, operation and closure/abandonment phases of the project. It must also include a plan to mitigate, repair, and compensate, as well as risk prevention and accident control measures, to achieve a project compatible with the environment. The study must be presented to the community for comment and to the regional arm of the National Environmental Commission for approval. We have completed an environmental base line study on the property, which has not yet been submitted to the regional Chilean government authority for review and approval.
Insurance
We maintain property and general liability insurance with coverage we believe is reasonably satisfactory to insure against potential covered events, subject to reasonable deductible amounts, through our exploration stage.
Employees
Aside from our President, who devotes his full time to our company, and our directors and executive officers that donate a portion of their time to our business, we currently have only one other full-time employee who works as an assistant to Mr. Kurtanjek. We will also be dependent upon the services of outside geologists, metallurgists, engineers, and other independent contractors to conduct our drilling program, develop our pilot plant, and conduct the various studies required to complete exploration of our mining concessions. In addition, we do not have any agreements or arrangements for the necessary managers and employees who will be necessary to operate the mine if commercial production commences. We do not have any existing contracts for these services or employees.
ITEM 1A.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we have elected not to provide the disclosure required by this item.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Because we are neither an accelerated filer nor a large accelerated filer, we have elected not to provide the disclosure required by this item.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY
Location and Access
The Cerro Blanco property is located approximately 39 kilometers, or approximately 24 miles, west of the city of Vallenar in the Atacama geographic region (Region III) of northern Chile and southwest of the Cerro Rodeo Mining District. Access to the property is as follows: The main Ruta 5, the PanAmerican Highway, runs north from Santiago for approximately 625 kilometers to Vallenar; from there a paved road runs west toward the Port of Huasco for a distance of 22 kilometers to the village of Nicolasa; at Nicolasa a municipally maintained dirt road runs approximately 14 kilometers southwest to the property. Management believes access to the property is adequate to accommodate the type of vehicles and traffic during the exploration stage on the property. Improvements to the dirt road will be required for the development and production stages. These improvements will include widening of the road and topping it with gravel. Management believes adequate supplies of bedrock and gravel are available for this purpose, although it currently has no arrangements or agreements to provide either the improvement services or supplies. The area is served by a regional airport at Vallenar.
Cerro Blanco lies within an established mining district where management believes experienced mineworkers and support personnel are available. Labor rates in the region are considerably less costly when compared with standard North American rates. Mining is one of the main sectors of the Chilean economy and Region III has a broad base of mining contractors and suppliers of both new and used mining and processing equipment. They service all the major gold, copper, and iron ore mines in the area.
The local climate is generally arid with little rainfall in normal years. Vegetation is minimal, supporting only desert scrub and sparse cactus. Topography consists of low hills with a mean elevation of 100 meters, which are incised periodically by active creeks. The Huasco River, 15 kilometers, approximately 9 miles, to the north, is a source of water. Additionally, high-tension power lines pass 15 kilometers, approximately 9 miles, to the north of the property along the Vallenar-Huasco highway.
In addition to road transport links, power and water access, a port facility with a capacity to handle 70,000 ton ships is accessible at Huasco, which is 30 kilometers, approximately 19 miles, northwest of the property. The property also lies close to a fully operational rail track. If necessary, a spur line could be run into the property linking it directly to the port.
Title Status and Exploration Rights
Under the Chilean mining code, surveyed mineral concessions can be held in perpetuity subject only to an annual tax based on the land held. Tax payments are due in March and payments for 2005, and 2006 were approximately $17,961, and $19,812, respectively. We have converted our existing exploration licenses into thirty-three exploitation licenses in the current tax year which will increase the tax payable. The tax payment for March
2007 was approximately $50,000 based upon the status of the mining concessions and the currency exchange rate at that time.
The Chilean mining code does not convey surface rights to owners of the mining concessions. However, the owners of mining concessions are entitled to the establishment of the necessary easements for mining exploration and exploitation. The surface lands are subject to the burden of being occupied, to the extent required by mining operations, by ore yards and dumps, slag and tailings, ore extraction and benefaction plants, electric substations and communications lines, canals, reservoirs, piping, housing, construction and supplementary works, and to the encumbrance of transit and of being occupied by roads, railways, piping, tunnels, inclined planes, cableways, conveyor belts and all other means used to connect the operations of the concession with public roads, benefaction facilities, railroad stations, shipping ports, and consumer centers. The establishment of these easements, the exercise thereof, and the compensation therefore, are to be agreed upon either between the concession owner and the surface owner, or are established by court decision under a special brief procedure contemplated by the law.
The surface rights are owned by Agrosuper, a large Chilean agricultural concern, and we are negotiating with the attorney who represents the company to either sell outright the surface rights to us or negotiate an easement and right of way with us. Nevertheless, should this alternative fail, we will proceed to seek the easement through the court, which under Chilean mining law we have the right to obtain. We do not anticipate any material difficulty with surface rights on the Cerro Blanco property.
Exploration History
In 1990-1991 the western half of the property, then referred to a as Barranca Negra, was held under option by Adonos Resources of Toronto, Canada, who conducted extensive rock sampling, geological mapping and 450 meters of trenching. In 1992 the property was optioned by Phelps Dodge, to which they applied the name Freirina. In late 1992 and early 1993, 1,200 meters of diamond and 6,000 meters of reverse circulation drilling were completed, principally in the most westerly Cerro Blanco anomaly. In 1993 two 15 ton bulk samples were taken for metallurgical testing. A gravity concentrate was produced from a 15 ton sample of this material by Lakefield Research in Santiago. Fifty kilos of this concentrate were shipped to Carpco Inc. in Florida for further gravity circuit up-grading followed by dry-milling using magnetic and electrostatic separation techniques.
In 1999 Dorado Mineral Resources N.L. purchased the property and re-named the property Celtic. In February 2000, a preliminary processing test carried out by RMG Services Pty. Ltd., Adelaide, Australia, on behalf of Dorado, used combined microwave leaching and flotation in the up-grading of Celtic (Freirina) gravity concentrate. In June 2000 a review and summary of prior exploration programs and results was conducted by an independent geological consultant on behalf of Dorado Mineral Resources N.L. A cross-sectional estimation of the resource potential of the Cerro Blanco deposit based on the prior drilling and surface sampling was completed as part of this study. Later the same month a scoping study based on level plans produced for the area of highest density drilling was undertaken on behalf of Dorado Recursos Minerales Chile S.A. by Tecniterrae Limitada, a Santiago based group of consulting mining engineers.
In November and December 2000 a further study was commissioned by Dorado Recursos Minerales Chile S.A. to supervise the collection of a second bulk sample of 25 tons for metallurgical testing. Also during this program the Cerro Blanco area was geologically re-mapped. In August 2001, ownership of the property was transferred to Kinrade Resources Limited. Subsequent to these events, Kinrade defaulted on its obligations and was unable to meet the payment schedules as required under contract. In the fall of 2003 ownership of the property passed to Compania Minera Rutile Resources Limitada, the wholly owned subsidiary of White Mountain Titanium Corporation. The purchase was completed in September 2005.
Geology and Mineralization
Management believes the Cerro Blanco property contains a large and possibly unique type of titanium mineralization. Nevertheless, we are still in the exploration stage of development and there are no known reserves on the property. The titaniferous mineral located on the property is clean red-brown and black rutile which occurs disseminated with the tonalitic suite of an alkalic diorite-gabbro-pyroxenite intrusive. Its uniformly disseminated nature and associated alteration endow it with strong similarities to porphyry copper deposits. Natural rutile concentrates such as found on this property would be the preferred feed stock for both titanium metal and pigment grade titanium dioxide production.
Exploration Plans
During 2006, we undertook two separate drilling campaigns. The first was designed to test ore variability, and provided 15 different composites which were subjected to metallurgical testing by Lakefield Research. The second campaign, which commenced in October 2006, centered on an exploration program consisting mainly of infill and step out drilling, grade variability studies and regional reconnaissance in search of possible extensions to the mineralization and geologic modelling. On January 24, 2007, we announced that we had completed a 16-hole diamond drilling campaign, totaling over 2,900 meters at Cerro Blanco. The principal objectives of this campaign were to increase resources in the central portion of the main zone as well as to test new target areas to the south and south-west. Core recoveries in excess of 95% were achieved in the majority of holes drilled. Split core samples were sent to Lakefield Research in Ontario, Canada, for on-going metallurgical testing, and whole-core geotechnical testing has been carried out in respect of rock mechanics for mine planning purposes.
Planning and execution of the drilling campaign was closely linked to previous metallurgical test work. The principal focus was to target titanium resources which would yield a high grade TiO2 concentrate from conventional flotation. After an extensive evaluation of historic data, our contract geologists devised and are now utilizing an ore ranking system, MR1 ("Mine Rank 1") through to MR4, with ranks MR1 and MR2 producing the best, and most commercially acceptable chemical product specifications. Data from the latest drilling campaign was input into a geological model and this model, together with ongoing technical work, will be integrated into a resource model.
Titanium mineralization starts at surface and extends over long intercepts with both attributes offering the potential for low mining costs. We believe we have good results in the central portion of the main zone of Cerro Blanco, as well as significant potential for further resource development to the south and south-west areas of the property.
During 2007, the Company's geological team undertook and extensive geochemical sampling program at the Eli prospect. Working on a 25 by 25 meter grid, the team took nearly 700 samples of outcrop material over an area of 1100 meters by 900 meters. These were sent for chemical assay, and good surface expression was noted throughout. Samples showed good mineralization with TiO2 grades in the range 1.0% to 3.0%; two samples from high grade vein material reported results in excess of 21% TiO2 and 25% TiO2 respectively. As a result, in early 2008, the Company has built a 12 kilometer, 5 meter wide access road to and around the Eli prospect. Subject to the availability of funds, a diamond drill program is planned at Eli to gain more information about the mineralization, and assess the resource potential for future geological and metallurgical testwork.
We are expecting to receive, in the near future, the results of our pre-feasibility study from AMEC-Cade, an internationally recognized engineering contractor. Based on preliminary discussions, we expect the results of the study to support our internal assessments of the project.
A considerable body of engineering design and process engineering work has already been completed, both by us and previous owners, for the development of a large open pit mine and milling operation. The extent to which this engineering work could be incorporated into a final feasibility study will depend on factors such as optimal plant sizing and configuration based on product volumes and specifications set out in off-take contracts and process design, the latter to be determined by refinements coming out of this year's planned metallurgical test work and pilot scale testing. With off-take contracts in hand, we would undertake a program of drilling to provide data for mine planning and design, for an environmental impact assessment and permitting program, and to commission a feasibility study. As some of these activities would be undertaken in tandem, we believe a feasibility study could be completed within twelve to fourteen months of us receiving off-take contracts, subject to the availability of funds, personnel and equipment. We estimate the cost to take the project to the point of commissioning a final engineering feasibility study at approximately $3,408,000. This figure includes a 20 per cent contingency but excludes general and administrative expenses. As of December 31, 2007, our cash position was $2,678,652. We currently do not have sufficient capital to complete this plan and estimate that we will require additional financing to do so. Our business plan remains to explore solely for titanium deposits or reserves on the Cerro Blanco mining concessions. If this exploration program is unsuccessful, we will be unable to continue operations.
Also, as an exploration stage company, our work is highly speculative and involves unique and greater risks than are generally associated with other businesses. We cannot know if our mining concessions contain commercially viable ore bodies or reserves until additional exploration work is done and an evaluation based on such work concludes that development of and production from the ore body is technically, economically, and legally feasible.
If we proceed to development of a mining operation, our mining activities could be subject to substantial operating risks and hazards, including environmental hazards, industrial accidents, labor disputes, encountering unusual or unexpected geologic formations or other geological or grade problems, encountering unanticipated ground or water conditions, pit-wall failures, flooding, rock falls, periodic interruptions due to inclement weather conditions or other unfavorable operating conditions and other acts of God. Some of these risks and hazards are not insurable or may be subject to exclusion or limitation in any coverage which we obtain or may not be insured due to economic considerations.
