Attached files
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EX-23.5 - WHITE MOUNTAIN TITANIUM CORP | v178501_ex23-5.htm |
EX-23.4 - WHITE MOUNTAIN TITANIUM CORP | v178501_ex23-4.htm |
EX-23.1 - WHITE MOUNTAIN TITANIUM CORP | v178501_ex23-1.htm |
EX-23.2 - WHITE MOUNTAIN TITANIUM CORP | v178501_ex23-2.htm |
EX-23.6 - WHITE MOUNTAIN TITANIUM CORP | v178501_ex23-6.htm |
EX-23.3 - WHITE MOUNTAIN TITANIUM CORP | v178501_ex23-3.htm |
As
Filed with the Securities and Exchange Commission on March 29,
2010
Registration
No. 333-164963
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM
S-1/A
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES
ACT OF 1933
WHITE
MOUNTAIN TITANIUM CORPORATION
(Exact
name of Registrant as Specified in Its Charter)
Nevada
|
1000
|
87-0577390
|
||
(State
or other jurisdiction of
incorporation
or
organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
Identification
No.)
|
Augusto
Leguia 100, Oficina 812
Las
Condes, Santiago
Chile
(56
2) 657-1800
(Address,
including zip code, and telephone number, including area code,
of
registrant's principal executive offices)
Charles
E. Jenkins, CFO
Suite
1508 – 999 West Hastings Street
Vancouver,
B.C.
Canada V6C
2W2
(604)
408-2333
(Name,
address, including zip code, and telephone number
including
area code, of agents for service)
Copies
to:
Ronald
N. Vance, P.C.
Attorney
at Law
1656
Reunion Avenue
Suite
250
South
Jordan, UT 84095
(801)
446-8802
(801)
446-8803 (fax)
ron@vancelaw.us
Approximate
date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large
Accelerated Filer ¨
|
Accelerated
Filer ¨
|
Non-Accelerated
Filer ¨
|
Smaller
reporting company x
|
CALCULATION OF REGISTRATION FEE
|
||||||||||||||||
Title of Each Class of
Securities to be
Registered
|
Amount to be
Registered (1)
|
Proposed Maximum
Offering Price Per
Share
|
Proposed Maximum
Aggregate Offering
Price
|
Amount of
Registration Fee
|
||||||||||||
Primary
Offering:
|
||||||||||||||||
Units,
each consisting of three shares of common stock $0.001 par value and one
warrant to purchase one share of common stock
|
1,869,159
units
|
$ | 3.21 | $ | 6,000,000 | (2) | $ | 427.80 | ||||||||
Shares
of common stock underlying the warrants included in the
units
|
5,607,477
shares
|
_____
|
_____
|
_____
|
(3) | |||||||||||
Warrants
included in units
|
1,869,159
warrants
|
_____
|
_____
|
_____
|
(3) | |||||||||||
Shares
of common stock underlying the warrants included in the
units
|
1,869,159
shares
|
$ | 1.34 | $ | 2,504,674 | $ | 178.58 | |||||||||
Secondary
Offering:
|
||||||||||||||||
Common
Stock, $.001 par value issuable upon conversion of Series A Convertible
Preferred Stock
|
1,000,000 | $ | 1.12 | (4) | $ | 1,120,000 | $ | 79.86 | ||||||||
Common
Stock, $.001 par value issuable upon exercise of $0.50
warrants
|
4,250,000 | $ | 1.12 | (4) | $ | 4,760,000 | $ | 339.39 | ||||||||
Common
Stock, $.001 par value of selling stockholders
|
8,154,000 | $ | 1.12 | (4) | $ | 9,132,480 | $ | 651.15 | ||||||||
Common
Stock, $.001 par value issuable upon exercise of $0.60
warrants
|
5,847,600 | $ | 1.12 | (4) | $ | 6,549,312 | $ | 466.97 | ||||||||
Common
Stock, $.001 par value issuable upon exercise of
options
|
850,000 | $ | 1.12 | (4) | $ | 952,000 | $ | 67.88 | ||||||||
TOTALS
|
$ | 31,013,792 | $ | 1,335.01 | (5) |
(1) In
accordance with Rule 416(a), the registrant is also registering hereunder an
indeterminate number of shares that may be issued and resold to prevent dilution
resulting from stock splits, stock dividends or similar
transactions. Should the conversion ratio result in our having
insufficient shares, we will not rely upon Rule 416, but will file a new
registration statement to cover the resale of such additional shares should that
become necessary.
(2)
Estimated solely for the purpose of calculating the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933, as
amended.
(3) No
fee pursuant to Rule 457(g)
(4)
Estimated solely for the purpose of computing the amount of the registration fee
pursuant to Rule 457(c) based upon the average bid and asked price as reported
by the OTC Bulletin Board.
(5) A
portion of these securities was previously registered on Registration Statement
No. 333-148644 initially filed by White Mountain Titanium Corporation on January
14, 2008, for which a filing fee of $876.62 was previously paid that is being
offset against the currently due filing fee pursuant to Rule
457(p).
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
The
registrant is filing a single prospectus in this registration statement pursuant
to Rule 429 under the Securities Act of 1933, as amended, in order to satisfy
the requirements of the Securities Act and the rules and regulations thereunder
for this offering and other offerings registered on earlier registration
statements. The combined prospectus in this registration statement relates to,
and shall act, upon effectiveness, as a post-effective amendment to,
Registration Statement No. 333-148644 and Registration Statement No.
333-129347. Any of the previously registered securities that are or
were offered or sold before the effective date of this registration statement
shall not be included in any prospectus hereunder.
The
information contained in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.
Preliminary
Prospectus
Subject
to Completion, March 29, 2010
White
Mountain Titanium Corporation
1,869,159
Units
20,101,600
Shares of Common Stock
We are
offering up to 1,869,159 units at $3.21 per unit, each unit consisting of three
shares of common stock and one three-year warrant to purchase an additional
share of common stock at $1.34 per share, or 125% of the price per share
allocated to the common shares in the units. The units will separate
immediately and the common stock and the warrants will be issued
separately. The selling stockholders named in this prospectus are
offering 20,101,600 shares, including 11,947,600 shares reserved for issuance
upon conversion of our Series A Convertible Preferred Stock and upon exercise of
warrants and options that we have issued to the selling
stockholders. Our common stock is currently quoted on the OTC
Bulletin Board under the symbol “WMTM.” The last reported sales price
of our common stock on the OTC Bulletin Board on March 19, 2010, was $1.05 per
share.
Source
Capital Group, Inc. will act as the placement agent for the units offered by
us. The offering is being made on a “best efforts” basis, which means
that the placement agent will use its best efforts to sell up to the maximum
number of units without agreeing to purchase any of the securities
itself. There is no minimum number of units to be sold in this
offering. We have agreed to pay the placement agent a selling
commission of 8% on sales of the units; no commission will be paid on the
exercise of the warrants. The proceeds of this offering will not be
placed into an escrow account but will be released at the end of the offering
period. The offering will terminate upon the earlier of: (i) a
date all of the units are sold, or (ii) two months after the date of this
prospectus, unless extended for up to 30 days by mutual consent of the placement
agent and us. At the close of the offering, the proceeds, less
selling commissions, will be delivered to us by the placement agent on the
closing date.
Offering
Price
|
Selling
Commissions
|
Selling
Costs
|
Proceeds
to
Company
|
|||||||||||||
Per
Unit
|
$ | 3.21 | $ | 0.26 | $ | 0.03 | $ | 2.92 | ||||||||
Total
|
$ | 6,000,000 | $ | 480,0000 | $ | 60,000 | $ | 5,460,000 |
The
selling stockholders, or their pledgees, donees, transferees or other
successors-in-interest, may offer the shares of our common stock for resale on
the OTC Bulletin Board, in isolated transactions, or in a combination of such
methods of sale. They may sell their shares at fixed prices that may
be changed, at market prices prevailing at the time of sale, at prices related
to prevailing market prices, or at negotiated prices with institutional or other
investors, or, when permissible, pursuant to the exemption of Rule 144 under the
Securities Act of 1933. There will be no underwriter’s discounts or
commissions, except for the charges to a selling stockholder for sales through a
broker-dealer. All net proceeds from a sale will go to the selling
stockholder and not to us. We will pay the expenses of registering
these shares.
Investing
in our stock involves risks. You should carefully consider the
Risk Factors beginning on page 4 of this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
SOURCE
CAPITAL GROUP, INC.
The date
of this prospectus is ____________, 2010
TABLE
OF CONTENTS
Page
|
|
PROSPECTUS
SUMMARY
|
1
|
RISK
FACTORS
|
4
|
FORWARD-LOOKING
STATEMENTS
|
11
|
USE
OF PROCEEDS
|
12
|
DILUTION
|
13
|
MARKET
FOR OUR COMMON STOCK
|
14
|
DETERMINATION
OF OFFERING PRICE
|
15
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
15
|
BUSINESS
AND PROPERTIES
|
18
|
LEGAL
PROCEEDINGS
|
32
|
MANAGEMENT
|
32
|
EXECUTIVE
COMPENSATION
|
37
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
40
|
SELLING
STOCKHOLDERS
|
42
|
DESCRIPTION
OF SECURITIES
|
46
|
PLAN
OF DISTRIBUTION
|
49
|
LEGAL
MATTERS
|
51
|
EXPERTS
|
52
|
ADDITIONAL
INFORMATION
|
52
|
We have
not authorized anyone to provide you with information different from that
contained in this prospectus. Source Capital and the selling
stockholders are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of the securities offered hereby.
Throughout
this prospectus, unless otherwise designated, the terms “we,” “us,” “our,” “the
Company” and “our Company” refer to White Mountain Titanium Corporation, a
Nevada corporation, and its subsidiaries. All amounts in this prospectus are in
U.S. Dollars, unless otherwise indicated.
ii
The
following summary highlights selected information contained in this
prospectus. This summary does not contain all the information you
should consider before investing in the securities. Before making an
investment decision, you should read the entire prospectus carefully, including
the “Risk Factors” section, the financial statements and the notes to the
financial statements.
White
Mountain Titanium Corporation
White
Mountain Titanium Corporation was incorporated under the laws of the State of
Nevada on April 24, 1998. From approximately 2000 until 2004, we had
no business operations and no source of generating revenues. We were
a non-reporting shell company between 2000 and February 2004 when we entered
into a reverse acquisition with GreatWall Minerals, Ltd., an Idaho
corporation. In February 2004 we merged with GreatWall which had had
an on-going interest in the natural resources sector in Chile for several years
and in 2003 had entered into an agreement to acquire a core holding of Cerro
Blanco mining concessions through its 100% owned Chilean subsidiary, Compañía
Minera Rutile Resources Limitada. In September 2005 we completed the
purchase of these mining concessions.
The
mining concessions now consist of 33 registered mining exploitation concessions,
and 5 exploration concessions, over approximately 8,225 hectares located
approximately 39 kilometers west of the City of Vallenar in the Atacama, or
Region III, geographic region of northern Chile. We are in the
exploration stage, which means we are engaged in the search for mineral deposits
or reserves which could be economically and legally extracted or
produced. We are conducting a drilling campaign and pre-feasibility
work in preparation for a feasibility study to determine whether the concessions
contain commercially viable ore reserves. If we are successful in
obtaining a feasibility study which supports commercially viable ore reserves,
we intend to exploit the concessions and to produce titanium dioxide concentrate
through conventional open pit mining and minerals processing. Our
business plan is to explore solely for titanium deposits or reserves on the
Cerro Blanco mining concessions. If this exploration program is
unsuccessful, we will be unable to continue operations.
We
have produced no revenues, have achieved losses since inception, have no
operations, and currently rely upon the sale of our securities to fund our
operations. We estimate the cost to take the Cerro Blanco project to
the point of completing a final engineering feasibility study at approximately
$3,810,000, including general and administrative and marketing
expenses. This figure excludes general and administrative
expenses. As of March 15, 2010, our cash position was approximately
$875,000. We currently do not have sufficient capital to complete
this plan and estimate that we will require additional financing to do
so.
Over the
next twelve to twenty-four months we have two principal objectives: to continue
to advance the project towards a final engineering feasibility level and to
secure off-take contracts for the planned rutile concentrate
output. We also continue to investigate the commercial viability of
producing a feldspar co-product. The feldspar could find applications
in the glass and ceramics industries.
On July
11, 2005, we closed the Securities Purchase Agreement with a Cayman Island
institutional investor, Rubicon Master Fund (“Rubicon”) on $5,000,000 in equity
financing and issued to Rubicon 6,250,000 shares of Series A Convertible
Preferred Stock and warrants to purchase 6,250,000 shares of our common
stock. Each share of Series A Convertible Preferred Stock is
convertible into our common shares at the effective rate of 1.6 shares of our
common stock for each share of the preferred stock converted and each warrant is
exercisable at $0.50 per share (previously $1.25 per share) at any time through
April 1, 2011. The original conversion ratio of the Series A
Convertible Preferred Stock was determined according to a formula computed by
dividing the stated value of the preferred stock, which is designated as $0.80
per share, by the conversion price of the preferred stock, which is designated
as $0.80 per share, subject to adjustment in the event of certain
transactions. The conversion price is subject to adjustment if we
sell shares of our common stock for less than the conversion price of the Series
A Preferred Stock. In 2007, we sold shares in an offering at $0.50,
which reduced the conversion price to $0.50 per share and adjusted the
conversion ratio. Any sale of our common stock at less than $0.50 per
share would result in a further reduction of the conversion price equal to the
reduced sale price of the common stock. In May 2009, Rubicon
exercised 2,000,000 of its warrants and we issued 2,000,000 common shares to
Rubicon.
1
On
September 7, 2005, we amended the Securities Purchase Agreement with Rubicon to
include a transaction with Phelps Dodge Corporation (“Phelps Dodge”), now a
wholly-owned subsidiary of Freeport-McMoRan Copper & Gold Inc. and the prior
owner of our initial mining concessions, in which we issued 625,000 shares of
Series A Convertible Preferred Stock and common stock purchase warrants to
purchase 625,000 shares of our common stock under identical terms as with
Rubicon. These securities were issued in satisfaction of the final
payment of $500,000 due to Phelps Dodge in connection with the purchase of the
initial Cerro Blanco mining concessions. The warrants expired on
September 7, 2009, without being exercised.
On May 5,
2006, we entered into an amendment to the Securities Purchase Agreement with
Rubicon and Phelps Dodge. The amendment was necessitated by our
inability to obtain effectiveness of the registration statement of which this
prospectus is a part by January 31, 2006, as required in the
agreement. Pursuant to the amendment, we issued 400,000 shares to
Rubicon and 40,000 shares to Phelps Dodge in settlement of the breach of this
provision of the agreement by us. In addition, we eliminated any
further damages provisions pertaining to the effectiveness of the registration
statement and the need to obtain a listing of our common stock on a Canadian
exchange.
On or
about September 30, 2007, Rubicon converted all of the Series A Convertible
Preferred Stock and sold all of the common shares issued upon the
conversion.
In August
2007 we completed a private placement equity financing wherein we issued
5,070,000 units at $0.50 per unit, each unit consisting of one common share and
one common share purchase warrant. Each warrant is exercisable
at $0.60 per share at any time through August 10, 2010. In addition,
77,600 warrants were issued to a consultant in connection with the private
placement. In September 2008 we completed an offering of shares of
our common stock at $0.75 per share. We sold 2,814,909 shares for
gross proceeds of $2,111,180.
On
October 16, 2009, we completed a private placement where we issued 1,496,930
shares at a price of $0.65 per share for gross proceeds of
$973,005. Commissions of $68,110 were paid and broker’s warrants were
issued for 104,785 shares at a price of $0.90 exercisable until April 15,
2011.
Pursuant
to the terms of the Securities Purchase Agreement that we entered into with
Rubicon and Phelps Dodge, as well as a condition of our unit offering completed
in August 2007, we are required to file and maintain the effectiveness of the
registration statement of which this prospectus is a part with the Securities
and Exchange Commission and register the resale of the securities included in
this prospectus.
Our
principal executive offices are located at Augusto Leguia 100, Oficina 812,
Las Condes, Santiago, Chile. Our telephone number is (56 2)
657-1800. Our Internet address is www.wmtcorp.com. The
information on our Internet website is not incorporated by reference in this
prospectus.
The
Offering
Securities
offered by us
|
This
is a best-efforts public offering of 1,869,159 units, consisting of an
aggregate of 5,607,477 shares of our common stock and warrants to purchase
an additional 1,869,159 shares of our common stock. Each
unit consists of three shares of common stock and a warrant to purchase
one share of common stock at an exercise price of 125% of the public
offering price of share component of the units in this
offering. The common stock and warrants are immediately
separable and will be issued
separately.
|
2
Description
of warrants
|
Each
purchaser of a unit will receive a warrant to purchase one share of our
common stock for three shares of common stock it purchases in this
offering. The warrants are exercisable at an exercise price of
$1.34 per share of common stock. The warrants will be subject
to adjustment in the exercise price and the class and number of the shares
of common stock to be issued upon exercise of the warrants upon the
occurrence of certain events, including any subdivision, consolidation or
reclassification of our common stock, the payment of stock dividends, our
amalgamation, and certain rights offerings and other distributions to all
holders of our common stock. The warrants are exercisable
starting on the closing date of this offering and expire on three years
thereafter.
|
|
Common
stock offered by selling stockholders
|
Up
to 1,000,000 shares of common stock underlying Series A Convertible
Preferred Stock;
Up
to 4,250,000 shares of common stock issuable upon the exercise of common
stock purchase warrants at an exercise price of $0.50 per
share;
Up
to 5,847,600 shares of common stock issuable upon the exercise of common
stock purchase warrants at an exercise price of $0.60 per
share;
Up
to 850,000 shares of common stock issuable upon exercise of options at
$2.00 per share; and
Up
to 8,154,000 outstanding shares of common stock.
|
|
Common
stock outstanding immediately prior to the offering
|
37,120,972
|
|
Common
stock to be outstanding after the offering by us and the selling
stockholders
|
Up
to 56,545,208 shares
|
|
Use
of proceeds
|
We
will use the net proceeds of this offering to complete a drilling program,
environmental impact study, and final feasibility study on the Cerro
Blanco property, and to market products developed from the
project. Net proceeds from this offering will also provide
operating funds for the next 12 months. We expect to use the
proceeds received from the exercise of the unit warrants, if any, for
general working capital purposes.
We
will not receive any proceeds from the sale of the common stock by the
selling stockholders. However, we will receive the sale price
of any common stock we sell to the selling stockholders upon exercise of
the warrants or options. We expect to use the proceeds, if any,
received from the exercise of the warrants and options for general working
capital purposes.
|
|
OTC
Bulletin Board trading symbol
|
WMTM
|
3
The
above information regarding common stock to be outstanding after the
offering is based on 37,120,972 shares of common stock outstanding as of
March 22, 2010, and assumes the subsequent conversion of our issued and
outstanding Series A Convertible Preferred Stock into 1,000,000 common shares,
exercise of warrants and options by our selling stockholders into 10,947,600
common shares, and exercise of the warrants issued with our units herein into
1,869,159 common shares.
RISK
FACTORS
This
investment has a high degree of risk. Before you invest you should
carefully consider the risks and uncertainties described below and the other
information in this prospectus. If any of the following risks
actually occur, our business, operating results and financial condition could be
harmed and the value of our stock could go down. This means you could
lose all or a part of your investment.
Risks
Related to Our Company and its Business
Our
independent auditor has stated there is substantial doubt about our ability to
continue as a going concern, which may hinder our ability to obtain future
financing.
Our
financial statements as of and for the years ended December 31, 2009 and 2008,
were prepared assuming that we would continue as a going concern. Our
significant losses from operations as of December 31, 2009 and 2008, raised
substantial doubt about our ability to continue as a going
concern. If the going-concern assumption were not appropriate for our
financial statements, then adjustments would be necessary to the carrying values
of the assets and liabilities, the reported revenues and expenses, and the
balance sheet classifications used. Since December 31, 2009, we have
continued to experience losses from operations. In July 2005 we
completed a financing with Rubicon in which we raised $5,000,000 through the
sale of preferred stock and warrants and in September 2005 we satisfied our
obligation to pay $500,000 for our Cerro Blanco mining concessions through the
issuance of preferred stock and warrants. In August 2007 we completed
a private placement of 5,070,000 units at an offering price of $0.50 per unit
for net proceeds of $2,340,684. In September 2008 we completed a
second private placement of 2,814,909 shares of our common stock at $0.75 per
share for net proceeds of $1,967,086. In May 2009, Rubicon exercised
2,000,000 warrants for proceeds of $1,000,000 to us. And in October
2009 we completed another private placement of 1,496,930 shares for net proceeds
of $899,021. Nevertheless, we will require additional funding of
approximately $3,810,000 to complete much of our planned mineral exploration
activities and completing a feasibility study on our mining concessions,
including general and administrative and marketing expenses. Our
ability to continue as a going concern following the completion of the
feasibility study on our mining concessions is subject to our ability to
generate a profit and/or obtain necessary additional funding from outside
sources, including obtaining additional funding from the sale of our
securities. Except for potential proceeds from the sale of units in
this offering by us, we have no other source for additional
funding. Our continued net operating losses and stockholders’
deficiency increase the difficulty in meeting such goals and there can be no
assurances that such methods will prove successful.
Because
of our reliance on a single mining project, there is a substantial risk that our
business may fail.
The Cerro
Blanco property is our only mining project and may not contain any reserves
which could be economically and legally extracted or produced, in which event
the funds that we spend on exploration would be lost and we would be forced to
cease operations. Our business plan is to explore solely for titanium
deposits or reserves on the Cerro Blanco mining concessions. If this
exploration program is unsuccessful, we will be unable to continue operations
and you will lose your entire investment.
Because
of the speculative nature of exploration of mining concessions, there is a
substantial risk that our business may fail.
Exploration
for minerals is highly speculative and involves substantial risks, even when
conducted on properties known to contain significant quantities of
mineralization, and most exploration projects do not result in the discovery of
commercially mineable deposits of ore. The likelihood of our mining
concessions containing economic mineralization or reserves, or our ability to
produce a rutile concentrate meeting buyers’ specifications for particle size,
concentrate levels, or calcium and impurities, is not assured.
4
Even
if we discover commercial reserves of titanium on the Cerro Blanco property, we
may not be able to successfully commence commercial production unless we receive
additional funds, for which there is no present arrangements or
agreements.
The Cerro
Blanco property does not contain any known ore reserves. We estimate
that if we are able to raise the maximum funds in this offering, of which there
is no assurance, we will have sufficient funds to complete all intended
exploration of the Cerro Blanco property, but we may encounter contingencies or
additional costs not presenting contemplated. We currently do not
have any operations and we have no income. Substantial expenditures
are required to establish proven and probable ore reserves through drilling, to
determine metallurgical processes to extract the metals from the ore, and to
construct mining and processing facilities. If our exploration
programs are successful in establishing titanium dioxide reserves of commercial
tonnage and grade, we will require additional funds in order to place the mining
concessions into commercial production. At present we do not have any
source of this additional funding and there is no assurance that we will be able
to obtain such financing.
Should we
determine that there are estimates of proven and probable reserves, they are
subject to considerable uncertainty. Such estimates are, to a large extent,
based on specific commodity prices and interpretations of geologic data obtained
from drill holes and other exploration techniques. Producers use feasibility
studies to derive estimates of capital and operating costs based upon
anticipated tonnage and grades of ore to be mined and processed, the predicted
configuration of the ore body, expected recovery rates of metals from the ore,
the costs of comparable facilities, the costs of operating and processing
equipment and other factors. Actual operating costs and economic returns on
projects may differ significantly from original estimates. Further, it may take
many years from the initial phase of exploration before production and, during
that time, the economic feasibility of exploiting a discovery may
change.
The most
likely source of future funds presently available to us to commence commercial
production is through the sale of equity capital. However, we do not
currently have any arrangements in this regard. Any sale of equity
securities will result in dilution to existing shareholders. As an
alternative for the financing of commercial production we could seek to locate a
joint venture partner to provide a portion or all of the required financing or
through the sale of a partial interest in the Cerro Blanco property to a third
party in exchange for cash or production expenditures. We presently
have no sources for this type of alternative financing.
We
have an absence of historical revenues and no current prospects for future
revenues. We also have a history of losses which we expect to
continue into the future. Our current cash resources are insufficient
to meet our obligations through the exploration stage, and if we are unable to
secure additional financing, we will either have to suspend or cease operations,
in which case you will lose your investment.
We
have been engaged in the exploration of minerals for several years and have not
generated any historical revenues relating to our mineral exploration
activities. Including approximately $3,188,211 of stock-based
compensation expense, we have incurred cumulative net losses of $21,127,499 from
these activities through December 31, 2009, and anticipate a net loss until we
are able to commence principal mining operations, if ever. During
this exploration stage we have no source of funding to satisfy our cash needs
except for our existing cash resources, which management estimates will not be
sufficient to meet our cash needs to complete all of our planned mineral
exploration activities and a feasibility study. The scope and cost of a
feasibility study will be dependent upon factors such as plant size and process
recovery design, neither of which will be known until further metallurgical
testing and product marketing are completed. As such, we have
no plans for revenue generation and we do not anticipate revenues from
operations unless we are able to locate an economic ore body, and are able to sell the
concentrate. There is no assurance that management’s estimates of the
costs of exploration and completion of the feasibility study are accurate, or
that contingences will not occur which will increase the costs of
exploration. Even if we locate an ore body, we may not achieve or
sustain profitability in the future. If we are unable to secure
additional financing and do not begin to generate revenues or find alternate
sources of capital before our cash resources expire, we will either have to
suspend or cease operations, in which case you will lose your
investment.
5
We have not secured firm contracts
for the commodities and labor force to be utilized at our mining property and
increased costs could affect our future profitability.
Costs at
any mining location are affected by the price of input commodities, such as
fuel, electricity and labor. Chile is heavily reliant on the importation of oil,
natural gas, refined petroleum products and coal to meet its fuel and
electricity needs. Since we acquired the Cerro Blanco project, global
energy price and transportation cost increases have caused fuel and electricity
prices in Chile to rise; labor costs in Chile have risen as well. A
continuation of this trend of increasing costs could have a significant negative
effect on the economics and the viability of our project.
Currency fluctuations may negatively affect costs we incur outside of the United
States.
Currency
fluctuations may affect our costs as a significant portion of our expenses are
incurred in Chilean pesos. Over the past 15 months for example, we have seen the
Chilean peso trade in a range of 497 to 684 pesos to the U.S.
dollar. These fluctuations have meant that our in-country operational
and exploration expenses in U.S. dollar terms have been difficult to
predict in any specific reporting period.
Current global financial conditions could adversely affect the availability of new financing and our operations.
Current
global financial conditions have been characterized by increased market
volatility. Several financial institutions have either gone into bankruptcy or
have had to be re-capitalized by governmental authorities. Access to financing
has been negatively impacted by both the rapid decline in value of sub-prime
mortgages and the liquidity crisis affecting the asset-backed commercial paper
market. We are wholly dependent on outside financing to meet our future
operating needs and these factors may adversely affect our ability to obtain
equity or debt financing in the future on terms favorable to us. Additionally,
these factors, as well as other related factors, may cause decreases in asset
values that are deemed to be other than temporary, which may result in
impairment losses. If such increased levels of volatility and market turmoil
continue, our operations, and our ability to finance the capital costs of our
project could be adversely impacted.
If
we are unable to adequately prevent dust from our mining operations or to meet
dust level standards established in any operating permit obtained in the future,
we may be unable to commence or continue planned mining operations on the Cerro
Blanco project, or the costs associated with the remediation of dust created
from our mining operations could exceed amounts currently budgeted for
compliance with anticipated standards .
We have
not obtained our mining permit to commence principal mining operations on the
Cerro Blanco project, nor have we commenced an environmental impact study
relating to our planned mining activity on the property which will be required
to obtain this permit. Based upon our past environmental monitoring
and base line studies prepared for us which cited a risk of airborne dust being
generated from rock blasting and crushing operations and from road haulage
activities at open pit mining operations, we anticipate that the issue of
airborne dust will be an issue closely reviewed and monitored by the
government. Without proper blasting, crushing and road maintenance
practices in place, there is a risk that airborne dust generated from the
planned mining activity at Cerro Blanco could be transported by winds to the
village of Nicolasa, located approximately 14 kilometers to the northeast, or
onto farmland located within the Huasco River valley. Airborne dust
from our mining operations could negatively affect agricultural plants or
animals being raised in the area, or could negatively affect respiratory
functions of persons living near the site. If we are unable to
provide adequate remediation plans in our environment impact statement, we may
be unable to obtain the necessary operations permit to commence principal mining
operations. In the alternative, the government could require us to
implement more costly remediation procedures to obviate any potential airborne
dust contamination. Once we receive our operating permit, if we are
unable to meet the standards for airborne particles set forth in the permit, we
could be cited by the government for noncompliance and fined or we could be
forced to cease mining operations until the problem is remedied, which could
require more expensive remediation measures. In addition, if we
exceed reasonable dust standards, neighboring communities and businesses,
especially the agriculture business in the Huasco River valley, could seek
monetary damages from damages caused by the dust created from our mining
activities or could seek injunctive relief to terminate any mining operations
causing damage to the community or business. We could incur increased
operating costs from these actions and could be delayed in our planned mining
activities, each of which would have a material negative impact on our ability
to commence or engage in our planned mining activities.
6
Because
we have not secured water rights and access to utilities for development of our
mining concessions, there is no assurance that we would be able to develop the
property.
We are
subject to factors beyond our control, such as production costs, including the
availability of adequate and cost-effective supplies of electricity, water, and
diesel fuel to run the heavy equipment and backup generators. We have
no current arrangements to provide electricity, water, or diesel
fuel. While we believe that we have various alternatives available to
us with respect to negotiating these arrangements, there is no assurance that we
will be able to do so, or that the terms and costs of such arrangement or
agreement will be satisfactory to us or within our current operating
budget. Our inability to secure these items, or to obtain them at a
reasonable cost, could affect our ability to proceed with the project if
commercial reserves of titanium are discovered.
Even
if we are able to commence commercial production, we do not have any agreements
or arrangements for anyone to purchase any titanium dioxide concentrates
produced from our mining concessions.
A
significant risk affecting the titanium metal industry is the historically
divergent fluctuations in demand for titanium. In large part the
fluctuations for titanium metal are due to changes in requirements for both
military and commercial aircraft. The demand for titanium dioxide
pigment is subject to changes in the economy affecting the use of paint and
other products using this mineral. We have no control over the demand
for titanium. We do not have any agreements or arrangements for the
sale of any titanium dioxide concentrate mined from our property, should
commercial production commence. If the market for titanium and
pigments experiences a down-turn, we may not be able to find a market for our
titanium dioxide concentrate or sell it at
commercially acceptable prices which would justify continuing
operations. In such event, we may be required to suspend or terminate
any production operations.
Commodity prices,
including those for industrial minerals such as titanium dioxide, are
subject to fluctuation based on factors that are not within our control, and a
significant reduction in the commodity price for titanium dioxide could have a
material negative impact on our ability to continue our exploration of our mining concessions or to
raise operating funds.
Titanium
dioxide pigment is used in a number of products, primarily paint and coatings,
paper, and plastics, while titanium metal is used largely in the commercial
airline, aerospace and defense industries. Any decline in the economy
of these products or industries could have a material impact on the value of
titanium. In addition, there are newly developing low-cost methods
for developing titanium metal which may have an impact on the price of
titanium. Also, there are existing lower-cost substitutes for
titanium. For example, titanium competes with aluminum, composites,
intermetallics, steel, and super alloys in high-strength
applications. There are also a number of lower-cost ores which can be
substituted for titanium in applications that require corrosion resistance or
which can be used as a white pigment. Management is unable to
presently predict the effect the decline in the economy or the use of titanium
substitutes may have on the price of titanium in the future.
We
have no full-time employees, other than our President and his assistant, and are
dependent on our directors, officers and third-party
contractors. We do not have long-term agreements with any of
these parties and the loss of current management, or the inability to retain
suitable third-party contractors, could delay our business plan or increase the
costs associated with our plan.
Other
than our President, Michael Kurtanjek, and his assistant, we have no full-time
employees and rely heavily and are wholly dependent upon the personal efforts
and abilities of our other officers and directors, each of whom, excepting our
President, devotes less than all of his or her time and efforts to our
operations. Because these individuals work only part-time, instances
may occur where the appropriate individuals are not immediately available to
provide solutions to problems or address concerns that arise in the course of us
conducting our business and thus adversely affect our business. The
loss of any one of these individuals could adversely affect our
business. We have consulting agreements with an entity partly owned
by Brian Flower, our Chairman, and with another, family owned entity of Howard
Crosby, one of our directors, but save for a non-exclusive consulting agreement
with Michael Kurtanjek, our President, and a management services agreement with
Charles E. Jenkins, our Chief Financial Officer, we do not have employment
agreements directly with any of our officers or directors. We also do
not maintain key-man insurance on any of them. We may not be able to
hire and retain such personnel in the future to replace these individuals if
they become unavailable for any reason.
7
We will
also be dependent upon the services of outside geologists, metallurgists,
engineers, and other independent contractors to conduct our drilling program,
develop our pilot plant, and conduct the various studies required to complete
exploration of our mining concessions. In addition, we do not have
any agreements or arrangements for the necessary managers and employees who will
operate the mine if commercial production commences. We do not have
any existing contracts for these services or employees.
