UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
Quilchena Resources, Inc.
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(Name of Small Business Issuer in its charter)
Nevada 91-2006414
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
#3400 - 666 Burrard Street V6C 3M7
Vancouver, British Columbia, Canada
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (604) 688-3929
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None N/A
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Securities to be registered under Section 12(g) of the Act:
Common Capital Shares $0.001 par value
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(Title of class)
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GLOSSARY OF TERMS
<S> <C>
AMPHIBOLITE . . . . . . . . . . granular metamorphic rocks
ANDESITIC . . . . . . . . . fine-grained brown or greenish intermediate volcanic rocks
DACITIC . . . . . . . . fine-grained brown or greenish intermediate volcanic rocks, similar to andesitic rock
DIORITE . . . . . . . . . . . . coarse-grained plutonic igneous rocks containing quartz
GNEISSIC. . . . . . . . . . . . coarse grained metamorphic rock foliated by mineral layers
GREENSTONE. . . . . . . . . . . greenish igneous rock
LITHOLOGIES . . . . . . . . . . the general physical characteristics of rocks
MAGNETITE . . . . . . . . . . . magnetic iron oxide
MIGMATITES. . . . . . . . . . . composite rocks composed of igneous and metamorphic minerals
PELITES . . . . . . . . . . . . rocks composed of clay-like sediment
PERMIAN . . . . . . . . . . . . belonging to the last period of the Palaeozoic Era
PLUTONIC. . . . . . . . . . . . formed as igneous rock
PYRRHOTITE. . . . . . . . . . . minerals that form in magmatic igneous deposits; also found in highly metamorphic
rocks and in hydrothermal veins
PYROXENITE. . . . . . . . . . . any group of minerals
SCHIST. . . . . . . . . . . . . a foliated metamorphic rock composed of layers of different minerals which
split into thin, irregular plates
SUPRACRUSTALS . . . . . . . . . rocks that overlie basement rocks
TREMOLITE-ACTINOLITE. . . . . . a common mineral in metamorphic rocks, of which actinolite is the intermediate member
ULTRAMAFIC. . . . . . . . . . . intrusive rocks consisting of only dark colored minerals
VOLCANICLASTIC clastic rock (sediment composed of clasts which have been transported from their
place of origin, such as sandst
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 1. DESCRIPTION OF BUSINESS
1.1 Introduction
Quilchena Resources, Inc. (hereinafter referred to as the "Company") is a
mineral exploration and development company. The Company's corporate and head
offices are located at #3400 - 666 Burrard Street, Vancouver, British Columbia
V6C 3M7. The telephone number is (604) 688-3929 and the facsimile number is
(604) 688-3927.
The Company's consolidated financial statements are stated in United States
Dollars (US$) and are prepared in accordance with United States Generally
Accepted Accounting Principles.
In this Registration Statement, unless otherwise specified, all dollar amounts
are expressed in United States Dollars. Herein, all references to "CDN$" refer
to Canadian Dollars and all references to common shares refer to the common
capital shares in the capital stock of the Company.
1.2 Business Development of Issuer During Last Three Years
The Company was incorporated under the laws of the State of Nevada on March 3,
1999, and as such has had limited business development.
On July 20, 1999, the Company entered into an Assignment Agreement (the
"Assignment Agreement") with Wet Coast Capital Corporation ("Wet Coast"),
pursuant to which the Company paid Wet Coast the sum of $10,000 and in return,
was assigned Wet Coast's interest in an Option Agreement between Wet Coast and
Gerry Diakow, dated July 20, 1999 (the "Option Agreement"). Pursuant to the
Option Agreement, Mr. Diakow granted Wet Coast an option (the "Option") to
acquire a 100% undivided interest in property known as the "Hi-Ho 1 - 10 Mining
Claims", located in the New Westminster Mining Division, 121, 36 West Longitude
and 49 23, 30 North Latitude, British Columbia, Canada (the "Hi-Ho Claims").
Pursuant to the terms of the Assignment Agreement, in order to exercise the
Option, the Company must finance the work program on the Hi-Ho Claims (the "Work
Program"), as recommended by Douglas H. Hopper, Consulting Geologist, in his
report entitled "Exploration Potential of Hi-Ho Claims, Garnet Creek", dated
March 11, 1999 (the "Exploration Report"). A copy of the Exploration Report is
attached to this Registration Statement as an exhibit, as is Mr. Hopper's
consent to utilize the Exploration Report for this purpose. In the Exploration
Report, Mr. Hopper estimates the total cost of the Work Program at CDN$8,495.
Pursuant to the terms of an Amending Agreement dated February 9, 2000 (the
"Amending Agreement"), between Gerry Diakow and the Company, the Work Program
must be financed by December 31, 2000.
In partial satisfaction of the Work Program and under the terms of the Option
Agreement, Gerry Diakow spent five (5) days between November 22, 1999 and
November 27, 1999 examining, mapping, hand trenching and sampling the Hi-Ho
Claims (the "Initial Reconnaissance"). As required by the Work Program, on
February 3, 2000, Mr. Diakow prepared the initial engineering report, entitled
"Prospecting Report on Rock Sampling over the Hi-Ho Property"
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(the "Prospecting Report"). A copy of the Prospecting Report is attached to
this Registration Statement as an exhibit, as is Mr. Diakow's consent to utilize
the Prospecting Report for this purpose. In order to fulfil the requirements of
the Work Program, Mr. Diakow will spend a further period of time (as yet
undetermined), prior to December 31, 2000, examining, mapping, hand trenching
and sampling the Hi-Ho Claims (the "Secondary Reconnaissance"). Following the
Secondary Reconnaissance, and within two months, Mr. Diakow will prepare a final
engineering report (the "Final Engineering Report"). The Final Engineering
Report, together with the Prospecting Report, will fulfil the terms of the Work
Program, as well as the requirements to hold the Hi-Ho Claims in good standing
for between 3 and 4 years. Depending upon the economics of developing either an
industrial mineral property or a precious metal property, a second phase of
exploration may be commenced. The determination with respect to a second phase
of exploration will be made by the President of the Company, Derek Herman. The
Company anticipates that the Secondary Reconnaissance under the Work Program
will be completed by December 31, 2000.
The Company has not been involved in any bankruptcy, receivership or similar
proceedings, nor has it been a party to any material reclassification, merger,
consolidation or purchase or sale of a significant amount of assets not in the
ordinary course of its business.
1.3 Business of the Company
Since its incorporation, the Company has operated as a mineral exploration and
development company.
1.4 Business Strategy
The Company's objective is to explore, map, sample, develop and eventually mine
the Hi-Ho Claims. As a starting point, the Company has implemented the initial
stage of the Work Program, and the initial financing of same. The Work Program
must be completely financed by December 31, 2000, pursuant to the Amending
Agreement. Upon completion of the Work Program, the Company will evaluate the
findings made in the Prospecting Report and the Final Engineering Report, and
will determine its next course of action based upon the findings in both the
Prospecting Report and the Final Engineering Report.
1.5 Research and Development
To date, the Company has spent a minimal amount of money on the exploration of
the Hi-Ho Claims. Funds were expended in conjunction with seeking and securing
the Assignment Agreement ($10,000), and to facilitate the initial stage of the
Work Program (CDN$4,280). The Company must finance the Secondary Reconnaissance
by December 31, 2000, and anticipates that the cost to do so will be
approximately CDN$4,215. The Company does not anticipate that it will expend
any further funds through December 31, 2000.
1.6 Competition
The Company competes with mining companies and smaller natural resources
companies in the acquisition, exploration, financing and development of mineral
properties and projects. Many of these companies are larger, more experienced
and more well-established financially than the
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Company. The Company's economic position will depend upon its ability to
successfully and economically explore and develop, if economically feasible, the
Hi-Ho Claims and any other new mineral resource properties or projects. The
Company's ability to be competitive in the market over the long term is
dependent upon the quality and amount of ore discovered, cost of production and
proximity to its market. Due to the large number of companies and variables
involved in the mining industry, it is not possible to pinpoint the Company's
direct competition.
1.7 Risk Factors
Much of the information included in this Registration Statement includes or is
based upon estimates, projections or other "forward-looking statements". Such
forward-looking statements include any projections or estimates made by the
Company and its management in connection with its business operations. While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect the Company's current judgment regarding the
direction of its business, actual results will almost always vary, sometimes
materially, from any estimates, predictions, projections, assumptions, or other
future performance suggested herein. The Company undertakes no obligation to
update forward-looking statements to reflect events or circumstances occurring
after the date of such statements.
Such estimates, projections or other "forward-looking statements" involve
various risks and uncertainties as outlined below. The Company cautions the
readers that important factors in some cases have affected and, in the future,
could materially affect actual results and cause actual results to differ
materially from the results expressed in any such estimates, projections or
other "forward-looking statements". In evaluating the Company, its business and
any investment in the Company, readers should carefully consider the following
factors.
1.8 Risks of Exploration and Development
Resource exploration and development is by nature a speculative enterprise and
therefore involves a high degree of risk. The marketability of any natural
resources discovered by the Company will be affected by a number of factors
beyond its control, including commodity price, currency volatility, the
proximity and capacity of the natural resource markets and processing equipment,
government regulations with respect to prices, taxes, royalties, land tenure,
importing and exporting of minerals and environmental protection. In addition,
few mineral exploration properties become commercially viable mines, and there
cannot be any assurances that the exploration work carried out by the Company
will lead to the discovery of an ore body which will result in a commercially
viable or economically feasible mining operation. Although the exact effect of
these factors cannot be accurately predicted, a combination of these factors may
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result in the Company not receiving adequate return on invested capital and may
have an adverse impact on the Company's continued operations.
1.9 Recovery of Reserves
In carrying on its mineral exploration and development activities, the Company
may rely upon calculations as to potential ore reserves and corresponding ore
grades on the Company's prospects which, by their nature, are not exact. Until
the minerals are actually mined and processed, any ore reserves and ore grades
must be considered estimates only. As mineral prices have historically been
cyclical and dependent upon factors beyond the Company's control (including
changes in investment trends, international monetary systems, political events
and changes in the supply and demand for minerals on public and private
markets), the quantity of economic reserves will also vary. Any material
changes in reserves, ore grades or stripping ratios will further affect the
economic viability of any future prospects which may be developed. In addition,
short term operating factors relating to prospect development, including a need
for the orderly development and the processing of new or different mineral
grades may affect the Company's profitability at any given time. There can be
no assurances that mineral recovery rates predicted as a result of testing will
be duplicated on-site or during production.
1.10 Fluctuation of Mineral Prices
The Company's mining operations, if any are undertaken, will be subject to the
normal risks of mining. Profits are subject to fluctuations in mineral prices
and in particular the market price of the mineral being mined. The price of
minerals has fluctuated widely in the past and is affected by factors beyond the
Company's control, including international economic and political trends,
expectations of inflation, interest rates, global or regional consumptive
patterns, speculative activities and production methods. The effect of these
factors on the price of minerals cannot be accurately predicted.
1.11 Capitalization and Commercial Viability
The Company has limited financial resources and there can be no assurances that
additional funding will be available to the Company for further exploration or
development of the Hi-Ho Claims beyond the Work Program, or of any other
properties which may be acquired by the Company in the future. Although the
Company has been successful to date in obtaining financing through the sale of
its common shares, there can be no assurances that the Company will be
successful in doing so in the future. Failure to obtain additional financing
could result in delay or indefinite postponement of further exploration and
development of the Hi-Ho Claims or any future claims, with the possible loss of
exploration permits and/or the expiry of options in connection with such claims.
The commercial viability of production on a particular claim will be affected by
factors that are beyond the Company's control, including the attributes of any
particular deposit, the fluctuation in mineral prices, the costs of constructing
and operating a mine, processing facilities, the availability of economic
sources of energy, government regulations, including regulations relating to
prices, royalties, restrictions on production, quotas on exportation of mineral,
as well
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as the costs associated with environmental and agricultural land protection. It
is not possible to assess with any degree of certainty the impact of these
factors upon the Company's business.
1.12 Uninsurable Risks
Mining operations generally involve a high degree of risk. Hazards such as
unusual or unexpected formations, power outages, labour disruptions, flooding,
explosions, cave-ins, landslides, and the inability to obtain suitable or
adequate machinery or labour may have an effect on the Company's ability to
explore and develop the Hi-Ho Claims and other claims in the future. The
Company may become subject to liability for pollution, cave-ins or hazards
against which it cannot insure or against which it may not elect to insure. The
payments with respect to these types of liability may have a material, adverse
effect on the Company's financial position and continuing operations.
1.13 Compliance with Government Regulations
The Company's explorations and operations are subject to mining, health, labour
and environmental regulations, changes in which may result in additional
expenditures, availability of capital, competition, reserve uncertainty,
potential conflicts of interest, title risks, dilution and restrictions and
delays in operations, the extent of which is not possible to predict.
The mining industry in Canada is subject to legislation at both the federal and
provincial levels, and is mainly related to the protection of the environment.
The Company is required to obtain and maintain compliance with a full range of
activities during exploration, development, production and closure and
reclamation. Existing and possible future legislation could cause additional
expense and capital expenditures, restrictions and delays in the development and
future operations of the Hi-Ho Claims, the extent of which cannot be predicted
by management of the Company. The Company may incur increased or decreased
costs and delays depending upon the nature of its future activities, and the
standards that are applied. It is possible that the costs and delays associated
with meeting such standards may become such that the Company would not proceed
with the further development or operation of a mine.
