Attached files
file | filename |
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EX-32.1 - WHITE MOUNTAIN TITANIUM CORP | v179400_ex32-1.htm |
EX-23.6 - WHITE MOUNTAIN TITANIUM CORP | v179400_ex23-6.htm |
EX-31.1 - WHITE MOUNTAIN TITANIUM CORP | v179400_ex31-2.htm |
EX-31.1 - WHITE MOUNTAIN TITANIUM CORP | v179400_ex31-1.htm |
EX-32.2 - WHITE MOUNTAIN TITANIUM CORP | v179400_ex32-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
|
||
x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended December 31, 2009
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF
1934
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For the
transition period from __________ to __________
Commission
File Number: 333-129347
White
Mountain Titanium Corporation
(Exact
name of Registrant as specified in its charter)
NEVADA
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87-0577390
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State
or other jurisdiction of incorporation or organization
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I.R.S.
Employer Identification No.
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Augusto
Leguia 100, Oficina 812, Las Condes, Santiago Chile
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None
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|
(Address
of principal executive offices)
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(Zip
Code)
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Issuer’s
telephone number, including area code: (56 2) 657-1800
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. Yes o No x
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. (1) Yes x No
o (2) Yes x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data file required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or such shorter period that the
registrant was required to submit and post such files Yes o No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405) is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.o
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. (Check one):
Large
Accelerated Filer o
|
Accelerated
Filer o
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Non-Accelerated
Filer o
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Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).Yes o No
x
As of
June 30, 2009, the aggregate market value of the registrant’s common equity
held by non-affiliates was approximately $25,394,438 computed by reference to
the average bid and asked price of the Common Stock. For the purpose of the
foregoing calculation only, all directors and executive officers of the
registrant are assumed to be affiliates of the registrant. Such
determination should not be deemed an admission that such officers and directors
are, in fact, affiliates of the registrant.
At March
22, 2010, there were 37,120,972 shares of the registrant’s Common Stock
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
None
Table
of Contents
Page
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PART
I
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5
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ITEM
1. BUSINESS
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5
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ITEM
1A. RISK FACTORS
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11
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ITEM
1B. UNRESOLVED STAFF COMMENTS
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11
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ITEM
2. PROPERTIES
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11
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ITEM
3. LEGAL PROCEEDINGS
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19
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ITEM
4. (REMOVED AND RESERVED)
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19
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PART
II
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19
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ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS
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AND
ISSUER PURCHASES OF EQUITY SECURITIES
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19
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ITEM
6. SELECTED FINANCIAL DATA
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20
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ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
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RESULTS
OF OPERATIONS
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20
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ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
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22
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ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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23
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ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
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FINANCIAL
DISCLOSURE
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50
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ITEM
9A(T). CONTROLS AND PROCEDURES
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50
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ITEM
9B. OTHER INFORMATION
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51
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PART
III
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51
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ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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51
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ITEM
11. EXECUTIVE COMPENSATION
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53
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ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND
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RELATED
STOCKHOLDER MATTERS
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57
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ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR
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INDEPENDENCE
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59
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ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
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61
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PART
IV
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61
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ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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61
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3
Forward
Looking Statements
The
statements contained in this report that are not historical facts 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.
Among the
factors that could cause actual future results to differ materially are the
risks and uncertainties discussed in this report. 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.
4
PART
I
ITEM
1. BUSINESS
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.
We
anticipate offering up to 1,869,159 units at $3.21 per unit for gross proceeds
of $6,000,000. Each unit is proposed to consist 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. We have entered into an agreement with
Source Capital Group, Inc. to act as the placement agent for the units on a
“best-efforts” basis.
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.
5
Titanium
Industry and Market Overview
Overview
Titanium
is the ninth most abundant element, making up about 0.6% of the earth’s
crust. Titanium occurs primarily in the minerals anatase, brookite,
ilmenite, leucoxene, perovskite, rutile, and sphene. Of these
minerals, only rutile, ilmenite and leucoxene, an alternation product of
ilmenite, have significant economic importance. Both rutile and
ilmenite are chemically processed to produce both titanium dioxide pigment and
titanium metal.