If we are able to commence commercial
production, we will be in competition with a number of other companies, most of
which are better financed than are we.
The
market for titanium dioxide, as with other minerals, is intensely competitive
and dominated, in this case, by a small number of large, well-established and
well-financed companies, including Iluka Resources Inc., a subsidiary of Iluka
Resources Ltd., Richards Bay Iron and Titanium Pty. Ltd., QIT-Fer et Titane
Inc., and Titania A/S, which represent the world leaders in production of
titanium mineral concentrates, as well as smaller titanium
producers. All of the major competitors have longer operating
histories and greater financial, technical, sales and mining resources than do
we. Management cannot guarantee that should we commence mining
operations, we will be able to compete successfully against other current mining
companies.
Risks
Relating to Our Preferred Stock Financing Arrangements
There
are a large number of shares underlying our Series A Convertible Preferred Stock
and warrants that may be available for future sale, and the sale of these shares
may depress the market price of our common stock.
As of
March 22, 2010, we had 37,120,972 shares of common stock issued and outstanding,
625,000 outstanding shares of Series A Convertible Preferred Stock issued
in September 2005 that may be converted into an estimated 1,000,000 shares of
common stock, outstanding warrants issued in July 2005 to purchase
4,250,000 shares of common stock. In addition, the number of shares of
common stock issuable upon conversion of the outstanding shares of Series A
Convertible Preferred Stock may increase and the exercise price of the warrants
issued in July 2005 may decrease if we sell securities below the amended
conversion price of the Series A Convertible Preferred Stock and the amended
exercise price of these warrants. In addition, in August, 2007, we
issued 5,070,000 units by way of a private placement equity financing, each unit
comprised of one share of common stock and one warrant exercisable into one
share of common stock at $0.60 per share. All of the shares issuable
upon conversion of the Series A Convertible Preferred stock and warrants issued
in July of 2005, the shares and the shares underlying the warrants issued in the
August, 2007 private placement equity financing as well as shares underlying the
options exercisable into 850,000 common shares are included in this
prospectus. All of the warrants and options are immediately
exercisable. The sale of these shares may adversely affect the market
price of our common stock.
Risks
Related to Our Common Stock and this Offering
No
one has guaranteed the sale of any of the units being offered by us which means
that we may not be able to sell all of the units being offering
hereby.
We have
entered into an agreement with Source Capital Group, Inc. to act as our
exclusive placement agent for the units being offered hereby. They
have agreed to use their best efforts to sell the units for us, but they are not
under any obligation to purchase any of the units. They are also not
required to sell a minimum number of units in this offering, which means that we
may not raise all of the funds in this unit offering. If we raise
less than the maximum proceeds, we may not be able to fully implement our
current business plan as outlined in this prospectus, or we may be required to
seek additional financing from sources which may be less favorable to the
company than through the sale of the units.
8
Because our shares are designated as
“penny stock”, broker-dealers will be less likely to trade in our stock due to,
among other items, the requirements for broker-dealers to disclose to investors
the risks inherent in penny stocks and to make a determination that the
investment is suitable for the purchaser.
Our
shares are designated as “penny stock” as defined in Rule 3a51-1 promulgated
under the Exchange Act and thus may be more illiquid than shares not designated
as penny stock. The SEC has adopted rules which regulate
broker-dealer practices in connection with transactions in “penny
stocks.” Penny stocks are defined generally as: non-Nasdaq equity
securities with a price of less than $5.00 per share; not traded on a
“recognized” national exchange; or in issuers with net tangible assets less than
$2,000,000, if the issuer has been in continuous operation for at least three
years, or $10,000,000, if in continuous operation for less than three years, or
with average revenues of less than $6,000,000 for the last three
years. The penny stock rules require a broker-dealer to deliver a
standardized risk disclosure document prepared by the SEC, to 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,
monthly account statements showing the market value of each penny stock held in
the customers account, to 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, if any, in the
secondary market for a stock that is subject to the penny stock
rules. Since our securities are subject to the penny stock rules,
investors in the shares may find it more difficult to sell their
shares. Many brokers have decided not to trade in penny stocks
because of the requirements of the penny stock rules and, as a result, the
number of broker-dealers willing to act as market makers in such securities is
limited. The reduction in the number of available market makers and
other broker-dealers willing to trade in penny stocks may limit the ability of
purchasers in this offering to sell their stock in any secondary
market. These penny stock regulations, and the restrictions imposed
on the resale of penny stocks by these regulations, could adversely affect our
stock price.
Our board of directors can, without
stockholder approval, cause preferred stock to be issued on terms that adversely
affect common stockholders.
Under our
articles of incorporation, our board of directors is authorized to issue up to
20,000,000 shares of preferred stock, only 625,000 of which are issued and
outstanding as of the date of this prospectus, and to determine the price,
rights, preferences, privileges and restrictions, including voting rights, of
those shares without any further vote or action by our
stockholders. If the board causes any additional preferred stock to
be issued, the rights of the holders of our common stock could be adversely
affected. The board’s ability to determine the terms of preferred
stock and to cause its issuance, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of our outstanding voting stock. Preferred shares issued by the board
of directors could include voting rights, or even super voting rights, which
could shift the ability to control the company to the holders of the preferred
stock. Preferred shares could also have conversion rights into shares
of common stock at a discount to the market price of the common stock which
could negatively affect the market for our common stock. In addition,
preferred shares would have preference in the event of liquidation of the
corporation, which means that the holders of preferred shares would be entitled
to receive the net assets of the corporation distributed in liquidation before
the common stock holders receive any distribution of the liquidated
assets. We have no current plans to issue any additional shares of
preferred stock.
Our
board of directors is authorized to adopt a shareholder rights plan which, when
adopted by us, may make it more difficult for a third party to effect a
change-of-control.
In
January 2010 our board of directors authorized adoption of a shareholder rights
plan for the purpose of impeding any effort to acquire our company on terms that
are inconsistent with its underlying value and which would not therefore be in
the best interests of our stockholders. The existence of any shareholder rights
plan will make it more difficult, delay, discourage, prevent or make it more
costly to acquire or effect a change-in-control that is not approved by our
board of directors, which in turn could prevent our stockholders from
recognizing a gain in the event that a favorable offer is extended and could
materially and negatively affect the market price of our common
stock.
9
We have not paid, and do not intend
to pay, dividends and therefore, unless our common stock appreciates in value,
our investors may not benefit from holding our common stock.
We have
not paid any cash dividends since inception. We do not anticipate
paying any cash dividends in the foreseeable future. We currently
have outstanding a class of preferred stock designated as Series A Convertible
Preferred Stock. The holders of our outstanding preferred shares are
entitled to any dividends paid and distributions made to the holders of our
common stock to the same extent as if these holders of preferred shares had
converted the preferred shares into common stock and had held such shares of
common stock on the record date for the particular dividends and
distributions. As a result, our investors will not be able to benefit
from owning our common stock unless the market price of our common stock becomes
greater than the price paid for the stock by these investors.
If
you purchase units in this offering, you will suffer immediate and substantial
dilution in the net tangible book value of your shares and may be subject to
additional future dilution.
Prior
investors have paid less per share for our common stock than the price in this
offering. Immediately after this offering there will be a per share net tangible
book value deficiency of our common stock. Therefore, based on an assumed
offering price of $1.07 per share, allocating the entire purchase price of the
units to the share components of the units, if you purchase units in this
offering, you will suffer immediate and substantial dilution of approximately
$0.96 per share. Any future equity issuances and the future exercise
of outstanding warrants or stock options will also affect the amount of dilution
to holders of our common stock.
The public trading market for our
common stock is volatile and will likely result in higher spreads in stock
prices.
Our
common stock is trading in the over-the-counter market and is quoted on the OTC
Bulletin Board and on the Pink Sheets. The over-the-counter market
for securities has historically experienced extreme price and volume
fluctuations during certain periods. These broad market fluctuations
and other factors, such as our ability to implement our business plan pertaining
to the Cerro Blanco mining concessions in Chile, as well as economic conditions
and quarterly variations in our results of operations, may adversely affect the
market price of our common stock. In addition, the spreads on stock
traded through the over-the-counter market are generally unregulated and higher
than on stock exchanges, which means that the difference between the price at
which shares could be purchased by investors on the over-the-counter market
compared to the price at which they could be subsequently sold would be greater
than on these exchanges. Significant spreads between the bid and
asked prices of the stock could continue during any period in which a sufficient
volume of trading is unavailable or if the stock is quoted by an insignificant
number of market makers. We cannot insure that our trading volume
will be sufficient to significantly reduce this spread, or that we will have
sufficient market makers to affect this spread. These higher spreads
could adversely affect investors who purchase the shares at the higher price at
which the shares are sold, but subsequently sell the shares at the lower bid
prices quoted by the brokers. Unless the bid price for the stock
increases and exceeds the price paid for the shares by the investor, plus
brokerage commissions or charges, the investor could lose money on the
sale. For higher spreads such as those on over-the-counter stocks,
this is likely a much greater percentage of the price of the stock than for
exchange listed stocks. There is no assurance that at the time the
investor wishes to sell the shares, the bid price will have sufficiently
increased to create a profit on the sale.
The
prior issuance of 400,000 shares to Rubicon and 40,000 shares to Phelps Dodge in
May 2006 may have been issued without a valid exemption from registration which
may subject us to rescission of the issuance of the shares and potential
liability in the event an exemption from registration is not available for the
issuance.
Our
Securities Purchase Agreement with Rubicon and Phelps Dodge required that we
file a registration statement to be effective by January 31, 2006, and that we
file a prospectus in Canada. In May 2006, we amended the Securities
Purchase Agreement and issued 400,000 shares to Rubicon and 40,000 shares to
Phelps Dodge, the selling shareholders in this offering, in lieu of liquidated
damages and for extending the registration period to September 30, 2006, and
eliminating the Canadian filing requirement. These 440,000 shares may
not have been eligible for an exemption from registration under the Securities
Act of 1933. In the absence of such an exemption, these parties could
bring suit against us to rescind their share purchases, in which event we could
be liable for rescission payments to these persons.
10
We
entered into the amendment to the Securities Purchase Agreement on May 5, 2006,
after the initial filing of this registration statement on October 31,
2005. We believed that the offer and sale of these shares to Rubicon
and Phelps Dodge shares was exempt from registration under the Securities Act
and under applicable state securities laws pursuant to Section 4(2) or 4(6) of
the Securities Act and Rule 506 of Regulation D promulgated
thereunder. The offer and sale of the shares were made some seven
months after the original sale of the preferred shares and warrants to the same
parties. We did not offer securities to any new investors, nor were
we receiving proceeds from the issuance of these additional
shares. The offer was made solely in response to settlement of the
liquidated damages requirements of the Securities Purchase
Agreement.
Questions
have been raised by the SEC as to the availability of the claimed
exemptions. In the event we are found to have offered and sold such
shares in transactions for which exemption from registration was not available,
such shares may have been offered in violation of the registration provisions of
Section 5 of the Securities Act. In that event, Rubicon and Phelps
Dodge may have rescission rights to recover their purchase price, plus interest
and attorney’s fees, depending upon their state of residence.
If we
were to rescind the sale of the shares to Rubicon and Phelps Dodge, we would be
liable for liquidated monetary damages since January 31, 2006, equal to $5,000
per month to Phelps Dodge for failure to meet the registration deadlines in the
Securities Purchase Agreement. Notwithstanding the fact that the
shares have been removed from the prior registration statement which was
declared effective by the SEC on August 14, 2006, the SEC is not foreclosed from
taking any enforcement action with respect to the filing and we may not assert
the declaration of effectiveness as a defense in any proceeding initiated by the
SEC.
Standards
for compliance with Section 404 of the Sarbanes-Oxley Act of 2002 are uncertain,
and if we fail to comply in a timely manner, our business could be harmed and
our stock price could decline.
Rules
adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002
require an annual assessment of our internal controls over financial reporting,
and attestation of our assessment by our independent registered public
accounting firm. The standards that must be met for management to assess
the internal controls over financial reporting as effective are evolving and
complex, and require significant documentation, testing, and possible
remediation to meet the detailed standards. We expect to continue to incur
significant expenses and to devote resources to continued Section 404 compliance
during the remainder of fiscal 2010 and on an ongoing basis. It is
difficult for us to predict how long it will take or how costly it will be to
complete the assessment of the effectiveness of our internal controls over
financial reporting to the satisfaction of our independent registered public
accounting firm for each year, and to remediate any deficiencies in our internal
controls over financial reporting. As a result, we may not be able to
complete the assessment and remediation process on a timely basis. In
addition, the attestation process by our independent registered public
accounting firm will be new for fiscal 2010 and we may encounter problems or
delays in completing the implementation of any requested improvements and
receiving an attestation of our assessment by our independent registered public
accounting firm. In the event that our Chief Executive Officer, Chief
Financial Officer or independent registered public accounting firm determines
that our internal controls over financial reporting are not effective as defined
under Section 404, we cannot predict how regulators will react or how the market
price of our common stock will be affected; however, we believe that there is a
risk that investor confidence and share value may be negatively
impacted.
FORWARD-LOOKING
STATEMENTS
The
statements contained in this prospectus that are not historical facts,
including, but not limited to, statements found in the section entitled “Risk
Factors,” are forward-looking statements that represent management’s beliefs and
assumptions based on currently available information. Forward-looking
statements include the information concerning our possible or assumed future
results of operations, business strategies, need for financing, competitive
position, potential growth opportunities, potential operating performance
improvements, ability to retain and recruit personnel, the effects of
competition and the effects of future legislation or
regulations. Forward-looking statements include all statements that
are not historical facts and can be identified by the use of forward-looking
terminology such as the words “believes,” “intends,” “may,” “will,” “should,”
“anticipates,” “expects,” “could,” “plans,” or comparable terminology or by
discussions of strategy or trends. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we
cannot give any assurances that these expectations will prove to be
correct. Such statements by their nature involve risks and
uncertainties that could significantly affect expected results, and actual
future results could differ materially from those described in such
forward-looking statements.
11
Among the
factors that could cause actual future results to differ materially are the
risks and uncertainties discussed in this prospectus. While it is not
possible to identify all factors, we continue to face many risks and
uncertainties including, but not limited to, the cyclicality of the titanium
dioxide industry, global economic and political conditions, global productive
capacity, customer inventory levels, changes in product pricing, changes in
product costing, changes in foreign currency exchange rates, competitive
technology positions and operating interruptions (including, but not limited to,
labor disputes, leaks, fires, explosions, unscheduled downtime, transportation
interruptions, war and terrorist activities). Mining operations are
subject to a variety of existing laws and regulations relating to exploration
and development, permitting procedures, safety precautions, property
reclamation, employee health and safety, air and water quality standards,
pollution and other environmental protection controls, all of which are subject
to change and are becoming more stringent and costly to comply
with. Should one or more of these risks materialize (or the
consequences of such a development worsen), or should the underlying assumptions
prove incorrect, actual results could differ materially from those
expected. We disclaim any intention or obligation to update publicly
or revise such statements whether as a result of new information, future events
or otherwise.
The risk
factors discussed in “Risk Factors” on page 4 of this prospectus could cause our
results to differ materially from those expressed in forward-looking
statements. There may also be other risks and uncertainties that we
are unable to predict at this time or that we do not now expect to have a
material adverse impact on our business.
The net
maximum proceeds to us from the sale of the units offered hereby are estimated
to be approximately $5,460,000, after payment of selling commissions and general
costs of the offering, including, but not limited to, filing fees, legal and
accounting fees, and other direct costs of the offering. Pending use
of the net proceeds, we intend to invest the funds in interest-bearing accounts
with one or more financial institutions.
The use
of the net proceeds of this offering is based upon our cost estimates and
current business plans, in particular the cost to complete the final feasibility
study on the Cerro Blanco project. If actual costs exceed these
estimates or unanticipated events require a change in our plans, we may find it
necessary or advisable to reallocate some of the proceeds. Any
proceeds from the exercise of the warrants issued as a component of the units
will be allocated to general working capital purposes.
The
following table sets forth the anticipated use of the total proceeds of this
offering and the applicable percentage of each use. In the event we
raise less than the maximum proceeds in this offering, we intend to allocate the
proceeds from the offering in the order set forth below.
Uses of the Proceeds
|
Offering
Proceeds
|
Percentage
|
||||||
Selling
Commissions
|
$ | 480,000 | 8.0 | % | ||||
Offering
Costs
|
60,000 | 1.0 | % | |||||
Step
Out and Infill Drilling Program
|
1,500,000 | 25.0 | % | |||||
Claim
Holding Costs
|
60,000 | 1.0 | % | |||||
Environmental
Impact Study
|
300,000 | 5.0 | % | |||||
Final
Feasibility Study
|
900, 000 | 15.0 | % | |||||
General
and Administrative Expenses
|
850,000 | 14.2 | % | |||||
Rutile
Marketing Expenses
|
200,000 | 3.3 | % | |||||
Working
Capital
|
1,650,000 | 27.5 | % | |||||
Total
|
$ | 6,000,000 | 100 | % |
12
We will
not receive any proceeds from the sale of the common stock by the selling
stockholders. However, we will receive the sale price of any common
stock we sell to the selling stockholders upon exercise of the warrants owned by
them which we estimate to be approximately $5,633,560. We expect to
use the proceeds received from existing warrant holders upon the exercise of the
warrants, if any, for general working capital purposes.
DILUTION
If you
purchase units from us, your interest in the share components of the units will
be diluted to the extent of the difference between the amount of the unit price
allocated to the share components and the adjusted net tangible book value per
share of our common stock after this offering. Our net tangible book
value as of December 31, 2009 was ($967,399), or (0.03) per share of common
stock (based upon 36,400,972 common shares outstanding at December 31,
2009). We calculate net tangible book value per share by calculating
the difference between the total assets less goodwill and other intangible
assets and total liabilities, and dividing the result by the number of shares of
common stock outstanding at the time.
Net
tangible book value dilution per share represents the difference between the
amount per share paid by new investors who purchase units in this offering
(assuming allocation of the entire purchase price to the common share components
of the units) and the pro forma net tangible book value per share of common
stock immediately after completion of this offering as of December 31,
2009, after giving effect to the sale of all of the units in this offering, less
the costs of the offering, the issuance of common shares by us since December
31, 2009, but not giving effect to the conversion of any outstanding convertible
instruments.
Adjusted
|
||||
Public
offering price per share
|
$ | 1.07 | ||
Net
tangible book value as of December 31, 2009
|
$ | (0.03 | ) | |
Increase
attributable to this offering
|
$ | 1.10 | ||
Adjusted
net tangible book value per share after this offering
|
$ | 0.11 | ||
Dilution
in net tangible book value per share to new investors
|
$ | 0.96 |
The
following table summarizes as of December 31, 2009, on a pro forma basis to
reflect the same adjustments described above, the number of shares of common
stock purchased from us, the total consideration paid and the average price per
share paid by:
●
|
The
existing common stockholders; and
|
|
●
|
The
new investors in this offering, assuming the sale of all of
the units offered hereby at a public offering price of $1.07
per share for the share component of the
units.
|
The
calculations are based upon total consideration given by new and existing
stockholders, before any deduction of estimated underwriting discounts and
commissions and offering expenses.
Shares
of common stock Purchased
|
Total
Consideration
|
Average
Price
Per
Share
|
||||||||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
|||||||||||||||||
Existing
Stockholders
|
36,400,972 |
___87%
|
$ | 22,285,100 | 79 | % | $ | 0.61 | ||||||||||||
New
Investors
|
5,607,477 | 13 | % | $ | 6,000,000 | 21 | % | $ | 1.07 | |||||||||||
Total
|
42,008,449 | 100 | % | $ | 28,285,100 | 100 | % | $ | 0.67 |
The
above table excludes an aggregate of up to 16,596,512 additional shares of
common stock reserved and available for future issuance (i) upon the conversion
of all outstanding preferred shares, (ii) the exercise of all outstanding stock
options and warrants to purchase common stock, (iii) the exercise of all
warrants issued in connection with the units in this public offering, and (iv)
under our stock option plan as of December 31, 2009.
13
Market
Information
Our
common stock is quoted on the OTC Bulletin Board and on the Pink Sheets under
the symbol “WMTM.” The table below sets forth for the periods
indicated the range of the high and low bid information as reported by a
brokerage firm and/or as reported on the Internet. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down, or commission
and may not necessarily represent actual transactions.
Quarter
|
High
|
Low
|
|||||||
FISCAL
YEAR ENDED
|
|||||||||
DECEMBER
31, 2008
|
First
|
$ | 1.13 | $ | 1.06 | ||||
Second
|
$ | 1.02 | $ | 0.97 | |||||
Third
|
$ | 0.97 | $ | 0.86 | |||||
Fourth
|
$ | 0.56 | $ | 0.49 | |||||
FISCAL
YEAR ENDING
|
First
|
$ | 1.37 | $ | 0.83 | ||||
DECEMBER
31, 2009
|
Second
|
$ | 1.06 | $ | 0.35 | ||||
Third
|
$ | 0.95 | $ | 0.75 | |||||
Fourth
|
$ | 0.93 | $ | 0.90 |
At
March 22, 2010, we had outstanding the following options or warrants to
purchase, and securities convertible into, our common shares:
|
·
|
625,000
shares of Series A Convertible Preferred Stock, which are convertible into
1,000,000 shares of our common stock. All of these shares of
common stock are included in the registration statement of which this
prospectus is a part for resale by the selling stockholders
herein.
|
|
·
|
Options
to purchase 2,790,000 shares of our common stock issued under our existing
stock option plan. All options are fully vested and immediately
exercisable. Exercise prices of the options range from $0.50 to
$2.00. 850,000 shares of common stock issuable upon exercise of
these options are included in this
prospectus.
|
|
·
|
Warrants
to purchase 12,587,385 shares of our common stock, of which shares
issuable upon exercise of 12,097,600 are included in this
prospectus. Of these 4,250,000 are immediately exercisable at
$0.50 per share through April 1, 2011; 5,847,600 are immediately
exercisable at $0.60 per share through August 10, 2010; 150,000 are
immediately exercisable at $0.75 per share through June 30, 2011; 235,000
are immediately exercisable at $0.50 per share through June 30, 2012;
104,785 are immediately exercisable at $0.90 per share through April 15,
2011; and 2,000,000 are exercisable at $1.50 per share through December
31, 2015, and subject vesting
requirements.
|
Holders
At
March 22, 2010, we had approximately 120 record holders of our common
stock. The number of record holders was determined from the records
of our transfer agent and does not include beneficial owners of common stock
whose shares are held in the names of various security brokers, dealers, and
registered clearing agencies. We have appointed Interwest Transfer
Company, Inc., 1981 East 4800 South, Suite 100, Salt Lake City, UT 84117, to act
as the transfer agent of our common stock. We have also appointed
them to act as warrant agent for the warrants issued as a component of the units
sold in this offering.
Dividends
We have
never declared or paid any cash dividends on our common stock. We do
not anticipate paying any cash dividends to stockholders in the foreseeable
future. In addition, any future determination to pay cash dividends
will be at the discretion of the Board of Directors and will be dependent upon
our financial condition, results of operations, capital requirements, and such
other factors as the Board of Directors deem relevant
14
We
currently have outstanding a class of preferred stock designated as Series A
Convertible Preferred Stock. The holders of these preferred shares
are entitled to any dividends paid and distributions made to the holders of our
common stock to the same extent as if these holders of preferred shares had
converted the preferred shares into common stock and had held such shares of
common stock on the record date for the particular dividends and
distributions.
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table sets forth as of the most recent fiscal year ended December 31,
2009, certain information with respect to compensation plans (including
individual compensation arrangements) under which our common stock is authorized
for issuance:
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a) and (b))
(c)
|
||||||||||
Equity
compensation plans approved by security holders
|
2,790,000 | (1) | $ | 0.53 | -0- | |||||||
Equity
compensation plans not approved by security holders
|
10,587,385 | (2) | $ | 0.56 | -0- | |||||||
Total
|
13,377,385 | $ | 0.55 | -0- |
(1) These options were granted to
our officers and to various consultants pursuant to our stock option plan
adopted in August 2005 described in the Executive Compensation section under the
heading “Equity Awards” on page 38 of this prospectus.
(2) Of these, 4,250,000 shares are
issuable pursuant to common stock purchase warrants exercisable at $0.50 per
share at any time through April 1, 2011; 5,847,600 are issuable pursuant to
common stock purchase warrants exercisable at $0.60 per share at any time
through August 10, 2010; 150,000 are issuable pursuant to common stock purchase
warrants exercisable at $0.75 per share at any time through June 30, 2011;
235,000 are issuable pursuant to common stock purchase warrants exercisable at
$0.50 per share at any time through June 30, 2012; and 104,785 are issuable
pursuant to common stock purchase warrants exercisable at $0.90 per share at any
time through June 30, 2012.
DETERMINATION
OF OFFERING PRICE
The
public offering price of the units offered by this prospectus will be determined
by our board of directors with advice from our placement agent and will be based
on a discount to the closing market price of the stock immediately prior to the
closing date of this offering prior to the effectiveness of the registration
statement of which this prospectus is a part.
OPERATIONS
The
following discussion should be read in conjunction with our consolidated
financial statements and related notes thereto as filed with this
prospectus.
Background
We are a
mineral exploration company. We hold mining concessions composed of
33 registered mining exploitation concessions, and 5 exploration concessions,
over approximately 8,225 hectares located approximately 39 kilometers west of
the City of Vallenar in the Atacama, or Region III, geographic region of
northern Chile (“Cerro Blanco”). We are in the exploration stage,
which means we are engaged in the search for mineral deposits or reserves which
could be economically and legally extracted or recovered. Our primary
expenditures at this stage consist of acquisition and exploration costs and
general and administration expenses. We have produced no revenues,
have achieved losses since inception, have no operations, and currently rely
upon the sale of our securities to fund our operations.
15
Our
common stock is quoted on the OTC Bulletin Board under the symbol
“WMTM.” The last reported sales price per share of our common stock
as reported by the OTC Bulletin Board on March 19, 2010, was
$1.05.
We
recorded a loss for the year ended December 31, 2009 of $5,860,005 ($0.17 per
weighted average common share outstanding) compared to a loss of $3,175,908
($0.10 per weighted average common share outstanding) for 2008. This
was a direct result of a loss recorded due to the adoption of an accounting
policy in 2009, which required us to remeasure our warrant liability at its fair
market value. As a result in 2009 we recognized loss of $2,071,350
(2008: $nil). Excluding this change in this accounting policy, our
loss for the year was a more comparable $3,788,655.
A
significant difference in 2009 compared to 2008 was the reduced level of
exploration expenditures as the activities of the Company were focused on the
pilot plant program and not field exploration. Exploration expense
was $377,891 (2008: $1,525,060), while engineering consulting expense was
$639,185 (2008: $55,651).
Consulting
fees – directors and officers was $1,182,776 (2008: $354,139) as a result of
stock-based compensation recognized for previously issued options which vested
during the year and shares issuances to management for attaining goals specified
by the compensation committee during the year.
Investor
relations expense of $696,191(2008: $4,809) reflects the stock-based
compensation expense recorded with respect to the revaluation of the warrants in
second quarter.
Interest
revenue at $1,768 was down significantly from $38,057 in 2008 due to continued
lower US dollar denominated deposit interest rates.
Generally
most other expenses were comparable or lower this year due to changes in
operations and cost constraints applied earlier in the year.
Liquidity
and Cash Flow
As of
December 31, 2009 we had working capital of $1,263,449 (2008 - $1,509,859)
including $1,343,994 (2008 -$1,475,460) of cash and cash
equivalents. As of March 15, 2009, our cash position was
approximately $875,000.
During
the year ended December 31, 2009, the Company completed an offering of 1,496,930
shares at a price of $0.65 per unit for total gross proceeds of
$973,005. Share issuance costs for the private placement consisted of
cash payments of $72,314 and issuance of 104,785 warrants at an exercise price
of $0.90, to give net proceeds of $900,691
During
the year ended December 31, 2008, the Company completed an offering of 2,814,909
shares at a price of $0.75 per share for gross proceeds of
$2,111,180. Share issuance costs for the private placement consist of
cash payments of $144,094 to give net proceeds of $1,967,086.
We
have prepared a 2010 combined operating budget which incorporates general
corporate and administrative expenses as well as a base case of Chilean
operations plus engineering studies. We anticipate that expenditures,
net of interest income will be such that we have sufficient funds for up to two
years of operations, excluding 2009 drilling expenditures. The
diversion of funds from general purposes to engineering and marketing will,
however, reduce the period during which we can cover
expenditures.
We
anticipate 2010 expenditures on the engineering and marketing plans to be as
follows:
Minimum
|
Maximum
|
|||||||
Step
out and infill drilling
|
$ | 1,200,000 | $ | 1,500,000 | ||||
Claim
holding costs
|
50,000 | 60,000 | ||||||
Environmental
impact study
|
200,000 | 300,000 | ||||||
Final
feasibility study
|
600,000 | 900,000 | ||||||
Total
|
$ | 2,050,000 | $ | 2,760,000 |
16
We
continue to actively source additional funds to meet or exceed the anticipated
expenditures above. We believe that the prospects are such that we
will be able to raise sufficient funds; however there are a number of risk
factors which will influence our ability to do so, including the state of the
capital markets generally, and the market price of our common stock. With the
exception of funds on deposit, we have no other sources of committed funds,
except for outstanding warrants for which there are no commitment to
exercise. The most likely source of new funds would be an equity
placement of common shares. We believe that a failure to raise funds
in a timely manner would likely delay the achievement of some of the milestones
in the engineering and marketing plans, and would delay any decision regarding
the viability of operations while likely increasing future
costs.
The
July 2005 funding agreement with Rubicon contained certain anti-dilution
provisions, such that any subsequent funds raised below $1.25 per share may
trigger provisions which require the issuance of additional shares or re-pricing
of warrants held by Rubicon. This
may influence our decision as to the suitability of any future
financing. In 2007 we commenced an offering of securities at $0.50
which triggered a reduction in the warrant exercise price to $0.50 per share and
increased the number of shares issuable upon exercise of the outstanding
preferred shares by a factor of 1.6.
Off-Balance
Sheet Arrangements
During
the year ended December 31, 2009, the Company did not have any off-balance sheet
arrangements.
Critical
Accounting Estimates
Effective
January 1, 2009, the Company adopted the provisions of Emerging Issues Task
Force (“EITF”) EITF 07-05, Determining Whether an Instrument (or Embedded
Feature) Is Indexed to an Entity’s Own Stock, (EITF 07-05), which was primarily
codified into Topic 815 - Derivatives and Hedging. ASC 815 applies to
any freestanding financial instruments or embedded features that have the
characteristics of a derivative and to any freestanding financial instruments
that are potentially settled in an entity’s own common stock. As a result
of adopting ASC 815, warrants to purchase 6,875,000 shares of our common stock
previously treated as equity pursuant to the derivative treatment exemption were
no longer afforded equity treatment. The warrants had an exercise price of $0.50
and expire in July and September 2009, of which 4,250,000 warrants were extended
to April 2011. As such, effective January 1, 2009, the Company
reclassified the fair value of these warrants to purchase common stock, which
had exercise price reset features, from equity to liability status as if these
warrants were treated as a derivative liability since their date of
issue. On January 1, 2009, the Company reclassified $1,084,375
to beginning accumulated deficit and $1,084,375 to other liabilities - warrants
to recognize the fair value of such warrants on such date. As of December
31, 2009, the remaining 4,250,000 warrants were fair valued using the
Black-Scholes pricing model with the following weighted average
assumptions: risk-free interest rate of 1.08%, expected life of 1.25
years, an expected volatility factor of 84.10% and a dividend yield of 0.0%. The
fair value of these warrants to purchase common stock increased to $2,956,725 as
of December 31, 2009. As such, the Company recognized a $2,071,350 non-cash
charge from the change in fair value of these warrants for the year ended
December 31, 2009.
The
Company accounts for stock-based compensation expenses associated with stock
options and other forms of equity compensation in accordance with ASC 718-10,
Share-Based Payment, as
interpreted by SEC Staff Accounting Bulletin No. 107. ASC
718-10 requires the Company to estimate the fair value of share-based payment
awards on the date of grant using an option-pricing model. The value
of the portion of the award that is ultimately expected to vest is recognized as
expense over the requisite service periods in the Company’s statement of
operations. The Company uses the straight-line single-option method
to recognize the value of stock-based compensation expense for all share-based
payment awards. Stock-based compensation expense recognized in the
statement of operations is reduced for estimated forfeitures, as it is based on
awards ultimately expected to vest. ASC 718-10 requires forfeitures
to be estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates.
17
BUSINESS
AND PROPERTIES
Overview
White
Mountain Titanium Corporation is an exploration stage company, which means we
are engaged in the search for mineral deposits or reserves which could be
economically and legally extracted or produced. Although incorporated
in the State of Nevada on April 24, 1998, our company was reorganized in
February 2004 as a result of the reverse merger of GreatWall Minerals Ltd., an
Idaho corporation, into Utah Networking Services, Inc., a Nevada
corporation. GreatWall had had an ongoing interest in the natural
resources sector in Chile for several years prior to the merger and in 2003 had
entered into an agreement with Phelps Dodge to acquire the Cerro Blanco rutile
registered exploitation mining concessions. The agreement was
executed by GreatWall through its wholly owned subsidiary, Compañía Minera
Rutile Resources Limitada. Utah Networking Services, Inc. had been
previously engaged in business of providing internet services but had refocused
its business on the natural resources industry in March 2002. The
merger was approved by the shareholders of both companies on January 26, 2004,
and was completed on February 10, 2004. The newly reorganized company
was subsequently renamed White Mountain Titanium
Corporation. Compañía Minera Rutile Resources Limitada was
subsequently converted to a Chilean stock company and the name changed to
Sociedad Contractual Minera White Mountain Titanium. We also have
another wholly owned Hong Kong company, White Mountain Titanium (Hong Kong),
which is inactive.
