ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Forward Looking Statements
This quarterly report contains forward-looking statements.
Forward-looking statements are projections of events, revenues, income, future
economic performance or management’s plans and objectives for our future
operations. In some cases, you can identify forward-looking statements by
terminology such as “may”, “should”, “expects”, “plans”, “anticipates”,
“believes”, “estimates”, “predicts”, “potential” or “continue” or the negative
of these terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled “Risk Factors” and the
risks set out below, any of which may cause our or our industry’s actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. These
risks include, by way of example and not in limitation:
-
risks and uncertainties relating to the interpretation of sampling
results, the geology, grade and continuity of mineral deposits;
-
risks and uncertainties that results of initial sampling and mapping will
not be consistent with our expectations;
-
mining and development risks, including risks related to accidents,
equipment breakdowns, labor disputes or other unanticipated difficulties with
or interruptions in production;
-
the potential for delays in exploration activities;
-
risks related to the inherent uncertainty of cost estimates and the
potential for unexpected costs and expenses;
-
risks related to commodity price fluctuations;
-
the uncertainty of profitability based upon our limited history;
-
risks related to failure to obtain adequate financing on a timely basis
and on acceptable terms for our planned exploration project;
-
risks related to environmental regulation and liability;
-
risks that the amounts reserved or allocated for environmental compliance,
reclamation, post-closure control measures, monitoring and on-going
maintenance may not be sufficient to cover such costs;
-
risks related to tax assessments;
-
political and regulatory risks associated with mining development and
exploration; and
-
other risks and uncertainties related to our mineral property and business
strategy.
This list is not an exhaustive list of the factors that may
affect any of our forward-looking statements. These and other factors should be
considered carefully and readers should not place undue reliance on our
forward-looking statements.
Forward looking statements are made based on management’s
beliefs, estimates and opinions on the date the statements are made and we
undertake no obligation to update forward-looking statements if these beliefs,
estimates and opinions or other circumstances should change. Although we believe
that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars and all references to
“common stock” refer to the common shares in our capital stock.
As used in this quarterly report, the terms “we”, “us”, “our”,
the “Company” and “Lake Victoria” mean Lake Victoria Mining Company, Inc., and
our wholly owned subsidiaries Kilimanjaro Mining Company, Inc. and Lake Victoria
Resources (T) Limited, Chrysos 197 Company Tanzania Ltd. and Jin 179 Company
Tanzania Ltd., unless otherwise indicated.
Recent Corporate Developments
Since the commencement of the three months period ended June
30, 2013, we experienced the following significant corporate developments:
|
|
1.
|
On August 5, 2013, the Company completed and filed
Environmental and Social Impact Assessment report for Kinyambwiga mining
project with the Tanzanian government.
|
|
|
|
|
|
|
2.
|
In September 2012, the Company offered a total of up to
120 royalty units to raise a gross amount of $3,000,000 for a small scale
mining operation on the Kinyambwiga property. Each unit will entitle
investors to receive ½ of 1 percent (1%) of the net proceeds of production
from the small-scale mining operation at Kinyambwiga. Up to 60% of the net
proceeds of gold production are offered to investors. As of June 30, 2013
the Company received subscription payments of $1,100,000 for 44
units.
|
Our Current Business
We are an exploration stage corporation focused on acquiring,
exploring and developing gold deposits in Tanzania, East Africa. We hold 7
prospective gold projects, consisting of 15 Prospecting Licenses (PLs) and 71
Primary Mining Licenses (PMLs) and 4 uranium projects consisting of 6
Prospecting Licenses, within our Tanzania property portfolio, covering
approximately 1,512.26 square kilometers (373,687acres).
Our main area of interest is acquiring, exploring and
evaluating mineral properties through our ongoing exploration program. Following
exploration, we intend to either advance them to a commercially feasible mining
stage, enter joint ventures to further develop these properties, sell or dispose
of them if the properties do not meet our requirements. Our properties are all
early stage exploration properties. Within our mineral exploration land in
Tanzania our focus is primarily on gold, although our portfolio also contains
uranium prospects.
Since inception we have had no revenues and have relied upon
the sale of our securities to fund operations. To date, we have not discovered a
commercially viable ore body, mineral deposit or mineral reserve on any of our
properties and we will be unable to do so until further exploration is done and
a comprehensive evaluation concludes with an economic feasibility study or
production is initiated.
Assuming funding is available, we plan to develop and conduct
small-scale gold mining on selected mineral properties within certain areas that
are currently contained within our primary mining licenses. The production
decision or significant development on these projects will not be based on
mineral reserves supported by an NI43-101 compliant technical report. We plan to
secure Mining Licenses for each of these potential mining areas.
Our property portfolio is large, therefore we may interest
other companies in our properties to either participate by means of option or
joint venture agreements in the exploration of them or to finance and establish
production if mineralization is found.
We maintain our registered agent’s office at The Corporation
Trust Company of Nevada, 6100 Neil Road, Suite 500, Reno, Nevada 89511 and our
business and administrative office is located at Suite 810 – 675 West Hastings
Street, Vancouver, British Columbia, V6B 1N2, Canada. Our telephone number is
604.248.5750.
Prospective Gold Projects
The following is a brief overview of portfolio of prospective
mineral properties, the exploration developments on them where applicable and
some of the details of the historical option agreements for them. During the
three months ended June 30, 2013, exploration work was confined to the
Kinyambwiga project
Musoma Bunda Murangi Gold Project
The Musoma Bunda Murangi Project is now comprised of 2
Prospecting Licenses covering 33.47 square kilometers and 39 PMLs totaling 3.44
square kilometers. During the quarter, an additional 15 PML, adjoining the
existing 24 PMLs owned by the Company, were applied for and acquired (
Map
3
). Furthermore, all the PMLs have subsequently been amalgamated into one
License as part of the application for a Mining License.
