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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2012

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

 

For the transition period from                                    to                                           

 

Commission File Number 333-129347

 

WHITE MOUNTAIN TITANIUM CORPORATION

(Name of small business issuer in its charter)

 

NEVADA 87-0577390
(State of incorporation or organization) (IRS Identification No.)

 

Augusto Leguia 100, Oficina 1401

Las Condes, Santiago

Chile

(Address of principal executive offices)

 

(562) 657-1800

(Issuer’s telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed under Section 13 or 15(d) of the Exchange Act during the past 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. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

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 the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ¨ Accelerated Filer ¨
   
Non-Accelerated Filer ¨ (Do not check if a smaller reporting company) 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 ¨ No x

 

63,836,689 shares of the issuer’s common stock, $.001 par value, were outstanding at November 5, 2012.

 

 
 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION 3
   
Item 1. Financial Statements 3
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
   
Item 4. Controls and Procedures 21
   
PART II. OTHER INFORMATION 21
   
Item 4. Mine Safety Disclosures 21
   
Item 6. Exhibits 21

 

 

2
 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Condensed Consolidated Balance Sheets

(Unaudited - Expressed in US dollars)

 

 

As at  September 30, 2012   December 31, 2011 
         
Assets          
Current          
Cash and cash equivalents  $2,436,023   $1,983,725 
Prepaid expenses   74,013    80,970 
Receivables   46,291    62,479 
Total Current Assets   2,556,327    2,127,174 
Property and Equipment (Note 3)   184,459    151,115 
Mineral Properties (Note 4)   651,950    651,950 
Technology Rights ( Note 5)   2,177,776    2,411,110 
           
Total Assets  $5,570,512   $5,341,349 
           
Liabilities          
Current          
Accounts payable and accrued liabilities  $288,507   $324,580 
           
Stockholders’ Equity          
Preferred Stock and Paid-in Capital in Excess          
of $0.001 Par Value (Note 6(a))          
20,000,000  shares authorized          
Nil (December 31, 2011 – Nil) shares issued and outstanding   -    - 
Common Stock and Paid-in Capital in Excess          
of $0.001 Par Value (Note 6(b))          
100,000,000  shares authorized          
63,836,689 (December 31, 2011 – 58,490,941) shares issued and outstanding   47,057,196    39,865,402 
Deficit Accumulated During the Exploration Stage   (41,775,191))   (34,848,633)
           
Total Stockholders’ Equity   5,282,005    5,016,769 
           
Total Liabilities and Stockholders’ Equity  $5,570,512   $5,341,349 

 

See notes to unaudited condensed consolidated financial statements.

 

3
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Condensed Consolidated Statements of Operations

(Unaudited - Expressed in US dollars)  

 

  

   Three months ended 
September 30,
   Nine months ended
September 30,
   Cumulative
Period
from
Inception on
November 13,
2001 through
September 30,
 
   2012   2011   2012   2011   2012 
Expenses                         
Advertising and promotion  $47,186   $17,572   $80,715   $60,865   $470,361 
Amortization   104,251    76,221    306,011    250,120    896,419 
Bank charges and interest   9,036    4,150    28,066    21,216    93,502 
Consulting fees (Note 6(d))   69,316    90,288    323,782    276,872    2,968,725 
Consulting fees – directors and officers (Note 6(d))   100,200    1,493,883    908,325    2,256,923    8,190,287 
Engineering consulting (recovery)   -    1,441    -    (25,672)   711,084 
Exploration (Note 4)   1,136,228    193,806    3,205,155    1,717,194    10,788,053 
Filing fees   20    (109)   1,918    4,696    82,048 
Insurance   19,968    5,184    44,733    38,138    383,065 
Investor relations   8,000    -    38,000    62,298    890,664 
Licenses, taxes and filing fees, net   -    -    -    -    379,947 
Management fees (Note 6(d))   101,228    559,626    632,184    1,191,669    4,081,361 
Office (Note 6(d))   61,708    53,230    314,227    135,042    778,024 
Professional fees   93,028    51,994    233,985    159,083    2,268,999 
Rent   49,803    30,903    125,068    71,333    703,930 
Research and development (Note 5)   -    -    307,574    176,504    751,136 
Telephone   8,271    6,767    24,474    18,967    162,457 
Transfer agent fees   1,963    2,371    6,117    6,369    34,342 
Travel and vehicle   48,506    55,469    190,251    172,698    1,577,932 
                          
Loss Before Other Items   (1,858,712)   (2,642,796)   (6,770,585)   (6,594,315)   (36,212,336)
Gain on Sale of Marketable Securities   -    -    -    -    87,217
Loss on Sale of Assets   -    -    -    -    (19,176)
Adjustment to Market for Marketable Securities   -    -    -    -    (67,922)
Foreign Exchange   7,794    (22,501)   (156,936)   (288,883)   (708,872)
Interest Income   62    271    963    2,241    363,409 
Dividend Income   -    -    -    -    4,597 
Change in Fair Value of Warrants (Note 6(e))   -    -    -    (543,150)   (2,748,999)
Change in Fair Value of Preferred Stock (Note 6(a))   -    -    -    -    (240,000)
Financing Agreement Penalty   -    -    -    -    (330,000)
                          
Net Loss and Comprehensive Loss for Period   (1,850,856)   (2,665,026)   (6,926,558)   (7,424,107)   (39,872,082)
Preferred stock dividends   -    -    -    -    (1,537,500)
                          
Net Loss Available for Distribution  $(1,850,856)  $(2,665,026)  $(6,926,558)  $(7,424,107)  $(41,409,582)
                          
Basic and Diluted Loss Per Common Share (Note 7)  $(0.03)  $(0.05)  $(0.11)  $(0.13)     
Weighted Average Number of Shares of Common Stock Outstanding   62,043,574    57,973,468    60,436,990    55,196,955      

 

 

See notes to unaudited condensed consolidated financial statements.