Approximately
95% of titanium is consumed in the form of titanium dioxide concentrate,
primarily as a white pigment in paints, paper, and plastics. Titanium
dioxide pigment is characterized by its purity, refractive index, particle size,
and surface properties. The superiority of titanium dioxide as a
white pigment is due mainly to its high refractive index and resulting
light-scattering ability, which impart excellent hiding power and
brightness.
Titanium
metal is well known for its corrosion resistance, high strength-to-weight ratio,
and high melting point. Accordingly, titanium metal is used in
sectors, such as the aerospace and chemicals industries, where such
considerations are extremely important.
Our
business is currently focused on the mining concessions which constitute the
Cerro Blanco property. These concessions host a hard rock rutile
deposit as opposed to ilmenite laden mineral sands deposits held by most of our
competitors. Rutile 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
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||||
Industry
|
Percent
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|||
Paint
and Coatings
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59.1
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% | ||
Plastics
and Rubber
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23.8
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% | ||
Paper
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11.6
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%
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||
Other*
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5.5
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% | ||
*
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Includes
agricultural, building materials, ceramics, coated fabrics and textiles,
cosmetics, food, paper and printing
ink
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6
The table
below gives a broad picture of principal uses for titanium dioxide.
Uses
of Titanium Dioxide
|
||
Industry
|
Use
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|
Paints
& Pigments
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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
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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.
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Paper
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Additive
to whiten and increase opacity of paper.
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|
Cosmetics
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Protection
against UV radiation in high-factor sun creams; to give high brightness
and opacity in toothpaste and soaps.
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|
Food
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High
brightness and opacity in foods and food packaging.
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|
Pharmaceuticals
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High
chemical purity titanium dioxide is used as a carrier and to ensure
brightness and opacity.
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|
Printing
Inks
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Protection
against fading and color deterioration.
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|
Other
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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
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31,000 | - | ||||||
China
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200,000 | - | ||||||
India
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85,000 | 7,400 | ||||||
Norway
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37,000 | - | ||||||
South
Africa
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63,000 | 8,300 | ||||||
Ukraine
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5,900 | 2,500 | ||||||
US
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6,000 | 400 | ||||||
Other
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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.
7
Titanium
Pigment Production
Mining of
titanium minerals is usually performed using surface methods like dredging and
dry mining and gravity spirals. Ilmenite is often processed to
produce a synthetic rutile.
The most
widely used processes available for the manufacture of titanium dioxide pigment
are the sulphate and chloride processes. Commercially manufactured
titanium dioxide pigment is available as either anatase-type or rutile-type,
categorized according to its crystalline form, regardless of whether it is made
from the mineral rutile. Anatase pigment is currently made by
sulphate producers only, while rutile pigment is made by both the chloride and
the sulphate processes. The decision to use one process instead of
the other is based on numerous factors, including raw material availability,
freight, and waste disposal costs.
Anatase
and rutile pigments, while both are white, have different properties and thus
have different end-uses. For example, rutile pigment is less reactive
with the binders in paint when exposed to sunlight than is the anatase pigment
and is preferred for use in outdoor paint. Anatase pigment has a
bluer tone than rutile, is somewhat softer, and is used mainly in indoor paints
and in paper manufacturing. Depending on the manner in which it is
produced and subsequently finished, TiO2 pigment
can exhibit a range of functional properties, including dispersion, durability,
opacity, and tinting.
In the
chloride process, rutile is converted to TiCl4 by
chlorination in the presence of petroleum coke. TiCl4 is
oxidized with air or oxygen at about 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.
8
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.
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.
