Amendment #2
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Golden Phoenix Minerals, Inc.
(Name of Small Business Issuer in its charter)
Minnesota 41-1878178
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3595 Airway Drive, Suite 405
Reno, Nevada 89511
(Address of principal executive office) (Zip Code)
Issuer's telephone number (702) 853-4919
Securities to be registered under Section 12(g) of the Act:
Common Shares
Preferred Shares
Shares Underlying the Options
Charles Clayton
527 Marquette
Minneapolis, Minnesota 55402
(612) 338-3738
(Agent for Service)
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ITEM 1. DESCRIPTION OF BUSINESS
(Please refer to the Glossary at the end of Item 3 for the definition of certain
mining terms used in this Report.)
Golden Phoenix Minerals, Inc. was formed in Minnesota on June 2, 1997,
and has had limited operations.
The Company plans to explore economically valuable minerals from the
mineral properties it currently controls, and from mineral properties that it
will acquire in the future. The Company intends to concentrate its exploration
efforts in the Western US and Alaska. The Company is presently in the
exploration stage and there is no assurance that a commercially viable
mineralized deposit exists in any of its properties until further exploration
work and a final economically feasible report is conducted.
The Company has a five member Board of Directors; three of the
directors are corporate officers. The Company's officers and technical support
team, including consultants, is comprised of 7 former senior management,
clerical, geological exploration and development staff members from Santa Fe
Pacific Gold Corp. (SFPG), one landman formerly with Gold Fields Mining, and one
senior exploration manager from Rio Tinto (RTZ/Kennecott).
Golden Phoenix's key employees were members of the SFPG Project
Services Group which was responsible for the calculation of the resource reports
for every property in Nevada which SFPG developed into a producing gold mine.
SFPG discovered and developed over 28 million ounces of gold reserves in Nevada
with annual production in excess of 800,000 ounces making it the sixth largest
gold producer in North America.
The Company will provide joint venture opportunities to other selected
mining companies, to conduct exploration or development on mineral properties
the Company owns or controls. The Company and its joint venture partners will
explore and develop selected properties to a stage of proven and probable
reserves, at which time the Company will then decide whether to sell its
interest in a property or take the property into production with its joint
venture partner. By joint venturing its properties, and thereby reducing its
share of the costs for exploration of those properties, the Company can
maintain, while continuing to acquire interests in, a portfolio of gold and base
metals properties in various stages of mineral exploration and development. This
corporate strategy will minimize the financial risk of assuming all the
exploration costs associated with any one property, while maximizing the
potential of success and growth through the diversity of its property holdings.
The Company believes that it can create the basis for a competitive
minerals exploration company through assembling a unique group of individuals
with experience in target generation and discovery, resource evaluation and mine
development. The technical team that the Company has assembled consist of two
geological engineers with 42 years of combined experience in the economic
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evaluation mining properties, three geologists with 54 years of combined
experience in the mineral exploration, one professional land surveyor who is
also an explorationist with 19 years experience, and one landman/lawyer with 15
years experience in the minerals industry. This experienced and diverse team has
in excess of 100 years of major corporate mineral exploration, development and
gold production experience.
There are at least five sources of land for exploration by the Company:
public lands, private fee lands, aboriginal tribal lands, unpatented mining
claims, and patented mining claims. The primary sources for these lands are the
United States government, through the Bureau of Land Management and the U. S.
Forest Service, state governments, tribal governments, and individuals that
currently hold title to or lease government and private lands.
There are numerous levels of government regulation associated with the
activities of exploration and mining companies. The only two types of permitting
which the Company should have to be concerned with in the near future are
"Notice of Intent" and "Plan of Operation." Both of these types of procedures
will be necessary in the next twelve months. The Company has not yet filed for
any of these permits and cannot guarantee that the regulatory agency will timely
approve, if at all, the necessary permits. Further, it will be necessary to
obtain or post a bond to ensure the reclamation of any proposed surface
disturbance.
The cost and effects of the permitting process can not be summarized at
this time. The cost will vary for each project when they are initiated.
The Company has seven full-time employees and one part time accountant.
The full-time staff is made up one clerical and six professional exploration
staff. The Company also has one full-time and one part-time consultant. The
Company does not anticipate adding any full time staff in the next twelve
months. The changes in staffing which have been made during the first five
months of operation will facilitate the timely and cost-effective evaluation of
the exploration and development projects described in the property section (Item
3). The Company will use independent contractors to fill any short-term
employment needs that may arise.
ITEM 2. PLAN OF OPERATION
The Company's initial property acquisition was the Garamendi property
in Nevada. Subsequently, the Company has acquired 15 other properties in Nevada
and Alaska, of which it will hold a 100% ownership interest in 14. The Company
is actively acquiring additional properties. Prior to the formation of the
company, Donald J. McDowell, one of the company's founders and officer, was
actively exploring in Nevada and Alaska. Mr. McDowell conveyed the Garamendi
property into the Company as part of its initial capitalization at no cost, but
he retained a 2% net smelter return production royalty payable if the property
goes into production.
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JOINT VENTURES
The company has signed an acquisition agreement ("Welsh Agreement")
with J. D. Welsh & Associates ("Welsh") to acquire 100% of Welsh's 30% interest
in the Borealis Mine project in Mineral County, Nevada. The Company has
initially paid Welsh $250,000 USD and 50,000 shares of its common stock (valued
at $2.10) for an initial 25% ownership in Welsh's 30% participating interest in
the Borealis Mine project. The original purchase agreement with Welsh was setup
with scheduled payments totaling an additional $1.25 Million USD over the next 3
years. The Company has amended the original agreement with Welsh for an early
buy-out of the their interest in the property. The new terms are two payments of
$100,000 each on November 15th and December 15th, 1997 with a stock payment of
225,000 shares of common stock at market price. The Company is carried through
positive feasibility after the completion of the Welsh payments. Cambior
Exploration USA, Inc. ("Cambior") currently has a 70% interest in the project
subject to spending $7 Million USD over the next 7 years. Cambior is the
operator of the Borealis Mine project. If Cambior fails to make its required
work commitment then the property will revert to 100% ownership and operation by
the Company. The Welsh Agreement and the amendment are included as exhibit 10.2
of this filing.
An agreement ("Kennecott Agreement") to acquire the property called
High Grade, located in Modoc County, California, has been entered into with
Kennecott Exploration Company ("Kennecott"), a subsidiary of Rio Tinto Plc., and
will allow the Company to earn-in a 100% interest in the property. Kennecott
Exploration has retained a buy-back option at the time a positive feasibility
study is completed. Should Kennecott exercise that option, they would become
mine operator and reimburse the Company 150% of 51% of its exploration
expenditures to enter into a 51%-49% joint mining venture, if not Kennecott
would reduce to a 2% net smelter return royalty. The Company has agreed to make
a $1 Million USD work commitment over 3 years and a cash or stock payment of
$200,000 USD. No other payments are required. The Kennecott Agreement is
included as exhibit 10.3 of this filing.
FUNDING
The Company plans to finance its operations on a short-term basis
through the exercising of common stock options controlled by two key officers
and directors of the Company. As part of the formation of the Company, the Board
of Directors resolved to create two million options with one million at a $2.00
exercise price and one million at a $3.00 exercise price. Those options were
created, respectively, in the names of Michael R. Fitzsimonds and Donald J.
McDowell for the purpose of raising additional financing as the company needed
operating capital for its exploration and development activities. The Company
will also offset some of its costs by joint-venturing its properties with other
mining groups for exploration and development
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and from receiving fees from its joint venture partner for the right to earn an
interest in the joint venture property.
COMPETITION
Over the last five years imposition of claim rental policies by the
United States Government and the general exodus of major gold corporations from
the U.S. to pursue mineral exploration in foreign countries has resulted in
areas of very mineral prospective public lands to become open for mineral
location and acquisition, especially in the Western U.S. However, recently there
has been an increase in mining claim staking activities by the major mining
companies on public lands, which may be signaling a more competitive environment
for the Company in the future.
SEASONAL EFFECTS
The Company has positioned itself to handle any seasonal aspect of the
exploration business by location of its properties in California, Nevada and
Alaska. Further problems of access and inclement weather will be minimized
through strategic planning of fieldwork.
CAPITAL EQUIPMENT
The only capital equipment the Company plans to purchase in the next
twelve months will be field vehicles and computer equipment. The field vehicles
will be for staff professionals only; all contractors will provide their own
vehicles. The computer equipment will aid in the compilation and analysis of
data and in the preparation of technical charts and reports for shareholders.
The Company will be able to evaluate and make decisions on the economic
viability of a property more efficiently with the appropriate computer equipment
and software.
STAFFING
The Company has expanded its staffing level, during the last three
months of 1997, with three professionals to cover land issues, resource
evaluation and project evaluation. The Company does not anticipate adding any
further permanent staff in the next twelve months of operation. The Company will
employ independent contractors to fulfill short-term needs and obligations.
ENVIRONMENTAL CONTROLS
The Company is required to comply with numerous environmental laws and
regulations imposed by federal and state authorities. At the federal level,
legislation such as the Clean Water Act, the Clean Air Act, the RCRA, CERCLA and
the National Environmental Policy Act impose effluent and waste standards,
performance standards, air quality and emissions standards and other design or
operational requirements for various components of mining and mineral
processing, including gold ore mining and processing. Although the majority of
the waste produced by the Company's operations are "extraction" and
"beneficiation" wastes, which the EPA does not regulate under its current
"hazardous waste"
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program, the EPA is currently developing a separate program under the RCRA to
regulate such waste. Until the EPA formally proposes the new regulatory program,
there is not a sufficient basis on which to predict the potential impacts of
such regulations on the Company.
Many states, including the State of Nevada (where a majority of the
Company's properties are located), have also adopted regulations that establish
design, operation, monitoring, and closing requirements for mining operations.
Under these regulations, mining companies are required to provide a reclamation
plan and financial assurance to insure that the reclamation plan is implemented
upon completion of mining operations. Additionally, Nevada and other states
require mining operations to obtain and comply with environmental permits,
including permits regarding air emissions and the protection of surface water
and groundwater.
The Company's compliance with federal and state environmental laws may
necessitate significant capital outlays or delays, may materially and adversely
affect the economics of a given property, or may cause material changes or
delays in the Company's intended exploration, development and production
activities. Further, new or different environmental standards imposed by
governmental authorities in the future could adversely affect the Company's
business activities.
PROPOSED LEGISLATION AFFECTING THE MINING INDUSTRY
During the past several years, the United States Congress considered a
number of proposed amendments to the General Mining Law of 1872, as amended (the
"General Mining Law") which governs mining claims and related activities on
federal lands. In 1992, a holding fee of $100 per claim was imposed upon
unpatented mining claims located on federal lands. Beginning in October 1994, a
moratorium on processing of new patent applications was approved. In addition, a
variety of legislation is now pending before the United States Congress to amend
further the General Mining Law. The proposed legislation would, among other
things, change the current patenting procedures, limit the rights obtained in a
patent, impose royalties on unpatented claims, and enact new reclamation,
environmental controls and restoration requirements. The royalty proposal ranges
from a 2% royalty on "net profits" from mining claims to an 8% royalty on
modified gross income/net smelter returns. The extent of any such changes that
may be enacted is not presently known, and the potential impact on the Company
as a result of future congressional action is difficult to predict. If enacted,
the proposed legislation could adversely affect the economics of development of
operating mines on the federal unpatented mining claims held by the Company.
Many of the Company's properties consist of unpatented mining claims on federal
lands. The Company's financial performance could therefore be materially and
adversely affected by passage of all or pertinent parts of the proposed
legislation.
UNCERTAINTY OF DEVELOPMENT PROPERTY ECONOMICS
Exploration for and production of minerals is highly speculative and
involves greater risks than are inherent in many other industries. Many
exploration
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programs do not result in the discovery of mineralization, and any
mineralization discovered may not be of sufficient quantity or quality to be
profitably mined. Also, because of the uncertainties in determining
metallurgical amenability of any minerals discovered, the mere discovery of
mineralization may not warrant the mining of the minerals on the basis of
available technology.
The Company's decision as to whether any of the mineral development
properties it now holds or which it may acquire in the future contain
commercially mineable deposits, and whether such properties should be brought
into production, depends upon the results of its exploration programs and/or
feasibility analyses and the recommendations of engineers and geologists. The
decision will involve the consideration and evaluation of a number of
significant factors, including, but not limited to, the: (i) receipt of
government permits; (ii) costs of bringing the property into production,
including exploration and development work, preparation of feasibility studies
and construction of production facilities; (iii) availability and costs of
financing; (iv) ongoing costs of production; (v) market prices for the metals to
be produced; and (vi) estimates of reserves or mineralization. No assurance can
be given that any of the development properties the Company owns, leases or
acquires contain (or will contain) commercially mineable mineral deposits, and
no assurance can be given that the Company will ever generate a positive cash
flow from production operations on such properties.
UNCERTAINTY OF TITLE
A majority of the Company's properties consist of unpatented mining
claims or mill site claims which the Company owns or leases. These claims are
located on federal land or involve mineral rights which are subject to the
claims procedures established by the General Mining Law. Under this law, if a
claimant complies with the statute and the regulations for the location of a
mining claim or mill site claim, the claimant obtains a valid possessory right
to the land or the minerals contained therein. To preserve an otherwise valid
claim, the claimant must also make certain additional filings with the county in
which the land or mineral is situated and the Bureau of Land Management and pay
an annual holding fee of $100 per claim. If a claimant fails to make the annual
holding payment or make the required filings, the mining claim or mill site
claim is void or voidable.
Because mining claims and mill site claims are self-initiated and
self-maintained rights, they are subject to unique vulnerabilities not
associated with other types of property interests. It is difficult to ascertain
the validity of unpatented mining claims or mill site claims from public
property records and, therefore, it is difficult to confirm that a claimant has
followed all of the requisite steps for the initiation and maintenance of a
claim. The General Mining Law requires the discovery of a valuable mineral on
each mining claim in order for such claim to be valid, and mining claims may be
challenged by rival mining claimants and the United States. Under judicial
interpretations of the rule of discovery, the mining claimant has the burden of
proving that the mineral found is of such quality and quantity as to justify
further development, and that the deposit is of such value that it can be mined,
removed and disposed of at a profit. The burden of showing that
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there is a present profitable market applies not only to the time when the claim
was located, but also to the time when such claim's validity is challenged. It
is therefore conceivable that, during times of falling metal prices, claims
which were valid when they were located could become invalid if challenged.
Title to unpatented claims and other mining properties in the western
United States typically involves certain other inherent risks due to the
frequently ambiguous conveyance history of those properties, as well as the
frequently ambiguous or imprecise language of mining leases, agreements and
royalty obligations. No generally applicable title insurance is available for
mining or mill site claims. As a result, some of the titles to the Company's
properties may be subject to challenge.
MINING RISKS AND INSURANCE
The Company's operations are subject to all of the operating hazards
and risks normally incident to exploring for and developing mineral properties,
such as unusual or unexpected geological formations, environmental pollution,
personal injuries, flooding, cave-ins, changes in technology or mining
techniques, periodic interruptions because of inclement weather and industrial
accidents. Although the Company currently maintains insurance within ranges of
coverage consistent with industry practice to ameliorate some of these risks, no
assurance can be given that such insurance will continue to be available at
economically feasible rates, or that the Company's insurance is adequate to
cover the risks and potential liabilities associated with exploring, owning and
operating its properties. Insurance against environmental risks is not generally
available to the Company or to other companies in the mining industry.
UNKNOWN ENVIRONMENTAL LIABILITIES FOR PAST ACTIVITIES
Mining operations involve a potential risk of releases to soil, surface
water and groundwater of metals, chemicals, fuels, liquids having acidic
properties and other contaminants. In recent years, regulatory requirements and
improved technology have significantly reduced those risks. However, those risks
have not been eliminated, and the risk of environmental contamination from
present and past mining activities exists for mining companies. Companies may be
liable for environmental contamination and natural resource damages relating to
properties which they currently own or operate or at which environmental
contamination occurred while or before they owned or operated the properties.
However, no assurance can be given that potential liabilities for such
contamination or damages caused by past activities at these properties do not
exist.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the services of certain key executives,
including Michael Fitzsimonds, President and Chairman of the Board of Directors;
Donald J. McDowell, Executive Vice President; and Daniel T Taylor Vice President
of Exploration. The loss of any of these individuals could have a material
adverse effect on the Company's business and operations. The Company currently
does not have key person insurance on these individuals.
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RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS
The Company periodically considers the acquisition of mining claims,
properties and businesses. In connection with any such future acquisitions, the
Company may incur indebtedness or issue equity securities, resulting in dilution
of the percentage ownership of existing stockholders. The Company intends to
seek stockholder approval for any such acquisitions only to the extent required
by applicable law, regulations or stock market listing rules.
ITEM 3. DESCRIPTION OF PROPERTY
The Company owns, or controls through leases and mining claims, 57,838
acres of mining and mineral exploration properties within the states of Nevada,
California and Alaska. The properties are categorized into project areas. Table
2.1 provides an overview of the Company's projects in terms of acreage and the
nature of the property holding.
TABLE 2.1 - COMPANY PROPERTIES AND PROJECTS
Alaska Federal
State Unpatented
Mineral Mining
Leases Claims
Company Project Geographical Region (Acres) (Acres)
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Borealis** Mineral County NV 10,330
Highgrade*** Modoc County CA 1,446
Garamendi Elko County NV 1,332
Long Canyon Elko County NV 980
Medicine Man Elko County NV 1,694
Exxon Elko County NV 2,479
Blue Basin Elko County NV 1,240
NcNew Elko County NV 1,157
Monarch Elko County NV 1,160
Chisna Alaska 2,080
Chisna West Alaska 2,240
Chistochina Alaska 2,270
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PG&E Alaska 2,560
Bonnifield District Alaska 10,240
Richardson Alaska 15,360
District
North Delta Alaska 1,280
** Joint Venture operated by Cambior USA
***Joint Venture with Kennecott Exploration (Rio Tinto)
The following sections discuss the existing exploration projects owned
or controlled by the Company.
