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:
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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;
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mining and development risks, including risks related to accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in production;
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the potential for delays in exploration activities;
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risks related to the inherent uncertainty of cost estimates and the potential for unexpected costs and expenses;
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risks related to commodity price fluctuations;
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the uncertainty of profitability based upon our limited history;
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risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned exploration project;
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risks related to environmental regulation and liability;
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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;
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risks related to tax assessments;
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political and regulatory risks associated with mining development and exploration; and
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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 have the forward-looking statements to actual results.
4
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 second quarter ended December 31, 2013, we experienced the following significant corporate developments:
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1.
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On January 24, 2014, the Company opened a private placement to offer up to 10,000,000 shares of its common stock at a purchase price of US$0.025 accompanied by a gold bonus distribution of a total of 100 ounces of 0.999 gold
during the first 395 days of commercial gold production to Qualified Investors. As of February 14, 2014, the Company has received subscriptions of $150,000.
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2.
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On January 23, 2014, the Company agreed to forward sell a portion of its future gold production from Kinyambwiga project to finance the capital costs of establishing the Kunanaga Medium Scale Gold Mine. The summary of terms and
conditions of the Forward Gold Purchase Agreement are as follows:
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i.
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Price: the forward gold sales pricing will be calculated using the future's gold price as per COMEX for the month being offered. For bulk or sizable orders we may enter a negotiation. The net amount realized by the Company per
agreement will be the discounted price less any promotional discount, consulting fees and the amount of 5 cents allocated per dollar received, for CSR projects at the Kunanga Village area.
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ii.
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Penalty and Convertibility:
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1)
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Failure of the Company to meet minimum monthly production and monthly gold distribution schedules, according to the Forward Gold Purchase Agreement, will result in a penalty premium to the Company, equal to the US Bond Interest
Rate per annum of the remaining balance of distributable Au, to be calculated over each 12 month period.
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2)
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Failure to meet minimum production and gold distribution schedules, as per the Forward Gold Purchase Agreement(s) Distribution Schedule, for 6 months (6 out of 9 consecutive months), will result in forced conversion into common
shares of the Company at the 30-day weighted average market price of the Company's stock of any remaining balance of distributable Au for that 12 month period.
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3.
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On August 2, 2013, the Company completed and filed Environmental and Social Impact Assessment report for the Kinyambwiga mining project with the Tanzanian government.
The company received the approved report from the government
on January 7
th
, 2014 See news release dated January 9
th
, 2014. An application for the Mining License, covering the amalgamated 39 PMLs, together with the required Environmental Certificate, was
submitted to the Ministry of Energy and Minerals in January 2014.
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4.
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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 December 31, 2013 the Company received subscription
payments of $1,125,000 for 45 units.
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Our Current Business
We are an exploration stage corporation focused on acquiring, exploring and developing gold deposits in Tanzania, East Africa. We hold 6 prospective gold projects, consisting of 8 Prospecting Licenses (PLs) and 86 Primary Mining Licenses (PMLs),
within our Tanzania property portfolio, covering approximately 526.79 square kilometers (130,172 acres).
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.
5
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 a Canadian government 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 the properties 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 nine months ended December 31,
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 1
). Furthermore, all the PMLs have subsequently been amalgamated into one License as part of the application for a Mining License.
No field exploration was undertaken on the Kinyambwiga (PL4653/2007) nor Suguti (
PL3966/2006
) Licenses during this period. The Murangi license
(PL4511/2007)
was previously 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 dark gray to black, clay rich soil and underlain by granitic rocks with no known artisanal workings, was relinquished. The Company maintained the northern part of the License which is host to the Kunanga 1,2 and 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, has been abandoned. Furthermore, the +500 artisanal miners that were mining the surface quartz rubble at Kunanga 3 in the northern part of the license, have
ceased operations and left the site.
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 facilitate the Environmental Impact
Assessment (EIA) study and the application for a Mining License to cover the area (
Map 1
).
6
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 are expected to proceed once necessary funding and the issuing of a Mining License has been achieved. The ESIA report, completed by TANSHEQ a local Tanzanian consulting
firm specializing in Environmental Management, has been approved by the National Environmental Management Council (NEMC) on the 23
rd
December 2013 and the Environmental Certificate issued to Lake Victoria Resources (T) Ltd. An application
for the Mining License, covering the amalgamated 39 PMLs, together with the required Environmental Certificate, was submitted to the Ministry of Energy and Minerals early in 2014.