9
Mining
claims in Chile are acquired in the following manner:
|
·
|
Pedimento:
A pedimento is an exploration claim precisely defined by coordinates with
north-south and east-west boundaries. These may range in size
from a minimum of 100 hectares to a maximum of 5000 hectares, with a
maximum length-to-width ratio of 5:1. A pedimento is valid for
a maximum period of two years, following which the claim may be
reduced in size by at least 50%, and renewed for an additional
two years, provided that no overlying claim has been
staked. Claim taxes are due annually in the month of March; if
the taxes on a pedimento are not paid by such time, the claim can be
restored to good standing by paying double the annual claim tax by or
before the beginning of the following year. In Chile, new
pedimentos are permitted to overlap pre-existing claims; however, the
previously staked or underlying claim always takes precedence as long as
the claim holder maintains his claim in good standing and converts the
pedimento to a manifestacion within the initial two year
period.
|
|
·
|
Manifestacion:
During the two-year life of a pedimento, it may be converted at any time
to a manifestacion. Once an application to this effect has been
filed, the claim holder has 220 days to file a “Solicitud de
Mensura”, or “Request for Survey” with a court of competent jurisdiction,
and notify surrounding claim holders of the application by publishing such
request in the Official Mining Bulletin. This notifies
surrounding claim holders, who may contest the claim if they believe their
pre-established rights are being encroached upon. The option
also exists to file a manifestacion directly on open ground, without going
through the pedimento filing
process.
|
|
·
|
Mensura: The
claim must be surveyed by a government licensed surveyor within
nine months of the approval of the “Request for
Survey.” During the survey any surrounding claim owners may be
present, and once completed the survey documents are presented to the
court and reviewed by SERNAGEOMIN, the National Mining
Service. Assuming that all steps have been carried out
correctly and all other necessary items are in order, the court then
adjudicates the application and grants a permanent property right
(a mensura), the equivalent to a “patented
claim.”
|
Each of
the above stages of the acquisition of a mining claim in Chile requires the
completion of several steps, including application, publication, inscription
payments, notarization, tax payments, legal fees, “patente” payments, and
extract publication, prior to the application being declared by the court as a
new mineral property. Details of the full requirements of the claim
staking process are documented in Chile’s mining code. Most companies
carrying on operations in Chile retain a mining claim specialist to carry out
and review the claim staking process and ensure that their land position is kept
secure.
In 1994
Chile adopted legislation establishing general environmental norms which must be
followed in activities such as mining. This legislation requires us
to prepare an environmental impact study which must include a description of the
project and a plan for compliance with the applicable environmental
legislation. It must also include base line studies containing the
information relative to the current components of the existing environment in
the area influenced by the project. Further, it must consider the
construction, operation and closure/abandonment phases of the
project. It must also include a plan to mitigate, repair, and
compensate, as well as risk prevention and accident control measures, to achieve
a project compatible with the environment. The study must be
presented to the community for comment and to the regional arm of the National
Environmental Commission for approval.
We have
completed an environmental base line study on the property, which has not yet
been submitted to the regional Chilean government authority for review and
approval. 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.
10
Insurance
We
maintain property and general liability insurance with coverage we believe is
reasonably satisfactory to insure against potential covered events, subject to
reasonable deductible amounts, through our exploration stage.
Employees
Aside
from our President, 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 our proposed
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.
ITEM
1A. RISK FACTORS
As a
smaller reporting company, we have elected not to provide the disclosure
required by this item.
ITEM
1B. UNRESOLVED STAFF COMMENTS
We have
not received written comments from the staff of the Securities and Exchange
Commission in regard to our periodic or current reports under the Exchange Act
which comments remain unresolved.
ITEM
2. PROPERTIES
Cerro
Blanco Property
Glossary
of Terms
Certain
terms used in this section are defined in the following glossary:
ALKALIC
DIORITE-GABBRO-PYROXENITE INTRUSIVE: a potassium and sodium rich, coarse grained
and possibly dark colored igneous rock with associated magnesium and iron that
consolidated from magma beneath the earth's surface.