 

4
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited - Expressed in US dollars)

 

 

   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, 2010   49,766,636   $30,834,680    -   $-   $(32,500)  $-   $(25,993,779)  $4,808,401 
Stock-based compensation (Note 6(d))   -    188,097    -    -    -    -    -    188,097 
Share subscriptions received   -    -    -    -    32,500    -    -    32,500 
Common stock issued for services (Note 6(b))   2,565,000    3,137,250    -    -    -    -    -    3,137,250 
Additional paid in capital recognized on warrant conversion (Note 6(e))   -    2,550,000    -    -    -    -    -    2,550,000 
Warrants exercised (Note 6(e))   4,499,306    2,325,375    -    -    -    -    -    2,325,375 
Stock options exercised (Note 6(c))   1,659,999    830,000    -    -    -    -    -    830,000 
Net loss for the year   -    -    -    -    -    -    (8,854,854)   (8,854,854)
Balance, December 31, 2011   58,490,941    39,865,402    -    -    -    -    (34,848,633)   5,016,769 
Stock-based compensation (Note 6(d))   -    123,684    -    -    -    -    -    123,684 
Warrants exercised   235,000    117,500    -    -    -    -    -    117,500 
Stock options exercised   790,000    395,000    -    -    -    -    -    395,000 
Private placement   3,736,248    5,275,555    -    -    -    -    -    5,275,555 
Common stock issued for services (Note 6(b))   584,500    1,280,055    -    -    -    -    -    1,280,055 
Net loss for the period   -    -    -    -    -    -    (6,926,558)   (6,926,558)
Balance, September 30, 2012   63,836,689   $47,057,196    -   $-   $-   $-   $(41,775,191)  $5,282,005 

  

 

 See notes to unaudited condensed consolidated financial statements.

 

5
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Condensed Consolidated Statements of Cash Flows

(Unaudited - Expressed in US dollars)  

 

  

   Nine months ended September 30,   Cumulative Period
from Inception on
November 13,
2001 through
September 30,
 
   2012   2011   2012 
Operating Activities               
Net loss for period  $(6,926,558)  $(7,424,107)  $(39,872,082)
Items not involving cash               
Amortization   306,011    250,120    896,419 
Stock-based compensation   123,684    147,911    3,620,401 
Loss on sale of assets   -    -    19,176 
Common stock issued for services   1,280,055    3,021,000    7,921,335 
Change in fair value of warrants   -    543,150    2,748,999 
Change in fair value of preferred stock   -    -    240,000 
Financing agreement penalty   -    -    330,000 
Adjustment to market for marketable securities   -    -    67,922 
Gain on sale of marketable securities   -    -    (87,217)
Non-cash exploration expenditures   -    -    600,000 
Changes in non-cash working capital               
Prepaid expenses   6,957    (46,017)   (83,314)
Receivables   16,188    2,827    (39,009)
Marketable securities   -    -    19,295 
Accounts payable and accrued liabilities   (36,073)   (410,116)   222,661 
                
Cash Used in Operating Activities   (5,229,736)   (3,915,232)   (23,395,414)
Investing Activities               
Additions to property and equipment   (106,021)   (137,347)   (464,050)
Additions to mineral properties   -    -    (651,950)
Cash Used in Investing Activities   (106,021)   (137,347)   (1,116,000)
                
Financing Activities               
Repayment of long-term debt   -    -    (100,000)
Issuance of preferred stock for cash   -    -    5,000,000 
Issuance of common stock for cash   5,788,055    3,104,334    21,793,601 
Stock subscriptions received   -    32,500    263,500 
Working capital acquired on acquisition   -    -    171 
                
Cash Provided by Financing Activities   5,788,055    3,136,834    26,957,272 
                
Foreign Exchange Effect on Cash   -    -    (9,835)
Inflow (Outflow) of Cash and Cash Equivalents   452,298    (915,745)   2,436,023 
Cash and Cash Equivalents, Beginning of Period   1,983,725    3,766,959    - 
Cash and Cash Equivalents, End of Period  $2,436,023   $2,851,214   $2,436,023 
                
Supplemental Cash Flow Information               
Common shares issued for settlement of debt  $-   $-   $830,000 
Common shares issued to acquire technology  $-   $-   $2,800,000 
Common shares issued for preferred stock  $-   $-   $740,000 

 

See notes to unaudited condensed consolidated financial statements.

 

6
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

Nine months ended September 30, 2012

(Unaudited - Expressed in US dollars)

 

 

1.NATURE OF BUSINESS AND BASIS OF PRESENTATION AND GOING CONCERN

 

White Mountain Titanium Corporation (the “Company”) is in the business of exploring for titanium deposits or reserves on its Cerro Blanco mining concessions. The Company is an exploration stage company and 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 accompanying consolidated condensed financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2012, and for the period then ended, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. It is suggested that these unaudited consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s December 31, 2011, annual report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 29, 2012. The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the Company’s audited consolidated condensed financial statements for the year ended December 31, 2011 filed as part of the Company’s December 31, 2011 Form 10-K. The results of operations for the period ended September 30, 2012 are not necessarily indicative of the operating results for the full year.