In British Columbia, mining activities are regulated by two statutes, the Mines
Act and the Mineral Tenure Act.
The Mines Act applies to all mines during exploration, development,
construction, production, closure, reclamation and abandonment, and sets out the
regulations surrounding the initial staking and reserving of a mining property.
Pursuant to the Mines Act, the owner, agent or manager must apply for a permit
and must provide a plan outlining the proposed work and a program for, among
other things, the protection and reclamation of the lands prior to the
commencement of any work on the mining property. In addition, a manager of the
mine must be appointed prior to the commencement of any work is commenced.
Finally, each manager is responsible for keeping accurate mine site plans at the
provincial mining office; the plans must be updated every three months.
The Mineral Tenure Act addresses such things as the administration of the office
of the provincial gold commissioner, the manner in which a claim must be
recorded and maintained,
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the preparation of reports on geological work completed on a site, the issuance
of mining leases and other miscellaneous items pertaining to mining in the
Province of British Columbia.
1.14 "Penny Stock" Rules
The Company's common shares are subject to rules promulgated by the SEC relating
to "penny stocks", which apply to companies whose shares are not traded on a
national stock exchange or on the NASDAQ system, trade at less than $5.00 per
share, or who do not meet certain other financial requirements specified by the
SEC. These rules require brokers who sell "penny stocks" to persons other than
established customers and "accredited investors" to complete certain
documentation, make suitability inquiries of investors, and provide investors
with certain information concerning the risks of trading in the such penny
stocks. These rules may discourage or restrict the ability of brokers to sell
the Company's common shares and may affect the secondary market for the
Company's common shares. These rules could also hamper the Company's ability to
raise funds in the primary market for the Company's common shares.
1.15 Limited Operating History
As the Company was incorporated one year ago, on March 3, 1999, it has a limited
operating history on which to base an evaluation of its business and prospects.
The Company's prospects must be considered in light of the risks, uncertainties,
expenses and difficulties frequently encountered by companies in their early
stages of development. Some of these risks and uncertainties relate to the
Company's ability to explore, develop and exploit the Hi-Ho Claims, and other
claims in the future, and to attract, retain and motivate qualified personnel.
The Company cannot be sure that it will be successful in addressing these risks
and uncertainties, and its failure to do so could have a materially adverse
effect on its financial condition and continued operations. In addition, the
Company's operating results are dependent to a large degree upon factors outside
the Company's control, including among other things, the speculative nature of
resource exploration and development, inaccurate calculation of reserves and
difficulties associated with the recovery of same, fluctuation of mineral prices
and uninsurable risks. There are no assurances that the Company will be
successful in addressing these risks, and failure to do so may adversely affect
the Company's business and financial condition.
1.16 History of Losses
The Company has not achieved profitability and expects to continue to incur net
losses for the foreseeable future and may never become profitable. The Company
has incurred net losses of approximately $13,460 to December 31, 1999.
The Company's ability to generate significant revenues is uncertain. Its short
and long-term prospects depend upon the viability of the Hi-Ho Claims and any
claims it may acquire and develop in the future. The Company has projected that
a significant portion of its revenues will be generated from the exploration and
possible production of such minerals as nickel, copper, chromium, gold and
platinum from the Hi-Ho Claims. Accordingly, the Company's success is highly
dependent on developing the Hi-Ho Claims into a fully operational mine, which
may not prove to be commercially or economically viable, and the Company may
never generate significant revenues if the Hi-Ho Claims and any future claims do
not prove to be commercially
<PAGE>
or economically viable. In order for the Company to make a profit, its revenues
(of which it currently has none) must increase proportionately to its
exploration and development costs to cover those and other future costs. Even
if it becomes profitable, the Company may not sustain or increase its profits on
a quarterly or annual basis in the future.
1.17 Uncertain Ability to Manage Growth
The Company's ability to achieve its planned growth is dependent upon a number
of factors including, but not limited to, its ability to hire suitable
employees, the adequacy of the Company's financial resources and the Company's
ability to identify and develop the Hi-Ho Claims and any claims it may acquire
and develop in the future. In addition, there can be no assurance that the
Company will be able to achieve its anticipated goals or that it will be able to
manage successfully its operations. Failure to manage anticipated growth
effectively and efficiently could have a material adverse effect on the Company.
1.18 Need for Additional Financing
Based on its current operating plan, the Company anticipates that it will
require funds in the amount of approximately CDN$4,215 prior to December 31,
2000 in order to finance the Secondary Reconnaissance under the Work Program.
The funds required to do so are already in place. The Company does not
anticipate that it will require additional financing by the end of 2000;
however, the Company may need to raise additional capital sooner to fund more
rapid expansion, to conduct further exploration and/or to test the Hi-Ho Claims,
to develop new mineral claims or to respond to competitive pressures.
The Company's ability to continue in business in the future depends upon its
continued ability to obtain financing. There can be no assurance that any such
financing would be available upon terms and conditions acceptable to the
Company, if at all. The inability to obtain additional financing in a
sufficient amount when needed and upon acceptable terms and conditions could
have a material adverse effect upon the Company. Although the Company believes
that it can raise financing sufficient to meet its immediate needs, it will
require funds to finance its exploration and development activities in the
future. There can be no assurance that such funds will be available or
available on terms satisfactory to the Company. If additional funds are raised
by issuing equity securities, further dilution to existing or future
stockholders is likely to result. If adequate funds are not available on
acceptable terms when needed, the Company may be required to delay, scale-back
or eliminate its development. Inadequate funding also could impair the
Company's ability to compete in the marketplace and could result in its
dissolution.
1.19 Dependence Upon Key Personnel
The Company's key personnel is limited at present to Derek Herman, the President
of the Company. Mr. Herman is currently the sole director, officer and employee
of the Company. The loss of Mr. Herman's services and the services of any
future employees, for any reason, may have a materially adverse effect on the
prospects of the Company. There can be no assurance that the Company would be
able to find a suitable replacement in the event that Mr. Herman's services or
the services of future key employees are lost. Furthermore, the Company does
not presently maintain "key man" life insurance on the live of Mr. Herman. To
the extent that the
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services of any key employee of the Company become unavailable, the Company will
be required to retain other qualified persons; however, there can be no
assurance that it will be able to employ qualified persons upon acceptable
terms.
1.20 Employees
As at February 29, 2000, the Company employs 1 person on a full-time basis, the
President and sole director the Company, Derek Herman.
1.21 Insider Control of Common Stock
As of February 29, 2000, the sole director and executive officer beneficially
owned approximately 10% of the outstanding common shares.
1.22 Volatility of Stock Price
The Company's common shares are not currently publicly traded. In the future,
the trading price of the Company's common shares may be subject to wide
fluctuations. Trading prices of the common shares may fluctuate in response to
a number of factors, many of which will be beyond the Company's control. In
addition, the stock market in general, and the market for natural resource and
mining companies in particular, has experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of such companies. Market and industry factors may adversely affect
the market price of the common shares, regardless of the Company's operating
performance.
In the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been instituted. Such
litigation, if instituted, could result in substantial costs and a diversion of
management's attention and resources.
1.23 Reports to Security Holders
Under Nevada state law, the Company is not required to deliver an annual report
to its shareholders but does intend to voluntarily send an annual report
including its audited financial statements.
1.24 Securities and Exchange Commission's Public Reference
Any member of the public may read and copy any materials filed by the Company
with the Securities and Exchange Commission (the "SEC") at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information
on the operation of the Public Reference Room may be obtained by calling the SEC
at 1-800-SEC-0330. The SEC maintains an Internet web site (http://www.sec.gov)
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
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ITEM 2. PLAN OF OPERATION
2.1 General
The Company has completed the Initial Reconnaissance under the Work Program with
respect to the Hi-Ho Claims, and intends to implement the Secondary
Reconnaissance prior to December 31, 2000. As set out in the Option Agreement
and in accordance with the Work Program, Gerry Diakow will spend a further
period of time (as yet undetermined) conducting the Secondary Reconnaissance,
following which the Final Engineering Report will be completed. The Final
Engineering Report will fulfil the Work Program and the requirements to hold the
Hi-Ho Claims in good standing for between 3 and 4 years. Depending upon the
economics of developing either an industrial mineral property or a precious
metal property, a second phase of exploration may be commenced. A determination
with respect to a second phase of exploration will be made by the President of
the Company, Derek Herman, and will be dependent upon whether further
exploration of the Hi-Ho Claims is deemed to be economically and commercially
viable.
2.2 Cash Requirements
The Company's cash requirements for the period ending December 31, 2000 are
estimated at CDN$4,215 for completion of the Work Program. As the Company has
the funds to satisfy its cash requirements, it does not anticipate having to
raise additional funds over the next 12 months.
2.3 Exploration and Development
To date, the Company has not expended significant funds for exploration and
development. The Exploration Report was prepared prior to Company entering into
the Assignment Agreement. Pursuant to the Assignment Agreement, the Company
paid the sum of $10,000 to Wet Coast to acquire Wet Coast's interest in the
Option Agreement. The Company anticipates that it will spend approximately
CDN$4,215 on further exploration and development through December 31, 2000, in
the form of financing of the Final Reconnaissance under the Work Program. The
Company does not anticipate that it will expend further funds for exploration
and development through December 31, 2000, and will not know whether it will
expend any funds after that date until it receives and reviews the Final
Engineering Report.
2.4 Purchase of Significant Equipment
The Company does not intend to purchase any significant equipment through
December 31, 2000.
2.5 Employees
At this time, the Company does not anticipate a change in the number of
employees it retains (currently one employee).
ITEM 3. DESCRIPTION OF PROPERTY
The Company's executive and head offices are located at Suite 3400 - 666 Burrard
Street, Vancouver, British Columbia. The offices are extremely small in size
and are provided to the Company on a rent free basis by Sonora Capital
Corporation, a company with which the sole director and executive officer of the
Company, Derek Herman, has a relationship. The Company anticipates that its
office space will continue to be provided to it on a rent free basis through
December 31, 2000.
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Assignment Agreement/Option to Purchase
The Company does not own any property outright. Pursuant to the Assignment
Agreement, it has an option to acquire an undivided 100% interest in the Hi-Ho
Claims. Prior to entering into the Assignment Agreement, Wet Coast warranted
that it paid the sum of CDN$7,500 to Gerry Diakow, pursuant to the terms of the
Option Agreement. The Company, in turn, paid the sum of $10,000 to acquire the
Option Agreement from Wet Coast. In order to exercise its option under the
Assignment Agreement, and pursuant to the Amending Agreement, the Company must
fund the Work Program in its entirety by December 31, 2000. The Option
Agreement and the Assignment Agreement expire on January 20, 2001.
As set out in the Option Agreement and in accordance with the Work Program,
Gerry Diakow has completed the Initial Reconnaissance (5 days) and will spend a
further period of time (as yet undetermined) conducting the Secondary
Reconnaissance. Following the Initial Reconnaissance, the Prospecting Report
was completed. The Prospecting Report, together with the Final Engineering
Report, will fulfil the Work Program and the requirements to hold the Hi-Ho
Claims in good standing for between 3 and 4 years. Depending upon the economics
of developing either an industrial mineral property or a precious metal
property, a second phase of exploration may be commenced. At this time, the
Hi-Ho Claims are without known reserves and the Work Program and any further
programs are, at this time, exploratory in nature.
Location and Access
At present, the Company is at the "exploration stage" with respect to the Hi-Ho
Claims, and expects to remain at the exploration stage at least through December
31, 2000. The Hi-Ho Claims consist of 10 contiguous mineral claims comprising
225 hectares in the New Westminster Mining Division in southwestern British
Columbia, Canada. The Claims are located on Garnet Creek on the north side of
the Fraser River, approximately 13 kilometres west of Hope, British Columbia,
and are accessed by a dirt road which parallels the east side of Ruby Creek and
runs north from Highway 7 at a point 12 kilometres southwest of the juncture of
Highway 7 and the Trans Canada Highway.
Previous Operations
The Hi-Ho Claims are situated between two mining camps, each of which are within
10 miles of the Hi-Ho Claims. The first (the "Harrison Lake Group") is located
on the south slope of Bear Mountain approximately 4 miles west of the Hi-Ho
Claims. Considerable development work was done on the Harrison Lake Group
between 1915 and 1917, and approximately 181.4 tonnes of ore was shipped from
the property during 1916 and 1917. The second mining camp (the "Emory Creek
Mines") is located northeast of the Hi-Ho Claims, and has been developed since
the 1920's. The commodities include nickel, copper, chromium, gold, platinum
and palladium. Seventeen main ore bodies from these early works were later
mined by the Giant Nickel mine, which was in operation between 1958 and 1974.
Nickel and copper were the prime metallic products, with cobalt as a by-product.
Chrome oxide, platinum, gold and silver were also reported.
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The earliest recorded work in the vicinity of the Hi-Ho Claims was conducted by
Black Mastoden Mining Ltd. on a mineral claim located one mile north of the
mouth of Ruby Creek. An area known as Doctor's Point, located on the southwest
shore of Harrison Lake approximately 45 kilometres north-northeast of Harrison
Hot Springs contains two deposits. The first (the Providence Mine) was worked
in the late 1800s/early 1900s and is covered by Crown (government) grants. The
second is the Nagy Gold Occurrence, in which area Mr. G. Nagy discovered
gold-silver mineralization during the 1970s. The Nagy claims were purchased in
1981 and a further exploration program was undertaken by Rhyolite Resources Inc.