A scoping study covering metallurgical test work, mine planning, mine scheduling (details of which were included in
the 1st Quarter Report) and preliminary financial evaluations was prepared A capital investment of US$3M is an estimated requirement for building the project.
7
Mine Planning
The Kunanga 1 Prospect consists of a small, conceptual gold target that based on 40 meter spaced reverse circulation drill sections and trenches and may contain gold bearing mineralized material of between 600,000 and 1,000,000 tonnes. The estimated
gold grades are between 1.50 and 2.00 g/t. The mineralized area which lies in three vein structures at Kanunga 1, is within the first 150 and 200 meters of surface. Continuity of the narrow quartz veins appears to extend along a strike length for
about 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 results 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 the proposed 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 1st Quarter, a pit slope of 55-60 degrees was re-modeled for the open pit, using 10 meter and 7 meter benches (
Map 3 & Map 4
). At this time, the last bench in the 40m deep pit would
be steeper depending upon the reach of the equipment and rock strength of the pit walls.
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; this is the estimated amount of rock to be mined to a depth of 40 meters.
8
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
9
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
Mining Application
The Environmental Impact Assessment (ESIA) report, completed by TANSHEQ, a local Tanzanian consulting firm specializing in Environmental Management, was submitted to the Tanzanian Government’s National Environmental Management Council (NEMC)
on the 2
nd
August 2013 and was approved on the 23
rd
December 2013. The company received the approved report on January 7
th
, 2014 (see news release dated January 9
th
, 2014). The Company has been
awarded the Environmental Certificate of approval, registration number EC/EIS/1106, issued under the Environmental Management Act No.20 of 2004 and signed by the Tanzanian Minister of Environment. The EIA Certificate is valid during the entire life
cycle of the project based on the Company’s compliance with the General and Specific Conditions of its issuance.
10
The Company has already completed the Mining and Processing License Application to cover not only the Kunanga Prospect but also the 39 amalgamated Primary Mining Licenses (PMLs) currently held by the Company’s Tanzanian subsidiary. The area,
totalling 3.45 square kilometers also includes the 2 other known gold occurrences at Kunanga 2 and 3. The application was submitted to the Ministry of Energy and Minerals in January 2014.
Future work
Once the Mining and Processing application has been approved and a Mining License has been awarded by the Ministry Energy and Minerals, the Company will be in a position to proceed with the proposed mine plan.
A prospective exploration area lies to the east of the Kunanga 1 Prospect and is referred to as the Kunanga School Anomaly. Once the Mining License has been approved, the Company will be in the position to apply for the area in order to follow-up
investigation of this gold anomaly.
An anomalous stone layer as encountered from previous RAB drilling during 2009 as well as the soil anomaly over the school zone 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 are present (
Map 7
). Since this area was previously relinquished as part of the government’s requirement to reduce the PL area by 50 percent, an application to renew the area of “shed-off”
was filed with the Ministry of Mines.
Map 7: Kanunga 1 East and School soil anomalies
The recent influx of +500 artisanal miners at the Kunanga 3 Prospect, situated approximately 1 kilometer to the north of Kunanga 1 (
Map 8
), was short lived. After processing some of the surface quartz gravels, the miners migrated
elsewhere and off the license. 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
).
11
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.
12
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. The current License is scheduled to be
relinquished.
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 September 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
).
13
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.
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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.
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2.
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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.
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3.
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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.
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14
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
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Detailed mapping and soil/rock sampling at and around the artisanal sites
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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 now been reduced to 2 PLs amounting to 264.11 square
kilometers (
Map
12). Four PMLs on PL5153/2008 are currently optioned to the Company.
No exploration work was undertaken on any of the Licenses during the Quarter.
15
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 dark gray to black, clay rich soil. 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 a possible
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.
16
Handeni Gold Project
The Handeni Project, comprising of PL7148/2011 and covering a total area of 12.03 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 PL7148/2011 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 PL7148/2011 is given:
Future exploration
An infill soil sampling program 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 program across the main anomalous zones. Should a
trenching program 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 extent of the gold anomalies.
17
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
North Mara Gold Projects
The North Mara Gold Project, previously comprised of 3 Prospecting Licenses totaling 70.61 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.
All three licenses have been relinquished
18
Uranium Projects
The Company has relinquished all Prospecting Licenses for
Uranium, due to a downturn in global uranium exploration activities.
General
The following is a discussion and analysis of our plan of
operation and results of operations for the three month period ended December
31, 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 December 31, 2013, we had negative working capital of
approximately $1,236,000. We plan to spend approximately $50,000 for our
property acquisitions and holding costs and $2,000,000 for development and
production of small scale mining for the next twelve months, with work being
conducted on several projects including soil sampling, trenching and drilling.
