<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13a OR 15d OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of February, 1997
DIADEM RESOURCES LTD.
- --------------------------------------------------------------------------------
(Translation of Registrant's name into English)
110 MEADOWVALE ROAD, SCARBOROUGH, ONTARIO, CANADA MIC 151
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(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F).
Form 20-F X Form 40-F
----- -----
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934).
Yes No X
----- -----
<PAGE> 2
DIADEM RESOURCES LTD.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS AT NOVEMBER 30, 1996 1995
(IN CANADIAN DOLLARS APPLYING U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) $ $
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and term deposits 4,993,677 1,278,313
Marketable securities (note 3) 149,752 80,805
Prepaid expenses and sundry receivables (note 5) 114,818 9,622
------------- -------------
5,258,247 1,368,740
INTEREST IN MINING PROPERTIES (note 4) 7,782,756 1,247,065
INVESTMENT IN MINING SYNDICATES AND MINING COMPANIES 197,978 40,000
FIXED ASSETS (note 6) 24,614 9,360
------------- -------------
13,263,595 2,665,165
============= =============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued charges (notes 3 and 7) 490,517 72,240
------------- -------------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (note 8) 14,319,340 4,003,193
DEFICIT INCURRED PRIOR TO DEVELOPMENT STAGE ACTIVITIES (968,527) (968,527)
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (631,916) (439,949)
DIFFERENCE BETWEEN COST AND MARKET VALUE
OF MARKETABLE SECURITIES 54,181 (1,792)
------------- -------------
12,773,078 2,592,925
------------- -------------
13,263,595 2,665,165
============= =============
</TABLE>
-2-
<PAGE> 3
DIADEM RESOURCES LTD.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED NOVEMBER 30, 1996 1995
(IN CANADIAN DOLLARS APPLYING U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) $ $
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EXPENSES
Amortization 3,507 987
Business development 20,867 2,203
Expiration of mining interest (note 4) 119,241 35,382
General 31,876 14,405
Insurance 3,108 3,108
Legal, audit and accounting fees 40,484 15,958
Office expenses 20,117 13,216
Salaries and benefits 31,755 17,203
Search for new properties - 1,212
Shareholder relations 130,229 36,321
Travel 3,165 12,285
------------- -------------
404,349 152,280
------------- -------------
(404,349) (152,280)
------------- -------------
OTHER INCOME (LOSS)
Interest 122,683 27,147
Gain (loss) on securities and investments 6,080 (668)
------------- -------------
128,763 26,479
------------- -------------
NET LOSS (275,586) (125,801)
============= =============
NET LOSS PER COMMON SHARE .01 .01
============= =============
</TABLE>
-3-
<PAGE> 4
DIADEM RESOURCES LTD.
CONSOLIDATED STATEMENT OF ACCUMULATED LOSSES AS DEVELOPMENT STAGE COMPANY
<TABLE>
<CAPTION>
FOR THE PERIOD FROM JUNE 1, 1992 TO NOVEMBER 30, 1996 1995
(IN CANADIAN DOLLARS APPLYING U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) $ $
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EXPENSES
Advertising and promotion 1,349 1,349
Amortization 15,641 10,452
Business development 56,201 9,427
Expiration of mining interest 234,443 115,202
General 50,538 22,662
Insurance 27,450 21,235
Legal, audit and accounting fees 134,709 52,701
Office expense 82,428 45,181
Salaries and benefits 175,768 103,336
Search for new properties 9,088 8,821
Shareholder relations 229,114 72,710
Travel 35,429 32,098
------------- -------------
1,052,158 495,174
------------- -------------
INCOME
Consulting 6,200 6,200
Interest 191,304 41,142
Gain on securities and investments 222,738 7,883
------------- -------------
420,242 55,225
------------- -------------
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE (631,916) (439,949)
============= =============
</TABLE>
-4-
<PAGE> 5
DIADEM RESOURCES LTD.