Present Condition of the Hi-Ho Claims
Between November 22 and November 29, 1999, Gerry Diakow, a mineral exploration
technician, carried out the Initial Reconnaissance on Hi-Ho Claims #1, #2, #3
and #4. The sampling completed by Mr. Diakow resulted in 17 rock samples and 2
silt samples, which were sent for analysis to Acme Analytical Laboratories Ltd.
("Acme") in Vancouver, British Columbia. The results of this analysis are
contained in a Geotechnical Analysis Certificate prepared by Acme in January,
2000, which Certificate forms part of the Prospecting Report.
The Hi-Ho Claims have not been explored for approximately 10 years. The low
elevation and warm, wet climate encourages the rapid growth of foliage in the
area, which has effectively covered the known showing and previous grid work.
THE HI-HO CLAIMS ARE WITHOUT KNOWN RESERVES, AND THE COMPANY'S PROPOSED PLAN
WITH RESPECT TO THE HI-HO CLAIMS IS EXPLORATORY IN NATURE.
Plant and Equipment
At this time, the Company does not have a plant or any equipment at the Hi-Ho
Claims. As the Company is in the early stages of exploration with respect to
the Hi-Ho Claims, it does not anticipate expending any capital on a plant or
related equipment at the Hi-Ho Claims through December 31, 2000.
Rock Formations and Mineralization
The following information was extracted from the Exploration Report, prepared by
Douglas H. Hopper, Consulting Geologist.
The words in BOLD PRINT in this section are defined at the beginning of this
Registration Statement: See "Glossary of Terms".
The Harrison Lake fracture system forms a major, southeasterly trending
dislocation over 100 kilometres in length, which in part passes along, and
parallel to Harrison Lake. The system separates highly contrasting geological
regimes. To the northeast, the rocks include well-formed SUPRACRUSTALS of the
Pennsylvanian to Permian Chilliwack Group, as well as highly foliated GNEISSIC
rocks and some younger granites. By contrast, the rocks on the southwestern
side of the
<PAGE>
fracture are generally younger, are less deformed and have suffered lower
metamorphic grade. They include a variety of volcanic, VOLCANICLASTIC and
sedimentary rocks, as well as intrusive granite rocks and MIGMATITES. The most
important regarding gold mineralization are the Fire Lake and Harrison Lake
Groups which are well developed respectively northwest and southwest of Harrison
Lake. The Fire Lake Group comprises a variety of coarse to fine-grained
sedimentary rocks with lesser GREENSTONE volcanic rocks, while the Harrison Lake
Group is predominantly a volcanic sequence of ANDESITIC to DACITIC composition,
with smaller amounts of VOLCANICLASTIC and sedimentary rocks. Both groups are
intruded by younger PLUTONIC rocks ranging from granite to DIORITE.
The Harrison Lake fracture system is associated with regional hot spring
activity; this includes two hot springs along the Lillooet River valley,
northwest of the lake, as well as one situated at Harrison Hot Springs on the
southeastern extremity of the lake. The gold mineralization along the system is
hosted in rocks of various ages and LITHOLOGIES. The Fire Lake gold camp,
situated approximately 20 kilometres northwest of Harrison Lake, includes six
mineralized occurrences, all of which are found in quartz-rich veins that cut
the Fire Lake Group.
The Hi-Ho Claims are underlain mainly by lower Pennsylvanian to lower PERMIAN
basic volcanic rocks and PELITES of the Chilliwack Group. On the east side of
Ruby Creek, a small band of SCHIST and AMPHIBOLITE rocks are separated from the
Chilliwack volcanics by a north/south trending fault. A talc exposure 70 metres
thick with a strike length of 10 metres has been reported on the southwest bank
of Ruby Creek. The talc is believed to be completely altered ULTRAMAFIC body,
as many such bodies are seen in the vicinity, including a bluff of pyroxenite
north of the talc showing. In this section, the talc ore consists of 25%
TREMOLITE-ACTINOLITE and 5% MAGNETITE. PYRROHTITE, carrying values in nickel
and copper is also reported. Silver in amounts up to 100 grams per tonne was
obtained from pack rock drill samples.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
4.1 Beneficial Ownership
As used in this section, the term "beneficial ownership" with respect to a
security is defined by Regulation 228.403 under the Securities Exchange Act of
1934, as amended, as consisting of: (1) any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise has
or shares voting power (which includes the power to vote, or to direct the
voting of such security) or investment power (which includes the power to
dispose, or to direct the disposition of, such security); and (2) any person
who, directly or indirectly, creates or uses a trust, proxy, power of attorney,
pooling arrangement or any other contract, arrangement or device with the
purpose or effect of divesting such person of beneficial ownership of a security
or preventing the vesting of such beneficial ownership.
Each person has sole voting and investment power with respect to the common
shares, except as otherwise indicated. Beneficial ownership consists of a
direct interest in the common shares, except as otherwise indicated.
<PAGE>
As of February 29, 2000, 5,000,000 common shares, par value $0.001 were issued
and outstanding. The Company is authorized to issue 200,000,000 common shares,
par value $0.001.
As of February 29, 2000, no person known to the Company was the beneficial owner
of more than five percent (5%) of the outstanding common shares of the Company
except the following:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
<S> <C> <C> <C>
Common Shares Dream Weaver Investments Ltd.
Glendenning House, 618 Wicklow
Street, Dublin 2 Ireland 497,500 9.95%
- ------------------------------------- --------------------------------- -------------------- --------------
Common Shares Cronwall Investments Ltd.
Suite 95 East Bay Shopping Centre
P.O. Box N-1836, Nassau, Bahamas 497,500 9.95%
- ------------------------------------- --------------------------------- -------------------- --------------
Common Shares Spirit Investments Ltd. (2)
16 Promenade Saint-Antoine
1204 Geneva, Switzerland 497,500 9.95%
- ------------------------------------- --------------------------------- -------------------- --------------
Common Shares Lamplighter Investments Ltd.
88 Ellis Road, Crowthorne Berks
. . . . . . . . . . . . England RG45 6PN 497,500 9.95%
- ------------------------------------- --------------------------------- -------------------- --------------
Common Shares Strathburn Investments Ltd.
Suite 95 East Bay Shopping Centre
P.O. Box N-1836, Nassau, Bahamas 497,500 9.95%
- ------------------------------------- --------------------------------- -------------------- --------------
Common Shares Dynamic Investments Ltd.
Penthouse Suite, Buckingham Square
West Bay Road, SMB,
Grand Cayman, Cayman Islands, BWI 497,500 9.95%
- ------------------------------------- --------------------------------- -------------------- --------------
Common Shares Anchor Cove Investments Ltd.
2 Elyston Court, Howard's Lane,
Putney, London,
England SW15 6QH 497,500 9.95%
- ------------------------------------- --------------------------------- -------------------- --------------
Common Shares Aero Atlantic Ltd.
Palm Chambers, P.O. Box 119
Roadtown, Tortola, BVI 497,500 9.95%
- ------------------------------------- --------------------------------- -------------------- --------------
Common Shares Sonora Capital Corp.
1000 - 355 Burrard Street
Vancouver, BC V6C 2G8 Canada 497,500 9.95%
- ------------------------------------- --------------------------------- -------------------- --------------
Common Shares Castaways Holdings
Palm Chambers, P.O. Box 119
Roadtown, Tortola, BVI 497,500 9.95%
===================================== ================================= ==================== ==============
<FN>
(1) Based on 5,000,000 shares outstanding as of February 29, 2000.
(2) Derek Herman is the authorized signatory for but not the beneficial owner of the shares owned by
Spirit Investments Ltd.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The following table lists, as of February 29, 2000, the number of common shares
beneficially owned, and the percentage of the Company's common shares so owned,
by the sole director and officer.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
============== ================================ ===================== ===========
<S> <C> <C> <C>
Derek Herman
Common . . . . 302 - 1825 West 8th Avenue
Shares . . . . Vancouver, BC V5E 1E3 Canada 498,500(2) 10.0%
Common
Shares . . . . Directors and Officer as a group 498,500 10.0%
============== ================================ ===================== ===========
<FN>
(1) Based on 5,000,000 shares outstanding as of February 29, 2000 and, as to a
specific person, shares issuable pursuant to the conversion or exercise, as the case
may be, of currently exercisable or convertible debentures, share purchase warrants
and stock options.
(2) Spirit Investments Ltd. (16 Promenade Saint-Antoine, 1204 Geneva,
Switzerland) owns 497,500 of the total number of common shares held by Derek Herman.
Mr. Herman is the authorized signatory for but not the beneficial owner of the
shares owned by Spirit Investments Ltd.
</TABLE>
4.2 Changes in Control
The Company is unaware of any contract or other arrangement, the operation of
which may at a subsequent date result in a change of control of the Company.
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table and text sets forth the names and ages of the Company's sole
director, sole executive officer and sole significant employee as of February
29, 2000. The present director will serve until the next Annual General Meeting
of shareholders and until his successor(s) is/are elected and qualified, or
until his earlier death, retirement, resignation or removal. Also provided is a
brief description of the business experience of the sole director, executive
officer and significant employee during the past five years and an indication of
directorships held by the sole director in other companies subject to the
reporting requirements under the federal securities laws.
<TABLE>
<CAPTION>
5.1 Directors, executive officers and other significant employees:
POSITION HELD WITH THE DATE FIRST ELECTED
NAME COMPANY AGE OR APPOINTED
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Derek Herman President, Secretary,
Treasurer and Director 46 March 4, 1999 (as
to all positions)
- --------------------------------- ------------------ ------------ -----------------
</TABLE>
During 1999 and 2000, Derek Herman was the Acting Chairman of Sportsprize
Entertainment Inc., an e-commerce sporting product sales company, and so acted
until Sportsprize's offices moved to California. Between 1996 and 2000, Mr.
Herman was the owner and President of TCD Technology Ltd. (Vancouver, British
Columbia), a developer, manufacturer and marketer of specialized computer
products. Prior to his employment at TCD Technology Ltd., Mr. Herman was the
owner of DH & Associates, a company located in Johannesburg, South Africa, which
began as a print marketing company and evolved over time to offer services
including electronic pre-press through to film imaging, print brokering, and
public relations. Mr. Herman completed his articled chartered accountant
training at Michelow Karlin & James Chartered Accounts in South Africa in 1973.
<PAGE>
There are no arrangements or understandings between any two or more directors or
executive officers, pursuant to which Mr. Herman was selected to be a director
or executive officer.
The Company's sole director, executive officer, promoter and control person has
not been involved in any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
3. being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
4. being found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
ITEM 6. EXECUTIVE COMPENSATION
The Company's chief executive officer (and sole director and executive officer)
did not receive any cash or other compensation during the year ended December
31, 1999.
There were no grants of stock options or stock appreciation rights made during
the fiscal year ended December 31, 1999 to the Company's sole executive officer
and sole director. There were no stock options outstanding as at February 29,
2000, and the Company has not granted options to its executive officer and
director. To date, the Company has granted no stock options to employee or
consultants.
The Company has no formal plan for compensating its directors for their service
in their capacity as directors although such directors have received from time
to time and are expected to receive in the future options to purchase common
shares as awarded by the Board of Directors or (as to future options) a
Compensation Committee which may be established. Directors are entitled to
reimbursement for reasonable travel and other out-of-pocket expenses incurred in
connection with attendance at meetings of the Board of Directors. The Board of
Directors may award
<PAGE>
special remuneration to any director undertaking any special services on behalf
of the Company other than services ordinarily required of a director. Other
than indicated below, no director received and/or accrued any compensation for
his services as a director, including committee participation and/or special
assignments.
There are no management agreements with the Company's sole director or sole
executive officer.
Other than as discussed above, the Company has no plans or arrangements in
respect of remuneration received or that may be received by the sole executive
officer of the Company to compensate such officer in the event of termination of
employment (as a result of resignation, retirement, change of control) or a
change of responsibilities following a change of control, where the value of
such compensation exceeds US$60,000 per executive officer.
There are no arrangements or plans in which the Company provides pension,
retirement or similar benefits for directors or executive officers. Other than
the management agreements and advisory agreements discussed herein, the Company
has no material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to the Company's directors or executive officers,
except that stock options have been and may be granted at the discretion of the
Board of Directors or a committee thereof.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than as disclosed above, there have been no transactions, or proposed
transactions, which have materially affected or will materially affect the
Company in which any director, executive officer, or beneficial holder of more
than 10% of the outstanding common stock, or any of their respective relatives,
spouses, associates or affiliates has had or will have any direct or material
indirect interest.
Derek Herman is the sole promoter of the Company. He subscribed for and was
issued 1,000 common shares of the Company at a price of $0.01 per share (see
Items 4 and 10).
ITEM 8. LEGAL PROCEEDINGS
The Company knows of no material, active or pending legal proceedings against
it, nor is the Company involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any director, officer of
affiliate of the Company, or any registered or beneficial shareholder is an
adverse party or has a material interest adverse to the Company.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no public trading market for the Company's common shares.