 

These condensed consolidated financial statements have been prepared by management on the basis of U.S. GAAP 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 $41,775,191 at September 30, 2012 (December 31, 2011 - $34,848,633), 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 and its Chinuka process technology. During the nine months ended September 30, 2012, the Company closed two private placements with three closings for gross proceeds of $5,611,622 (note 6). Management intends to raise additional capital through stock issuances to finance operations. However, there is no assurance that management will be successful in its future financing activities.

 

2.FINANCIAL INSTRUMENTS AND RISKS

 

The Company has classified its financial instruments as follows:

 

Cash and cash equivalents – as held-for-trading

Receivables – as loans and receivables

Accounts payable and accrued liabilities – as other financial liabilities.

 

  (a) Fair value

 

The Company’s financial instruments consist of cash and cash equivalents, receivables, and accounts payable and accrued liabilities. The carrying amounts of these instruments approximate their respective fair values due to the short maturities of these instruments. The three levels of the fair value hierarchy are described below:

 

§ Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

§ Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

§ Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

7
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

Nine months ended September 30, 2012

(Unaudited - Expressed in US dollars)

 

 

2.FINANCIAL INSTRUMENTS AND RISKS (Continued)

 

  (b) Credit risk

 

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge its contractual obligations.

 

The Company mitigates credit risk, in respect of cash and cash equivalents, by purchasing highly liquid, short-term guaranteed investment certificates (“GIC”) held at a high credit quality Canadian financial institution and by maintaining its cash with high credit quality Canadian and Chilean financial institutions. The receivables consist of Harmonized Sales Tax due from the Government of Canada and receivable for warrants exercised, received subsequent to September 30, 2012.

.

   September 30,
2012
   December 31,
2011
 
Cash  $2,182,562   $230,373 
GICs   253,461    1,753,352 
   $2,436,023   $1,983,725 

 

  (c) Liquidity risk

 

Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due. The Company manages its liquidity risk by forecasting cash flows required for operations and anticipated investing and financing activities. The Company’s cash and cash equivalents at September 30, 2012 and December 31, 2011 totaled $2,436,023 and $1,983,725, respectively. At September 30, 2012 and December 31, 2011, the Company had accounts payable and accrued liabilities of $288,507 and $324,580, respectively, all of which fall due in the next fiscal quarter.

 

  (d) Market risk

 

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price 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.

 

8
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

Nine months ended September 30, 2012

(Unaudited - Expressed in US dollars)

 

  

2.FINANCIAL INSTRUMENTS AND RISKS (Continued)

 

  (d) Market risk (Continued)

 

  (i) Interest rate risk (Continued)

 

The Company’s cash and cash equivalents consist of cash held in bank accounts and variable rate GICs. 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 and on cash flows associated with the interest income as of September 30, 2012.

 

  (ii) Foreign currency risk

 

The Company is exposed to foreign currency risk to the extent expenditures incurred or funds received and balances maintained by the Company are denominated in currencies other than the US dollar (primarily Canadian dollars (“CAD”) and Chilean pesos (“CLP”)). As at September 30, 2012, the Company has net monetary assets of $125,119 (December 31, 2011 - $62,800) denominated in CAD and net monetary liabilities of $139,914 (December 31, 2011 – net assets of $10,600) in CLP.

 

As at September 30, 2012, the Company’s sensitivity analysis suggests that a change in the absolute rate of exchange in CAD by 4% will not have a material effect on the Company’s business, financial condition and results of operations, and a change in the absolute rate of exchange in CLP by 6% will also not have a material impact.

 

The Company has not entered into any foreign currency contracts to mitigate this risk.

 

  (iii) Other price risk

 

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk. The Company is not exposed to other price risk.

 

9
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

Nine months ended September 30, 2012

(Unaudited - Expressed in US dollars)

 

 

3.PROPERTY AND EQUIPMENT

 

   September 30, 2012 
   Cost   Accumulated
Amortization
   Net 
             
Vehicles  $129,439   $68,855   $60,584 
Office furniture   53,843    19,120    34,724 
Office equipment   32,007    13,778    18,228 
Computer equipment   8,197    7,998    199 
Computer software   62,167    42,212    19,955 
Field equipment   122,360    71,591    50,769 
                
   $408,013   $223,554   $184,459 

 

   December 31, 2011 
   Cost   Accumulated
Amortization
   Net 
             
Vehicles  $110,962   $58,851   $52,111 
Office furniture   50,677    11,947    38,730 
Office equipment   26,560    10,183    16,377 
Computer equipment   8,197    7,887    310 
Computer software   2,144    1,255    889 
Field equipment   103,767    61,069    42,698 
                
   $302,307   $151,192   $151,115 

 

10
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

Nine months ended September 30, 2012

(Unaudited - Expressed in US dollars)

 

 

4.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, to acquire a 100% interest in nine exploration mining concessions totaling 1,183 hectares, collectively known as Cerro Blanco. Cerro Blanco is located in Region III of northern Chile, approximately 39 kilometers, 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.

 

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. At present, the Company has determined that it has no material asset retirement obligations.