GARAMENDI PROJECT ELKO COUNTY, NV
LOCATION, ACCESS AND TERRAIN
The Garamendi project area is located in Elko County, Nevada at the
northern end of the Adobe Range in northeastern Nevada. The area can be reached
in less than an hour from the city of Elko via Interstate I-80 and on a gravel
and dirt road that extends northward from the Ryndon exit, located 10 miles east
of Elko. In dry weather, the area can be reached by two-wheel drive pickup truck
or van, but a four-wheel drive vehicle is recommended.
The Garamendi project area is located in the Basin and Range tectonic
Province of the western U.S. The claims are located on an east-west ridge
projecting off the main Adobe Range. Relief is moderate with the minimum
elevation approximately 6500 feet and the maximum elevation approximately 6900
feet.
Rainfall in the area is low with the main vegetation on the property
consisting of sagebrush and various grasses. There are small springs in the
vicinity of the claims with small discharge rates and they account for the only
surface water except during spring run off. Larger shrubs and small trees are
clustered around these springs.
LAND POSITION
The Garamendi project area is located within a checkerboard of fee land
and U.S. Government (BLM) lands in Elko County, Nevada. The property consists of
10 unpatented mining claims situated in the northwest quarter of Sec. 24, T38N,
R55E, and 3 unpatented mining claims situated in the southwest quarter of Sec.
18, T38N, R56E Mount Diablo Base and Meridian.
HISTORY AND PRODUCTION
Published information on the history of mining in the Garamendi project
area is sparse. There appear to be at least two generations of work which
include older (1930's) underground workings and more recent (post 1970?)
trenches and pits. Unpublished U.S. Bureau of Mines production data reports
production of 48,850
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pounds of lead, 59 ounces of silver, and 135 pounds of copper. About 500 tons of
oxidized lead ore was removed from pits in the Garamendi mine area. Total
production from the district is unknown.
Texasgulf Western, Inc. explored the area around the Garamendi project
area for stratiform sediment hosted massive sulfide deposits during the late
1970's and early 1980's. Their drilling in 1981 outlined a small lead-zinc
resource in and around the Garamendi mine. Prospecting conducted in the area in
late 1996 and early 1997 focused on similarities in rock types and gold
mineralization to those observed at the Twin Creeks Mine and other mineralized
areas in northern Nevada. Based on these similarities the land was staked.
REGIONAL GEOLOGIC SETTING
The rocks in the Adobe Range consist of a sequence of Ordovician
through Triassic, siltstones, cherts, and limestones. Bedding strikes northeast
and is cut by numerous northeast and northwest-striking high-angle faults.
Northeast-striking thrust faults cross the area bringing older Paleozoic
sediments into contact with younger Paleozoic and Mesozoic clastic rocks.
The geologic relationships involved in the low-angle thrust faults are
complicated by younger high-angle faults. A thrust plate composed of Silurian
and Permian clastic rocks and one composed of Triassic clastic sedimentary rocks
has been thrust over Mississippian autochthonous or semiautochthonous rocks. All
three were then folded to form the Adobe Mountain syncline and Garamendi
anticline. These structures were over thrust by plates composed predominately of
lower Paleozoic rocks such as Silurian siltstones and the Ordovician Vinini
Formation, which are usually assigned to the Roberts Mountains allochthon.
Younger, high-angle faults cut these thrust faults and their corresponding
sedimentary packages.
PROPERTY GEOLOGY
The geology of the Garamendi project area is complicated. The
Ordovician-Silurian sediments strike northeast-southwest and are exposed along
an oblique belt cutting across the Adobe Range. Exposures are covered to the to
the west under alluvial cover. These sediments were subsequently folded and
thrust to the southeast over younger Mississippian shales and sandstones and are
locally covered by Tertiary volcanic rocks.
Mapping by Texasgulf of the Garamendi mineralized zone outcrops
indicate resistant, topographically obvious, northerly dipping siliceous gossan.
This gossanous unit varies from well bedded to brecciated to massive sugary
silica. The silica varies in color from white to light gray to black and yellow
with various shades of orange and red. Interbedded within this gossan is remnant
limestone, possibly the original protolith.
The lithologic unit underlying the gossan is black shale and overlying
the gossan is a gray-green siltstone. The siltstone is in turn overlain by
another black shale that is very similar in appearance to the shale beneath the
gossan zone. The
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contact between this shale and the underlying siltstone varies from transitional
to very fine interbeds.
Texas Gulf was unaware of the sequence of shales and siltstones
overlying the gossan zone. The area to the north consists of a series of thrust
faults with intensely folded sediments marking the thrust plates.
Texasgulf mapped many occurrences as "chert/jasperoid" for lack of a
better name. These rocks vary from black to red and many show evidence of
secondary silicification and brecciation with subsequent resilicification. These
units have small remnants of disturbed recrystallized limestone adjacent to them
and may represent what is left of the original protolith.
Igneous rocks occur sporadically across the property and are mapped as
dikes, but Texasgulf never reported their composition.
MINERALIZATION
The host rocks in the Garamendi area consist of fine-grained quartzite
interbedded with calcareous siltstones, limey shales, and limestones. The beds
are relatively flat lying but are fractured by several east-west structures.
Mineralization occurs in a highly silicified, partially brecciated calcareous
unit and in replacement zones parallel to the east-west structures. Primary
sulfide minerals occur as pyrite, marcasite, galena and sphalerite and
characterize the lead-zinc mineralization. Gold mineralization, when assayed by
Texasgulf, generally occurred in the calcareous siltstones and silicified
sediments above the lead-zinc mineralization. Because of extensive
recrystallization, few original sedimentary structures are recognizable.
The non-sulfide minerals are calcite, dolomite, quartz and minor
barite. Very little gold or silver has been reported within the mineralized
area. By Texasgulf's own admission, this may be the result of the samples not
regularly being assayed for gold or silver. However, Texasgulf does report
assays of up to 0.11 opt Au and 1.25 opt Ag from drill hole samples that were
assayed. Surface rock geochemistry also indicated anomalous local Au and Ag
values when assays were performed for precious metals.
The trace amounts of gold in the drill hole and rock chip samples
reported by Texasgulf occur in silicified breccias, jasperoids, jasperoid
breccias, and calcareous siltstones. These occurrences suggest that the
mineralization in the Garamendi area was a multi-episodic hydrothermal event.
The potential host rocks of silty or "dirty" limestones, calcareous siltstones
and limey shales were structurally prepared by the low and high angle normal and
reverse faulting in the area. The prominent outcrops of silicified and
brecciated jasperoid on the ridges and pediment areas to the west mark the
traces of these reverse faults and high angle structures. The hydrothermal
fluids traveled up these structures and mineralized the receptive host rocks as
they were encountered. Remnant pieces of recrystallized limestone and calcareous
siltstone within the jasperoid zones show that the hydrothermal fluids easily
altered these rocks. The occurrence of the resilicified jasperoid breccias and
silica stockworks within jasperoids and jasperoid breccias suggest that there
was more than one pulse of mineralization. The trace amounts of precious metals
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associated with the base metal deposit is also indicative of a multi-episodic
hydrothermal event with the precious metal bearing fluids overprinting the base
metal occurrence. The presence of these characteristics, favorable host rocks,
structural preparation, multi-episodic hydrothermal event(s), and the presence
of precious metal values, suggest that the Garamendi area has the potential of a
large tonnage "Northern Nevada" or Carlin-type gold deposit.
DATA REVIEW
The data contained in this report was extracted from two Texasgulf
in-house progress reports. The reports were from 1980 and 1985 and consisted of
summary data for work, which had been completed that year.
Texasgulf completed a total of 23 core holes between 1979 and 1984.
Based on company information only those intervals that had visible sulfides,
which were less than 50 percent were analyzed for lead and zinc. Precious metal
assays were reported for select intervals and consisted primarily of silver.
There were some gold, assays but only on 10 percent of the reported intervals.
The known gold assays are represented in Table 3.2. There were significant gold
surface assays reported for the project, but were not in the same area of
lead-zinc mineralization.
Table 1
NAME FROM TO AU(opt)FA AG(opt)AA
GAR-79-1-1 146.5 147.0 <0.002 0.59
GAR-79-1-2 155.6 156.0 0.002 2.06
GAR-79-1-18 281.0 285.0 0.005 1.03
GAR-79-1-19 287.5 290.0 0.004 5.83
GAR-79-1-20 290.0 293.0 <0.002 0.89
GAR-79-1-21 293.0 295.0 0.110 1.03
GAR-79-1-22 307.0 310.0 0.010 1.37
DH-80-3 263.0 267.0 0.007 0.10
DH-80-3 267.0 275.6 trace 2.40
DH-80-3 281.0 289.5 0.005 7.40
DH-80-3 298.5 304.0 0.004 1.80
DH-81-2 20.0 28.0 0.020 0.20
DH-82-1 163.5 175.0 0.015 0.40
DH-82-2 5.0 50.0 trace 0.10
DH-82-2 145.0 190.0 trace 0.10
DH-82-3 55.0 85.0 0.008 0.10
DH-82-5 5.0 20.0 0.022 0.10
DH-82-4 5.0 20.0 trace 4.20
DH-82-4 70.0 80.0 trace 0.40
DH-82-4 135.0 155.0 trace 0.10
DH-82-4 245.0 250.0 trace 0.10
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EXPLORATION PROGRAM
The initial, first year exploration program will include obtaining and
evaluating any open ground adjacent to the core area of interest. This will
involve staking additional BLM ground and leasing adjacent private land. All
data that is available will need to be reviewed and field checked for accuracy.
The geologic mapping completed by Texasgulf is good; however, some
additional areas need to be covered. Several outcrops of jasperoid that did not
appear on Texasgulf maps were found during the recent staking event. The
distinction between jasperoid and chert also needs additional refining.
Depositional or primary chert is present in the area and is not distinguished
from the hydrothermal jasperoids. Texasgulf interpreted the mineralization
within the Garamendi area as an exhalative massive sulfide and did not consider
a hydrothermal source for the mineralization. Distinguishing the difference
between jasperoids and cherts has important implications in the finding of
additional, precious metal mineralization. A similar problem in distinguishing
cherts from jasperoids occurred at the Twin Creeks mine. Many rocks that were
originally called chert were later found to be jasperoid. Additional work needs
to be done with the structure as well, especially in light of new structural
information that has recently been released on northeast Nevada.
The geochemical surveys performed by Texasgulf were designed for a base
metal exploration program involving lead-zinc mineralization. The soil samples
were analyzed for lead, zinc and locally for mercury. Rock chip samples show the
same general suite but were also occasionally assayed for copper, silver and
gold. Since the rock chip and soil sample pulps are no longer available,
additional work will need to be completed to test for gold and silver. The rock
chip sampling will be done in conjunction with the field checking and remapping
of the project area. The soil sampling will include a grid with soil samples
taken every 100 feet along lines no more than 200 feet apart over the areas of
interest. All rock and soil samples will assayed for gold, silver, arsenic,
antimony, mercury, copper, lead, zinc, molybdenum, bismuth and cadmium.
Texasgulf conducted several geophysical surveys over the Garamendi
area. The EM techniques worked very well in locating the structures in the area.
The IP and CSAMT surveys were successful in locating both massive and
disseminated sulfide mineralization. The geophysical data will become available
in the near future and will be reinterpreted to determine if additional
geophysical work needs to be done.
The core and rejects from the Texasgulf core and reverse circulation
drilling are not available. The future drill program will be designed to test
new targets related to gold mineralization developed from the geological,
geochemical and geophysical data.
<PAGE>
BOREALIS JOINT VENTURE MINERAL COUNTY, NV
SUMMARY
Tenneco Resources put the Borealis mine property into production in the
early 1980's as a low-cost oxide heap-leach mining operation. Cambior (70%) and
Welsh (30%) currently control the property. The Company has entered into an
agreement to purchase the Welsh 30 percent interest. The 30 percent interest is
carried through feasibility. The property has a drill-indicated resource of
600,000 ounces gold and 3,000,000 ounces silver as reported by documentation
received from J. D. Welsh & Associates. Cambior plans to explore the property
with the intent of developing the oxide and sulfide resource into a minable
reserve. Should Cambior return the property to Welsh the full ownership (100%)
would revert to Welsh or to the Company if the Company has completed the
purchase of the Welsh interest.
PROPERTY
The current land position consists of over 500 unpatented mining
claims.
GEOLOGY
The property is a volcanic hosted epithermal system marked by extensive
silicification, hydrothermal brecciation and advanced argillic alteration. The
stratigraphy consists of primarily Tertiary andesite flows and tuffs.
PREVIOUS EXPLORATION
The property was previously mined by Tenneco and Echo Bay Minerals as a
low cost, heap-leach operation. The mine cutoff grade was 0.03 ounce per ton
(opt) gold for oxide ore. The sulfides were never mined, even though significant
resources were encountered. After mine closure, SFPG and Cambior conducted
additional sulfide exploration and development.
EXPLORATION TARGET
Cambior plans to complete data compilation and additional geological,
geochemical and geophysical work programs on the entire property by year-end
1997. In addition, engineering and metallurgical teams will review and upgrade
the resource modeling and metallurgical data and testing. They plan to implement
a multiple phase drilling exploration/development-drilling program for the next
two to three years, depending on results. Phase one will be continued
exploration and development of the Freedom Flats/Graben sulfide resource area.
The second phase will be an exploratory drilling program designed to explore for
new resources and expand existing resources elsewhere on the property. The third
phase will evaluate the low-grade oxide resources and possible heap-leach
recoveries in the event production at the mine resumes.
<PAGE>
HIGH GRADE PROPERTY MODOC COUNTY, CA
SUMMARY
Acquisition of the High-Grade property has been approved by Kennecott
(the property holder) and will allow the Company to earn-in a 100 percent
interest in the property. Kennecott has retained a buy-back right at the time a
positive feasibility study has been completed. Should they exercise that
but-back option, Kennecott would become mine operator; if not, Kennecott would
reduce their interest to a two percent (2%) net smelter return production
royalty.
The High Grade district is located in the Warner Mountains
approximately 30 miles northeast of Alturas in Modoc County, California. The
target objective is to increase the existing gold resource by drill testing
extensions of known high-grade mineralization to develop a bulk minable
multi-million ounce gold reserve. Investigations of geology, structure,
alteration and mineralization indicate that many favorable targets remain
untested. The primary focus of the drilling program will be to develop a large
minable reserve.
PROPERTY
The current land position consists of 92 unpatented mining claims.
Three small, but strategically important, adjacent land positions need to be
acquired. They consist of 8 claims, 4 claims and 1 patented claim, respectively.
Kennecott initiated and advanced negotiations with all three land owners late in
1996. The Company is negotiating with the owners of those properties for a lease
with option to purchase. No agreements have been consummated as of this filing.
An independent surveying company at a cost of $21,700 has completed a survey of
the entire land package to ensure the integrity of the land status over the
resource/exploration area.
GEOLOGY
The High Grade district is a gold bearing volcanic-hosted epithermal
system that outcrops along a three-mile long, one-mile wide northeast trending
belt. Post-mineral basalt and colluvium to the northeast and southeast conceal
mineralized lithologies. Disseminated gold is hosted in Tertiary rhyolitic
domes, flows and tuffaceous sediments, while high-grade mineralization is
associated with veins, breccias and fault zones. The 98 holes drilled on the
property prior to acquisition by Kennecott are confined to two small areas with
the average hole depth less than 200 feet and the maximum depth 445 feet. More
than one-half of the existing drill holes intersected ore-grade gold
mineralization; many were terminated in [1ppm gold material. Some of the
higher-grade intercepts include 50 feet @ 0.051 opt gold, 40 feet @ 0.102 opt
gold, and 20 feet @ 0.165 gold; all of which occur at depths less than 100 feet.
Surface rock geochemistry has identified many areas with values greater than 3
ppm (0.087 opt) gold that have never been drill tested.
PREVIOUS EXPLORATION
A group in Spokane, Washington originally staked the property in the
late 1970's. FMC was the first major company to lease the property and drilled
36 holes
<PAGE>
from 1981 to 1983. Nord Resources completed 62 drill holes from 1983-1985. No
drilling was completed after 1985. Over the next nine years the property sat
idle, although the unpatented claims were maintained. In 1994 the claim rental
fee requirement resulted in significant claim reductions. In 1995, Kennecott
became interested in the property and obtained the claims from Donald J.
McDowell. The geology and structure of the property are similar to the Mule
Canyon deposit in Nevada, which is a volcanic-hosted epithermal gold-silver
deposit being developed by SFPG and containing over 3 million ounces of gold.
EXPLORATION TARGET
The objective is to increase the size of the existing gold resource by
stepping out from known high-grade mineralization to develop a bulk minable
multi-million ounce gold reserve. A review of the geology, structure, alteration
and mineralization indicate that many favorable targets remain untested on the
property suggesting a large minable reserve could be developed similar to that
found at Mule Canyon.
LONG CANYON ELKO COUNTY, NV
SUMMARY
Long Canyon is located 30 miles northeast of Elko. It lies within a
west-northwest trending zone of hydrothermally altered rock, distinguished by
poorly exposed, thin-bedded jasperoid and gossan occupying zones between 50 and
100 feet wide. Previous work by Texasgulf indicates significant geochemical
anomalies of copper, lead and zinc in the area. There were only a few rock chip
samples assayed for gold, the highest assays reported from one rock chip sample
was 35 ppm (1 ounce/ton).
PROPERTY
Long Canyon is located 30 miles northeast of the city of Elko in the
Coal Mine Canyon mining district. It covers approximately four square miles,
with 100 unpatented mining claims. The property is located in Sec. 32, T39N
R57E; Sec. 4 & 6, T38N, R57E and Sec. 12, T38N, R56E Mount Diablo Base and
Meridian.