The Company's common shares are issued in registered form. First American Stock
Transfer, Inc., 610 East Bell Road, #2 - 155, Phoenix, Arizona 85022-2393
(Telephone: (602) 485-1346 Facsimile: (602) 953-7482) is the registrar and
transfer agent for the Company's common shares.
<PAGE>
On February 29, 2000, the shareholders' list for the Company's common shares
showed 32 registered shareholders and 5,000,000 shares outstanding. The Company
has researched indirect holdings registered to the various depository
institutions and stock brokerage firms, and estimates that there no additional
beneficial shareholders beyond the 32 registered shareholders at the above date.
The Company has not declared any dividends since incorporation and does not
anticipate that it will do so in the foreseeable future. Although there are no
restrictions that limit the ability to pay dividends on the Company's common
shares, the intention of the Company is to retain future earnings for use in its
operations and the expansion of its business.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
In the past three years, the Company has sold the following common shares
without registering such common shares under the Securities Act of 1933:
On March 15, 1999, the Company sold a total of 5,000,000 common shares at a
price of $0.01 per common share, for total cash consideration of $50,000 to the
following persons, relying on Rule 504 of Regulation D under the Securities Act
of 1933, as amended. The price per share was established arbitrarily by the
Company's management.
<TABLE>
<CAPTION>
NUMBER OF
COMMON CAPITAL
SHARES NAME CONSIDERATION
<C> <S> <C>
497,500 Dream Weaver Investments Ltd. $ 4,975
- -------------- ------------------------------- --------------
497,500 Cronwall Investments Ltd. . . $ 4,975
- -------------- ------------------------------- --------------
497,500 Spirit Investments Ltd. . . . $ 4,975
- -------------- ------------------------------- --------------
497,500 Lamplighter Investments Ltd.. $ 4,975
- -------------- ------------------------------- --------------
497,500 Strathburn Investments Ltd. . $ 4,975
- -------------- ------------------------------- --------------
497,500 Dynamic Investments Ltd.. . . $ 4,975
- -------------- ------------------------------- --------------
497,500 Anchor Cove Investments Ltd.. $ 4,975
- -------------- ------------------------------- --------------
497,500 Aero Atlantic Ltd.. . . . . . $ 4,975
- -------------- ------------------------------- --------------
497,500 Sonora Capital Corp.. . . . . $ 4,975
- -------------- ------------------------------- --------------
<PAGE>
497,500 Castaways Holdings. . . . . . $ 4,975
- -------------- ------------------------------- --------------
1,000 Farrel Barwin . . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Bill Turner . . . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Derek Herman. . . . . . . . . $ 10
- -------------- ------------------------------- --------------
2,000 Zvi Mammon. . . . . . . . . . $ 20
- -------------- ------------------------------- --------------
1,000 Darryl Fain . . . . . . . . . $ 10
------------------------------- --------------
1,000 Brandon Barwin. . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Phil DuBois . . . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Michael O'Brien . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Don Graham. . . . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Serena Sive . . . . . . . . . $ 10
- -------------- ------------------------------- --------------
2,000 Norman Mammon . . . . . . . . $ 20
- -------------- ------------------------------- --------------
1,000 Laurie Stringer . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Matt Emery. . . . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Dan Isserow . . . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Russ Isaac. . . . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Phillip Levinson. . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Gary Treisman . . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Kevin Ossip . . . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Sydney Broer. . . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Kathy Robinson. . . . . . . . $ 10
- -------------- ------------------------------- --------------
1,000 Jonty McNair. . . . . . . . . $ 10
- -------------- ------------------------------- --------------
2,000 Gisele Decker . . . . . . . . $ 20
============== =============================== ==============
</TABLE>
ITEM 11. DESCRIPTION OF SECURITIES
All of the authorized shares of common stock of the Company are of the same
class and, once issued, rank equally as to dividends, voting powers, and
participation in assets. Holders of common shares are entitled to one vote for
each share held of record on all matters to be acted upon by the shareholders.
Holders of common shares are entitled to receive such dividends as may be
declared from time to time by the Board of Directors, in its discretion, out of
funds legally available therefore.
Upon liquidation, dissolution or winding up of the Company, holders of common
shares are entitled to receive pro rata the assets of Company, if any, remaining
after payments of all debts and liabilities. No common shares have been issued
subject to call or assessment. There are no pre-emptive or conversion rights
and no provisions for redemption or purchase for cancellation, surrender, or
sinking or purchase funds.
Provisions as to the modification, amendment or variation of the rights
attaching to the common shares or provisions are contained in Title 7 (Business
Associations; Securities; Commodities) of the Nevada Revised Statutes (Chapter
78 - Private Corporations) as follows (NRS 78.207):
1. Unless otherwise provided in the articles of incorporation, a corporation
organized and existing under the laws of this state that desires to change the
number of shares of a class and series, if any, of its authorized stock by
increasing or decreasing the number of authorized shares of the class and series
and correspondingly increasing or decreasing the number of issued and
outstanding shares of the same class and series held by each stockholder of
record at the effective date and time of the change, may, except as otherwise
provided in subsections 2 and 3, do so by a resolution adopted by the board of
directors, without obtaining the approval of the stockholders. The resolution
may also provide for a change of the par value, if any, of the same class and
series of the shares increased or decreased. After the effective date and time
of the change, the corporation may issue its stock in accordance therewith.
2. A proposal to increase or decrease the number of authorized shares of any
class and series, if any, that includes provisions pursuant to which only money
will be paid or scrip will be issued to stockholders who:
<PAGE>
(a) Before the increase or decrease in the number of shares becomes
effective, in the aggregate hold 10 percent or more of the outstanding shares of
the affected class and series; and
(b) Would otherwise be entitled to receive fractions of shares in exchange
for the cancellation of all of their outstanding shares,
must be approved by the vote of stockholders holding a majority of the voting
power of the affected class and series, or such greater proportion as may be
provided in the articles of incorporation, regardless of limitations or
restrictions on the voting power thereof.
3. If a proposed increase or decrease in the number of authorized shares of
any class or series would alter or change any preference or any relative or
other right given to any other class or series of outstanding shares, then the
increase or decrease must be approved by the vote, in addition to any vote
otherwise required, of the holders of shares representing a majority of the
voting power of each class or series whose preference or rights are affected by
the increase or decrease, regardless of limitations or restrictions on the
voting power thereof.
4. Any proposal to increase or decrease the number of authorized shares of
any class and series, if any, that includes provisions pursuant to which only
money will be paid or scrip will be issued to stockholders who:
(a) Before the increase or decrease in the number of shares becomes
effective, hold 1 percent or more of the outstanding shares of the affected
class and series; and
(b) Would otherwise be entitled to receive a fraction of a share in exchange
for the cancellation of all of their outstanding shares,
is subject to the provisions of NRS 92A.300 to 92A.500 inclusive. If the
proposal is subject to those provisions, any stockholder who is obligated to
accept money or scrip rather than receive a fraction of a share resulting from
the action taken pursuant to this section may dissent in accordance with those
provisions and obtain payment of the fair value of the fraction of a share to
which the stockholder would otherwise be entitled.
The Company's articles and by-laws do not contain any provisions that would
delay, defer or prevent a change in control of the Company.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws provide that, subject to the provisions of the Nevada
Revised Statutes, Title 7 (Business Associations, Securities, Commodities),
Chapter 78 (Private Corporations) and the General Corporation Law of the State
of Nevada, any person who was or is a party or is threatened to be made a party
to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, because he or a person whom he legally
represents is or was a director or officer of the Company, or is or was serving
at the request of the Company or for its benefit as a director or officer of
another corporation, or as its representative in a partnership, joint venture,
trust or other enterprise, will be indemnified and held harmless to the
<PAGE>
fullest extent legally permissible under the General Corporation Law of the
State of Nevada from time to time against all expenses, liability and loss
(including attorneys' fees, judgments, fines and amounts paid in settlement)
reasonably incurred or suffered by him in connection with his acting in any such
positions. The expenses of officers and directors incurred in defending a civil
or criminal action, suit or proceeding must be paid by the Company as such costs
are incurred and in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that such director and/or officer is not entitled to be
indemnified by the Company.
12.1 Indemnification under the Nevada Revised Statutes
Pursuant to NRS 78.7502 the Nevada Revised Statutes, Title 7 (Business
Associations, Securities, Commodities), Chapter 78 (Private Corporations):
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which 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. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
<PAGE>
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, the corporation shall indemnify him against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection with the defense.
Pursuant to NRS 78.751:
1. Any discretionary indemnification under NRS 78.7502, unless ordered by a
court or advanced pursuant to subsection 2, may be made by the corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent legal counsel in a
written opinion.
2. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
3. The indemnification and advancement of expenses authorized in or ordered
by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to NRS 78.7502
<PAGE>
or for the advancement of expenses made pursuant to subsection 2, may not be
made to or on behalf of any director or officer if a final adjudication
establishes that his acts or omissions involved intentional misconduct, fraud or
a knowing violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
ITEM 13. FINANCIAL STATEMENTS
The Company's consolidated financial statements are stated in United States
Dollars (US$) and are prepared in accordance with United States Generally
Accepted Accounting Principles.
The consolidated financial statements are attached hereto and found immediately
following the text of this Registration Statement. The Auditor's Report of
Davidson & Company, for the audited interim financial statements for the
quarters ended June 30, 1999, September 30, 1999 and December 31, 1999 are
included herein immediately preceding the audited consolidated financial
statements.
Audited Consolidated Financial Statements and Financial Statement Schedules by
Davidson and Company:
Auditor's Report, dated February 1, 2000.
Consolidated Balance Sheet at December 31, 1999.
Consolidated Statements of Operations and Deficit for the Year Ended
December 31, 1999.
Consolidated Statement of Cash Flows for the Year Ended December 31, 1999.
Notes to Consolidated Financial Statements.
<PAGE>
QUILCHENA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1999
<PAGE>
DAVIDSON & COMPANY
Chartered Accountants
A Partnership of Incorporated Professionals
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Quilchena Resources, Inc.
(An Exploration Stage Company)
We have audited the accompanying balance sheet of Quilchena Resources, Inc. as
at December 31, 1999 and the related statements of operations, stockholders'
equity and cash flows for the period from incorporation on March 3, 1999 to
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1999 and the
results of its operations and its cash flows for the period from incorporation
on March 3, 1999 to December 31, 1999 in conformity with generally accepted
accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming that
Quilchena Resources, Inc. will continue as a going concern. As discussed in
Note 2 to the financial statements, unless the Company attains further
profitable operations and/or obtains additional financing, there is substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regards to these matters are discussed in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
February 1, 2000
A Member of SC INTERNATIONAL
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372, Pacific
Centre, Vancouver, BC, Canada, V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
<PAGE>
<TABLE>
<CAPTION>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
BALANCE SHEET
(Expressed in United States Dollars)
AS AT DECEMBER 31, 1999
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 40,964
================================================= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 4,424
---------
STOCKHOLDERS' EQUITY
Capital stock (Note 5)
Authorized
200,000,000 common shares, par value of $0.001
Issued and outstanding
5,000,000 . common shares 5,000
Additional paid in capital 45,000
Deficit accumulated during the exploration stage (13,460)
---------
Total stockholders' equity 36,540
---------
Total liabilities and stockholders' equity $ 40,964
================================================= =========
<FN>
HISTORY AND ORGANIZATION OF THE COMPANY (Note 1)
GOING CONCERN (Note 2)
ON BEHALF OF THE BOARD:
/s/ Derek Herman
Director
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
STATEMENT OF OPERATIONS
(Expressed in United States Dollars)
PERIOD FROM INCORPORATION ON MARCH 3, 1999 TO DECEMBER 31, 1999
<S> <C>
EXPENSES
Incorporation costs . . . . . . . . . $ 640
Professional fees . . . . . . . . . . 1,924
Transfer agent fees . . . . . . . . . 896
Mineral property acquisition costs. . 10,000
-----------
LOSS FOR THE PERIOD. . . . . . . . . . $ (13,460)
====================================== ===========
BASIC AND FULLY DILUTED LOSS PER SHARE $ (0.01)
WEIGHTED AVERAGE SHARES OUTSTANDING. . 4,000,000
====================================== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Expressed in United States Dollars)
PERIOD FROM INCORPORATION ON MARCH 3, 1999 TO DECEMBER 31, 1999
Deficit
Accumulated
Additional During the
Common Stock Paid-in Exploration
Shares Amount Capital Stage Total
--------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCORPORATION, MARCH 3, 1999 - $ - $ - $ - $ -
Shares issued for cash . . . 5,000,000 5,000 45,000 - 50,000
Loss for the period. . . . . - - - (13,460) (13,460)
--------- ------- -------- --------- ---------
BALANCE AT DECEMBER 31, 1999 5,000,000 $ 5,000 $ 45,000 $(13,460) $ 36,540
============================ ========= ======= ======== ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
STATEMENT OF CASH FLOWS
(Expressed in United States Dollars)
PERIOD FROM INCORPORATION ON MARCH 3, 1999 TO DECEMBER 31, 1999
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period. . . . . . . . . . . . . . . . . $(13,460)
Changes in other operating assets and liabilities:
Increase in accounts payable . . . . . . . . . . . 4,424
---------
Net cash provided by operating activities. . . . . . (9,036)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of capital stock for cash . . . . . . . . . 50,000
---------
Net cash provided by financing activities. . . . . . 50,000
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash provided by investing activities. . . . . . -
---------
CHANGE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD 40,964
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD. . . . -
---------
CASH AND CASH EQUIVALENTS, END OF PERIOD. . . . . . . $ 40,964
===================================================== =========
CASH PAID DURING THE PERIOD FOR:
Interest expense . . . . . . . . . . . . . . . . . . $ -
Income taxes . . . . . . . . . . . . . . . . . . . . -
===================================================== =========
<FN>
SUPPLEMENTAL DISCLOSURE FOR NON-CASH OPERATING, FINANCING AND INVESTING
ACTIVITIES (Note 6)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1999
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was formed on March 3, 1999 under the Laws of the State of
Nevada and is in the business of exploration and development of mineral
properties. The Company has not yet determined whether its properties contain
mineral resources that may be economically recoverable. The Company therefore
has not reached the development stage and is considered to be an exploration
stage company.