 

Exploration expenditures incurred by the Company during the nine months ended September 30, 2012 and 2011 were as follows:

 

   2012   2011 
         
Assaying  $16,301   $63,227 
Concession fees   107,123    84,700 
Drilling   189,979    1,005,861 
Environmental   395,440    63,377 
Equipment rental   151,689    51,586 
Geological consulting fees   1,302,116    93,758 
Metallurgy   79,138    4,568 
Site costs   921,519    316,337 
Transportation   41,850    33,780 
           
Exploration expenditures for period  $3,205,155   $1,717,194 

 

11
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

Nine months ended September 30, 2012

(Unaudited - Expressed in US dollars)

 

 

5.TECHNOLOGY RIGHTS

 

On October 1, 2010, the Company issued 4,000,000 shares of common stock pursuant to the terms of the non-exclusive, sublicensing agreement of the titanium metal technology developed by Chinuka Limited plc (“Chinuka” or the “Chinuka Process”), giving the Company access to the Chinuka Process for the Cerro Blanco project. La Serena Technologies Ltd. (“La Serena”) executed the sublicensing agreement as holder of the Chinuka Process master license. Four million restricted shares of common stock were issued to Chinuka and La Serena (800,000 to Chinuka and 3,200,000 to La Serena); 1,000,000 of the total were delivered at the time of signing of the agreement (500,000 shares released each to Chinuka and La Serena). The balance of common stock is to be released from escrow over 24 months at the end of each subsequent fiscal quarter on the basis of 37,500 to Chinuka and 337,500 to La Serena. As of September 30, 2012, nil (December, 31, 2011 - 1,125,000) shares were in escrow. The Company may cancel the sublicense agreement (and related escrow share releases) at any time following the initial release of shares. La Serena may cancel the agreement if any of the following conditions are not met:

 

  · Cumulative expenditures of $5,000,000 by the Company within five years of the effective date to advance development of the Chinuka Process towards commercialization (cumulative expenditures to September 30, 2012: $751,136);
  · 2% gross royalty payments to La Serena on any revenue generated by the Cerro Blanco project, which is attributable to the Chinuka Process. The gross royalty payments following five years from the effective date of the agreement are subject to a minimum payment of $200,000 per year; and
  · Commercial production of titanium metal using the Chinuka Process and feed stock derived from the Cerro Blanco project within nine years after closing.

 

The Company has valued the consideration for the technology rights on the basis of the market value of the common shares issued for technology rights on the date of issuance of $2,800,000 and is amortizing over nine years.

 

For the nine months ended September 30, 2012, amortization of technology rights included in amortization expense is $233,334 (2011 - $233,334).

  

   September 30, 2012 
   Cost   Accumulated
Amortization
   Net 
                
Technology rights  $2,800,000    622,224   $2,177,776 

 

 

   December 31, 2011 
   Cost   Accumulated
Amortization
   Net 
                
Technology rights  $2,800,000    388,890   $2,411,110 

 

12
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

Nine months ended September 30, 2012

(Unaudited - Expressed in US dollars)

 

 

 

6.CAPITAL STOCK

 

(a)Preferred stock

           

During the year ended December 31, 2005, the Company designated shares of Series A preferred stock with a par value of $0.001 per share. Each share of preferred stock was convertible into one common share at any time at the holder’s option, subject to the adjustments to the conversion ratio. The adjustment to the conversion price of these preferred shares is based on the lowest of the share price of any common shares issued, the exercise price of any options granted or reprised, or any preferred shares issued after the issuance of these preferred shares. The preferred stock was unlisted, non-retractable and non-redeemable. The preferred stockholders were 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 were further entitled to the same dividends and distributions as the common stockholders.

 

There are no preferred shares outstanding.

 

  (b) Common stock

 

During the nine months ended September 30, 2012, the Company:

 

·Issued 584,500 shares of common stock to management, employees and consultants at a fair value of $2.19 per share based on the market value at the time of the director’s approval. Total value of this share issuance was $1,280,055, and has been expensed to management fees, consulting fees, office expenses and consulting fees – directors and officers (Note 6(d)). The shares were granted under the 2010 Management Compensation Plan;

 

·Issued 235,000 shares on the exercise of warrants at $0.50 per share and a further 790,000 shares on the exercise of stock options at $0.50 per share; and

 

·Issued 1,536,248 units for gross proceeds of $2,611,622 by way of a private placement priced at $1.70 per unit. Each unit consisted of one share of common stock and one-half warrant, each whole warrant exercisable at $1.70 per share until March 31, 2014. The Company paid commissions of $216,067. In addition, 142,409 compensation warrants were issued to agents. The terms and conditions of the selling agent warrants are essentially identical to the terms and conditions of the warrants sold to investors as part of the Units.
·Sold 1,000,000 shares of common stock at $1.50 per share for gross proceeds of $1,500,000 and paid a finder’s fee of $60,000.
·Sold 1,200,000 shares of common stock at $1.25 per share for gross proceeds of $1,500,000 and paid a finder’s fee of $60,000.

        

During the year ended December 31, 2011, the Company:

 

·Issued 2,565,000 shares of common stock to management for past services at a weighted average fair value of $1.22 per share based on the market value at the time of the directors’ approval. Total value of this share issuance was $3,137,250 and has been expensed as management fees, consulting fees, office expenses, and consulting fees – directors and officers (Note 6(d));

 

·Issued 4,499,306 shares of common stock upon the exercise of previously issued warrants for gross proceeds of $2,325,375 (Note 6(e)); and

 

·Issued 1,659,999 shares of common stock upon the exercise of stock options for gross proceeds of $830,000 (Note 6(c)).