No field exploration has been undertaken on the Kinyambwiga (PL
4653/2007) nor Suguti (PL
PL3966/2006
) Licenses during this
period. The Murangi
(PL4511/2007)
was relinquished.
Exploration Strategy
The Kinyambwiga License has been reduced from 30.90 square
kilometers to 13.47 square kilometers as part of the required Government
relinquishment of 50 percent of the ground holdings on License renewal. The
southern part of the License area, largely covered by black cotton soil and
underlain by granitic rocks with no known artisanal workings, has been
relinquished. The northern part of the License is host to the Kunanga 1 to 3
artisanal mine sites. The relinquished area is currently under application on
account of a soil anomaly in the NE corner of the License.
The new artisanal mining site, located 1 kilometer along strike
to the east of Kunanga 2, appears to have been abandoned. A recent influx of
+500 artisanal miners have commenced mining the surface quartz rubble at Kunanga
3 in the northern part of the License.
An additional 15 PMLs, adjoining and covering the area
immediately to the south and north of the current PML boundary has been granted.
The amalgamation of all 39 PMLs has also been completed in order to facilate the
Environmental Impact Assessment (EIA) study and the application for a Mining
License to cover the area (Map 1).
Map 1: Plan showing the 24 PMLs plus the 15 additional PMLs
that have now been amalgamated into a single license
The Kunanga 1 Prospect has been earmarked for small scale
mining operations that is expected to proceed once necessary funding and the
issuing of a Mining License has been achieved. Currently, the ESIA report has
recently been completed and has been submitted to the National Environment
Management Council (NEMC) for approval. Once the certificate of approval has
been issued, an application for the Mining License, covering the amalgamated 39
PMLs will be made with the Ministry of Mines.
A scoping study involving metallurgical test work, mine
planning and scheduling, details of which are included in the 1
st
Quarter Report, as well as financial evaluations have been undertaken on the
prospect. A total capital investment of US$3M has been targeted for the
project.
Mine Planning
The Kunanga 1 Prospect comprises of a small gold conceptual
target that based on 40 meter spaced reverse circulation drill sections and
trenches may contain gold bearing mineralized material of between 600,000 and
1,000,000 tonnes at grades between 1.50 and 2.00 gpt in the three vein
structures at Kanunga 1 within the first 150 and 200 meters of surface.
Continuity of the narrow quartz veins appears to extend for a strike length of
some 500 meters.
The potential quantity and grade of these targets are
conceptual in nature. There has been insufficient exploration to define a
mineral resource and that it is uncertain if further exploration will result in
the target being delineated as a mineral resource. The conceptual target has been determined on
the basis of trenching, mapping, geophysics and both RC and RAB drilling.
It is currently proposed to mine the mineralization by open pit
mining methods using an excavator and trucks to transport the ore to an onsite
processing plant. A vertical test pit to a depth of 8 meters was excavated in
granitic saprolite (host rock) at site using a Caterpillar 320 excavator in a
relatively short time of 3 hours. The results of the test pit proved good
retaining rock wall strength, ease of excavation and the lack of ground
water.
The proposed site plan showing location of pit, waste dumps and
processing plant is shown in
Map 2
.
Map 2: Site plan showing position of the rock waste dump
tailings dam and the pit. 100 meter and 200 meter buffer zone from the pit and
representing an area of non inhabitation and limited farming activities, as per
requirement by the Mining Act of Tanzania, is indicated.
Based on the results of the test pit undertaken in the
1
st
Quarter, a pit slope of 55-60 degrees was re-modeled for the open
pit, using 10 meter x 7 meter benches (Map 3
&
Map 4). The
last bench in the 40m pit would be steeper depending upon the reach of the
equipment and rock strength of the pit walls to a depth of 40 meters.
The rock dump and tailings dam have been re-designed (Map 5
& Map 6) to accommodate approximately 1.5M tons and 260,000 tons
respectively – the estimated amount of rock to be mined to a depth of 40
meters.
Map 3: Plan view of the open pit on the Kunanga 1 showing
the access ramp and benches
Map 4: Longitudinal and cross sections of the Kunanga 1 Pit
Map 5: Plan and profile section of the rock waste dump
Map 6: Plan and profile section of the tailings dam
The Mining and Mill plan is designed for processing 300 tonnes
per day (
Chart 1
).
Chart 1:
Flow sheet diagram showing the conceptual
processing plant
Environmental Impact Assessment Study
In order to apply for a Mining License over the 39 PMLs that
overlie the Kunanga 1 Prospect, an Environmental Impact Assessment (ESIA) study
must first be carried out and an ESIA Certificate obtained.
TANSHEQ, a local Tanzanian consulting firm specializing in
Environmental Management, was awarded the contract to undertaken the
Environmental Impact Assessment study on the Kunanga 1 Prospect.
Fieldwork by TANSHEQ commenced in December 2012 and by March
2013 a Baseline study and a preliminary Environmental Impact Assessment report
had been completed and submitted to the Tanzanian Government’s National
Environmental Management Council (NEMC). Based upon this report, NEMC led a
field investigation in May 2013 in which both the environmental and social
aspect of the project was discussed with local and Government stakeholders in
the area. Various issues were resolved which led to the finalizing of the
technical requirements as outlined in the draft report. The Final EIA report has
recently been submitted to NEMC.