2. GOING CONCERN
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and the satisfaction of liabilities and commitments in
the normal course of business. The general business strategy of the Company is
to acquire mineral properties either directly or through the acquisition of
operating entities. The continued operations of the Company and the
recoverability of mineral property costs is dependent upon the existence of
economically recoverable reserves, confirmation of the Company's interest in the
underlying mineral claims, the ability of the Company to obtain necessary
financing to complete the development and upon future profitable production.
The Company has incurred operating losses and requires additional funds to meet
its obligations and maintain its operations. Management's plan in this regard
is to raise equity financing as required. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. These
financial statements do not include any adjustments that might result from this
uncertainty.
1999
-----
Deficit accumulated during the exploration stage $ (13,460)
Working capital 36,540
==============================================================================
3. SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less. These are recorded at cost which
approximates market.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
accounts payable and accrued liabilities. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from these financial instruments. The fair
value of these financial instruments approximate their carrying values, unless
otherwise noted.
FOREIGN CURRENCY TRANSLATION
Amounts denominated in foreign currencies are translated into United States
currency at exchanges rates prevailing at transactions dates. Carrying values
of monetary assets and liabilities are adjusted at each balance sheet date to
reflect the exchange rate at that date. Gains and losses from restatement of
foreign currency monetary assets and liabilities are included in income.
<PAGE>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1999
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd )
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133") which establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
In June 1999, the FASB issued SFAS 137 to defer the effective date of SFAS 133
to fiscal quarters of fiscal years beginning after June 15, 2000. The Company
does not anticipate that the adoption of the statement will have a significant
impact on its financial statements.
RESOURCE PROPERTIES
Costs of acquisition, exploration, carrying, and retaining unproven
properties are expenses as incurred. Costs incurred in proving and developing a
property ready for production are capitalized and amortized over the life of the
mineral deposit or over a shorter period if the property is shown to have an
impairment in value.
ENVIRONMENTAL REQUIREMENTS
At the report date, environmental requirements related to the mineral
claims acquired (Note 4) are unknown and therefore an estimate of any future
cost cannot be made.
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes". A
deferred tax asset or liability is recorded for all temporary differences
between financial and tax reporting and net operating loss carryforwards.
Deferred tax expenses (benefit) result from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
LOSS PER SHARE
Loss per share is computed based on the weighted average number of common
shares and common stock equivalents outstanding during each period, unless the
common stock equivalents are anti-dilutive. For the period ended December 31,
1999, the weighted average number of common shares outstanding was 4,000,000.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value.
The Company has chosen to account for stock-based compensation using Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee is required to pay for the stock.
COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income". This statement establishes
rules for the reporting of comprehensive income and its components. The
adoption of SFAS 130 had no impact on total shareholders' equity as of December
31, 1999.
<PAGE>
QUILCHENA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1999
4. MINERAL PROPERTY
On July 20, 1999, the Company acquired an option to earn a 100% interest in
the Hi-Ho 1-10 Mining claims located in the New Westminster Mining Division of
British Columbia for the price of $10,000 (paid). To exercise its option, the
Company must complete a recommended work program in the amount of CDN$8,495 by
July 20, 2000. As the claims do not contain any known reserves, the acquisition
costs have been expensed during the year.
5. CAPITAL STOCK
During the period, the Company issued 5,000,000 common shares under Rule
504 of Regulation D of the Securities Act of 1933, at a price per share of
$0.01, for total proceeds of $50,000.
6. SUPPLEMENTAL DISCLOSURE FOR NON-CASH OPERATING, FINANCING AND
INVESTING ACTIVITIES
There were no significant non-cash transactions during the period ended December
31, 1999.
7. INCOME TAXES
The Company's total deferred tax asset at December 31 is as follows:
1999
-----
Tax benefit of net operating loss carryforward $ 520
Valuation allowance (520)
------
$ -
======
The Company has a net operating loss carryforward of approximately $3,460.
The Company has provided a full valuation allowance on the deferred tax asset
because of the uncertainty regarding realizability.
8. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four digits to identify a year. Date-sensitive systems may
incorrectly recognize the Year 2000 as some other date, resulting in errors.
The effects of the Year 2000 Issue may be experienced before, on or after
January 1, 2000 and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers or other
third parties, will be fully resolved.
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
15.1 Financial Statements Filed as Part of the Registration Statement:
See Item 13 (Financial Statements).
15.2 Exhibits Required by Item 601 of Regulation S-B
Exhibit Description
Number
(3) Articles of Incorporation and By-laws:
3.1 Articles of Incorporation effective March 3, 1999.
3.2 By-Laws effective March 4, 1999.
(10) Material Contracts
10.1 Option Agreement dated July 20, 1999
10.2 Assignment Agreement dated July 20, 1999
10.3 Amending Agreement dated February 9, 2000
(21) Name of Subsidiaries
Nil.
(23) Consent of Expert
(27) Financial Data Schedule
(99) Other
99.1 Report entitled "Exploration Potential of Hi-Ho Claims, Garnet
Creek", prepared March 11, 1999 by Douglas H. Hopper
(Full copy of Report filed in paper format under Form SE)
99.2 Report entitled "Prospecting Report on Rock Sampling over the
Hi-Ho Property, prepared February 3, 2000 by Gerry Diakow
(Full copy of Report filed in paper format under Form SE)
<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.
QUILCHENA RESOURCES, INC.
Date: March 29, 2000 By: /s/ Derek Herman
------------------------------
Derek Herman, President
SECRETARY OF STATE
STATE OF NEVADA
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that QUILCHENA RESOURCES INC. did on March 3, 1999 file in this
office the original Articles of Incorporation; that said Articles are now on
file and of record in the office of the Secretary of State of the State of
Nevada, and further, that said Articles contain all the provisions required by
the law of said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Great Seal
of State, at my office, in Carson City, Nevada, on March 4, 1999.
"DEAN HELLER"
Secretary of State
By:
KELLY R. DAVENPORT
Certification Clerk
<PAGE>
ARTICLES OF INCORPORATION
OF
Quilchena Resources, Inc.
The undersigned, acting as incorporator, pursuant to the provisions of
the laws of the State of Nevada relating to private corporations, hereby adopts
the Articles of Incorporation:
ARTICLE ONE. [NAME]. The name of the corporation is:
Quilchena Resources, Inc.
ARTICLE TWO. [RESIDENT AGENT]. The initial agent for service of
process is Nevada Agency and Trust Company, 50 West Liberty Street, Suite 880,
City of Reno, County of Washoe, State of Nevada 89501.
ARTICLE THREE. [PURPOSES]. The purposes for which the corporation is
organized are to engage in any activity or business not in conflict with the
laws of the State of Nevada or of the United States of America, and without
limiting the generality of the foregoing, specifically:
I. [OMNIBUS]. To have to exercise all the powers now or hereafter
conferred by the laws of the State of Nevada upon corporations organized
pursuant to the laws under which the corporation is organized and any and all
acts amendatory thereof and supplemental thereto.
II. [CARRYING ON BUSINESS OUTSIDE STATE]. To conduct and carry on
its business or any branch thereof in any state or territory of the United
States or in any foreign country in conformity with the laws of such state,
territory, or foreign country, and to have and maintain in any state, territory,
or foreign country a business office, plant, store or other facility.
III. [PURPOSES TO BE CONSTRUED AS POWERS] The purposes specified
herein shall be construed both as purposes and powers and shall be in no wise
limited or restricted by reference to, or inference from, the terms of any other
clause in this or any other article, but the purposes and powers specified in
each of the clauses herein shall be regarded as independent purposes and powers,
and the enumeration of specific purposes and powers shall not be construed to
limit or restrict in any manner the meaning of general terms or of the general
powers of the corporation; nor shall the expression of one thing be deemed to
exclude another, although it be of like nature not expressed.
ARTICLE FOUR. [CAPITAL STOCK]. The corporation shall have authority
to issue an aggregate of TWO HUNDRED MILLION (200,000,000) Common Capital
Shares, PAR VALUE ONE MILL ($0.001) per share for a total capitalization of TWO
HUNDRED THOUSAND DOLLARS ($200,000.00).
<PAGE>
The holders of shares of capital stock of the corporation shall not be
entitled to pre-emptive or preferential rights to subscribe to any unissued
stock or any other securities which the corporation may now or hereafter be
authorized to issue.
The corporation's capital stock may be issued and sold from time to
time for such consideration as may be fixed by the Board of Directors, provided
that the consideration so fixed is not less than par value.
The stockholders shall not possess cumulative voting rights at all
shareholders meetings called for the purpose of electing a Board of Directors.
ARTICLE FIVE. [DIRECTORS]. The affairs of the corporation shall be
governed by a Board of Directors of no more than eight (8) nor less than one (1)
person. The name and address of the first Board of Director is:
NAME ADDRESS
Trent Jordan 355 Burrard Street, Suite 1000
Vancouver, British Columbia
Canada V6C 2G8
ARTICLE SIX. [ASSESSMENT OF STOCK]. The capital stock of the
corporation, after the amount of the subscription price or par value has been
paid in, shall not be subject to pay debts of the corporation, and no paid up
stock and no stock issued as fully paid up shall ever be assessable or assessed.
ARTICLE SEVEN. [INCORPORATOR]. The name and address of the
incorporator of the corporation is as follows:
NAME ADDRESS
Amanda Cardinalli 50 West Liberty Street, Suite 880 Reno,
Nevada 89501
ARTICLE EIGHT.[PERIOD OF EXISTENCE]. The period of existence of the
corporation shall be perpetual.
ARTICLE NINE. [BY-LAWS]. The initial By-laws of the corporation shall
be adopted by its Board of Directors. The power to alter, amend, or repeal the
By-laws, or to adopt new By-laws, shall be vested in the Board of Directors,
except as otherwise may be specifically provided in the By-laws.
ARTICLE TEN. [STOCKHOLDERS' MEETINGS]. Meetings of stockholders shall
be held at such place within or without the State of Nevada as may be provided
by the By-laws of the corporation. Special meetings of the stockholders may be
called by the President or any other executive officer of the corporation, the
Board of Directors, or any member thereof, or by the record holder or holders of
at least ten percent (10%) of all shares entitled to vote at the meeting. Any
action otherwise required to be taken at a meeting of the stockholders, except
election of directors, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by stockholders having at
least a majority of the voting power.
<PAGE>
ARTICLE ELEVEN. [CONTRACTS OF CORPORATION]. No contract or other
transaction between the corporation and any other corporation, whether or not a
majority of the shares of the capital stock of such other corporation is owned
by this corporation, and no act of this corporation shall in any way be affected
or invalidated by the fact that any of the directors of this corporation are
pecuniarily or otherwise interested in, or are directors or officers of such
other corporation. Any director of this corporation, individually, or any firm
of which such director may be a member, may be a party to, or may be pecuniarily
or otherwise interested in any contract or transaction of the corporation;
provided, however, that the fact that he or such firm is so interested shall be
disclosed or shall have been known to the Board of Directors of this
corporation, or a majority thereof; and any director of this corporation who is
also a director or officer of such other corporation, or who is so interested,
may be counted in determining the existence of a quorum at any meeting of the
Board of Directors of this corporation that shall authorize such contract or
transaction, and may vote thereat to authorize such contract or transaction,
with like force and effect as if he were not such director or officer of such
other corporation or not so interested.
ARTICLE TWELVE. [LIABILITY OF DIRECTORS AND OFFICERS]. No director or
officer shall have any personal liability to the corporation or its stockholders
for damages for breach of fiduciary duty as a director or officer, except that
this Article Twelve shall not eliminate or limit the liability of a director or
officer for (I) acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law, or (ii) the payment of dividends in violation of the
Nevada Revised Statutes.
IN WITNESS WHEREOF, the undersigned incorporator has hereunto affixed
her signature at Reno, Nevada this 2nd day of March, 1999.
"AMANDA CARDINALLI"
STATE OF NEVADA }
:
COUNTY OF WASHOE }
On the 2nd day of March, 1999, before me, the undersigned, a Notary
Public in and for the State of Nevada, personally appeared AMANDA CARDINALLI,
known to me to be the person described in and who executed the foregoing
instrument, and who acknowledged to me that she executed the same freely and
voluntarily for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
"MARGARET A. OLIVER"
------------------------
NOTARY PUBLIC
Residing in Reno, Nevada
<PAGE>
CONSENT TO SERVE AS RESIDENT AGENT
The Nevada Agency and Trust Company, located at 50 West Liberty
Street, Suite 880, Reno, Nevada 89501, hereby consents to serve as Resident
Agent in the State of Nevada for the following Corporation:
Quilchena Resources, Inc.