On or
about September 5, 2003, Sociedad Contractual Minera White Mountain Titanium
(formerly known as Compania Minera Rutile Resources Limitada, and formally
known as Minera Royal Silver Limitada), a subsidiary of GreatWall at the time,
and Compania Contractual Minera Ojos del Salado, a Chilean operating subsidiary
of Phelps Dodge Corporation, entered into a Transfer of Contract and Mortgage
Credit agreement for the purchase by GreatWall’s subsidiary of the initial nine
mining registered exploitation concessions located in Chile for which Compania
Contractual Minera Ojos del Salado held a mortgage. Pursuant to the
transfer agreement, Compania Contractual Minera Ojos del Salado sold and
transferred its mortgage right to the mining concessions to GreatWall’s
subsidiary. Subject to the terms of the transfer agreement, Compania
Minera Rutile Resources Limitada was obligated to pay $650,000 to Compania
Contractual Minera Ojos del Salado for its transfer of the mortgage to
GreatWall’s subsidiary, payable $50,000 within thirty days of the transfer
agreement, $50,000 on March 5, 2004, and $50,000 on September 5, 2004, and was
obligated to pay $500,000 on September 4, 2005, which date was extended by
mutual consent of the parties to September 9, 2005. The original
transfer agreement was negotiated between the management of GreatWall and Phelps
Dodge, and as a result of the merger of GreatWall into our company, Compania
Minera Rutile Resources Limitada became our wholly owned
subsidiary. The initial payment of $50,000 was paid by GreatWall
prior to its merger into our company in February 2004. The subsequent
payments of $50,000 each on March 5, 2004, and September 5, 2004, were paid by
us. Prior to the final payment, Compania Contractual Minera Ojos del
Salado transferred by dividend the right to receive the final payment from our
Chilean subsidiary to its parent corporation, PD Ojos del Salado, Inc., a
Delaware corporation, and PD Ojos del Salado, Inc. subsequently transferred by
dividend the right to receive the final payment from to its parent corporation,
Phelps Dodge. In September 2005, we completed a debt conversion
agreement with Phelps Dodge whereby we issued 625,000 shares of Series A
Convertible Preferred Stock and warrants to purchase 625,000 shares of our
common stock as consideration for the final payment of $500,000 owed under the
property payment schedule.
Our sole
business plan is to explore for titanium deposits or reserves on the Cerro
Blanco mining concessions. If this exploration program is
unsuccessful, we will be unable to continue operations.
Titanium
Industry and Market Overview
Overview
Titanium
is the ninth most abundant element, making up about 0.6% of the earth’s
crust. Titanium occurs primarily in the minerals anatase, brookite,
ilmenite, leucoxene, perovskite, rutile, and sphene. Of these
minerals, only rutile, ilmenite and leucoxene, an alternation product of
ilmenite, have significant economic importance. Both rutile and
ilmenite are chemically processed to produce both titanium dioxide pigment and
titanium metal.
Approximately
95% of titanium is consumed in the form of titanium dioxide concentrate,
primarily as a white pigment in paints, paper, and plastics. Titanium
dioxide pigment is characterized by its purity, refractive index, particle size,
and surface properties. The superiority of titanium dioxide as a
white pigment is due mainly to its high refractive index and resulting
light-scattering ability, which impart excellent hiding power and
brightness.
18
Titanium
metal is well known for its corrosion resistance, high strength-to-weight ratio,
and high melting point. Accordingly, titanium metal is used in
sectors, such as the aerospace and chemicals industries, where such
considerations are extremely important.
Our
business is currently focused on the mining concessions which constitute the
Cerro Blanco property. These concessions host a hard rock rutile
deposit as opposed to ilmenite laden mineral sands deposits held by most of our
competitors. Rutile has a higher percentage of titanium oxide than
mineral sands.
Industry
Background
The bulk
of the world’s titanium is used as the metal oxide, titanium dioxide (TiO2). The
chemically processed titanium ore, whether rutile or ilmenite based, is turned
into pure titanium dioxide and used as a brilliant white pigment which imparts
whiteness and opacity to paint, plastics, paper and other
products. The use of titanium dioxide as a color carrier has grown
over the last 40 years, since the use of white lead based paints was banned
throughout the world for health reasons. Titanium dioxide is
chemically inert, which gives it excellent color retention. It is
thermally stable, with a melting point at 1,668ºC, which makes it suitable for
use in paints and products that are designed to withstand high
temperatures. About 5% of the world’s titanium is used as the metal,
due to its exceptional properties. It has the highest strength to
weight ratio of any metal; is as strong as steel but 45% lighter. The
most noted chemical property of titanium is its excellent resistance to
corrosion; it is almost as resistant as platinum, capable of withstanding attack
by acids, moist chlorine gas, and by common salt solutions.
The table
below gives a summary of distribution and end uses on an industry by industry
basis for TiO2.
U.S. Distribution of TiO2 pigment shipments by industry:
2006
|
||||
Industry
|
Percent
|
|||
Paint
and Coatings
|
59.1 | % | ||
Plastics
and Rubber
|
23.8 | % | ||
Paper
|
11.6 | % | ||
Other*
|
5.5 | % |
*
Includes agricultural, building materials, ceramics, coated fabrics and
textiles, cosmetics, food, paper and printing ink
The table
below gives a broad picture of principal uses for titanium dioxide.
Uses of Titanium Dioxide
|
||
Industry
|
Use
|
|
Paints
& Pigments
|
Paints,
coatings, lacquer, varnishes, to whiten and opacity polymer binder
systems, to provide coating and hiding power, and to protect paints from
UV radiation and yellowing of the color in sunlight.
|
|
Plastics
|
To
ensure high whiteness and color intensity, and increase plastic impact
strength in such items as window sections, garden furniture, household
objects, plastic components for the automotive
industry.
|
|
Paper
|
Additive
to whiten and increase opacity of paper.
|
|
Cosmetics
|
Protection
against UV radiation in high-factor sun creams; to give high brightness
and opacity in toothpaste and
soaps.
|
19
Uses of Titanium Dioxide
|
||
Industry
|
Use
|
|
Food
|
High
brightness and opacity in foods and food packaging.
|
|
Pharmaceuticals
|
High
chemical purity titanium dioxide is used as a carrier and to ensure
brightness and opacity.
|
|
Printing
Inks
|
Protection
against fading and color deterioration.
|
|
Other
|
Titanium
dioxide is used in chemical catalysts, wood preservation, rubber,
ceramics, glass, electroceramics, welding fluxes, and high temperature
metallurgical
processes.
|
Since
2004, an expanding world economy and industrial growth in China led to strong
demand for titanium mineral concentrates, titanium metal and titanium dioxide
(TiO2)
pigment. According to the U.S. Bureau of Mines, gross production of
titanium mineral concentrates (ilmenite, rutile, and leucoxene) rose from 6.7
million tonnes in 2005 to an estimated 7.8 million tonnes in
2007. During the same period, published prices for high grade rutile
have held up at $500 - $750 per tonne, depending on grade.
The
following table sets forth the estimated world reserves of titanium minerals
based upon global resources of titanium minerals.
World Reserves of Ilmenite and Rutile (‘000t
TiO2)
|
||||||||
Country
|
Ilmenite
|
Rutile
|
||||||
Australia
|
130,000 | 19,000 | ||||||
Canada
|
31,000 | - | ||||||
China
|
200,000 | - | ||||||
India
|
85,000 | 7,400 | ||||||
Norway
|
37,000 | - | ||||||
South
Africa
|
63,000 | 8,300 | ||||||
Ukraine
|
5,900 | 2,500 | ||||||
US
|
6,000 | 400 | ||||||
Other
|
15,000 | 8,100 |
Source: U.S.
Geological Survey, Mineral Commodity Summaries, January 2009, found online at
http://minerals.usgs.gov/minerals/pubs/mcs/2007/mcs2007.pdf.
Titanium
Pigment Production
Mining of
titanium minerals is usually performed using surface methods like dredging and
dry mining and gravity spirals. Ilmenite is often processed to
produce a synthetic rutile.
The most
widely used processes available for the manufacture of titanium dioxide pigment
are the sulphate and chloride processes. Commercially manufactured
titanium dioxide pigment is available as either anatase-type or rutile-type,
categorized according to its crystalline form, regardless of whether it is made
from the mineral rutile. Anatase pigment is currently made by
sulphate producers only, while rutile pigment is made by both the chloride and
the sulphate processes. The decision to use one process instead of
the other is based on numerous factors, including raw material availability,
freight, and waste disposal costs.
20
Anatase
and rutile pigments, while both are white, have different properties and thus
have different end-uses. For example, rutile pigment is less reactive
with the binders in paint when exposed to sunlight than is the anatase pigment
and is preferred for use in outdoor paint. Anatase pigment has a
bluer tone than rutile, is somewhat softer, and is used mainly in indoor paints
and in paper manufacturing. Depending on the manner in which it is
produced and subsequently finished, TiO2 pigment
can exhibit a range of functional properties, including dispersion, durability,
opacity, and tinting.
In the
chloride process, rutile is converted to TiCl4 by
chlorination in the presence of petroleum coke. TiCl4 is
oxidized with air or oxygen at about 900ºC, and the resulting TiO2 is
calcined to remove residual chlorine and any hydrochloric acid that may have
formed in the reaction. Aluminum chloride is added to the TiCl4 to assure
that virtually all the titanium is oxidized into the rutile crystal
structure. The process is conceptually simple but poses a number of
significant chemical engineering problems because of the highly corrosive nature
of chlorine, chlorine oxides and titanium tetrachloride at temperatures of 900°C
or higher.
In the
sulphate process, ilmenite or titanium slag is reacted with sulfuric
acid. Titanium hydroxide is then precipitated by hydrolysis, filtered
and calcined. This is a process involving approximately 20 separate
processing steps. Because sulphate technology is predominantly a
batch process, it is possible to operate one part of a sulphate process plant
while another part is shut down for maintenance. To some extent,
stocks of intermediate reaction products can be allowed to build up, awaiting
further processing downstream at some later time. It is also possible
that a sulphate process plant can be run at 60-80% capacity utilization fairly
easily if necessary, simply by switching off one or more of its
calciners.
Synthetic
rutile is formed by removing the iron content from ilmenite, thereby
concentrating the titanium dioxide content to at least 90%. In this
way, ilmenites can be upgraded to chloride route feedstocks and used as a
substitute for rutile.
For 2007,
U.S. consumption of ilmenite and titaniferous slag was more than three times
that of both natural and synthetic rutile.
Demand
for Titanium Pigment
An
assessment of U.S. Geological Survey historical data (Titanium Minerals
Handbook, 1970-2007) shows that world demand for titanium dioxide pigments
showed practically unbroken annual growth from 1.6 million tons (Mt) in
1970 to 3.9Mt in 2000. It declined to 3.7Mt in 2001 but rebounded to
around 4Mt in 2002, with sales increasing by around 6.6% and a further rise of
3.2% in 2003. In 2007 world consumption rose to 4.9Mt.
Titanium
Dioxide Prices
The 2007
year end published price range for bagged rutile mineral concentrates was US$570
to US$700 per metric ton, a moderate increase compared with that of
2005. Year end prices of ilmenite concentrate ranged from US$75to
US$85 per ton for 2007.
Competition
Once in
production we will compete with a number of existing titanium dioxide
concentrate producers, including Iluka Resources Inc., Richards Bay Iron and
Titanium Pty. Ltd., QIT-Fer et Titane Inc., and Titania A/S as well as other
projects proposed for development. Each of the existing producers has
an operating history as well as proven reserves and resources; however the
majority of their collective production is in the form of ilmenite or synthetic
rutile, not natural rutile.
Management
believes that the location of the Cerro Blanco property may provide a
significant advantage in competing with other producers of
titanium. In addition to good road transport links, power and water,
a port facility capable of handling 70,000 ton ships is available at Huasco, 30
kilometers northwest of the Cerro Blanco property. The property also
lies close to a fully operational rail track, and if necessary, a spur line
could be run into the property linking it directly to port facilities at
Huasco.
21
In order
to be competitive, we will be required to meet buyers’ specifications, including
particle size, concentration levels, calcium and
impurities. Management believes metallurgical tests to date have
demonstrated that the rutile mineralization at the Cerro Blanco concessions can
be concentrated to an acceptable level to buyers. Results
received in November 2006 of metallurgical mapping studies of the Cerro Blanco
rutile deposit, which were based on 15 different samples selected from a recent
RC drilling campaign, indicate that a high grade rutile product with low levels
of calcium and other impurities can be produced from a range of ore types.
Based on these earlier results, the Company has initiated work at the pilot
plant level, to investigate critical engineering and commercial
factors. The Company’s technical team, working with consultants, aims
to process some 500 tonnes of Cerro Blanco ore in Chile to produce a commercial
grade concentrate.
Management
does not currently have any customers for any rutile titanium which it may
produce. We anticipate that the concentrate would be transported by
ship which makes the location of the mining concessions near a port
advantageous. Notwithstanding this, management will need to evaluate
shipping rates and transit times when it obtains potential customers to
determine whether existing prices for titanium would make sales to such
customers economically viable.
Mining,
particularly copper mining is a significant industry in Chile. We
will be competing with a number of existing mining companies, including the
state-owned Codelco Copper Corporation, one of the world’s largest copper
producers, for qualified workers, supplies, and equipment. However,
management believes Cerro Blanco has an attractive location and good
infrastructure in an active mining region. The property is located at
a low elevation, near the coast, with two nearby towns from which it will be
able to draw manpower and supplies.
Government
Compliance
Our
exploration activities are subject to extensive national, regional, and local
regulations in Chile. These statutes regulate the mining of and
exploration for mineral properties, and also the possible effects of such
activities upon the environment. Future legislation and regulations
could cause additional expense, capital expenditures, restrictions and delays in
the development of the Cerro Blanco property, the extent of which cannot be
predicted. Also, permits from a variety of regulatory authorities are
required for many aspects of mine operation and reclamation. In the
context of environmental permitting, including the approval of reclamation
plans, we must comply with known standards, existing laws and regulations that
may entail greater or lesser costs and delays, depending on the nature of the
activity to be permitted and how stringently the regulations are implemented by
the permitting authority. We are not presently aware of any specific
material environmental constraints affecting the Cerro Blanco property that
would preclude its exploration, economic development, or
operation. Nevertheless, as a condition to placing the property into
production, we are required to submit an environmental impact study for review
and approval.
Chile
enacted provisions in its 1980 Constitution to stimulate the development of
mining, while at the same time guaranteeing the property rights of both local
and foreign investors. While the state owns all mineral resources,
exploration and exploitation of these resources is allowed via mining
concessions, which are granted by the courts. A Constitutional
Organic Law, enacted in 1982, sets out that certain rights and obligations may
attach to concessions, such as the right to mortgage or transfer concessions and
the entitlement of the holder to explore (pedimentos) as well as to exploit
(mensuras). A concession is obtained by filing a claim and includes
all minerals that may occur within the area covered by the
concession. The holder of a concession also has the right to defend
his interest against the state and third parties.
Mining
claims in Chile are acquired in the following manner:
|
·
|
Pedimento:
A pedimento is an exploration claim precisely defined by coordinates with
north-south and east-west boundaries. These may range in size
from a minimum of 100 hectares to a maximum of 5000 hectares, with a
maximum length-to-width ratio of 5:1. A pedimento is valid for
a maximum period of two years, following which the claim may be
reduced in size by at least 50%, and renewed for an additional
two years, provided that no overlying claim has been
staked. Claim taxes are due annually in the month of March; if
the taxes on a pedimento are not paid by such time, the claim can be
restored to good standing by paying double the annual claim tax by or
before the beginning of the following year. In Chile, new
pedimentos are permitted to overlap pre-existing claims; however, the
previously staked or underlying claim always takes precedence as long as
the claim holder maintains his claim in good standing and converts the
pedimento to a manifestacion within the initial two year
period.
|
22
|
·
|
Manifestacion:
During the two-year life of a pedimento, it may be converted at any time
to a manifestacion. Once an application to this effect has been
filed, the claim holder has 220 days to file a “Solicitud de
Mensura”, or “Request for Survey” with a court of competent jurisdiction,
and notify surrounding claim holders of the application by publishing such
request in the Official Mining Bulletin. This notifies
surrounding claim holders, who may contest the claim if they believe their
pre-established rights are being encroached upon. The option
also exists to file a manifestacion directly on open ground, without going
through the pedimento filing
process.
|
|
·
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Mensura:
The claim must be surveyed by a government licensed surveyor within
nine months of the approval of the “Request for
Survey.” During the survey any surrounding claim owners may be
present, and once completed the survey documents are presented to the
court and reviewed by SERNAGEOMIN, the National Mining
Service. Assuming that all steps have been carried out
correctly and all other necessary items are in order, the court then
adjudicates the application and grants a permanent property right (a
mensura), the equivalent to a “patented
claim.”
|
Each of
the above stages of the acquisition of a mining claim in Chile requires the
completion of several steps, including application, publication, inscription
payments, notarization, tax payments, legal fees, “patente” payments, and
extract publication, prior to the application being declared by the court as a
new mineral property. Details of the full requirements of the claim
staking process are documented in Chile’s mining code. Most companies
carrying on operations in Chile retain a mining claim specialist to carry out
and review the claim staking process and ensure that their land position is kept
secure.
In 1994
Chile adopted legislation establishing general environmental norms which must be
followed in activities such as mining. This legislation requires us
to prepare an environmental impact study which must include a description of the
project and a plan for compliance with the applicable environmental
legislation. It must also include base line studies containing the
information relative to the current components of the existing environment in
the area influenced by the project. Further, it must consider the
construction, operation and closure/abandonment phases of the
project. It must also include a plan to mitigate, repair, and
compensate, as well as risk prevention and accident control measures, to achieve
a project compatible with the environment. The study must be
presented to the community for comment and to the regional arm of the National
Environmental Commission for approval.
We have
completed an environmental base line study on the property, which has not yet
been submitted to the regional Chilean government authority for review and
approval. The work completed to date will form the basis of the
environmental impact study to commence mining operations. While the
environmental monitoring and base line studies completed to date have not
identified any endangered plant or animal species on the property, and while the
property is located at distance from human habitation, these studies cited a
risk of airborne dust being generated from rock blasting and crushing operations
and from road haulage activities at open pit mining
operations. Without proper blasting, crushing and road maintenance
practices in place, there is a risk that airborne dust generated from the
planned mining activity at Cerro Blanco could be transported by winds to the
village of Nicolasa, located approximately 14 kilometers to the northeast, or
onto farmland located within the Huasco River valley to the
north-northeast. Nevertheless, prevailing winds at the mine site are
east-west which should permit us to schedule blasting and other activities which
create significant dust on days with prevailing or no winds. Our
principal rock crushing plant will be fitted with dust containment units which
should also mitigate dust from these activities. We also plan to use
water trucks to dampen roadways and limit the amount of dust from trucks using
these roads.
Insurance
We
maintain property and general liability insurance with coverage we believe is
reasonably satisfactory to insure against potential covered events, subject to
reasonable deductible amounts, through our exploration stage.
Cerro
Blanco Property
Glossary
of Terms
Certain
terms used in this section are defined in the following
glossary:
23
ALKALIC
DIORITE-GABBRO-PYROXENITE INTRUSIVE: a potassium and sodium rich, coarse grained
and possibly dark colored igneous rock with associated magnesium and iron that
consolidated from magma beneath the earth's surface.
DEVELOPMENT:
work carried out for the purpose of opening up a mineral deposit and making the
actual extraction possible.
DISSEMINATED:
fine particles of mineral dispensed through the enclosing rock.
EXPLOITATION
MINING CONCESSIONS: licensed claims where the holder has the right to permit,
develop, and operate a mine.
EXPLORATION:
work involved in searching for ore by geological mapping, geochemistry,
geophysics, drilling and other methods.
GRADE:
mineral or metal content per unit of rock or concentrate or expression of
relative quality e.g. high or low grade.
INTRUSIVE:
a volume of igneous rock that was injected, while still molten, and crystallized
within the earth’s crust.
MINERALIZATION:
the concentration of metals and their compounds in rocks, and the processes
involved therein.
ORE:
material that can be economically mined from an ore body and
processed.
RECLAMATION:
the restoration of a site after exploration activity or mining is
completed.
RUTILE: a
mineral, titanium dioxide (TiO2),
trimorpheus with anatase and brookite.
TiO2: Titanium
dioxide. The form of titanium found in the mineral
rutile.
TITANIUM:
a widely distributed dark grey metallic element, (Ti), found in small quantities
in many minerals. The mineral ilmenite, (FeTiO3), is
currently the principal feedstock for the production of titanium dioxide
(TiO2)
powder and titanium metal.
Location
and Access
The Cerro
Blanco property is located approximately 39 kilometers, or approximately 24
miles, west of the city of Vallenar in the Atacama geographic region (Region
III) of northern Chile and southwest of the Cerro Rodeo Mining
District. Access to the property is as follows: The main
Ruta 5, the PanAmerican Highway, runs north from Santiago for approximately 625
kilometers to Vallenar; from there a paved road runs west toward the Port of
Huasco for a distance of 22 kilometers to the village of Nicolasa; at Nicolasa a
municipally maintained dirt road runs approximately 14 kilometers southwest to
the property. Management believes access to the property is adequate
to accommodate the type of vehicles and traffic during the exploration stage on
the property. Improvements to the dirt road will be required for the
development and production stages. These improvements will include
widening of the road and topping it with gravel. Management believes
adequate supplies of bedrock and gravel are available for this purpose, although
it currently has no arrangements or agreements to provide either the improvement
services or supplies. The area is served by a regional airport
at Vallenar.
Cerro
Blanco lies within an established mining district where management believes
experienced mineworkers and support personnel are available. Labor
rates in the region are considerably less costly when compared with standard
North American rates. Mining is one of the main sectors of the
Chilean economy and Region III has a broad base of mining
contractors and suppliers of both new and used mining and processing
equipment.
The local
climate is generally arid with little rainfall in normal
years. Vegetation is minimal, supporting only desert scrub and sparse
cactus. Topography consists of low hills with a mean elevation of 100
meters, which are incised periodically by active creeks. The Huasco
River, 15 kilometers, approximately 9 miles, to the north, is a source of
water. Additionally, high-tension power lines pass 15 kilometers,
approximately 9 miles, to the north of the property along the Vallenar-Huasco
highway.
24
In
addition to road transport links, power and water access, a port facility with a
capacity to handle 70,000 ton ships is accessible at Huasco, which is 30
kilometers, approximately 19 miles, northwest of the property. The
property also lies close to a fully operational rail track. If
necessary, a spur line could be run into the property linking it directly to the
port.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
25
Title
Status and Exploration Rights
Under the
Chilean mining code, surveyed mineral concessions can be held in perpetuity
subject only to an annual tax based on the land held. We have
converted our existing exploration licenses into 33 exploitation licenses. The
tax payment for March 2007 was approximately $50,000 based upon the status of
the mining concessions and the currency exchange rate at that
time. The payment for March 2008 and 2009 was $55,000 at the
prevailing exchange rate. We estimate that the amount for 2010 will
increase because of the increase in the number of our mining
concessions.
26
The
Chilean mining code does not convey surface rights to owners of the mining
concessions. However, the owners of mining concessions are entitled
to the establishment of the necessary easements for mining exploration and
exploitation. The surface lands are subject to the burden of being
occupied, to the extent required by mining operations, by ore yards and dumps,
slag and tailings, ore extraction and benefaction plants, electric substations
and communications lines, canals, reservoirs, piping, housing, construction and
supplementary works, and to the encumbrance of transit and of being occupied by
roads, railways, piping, tunnels, inclined planes, cableways, conveyor belts and
all other means used to connect the operations of the concession with public
roads, benefaction facilities, railroad stations, shipping ports, and consumer
centers. The establishment of these easements, the exercise thereof,
and the compensation therefore, are to be agreed upon either between the
concession owner and the surface owner, or are established by court decision
under a special brief procedure contemplated by the law.
The
surface rights are owned by Agrosuper, a large Chilean agricultural
concern.. Upon completion of the final feasibility study, we intend
to either negotiate surface rights with Agrospuper or to apply to local courts
for these surface rights. This is an ongoing
progress. Nevertheless, should this alternative fail, we will
proceed to seek the easement through the court, which under Chilean mining law
we have the right to obtain. We do not anticipate any material difficulty
with surface rights on the Cerro Blanco property.
Exploration
History
In
1990-1991, the western half of the property, then referred to a as Barranca
Negra, was held under option by Adonos Resources of Toronto, Canada, who
conducted extensive rock sampling, geological mapping and 450 meters of
trenching. In 1992 the property was optioned by Phelps Dodge, to
which they applied the name Freirina. In late 1992 and early 1993,
1,200 meters of diamond and 6,000 meters of reverse circulation drilling were
completed, principally in the most westerly Cerro Blanco anomaly. In
1993 two 15 ton bulk samples were taken for metallurgical testing. A
gravity concentrate was produced from a 15 ton sample of this material by
Lakefield Research in Santiago. Fifty kilos of this concentrate were
shipped to Carpco Inc. in Florida for further gravity circuit up-grading
followed by dry-milling using magnetic and electrostatic separation
techniques.
In 1999,
Dorado Mineral Resources N.L. purchased the property and re-named the property
Celtic. In February 2000, a preliminary processing test carried out
by RMG Services Pty. Ltd., Adelaide, Australia, on behalf of Dorado, used
combined microwave leaching and flotation in the up-grading of Celtic (Freirina)
gravity concentrate. In June 2000 a review and summary of prior
exploration programs and results was conducted by an independent geological
consultant on behalf of Dorado Mineral Resources N.L. A
cross-sectional estimation of the resource potential of the Cerro Blanco deposit
based on the prior drilling and surface sampling was completed as part of this
study. Later the same month a scoping study based on level plans
produced for the area of highest density drilling was undertaken on behalf of
Dorado Recursos Minerales Chile S.A. by Tecniterrae Limitada, a Santiago based
group of consulting mining engineers.
In
November and December 2000 a further study was commissioned by Dorado Recursos
Minerales Chile S.A. to supervise the collection of a second bulk sample of 25
tons for metallurgical testing. Also during this program the Cerro
Blanco area was geologically re-mapped. In August 2001, ownership of
the property was transferred to Kinrade Resources Limited. Subsequent
to these events, Kinrade defaulted on its obligations and was unable to meet the
payment schedules as required under contract. In the fall of 2003
ownership of the property passed to Sociedad Contractual Minera White Mountain
Titanium, formerly known as Compañía Minera Rutile Resources Limitada, the
wholly owned subsidiary of White Mountain Titanium Corporation. The
purchase was completed in September 2005.
27
Geology
and Mineralization
Management
believes the Cerro Blanco property contains a large and possibly unique type of
titanium mineralization. Nevertheless, we are still in the
exploration stage of development and there are no known reserves on the
property. The titaniferous mineral located on the property is clean
red-brown and black rutile which occurs disseminated with the tonalitic suite of
an alkalic diorite-gabbro-pyroxenite intrusive. Its uniformly
disseminated nature and associated alteration endow it with strong similarities
to porphyry copper deposits. Natural rutile concentrates such as
found on this property would be the preferred feed stock for both titanium metal
and pigment grade titanium dioxide production.
Exploration
Plans
During
2006, we undertook two separate drilling campaigns. The first was
designed to test ore variability, and provided 15 different composites which
were subjected to metallurgical testing. The second campaign, which
commenced in October 2006, centered on an exploration program
consisting mainly of infill and step out drilling, grade variability studies and
regional reconnaissance in search of possible extensions to the mineralization
and geologic modelling. On January 24, 2007, we announced that we had
completed a 16-hole diamond drilling campaign, totaling over 2,900
meters at Cerro Blanco. The principal objectives of this campaign
were to increase resources in the central portion of the main zone as well as to
test new target areas to the south and south-west. Core recoveries in
excess of 95% were achieved in the majority of holes
drilled. Split core samples were sent in for on-going
metallurgical testing, and whole-core geotechnical testing has been carried
out in respect of rock mechanics for mine planning
purposes.
Planning
and execution of the drilling campaign was closely linked to previous
metallurgical test work. The principal focus was to target titanium
resources which would yield a high grade TiO2
concentrate from conventional flotation. After an extensive
evaluation of historic data, our contract geologists devised and are now
utilizing an ore ranking system, MR1 (“Mine Rank 1”) through to MR4,
with ranks MR1 and MR2 producing the best, and most commercially
acceptable chemical product specifications. Data from the latest
drilling campaign was input into a geological model and this model, together
with ongoing technical work, will be integrated into a resource
model.
Titanium
mineralization starts at surface and extends over long intercepts with both
attributes offering the potential for low mining costs. We believe we
have good results in the central portion of the main zone of Cerro Blanco, as
well as significant potential for further resource development to the south
and south-west areas of the property.
During
2007, the Company’s geological team undertook and extensive geochemical sampling
program at the Eli prospect. Working on a 25 by 25 meter grid, the
team took nearly 700 samples of outcrop material over an area of 1100 meters by
900 meters. These were sent for chemical assay. Samples
showed mineralization with TiO2 grades in the range 1.0% to 3.0%; two samples
from high grade vein material reported results in excess of 21% TiO2 and 25%
TiO2, respectively.
In early
2008 the Company built a 12 kilometer, 5 meter wide access road to and around
Eli. Drill pads were constructed on 50 meter centers adjacent to the
road grid covering the prospect. An initial drill program, which
involved two diamond drill rigs, commenced in late April and ran through June.
Approximately 4,000 meters of drilling was completed. The Company is awaiting
final analyses and a compilation report on the program.
In
January 2008 the Company retained Thomas A. Henricksen, PhD. and a qualified
person under Canadian National Instrument 43-101 to prepare a NI 43-101
compliant technical report on the Cerro Blanco property (the “Technical
Report”). The Technical Report, which was dated February 25, 2008,
was based on extensive geological mapping, surface sampling, 14,078 meters of
drilling and a geological model developed by the Company.
Following
completion of the Technical Report, the Company retained Dr. Henricksen to
compile a NI 43-101 compliant preliminary assessment of the Cerro Blanco project
(the “Assessment”). The Assessment, which was dated May 30, 2008, incorporated
by reference the Technical Report as well as reports prepared for the Company by
other independent experts in their fields. The latter reports include
preliminary process engineering and costing report prepared by AMEC-Cade dated
March, 2008, a preliminary pit design report prepared by NCL Ingenieria y
Construccion dated May 2008, various metallurgical reports prepared by SGS
Lakefield, an environmental base line study prepared by Arcadis Geotecnica dated
December 2004 and titanium marketing information provided by the Company’s
marketing consultant.
28
For
engineering design purposes, the Assessment adopted a base case set of
assumptions, the major assumptions being the construction of an open pit mine,
processing plant and ancillary facilities capable of producing 100,000 tonnes
per year of high grade rutile concentrate grading plus 94.5% TiO2 at start
up, scaling to 130,000 tonnes per year in production Year 4 at an assumed
undiluted head grade to the plant of 2.3% TiO2. Mining
would commence on the Las Carolinas prospect and feed would be conveyed downhill
to a processing plant located less than two kilometers to the
northeast. Within the plant, the process flow sheet consisted of a
semi-autogenous grinding mill, gravity pre-concentration and column flotation
circuits and high intensity magnetic separation with process water sourced from
a desalination plant constructed at the port of Huasco. AMEC-Cade assumed that
mining would be done under contract at a cost of US$1.20 per tonne mined and
that the price of high grade rutile concentrates would be US$500 per tonne FOB
port.
Based on
these assumptions AMEC-Cade, our internationally recognized engineering
contractor, designed a processing plant with an initial operating capacity of
approximately 5.1 million tonnes per year, increasing to approximately 6.1
million tonnes per year by Year 4. They estimated a cost to construct
the plant and ancillary facilities of US$117 million in direct costs and US$42
million in indirect costs, for a total of US$159 million. To this
figure, and as this was a preliminary study, AMEC-Cade added a 20% contingency
to arrive at a total estimated cost of US$190 million. With respect to
processing plant operating costs, AMEC-Cade estimated site and transportation
costs to port of US$3.60 per tonne processed (US$184 per tonne of rutile
concentrate) in Year 1, dropping to US$3.50 per tonne processed (US$180 per
tonne of rutile concentrate) in Year 4. The anticipated reduction in operating
costs is attributed to increased volumes as well as increased efficiencies from
the gravity pre-concentration circuit. Electric power consumption was
the highest single cost item, comprising approximately 31% of the total
estimated unit operating costs. AMEC-Cade recommended that the Company proceed
to the pilot stage and investigate two possibilities for reducing capital costs:
the use of sea water rather than desalinated water in the processing plant and
siting the plant elsewhere on the property to lower the installed cost of the
conveyor. Two alternate sites were identified.