During the Quarter, the Company embarked on an awareness
campaign with the Ministry of Mines, Environment, Lands, and Water affairs as
well as with the local inhabitants of the area who would be effected by the
planned small scale mining project at Kunanga 1. After many meetings with the
local District representatives together with the village council and
inhabitants, the majority of all stakeholders voted in favor for the planned
project.
Future work
The completion of the EIA report and awarding of the Mining
License is of top priority. Only once this License has been obtained, can the
Company finalize its decision on whether to proceed with the mine plan.
The prospective area to the east of the Kunanga 1 Prospect
Exploration and referred to as the Kunanga School Anomaly requires follow-up
investigation.
The anomalous stone layer as encountered from previous RAB
drilling during 2009 as well as the soil anomaly over the school requires
further investigation. A number of auger drill traverses are planned to test the
strike towards the SW where a number of anomalous soil samples have been
indicated
(
Map 7). Since this area was previously relinquished as part of
the Government requirement to reduce the PL area by 50 percent, an application
to renew the area of “shed-off” is pending approval by the Ministry of Mines.
Map 7: Kanunga 1 East and School soil anomalies
A recent influx of +500 artisanal miners have centered on the
Kunanga 3 Prospect, situated approximately 1 kilometer to the north of Kunanga 1
(Map 8). The prospect consists of abundant quartz float covering an area of 200
meters x 200 meters which has been the site for periodic artisanal activity over
the years. Trenching and reverse circulation drilling intersected a number of
narrow discontinuous quartz veins (Map 9).
Map 8: Distribution of recently acquired PMLs(green and
purple blocks) and showing positions of Kunanga 1, 2 and 3 prospects as well as
the Kunanga School gold-in-soil anomaly in the eastern part of the Kinyambwiga
licenses
Map 9: Kanunga 3 prospect showing results of trenching and
drilling undertaken across the area.
Suguti (PL3966/2006)
No exploration work has been undertaken on the Suguti License
during the Quarter.
The Company decided not to place an application bid in for the
northern part of the Suguti License, preferring to reserve the exploration funds for more advanced projects within
the Company portfolio.
Murangi(PL4511/2007)
The Murangi License (PL4511/2007) was been relinquished during
the Quarter with no further exploration being undertaken during this period.
Singida Gold Project
No exploration work was undertaken during the Quarter
Future exploration
An evaluation of the Reverse Circulation drill results for both
Phase 1 and 2 programs undertaken during 2010 and 2011 has shown that gold
mineralization at the Singida-Londoni project consists of narrow, medium to low
grade and often discontinuous lenses. The shear structures hosting the gold-rich
zones typically “pinch and swell” along strike, which in places, has resulted in
larger pods of limited size as at Sambaru 3 and Sambaru 4 which indicates that
the gold deposits have limited potential to be developed into a major ore
resource contrary to the Company’s vision of discovering substantially larger
and economically viable gold deposits in the short term. In this regard, the
Company believes that the nature and extent of the mineralization revealed thus
far may lend itself towards a small-scale commercial mining operation. The
Company intends to explore the possibilities of undertaking a small scale mining
operation on a number of PMLs once a scoping study has been completed.
Although the Company completed a Technical report in compliance
with Canadian National Instrument 43-101 prior to the June 2010 revised code, it
was not submitted. The report is to be prepared under the revised
guidelines.
Buhemba Gold Projects
The Buhemba Gold projects comprise of the Kiabakari East
(PL7142/2007) and the recently acquired Maji Moto (HQ-P23869) licenses
.
No exploration work was undertaken on either of the Licenses
during the Quarter
Kiabakari East (PL7142/2011)
The Kiabakari East Project is located approximately 55
kilometers southeast of Musoma town, in the Mara Region. The PL, covering 14.94
square kilometers and lying within the central part of the Musoma-Mara
Greenstone Belt, was granted to Lake Victoria Resources by the Ministry of Mines
in April 2011.
No exploration work was undertaken during the Quarter
Future exploration
Metallurgical test work is to be undertaken on the oxide rock
material taken from artisanal working and trenches on surface as part of the
scoping study to determine the viability of commencing and open pit/underground
small scale mining operation at BIF Hill. In order to get a better understanding
of the geology and gold mineralisation, the Company is considering developing a
north trending adit form the southern side at the base of the hill at a later
date.
Maji Moto Gold Project (HQ-P23869)
A recent acquisition to the North Mara group of Licenses is the
Maji Moto License that was awarded to the Company by the Ministry of Mines
through application and tender in April 2012. The License is situated in the
North Mara Greenstone Belt (Eastern Musoma Goldfields) approximately 28
kilometers to the SW of African Barrick’s North Mara Gold Mine (Map 10).
Map 10: Location map of Maji Moto HQ-P23869
Note: HQ-O23869 is the Application number. The License has yet
to be allocated a PL number by the Ministry. Artisanal workings
:
Three artisanal sites are present in the northern part of the License (Map
11):
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|
1.
|
Located at Kitarahota Hill, some 2 kilometres east of
Maji Moto village is actively being mined by a relatively small group of
artisanal miners. The site, located on the lower slope of the Kitarahota
Hill, consists mostly of surface workings.
|
|
|
2.
|
Nyamarubiti Hill, located in the north-eastern arm of the
License was an active artisanal site in 1980s and is only being worked
sporadically by a handful of artisanal miners.
|
|
|
3.
|
Kebosi Hill, situated on the NW arm of the PL and east of
the much larger Kitengara Hill. This site does not appear to be as
extensively mined as site 2 and is currently not being mined by artisanal
miners.
|
Map 11: Geology of HQ-P23869
Other than a reconnaissance visit to the License, exploration
has not yet commenced.