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
SIX MONTHS ENDED NOVEMBER 30, 1996 1995
(IN CANADIAN DOLLARS APPLYING U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) $ $
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net loss (275,586) (125,801)
Items not affecting cash
Amortization 3,507 987
Expiration of mining interest 119,241 35,382
Loss (gain) on marketable securities and investments (6,080) 668
------------- -------------
(158,918) (88,764)
Decrease (increase) in prepaid expenses and sundry receivables (22,138) 25,789
Increase (decrease) in accounts payable and accrued charges 101,150 (67,658)
------------- -------------
(79,906) (130,633)
------------- -------------
FINANCING ACTIVITIES
Costs associated with issuance of shares (note 8) - (2,312)
Issuance of common shares (note 8) 85,200 811,600
------------- -------------
85,200 809,288
------------- -------------
INVESTING ACTIVITIES
Acquisition of interest in mining properties (3,149,624) (171,613)
Disposition (acquisition) of fixed assets (2,674) 958
Acquisition of marketable securities (6,080) (1,606)
Investment in mining syndicates and mining companies (20,000) -
Proceeds on gain on marketable securities and investments 6,080 7,476
------------- -------------
(3,172,298) (664,785)
------------- -------------
Change in cash and cash equivalents (3,167,004) 13,870
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 8,160,681 1,264,443
------------- -------------
CASH AND CASH EQUIVALENTS, END OF YEAR 4,993,677 1,278,313
============= =============
</TABLE>
-5-
<PAGE> 6
DIADEM RESOURCES LTD.
CONSOLIDATED STATEMENT OF ACCUMULATED CASH FLOW AS DEVELOPMENT STAGE COMPANY
<TABLE>
<CAPTION>
FOR THE PERIOD FROM JUNE 1, 1992 TO NOVEMBER 30, 1996 1995
(IN CANADIAN DOLLARS APPLYING U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) $ $
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED FOR):
Net accumulated loss (631,916) (439,949)
Items not affecting cash
Amortization 15,641 10,452
Expiration of mining interest 234,443 115,202
Gain on marketable securities and investments (222,738) (7,883)
------------- -------------
(604,570) (322,178)
Decrease in accounts receivable 1,761 1,761
Increase in prepaid expenses and sundry receivables (109,878) (4,682)
Increase in accounts payable and accrued charges 423,191 17,913
------------- -------------
(289,496) (307,186)
------------- -------------
FINANCING ACTIVITIES
Costs associated with issuance of shares (1,097,249) (474,806)
Increase (decrease) in advances from shareholder 40,744 40,744
Issuance of common shares 11,642,929 2,920,814
------------- -------------
10,586,424 2,486,752
------------- -------------
INVESTING ACTIVITIES
Acquisition of interest in mining properties (5,199,802) (795,183)
Acquisition of fixed assets (24,057) (3,613)
Acquisition of marketable securities (146,173) (155,183)
Investment in mining syndicates and mining companies (245,300) (40,000)
Proceeds on gain on marketable securities and investments 305,288 85,933
------------- -------------
(5,310,044) (908,046)
------------- -------------
Change in cash and cash equivalents 4,986,884 1,271,520
CASH AND TERM DEPOSITS, BEGINNING OF YEAR 6,793 6,793
------------- -------------
CASH AND TERM DEPOSITS,END OF YEAR 4,993,677 1,278,313
============= =============
</TABLE>
-6-
<PAGE> 7
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
The Company, directly and through joint ventures, is in the process of
exploring its mineral properties and has not yet determined whether these
properties contain ore reserves that are economically recoverable.
The recoverability of amounts shown for mineral properties and related
deferred costs is dependent upon the discovery of economically
recoverable reserves, confirmation of the Company's interest in the
underlying mineral claims, the ability of the Company to obtain necessary
financing to complete the development, and future profitable production
or proceeds from the disposition thereof.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the
corporation and its subsidiaries and a proportionate share of the
accounts of joint ventures in which Diadem Resources Ltd. and its
subsidiaries have an interest.
FIXED ASSETS AND AMORTIZATION
Fixed assets are recorded at cost and are amortized over their
estimated useful lives using the declining balance method at the
following annual rates:
Furniture and fixtures 20%
Computer and equipment 30%
FOREIGN CURRENCY TRANSLATION
Monetary and non-monetary items carried at market are translated at the
rate of exchange in effect at the balance sheet date. All other
non-monetary items are translated at historical rates. Revenue and
expense items are translated at the average rate of exchange for the
year.
MARKETABLE SECURITIES
Marketable securities are carried at the lower of cost and quoted
market value.
INVESTMENT IN MINING SYNDICATES AND MINING COMPANIES
Investment in mining syndicates and a private mining company are
carried at cost.
Investment in Waseco Resources Inc. is accounted for on the equity
basis of accounting.
7
<PAGE> 8
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTEREST IN MINING PROPERTIES
The Company's interest in mining properties is carried at cost on a
property by property basis. Costs include capitalized expenditures for
acquisition, geological surveys, exploration and development. When
shares of the Company are issued from treasury as consideration for the
acquisition of mining properties, the market value of the shares is
considered a cost of acquisition. Costs for each property are written
off to the statement of income if future recovery is determined to be
unlikely.