 

13
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

Nine months ended September 30, 2012

(Unaudited - Expressed in US dollars)

 

 

6.CAPITAL STOCK (Continued)

 

(c)Stock options

 

The Company has a stock option plan, adopted in 2005, and a Stock Option/Stock Issuance Plan, adopted in 2010, (individually the “2005 Plan” and the “2010 Plan”, respectively, and, collectively, the “Plans”). Under the Plans, the Company is authorized to grant options to executive officers and directors, employees and consultants of the Company. The 2005 Plan was originally authorized to grant 3,140,000 shares; the 2010 Plan was originally authorized to issue 4,901,740 shares, which amount is increased at the end of each year to represent 10% of the total outstanding shares at year-end, up to a maximum of 3,800,000. The terms of any stock options granted under the 2005 Plan may not exceed five years and the exercise price of any stock option granted may not be discounted below the maximum discount permitted under the policies of the Toronto Stock Exchange. The terms of any stock options granted under the 2010 Plan may not exceed ten years and the exercise price of any stock option plan is fixed by the plan administrator.

 

The Company has also adopted a Management Compensation Plan for the benefit of officers, directors and employees of the Company. The pool will consist of 1% of the outstanding shares at the end of each year.

 

During the nine months ended September 30, 2012 and the year ended December 31, 2011, no stock options were granted. During 2012, options for 790,000 (2011: 1,659,999) shares were exercised for gross proceeds of $395,000 (2011: $830,000).

 

The following table represents service-based stock option activity during the nine months ended September 30, 2012 and the year ended December 31, 2011:

 

   September 30, 2012   December 31, 2011 
   Number of
Shares
   Weighted Average
Exercise
Price
   Number of
Shares
   Weighted Average
Exercise
Price
 
         
Outstanding - beginning of period   1,080,000   $0.58    2,740,000   $0.53 
Expired   (125,000)   0.50    (1)   0.50 
Exercised   (790,000)   0.50    (1,659,999)   0.50 
                     
Outstanding – end of period   165,000   $1.00    1,080,000   $0.58 
Exercisable – end of period   165,000   $1.00    1,080,000   $0.58 

 

As at September 30, 2012 and December 31, 2011, the following stock options were outstanding:

 

   Exercise   September 30,   December 31, 
Expiry Date  Price   2012   2011 
                
August 31, 2012  $0.50    -    915,000 
June 23, 2013  $1.00    165,000    165,000 
                
         165,000    1,080,000 

 

14
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

Nine months ended September 30, 2012

(Unaudited - Expressed in US dollars)

 

  

6.CAPITAL STOCK (Continued)

 

(c)Stock options (Continued)

 

The shares under option at September 30, 2012 were in the following exercise price ranges:

 

Weighted Average
Exercise Price
   Number of Shares
under Option
   Aggregate Intrinsic
Value
   Weighted Average
Remaining Contractual
Life in Years
 
              
$1.00    165,000   $49,500    0.73 
                  
$1.00    165,000   $49,500    0.73 

 

The shares under option at December 31, 2011 were in the following exercise price ranges:

 

Weighted Average
Exercise Price
   Number of Shares
under Option
   Aggregate Intrinsic
Value
   Weighted Average
Remaining Contractual
Life in Years
 
              
$0.50    915,000   $1,683,600    0.67 
 1.00    165,000    221,100    1.48 
                  
$0.58    1,080,000   $1,904,700    0.79 

 

(d)Stock-based compensation

 

During the nine months ended September 30, 2012, $123,684 (2011 - $147,911) was recognized as stock-based compensation for the 2,000,000 management warrants issued to directors and officers in 2010 (Note 6(e)). The maximum stock-based compensation to be recognized is $944,959. The remaining unamortized balance of $512,769 (December 31, 2011 - $636,453) will be amortized through December 2015. These warrants were fair valued using a trinomial barrier pricing model with the following weighted average assumptions:  exercise price of $1.50, risk-free interest rate of 1.89%, expected life of 3.4 years, an expected volatility factor of 75.90%, a dividend yield of 0.00% and a probability exercisability of 11%. The Company estimated the exercisability of these warrants using a Monte Carlo probability calculator. During the nine months ended September, 2012, the Company issued 584,500 shares of common stock at a fair value of $1,280,055 to management, employees and consultants, under the 2010 Management Compensation Plan.

 

During the year ended December 31, 2011, the Company issued 2,565,000 shares of common stock at a fair value of $3,137,250, valued at market value at the time of issuance, to management, employees and consultants, under the 2010 Management Compensation Plan.

 

15
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

Nine months ended September 30, 2012

(Unaudited - Expressed in US dollars)

 

  

6.CAPITAL STOCK (Continued)

 

(d)Stock-based compensation (Continued)

 

The total stock-based compensation recognized for shares issued and warrants granted for services was as follows:

 

   September 30,   September 30, 
   2012   2011 
           
Consulting fees  $153,300   $90,000 
Consulting fees – directors and officers   607,725    1,971,000 
Management fees   452,184    1,044,911 
Office   190,530    63,000 
           
   $1,403,739   $3,168,911 

 

(e)Warrants

 

During the year ended December 31, 2005, the Company issued warrants to purchase 6,875,000 shares of common stock. The warrants had an exercise price of $0.50 per warrant and originally expired in July and September 2009; 4,250,000 warrants were extended to April 2011. These warrants had exercise price reset features and are fair valued at each reporting date.

 

During the year ended December 31, 2011, the 4,250,000 warrants were exercised. Accordingly, the Company recognized a $543,150 non-cash loss from the change in fair value of these warrants, and $2,550,000 was added to paid-in capital on the common stock issued upon conversion.