Glossary of Terms
Certain terms used in this section are defined in the following glossary:
ALKALIC DIORITE-GABBRO-PYROXENITE INTRUSIVE: a potassium and sodium rich, coarse grained and possibly dark colored igneous rock with associated magnesium and iron that consolidated from magma beneath the earth's surface.
DEVELOPMENT: work carried out for the purpose of opening up a mineral deposit and making the actual extraction possible.
DISSEMINATED: fine particles of mineral dispensed through the enclosing rock.
EXPLOITATION MINING CONCESSIONS: licensed claims where the holder has the right to permit, develop, and operate a mine.
EXPLORATION: work involved in searching for ore by geological mapping, geochemistry, geophysics, drilling and other methods.
EXPLORATION MINING CONCESSIONS: licensed claims where the holder has the right to explore.
GRADE: mineral or metal content per unit of rock or concentrate or expression of relative quality e.g. high or low grade.
INTRUSIVE: a volume of igneous rock that was injected, while still molten, and crystallized within the earth's crust.
MINERALIZATION: the concentration of metals and their compounds in rocks, and the processes involved therein.
MORPHOLOGY: the observation of the form of lands.
ORE: material that can be economically mined from an ore body and processed.
PORPHYRY DEPOSITS: deposits hosted in igneous rocks characterized by large crystals of alkali feldspar set in a finer groundmass with the resulting texture called porphyritic. In a commercial sense, the term is applied to deposits characterized by large size (particularly with respect to the horizontal dimension) and a uniform dissemination of the mineral or metal.
RECLAMATION: the restoration of a site after exploration activity or mining is completed.
RUTILE: a mineral, titanium dioxide (TiO2), trimorpheus with anatase and brookite.
TiO2: Titanium dioxide. The form of titanium found in the mineral rutile.
TITANIUM: a widely distributed dark grey metallic element, (Ti), found in small quantities in many minerals. The mineral ilmenite, (FeTiO3), is currently the principal feedstock for the production of titanium dioxide (TiO2) powder and titanium metal.
Metric Conversion Table
For ease of reference, the following conversion factors are provided:
Metric Share U.S. Measure U.S. Measure Metric Share ------------ ------------ ------------ ------------ 1 hectare.......2.471 acres 1 acre..........0.4047 hectares 1 meter.........3.2881 feet 1 foot..........0.3048 meters 1 kilometer.....0.621 miles 1 mile..........1.609 kilometers 1 tonne.........1.102 short tons 1 short ton.....0.907 tonnes
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We received a Cease Trade Order in British Columbia (the "Order") from the British Columbia Securities Commission (the "BCSC") dated January 16, 2008. As White Mountain is not a reporting issuer in Canada and its shares do not trade on any Canadian exchange, we instructed the Company's Canadian legal counsel to contact the BCSC to discuss the Order and prepare an appropriate response. We understand from counsel that the basis of the Order is that on May 22, 2007, the Company announced an internally prepared mineral resource estimate on its Cerro Blanco titanium project (the "Project") in Chile without filing a technical report in compliance with Canadian Securities Administrator's National Instrument 43-101 ("NI 43-101") within 45 days of the announcement. NI 43-101 applies to issuers with a significant connection to Canada and requires disclosure with regard to resources to be supported by a technical report prepared in a prescribed manner. We understand that the BCSC maintains that the filing of a NI 43-101 report is required regardless of reporting issuer status within British Columbia.
To provide investors with an independent resource estimate and in deference to proposed new provincial legislation, BC Instrument 51-509, which if enacted would require OTCBB listed issuers with a significant connection to British Columbia to file with the BCSC as if they were fully reporting in the province, the Company engaged the independent, qualified person who authored a previous NI 43-101 report on the Project in 2005 to prepare an update of the report including his own estimate of current resources. This report was filed with the BCSC on February 29, 2007. We anticipate that the Order will be rescinded in the near future.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders of the Company during the fourth quarter of the fiscal year ended December 31, 2007.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is quoted on the OTC Bulletin Board and on the Pink Sheets under the symbol "WMTM." The table below sets forth for the periods indicated the range of the high and low bid information as reported by a brokerage firm and/or as reported on the Internet. These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
Quarter High Low ------- ---- --- FISCAL YEAR ENDED DECEMBER 31, 2006 First $1.10 $0.70 Second $0.90 $0.63 Third $0.84 $0.58 Fourth $1.01 $0.31
FISCAL YEAR ENDED DECEMBER 31, 2007 First $0.70 $0.41 Second $0.61 $0.49 Third $0.66 $0.40 Fourth $1.45 $0.51
Holders
At March 18, 2008, we had approximately 100 holders of our common stock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. We have appointed Interwest Transfer Company, Inc., 1981 East 4800 South, Suite 100, Salt Lake City, UT 84117, to act as the transfer agent of our common stock.
Dividends
We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in the foreseeable future. In addition, any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant
We currently have outstanding a class of preferred stock designated as Series A Convertible Preferred Stock. The holders of these preferred shares are entitled to any dividends paid and distributions made to the holders of our common stock to the same extent as if these holders of preferred shares had converted the preferred shares into common stock and had held such shares of common stock on the record date for the particular dividends and distributions.
Securities Authorized for Issuance under Equity Compensation Plans
See "Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" regarding information about our equity compensation plans.
Purchases of Equity Securities
We have no equity securities registered pursuant to Section 12 of the Exchange Act.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
As a smaller reporting company, we have elected not to provide the disclosure required by this item.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
During the year, after discussions with our auditors, we reevaluated our accounting for certain items to ensure that we were fully compliant with generally accepted accounting policies for a company at our stage of development. For example, in accordance with EITF 04-2, it was determined that it would be appropriate to capitalize the acquisition costs of our property due to the advances made during the year, where these costs had been expensed in previous years. Accordingly, balance sheet for 2006 saw an increase in assets of $650,000 and the reported deficit decreased by the same amount. Similarly, it was determined that stock based compensation for the previous years should be allocated to the underlying expense category where the expense for the individual concerned was recorded. Accordingly, consulting fees, directors and officers consulting fees, and management fees are restated for 2006 in the discussion below. The aggregate loss for 2006 is unchanged.
We recorded a loss for the year ended December 31, 2007, of $3,921,817 ($0.19 per weighted average common share outstanding) compared to a loss of $2,184,843 ($0.10 per weighted average common share outstanding) for 2006. This 79% increase in loss in the current year is attributable primarily to increased stock based compensation, both through the issuance of stock options and through stock issuances. During the year, we caused our compensation committee to review the compensation structure of the company as a whole, and determined that we significantly lagged the market in all areas, and have done so historically. Given the critical stage of the company's development, we considered that it would be detrimental to the company and its
shareholders to loose any of our management or consultants to competitors. Accordingly we issued stock options and shares where we were not able to issue stock options, as an alternative to significantly increasing cash compensation. We refer the reader to note 7 b) and d) of the financials for the details of stock based compensation and the restatement noted above.
The principal expenses were:
* Consulting fees of $928,532 (2006 - $115,955) due to approximately $788,500 ($2006 - $24,200) of stock based compensation to external consultants and geological staff, as well as increased fees for marketing and metallurgical consulting with the addition of external consultants in those areas;
* Consulting fees - directors and officers of $1,231,327 (2006 - $218,183) due to $1,001,700 (2006 - $35,700) of stock based compensation due to options and share issuances;
* Exploration of $571,090 (2006 - $1.041,629) as we scaled back exploration in the first half of the year due to available funds, and subsequently emphasized consolidating the results obtained to date, commencing our engineering studies, and the acquisition of land where we located additional prospects as opposed to additional drilling;
* Investor relations had a credit of $7,708 (2006 - $32,838) as we received a refund of $10,470 of fees paid in 2006;
* Licenses, taxes and filing fees of $37,797 (2006 - $112,543) due to reduced regulatory filings and reduced fees in Chile;
* Management fees of $595,350 (2006 - $96,000) due to stock based compensation of $492,750 (2006 - $nil); and
* Professional fees of $191,331 (2006 - $319,396) due to reduced regulatory filings and significantly reduced legal fees in Chile.
With respect to income:
* We did not record a gain of the sale of marketable securities in 2007 as we did not hold any securities; however we had a gain of $69,064 in 2006;
* We recorded $88,485 of interest income (2006 - $146,503) due to lower cash balances for part of 2007; and
* We recorded a nominal $9,418 of foreign exchange gain in 2007 as opposed to an expense of $29,445 due to fluctuations in the US dollar.
Liquidity and Cash Flow
As of December 31, 2007 we had working capital of $2,700,895 (2006 - $2,002,590) including $2,678,652 (2006 -$2,049,315) of cash and cash equivalents. As of March 15,2008 our cash position is approximately $2,288,950.
We have prepared a 2008 combined operating budget which incorporates general corporate and administrative expenses as well as a base case of Chilean operations plus road construction, engineering studies, and drilling. We anticipate that expenditures, net of interest income will be such that we have sufficient funds for up to two years of operations, excluding 2008 drilling expenditures. The diversion of funds from general purposes to engineering and marketing will, however, reduce the period during which we can cover expenditures.
We anticipate 2008 expenditures on the engineering and marketing plans to be as follows:
Minimum Maximum ----------- ----------- Pre-feasibility study $ 120,000 $ 120,000 Pilot plant program 500,000 600,000 Marketing 50,000 60,000 Drilling of additional targets including the Eli claims and roadwork 1,120,000 1,120,000 Additional claim holding costs 40,000 60,000 Environmental compliance 100,000 200,000 Final feasibility study 400,000 400,000 Contingency 160,000 210,000 --------- --------- Total $2,490,000 $2,770,000 ========= =========
We have been actively sourcing additional funds to meet or exceed the anticipated expenditures above. We believe that the prospects are such that we will be able to raise sufficient funds; however there are a number of risk factors which will influence our ability to do so, including the state of the capital markets generally, and the market price of our common stock. With the exception of funds on deposit, we have no other sources of committed funds, except for outstanding warrants for which there are no commitment to exercise. The most likely source of new funds would be an equity placement of common shares.
We believe that a failure to raise funds in a timely manner would likely delay the achievement of some of the milestones in the engineering and marketing plans, and would delay any decision regarding the viability of operations while likely increasing future costs.
The July 2005 funding agreement with Rubicon contained certain anti-dilution provisions, such that any subsequent funds raised below $1.25 per share may trigger provisions which require the issuance of additional shares or re-pricing of warrants held by Rubicon. This may influence our decision as to the suitability of any future financing.
Off-Balance Sheet Arrangements
During the year ended December 31, 2007, the Company did not have any off-balance sheet arrangements.