GEOLOGY
The Ordovician-Silurian sediments strike west-northwest and are exposed
in an oblique belt cutting across the northeast end of the Adobe Range. Tertiary
volcanic rocks to the northwest are in both fault contact and lie unconformably
on top of the sedimentary rocks. The unit is poorly exposed and eventually
disappears to the east and the west under alluvial cover. These sediments were
subsequently folded and thrust to the southeast over younger Mississippian
shales and sandstones.
Texasgulf mapped many outcrops as Ordovician or Silurian chert,
however, field examination reveals that the thin-bedded, high-angle jasperoid
unit is distinctly different than the "chert/jasperoid" mapped at Garamendi. The
Long
<PAGE>
Canyon rocks include opaline and chalcedonic silicification and vary in color
from orange to red. Many occurrences show evidence of secondary silicification
and brecciation with subsequent resilicification.
PREVIOUS EXPLORATION
Texasgulf appraised the area for its potential to host a lead-zinc
deposit in the late 1970's and early 1980's. The only documented work is
geologic mapping, trenching and rock chip sampling. The majority of the samples
were analyzed for copper, lead and zinc, with a few assays for gold.
EXPLORATION TARGET
The trace amounts of gold in rock chip samples reported by Texasgulf
occur in silicified breccias, jasperoids and jasperoid breccias. These
occurrences suggest the mineralization in the Long Canyon area was a
multi-episodic hydrothermal event. The potential host rocks are thin-bedded
silty or "dirty" limestones, calcareous siltstones, and limey shales. Structural
preparation in the area includes low angle thrusts and high-angle normal and
reverse faults. The prominent outcrops of silicified and brecciated jasperoid on
the ridges mark the traces of these reverse faults and high-angle structures.
The hydrothermal fluids traveled along these structures and mineralized the
receptive host rocks as they were encountered. The occurrence of the
resilicified jasperoid breccias and silica stockworks within jasperoids and
jasperoid breccias suggest that there was more than one pulse of mineralization.
The trace amounts of precious metals associated with the base metal deposit is
also indicative of a multi-episodic hydrothermal event with the precious
metal-bearing fluids overprinting the base metal occurrence. The presence of the
following characteristics: favorable host rocks, structural preparation,
multi-episodic hydrothermal events, and the presence of precious metal values
suggest that the Long Canyon area has the potential a large tonnage,
sediment-hosted or "Carlin"type gold deposit.
MEDICINE MAN ELKO COUNTY, NV
SUMMARY
Medicine Man is located approximately 36 miles southeast of the city
Elko in the Medicine Mountain Range. The property is host to large areas of
silicification (jasperoids) in Pennsylvanian/Permian sedimentary rocks. The
property was held and explored by USMX (now Dakota Mining) which delineated a
small gold-silver resource grading 1-2 opt silver and "low-grade" gold. There
are currently 100 claims staked. A data package has been received from Dakota
Mining and is in the process of being reviewed.
PROPERTY
The Medicine Man project currently consists of 100 unpatented mining
claims in Sec. 13 & 24, T28N, R60E and Sec. 18, T28N, R61E Mount Diablo Base and
Meridian. Data are being compiled and reviewed.
<PAGE>
GEOLOGY
The Permian and Pennsylvanian stratigraphy consists of silty
limestone's, calcareous siltstones and minor calcareous conglomerates.
Alteration in the form of silicification, hydrothermal brecciation and quartz
veining covers an area in excess of two square miles and extends under shallow
cover to the northeast. Similar jasperoid silicification is located on a small
hill exposed in the pediment. This could suggest the presence of an extensive,
unexplored mineralized system extending into and covered by a thin pediment.
PREVIOUS EXPLORATION
USMX originally located the property in 1980 and explored the area for
many years. An unknown number of drill holes were completed and USMX delineated
a "small Au, Ag resource" grading 1-2 opt silver and "low grade" gold. The data
are currently being compiled and reviewed.
EXPLORATION TARGET
The exploration target on the Medicine Man property is a large-tonnage,
sediment-hosted or Carlin-type gold target. The favorable stratigraphy,
structural preparation and hydrothermal alteration found on the property
indicate the presence of a potentially extensive and poorly understood
hydrothermal system.
EXXON PROJECT ELKO COUNTY, NV
SUMMARY
The Exxon project area is located approximately 40 miles southeast of
the city of Elko at the southwest end of the Delcer Buttes Range. The property
is host to large areas of skarn and hydrothermal alteration in
Permian/Pennsylvanian sedimentary rocks. Exxon Corporation held the property in
the late 1970's as a range front and pediment covered copper target. Newmont
Gold staked the property in 1992 as a gold skarn target. Neither company drill
tested either the exposed or pediment covered areas of this system. There are
100 claims staked in the area. This property has potential for a large porphyry-
related gold deposit.
PROPERTY
The Exxon project currently consists of 100 unpatented mining claims in
Sec. 27, 28, 33 & 34, T29N, R61E in the Mount Diablo Base and Meridian.
GEOLOGY
The Pennsylvanian-Permian stratigraphy consists of silty limestones,
calcareous siltstones and calcareous conglomerates. The alteration is spatially
related to a Jurassic granodiorite intrusive. Limited field examination has
revealed highly altered diorite forming dikes and sills within altered
sedimentary host rocks. The area contains several exposures of hydrothermally
altered and mineralized rock consisting of extensive skarn-related
silicification, disseminated sulfides, copper oxide bearing jasperoids, gossans
and quartz veining. Alteration in the rocks covers
<PAGE>
a two square mile area and is concealed by pediment cover to the west, south and
east. The presence of a large, unexplored, pediment covered mineralized porphyry
copper-gold system is suggested by surface geology and alteration.
PREVIOUS EXPLORATION
Both Exxon Corporation and Newmont previously controlled the property.
Exxon's exploration target was reportedly a poorly exposed copper porphyry
system. Newmont was probably pursuing the exposed skarn related mineralization.
Apparently, neither company drilled the property. Based on the Company's
experience with the skarn related gold deposit at Newmont's (SFPG) Elkhorn
property in Montana (2 MM ounces Au) the mineral potential has not been drill
tested.
EXPLORATION TARGET
The exploration target on the Exxon property is a large tonnage
porphyry/skarn related copper-gold system. The favorable host rocks, structural
preparation and alteration found on the property, indicate the presence of an
extensive mineralized system of intrusive and sedimentary rocks.
BLUE BASIN ELKO COUNTY, NV
SUMMARY
Blue Basin is located 20 miles northwest of the city of Elko on the
north flank of Swales Mountain. It is about five miles north of the Roberts
Mountains window mapped at Swales Mountain in a sequence of highly silicified
Ordovician and Silurian sediments. The land position is adjacent to and
contiguous with Newmont Gold's land position covering the same geologic target.
Newmont holds approximately 80 percent of the geologic target, while the
Company's position covers the remainder of the exposed window. An important
fault marking the margin of a volcanic-filled graben adjacent to the sediments
is also covered by the Company's claims.
PROPERTY
Blue Basin is located 20 miles northwest of Elko in the Swales Mountain
mining district. It covers approximately three square miles in which 62
unpatented mining claims have been staked. The property is located in Sec. 4, 6,
8, 16, 18 in T38N and R56E Mount Diablo Base and Meridian.
GEOLOGY
Cherts, calcareous siltstones, limestones and shales of the Ordovician
Vinini Formation are present in the upper plates of the thrust fault covering
the Roberts Mountains Formation. The lower plate consists of Roberts Mountains,
limestones, shales, cherts and tuffaceous siltstones of Silurian and Devonian
age. The thrust fault is thought to be Mississippian in age. Numerous siliceous,
semi-massive sulfide horizons appear throughout the stratigraphy of both units,
as do several large areas of hydrothermal silicification (jasperoid). A field
investigation of these
<PAGE>
areas indicates the jasperoids may be structurally related with mineralization
associated with areas of hydrothermal alteration.
PREVIOUS EXPLORATION
Texasgulf Western, Inc. explored the Blue Basin project area for
stratiform sediment-hosted massive sulfide deposits during the late 1970's and
early 1980's. Newmont Gold is presently exploring the adjacent sections to the
Company's property for a large tonnage, sediment-hosted or Carlin-type gold
deposit. Texasgulf drilled at least one hole on this property, the results of
which are unknown. Newmont has drilled several holes on their property to
evaluate the resource potential but no data have been released.
EXPLORATION TARGET
The exploration target on the Blue Basin property is a large tonnage,
sediment-hosted or Carlin-type gold target. The favorable stratigraphy,
structural preparation, and hydrothermal alteration found on the property
provide a good host for gold mineralization.
MCNEW ELKO COUNTY, NV
SUMMARY
The McNew property area is located approximately 40 miles southeast of
the city of Elko, Nevada in the West Buttes of the Cherry Creek Range. The
property is underlain by limestone of Permian age, which has been intruded by a
Tertiary granitic pluton, and overlain by a series of Tertiary-rhyolite flow
rocks. The area contains large areas of hydrothermally altered rock, localized
along faults, which cut both the limestones and volcanics. The property was held
and explored by Pegasus Gold in the mid-1980's. During that time a number of
gold anomalies were outlined. A total of 68 claims have been staked over the
mineralized areas. All of Pegasus's data is available for review.
PROPERTY
The McNew currently consists of 68 unpatented mining claims located in
Sec. 13, 24 in T29N, R61E and Sec. 18, 19 in T29N, R62E in central Elko County,
Nevada. The property is approximately 40 miles southeast of Elko, Nevada.
GEOLOGY
A sequence of limestones, limey shales, and siltstones reportably
Permian in age underlie the property. However, the geology as mapped by Pegasus
suggests that the rocks are older and similar to the host rocks at Alligator
Ridge and other similar gold deposits in the Cherry Creek Range. The sedimentary
package has been intruded by a Tertiary granitic pluton. Much of the area was
covered by a Tertiary rhyolite flow which has subsequently been eroded, exposing
the older sediments and intrusive in the project area. The area geology has been
further complicated by a series of northwest-striking high-angle faults that
have been offset by a younger series of faults striking east-west. Gold
mineralization is found adjacent to the
<PAGE>
northwest and east-west striking structures with a disseminated aureole
surrounding the higher-grade zones. Surface sampling by Pegasus Gold shows
values of 0.02 opt gold in rock chip samples. Pegasus also conducted a limited
drill program with drill intercepts of 0.05 opt gold. Most of this
mineralization is confined in zones adjacent to structures.
PREVIOUS EXPLORATION
The property was previously held by Pegasus Gold in the mid-1980's.
Pegasus explored the property and outlined several areas of anomalous gold
mineralization. The Pegasus program consisted of surface sampling and subsequent
drilling of some of the anomalous areas. The Company has reviewed the Pegasus
data package as part of the initial evaluation of the project. No other
significant exploration activity is known to have been undertaken on the
property since that time.
EXPLORATION TARGET
The exploration program undertaken by Pegasus Exploration outlined
several areas of anomalous gold mineralization, of which they only drill-tested
a few. Several more areas were never drill-tested and remain to be evaluated.
Future work by the Company will include enlarging and further delineating the
anomalous areas as well as testing other near surface targets on the property.
MONARCH ELKO COUNTY, NV
SUMMARY
The Monarch Property is located approximately 6 miles west of
Charleston, in north central Elko County, Nevada. The property is host to large
areas of argillically altered intrusive and sedimentary rocks. The property was
held and explored by Rio Algom Exploration in the mid-1980's who outlined
several areas of anomalous gold mineralization. A total of 62 claims have been
staked over the mineralized areas, and Rio Algom's data is available for review.
PROPERTY
The Monarch project consists of 62 unpatented mining claims located in
Sections 1 and 2 of T43N, R56E in north central Elko County, Nevada. The
property is located approximately six miles west of Charleston and 70 miles
north of Elko, Nevada.
GEOLOGY
The property is in a region dominated by a thick sequence of Triassic
white to gray, slightly calcareous siltstones. Intrusive rocks occur as dikes,
sills, and small plugs and are scattered throughout the region. Volcanic rocks,
that are rhyolitic in composition, overlie the siltstones on the northern
periphery of the property. A large thrust fault occurs within the siltstones and
strikes east-west across the property and dips approximately 20 degrees to the
north and is characterized by dense black, micro-brecciated siltstone.
Smaller thrusts occur above and below this main thrust fault. Mineralization
occurs within a high-angle, northwest striking
<PAGE>
fault zone in the hanging wall of the thrust fault. A large area of altered rock
approximately 4000 feet long by 500 to 1000 feet wide encompasses this fault
zone. The hydrothermal alteration associated with this zone consists
predominantly of clays. Gold mineralization with values in excess of 0.035 opt
gold occur along structures and as disseminations in the host rock within this
altered zone.
PREVIOUS EXPLORATION
The property was previously held by Golden Empire Mineral Ventures and
Rio Algom Exploration in the 1980's. Rio Algom explored the property in the
mid-1980's and outlined several areas with anomalous gold mineralization. The
Rio Algom's program consisted of surface sampling and subsequent drilling of
some of the anomalous areas. The Rio Algom data package has been reviewed. No
other significant exploration activity is known to have been undertaken on the
property since that time.
EXPLORATION TARGET
The exploration program undertaken by Rio Algom outlined several areas
with anomalous gold mineralization, of which only a few were drill-tested.
Additional, anomalous areas were never drill-tested and remain to be evaluated.
A large area containing gold mineralization was outlined that had anomalies open
in two directions. Future work by the Company will include enlarging and further
delineating this anomalous area and to test other near surface targets in the
area.
CHISNA ALASKA
SUMMARY
Chisna is located approximately 20 miles northeast of the town of
Paxson. The property is accessible from both major winter roads and three
airstrips located on the property. The area is four miles northwest of the Slate
Creek placer operation mined in the 1960's through the early 1980's. A base camp
exists at this site, however, it is neither manned nor owned by the Company. The
property is host to a number of pyrite-altered zones spatially related to quartz
monzonite and ultramafic intrusive rocks.
PROPERTY
The property consists of three and one quarter square miles on
locatable state select lands and is located in T20S, R15E, Fairbanks Meridian.
The Company is considering additional land acquisition of about six square
miles.
GEOLOGY
The property contains numerous pyrite-altered zones that cut the
Permian Mankomen Formation. Lithologies consist of argillite, schist,
amphibolite, hornfelsed limestone and basalt. Several phases of quartz monzonite
intrue the Mankomen Formation. In addition, an ultramafic peridotite and dunite
are present and are associated with the mineralized Wrangellia terrane.
<PAGE>
One area of pyrite-altered rock, approximately one and one-half square
miles in size is associated with porphyry-related mineralization or mineralized
ultramafic terrane. Gold values up to 0.04 opt reported by the State of Alaska.
In addition, copper is reported in massive sulfides with grades up to 0.75
percent and nickel with grades up to 0.2 percent. There is also a large area of
State documented placer platinum occurrences in the immediate area.
PREVIOUS EXPLORATION
The State of Alaska studied the area in 1964 and again in 1992. A large
amount of general geologic, geophysical and geochemical data is available. No
surface trenching or drilling appears to have been completed in the area. This
part of Alaska was targeted for porphyry copper exploration in the 1970's by
several major mining companies.
EXPLORATION TARGET
The Company plans to explore areas of sulfide-related mineralization.
Initial geologic and geochemical work will outline the extent of the alteration
and mineralization and will refine the target model.
CHISNA WEST ALASKA
SUMMARY
Chisna West is located approximately 18 miles east-northeast of the
town of Paxson. The property is accessible from both major winter roads and
three airstrips located four miles from the property. The project area is four
miles west of the Slate Creek placer operation,. which was in production during
the 1960s through the early 1980s. A large base camp exists at the site,
however the Company does not own it. The property is host to anomalous amounts
of pyritic alteration in both quartz monzonite and granodiorite porphyry
intrusions. Mineralized outcrop is exposed at and near the pediment edge.
Quartz-sulfide veinlets within the pyrite altered intrusive rock have reported
assays of 2.2 percent copper and 0.02 opt gold. It is believed this is part of
an extensive porphyry-related mineralized system.
PROPERTY
The property currently consists three and one-half square miles on
locatable state select lands located in Sections 14 & 23 of T20S, R14E,
Fairbanks Meridian.
GEOLOGY
The lithologic units on the property consist of several phases of
diorite, quartz monzonite and granodiorite intrusive rocks which have intruded
the Mankomen Formation. This formation contains various lithologies of
argillite, schist, hornfels, limestone, diabase, basalt, amphibolite and
greenstone breccia. An exposure along the pediment edge consists of pervasive
pyrite altered intrusive rock with quartz sulfide veinlets associated with a
porphyry-related system. The State of Alaska reported copper values up to 2
percent and gold values up to 0.02 opt.
<PAGE>
PREVIOUS EXPLORATION
The State of Alaska studied the area in 1964 and in 1992. A large
amount of general geologic, geophysical and geochemical data is available. No
surface trenching or drilling appears to have ever been completed on the
property. This area of Alaska was targeted for porphyry copper exploration in
the 1970's by several major mining companies
EXPLORATION TARGET
The Company plans to evaluate the potential of a bulk minable gold or
copper-gold deposit on the property.
CHISTOCHINA ALASKA
SUMMARY
Chistochina is located approximately 20 miles east-northeast of the
town of Paxson. The property is accessible from both major winter roads and
three airstrips located on the property. The area was the site of the Slate
Creek placer operation in the 1960's through the early 1980's. A base camp
exists at the site; however, it is not owned by the Company. The property
contains a zone of pyrite altered intrusive rock. Quartz monzonite and
granodiorite porphyry has intruded the Chisna volcanic sequence. It is believed
this is part of an extensive porphyry-related mineralized system. Selected gold
values exceed 0.4 opt.
PROPERTY
The property consists four and one half square miles on locatable state
select lands and is located in T20S, R15E, Fairbanks Meridian.