We understand that as agent for the Corporation, it will be our
responsibility to receive service of process in the name of the Corporation; to
forward all mail to the Corporation; and to immediately notify the office of the
Secretary of State in the event of our resignation, or of any changes in the
registered office of the Corporation for which we are an agent.
IN WITNESS WHEREOF, the undersigned authorized representative of The
Nevada Agency and Trust Company has hereunto affixed her signature at Reno,
Nevada this 2nd day of March, 1999.
-----------------------
AMANDA CARDINALLI
STATE OF NEVADA }
: ss.
COUNTY OF WASHOE }
On the 2nd day of March, 1999, before me, the undersigned, a Notary
Public in and for the State of Nevada, personally appeared AMANDA CARDINALLI,
known to me to be the person described in and who executed the foregoing
instrument, and who acknowledged to me that she executed the same freely and
voluntarily for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.
"MARGARET A. OLIVER"
----------------------
NOTARY PUBLIC
Residing in Reno, Nevada
My Commission Expires:
October 10, 2002
- ------------------
BY LAWS
of
QUILCHENA RESOURCES INC.
a Nevada corporation
ARTICLE 1
Offices
Section 1. The registered office of this corporation is in the city of Reno,
Nevada.
Section 2. The corporation may also have offices at other places both within
and without the State of Nevada as the directors may determine or the business
of the corporation may require.
ARTICLE 2
Meetings of Stockholders
Section 1. Annual meetings of the stockholders must be held at the
registered office of the corporation or at any other place within or without the
State of Nevada as the directors may decide. Special meetings of the
stockholders may be held at the time and place within or without the State of
Nevada as is stated in the notice of the meeting, or in a duly executed waiver
of notice.
Section 2. Annual meetings of the stockholders must be held on the
anniversary date of incorporation each year if it is not a legal holiday and,
and if it is a legal holiday, then on the next secular day following, or at
another time as the directors may decide, at which the stockholders will elect
the directors and transact any other business that is properly before the
meeting.
Section 3. The president or the secretary may, by resolution of the
directors or on the written request of the stockholders owning a majority of the
issued and outstanding shares and entitled to vote, call special meetings of the
stockholders for any purpose unless otherwise prescribed by statute or by the
articles of incorporation. A request must state the purpose of the proposed
meeting.
Section 4. Notices of meetings must be written and signed by the president
or vice-president or the secretary or an assistant secretary or by any other
person designated by the directors. The notice must state the purpose for which
the meeting is called and the time and the place, which may be within or without
the State, where it is to be held. A copy of the notice must be either
delivered personally or mailed, postage prepaid, to each stockholder of record
entitled to vote at the meeting not less than ten nor more than sixty days
before the meeting. If it is mailed, it must be directed to a stockholder at
the address that appears upon the records of the corporation and is deemed to be
delivered to the stockholder when it is deposited into the mail. If a
stockholder is a corporation, association or partnership, the notice is deemed
to have been delivered to the stockholder it is delivered personally to an
officer of the corporation or association, or to any member of a partnership. A
transferee is not entitled to notice of a meeting if the stock is transferred
after the notice is delivered and before the meeting is held.
<PAGE>
Section 5. Business transactions at any special meeting of stockholders are
limited to the purpose stated in the notice.
Section 6. The holders of a majority of the stock issued and outstanding and
entitled to vote and present in person or represented by proxy, constitutes a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the articles of incorporation. If
a quorum is not present or represented at any meeting of the stockholders, the
stockholders who are entitled to vote and present in person or represented by
proxy may adjourn the meeting from time to time, without notice other than
announcements at the meeting, until a quorum is present or represented. Any
business may be conducted at the adjourned meetings that could have been
transacted at the meeting as originally notified if a quorum is present or
represented at the adjourned meeting.
Section 7. When a quorum is present or represented at any meeting, the vote
of the holders of 10% of the stock having voting power present in person or
represented by proxy is sufficient to elect directors or to decide any question
brought before the meeting unless the statute or the articles of incorporation
specify that the question requires that a different percentage is required to
decide the question.
Section 8. Each stockholder of record of the corporation is entitled at each
meeting of the stockholders to one vote for each share standing in his name on
the books of the corporation. Any stockholder may demand that the vote for
directors and any question before the meeting be by ballot.
Section 9. At any meeting of the stockholders any stockholder may be
represented and vote by a proxy or proxies appointed by in writing. If the
written proxy designates two or more persons to act as proxies, a majority of
the designated persons present at the meeting, or one if only one is present,
has the powers conferred by the written instruction. No proxy or power of
attorney to vote may be voted at a meeting of the stockholders unless it has
been filed with the secretary of the meeting when required by the inspectors of
election. All questions regarding the qualifications of voters, the validity of
proxies, and the acceptance or rejection of votes must be decided by the
inspectors of election who are appointed by the directors, or if not appointed,
then by the officer presiding at the meeting.
Section 10. Any action that may be taken by the vote of the stockholders at
a meeting may be taken without meeting if it is authorized by the written
consent of stockholders holding at least a majority of the voting power, unless
the provisions of the statute or the articles of incorporation require a greater
proportion of voting power to authorize the action, in which case the greater
proportion of written consents is required.
<PAGE>
ARTICLE 3
Directors
Section 1. The directors must manage business of the corporation and they
may exercise all the powers of the corporation and do any lawful thing unless
the statute or the articles of incorporation or these bylaws specify that the
stockholders have the power to do the thing.
Section 2. he number of directors that constitute the whole board may not be
less than one or more than eight. The directors at any time may increase or
decrease the number of directors to not less than one nor more than eight. The
stockholders will elect the directors at the annual meeting of the stockholders
and except as provided in section 2 of this article, each director elected holds
office until his successor is elected and qualified. Directors need not be
stockholders.
Section 3. majority of the remaining directors, even if they are less than
a quorum, or a sole remaining director may fill any vacancies in the board of
directors, including those caused by an increase in the number of directors, and
each director so elected holds office until his successor is elected at the
annual or a special meeting of the stockholders. The holders of two-thirds of
the outstanding shares of stock entitled to vote may at any time peremptorily
terminate the term of office of all or any of the directors by voting at a
meeting called for the purpose or by a written statement filed with the
secretary or, if the secretary is absent, with any other officer. The removal
is effective immediately even if successors are not elected simultaneously, and
the resulting vacancies on the board of directors may be filled only from the
stockholders.
A vacancy on the board of directors is deemed to exist if a director dies,
resigns or is removed, or if the authorized number of directors is increased, or
if the stockholders fail to elect the number of directors to be elected at any
annual or special meeting of stockholders at which any director is to be
elected.
The stockholders may elect a director at any time to fill any vacancy not filled
by the directors. If the directors accept the resignation of a director
tendered to take effect at a future time, the board or the stockholders may
elect a successor to take office when the resignation becomes effective.
Neither the directors nor the stockholders can reduce the authorized number of
directors to cause the removal of any director before the expiration of his term
of office.
ARTICLE 4
Meeting of the Board of Directors
Section 1. Regular meetings of the board of directors must be held at any
place within or without the State that is designated by a resolution of the
board or the written consent of all members of the board. In the absence of a
designation, regular meetings must be held at the registered office.
<PAGE>
Section 2. The first meeting of each newly elected directors should be held
immediately following the adjournment of the meeting of stockholders and at the
place of the meeting. A notice of the meeting is not necessary in order legally
to constitute the meeting if a quorum is present. If the meeting is not held
then, it may be held at the time and place that is specified in a notice given
as these bylaws provide for special meetings of the directors.
Section 3. Regular meetings of the board of directors may be held without
call or notice at the time and at the place that is fixed by the directors.
Section 4. Special meetings of the directors may be called by the chairman
or the president or by the vice-president or by any two directors.
Written notice of the time and place of special meetings must be delivered
personally to each director, or sent to each director by mail or by other form
of written communication, charges prepaid, addressed to the director at the
address as it is shown upon the records or, if not readily ascertainable, at the
place in which the meetings of the directors are regularly held. If the notice
is mailed or telegraphed, it will be deposited in the postal service or
delivered to the telegraph company at least forty-eight hours before the meeting
is scheduled to start. If the notice is delivered or faxed, it must be
delivered or faxed at least twenty-four hours before the meeting is scheduled to
start. Delivery as described in this article is legal and sufficient notice to
the director.
Section 5. Notice of the time and place for convening an adjourned meeting
need not be given to the absent directors if the time and place have been fixed
at the meeting adjourned.
Section 6. The transaction of business at any meeting of the directors,
however called and noticed or wherever held, is as valid as though transacted at
a meeting duly held after regular call and notice if a quorum is present and if,
either before or after the meeting, each of the directors not present signs a
written waiver of notice or a consent to meeting's being held, or written
approvals are filed with the corporate records or made a part of the minutes of
the meeting.
Section 7. majority of the authorized number of directors constitutes a
quorum for the transaction of business, except to adjourn as described in these
bylaws. Every decision made by a majority of the directors present at a meeting
duly held at which a quorum is present is deemed to be the decision of the board
of directors unless a greater number is required by law or by the articles of
incorporation. Any action of a majority, although not at a regularly called
meeting, and the record of it if the other directors have consented in writing,
is as valid and effective in all respects as if it were passed by the board in
regular meeting.
Section 8. quorum of the directors may adjourn any directors' meeting to
meet again at a stated day and hour; but, in the absence of a quorum, a majority
of the directors present at any directors' meeting, either regular or special,
may adjourn the meeting to the next regular meeting of the board.
<PAGE>
ARTICLE 5
Committees of Directors
Section 1. The directors may, by resolution adopted by a majority of them,
designate one or more committees of the directors, each to consist of two or
more of the directors. A committee may exercise the power of the whole board in
the management of the business of the corporation and may authorize the fixing
of the seal of the corporation to any document that requires it. The directors
may name the committee. The members of the committee present at any meeting and
not disqualified from voting may, whether or not they constitute a quorum,
unanimously appoint another member of the board to act at the meeting in the
place of any absent or disqualified member. The consent of a majority of the
members or alternate members at any meeting of a committee that has a quorum is
required to approve any act of the committee.
Section 2. The committee must keep regular minutes of their proceedings and
report them to the whole board.
Section 3. Any action that must or may be taken at meetings of the directors
or any committee of them may be taken without a meeting if the directors on the
board or committee consent unanimously in writing and the written consent is
filed with the minutes of the proceedings of the board or committee.
ARTICLE 6
Compensation of Directors
Section 1. he directors may be paid their expenses for attending each
meeting of the directors and may be paid a fixed sum for attendance at each
meeting of the directors or a stated salary as director. No payment precludes
any director from serving the corporation 'in any other capacity and being
compensated for the service. Members of special or standing committees may be
allowed like reimbursement and compensation for attending committee meetings.
ARTICLE 7
Notices
Section 1. Notices to directors and stockholders must be written and
delivered personally or mailed to the directors or stockholders at their
addresses as they appear on the books of the corporation. Notices to directors
may also be given by fax and by telegram. Notice by mail, fax or telegram is
deemed to be given when the notice is mailed, faxed or telegraphed.
Section 2. Whenever all parties entitled to vote at any meeting, whether of
directors or stockholders, consent, either by writing on the records of the
meeting or filed with the secretary, or by their presence at the meeting or oral
consent entered on the minutes, or by taking part in the deliberations at the
meeting without objection, the doings of the meeting are as valid as if they
were done at a meeting regularly called and noticed, and at the meeting any
business may be transacted that is not excepted from the written consent if no
objection for want of notice is made at the time and, if any meeting is
irregular for want of notice or consent and a quorum was present at the meeting,
the proceedings of the meeting may be ratified and approved and rendered valid,
and the irregularity or defect is waived if all parties having the night to vote
at the meeting consent in writing. The consent or approval of stockholders may
be by proxy or attorney, but all the proxies and powers of attorney must be in
writing.
<PAGE>
Section 3. Whenever any notice is required to be given under the provisions
of the statute, the articles of incorporation or these bylaws, a written waiver
signed by the persons entitled to the notice, whether before or after the time
stated, is deemed to equivalent.
BYLAWS
ARTICLE 8
Officers
Section 1. The directors will choose the officers of the corporation. The
offices to be filled are president, secretary and treasurer. A person may hold
two or more offices.
Section 2. The directors at their first meeting after each annual meeting of
stockholders will choose a chairman of the board of directors from among
themselves, and will choose a president, a secretary and a treasurer, none of
whom must be directors.
Section 3. The directors may appoint a vice-chairman of the board,
vice-presidents and one or more assistant secretaries and assistant treasurers
and the other officers and agents as it deems necessary to hold their offices
for the terms and exercise the powers and perform the duties determined by the
directors.
Section 4. The directors will fix the salaries and compensation of all
officers of the corporation.
Section 5. The officers of the corporation hold their offices at the
pleasure of the directors. Any officer elected or appointed by the directors
may be removed any time by the directors. The directors will fill any vacancy
occurring in any office of the corporation by the death, resignation, removal or
otherwise.
Section 6. The chairman of the board will preside at meetings of the
stockholders and the directors and will see that the orders and resolutions of
the directors are carried into effect.
Section 7. The vice-chairman will, if the chairman is absent or disabled,
perform the duties and exercise the powers of the chairman of the board and will
perform other duties as the directors may prescribe.