In
December 2009 we announced completion of a detailed Stage 2 pilot plant test
work program culminating in one 60 hour continuous test run. The
primary objective of the Stage 2 pilot plant test work was to produce a natural
rutile, titanium dioxide concentrate meeting the chemical and particulate
specifications of titanium pigment and sponge metal producers. The
test work was conducted on a 275 tonne bulk sample representative of currently
identified, at and near surface natural rutile mineralization sourced from the
Las Carolinas prospect at our Cerro Blanco project. The bulk sample,
which was taken from an area of the Las Carolinas prospect which could be chosen
to provide initial mine feed to a full scale process plant, assayed 2.9%
TiO2.
Following
crushing to minus ½ inch, mill underflow was fed to a gravity pre-concentration
circuit which consisted of a fine fraction recovery cyclone as well as middlings
and coarse fraction mechanical vibrating tables. The mechanical
vibrating tables concentrated the higher specific gravity, natural rutile while
rejecting some 50% by volume of the lower specific gravity feed
material. The result of gravity pre-concentration was to upgrade the
natural rutile being processed from an initial grade of 2.9% TiO2 to a grade of
approximately 5.0% TiO2. Upgraded material from the gravity
pre-concentration circuit was fed to a conditioning tank for pH adjustment and
from there to a conventional flotation circuit for further recovery,
concentration and cleaning. Flotation feed from the conditioning tank
was passed to rougher, scavenger and 5 cleaning flotation stages, where the
majority of the natural rutile was recovered and concentrated. An
acid pH in the flotation circuit between 3.5 and 4.75 was maintained in the
flotation circuit. Tailings from the flotation circuit could form the
feed source for a feldspar recovery circuit.
Following
the final flotation cleaning stage, the natural rutile, titanium dioxide
concentrate was fed to a high intensity magnetic separator to remove magnetic
and para-magnetic minerals. Magnetic separation resulted in two
concentrate products: a high grade natural rutile, titanium dioxide concentrate
and a magnetic and para-magnetic minerals by-product concentrate.
The
following table provides a chemical analysis of the final product from the 60
hour test run for both + and -75 micron fractions after magnetic
separation:
29
Table
17. Magnetic Separation Results from the Concentrate
produced
during Continuous Operation – Non-magnetics
|
Assays
|
|||||
Element
|
+75
Micron Fraction
|
-75
Micron Fraction
|
||||
Titanium
|
TiO2
|
%
|
96.8
|
97.3
|
||
Iron
|
Fe2O3
|
%
|
0.70
|
0.86
|
||
Silica
|
SiO2
|
%
|
0.95
|
0.80
|
||
Alumina
|
Al2O3
|
%
|
0.11
|
0.08
|
||
Magnesia
|
MgO
|
%
|
<0.01
|
<0.01
|
||
Calcium
|
CaO
|
%
|
0.06
|
0.17
|
||
Sodium
|
Na2O
|
%
|
0.07
|
0.03
|
||
Potassium
|
K2O
|
%
|
0.02
|
0.02
|
||
Phosphorus
|
P2O5
|
%
|
<0.01
|
<0.01
|
||
Manganese
|
MnO
|
%
|
<0.01
|
0.01
|
||
Chromium
|
Cr2O3
|
%
|
0.39
|
0.42
|
||
Vanadium
|
V2O5
|
%
|
0.23
|
0.26
|
||
LOI
|
%
|
0.17
|
0.18
|
We are
now preparing samples of the coarser, +75 micron product for testing by
potential buyers of the natural rutile, titanium dioxide concentrate for paint
and pigment applications.
Following
completion of the Stage 2 pilot plant test work, we conducted further
optimization test work on the rutile process flow sheet, specifically the use of
spirals and Knelson concentrators in the gravity pre-concentration circuit and
the use of sea water as the aqueous medium in the flotation
circuit. In January 2010 we released results from this optimization
test work which stated that spirals were a viable alternative to mechanical
vibrating tables in the pre-concentration circuit and that comparable
concentrate grades and recoveries were obtained using sea water versus fresh
water as the aqueous medium in the flotation circuit.
Also in
January 2010 we reported that we had successfully completed a locked cycle,
flotation test work program to recover feldspar from natural rutile (titanium
dioxide) flotation tailings.
All test
work was carried out in an acidic environment (pH 3.5 to 5.5)—very similar to pH
conditions previously used in the flotation of rutile. Management
believes this is an important achievement as it obviates the need to undertake
major pH adjustment from the rutile to the feldspar flotation
circuit. A sodium feldspar concentrate assaying 9.07% Na2O and 0.37%
Fe2O3 was produced using fresh water as the aqueous medium and minimal addition
of flotation reagents. As with the natural rutile, titanium dioxide
concentrate results achieved in the optimization test work, comparable sodium
feldspar concentrate grades were obtained using sea water versus fresh water as
the aqueous medium.
With
respect to mining, mining costs would be in addition to the processing plant
operating costs estimates set out above. A preliminary mine plan will
be prepared once further drilling has been completed. At present NCL
have modeled preliminary optimized pits for only the Central Zone of the Las
Carolinas prospect on the assumption that this could be the initial pit
area. The pits were modeled using 10 x 10 x 10 meter blocks and base
case pit wall angles of 45 degrees, with sensitivities run at 50
degrees. Whilst the objective of our mapping, surface sampling and
drilling programs is to both increase the quantity and classification of
TiO2
resources on the Cerro Blanco property, the project is at an exploration stage
and there is no guarantee of future exploration success or of economic
viability. For these reasons, project cash flow estimates are not included in
the Assessment.
30
Arcadis
Geotecnica conducted an environmental base line study in 2005 -2006 over the Las
Carolinas and La Cantera prospects. Based on field information gathered,
vegetation in the area was comprised mostly of bushes, cactus and plants
characteristically found in desert regions and areas of sandy and stony
soils. Whilst no native animals were observed, animals potentially
living in the area would include foxes, rodents, pumas, guanacos, rabbits and
reptiles. The study stated that a mining operation as contemplated would have no
significant impact on land vertebrates but care would need to be exercised on
the northern slopes favored by reptiles. Six underground springs were
identified, several with only seasonal flow. As well six houses were
observed extending from the project north towards Vallenar, three of which are
occupied on a permanent basis. Conversations with the inhabitants
suggested that they would have a positive view of the project due to the
economic and social benefits it would bring. Arcadis Geotecnica
recommended an intensive follow up survey of one ravine for possible
archaeological relics and indentified two areas for the possible stockpiling of
waste rock. We retained Arcadis Geotechnica to complete the
recommended follow up survey and no archaeological relics were
found.
The
Assessment concluded that results from the considerable body of work completed
on the project to date support the our recommended, phased work programs and
that the estimated costs for the work programs were reasonable and adequate to
the present stage of the project. The overall objective of our work
programs is to complete an independent final feasibility study which supports
the construction of a natural rutile, TiO2 mining operation on the
property.
We
now have a considerable body of engineering design and process engineering work
completed, both by us and previous owners, for the development of a large open
pit mine and milling operation. The extent to which this engineering
work could be incorporated into a feasibility study will depend on factors such
as optimal plant sizing and configuration based on product volumes and
specifications set out in off-take contracts and process design, the latter to
be determined by refinements coming out of the metallurgical test work and pilot
scale testing completed last year. With a portion of the funds from
this offering, and contemporaneous with commencement of our marketing plan to
seek suitable off-take contracts, we intend to undertake a program of drilling
to provide data for mine planning and design, for an environmental impact
assessment and permitting program, and to commission a feasibility
study. As some of these activities would be undertaken in tandem, we
believe a feasibility study could be completed by fourth quarter 2010 or first
quarter 2011, subject to the availability of funds, personnel and
equipment. We estimate the cost to take the project to the point of
completing a final engineering feasibility study at approximately $3,810,000,
including general and administrative and marketing expenses. As of
January 31, 2010, our cash position was approximately $1,091,000. We
currently do not have sufficient capital to complete this plan and estimate that
we will require additional financing to do so.
Also, as
an exploration stage company, our work is highly speculative and involves unique
and greater risks than are generally associated with other
businesses. We cannot know if our mining concessions contain
commercially viable ore bodies or reserves until additional exploration work is
done and an evaluation based on such work concludes that development of and
production from the ore body is technically, economically, and legally
feasible.
If we
proceed to development of a mining operation, our mining activities could be
subject to substantial operating risks and hazards, including environmental
hazards, industrial accidents, labor disputes, encountering unusual or
unexpected geologic formations or other geological or grade problems,
encountering unanticipated ground or water conditions, pit-wall failures,
flooding, rock falls, periodic interruptions due to inclement weather conditions
or other unfavorable operating conditions and other acts of God. Some
of these risks and hazards are not insurable or may be subject to exclusion or
limitation in any coverage which we obtain or may not be insured due to economic
considerations.
Metric
Conversion Table
For ease
of reference, the following conversion factors are provided:
Metric Share
|
U.S. Measure
|
U.S. Measure
|
Metric Share
|
|||
1
hectare
|
2.471
acres
|
1
acre
|
0.4047
hectares
|
|||
1
meter
|
3.2881
feet
|
1
foot
|
0.3048
meters
|
|||
1
kilometer
|
0.621
miles
|
1
mile
|
1.609
kilometers
|
|||
1
tonne
|
|
1.102
short tons
|
|
1
short ton
|
|
0.907
tonnes
|
31
Employees
Aside
from our President, Michael P. Kurtanjek, who works full time for our company,
and our directors and executive officers that donate a portion of their time to
our business, we currently have only one other full-time employee who works as
an assistant to Mr. Kurtanjek. With the funds from this offering, we
intend to hire an on-site full-time manager for the Cerro Blanco
project. We will also be dependent upon the services of outside
geologists, metallurgists, engineers, and other independent contractors to
conduct our drilling program, develop our pilot plant, and conduct the various
studies required to complete exploration of our mining
concessions. In addition, we do not have any agreements or
arrangements for the necessary managers and employees who will be necessary to
operate the mine if commercial production commences. We do not have
any existing contracts for these services or employees.
LEGAL
PROCEEDINGS
From time
to time, we may become involved in various lawsuits and legal proceedings, which
arise in the ordinary course of business. However, litigation is
subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm our business. We
are currently not aware of any such legal proceedings or claims that we believe
will have, individually or in the aggregate, a material adverse affect on our
business, financial condition or operating results.
MANAGEMENT
Current
Management
The
following table sets forth as of March 22, 2010, the name and ages of, and
position or positions held by, our executive officers and directors and the
employment background of these persons:
32
Name
|
Age
|
Positions
|
Director
Since
|
Employment
Background
|
||||
Michael
P. Kurtanjek
|
57
|
Director
& President
|
2004
|
Mr.
Kurtanjek has served as our President since February 2004. From
1988 to 1995, he was a mining equity research analyst and institutional
salesman with James Capel & Co. and Credit Lyonnais Lang and from 1995
to 2004, a director of Grosvenor Capital Ltd., a private business
consulting firm.
|
||||
Howard
M. Crosby
|
57
|
Director
|
2004
|
Since
1989, Mr. Crosby has been president of Crosby Enterprises, Inc., a
family-owned business advisory and public relations firm. From
1994 to June 2006 he was president and a director of Cadence Resources
Corporation (now Aurora Oil and Gas, Inc.), a publicly traded oil and gas
company. From 2006 until 2008 he was the President and a
director of Gold Crest Mines, Inc., a reporting company engaged in mining
activities. He is also an officer and/or director of Dotson
Exploration Company, Nevada-Comstock Mining Company (formerly Caledonia
Silver-Lead Mines Company), Tomco Energy, Apoquindo Minerals, Inc.,
Plasmet Corp. (which has filed an S-1 registration statement
with the SEC), and Neokinetics Corp., none of which is a reporting
company, except for Tomco Energy.
|
||||
Brian
Flower
|
60
|
Director
& Chairman
|
2005
|
Mr.
Flower has served as our Chairman since September 8, 2006. He
served as our Chief Financial Officer from February 2005 through September
8, 2006. From 1986 to 1993 he was a mining equity research
analyst and investment banker with James Capel & Co. and from 1993 to
1999, Chief Financial Officer and Senior Vice-President, Corporate
Development with Viceroy Resource Corporation. Since January
2000, he has provided management consulting and advisory services through
two partly owned companies of which he is president, Chapelle Capital
Corp. and Trio International Capital Corp. He is also chairman,
president, and a director of Orsa Ventures Corp., a reporting
company.
|
||||
Charles
E. Jenkins
|
54
|
Director
& CFO
|
2007
|
Mr.
Jenkins has served as our CFO since September 8, 2006. From
November 2005 through August 2006 Mr. Jenkins served as the Vice-President
of Finance for Conor Pacific Canada, Inc., a private merchant
bank. From January 2005 until September 2005, he served as
Controller and Acting CFO for Metamedia Capital Corp., a magazine
publishing company. From May 2003 until December 2004 Mr.
Jenkins was self-employed as a consultant providing controller or CFO
duties for a number of private companies. From September 2000
until May 2003 Mr. Jenkins was employed as a manager of special projects
for Canaccord Capital Corporation. Prior to this, from August 1989 to
August 2000 Mr. Jenkins was employed by two brokerage houses in Vancouver
and Calgary in a corporate finance capacity.
|
||||
Wei
Lu
|
43
|
Director
|
2008
|
Wei
Lu has been a partner of Cybernaut Capital Management Ltd, a private
equity firm with a Greater China regional focus since 2008, and has over
fifteen years of diverse experience in investment research and management
as well as business operations. From 2005 until 2007 he was
previously a vice president of The Blackstone Group, assisting in managing
an Asia Pacific investment fund. Prior to Blackstone, from 2004 to
2005, he was a vice president and senior analyst at Oppenheimer Asset
Management and a vice-president and senior analyst at Bank of New York
Capital Markets from 1998 to 2001. From 2001 until 2004 he was also
a co-founder and CFO of the San Francisco headquartered internet
technology and consulting firm SRS2 Inc. Mr. Lu received an MBA
degree from Northeastern University in 1993, an MS in Economics from the
University of Connecticut in 1992, and a Bachelor of Science degree in
International Business from Shanghai Jiaotong University in 1988.
Mr. Lu is a Chartered Financial Analyst Charter holder.
|
||||
John
J. May
|
|
61
|
|
Director
|
|
2008
|
|
Mr.
May has been a managing partner of City of Westminster Corporate Finance
LLP, a financial consulting firm, since April 2008. He has also
been a senior partner of John J. May Chartered Accountants since July
1994. Mr. May is also a director of Avatar Systems, Inc.;
International Consolidated Minerals, Inc.; Petroleum Energy PLC; Tomlo
Energy PLC; Red Leopard Minerals PLC; Southbank UK OIC, and London &
Darfur Healthcare, Inc., each of which is a reporting company with the
Securities and Exchange
Commission.
|
33
Directors
hold office until the next annual meeting of stockholders and until his
successor has been elected and qualified. Officers are elected by the
directors annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer holds office until his
successor has been duly elected and has been qualified or until his death or
until he resigns or has been removed from office. Any officer elected
or appointed by the directors may be removed by the directors whenever in their
judgment the best interests of the company would be served thereby.
Audit
and Compensation Committees
We have a
standing audit committee composed of the following directors: Brian
Flower, Wei Lu, and John J. May. The Board of Directors has
determined that Mr. Flower is an audit committee financial expert by virtue of
his past experience which includes acting as the chief financial officer, an
accounting supervisor and an internal auditor. Mr. Flower,
because of his consulting agreement with us under which he received in excess of
$60,000 last year, would not be considered an independent member of the audit
committee.
We also
have a standing compensation committee composed of the following
directors: Howard M. Crosby, John J. May and Wei Lu.
The board
has adopted a policy to compensate non-executive directors who are
members of committees of the board. These persons will receive $1,000
plus expenses for attendance in person at each committee
meeting. They will receive $500 for attendance at committee meetings
by conference telephone. In addition, each chairman of the committee
will receive $1,000 per meeting they chair.
Nominating
Procedures
We do not
have a standing nominating committee; recommendations for candidates to stand
for election as directors are made by the Board of Directors. We have
not adopted a policy which permits security holders to recommend candidates for
election as directors or a process for stockholders to send communications to
the Board of Directors.
Code
of Ethics
On August
30, 2005, we adopted a Code of Ethics which applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, as well as to other
employees or contractors and anyone associated with our company.
Certain
Relationships and Related Transactions
On
November 26, 2007, we entered into a Brokerage Representation Agreement with
Beacon Hill Shipping Ltd., an entity in which Mr. Flower is a
principal. The term of the agreement is for the life of our mining
property in Chile. We have agreed to pay commissions of 2.5% for
carriers or vessels sourced by Beacon Hill and 1% in the case of any sale or
purchase of vessels by or for the project owners.
34
On
February 1, 2004, we entered into a Management Services Agreement through our
Chilean subsidiary with Lopez & Ashton Ltda., an entity composed of Cesar
Lopez, a former director who resigned in July 2009, and Stephanie D. Ashton, a
former director who resigned in March 2007. This agreement provided
that Lopez & Ashton would provide consulting and management services in
Chile in connection with our mining concessions located there. The
agreement expired on December 31, 2005. Effective January 1, 2006, we
entered into a new one-year renewable Management Services Agreement dated
February 6, 2006, with Lopez and Ashton. This agreement was extended
automatically for an additional one-year term beginning February 1, 2007 and
expired on January 31, 2008. Under the new agreement, Lopez &
Ashton provided and maintained our corporate offices in Chile, provided
administrative services for us in Chile, including maintaining our accounting
records, provided legal services, and furnished other related
services. The new agreement also provided for monthly payments of
$2,500 for the office space, $500 for office support services such as a
receptionist, $1,000 for accounting services, and $2,000 for administrative
services. We also paid $0 and $6,352 for the years ended December
2008 and 2007, respectively, to Ms. Ashton for management services at an hourly
rate of $100 and we paid $49,741 and $54,086 for the same respective years to
Mr. Lopez for legal services at $250 per hour. We paid the flat fee
amounts in Chilean pesos at a fixed rate of CH$550 pesos for each US$1.00 and
the hourly fees at prevailing exchange rates. On December 21, 2007, the Board
granted a bonus of 100,000 fully vested shares to Mr. Lopez for past
services.
On July
11, 2005, we closed a Securities Purchase Agreement with Rubicon, one of our
shareholders, for $5,000,000 in equity financing and issued 6,250,000 shares of
Series A Convertible Preferred Stock and common stock purchase warrants to
purchase 6,250,000 shares of our common stock. Each share of Series A
Convertible Preferred Stock is convertible into our common shares at the rate of
one share of common stock for each share of preferred stock converted, subject
to adjustment in the event of certain transactions, and each warrant is
exercisable at $0.50 per share at any time through July 11, 2009. On
May 5, 2006, we entered into an amendment of the Securities Purchase Agreement
whereby we issued 400,000 shares of our common stock to Rubicon in satisfaction
of breach of a provision of the agreement requiring that the registration
statement be declared effective by January 31, 2006. In September 2007, Rubicon
converted all of its preferred shares into 6,250,000 common shares and sold all
of the shares.
On May 7,
2009, we entered into an Exchange Agreement with Rubicon pursuant to which it
exercised outstanding warrants to purchase 2,000,000 shares of our common stock
at $0.50 per share for gross proceeds to us of $1,000,000. The
closing of the agreement, payment of the funds, and issuance of the shares
occurred on May 8, 2009. In addition, the remaining 4,250,000
warrants held by Rubicon were extended to April 1, 2011, and a cashless exercise
provision was added to the warrants in the event we fail to reasonably maintain
an effective registration statement for the shares issuable upon exercise of the
warrants.
Effective
September 8, 2006, we entered into a one-year renewable Management Services
Agreement dated September 1, 2006, with Mr. Jenkins for services as our
part-time Chief Financial Officer. This agreement expired on December
31, 2009, and effective January 1, 2010, we entered into a Management Services
Agreement with 0834406 BC Ltd., a corporation created under the laws of British
Columbia, Canada, and owned by Mr. Jenkins. Under the new agreement
he is to provide the same services as under the prior agreement. The
term of the new agreement is for a period of five years through December 31,
2015, and may be extended for additional one-year terms unless it is terminated
during the extended periods by either party. Under the new agreement
we have agreed to pay a monthly fee of $6,900, plus reimbursable out-of-pocket
expenses. Either party may terminate the agreement without cause upon three
months’ written notice and at any time for cause. The new agreement
also provides for severance payments in the event of termination upon a change
of control and maintaining the confidentiality of any proprietary
information. On December 21, 2007, the board granted a bonus of
200,000 fully vested shares to Mr. Flower for past services. Also on
December 21, 2007, our board approved grants of 200,000 shares to Mr. Flower
every time a project milestone is achieved, such as positive pre-feasibility
study, piloting and final feasibility study. In January 2009, 200,000
shares were granted based upon the successful pre-feasibility
study. In addition, the board approved a bonus of 200,000 shares to
Mr. Flower upon the listing of our stock on the American Stock Exchange or other
senior exchange. In 2010 we granted Mr. Jenkins 72,000 fully vested
shares valued at $82,800 for services provided in 2008 and 2009. Mr.
Jenkins devotes approximately half of his time to the fulfillment of the
obligations under this agreement and services as our Chief Financial
Officer.
35
On August
1, 2005, we entered into a five-month renewable Business Consultant Agreement
with Crosby Enterprises, an entity controlled by Howard M. Crosby. On
February 6, 2006, we renewed this agreement from January 1, 2006 through May 31,
2006, and have since extended it on a month-to-month basis. Crosby
Enterprises has agreed to perform financial consulting and public relations
services for us. In return, we have granted to this entity options to
purchase 200,000 shares of our common stock at any time through August 1,
2009. The original exercise price of the options was $1.25 per
share. On August 7, 2007, we reduced the exercise price to $0.50 per
share and extended the term of the options for an additional two
years. In addition, we paid a monthly fee of $12,000 for the initial
five-month term of the agreement; we paid a monthly fee of $6,500 during the
five-month renewal period; and we have agreed to pay $6,500 per month thereafter
for the services performed by Crosby Enterprises. Effective August
31, 2007, Mr. Crosby received a bonus for past services comprised of five-year,
fully vested options to purchase 100,000 shares at $0.50 per share, 100,000
shares of common stock, and 100,000 stock purchase warrants, the latter
exercisable through August 15, 2010, at an exercise price of $0.60 per
share. In 2010 we granted Crosby Enterprises 54,000 fully vested
shares valued at $62,100 for services provided in 2008 and 2009. Mr.
Crosby devotes approximately 40% of his time to the fulfillment of the
obligations under this agreement and services as a director of our
company. In the event of termination upon a change of control, Crosby
Enterprises will be compensated as follows: immediate payment of a
severance amount equal to three times the highest annual base cash compensation
paid to it; the immediate vesting of any outstanding unvested options, warrants,
or other convertible instruments; the pro rata amount of any bonuses for which
it is eligible; the extension of the exercise period for at least six months
following such termination.
Director
Independence
Our
securities are not listed on a national securities exchange or in an
inter-dealer quotation system which has requirements that directors be
independent. Therefore, we have adopted the independence standards of
the American Stock Exchange, now known as the NYSE Amex Equities, to determine
the independence of our directors and those directors serving on our
committees. These standards provide that a person will be considered
an independent director if he or she is not an officer of the company and is, in
the view of the company’s board of directors, free of any relationship that
would interfere with the exercise of independent judgment. Our board
of directors has determined that Wei Lu and John May would meet this standard,
and therefore, would be considered to be independent.
Our audit
committee is composed of the following directors: Brian Flower, Wei
Lu and John May. Our compensation committee is composed of the
following directors: Howard M. Crosby, Wei Lu, and John
May. The rules of the American Stock Exchange require that an audit
committee of a small business issuer must maintain at least two members and that
a majority of the members must be independent directors. We believe
our audit and compensation committees meet this standard. The rules
further provide that compensation of the chief executive officer and the other
officers can be determined by a compensation committee generally composed of
independent directors. Neither Mr. Flower nor Mr. Crosby would be
considered independent members of these committees. During the year
ended December 31, 2008, Mr. Crosby served as a member of our audit committee
and Mr. Kurtanjek served as a member of our compensation committee, neither of
whom was considered an independent director or member of these
committees.
Indemnification
Nevada
law expressly authorizes a Nevada corporation to indemnify its directors,
officers, employees, and agents against liabilities arising out of such persons’
conduct as directors, officers, employees, or agents if they acted in good
faith, in a manner they reasonably believed to be in or not opposed to the best
interests of the company, and, in the case of criminal proceedings, if they had
no reasonable cause to believe their conduct was unlawful. Generally,
indemnification for such persons is mandatory if such person was successful, on
the merits or otherwise, in the defense of any such proceeding, or in the
defense of any claim, issue, or matter in the proceeding. In
addition, as provided in the articles of incorporation, bylaws, or an agreement,
the corporation may pay for or reimburse the reasonable expenses incurred by
such a person who is a party to a proceeding in advance of final disposition if
such person furnishes to the corporation an undertaking to repay such expenses
if it is ultimately determined that he did not meet the
requirements. In order to provide indemnification, unless ordered by
a court, the corporation must determine that the person meets the requirements
for indemnification. Such determination must be made by a majority of
disinterested directors; by independent legal counsel; or by a majority of the
shareholders.
36
Article
IX of our Articles of Incorporation provides that we are required to indemnify,
and advance expenses as they are incurred to, any person who was or is a party
or is threatened to be made a party to any threatened or completed action, suit
or proceeding, whether civil or criminal, administrative or investigative, by
reason of the fact that such person is or was a director or officer of our
company, or who is serving at our request or direction as a director or officer
of another corporation or other enterprise, against expenses, including
attorneys’ fees, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by such person in connection with the action, suit, or
proceeding, to the full extent permitted by Nevada law.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the
“Act”) may be permitted to directors, officers and controlling persons of our
company pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
Shareholder
Rights Plan
The Board
of Directors has approved in principle the adoption of a shareholder rights plan
the effect of which would be to protect the current shareholders from any
unwelcomed takeover attempt of the company. Management is in the
process of determining the nature of a plan but has not completed any
preliminary draft of the plan or determined any specifics related to the
proposed plan.
EXECUTIVE
COMPENSATION
Executive
Compensation
The
following table sets forth the compensation of the following “named executive
officers” composed of our principal executive, Michael P. Kurtanjek, and our
Chairman, Brian Flower, our only other executive officer whose compensation
exceeded $100,000, for each of the two fiscal years ended December 31, 2009 and
2008:
Summary
Compensation Table
Name
and Principal
Position
|
Year
|
Salary
($)
|
Stock
Awards
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||||||
Michael
P. Kurtanjek,
|
2009
|
$ | 160,800 | $ | 255,424 | $ | 14,506 | $ | 430,730 | |||||||||
President
|
2008
|
$ | 158,800 | — | $ | 16,932 | (1) | $ | 175,732 | |||||||||
Brian
Flower,
|
2009
|
$ | 255,424 | $ | 139,200 | (2) | $ | 394,624 | ||||||||||
Chairman
|
2008
|
— | — | $ | 139,200 | (2) | $ | 139,200 |
|
(1)
|
This
amount represents the cost to us of maintaining an apartment in Chile for
Mr. Kurtanjek.
|
|
(2)
|
This
amount was paid to Trio International Capital Corp., an entity partially
owned by Mr. Flower, through July 31, 2009, and to Chapelle Capital Corp.,
an entity owned by Mr. Flower from August 1, 2009 through
year-end.
|
37
Effective
February 1, 2006, we entered into a one-year renewable Management Services
Agreement dated February 6, 2006, with Mr. Kurtanjek for service as President of
our company and for providing management of the planning, implementation, and
reporting on exploration, feasibility, and project development activities
carried out on the Cerro Blanco property. This agreement was amended
on February 1, 2006 and August 31, 2007, and effective January 1, 2010, the
agreement was further updated and amended. The term of the amended
agreement is for a period of five years through December 31, 2015, and may be
extended for additional one-year terms unless it is terminated during the
extended periods by either party. For Mr. Kurtanjek’s consent to
extend the agreement, we granted him a five-year incentive warrant to purchase
up to 1,000,000 shares of our common stock at $1.50 per share. The
warrant will vest and become fully exercisable if on or before June 30, 2011,
the closing price of our common stock is at least $2.00 per share for five
consecutive trading days, if on or before December 31, 2012, the closing price
is at least $2.50 per share for five consecutive trading days, or if on or
before December 31, 2015, the closing price is at least $3.00 per share for five
consecutive trading days. Mr. Kurtanjek will also be entitled to
participate in our annual management share compensation pool. Under
the amended agreement we have agreed to pay a monthly fee of $15,410, plus
reimbursable out-of-pocket expenses. Either party may terminate the agreement
without cause upon six months’ written notice and at any time for
cause. The amended agreement also provides for severance payments in
the event of termination upon a change of control and maintaining the
confidentiality of any proprietary information. On December 21, 2007,
our board approved grants of 200,000 shares to Mr. Kurtanjek every time a
project milestone is achieved, such as positive pre-feasibility study, piloting
and final feasibility study. In January 2009, 200,000 shares were
granted based upon the successful pre-feasibility study. In addition,
the board approved a bonus of 200,000 shares to Mr. Kurtanjek upon the listing
of our stock on the American Stock Exchange or other senior
exchange. In 2010 we granted Mr. Kurtanjek 252,000 fully vested
shares valued at $289,800 for services provided in 2008 and 2009. Mr.
Kurtanjek devotes essentially all of his time to the business of our
company.
Effective
February 1, 2006, we entered into a one-year renewable Management Services
Agreement dated February 6, 2006, with Trio International Capital Corp. under
which Mr. Flower provided services to us as senior management. On
April 1, 2009, the Company elected to terminate Trio’s Management Services
Agreement effective July 31, 2009, on a without cause basis by issuing a 120 day
written notice of termination. On August 1, 2009, we entered into a
Management Services Agreement with Chapelle Capital Corp., a company partly
owned by Brian Flower. Under this agreement Mr. Flower will continue
to act as our Executive Chairman and will continue to provide management
services previously provided by Trio. This agreement was amended
effective January 1, 2010. The term of the amended agreement is for a period of
five years through December 31, 2015, and may be extended for additional
one-year terms unless it is terminated during the extended periods by either
party. For Mr. Flower’s consent to extend the agreement, we granted
him a five-year incentive warrant to purchase up to 1,000,000 shares of our
common stock at $1.50 per share. The warrant will vest and become
fully exercisable if on or before June 30, 2011, the closing price of our common
stock is at least $2.00 per share for five consecutive trading days, if on or
before December 31, 2012, the closing price is at least $2.50 per share for five
consecutive trading days, or if on or before December 31, 2015, the closing
price is at least $3.00 per share for five consecutive trading
days. Mr. Flower will also be entitled to participate in our annual
management share compensation pool. Under the amended agreement we
have agreed to pay a monthly fee of $13,340, plus reimbursable out-of-pocket
expenses. Either party may terminate the agreement without cause upon six
months’ written notice and at any time for cause. The amended
agreement also provides for severance payments in the event of termination upon
a change of control and maintaining the confidentiality of any proprietary
information. On December 21, 2007, the board granted a bonus of
200,000 fully vested shares to Mr. Flower for past services. Also on
December 21, 2007, our board approved grants of 200,000 shares to Mr. Flower
every time a project milestone is achieved, such as positive pre-feasibility
study, piloting and final feasibility study. In January 2009, 200,000
shares were granted based upon the successful pre-feasibility
study. In addition, the board approved a bonus of 200,000 shares to
Mr. Flower upon the listing of our stock on the American Stock Exchange or other
senior exchange. In 2010 we granted Mr. Flower’s company 252,000
fully vested shares valued at $289,800 for services provided in 2008 and
2009. Mr. Flower devotes approximately 80% of his time to the
fulfillment of the obligations under this agreement and services as Executive
Chairman of our company.
38
Equity
Awards
The
following table sets forth certain information for the named executive officers
concerning unexercised options that were outstanding as of December 31,
2009:
Outstanding
Equity Awards at Fiscal Year-End
Option Awards
|
|||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
||||||||||||
Michael
P. Kurtanjek,
|
600,000 | -0- | -0- | $ | 0.50 |
5/31/2011
|
|||||||||||
President
(Principal
|
150,000 | -0- | -0- | $ | 0.50 |
8/31/2012
|
|||||||||||
Executive
Officer)
|
|||||||||||||||||
Brian
Flower, Chairman
|
400,000 | -0- | -0- | $ | 0.50 |
1/31/2011
|
|||||||||||
150,000 | -0- | -0- | $ | 0.50 |
8/31/2012
|
The
options held by the named executive officers at year-end were granted pursuant
to our existing Stock Option Plan adopted on August 30, 2005. Our shareholders
approved the plan on November 10, 2006. The purpose of the plan is to
provide eligible persons an opportunity to acquire a proprietary interest in our
company and to participate in the profitability of the company.
There are
3,140,000 shares of common stock authorized for stock options under the plan,
which are subject to adjustment in the event of stock splits, stock dividends,
and other situations. In addition, aggregate grants to a single
person are limited to 5% of the total number of issued and outstanding shares
and the aggregate number authorized for grants to insiders is limited to 20% of
the issued and outstanding shares. Grants to consultants are limited
to 2% of the issued and outstanding shares.
The plan
is administered by our Board of Directors. Participants in the plan
are to be selected by our Board of Directors. The persons eligible to
participate in the plan are as follows: (a) directors of our
company and its subsidiaries; (b) officers of our company and its subsidiaries;
(c) employees of our company and any of its subsidiaries; and (d) those engaged
by us to provide ongoing management or consulting services, or investor
relations activities for us or any entity controlled by us.