GEOLOGY
Geology on the property consists of several phases of diorite, quartz
monzonite and granodiorite intrusions into the Chisna volcanic sequence, which
consists of andesite, dacite, associated tuffs and flows. A large area,
exceeding two square miles of pyrite altered intrusive rocks suggest the
presence of a copper-gold porphyry system containing values up to 2 percent
copper and gold as high as 0.4 opt.
PREVIOUS EXPLORATION
The State of Alaska studied the area in 1964 and in 1992. A large
volume of general geologic, geophysical and geochemical data is available. No
surface trenching or drilling appears to have been done in the area. This area
of Alaska was targeted for porphyry copper exploration in the 1970's by several
major mining companies.
EXPLORATION TARGET
The Company plans to evaluate the porphyry-related mineralization and
determine if there is potential for a bulk minable gold deposit.
<PAGE>
PG & E PROSPECT ALASKA
SUMMARY
The PG&E property is located approximately 20 miles northeast of the
town of Paxson and west of the Golden Phoenix Minerals, Inc. Chisna property.
The property is accessible from major winter roads and airstrips near the
property. The area is 12 miles northwest of the Slate Creek placer operation
mined during the 1960s through the early 1980s. A base camp exists at this site;
however it is not owned by the Company. The property is host to a number of
pyrite altered-intrusive zones spatially related to quartz monzonite and
ultramafic intrusive bodies. This sulfide alteration could either be related to
the Chistochina porphyry system or to mineralized ultramafic intrusives.
PROPERTY
The property covers about four square miles on locatable state select
lands located in T19S and T20S, R14E, Fairbanks Meridian. The land acquisition
effort has been completed.
GEOLOGY
The geology on the property consists of several phases of quartz
monzonite intrusions and Permian Mankomen Formation, which consists of
argillite, schist, amphibolite, hornfels, limestone and basalt. In addition, an
ultramafic peridotite and dunite are present and have been assigned to the
mineralized Wrangellia metallogenic terrane.
Several areas of pyrite altered intrusive rocks associated with a
porphyry-related mineralized system or the mineralized ultramafic Wrangellia
terrane. There is also a large area of State documented placer platinum
occurrences in the immediate area of interest.
PREVIOUS EXPLORATION
The area was studied by the State of Alaska in 1964 and in 1992. A
large amount of general geologic, geophysical and geochemical data is available.
No surface trenching or drilling appears to have ever been done in the area.
EXPLORATION TARGET
The Company plans to explore areas that host sulfide mineralization.
Geologic and geochemical work will outline the extent of the alteration and
mineralization to further define the target model.
NORTH DELTA PROJECT ALASKA
SUMMARY
The North Delta district is located approximately six miles
west-northwest of the Delta district on the Robertson River west of Tok, Alaska.
The Delta district has been the focus of aggressive exploration by American
Copper and Nickel Company
<PAGE>
whose active claims cover almost two townships. The district hosts numerous
polymetallic "Kuroko" type massive sulfide deposits with gold credits. The
Company has secured a small land position in the district through claim staking
activities.
PROPERTY
The property consists of two square miles of acquired mineral rights
located in T18N, R5E, Copper River Meridian.
GEOLOGY
The general geology of the area consists of a series of meta-volcanic
rocks of the Jarvis Creek Glacier subterrane. These rocks are cut by a series of
mafic dikes with an extensive amount of high-angle structure and fracture
related mineralization. Mineralized grab samples taken by a State of Alaska
geologist contained both disseminated and massive sulfides. These samples
assayed as high as 6.0 ppm gold, 100 ppm silver, 14000 ppm lead and 3000 ppm
arsenic.
PREVIOUS EXPLORATION
The State of Alaska briefly studied the area in 1981. A large amount of
general geologic, geophysical and geochemical data is available. No drilling
appears to have been done on the Company's land. Adjacent lands in the Delta
district have been the focus of extensive exploration for many years by numerous
companies. Currently American Copper and Nickel Company is conducting an
extensive drilling program for the second consecutive year on adjacent land.
EXPLORATION TARGET
The Company plans to explore and evaluate the intrusive and
structure-related mineralization and alteration within the district. Initial
geologic and geochemical work will outline the extent of the alteration and
mineralization to refine the target models and better define the initial drill
targets.
RICHARDSON DISTRICT ALASKA
SUMMARY
The Richardson district is located approximately 70 miles southeast of
the city of Fairbanks, Alaska. The property is accessible from the Richardson
Highway, which passes through the southwestern part of the district. The
district has been a historic producer of both placer and high-grade lode gold
occurrences. The property has been the focus of attempted acquisition by major
mining companies. The Company has secured a 26 square mile land position in the
district through claim staking and property lease agreements.
PROPERTY
The property consists of over 26 square miles of acquired and leased
mineral rights located in T5, 6, and 7S, R5, 6, 7, and 8E, Fairbanks Meridian.
The Company has two leases which include the Hansen lease for 7 state select
mining claims and
<PAGE>
the Mack Rife lease for 11 state select mining claims. Copies of these leases
are presented in exhibit 10.4 and 10.5 respectively. Additional land acquisition
and land lease agreements are being evaluated.
GEOLOGY
The bedrock geology of the Richardson district is composed of
sedimentary and igneous rocks that have been metamorphosed and subsequently
intruded by Mesozoic plutons. The most common lithologies in the area are
biotite and muscovite schists. Coarse-grained meta-granite crops out near the
head of Buckeye Creek adjacent to several outcrops of hornfelsed sediments.
Meta-granite is also reported to outcrop in the Rose Creek drainage. Altered
quartz porphyry is exposed in Democrat Creek and Hinkley Gulch and was
encountered in the placer workings in Susie Creek. This unit has been the focus
of gold exploration efforts in the past. More recent exploration in the district
has determined that gold mineralization also occurs in the granite and schistose
units in the district. The quartz porphyry exposed in Democrat Creek is oxidized
with quartz veins and disseminated sulfides. The hydrothermally altered portions
of this unit have been the focus of recent drilling immediately adjacent to the
Company's land position.
PREVIOUS EXPLORATION
The area was studied by the state of Alaska in 1964, 1977, and in 1992.
A large volume of general geologic, geophysical, and geochemical data is
available. No drilling appears to have been done on the Company's land. Adjacent
lands have been the focus of limited exploration for many years. Several major
mining companies have recently undertaken exploration activities, including
trenching, geophysics, drilling, and claim staking. Reportedly, gold
mineralization has been encountered along rhyolite dikes, which trend towards
the Golden Phoenix Minerals, Inc. property. This suggests the possibility that
similar mineralized rhyolite will be encountered on the Golden Phoenix Minerals,
Inc. property as well.
EXPLORATION TARGET
The Company plans to explore and evaluate the gold porphyry and
structure-related gold potential within the district.
BONNIFIELD DISTRICT ALASKA
SUMMARY
The Company has acquired 16 project areas covering over 39 square miles
in the Bonnifield district on the north flank of the Alaska Range, south of the
city of Fairbanks, Alaska. The Bonnifield district hosts both base and precious
metal occurrences. Getty, Resource Associates of Alaska, Anaconda, and others
have conducted exploration in the area. Recent announcements of high-grade
intercepts of both base and precious metals have sparked renewed interest in the
district. The Company's properties in the district include base and precious
metal occurrences. The Glory Creek and Kansas Gold properties represent
epithermal gold targets with
<PAGE>
the Mystic Mountain and Chute Creek properties having potential for porphyry
style mineralization associated with altered intrusive rocks.
EXPLORATION TARGET
The Company is completing a district-wide compilation of all available
geologic information. The company will conduct additional mapping and sampling
to define and delineate mineralized areas to determine initial drill targets and
areas in need of further evaluation. The Company intend to define the epithermal
and porphyry related mineralization to evaluate the potential of a bulk minable
gold deposit.
F.W. LEWIS, INC. AND MINA GOLD, INC.
SUMMARY
Golden Phoenix Minerals, Inc. has acquired an exclusive option on the
mining assets of F.W. Lewis and Mina Gold, Inc. The assets include 57 mining
properties, mostly in the state of Nevada. One of the properties, the Lewis
Mine, has been in production for 15 years by Hycroft Resources and has provided
$3.5 million in royalties to Lewis. Two other properties are currently leased to
other companies and provide income to Lewis. Geologic resources exist on several
of the properties.
GENERAL LAND HOLDING DESCRIPTION
The total acreage is estimated at 24,889 with 9,019 acres (36%) being
patented. All of the 57 properties, with few exceptions, are owned 100 percent
by Lewis. The majority of these properties are in Nevada with some located in
Colorado. Also included in the company are oil rights aggregating approximately
four acres in Los Angeles County, California and some fee land in Humboldt
County, Nevada.
INDIVIDUAL PROPERTY DESCRIPTIONS
Six of the Lewis properties are discussed in the following text and
include: The Lewis Mine, Battle Mountain Project, Wonder Project, Mina Gold
Project, Contact Project and the Hamilton Project.
LEWIS MINE, Humboldt County, Nevada
SUMMARY
The Lewis Mine is located 50 miles west of Winnemucca, Nevada. The
property consists of five patented placer tracts and approximately 440
unpatented claims totaling 10,200 acres. The property is leased to Hycroft
Resources and is part of the Crofoot-Lewis Mine owned by Vista Gold Corp. The
mine has been in production for 15 years by the lessee and has generated $3.5
million in royalties to Lewis.
<PAGE>
GEOLOGY
The Crofoot-Lewis Mine is a Pliocene to Pleistocene low-sulfur hot
springs deposit. Fanglomerates, eruption breccias, felsic volcanic units and
silica sinters host low-grade gold mineralization. A series of north-striking,
west-dipping normal faults control the extent and intensity of alteration as
well as the grade of mineralization. An acid-sulfate alteration blanket 200 to
800 feet thick caps the system. Siliceous sinter deposits are locally common in
the area.
MINING INFORMATION
Mining is done by open pit methods at an annual rate of 13 million tons
of ore and 20 million tons of waste. Both run of mine and crushed oxidized ore
is processed by cyanide heap-leaching. The mine has produced over 800,000 ounces
during the last 15 years. Current mine plans call for producing 16.5 million
tons with an average recoverable grade of 0.013 opt gold from the Lewis portion
of the mine over the next four years. Lewis receives a five percent royalty on
this production. Direct cash costs for the operation were $274 per ounce in
1996.
EXPLORATION POTENTIAL
There is potential for additional oxide deposits and for deeper,
high-grade sulfide mineralization below the oxidized near-surface deposits. The
sulfide potential has not been evaluated nor has the potential for bonanza-type
gold-bearing quartz veins.
BATTLE MOUNTAIN PROJECT, Lander County, Nevada
SUMMARY
The Battle Mountain property consists of 381 unpatented and 7 patented
mining claims located in the Battle Mountain Mining District, near Battle
Mountain, Nevada. The property is currently under lease to United Tex-Sol Mines,
Inc.
GEOLOGY
Mineral deposits in the Battle Mountain district are spatially and
genetically related to Cretaceous and Tertiary intrusive stocks. Metal zonation
is observed laterally from the stocks. Major north-south regional structures and
local stratigraphy are also important controls for mineralization. The Virgin
Fault system controlling mineralization in Battle Mountain Gold's Fortitude Mine
extends onto the Lewis property. The Fortitude open pit has produced in excess
of 2.6 million ounces of gold.
PREVIOUS EXPLORATION AND DEVELOPMENT
Hart Resources conducted exploration activities on the property over a
five year period form 1980 to 1985. In 1986 and 1987 Barrick Resources conducted
extensive exploration activities in the Virgin target area adjacent to the
Fortitude Open Pit and performed limited work in other target areas. Between
1988 and 1993 Lewis enlarged an existing drift in the Buena Vista Mine with the
intent of
<PAGE>
intersecting mineralization encountered in the Hart Resources drilling. Before
the target was reached, Santa Fe Pacific Gold formed a joint venture on the
property in 1994 to 1995. In 1997 United Tex-Sol drilled 16 drill holes on the
Virgin Deposit. As a result of this additional drilling, resources have been
announced and include 1.9 million tons averaging 0.122 opt gold on six current
target areas as well as 942, 268 tons averaging 0.169 opt gold in the Virgin
Deposit.
EXPLORATION POTENTIAL
The existing target areas have not been fully tested and have the
potential for additional ounces of gold.
WONDER PROJECT, Churchill County, Nevada
SUMMARY
The Wonder property is located near Fallon, Nevada and consists of 45
patented and 67 unpatented mining claims. The property is presently optioned to
Arizuma Resources, Inc.
GEOLOGY
Miocene volcanic tuffs and flows underlie most of the district. These
units have been intruded by dacite plugs and rhyolite, andesite and basalt
dikes. Mineralization occurs in quartz veins, mostly within the extrusive rocks.
The most productive deposit has been the Nevada-Wonder vein which occurs at the
contact between the extrusive rocks and the large dacite stock. The veins occupy
shear zones and are separated from the country rock by a tabular sheet of gouge
varying from several inches to several feet in width. Locally the gouge is
mineralized. The Nevada-Wonder vein has been mined historically to a depth in
excess of 2,000 feet. Oxidation persists to a depth of 1,300 feet. The district
has produced 418,729 tons of ore averaging 0.176 opt gold and 16.4 opt silver
from 1897 to 1955.
PREVIOUS EXPLORATION AND DEVELOPMENT
Several drilling programs and some open pit mining have taken place on
the property. Belmont Resources carried out a heap-leach program in the
mid-1980s on low-grade open pit ore and mixed oxide and sulfide dump material.
Arizuma became involved in the district in 1996 and conducted a drilling
program. Arizuma has announced a resource based on preliminary analysis of
previous drill data. They report a drill indicated probable resource of 2.3
million tons averaging 2.64 opt silver and 0.013 opt gold.
EXPLORATION POTENTIAL
Additional potential exists in several of the old mine areas along the
strike of the Wonder vein. Deeper underground potential also exists along the
Wonder vein for oxide and sulfide mineralization.
<PAGE>
MINA GOLD PROJECT, Mineral County, Nevada
SUMMARY
The Mina Gold property consists of five patented and 30 unpatented lode
mining claims situated in the Bell mining district 16 miles northeast of Mina,
Nevada.
GEOLOGY
Gold mineralization is hosted in a Tertiary feldspar porphyry andesite
which in the vicinity of Mina Hill has been extensively altered and has been
referred to locally as the Mina rhyolite. The andesite flows are thought to
overlie the Triassic Luning Limestone Formation. Other volcanic units are in
fault contact with the andesite unit in the northern part of the property. In
the Mina Hill area the andesite is surrounded on the south, east and west by
outcrops of the Esmeralda Formation. In the Mina Hill area mineralization occurs
along several subparallel fault zones that strike northwesterly and dip steeply
to the north. In areas of intense alteration, clay development is common with
variable amounts of silicification. The mineralized zones pinch and swell as
well as change orientation both along strike and down dip.
PREVIOUS EXPLORATION AND DEVELOPMENT
A total of 177 exploration drill holes and 400 airtrack rotary holes
are reported on the property as well as 1,300 feet of underground development.
In 1996, Glamis Gold undertook a development-evaluation program and reported a
geologic resource of 1.7 million tons averaging 0.055 opt gold at a 0.01 opt
cutoff grade. Lewis reported 1.09 million tons averaging 0.076 opt gold from a
manual pit design drawn from cross sections.
EXPLORATION POTENTIAL
A total of 12 target areas have been identified on the property, some
of which have been only partially tested by drilling. Potential for additional
mineralization may exist in areas covered by the Esmeralda Formation.
CONTACT PROJECT, Elko County, Nevada
SUMMARY
The Contact Property is located near Contact, Nevada and consists of
111 patented and two unpatented mining claims in the Salmon River Mining
District.
GEOLOGY
A 16,000 foot thick sequence of Mississippian-Permian sedimentary rocks
has been domed and tilted by the intrusion of a Jurassic granodiorite stock. The
stock is 16 miles long in an east-went direction and eight miles wide. Sediments
within 2,000 feet of the stock has been metamorphosed to skarn and hornfels. The
pre-Tertiary rocks are unconformably overlain by Miocene rhyolite flows and
tuffs and by lacustrine deposits of the Pliocene Humboldt Formation. Between
1908 and 1965
<PAGE>
the district produced 5.75 million pounds of copper, 126,000 ounces of silver
and minor amounts of gold, lead, zinc and tungsten. The most productive
occurrences have been copper deposits in quartz veins along the contact zone of
the stock, near the original townsite of Contact.
PREVIOUS EXPLORATION AND DEVELOPMENT
Phelps Dodge and Coralta Mines were active in the main part of the
district in the 1970s. Considerable drilling was done and eight million tons of
material averaging 2.3 percent copper were delineated. Most of the developed
mineralization is on the Enexco property adjacent to the Lewis ground and in
which he has a royalty interest. Some underground work has been completed.
EXPLORATION POTENTIAL
One of the main zones in the district extends 12,000 feet along strike.
Very little drilling has been done to test this zone. The potential exists for
developing relatively large high-grade copper deposits with silver and possible
molybdenum credits.
HAMILTON PROJECT, White Pine County, Nevada
SUMMARY
The Hamilton project is located approximately 35 miles west of Ely and
consists of 104 patented and 20 unpatented mining claims. The claims are located
in the White Pine Mining District on the east slope of Mount Hamilton.
GEOLOGY
The district geology consists of 18,000 feet of sedimentary rocks,
mostly limestones and dolomites, which have been folded and domed along
north-south trending axes. The package has been intruded by two or more igneous
stocks and displaced by at least five sets of faults. Mineralization in the
district is controlled by the major faults as well as stratigraphy. Mineral
zonation is developed evolving outward from the Monte Cristo quartz monzonite
stock.