We will need to raise additional funds to finance the exploration activities on
our projects. No assurance can be given that additional financing will be
available, or that it can be obtained on terms acceptable to the Company and its
shareholders. Our estimated expenses over the next twelve months are as follows:
Cash Requirements During the Next Twelve Months
|
Expenses
|
|
($)
|
|
|
Property acquisition and holding costs
|
|
50,000
|
|
|
Mine development and production costs
|
|
2,000,000
|
|
|
Professional fees
|
|
100,000
|
|
|
General and administration fees
|
|
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.
19
RESULTS OF OPERATIONS
Three and Nine Month Summary
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|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
Revenue
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
Expenses
|
|
208,695
|
|
|
617,534
|
|
|
827,731
|
|
|
2,192,207
|
|
|
Other income (expenses)
|
|
12,394
|
|
|
872,455
|
|
|
209,571
|
|
|
864,600
|
|
|
Net Income (Loss)
|
$
|
(196,301
|
)
|
$
|
254,921
|
|
$
|
(618,160
|
)
|
$
|
(1,327,607
|
)
|
Revenue
We had no operating revenues for the three month period ended
December 31, 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 December 31, 2013 and 2012 are outlined in the table below:
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization and
depreciation
|
|
9,616
|
|
|
10,183
|
|
|
28,782
|
|
|
30,550
|
|
|
Exploration costs
|
|
32,356
|
|
|
246,090
|
|
|
109,652
|
|
|
868,320
|
|
|
General and
administrative
|
|
27,471
|
|
|
104,030
|
|
|
113,649
|
|
|
249,612
|
|
|
Impairment of mineral property
acquisition costs
|
|
–
|
|
|
–
|
|
|
90,000
|
|
|
8,550
|
|
|
Management and
director fees
|
|
9,000
|
|
|
9,000
|
|
|
27,000
|
|
|
27,000
|
|
|
Professional fees
|
|
13,150
|
|
|
105,559
|
|
|
93,954
|
|
|
226,182
|
|
|
Salaries
|
|
112,313
|
|
|
118,165
|
|
|
344,410
|
|
|
377,884
|
|
|
Stock-based compensation
|
|
–
|
|
|
–
|
|
|
–
|
|
|
362,336
|
|
|
Travel and accommodation
|
|
4,789
|
|
|
24,507
|
|
|
20,285
|
|
|
41,773
|
|
|
Total Expenses
|
|
208,695
|
|
|
617,534
|
|
|
827,732
|
|
|
2,192,207
|
|
General and Administrative Expenses
The Company reported a loss of $208,695 for the three months
ended December 31, 2013 compared with a loss of $617,534 for same period in
fiscal 2012. The decreased loss in the current period is mainly attributed to
decreased exploration costs, professional fee and general and administrative
expenses.
The $76,559 decrease in our general and administrative expenses
for the three month period ended December 31, 2013 as compared to the same
period in fiscal 2012 was primarily due to the decrease in office expenses,
promotion and shareholder relationship expenses.
20
Liquidity and Capital Resources
Working Capital
|
|
|
December 31, 2013
|
|
|
March 31, 2013
|
|
|
Current Assets
|
$
|
88,652
|
|
$
|
259,371
|
|
|
Current Liabilities
|
|
1,511,527
|
|
|
1,181,158
|
|
|
Working Capital
|
$
|
(1,422,875
|
)
|
$
|
(921,787
|
)
|
Cash Flows
|
|
|
Nine Months Ended
|
|
|
|
|
December 31, 2013
|
|
|
Cash used in Operating
Activities
|
$
|
(193,750
|
)
|
|
Cash used in Investing Activities
|
|
(1,709
|
)
|
|
Cash provided by Financing
Activities
|
|
8,901
|
|
|
Net Increase (Decrease) in Cash
|
$
|
(186,558
|
)
|
We had a cash balance of approximately $21,000 and negative
working capital of $1,423,000 as of December 31, 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 December 31, 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 December 31, 2013, we had a cash
balance of approximately $21,000 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 $21,000 and negative
working capital of $1,423,000 as of December 31, 2013 compared to a cash balance
of $208,000 and working capital of $922,000 as of March 31, 2013 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 February 14, 2014, we have 114,554,067 shares of common
stock outstanding, 9,520,000 stock options outstanding and 17,068,334 warrants
outstanding.
21
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.
22
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.
23
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.
24
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.
25
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.