DEVELOPMENT:
work carried out for the purpose of opening up a mineral deposit and making the
actual extraction possible.
DISSEMINATED:
fine particles of mineral dispensed through the enclosing rock.
EXPLOITATION
MINING CONCESSIONS: licensed claims where the holder has the right to permit,
develop, and operate a mine.
EXPLORATION:
work involved in searching for ore by geological mapping, geochemistry,
geophysics, drilling and other methods.
11
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.
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.
12
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.
13
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.
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.
14
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.
15
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.
16
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:
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.
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.
17
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
our proposed 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
|
18
ITEM
3. 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.
ITEM
4. (REMOVED AND RESERVED)
PART
II
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY
SECURITIES
|
Market
Information
Our
common stock is quoted on the OTC Bulletin Board and on the Pink Sheets under
the symbol “WMTM.” The table below sets forth for the periods
indicated the range of the high and low bid information as reported by a
brokerage firm and/or as reported on the Internet. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down, or commission
and may not necessarily represent actual transactions.
Quarter
|
High
|
Low
|
|||||||
FISCAL
YEAR ENDED
|
|||||||||
DECEMBER
31, 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 |
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.
Dividends
We have
never declared or paid any cash dividends on our common stock. We do
not anticipate paying any cash dividends to stockholders in the foreseeable
future. In addition, any future determination to pay cash dividends
will be at the discretion of the Board of Directors and will be dependent upon
our financial condition, results of operations, capital requirements, and such
other factors as the Board of Directors deem relevant
We
currently have outstanding a class of preferred stock designated as Series A
Convertible Preferred Stock. The holders of these preferred shares
are entitled to any dividends paid and distributions made to the holders of our
common stock to the same extent as if these holders of preferred shares had
converted the preferred shares into common stock and had held such shares of
common stock on the record date for the particular dividends and
distributions.
19
Securities
Authorized for Issuance under Equity Compensation Plans
See “Item
12 – Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters” regarding information about our equity compensation
plans.
Purchases
of Equity Securities
We have
no equity securities registered pursuant to Section 12 of the Exchange
Act.
ITEM
6. SELECTED FINANCIAL DATA
As a
smaller reporting company, we have elected not to provide the disclosure
required by this item.
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The
following discussion should be read in conjunction with our consolidated
financial statements and related notes thereto as filed with this
report.
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.
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.
20
Generally
most other expenses were comparable or lower this year due to changes in
operations and cost constraints applied earlier in the year.
We
anticipate offering up to 1,869,159 units at $3.21 per unit for gross proceeds
of $6,000,000. Each unit is proposed to consist 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. We have entered into an agreement with
Source Capital Group, Inc. to act as the placement agent for the units on a
“best-efforts” basis.
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 |
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.
21
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.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
As a
smaller reporting company, we have elected not to provide the disclosure
required by this item.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
22
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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
|
24
|
|
Consolidated
Financial Statements
|
||
Consolidated
Balance Sheets
|
25
|
|
Consolidated
Statements of Operations
|
26
|
|
Consolidated
Statements of Cash Flows
|
27
|
|
Consolidated
Statements of Stockholders’ Equity (Deficit)
|
28
|
|
Notes
to Consolidated Financial Statements
|
31
|
23
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
24
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 |
25
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Consolidated
Statements of Operations
(US
Funds)
Years
Ended December 31,
|
Cumulative
Period From
Inception (November
13, 2001)
through
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
|
26
WHITE
MOUNTAIN TITANIUM CORPORATION
(An
Exploration Stage Company)
Consolidated
Statements of Cash Flows
(US
Funds)
Years
Ended December 31,
|
Cumulative Period From
Inception (November
13, 2001)
through 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 CashEquivalents
|
(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 |
27
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 overnet 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 |
28
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 |
29
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 | ) |
30
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.
31
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.
32
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.