The
purchase price under each option is established by the Board of Directors at the
time of the grant and may not be discounted below the maximum discount permitted
under the policy of the Toronto Exchange.
The Board
of Directors will fix the terms of each option, but no option can be granted for
a term in excess of five years. The Board of Directors will not
impose a vesting schedule upon any options granted which provides for exercise
of an option for less than 25% of the shares subject to the option upon approval
of listing of our stock on the Toronto Exchange and 12.5% every quarter
thereafter.
During
the lifetime of the person to whom an option has been granted, only that person
has the right to exercise the option and that person cannot assign or transfer
any right to the option.
In the
event of the death of the option holder, the options will immediately vest and
may be exercised for up to one year from the date of death. If the
option holder’s relationship with us is terminated for cause, the unexercised
options will immediately terminate. If the option holder retires,
voluntarily resigns, or is terminated for other than cause, the options will be
exercisable for 90 days thereafter or for 30 days if the person was engaged in
investor relations.
In the
event of the corporate take-over, reorganization or change of control, the
options will vest and the holder may exercise the options or, in the event of a
corporate reorganization, receive the kind and amount of shares or other
securities or property that he would have been entitled to receive if he had
been a holder of shares of our company at the time of the reorganization, or, if
appropriate, as otherwise determined by the Board of Directors.
39
The Board
of Directors has approved an employee benefit plan for officers, directors, and
employees to increase stockholder value and the success of the company by
motivating members of management to provide services to the company and perform
to the best of their abilities, to achieve the company’s objectives, and to
allow us to minimize the cash component of compensation while at the same time
providing a sufficiently attractive overall compensation plan with which to
attract and retain management. The plan will be open to directors,
officers or employees of or consultants to our company or an affiliate of the
company. The pool will consist of up to 1% of the outstanding shares
at the end of each year. Participants in the pool will be determined
by our Chairman subject to approval by the Compensation Committee.
Director
Compensation
The
following table sets forth certain information concerning the compensation of
our directors, excluding the named executive officers whose total compensation
is set forth in the Summary Compensation Table above, for the last fiscal year
ended December 31, 2009:
Director
Compensation
Name
|
Fees Earned or
Paid in Cash
($)
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||
Charles
E. Jenkins
|
0 | $ | 72,000 | (1) | $ | 72,000 | ||||||
Howard
Crosby
|
0 | $ | 78,000 | (2) | $ | 78,000 | ||||||
Cesar
Lopez
|
0 | $ | 61,800 | (3) | $ | 61,800 | ||||||
Wei
Lu
|
$ | 3,000 | $ | 72,615 | (3) | $ | 75,615 | |||||
John
May
|
$ | 3,000 | $ | 72,615 | (3) | $ | 75,615 |
|
(1)
|
This
amount was paid to Mr. Jenkins as salary under our management services
agreement with him.
|
|
(2)
|
This
amount was paid to Crosby Enterprises under our Business Consulting
Agreement with Mr. Crosby’s
company.
|
|
(3)
|
In
2009 we awarded Mr. Lopez warrants to purchase 100,000 shares at $0.50 per
share, and awarded to Messrs Lu and May warrants to purchase 117,500
shares each at $0.50 per share. Mr. Lopez resigned as a
director in July 2009. The dollar amount of the warrant grants
is based upon the value recognized for financial statement reporting
purposes with respect to the fiscal year in accordance with FAS
123R.
|
On July
29, 2005, the board adopted a policy to compensate directors who are not
executive officers of the Company. Such persons will receive $1,000
plus expenses for attendance in person at each meeting of the Board of
Directors. They will receive $500 for attendance at such meetings by
conference telephone. Also on July 29, 2005, the board adopted a
policy to compensate non-executive directors who are
members of committees of the board. These persons will receive $1,000
plus expenses for attendance in person at each committee
meeting. They will receive $500 for attendance at committee meetings
by conference telephone. In addition, each chairman of the committee
will receive $1,000 per meeting they chair.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information furnished by current management
and others, concerning the ownership of our common stock as of March 22, 2010,
of (i) each person who is known to us to be the beneficial owner of more than 5
percent of our common stock, without regard to any limitations on conversion or
exercise of convertible securities or warrants; (ii) all directors and executive
officers; and (iii) our directors and executive officers as a
group:
40
Amount
and Nature
|
||||||||||||
Name
and Address
|
of
Beneficial
|
Percentage
of Class (2)
|
||||||||||
of Beneficial Owner
|
Ownership (1)
|
Before Offering
|
After Offering
|
|||||||||
Michael
P. Kurtanjek
|
3,585,295 | (3) | 9.17 | % | 6.13 | % | ||||||
9
Church Lane
|
||||||||||||
Copthorne
|
||||||||||||
West
Sussex, England
|
||||||||||||
RH10
3PT
|
||||||||||||
Howard
M. Crosby
|
1,041,500 | (4) | 2.78 | % | 1.83 | % | ||||||
6
East Rose Street
|
||||||||||||
Walla
Walla, WA 99362
|
||||||||||||
Brian
Flower
|
2,782,000 | (5) | 47.15 | % | 4.77 | % | ||||||
Suite
1508 - 999 West Hastings Street
|
||||||||||||
Vancouver,
British Columbia
|
||||||||||||
Canada V6C
2W2
|
||||||||||||
Charles
E. Jenkins
|
647,000 | (6) | 1.72 | % | 1.13 | % | ||||||
Suite
1508 - 999 West Hastings Street
|
||||||||||||
Vancouver,
British Columbia
|
||||||||||||
Canada
V6C 2W2
|
||||||||||||
Wei
Lu
|
382,500 | (7) | 1.03 | % | * | |||||||
120
Linden Street
|
||||||||||||
Needham,
MA 02492
|
||||||||||||
John
J. May
|
332,500 | (8) | * | * | ||||||||
2
Belmont Mews
|
||||||||||||
Camberley
|
||||||||||||
Surrey
GU15 2PH
|
||||||||||||
Executive
Officers and
|
8,770,795 | 20.89 | % | 14.28 | % | |||||||
Directors
as a Group
|
||||||||||||
(6
Persons)
|
||||||||||||
Rubicon
Master Fund (9)
|
6,594,000 | (9)(10) | 15.94 | % | 10.85 | % | ||||||
c/o
Rubicon Fund Management LLP
|
||||||||||||
103
Mount St.
|
||||||||||||
London
W1K 2TJ
|
||||||||||||
United
Kingdom
|
||||||||||||
Kin
Wong
|
5,600,000 | (11) | 14.31 | % | 9.57 | % | ||||||
6
Bl 23 Floor
|
||||||||||||
Cts
Plaza Otc
|
||||||||||||
Peoples
Republic of China
|
*Less than 1%
|
(1)
|
Beneficial
Ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of common stock subject to
options, warrants, or other conversion privileges currently exercisable or
convertible, or exercisable or convertible within 60 days of March 22,
2010, are deemed outstanding for computing the percentage of the person
holding such option or warrant but are not deemed outstanding for
computing the percentage of any other
person.
|
41
|
(2)
|
Percentage
before the offering is based on 37,120,972 shares of common stock
outstanding as of March 22, 2010. Percentage after the
offering, assuming the sale of all of the shares in this offering,
including the shares issuable upon conversion of the Series A Preferred
stock, the outstanding warrants and options included in this offering, and
the warrants issued with our units, would be 56,545,208 shares
outstanding.
|
|
(3)
|
Includes
750,000 shares issuable pursuant to vested options and 1,225,000 stock
purchase warrants.
|
|
(4)
|
Includes
300,000 shares issuable pursuant to vested options and 100,000 stock
purchase warrants.
|
|
(5)
|
Includes
550,000 shares issuable pursuant to vested options and 1,225,000 stock
purchase warrants.
|
|
(6)
|
Includes
150,000 shares issuable pursuant to stock purchase warrants and 400,000
shares issuable pursuant to vested
options.
|
|
(7)
|
Includes
82,500 shares issuable pursuant to vested
options.
|
|
(8)
|
Includes
82,500 shares issuable pursuant to vested
options.
|
|
(9)
|
Pursuant
to Investment Agreements, each of Rubicon Fund Management Ltd. and Rubicon
Fund Management LLP share all investment and voting power with respect to
the securities held by Rubicon Master Fund. Paul Anthony Brewer
and Horace Joseph Leitch III share all investment and voting power with
respect to Rubicon Fund Management Ltd. and Rubicon Fund Management
LLP. Each of Rubicon Fund Management Ltd., Rubicon Fund
Management LLP, Paul Anthony Brewer, and Horace Joseph Leitch III may be
deemed to be beneficial owners of the securities held by Rubicon Master
Fund. Each of Rubicon Fund Management Ltd., Rubicon Fund
Management LLP, Paul Anthony Brewer, and Horace Joseph Leitch III disclaim
beneficial ownership of the securities held by Rubicon Master
Fund.
|
|
(10)
|
Includes
4,250,000 shares issuable upon exercise of
warrants. Notwithstanding the foregoing, the warrants may not
be exercised if the holder of the security, together with its affiliates,
after such exercise would hold 4.9% of the then issued and outstanding
shares of our common stock.
|
|
(11)
|
Includes
2,000,000 shares issuable pursuant to stock purchase
warrants.
|
SELLING
STOCKHOLDERS
The table
below sets forth information concerning the resale of the shares of common stock
by the selling stockholders. We will not receive any proceeds from
the resale of the common stock by the selling stockholders. We will
receive proceeds from the exercise of the warrants. Assuming all the
shares registered below are sold by the selling stockholders, none of the
selling stockholders will continue to own any shares of our common
stock.
The
following table also sets forth the name of each person who is offering the
resale of shares of common stock by this prospectus, the number of shares of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common stock
each person will own after the offering, assuming they sell all of the shares
offered, without regard to any limitation on conversion or
exercise.
Name
|
Beneficial
Ownership
Before
Offering
|
Percentage of
Common
Stock Owned
Before
Offering
|
Amount to be offered
for the security
holder’s account
|
Percentage of
Common Stock
Owned After
Offering(1)
|
||||||||||||
Rubicon
Master Fund(2)
|
6,594,000 | (3) | 15.9 | %(3) | 6,594,000 | 0 | ||||||||||
Phelps
Dodge Corporation
|
1,040,000 | (4) | 2.8 | %(4) | 1,040,000 | 0 | ||||||||||
Zheng
Rong Ye
|
500,000 | (5) | 1.3 | % | 400,000 | * | ||||||||||
Xin
Hui Qian
|
200,000 | (6) | * | 200,000 | 0 | |||||||||||
Hua
Jiang
|
600,000 | (7) | 1.65 | % | 600,000 | 0 | ||||||||||
Hai
Qian Liang
|
2,000,000 | (8) | 5.2 | % | 2,000,000 | 0 | ||||||||||
Wong
Kin
|
5,600,000 | (9) | 14.3 | % | 4,000,000 | 9.57 | % | |||||||||
Yuan
Sheng Zhang
|
400,000 | (10) | * | 400,000 | 0 | |||||||||||
Lloyd
Edwards Jones SAS
|
400,000 | (11) | * | 400,000 | 0 | |||||||||||
Long
Short Equity Deep Discount Value 1
|
1,600,000 | (12) | 4.2 | % | 1,600,000 | 0 | ||||||||||
Fredric
D. Ohr IRA
|
200,000 | (13) | * | 200,000 | 0 | |||||||||||
Michael
M. McKinstry
|
266,667 | (14) | * | 200,000 | * | |||||||||||
Leonard
J. Gross
|
140,000 | (15) | * | 140,000 | 0 | |||||||||||
Michael
P. Kurtanjek(16)
|
3,585,295 | (17) | 9.2 | % | 450,000 | * | ||||||||||
Trio
International Capital Corp.(18)
|
2,782,000 | (19) | 7.2 | % | 1,000,000 | * | ||||||||||
Charles
E. Jenkins (20)
|
647,000 | (21) | 1.7 | % | 300,000 | * | ||||||||||
Crosby
Enterprises (22)
|
1,041,500 | (23) | 2.86 | % | 500,000 |
___
|
% | |||||||||
Objective
Equity LLC(24)
|
77,600 | (25) | * | 77,600 | 0 | |||||||||||
TOTAL
|
27,674,062 | 20,101,600 |
42
* Less
than 1%
(1)
|
Assumes
that all securities registered will be sold by us and the selling
stockholders, in which event 56,545,208 would be
outstanding.
|
(2)
|
Pursuant
to Investment Agreements, each of Rubicon Fund Management Ltd. and Rubicon
Fund Management LLP share all investment and voting power with respect to
the securities held by Rubicon Master Fund. Paul Anthony Brewer
and Horace Joseph Leitch III share all investment and voting power with
respect to Rubicon Fund Management Ltd. and Rubicon Fund Management
LLP. Each of Rubicon Fund Management Ltd., Rubicon Fund
Management LLP, Paul Anthony Brewer and Horace Joseph Leitch III may be
deemed to be beneficial owners of the securities held by Rubicon Master
Fund. Each of Rubicon Fund Management Ltd., Rubicon Fund
Management LLP, Paul Anthony Brewer and Horace Joseph Leitch III disclaim
beneficial ownership of the securities held by Rubicon Master
Fund.
|
(3)
|
Includes
4,250,000 shares issuable upon exercise of warrants, which are convertible
and exercisable within 60 days. Notwithstanding the foregoing,
the shares of the warrants may not be converted or exercised if the holder
of the security, together with its affiliates, after such conversion or
exercise would hold 4.9% of the then issued and outstanding shares of our
common stock.
|
(4)
|
Includes
1,000,000 shares issuable upon conversion of 625,000 Series A Convertible
Preferred Shares, which are convertible within 60
days. Notwithstanding the foregoing, the shares of the Series A
Convertible Preferred Stock may not be converted if the holder of the
security, together with its affiliates, after such conversion would hold
4.9% of the then issued and outstanding shares of our common
stock.
|
(5)
|
Includes
200,000 shares issuable upon exercise of common stock purchase
warrants.
|
(6)
|
Includes
100,000 shares issuable upon exercise of common stock purchase
warrants.
|
(7)
|
Includes
300,000 shares issuable upon exercise of common stock purchase
warrants.
|
(8)
|
Includes
1,000,000 shares issuable upon exercise of common stock purchase
warrants.
|
(9)
|
Includes
2,000,000 shares issuable upon exercise of common stock purchase
warrants.
|
(10)
|
Includes
200,000 shares issuable upon exercise of common stock purchase
warrants.
|
(11)
|
Includes
200,000 shares issuable upon exercise of common stock purchase
warrants.
|
(12)
|
Includes
800,000 shares issuable upon exercise of common stock purchase
warrants.
|
(13)
|
Includes
100,000 shares issuable upon exercise of common stock purchase
warrants.
|
(14)
|
Includes
100,000 shares issuable upon exercise of common stock purchase
warrants.
|
(15)
|
Includes
70,000 shares issuable upon exercise of common stock purchase
warrants.
|
(16)
|
Mr.
Kurtanjek has served as a director and our President and CEO since
February 2004.
|
(17)
|
Includes
1,225,000 shares issuable upon exercise of common stock purchase warrants
and 750,000 shares issuable upon exercise of common stock purchase
options.
|
(18)
|
Brian
Flower, our Chairman, is a principal of Trio International Capital
Corp. Mr. Flower has served as our Chairman since September 8,
2006, and served as our Chief Financial Officer from February 2005 through
September 8, 2006. He was first elected as a director in
2005. Trio had a consulting agreement with us from February
2006 to July 2009, to provide management and administrative services,
including the services of Mr. Flower. In addition, Trio,
through its wholly owned subsidiary Beacon Hill Shipping Ltd, has entered
into an agreement with us to provide ocean transportation services to us
for any minerals shipped from our mining properties in
Chile. Trio also provided us office space in Vancouver, British
Columbia, through July 31, 2009. These same services previously
provided by Trio are now provided by Chapelle Capital Corp., an entity
owned and controlled by Mr.
Flower.
|
43
(19)
|
Includes
1,225,000 shares issuable upon exercise of common stock purchase warrants
and 550,000 shares issuable upon exercise of common stock purchase options
held by Trio.
|
(20)
|
Mr.
Jenkins has served as our CFO since September 8, 2006 and has been a
director since August 31, 2007.
|
(21)
|
Includes
150,000 shares issuable upon exercise of common stock purchase warrants
and 400,000 shares issuable upon exercise of common stock purchase
options.
|
(22)
|
Crosby
Enterprises is controlled by Howard M. Cosby, who has been a director
since 2004. Since August 1, 2005, Mr. Crosby provides
financial consulting and public relations services to us pursuant to a
consulting agreement with Crosby Enterprises on a month-to-month
basis.
|
(23)
|
Includes
100,000 shares issuable upon exercise of common stock purchase warrants
and 300,000 shares issuable upon exercise of common stock purchase
options.
|
(24)
|
Objective
Equity LLC has served as a financial consultant for us and has assisted in
our fundraising efforts. Objective is an NASD-registered
broker-dealer.
|
(25)
|
Represents
77,600 shares issuable upon exercise of common stock purchase
warrants. The warrants are shared among the three members of
the limited liability company as follows: Kent and Catherine
Williams 2007 Trust, 22,633 warrants; Doug Cole, 22,634 warrants; Delores
O’Connor, 22,633 warrants; and David Riedel, 9,700
warrants.
|
The
number and percentage of shares beneficially owned is determined in accordance
with Rule 13d-3 of the Securities Exchange Act of 1934, and the information is
not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as
to which the selling stockholders has sole or shared voting power or investment
power and also any shares, which the selling stockholders has the right to
acquire within 60 days.
Rubicon
Master Fund and Phelps Dodge have each contractually agreed to restrict its
ability to convert the Series A shares or exercise the warrants and receive
shares of our common stock such that the number of shares of common stock held
by each in the aggregate and their affiliates after such conversion or exercise
does not exceed 4.9% of the then issued and outstanding shares of common
stock. Accordingly, the number of shares of common stock set forth in
the table for these selling stockholders exceeds the number of shares of common
stock that the selling stockholders could own beneficially at any given time
through their ownership of the convertible preferred shares and the
warrants. In that regard, the beneficial ownership of the common
stock by the selling stockholder set forth in the table is not determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
Purchase
of Mining Concessions from Phelps Dodge
On or
about September 5, 2003, Sociedad Contractual Minera White Mountain Titanium,
formerly known as Compania Minera Rutile Resources Limitada, formally known as
Minera Royal Silver Limitada, a subsidiary of GreatWall Minerals Ltd. at the
time, and Compania Contractual Minera Ojos del Salado, a Chilean operating
subsidiary of Phelps Dodge Corporation, entered into a Transfer of Contract and
Mortgage Credit agreement for the purchase by GreatWall’s subsidiary of the
initial nine mining registered exploitation concessions located in Chile for
which Compania Contractual Minera Ojos del Salado held a
mortgage. Pursuant to the transfer agreement, Compania Contractual
Minera Ojos del Salado sold and transferred its mortgage right to the mining
concessions to GreatWall’s subsidiary. Subject to the terms of the
transfer agreement, Compania Minera Rutile Resources Limitada was obligated to
pay $650,000 to Compania Contractual Minera Ojos del Salado for its transfer of
the mortgage to GreatWall’s subsidiary, payable $50,000 within thirty days of
the transfer agreement, $50,000 on March 4, 2004, and $50,000 on September 5,
2004, and was obligated to pay $500,000 on September 4, 2005, which date was
extended by mutual consent of the parties to September 9, 2005. The
original transfer agreement was negotiated between the management of GreatWall
and Phelps Dodge, and as a result of the merger of GreatWall into our company,
Compania Minera Rutile Resources Limitada became our wholly owned
subsidiary. The initial payment of $50,000 was paid by GreatWall
prior to its merger into our company in February 2004. The subsequent
payments of $50,000 each on March 4, 2004, and September 5, 2004, were paid by
us. Prior to the final payment, Compania Contractual Minera Ojos del
Salado transferred by dividend the right to receive the final payment from our
Chilean subsidiary to its parent corporation, PD Ojos del Salado, Inc., a
Delaware corporation, and PD Ojos del Salado, Inc. subsequently transferred by
dividend the right to receive the final payment from to its parent corporation,
Phelps Dodge. In September 2005, we completed a debt conversion
agreement with Phelps Dodge whereby we issued 625,000 shares of Series A
Convertible Preferred Stock and warrants to purchase 625,000 shares of our
common stock as consideration for the final payment of $500,000 owed under the
property payment schedule. The warrants expired on September 7,
2009. Effective July 2007, pursuant to a repricing provision of the
debt conversion agreement, the number of common shares issuable for the 625,000
preferred shares was increased to 1,000,000.
44
Funding
Transaction with Rubicon Master Fund
On July
11, 2005, we closed the Securities Purchase Agreement with Rubicon Master Fund
on $5,000,000 in equity financing and issued to Rubicon 6,250,000 shares of
Series A Convertible Preferred Stock and common stock purchase warrants to
purchase 6,250,000 shares of our common stock. Each share of Series A
Convertible Preferred Stock is convertible into our common shares at the
effective rate of one share of our common stock for each share of the preferred
stock converted and each warrant is exercisable at $1.25 per share at any time
through July 11, 2009. The Series A stock and the warrants also
contain provisions adjusting the conversion and exercise prices in the event
that we issue our common stock, or instruments convertible into shares of our
common stock, at prices below the conversion price of the Series A shares or the
exercise price of the warrants. We have also agreed not to issue our
common stock, or instruments convertible into shares of our common stock, at
prices below the market value of our common stock. Pursuant to the
repricing provisions of the warrant agreement, the warrants are now exercisable
at $0.50 per share. Also, in September 2007, Rubicon converted
all of its preferred shares into 6,250,000 common shares, all of which it has
sold.
Pursuant
to the Securities Purchase Agreement that we entered into with Rubicon, we were
obligated to file the registration statement of which this prospectus is a part
with the Securities and Exchange Commission on or before October 31,
2005. The registration rights provisions of the Securities Purchase
Agreement require us to file a registration statement at our expense to register
the shares of common stock underlying the Series A stock and the warrants on or
before October 31, 2005. We are also required under the agreement to
use our commercially reasonable efforts to cause the registration statement to
be declared effective by the SEC as promptly as possible after filing, but in
any event prior to January 31, 2006. In the event that the
registration statement is not filed on or before October 31, 2005, or declared
effective by January 31, 2006, then we have agreed to pay liquidated damages to
Rubicon equal to 1% of the purchase price of the securities paid by them for
each month we fail to meet these requirements. This payment of the
liquidated damages does not relieve us from our obligations to register the
shares. Additional events which would trigger the liquidated damages
provision include the following: In the event we fail to file a
required post-effective amendment within ten trading days after our registration
statement is no longer effective or if the post-effective amendment is not
declared effective within 21 days following the deadline to file the
post-effective amendment; if we fail to have our common stock listed on a
designated U.S. or Canadian exchange or Nasdaq, or quoted on the OTC Bulletin
Board by January 31, 2006; or in the event the selling stockholders are not
permitted to sell their shares for any reason pursuant to this prospectus or
pursuant to registration in Canada for either 10 consecutive trading days or for
30 trading days in any 365 day period. We have also agreed not to
file a primary registration of our shares for our own account either in the U.S.
or Canada prior to the effective date of the registration of which this
prospectus is a part.
Debt
Conversion Transaction with Phelps Dodge Corporation
On
September 7, 2005, we amended the Securities Purchase Agreement with Rubicon to
include a transaction with the prior owner of our mining concessions, Phelps
Dodge, in which we issued 625,000 shares of Series A Convertible Preferred Stock
and common stock purchase warrants to purchase 625,000 shares of our common
stock under identical terms as with Rubicon. Effective July 2007, the
conversion ratio for the preferred shares was increased to 1,000,000 common
shares. These securities were issued in satisfaction of the final
payment of $500,000 due to Phelps Dodge in connection with the purchase of our
Chilean mining concessions. The warrants granted to Phelps Dodge
expired on September 7, 2009.
Amendment
to Securities Purchase Agreement
On May 5,
2006, we entered into an amendment to the Securities Purchase Agreement with
Rubicon and Phelps Dodge. The amendment was necessitated by our
inability to obtain effectiveness of the registration statement of which this
prospectus is a part by January 31, 2006, as required in the
agreement. Pursuant to the amendment, we issued 400,000 shares to
Rubicon and 40,000 shares to Phelps Dodge in settlement of the breach of this
provision of the agreement by us. In addition, we eliminated any
further damages provisions pertaining to the effectiveness of the registration
statement and the need to obtain a listing of our common stock on a Canadian
exchange. These shares have been included in the registration
statement of which this prospectus is a part.
45
Exercise
of Warrants by Rubicon
On May 7,
2009, we entered into an Exchange Agreement with Rubicon through which it
exercised outstanding warrants to purchase 2,000,000 shares of our common stock
at $0.50 per share for gross proceeds to us of $1,000,000. The
closing of the agreement, payment of the funds, and issuance of the shares
occurred on May 8, 2009. In addition, the remaining 4,250,000
warrants held by Rubicon were extended to April 1, 2011, and a cashless exercise
provision was added to the warrants in the event we fail to reasonably maintain
an effective registration statement for the shares issuable upon exercise of the
warrants.
DESCRIPTION
OF SECURITIES
Units
We are
offering units, each composed of three shares of common stock and one warrant to
purchase another share of common stock.
Common
Stock
The
shares registered pursuant to the registration statement, of which this
prospectus is a part, are shares of common stock, all of the same class and
entitled to the same rights and privileges as all other shares of common
stock.
We are
authorized to issue up to 100,000,000 shares of $.001 par value common
stock. The holders of common stock, including the shares offered
hereby, are entitled to equal dividends and distributions, per share, with
respect to the common stock when, as and if declared by the Board of Directors
from funds legally available therefore. No holder of any shares of
common stock has a pre-emptive right to subscribe for any securities of our
company nor are any common shares subject to redemption or convertible into
other securities of our company. Upon liquidation, dissolution or
winding up of our company, and after payment of creditors, the assets will be
divided pro-rata on a share-for-share basis among the holders of the shares of
common stock.
Each
share of common stock is entitled to one vote with respect to the election of
any director or any other matter upon which shareholders are required or
permitted to vote. Under Nevada corporate law, holders of our
company’s common stock do not have cumulative voting rights, so that the holders
of more than 50% of the combined shares voting for the election of directors may
elect all of the directors, if they choose to do so and, in that event, the
holders of the remaining shares will not be able to elect any members to our
board of directors.
The Board
of Directors has approved in principle the adoption of a shareholder rights plan
the effect of which would be to protect the current shareholders from any
unwelcomed takeover attempt of the company. Management is in the
process of determining the nature of a plan but has not completed any
preliminary draft of the plan or determined any specifics related to the
proposed plan.
Unit
Warrants
Each unit
will include a warrant to purchase one share of our common stock. The
warrants will be issued in the form of warrant certificates, which will govern
the rights of a holder of the warrants. The warrants are transferable
separately from the common stock that is part of the unit. The
warrant certificate has been filed as an exhibit to the registration statement
of which this prospectus is a part.
The
exercise price per share of common stock purchasable upon exercise of each
warrant is $1.34 (representing 125% of common stock offering price) per
share. The warrants will be exercisable by the holders at any time on
or after the closing date of this offering and through and including
three years from that date.
46
The
warrants will, among other things, include provisions for the appropriate
adjustment in exercise price of the warrants and the class and number of the
shares of common stock to be issued upon exercise of the warrants upon the
occurrence of certain events, including any subdivision, consolidation or
reclassification of our common stock, the payment of stock dividends, our
amalgamation, and certain rights offerings and other distributions to all
holders of our common
stock.
In the
event of a capital reorganization or a reclassification of our common stock
(except in certain circumstances), any warrant holder, upon exercise of the
warrants, receives, in substitution for the common stock to which he would have
become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other securities or
property of our company (or cash) that he would have been entitled to receive at
the same aggregate exercise price upon such reorganization or reclassification
if such warrants had been exercised immediately prior to the record date with
respect to such event.
The
common stock underlying the warrants, when issued upon exercise of a warrant,
will be fully paid and non-assessable.
We are
not required to issue fractional shares upon the exercise of a
warrant. In lieu of any fractional share that would otherwise be
issuable, we will pay the warrant holder in cash on the basis of the current
market value of any fractional interest. The holder of a warrant will
not possess any rights as our stockholder until such holder exercises the
warrant.
At any
time in which the registration statement of which this prospectus is a part is
effective after, a warrant may be exercised upon delivery to us, prior to the
expiry date of the warrant, of the exercise form found on the back of the
warrant certificate completed and executed as indicated, accompanied by payment
of the exercise price and any applicable transfer tax in immediately available
funds for the number of common shares with respect to which the warrant is being
exercised. The warrants may be exercised on a cashless basis in the
event that there is not an effective registration statement covering the resale
of the shares of common stock issuable upon the exercise of such warrants at the
time of their exercise.
Series
A Convertible Preferred Stock
We are
authorized to issue 20,000,000 preferred shares and have outstanding 625,000
preferred shares designated as Series A Convertible Preferred Stock, par value
$0.001 per share. The Series A shares have the following rights and
preferences:
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·
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The
Series A shares are convertible into shares of our common stock at any
time. The conversion ratio of the Series A Convertible
Preferred Stock is determined according to a formula computed by dividing
the stated value of the preferred stock, which is designated as $0.80 per
share, by the conversion price of the preferred stock, which is $0.50 per
share, subject to the following limitations and
conditions:
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|
o
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If
we issue or sell shares of our common stock, or grant options or other
convertible securities which are exercisable or convertible into our
common shares, at prices less than the conversion price of our Series A
shares, then the conversion price of the Series A shares will be reduced
to this lower sale or conversion
price.
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o
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The
Series A shares may not be converted into common shares if the beneficial
owner of such shares would thereafter exceed 4.99% of the outstanding
common shares.
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o
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We
are also not obligated to convert the Series A shares if the issuance of
the common shares would exceed the number of shares of common stock which
we may issue upon conversion of our preferred shares without breaching any
obligations under the rules or regulations of the principal market for our
common shares.
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·
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The
holders of the Series A shares are entitled to the number of votes equal
to the number of whole shares of common stock into which they are
convertible. The Series A shares vote together with the holders
of the common stock, except as provided by
law.
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·
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In
the event of any voluntary or involuntary liquidation, dissolution or
winding up of our company, the holders of the Series A shares
will be entitled to receive a pro rata amount of the funds
available for liquidation with the holders of the common stock as though
the Series A shares were converted.
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47
·
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The
holders of the Series A shares are entitled to such dividends paid and
distributions made to the holders of our common stock to the same extent
as if such holders of the Series A shares had converted their preferred
shares into common stock.
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·
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The
holders of the Series A shares do not have any preemptive rights to
purchase shares of our common
stock.
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·
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There
are no redemption or sinking fund provisions applicable to the Series A
shares.
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Outstanding
Warrants
We have
issued and outstanding warrants to purchase 4,250,000 to Rubicon Master Fund,
one of the selling stockholders herein. These warrants are
exercisable immediately at an exercise price of $0.50 per share, provided that
if we issue or sell shares of our common stock, or grant options or other
convertible securities which are exercisable or convertible into our common
shares, at prices less than this exercise price, then the exercise price of
these warrants will be reduced to this lower sale or conversion
price. The warrants expire on April 1, 2011. The warrants
may also be exercised on a cashless basis in the event we fail to reasonably
maintain an effective registration statement for the shares issuable upon
exercise of the warrants. Also, these warrants may not be exercised
if the beneficial owner of such shares would thereafter exceed 4.99% of the
outstanding common shares. In the event of a subdivision or
combination of our common shares, the exercise price in effect immediately prior
to such subdivision or combination and the number of shares issuable upon
exercise will be proportionately adjusted. The warrant holders are
also entitled to certain antidilution rights in the event of a pro rata
distribution to the shareholders. In the event of any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of our assets to another person or other transaction
effected in such a way that holders of our common stock would be entitled to
receive securities or assets with respect to or in exchange for our common
stock, the warrant holder will be entitled to exchange his warrant for a
security of the acquiring entity substantially similar in form and substance to
this warrant.
We also
have issued and outstanding warrants to purchase 5,847,600 to certain of the
selling stockholders herein. These three-year warrants are
exercisable immediately at an exercise price of $0.60 per
share. Because the closing price of our common stock was at or over
$0.90 per share for 20 consecutive days, we have the right to accelerate the
expiry of the warrants upon giving 30 days notice to the holders
thereof. The warrant holders are entitled to certain antidilution
rights in the event of a pro rata distribution to the
shareholders. In the event of any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of our
assets to another person or other organic change, the warrant holder will be
entitled to exchange his warrant for a security of the acquiring entity
substantially similar in form and substance to this warrant or demand the
payment of the value of the warrant.
Options
Shares
issuable upon exercise of the following options are included for resale in this
prospectus:
On August
1, 2006, we granted to Crosby Enterprises options to purchase up to 200,000
shares of our common stock. These options are immediately exercisable
at $0.50 per share and expire on August 1, 2011. On August 31, 2007,
we granted to Crosby Enterprises options to purchase up to 100,000 shares of our
common stock at $0.50 per share. These options are immediately
exercisable and expire on August 31, 2012.