Critical Accounting Estimates
In July 2005, we entered into an agreement with Rubicon to provide $5,000,000 in equity funding. In September 2005, we amended the agreement to add Phelps Dodge to the agreement and to satisfy a $500,000 final payment on our Cerro Blanco rutile property. The agreement with these parties provides for liquidated damages if we did not meet certain requirements, including the filing and effectiveness of a registration statement, and the filing of a prospectus in Canada. We were required under the agreement to obtain effectiveness of the registration statement and the filing of the prospectus in Canada by January 31, 2006, which deadline was not met. In May 2006 the Company amended the Securities Purchase Agreement and issued 400,000 shares to Rubicon and 40,000 shares to Phelps Dodge in consideration for extending the registration period to September 30, 2006, and eliminating the Canadian filing requirement. These 440,000 shares may not have been eligible for an exemption from registration under the Securities Act of 1933. In the absence of such an exemption, these parties could bring suit against the Company to rescind the purchase of the 440,000 shares, in which event the Company could be liable for rescission payments to these persons. Rubicon subsequently agreed not to require registration of the 400,000 shares issued to it. A similar agreement is being sought from Phelps Dodge, but has not yet been received. If the Company were to rescind the sale of the shares to Phelps Dodge, it would be liable for liquidated damages since January 30, 2006, equal to $5,000 per month for failure to meet the registration deadlines in the Securities Purchase Agreement. The Company believes that because of the relative amount of the liquidated damages collectable by Phelps Dodge, the likelihood of exercising a right of rescission and the attendant potential aggregate liability is not probable. As of June 30, 2006, the Company recorded the $330,000 as shares issued for settlement of this amount and believes no additional accruals are required.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we have elected not to provide the disclosure required by this item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company)
Consolidated Financial Statements December 31, 2007, 2006 and 2005 (US Funds)
Index Page - ----- ---- Report of Independent Registered Public Accounting Firm 19
Consolidated Financial Statements
Consolidated Balance Sheets 20
Consolidated Statements of Operations 21
Consolidated Statements of Cash Flows 22
Consolidated Statements of Stockholders' Equity (Deficit) 23 - 24
Notes to Consolidated Financial Statements 25 - 41
Smythe Ratcliffe Chartered Accountants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE DIRECTORS AND STOCKHOLDERS OF WHITE MOUNTAIN TITANIUM CORP. (An Exploration Stage Company)
We have audited the consolidated balance sheets of White Mountain Titanium Corporation (An Exploration Stage Company) as of December 31, 2007 and 2006, and the related statements of operations, stockholders' equity (deficit) and cash flows for the years ended December 31, 2007, 2006 and 2005, and the cumulative period from inception (November 13, 2001) through December 31, 2007. 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 audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2007 and 2006 and the results of its operations and its cash flows for the years ended December 31, 2007, 2006 and 2005, and for the cumulative period from inception (November 13, 2001) through December 31, 2007, 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 2 to the financial statements, the Company has no revenues and limited capital, which together raise substantial doubt about its ability to continue as a going-concern. Management plans in regard to these matters are also described in Note 2. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As discussed in Note 3 to the financial statements, the Company changed its method of accounting for acquisition costs of mineral properties.
(signed) "Smythe Ratcliffe, LLP"
Chartered Accountants
Vancouver, Canada March 27, 2008
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Consolidated Balance Sheets (US Funds) December 31, 2007 2006 ------------- ------------- (restated Note 3) Assets
Current Cash and cash equivalents $ 2,678,652 $ 2,049,315 Prepaid expenses 51,687 34,059 Receivables 39,953 28,787 ------------ ------------ Total Current Assets 2,770,292 2,112,161 Property and Equipment (Note 5) 58,466 56,671 Mineral Properties (Note 6) 651,950 650,000 ------------ ------------ Total Assets $ 3,480,708 $ 2,818,832 ============ ============
Liabilities
Current Accounts payable and accrued liabilities $ 69,397 $ 109,571 ------------ ------------ Total Current Liabilities and Total Liabilities 69,397 109,571
Stockholders' Equity
Preferred Stock and Paid-in Capital in Excess of $0.001 Par Value (Note 7) 20,000,000 shares authorized 625,000 (2006 - 6,875,000) shares issued and outstanding 500,000 5,500,000
Common Stock and Paid-in Capital in Excess of $0.001 Par Value (Note 7) 100,000,000 shares authorized 29,189,133 (2006 - 16,269,133) shares issued and outstanding 15,918,522 6,294,655
Deficit Accumulated During the Exploration Stage (13,007,211) (9,085,394) ------------ ------------ Total Stockholders' Equity 3,411,311 2,709,261 ------------ ------------ Total Liabilities and Stockholders' Equity $ 3,480,708 $ 2,818,832 ============ ============
See notes to consolidated financial statements.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Consolidated Statements of Operations (US Funds)
See notes to consolidated financial statements.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Consolidated Statements of Cash Flows (US Funds)
See notes to consolidated financial statements.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Consolidated Statements of Stockholders' Equity (Deficit) (US Funds)
See notes to consolidated financial statements.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Consolidated Statements of Stockholders' Equity (Deficit) (US Funds)
See notes to consolidated financial statements.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
White Mountain Titanium Corporation (the "Company") currently has no ongoing operations. Its principal business is to advance exploration and development activities on the Cerro Blanco rutile (titanium dioxide) property ("Cerro Blanco") located in Region III of northern Chile. The Company is considered an exploration stage company and its financial statements are presented in a manner similar to a development stage company as defined in Statement of Financial Accounting Standards ("SFAS") No. 7.
2. GOING-CONCERN
These consolidated financial statements have been prepared by management on the basis of generally accepted accounting principles applicable to a "going-concern," which assumes the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.
The Company has an accumulated deficit of $13,007,211 (2006 - $9,085,394), has not yet commenced revenue-producing operations, and has significant expenditure requirements to continue to advance its exploration and development activities on the Cerro Blanco property.
These consolidated financial statements do not reflect adjustments that would be necessary if the going-concern assumption were not appropriate because management believes that the actions already taken or planned will mitigate the adverse conditions and events that raise doubts about the validity of the going-concern assumption used in preparing these consolidated financial statements. Management intends to raise additional capital through stock issuances to finance operations and invest in other business opportunities.
If the going-concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.
3. RESTATEMENT
In accordance with EITF 04-2, the Company treats mineral properties as property and equipment and, accordingly, property acquisition costs are capitalized. Previously, the Company expensed mineral property acquisition costs. Accordingly, certain expenditures from prior periods have been restated.
The effects on the financial statements resulting from the balance sheet adaption of this standard are as follows:
------------ Total assets, as previously stated $ 2,168,832 Acquisition cost capitalized 650,000 ----------- Total assets, as restated $ 2,818,832 ===========
Deficit, as previously stated $ 9,735,394 Acquisition cost capitalized (650,000) ----------- Deficit, as restated $ 9,085,394 ===========
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
4. SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
These financial statements include the accounts of the Company and its wholly-owned subsidiaries, Compania Minera Rutile Resources Limitada ("Rutile") (formerly Compania Minera Royal Silver Limitada), a Chilean corporation; White Mountain Titanium Corporation, a Canadian corporation; and White Mountain Titanium (Hong Kong) Limited, a Hong Kong corporation. All significant intercompany balances and transactions have been eliminated.
(b) Cash equivalents
The Company considers all highly liquid debt instruments that are readily convertible to known amounts of cash and purchased with a maturity of three months or less from the date acquired to be cash equivalents.
(c) Amortization
Amortization is provided using a straight-line method based on the following estimated useful lives:
Vehicles - 5 years Office furniture - 5 years Office equipment - 5 years Computer equipment - 5 years Field equipment - 5 years
(d) Exploration expenditures
The Company is in the exploration stage of developing its mineral properties and has not yet determined whether these properties contain ore reserves that are economically recoverable.
Exploration costs incurred in locating areas of potential mineralization are expensed as incurred. Mineral property acquisition costs are capitalized. Commercial feasibility is established in compliance with SEC Industry Guide 7, which consists of identifying that part of a mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination. After an area of interest has been assessed as commercially feasible, expenditures specific to the area of interest for further development are capitalized. In deciding when an area of interest is likely to be commercially feasible, management may consider, among other factors, the results of prefeasibility studies, detailed analysis of drilling results, the supply and cost of required labor and equipment, and whether necessary mining and environmental permits can be obtained.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(d) Exploration expenditures (Continued)
Mining projects and properties are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. If the estimated future cash flows expected to result from the use of the mining project or property and its eventual disposition are less than the carrying amount of the mining project or property, an impairment is recognized based upon the estimated fair value of the mining project or property. Fair value is generally based on the present value of the estimated future net cash flows for each mining project or property, calculated using estimated mineable reserves and mineral resources based on engineering reports, projected rates of production over the estimated life of the mine, recovery rates, capital requirements, remediation costs and future prices considering the Company's hedging and marketing plans.
(e) Asset retirement obligations
The Company recognizes a legal liability for obligations related to the retirement of property, plant and equipment and obligations arising from the acquisition, construction, development, or normal operations of those assets. Such asset retirement costs must be recognized at fair value when a reasonable estimate of fair value can be estimated in the period in which the liability is incurred. A corresponding increase to the carrying amount of the related asset, where one is identifiable, is recorded and amortized over the life of the asset. Where a related future value is not easily identifiable with a liability, the change in fair value over the course of the year is expensed. The amount of the liability is subject to re-measurement at each reporting period. The estimates are based principally on legal and regulatory requirements.
It is possible that the Company's estimates of its ultimate reclamation and closure liabilities could change as a result of changes in regulations, changes in the extent of environmental remediation required, changes in the means of reclamation, or changes in cost estimates. Changes in estimates are accounted for prospectively commencing in the period the estimate is revised.
Although the Company has begun drilling, a reasonable estimate cannot be made at this time, therefore, no liability has been recorded.
(f) Income taxes
The Company uses the asset and liability approach in its method of accounting for income taxes that requires the recognition of deferred tax liabilities and assets for expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance against deferred tax assets is recorded if, based upon weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. There is no federal income tax due as of December 31, 2007.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(g) Stock-based compensation
In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123R, "Share Based Payment." SFAS 123R is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. SFAS 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. The Company has elected to adopt SFAS No. 123R as at January 1, 2005, using the modified prospective method. Common stock issued for services subsequent to January 1, 2005, have been issued with a strike price equal to the fair market value on the date of issuance. Stock-based compensation is allocated to the expense category where the underlying expense is recorded.
(h) Loss per share
The Company accounts for loss per share in accordance with SFAS No. 128, "Earnings Per Share," which requires the Company to present basic and diluted earnings per share. The computation of loss per share is based on the weighted average number of shares of common stock outstanding during the year presented (see Note 8).
The Company uses the two-class method to calculate loss per share for common stock as well as preferred stock at their conversion equivalent to common stock.
Diluted loss per share has not been presented because the effects of all common share equivalents were anti-dilutive.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(i) Financial instruments
The Company classifies its marketable securities into held-to-maturity, trading or available-for-sale categories. Marketable securities that are held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in operations. Marketable securities not classified as held-to-maturity or as trading are classified as available-for-sale and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive income and reported in shareholders' equity.
The fair value of substantially all securities is determined by quoted market prices. Gains and losses on securities sold are based on the specific identification method.
(i) Credit risk
The Company's financial asset that is exposed to credit risk consists primarily of cash and cash equivalents, which comprises a substantial portion of the Company's assets. To manage the risk, cash and cash equivalents are placed with major financial institutions.
(ii) Currency risk
The Company translates the results of non-US operations into US currency using rates approximating the average exchange rate each quarter. The exchange rate may vary from time to time. During the year ended December 31, 2007, the Company spent $258,817,890 Chilean pesos (US $497,801) on property exploration expenditures. Required expenditures to continue the exploration process will be affected by changes in foreign currency.
(j) Conversion of foreign currency
The functional and reporting currency of the Company and its subsidiaries is the US dollar. The Company's Chilean operations are re-measured into US dollars as follows:
* Monetary assets and liabilities, at year-end rates; * All other assets and liabilities, at historical rates; and * Revenue and expense items, at the average rate of exchange prevailing during each quarter.
Exchange gains and losses arising from these transactions are reflected in operations for the year.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(k) Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Accordingly, actual results could differ from those estimates and could impact the future results of operations and cash flows.
Significant areas requiring the use of estimates relate to the rates for amortization, determining the variables used in calculating the fair value of stock-based compensation expense, valuation allowance for future income tax assets and asset retirement obligations.
(l) Recently enacted accounting standards
(i) In September 2006, FASB issued SFAS No. 157, "Fair Value Measurements." SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. It clarifies that for items that are not actively traded, such as certain kinds of derivatives, fair value should reflect the price in a transaction with a market participant, including adjustment for risk, not just the company's mark-to-model value. Statement No. 157 also requires expanded disclosure of the effect on earnings for items measured using unobservable data. Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. Statement No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. There is no impact on the Company's financial statements
(ii) In February 2007, the FASB issued SFAS 159, "Fair Value Option for Financial Assets and Financial Liabilities." The fair value option established by this statement permits all entities to choose to measure eligible items at fair value at specified election dates. Most of the provisions of this statement apply only to entities that elect the fair value option. However, the amendment to FASB Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities," applies to all entities with available-for-sale and trading securities. This statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. The Company expects that this new pronouncement will have no impact on the Company's financial statements.