 

During the year ended December 31, 2010, the Company issued 2,000,000 warrants to two officers and directors of the Company as compensation, as approved by the Board in January 2010 (Note 6(d)). These warrants are exercisable at $1.50 per share expiring December 31, 2015. These warrants vest only upon occurrence of one of the following events and are exercisable in full upon the first of the following events:

 

  (i) If on or before June 30, 2011 the closing price of the common stock of the Company is at least $2.00 per share for five consecutive trading days (this vesting condition was not met);

 

  (ii) If on or before December 31, 2012 the closing price of the common stock of the Company is at least $2.50 per share for five consecutive trading days; and

 

  (iii) If on or before December 31, 2015 the closing price of the common stock of the Company is at least $3.00 per share for five consecutive trading days.

 

These prices are subject to reasonable adjustment upon occurrence of certain conditions, as defined in the warrant indenture.

 

16
 

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

Nine months ended September 30, 2012

(Unaudited - Expressed in US dollars)

 

  

6.CAPITAL STOCK (Continued)

 

(e)Warrants (Continued)

 

Details of stock purchase warrant activity is as follows:

 

   September 30, 2012   December 31, 2011 
   Number
of Warrants
   Weighted
Average
Exercise
Price
   Number
of Warrants
   Weighted
Average
Exercise
Price
 
             
Outstanding - beginning of period   4,041,383   $1.07    8,515,168   $0.78 
Issued   910,534    1.70    36,000    1.18 
Exercised   (235,000)   0.50    (4,499,306)   0.52 
Expired   -    -    (10,479)   0.90 
                     
Outstanding - end of period   4,716,917   $1.22    4,041,383   $1.07 

 

As at September 30, 2012 and December 31, 2011, the following share purchase warrants were outstanding:

 

Expiry Date  Exercise Price   September 30,
2012
   December 31,
2011
 
             
June 30, 2012  $0.50   -   235,000 
January 19, 2013  $1.18    36,000    36,000 
December 31, 2013  $0.65    1,770,383    1,770,383 
March 31, 2014  $1.70    910,534    - 
December 31, 2015  $1.50    2,000,000    2,000,000 
                
         4,716,917    4,041,383 

 

7.LOSS PER SHARE

 

Potentially dilutive securities not included in diluted weighted average shares outstanding include shares underlying 165,000 in outstanding options and 4,716,917 warrants.

 

8.SUBSEQUENT EVENT

 

Management has evaluated subsequent events through November 6, 2012, which represents the date the consolidated financial statements were issued. The following subsequent events have occurred:

 

On October 1, 2012, the Company granted 150,000 stock options to an officer of the Company, pursuant to a Management Service Agreement. The options vested immediately upon issuance, and have a term of five years with an exercise price of $1.30 per share.

 

17
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations analyze the major elements of our balance sheets and statements of operations. This section should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2011, and our unaudited interim consolidated condensed financial statements for the three and nine months ended September 30, 2012 and accompanying notes to these financial statements.

 

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,” “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.

 

There may also be other risks and uncertainties that we are unable to predict at this time or that we do not now expect to have a material adverse impact on our business.

 

Overview

 

We are a mineral exploration company. We hold mining concessions comprised of 33 registered mining exploitation concessions, and five 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 (hereinafter referred to as “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 also continue to fund research and development on the Chinuka Process. We have produced no revenues, have experienced losses since inception, have no operations, and currently rely upon the sale of our securities to fund our operations.

 

Business Developments

 

During the nine months ended September 30, 2012, we had the following major developments:

 

  · We entered into an agreement with AMEC International (Chile) S.A. (“AMEC”) to conduct a full review of earlier engineering studies prepared by Cade Idepe on the Cerro Blanco project. AMEC's scope of work involves a full review of process plant design and recovery, location of waste dumps and tailings areas and economic assessment. The review is expected to be completed by mid-year. Management anticipates that the results from this review will be incorporated into the Final Feasibility Study as well as the Environmental Impact Statement (“EIS”). The EIS is anticipated to be submitted to the Chilean mining authorities later this year. In conjunction with our environmental consultant, we intend to integrate the results of AMEC's process design and the location of tailings and waste review into the EIS study and the most recent baseline monitoring studies in respect of flora and fauna on site as well as the project's possible impact on the local communities. We have also commenced holding project information and awareness discussions with leaders of the three communities located closest to the project.

 

18
 

 

  · We entered into a non-binding agreement with Empresa Electrica Guacolda S.A. (“Guacolda”) for the supply of electric power, associated transmission lines and sea water for a desalination plant proposed to be built at site. The terms of the agreement will only become binding when we have all the permits in hand to commence construction of the Cerro Blanco project. We and Guacolda held discussions with respect to port storage and loading facilities for rutile concentrate.

 

  · We were notified by personnel conducting research on the Chinuka Titanium Metals Technology at the University of Cambridge that the next stage of research will involve increasing the size of the reactor vessel to produce sponge titanium using Cerro Blanco rutile concentrate and that the exact vessel dimensions and capacities are currently being determined. The Company continues to monitor White Mountain funded research being undertaken. The principal researcher has reported that testing of the larger scale reactor has been completed and is ready to initiate larger scale electrolysis. In addition, a variety of other feedstocks containing either significant quantities of iron or other minerals containing niobium and tantalum are being assessed regarding their viability for treatment by the Chinuka Process.

 

  · We applied for an access license to draw sea water for a planned desalination plant. This plant will provide both industrial and potable water to the Cerro Blanco project and possibly to other users in the region as well. Process and design engineering work is underway on the planned desalination plant which, together with the access license, will be incorporated into the final project engineering design and Environmental Impact Statement (“EIS”) for submittal to the Chilean mining authorities.