The following exploration strategy (Phase 1) will be followed
as soon as a field camp is established on site:
-
Regional ground Magnetic survey
-
Regional mapping of the License
-
Regional soil sampling on 200 meter x 50 meter sample grid
-
Detailed mapping and soil/rock sampling at and around the artisanal sites
-
Schlumberger profiles across the known artisanal sites.
Phase 2 will be dependant on the results achieved from the
Phase 1 exploration programme.
Uyowa Gold Project
The Uyowa Gold project, located 120 kilometers northwest of
Tabora town, previously consisted of seven (7) Prospecting Licenses (PLs) that
initially covered a total area of 729.73 square kilometers in the west-central
area of Tanzania. Due to increased Ministerial costs of annual renewals coupled
with the Company’s objective to focus its exploration efforts on more
potentially viable ground holding, the number of licenses has been reduced to 4
PLs amounting to 328.47 square kilometers (Map 12).
No exploration work was undertaken on any of the Licenses
during the Quarter.
Map 12: Current license holdings of the Uyowa Poject
Future exploration
Interpretation of the ground magnetic survey suggests the
presence of a graben structure that coincides with the last of the artisanal
workings on the western side of known mineralized zone. The area, unlike the
artisanal site where laterite is often exposed on surface, is overlain by sand
cover for some 500 meters to the west before lateritic soils are again present
suggesting possible continuation of the mineralized trend further to the west.
Landsat imagery clearly shows areas of laterite and lateritic soil over the
area. Based on the recent soil geochemistry results, follow up specific soil
sampling is planned across the interpolated trend of gold mineralization to both
the west and east of the artisanal workings covering a total strike length of
3.5 kilometers.
Conventional soil sampling is planned across areas of lateritic
soil cover. Initially a RAB program is recommended to test the intervening areas
covered by black cotton soil (“mbuga’). However, prior to embarking on such a
program, an orientation survey using enzyme geochemistry is recommended as a
trial study over a portion of the area to be sampled. Should results be positive
further sampling incorporating this geochemical method will continue to be used
to outline the gold anomaly.
Follow-up investigation using possibly both methods of soil
sampling will be undertaken across a number of ground magnetic targets in order
to prioritize targets for later testing by RAB drilling.
Reverse Circulation infill drilling is recommended on 40 meter
spaced N-S sections across the artisanal site in order to undertake a resource
calculation. Furthermore, part of the program will also focus on testing the
soil anomaly along strike.
Handeni Gold Project
The Handeni Project, comprising of PL4816/2007 and covering a
total area of 16.24 square kilometers, is located approximately 240 kilometers
by road north-west of Dar es Salaam and some 30 kilometers south of Handeni town
within the Handeni District (
Map 13
).
Map 13: Location map of the Handeni Project showing
PL4816/2007 in red.
Exploration
No exploration was undertaken on the Handeni Project during the
Quarter. A brief summary of the status of proposed future exploration of
PL4816/2007 is given:
Future exploration
An infill soil sampling programme on 100 meter x 25 meter grid
is planned across the Mkulima Hill (188 samples) in order to better define the
apparent gold anomalies prior to commencing a trenching programme across the
main anomalous zones. Should a trenching programme be warranted, further soil
sampling on 100 meter x 50 meter grid is proposed around the hill on 200 meter x
50 meter grid (623 samples) to increase the area of investigation and strike
extend of the gold anomalies.
Kahama Project
Kahama South (PL6437/2011)
The Kahama South Project area is situated approximately 35
kilometres south of the town of Kahama in the central part of Tanzania. It
covers an area of 183.05 square kilometres within the Kahama Greenstone Belt.
Exploration
Regional exploration has been conducted across the License,
together with the adjoining License (PL6341/2010) to the north that has since
been relinquished (
Map 14
), and includes:
-
Regional mapping
-
Ground Magnetic survey
Details of the exploration undertaken are presented in the
1
st
Quarter (2013) report.
The underlying geology of the License comprise of granitic
rocks. No artisanal activity is present and no geochemical indications of any
existing gold anomalies were found in the License.
The License is scheduled to be relinquished.
Map 14: Location and geology map of the Kahama South Project
Kahama Shinyanga (PL3439/2005).
The Kahama Shinyanga project (PL 3539/2005) is located in
central to northern Tanzania, is about 130 kilometers north from the Kahama
South Project,110 kilometers northwest of the town of Shinyanga and 50
kilometers southeast from Bulyanhulu Mine. The License area covers 48 square
kilometers.
A brief period of exploration involving ground magnetic surveys
and regional mapping was conducted before the License was relinquished in June
2012.
Details of the exploration undertaken upto June 2012 are
presented in the 1
st
Quarter (2013) report.
North Mara Gold Projects
The North Mara Gold Project, comprising of 2 Prospecting
Licenses totaling 39.82 square kilometers. Reconnaissance exploration indicated
poor potential to discover an economic resource within the near future. Minor,
or lack thereof, of artisanal activity is evident on these Licenses.
No exploration activities were undertaken on any of the two
Licenses during the Quarter.
The remaining Licenses, Utegi PL4873/2007 and Kubiasi Kiserya
PL4833/2007 are considered to have low gold potential and are to be relinquished
in the near future
Uranium Projects
The Company currently holds 4 Prospecting Licenses for Uranium,
located in the SW part of Tanzania and covering 684.23 square kilometers. Due to
the economic downturn on Uranium exploration coupled with the Company’s
intention to stream line its gold portfolio, these Licenses will be relinquished
once their rental term expires.