(iii) In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" (SFAS 141(R)), which replaces SFAS 141. SFAF 141(R) requires assets and liabilities acquired in a business combination, contingent consideration, and certain acquired contingencies to be measured at their fair values as of the date of acquisition. SFAS 141(R) also requires that acquisition-related costs and restructuring costs be recognized separately from the business combination. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008 and will be effective for business combinations entered into after January 1, 2009. There is no impact on the Company's financial statements.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(l) Recently enacted accounting standards (Continued)
(iv) In December 2007, the FASB issued SFAS No. 160, "Non-controlling interests in Consolidated Financial Statements, an Amendment of ARB No. 51" (SFAS 160). SFAS 160 clarifies the accounting for non-controlling interests and establishes accounting and reporting standards for the non-controlling interest in a subsidiary, including classification as a component of equity. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company does not currently have any minority interests.
(v) SFAS 154, "Accounting Changes and Error Corrections." This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB 3, "Reporting Accounting Changes in Interim Financial Statements." Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a "restatement." The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. There is no impact on the Company's financial statements.
(vi) On July 13, 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109." Interpretation 48 clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements in accordance with Statement 109 and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Additionally, Interpretation 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Interpretation 48 is effective for fiscal years beginning after December 15, 2006, with early adoption permitted. There is no impact on the Company's financial statements.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
5. PROPERTY AND EQUIPMENT
-------------------------------------- Accumulated Cost Amortization Net ---------- ------------ ---------- Vehicles $ 42,549 $ 10,226 $ 32,323 Office furniture 2,704 860 1,844 Office equipment 5,417 1,442 3,975 Computer equipment 7,553 2,121 5,432 Computer software 1,142 207 935 Field equipment 23,085 9,128 13,957 --------- --------- --------- $ 82,450 $ 23,984 $ 58,466 ========= ========= =========
-------------------------------------- Accumulated Cost Amortization Net ---------- ------------ ---------- Vehicles $ 38,738 $ 16,158 $ 22,580 Office furniture 5,927 1,439 4,488 Office equipment 4,422 1,027 3,395 Computer equipment 11,072 659 10,413 Field equipment 23,402 7,607 15,795 --------- --------- --------- $ 83,561 $ 26,890 $ 56,671 ========= ========= =========
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
6. MINERAL PROPERTY AGREEMENTS
On September 5, 2003, the Company, through its wholly-owned Chilean subsidiary, Rutile, entered into a purchase agreement with Compania Contractual Mineral Ojos del Salado ("Ojos del Salado"), a wholly-owned Chilean subsidiary of Phelps Dodge Corporation, to acquire a 100% interest in nine exploration mining concessions totalling 1,183 hectares, collectively known as Cerro Blanco. Cerro Blanco is located in Region III of northern Chile, approximately 39 kilometres, or 24 miles, west of the city of Vallenar. Consideration for the purchase was $650,000 comprised of staged payments as set out below:
(i) $50,000 within 30 days from execution of the agreement (paid); (ii) $50,000 on March 4, 2004 (paid); (iii) $50,000 on September 5, 2004 (paid); and (iv) $500,000 on September 4, 2005 (paid).
The purchase agreement covering Cerro Blanco was originally entered into between Ojos del Salado and Dorado Mineral Resources NL ("Dorado") on March 17, 2000. Under that agreement, Dorado purchased the mining exploitation concessions from Ojos del Salado for US $1,000,000, of which US $350,000 was paid. A first mortgage and prohibitions against entering into other contracts regarding mining concessions without the prior written consent of Ojos del Salado had also been established in favor of Ojos del Salado. On September 5, 2003, Rutile assumed Dorado's obligations under the purchase agreement, including the mortgage and prohibitions, with payment terms as described above.
Ownership in mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequent, ambiguous conveyance history characteristic of mineral properties. The Company has investigated ownership of its mineral properties, and to the best of its knowledge, ownership of its interests is in good standing.
Years Ended December 31, 2007 2006 2005 ----------- ----------- ----------- Assaying $ 70,671 $ 75,741 $ 89,222 Concession fees 43,148 20,632 2,060 Drilling - 325,021 - Environmental 10,792 - 47,098 Equipment rental 16,560 28,048 31,200 Geological consulting fees 260,811 368,218 265,286 Maps and miscellaneous 75,922 109,616 1,056 Metallurgy 5,766 5,441 - Site costs 71,977 84,075 36,655 Transportation 15,443 24,837 3,072 ---------- ---------- ---------- Exploration expenditures for year $ 571,090 $ 1,041,629 $ 475,649 ========== ========== ==========
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
7. CAPITAL STOCK
(a) Preferred stock
The Company's authorized preferred stock with a par value of $0.001 is 20,000,000 shares. Each share of preferred stock has such rights, preferences and designations and will be issued in such series as determined by the Board of Directors.
During the year ended December 31, 2005, the Company designated and issued Series A Convertible Stock with a par value of US $0.001 per share. Each share of preferred stock is convertible into one common share of common stock at any time at the holder's option. The preferred stock is unlisted, non-retractable and non-redeemable. The preferred stockholders are entitled to the number of votes equal to the number of whole shares of common stock into which they are convertible. The preferred stockholders are further entitled to the same dividends and distributions as the common stockholders.
Pursuant to the issuance of 6,875,000 shares of preferred stock in 2005, the Company was required to reach certain milestones including filing a registration statement relating to the common stock that would be issued on conversion of the preferred stock into common stock. Failure to meet these milestones would cause the Company to incur a penalty of 1% of the purchase price of the securities for each month the Company failed to meet the requirements. On May 5, 2006, the Company reached an agreement with the preferred stockholders to settle damages incurred related to breaching these milestones and deferred the period by when the registration must become effective to September 30, 2006. To settle this penalty, the Company agreed to issue 440,000 registered shares of common stock at a price of $0.75 each representing the fair market value at the date of settlement, for a total of $330,000. The Company treated the liquidating damages of the above transaction as a separate instrument and estimated its value at December 31, 2005, to be $330,000, being the Company's estimate of the total penalty it would pay. During 2006, this liability was settled through the issuance of common stock.
During the year ended December 31, 2007, the holder of 6,250,000 shares of preferred stock elected to sell its position to new investors. The new investors purchased and received shares of common stock that resulted from the conversion of the preferred stock into 6,250,000 shares of common stock. Accordingly, the value of those shares of preferred stock was transferred to common share equity.
No additional preferred stock was issued during the year ended December 31, 2007.
(b) Common stock
The Company's authorized common stock with a par value of $0.001 is 100,000,000 shares.
During the year ended December 31, 2006, the Company issued 440,000 shares of common stock at a fair value of $330,000 in settlement of the penalty described in Note 11.
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
7. CAPITAL STOCK (Continued)
(b) Common stock (Continued)
During the year ended December 31, 2007, the Company:
(i) completed an offering of 5,070,000 units at a price of $0.50 per unit for total gross proceeds of $2,535,000. Each unit consisted of one share of common stock and one common stock purchase warrant exercisable at $0.60 until August 10, 2010. Share issuance costs for the private placement consist of cash payments of $194,317 and issuance of 77,600 warrants at an exercise price of $0.60, to give net proceeds of $2,340,683;
(ii) issued 700,000 shares of common stock to management, employees, and consultants for past services at $0.50 per share of common stock, the market value at the time of signing the agreement. These costs have been expensed as management and consulting fees. An additional 700,000 warrants were issued exercisable on the same terms as in note (i) above, and were recorded at fair value using the Black-Scholes option pricing model;
(iii) issued 6,250,000 shares of common stock upon the conversion of 6,250,000 shares of preferred stock as described in Note 7(a); and
(iv) issued 900,000 shares of common stock to management, employees and consultants for services at $1.35 each, the market value at the time of signing the agreement. These costs have been expensed as management and consulting fees.
(c) Stock options
During the year ended December 31, 2005, the Company adopted a formal stock option plan that covers its employees, directors, officers and consultants. Options granted under this plan are for five years and are subject to a vesting schedule as determined by the board at the time of grant.
During the year ended December 31, 2006, 350,000 stock options were granted at an exercise price of $1.25 each. These options were partially vested as at December 31, 2006.
During the year ended December 31, 2007, 1,325,000 stock options were granted at an exercise price of $0.50. These options were fully vested as at December 31, 2007. In addition, all partially vested stock options previously granted fully vested during 2007 and terms of certain options were extended as follows:
(i) 600,000 options were re-priced from an exercise price of $0.60 each to $0.50 each and were extended from an expiry date of May 31, 2009, to May 31, 2011
(ii) 400,000 options were re-priced from an exercise price of $1.00 each to $0.50 each and were extended from an expiry date of January 31, 2008, to January 31, 2011;
(iii) 200,000 options were re-priced from an exercise price of $1.25 each to $0.50 each and were extended from an expiry date of August 1, 2009, to August 1, 2011; and
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
7. CAPITAL STOCK (Continued)
(c) Stock options (Continued)
(iv) 350,000 options were re-priced from an exercise price of $1.25 each to $0.50 each and were extended from an expiry date of August 31, 2009, to August 31, 2011.
As at December 31, 2007 and 2006, the following director and consultant stock options were outstanding:
Exercise Years Ended December 31, Expiry Date Price 2007 2006 ----------- -------- ---------- ---------- January 31, 2008 $ 1.00 - 400,000 May 31, 2009 $ 0.60 - 600,000 August 1, 2009 $ 2.00 100,000 100,000 August 1, 2009 $ 1.25 - 200,000 April 5, 2010 $ 0.50 250,000 - January 31, 2011 $ 0.50 400,000 - August 31, 2011 $ 1.25 - 350,000 May 31, 2011 $ 0.50 600,000 - August 1, 2011 $ 0.50 200,000 - August 31, 2011 $ 0.50 350,000 - August 31, 2012 $ 0.50 1,075,000 - ---------- ---------- 2,975,000 1,650,000 ========== ==========
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
7. CAPITAL STOCK (Continued)
(c) Stock options (Continued)
The shares under option at December 31, 2007, were in the following exercise price ranges:
Options Outstanding and Exercisable --------------------------------------------------- Weighted Weighted Average Average Number of Aggregate Remaining Exercise Shares Intrinsic Contractual Exercise Price Price Under Option Value Life in Years -------------- -------- ------------ --------- -------------
$0.50 $ 0.50 2,875,000 $ 0.00 3.78 $2.00 $ 2.00 100,000 $ 0.00 1.59 --------- $ 0.55 2,975,000 $ 0.00 3.71 =========
(d) Stock-based compensation
During the year ended December 31, 2007, the total stock-based compensation recognized under the fair value method for management and consulting fees was $718,184 (2006 - $59,896; 2005 - $688,920) using the Black-Scholes option pricing model (Note 4 (g)). Included in the above total is stock-based compensation of $183,269 (2006 - $nil; 2005 - $nil) incurred as a result of the issuance of warrants (see note 7(b)(ii)), $455,290 (2006 - $59,896; 2005 - $688,920) incurred as a result of options granted during the year and $79,625 (2006 - $nil; 2005 - $nil) incurred as a result of re-pricing and of previously unvested issued stock options.
During 2007, stock-based compensation was reallocated in the statement of operations to the underlying expense account and, accordingly, stock-based compensation for prior periods have also been reallocated to conform to this year's presentation. Prior 2007 2006 2005 Periods ---------- ---------- ---------- ---------- Consulting fees - directors and officers $ 359,227 $ 35,683 $ 171,360 $ 510,000 Consulting fees 248,507 24,213 - 141,750 Management fees 110,450 - 517,560 - --------- --------- --------- --------- Compensation - options $ 718,184 $ 59,896 $ 688,920 $ 651,750 ========= ========= ========= =========
The following assumptions were used for the Black-Scholes option pricing model valuation of stock options granted:
Years Ended December 31, 2007 2006 2005 -------- -------- -------- Expected life (years) 3 - 5 3 - 4 3 - 4 Interest rate 4.40% 3.98% 3.45% Volatility 88.79% 83.83% 165.00% Dividend yield 0.00% 0.00% 0.00%
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
7. CAPITAL STOCK (Continued)
(e) Share purchase warrants
Details of stock purchase warrant activity is as follows:
Years Ended December 31, 2007 2006 Weighted Weighted Average Average Number Exercise Number Exercise of Shares Price of Shares Price --------- -------- --------- -------- Outstanding - beginning of year 7,175,000 $ 0.50 9,533,633 $ 1.32 Issued 5,847,600 $ 0.60 - $ 0.00 Expired - $ 0.00 (2,358,633) $ 1.50 ---------- --------- Outstanding and exercisable - end of year 13,022,600 $ 0.54 7,175,000 $ 1.25 ========== =========
During the year, 7,175,000 warrants had their exercise price reduced from $1.25 each to $0.50 each due to anti-dilution provisions, which were triggered by the private placement at $0.50 per unit. See Notes 7(b) and (d).