All capitalized costs for each property will be amortized as depletion
to the statement of income when commercial production commences. The
units-of-depletion method will be applied based upon previous and
probable reserves. Possible reserves are excluded.
3. MARKETABLE SECURITIES
<TABLE>
<CAPTION>
1996 1995
$ $
<S> <C> <C>
Marketable securities 61,571 61,597
</TABLE>
The estimated market value of the marketable securities is $149,752 (1995
- $80,805). The Company also holds options to purchase 300,000 additional
common shares of Blue Emerald Resources Inc. at a price of $0.25 per
share up to March 16, 1997. The market value of the common shares was
$0.37 per share as at November 30, 1996.
Included in marketable securities are 100,000 shares of Noront Resources
Limited which are carried at $14,000. The current market value as at
November 30, 1996 was $48,000, (1995 - $35,000). These shares were
received from Noront Resources Limited pursuant to an agreement whereby
the Company optioned a portion of its interest in certain mining claims.
Since these mining claims have been terminated, the Company may have to
return the shares to Noront Resources Limited. Included in accounts
payable is $14,000 which is equivalent to the carrying value of the
shares.
8
<PAGE> 9
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
4. INTEREST IN MINING PROPERTIES
Interest in mining properties is comprised of the following:
<TABLE>
<CAPTION>
1996 1995
$ $
<S> <C> <C>
Acquisition costs
Fletcher Lake, Northwest Territories (note 4b) 10,355 10,355
Rancheria, California (note 4c) 652,733 280,733
Leek Springs, California (note 4d) 1,681,711 -
Crystal Valley Region, Quebec (note 4e) 72,500 72,500
Dihourse Permit, Quebec (note 4a) - 9,200
Pekan River and Sarah Lake, Quebec (note 4f) 119,400 9,200
Mercury Permit, Quebec (note 4g) 136,300 16,300
Belitung Island, Indonesia (note 4h) 368,190 -
--------- ---------
3,041,189 398,288
--------- ---------
Deferred exploration costs
Fletcher Lake, Northwest Territories 78,607 5,914
Rancheria, California 689,308 506,973
Leek Springs, California 1,926,156 1,000
Crystal Valley Region, Quebec 168,151 167,596
Dihourse Permit, Quebec - 1,024
Pekan River and Sarah Lake, Quebec 1,667,420 101,187
Mercury Permit, Quebec 23,515 23,515
Belitung Island, Indonesia 141,088 -
Tewah, Indonesia (note 4k) 47,322 41,568
--------- ---------
4,741,567 848,777
--------- ---------
7,782,756 1,247,065
========= =========
</TABLE>
(a) EXPIRATION OF MINING INTEREST
During the current period, the exploration permit on the Dihourse
property in Quebec expired. Accordingly, the accumulated costs of
acquisition and exploration in the amount of $119,241 were written off as
an expense.
(b) FLETCHER LAKE, NORTHWEST TERRITORIES
The Company holds an option with Noront Resources Ltd. to earn a 60%
mining interest in a 100,000 acre property in the Northwest Territories.
In order to exercise this option, the company was originally required to:
1) issue 200,000 shares of its capital stock to Noront Resources Ltd.
which were issued during the years ended May 31, 1994 and May 31,
1995;
9
<PAGE> 10
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
4. INTEREST IN MINING PROPERTIES (CONTINUED)
2) complete $1,000,000 in work prior to February 12, 1999.
The original stakers of the property retain a royalty of 3% on any
diamond production and a 1.5% net smelter royalty on any base metal or
gold production.
The Company and Noront Resources Ltd. then entered into an agreement with
Pure Gold Resources Inc. whereby Pure Gold Resources Inc. would earn a
40% undivided interest in the property by issuing 100,000 of its capital
(60,000 to the Company) and incurring $500,000 of expenditures on the
property prior to February 12, 1996 and maintaining the property in good
standing to March 15, 1996. The Company received 30,000 of these shares
during the year ended May 31, 1994 when the market value of the shares
was $18,000 in aggregate and an additional 30,000 shares during the year
ended May 31, 1995 when the market value of the shares was $6,600 in
aggregate. The Company reduced its carrying value of the property by the
market value of the shares of Pure Gold Resources Inc. received.