PREVIOUS EXPLORATION AND DEVELOPMENT
Rich silver ores were discovered in the Treasure Hill area in 1868 and
there was a large influx of people into the area. Through 1996, the district is
credited with producing 21 million ounces of silver, 203 million pounds of lead
and lesser amounts copper, zinc and gold. In 1980 the Hamilton property was
leased to Treasure City Mines, Inc. and was subleased to a company called SSH&K.
During this time a heap leach operation was established to process old waste
dumps on Treasure Hill. An undetermined amount of silver was recovered, however,
the lease was terminated due to non-payment of royalties.
<PAGE>
EXPLORATION POTENTIAL
Very little serious exploration has been done in the district since the
1960s. A compilation of information and a prioritization of target areas is in
the process of being completed.
GLOSSARY OF CERTAIN MINING TERMS
ACID MINE DRAINAGE -- Acidic run-off water from mine waste dumps and mill
tailings ponds containing sulfide minerals. Also refers to ground water
pumped to surface from mines.
ADIT -- An opening driven horizontally into the side of a mountain or hill for
providing access to a mineral deposit.
ALTERATION -- Any physical or chemical change in a rock or mineral subsequent to
its formation. Milder and more localized than metamorphism.
ALLOCHTHON -- Rocks that have been moved a long distance from their place of
deposition by some tectonic process, generally related to overthrusting or
recumbent folding.
ANTICLINE -- An arch or fold in layers of rock shaped like the crest of a wave.
ASSAY -- A chemical test performed on a sample of ores or minerals to determine
the amount of valuable metals contained.
BACKFILL -- Waste material used to fill the void created by mining an orebody.
BASEMENT ROCKS -- The underlying or older rock mass. Often refers to rocks of
Precambrian age, which may be covered, by younger rocks.
BASE METAL -- Any non-precious metal (e.g. copper, lead, zinc, nickel, etc.)
BEDDING -- The arrangement of sedimentary rocks in layers.
BENEFICIATION -- The process of improving the grade of ore by milling, roasting,
etc.
BLOCK CAVING -- An inexpensive method of mining in which large blocks of ore are
undercut, causing the ore to break or cave under its own weight.
BRECCIA -- A rock in which angular fragments are surrounded by a mass of
fine-grained minerals.
BRECCIATION -- The mechanical process of making a breccia.
BULK MINING -- Any large-scale, mechanized method of mining involving many
thousands of tones of ore being brought to surface per day.
"CARLIN" type gold deposit -- A genetic model for sediment hosted gold deposit
patterned after occurrences near Carlin, Nevada.
CATHODE -- A rectangular plate of metal, produced by electrolytic refining,
which is melted into commercial shapes such as wirebars, billets, ingots,
etc.
<PAGE>
CERCLA -- Comprehensive Environmental Response, Compensation and Liability Act
CHALCOCITE -- A sulfide mineral of copper common in the zone of secondary
enrichment.
CHANNEL SAMPLE -- A sample composed of pieces of vein or mineral deposit that
have been cut out of a small trench or channel, usually about 10 cm wide by
2 cm deep.
CHERT -- A compact, siliceous rock formed of chalcedonic or opaline silica and
of organic or precipitated origin.
CHUTE -- An opening, usually constructed of timber and equipped with a gate,
through which ore is drawn from a stope into mine cars.
CLASTIC ROCKS -- Consisting of fragments of rocks that have been moved from
their place of origin.
COMPLEX ORE -- An ore containing a number of minerals of economic value. The
term often implies that there are metallurgical difficulties in liberating
and separating the valuable metals.
CONCENTRATE -- A fine, powdery product of the milling process containing a high
percentage of valuable metal.
CONGLOMERATE -- A sedimentary rock consisting of rounded, water-worn pebble or
boulders cemented into a solid mass.
CONTACT -- A geological term used to describe the line or plane along which two
different rock formations meet.
CORE -- The long cylindrical piece of rock, from one to three inches in
diameter, brought to surface by diamond drilling.
CROSSCUT -- A horizontal opening driven from a shaft and (or near) right angles
to the strike of a vein or other orebody.
CSAMT -- Controlled Source Audio-frequency Magneto-Tellurics, a geophysical
technique.
CUT-AND-FILL -- A method of stoping in which ore is removed in slices, or lifts,
and then the excavation is filled with rock or other waste material
(backfill), before the subsequent slice is extracted.
DECLINE -- An underground passageway connecting one or more levels in a mine,
providing adequate traction for heavy, self-propelled equipment. Such
underground openings are often driven in an upward or downward spiral, much
the same as a spiral staircase.
DEVELOPMENT -- Work carried out for the purpose of opening up a mineral deposit
and making the actual ore extraction possible.
DEVELOPMENT DRILLING -- Drilling to establish accurate estimates of mineral
reserves.
<PAGE>
DIAMOND DRILL -- A rotary type of rock drill that cuts a core of rock that is
recovered in long cylindrical sections, two centimeters or more in diameter.
DIKE -- A long and relatively thin body of igneous rock that, while in the
molten state, intruded a fissure in older rocks.
DILUTION (mining) -- Rock that is, by necessity, removed along with the ore in
the mining process, subsequently lowering the grade of the ore.
DIP -- The angle at which a vein, structure or rock bed is inclined from the
horizontal as measured at right angles to the strike.
DISSEMINATED ORE -- Ore carrying small particles of valuable minerals spread
more or less uniformly through the host rock.
DORE -- Unparted gold and silver poured into molds when molten to form buttons
or bars. Further refining is necessary to separate the gold and silver.
DRIFT -- A horizontal underground opening that follows along the length of a
vein or rock formation as opposed to a crosscut which crosses the rock
formation.
DRILL-INDICATED RESOURCE -- The size and quality of a potential orebody as
suggested by widely spaced drillholes; more work is required before the
resource can be classified as probable or proven reserves.
DUE DILIGENCE -- The degree of care and caution required before making a
decision; loosely, a financial and technical investigation to determine
whether an investment is sound.
DUMP -- A site where solid waste rock from a mining operation is disposed of.
ELECTROLYTIC REFINING -- The process of purifying metal ingots that are
suspended as anodes in an electrolytic bath, alternated with refined sheets
of the same metal which act as starters or cathodes.
EM -- Electro-Magnetics, a geophysical technique.
ENVIRONMENTAL IMPACT STUDY -- A written report, compiled prior to production
decision that examines the effects proposed mining activities will have on
the natural surroundings.
EPA -- Environmental Protection Agency.
EPITHERMAL DEPOSIT -- A mineral deposit consisting of veins and replacement
bodies, usually in volcanic or sedimentary rocks, containing precious
metals, or, more rarely, base metals.
EXPLORATION -- Work involved in searching for ore, usually by drilling or
driving a drift.
FACE -- The end of a drift, crosscut or stope in which work is taking place.
FISSURE -- An extensive crack, break or fracture in rocks.
FLOAT -- Pieces of rock that have been broken off and moved from their original
location by natural forces such as frost or glacial action.
<PAGE>
FLOTATION -- a milling process in which valuable mineral particles are induced
to become attached to bubbles and float, while others sink.
FOOTWALL -- The rock on the underside of a vein or ore structure.
FRACTURE -- A break in the rock, the opening of which allows mineral-bearing
solutions to enter. A "cross-fracture" is a minor break extending at
more-or-less right angles to the direction of the principal fractures.
FREE MILLING -- Ores of gold or silver from which the precious metals can be
recovered by concentrating methods without resort to pressure leaching or
other chemical treatment.
GALENA -- Lead sulfide, the most common ore mineral of lead.
GOSSAN -- The rust-colored capping or staining of a mineral deposit, generally
formed by the oxidation or alteration of iron sulfides.
GRAB SAMPLE -- A sample from a rock outcrop that is assayed to determine if
valuable elements are contained in the rock. A grab sample is not intended
to be representative of the deposit, and usually the best-looking material
is selected.
GRADE -- The average assay of a ton of ore, reflecting metal content.
HANGINGWALL -- The rock on the upper side of a vein or ore deposit.
HEAD GRADE -- The average grade of ore fed into a mill.
HEAP LEACHING -- A process involving the percolation of a cyanide solution
through crushed ore heaped on an impervious pad or base to dissolve minerals
or metals out of the ore.
HIGH GRADE -- Rich ore. As a verb, it refers to selective mining of the best ore
in a deposit.
HOST ROCK -- The rock surrounding an ore deposit.
HYDROMETALLURGY -- The treatment of ore by wet processes (e.g., leaching)
resulting in the solution of a metal and its subsequent recovery.
HYDROTHERMAL -- An adjective applied to heated or hot magmatic emanations rich
in water, to the processes in which they are concerned, and to the rocks,
ore deposits, alteration products, and springs produced by them.
INTERBEDDED -- Occurring between beds, or lying in a bed parallel to other beds
of different material.
INTRUSIVE-- A body of igneous rock formed by the consolidation of magma intruded
into other rocks, in contrast to lavas, which are extruded upon the surface.
IP -- Induced Polarization
"KUROKO" type massive sulfide -- A genetic model for a volcanogenic massive
sulfide deposit patterned after occurrences at Kuroko, Japan.
<PAGE>
JASPEROID -- A rock consisting essentially of cryptocrystalline, chalcedonic, or
phenocrystalline silica, which has formed by the replacement of some other
material, ordinarily calcite or dolomite.
LAGGING -- Planks or small timbers placed between steel ribs along the roof of a
stope or drift to prevent rocks from falling, rather than to support the
main weight of the overlying rocks.
LENS -- Generally used to describe a body of ore that is thick in the middle and
tapers towards the ends.
LEVEL -- The horizontal openings on a working horizon in a mine; it is customary
to work mines from a shaft, establishing levels at regular intervals,
generally about 50 meters or more apart.
LITHOLOGY -- The physical character of a rock.
LIMESTONE -- A bedded, sedimentary deposit consisting chiefly of calcium
carbonate.
LODE -- A mineral deposit in solid rock.
MARCASITE -- White iron pyrites, a common mineral associated in ore deposits.
METAMORPHIC ROCKS -- Rocks which have undergone a change in texture or
composition as the result of heat and/or pressure.
MILL -- A processing plant that produces a concentrate of the valuable minerals
or metals contained in an ore. The concentrate must then be treated in some
other type of plant, such as a smelter, to affect recovery of the pure
metal.
MILLING ORE -- Ore that contains sufficient valuable mineral to be treated by
milling process.
MINERAL -- A naturally occurring homogeneous substance having definite physical
properties and chemical composition and, if formed under favorable
conditions, a definite crystal form.
MINERALIZATION -- The act or process of mineralizing.
MINERALIZED MATERIAL OR DEPOSIT -- A mineralized body which has been delineated
by appropriate drilling and/or underground sampling to support a sufficient
tonnage and average grade of metal(s). Under SEC standards, such a deposit
does not qualify as a reserve until a comprehensive evaluation, based upon
unit cost, grade, recoveries, and other factors, conclude economic
feasibility.
MUCK -- Ore or rock that has been broken by blasting.
NATIVE METAL -- A metal occurring in nature in pure form, uncombined with other
elements.
NET PROFIT INTEREST -- A portion of the profit remaining after all charges,
including taxes and bookkeeping charges (such as depreciation) have been
deducted.
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NET SMELTER RETURN -- A share of the net revenues generated from the sale of
metal produced by a mine.
OPEN PIT -- A mine that is entirely on surface. Also referred to as an open-cut
or open-case mine.
ORE -- Mineralized material that can be mined and processed at a positive cash
flow.
ORE PASS -- Vertical or inclined passage for the downward transfer of ore
connecting a level with the hoisting shaft or a lower level.
OREBODY -- A natural concentration of valuable material that can be extracted
and sold at a profit.
ORESHOOT -- The portion, or length, of a vein or other structure, that carries
sufficient valuable mineral to be extracted profitably.
OXIDATION -- A chemical reaction caused by exposure to oxygen that results in a
change in the chemical composition of a mineral.
PARTICIPATING INTEREST -- A company's interest in a mine, which entitles it to a
certain percentage of profits in return for putting up an equal percentage
of the capital cost of the project.
PATENT -- The ultimate stage of holding a mineral claim, after which no more
assessment work is necessary because all mineral rights have been earned.
PATENTED MINING CLAIM -- A parcel of land originally located on federal lands as
an unpatented mining claim under the General Mining Law, the fee simple
title of which has been conveyed from the federal government to a private
party pursuant to the patenting requirements of the General Mining Law.
PILLAR -- A block of solid ore or other rock left in place to structurally
support the shaft, walls or roof of a mine.
PLACER -- An alluvial or glacial deposit of sand and gravel, containing
particles of gold or other valuable minerals.
PORPHYRY -- Any igneous rock in which relatively large crystals, called
phenocrysts, are set in a fine-grained groundmass.
PRECAMBRIAN SHIELD -- The oldest, most stable regions of the Earth's crust, the
largest of which is the Canadian Shield.
PROSPECT -- A mining property, the value of which has not been determined by
exploration.
PROTOLITH -- The original lithology of an altered rock.
PROBABLE (INDICATED) RESERVES -- Resources for which tonnage and grade and/or
quality are computed primarily from information similar to that used for
proven reserves, but the sites for inspection, sampling and measurement are
farther apart or are otherwise less adequately spaced. The degree of
<PAGE>
assurance, although lower than that for proven reserves, is high enough to
assume continuity between points of observation.
PROVEN (MEASURED) RESERVES -- Resources for which tonnage is computed from
dimensions revealed in outcrops, trenches, workings or drill holes and for
which the grade and/or quality is computed from the results of detailed
sampling. The sites for inspection, sampling and measurement are spaced so
closely and the geologic character is so well defined that size, shape,
depth and mineral content of reserves are well established. The computed
tonnage and grade are judged to be accurate, within limits which are stated,
and no such limit is judged to be different from the computed tonnage or
grade by more than 20 percent.
PROVEN AND PROBABLE MINERAL RESERVES -- Reserves that reflect estimates of the
quantities and grades of mineralized material at a mine which the Company
believes could be recovered and sold at prices in excess of the cash cost of
production. The estimates are based largely on current costs and on
projected prices and demand for such mineralized material. Mineral reserves
are stated separately for each such mine, based upon factors relevant to
each mine. Proven and probable mineral reserves are based on calculations of
reserves provided by the operator of a property that have been reviewed but
not independently confirmed by the Company. Changes in reserves represent
general indicators of the results of efforts to develop additional reserves
as existing reserves are depleted through production. Grades of ore fed to
process may be different from stated reserve grades because of variation in
grades in areas mined from time to time, mining dilution and other factors.
Reserves should not be interpreted as assurances of mine life or of the
profitability of current or future operations.
RAISE -- A vertical or inclined underground working that has been excavated from
the bottom upward.
RAKE -- The trend of an orebody along the direction of its strike.
RCRA -- Resource Conservation and Recovery Act
RECLAMATION -- The restoration of a site after mining or exploration activity is
completed.
RECOVERY -- The percentage of valuable metal in the ore that is recovered by
metallurgical treatment.
REPLACEMENT ORE -- Ore formed by a process during which certain minerals have
passed into solution and have been carried away, while valuable minerals
from the solution have been deposited in the place of those removed.
RECRYSTALIZED -- The formation of new mineral grains in a rock while in a solid
state.
RESILICIFIED or RESILICIFICATION -- The process of altering or recementing a
rock which has been previously altered by the introduction of silica.
<PAGE>
RESERVES -- That parts of a mineral deposit which could be economically and
legally extracted or produced at the time of the reserve determination.
Reserves are customarily stated in terms of "Ore" when dealing with
metalliferous minerals. Reserves are further classified by SEC guidelines as
"Proven Reserves" or "Probable Reserves" according to the degree of
assurance in the reserve determination data.
RESOURCE -- The calculated amount of material in a mineral deposit, based on
limited drill information.
RIB SAMPLES -- Ore taken from rib pillars in a mine to determine metal content.
ROCKBOLTING -- The act of supporting openings in rock with steel bolts anchored
in holes drilled especially for this purpose.
ROCK MECHANICS -- The study of the mechanical properties of rocks, which
includes stress conditions around mine openings and the ability of rocks and
underground structures to withstand these stresses.
ROOM-AND-PILLAR MINING -- A method of mining flat-lying ore deposits in which
the mined-out area, or rooms, are separated by pillars of approximately the
same size.
ROTARY DRILL -- A machine that a drill holes by rotating a rigid, tubular string
of drill rods to which is attached a bit. Commonly used for drilling
large-diameter blastholes in open pit mines.
ROYALTY -- An amount of money paid at regular intervals by the lessee or
operator of an exploration or mining property to the owner of the ground.
Generally based on a certain amount per ton or a percentage of the total
production or profits. Also, the fee paid for the right to use a patented
process.
RUN-OF-MINE -- A loose term used to describe ore of average grade.
SAMPLE -- A small portion of rock or a mineral deposit, taken so that the metal
content can be determined by assaying.
SECONDARYENRICHMENT -- Enrichment of a vein or mineral deposit by minerals that
have been taken into solution from one part of the vein or adjacent rocks
and redeposited in another.
SHALE -- A laminated sediment in which the constituent particles are
predominantly clay grade or size.
SHAFT -- A vertical or steeply inclined excavation for the purpose of opening
and servicing a mine. It is usually equipped with a hoist at the top, which
lowers and raises a conveyance for handling personnel and materials.
SHEAR OR SHEARING -- The deformation of rocks by lateral movement along
unnumberable parallel planes, generally resulting from pressure and
producing such metamorphic structures as cleavage and schistosity.
SHRINKAGE STOPING -- A stoping method which uses part of the broken ore as a
working platform and as support for the walls of the stope.
<PAGE>
SILICIFICATION -- The introduction of or replacement by silica.
SILTSTONE -- A very fine-grained consolidated clastic rock composed
predominantly of particles of silt grade or size.
SKARN -- Name for the metamorphic rocks surrounding an igneous intrusive where
it comes in contact with a limestone or dolostone formation.