As at December 31, 2007, the following share purchase warrants were outstanding:
Years ended Exercise December 31, Expiry Date Price 2007 2006 - ----------- -------- ---------- ---------- July 11, 2009 $ 0.50 6,550,000 6,550,000 September 7, 2009 $ 0.50 625,000 625,000 August 10, 2010 $ 0.60 5,847,600 - ----------- ---------- 13,022,600 7,175,000 =========== ==========
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
8. LOSS PER SHARE
The following data shows the amounts used in computing loss per share for the years presented:
Weighted average number of shares:
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
9. INCOME TAXES
Income tax provisions are determined as follows:
2007 2006 2005 ------------ ------------ ------------ Income tax benefit computed at statutory tax rate $ (1,372,636) $ (764,695) $ (925,034) Amortization 7,988 6,139 4,503 Stock-based-compensation 251,364 20,964 241,122 Unrecognized tax losses 1,113,284 737,592 679,409 ----------- ----------- ------------ $ - $ - $ - =========== =========== ============
Deferred income taxes reflect the tax effect of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The applicable tax rate to be expected is 35%. The components of the net deferred income tax assets are approximately as follows:
Years Ended December 31, 2007 2006 2005 ------------ ------------ ------------ Deferred income tax assets Net operating losses and credit carry-forwards $ 2,502,178 $ 1,388,895 $ 1,168,850 ----------- ----------- ----------- Deferred tax assets 2,502,178 1,388,895 1,168,850 Valuation allowance (2,502,178) (1,388,895) (1,168,850) ----------- ----------- ----------- $ - $ - $ - =========== =========== ===========
The valuation allowance reflects the Company's estimate that the tax assets more likely than not will not be realized.
The Company has estimated net operating losses that may be carried forward to apply against future years' income for US tax purposes. These losses expire as follows:
Available to Amount ------------ ---------- 2018 $ 9,336 2019 10,270 2020 1,704 2021 4,574 2022 1,200 2023 22,201 2024 555,336 2025 1,101,371 2026 2,262,279 2027 3,180,809 ---------- $ 7,149,080 ==========
WHITE MOUNTAIN TITANIUM CORPORATION (An Exploration Stage Company) Notes to Consolidated Financial Statements Years Ended December 31, 2007 and 2006 (US Funds)
10. RELATED PARTY TRANSACTIONS
2007 2006 2005 --------- --------- --------- Advances for expenses outstanding at year end $ - $ 10,000 $ 19,984 Consulting fees 434,993 308,576 229,879 Management fees 121,600 96,000 50,289 Rent 22,000 15,000 10,038 -------- -------- -------- $ 578,593 $ 429,576 $ 310,190 ======== ======== ========
Advances are made to various related parties as required for corporate purposes including travel.
Consulting fees include payments to the officers and directors of the Company for services rendered, and include payments to the President, CFO, and VP Investor Relations. Management fees and rent consist of fees paid to a company partly controlled by the CEO of the Company.
Related party transactions are recorded at the exchange amount, which is the amount agreed to between the parties.
11. LOSS CONTINGENCY
The Company's Securities Purchase Agreement with Rubicon and Phelps Dodge required that a registration statement for the resale of the shares underlying the preferred shares and warrants issued to them be effective by January 30, 2006, and that the Company file a prospectus in Canada. In May 2006, the Company amended the Securities Purchase Agreement and issued 400,000 shares to Rubicon and 40,000 shares to Phelps Dodge in consideration for extending the registration period to September 30, 2006, and eliminating the Canadian filing requirement. These 440,000 shares may not have been eligible for an exemption from registration under the Securities Act of 1933. In the absence of such an exemption, these parties could bring suit against the Company to rescind the purchase of the 440,000 shares, in which event the Company could be liable for rescission payments to these persons.
During the year ended December 31, 2006, Rubicon agreed not to require registration of the 400,000 shares issued to it. A similar agreement is being sought from Phelps Dodge, but has not yet been received.
If the Company were to rescind the sale of the shares to Phelps Dodge, it would be liable for liquidated damages since January 30, 2006, equal to $5,000 per month for failure to meet the registration deadlines in the Securities Purchase Agreement. Through December 31, 2007, these damages could be as much as $115,000, plus interest at the rate of 1.5% per month. The Company believes that because of the relative amount of the liquidated damages collectable by Phelps Dodge, the likelihood of exercising a right of rescission and the attendant potential aggregate liability is not probable.
The Company recorded the $330,000 as shares issued for settlement of this amount and believes no additional accruals are required.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A(T).
ITEM 9A(T). CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our principal executive officer, Michael P. Kurtanjek, and our principal financial officer, Charles E. Jenkins, have concluded, based on their evaluation, as of the end of the period covered by this report, that our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) are (1) effective to ensure that material information required to be disclosed by us in reports filed or submitted by us under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and (2) designed to ensure that material information required to be disclosed by us in such reports is accumulated, organized and communicated to our management, including our principal executive officer and principal financial officer, as appropriated, to allow timely decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of our company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and (iii) 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.
Management assessed our internal control over financial reporting as of December 31, 2007, the end of our fiscal year. Management based its assessment on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.
We believe the internal controls we have implemented are reasonable in the circumstances given the size of the Company. Our principal weaknesses are (i) a lack of segregation of duties due to the small size of the company; and (ii) a reliance on key management personnel to perform such duties. We believe our management is aware of the need for strong internal controls and actively implements new controls when it is cost effective to do so.
Based on our assessment, management has concluded that our internal control over financial reporting was effective, as of the end of the fiscal year, for a company of our size, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.
Changes in Internal Control over Financial Reporting
During the year ended December 31, 2007, after discussions with our auditors, we reevaluated our accounting for certain items to ensure that we were fully compliant with generally accepted accounting policies for a company at our stage of development. For example, in accordance with EITF 04-2, it was determined that it would be appropriate to capitalize the acquisition costs of our property due to the advances made during the year, where these costs had been expensed in previous years. Accordingly, balance sheet for 2006 saw an increase in assets of $650,000 and the reported deficit decreased by the same amount. Similarly, it was determined that stock based compensation for the previous years should be allocated to the underlying expense category where the expense for the individual concerned was recorded. Accordingly, consulting fees, directors and officers consulting fees, and management fees are restated for 2006 and 2005. The aggregate loss for these years is unchanged.
Other than the above, there were no changes in our internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2007, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth the name and ages of, and position or positions held by, our executive officers and directors and the employment background of these persons:
Director Name Age Positions Since Employment Background - ---- --- --------- ----- ------------------- Michael P. Kurtanjek Director 2004 Mr. Kurtanjek has served as our 56 President since February 2004. From 1988 to 1995, he was a mining equity research analyst and institutional salesman with James Capel & Co. and Credit Lyonnais Lang and from 1995 to 2004, a director of Grosvenor Capital Ltd., a private business consulting firm.
Howard M. Crosby 55 Director 2004 Since 1989, Mr. Crosby has been president of Crosby Enterprises, Inc., a family-owned business advisory and public relations firm. From 1994 to June 2006 he was president and a director of Cadence Resources Corporation (now Aurora Oil and Gas, Inc.), a publicly traded oil and gas company. He has been the President and a director of Gold Crest Mines, Inc., a reporting company engaged in mining activities, since August 2006. He is also an officer and director of High Plains Uranium, Inc., Sundance Diamonds Corporation, Dotson Exploration Company, Nevada-Comstock Mining Company (formerly Caledonia Silver-Lead Mines Company), Platinum Diversified Mining, Inc., and Tomco Energy, all of which are privately held companies.
Cesar Lopez 43 Director 2004 Mr. Lopez has been a partner of Lopez & Ashton, a legal and consulting firm primarily to mining companies, since January 2002. From November 1995 until January 2002 he was self-employed as independent legal counsel to mining companies and other clients operating in Chile.
Brian Flower 58 Director 2005 Mr. Flower has served as our Chairman since September 8, 2006. He served as our Chief Financial Officer from February 2005 through September 8, 2006. From 1986 to 1993 he was a mining equity research analyst and investment banker with James Capel & Co. and from 1993 to 1999, Chief Financial Officer and Senior Vice-President, Corporate Development with Viceroy Resource Corporation. Since January 2000, he has provided management consulting and advisory services through two partly owned companies of which he is president, Chapelle Capital Corp. and Trio International Capital Corp. He is also a director of Orsa Ventures Corp., Aurcana Corporation, and Pacific Wildcat Resources Corp.
Charles E. Jenkins 52 Director 2007 Mr. Jenkins has served as our CFO since September 8, 2006. From November 2005 through August 2006 Mr. Jenkins served as the Vice-President of Finance for Conor Pacific Canada, Inc., a private merchant bank. From January 2005 until September 2005, he served as Controller and Acting CFO for Metamedia Capital Corp., a magazine publishing company. From May 2003 until December 2004 Mr. Jenkins was self-employed as a consultant providing controller or CFO duties for a number of private companies. From September 2000 until May 2003, Mr. Jenkins was employed as a manager of special projects for Canaccord Capital Corporation. Prior to this, from August 1989 to August 2000 Mr. Jenkins was employed by two brokerage houses in Vancouver and Calgary in a corporate finance capacity.
Audit and Compensation Committees
On July 29, 2005, our board created a standing audit committee composed of the following directors: John P. Ryan, Stephanie Ashton, and Brian Flower; Ms. Ashton and Mr. Ryan resigned as directors and ceased being members of the committee in March 2007. Howard M. Crosby was appointed to the committee in March 2007. The Board of Directors has determined that Mr. Flower is an audit committee financial expert by virtue of his past experience which includes acting as the chief financial officer, an accounting supervisor and an internal auditor. Mr. Flower and Mr. Crosby, because of their consulting agreements with us under which they received in excess of $60,000 last year, would not be considered independent members of the audit committee.
Also on July 29, 2005, our board created a standing compensation committee. Our compensation committee is composed of the following directors: Howard M. Crosby and Michael Kurtanjek.
The board has adopted a policy to compensate non-executive directors who are members of committees of the board. These persons will receive $1,000 plus expenses for attendance in person at each committee meeting. They will receive $500 for attendance at committee meetings by conference telephone. In addition, each chairman of the committee will receive $1,000 per meeting they chair.
Nominating Procedures
We do not have a standing nominating committee; recommendations for candidates to stand for election as directors are made by the Board of Directors. We have not adopted a policy which permits security holders to recommend candidates for election as directors or a process for stockholders to send communications to the Board of Directors.
Code of Ethics
On August 30, 2005, we adopted a Code of Ethics which applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as well as to other employees or contractors and anyone associated with our company.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation Summary
The following table sets forth the compensation of the named executive officers for each of the two fiscal years ended December 31, 2007 and 2006:
(1) The salary for January 2006 was approved by the Board for Mr. Kurtanjek's services as President. The salary earned by Mr. Kurtanjek for the months of February through December of 2006 was paid to him pursuant to the Management Services Agreement which provides for a monthly salary of $9,500. (2) This amount represents the cost to us of maintaining an apartment in Chile for Mr. Kurtanjek. (3) This amount was paid to Crosby Enterprises under our Business Consulting Agreement with Mr. Crosby's company. (4) This amount was paid to Trio International Capital Corp., an entity partially owned by Mr. Flower.