33
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).
34
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.
35
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.
36
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 |
37
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.
38
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.
39
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.
40
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.
41
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
ExercisePrice
|
|||||||||||||
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 |
42
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.
43
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.
|
44
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 | ) |
45
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.
46
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.
47
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.
|
48
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.
|
[THIS
SPACE INTENTIONALLY LEFT BLANK]
49
ITEM
9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
No events
are reportable pursuant to this item.
ITEM
9A(T). CONTROLS
AND PROCEDURES
Disclosure
Controls and Procedures
Our
principal executive officer, Michael P. Kurtanjek, and our principal financial
officer, Charles E. Jenkins, have concluded, based on their evaluation, as of
the end of the period covered by this report, that our disclosure controls and
procedures (as defined in Rule 15d-15(e) under the Exchange Act) are
(1) effective to ensure that material information required to be disclosed
by us in reports filed or submitted by us under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in
the rules and forms of the Securities and Exchange Commission, and
(2) designed to ensure that material information required to be disclosed by us
in such reports is accumulated, organized and communicated to our management,
including our principal executive officer and principal financial officer, as
appropriated, to allow timely decisions regarding required
disclosure.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting to provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. Internal control
over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the assets of
our company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of our management and directors; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that could have a
material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management
assessed our internal control over financial reporting as of December 31, 2009,
the end of our fiscal year. Management based its assessment on
criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Management’s assessment included evaluation of
such elements as the design and operating effectiveness of key financial
reporting controls, process documentation, accounting policies, and our overall
control environment.
Based on
our assessment, management has concluded that our internal control over
financial reporting was effective, as of the end of the fiscal year, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external reporting purposes in
accordance with generally accepted accounting principles.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting (as defined in
Rule 15d-15(f) under the Exchange Act) that occurred during the year ended
December 31, 2009, that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting. Our management’s report was not subject to attestation by
our registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit us to provide only our
management’s report in this annual report.
50
ITEM
9B.OTHER
INFORMATION
No events
are reportable pursuant to this item.
PART
III
ITEM
10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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:
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.
|
51
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.
|
52
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.
ITEM
11. EXECUTIVE
COMPENSATION
Executive
Compensation Summary
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 $100,000, for each of the two fiscal years ended December 31, 2009 and
2008:
53
Summary
Compensation Table
Name
and Principal Position
|
Year
|
Salary
($)
|
Stock
Awards
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||||||
Michael
P. Kurtanjek, President
|
2009
|
$ | 160,800 | $ | 255,424 | $ | 14,506 | $ | 430,730 | |||||||||
2008
|
$ | 158,800 | -- | $ | 16,932 | (1) | $ | 175,732 | ||||||||||
Brian
Flower, Chairman
|
2009
|
$ | 255,424 | $ | 139,200 | (2) | $ | 394,624 | ||||||||||
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.
|
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 $289,800 for services provided in 2008 and
2009. Mr. Flower devotes approximately 80% of his time to the
fulfillment of the obligations under this agreement and services as Executive
Chairman of our company.
54
Equity
Awards
The
following table sets forth certain information for the named executive officers
concerning unexercised options that were outstanding as of December 31,
2009:
Outstanding
Equity Awards at Fiscal Year-End
Option
Awards
|
|||||||||||||||||
Name
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
||||||||||||
Michael
P. Kurtanjek,
President
(Principal
Executive Officer)
|
600,000 | -0- | -0- | $ | 0.50 |
5/31/2011
|
|||||||||||
150,000 | -0- | -0- | $ | 0.50 |
8/31/2012
|
||||||||||||
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.
55
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.
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 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 toMessrs 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.