SOLVENT EXTRACTION-ELECTROWINNIG (SX/EW) -- A metallurgical technique, so far
applied only to copper ores, in which metal is dissolved from the rock by
organic solvents and recovered from solution by electrolysis.
SPHALERITE -- A zinc sulphide mineral; the most common ore mineral of zinc.
STEP-OUT DRILLING -- Holes drilled to intersect a mineralization horizon or
structure along strike or down dip.
STOCKPILE -- Broken ore heaped on surface, pending treatment or shipment.
STOCKWORKS -- a rock mass interpenetrated by small veins.
STOPE -- An underground excavation from which ore has been extracted either
above or below mine level.
STRATIGRAPHY -- Strictly, the description of bedded rock sequences; used
loosely, the sequence of bedded rocks in a particular area.
STRIKE -- The direction, or bearing from true north, of a vein or rock formation
measured on a horizontal surface.
STRINGER -- A narrow vein or irregular filament of a mineral or minerals
traversing a rock mass.
STRIPPING RATIO -- The ratio of tons removed as waste relative to the number of
tons or ore removed from an open pit mine.
SUBLEVEL -- A level or working horizon in a mine between main working levels.
SULPHIDE (SULFIDE) -- A compound of sulfur and some other element.
TAILINGS -- Material rejected from a mill after more of the recoverable valuable
minerals have been extracted.
TAILINGS POND -- A low-lying depression used to confine tailings, the prime
function of which is to allow enough time for heavy metals to settle out or
for cyanide to be destroyed before water is discharged into the local
watershed.
TREND -- The direction, in the horizontal plane, or a linear geological feature
(for example, an ore zone), measured from true north.
TROY OUNCE -- Unit of weight measurement used for all precious metals. The
familiar 16-ounce avoirdupois pound equals 14.583 Troy Ounces.
UNPATENTED MINING CLAIM -- A parcel of property located on federal lands
pursuant to the General Mining Law and the requirements of the state in
which the unpatented claim is located, the paramount title of which remains
with the federal government. The holder of a valid, unpatented lode mining
<PAGE>
claim is granted certain rights including the right to explore and mine such
claim under the General Mining Law.
USD -- United States Dollars
VEIN -- A mineralized zone having a more or less regular development in length,
width and depth, which clearly separates it from neighboring rock.
VUG -- A small cavity in a rock, frequently lined with well-formed crystals.
Amethyst commonly forms in these cavities.
WALL ROCKS -- Rock units on either side of an orebody. The hangingwall and
footwall rocks of an orebody.
WASTE -- Barren rock in a mine, or mineralized material that is too low in grade
to be mined and milled at a profit.
WINZE -- An internal shaft.
ZONE OF OXIDATION -- The upper portion of an orebody that has been oxidized.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the information as to the ownership of
each person who owns of record, or is known by the Company to own beneficially,
more than five per cent of the Company's common and preferred stock, and the
officers and directors of the Company.
Common Stock
Name Shares Percent Converted*
---- ------ ------- ----------
Michael R. Fitzsimonds 1,750,000 14% 23%
4935 San Diego Court
Sparks, NV
Donald J. McDowell 2,000,000 16% 25%
1555 Ridgeview
Reno, NV
Dennis J. McDowell 500,000 4%
28119 180th Avenue S.E.
Kent, WA
All officers and directors as a group 4,250,000 34% 46%
* Shows the per cent of common shares owned if preferred shares are converted.
<PAGE>
There are options outstanding to purchase 4,000,000 shares of common
stock. Donald McDowell holds 225,000 at $.10, 250,000 at $.20, 125,000 at $.50,
125,000 at $.75, 500,000 at $2.00 and 500,000 at $3.00. Michael Fitzsimonds
holds 225,000 at $.10, 250,000 at $.20, 125,000 at $.50, 125,000 at $.75,
500,000 at $2.00 and 500,000 at $3.00. Dennis McDowell holds 50,000 at $.10.
Daniel Taylor holds 300,000 at $.10. Angelette McGovern holds 100,000 at $.10.
David Caldwell holds 100,000 at $.10.
Preferred Stock
Shares Percent
------ -------
Andrea Albanesse 66,667 13%
1036 Jefferson Avenue
West Vancouver, B.C. Canada
Stephan Maurer 25,000 5%
28 W050 Garyes Mill Road
Winfield, IL
Paul Dickson 25,000 5%
202-1049 Chilco Street
Vancouver, B.C. Canada
Dave Venchus 25,000 5%
255 Eagle Ridge
West Chicago, IL
Jason Kolpec 25,000 5%
858 Spiros Drive
DeKalb, IL
Fiona Lattanzi 66,667 13%
2879 Norman Avenue
Coquitlam, B.C. Canada
Peter Shepherd 33,333 6%
7426 Bridge Street
Richmond, B.C. Canada
Terry Shepherd 33,333 6%
7426 Bridge Street
Richmond, B.C. Canada
Donald J. McDowell 100,000 20%
1555 Ridgeview
<PAGE>
Reno, NV
Michael R. Fitzsimonds 100,000 20%
4935 San Diego Court
Sparks, NV
All officers and directors as a group 200,000 40%
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The executive officers and directors of the company, with a brief
description are as follows:
Name Age Position
- ---- --- --------
Michael R. Fitzsimonds 41 President, Director
Daniel T. Taylor 41 Vice President, Director
Donald J. McDowell 37 Executive Vice President, Director
Dennis J. McDowell 37 Secretary, Director
David A. Caldwell 36 Director
Michael R. Fitzsimonds, Mr. Fitzsimonds is the President, and a
Director of the Company. He is a Geological Engineer. He has been associated
with Santa Fe Gold Corporation for the past 10 years. He was responsible for
resource evaluation and due diligence on corporate acquisition projects
worldwide. He has experience in the minerals industry with project development
ranging from grass roots exploration to advanced project development and
expertise in resource evaluation.
Daniel T. Taylor, Mr. Taylor is Vice President and a Director. Mr.
Taylor is a Geologist. He has been associated with Santa Fe Gold Corporation for
the past 10 years in managing exploration and development projects in the
Western United States. He has experience in the minerals industry with project
development ranging from grass roots exploration to advanced project
development.
Donald J. McDowell, Mr. McDowell is Executive Vice President and a
Director. Mr. McDowell is a professional land surveyor and geologic explorations
with more than 19 years of surveying, mineral exploration and development
experience. He was associated with Santa Fe Gold Corporation for more than 10
years and most recently was a geologic consultant expediting project generation
for the Kennecot/RTZ exploration team.
<PAGE>
Dennis J. McDowell, Mr. McDowell is Secretary and a Director. Mr.
McDowell is Vice President, Regional Director of Stores for Fred Meyer, Inc. and
has worked for that company for the past 12 years.
David A. Caldwell, Mr. Caldwell is a Director. Mr. Caldwell is a
geologist and geophysicist. He has more than 10 years experience in the minerals
exploration industry, with experience in sulfur, base metal and gold exploration
and development. He had roles in project management and development for Santa Fe
Gold Corporation and Gold Fields Mining Company in Nevada, New Mexico and Texas.
He was a project geologist with Santa Fe Pacific Gold Corporation and is
currently an Officer and Director with Nevada Pacific Gold (US), Inc.
ITEM 6. EXECUTIVE COMPENSATION
There is no employee that was paid as much as $60,000 per year as
salary. There is no contract for the payment of a salary to any employee. There
are no employment agreements. The Company has agreed to pay Michael R.
Fitzsimonds, Donald J. McDowell and Daniel T. Taylor the sum of $60,000 per year
each.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As part of the agreement between Mr. McDowell and the other principles
of the company who make up the Board of Directors, Mr. McDowell agreed to make
available to the company any of the properties he had located prior to the
formation of the company. The only property, which was located and filed with
the Federal Government and subsequently, QUIT CLAIMED to the company by MR.
McDowell is the Garamendi property. Four other properties, Long Canyon, Blue
Basin, Chisna, and Chistochina were allowed to lapse and were subsequently
staked for mineral location by the company. As part of the agreement to bring
these properties into the company Mr. McDowell would not be compensated
monetarily but would retain a 2% NSR on each of the properties if they were put
into production.
ITEM 8. LEGAL PROCEEDINGS
None
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock has been traded since August 6,1997 on the
OTC Bulletin Board, before that time there was no activity. As of October 13,
1997 the
<PAGE>
following brokerage firms were making a market in the Company's common stock: H.
S. Meyers & Co., Mercer Bokest Buckman & Reid, Fahnestock & Co., Wien
Securities, Mayer & Schwitzer, Herzog Heine Geduld, Inc., J. B. Oxford & Co.,
Hill Thompson Magid & Co., Wm V. Frankel & Co, Inc., Fidelity Capital Markets,
GVR Co., Sharpe Capital, Inc., Nash Weiss & Co., Paragon Capital Corp.,
Protective Group Securities.
The following table sets forth for the periods indicated the range of
high and low closing bid quotations per share as reported by the
over-the-counter market. These quotations represent inter-dealer prices, without
retail markups, markdowns or commissions and may not necessarily represent
actual transactions.
Price per Share
---------------
High Low
---- ---
Fiscal year 1997 $5.875 $.05
Third Quarter (June 30, 1997
through September 30, 1997)
There are 46 holders of the common and preferred stock of the Company.
There have never been any dividends, cash or otherwise, paid on the common
shares of the Company.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
There was a Form D for a Rule 504 offering filed in June, 1997. The
offering was for $50,000 and was sold to 37 persons. There was a 504 offering
for 40,000 shares dated July 10, 1997 for $20,000. There was a 504 offering for
330,000 shares dated July 10, 1997 for $693,000 which was sold to 8
institutions. There was a 504 offering for 54,480 shares dated October 8, 1997
for $236,988 which was sold to 5 individuals, including 2 directors of the
Company.
Common Shares
Name Date Shares Cost Per Share
Andrea Albanese 6/97 500,000 $2,500 .005
Elizabeth Ranft 6/97 500,000 $2,500 .005
Karen Dawson 6/97 333,334 $1,666 .005
Michelle White 6/97 70,000 $350 .005
Stephan Maurer 6/97 500,000 $2,500 .005
Paul Dickson 6/97 500,000 $2,500 .005
Dave Venchus 6/97 500,000 $2,500 .005
Jason Kolpec 6/97 500,000 $2,500 .005
Fiona Lattanzi 6/97 500,000 $2,500 .005
Stuart Hunter 6/97 250,000 $1,250 .005
<PAGE>
Chris Cooper 6/97 583,332 $2,916 .005
Peter Shepherd 6/97 505,000 $2,525 .005
Terry Shepherd 6/97 505,000 $2,525 .005
Bruce Goodwin 6/97 25,000 $125 .005
Steve Clark 6/97 25,000 $125 .005
Chris Walters 6/97 33,334 $166 .005
Lorelei Lauten 6/97 50,000 $250 .005
Florence Walters 6/97 20,000 $100 .005
Joe Walters 6/97 20,000 $100 .005
Jon Walters 6/97 20,000 $100 .005
Jean Walters 6/97 30,000 $150 .005
Marlene Shepherd 6/97 10,000 $50 .005
Mike Case 6/97 10,000 $50 .005
Donald J. McDowell 6/97 2,000,000 $5,000 .0025
Michael R. Fitzsimonds 6/97 1,750,000 $5,000 .0028
Leona D. Fitzsimonds 6/97 200,000 $1,000 .005
Nicole D. Fitzsimonds 6/97 200,000 $1,000 .005
Marjorie L. Fitzsimonds 6/97 50,000 $250 .005
Myrtle P. Burnett 6/97 50,000 $250 .005
Dennis J. McDowell 6/97 500,000 $1,250 .0025
Donna Birdwell 6/97 50,000 $250 .005
Danette Dunn 6/97 200,000 $1,000 .005
Capital Formation Trust 6/97 150,000 $750 .005
Capital Strategies Group 6/97 150,000 $750 .005
Duet, Ltd. 6/97 245,000 $1,225 .005
Millport Overseas, Ltd. 6/97 210,000 $1,050 .005
Wrigley Investments Holdings, Ltd. 6/97 225,000 $1,125 .005
Loewen Ondaatje McCutcheon, Ltd. 7/97 40,000 $20,000 .50
Banque De Gestion Privee 7/97 52,000 $109,200 2.10
Cook et Cie SA 7/97 75,000 $157,500 2.10
Banque d'Orsay 7/97 30,000 $63,000 2.10
Banque Scalbert Dupont 7/97 50,000 $105,000 2.10
Banque Rivaud 7/97 60,000 $126,000 2.10
Credit Industriel et Commercial 7/97 25,000 $52,500 2.10
Neuflize Schlumberger Mallet 7/97 25,000 $52,500 2.10
E.B.P.F. 7/97 13,000 $27,300 2.10
Andrea Albanese 10/97 8,448 $36,749 4.35
Peter Shepherd 10/97 8,448 $36,749 4.35
Michael R. Fitzsimonds 10/97 10,344 $44,996 4.35
Dennis McDowell 10/97 10,344 $44,996 4.35
Gaza Investments 10/97 16,896 $73,498 4.35
Preferred Shares
Andrea Albanese 6/97 66,667
<PAGE>
Stephan Maurer 6/97 25,000
Paul Dickson 6/97 25,000
Dave Venchus 6/97 25,000
Jason Kolpec 6/97 25,000
Fiona Lattanzi 6/97 66,667
Peter Shepherd 6/97 33,333
Terry Shepherd 6/97 33,333
Donald J. McDowell 6/97 100,000
Michael R. Fitzsimonds 6/97 100,000
All sales in June, 1997 were for $.005 per share. There were shares
issued to Donald J. McDowell, 1,000,000 shares, Michael R. Fitzsimonds, 750,000
shares and Dennis J. McDowell, 250,000 shares for which there was no cash
compensation, but for services performed in the founding of the Company. Later
in July, 1997 there was a value in the Company and 330,000 shares were sold for
$2.10 per share. The Underwriter of those shares was sold, as part compensation
for its services, 40,000 shares for $.50 per share.
There was no underwriter on the sales of any of the securities, except
the sale to the 8 institutions, and no commissions were paid. except there was a
commission of $.10 paid on the sale of 330,000 shares to Banque De Gestion
Privee, Cook et Cie SA, Banque d'Orsay, Banque Scalbert Dupont, Banque Rivard,
Credit Industriel et Commercial Cicotitres, Newflize Schlimberger Mattet and
E.B.P.F to Loewn Ondaatje McCutcheon, Ltd. All sales were for cash.
The registrant believes that all transactions were transactions not
involving any public offering within the meaning of Section 4(2) of the
Securities Act of 1933, since (a) each of the transactions involved the offering
of such securities to a substantially limited number of persons; (b) each person
took the securities as an investment for his own account and not with a view to
distribution; (c) each person had access to information equivalent to that which
would be included in a registration statement on the applicable form under the
Act; (d) each person had knowledge and experience in business and financial
matters to understand the merits and risk of the investment; therefore no
registration statement need be in effect prior to such issuances.
ITEM 11. DESCRIPTION OF SECURITIES
The company has authorized 200,000,000 shares of stock, no par value,
150,000,000 shares have been designated as common shares, and the remaining
50,000,000 shares are preferred shares. Each holder of common stock has one vote
per share on all matters voted upon by the shareholders. Such voting rights are
noncumulative so that shareholders holding more than 50% of the outstanding
<PAGE>
shares of common stock are able to elect all members of the Board of Directors.
There are no preemptive rights or other rights of subscription.
Each share of common stock is entitled to participate equally in
dividends as and when declared by the Board of Directors of the company out of
funds legally available, and is entitled to participate equally in the
distribution of assets in the event of liquidation. All shares, when issued and
fully paid, are nonassessable and are not subject to redemption or conversion
and have no conversion rights.
The preferred shares are convertible into 10 common shares at a price
of $.10 per share for a period of 10 years. The preferred shares have no voting
power, unless converted into common shares. There are no other preferences.
Risk Factor - Penny Stock Regulation. Broker-dealer practices in
connection with transactions in "penny stocks" are regulated by certain penny
stock rules adopted by the Securities and Exchange Commission. Penny stock
generally are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on the
Nasdaq system, provided that current price and volume information with respect
to transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules generally require that prior to a
transaction in a penny stock the broker-dealer make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. If the Company's securities become subject to the penny stock
rules, investors in this offering may find it more difficult to sell their
securities.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Minnesota Statutes, Section 302A.521, contain an extensive
indemnification provision which requires mandatory indemnification by a
corporation of any officer, director and affiliated person who was or is a
party, or who is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a member, director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a member, director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against
<PAGE>
expenses, including attorneys' fees, and against judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted, or failed to act, in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. In some instances a
court must approve such indemnification.
ITEM 13. FINANCIAL STATEMENTS
Please see the attached Financial Statements.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Please see the attached Financial Statements
(b) Exhibits:
3.1* Articles of Incorporation and bylaws
5.1* Opinion of counsel
10.1* Quitclaim Deed
10.2* Welsh Agreement
10.2a Amendment to Welsh Agreement
10.3* Kennecott Agreement
10.4 Hansen Agreement
10.5 Mack Rife Agreement
*Filed at a prior time
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: December 23, 1997 Golden Phoenix Minerals, Inc.
/s/ Michael R. Fitzsimonds
---------------------------------
Michael R. Fitzsimonds, President
/s/ Donald J. McDowell
--------------------------------------------
Donald J. McDowell, Executive Vice President
/s/ Daniel T. Taylor
--------------------------------
Daniel T. Taylor, Vice President
/s/ Dennis J. McDowell
-----------------------------
Dennis J. McDowell, Secretary
/s/ David A. Caldwell
---------------------------
David A. Caldwell, Director
Exhibit 10.2A
AMENDED SUPPLEMENTAL AGREEMENT
Amended Supplemental Agreement, dated November 15, 1997, by and between
J. D. WELSH & ASSOCIATES, INC., a Nevada corporation ("Welsh") and GOLDEN
PHOENIX MINERALS, INC., a corporation ("Golden Phoenix").