During the year ended May 31, 1995, sufficient assessment work was
completed to ensure that approximately 15,000 acres of the 100,000 acres
were in good standing until March 11, 1996. The Company relinquished any
interest in the remaining 85,000 acres. Accordingly, a charge to the
income statement in the amount of $57,545 was recorded in the year ended
May 31, 1995. This charge was calculated as 85% of accumulated
acquisition costs.
The Company then had no financial obligations with respect to the
property until the completion of Pure Gold Resources Inc.'s work.
However, Pure Gold Resources Inc. failed to complete the work and,
accordingly, several of the claims were forfeited. In order to mitigate
damages, Pure Gold Resources Inc. restaked some of the lost claims which
resulted in the reacquisition of certain of the claims. Noront Resources
Limited and the Company have now entered into an amending agreement
whereby the Company may earn a 60% interest in the claims maintained and
in additional staked claims by spending an aggregate of $250,000 of
additional expenditures by March 15, 1999.
(c) RANCHERIA, CALIFORNIA
The Company has obtained an option to acquire up to a 60% interest in
mining claims in the Rancheria area of Amador County in California. This
option was granted by Silverstone Prospecting Syndicate which will
continue to hold the remaining unearned interest in the property.
Silverstone Prospecting Syndicate has registered 13 claims.
During the year ended May 31, 1995, the Company acquired a 15% interest
in these claims by paying the sum of U.S. $50,000 to Silverstone
Prospecting Syndicate and issuing to Silverstone Prospecting Syndicate
150,000 common shares of the Company, valued at $0.30 per share.
10
<PAGE> 11
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
4. INTEREST IN MINING PROPERTIES (CONTINUED)
During the six months ended November 30, 1995, the Company increased its
interest in the property to 30% by paying the sum of U.S. $50,000 to
Silverstone Prospecting Syndicate, issuing to Silverstone Prospecting
Syndicate 150,000 common shares valued at $0.60 per share and spending a
cumulative amount of approximately $506,000 on the property.
During the second half of the year ended May 31, 1996, the Company also
issued to Silverstone Prospecting Syndicate an additional 150,000 common
shares valued at $2.48 per share during the current year as a step to
increasing its interest to 45%. In order to complete the acquisition of
45% in the property, the Company must complete the following by February
1, 1998:
1) pay an additional $100,000 U.S. to Silverstone Prospecting
Syndicate, and
2) complete $1,000,000 U.S. in cumulative expenditures on the
property.
In order to increase its interest to 60%, the Company will be required to
complete $2,000,000 U.S. in cumulative expenditures on the property by
October 4, 1997. The Company is currently negotiating to extend this
deadline.
The agreement also provides that if Silverstone Prospecting Syndicate is
successful in acquiring additional claims in the subject area, these
claims will also be included in the agreement. The Company will be
entitled to earn a 60% interest in each additional claim without payment
of additional consideration except for the reimbursement of the actual
costs of acquiring these additional claims.
(d) LEEK SPRINGS, CALIFORNIA
The Company has obtained an option to acquire up to a 55% interest in 215
unpatented mining claims covering approximately 2,500 acres in the Leek
Springs area of El Dorado County in California. This option was also
granted by Silverstone Prospecting Syndicate which will continue to hold
the remaining unearned interest in the property.
During the second half of the year ended May 31, 1996, the Company earned
a 10% interest in the property by paying the sum of U.S. $50,000 to
Silverstone Prospecting Syndicate and issuing to Silverstone Prospecting
Syndicate 150,000 common shares valued at $1.24 per share.
During the current six month period, the Company increased its interest
to 25% in the property by issuing 200,000 common shares valued at $6.45
per share and by paying U.S. $100,000 to Silverstone Prospecting
Syndicate.
To earn an additional 15% interest, thereby increasing its interest to
40%, the Company must complete the following by March 20, 1997:
1) pay an additional $100,000 U.S. to Silverstone Prospecting
Syndicate;
2) issue 200,000 additional common shares to Silverstone Prospecting
Syndicate; and
3) complete $1,000,000 U.S. of cumulative exploration expenditures.
11
<PAGE> 12
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
4. INTEREST IN MINING PROPERTIES (CONTINUED)
Depending upon exploration results, the cumulative expenditures could be
increased to $1,500,000 to obtain this additional 15% interest.
To earn the final 15% interest in the property, thereby increasing its
interest to 55%, the company must complete the following by August 2,
1998:
1) pay an additional $100,000 U.S. to Silverstone Prospecting
Syndicate;
2) issue 200,000 additional common shares to Silverstone Prospecting
Syndicate; and
3) complete $5,000,000 U.S. of cumulative exploration expenditures.