 

  · We completed a ground geophysics study covering the central portion of the Cerro Blanco concessions. A grid totalling approximately 232 line kilometres, each line spaced 50 meters apart, was established over concessions encompassing the four known prospects. The purpose of the study was two-fold. The first, to assist exploration personnel to site and orient drill holes planned for the upcoming Las Carolinas and La Cantera drill program as well as to identify new exploration targets. The second, to assist engineering personnel to locate the crusher, process plant, waste dumps, tailings facility and site infrastructure away from mineralized areas. As a result of the geophysics study, a project footprint has been established for final engineering design purposes and possible extensions to Las Carolinas and La Cantera as well as two new exploration target areas have been identified. Initial mapping and sampling of the two new exploration target areas is underway and a diamond drilling work program for Las Carolinas and La Cantera incorporating results from the geophysics study has been prepared and budgeted. A 31 hole diamond drilling program - 7 drill holes in Las Carolinas and 24 in La Cantera – totalling approximately 5,200 meters, is planned for completion over a three month period. We have not yet determined a commencement date for this drilling. The Company has received all necessary permits to undertake the drilling program and earth moving equipment has been assembled to start construction of drill roads and pads.

 

  · We continued to monitor the market for titanium dioxide feedstock, which remains buoyant. Various recent public articles have reported contract rutile sales at prices of $2,700 per tonne and above. An article in the March 7, 2012, edition of Industrial Minerals stated that feedstock producers were warning that welding grade rutile prices could top $4,000 per tonne in the second half of 2012 due to increasing demand and anticipated supply constraints.

 

  · As a result of a ground, geophysical magnetic survey carried out on the Cerro Blanco property in March, 2012, three new rutile target prospects were identified. The survey was contracted out to Santiago-based geophysical specialist consultancy which tested the magnetic susceptibility of rock within a surveyed grid. This technique is used extensively in Chile as an exploration tool in the copper industry and the Company wanted to test its applicability to titanium exploration. The consultant constructed a rectangular grid measuring 7.5 km by 3 km (2,250 hectares) comprised of 61 lines oriented northeast-southwest and spaced 50 meters apart. The grid covered the previously known main rutile prospects at Cerro Blanco – Las Carolinas, La Cantera, Chascones and Eli. Rock underlying the grid lines was subjected to a magnetic field and the magnetic response was measured. In the case of Cerro Blanco, rutile bearing rock typically exhibited a lower magnetic response than for example rutile deficient or iron bearing rocks. Based on an interpretation of the survey data, the consultant and the Company were able to identify three new rutile target prospects warranting further investigation. These targets are:

 

  · Target 1 Hippo Ear
This target covers an area of approximately 16 hectares and is located directly south of the Las Carolinas prospect. Since completing the survey, detailed geological mapping has been completed on this target and three trenches measuring approximately 20 meters in length, 2.5 meters deep and 1.5 meters wide have been mapped and sampled. Three trenches measuring approximately 20 meters in length, 2.5 meters deep and 1.5 meters were mapped and sampled. Composite sample results over the length of the three trenches had an average grade of 1.5% TiO2.

 

  · Target 2 Algodon Prospect
This target covers an area of approximately 44 hectares and is located approximately 1.5 km west of the Las Carolinas prospect. Geological reconnaissance and selective sampling of outcrop has been completed over approximately 60% of the target area. Nine samples were taken, which had an average grade of 1.54% and a maximum grade of 5.58% TiO2.

 

  · Target 3 Quartz Creek
This target covers an area of approximately 77 hectares and is located directly southeast of the Las Carolinas prospect. Geological reconnaissance and systematic grid rock sampling (one sample every 25 - 30 meters) has been completed over approximately 27% of the target area. Some outcrop samples showed abundant rutile related to coarse quartz, albite and veinlets. Samples taken from the target areas listed above were submitted for XRF total rock analyses. The 47 samples submitted had an average grade of 1.41% and a maximum grade of 5.52% TiO2. Four samples had grades of over 4.0% TiO2.   A further twenty-four samples were taken from the Chascones prospect with rutile mineralization observed in all samples. These samples had an average grade of 1.39% and maximum grade of 2.57% TiO2.  

 

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    A further twenty-four samples were taken from the Chascones prospect with rutile mineralization observed in all samples. These samples had an average grade of 1.39% and maximum grade of 2.57% TiO2.  

These initial rock sampling results for the three new rutile target areas as well as the Chascones prospect are similar to historic results obtained on the Las Carolinas and La Cantera prospects which are located along strike and to the northeast of Chascones. Las Carolinas contains the Cerro Blanco project’s current estimated rutile resource and La Cantera is the next prospect scheduled for drilling. At La Cantera, an historic surface rock sampling program comprised of 149 samples had an average grade of 1.63% and maximum grade of 3.49% TiO2. 
     
  · We entered into a letter of intent (“ LOI ”) with Hyundai Welding Co., Ltd., (“Hyundai Welding”) and Korea Resources Corporation, (“KORES”) which contained binding provisions whereby Hyundai Welding and KORES were required to provide the Company with US$10,000,000 in funding for the Cerro Blanco project (“Cerro Blanco”) in Chile in three installments of US$2,000,000 on or before July 7, 2012, US$3,000,000 on or before August 7, 2012, and US$5,000,000 on or before August 31, 2012. This was subsequently amended, due to Korean banking and regulatory requirements, to allow for the full $10,000,000 payment to be made in one payment by August 17, 2012. On August 20, 2012, we terminated the LOI as Hyundai Welding and KORES had failed to make required initial payments by August 17, 2012.