General
The following is a discussion and analysis of our plan of
operation and results of operations for the three month period ended June 30,
2013, and the factors that could affect our future financial condition. This
discussion and analysis should be read in conjunction with our consolidated
unaudited financial statements and the notes thereto included elsewhere in this
quarterly report. Our consolidated financial statements are prepared in
accordance with United States generally accepted accounting principles. All
references to dollar amounts in this section are in United States dollars unless
expressly stated otherwise.
Plan of Operation
As of June 30, 2013, we had negative working capital of
approximately $1,032,000. We plan to spend approximately $50,000 for our
property acquisitions and holding costs and $2,000,000 for development and
production of small scale mining for the next twelve months, with work being
conducted on several projects including soil sampling, trenching and drilling.
We will need to raise additional funds to finance the exploration activities on
our projects. No assurance can be given that additional financing will be
available, or that it can be obtained on terms acceptable to the Company and its
shareholders. Our estimated expenses over the next twelve months are as follows:
Cash Requirements during the Next Twelve Months
|
Expense
|
|
($)
|
|
Property acquisition and holding costs
|
|
50,000
|
|
Mine development and production costs
|
|
2,000,000
|
|
Professional fee
|
|
100,000
|
|
General and administration fee
|
|
500,000
|
|
Total
|
|
2,650,000
|
There is no historical financial information about us upon
which to base an evaluation of our performance. We are an exploration stage
corporation and have not generated any revenues from operations. We cannot
guarantee we will be successful in our business operations. Our business is
subject to risks inherent in the establishment of a new business enterprise,
including limited capital resources, possible delays in the exploration of our
properties, possible cost overruns due to price and cost increases for services
and economic conditions. Because the Company does not currently derive any
production revenue from operations, its ability to conduct exploration and
development on properties is largely based upon its ability to raise capital by
equity funding.
Our exploration objective is to find an economic mineral body
containing gold. Our success depends upon finding mineralized material. This
includes a determination by our contracted consultants and professional staff
whether the property contains resources and/or reserves. Mineralized material is
a mineralized body, which has been delineated by appropriately spaced drilling
or underground sampling to support sufficient tonnage and average percentage
grade of metals to justify removal. If we don’t find mineralized
material or we cannot remove mineralized material, either because we do not have
the money to do so or because it is not economically feasible to do so, we will
cease operations or seek other properties.
RESULTS OF OPERATIONS
Three and Nine Month Summary
|
|
|
Three Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Revenue
|
$
|
-
|
|
$
|
-
|
|
|
Expenses
|
|
390,476
|
|
|
1,238,495
|
|
|
Other income (expenses)
|
|
182,335
|
|
|
(5,818
|
)
|
|
Net Income (Loss)
|
$
|
(208,141
|
)
|
$
|
(1,244,313
|
)
|
Revenue
We had no operating revenues for the three month period ended
June 30, 2013 and 2012. We anticipate that we will not generate any revenues
until we generate additional financing to support our planned operations.
Operating Costs and Expenses
The major components of our expenses for the three and nine
months ended June 30, 2013 and 2012 are outlined in the table below:
|
|
|
Three Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Amortization and depreciation
|
|
9,549
|
|
|
10,183
|
|
|
Exploration costs
|
|
42,888
|
|
|
517,021
|
|
|
General and administrative
|
|
47,319
|
|
|
90,246
|
|
|
Impairment of mineral property acquisition
costs
|
|
90,000
|
|
|
8,550
|
|
|
Management and director fees
|
|
9,000
|
|
|
9,000
|
|
|
Professional fees
|
|
61,032
|
|
|
91,161
|
|
|
Salaries
|
|
118,513
|
|
|
136,672
|
|
|
Stock-based compensation
|
|
–
|
|
|
362,336
|
|
|
Travel and accommodation
|
|
12,175
|
|
|
13,326
|
|
|
Total
Expenses
|
|
390,476
|
|
|
1,238,495
|
|
General and Administrative Expenses
The Company reported a loss of $390,476 for the three months
ended June 30, 2013 compared with a loss of $1,238,495 for same period in fiscal
2012. The decreased loss in the current period is mainly attributed to decreased
exploration costs, mineral acquisition costs and stock-based compensation
expenses.
The $42,927 decrease in our general and administrative expenses
for the three month period ended June 30, 2013 as compared to the same period in
fiscal 2012 was primarily due to the decrease in office expenses, promotion and
shareholder relationship expenses.
Liquidity and Capital Resources
Working Capital
|
|
|
June 30, 2013
|
|
|
March 31, 2013
|
|
|
Current Assets
|
$
|
221,954
|
|
$
|
259,371
|
|
|
Current Liabilities
|
|
1,254,042
|
|
|
1,181,158
|
|
|
Working Capital
|
$
|
(1,032,088
|
)
|
$
|
(921,787
|
)
|
Cash Flows
|
|
|
Three Months Ended
|
|
|
|
|
June 30, 2013
|
|
|
Cash used in Operating Activities
|
$
|
(32,547
|
)
|
|
Cash used in Investing Activities
|
|
(1,709
|
)
|
|
Cash provided by Financing Activities
|
|
(1,320
|
)
|
|
Net Increase (Decrease) in Cash
|
$
|
(35,576
|
)
|
We had a cash balance of approximately $172,000 and negative
working capital of $1,032,000 as of June 30, 2013 compared to cash of $208,000
and working capital of $922,000 as of March 31, 2013. The decrease of cash
balance and working capital primarily due to cash spent on exploration and
general and administration expenses. We anticipate that we will incur
approximately $2,650,000 for operating expenses, including professional, legal
and accounting expenses during the next twelve months. Accordingly, we will need
to obtain additional financing in order to complete our full business plan.