On
January 31, 2005, we granted to Trio International Capital Corp. options to
purchase up to 400,000 shares of our common stock at $0.50 per
share. These options are immediately exercisable at $0.50 per share
and expire on January 31, 2011. On August 31, 2007, we granted to
Trio International Capital Corp. options to purchase up to 150,000 shares of our
common stock at $0.50 per share. These options are immediately
exercisable and expire on August 31, 2012.
48
PLAN
OF DISTRIBUTION
Unit
Offering
We have
appointed Source Capital Group, Inc. as our exclusive placement agent for the
unit offering. They are not required to purchase any securities in
the offering and will merely use their best-efforts to place the units for us
with investors. We have agreed to pay them a cash fee equal to 8% of
the dollar amount received from the sale of the units. We have also
paid an advance of $30,000 against the cash fee payable upon closing of the
offering. This advance is non-refundable to the extent they provide
us with supporting invoices and receipts of actual expenses
incurred. We have also agreed to indemnify Source Capital, its
affiliates and each person controlling Source Capital against losses or damages
incurred as a result of our furnishing them with containing any untrue statement
of material fact which is contained in this prospectus or caused by omission of
material information therefrom, except as such damages or losses caused by
Source Capital’s own gross negligence, bad faith or willful
misconduct.
We are
offering units each composed of three shares of common stock and one
warrant. The purchase price of the units is $3.21 per
unit. The offering will remain open for a period of two months,
unless extended by mutual consent for up to an additional 30 days, and may close
sooner upon the sale of all of the units.
We
estimate that the expenses payable by us in connection with the offer and sale
of the units, as well as the registration of the common stock for the selling
stockholders, all of which will be borne by us, other than underwriting
discounts and commissions, will be as follows:
Securities
and Exchange Commission - Registration Fee
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$ | 1,335 | ||
State
filing Fees
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10,000 | |||
Printing
and Engraving Expenses
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5,000 | |||
Edgarizing
Costs
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5,000 | |||
Accounting
Fees and Expenses
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10,000 | |||
Legal
Fees and Expenses
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25,000 | |||
Miscellaneous
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3,665 | |||
Total
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$ | 60,000 |
Selling
Stockholders
We are
registering outstanding shares of Common Stock and shares of Common stock
issuable upon conversion of the outstanding shares of Series A Convertible
Preferred Stock and exercise of the warrants and options to permit the resale of
such shares of common stock by the selling stockholders, from time to time after
the date of this prospectus. We will not receive any of the proceeds
from the sale by the selling stockholders of such shares of our common
stock. We will bear all fees and expenses incident to our obligation
to register these shares of common stock.
The
selling stockholders, or their pledgees, donees, transferees or other
successors-in-interest, may offer the shares of our common stock for resale at
prevailing market prices on the OTC Bulletin Board, in isolated transactions, or
in a combination of such methods of sale. They may sell their shares
at fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices, or at negotiated prices
with institutional or other investors, or, when permissible, pursuant to the
exemption of Rule 144 under the Securities Act of 1933. These sales
may be effected in transactions, which may involve crosses or block
transactions, in any one or more of the following methods:
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on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
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in
the over-the-counter market;
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in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
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·
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through
the writing of options, whether such options are listed on an options
exchange or otherwise;
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49
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·
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ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
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·
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block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
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purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
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·
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an
exchange distribution in accordance with the rules of the applicable
exchange;
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privately
negotiated transactions;
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short
sales;
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·
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sales
pursuant to Rule 144;
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broker-dealers
which have agreed with the selling security holders to sell a specified
number of such shares at a stipulated price per
share;
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a
combination of any such methods of sale;
and
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any
other method permitted pursuant to applicable
law.
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If the
selling stockholders effect such transactions by selling shares of our common
stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with
sales of the shares of our common stock or otherwise, the selling stockholders
may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of common stock in the course of hedging in
positions they assume. The selling stockholders may also sell shares
of our common stock short and deliver shares of common stock covered by this
prospectus to close out short positions and to return borrowed shares in
connection with such short sales. The selling stockholders may also
loan or pledge shares of our common stock to broker-dealers that in turn may
sell such shares.
The
selling stockholders may pledge or grant a security interest in some or all of
the preferred shares and warrants or shares of our common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time pursuant to this prospectus or any amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of
1933, as amended, amending, if necessary, the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus. The selling stockholders also may
transfer and donate the shares of common stock in other circumstances in which
case the transferees, donees, pledgees or other successors in interest will be
the selling beneficial owners for purposes of this prospectus.
The
selling stockholders and any broker-dealer participating in the distribution of
the shares of Common stock may be deemed to be “underwriters” within the meaning
of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular
offering of the shares of common stock is made, a prospectus supplement, if
required, will be distributed which will set forth the aggregate amount of
shares of common stock being offered and the terms of the offering, including
the name or names of any broker-dealers or agents, any discounts, commissions
and other terms constituting compensation from the selling stockholders and any
discounts, commissions or concessions allowed or reallowed or paid to
broker-dealers.
50
Under the
securities laws of some states, the shares of our common stock may be sold in
such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of common stock may
not be sold unless such shares have been registered or qualified for sale in
such state or an exemption from registration or qualification is available and
is complied with.
There can
be no assurance that any selling stockholder will sell any or all of the shares
of common stock registered pursuant to the registration statement, of which this
prospectus forms a part.
The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may
also restrict the ability of any person engaged in the distribution of the
shares of common stock to engage in market-making activities with respect to the
shares of common stock. All of the foregoing may affect the
marketability of the shares of common stock and the ability of any person or
entity to engage in market-making activities with respect to the shares of
common stock.
We will
pay all expenses of the registration of the shares of common stock pursuant to
the registration rights provisions contained in the Securities Purchase
Agreement with between us and the selling stockholders; provided, however, that
a selling stockholder will pay all underwriting discounts and selling
commissions, if any. We will indemnify the selling stockholders
against liabilities, including some liabilities under the Securities Act, in
accordance with the registration rights agreements, or the selling stockholders
will be entitled to contribution. We may be indemnified by the
selling stockholders against civil liabilities, including liabilities under the
Securities Act, that may arise from any written information furnished to us by
the selling stockholders specifically for use in this prospectus, in accordance
with the related registration rights provisions, or we may be entitled to
contribution.
The
selling stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of the shares, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of the shares by
the selling stockholders. If we are notified by any one or more
selling stockholders that any material arrangement has been entered into with a
broker-dealer for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer, we will file, or cause to be filed, a supplement to this prospectus, if
required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the
name of each such selling stockholder and of the participating broker-dealer(s),
(ii) the number of shares involved, (iii) the price at which such shares were
sold, (iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this prospectus, and (vi) other facts material to the
transaction.
Once sold
under the registration statement, of which this prospectus forms a part, the
shares of common stock will be freely tradable in the hands of persons other
than our affiliates.
The
selling stockholders are not restricted as to the price or prices at which they
may sell their shares. Sales of the shares may have an adverse effect
on the market price of the common stock. Moreover, the selling
stockholders are not restricted as to the number of shares that may be sold at
any time, and it is possible that a significant number of shares could be sold
at the same time, which may have an adverse effect on the market price of the
common stock.
LEGAL
MATTERS
The
validity of the shares of common stock offered under this prospectus is being
passed upon for us by Ronald N. Vance, Attorney at Law, Salt Lake City,
Utah.
51
EXPERTS
Our
financial statements for the years ended December 31, 2008 and 2007 appearing in
this prospectus which is part of a registration statement have been audited by
Smythe Ratcliffe, LLP, and are included in reliance upon such reports given upon
the authority of Smythe Ratcliffe, as experts in accounting and
auditing.
Certain
information with respect to the mineralization and economic estimates of our
Cerro Blanco project incorporated in this prospectus is derived from NI 43-101
reports of Thomas A. Henricksen, PhD and has been incorporated in this
prospectus upon the authority of Mr. Henricksen as an expert with respect to the
matters covered by the reports. In addition, certain information
included in the reports of Mr. Hennricksen has been derived from reports by
AMEC-Cade, NCL Ingenieria y Construccion, SGS Lakefield, and Arcadis
Geotechnica, upon their authority as experts with respect to the matters covered
by their reports.
ADDITIONAL
INFORMATION
We
have filed a registration statement on Form SB-2 under the Securities Act of
1933, as amended, (SEC File No. 333-129347), a registration statement on Form
S-1 under the Securities Act of 1933, as amended (SEC File No. 333-148644), and
a registration statement on Form S-1 under the Securities Act of 1933, as
amended (SEC File No. 333-164963) relating to the shares of common
stock being offered by this prospectus, and reference is made to such
registration statements. This prospectus constitutes the prospectus
of White Mountain Titanium Corporation, filed as part of the registration
statements, and it does not contain all information in the registration
statements, as certain portions have been omitted in accordance with the rules
and regulations of the Securities and Exchange Commission.
We are
required to file reports and other documents with the SEC. We do not
presently intend to voluntarily furnish you with a copy of our annual
report. You may read and copy any document we file with the
Securities and Exchange Commission at the public reference room of the
Commission between the hours of 9:00 a.m. and 5:00 p.m., except federal holidays
and official closings, at 100 F Street, NE, Room 1580, Washington, D.C.
20549. You should call (202) 551-8090 for more information on the
public reference room. Our SEC filings are also available to you on
the Internet website for the Securities and Exchange Commission at http://www.sec.gov.
52
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Consolidated
Financial Statements
December
31, 2009, 2008 and 2007
(US
Funds)
Index
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
2
|
|
Consolidated
Financial Statements
|
||
Consolidated
Balance Sheets
|
3
|
|
Consolidated
Statements of Operations
|
4
|
|
Consolidated
Statements of Cash Flows
|
5
|
|
Consolidated
Statements of Stockholders’ Equity (Deficit)
|
6
- 8
|
|
Notes
to Consolidated Financial Statements
|
9
-
27
|
1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO
THE DIRECTORS AND STOCKHOLDERS OF
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
We
have audited the accompanying consolidated balance sheets of White Mountain
Titanium Corporation (An Exploration Stage Company) as of December 31, 2009 and
2008, and the related consolidated statements of operations, cash flows and
stockholders' equity (deficit) for each of the years in the three-year period
ended December 31, 2009, and the cumulative period from inception (November 13,
2001) through December 31, 2009. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, these consolidated financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2009 and
2008, and the results of its operations and its cash flows for each of the years
in the three-year period ended December 31, 2009, and the cumulative period from
inception (November 13, 2001) through December 31, 2009 in conformity with
accounting principles generally accepted in the United States.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2
to the financial statements, the Company has no revenues and limited capital,
which together raise substantial doubt about its ability to continue as a going
concern. Management plans in regard to these matters are also
described in Note 2. These financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
As
discussed in Note 12 to the consolidated financial statements, effective January
1, 2009, the Company retrospectively adopted the presentation and disclosure
requirements of ASC 815.
/s/“Smythe
Ratcliffe LLP” (signed)
Chartered
Accountants
Vancouver,
Canada
March
22, 2010
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
|
Consolidated
Balance Sheets
(US
Funds)
December
31,
|
||||||||
2009
|
2008
|
|||||||
Assets
|
||||||||
Current
|
||||||||
Cash
and cash equivalents
|
$ | 1,343,994 | $ | 1,475,460 | ||||
Prepaid
expenses
|
57,546 | 54,530 | ||||||
Receivables
|
50,443 | 15,646 | ||||||
Total
Current Assets
|
1,451,983 | 1,545,636 | ||||||
Property and
Equipment (Note
5)
|
73,927 | 86,019 | ||||||
Mineral
Properties (Note
6)
|
651,950 | 651,950 | ||||||
Total
Assets
|
$ | 2,177,860 | $ | 2,283,605 | ||||
Liabilities
|
||||||||
Current
|
||||||||
Accounts
payable and accrued liabilities
|
$ | 188,534 | $ | 35,777 | ||||
Total
Current Liabilities
|
188,534 | 35,777 | ||||||
Other
Liabilities – warrants (Notes
3 and 11)
|
2,956,725 | - | ||||||
Total
Liabilities
|
3,145,259 | 35,777 | ||||||
Subsequent Events
(Note
13)
|
||||||||
Stockholders’
Equity (Deficit)
|
||||||||
Preferred
Stock and Paid-in Capital in Excess of
$0.001 Par Value (Note
7(a))
|
||||||||
20,000,000 Shares
authorized
|
||||||||
625,000 (2008
– 625,000) shares issued and outstanding
|
500,000 | 500,000 | ||||||
Common
Stock and Paid-in Capital in Excess of $0.001 Par Value
(Note
7(b))
|
||||||||
100,000,000 Shares
authorized
|
||||||||
36,400,972 (2008
– 32,004,042) shares issued and outstanding
|
21,660,100 | 17,930,947 | ||||||
Deficit
Accumulated During the Exploration Stage
|
(23,127,499 | ) | (16,183,119 | ) | ||||
Total
Stockholders’ Equity (Deficit)
|
(967,399 | ) | 2,247,828 | |||||
Total
Liabilities and Stockholders’ Equity (Deficit)
|
$ | 2,177,860 | $ | 2,283,605 |
3
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Consolidated
Statements of Operations
(US
Funds)
Cumulative
Period
From
Inception
(November
13,
2001)
through
|
||||||||||||||||
Years
Ended December 31,
|
December
31,
|
|||||||||||||||
2009
|
2008
|
2007
|
2009
|
|||||||||||||
Expenses
|
||||||||||||||||
Advertising
and promotion
|
$ | 45,702 | $ | 38,168 | $ | 65,757 | $ | 226,664 | ||||||||
Amortization
|
45,525 | 39,766 | 22,824 | 141,105 | ||||||||||||
Bank
charges and interest
|
4,765 | 5,697 | 5,754 | 27,568 | ||||||||||||
Consulting
fees (Note
7(d))
|
106,814 | 119,194 | 928,532 | 1,981,785 | ||||||||||||
Consulting
fees – directors and officers(Notes 7(b)(ii) and
(d))
|
1,182,776 | 354,139 | 1,231,327 | 4,059,819 | ||||||||||||
Engineering
consulting
|
639,185 | 55,651 | - | 694,836 | ||||||||||||
Exploration
(Note
6)
|
377,891 | 1,525,060 | 571,090 | 4,520,524 | ||||||||||||
Filing
fees
|
5,010 | 2,570 | 250 | 52,877 | ||||||||||||
Insurance
|
53,757 | 64,452 | 44,711 | 246,222 | ||||||||||||
Investor
relations, net (Note
7(d))
|
696,191 | 4,809 | (7,708 | ) | 769,989 | |||||||||||
Licenses,
taxes and filing fees
|
18,595 | 81,987 | 37,797 | 379,947 | ||||||||||||
Management
fees (Note
7(d))
|
139,200 | 139,200 | 595,350 | 1,535,590 | ||||||||||||
Office
|
37,047 | 40,861 | 30,086 | 186,535 | ||||||||||||
Professional
fees
|
173,685 | 246,212 | 191,331 | 1,544,914 | ||||||||||||
Rent
|
73,091 | 102,258 | 86,827 | 391,097 | ||||||||||||
Telephone
|
15,707 | 22,573 | 28,266 | 89,806 | ||||||||||||
Transfer
agent fees
|
3,295 | 2,354 | 950 | 14,518 | ||||||||||||
Travel
and vehicle
|
138,596 | 181,544 | 189,182 | 1,003,629 | ||||||||||||
Loss
Before Other Items
|
(3,756,832 | ) | (3,026,495 | ) | (4,022,326 | ) | (17,867,425 | ) | ||||||||
Gain
on Sale of Marketable Securities
|
- | - | - | 87,217 | ||||||||||||
Loss
on Sale of Assets
|
(7,465 | ) | (11,711 | ) | - | (19,176 | ) | |||||||||
Adjustment
to Market for Marketable Securities
|
- | - | - | (67,922 | ) | |||||||||||
Foreign
Exchange
|
(26,126 | ) | (175,759 | ) | 9,418 | (223,100 | ) | |||||||||
Interest
Income
|
1,768 | 38,057 | 88,485 | 347,143 | ||||||||||||
Dividend
Income
|
- | - | 2,606 | 4,597 | ||||||||||||
Change in Fair Value of
Warrants (Note
11)
|
(2,071,350 | ) | - | - | (3,155,724 | ) | ||||||||||
Financing Agreement
Penalty
|
- | - | - | (330,000 | ) | |||||||||||
Net
Loss and Comprehensive Loss for Year
|
(5,860,005 | ) | (3,175,908 | ) | (3,921,817 | ) | (21,224,390 | ) | ||||||||
Preferred
stock dividends (Note
7(a))
|
- | - | - | (1,537,500 | ) | |||||||||||
Net
Loss Available for Distribution
|
$ | (5,860,005 | ) | $ | (3,175,908 | ) | $ | (3,921,817 | ) | $ | (22,761,890 | ) | ||||
Basic and Diluted Loss Per
Common Share (Note
8)
|
$ | (0.17 | ) | $ | (0.10 | ) | $ | (0.19 | ) | |||||||
Weighted
Average Number of Shares of Common Stock Outstanding
|
34,065,064 | 29,905,878 | 19,713,626 |
4
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Consolidated
Statements of Cash Flows
(US
Funds)
Cumulative
Period
From
Inception
(November
13,
2001)
through
|
||||||||||||||||
Years
Ended December 31,
|
December
31,
|
|||||||||||||||
2009
|
2008
|
2007
|
2009
|
|||||||||||||
Operating
Activities
|
||||||||||||||||
Net
loss for year
|
$ | (5,860,005 | ) | $ | (3,175,908 | ) | $ | (3,921,817 | ) | $ | (21,224,390 | ) | ||||
Items
not involving cash
|
||||||||||||||||
Amortization
|
45,525 | 39,766 | 22,824 | 129,394 | ||||||||||||
Stock-based
compensation
|
1,024,122 | 45,339 | 718,184 | 3,188,211 | ||||||||||||
Loss
on sale of assets
|
7,465 | 11,711 | - | 19,176 | ||||||||||||
Common
stock issued for services
|
560,000 | - | 1,565,000 | 2,517,630 | ||||||||||||
Change
in value of warrants
|
2,071,350 | - | - | 3,155,724 | ||||||||||||
Financing
agreement penalty
|
- | - | - | 330,000 | ||||||||||||
Adjustment
to market on marketable securities
|
- | - | - | 67,922 | ||||||||||||
Gain
on sale of marketable securities
|
- | - | - | (87,217 | ) | |||||||||||
Non-cash
resource property expenditures
|
- | - | - | 600,000 | ||||||||||||
Changes
in non-cash working capital Receivables
|
(34,797 | ) | 24,307 | (11,166 | ) | (50,443 | ) | |||||||||
Marketable
securities
|
- | - | - | 19,295 | ||||||||||||
Accounts
payable and accrued liabilities
|
152,757 | (33,620 | ) | (40,174 | ) | 188,534 | ||||||||||
Prepaid
expenses
|
(3,016 | ) | (2,843 | ) | (17,629 | ) | (57,546 | ) | ||||||||
Cash
Used in Operating Activities
|
(2,036,599 | ) | (3,091,248 | ) | (1,684,778 | ) | (11,203,710 | ) | ||||||||
Investing
Activities
|
||||||||||||||||
Addition
to property and equipment
|
(40,898 | ) | (79,030 | ) | (24,619 | ) | (222,497 | ) | ||||||||
Addition
to mineral property
|
- | - | (1,950 | ) | (651,950 | ) | ||||||||||
Cash
Used in Investing Activities
|
(40,898 | ) | (79,030 | ) | (26,569 | ) | (874,447 | ) | ||||||||
Financing
Activities
|
||||||||||||||||
Repayment
of long-term debt
|
- | - | - | (100,000 | ) | |||||||||||
Issuance
of preferred stock for cash
|
- | - | - | 5,000,000 | ||||||||||||
Issuance
of common stock for cash
|
1,946,031 | 1,967,086 | 2,340,684 | 8,290,980 | ||||||||||||
Stock
subscriptions received
|
- | - | - | 120,000 | ||||||||||||
Stock
subscriptions receivable
|
- | - | - | 111,000 | ||||||||||||
Working
capital acquired on acquisition
|
- | - | - | 171 | ||||||||||||
Cash
Provided by Financing Activities
|
1,946,031 | 1,967,086 | 2,340,684 | 13,422,151 | ||||||||||||
Inflow
(Outflow) of Cash and Cash Equivalents
|
(131,466 | ) | (1,203,192 | ) | 629,337 | 1,343,994 | ||||||||||
|
||||||||||||||||
Cash
and Cash Equivalents, Beginning
of Year
|
1,475,460 | 2,678,652 | 2,049,315 | - | ||||||||||||
Cash
and Cash Equivalents, End of Year
|
$ | 1,343,994 | $ | 1,475,460 | $ | 2,678,652 | $ | 1,343,994 | ||||||||
Supplemental
Cash Flow Information
|
||||||||||||||||
Income
tax paid
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Interest
paid
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Shares
Issued for
|
||||||||||||||||
Settlement
of debt
|
$ | - | $ | - | $ | - | $ | 830,000 | ||||||||
Services
|
$ | 560,000 | $ | - | $ | 1,565,000 | $ | 1,957,630 |
5
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Consolidated
Statements of Stockholders’ Equity (Deficit)
(US
Funds)
Shares of
Common
Stock
|
Common Stock
and Paid-In
Capital in
Excess of
Par Value
|
Shares of
Preferred Stock
|
Preferred Stock
and Paid-in
Capital in
Excess of
Par Value
|
Subscriptions
Receivable
|
Subscriptions
Received
|
Accumulated
Deficit
|
Total
Stockholders’
Equity
(Deficit)
|
|||||||||||||||||||||||||
Balance,
December 31, 2002 and inception (November 13,
2001)
|
- | $ | - | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
Shares
issued for cash Private placements
|
4,040,000 | 404,000 | - | - | (111,000 | ) | - | - | 293,000 | |||||||||||||||||||||||
Shares
issued for
services
|
7,211,000 | 72,110 | - | - | - | - | - | 72,110 | ||||||||||||||||||||||||
Balance,
prior to acquisition
|
11,251,000 | 476,110 | - | - | (111,000 | ) | - | - | 365,110 | |||||||||||||||||||||||
Shares
of accounting subsidiary acquired on reverse
takeover
|
1,550,000 | 28,368 | - | - | - | - | - | 28,368 | ||||||||||||||||||||||||
Adjustment
to eliminate capital of accounting subsidiary on
reverse takeover
|
- | (28,368 | ) | - | - | - | - | - | (28,368 | ) | ||||||||||||||||||||||
Adjustment
to increase capital of accounting parent on
reverse takeover
|
- | 365,779 | - | - | - | - | - | 365,779 | ||||||||||||||||||||||||
Excess
of purchase price over net assets acquired on
recapitalization
|
- | - | - | - | - | - | (365,607 | ) | (365,607 | ) | ||||||||||||||||||||||
Net
loss for
year
|
- | - | - | - | - | - | (830,981 | ) | (830,981 | ) | ||||||||||||||||||||||
Balance,
December 31, 2003
|
12,801,000 | 841,889 | - | - | (111,000 | ) | - | (1,196,588 | ) | (465,699 | ) | |||||||||||||||||||||
Shares
issued for cash Private placement
|
2,358,633 | 1,405,180 | - | - | - | - | - | 1,405,180 | ||||||||||||||||||||||||
Share
subscriptions received
|
- | - | - | - | - | 120,000 | - | 120,000 | ||||||||||||||||||||||||
Shares
issued for services
|
128,500 | 205,320 | - | - | - | - | - | 205,320 | ||||||||||||||||||||||||
Receipt
of subscriptions receivable
|
- | - | - | - | 111,000 | - | - | 111,000 | ||||||||||||||||||||||||
Stock-based
compensation
|
- | 651,750 | - | - | - | - | - | 651,750 | ||||||||||||||||||||||||
Net
loss for
year
|
- | - | - | - | - | - | (1,523,509 | ) | (1,523,509 | ) | ||||||||||||||||||||||
Balance,
December 31,
2004
|
15,288,133 | $ | 3,104,139 | 0 | $ | 0 | $ | 0 | $ | 120,000 | $ | (2,720,097 | ) | $ | 504,042 |
6
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Consolidated
Statements of Stockholders’ Equity (Deficit)
(US
Funds)
Shares of
Common
Stock
|
Common Stock
and Paid-In
Capital in
Excess of
Par Value
|
Shares of
Preferred Stock
|
Preferred Stock
and Paid-in
Capital in
Excess of
Par Value
|
Subscriptions
Receivable
|
Subscriptions
Received
|
Accumulated
Deficit
|
Total
Stockholders’
Equity
(Deficit)
|
|||||||||||||||||||||||||
Balance,
December 31, 2004
|
15,288,133 | $ | 3,104,139 | - | $ | - | $ | - | $ | 120,000 | $ | (2,720,097 | ) | $ | 504,042 | |||||||||||||||||
Preferred
stock issued for cash Private placement
|
- | - | 6,250,000 | 5,000,000 | - | - | - | 5,000,000 | ||||||||||||||||||||||||
Preferred
stock issued for debt
|
- | - | 625,000 | 500,000 | - | - | - | 500,000 | ||||||||||||||||||||||||
Shares
issued for cash Private placement
|
459,000 | 459,000 | - | - | - | (120,000 | ) | - | 339,000 | |||||||||||||||||||||||
Shares
issued for services
|
82,000 | 115,200 | - | - | - | - | - | 115,200 | ||||||||||||||||||||||||
Stock-based
compensation
|
- | 688,920 | - | - | - | - | - | 688,920 | ||||||||||||||||||||||||
Beneficial
conversion feature
|
- | 1,537,500 | - | - | - | - | (1,537,500 | ) | - | |||||||||||||||||||||||
Net
loss for year
|
- | - | - | - | - | - | (2,642,954 | ) | (2,642,954 | ) | ||||||||||||||||||||||
Balance,
December 31, 2005
|
15,829,133 | 5,904,759 | 6,875,000 | 5,500,000 | - | - | (6,900,551 | ) | 4,504,208 | |||||||||||||||||||||||
Shares
issued for financial agreement penalty to be settled
|
440,000 | 330,000 | - | - | - | - | - | 330,000 | ||||||||||||||||||||||||
Stock-based
compensation
|
- | 59,896 | - | - | - | - | - | 59,896 | ||||||||||||||||||||||||
Net
loss for year
|
- | - | - | - | - | - | (2,184,843 | ) | (2,184,843 | ) | ||||||||||||||||||||||
Balance,
December 31, 2006
|
16,269,133 | 6,294,655 | 6,875,000 | 5,500,000 | - | - | (9,085,394 | ) | 2,709,261 | |||||||||||||||||||||||
Stock-based
compensation
|
- | 718,184 | - | - | - | - | - | 718,184 | ||||||||||||||||||||||||
Shares
issued for cash Private placement
|
5,070,000 | 2,340,683 | - | - | - | - | - | 2,340,683 | ||||||||||||||||||||||||
Shares
issued for services
|
1,600,000 | 1,565,000 | - | - | - | - | - | 1,565,000 | ||||||||||||||||||||||||
Shares
issued for conversion of preferred stock
|
6,250,000 | 5,000,000 | (6,250,000 | ) | (5,000,000 | ) | - | - | - | - | ||||||||||||||||||||||
Net
loss for the year
|
- | - | - | - | - | - | (3,921,817 | ) | (3,921,817 | ) | ||||||||||||||||||||||
Balance,
December 31, 2007
|
29,189,133 | $ | 15,918,522 | 625,000 | $ | 500,000 | $ | - | $ | - | $ | (13,007,211 | ) | $ | 3,411,311 |
7
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Consolidated
Statements of Stockholders’ Equity (Deficit)
(US
Funds)
Shares of
Common
Stock
|
Common Stock
and Paid-In
Capital in
Excess of
Par Value
|
Shares of
Preferred Stock
|
Preferred Stock
and Paid-in
Capital in
Excess of
Par Value
|
Accumulated
Deficit
|
Total
Stockholders’
Equity
|
|||||||||||||||||||
Balance,
December 31, 2007
|
29,189,133 | $ | 15,918,522 | 625,000 | $ | 500,000 | $ | (13,007,211 | ) | $ | 3,411,311 | |||||||||||||
Stock-based
compensation
|
- | 45,339 | - | - | - | 45,339 | ||||||||||||||||||
Shares
issued for cash Private placement
|
2,814,909 | 1,967,086 | - | - | - | 1,967,086 | ||||||||||||||||||
Net
loss for the year
|
- | - | - | - | (3,175,908 | ) | (3,175,908 | ) | ||||||||||||||||
Balance,
December 31, 2008
|
32,004,042 | 17,930,947 | 625,000 | 500,000 | (16,183,119 | ) | 2,247,828 | |||||||||||||||||
Stock-based
compensation (Note
7(d))
|
- | 1,024,122 | - | - | - | 1,024,122 | ||||||||||||||||||
Warrants exercised
(Note
7(e))
|
2,100,000 | 1,045,340 | - | - | - | 1,045,340 | ||||||||||||||||||
Shares
issued for cash Private placement (Note
7(b))
|
1,496,930 | 900,691 | - | - | - | 900,691 | ||||||||||||||||||
Reduction
in warrant liability on exercise of 2,000,000 warrants
|
- | 199,000 | - | - | - | 199,000 | ||||||||||||||||||
Common stock
issued for services (Note
7(d))
|
800,000 | 560,000 | - | - | - | 560,000 | ||||||||||||||||||
Cumulative effect
of change in accounting principle (Note
11) )
|
- | - | - | - | (1,084,375 | ) | (1,084,375 | ) | ||||||||||||||||
Net
loss for the year
|
- | - | - | - | (5,860,005 | ) | (5,860,005 | ) | ||||||||||||||||
Balance,
December 31, 2009
|
36,400,972 | $ | 21,660,100 | 625,000 | $ | 500,000 | $ | (23,127,499 | ) | $ | (967,399 | ) |
8
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
1.
|
NATURE
OF BUSINESS AND BASIS OF
PRESENTATION
|
White
Mountain Titanium Corporation (the “Company”) currently has no ongoing
operations. Its principal business is to advance exploration and
development activities on the Cerro Blanco rutile (titanium dioxide) property
(“Cerro Blanco”) located in Region III of northern Chile. The Company
is considered an exploration stage company and its financial statements are
presented in a manner similar to a development stage company as defined in
Statement of Financial Accounting Standards (“SFAS”) No. 7.
These
consolidated financial statements are prepared in accordance with United States
(“US”) generally accepted accounting principles (“GAAP”).
2.
|
GOING
CONCERN
|
These
consolidated financial statements have been prepared by management on the basis
of generally accepted accounting principles applicable to a going concern, which
assumes the Company will continue to operate for the foreseeable future and will
be able to realize its assets and discharge its liabilities in the normal course
of operations.
The
Company has an accumulated deficit of $23,127,499 (2008 - $16,183,119), has not
yet commenced revenue-producing operations, and has significant expenditure
requirements to continue to advance its exploration and development activities
on the Cerro Blanco property.
These
consolidated financial statements do not reflect adjustments that would be
necessary if the going concern assumption were not appropriate because
management believes that the actions already taken or planned will mitigate the
adverse conditions and events that raise doubts about the validity of the going
concern assumption used in preparing these consolidated financial statements.
Management intends to raise additional capital through stock issuances to
finance operations and invest in other business opportunities.
If the
going concern assumption were not appropriate for these consolidated financial
statements, then adjustments would be necessary to the carrying values of the
assets and liabilities, the reported revenues and expenses, and the balance
sheet classifications used.
3.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
|
(a)
|
Principles
of consolidation
|
These
financial statements include the accounts of the Company and its wholly-owned
subsidiaries Sociedad Contractual Minera White Mountain Titanium (formerly
Compañía Minera Rutile Resources Limitada) (“White Mountain Chile”), a Chilean
corporation; White Mountain Titanium Corporation, a Canadian corporation; and
White Mountain Titanium (Hong Kong) Limited, an inactive Hong Kong
corporation. All significant intercompany balances and transactions
have been eliminated.
|
(b)
|
Cash
equivalents
|
The
Company considers all highly liquid debt instruments that are readily
convertible to known amounts of cash and purchased with a maturity of three
months or less from the date acquired to be cash
equivalents.
9
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
3. SIGNIFICANT ACCOUNTING
POLICIES (Continued)
|
(c)
|
Amortization
|
Amortization
is provided using a straight-line method based on the following estimated useful
lives:
Vehicles
|
-
5 years
|
|
Office
furniture
|
-
5 years
|
|
Office
equipment
|
-
5 years
|
|
Computer
equipment and software
|
-
5 years
|
|
Field
equipment
|
-
5 years
|
|
(d)
|
Exploration
expenditures
|
The
Company is in the exploration stage of developing its mineral properties and has
not yet determined whether these properties contain ore reserves that are
economically recoverable.
Exploration
costs incurred in locating areas of potential mineralization are expensed as
incurred. Mineral property acquisition costs are
capitalized. Commercial feasibility is established in compliance with
Securities and Exchange Commission (“SEC”) Industry Guide 7, which consists of
identifying that part of a mineral deposit that could be economically and
legally extracted or produced at the time of the reserve
determination. After an area of interest has been assessed as
commercially feasible, expenditures specific to the area of interest for further
development are capitalized. In deciding when an area of interest is
likely to be commercially feasible, management may consider, among other
factors, the results of prefeasibility studies, detailed analysis of drilling
results, the supply and cost of required labor and equipment, and whether
necessary mining and environmental permits can be obtained.