(e) CRYSTAL VALLEY REGION, QUEBEC
The Company has acquired a 100% interest in 144 registered claims,
totalling 5,036 hectares, in the Crystal Valley Region near Montreal in
the Province of Quebec. To acquire the mining rights, the Company made a
cash payment of $12,500 and issued 200,000 common shares when the market
value of the shares was $0.30 per share. The agreement also provides that
the Company will pay a royalty of 2% of gross proceeds for the sale of
diamonds recovered from the property. The claims are currently in good
standing.
(f) PEKAN RIVER AND SARAH LAKE, QUEBEC
The Company entered into an option agreement which enables it to purchase
a 90% interest in 5,000 hectares of property in Quebec known as the Pekan
River Prospect. This option was granted by Beaver Syndicate which will
continue to hold the remaining unearned interest in the property. A
further agreement was reached with Beaver Syndicate to also acquire an
interest in an additional property in Quebec known as the Sarah Lake
Project. This second property is included in the earlier agreement for no
additional consideration other than a fee of $5,200. The original permit
holder will retain a 1.5% net smelter return on production.
The Company earned a 51% interest in the properties during the year ended
May 31, 1996 by paying the sum of $9,200 to Beaver Syndicate and issuing
to Beaver Syndicate 80,000 common shares valued at $0.50 per share.
The Company earned an additional 19% interest, during the current six
month period thereby increasing its interest to 70%, by issuing to Beaver
Syndicate $60,000 worth of common shares and paying $5,000 in annual
permit fees.
12
<PAGE> 13
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
4. INTEREST IN MINING PROPERTIES (CONTINUED)
The Company can earn an additional 10% interest, thereby increasing its
interest to 80%, up to May 30, 1997, by issuing to Beaver Syndicate
$60,000 worth of common shares or by paying $60,000 in cash, at the
Company's option.
The Company can earn an additional 10% interest, thereby increasing its
interest to 90%, up to May 30, 1998, by issuing to Beaver Syndicate
$60,000 worth of common shares or by paying $60,000 in cash, at the
Company's option.
The Company has been advised that the Pekan River permit is valid until
May 23, 2000 and is in good standing until May 24, 1997, at which time
renewal fees must be paid and suitable assessment work filed. The Sarah
Lake permit is valid until October 25, 2000, provided the Company pays
annual renewal fees and files assessment work within the time required.
(g) MERCURY PERMIT, QUEBEC
The Company has also entered into an agreement with Trinity Syndicate to
purchase a 90% mining interest in 11,500 hectares of property in Quebec.
Trinity Syndicate will continue to hold the unearned interest and will
retain a 1.5% net smelter return on production.
The Company earned a 51% interest in the property during the year ended
May 31, 1996 by paying the sum of $16,300 to Trinity Syndicate and
issuing to Trinity Syndicate 80,000 common shares valued at $0.50 per
share.
The Company earned an additional 19% interest, thereby increasing its
interest to 70% during the six months ended November 30, 1996, by issuing
to Trinity Syndicate 14,404 common shares valued at a total of $80,000.
The Company can earn an additional 10% interest, thereby increasing its
interest to 80%, up to May 16, 1997, by issuing to Trinity Syndicate
$80,000 worth of common shares or by paying $80,000 in cash, at the
Company's option.
The Company can earn an additional 10% interest, thereby increasing its
interest to 90%, up to May 16, 1998, by issuing to Trinity Syndicate
$80,000 worth of common shares or by paying $80,000 in cash, at the
Company's option. Trinity Syndicate has advised the company that the
permit is valid to May 11, 2000 and the property is in good standing
until May 21, 1997, at which time renewal fees will be payable and
assessment work will need to be filed.
13
<PAGE> 14
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
4. INTEREST IN MINING PROPERTIES (CONTINUED)
(h) BELITUNG ISLAND, INDONESIA
The Company has entered into an option agreement with an Indonesian
company whereby it can acquire a 90% interest in mining property on
Belitung Island in Indonesia. The Company is required to spend a total of
U.S. $1,000,000 in exploration and development expenditures. The Company
issued 100,000 shares valued at $1.03 per share for the opportunity of
entering into the agreement. The Indonesian company will retain a 10%
working interest in the property. The Company has entered into an
agreement with Bresea Resources Ltd. whereby Bresea Resources Ltd. has
the right to acquire a 60% working interest in the property with the
company retaining a right to acquire a 30% working interest in the
property.