56
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The
following table sets forth certain information furnished by current management
and others, concerning the ownership of our common stock as of March 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:
Name
and Address
of
Beneficial Owner
|
Amount
and Nature of
Beneficial
Ownership
(1)
|
Percentage
of Class(2)
|
||||||
Michael
P. Kurtanjek
9
Church Lane
Copthorne
West
Sussex, England
RH10
3PT
|
3,585,295 | (3) | 9.17 | % | ||||
Howard
M. Crosby
6
East Rose Street
Walla
Walla, WA 99362
|
1,041,500 | (4) | 2.78 | % | ||||
Brian
Flower
Suite
1508 - 999 West Hastings Street
Vancouver,
British Columbia
Canada V6C
2W2
|
2,782,000 | (5) | 47.15 | % | ||||
Charles
E. Jenkins
Suite
1508 - 999 West Hastings Street
Vancouver,
British Columbia
Canada V6C
2W2
|
647,000 | (6) | 1.72 | % | ||||
Wei
Lu
120
Linden Street
Needham,
MA 02492
|
382,500 | (7) | 1.03 | % | ||||
John
J. May
2
Belmont Mews
Camberley
Surrey
GU15 2PH
|
332,500 | (8) | * | |||||
Executive
Officers and
Directors
as a Group
(6
Persons)
|
8,770,795 | 20.89 | % | |||||
Rubicon
Master Fund (9)
c/o
Rubicon Fund Management LLP
103
Mount St.
London W1K
2TJ
United
Kingdom
|
6,594,000 | (9)(10) | 15.94 | % | ||||
Kin
Wong
6
Bl 23 Floor
Cts
Plaza Otc
Peoples
Republic of China
|
5,600,000 | (11) | 14.31 | % |
*
|
Less than
1%
|
57
(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.
|
(2)
|
Percentage
is based on 37,120,972 shares of common stock outstanding as of March 22,
2010.
|
(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.
|
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) | $ | 0.55 | -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.
|
(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.
|
58
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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.
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.
59
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.
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.
60
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees
Paid
Smythe
Ratcliffe LLP, Chartered Accountants, served as our accounting firm for the two
years ended December 31, 2009 and 2008. The following fees were paid
to our independent registered public accounting firm for services rendered
during our last two fiscal years:
Audit
Fees
The
aggregate fees billed for professional services rendered by our principal
accountant for the audit of our annual financial statements, review of financial
statements included in the quarterly reports and other fees that are normally
provided by the accountant in connection with statutory and regulatory filings
or engagements for the fiscal year ended December 31, 2009 were $51,145
(invoiced as C$58,100). This total includes $20,335 (C$23,100) for
fees incurred for a review of the financial statements included in our forms
10-QSB for the year ended December 31, 2008. The aggregate fees
incurred for professional services rendered for the audit of our annual
financial statements for the fiscal year ended December 31, 2008 were $49,506
(C$57,150). This total includes $25,443 (C$26,950) for fees incurred
for a review of the financial statements included in our forms 10-QSB for the
year ended December 31, 2008.
Audit-Related
Fees
There
were no fees billed for assurance and related services by our principal
accountant that are reasonably related to the performance of the audit or review
of the financial statements, other than those previously reported above, for the
fiscal years ended December 31, 2009 and 2008.
Tax Fees
We paid
$12,176 to our auditors for tax related work in 2009; (2008: $4,578
(C$4,850)).
All Other
Fees
There
were no other fees billed for products or services provided by the principal
accountant, other than those previously reported above, for the fiscal years
ended December 31, 2009 and 2008.
Audit
Committee
Our Audit
Committee has considered whether the non-audit services provided by our auditors
to us are compatible with maintaining the independence of our auditors and
concluded that the independence of our auditors is not compromised by the
provision of such services. Our Audit Committee pre-approves all
auditing services and permitted non-audit services, including the fees and terms
of those services, to be performed for us by our independent auditor prior to
engagement.