RECITALS
a. Welsh is a party to a joint venture with Cambior Exploration USA,
Inc. Welsh's interest in the joint venture is hereinafter referred to as the
"Interest."
b. Welsh and Golden Phoenix entered into an Agreement, dated August 4,
1997, (the "Agreement") according to which Golden Phoenix agreed to purchase the
Interest in a series of transactions according to a stipulated schedule.
c. Golden Phoenix delivered the consideration for Twenty-five Percent
(25%) of the Interest to Welsh in accordance with the Agreement, and was
assigned Twenty-five Percent (25%) of the Interest by Assignment dated August
22, 1997.
d. By Supplemental Agreement, dated October 21, 1997 (the "Supplemental
Agreement"), Golden Phoenix and Welsh agreed that Golden Phoenix would deliver
to Welsh Two Hundred Twenty-five Thousand (225,000) common shares of Golden
Phoenix, in lieu of the periodic payments provided for by the Agreement, in
exchange for the immediate assignment of the balance of the Interest to Golden
Phoenix.
e. The parties hereby amend and restate the Supplemental Agreement on
the terms and conditions set forth in this document.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
1. Purchase and Sale of Interest. Welsh agrees to assign and transfer
its remaining Seventy-five Percent (75%) of the Interest to Golden Phoenix in
exchange
<PAGE>
for the following consideration:
(a) A cash payment in the amount of Ten Thousand Dollars ($10,000.00)
on November 21, 1997;
(b) A cash payment in the amount of Ninety Thousand Dollars
($90,000.00) on or before November 28, 1997;
(c) A cash payment in the amount of One Hundred Thousand Dollars
($100,000.00) on or before December 15, 1997; and
(d) The delivery of Two Hundred Twenty-five Thousand (225,000) common
shares of Golden Phoenix (the "Shares") on December 15, 1997.
The delivery of said consideration shall be in lieu of the periodic
payments to Welsh provided in Section 1 of the Agreement and in lieu of the
delivery of shares pursuant to the Supplemental Agreement. Provided, however,
that Golden Phoenix shall remain obligated to pay Cambior(1) the sum of One
Hundred Thousand Dollars ($100,000.00), with interest at Ten Percent (10%) per
annum, on or before January 5, 1998.
2. Indemnity by Golden Phoenix. Golden Phoenix agrees to indemnify and
hold Welsh harmless from and against any and all costs, losses, liabilities,
damages, lawsuits, claims and expenses incurred in connection with or arising
out of or resulting from or incident to the failure of Golden Phoenix to pay the
obligation in the amount of One Hundred Thousand Dollars ($100,000), plus
interest, to Cambior. Such indemnity shall include, without limitation, all
reasonable and necessary costs and expenses of defending any claim arising (and
any lawsuit instituted asserting such claim) with respect to any matter as to
which said indemnity is applicable, and reasonable attorneys' fees and costs
incurred in connection therewith, whether or not such claim is ultimately
defeated, and any amounts paid incident to any compromise or settlement of any
such claim.
3. Representations and Warranties.
(a) By Welsh: Welsh makes the following representations and warranties
to
- ---------------------------
(1) Cambior Exploration USA, Inc.
<PAGE>
Golden Phoenix:
(i) Welsh has good and marketable title to the Interest
(except the Twenty-five Percent (25%) of the Interest previously
assigned to Golden Phoenix), free and clear of any and all liens,
mortgages, pledges, and encumbrances or rights of third parties;
(ii) Welsh has full authority to assign the remainder of the
Interest to Golden Phoenix; and
(iii) There are no known pending or threatened actions, suits,
proceedings, or notices of default which apply to the remaining
Interest.
(b) By Golden Phoenix: Golden Phoenix makes the following
representations and warranties to Welsh:
(i) The Shares, at time of delivery to Welsh, will be duly
authorized and issued by Golden Phoenix; and
(ii) Said shares will not be subject to any restrictions on
sale, are duly registered under the Securities Act of 1933, and can be
sold or transferred by Welsh without violating any state or federal
securities laws or regulations.
4. Delivery of Assignment. Upon receipt of the consideration to be
delivered to Welsh pursuant to Paragraph 1, Welsh shall deliver to Golden
Phoenix a duly executed Assignment of Seventy-five Percent (75%) of the
Interest.
IN WITNESS WHEREOF, the parties hereto have executed this Supplemental
Agreement the day and year first above written.
Golden Phoenix: Welsh:
GOLDEN PHOENIX MINERALS, INC. J. D. WELSH & ASSOCIATES, INC.
<PAGE>
By /s/ Michael R. Fitzsimonds By /s/ J. D. Welsh
------------------------------- ------------------------------
Michael R. Fitzsimonds JOHN D. WELSH, President
Its: President
Exhibit 10.4
HANSEN AGREEMENT
Banner Creek
MINERAL LEASE AGREEMENT & OPTION TO PURCHASE
This Mineral Lease Agreement & Option to Purchase is made and entered
into between GOLDEN PHOENIX MINERALS, INC.(GPM) the lessee and ERIK HANSEN
("HANSEN") the owner.
RECITALS
A. HANSEN is the owner of certain state mining claims situated in the
Fairbanks recording district, Alaska known as the Lucky Group/Banner Creek
Claims situated in the Richardson Mining District more particularly described in
Exhibit A (including the map which is a part of Exhibit A) attached to this
Agreement and by this reference incorporated herein. The foregoing state mining
claims are referred to in this Agreement as the "Claims."
B. GOLDEN PHOENIX desires to lease the Claims to conduct mineral
exploration activities on the Claims to develop a commercial mine and to have
the option to purchase the Claims.
C. HANSEN desires to reserve to himself the placer rights associated
with the Claims unless the Claims are purchased by GOLDEN PHOENIX.
NOW, THEREFORE, in consideration of the parties' promises in this
Agreement, the parties agree:
AGREEMENT
1. Grant of Rights and Term. HANSEN grants to GPM all rights, which
Hansen has acquired from the State of Alaska through the ownership of the
Claims, to enter upon the Claims to conduct such exploration and prospecting
operations as GPM may deem appropriate to determine the presence, location,
quantity and value of minerals contained within the Claims, excepting therefrom
the placer rights.
<PAGE>
Such operations may include, but shall not be limited to, mapping, sampling
including bulk sampling, trenching, drilling, testing, assaying, conducting
environmental studies and other geochemical and geophysical exploration methods
whether now known or in the future developed. GPM may establish drill sites and
construct such minor roads as may be necessary to the conduct of the foregoing
activities, provided GPM secure permits from the appropriate permitting
authorities. GPM may also mine and remove such amount of minerals as GPM may
deem appropriate for sampling, assaying, metallurgical testing and evaluation of
the Property without exercising the Option to purchase, however, minerals may
not be removed for sale unless the Option to Purchase has been exercised and the
full purchase price paid. The term of this Agreement shall expire on October 1,
2002 unless sooner terminated in accordance with the terms of this Agreement.
2. Payments, Work Commitments and Net Returns Production Royalty.
2.1 On execution of this agreement GPM shall pay HANSEN the
sum of TEN THOUSAND DOLLARS ($10,000.00) in cash and Five Thousand
(5,000) shares of common stock of Golden Phoenix Minerals, Inc.
2.2 During the term of this Agreement GPM shall make the
following payments to HANSEN and such payments shall be directed to
HANSEN'S bank account provided HANSEN has given GPM detailed
instructions as to the account and the procedures to be used:
Date
Cash Payment
Stock
On or before April 1, 1998
$6,000.00
2,500 shares of
GOLDEN PHOENIX
On or before October 1, 1998
$6,000.00
2,500 shares of
GOLDEN PHOENIX
<PAGE>
On or before April 1, 1999
$10,000.00
2,500 shares of
GOLDEN PHOENIX
On or before October 1, 1999
$10,000.00
2,500 shares of
GOLDEN PHOENIX
On or before April 1, 2000
$15,000.00
2,500 shares of
GOLDEN PHOENIX
On or before October 1, 2000
$15,000.00
2,500 shares of
Golden Phoenix
On or before April 1, 2001
$20,000.00
2,500 shares of
Golden Phoenix
On or before October 1, 2001
$20,000.00
2,500 shares of
Golden Phoenix
On or before April 1, 2002
$25,000.00
<PAGE>
2,500 shares of
Golden Phoenix
2.3 GPM agrees to perform work upon the claims in the amount
and during the time frames stated herein as follows:
Work Commitment
Period within which work is to
be performed
$10,000.00
Before September 1, 1998
$10,000.00
Before September 1, 1999
$20,000.00
Before September 1, 2000
$50,000.00
Before September 1, 2001
$50,000.00
Before September 1, 2002
2.4 GPM agrees to pay a two percent (2%) net returns
production royalty ("Net Returns Royalty) for any production from the
Lucky Group/Banner Creek Claims subject to this Agreement. GPM also
agrees to pay a one percent (1%) Net Returns Royalty on any other
claims owned, acquired or controlled by GPM in the Richardson mining
district between August 1, 1997 and December 31, 1999, including, but
not limited to the claims and prospecting sites listed in Exhibit B,
attached hereto. The Net Returns Royalty shall be calculated and
payable on a calendar quarter basis payable on all minerals, ores,
concentrates, metals and other materials ("Minerals") produced from the
Claims during "Commercial Production."
2.5 The term "Commercial Production" shall be defined as the
mining, extraction, processing, and recovery for sale of Minerals from
the Claims.
<PAGE>
Commercial Production shall not include the taking of Minerals from the
Claims for the purpose of determining the amenability to beneficiation
processes or mining thereof, including bulk sampling.
2.6 The term "Net Returns Royalty" shall mean the total "Gross
Sale Proceeds" or "Deemed Gross Sale Proceeds" less deduction for the
following total actual costs paid by, charged to or otherwise incurred
by GPM within that calendar quarter which are attributed to handling,
treatment and sale of individual Minerals within that calendar quarter;
(1) All smelting, refining, treatment, assaying, sampling,
umpiring, selling, or other costs, charges and penalties
charged by any refinery, smelter or other purchaser of
Minerals;
(2) All taxes paid on production of Minerals, except income
taxes, including but not limited to, production, severance,
sales and privilege taxes, and all local, state and federal
royalties that are based upon the production of Minerals;
(3) All costs of loading, securing, transporting and insuring
Minerals from the Claims to the refinery, smelter or
purchaser;
3. Option to Purchase.
3.1 HANSEN grants to GPM the option ("the "Option"),
exercisable by GPM in its sole and exclusive discretion at any time
during the term of this Agreement, to purchase all of the Claims for a
purchase price of One Million Dollars ($1,000,000.00). All cash
payments paid to HANSEN prior to the exercise of the Option shall be
credited against the purchase price.
3.2 If GPM timely exercises the Option, the closing shall be
no later than December 31, 2002. The closing shall be held at a time
and place as may be mutually agreed upon by the parties. At the closing
HANSEN shall deliver to GPM a properly executed and acknowledged
assignment or other form of conveyance document conveying the Claims
free and clear of liens and encumbrances other than the Net Returns
Royalties as provided for in Section 2.4 payable from production from
the Claims and GPM shall deliver the balance of the purchase price. The
parties agree that they will execute and deliver such other documents
and take such other action as may be necessary to carry out their
obligations under this Agreement.
<PAGE>
4. Indemnification & Insurance. GPM shall indemnify and save harmless
HANSEN, his successors and assigns, of and from any liability for any claims,
actions or damages arising from the occupation and use of the Claims by GPM
pursuant to this Agreement. GPM agrees to maintain liability insurance in the
amount of One Million Dollars($1,000,000.00) and to provide HANSEN with evidence
thereof. HANSEN shall indemnify and save harmless GPM, its successors and
assigns, from liability for any claims, actions or damages arising from
occupation and use of the Claims by HANSEN before the Effective Date of this
Agreement.
5. Compliance with the Law. All exploration and development work
performed by GPM on the Property during the term of this Agreement shall conform
with the applicable laws and regulations of the state in which the Property is
situated and the United States of America. GPM shall be fully responsible for
compliance with all applicable Federal, state and local reclamation statutes,
regulations and ordinances related to such work. GPM agrees to post a
reclamation bond prior to exploration activities involving heavy equipment.
HANSEN agrees to cooperate with GPM and GPM's application for governmental
licenses, permits, zoning changes and approvals, the cost of which shall be born
by GPM.
6. No Partnership. This Agreement shall not constitute any party the
partner, agent or legal representative of any other party nor create any
partnership, mining partnership or fiduciary relationship among the parties for
any purpose.
7. Annual payments. HANSEN hereby represents that he has paid all
current fees for the claims described in Exhibit A. GPM agrees to pay all
further claim fees due and payable prior to termination of this Agreement. GPM
agrees to pay the State of Alaska 6(i) mining claim rent by October 1 of each
year the lease is in effect and provide HANSEN with evidence of that payment
within ten (10) working days thereof. GPM agrees to provide Hansen with a copy
of the recorded Affidavit of Annual Labor by October 15 of each year this lease
is in effect.
8. Assignment. Either party may sell, assign, transfer, convey or
otherwise dispose of or deal with its interest in the Agreement upon giving the
other party written notice thereof fifteen (15) days prior to the intended
transfer. The parties hereto agree that the assignment of either parties
interest shall not increase the obligations of the other party nor change any of
the terms of the Agreement.
9. Amendment, Relocation and Conversion of Claims. Subject to Hansen's
<PAGE>
approval, which shall not be unreasonably withheld, GPM shall have the right, in
its sole and exclusive discretion, to amend or relocate the Claims. If the
mining laws of the United States or the State of Alaska are amended or repealed
or law enacted which permit or require the conversion of the Claims from
unpatented mining claims to leases, licenses, privileges or other interests, GPM
may, in its sole and exclusive discretion, elect to convert the Claims in which
case the interest of GPM in any such leases, licenses, privileges or other
interests shall be subject to the terms of this Agreement. To the extent GPM
elects not to convert the Claims in accordance with this Section 9 and such
claims become subject to surrender, abandonment or forfeiture, the right and
obligations of GPM and HANSEN with respect to any Claims or portion of the
Claims subject to the surrender, abandonment or forfeiture shall be subject to
the provisions of Section 10.1. GPM shall have no obligation or liability to
HANSEN for any claim or assertion of loss or damage resulting from the
amendment, relocation, conversion or attempted conversion of the Claims in
accordance with the terms of this Section 9.
10. Abandonment, Surrender and Termination. GPM shall have the right to
abandon or surrender any portion of the Property or terminate this Agreement as
provided below.
10.1 Abandonment of Claims.
GPM may, in its sole and exclusive discretion, abandon any of
the Claims. GPM shall give written notice to HANSEN of its election to
abandon a Claim which notice shall describe the Claim to be abandoned.
HANSEN shall have thirty (30) days after its receipt of the notice of
abandonment to elect, in his sole and exclusive discretion, to take
from GPM a quitclaim deed for the Claim to be abandoned. HANSEN shall
deliver written notice of his election. If HANSEN does not elect to
take a quitclaim deed of the Claim, GPM shall have the absolute right
to abandon such Claim. On conveyance of the Claim to HANSEN or
abandonment of the Claim by GPM, the obligations of GPM to HANSEN
under this Agreement with respect to such conveyed or abandoned Claim
shall cease, except such obligations as have accrued before the date of
abandonment or reconveyance.
10.2 Termination of Agreement.
GPM may at any time terminate this Agreement by giving written
notice to HANSEN. Termination of this Agreement by GPM shall be deemed
to be an election by GPM to abandon the Claims and to surrender any
right, title and interest therein.
<PAGE>
1. 11. GPM Representations.
11.1 GPM is a corporation duly incorporated under the laws of
the State of Minnesota, is validly existing and is in good standing
under the laws of Minnesota, and is duly qualified to conduct business
in the State of Alaska.
11.2 GPM has the authority to enter into this Agreement and
the Officer signing this Agreement has the authority to enter into this
Agreement.
2. 12. HANSEN Representations.
12.1 HANSEN is the sole legal and equitable owner of the
Claims (subject to the paramount title in the State of Alaska).
12.2 The Claims are free and clear of all liens and
encumbrances and outstanding adverse claims and interests, except taxes
not yet payable.
3. 13. Force Majeure.
GPM shall not be deemed in default of this Agreement during any period
when it is hindered, prevented or delayed from complying therewith in whole or
in party by, including but not limited to: acts of God; acts of the public
enemy; labor disturbances; civil disorders; war; unavoidable accidents;
unusually severe weather; unforeseen geological conditions; inability to obtain
any necessary permits, bonds or operating approvals whether by action or
inaction of governmental agency under asserted authority; environmental
restrictions or conditions; or any other cause reasonably beyond the control of
GPM, other than financial or economic delays, each of which is called a "Force
Majeure." The term of this Agreement shall be extended by the period of any
Force Majeure. GPM shall not be required to compensate HANSEN for any loss
occasioned by a Force Majeure. GPM shall promptly notify HANSEN of any
suspension caused by a Force Majeure and it shall use reasonable diligence to
remedy or eliminate the cause of such suspension. However, GPM shall not be
required to remedy the effects of any Force Majeure by settlement of any labor
difficulty contrary to its wishes or contest the validity of any law, regulation
or any action or inaction by a civil or military authority. The handling of
those
<PAGE>
controversies shall be entirely within GPM's discretion.
4. 14. Disputes not to Interrupt Operations.
Disputes or differences between GPM and the HANSEN shall not interrupt
performance of this Agreement. In the event of any dispute or difference, GPM
may continue operations and pay any Net Returns Royalties in the same manner as
prior to the dispute until the matters have finally been determined between GPM
and HANSEN by judicial determination, if necessary.
5. 15. Memorandum Agreement.
GPM and HANSEN shall sign and acknowledge a memorandum of this
Agreement suitable for recording to give notice hereof to third parties. GPM
shall record the memorandum at its expense. This Agreement shall not be
recorded.