(i) MIRAH NORTH EAST, KALIMANTAN, INDONESIA
The Company has entered into a joint venture arrangement to acquire a 30%
interest in a 10,300 hectare property in the Kalimantan gold belt in
Indonesia. The remaining interest will be held 15% by an Indonesian
company, 30% by Tandem Resources Ltd. and 25% by Bresea Resources Ltd.
All joint venture exploration expenditures are to be incurred by each
non-Indonesian joint venture party in proportion to their interest in the
property. Upon commencement of mining operations, all costs and expenses
incurred are to be borne by all parties on a pro rata basis.
(j) MAHAKAM, KALIMANTAN, INDONESIA
The Company has entered into two separate joint venture arrangements to
acquire a 30% interest in two 10,000 hectare properties in the Kasogan
Area of East Kalimantan, Indonesia. The properties are located 20
kilometres apart. The remaining interest in each property will be held
15% by an Indonesian company, 30% by Tandem Resources Ltd. and 25% by
Bresea Resources Ltd. All joint venture exploration expenditures are to
be incurred by each non-Indonesian joint venture party in proportion to
their interest in the property. Upon commencement of mining operations,
all costs and expenses incurred are to be borne by all parties on a pro
rata basis.
(k) TEWAH, INDONESIA
The Company entered into an agreement to participate with an Indonesian
mining company for the exploration and development of gold property in
the Kahayan River Valley in Indonesia. The agreement allows the Company
to acquire a 60% interest for an expenditure of the greater of U.S.
$1,500,000 or the cost of completing a full feasibility study on the
property.
The Company then entered into an agreement with Waseco Resources Inc.
whereby Waseco Resources Inc. could earn the Company's interest in the
property by spending the U.S. $1,500,000 on the property and issuing
treasury shares to the Company. The acquisition was to be accomplished by
Waseco Resources Inc. whereby it has three separate options to purchase
20% at each option date satisfied by spending U.S. $500,000 by each date
and issuing a cumulative 7,000,000 common shares from treasury.
14
<PAGE> 15
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
4. INTEREST IN MINING PROPERTIES (CONTINUED)
Waseco has funded the initial U.S. $1,000,000 in Tewah Project
feasibility expenditures and has delivered to the Company an aggregate of
5,000,000 common shares and has thereby earned a 40% working interest in
the property. Waseco Resources Inc. has a further option to acquire an
additional 20% interest in the joint venture by issuing a further
2,000,000 common shares to the Company and by expending a further U.S.
$500,000 in proposed expenses. If the full 60% interest in the joint
venture is acquired by Waseco Resources Inc., the Company will own
7,000,000 common shares of Waseco Resources Inc. which would represent
less than 50% of the outstanding shares on a fully diluted basis. The
5,000,000 shares of Waseco Resources Inc. currently represent
approximately 39% of the outstanding shares. The cumulative expenditure
on the Tewah property represents unreimbursed expenditures to date.
5. INVESTMENT IN MINING SYNDICATES AND MINING COMPANIES
<TABLE>
<CAPTION>
1996 1995
$ $
<S> <C> <C>
Investment in mining syndicates 40,000 40,000
Investment in private mining company 157,978 -
------- ------
197,978 40,000
======= ======
</TABLE>
The Company participated in a private placement during the year ended May
31, 1996 whereby it purchased 10,000 ordinary shares of Randgold
Resources Limited at a cost of $137,978. The Company holds less than 1%
of the outstanding shares. Randgold Resources Limited is involved in the
exploration of gold mining properties in Africa.
Investment in mining syndicates consists of 4.0 units (1995 - 4.0 units)
in Silverstone Prospecting Syndicate with a cost of $20,000 (1995 -
$20,000) and 2.0 units (1995 - 2.0) in Beaver Syndicate with a cost of
$20,000 (1995 - $20,000) and 2.0 units (1995 - nil) in Crystal Valley
Prospecting Syndicate. Silverstone Prospecting Syndicate is currently
exploring properties in the United States while Beaver Syndicate is
exploring properties in Northern Labrador and Quebec. As at May 31, 1996,
the Company holds 8% of the outstanding units in Silverstone Prospecting
Syndicate and 8% of the outstanding units in Beaver Syndicate and 4% of
the outstanding units in Crystal Valley Prospecting Syndicate.