Going Concern
The unaudited financial statements accompanying our quarterly
report on Form 10-Q for the quarter ended June 30, 2013 have been prepared on a
going concern basis, which implies that our company will continue to realize its
assets and discharge its liabilities and commitments in the normal course of
business. Our company has not generated revenues since inception and has never
paid any dividends and is unlikely to pay dividends in the immediate future. The
continuation of our company as a going concern is dependent upon the continued
financial support from our shareholders, the ability of our company to obtain
necessary equity financing to achieve our operating objectives, and the
attainment of profitable operations. As of June 30, 2013, we had a cash balance
of approximately $172,000 and we estimate that we will require approximately
$500,000 for general and administration costs and professional fees, and
$2,000,000 for property acquisition holding and small-scale mining evaluation,
development and production costs associated with our plan of operation over the
next twelve months. We do not have sufficient funds for general and
administration activities and planned mineral property acquisition and
exploration activities and therefore we will be required to raise additional
funds. No assurance can be given that additional financing will be available, or
that it can be obtained on terms acceptable to the Company and its shareholders.
The advancement of our business is dependent upon us raising
additional financial support. The issuance of additional equity securities by us
could result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
Future Financings
We had an approximate cash balance of $172,000 and negative
working capital of $1,032,000 as of June 30, 2013 compared to a cash balance of
$523,000 and working capital of $367,000 as of March 31, 2012 and we estimate
that we will require approximately $2,650,000 for costs associated with our plan
of operation over the next twelve months. Accordingly, we do not have sufficient
funds for planned operations and we will be required to raise additional funds
for operations. We intend to raise additional funds from another equity offering
or loans. At the present time, we are attempting to raise additional money, but
there is no assurance that we will be successful. If we need additional funds
and are unable to raise them, we will have to suspend or cease operations until
we succeed in raising additional funds.
Outstanding shares and options
As of August 14, 2013, we have 114,554,067 shares of common
stock outstanding, 9,520,000 stock options outstanding and 26,649,734 warrants
outstanding.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
stockholders.
Risks and Uncertainties
Much of the information included in this quarterly report
includes or is based upon estimates, projections or other “forward looking
statements”. Such forward looking statements include any projections and
estimates made by us and our management in connection with our business
operations. While these forward-looking statements, and any assumptions upon
which they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions
or other future performance suggested herein.
Such estimates, projections or other “forward looking
statements” involve various risks and uncertainties as outlined below. We
caution the reader that important factors in some cases have affected and, in
the future, could materially affect actual results and cause actual results to
differ materially from the results expressed in any such estimates, projections
or other “forward looking statements”.
Risks Associated with Mining
All of our properties are in the exploration stage. There is
no assurance that we can establish the existence of any mineral resource on any
of our properties in commercially exploitable quantities. Until we can do so, we
cannot earn any revenues from operations and if we do not do so we will lose all
of the funds that we expend on exploration. If we do not discover any mineral
resource in a commercially exploitable quantity, our business could fail.
Despite exploration work on our mineral properties, we have not
established that any of them contain any mineral reserve, nor can there be any
assurance that we will be able to do so. If we do not, our business could
fail.
A mineral reserve is defined by the Securities and Exchange
Commission in its Industry Guide 7 (which can be viewed over the Internet at
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7
) as
that part of a mineral deposit which could be economically and legally extracted
or produced at the time of the reserve determination. The probability of an
individual prospect ever having a “reserve” that meets the requirements of the
Securities and Exchange Commission’s Industry Guide 7 is extremely remote; in
all probability our mineral resource property does not contain any ‘reserve’ and
any funds that we spend on exploration will probably be lost.
Even if we do eventually discover a mineral reserve on one or
more of our properties, there can be no assurance that we will be able to
develop our properties into producing mines and extract those resources. Both
mineral exploration and development involve a high degree of risk and few
properties which are explored are ultimately developed into producing mines.
The commercial viability of an established mineral deposit will
depend on a number of factors including, by way of example, the size, grade and
other attributes of the mineral deposit, the proximity of the resource to
infrastructure such as a smelter, roads and a point for shipping, government
regulation and market prices. Most of these factors will be beyond our control,
and any of them could increase costs and make extraction of any identified
mineral resource unprofitable.
Mineral operations are subject to applicable law and
government regulation. Even if we discover a mineral resource in a commercially
exploitable quantity, these laws and regulations could restrict or prohibit the
exploitation of that mineral resource. If we cannot exploit any mineral resource
that we might discover on our properties, our business may fail.
Both mineral exploration and extraction require permits from
various foreign, federal, state, provincial and local governmental authorities
and are governed by laws and regulations, including those with respect to
prospecting, mine development, mineral production, transport, export, taxation,
labor standards, occupational health, waste disposal, toxic substances, land
use, environmental protection, mine safety and other matters. There can be no
assurance that we will be able to obtain or maintain any of the permits required
for the continued exploration of our mineral properties or for the construction
and operation of a mine on our properties at economically viable costs. If we
cannot accomplish these objectives, our business could fail.
We believe that we are in compliance with all material laws and
regulations that currently apply to our activities but there can be no assurance
that we can continue to remain in compliance. Current laws and regulations could
be amended and we might not be able to comply with them, as amended. Further,
there can be no assurance that we will be able to obtain or maintain all permits
necessary for our future operations, or that we will be able to obtain them on
reasonable terms. To the extent such approvals are required and are not
obtained, we may be delayed or prohibited from proceeding with planned
exploration or development of our mineral properties.
Our business activities are conducted in Tanzania.