6. 16. Notices.
Any notice or other communication ("Notice") required to be given under
the terms of this Agreement shall be in writing and shall become effective; when
personally served upon the party to be given such Notice; when posted by
certified or registered mail, return receipt requested; or when delivered by
telex, telegram, telecopier or other wire service.
The addresses for such Notices shall be:
HANSEN: Erik Hansen
P.O. Box 97
Ester Alaska 99725
(907) 479-2195 - phone
(907) 479-2191 - telecopier
GPM: Golden Phoenix Minerals, Inc.
3595 Airway Drive, Suite 405
Reno, NV 89511
ATTN: Michael R. Fitzsimonds, President
<PAGE>
(702) 853-4919 - phone
(702) 853-5010 - telecopier
7. 17. Binding Effect of Obligations.
All covenants, conditions and terms of this Agreement shall be of
benefit to and run with the Property and shall bind and inure to the benefit of
the parties hereto, their respective heirs, representatives, assigns and
successors in interest.
8. 18. Whole Agreement.
This Agreement and exhibits attached hereto set for the entire
agreement between the parties hereto with respect to the subject matter hereof.
This Agreement supersedes all prior written and oral negotiations, discussions,
agreements and understandings related to such subject matter. Any modification
of the terms of this Agreement must be in writing, dated subsequent to the
Effective Date, and signed by each of the parties hereto.
9. 19. Governing Law.
This Agreement is to be governed by and construed under the laws of the
State of Alaska.
10. 20. Multiple Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which shall constitute the same Agreement.
11. 21. Severability.
Any provision of this Agreement prohibited by the laws of the United
States or the State of Alaska shall be ineffective to the extent of such
prohibition without invalidating the remaining provisions of this Agreement.
12. 22. Summary Reports.
<PAGE>
In each year during the term of this Agreement, HANSEN may request that
GPM deliver a summary report of GPM's activities on the Claims for the preceding
calendar year. GPM shall deliver the summary report to HANSEN within sixty (60)
days from GPM's receipt of the request. GPM shall have no liability to HANSEN or
any other party arising from or relating to the information in the summary
report.
13. 23. Effective Date.
The effective date of this Agreement shall be ____________, 1997.
The parties hereto have executed this Agreement on the dates set forth
hereafter.
HANSEN:
- ---------------------------------- --------------------------------
Erik Hansen Taxpayer Identification Number
GOLDEN PHOENIX MINERALS, INC.
- ----------------------------------
BY:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
State of ALASKA )
)ss.
County of____________)
This Agreement was acknowledged before me on this ______ day of
____________, 1997 by ERIK HANSEN.
- ---------------------------------
NOTARY PUBLIC
State of NEVADA )
)ss.
County of WASHOE_____)
This Agreement was acknowledged before me on this ____ day of
_______________________, 1997 by _____________________ as the
_______________________ of GOLDEN PHOENIX MINERALS, INC.
- -------------------------------
NOTARY PUBLIC
Exhibit 10.5
MACK RIFE AGREEMENT
MINERAL LEASE AGREEMENT & OPTION TO PURCHASE
This Mineral Lease Agreement & Option to Purchase is made and entered
into between GOLDEN PHOENIX MINERALS, INC.(GPM),the lessee, and MACK
<PAGE>
RIFE ("RIFE"), the owner.
RECITALS
A. RIFE is the owner of eleven state mining claims situated in the
Fairbanks recording district, Alaska known as the Banner Creek Claims situated
in the Richardson Mining District more particularly described in Exhibit A
(including the map which is a part of Exhibit A) attached to this Agreement and
by this reference incorporated herein. The foregoing state mining claims are
referred to in this Agreement as the "Claims."
B. GOLDEN PHOENIX desires to lease the Claims to conduct mineral
exploration activities on the Claims to develop a commercial mine and to have
the option to purchase the Claims.
C. RIFE desires to reserve to himself the placer rights associated with
the Claims unless the Claims are purchased by GOLDEN PHOENIX.
NOW, THEREFORE, in consideration of the parties' promises in this
Agreement, the parties agree:
AGREEMENT
1. Grant of Rights and Term. RIFE grants to GPM all rights, which RIFE
has acquired from the State of Alaska through the ownership of the Claims, to
enter upon the Claims to conduct such exploration and prospecting operations as
GPM may deem appropriate to determine the presence, location, quantity and value
of minerals contained within the Claims, excepting therefrom the placer rights.
Such operations may include, but shall not be limited to, mapping, sampling
including bulk sampling, trenching, drilling, testing, assaying, conducting
environmental studies and other geochemical and geophysical exploration methods
whether now known or in the future developed. GPM may establish drill sites and
construct such minor roads as may be necessary to the conduct of the foregoing
activities, provided GPM secure permits from the appropriate permitting
authorities. GPM agrees to provide RIFE with ten (10) days notice of any
drilling activities. GPM may also mine and remove such amount of minerals as GPM
may deem appropriate for sampling, assaying, metallurgical testing and
evaluation of the Property without
<PAGE>
exercising the Option to purchase, however, minerals may not be removed for sale
unless the Option to Purchase has been exercised and the full purchase price
paid. The term of this Agreement shall expire on January 1, 2003 unless sooner
terminated in accordance with the terms of this Agreement.
2. Payments, Work Commitments and Net Returns Production Royalty.
2.1 On execution of this agreement GPM shall pay RIFE the sum
of FIVE THOUSAND DOLLARS ($5,000.00).
2.2 During the term of this Agreement GPM shall make the
following payments to RIFE:
Date
Cash Payment
On or before August 1, 1998
$3,000.00
On or before August 1, 1999
$7,500.00
On or before August 1, 2000
$15,000.00
On or before August 1, 2001
$20,000.00
On or before August 1, 2002
$25,000.00
2.3 GPM agrees to perform work upon the claims in the amount
and during the time frames stated herein as follows:
Work Commitment
Period within which work is to be performed
<PAGE>
$20,000.00
Before August 1, 1998
$20,000.00
Before August 1, 1999
$50,000.00
Before August 1, 2000
$100,000.00
Before August 1, 2001
$100,000.00
Before August 1, 2002
2.4 GPM agrees to pay a two percent (2%) net returns
production royalty ("Net Returns Royalty) for any production from the
Banner Creek Claims subject to this Agreement. The Net Returns Royalty
shall be calculated and payable on a calendar quarter basis payable on
all minerals, ores, concentrates, metals and other materials
("Minerals") produced from the Claims during "Commercial Production."
2.5 The term "Commercial Production" shall be defined as the
mining, extraction, processing, and recovery for sale of Minerals from
the Claims. Commercial Production shall not include the taking of
Minerals from the Claims for the purpose of determining the amenability
to beneficiation processes or mining thereof, including bulk sampling.
2.6 The term "Net Returns Royalty" shall mean the total "Gross
Sale Proceeds" or "Deemed Gross Sale Proceeds" less deduction for the
following total actual costs paid by, charged to or otherwise incurred
by GPM within that calendar quarter which are attributed to handling,
treatment and sale of individual Minerals within that calendar quarter;
(1) All smelting, refining, treatment, assaying, sampling,
umpiring, selling, or other costs, charges and penalties
charged by any refinery, smelter or other purchaser of
Minerals;
(2) All taxes paid on production of Minerals, except income
taxes, including but not limited to, production, severance,
sales and privilege taxes, and all local, state and federal
royalties that are based upon the production of Minerals;
<PAGE>
(3) All costs of loading, securing, transporting and insuring
Minerals from the Claims to the refinery, smelter or
purchaser;
3. Option to Purchase.
3.1 RIFE grants to GPM the option ("the "Option"), exercisable
by GPM in its sole and exclusive discretion at any time during the term
of this Agreement, to purchase all of the Claims for a purchase price
of One Million Dollars ($1,000,000.00). All cash payments paid to RIFE
prior to the exercise of the Option shall be credited against the
purchase price.
3.2 If GPM timely exercises the Option, the closing shall be
no later than March 1, 2003. The closing shall be held at a time and
place as may be mutually agreed upon by the parties. At the closing
RIFE shall deliver to GPM a properly executed and acknowledged
assignment or other form of conveyance document conveying the Claims
free and clear of liens and encumbrances other than the Net Returns
Royalties as provided for in Section 2.4 payable from production from
the Claims and GPM shall deliver the balance of the purchase price. The
parties agree that they will execute and deliver such other documents
and take such other action as may be necessary to carry out their
obligations under this Agreement.
4. Indemnification & Insurance. GPM shall indemnify and save harmless
RIFE, his successors and assigns, of and from any liability for any claims,
actions or damages arising from the occupation and use of the Claims by GPM
pursuant to this Agreement. GPM agrees to maintain liability insurance in the
amount of One Million Dollars ($1,000,000.00) and to provide RIFE, with evidence
thereof. RIFE shall indemnify and save harmless GPM, its successors and assigns,
from liability for any claims, actions or damages arising from occupation and
use of the Claims by RIFE before the Effective Date of this Agreement.
5. Compliance with the Law. All exploration and development work
performed by GPM on the Property during the term of this Agreement shall conform
with the applicable laws and regulations of the state in which the Property is
situated and the United States of America. GPM shall be fully responsible for
compliance with all applicable Federal, state and local reclamation statutes,
regulations and ordinances related to such work. GPM agrees to post a
reclamation bond prior to exploration activities involving heavy equipment. RIFE
agrees to cooperate with GPM and GPM's application for governmental licenses,
permits, zoning changes and approvals, the cost of which shall be born by GPM.
<PAGE>
6. No Partnership. This Agreement shall not constitute any party the
partner, agent or legal representative of any other party nor create any
partnership, mining partnership or fiduciary relationship among the parties for
any purpose.
7. Annual payments. RIFE hereby represents that he has paid all current
fees for the claims described in Exhibit A. GPM agrees to pay all further claim
fees due and payable prior to termination of this Agreement. GPM agrees to pay
the State of Alaska 6(i) mining claim rent by October 1 of each year the lease
is in effect and provide RIFE with evidence of that payment within ten (10)
working days thereof. GPM agrees to provide RIFE with a copy of the recorded
Affidavit of Annual Labor by October 15 of each year this lease is in effect.
8. Assignment. Either party may sell, assign, transfer, convey or
otherwise dispose of or deal with its interest in the Agreement upon giving the
other party written notice thereof fifteen (15) days prior to the intended
transfer. The parties hereto agree that the assignment of either parties
interest shall not increase the obligations of the other party nor change any of
the terms of the Agreement.
9. Amendment, Relocation and Conversion of Claims. Subject to RIFE's
approval, which shall not be unreasonably withheld, GPM shall have the right, in
its sole and exclusive discretion, to amend or relocate the Claims. If the
mining laws of the United States or the State of Alaska are amended or repealed
or law enacted which permit or require the conversion of the Claims from
unpatented mining claims to leases, licenses, privileges or other interests, GPM
may, in its sole and exclusive discretion, elect to convert the Claims in which
case the interest of GPM in any such leases, licenses, privileges or other
interests shall be subject to the terms of this Agreement. To the extent GPM
elects not to convert the Claims in accordance with this Section 9 and such
claims become subject to surrender, abandonment or forfeiture, the right and
obligations of GPM and RIFE with respect to any Claims or portion of the Claims
subject to the surrender, abandonment or forfeiture shall be subject to the
provisions of Section 10.1. GPM shall have no obligation or liability to RIFE
for any claim or assertion of loss or damage resulting from the amendment,
relocation, conversion or attempted conversion of the Claims in accordance with
the terms of this Section 9.
10. Abandonment, Surrender and Termination. GPM shall have the right to
abandon or surrender any portion of the Property or terminate this Agreement as
provided below.
<PAGE>
10.1 Abandonment of Claims.
GPM may, in its sole and exclusive discretion, abandon any of
the Claims. GPM shall give written notice to RIFE of its election to
abandon a Claim which notice shall describe the Claim to be abandoned.
RIFE shall have thirty (30) days after its receipt of the notice of
abandonment to elect, in his sole and exclusive discretion, to take
from GPM a quitclaim deed for the Claim to be abandoned. RIFE shall
deliver written notice of his election. If RIFE does not elect to take
a quitclaim deed of the Claim, GPM shall have the absolute right to
abandon such Claim. On conveyance of the Claim to RIFE or abandonment
of the Claim by GPM , the obligations of GPM to RIFE under this
Agreement with respect to such conveyed or abandoned Claim shall cease,
except such obligations as have accrued before the date of abandonment
or reconveyance.
10.2 Termination of Agreement.
GPM may at any time terminate this Agreement by giving written
notice to RIFE. Termination of this Agreement by GPM shall be deemed to
be an election by GPM to abandon the Claims and to surrender any right,
title and interest therein.
14. 11. GPM Representations.
11.1 GPM is a corporation duly incorporated under the laws of
the State of Minnesota, is validly existing and is in good standing
under the laws of Minnesota, and is duly qualified to conduct business
in the State of Alaska.
11.2 GPM has the authority to enter into this Agreement and
the Officer signing this Agreement has the authority to enter into this
Agreement.
15. 12. RIFE Representations.
12.1 RIFE is the sole legal and equitable owner of the Claims
(subject to the paramount title in the State of Alaska).
12.2 The Claims are free and clear of all liens and
encumbrances and outstanding adverse claims and interests, except taxes
not yet payable.
<PAGE>
16. 13. Force Majeure.
GPM shall not be deemed in default of this Agreement during any period
when it is hindered, prevented or delayed from complying therewith in whole or
in party by, including but not limited to: acts of God; acts of the public
enemy; labor disturbances; civil disorders; war; unavoidable accidents;
unusually severe weather; unforeseen geological conditions; inability to obtain
any necessary permits, bonds or operating approvals whether by action or
inaction of governmental agency under asserted authority; environmental
restrictions or conditions; or any other cause reasonably beyond the control of
GPM, other than financial or economic delays, each of which is called a "Force
Majeure." The term of this Agreement shall be extended by the period of any
Force Majeure. GPM shall not be required to compensate RIFE for any loss
occasioned by a Force Majeure. GPM shall promptly notify RIFE of any suspension
caused by a Force Majeure and it shall use reasonable diligence to remedy or
eliminate the cause of such suspension. However, GPM shall not be required to
remedy the effects of any Force Majeure by settlement of any labor difficulty
contrary to its wishes or contest the validity of any law, regulation or any
action or inaction by a civil or military authority. The handling of those
controversies shall be entirely within GPM's discretion.
17. 14. Disputes not to Interrupt Operations.
Disputes or differences between GPM and the RIFE shall not interrupt
performance of this Agreement. In the event of any dispute or difference, GPM
may continue operations and pay any Net Returns Royalties in the same manner as
prior to the dispute until the matters have finally been determined between GPM
and RIFE by judicial determination, if necessary.
18. 15. Memorandum Agreement.
GPM and RIFE shall sign and acknowledge a memorandum of this Agreement
suitable for recording to give notice hereof to third parties. GPM shall record
the memorandum at its expense. This Agreement shall not be recorded.
19. 16. Notices.
Any notice or other communication ("Notice") required to be given under
the terms of this Agreement shall be in writing and shall become effective; when
personally served upon the party to be given such Notice; when posted by
certified or registered mail, return receipt requested; or when delivered by
telex, telegram,
<PAGE>
telecopier or other wire service.
The addresses for such Notices shall be:
RIFE: MACK RIFE
803 John Cole Road
Fairbanks, AK 99712
(907) 488-2957 - phone
GPM: Golden Phoenix Minerals, Inc.
3595 Airway Drive, Suite 405
Reno, NV 89511
ATTN: Michael R. Fitzsimonds, President
(702) 853-4919 - phone
(702) 853-5010 - telecopier
20. 17. Binding Effect of Obligations.
All covenants, conditions and terms of this Agreement shall be of
benefit to and run with the Property and shall bind and inure to the benefit of
the parties hereto, their respective heirs, representatives, assigns and
successors in interest.
21. 18. Whole Agreement.
This Agreement and exhibits attached hereto set for the entire
agreement between the parties hereto with respect to the subject matter hereof.
This Agreement supersedes all prior written and oral negotiations, discussions,
agreements and understandings related to such subject matter. Any modification
of the terms of this Agreement must be in writing, dated subsequent to the
Effective Date, and signed by each of the parties hereto.
<PAGE>
22. 19. Governing Law.
This Agreement is to be governed by and construed under the laws of the
State of Alaska.
23. 20. Multiple Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which shall constitute the same Agreement.
24. 21. Severability.
Any provision of this Agreement prohibited by the laws of the United
States or the State of Alaska shall be ineffective to the extent of such
prohibition without invalidating the remaining provisions of this Agreement.
25. 22. Summary Reports.
In each year during the term of this Agreement, RIFE may request that
GPM deliver a summary report of GPM's activities on the Claims for the preceding
calendar year. GPM shall deliver the summary report to RIFE within sixty (60)
days from GPM's receipt of the request. GPM shall have no liability to RIFE or
any other party arising from or relating to the information in the summary
report.
26. 23. Effective Date.
The effective date of this Agreement shall be December 1, 1997.
The parties hereto have executed this Agreement on the dates set forth
hereafter.
RIFE:
<PAGE>
- --------------------------- -------------------------------
MACK RIFE Taxpayer Identification Number
State of ALASKA )
)ss.
County of________________)
This Agreement was acknowledged before me on this ______ day of
____________, 1997 by MACK RIFE.
- ---------------------------------
NOTARY PUBLIC
GOLDEN PHOENIX MINERALS, INC.
- ----------------------------
BY: Michael Fitzsimonds
Title: President
State of NEVADA )
)ss.
<PAGE>
County of WASHOE__________)
This Agreement was acknowledged before me on this ____ day of
_______________________, 1997 by Michael Fitzsimonds as the President of GOLDEN
PHOENIX MINERALS, INC.
- -------------------------------
NOTARY PUBLIC