On August 18, 2005, our compensation committee recommended, and the board approved, an increase in Mr. Kurtanjek's monthly salary from $6,000 to $9,500 beginning August 1, 2005. Effective February 1, 2006, we entered into a one-year renewable Management Services Agreement dated February 6, 2006, with Mr. Kurtanjek for
service as President of our company and for providing management of the planning, implementation, and reporting on exploration, feasibility, and project development activities carried out on the Cerro Blanco property. This agreement was extended automatically for an additional one-year term beginning February 1, 2007. Under the agreement we agreed to pay a monthly fee of $9,500, plus reimbursable out-of-pocket expenses, which was increased to $11,400 on August 31, 2007. Either party may terminate the agreement without cause upon 120 days' written notice and at any time for cause. The agreement also provides for severance payments in the event of termination upon a change of control and maintaining the confidentiality of any proprietary information. On December 21, 2007, our board approved grants of 200,000 shares to Mr. Kurtanjek every time a project milestone is achieved, such as positive pre-feasibility study, piloting and final feasibility study. In addition, the board approved a bonus of 200,000 shares to Mr. Kurtanjek upon the listing of our stock on the American Stock Exchange or other senior exchange. Mr. Kurtanjek devotes essentially all of his time to the business of our company. On May 31, 2004, we granted to him fully vested four-year common stock purchase options for 600,000 shares exercisable at $0.60 per share. On August 31, 2007, we granted him common stock purchase options for 150,000 shares exercisable at $0.50 per share; we also repriced the prior options to $0.50 per share and extended the options by three years. On August 10, 2007, we granted Mr. Kurtanjek warrants to purchase 225,000 shares at $0.60 per share.
Effective September 8, 2006, we entered into a one-year renewable Management Services Agreement dated September 1, 2006, with Mr. Jenkins for service as a part-time Chief Financial Officer of our company. Under the agreement we have agreed to pay a monthly fee of C$5,000 per month plus Goods and Services Tax in Canada, plus reimbursable out-of-pocket expenses. As additional compensation under the agreement, we granted to him 100,000 five-year options exercisable at $1.25 per share. On August 31, 2007, the options were repriced to $0.50 per share and were fully vested. These options will be subject to the terms, definitions and provisions of our Stock Option Plan. Effective August 31, 2007, the monthly management fee payable to Mr. Jenkins was raised to US$6,000. Either party may terminate the agreement without cause upon 120 days' written notice and at any time for cause. In the event of termination upon a change of control, Mr. Jenkins will be compensated as follows: immediate payment of a severance amount equal to three times the highest annual base cash compensation paid to him; the immediate vesting of any outstanding unvested options, warrants, or other convertible instruments; the pro rata amount of any bonuses for which he is eligible; the extension of the exercise period for at least six months following such termination. The agreement also provides for maintaining the confidentiality of any proprietary information. Also effective August 31, 2007, Mr. Jenkins received a bonus for past services comprised of five-year, fully vested options to purchase 300,000 shares at $0.50 per share, 150,000 shares of common stock, and 150,000 stock purchase warrants, the latter exercisable through August 15, 2010, at an exercise price of $0.60 per share. All options have now vested. On December 21, 2007, our board approved a bonus of 100,000 shares to Mr. Jenkins upon the listing of our stock on the American Stock Exchange or other senior exchange. Mr. Jenkins devotes approximately half of all of his time to the business of our company. On August 10, 2007, we granted Mr. Jenkins warrants to purchase 150,000 shares at $0.60 per share.
On August 1, 2005, we entered into a five-month renewable Business Consultant Agreement with Crosby Enterprises, an entity controlled by Howard M. Crosby. On February 6, 2006, we renewed this agreement from January 1, 2006, through May 31, 2006, and have extended it on a month-to-month basis. Crosby Enterprises has agreed to perform financial consulting and public relations services for us. In return, we have granted to this entity options to purchase 200,000 shares of our common stock at any time through August 1, 2009. The original exercise price of the options was $1.25 per share. On August 7, 2007, we reduced the exercise price to $0.50 per share and extended the term of the options for an additional two years. In addition, we paid a monthly fee of $12,000 for the initial five-month term of the agreement; we paid a monthly fee of $6,500 during the five-month renewal period; and we have agreed to pay $6,500 per month thereafter for the services performed by Crosby Enterprises. Effective August 31, 2007, Mr. Crosby received a bonus for past services comprised of five-year, fully vested options to purchase 100,000 shares at $0.50 per share, 100,000 shares of common stock, and 100,000 stock purchase warrants, the latter exercisable through August 15, 2010, at an exercise price of $0.60 per share. Mr. Crosby devotes approximately 40% of his time to the fulfillment of the obligations under this agreement and services as a director of our company. In the event of termination upon a change of control, Crosby Enterprises will be compensated as follows: immediate payment of a severance amount equal to three times the highest annual base cash compensation paid to it; the immediate vesting of any outstanding unvested options, warrants, or other convertible instruments; the pro rata amount of any bonuses for which it is eligible; the extension of the exercise period for at least six months following such termination.
On February 10, 2005, we entered into a letter agreement with Trio International Capital Corp., a company partly owned by Brian Flower. This agreement provided that Trio, through its wholly owned subsidiary, Pacific Venture Management Ltd., would provide services to us in connection with our plans to seek listing of our stock on the Toronto Stock Exchange or other suitable senior exchange; provide and coordinate our office in Vancouver, Canada; manage our corporate functions; and provide assistance with the pre-feasibility and feasibility reports on our property in Chile. Mr. Flower devoted approximately 80% of his time to the affairs of the company under this agreement, including serving as our Chief Financial Officer from February 2005 through September 8, 2006. As compensation under the agreement, Trio received options to purchase 400,000 shares of our common stock at $1.00 per share at any time on or before January 31, 2008. On August 31, 2007, the exercise price was reduced to $0.50 per share and the term of the options was extended by three years. We also paid Trio a monthly fee of $5,250 plus Goods and Services Tax in Canada under the agreement since its inception through July 31, 2005, at which time the monthly fee was increased by the board to $8,000. Effective February 1, 2006, we entered into a one-year renewable Management Services Agreement dated February 6, 2006, which replaced the original agreement and provides for the furnishing of the same services as under the original letter agreement. This agreement was extended automatically for an additional one-year term beginning February 1, 2007. Under the new agreement we agreed to pay a monthly fee of $8,000, plus reimbursable out-of-pocket expenses. Trio has also agreed to provide office space for us for which we pay $1,250 per month. We have also allowed Trio, through one of its subsidiaries, to broker the ocean transportation services for any product produced from our Cerro Blanco property. Either party may terminate the new agreement without cause upon 120 days' written notice and at any time for cause. In the event of termination upon a change of control, Trio will be compensated as follows: immediate payment of a severance amount equal to three times the highest annual base cash compensation paid to it; the immediate vesting of any outstanding unvested options, warrants, or other convertible instruments; the pro rata amount of any bonuses for which it is eligible; the extension of the exercise period for at least six months following such termination. The new agreement also provides for maintaining the confidentiality of any proprietary information. In September 2006, we amended the agreement to provide for Mr. Flower's services as our Chairman rather than our Chief Financial Officer with additional responsibilities for marketing, finance, corporate development and investor relations. The agreement also provides for payment of operating expenses for the company. Effective August 31, 2007, the monthly management fee payable to Trio was raised to $9,600 and the monthly office fee, to $2,000. Effective January 1, 2008, the monthly management fee was raised to $11,600. On December 21, 2007, the Board determined that in the event that the time commitment of Mr. Flower increases beyond 80%, the base compensation payable to Trio will be increased proportionately, but not to exceed the base compensation payable to Mr. Kurtanjek. Mr. Flower receives no other compensation for serving as our Chairman, except as provided in this agreement with Trio. Also effective August 31, 2007, Trio received a bonus for past services comprised of five-year, fully vested options to purchase 150,000 shares at $0.50 per share, 225,000 shares of common stock, and 225,000 stock purchase warrants, the latter exercisable through August 15, 2010, at an exercise price of $0.60 per share. On December 21, 2007, the board granted a bonus of 200,000 fully vested shares to Mr. Flower for past services. Also on December 21, 2007, our board approved grants of 200,000 shares to Mr. Flower every time a project milestone is achieved, such as positive pre-feasibility study, piloting and final feasibility study. In addition, the board approved a bonus of 200,000 shares to Mr. Flower upon the listing of our stock on the American Stock Exchange or other senior exchange. Mr. Flower devotes approximately 80% of his time to the fulfillment of the obligations under this agreement and services as a director of our company.
Equity Awards
The following table sets forth certain information for the named executive officers concerning unexercised options that were outstanding as of December 31, 2007:
The options held by the named executive officers at year-end were granted pursuant to our existing Stock Option Plan adopted on August 30, 2005. Our shareholders approved the plan on November 10, 2006. The purpose of the plan is to provide eligible persons an opportunity to acquire a proprietary interest in our company and to participate in the profitability of the company.
There are 3,140,000 shares of common stock authorized for stock options under the plan, which are subject to adjustment in the event of stock splits, stock dividends, and other situations. In addition, aggregate grants to a single person are limited to 5% of the total number of issued and outstanding shares and the aggregate number authorized for grants to insiders is limited to 20% of the issued and outstanding shares. Grants to consultants are limited to 2% of the issued and outstanding shares.
The plan is administered by our Board of Directors. Participants in the plan are to be selected by our Board of Directors. The persons eligible to participate in the plan are as follows: (a) directors of our company and its subsidiaries; (b) officers of our company and its subsidiaries; (c) employees of our company and any of its subsidiaries; and (d) those engaged by us to provide ongoing management or consulting services, or investor relations activities for us or any entity controlled by us.
The purchase price under each option is established by the Board of Directors at the time of the grant and may not be discounted below the maximum discount permitted under the policy of the Toronto Exchange.
The Board of Directors will fix the terms of each option, but no option can be granted for a term in excess of five years. The Board of Directors will not impose a vesting schedule upon any options granted which provides for exercise of an option for less than 25% of the shares subject to the option upon approval of listing of our stock on the Toronto Exchange and 12.5% every quarter thereafter.
During the lifetime of the person to whom an option has been granted, only that person has the right to exercise the option and that person cannot assign or transfer any right to the option.
In the event of the death of the option holder, the options will immediately vest and may be exercised for up to one year from the date of death. If the option holder's relationship with us is terminated for cause, the unexercised options will immediately terminate. If the option holder retires, voluntarily resigns, or is terminated for other than cause, the options will be exercisable for 90 days thereafter or for 30 days if the person was engaged in investor relations.
In the event of the corporate take-over, reorganization or change of control, the options will vest and the holder may exercise the options or, in the event of a corporate reorganization, receive the kind and amount of shares or other securities or property that he would have been entitled to receive if he had been a holder of shares of our company at the time of the reorganization, or, if appropriate, as otherwise determined by the Board of Directors.
Director Compensation
The following table sets forth certain information concerning the compensation of our directors, excluding the named executive officers whose total compensation is set forth in the Summary Compensation Table above, for the last fiscal year ended December 31, 2007:
Director Compensation
All Other Stock Awards Compensation Total Name ($) ($) ($) - ------------------- ------------ ------------ ------------ Cesar Lopez $130,000(1) $54,086(2) $184,086
Stephanie Ashton(4) - $6,352(3) $6,352 - ---------- (1) This amount represents a stock bonus of 100,000 fully vested shares granted on December 21, 2007. (2) This amount represents legal fees paid to Mr. Lopez and one-half of the rent paid to Lopez and Ashton for our office in Chile. The hourly legal fees were paid in Chilean pesos at prevailing exchange rates and the rent was paid in Chilean pesos at a fixed rate of CH$552 pesos for each US$1.00. (3) This amount represents accounting and administrative fees paid to Ms. Ashton and one-half of the rent paid to Lopez and Ashton for our office in Chile up to the date of her resignation as a director. These fees were paid in Chilean pesos at a fixed rate of CH$552 pesos for each US$1.00. (4) Ms. Ashton resigned as a director on March 9, 2007.