Section 8. The president is the chief executive officer of the corporation
and will manage the business of the corporation. He will execute on behalf of
the corporation all instruments requiring execution unless the signing and
execution of them is expressly designated by directors to some other officer or
agent of the corporation.
Section 9. The vice-presidents will act under the direction of the president
and, if the president is absent or disabled, will perform the duties and
exercise the powers of the president. They will perform the other duties and
have the other powers prescribed by the president or directors. The directors
may designate one or more executive vice-presidents and may specify the order of
seniority of the vice-presidents. The duties and powers of the president
descend to the vice-presidents 'in the specified order of seniority.
<PAGE>
Section 10. The secretary will act under the direction of the president;
will attend and record the proceedings at all meetings of the directors and the
stockholders and at the standing committees when required-, will give or cause
to be given notice of all meetings of the stockholders and special meetings of
the directors; and will perform other the duties that are prescribed by the
president or the directors.
Section ll. The assistant secretaries will act under the direction of the
president in the order of their seniority unless the president or the directors
decide otherwise, and they will perform the duties and exercise the powers of
the secretary if the secretary is absent or disabled. They will perform other
duties and have the other powers that are prescribed by the president and the
directors.
Section l2. The treasurer will act under the direction of the president with
the custody of the corporate funds and securities; will keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation;
and will deposit all money and other valuable effects in the name and to the
credit of the corporation in the depositories that are designated by the
directors; will disburse the funds of the corporation as ordered by the
president or the directors, taking proper vouchers for the disbursements-, and
will render to the president and the directors, at their regular meetings or
when the directors require, an account of all the transactions undertaken by the
treasurer and of the financial condition of the corporation.
If the directors require, the treasurer will give the corporation a bond in the
sum and with the surety that is satisfactory to the directors for the faithful
performance of the duties of his office and for the restoration to the
corporation, if he dies, resigns, retires or is removed from office, of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the corporation.
Section 13. The assistant treasurers in order of their seniority, or as
determined by the president or the directors, will perform the duties and
exercise the powers of the treasurer if the treasurer is absent or disabled.
They will perform the other duties and have the other powers that are prescribed
by the president or the directors.
ARTICLE 9
Certificates of Stock
Section 1. Every stockholder is entitled to have a certificate signed by the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, that certifies the
number of shares owned by him in the corporation. If the corporation is
authorized to issue more than one class of stock or more than one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of the various classes of stock or series and the
qualifications, limitation or restrictions of the rights, must be described in
full or summarized on the face or back of the certificate that the corporation
issues to represent the stock.
Section 2. If a certificate is signed (a) by a transfer agent other than the
corporation or its employees or (b) by a registrar other than the corporation or
its employees, the signatures of the officers of the corporation may be
facsimiles. If any officer who has signed or whose facsimile signatures has
been placed upon a certificate ceases to be the officer before the certificate
is issued, the certificate may be issued with the same effect as though the
person had not ceased to be the officer. The seal of the corporation or a
facsimile of it may, but need not be, affixed to certificates of stock.
<PAGE>
Section 3. The directors may direct that a new certificate be issued in
place of any certificate issued by the corporation that is alleged to have been
lost or destroyed if the person claiming the loss or destruction of the
certificate makes an affidavit of that fact. When they authorize the issuance
of a new certificate, the directors may, in their discretion and as a condition
precedent to the issuance of the new certificate, require that the owner of the
lost or destroyed certificate or his legal representative advertise the loss as
it requires or give the corporation a bond in the sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost or destroyed.
Section 4. When a certificate for shares, duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, is
surrendered to the corporation or the transfer agent of the corporation shares,
the corporation must, if it is satisfied that it complies with the laws and
regulations applicable to the corporation regarding the transfer and ownership
of shares, issue a new certificate to the person entitled to it and will cancel
the old certificate and record the transaction upon its books.
Section 5. The directors may fix in advance a date not more than sixty days
nor less than ten days before the date of any meeting of stockholders, or the
date of the payment of any dividend, or the date of the allotment of rights, or
the date when any change or conversion or exchange of capital stock is
effective, or a date in connection with obtaining the consent of stockholders
for any purpose, as a record date for the determination of the stockholders
entitled to notice of and to vote at any meeting or adjournment, or entitled to
be paid any dividend, or to consent to any matter for which stockholders'
consent is required, and in either case, only the stockholders who are
stockholders of record on the date so fixed are entitled to notice of and to
vote as the meeting or any adjournment, or to be paid a dividend, or to be
allotted rights, or to exercise the rights, or to consent, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
the record date is fixed.
Section 6. The corporation is entitled to recognize the person registered on
its books as the owner of the share as the exclusive owner for all purposes
including voting and dividends, and the corporation is not bound to recognize
any other person's equitable or other claims to or interest in the shares,
whether it has express or other notice of a claim, except as otherwise provided
by the laws of Nevada.
ARTICLE 10
General Provisions
Section 1. The directors may declare dividends upon the capital stock of the
corporation, subject to the provisions of the articles of incorporation, if any,
at any regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property or in shares of the capital stock, subject to the provisions
of the articles of incorporation.
<PAGE>
Section 2. Before it pays any dividend, the corporation may set aside out of
any funds of the corporation available for dividends the sum that the directors,
in their absolute discretion, think proper as a reserve to meet contingencies,
or for equalizing dividends, or for repairing and maintaining any property of
the corporation, or for another purpose that the directors determine are in the
interests of the corporation, and the directors may modify or abolish any the
reserve in the manner that it was created.
Section 3. All checks or demands for money and notes of the corporation must
be signed by the officers or other persons that are designated by the directors.
Section 4. The directors will fix the fiscal year of the corporation.
Section 5. The directors may resolve to adopt a corporate seal for the
corporation. The name of the corporation must be inscribed on the seal with the
words "Corporate Seal" and "Nevada". The seal may be used by causing it or a
facsimile of it to be impressed or affixed or in any manner reproduced.
ARTICLE 11
Indemnification
Section 1. Every person who was or is a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, because he or a person whom he
legally represents is or was a director or officer of the corporation or is or
was serving at the request of the corporation or for its benefit as a director
or officer of another corporation, or as its representative in a partnership,
joint venture, trust or other enterprise, is indemnified and held harmless to
the fullest extent legally permissible under the General Corporation Law of the
State of Nevada from time to time against all expanses, liability and loss
(including attorney's fees, judgments, fines and amounts paid or to be paid in
settlements) reasonably incurred or suffered by him 'in connection with his
acting. The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by the corporation as they are
incurred and in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent Jurisdiction that he is not entitled to be indemnified by the
corporation. The night of indemnification is a contract night that may be
enforced in any matter desired by the person. The night of indemnification does
not any other right that the directors, officers or representatives may have or
later acquire and, without limiting the generality of the statement, they are
entitled to their respective rights of indemnification under any bylaw,
agreement, vote of stockholders, provision of law or otherwise, as well as their
rights under this article.
Section 2. The directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against the person and incurred in any capacity or arising out of the
status, whether or not the corporation would have the power to indemnify the
person.
<PAGE>
Section 3. The directors may adopt other bylaws regarding indemnification
and may amend the bylaws to provide at all times the fullest indemnification
permitted by the General Corporation Law of the State of Nevada.
ARTICLE 12
Amendments
Section 1. The bylaws may be amended by the majority vote of all the record
holders of stock issued and outstanding and entitled to vote at any annual or
special meeting of the stockholders, if the notice of the meeting contains a
notice of the intention to amend.
Section 2. The directors by a majority vote of the whole board at any
meeting may amend these bylaws, including bylaws adopted by the stockholders,
but the stockholders may specify particulars of the bylaws that cannot be
amended by the board of directors.
Approved and adopted on March 4, 1999
CERTIFICATE OF THE DIRECTOR
1, Trent Jordan, certify that I am a director of Quilchena Resources, Inc. and
that the foregoing bylaws consisting of eight pages constitute the code of
bylaws of this corporation as duly adopted at a regular meeting of the directors
of the corporation held on March 4, 1999.
March 4, 1999
"Trent Jordan" - Director
OPTION AGREEMENT
This agreement is dated for reference July 20, 1999.
BETWEEN: Wet Coast Capital Corporation, a British Columbia company, of Suite
420, 1090 West Pender Street, Vancouver, British Columbia, V6E 2N7, and fax
(604) 682-6509
("Wet Coast")
AND: GERRY DIAKOW, a mining engineer, of 1537 - 54"' Street, Delta, British
Columbia, V4M 3H6, and fax (604)682-6509
(the "Optionor")
RECITALS
A. The Optionor has an undivided 100% interest in Hi-Ho 1-10 Mining
Claims, New Westminster Mining Division, 121 , 36' West Longitude and 49 ', 23',
30" North Latitude, British Columbia, Canada (the "Property").
B. Wet Coast wants the exclusive and irrevocable right to acquire 100%
of the Optionor's interest in the Property.
IN CONSIDERATION of the recitals and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree that:
1. The definitions in the recitals are part of this agreement.
2 . The Optionor grants Wet Coast an option to acquire a 100% undivided
interest in the Property (the "Option").
3. To exercise the Option, Wet Coast must:
(a) finance the work program recommended for the Property in the initial
report of Douglas H. Hopper, Consulting Geologist, dated March 11, 1999 (the
"Work Program") within 12 months of the date of this agreement (the "Work
Period"); and
(b) pay the Optionor CDN$7,500 within 18 months of the date of this
agreement (the "Option Period").
4. The Optionor will perform the Work Program and provide an engineering
report that satisfies Wet Coast within two months of his completing the Work
Program or the end of the Work Period, whichever is earlier.
<PAGE>
5. Wet Coast may transfer, assign, grant an option to purchase or otherwise
alienate its rights and obligations under this agreement.
6. Wet Coast and its employees, agents, independent contractors, and
assignees may have full access to the Property during the Option Period.
7. Wet Coast may terminate this agreement at any time during the Option
Period by giving written notice of its intention to terminate by fax to the
Optionor's fax number as soon as Wet Coast arrives at its decision to terminate.
No monies already paid by Wet Coast under this agreement are refundable and Wet
Coast is entitled to no interest in the Property if this agreement is terminated
by Wet Coast during the Option Period.
8. During the Option Period, the Optionor will:
(a) do nothing that might adversely affect Wet Coast's rights under this
agreement, and
(b) keep the Property free and clear of any claims and in good standing with
applicable government authorities.
9. During the Option Period, Wet Coast will:
(a) conduct all work on the Property in a careful and miner-like manner and
in compliance with all applicable laws, and
(b) obtain and maintain and cause any contractor or sub-contractor engaged
under this agreement to obtain and maintain adequate insurance during any period
in which active work is carried out on the Property.
10. Each party represents and warrants to the other that:
(a) it has the power and authority to carry on its business and to make this
agreement and any agreement that is contemplated by this agreement, and
(b) the making of this agreement and any agreements contemplated by it does
not violate or breach its constating documents or the laws of any applicable
jurisdiction and has been authorized by its board of directors.
11. The Optionor represents and warrants that:
(a) title to the Property is free and clear of any claims or charges, either
actual, pending or threatened,
(b) the Property is not subject to any order or direction relating to
environmental matters that requires any action,
(c) he has the exclusive right to make this agreement, and to dispose of the
Interest in the Property in accordance with the terms of this agreement.
<PAGE>
12. The representations and warranties of the parties are conditions on
which the parties have relied in making this agreement and survive the
exercising of the Option.
13. The Optionor acknowledges that this agreement was prepared by Jeffs &
Company, Law Corporation, on behalf of and solely for Wet Coast, and that it may
contain terms and conditions onerous to the Optionor. The Optionor expressly
acknowledges that Wet Coast has given the Optionor adequate time to review this
agreement and to seek and obtain independent legal advice, and he represents to
Wet Coast that he has in fact sought and obtained independent legal advice and
is satisfied with all of the terms and conditions of this agreement.
14. This agreement contains the entire agreement among the parties and
supersedes all earlier representations, understandings and agreements, whether
written or oral, express or implied, that might have lead to the parties' making
this agreement.
15. The parties will sign any document and do anything within their power
that is necessary to implement the terms of this agreement.
16. Time is of the essence of this agreement and is of the essence of any
amendments to this agreement unless its essence is waived in the amendment.
17. This agreement is governed by the laws of British Columbia and must be
litigated in the courts of British Columbia.
18. This agreement enures to the benefit of and is binding on the parties
and their respective successors and permitted assigns.
19. This agreement may be executed in any number of separate counterparts
and delivered to the parties by fax. The counterparts together are deemed to be
one original document.
THE PARTIES' SIGNATURES below are evidence of their agreement.
WET COAST CAPITAL CORPORATION
Per:
Authorized Signatory
Signed by Gerry Diakow in the presence of:
"Alita M. Cerra" "Gerry Diakow
- ------------------------ -------------------
Signature of Witness Gerry Diakow
Alita M. Cerra
Name of Witness
Address of Witness
ASSIGNMENT AGREEMENT
THIS AGREEMENT dated for reference July 20, 1999, is BETWEEN WET COAST CAPITAL
CORPORATION, a British Columbia company, of Suite 420, 1090 West Pender Street,
Vancouver, British Columbia, V6E 2N7, and fax (604)682-6509 ("Wet Coast"); AND
QUILCHENA RESOURCES, INC., a Nevada company, of Suite 1000, 355 Burrard Street,
Vancouver, B.C., V6C 2G8, and fax (604)687-0554 ("Quilchena").