61
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Financial
Statements
The
following financial statements are filed with this report:
Report of
Independent Registered Public Accounting Firm
Consolidated
Balance Sheets at December 31, 2009 and 2008
Consolidated
Statements of Operations for the years ended December 31, 2009, 2008, 2007,
and for the cumulative period from inception (November 13, 2001) through
December 31, 2009
Consolidated
Statements of Cash Flows for the years ended December 31, 2009, 2008, 2007,
and for the cumulative period from inception (November 13, 2001) through
December 31, 2009
Consolidated
Statements of Stockholders’ Equity from inception (November 12, 2001) through
December 31, 2009
Notes to
Consolidated Financial Statements
Exhibits
The
following exhibits are included with this report:
Incorporated by Reference
|
||||||||||||
Exhibit
Number
|
Exhibit
Description
|
Form
|
File No.
|
Exhibit
|
Filing
Date
|
Filed Here-
with
|
||||||
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
|
|||||||
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
|
62
Incorporated by Reference
|
||||||||||||
Exhibit
Number
|
Exhibit
Description
|
Form
|
File No.
|
Exhibit
|
Filing
Date
|
Filed Here-
with
|
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
|
|||||||
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
|
63
Incorporated by Reference
|
||||||||||||
Exhibit
Number
|
Exhibit
Description
|
Form
|
File No.
|
Exhibit
|
Filing
Date
|
Filed Here-
with
|
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
|
|||||||
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
|
S-1/A
|
333-164963
|
23.2
|
3/29/10
|
|||||||
23.3
|
Consent
of AMEC-Cade
|
S-1/A
|
333-164963
|
23.3
|
3/29/10
|
|||||||
23.4
|
Consent
of NCL Ingenieria y Construccion
|
S-1/A
|
333-164963
|
23.4
|
3/29/10
|
|||||||
23.5
|
Consent
of SGS Lakefield
|
S-1/A
|
333-164963
|
23.5
|
3/29/10
|
64
Incorporated by Reference
|
||||||||||||
Exhibit
Number
|
Exhibit
Description
|
Form
|
File No.
|
Exhibit
|
Filing
Date
|
Filed Here-
with
|
23.6
|
Consent
of Arcadis Geotecnica
|
S-1/A
|
333-164963
|
23.6
|
3/29/10
|
|||||||
31.1
|
Rule
13a-14(a) Certification by Principal Executive Officer
|
X
|
||||||||||
31.2
|
Rule
13a-14(a) Certification by Principal Financial Officer
|
X
|
||||||||||
32.1
|
Section
1350 Certification of Principal Executive Officer
|
X
|
||||||||||
32.2
|
Section
1350 Certification of Principal Financial Officer
|
X
|
*
|
Management
contract, or compensatory plan or arrangement, required to be filed as an
exhibit.
|
[SIGNATURE
PAGE TO FOLLOW]
65
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
WHITE MOUNTAIN TITANIUM CORPORATION | |||
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) |
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.
NAME
|
TITLE
|
DATE
|
||
/s/ Michael P.
Kurtanjek
|
Director
& President
|
March
22, 2010
|
||
Michael
P. Kurtanjek
|
(Principal Executive Officer) | |||
/s/ Charles E.
Jenkins
|
Director
& Chief Financial Officer
|
March
22, 2010
|
||
Charles
E. Jenkins
|
(Principal
Financial and Accounting Officer)
|
|||
/s/ Brian Flower
|
Director
and Chairman
|
March
22, 2010
|
||
Brian
Flower
|
/s/ Howard M. Crosby
|
Director
|
March
22, 2010
|
||
Howard
M. Crosby
|
||||
/s/
Wei Lu
|
Director
|
March
22, 2010
|
||
Wei
Lu
|
||||
/s/ John J. May
|
Director
|
March
22, 2010
|
||
John
J. May
|
66
Supplemental
Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the
Act by
Registrants
Which Have not Registered Securities Pursuant to Section 12 of the
Act
No annual
report or proxy statement, form of proxy or other proxy soliciting material was
sent or provided to shareholders during the year ended December 31,
2009.
67