On July 29, 2005, the board adopted a policy to compensate directors who are not executive officers of the Company. Such persons will receive $1,000 plus expenses for attendance in person at each meeting of the Board of Directors. They will receive $500 for attendance at such meetings by conference telephone. Also on July 29, 2005, the board adopted a policy to compensate non-executive directors who are members of committees of the board. These persons will receive $1,000 plus expenses for attendance in person at each committee meeting. They will receive $500 for attendance at committee meetings by conference telephone. In addition, each chairman of the committee will receive $1,000 per meeting they chair. No fees were paid to or accrued by any director during 2006 pursuant to the policies adopted on July 29, 2005 for director and committee member compensation.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information furnished by current management and others, concerning the ownership of our common stock as of March 18, 2008, of (i) each person who is known to us to be the beneficial owner of more than 5 percent of our common stock, without regard to any limitations on conversion or exercise of convertible securities or warrants; (ii) all directors and executive officers; and (iii) our directors and executive officers as a group:
Amount and Nature Name and Address of Beneficial Percentage of Beneficial Owner Ownership (1) of Class(2) - ------------------- ----------------- -----------
Michael P. Kurtanjek 1,700,000 (3) 5.6% 9 Church Lane Copthorne West Sussex, England RH10 3PT
Howard M. Crosby 1,249,000 (4) 4.2% 6 East Rose Street Walla Walla, WA 99362
Cesar Lopez 1,089,000 3.7% Enrique Foster Sur 20, Piso 19 Las Condes, Santiago, Chile
Brian Flower 1,350,000 (5) 4.5% 2150-1188 West Georgia Street Vancouver, British Columbia Canada V6E 4A2
Charles E. Jenkins 700,000 (6) 2.4% 2150-1188 West Georgia Street Vancouver, British Columbia Canada V6E 4A2
Executive Officers and 5,988,000 18.5% Directors as a Group (5 Persons)
Rubicon Master Fund (7) 6,620,000 (8) 18.7% c/o Rubicon Fund Management LLP 103 Mount St. London W1K 2TJ United Kingdom
Phelps Dodge Corporation 1,665,000 (9) 5.4% One North Central Ave. Phoenix, AZ 85004
Wang Kin 1,600,000 7.0% Block G 23 Floor Shen Zhen 518053 Peoples Republic of China
Kin Wong 2,000,000 6.9% 6 Bl 23 Floor Cts Plaza Otc Peoples Republic of China - ---------- (1) Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants, or other conversion privileges currently exercisable or
convertible, or exercisable or convertible within 60 days of March 18, 2008, are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person. (2) Percentage based on 29,189,133 shares of common stock outstanding as of March 18, 2008. (3) Includes 750,000 shares issuable pursuant to options and 225,000 stock purchase warrants . (4) Includes 300,000 shares issuable pursuant to options and 100,000 stock purchase warrants. (5) Includes 550,000 shares issuable pursuant to options and 225,000 stock purchase warrants. (6) Includes 150,000 shares issuable pursuant to stock purchase warrants and 400,000 shares issuable pursuant to options. (7) Pursuant to Investment Agreements, each of Rubicon Fund Management Ltd., and Rubicon Fund Management LLP share all investment and voting power with respect to the securities held by Rubicon Master Fund. Paul Anthony Brewer, Vilas Gadkari and Horace Joseph Leitch III share all investment and voting power with respect to Rubicon Fund Management Ltd. and Rubicon Fund Management LLP. Each of Rubicon Fund Management Ltd., Rubicon Fund Management LLP, Paul Anthony Brewer, Vilas Gadkari, and Horace Joseph Leitch III may be deemed to be beneficial owners of the securities held by Rubicon Master Fund. Each of Rubicon Fund Management Ltd., Rubicon Fund Management LLP, Paul Anthony Brewer, Vilas Gadkari, and Horace Joseph Leitch III disclaim beneficial ownership of the securities held by Rubicon Master Fund. (8) Includes 6,250,000 shares issuable upon exercise of warrants. Notwithstanding the foregoing, the warrants may not be exercised if the holder of the security, together with its affiliates, after such exercise would hold 4.9% of the then issued and outstanding shares of our common stock. (9) Includes 1,000,000 shares issuable upon conversion of 625,000 Class A Convertible Preferred Shares and 625,000 shares issuable upon exercise of warrants. Notwithstanding the foregoing, the shares of the Class A Convertible Preferred Stock and warrants may not be converted or exercised if the holder of the security, together with its affiliates, after such conversion or exercise would hold 4.9% of the then issued and outstanding shares of our common stock.
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth as of the most recent fiscal year ended December 31, 2007, certain information with respect to compensation plans (including individual compensation arrangements) under which our common stock is authorized for issuance:
(1) These options were granted to our officers and to various consultants pursuant to our stock option plan adopted in August 2005. (2) These shares are issuable pursuant to common stock purchase warrants exercisable at prices ranging from $0.50 to $1.25 per share at any time through July 11, 2009. Of the total warrants, 6,250,000 and 625,000 were granted to Rubicon and Phelps Dodge, respectively, in connection with our funding transactions with these parties, and 300,000 were granted to a consultant in connection with the funding transaction with Rubicon. (3) These shares are issuable pursuant to a stock option agreement granted to a consultant outside of our stock option plan. These options expire on August 13, 2009.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
From February 23, 2004, through July 31, 2005, our Board of Directors approved and we paid a monthly salary of $6,000 to Mr. Kurtanjek for serving as President. On August 18, 2005, our compensation committee recommended, and the board approved, an increase in his monthly salary to $9,500 beginning August 1, 2005. Effective February 1, 2006, we entered into a one-year renewable Management Services Agreement dated February 6, 2006, with Mr. Kurtanjek for service as President of our company and for providing management of the planning, implementation, and reporting on exploration, feasibility, and project development activities carried out on the Cerro Blanco property. This agreement was extended automatically for an additional one-year term beginning February 1, 2007. Under the agreement we agreed to pay a monthly fee of $9,500, plus reimbursable out-of-pocket expenses. Effective August 31, 2007, the monthly management fee payable to Mr. Kurtanjek was raised to $11,400 and effective January 1, 2008, the monthly management fee was raised to $13,400. Either party may terminate the agreement without cause upon 120 days' written notice and at any time for cause. In the event of termination upon a change of control, Mr. Kurtanjek will be compensated as follows: immediate payment of a severance amount equal to three times the highest annual base cash compensation paid to him; the immediate vesting of any outstanding unvested options, warrants, or other convertible instruments; the pro rata amount of any bonuses for which he is eligible; the extension of the exercise period for at least six months following such termination. The agreement also provides for maintaining the confidentiality of any proprietary information. Also effective August 31, 2007, Mr. Kurtanjek received a bonus for past services comprised of five-year, fully vested options to purchase 150,000 shares at $0.50 per share, 225,000 shares of common stock, and 225,000 stock purchase warrants, the latter exercisable through August 15, 2010, at an exercise price of $0.60 per share. On December 21, 2007, the board granted a bonus of 200,000 fully vested shares to Mr. Kurtanjek for past services. In addition, on December 21, 2007, our board approved grants of 200,000 shares to Mr. Kurtanjek every time a project milestone is achieved, such as positive pre-feasibility study, piloting and final feasibility study. In addition, the board approved a bonus of 200,000 shares to Mr. Kurtanjek upon the listing of our stock on the American Stock Exchange or other senior exchange. Mr. Kurtanjek devotes virtually all of his time to our company under this agreement. During the year ended December 31, 2007, we paid $123,500 to Mr. Kurtanjek pursuant to our agreement with him. We also paid $22,362 to provide an apartment for him in Chile.
On February 10, 2005, we entered into a letter agreement with Trio International Capital Corp., a company partly owned by Brian Flower, a director and Chairman of our company. This agreement provided that Trio, through its wholly owned subsidiary, Pacific Venture Management Ltd., would provide services to us in connection with our plans to seek listing of our stock on the Toronto Stock Exchange or other suitable senior exchange; provide and coordinate our office in Vancouver, Canada; manage our corporate functions; and provide assistance with the pre-feasibility and feasibility reports on our property in Chile. Mr. Flower devoted approximately 80% of his time to the affairs of the company under this agreement, including serving as our Chief Financial Officer from February 2005 through September 8, 2006. As compensation under the agreement, Trio received options to purchase 400,000 shares of our common stock at $1.00 per share at any time on or before January 31, 2008. On August 31, 2007, the exercise price was reduced to $0.50 per share and the term of the options was extended by three years. We also paid Trio a monthly fee of $5,250 plus Goods and Services Tax in Canada under the agreement since its inception through July 31, 2005, at which time the monthly fee was increased by the board to $8,000. Effective February 1, 2006, we entered into a one-year renewable Management Services Agreement dated February 6, 2006, which replaced the original agreement and provides for the furnishing of the same services as under the original letter agreement. This agreement was extended automatically for an additional one-year term beginning February 1, 2007. Under the new agreement we agreed to pay a monthly fee of $8,000, plus reimbursable out-of-pocket expenses. Trio has also agreed to provide office space for us for which we pay $1,250 per month. We have also allowed Trio, through one of its subsidiaries, to broker the ocean transportation services for any product produced from our Cerro Blanco property. Either party may terminate the new agreement without cause upon 120 days' written notice and at any time for cause. In the event of termination upon a change of control, Trio will be compensated as follows: immediate payment of a severance amount equal to three times the highest annual base cash compensation paid to it; the immediate vesting of any outstanding unvested options, warrants, or other convertible instruments; the pro rata amount of any bonuses for which it is eligible; the extension of the exercise period for at least six months following
such termination. The new agreement also provides for maintaining the confidentiality of any proprietary information. In September 2006, we amended the agreement to provide for Mr. Flower's services as our Chairman rather than our Chief Financial Officer with additional responsibilities for marketing, finance, corporate development and investor relations. The agreement also provides for payment of operating expenses for the company. Effective August 31, 2007 the monthly management fee payable to Trio was raised to $9,600 and the monthly office fee, to $2,000. Effective January 1, 2008, the monthly management fee was raised to $11,600. On December 21, 2007, the Board determined that in the event that the time commitment of Mr. Flower increases beyond 80%, the base compensation payable to Trio will be increased proportionately, but not to exceed the base compensation payable to Mr. Kurtanjek. Mr. Flower receives no other compensation for serving as our Chairman, except as provided in this agreement with Trio. Also effective August 31, 2007, Trio received a bonus for past services comprised of five-year, fully vested options to purchase 150,000 shares at $0.50 per share, 225,000 shares of common stock, and 225,000 stock purchase warrants, the latter exercisable through August 15, 2010, at an exercise price of $0.60 per share. On December 21, 2007, the board granted a bonus of 200,000 fully vested shares to Mr. Flower for past services. Also on December 21, 2007, our board approved grants of 200,000 shares to Mr. Flower every time a project milestone is achieved, such as positive pre-feasibility study, piloting and final feasibility study. In addition, the board approved a bonus of 200,000 shares to Mr. Flower upon the listing of our stock on the American Stock Exchange or other senior exchange. Mr. Flower devotes approximately 80% of his time to the fulfillment of the obligations under this agreement and services as a director of our company. During the year ended December 31, 2007, we paid $102,400 to Trio for the services under the current agreement.
On November 26, 2007, we entered into a Brokerage Representation Agreement with Beacon Hill Shipping Ltd., an entity in which Mr. Flower is a principal. The term of the agreement is for the life of our mining property in Chile. We have agreed to pay commissions of 2.5% for carriers or vessels sourced by Beacon Hill and 1% in the case of any sale or purchase of vessels by for the project owners.