Mining
projects and properties are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of these assets may not be
recoverable. If the estimated future cash flows expected to result
from the use of the mining project or property and its eventual disposition are
less than the carrying amount of the mining project or property, an impairment
is recognized based upon the estimated fair value of the mining project or
property. Fair value is generally based on the present value of the
estimated future net cash flows for each mining project or property, calculated
using estimated mineable reserves and mineral resources based on engineering
reports, projected rates of production over the estimated life of the mine,
recovery rates, capital requirements, remediation costs and future prices
considering the Company’s hedging and marketing plans.
|
(e)
|
Asset
retirement obligations (“ARO”)
|
The
Company recognizes a legal liability for obligations related to the retirement
of property, plant and equipment, and obligations arising from the acquisition,
construction, development or normal operations of those assets. Such
asset retirement costs must be recognized at fair value when a reasonable
estimate of fair value can be estimated in the period in which the liability is
incurred. A corresponding increase to the carrying amount of the
related asset, where one is identifiable, is recorded and amortized over the
life of the asset. Where a related future value is not easily
identifiable with a liability, the change in fair value over the course of the
year is expensed. The amount of the liability is subject to
re-measurement at each reporting period. The estimates are based
principally on legal and regulatory requirements .
10
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
3. SIGNIFICANT ACCOUNTING
POLICIES (Continued)
(e) Asset retirement obligations
(“ARO”) (Continued)
It is
possible that the Company’s estimates of its ultimate reclamation and closure
liabilities could change as a result of changes in regulations, changes in the
extent of environmental remediation required, changes in the means of
reclamation or changes in cost estimates. Changes in estimates are
accounted for prospectively commencing in the period the estimate is
revised.
At
present, the Company has determined that it has no material
AROs.
|
(f)
|
Income
taxes
|
The
Company uses the asset and liability approach in its method of accounting for
income taxes that requires the recognition of deferred tax liabilities and
assets for expected future tax consequences of temporary differences between the
carrying amounts and the tax basis of assets and liabilities. A
valuation allowance against deferred tax assets is recorded if based upon
weighted available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.
|
(g)
|
Stock-based
compensation
|
The
Company accounts for stock-based compensation expenses associated with stock
options and other forms of equity compensation in accordance with ASC 718-10,
Share-Based Payment, as
interpreted by SEC Staff Accounting Bulletin No. 107. ASC
718-10 requires the Company to estimate the fair value of share-based payment
awards on the date of grant using an option-pricing model. The value
of the portion of the award that is ultimately expected to vest is recognized as
expense over the requisite service periods in the Company’s statement of
operations. The Company uses the straight-line single-option method
to recognize the value of stock-based compensation expense for all share-based
payment awards. Stock-based compensation expense recognized in the
statement of operations is reduced for estimated forfeitures, as it is based on
awards ultimately expected to vest. ASC 718-10 requires forfeitures
to be estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates.
|
(h)
|
Loss
per share
|
The
Company accounts for loss per share in accordance with ASC 260-10, Earnings Per Share, which
requires the Company to present basic and diluted earnings per
share. The computation of loss per share is based on the weighted
average number of shares of common stock outstanding during the year presented
(see Note 8). The Company uses the two-class method to calculate loss
per share for common stock as well as preferred stock at their conversion
equivalent to common stock.
The
calculation of diluted loss per share excludes the effects of all common share
equivalents that would be anti-dilutive.
11
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
3. SIGNIFICANT ACCOUNTING
POLICIES (Continued)
|
(i)
|
Financial
instruments
|
All
financial instruments are classified as one of the following: held-to-maturity,
loans and receivables, held-for-trading, available-for-sale or other financial
liabilities. Financial assets and liabilities held-for-trading are measured at
fair value with gains and losses recognized in net income. Financial assets
held-to-maturity, loans and receivables, and other financial liabilities are
measured at amortized cost using the effective interest method.
Available-for-sale instruments are measured at fair value with unrealized gains
and losses recognized in other comprehensive income (loss) and reported in
shareholders’ equity. Any financial instrument may be designated as
held-for-trading upon initial recognition.
Transaction
costs that are directly attributable to the acquisition or issue of financial
instruments that are classified as other than held-for-trading, which are
expensed as incurred, are included in the initial carrying value of such
instruments.
|
(j)
|
Conversion
of foreign currency
|
The
functional and reporting currency of the Company and its subsidiaries is the US
dollar. The Company’s Chilean operations are re-measured into US
dollars as follows:
·
|
Monetary
assets and liabilities, at year-end
rates;
|
·
|
All
other assets and liabilities, at historical rates;
and
|
·
|
Revenue
and expense items, at the average rate of exchange prevailing on the date
of the transaction.
|
Exchange
gains and losses arising from these transactions are reflected in operations for
the year.
|
(k)
|
Fair
value measurement
|
With
the adoption of ASC 820-10, Fair Value Measurements,
assets and liabilities recorded at fair value in the balance sheets are
categorized based upon the level of judgment associated with the inputs used to
measure their fair value.
ASC
820-10 specifies a hierarchy of valuation techniques based on whether the inputs
to those valuation techniques are observable or unobservable. In accordance with
ASC 820-10, these inputs are summarized in the three broad levels listed
below:
|
•
|
Level
1 — Quoted prices in active markets for identical
securities;
|
•
|
Level
2 — Other significant observable inputs that are observable through
corroboration with market data (including quoted prices in active markets
for similar securities);
and
|
•
|
Level
3 — Significant unobservable inputs that reflect management’s best
estimate of what market participants would use in pricing the asset or
liability.
|
The
Company performed a detailed analysis of the assets and liabilities (Note
4).
12
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
3. SIGNIFICANT ACCOUNTING
POLICIES (Continued)
|
(l)
|
Use
of estimates
|
The
preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect certain reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reported period. Accordingly, actual
results could differ from those estimates and could impact future results of
operations and cash flows.
Significant
areas requiring the use of estimates relate to the rates for amortization,
determining the variables used in calculating the fair value of stock-based
compensation expense, valuation of long-lived assets and allowance for future
income tax assets and determining AROs.
|
(m)
|
Recent
accounting pronouncements
|
|
(i)
|
Codification
|
In
June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of SFAS No. 162 (the “Codification”). The
Codification will be the single source of authoritative non-governmental US
accounting and reporting standards, superseding existing FASB, AICPA, EITF and
related literature. The Codification eliminates the hierarchy of GAAP contained
in SFAS No. 162 and establishes one level of authoritative GAAP. All other
literature is considered non-authoritative. This Statement is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009, which for the Company was September 30, 2009. All
accounting references have been updated with Accounting Standard Codification
(“ASC”) references.
|
(ii)
|
Fair
value measurements
|
In
August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which
amends ASC Topic 820, Measuring Liabilities at Fair
Value, which provides additional guidance on the measurement of
liabilities at fair value. These amended standards clarify that in circumstances
in which a quoted price in an active market for the identical liability is not
available, the Company is required to use the quoted price of the identical
liability when traded as an asset, quoted prices for similar liabilities, or
quoted prices for similar liabilities when traded as assets. If these quoted
prices are not available, the Company is required to use another valuation
technique, such as an income approach or a market approach. These amended
standards were effective on October 1, 2009 and did not have a material impact
on the consolidated financial statements.
13
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
3. SIGNIFICANT ACCOUNTING
POLICIES (Continued)
(m) Recent accounting pronouncements
(Continued)
|
(ii)
|
Fair
value measurements (Continued)
|
In
January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and
Disclosures, which amends ASC Topic 820, adding new requirements for
disclosures for Levels 1 and 2, separate disclosures of purchases, sales,
issuances and settlements relating to Level 3 measurements and clarification of
existing fair value disclosures.
ASU
2010-06 is effective for interim and annual periods beginning after December 15,
2009, except for the requirement to provide Level 3 activity of purchases,
sales, issuances and settlements on a gross basis, which will be effective for
fiscal years beginning after December 15, 2010 (the Company’s fiscal year 2011);
early adoption is permitted. The Company is currently evaluating the impact of
adopting ASU 2009-14 on its consolidated financial statements.
In
June 2008, the FASB ratified the consensus reached on ASC 815-40 Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock. ASC 815-40
clarifies the determination of whether an instrument (or an embedded feature) is
indexed to an entity’s own stock, which would qualify as a scope exception under
SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. The Company adopted ASC
815-40 as of January 1, 2009 (Note 11).
|
(iii)
|
Subsequent
events
|
In May
2009, the FASB issued ASC 855. ASC 855 is intended to establish
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date—that is, whether that date represents the date the financial statements
were issued or were available to be issued. The adoption of ASC 855
did not have a material impact on the consolidated financial
statements.
14
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
4. FINANCIAL
INSTRUMENTS
(a) Fair
value
The Company has classified its
financial instruments as follows:
Cash
and cash equivalents – as held-for-trading
Accounts payable and accrued
liabilities – as other financial liabilities
Other liabilities – warrants – as
other financial liabilities
The
carrying values of cash and cash equivalents, and accounts payable and accrued
liabilities approximate their fair values because of the short term to maturity
of these financial instruments.
The
following table summarizes fair value measurement by level at December 31, 2009
for assets and liabilities measured at fair value on a recurring
basis.
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Liabilities
|
||||||||||||||||
Other liabilities -
warrants
|
$ | 2,956,725 | $ | - | $ | 2,956,725 | $ | - |
(b) Credit
risk
Credit
risk is the risk that a counterparty to a financial instrument will fail to
discharge its contractual obligations. The Company’s financial asset
that is exposed to credit risk consists primarily of cash and cash equivalents,
which comprises a substantial portion of the Company’s assets. To
manage the risk, cash and cash equivalents are placed with high credit, quality
institutions.
Concentration
of credit risk exists with respect to the Company’s cash and cash equivalents as
amounts held at two major Canadian, high credit, quality institutions are in
excess of federally insured amounts.
2009
|
2008
|
|||||||
Cash
|
$ | 92,854 | $ | 92,364 | ||||
Term deposits
|
1,251,140 | 1,383,096 | ||||||
$ | 1,343,994 | $ | 1,475,460 |
15
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
4. FINANCIAL INSTRUMENTS
(Continued)
(c) Market
risk
Market
risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices. Market
risk comprises two types of risk: interest rate risk and foreign currency
risk.
(i) Interest
rate risk
Interest rate risk
consists of two components:
|
(a)
|
To
the extent that payments made or received on the Company’s monetary assets
and liabilities are affected by changes in the prevailing market interest
rates, the Company is exposed to interest rate cash flow
risk.
|
|
(b)
|
To
the extent that changes in prevailing market interest rates differ from
the interest rate in the Company’s monetary assets and liabilities, the
Company is exposed to interest rate price
risk.
|
|
The
Company’s cash and cash equivalents consists of cash held in bank accounts
and guaranteed investment certificates. Due to the short-term
nature of these financial instruments, fluctuations in market interest
rates do not have a significant impact on estimated fair values as of
December 31, 2009.
|
At
December 31, 2009, a hypothetical change of 1% in the interest rate would have a
$12,500 increase or decrease on net loss and comprehensive
loss.
|
(ii)
|
Foreign
currency risk
|
The
Company translates the results of non-US operations into US currency using rates
approximating the average exchange rate each quarter. The exchange
rate may vary from time to time. During the year ended December 31,
2009, the Company spent 187,143,746 Chilean pesos (US $328,391) on property
exploration expenditures and Cdn $1,220,902 (US $1,074,748) for engineering
consulting, operating and administration expenses. Required
expenditures to continue the engineering and exploration processes will be
affected by changes in foreign currency. The Company has not entered into any
foreign currency contracts to mitigate this risk.
16
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
5. PROPERTY
AND EQUIPMENT
2009
|
||||||||||||
Accumulated
|
||||||||||||
Cost
|
Amortization
|
Net
|
||||||||||
Vehicles
|
$ | 54,153 | $ | 38,031 | $ | 16,122 | ||||||
Office
furniture
|
17,712 | 3,189 | 14,523 | |||||||||
Office
equipment
|
10,828 | 4,139 | 6,689 | |||||||||
Computer
equipment
|
8,197 | 5,192 | 3,005 | |||||||||
Computer
software
|
1,142 | 664 | 478 | |||||||||
Field equipment
|
62,814 | 29,704 | 33,110 | |||||||||
$ | 154,846 | $ | 80,919 | $ | 73,927 |
2008
|
||||||||||||
Accumulated
|
||||||||||||
Cost
|
Amortization
|
Net
|
||||||||||
Vehicles
|
$ | 70,534 | $ | 32,050 | $ | 38,484 | ||||||
Office
furniture
|
2,704 | 1,846 | 858 | |||||||||
Office
equipment
|
5,417 | 2,829 | 2,588 | |||||||||
Computer
equipment
|
7,553 | 3,631 | 3,922 | |||||||||
Computer
software
|
1,142 | 436 | 706 | |||||||||
Field equipment
|
62,419 | 22,958 | 39,461 | |||||||||
$ | 149,769 | $ | 63,750 | $ | 86,019 |
6. MINERAL
PROPERTIES
On
September 5, 2003, the Company, through its wholly-owned Chilean subsidiary,
White Mountain Chile, entered into a purchase agreement with Compañía
Contractual Mineral Ojos del Salado (“Ojos del Salado”), a wholly-owned Chilean
subsidiary of Phelps Dodge Corporation (“Phelps Dodge”), to acquire a 100%
interest in nine exploration mining concessions totalling 1,183 hectares,
collectively known as Cerro Blanco. Cerro Blanco is located in Region III of
northern Chile, approximately 39 kilometres, or 24 miles, west of the city of
Vallenar. Consideration for the purchase, including legal fees, was
$651,950.
The
purchase agreement covering Cerro Blanco was originally entered into between
Ojos del Salado and Dorado Mineral Resources NL (“Dorado”) on March 17, 2000.
Under that agreement, Dorado purchased the mining exploitation concessions from
Ojos del Salado for $1,000,000, of which $350,000 was paid. A first
mortgage and prohibitions against entering into other contracts regarding mining
concessions without the prior written consent of Ojos del Salado had also been
established in favor of Ojos del Salado. On September 5, 2003, White
Mountain Chile assumed Dorado’s obligations under the purchase agreement,
including the mortgage and prohibitions, with payment terms as described
above.
17
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
6. MINERAL PROPERTIES
(Continued)
Ownership
in mineral properties involves certain inherent risks due to the difficulties of
determining the validity of certain claims as well as the potential for problems
arising from the frequent, ambiguous conveyance history characteristic of
mineral properties. The Company has investigated ownership of its
mineral properties, and to the best of its knowledge, ownership of its interests
is in good standing.
Exploration
expenditures incurred by the Company during the years ended December 31, 2009,
2008 and 2007 were as follows:
2009
|
2008
|
2007
|
||||||||||
Assaying
|
$ | 89,857 | $ | 107,052 | $ | 70,671 | ||||||
Concession
fees
|
40,397 | 47,014 | 43,148 | |||||||||
Drilling
|
- | 604,009 | - | |||||||||
Environmental
|
- | - | 10,792 | |||||||||
Equipment
rental
|
23,327 | 152,792 | 16,560 | |||||||||
Geological
consulting fees
|
147,136 | 312,988 | 260,811 | |||||||||
Maps
and miscellaneous
|
21,752 | 130,879 | 75,922 | |||||||||
Metallurgy
|
- | - | 5,766 | |||||||||
Site
costs
|
28,290 | 153,398 | 71,977 | |||||||||
Transportation
|
27,132 | 16,928 | 15,443 | |||||||||
Exploration expenditures for
year
|
$ | 377,891 | $ | 1,525,060 | $ | 571,090 |
7.
|
CAPITAL
STOCK
|
|
(a)
|
Preferred
stock
|
During
the year ended December 31, 2005, the Company designated and issued 6,825,000
shares of Series A preferred stock with a par value of $0.001 per
share. Each share of preferred stock is convertible into one common
share of common stock at any time at the holder’s option. The
preferred stock is unlisted, non-retractable and non-redeemable. The
preferred stockholders are entitled to the number of votes equal to the number
of whole shares of common stock into which the preferred stock are
convertible. The preferred stockholders are further entitled to the
same dividends and distributions as the common
stockholders.
18
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
7. CAPITAL STOCK
(Continued)
(a) Preferred stock
(Continued)
During
the year ended December 31, 2007, 6,250,000 shares of preferred stock were
converted into 6,250,000 shares of common stock. Accordingly, the
value of those shares of preferred stock was transferred to common share
equity.
No
additional preferred stock was issued during the years ended December 31, 2007,
2008 or 2009, and at December 31, 2009, 625,000 shares remain issued and
outstanding.
|
(b)
|
Common
stock
|
During
the year ended December 31, 2009, the Company:
|
(i)
|
Completed
an offering of 1,496,930 shares at a price of $0.65 per unit for total
gross proceeds of $973,005. Share issuance costs for the
private placement consisted of cash payments of $72,314 and issuance of
104,785 warrants at an exercise price of $0.90, to give net proceeds of
$900,691;
|
|
(ii)
|
Issued
800,000 shares of common stock to management for past services at $0.41
and $0.99 per share of common stock, the market value at the time of
issuance. Total cost of this share issuance was $560,000 and
has been expensed as consulting fees – directors and officers;
and
|
|
(iii)
|
Issued
2,100,000 shares of common stock upon the exercise of previously issued
warrants converted at $0.50 per share. Net proceeds received
upon exercise were $1,045,340.
|
During
the year ended December 31, 2008, the Company completed an offering of 2,814,909
shares at a price of $0.75 per share for gross proceeds of
$2,111,180. Share issuance costs for the private placement consist of
cash payments of $144,094 to give net proceeds of $1,967,086.
|
(c)
|
Stock
options
|
During
the year ended December 31, 2009, no options were granted. Options
for 100,000 shares exercisable at $2.00 per share expired, and a further 250,000
fully vested options exercisable at $0.50 were forfeited. All options
issued in previous years were fully vested as at December 31,
2009.
During
the year ended December 31, 2008, 165,000 stock options were granted at an
exercise price of $1.00. Options totaling 103,125 were fully vested
as at December 31, 2008, with a balance of 61,875 options to vest in
2009.
19
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
7.
|
CAPITAL STOCK
(Continued)
|
|
(c)
|
Stock options
(Continued)
|
2009
|
2008
|
|||||||||||||||
Number
of
Shares |
Weighted
Average Exercise
Price
|
Number of
Shares |
Weighted
Average Exercise
Price
|
|||||||||||||
Outstanding
- beginning of year
|
3,140,000 | $ | 0.57 | 2,975,000 | $ | 0.50 | ||||||||||
Granted
|
- | - | 165,000 | $ | 1.00 | |||||||||||
Expired
|
(100,000 | ) | $ | 2.00 | - | - | ||||||||||
Forfeited
|
(250,000 | ) | $ | 0.50 | - | - | ||||||||||
|
||||||||||||||||
Outstanding
– end of year
|
2,790,000 | $ | 0.53 | 3,140,000 | $ | 0.57 | ||||||||||
Exercisable
– end of year
|
2,790,000 | $ | 0.53 | 3,078,125 | $ | 0.57 |
As at
December 31, 2009 and 2008, the following director and consultant stock options
were outstanding:
Exercise
|
||||||||||||
Expiry Date
|
Price
|
2009
|
2008
|
|||||||||
August
1, 2009
|
$ | 2.00 | - | 100,000 | ||||||||
April
5, 2010
|
$ | 0.50 | - | 250,000 | ||||||||
January
31, 2011
|
$ | 0.50 | 400,000 | 400,000 | ||||||||
May
31, 2011
|
$ | 0.50 | 600,000 | 600,000 | ||||||||
August
1, 2011
|
$ | 0.50 | 200,000 | 200,000 | ||||||||
August
31, 2011
|
$ | 0.50 | 350,000 | 350,000 | ||||||||
August
31, 2012
|
$ | 0.50 | 1,075,000 | 1,075,000 | ||||||||
June 23, 2013
|
$ | 1.00 | 165,000 | 165,000 | ||||||||
2,790,000 | 3,140,000 |
20
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
7.
|
CAPITAL STOCK
(Continued)
|
(c)
|
Stock options
(Continued)
|
The
shares under option at December 31, 2009 were in the following exercise
prices:
Options Outstanding and
Exercisable
|
||||||||||||||||
Exercise Price
|
Weighted
Average
Exercise
Price
|
Number of
Shares Under
Option
|
Aggregate
Intrinsic
Value
|
Weighted Average
Remaining
Contractual Life in
Years
|
||||||||||||
$
0.50
|
$ | 0.50 | 2,625,000 | $ | 1,627,500 | 1.78 | ||||||||||
$ 1.00
|
$ | 1.00 | 165,000 | 19,800 | 3.48 | |||||||||||
$ | 0.53 | 2,790,000 | $ | 1,647,300 | 2.02 |
|
(d)
|
Stock-based
compensation
|
During
the year ended December 31, 2009, the total stock-based compensation recognized
under the fair value method was $1,024,122 as follows:
|
(i)
|
800,000
shares issued to two officers and directors of the Company upon attaining
previously determined milestones at $0.41 and $0.99 per share of common
stock, the market value at the time of issuance. A total fair
value of $560,000 (2008: $nil) was attributed to these shares and was
charged to consulting fees – directors and
officers.
|
|
(ii)
|
$252,117
was charged to consulting fees - directors and officers (2008: $45,339)
and $77,130 was charged to consulting (2008: $nil) relating to vesting of
61,875 options issued in the prior year and 485,000 warrants issued during
the year. As a result of an extension of the expiry date
of 4,250,000 warrants from July 11, 2009 to April 1, 2011, $694,875 (2008:
$nil) was charged to investor relations. All amounts were
determined using the Black-Scholes option pricing
model.
|
The
total stock-based compensation recognized under the fair value method to various
parties was as follows:
2009
|
2008
|
2007
|
||||||||||
Investor
relations
|
$ | 694,875 | $ | - | $ | - | ||||||
Consulting
fees - directors and officers
|
252,117 | 45,339 | 359,227 | |||||||||
Consulting
fees
|
77,130 | - | 248,507 | |||||||||
Management fees
|
- | - | 110,450 | |||||||||
Compensation -
options
|
$ | 1,024,122 | $ | 45,339 | $ | 718,184 |
As at
December 31, 2009, the total compensation cost related to non-vested options not
yet recognized is $nil.
21
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
7.
|
CAPITAL STOCK
(Continued)
|
(d) Stock-based compensation
(Continued)
The
following assumptions were used for the Black-Scholes option pricing model
valuation of stock options granted:
2009
|
2008
|
2007
|
||||||||||
Expected
life (years)
|
N/A | 5 | 3 – 5 | |||||||||
Interest
rate
|
N/A | 3.52 | % | 4.40 | % | |||||||
Volatility
|
N/A | 57.12 | % | 88.79 | % | |||||||
Dividend yield
|
N/A | 0.00 | % | 0.00 | % |
|
(e)
|
Share
purchase warrants
|
Details
of stock purchase warrant activity is as follows:
2009
|
2008
|
|||||||||||||||
Number
of
Warrants
|
Weighted
Average
Exercise
Price
|
Number
of
Warrants
|
Weighted
Average
Exercise
Price
|
|||||||||||||
Outstanding
- beginning of year
|
13,022,600 | $ | 0.54 | 13,022,600 | $ | 0.54 | ||||||||||
Issued
|
589,785 | $ | 0.63 | - | $ | 0.00 | ||||||||||
Exercised
|
(2,100,000 | ) | $ | 0.50 | - | $ | 0.00 | |||||||||
Expired
|
(925,000 | ) | $ | 0.50 | - | $ | 0.00 | |||||||||
Outstanding - end of
year
|
10,587,385 | $ | 0.56 | 13,022,600 | $ | 0.54 |
During
the year ended December 31, 2009, warrant activity included:
|
·
|
2,000,000
warrants were exercised. The balance of 4,250,000 warrants held
by the investor had their expiry date extended from July 11, 2009 to April
1, 2011. The warrants have a cashless exercise provision in the
event the Company fails to reasonably maintain an effective registration
statement for the shares issuable upon exercise of the
warrants;
|
|
·
|
150,000
warrants having an exercise price of $0.75 and an expiry date of June 30,
2011 were issued to a consultant for services. An additional
335,000 warrants having an exercise price of $0.50 per warrant and an
expiry date of June 30, 2012 were issued to two independent directors for
services. Stock-based compensation totaling $293,440 was
recorded with respect to these
issuances;
|
|
·
|
104,785
warrants having an exercise price of $0.90 per warrant and an expiry date
of June 30, 2012 were issued to an agent with respect to a private
placement;
|
|
·
|
100,000
warrants were exercised at a price of $0.50 per warrant for gross proceeds
of $50,000; and
|
|
·
|
925,000
warrants with an exercise price of $0.50 per warrant expired
unexercised.
|
22
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
7.
|
CAPITAL STOCK
(Continued)
|
(e) Share purchase warrants
(Continued)
As at
December 31, 2009 and 2008, the following share purchase warrants were
outstanding:
Expiry Date
|
Exercise Price
|
2009
|
2008
|
|||||||||
July
11, 2009
|
$ | 0.50 | - | 6,550,000 | ||||||||
April
1, 2011
|
$ | 0.50 | 4,250,000 | - | ||||||||
September
7, 2009
|
$ | 0.50 | - | 625,000 | ||||||||
August
10, 2010
|
$ | 0.60 | 5,847,600 | 5,847,600 | ||||||||
June
30, 2011
|
$ | 0.75 | 150,000 | - | ||||||||
June
30, 2012
|
$ | 0.50 | 235,000 | - | ||||||||
June 30, 2013
|
$ | 0.90 | 104,785 | - | ||||||||
10,587,385 | 13,022,600 |
8.
|
LOSS
PER SHARE
|
Basic
and diluted loss per share is computed using the weighted average number of
common shares outstanding as follows:
2009
|
2008
|
2007
|
||||||||||
Net
loss for year
|
$ | (5,860,005 | ) | $ | (3,175,908 | ) | $ | (3,921,817 | ) | |||
Preferred stock
dividends
|
- | - | - | |||||||||
Net loss available for
distribution
|
$ | (5,860,005 | ) | $ | (3,175,908 | ) | $ | (3,921,817 | ) | |||
Allocation
of undistributed loss
|
||||||||||||
Preferred
shares (1.80%, 2008 - 1.92%; 2007 - 2.10%)
|
$ | (98,917 | ) | $ | (60,834 | ) | $ | (82,214 | ) | |||
Common shares (98.20%; 2008 -
98.08%; 2007 - 97.90%)
|
(5,761,088 | ) | (3,115,074 | ) | (3,839,603 | ) | ||||||
$ | (5,860,005 | ) | $ | (3,175,908 | ) | $ | (3,921,817 | ) | ||||
Basic
loss per share amounts
|
||||||||||||
Undistributed
amounts
|
||||||||||||
Loss
per preferred share
|
$ | (0.16 | ) | $ | (0.10 | ) | $ | (0.02 | ) | |||
Loss per common
share
|
$ | (0.17 | ) | $ | (0.10 | ) | $ | (0.19 | ) |
23
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
8. LOSS PER SHARE
(Continued)
Weighted
average number of shares:
2009
|
2008
|
2007
|
||||||||||
Weighted
average number of shares for undistributed amounts
|
||||||||||||
Preferred
stock (common stock equivalent)
|
625,000 | 625,000 | 5,299,658 | |||||||||
Common stock
|
34,065,064 | 29,905,878 | 19,713,626 |
Potentially
dilutive securities not included in diluted weight average shares outstanding
include shares underlying 2,790,000 in outstanding options, 10,587,385 warrants
and 625,000 shares of convertible preferred stock.
9. INCOME
TAXES
Income
tax provisions are determined as follows:
2009
|
2008
|
2007
|
||||||||||
Income
tax benefit computed at statutory tax rate
|
$ | (1,816,957 | ) | $ | (1,077,225 | ) | $ | (1,372,636 | ) | |||
Stock-based-compensation
|
554,443 | 15,869 | 251,364 | |||||||||
Other
permanent timing differences
|
2,676 | - | - | |||||||||
Change
in fair value of warrants
|
724,973 | - | - | |||||||||
Adjustment
due to effective rate attributable to income taxes of other countries’
stock-based compensation
|
60,920 | 396,159 | 136,855 | |||||||||
Effect in change of tax
rate
|
62,855 | 3,268 | - | |||||||||
(411,090 | ) | (661,929 | ) | (984,417 | ) | |||||||
Change in valuation
allowance
|
411,090 | 661,929 | 984,417 | |||||||||
$ | - | $ | - | $ | - |
Deferred
income taxes reflect the tax effect of the temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for tax purposes. The applicable tax rate to be
expected is 35%. The components of the net deferred income tax assets are
approximately as follows:
2009
|
2008
|
2007
|
||||||||||
Deferred
income tax assets
|
||||||||||||
Net
operating losses and credit carry-forwards
|
$ | 3,284,999 | $ | 2,607,481 | $ | 2,502,178 | ||||||
Valuation allowance
|
(3,284,999 | ) | (2,607,481 | ) | (2,502,178 | ) | ||||||
$ | - | $ | - | $ | - |
The
valuation allowance reflects the Company’s estimate that the tax assets more
likely than not will not be realized.
24
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
9. INCOME TAXES
(Continued)
To
date the Company has paid a total of 255,015,000 Chilean pesos (US $491,000)
(2008 - $134,631,000 Chilean pesos (US $385,000)) related to value added tax
(“VAT”), which the Company will be able to credit against future VAT amounts
payable generated on Chilean revenue-producing operations.
The
Company has available approximate net-operating losses that may be carried
forward to apply against future years' income for income tax purposes in all
jurisdictions. The losses expire as follows:
Available to
|
USA
|
Foreign
|
Total
|
|||||||||
2019
|
$ | 10,270 | $ | - | $ | 10,270 | ||||||
2020
|
1,704 | - | 1,704 | |||||||||
2021
|
4,574 | - | 4,574 | |||||||||
2022
|
1,200 | - | 1,200 | |||||||||
2023
|
22,201 | - | 22,201 | |||||||||
2024
|
782,836 | - | 782,836 | |||||||||
2025
|
690,606 | 95,793 | 786,399 | |||||||||
2026
|
409,782 | 214,988 | 624,770 | |||||||||
2027
|
2,160,814 | 196,906 | 2,357,720 | |||||||||
2028
|
403,158 | 515,808 | 918,966 | |||||||||
2029
|
415,286 | 1,277,968 | 1,693,254 | |||||||||
Non-expiring carry-forward
losses
|
- | 6,051,627 | 6,051,627 | |||||||||
$ | 4,902,431 | $ | 8,353,090 | $ | 13,255,521 |
10.
|
RELATED
PARTY TRANSACTIONS
|
2009
|
2008
|
2007
|
||||||||||
Advances
for expenses outstanding at December 31,
|
$ | - | $ | 1,490 | $ | - | ||||||
Consulting
fees
|
876,800 | 354,139 | 434,993 | |||||||||
Management
fees
|
139,200 | 139,200 | 121,600 | |||||||||
Rent
|
24,000 | 24,000 | 22,000 | |||||||||
$ | 1,040,000 | $ | 518,829 | $ | 578,593 |
Advances
are made to various related parties as required for corporate purposes including
travel. Expenses are incurred on behalf of the
Company.
Consulting
fees include payments to the officers and directors of the Company for services
rendered, and include payments to the President, CFO and VP Investor
Relations. Management fees and rent consist of fees paid to a company
partly controlled by the CEO of the Company.
Related
party transactions are recorded at the exchange amount, which is the amount
agreed to between the parties.
25
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
11.
|
FAIR
VALUE MEASUREMENTS
|
Effective
January 1, 2009, we adopted the provisions of Emerging Issues Task Force
(“EITF”) EITF 07-05, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock, which was
primarily codified into Topic 815, Derivatives and
Hedging. ASC 815 applies to any freestanding financial
instruments or embedded features that have the characteristics of a derivative
and to any freestanding financial instruments that are potentially settled in an
entity’s own common stock.
As a
result of adopting ASC 815, warrants to purchase 6,875,000 shares of common
stock previously treated as equity pursuant to the derivative treatment
exemption were no longer afforded equity treatment. The warrants had exercise
price of $0.50 per warrant and expire in July and September 2009, of which
4,250,000 warrants were extended to April 2011. As such, effective
January 1, 2009, we reclassified the fair value of these warrants to purchase
common stock, which had exercise price reset features, from equity to liability
status as if these warrants were treated as a derivative liability since their
date of issue. On January 1, 2009, we reclassified $1,084,375
to beginning retained deficit and $1,084,375 to other liabilities - warrants to
recognize the fair value of such warrants on such date.
As of
December 31, 2009, the remaining 4,250,000 warrants were fair valued using the
Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rate of 1.08%, expected life of 1.25
years, an expected volatility factor of 84.10% and a dividend yield of 0.0%. The
fair value of these warrants to purchase common stock increased to $2,956,725 as
of December 31, 2009. As such, we recognized a $2,071,350 non-cash charge from
the change in fair value of these warrants for the year ended December 31,
2009.