Our mineral exploration activities in Tanzania may be affected
in varying degrees by political stability and government regulations relating to
the mining industry and foreign investment in that country. The government of
Tanzania may institute regulatory policies that adversely affect the exploration
and development (if any) of the Company’s properties. Any changes in regulations
or shifts in political conditions in this country are beyond the control of the
Company and may adversely affect its business. Investors should assess the
political and regulatory risks related to the Company’s foreign country
investments. Our operations may be affected in varying degrees by government
regulations with respect to restrictions on production, price controls, export
controls, foreign exchange controls, income taxes, expropriation of property,
environmental legislation and mine safety.
We may not have clear title to our properties.
Acquisition of title to mineral properties is a very detailed
and time-consuming process, and the Company’s title to its properties may be
affected by prior unregistered agreements or transfers, or undetected defects.
Several of the Company’s prospecting licenses are currently subject to renewal
by the Ministry of Energy and Minerals of Tanzania. In result, there is a risk
that we may not have clear title to all our mineral property interests, or they
may be subject to challenge or impugned in the future. We have exploration
licenses. We do not have a license to mine any minerals or reserves whatsoever
at this time on any part of our properties. Once exploration has advanced to a
point where mining on one or more of our properties is feasible, we plan to
apply for a mining license or licenses.
If we establish the existence of a mineral resource on any
of our properties in a commercially exploitable quantity, we will require
additional capital in order to develop the property into a producing mine. If we
cannot raise this additional capital, we will not be able to exploit the
resource, and our business could fail.
If we do discover mineral resources in commercially exploitable
quantities on any of our properties, we will be required to expend substantial
sums of money to establish the extent of the resource, develop processes to
extract it and develop extraction and processing facilities and infrastructure.
Although we may derive substantial benefits from the discovery of a major
deposit, there can be no assurance that such a resource will be large enough to
justify commercial operations, nor can there be any assurance that we will be
able to raise the funds required for development on a timely basis. If we cannot
raise the necessary capital or complete the necessary facilities and
infrastructure, our business may fail.
Mineral exploration and development is subject to
extraordinary operating risks. We do not currently insure against these risks.
In the event of a cave-in or similar occurrence, our liability may exceed our
resources, which would have an adverse impact on our company.
Mineral exploration, development and production involve many
risks, which even a combination of experience, knowledge and careful evaluation
may not be able to overcome. Our operations will be subject to all the hazards
and risks inherent in the exploration for mineral resources and, if we discover
a mineral resource in commercially exploitable quantity, our operations could be
subject to all of the hazards and risks inherent in the development and
production of resources, including liability for pollution, cave-ins or similar
hazards against which we cannot insure or against which we may elect not to
insure. Any such event could result in work stoppages and damage to property,
including damage to the environment. We do not currently maintain any insurance
coverage against these operating hazards. The payment of any liabilities that
arise from any such occurrence would have a material adverse impact on our
company.
Mineral prices are subject to dramatic and unpredictable
fluctuations.
We expect to derive revenues, if any, either from the sale of
our mineral resource properties or from the extraction and sale of precious and
base metals such as gold, silver and copper. The price of those commodities has
fluctuated widely in recent years, and is affected by numerous factors beyond
our control, including international, economic and political trends,
expectations of inflation, currency exchange fluctuations, interest rates,
global or regional consumptive patterns, speculative activities and increased
production due to new extraction developments and improved extraction and
production methods. The effect of these factors on the price of base and
precious metals, and therefore the economic viability of any of our exploration
properties and projects, cannot accurately be predicted.
The mining industry is highly competitive and there is no
assurance that we will continue to be successful in acquiring mineral claims. If
we cannot continue to acquire properties to explore for mineral resources, we
may be required to reduce or cease operations.
The mineral exploration, development, and production industry
is largely un-integrated. We compete with other exploration companies looking
for mineral resource properties. While we compete with other exploration
companies in the effort to locate and acquire mineral resource properties, we
will not compete with them for the removal or sales of mineral products from our
properties if we should eventually discover the presence of them in quantities
sufficient to make production economically feasible. Readily available markets
exist worldwide for the sale of mineral products. Therefore, we will likely be
able to sell any mineral products that we identify and produce.
In identifying and acquiring mineral resource properties, we
compete with many companies possessing greater financial resources and technical
facilities. This competition could adversely affect our ability to acquire
suitable prospects for exploration in the future. Accordingly, there can be no
assurance that we will acquire any interest in additional mineral resource
properties that might yield reserves or result in commercial mining operations.
If our costs of exploration are greater than anticipated,
then we may not be able to complete the exploration program for our Tanzanian
properties without additional financing, of which there is no assurance that we
would be able to obtain.
We are proceeding with the initial stages of exploration on our
Tanzanian properties. We are carrying out an exploration program that has been
recommended by a consulting geologist. This exploration program outlines a
budget for completion of the recommended exploration program. However, there is
no assurance that our actual costs will not exceed the budgeted costs. Factors
that could cause actual costs to exceed budgeted costs include increased prices
due to competition for personnel and supplies during the exploration season,
unanticipated problems in completing the exploration program and delays
experienced in completing the exploration program. Increases in exploration
costs could result in our not being able to carry out our exploration program
without additional financing. There is no assurance that we would be able to
obtain additional financing in this event.
Because of the speculative nature of exploration of mining
properties, there is substantial risk that no commercially exploitable minerals
will be found and our business will fail.
We are in the initial stages of exploration of our mineral
property, and thus have no way to evaluate the likelihood that we will be
successful in establishing commercially exploitable reserves of gold, silver or
other valuable minerals on our Tanzanian properties.