15
<PAGE> 16
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
5. INVESTMENT IN MINING SYNDICATES AND MINING COMPANIES (CONTINUED)
In addition, the Company holds 5,000,000 common shares of Waseco
Resources Inc. This represents approximately 39% of the outstanding
shares. These shares were acquired pursuant to the transfer of the mining
options in the Tewah property in Indonesia (see note 4k) to Waseco
Resources Inc. No value has been attached to these shares for accounting
purposes as the Company had not incurred any costs in obtaining these
option rights which were transferred in exchange for the shares.
6. FIXED ASSETS
<TABLE>
<CAPTION>
ACCUMULATED 1996 1995
COST AMORTIZATION NET NET
$ $ $ $
<S> <C> <C> <C> <C>
Furniture and fixtures 31,199 25,632 5,567 7,043
Computer and equipment 24,205 5,158 19,047 2,317
------ ------ ------ -----
55,404 30,790 24,614 9,360
====== ====== ====== =====
</TABLE>
7. RELATED PARTY INFORMATION
ACCOUNTS PAYABLE AND DEFERRED EXPLORATION COSTS
During the current year, the Company incurred fees totalling
$17,357, (1995 - $46,309), related to exploration work from a
company in which a director holds a 49% interest. A balance of
$4,966, (1995 - $16,491) related to these fees is included in
accounts payable at the end of the current year period. The Company
leases registered head office space from the same company at a cost
of $300 per month. The Company also leases office space from a
director at a cost of $250 per month. In addition, a company which
is wholly owned by a director, charged $21,675, (1995 - $10,850)
during the current year in consulting fees related to exploration
work. A balance of $29,119 (1995 - nil) related to these fees is
included in accounts payable at the end of the current period.
These transactions are in the normal course of operations and are
measured at the exchange amount which is the amount of
consideration established and agreed to by the related parties.
PREPAID EXPENSES AND SUNDRY RECEIVABLES
Included in prepaid expenses and sundry receivables is the amount
of $20,226 (1995 - $nil) due from Waseco Resources Inc.
16
<PAGE> 17
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
8. CAPITAL STOCK
(a) Authorized capital
Authorized capital stock of the Company consists of an unlimited
number of special shares, redeemable and retractable at paid-up
value and an unlimited number of common shares.
(b) Issued and outstanding shares
Details of issued and outstanding common shares are as follows:
<TABLE>
<CAPTION>
1996 1995
Shares $Amount Shares $Amount
<S> <C> <C> <C> <C>
Balance, beginning of period 21,916,256 12,654,140 12,399,581 3,090,305
Warrants exercised by shareholders - - 1,947,000 776,488
Shares issued to related
to the purchase of mining properties 249,034 1,580,000 150,000 90,000
Exercise of share options 85,000 85,200 116,000 46,400
---------- ---------- ---------- ---------
23,250,290 14,319,340 14,612,581 4,003,193
========== ========== ========== =========
</TABLE>
There was an average of approximately 22,400,000 outstanding common
shares (1995 - 12,920,000) during the current period.
(c) Initial public offering
During the year ended May 31, 1995, the Company completed an
initial public offering which resulted in the issuance of 7,236,000
common shares at a price of $0.30 per share for gross proceeds of
$2,170,800. In addition, a total of 6,752,000 warrants to purchase
additional common shares at $0.40 per share were issued pursuant to
the offering. In addition, 1,120,000 warrants were granted to
investors who had been issued shares through a private placement in
the year ended May 31, 1993. These warrants allowed the holder to
purchase additional common shares at $0.40 per share.
During the six months ended November 30, 1995, 1,947,000 warrants
were exercised with gross proceeds of $778,800. During the second
half of the year ended May 31, 1996, a further 5,894,600 warrants
were exercised for gross proceeds of $2,357,840. All unexercised
warrants have expired.
(d) Secondary public offering
During the six months ended November 30, 1996, the Company
completed a public offering with the issuance of 1,000,000 Special
Warrants at a price of $5.75 per Special Warrant for gross proceeds
of $5,750,000. The funds were held in escrow as at May 31, 1996,
pending the closing. Each Special Warrant entitled the holder to
receive one common share and one-half of a common share of the
Company at a price of $6.75 per share until May 17, 1997. An
additional 50,000 warrants were issued to the broker at an exercise
price of $6.75 per share expiring on May 17, 1997. None of the
total of 550,000 warrants has been exercised.