·On September 27, 2012, we entered into a second off-take agreement with a major international pigment producer for the supply of natural rutile concentrate from the Cerro Blanco project. Under the agreement, the pigment producer has agreed to purchase 10,000 tonnes per annum of White Mountain's standard grade, natural rutile concentrate at a fixed price. The three year term, which commences upon the production of 5,000 tons of product from the Cerro Blanco project, may be extended by mutual agreement.

  

Results of Operations

 

The Company recorded a net loss of $1,850,856 and $6,926,558 for the three and nine months respectively ended September 30, 2012 ($0.03 and $0.11 per weighted average common share outstanding) compared to a net loss of $2,665,026 and 7,424,107 ($0.05 and $0.13 per share) for the comparable interim periods in 2011.

 

The loss in the nine months ended September 30, 2011 was materially affected by ASC 815 which 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 and was applicable to the 4,250,000 warrants which were exercised in 2011.

 

For the nine months ended September 30, 2012, the Company recorded a fair value loss on the warrants of $nil. For the nine months ended September 30, 2011, the Company recorded a loss of $543,150.  

 

Many expenses continue to be comparable for this nine month period compared to the same period in 2011, reflecting the continuing activities of the Company in Chile to advance to final feasibility and the development of the Chinuka Process. The most material exceptions are as follows: 

  · Exploration expense of $1,136,228 for the three months ended September 30, 2012 (YTD: $3,205,155) (2011: $193,806 - YTD: $1,717,194) reflects the increased work being performed to meet the requirements of the final feasibility study, most particularly in the areas of environmental studies, mapping and geological analysis;
  · Office expenses of $61,708 for the three months ended September 30, 2012 (YTD: $314,227) (2011: $53,230 – YTD: $135,042) reflects stock-based compensation of $190,530 for the nine months ended September 30, 2012 (2011: $63,000), as well as the expanded activities in the Santiago office;
  · Research and development of $307,574 for the nine months ended September 30, 2012 (2011: $176,504) reflects increased expenditures on technology with respect to the Chinuka process; and
  · Foreign exchange gain of $7,794 for the three months ended September 30, 2012 (YTD: loss $156,936) (2011: loss $22,501 – YTD: loss $288,883) reflects the volatility of the U.S. dollar compared to the Chilean Peso and Canadian dollar during the period compared to 2011.

 

Consulting fees – directors and officers for the three months ended September 30, 2012 were $100,200 compared to $1,493,883 for the comparative quarter in 2011 (YTD: 2012: $908,325, 2011: $2,256,923), and management fees were $101,228 compared to $559,626 (YTD: 2012: $632,184, 2011: $1,191,669). The decreases in these expenses related to the stock-based compensation expenses recorded for the issuance of shares of common stock to directors, officers, management, employees and consultants during the comparable interim periods. For the three and nine months ended September 30, 2012, a total of Nil and 584,500 number of such shares were issued, respectively. By comparison, they were 1,290,000 and 2,490,000, respectively for 2011.

  

Liquidity and Cash Flows

 

As of September 30, 2012, we had working capital of $2,267,820 (December 31, 2011: $1,802,594), including $2,436,023 (December 31, 2011: $1,983,725) of cash and cash equivalents.

 

Cash used in operating activities was $5,229,736 for the nine months ended September 30, 2012, compared to $3,915,232 for the comparative period. Cash used in investing activities was $106,021 for the nine months ended September 30, 2012 (2011: $137,347).

 

During the nine months ended September 30, 2012, we raised a total of $5,788,055 in net cash through financing activities (2011: $3,136,834). Two private placements with three closings were closed for gross proceeds of $5,611,622, less commissions and finders’ fees of $336,067. In addition, $117,500 and $395,000 were generated, respectively through exercise of warrants and stock options during the year.

 

We anticipate that we will need to raise additional funds to meet or exceed the needs of our operations, and we continue to do so actively. 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.

 

Recent Accounting Pronouncements

 

In June 2011, the FASB issued ASU 2011-05 “Presentation of Comprehensive Income” eliminating the option to present the components of other comprehensive income as a part of the statement of shareholders’ equity. The standard requires other comprehensive income be presented as part of a single continuous statement of comprehensive income or in a statement of other comprehensive income immediately following the statement of net income. The new accounting guidance is effective for interim and annual periods beginning after December 15, 2011. This standard did not change the presentation of our financial statements or affect the calculation of net income, comprehensive income or earnings per share.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

 

Item 4. Controls and Procedures

 

Evaluation of disclosure controls and procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 15(d)-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

   

Changes in internal control over financial reporting

 

There has been no change in our internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during our most recent fiscal quarter ended September 30, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

Item 4. Mine Safety Disclosures

 

There are no reportable events required pursuant to this item.

 

Item 6. Exhibits

 

The following exhibits are furnished with this report:

 

Exhibit No.   Description
     
31.1   Rule 15d-14(a) Certification by Chief Executive Officer
31.2   Rule 15d-14(a) Certification by Chief Financial Officer
32.1   Section 1350 Certification of Chief Executive Officer
32.2   Section 1350 Certification of Chief Financial Officer
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  White Mountain Titanium Corporation
       
Date: November 9, 2012 By /s/ Michael P. Kurtanjek
      Michael P. Kurtanjek, President and Chief Executive Officer
       (Principal Executive Officer)
       
Date: November 9, 2012 By /s/ Lan Shangguan
      Lan Shangguan, Chief Financial Officer
       (Principal Financial Officer)

 

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