The search for valuable minerals as a business is extremely
risky. We may not find commercially exploitable reserves of gold, silver or
other valuable minerals in our mineral property. Exploration for minerals is a
speculative venture necessarily involving substantial risk. The expenditures to
be made by us on our exploration program may not result in the discovery of
commercial quantities of ore. The likelihood of success must be considered in
light of the problems, expenses, difficulties, complications and delays
encountered in connection with the exploration of the mineral properties that we
plan to undertake. Problems such as unusual or unexpected formations and other
conditions are involved in mineral exploration and often result in unsuccessful
exploration efforts. In such a case, we would be unable to complete our business
plan.
Because our executive officers have limited experience in
mineral exploration and do not have formal training specific to the
technicalities of mineral exploration, there is a higher risk that our business
will fail.
Our executive officers have limited experience in mineral
exploration and do not have formal training as geologists or in the technical
aspects of management of a mineral resource exploration company. As a result of
this inexperience, there is a higher risk of our being unable to complete our
business plan for the exploration of our mineral property. With no direct
training or experience in these areas, our management may not be fully aware of
many of the specific requirements related to working within this industry. Our
decisions and choices may not take into account standard engineering or
managerial approaches mineral resource exploration companies commonly use.
Consequently, the lack of training and experience of our management in this
industry could result in management making decisions that could result in a
reduced likelihood of our being able to locate commercially exploitable reserves
on our mineral property with the result that we would not be able to achieve
revenues or raise further financing to continue exploration activities. In
addition, we will have to rely on the technical services of others with
expertise in geological exploration in order for us to carry out our planned
exploration program. If we are unable to contract for the services of such
individuals, it will make it difficult and maybe impossible to pursue our
business plan. There is thus a higher risk that our operations, earnings and
ultimate financial success could suffer irreparable harm and our business will
likely fail.
Risks Relating to Our Common Stock
If we issue additional shares in the future, it will result
in the dilution of our existing shareholders.
Our articles of incorporation authorize the issuance of up to
250,000,000 shares of common stock with a par value of $0.00001 per share. Our
board of directors may choose to issue some or all of such shares to acquire one
or more businesses or to provide additional financing in the future. The
issuance of any such shares will reduce the book value and market price of the
outstanding shares of our common stock. If we issue any such additional shares,
such issuance will reduce the proportionate ownership and voting power of all
current shareholders. Further, such issuance may result in a change of control
of our corporation.
Our common stock is illiquid and shareholders may be unable
to sell their shares.
There is currently a limited market for our common stock and we
can provide no assurance to investors that a market will develop. If a market
for our common stock does not develop, our shareholders may not be able to
re-sell the shares of our common stock that they have purchased and they may
lose all of their investment. Public announcements regarding our company,
changes in government regulations, conditions in our market segment or changes
in earnings estimates by analysts may cause the price of our common shares to
fluctuate substantially. In addition, stock prices for junior mineral
exploration companies fluctuate widely for reasons that may be unrelated to
their operating results. These fluctuations may adversely affect the trading
price of our common shares.
Penny stock rules will limit the ability of our stockholders
to sell their stock.
The Securities and Exchange Commission has adopted regulations
which generally define “penny stock” to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“accredited investors”. The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Securities and
Exchange Commission which provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer’s account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer’s confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
The Financial Industry Regulatory Authority, or FINRA, has
adopted sales practice requirements which may also limit a shareholder’s ability
to buy and sell our stock.
In addition to the “penny stock” rules described above, FINRA
has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer’s financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for at least some customers. FINRA
requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our
stock and have an adverse effect on the market for its shares.
Because of the early stage of development and the nature of
our business, our securities are considered highly speculative.
Our securities must be considered highly speculative, generally
because of the nature of our business and the early stage of our development. We
are engaged in the business of identifying, acquiring, exploring and developing
commercial reserves of primarily gold and potentially uranium. Our properties
are in the exploration stage only and are without known reserves of gold and/or
uranium. Accordingly, we have not generated any revenues nor have we realized a
profit from our operations to date and there is little likelihood that we will
generate any revenues or realize any profits in the short term. Any
profitability in the future from our business will be dependent upon locating
and developing economic reserves of gold and/or uranium, which itself is subject
to numerous risk factors as set forth herein. Since we have not generated any
revenues, we will have to raise additional monies through the sale of our equity
securities or debt in order to continue our business operations.
We do not intend to pay dividends on any investment in the
shares of stock of our company.
We have never paid any cash dividends and currently do not
intend to pay any dividends for the foreseeable future. To the extent that we
require additional funding currently not provided for in our financing plan, our
funding sources may prohibit the payment of a dividend. Because we do not intend
to declare dividends, any gain on an investment in our company will need to come
through an increase in the stock’s price. This may never happen and investors
may lose all of their investment in our company.
Risks Related to Our Company
Our by-laws contain provisions indemnifying our officers and
directors.
Our by-laws provide the indemnification of our directors and
officers to the fullest extent legally permissible under the Nevada corporate
law against all expenses, liability and loss reasonably incurred or suffered by
them in connection with any action, suit or proceeding. Furthermore, our by-laws
provide that our board of directors may cause our company to purchase and
maintain insurance for our directors and officers, and we have implemented
director and officer insurance coverage.
Because most of our directors and officers are residents of
other countries other than the United States, investors may find it difficult to
enforce, within the United States, any judgments obtained against our directors
and officers.
Most of our directors and officers are nationals and/or
residents of countries other than the United States, and all or a substantial
portion of such persons’ assets are located outside the United States. As a
result, it may be difficult for investors to enforce within the United States
any judgments obtained against our officers or directors, including judgments
predicated upon the civil liability provisions of the securities laws of the
United States or any state thereof.