17
<PAGE> 18
DIADEM RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
8. CAPITAL STOCK (CONTINUED)
(e) Share Option Plan
The Company has a share option plan under which options to purchase
common shares may be granted by the board of directors to
directors, officers employees and eligible service providers of the
corporation for terms up to five years at a price equal to the
market price prevailing on the date of the grant. The maximum
number of options available for grant under the plan is 2,190,000.
The following is a summary of the options which have been granted
by the board of directors:
<TABLE>
<CAPTION>
Expiry Date Option Price Number of Shares
$
<S> <C> <C>
June 5, 2000 0.62 540,000
November 28, 2000 1.27 30,000
January 26, 2001 1.86 200,000
June 7, 2001 5.50 620,000
October 18, 2001 6.50 5,000
October 21, 2001 6.80 5,000
---------
1,400,000
=========
</TABLE>
9. INCOME TAXES
As at November 30, 1996, the Company had accumulated tax losses of
$1,163,000 which may be applied against future taxable income. These
losses expire as follows:
<TABLE>
<CAPTION>
Fiscal Year Ending In: $
<S> <C>
1998 114,000
1999 339,000
2000 30,000
2001 100,000
2002 190,000
2003 10,000
2004 380,000
---------
1,163,000
=========
</TABLE>
In addition, the Company has deferred exploration expenditures which are
deductible for tax purposes in the amount of approximately $5,400,000,
which has been capitalized for tax purposes.
10. SUBSEQUENT EVENTS
The Company has reached an agreement to acquire a 68.25% interest in a
200 hectare gold prospect in Nicaragua known as "La Mestiza." The
company made an initial payment of U.S. $50,000 and issued 100,000
common shares at a market value of $4.20 per share. To earn its full
interest, the Company must make further payments totalling U.S.
$725,000, issue a further 700,000 common shares and complete a five
phase exploration and development program leading to the commencement of
commercial production.
18
<PAGE> 19
ITEM 2 MANAGEMENT'S PLAN OF OPERATION
The company is still in the development stage as its activities are solely
concentrated on the exploration of the company's existing mining properties and
the search for potential new opportunities. It is not generating income at
this point. Subsequent to the end of the period, on December 11, 1996, the
company entered into an agreement to acquire a 68.25% interest in a 200 hectare
gold prospect in Nicaragua known as "La Mestiza." The company made an initial
payment of U.S. $50,000 and issued 100,000 common shares at a market value of
$4.20 per share. To earn its full interest, the company must make further
payments totalling U.S. $725,000, issue a further 700,000 common shares and
complete a five phase exploration and development program leading to the
commencement of commercial production.
During the current period, the exploration permit on The Dihourse property in
Quebec expired. Accordingly, the accumulated costs of acquisition and
exploration in the amount of $119,241 were written off.
With the existing cash available, the company believes that its liquidity is
very solid on a short-term basis in that it can meet its obligations with
respect to its existing properties and administration expenses over the next
year. Other sources of cash during this period would include the potential
proceeds for the exercising of outstanding options and warrants.
The company's main goal is to find sufficient quantities of minerals in its
various properties such that mining operations will be financially viable. If a
property is determined to be viable, the company should have the ability to
obtain external financing or find a strategic partner with sufficient resources
to develop the mining infrastructure. Once established, mining operations
should generate cash to finance continuing exploration activities. At this
point, the company is not in a position to determine whether any of its
properties contain sufficient reserves to become a viable mining operation. In
the meantime, it has sufficient cash resources to continue its exploration
program.
<PAGE> 20
SIGNATURES
Pursuant to the requirements 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.
DIADEM RESOURCES LTD.
---------------------------------
(Registrant)
Date: March 7, 1997 By: /s/ LINA NOBLE
------------------------------
Lina Noble
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND STATEMENT OF INCOME AS AT NOVEMBER 30, 1996 AND FOR THE SIX
MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM
6-K.
</LEGEND>
<CURRENCY> CANADIAN DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<EXCHANGE-RATE> .7413
<CASH> 4,993,677
<SECURITIES> 149,752
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,258,247
<PP&E> 55,404
<DEPRECIATION> 30,790
<TOTAL-ASSETS> 13,263,595
<CURRENT-LIABILITIES> 490,517
<BONDS> 0
0
0
<COMMON> 14,319,340
<OTHER-SE> (1,546,262)
<TOTAL-LIABILITY-AND-EQUITY> 13,263,595
<SALES> 0
<TOTAL-REVENUES> 128,763
<CGS> 0
<TOTAL-COSTS> 404,349
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (275,586)
<INCOME-TAX> 0
<INCOME-CONTINUING> (275,586)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (275,586)
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