12.
|
SEGMENTED
INFORMATION
|
The
Company operates in a single industry segment. At December 31, 2009 and 2008,
total assets by geographic location are as follows:
2009
|
2008
|
|||||||
Canada
|
$ | 74,844 | $ | 648,438 | ||||
Chile
|
99,574 | 105,874 | ||||||
United States
|
2,003,442 | 1,529,293 | ||||||
$ | 2,177,860 | $ | 2,283,605 |
13.
|
SUBSEQUENT
EVENTS
|
|
(a)
|
In
February 2010, the Company filed an S-1 registration statement related to
the offering of common shares with the SEC to raise up to
$6,000,000. The pricing and final amount of the offering are
not yet determined. The offering will consist of units, each
unit consisting of three shares of common stock and one three-year warrant
to purchase an additional share of common stock at 125% of the price per
share allocated to the common shares in the units. The units
will separate immediately and the common stock and the warrants will be
issued separately. Source Capital Group, Inc. will act as the
placement agent for the units, on a “best efforts” basis, and will receive
a selling commission of 8% on gross proceeds
raised.
|
26
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Years
Ended December 31, 2009, 2008 and 2007
(US
Funds)
13.
|
SUBSEQUENT EVENTS
(Continued)
|
|
(b)
|
In
February 2010, the Company granted 720,000 fully vested shares of common
stock at a fair value of $828,000 to management, employees and
consultants. The shares were granted under the 2010 Management
Compensation Plan. The shares were issued without registration
under the Securities
Act by reason of the exemptions from registration afforded by the
provisions of Section 4(2) of the Securities Act and
regulations promulgated by the SEC. Each person acknowledged
appropriate investment representations with respect to the issuance and
consented to the imposition of restrictive legends upon the
certificates.
|
27
[OUTSIDE
BACK COVER]
White
Mountain Titanium Corporation
1,869,159
Units
20,101,600
Shares of Common Stock
PROSPECTUS
WHITE
MOUNTAIN TITANIUM CORPORATION
Augusto
Leguia 100, Oficina 812
Las
Condes, Santiago
Chile
Telephone
(5 62) 657-1800
_______________,
2010
Until ,
2010, all dealers that effect transactions in our shares, whether or not
participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer’s obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution
The
following is an itemized statement of the estimated amounts of all expenses
payable by us in connection with the registration of the common stock, other
than underwriting discounts and commissions. All amounts are
estimates except the SEC registration fee.
Securities
and Exchange Commission - Registration Fee
|
$ | 1,335 | ||
State
filing Fees
|
$ | 10,000 | ||
Printing
and Engraving Expenses
|
$ | 5,000 | ||
Edgarizing
Costs
|
$ | 5,000 | ||
Accounting
Fees and Expenses
|
$ | 10,000 | ||
Legal
Fees and Expenses
|
$ | 25,000 | ||
Miscellaneous
|
$ | 3,665 | ||
Total
|
$ | 60,000 |
None of
the expenses of the offering will be paid by the selling security
holders.
Item
14. Indemnification of Directors and Officers
Nevada
law expressly authorizes a Nevada corporation to indemnify its directors,
officers, employees, and agents against liabilities arising out of such persons’
conduct as directors, officers, employees, or agents if they acted in good
faith, in a manner they reasonably believed to be in or not opposed to the best
interests of the company, and, in the case of criminal proceedings, if they had
no reasonable cause to believe their conduct was unlawful. Generally,
indemnification for such persons is mandatory if such person was successful, on
the merits or otherwise, in the defense of any such proceeding, or in the
defense of any claim, issue, or matter in the proceeding. In
addition, as provided in the articles of incorporation, bylaws, or an agreement,
the corporation may pay for or reimburse the reasonable expenses incurred by
such a person who is a party to a proceeding in advance of final disposition if
such person furnishes to the corporation an undertaking to repay such expenses
if it is ultimately determined that he did not meet the
requirements. In order to provide indemnification, unless ordered by
a court, the corporation must determine that the person meets the requirements
for indemnification. Such determination must be made by a majority of
disinterested directors; by independent legal counsel; or by a majority of the
shareholders.
Article
IX of our Articles of Incorporation provides that we are required to indemnify,
and advance expenses as they are incurred to, any person who was or is a party
or is threatened to be made a party to any threatened or completed action, suit
or proceeding, whether civil or criminal, administrative or investigative, by
reason of the fact that such person is or was a director or officer of our
company, or who is serving at our request or direction as a director or officer
of another corporation or other enterprise, against expenses, including
attorneys’ fees, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by such person in connection with the action, suit, or
proceeding, to the full extent permitted by Nevada law.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the
“Act”) may be permitted to directors, officers and controlling persons of our
company pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
II-1
Item
15. Recent Sales of Unregistered Securities
On March
4, 2007, the Compensation Committee approved, subject to board approval, the
granting of 250,000 options to David Nahmias for investor relations
activities. These five-year options were granted pursuant to our
stock option plan. The options are exercisable at $0.50 and are fully
vested. The options were granted without registration under the
Securities Act by reason of the exemption from registration afforded by Section
4(2) of the Act. Mr. Nahmias was an accredited investor at the time
of the grant. He delivered appropriate investment representations
with respect to the grant and consented to the imposition of restrictive legends
upon the grant form representing the option. Mr. Nahmias was provided
access to information similar to the type of information which would be included
in a prospectus. He did not enter into the transaction for the
options with us as a result of or subsequent to any advertisement, article,
notice, or other communication published in any newspaper, magazine, or similar
media or broadcast on television or radio, or presented at any seminar or
meeting and had a preexisting relationship with persons representing our company
at the time of the transaction. Mr. Nahmias represented that he had
been afforded the opportunity to ask questions of our management and to receive
answers concerning the terms and conditions of the option grants. No
underwriting discounts or commissions were paid in connection with the
grant.
From July
through August 2007, we conducted a non-public offering of up to 7,000,000
units, each unit consisting of one share of common stock and one common stock
purchase warrant. The purchase price of each unit was $0.50 and the
exercise price of the warrants is $0.60 per share at any time through August 10,
2010. The offering was completed with sales of 5,070,000 units made
to seven non-U.S. persons and to four persons in the U.S. for gross proceeds of
$2,535,000. The units were issued without registration under the
Securities Act by reason of the exemptions from registration afforded by the
provisions of Section 4(6) of the Securities Act and Regulation S promulgated by
the SEC in a simultaneous offering to both U.S. and to non-U.S.
persons. Each of the non-U.S. investors was a non-U.S. person at the
time of the sale. The offer and sale of the units to such persons was
made in an offshore transaction and no directed selling efforts were made in the
U.S. by us or anyone acting on our behalf. The offering restrictions
required pursuant to Regulation S were also implemented for these
sales. All of the investors represented that they were accredited
investors as defined in Rule 501 of Regulation D at the time of the
purchase. Each investor delivered appropriate investment
representations with respect to the issuance and consented to the imposition of
restrictive legends upon the certificates representing the shares and
warrants. They did not enter into the transaction with us as a result
of or subsequent to any advertisement, article, notice, or other communication
published in any newspaper, magazine, or similar media or broadcast on
television or radio, or presented at any seminar or meeting. Each
investor represented they were afforded the opportunity to ask questions of our
management and to receive answers concerning the terms and conditions of the
offering. We paid a cash selling commission of 8% of the gross
proceeds on the sale of 4,770,000 of the units sold by Objective Equity, LLC,
the selling agent for part of the offering. We also issued 77,600
warrants as a selling commission to such entity. We have agreed to
register the resale of the common shares sold as part of the units and issuable
upon exercise of the warrants.
Also on
August 31, 2007, the Board of Directors granted bonuses of 700,000 shares of
common stock and warrants to purchase 700,000 shares to management for past
services. The exercise price of the warrants is $0.60 per share at
any time through August 15, 2010. The shares and warrants were
granted to the following persons:
Name
|
Number of Shares
|
Number of Warrants
|
||||||
Michael
P. Kurtanjek
|
225,000 | 225,000 | ||||||
Trio
International Capital Corp
|
225,000 | 225,000 | ||||||
Charles
E. Jenkins
|
150,000 | 150,000 | ||||||
Howard
M. Crosby
|
100,000 | 100,000 |
The
shares and warrants were issued without registration under the Securities Act by
reason of the exemptions from registration afforded by the provisions of Section
4(6) of the Securities Act and Regulation S promulgated by the
SEC. All of the investors were accredited investors as defined in
Rule 501 of Regulation D at the time of the grant. Each person
acknowledged appropriate investment representations with respect to the issuance
and consented to the imposition of restrictive legends upon the certificates
representing the shares and warrants. They did not enter into the
transaction with us as a result of or subsequent to any advertisement, article,
notice, or other communication published in any newspaper, magazine, or similar
media or broadcast on television or radio, or presented at any seminar or
meeting. Each investor represented they were afforded the opportunity
to ask questions of our management and to receive answers concerning the terms
and conditions of the offering. No selling commissions were paid in
connection with the grant of the securities. We have agreed to
register the resale of the common shares sold as part of the units and issuable
upon exercise of the warrants.
II-2
On August
31, 2007, the Board of Directors approved the granting of 1,075,000 options to
various members of management and to consultants as follows:
Name
|
Number of Options Granted
|
|||
Michael
P. Kurtanjek
|
150,000 | |||
Trio
International Capital Corp.
|
150,000 | |||
Charles
E. Jenkins
|
300,000 | |||
Howard
M. Crosby
|
100,000 | |||
David
Rochester
|
150,000 | |||
Derek
Fray
|
100,000 | |||
Srdj
Bulatovic
|
100,000 | |||
Maria
Eugenia Moscoso
|
25,000 |
These
five-year options are fully vested and exercisable at $0.50 per
share. They expire on August 31, 2012. The options were
granted without registration under the Securities Act by reason of the exemption
from registration afforded by Section 4(2) of the Act. Each optionee
acknowledged appropriate investment representations with respect to the grants
and consented to the imposition of restrictive legends upon the certificates
representing the options. Each grantee was provided access to
information similar to the type of information which would be included in a
prospectus. Each grantee had a preexisting relationship with persons
representing our company at the time of the transaction. Each grantee
was afforded the opportunity to ask questions of our management and to receive
answers concerning the terms and conditions of the option grants. No
selling commissions were paid in connection with these option
grants.
On
December 21, 2007, the Board of Directors granted bonuses of 900,000 fully
vested shares of common stock to management and outside consultants for past
services. The shares were granted to the following
persons:
Name
|
Number of Shares
|
|||
Michael
P. Kurtanjek
|
200,000 | |||
Brian
Flower
|
200,000 | |||
Terese
Gieselman
|
100,000 | |||
Maria
Eugenia Moscoso
|
50,000 | |||
Ronald
Nash
|
100,000 | |||
Cesar
Lopez
|
100,000 | |||
Natasha
Tschischow
|
75,000 | |||
Christian
Feddersen
|
75,000 |
The
shares were issued without registration under the Securities Act by reason of
the exemptions from registration afforded by the provisions of Section 4(2) of
the Securities Act and Regulation S promulgated by the SEC. Each
person acknowledged appropriate investment representations with respect to the
issuance and consented to the imposition of restrictive legends upon the
certificates representing the shares. They did not enter into the
transaction with us as a result of or subsequent to any advertisement, article,
notice, or other communication published in any newspaper, magazine, or similar
media or broadcast on television or radio, or presented at any seminar or
meeting. Each recipient of the bonuses was afforded the opportunity
to ask questions of our management and to receive answers concerning the terms
and conditions of the issuance. No selling commissions were paid in
connection with the grant of the shares.
II-3
In
September 2008 we closed our offering of up to 5,000,000 shares at a price of
$0.75 per share. The offering was made concurrently to persons within
the United States and to non-U.S. persons located outside the United
States. We sold a total of 2,814,910 shares of common stock in the
offering for gross proceeds of $2,111,180. Of these 2,791,203 were
sold within the United States without registration under the Securities Act by
reason of the exemption from registration afforded by the provisions of Section
4(6) and/or Section 4(2) thereof, and Rule 506 promulgated thereunder, as a
transaction by an issuer not involving any public offering. Each of
the U.S. purchasers was an accredited investor as defined in Regulation
D. The remaining 23,707 shares were sold outside the United States to
non-U.S. persons in accordance with the provisions of Regulation
S. Each investor delivered appropriate investment representations
with respect to this stock sale and consented to the imposition of restrictive
legends upon the stock certificate representing the shares. No
investor entered into the transaction with us as a result of or subsequent to
any advertisement, article, notice, or other communication published in any
newspaper, magazine, or similar media or broadcast on television or radio, or
presented at any seminar or meeting. Each investor was also afforded
the opportunity to ask questions of our management and to receive answers
concerning the terms and conditions of the transaction. The Company
paid $140,168 in selling commissions to licensed selling agents in this
offering.
In
January 2009, the Board of Directors granted bonuses of 200,000 fully vested
shares of common stock each to Michael P. Kurtanjek, our President and a
director, and to Brian Flower, our Chairman for past services. The
shares were issued without registration under the Securities Act by reason of
the exemptions from registration afforded by the provisions of Section 4(2) of
the Securities Act and Regulation S promulgated by the SEC. Each
person acknowledged appropriate investment representations with respect to the
issuance and consented to the imposition of restrictive legends upon the
certificates representing the shares. They did not enter into the
transaction with us as a result of or subsequent to any advertisement, article,
notice, or other communication published in any newspaper, magazine, or similar
media or broadcast on television or radio, or presented at any seminar or
meeting. Each recipient of the bonuses was afforded the opportunity
to ask questions of our management and to receive answers concerning the terms
and conditions of the issuance. No selling commissions were paid in
connection with the grant of the shares.
On May 7,
2009, we entered into an Exchange Agreement with a Rubicon which it exercised
outstanding warrants to purchase 2,000,000 shares of our common stock at $0.50
per share for gross proceeds of $1,000,000. The closing of the
agreement, payment of the funds, and issuance of the shares occurred on May 8,
2009. The shares were issued without registration under the
Securities Act by reason of the exemptions from registration afforded by the
provisions of Section 4(2) and 4(6) of the Securities Act. The
purchaser was an accredited investor as defined in Rule 501 promulgated by the
SEC. The purchaser acknowledged appropriate investment
representations with respect to the sale. It did not enter into the
transaction with us as a result of or subsequent to any advertisement, article,
notice, or other communication published in any newspaper, magazine, or similar
media or broadcast on television or radio, or presented at any seminar or
meeting. The purchaser was afforded the opportunity to ask questions
of management of the Company and to receive answers concerning the terms and
conditions of exercise of the warrants. No selling commissions were
paid in connection with this transaction.
On June
23, 2008, we granted 82,500 options each to John May and Wei Lu for accepting
appointment to the Board of Directors and committees. These five-year
options vest as follows: 25% immediately and 12.5% per calendar
quarter thereafter with the first vesting occurring on June 30,
2008. The options were granted under our Stock Option
Plan. The options were granted without registration under the
Securities Act by reason of the exemption from registration afforded by Section
4(2) and 4(6) of the Act, and Rule 506 promulgated thereunder. Each
optionee was an accredited investor at the time of the grant. Each
optionee acknowledged appropriate investment representations with respect to the
grants and consented to the imposition of restrictive legends upon the
certificates representing the options. Each grantee had a preexisting
relationship with persons representing our company at the time of the
transaction. Each grantee was afforded the opportunity to ask
questions of our management and to receive answers concerning the terms and
conditions of the option grants. No selling commissions were paid in
connection with these option grants.
II-4
On June
30, 2009, the Compensation Committee and the Board of Directors approved the
issuance of warrants to KirkCapital Asset Management, Inc., an entity controlled
by David Kirkingberg, to purchase 150,000 shares of our common stock at $0.75
per share at any time prior to June 30, 2011. These warrants were
issued in connection with financial consulting services to be provided by Mr.
Kirkingberg’s company. The warrants will vest as
follows: (i) 37,500 of the warrants vested on June 30, 2009; (ii)
18,750 of the warrants will vest on July 31, 2009; and (iii) 18,750 of the
warrants will vest on the last day of each month thereafter until all warrants
are fully vested or the consulting services are terminated. The
warrants were issued without registration under the Securities Act by reason of
the exemption from registration afforded by Section 4(2) of the
Act. KirkCapital Asset Management, Inc. was an accredited investor at
the time of the grant. It delivered appropriate investment
representations with respect to the warrant issuance and consented to the
imposition of restrictive legends upon the warrant form. Mr.
Kirkingberg’s entity did not enter into the consulting agreement with us as a
result of or subsequent to any advertisement, article, notice, or other
communication published in any newspaper, magazine, or similar media or
broadcast on television or radio, or presented at any seminar or meeting and had
a preexisting relationship with persons representing our company at the time of
the transaction. Mr. Kirkingberg represented that he had been
afforded the opportunity to ask questions of our management and to receive
answers concerning the terms and conditions of the warrant
issuance. No underwriting discounts or commissions were paid in
connection with the transaction.
On June
30, 2009, the Compensation Committee and the Board of Directors approved and the
Company issued warrants to purchase 117,500 common shares each to John J. May
and Wei Lu for accepting appointment to the Board of Directors. We
also issued warrants to purchase 100,000 common shares to Cesar Lopez for
services as one of our directors. These three-year warrants are
exercisable at $0.50 per share and are fully vested. The warrants
were issued without registration under the Securities Act by reason of the
exemption from registration afforded by the provisions of Regulation
S. Each of the directors was a non-U.S. person at the time of the
grant. The issuance of the warrants was made in an offshore
transaction and no directed selling efforts were made in the U.S. by us or
anyone acting on our behalf. The offering restrictions required
pursuant to Regulation S were also implemented. No underwriting
discounts or commissions were paid in connection with the issuance of the
warrants.
In
October 2009 we closed our offering of common shares at a price of $0.65 per
share. We sold a total of 1,496,930 shares of common stock in the
offering for gross proceeds of $973,005. These shares were sold
without registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(6) and/or Section 4(2)
thereof, and Rule 506 promulgated thereunder, as a transaction by an issuer not
involving any public offering. Each of the 25 purchasers was an
accredited investor as defined in Regulation D. Each investor
delivered appropriate investment representations with respect to this stock sale
and consented to the imposition of restrictive legends upon the stock
certificate representing the shares. No investor entered into the
transaction with us as a result of or subsequent to any advertisement, article,
notice, or other communication published in any newspaper, magazine, or similar
media or broadcast on television or radio, or presented at any seminar or
meeting. Each investor was also afforded the opportunity to ask
questions of our management and to receive answers concerning the terms and
conditions of the transaction. The Company paid $68,110 in selling
commissions to a licensed selling agent in this offering and granted warrants to
purchase 104,785 shares at a price of $0.90 exercisable until April 15,
2011. These warrants were granted to Chelsea Financial Services, a
licensed broker-dealer, in connection with the above-referenced
offering. These warrants were issued without registration under the
Securities Act by reason of the exemption from registration afforded by the
provisions of Section 4(6) and/or Section 4(2) thereof, and Rule 506 promulgated
thereunder, as a transaction by an issuer not involving any public
offering. The investor was an accredited investor as defined in
Regulation D. It delivered appropriate investment representations
with respect to this warrant issuance and consented to the imposition of
restrictive legends upon the certificate representing the
warrants. The investor did not enter into the transaction with us as
a result of or subsequent to any advertisement, article, notice, or other
communication published in any newspaper, magazine, or similar media or
broadcast on television or radio, or presented at any seminar or
meeting. The investor was also afforded the opportunity to ask
questions of our management and to receive answers concerning the terms and
conditions of the transaction.
II-5
In
February 2010 we granted bonuses of 720,000 fully vested shares of common stock
to management for past services performed in 2008 and 2009. The
shares were granted under our 2010 Management Compensation Plan. We
granted 252,000 shares to Mr. Kurtanjek, 252,000 shares to an entity owned by
Mr. Flower, 72,000 shares to Mr. Jenkins, 54,000 shares to an entity owned by
Mr. Crosby, 54,000 shares to Christian Feddersen, an employee in Chile, and
36,000 shares to Maria Eugenia Moscosco, an employee in Chile. The
shares were issued without registration under the Securities Act by reason of
the exemptions from registration afforded by the provisions of Section 4(2) of
the Securities Act and Regulation S promulgated by the SEC. Each
person acknowledged appropriate investment representations with respect to the
issuance and consented to the imposition of restrictive legends upon the
certificates representing the shares. They did not enter into the
transaction with us as a result of or subsequent to any advertisement, article,
notice, or other communication published in any newspaper, magazine, or similar
media or broadcast on television or radio, or presented at any seminar or
meeting. Each recipient of the bonuses was afforded the opportunity
to ask questions of our management and to receive answers concerning the terms
and conditions of the issuance. No selling commissions were paid in
connection with the grant of the shares.
Item
16. Exhibits
Incorporated by
Reference
|
||||||||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
File No.
|
Exhibit
|
Filing
Date
|
Filed
Here-
with
|
||||||
1.1
|
Agreement
dated January 25, 2010, with Source Capital Group,
Inc.
|
S-1
|
333-164963
|
1.1
|
2/12/10
|
X
|
||||||
2.1
|
Agreement
and Plan of Merger dated January 26, 2004, with GreatWall Minerals,
Ltd.
|
SB-2
|
333-129347
|
2.1
|
10/31/05
|
|||||||
3.1
|
Articles
of Incorporation
|
SB-2
|
333-129347
|
3.1
|
10/31/05
|
|||||||
3.2
|
Current
Bylaws
|
8-K
|
333-129347
|
3.1
|
9/12/06
|
|||||||
4.1
|
Form
of Common Stock Certificate
|
SB-2
|
333-129347
|
4.1
|
10/31/05
|
|||||||
4.2
|
Certificate
of Designations, Preferences and Rights of the Series A Convertible
Preferred Stock, as amended
|
SB-2
|
333-129347
|
4.2
|
10/31/05
|
|||||||
4.3
|
Form
of Series A Convertible Preferred Stock Certificate
|
SB-2
|
333-129347
|
4.3
|
10/31/05
|
|||||||
4.4
|
Warrant
Certificate dated July 11, 2005, for Rubicon Master
Fund
|
SB-2
|
333-129347
|
4.4
|
10/31/05
|
|||||||
4.5
|
Amended
and Restated Warrant for Rubicon Master Fund
|
8-K
|
333-129347
|
99.2
|
5/8/09
|
|||||||
4.6
|
Warrant
Certificate dated September 7, 2005, for Phelps Dodge
Corporation
|
SB-2
|
333-129347
|
4.5
|
10/31/05
|
|||||||
4.7
|
Registration
Rights set forth in Article VI of the Securities Purchase Agreement dated
July 11, 2005, as amended September 7, 2005 and May 5, 2006, for Rubicon
Master Fund and Phelps Dodge Corporation
|
SB2/A
|
333-129347
|
4.6
|
11/24/06
|
|||||||
4.8
|
Warrant
Certificate effective July 11, 2005, in the name of Sunrise Securities
Corp. for 300,000 shares
|
SB-2
|
333-129347
|
4.8
|
10/31/05
|
|||||||
4.9
|
Stock
Option Plan*
|
SB-2
|
333-129347
|
4.9
|
10/31/05
|
|||||||
4.10
|
2010
Management Compensation Plan*
|
S-1
|
333-164963
|
4.11
|
2/12/10
|
|||||||
4.11
|
Form
of the Warrant Agreement with Interwest Transfer Company, with warrant
certificate for unit offering
|
**
|
||||||||||
4.12
|
Securities
Purchase Agreement for unit offering
|
**
|
||||||||||
5.1
|
|
Opinion
re Legality of Shares
|
|
|
|
|
|
X
|
** To
be filed by amendment
II-6
Incorporated by Reference
|
||||||||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
File No.
|
Exhibit
|
Filing
Date
|
Filed
Here-
with
|
||||||
10.1
|
Transfer
of Contract and Mortgage Credit dated September 5, 2003, between Compañía
Contractual Minera Ojos del Salado and Compañía Minera Rutile Resources
Limitada (formerly Minera Royal Silver Limitada), with payment extension
document
|
SB-2
|
333-129347
|
10.1
|
10/31/05
|
|||||||
10.2
|
Securities
Purchase Agreement dated July 11, 2005, as amended September 7, 2005, with
Rubicon Master Fund and Phelps Dodge Corporation
|
SB-2
|
333-129347
|
10.2
|
10/31/05
|
|||||||
10.3
|
Amendment
dated May 5, 2006, to Securities Purchase Agreement dated July 11,
2005
|
SB-2/A
|
333-129347
|
10.2(a)
|
5/30/06
|
|||||||
10.4
|
Management
Services Agreement dated February 6, 2006, with Trio International Capital
Corp.*
|
SB-2/A
|
333-129347
|
10.3(a)
|
5/30/06
|
|||||||
10.5
|
Amendment
dated September 1, 2006, to Management Services Agreement dated February
6, 2006, with Trio International Capital Corp.*
|
8-K
|
333-129347
|
10.1
|
9/12/06
|
|||||||
10.6
|
Amendment
dated August 31, 2007, to Management Services Agreement dated February 6,
2006, with Trio International Capital Corp.*
|
SB-2
|
333-148644
|
10.6
|
1/14/08
|
|||||||
10.7
|
Amendment
dated December 21, 2007, to Management Services Agreement dated February
6, 2006, with Trio International Capital Corp.*
|
SB-2
|
333-148644
|
10.7
|
1/14/08
|
|||||||
10.8
|
Option
Agreement dated February 9, 2005, with Trio International Capital
Corp.*
|
SB-2
|
333-129347
|
10.5
|
10/31/05
|
|||||||
10.9
|
Management
Services Agreement dated February 6, 2006, with Michael P.
Kurtanjek*
|
SB-2/A
|
333-129347
|
10.9
|
5/30/06
|
|||||||
10.10
|
Amendment
dated August 31, 2007, to Management Services Agreement dated February 6,
2006, with Michael P. Kurtanjek*
|
SB-2
|
333-148644
|
10.10
|
1/14/08
|
|||||||
10.11
|
Amendment
dated December 21, 2007, to Management Services Agreement dated February
6, 2006, with Michael P. Kurtanjek*
|
SB-2
|
333-148644
|
10.11
|
1/14/08
|
|||||||
10.12
|
Option
Agreement dated May 31, 2004, with Michael Kurtanjek*
|
SB-2
|
333-129347
|
10.4
|
10/31/05
|
|||||||
10.13
|
Business
Consulting Agreement dated August 1, 2005, with Crosby Enterprises,
Inc.*
|
SB-2
|
333-129347
|
10.7
|
10/31/05
|
|||||||
10.14
|
|
Renewal
dated February 6, 2006, of Business Consulting Agreement with Crosby
Enterprises, Inc.*
|
|
SB-2/A
|
|
333-129347
|
|
10.7(a)
|
|
5/30/06
|
|
II-7
Incorporated by
Reference
|
||||||||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
File No.
|
Exhibit
|
Filing
Date
|
Filed
Here-
with
|
||||||
10.15
|
Amendment
dated December 21, 2007, to Business Consulting Agreement dated August 1,
2005, with Crosby Enterprises, Inc.*
|
SB-2
|
333-148644
|
10.15
|
1/14/08
|
|||||||
10.16
|
Option
Agreement dated August 18, 2005, with Crosby Enterprises,
Inc.*
|
SB-2
|
333-129347
|
10.6
|
10/31/05
|
|||||||
10.17
|
Management
Services Agreement dated February 6, 2006, with Lopez & Ashton
Ltda.*
|
SB-2/A
|
333-129347
|
10.8(a)
|
5/30/06
|
|||||||
10.18
|
Management
Services Agreement dated September 1, 2006, with Charles E.
Jenkins*
|
8-K
|
333-129347
|
10.2
|
9/12/06
|
|||||||
10.19
|
Amendment
dated August 31, 2007, to Management Services Agreement dated September 1,
2006, with Charles E. Jenkins*
|
SB-2
|
333-148644
|
10.19
|
1/14/08
|
|||||||
10.20
|
Amendment
dated December 21, 2007, to Management Services Agreement dated September
1, 2006, with Charles E. Jenkins*
|
SB-2
|
333-148644
|
10.20
|
1/14/08
|
|||||||
10.21
|
Option
Agreement dated September 1, 2006, with Charles E.
Jenkins*
|
SB-2/A
|
333-129347
|
10.14
|
11/24/06
|
|||||||
10.22
|
Management
Services Agreement dated February 6, 2006, with MinCo Corporate Mgmt Inc.,
and First Amendment dated September 1, 2006*
|
8-K
|
333-129347
|
10.3
|
9/12/06
|
|||||||
10.23
|
Option
Agreement dated September 1, 2006, with Terese
Gieselman
|
SB-2/A
|
333-129347
|
10.16
|
11/24/06
|
|||||||
10.24
|
Brokerage
Representation Agreement dated November 26, 2007, with Beacon Hill
Shipping Ltd.
|
SB-2
|
333-148644
|
10.24
|
1/14/08
|
|||||||
10.25
|
Exchange
Agreement dated May 7, 2009, with Rubicon Master Fund
|
8-K
|
333-148644
|
99.1
|
5/8/09
|
|||||||
10.26
|
Warrant
Agreement dated June 30, 2009, with John J. May*
|
10-Q
|
333-148644
|
10.1
|
8/10/09
|
|||||||
10.27
|
Warrant
Agreement dated June 30, 2009, with Wei Lu*
|
10-Q
|
333-148644
|
10.2
|
8/10/09
|
|||||||
10.28
|
Warrant
Agreement dated June 30, 2009, with Cesar Lopez*
|
10-Q
|
333-148644
|
10.3
|
8/10/09
|
|||||||
10.29
|
Management
Services Agreement dated August 1, 2009, with Chapelle Capital
Corp.*
|
S-1/A
|
333-129347
|
10.29
|
12/31/09
|
|||||||
10.30
|
Amendment
effective January 1, 2010 to Management Services Agreement dated August 1,
2009, with Chapelle Capital Corp.*
|
S-1
|
333-164963
|
10.30
|
2/12/10
|
|||||||
10.31
|
Warrant
agreement dated February 7, 2010, with Chapelle Capital
Corp.*
|
S-1
|
333-164963
|
10.31
|
2/12/10
|
|||||||
10.32
|
Amendment
effective January 1, 2010, to Management Services Agreement dated August
1, 2009, with Michael P. Kurtanjek*
|
S-1
|
333-164963
|
10.32
|
2/12/10
|
|||||||
10.33
|
|
Warrant
agreement dated February 7, 2010, with Michael P.
Kurtanjek*
|
|
S-1
|
|
333-164963
|
|
10.33
|
|
2/12/10
|
|
II-8
Incorporated by
Reference
|
||||||||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
File No.
|
Exhibit
|
Filing
Date
|
Filed
Here-
with
|
||||||
10.34
|
Management
Services Agreement effective January 1, 2010, with 0834406 BC Ltd.
*
|
S-1
|
333-164963
|
10.34
|
2/12/10
|
|||||||
14.1
|
Code
of Ethics
|
10-KSB
|
333-129347
|
14.1
|
3/29/07
|
|||||||
21.1
|
List
of Subsidiaries
|
S-1/A
|
333-129347
|
21.1
|
12/31/09
|
|||||||
23.1
|
Consent
of Smythe Ratcliffe, LLP, independent registered public accounting
firm
|
X
|
||||||||||
23.2
|
Consent
of Thomas A. Henricksen, PhD
|
|
|
|
X
|
|||||||
23.3
|
Consent
of AMEC-Cade
|
X
|
||||||||||
23.4
|
Consent
of NCL Ingenieria y Construccion
|
|
X
|
|||||||||
23.5
|
Consent
of SGS Lakefield
|
|
X
|
|||||||||
23.6
|
Consent
of Arcadis Geotecnica
|
|
|
X
|
||||||||
23.7
|
|
Consent
of Attorney (included in Exhibit 5.1)
|
|
|
|
|
|
X
|
*Management
contract, or compensatory plan or arrangement, required to be filed as an
exhibit.
Item
17. Undertakings
The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i)
Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect
in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
effective registration statement.
(iii) Include
any material or changed information with respect to the plan of
distribution.
(2) That,
for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability of the undersigned registrant under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such
purchaser:
II-9
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424 of Regulation C of the
Securities Act;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(5) For
purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B
or other prospectuses filed in reliance on Rule 430A, shall be deemed to be part
of and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement
made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such date of first use.
[SIGNATURE
PAGE TO FOLLOW]
II-10
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santiago, Chile, on March
24, 2010.
WHITE
MOUNTAIN TITANIUM CORPORATION
|
||
By:
|
/s/ Michael P.
Kurtanjek
|
|
Michael
P. Kurtanjek, President (Principal
Executive
Officer)
|
||
By:
|
/s/ Charles E.
Jenkins
|
|
Charles
E. Jenkins, Chief Financial Officer
(Principal
Financial and Accounting
Officer)
|
In
accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
NAME
|
TITLE
|
DATE
|
||
/s/ Michael P.
Kurtanjek
|
Director
& President (Principal
|
March
24, 2010
|
||
Michael
P. Kurtanjek
|
Executive
Officer)
|
|||
/s/ Charles E.
Jenkins
|
Director
& Chief Financial Officer
|
March
24, 2010
|
||
Charles
E. Jenkins
|
(Principal
Financial and Accounting
Officer)
|
|||
Brian Flower
|
Director
and Chairman
|
March
24, 2010
|
||
Brian
Flower
|
||||
/s/ Howard M. Crosby
|
Director
|
March
24, 2010
|
||
Howard
M. Crosby
|
||||
Director
|
||||
Wei
Lu
|
||||
/s/ John J. May
|
Director
|
March
24, 2010
|
||
John
J. May
|
|
|
II-11