On August 1, 2005, we entered into a five-month renewable Business Consultant Agreement with Crosby Enterprises, an entity controlled by Howard M. Crosby, one of our directors. On February 6, 2006, we renewed this agreement from January 1, 2006 through May 31, 2006, and have extended it on a month-to-month basis. Crosby Enterprises has agreed to perform financial consulting and public relations services for us. In return, we have granted to this entity options to purchase 200,000 shares of our common stock at any time through August 1, 2009. The original exercise price of the options was $1.25 per share. On August 7, 2007, we reduced the exercise price to $0.50 per share and extended the term of the options for an additional two years. In addition, we paid a monthly fee of $12,000 for the initial five-month term of the agreement; we paid a monthly fee of $6,500 during the five-month renewal period; and we have agreed to pay $6,500 per month thereafter for the services performed by Crosby Enterprises. Effective August 31, 2007, Mr. Crosby received a bonus for past services comprised of five-year, fully vested options to purchase 100,000 shares at $0.50 per share, 100,000 shares of common stock, and 100,000 stock purchase warrants, the latter exercisable through August 15, 2010, at an exercise price of $0.60 per share. Mr. Crosby devotes approximately 40% of his time to the fulfillment of the obligations under this agreement and services as a director of our company. In the event of termination upon a change of control, Crosby Enterprises will be compensated as follows: immediate payment of a severance amount equal to three times the highest annual base cash compensation paid to it; the immediate vesting of any outstanding unvested options, warrants, or other convertible instruments; the pro rata amount of any bonuses for which it is eligible; the extension of the exercise period for at least six months following such termination. During the year ended December 31, 2007, we paid $78,000 to Crosby Enterprises for services under this agreement.
On February 1, 2004, we entered into a Management Services Agreement through our Chilean subsidiary with Lopez & Ashton Ltda., an entity composed of Cesar Lopez, one of our directors, and Stephanie D. Ashton, a former director who resigned in March 2007. This agreement provided that Lopez & Ashton would provide consulting and management services in Chile in connection with our mining concessions located there. The agreement expired on December 31, 2005. Effective January 1, 2006, we entered into a new one-year renewable Management Services Agreement dated February 6, 2006, with Lopez and Ashton. This agreement was extended automatically for an additional one-year term beginning February 1, 2007. Pursuant to the new agreement, Lopez & Ashton has agreed to provide and maintain our corporate offices in Chile, provide administrative services for us in Chile, including maintaining our accounting records, provide legal services, and furnish other related services. The agreement provides that during its term Lopez & Ashton will not advise or
represent any other company in conflict with their representation of our company. The new agreement provides for monthly payments of $2,500 for the office space, $500 for office support services such as a receptionist, $1,000 for accounting services, and $2,000 for administrative services. We have also agreed to pay for any specific management services requested by us to be performed by Ms. Ashton at an hourly rate of $100 and for any legal services performed by Mr. Lopez at $250 per hour. We have agreed to pay the flat fee amounts in Chilean pesos at a fixed rate of CH$550 pesos for each US$1.00 and the hourly fees at prevailing exchange rates. Either party may terminate the new agreement without cause upon 90 days' written notice and at any time for cause. We also have the right upon 60 days' written notice to terminate any specific service to be performed by Lopez & Ashton while maintaining the remaining services. The new agreement also provides for maintaining the confidentiality of any proprietary information. Mr. Lopez and Ms. Ashton each devote approximately 50% of their time to the fulfillment of the obligations under this agreement, including Mr. Lopez's services as a director of our company. During the year ended December 31, 2007, we paid $54,086 to Mr. Lopez and $6,352 to Ms. Ashton for services under our agreement with their firm. On December 21, 2007, the Board granted a bonus of 100,000 fully vested shares to Mr. Lopez for past services.
On July 11, 2005, we closed a Securities Purchase Agreement with Rubicon, one of our shareholders, on $5,000,000 in equity financing and issued 6,250,000 shares of Class A Convertible Preferred Stock and common stock purchase warrants to purchase 6,250,000 shares of our common stock. Each share of Class A Convertible Preferred Stock is convertible into our common shares at the rate of one share of common stock for each share of preferred stock converted, subject to adjustment in the event of certain transactions, and each warrant is exercisable at $0.50 per share at any time through July 11, 2009. On May 5, 2006, we entered into an amendment of the Securities Purchase Agreement whereby we issued 400,000 shares of our common stock to Rubicon in satisfaction of breach of a provision of the agreement requiring that the registration statement be declared effective by January 31, 2006. In September 2007, Rubicon converted all of its preferred shares into 6,250,000 common shares and sold all of the shares.
On September 7, 2005, we amended the Securities Purchase Agreement with Rubicon to include a transaction with Phelps Dodge, one of our shareholders, in which we issued 625,000 shares of Class A Convertible Preferred Stock convertible into 1,000,000 shares of our common stock and common stock purchase warrants to purchase 625,000 shares of our common stock under identical terms as with Rubicon. These securities were issued in satisfaction of the final payment of $500,000 due Phelps Dodge in connection with the purchase of our Chilean mining concessions. On May 5, 2006, we entered into an amendment of the Securities Purchase Agreement whereby we issued 40,000 shares of our common stock to Phelps Dodge in satisfaction of breach of a provision of the agreement requiring that the registration statement be declared effective by January 31, 2006.
Effective September 8, 2006, we entered into a one-year renewable Management Services Agreement dated September 1, 2006, with Mr. Jenkins for service as a part-time Chief Financial Officer of our company. Under the agreement we have agreed to pay a monthly fee of C$5,000 per month plus Goods and Services Tax in Canada, plus reimbursable out-of-pocket expenses. As additional compensation under the agreement, we granted to him 100,000 five-year options exercisable at $1.25 per share. On August 31, 2007, the options were repriced to $0.50 per share and were fully vested. These options will be subject to the terms, definitions and provisions of our Stock Option Plan. Effective August 31, 2007, the monthly management fee payable to Mr. Jenkins was raised to US$6,000. Either party may terminate the agreement without cause upon 120 days' written notice and at any time for cause. In the event of termination upon a change of control, Mr. Jenkins will be compensated as follows: immediate payment of a severance amount equal to three times the highest annual base cash compensation paid to him; the immediate vesting of any outstanding unvested options, warrants, or other convertible instruments; the pro rata amount of any bonuses for which he is eligible; the extension of the exercise period for at least six months following such termination. The agreement also provides for maintaining the confidentiality of any proprietary information. Also effective August 31, 2007, Mr. Jenkins received a bonus for past services comprised of five-year, fully vested options to purchase 300,000 shares at $0.50 per share, 150,000 shares of common stock, and 150,000 stock purchase warrants, the latter exercisable through August 15, 2010, at an exercise price of $0.60 per share. All options have now vested. On December 21, 2007, our board approved a bonus of 100,000 shares to Mr. Jenkins upon the listing of our stock on the American Stock Exchange or other senior exchange. Mr. Jenkins devotes approximately half of all of his time to the business of our company. During the year ended December 31, 2007, we paid $61,493 to Mr. Jenkins for services under this agreement.
In February 2004, control of our company changed by virtue of a reverse merger with GreatWall Minerals Ltd., an Idaho corporation, in which the shareholders of GreatWall exchanged their shares on a one-for-one basis for shares of our company. Prior to that time we were a shell company since we had no operations and no assets at the time. As a result of the merger, management of our company resigned and Michael Kurtanjek, John Ryan, Howard Crosby were appointed. GreatWall was controlled by these individuals, as well as Stephanie Ashton and Cesar Lopez, who were the executive officers, directors, and principal shareholders of that entity at the time of the merger. In addition to the compensation paid to this persons and the transactions with them since the reverse merger as set forth above, the following table sets forth the number of shares of our company received by each of these individuals in the reverse merger and the consideration paid for the GreatWall shares owned by them, all of which were acquired on or about October 5, 2003:
- ---------- (1) At the time of the reverse merger, we had 1,550,000 shares outstanding and GreatWall had 11,251,000 shares outstanding which converted into a like number of our shares in the merger. (2) This percentage is based upon the total shares outstanding, 12,801,000 shares, as a result of the reverse merger. (3) Resigned as a director on March 26, 2007. (4) Resigned as a director on March 9, 2007.
Director Independence
Our securities are not listed on a national securities exchange or in an inter-dealer quotation system which has requirements that directors be independent. As a result, we have adopted the independence standards of the American Stock Exchange to determine the independence of our directors and those directors serving on our committees. These standards provide that a person will be considered an independent director if he or she is not an officer of the company and is, in the view of the company's board of directors, free of any relationship that would interfere with the exercise of independent judgment. Our board of directors has determined that none of our directors would meet this standard, and therefore, all would be considered not to be independent.
On July 29, 2005, our board created standing audit and compensation committees. Our audit committee is composed of the following directors: Howard M. Crosby and Brian Flower. Our compensation committee is composed of the following directors: Howard M. Crosby, and Michael Kurtanjek.
The rules of the American Stock Exchange require that an audit committee of a small business issuer must maintain at least two members and that a majority of the members must be independent directors. The rules further provide that compensation of the chief executive officer and the other officers can be determined by a compensation committee generally composed of independent directors. Less than a majority of the members of our audit and compensation committees are deemed to be independent under the standards established by the American Stock Exchange.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees Paid
Smythe Ratcliffe LLP, Chartered Accountants, served as our accounting firm for the two years ended December 31, 2007 and 2006. The following fees were paid to our independent registered public accounting firm for services rendered during our last two fiscal years:
Audit Fees
The aggregate fees billed for professional services rendered by our principal accountant for the audit of our annual financial statements, review of financial statements included in the quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year ended December 31, 2007, were $50,223 (invoiced as C$50,350). This total includes $14,873 (C$15,350) for fees incurred for a review of the financial statements included in our forms 10-QSB for the year ended December 31, 2007. The aggregate fees incurred for professional services rendered for the audit of our annual financial statements for the fiscal year ended December 31, 2006, were $33,091 (C$38,000). This total includes $10,640 (C$12,240) for fees incurred for a review of the financial statements included in our forms 10-QSB for the year ended December 31, 2006.
Audit-Related Fees
There were no fees billed for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of the financial statements, other than those previously reported above, for the fiscal years ended December 31, 2007 and 2006.
Tax Fees
There were no fees billed for professional services rendered by our principal accountant for tax compliance, tax advice and tax planning in the fiscal year ended December 31, 2006.
All Other Fees
There were no other fees billed for products or services provided by the principal accountant, other than those previously reported above, for the fiscal years ended December 31, 2007 and 2006.
Audit Committee
Our Audit Committee has considered whether the non-audit services provided by our auditors to us are compatible with maintaining the independence of our auditors and concluded that the independence of our auditors is not compromised by the provision of such services. Our Audit Committee pre-approves all auditing services and permitted non-audit services, including the fees and terms of those services, to be performed for us by our independent auditor prior to engagement.
PART IV
ITEM 15.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements
The following financial statements are filed with this report:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2007 and 2006
Consolidated Statements of Operations for the years ended December 31, 2007, 2006, 2005, and for the cumulative period from inception (November 13, 2001) through December 31, 2007
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006, 2005, and for the cumulative period from inception (November 13, 2001) through December 31, 2007
Consolidated Statements of Stockholders' Equity from inception (November 12, 2001) through December 31, 2007
Notes to Consolidated Financial Statements
Exhibits
The following exhibits are filed with this report:
*Management contract, or compensatory plan or arrangement, required to be filed as an exhibit.
Signature Page Follows
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.
White Mountain Titanium Corporation
Date: March 27, 2008 By: /s/ Michael P. Kurtanjek Michael P. Kurtanjek, President
Pursuant to the requirements of Section 13 or 15(d) 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 date indicated.
Date: March 27, 2008 /s/ Michael P. Kurtanjek Michael P. Kurtanjek, Director and President (Principal Executive Officer)
Date: March 27, 2008 /s/ Charles E. Jenkins Charles E. Jenkins, Chief Financial Officer (Principal Financial and Accounting Officer)
Date: March 27, 2008 /s/ Howard M. Crosby Howard M. Crosby, Director
Date: March 27, 2008 /s/ Cesar Lopez Cesar Lopez, Director
Date: March 27, 2008 /s/ Brian Flower Brian Flower, Chairman