WET COAST has an option (the "Option") to purchase an undivided I 00% interest
in the Hi-Ho 1-10 Mining Claims, New Westminster Mining Division, 121 , 36' West
Longitude and 49 , 23', 30" North Latitude, British Columbia, Canada (the
"Property") by an agreement dated July 20, 1999, attached as Schedule A to this
agreement (the "Option Agreement") and has agreed to assign its entire interest
in the Option Agreement to Quilchena; So IN CONSIDERATION of the recitals and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree that:
1. The definitions in the recitals are part of this agreement.
2. This agreement is effective on July 20, 1999 (the "Effective Date").
3. Wet Coast irrevocably assigns Its entire interest in the Option Agreement
to Quilchena as of the Effective Date for US$ I 0,000 (the "Price").
4. Wet Coast represents and warrants that it may assign the Option Agreement
and that it has granted no other party any right to acquire any of its interest
in the Option Agreement.
5. Wet Coast represents and warrants that it has made the CDN$7,500 option
payment referred to in paragraph 3(b) of the Option Agreement.
6. Quilchena acknowledges that in order to exercise the Option, it is
required to finance the work program on the Property referred to in paragraph
3(a) of the Option Agreement.
7. Quilchena acknowledges that this agreement was prepared by Jeffs &
Company, Law Corporation, on behalf of and solely for Wet Coast, and that it may
contain terms and conditions onerous to Quilchena. Quilchena expressly
acknowledges that Wet Coast has given Quilchena adequate time to review this
agreement and to seek and obtain independent legal advice, and represents to Wet
Coast that it has in fact sought and obtained independent legal advice and is
satisfied with all of the terms and conditions of this agreement.
8. This agreement contains the entire agreement between the parties and
supersedes all earlier representations, understandings and agreements, whether
written or oral, express or implied, that might have lead to the parties making
this agreement.
9. The parties will sign any document and do anything within their power
that is necessary to implement the terms of this agreement.
<PAGE>
10. Time is of the essence of this agreement and of any amendments to this
agreement unless it is expressly waived in the amendment.
11. This agreement is governed by the laws of British Columbia and must be
litigated in the courts of British Columbia.
12. This agreement enures to the benefit of and is binding on the parties
and their respective successors and permitted assigns.
13. This agreement may be executed in any number of separate counterparts
and may be delivered to the parties by fax, and the counterparts together are
deemed to be one original document.
THE PARTIES' SIGNATURE'S are evidence of their agreement.
WEST COAST CAPITAL CORPORATION
Per:
Authorized Signatory
QUILCHENA RESOURCES, INC.
Per:
Authorized Signatory
<PAGE>
SCHEDULE "A"
OPTION AGREEMENT
This agreement is dated for reference July 20, 1999.
BETWEEN: Wet Coast Capital Corporation, a British Columbia company, of Suite
420, 1090 West Pender Street, Vancouver, British Columbia, V6E 2N7, and fax
(604) 682-6509
("Wet Coast")
AND: GERRY DIAKOW, a mining engineer, of 1537 - 54"' Street, Delta, British
Columbia, V4M 3H6, and fax (604)682-6509
(the "Optionor")
RECITALS
A. The Optionor has an undivided 100% interest in Hi-Ho 1-10 Mining
Claims, New Westminster Mining Division, 121 , 36' West Longitude and 49 ', 23',
30" North Latitude, British Columbia, Canada (the "Property").
B. Wet Coast wants the exclusive and irrevocable right to acquire 100%
of the Optionor's interest in the Property.
IN CONSIDERATION of the recitals and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree that:
1. The definitions in the recitals are part of this agreement.
2 . The Optionor grants Wet Coast an option to acquire a 100% undivided
interest in the Property (the "Option").
3. To exercise the Option, Wet Coast must:
(a) finance the work program recommended for the Property in the initial
report of Douglas H. Hopper, Consulting Geologist, dated March 11, 1999 (the
"Work Program") within 12 months of the date of this agreement (the "Work
Period"); and
(b) pay the Optionor CDN$7,500 within 18 months of the date of this
agreement (the "Option Period").
4. The Optionor will perform the Work Program and provide an engineering
report that satisfies Wet Coast within two months of his completing the Work
Program or the end of the Work Period, whichever is earlier.
<PAGE>
5. Wet Coast may transfer, assign, grant an option to purchase or otherwise
alienate its rights and obligations under this agreement.
6. Wet Coast and its employees, agents, independent contractors, and
assignees may have full access to the Property during the Option Period.
7. Wet Coast may terminate this agreement at any time during the Option
Period by giving written notice of its intention to terminate by fax to the
Optionor's fax number as soon as Wet Coast arrives at its decision to terminate.
No monies already paid by Wet Coast under this agreement are refundable and Wet
Coast is entitled to no interest in the Property if this agreement is terminated
by Wet Coast during the Option Period.
8. During the Option Period, the Optionor will:
(a) do nothing that might adversely affect Wet Coast's rights under this
agreement, and
(b) keep the Property free and clear of any claims and in good standing with
applicable government authorities.
9. During the Option Period, Wet Coast will:
(a) conduct all work on the Property in a careful and miner-like manner and
in compliance with all applicable laws, and
(b) obtain and maintain and cause any contractor or sub-contractor engaged
under this agreement to obtain and maintain adequate insurance during any period
in which active work is carried out on the Property.
10. Each party represents and warrants to the other that:
(a) it has the power and authority to carry on its business and to make this
agreement and any agreement that is contemplated by this agreement, and
(b) the making of this agreement and any agreements contemplated by it does
not violate or breach its constating documents or the laws of any applicable
jurisdiction and has been authorized by its board of directors.
11. The Optionor represents and warrants that:
(a) title to the Property is free and clear of any claims or charges, either
actual, pending or threatened,
(b) the Property is not subject to any order or direction relating to
environmental matters that requires any action,
(c) he has the exclusive right to make this agreement, and to dispose of the
Interest in the Property in accordance with the terms of this agreement.
<PAGE>
12. The representations and warranties of the parties are conditions on
which the parties have relied in making this agreement and survive the
exercising of the Option.
13. The Optionor acknowledges that this agreement was prepared by Jeffs &
Company, Law Corporation, on behalf of and solely for Wet Coast, and that it may
contain terms and conditions onerous to the Optionor. The Optionor expressly
acknowledges that Wet Coast has given the Optionor adequate time to review this
agreement and to seek and obtain independent legal advice, and he represents to
Wet Coast that he has in fact sought and obtained independent legal advice and
is satisfied with all of the terms and conditions of this agreement.
14. This agreement contains the entire agreement among the parties and
supersedes all earlier representations, understandings and agreements, whether
written or oral, express or implied, that might have lead to the parties' making
this agreement.
15. The parties will sign any document and do anything within their power
that is necessary to implement the terms of this agreement.
16. Time is of the essence of this agreement and is of the essence of any
amendments to this agreement unless its essence is waived in the amendment.
17. This agreement is governed by the laws of British Columbia and must be
litigated in the courts of British Columbia.
18. This agreement enures to the benefit of and is binding on the parties
and their respective successors and permitted assigns.
19. This agreement may be executed in any number of separate counterparts
and delivered to the parties by fax. The counterparts together are deemed to be
one original document.
THE PARTIES' SIGNATURES below are evidence of their agreement.
WET COAST CAPITAL CORPORATION
Per:
Authorized Signatory
Signed by Gerry Diakow in the presence of:
"Alita M. Cerra" "Gerry Diakow
- ------------------------ -------------------
Signature of Witness Gerry Diakow
Alita M. Cerra
Name of Witness
Address of Witness
AMENDING AGREEMENT
This AMENDING AGREEMENT made as of the 9th day of February, 2000, to the
Assignment Agreement dated for reference July 20, 1999, and to the Option
Agreement dated for reference July 20, 1999,
BETWEEN:
GERRY DIAKOW, a Mining Engineer, of 1537 - 54' Street, Delta, British Columbia,
V4M 3H6
("Diakow")
AND:
QUILCHENA RESOURCES, INC., a Nevada company of 101 West I " Avenue Street,
Vancouver, British Columbia, V5 Y I H9
("Quilchena")
WHEREAS:
A. by an Option Agreement dated for reference July 20, 1999, Diakow granted
Wet Coast Capital Corporation an option to acquire a 100% interest in the
Property in partial consideration of completing the recommended work program
within 12 months of the Option Agreement;
B. by an Assignment Agreement made between Wet Coast Capital Corporation and
Quilchena dated for reference July 20, 1999, Wet Coast Capital Corporation
assigned its entire interest in the Option Agreement to Quilchena in partial
consideration for agreeing to finance the work program on the Property referred
to in the paragraph 3(a) of the Option Agreement;
C. the parties wish to amend the Option Agreement pursuant to the terms and
conditions of this Agreement;
IN CONSIDERATION of the recitals and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree that:
1. The Option Agreement is amended by deleting the phrase "within 12 months
of the date of this agreement" found in Section 3(a) and replacing it with the
phrase "on or before December 31, 2000".
2. The Option Agreement and the Assignment Agreement will be read and
construed together with this Agreement, and both the Option Agreement and the
Assignment Agreement will remain in full force and effect.
<PAGE>
3 . In the event of any inconsistencies between this Agreement and either
the Option Agreement or the Assignment Agreement, this Agreement shall govern.
4. All terms, conditions, covenants, agreements, benefits and obligations
contained in the Option Agreement and in the Assignment Agreement, as amended
hereby, shall be binding upon and enure to the benefit of the parties hereto and
their respective successors and assigns.
THE PARTIES' SIGNATURES below are evidence of their agreement.
SIGNED, SEALED and DELIVERED by )
Gerry Diakow in the presence of: )
)
"R.H. DAIGNAULT" ) "S.G. Diakow"
) ---------------------
Signature of Witness ) GERRY DIAKOW
RENE DIAGNAULT )
8th Floor, 1100 Mellville Street )
Vancouver, B.C. V6E 4A6 )
Tel: (604) 684-0657 )
Address )
THE CORPORATE SEAL OF )
QUILCHENA RESOURCES, INC. )
was hereunto affixed in )
the presence of: )
)
) (SEAL)
Authorized Signatory )
Nil
GERRY DIAKOW
----------------------------------------------------
6th Floor * 110 Melville Street * Vancouver, B.C. * V6E 4A6
Tel: (604) 689-2944 * Fax: (604) 682-6509
February 24, 2000
Attn: Virgil Hlus
HSBC Building 800
885 West Georgia Street
Vancouver, B.C. V6C 3H1
Re: Hi-Ho Claims, Garnet Creek (the "Hi-Ho Claims"
---------------------------------------------------------
Dear Mr. Hlus:
In connection with the filing of the Registration Statement by Quilchena
Resources, Inc. with the Securities and Exchange Commission, I hereby consent to
the use of the report entitled "Prospecting Report on Rock Sampling over the
Hi-Ho Property" dated February 3, 2000 (the "Report") as an exhibit to the
Registration statement. This consent is not to be construed as an admission
that I am a person whose consent is required to be filed with the Registration
Statement under the provisions of the Securities Act 1934, as amended. The
Report may not be relied upon, used by or distributed to any person or entity
for any other purpose without my prior consent.
Yours truly,
/s/S.D. Diakow
Gerry Diakow
<PAGE>
GERRY DIAKOW
----------------------------------------------------
6th Floor * 110 Melville Street * Vancouver, B.C. * V6E 4A6
Tel: (604) 689-2944 * Fax: (604) 682-6509
February 24, 2000
Attn: Virgil Hlus
HSBC Building 800
885 West Georgia Street
Vancouver, B.C. V6C 3H1
Re: Hi-Ho Claims, Garnet Creek (the "Hi-Ho Claims"
---------------------------------------------------------
Dear Mr. Hlus:
In connection with the filing of the Registration Statement by Quilchena
Resources, Inc. with the Securities and Exchange Commission, I hereby consent to
the use of the report entitled "Exploration Potential of Hi-Ho Claims, Garnet
Creek" dated March 11, 1999 (the "Report") as an exhibit to the Registration
statement. This consent is not to be construed as an admission that I am a
person whose consent is required to be filed with the Registration Statement
under the provisions of the Securities Act 1934, as amended. The Report may not
be relied upon, used by or distributed to any person or entity for any other
purpose without my prior consent.
Yours truly,
/s/Douglas J. Hopper
Douglas H. Hopper
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 40964
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 40964
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0
0
<COMMON> 50000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 40964
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EXPLORATION POTENTIAL
of
Hi-Ho CLAIMS, GARNET CREEK
Property Hi-Ho 1-10
New Westminster Mining Division
121 36' W. Longitude 49 23' 30" N. Latitude
Owner S.G. Diakow
by Douglas H. Hopper
Consulting Geologist
March 11, 1999
<PAGE>
MAP - LOCATION - HARRISON LAKE
[OMITTED]
<PAGE>
CONTENTS
Location & Access 1
Property Status 1
List of Mining Claims 1
History & Discoveries 3
Regional Geology 4
Historical Production & Exploration Reserves 6
Property Geology 12
Property History 14
Conclusions & Recommendations 16
ESTIMATED COST OF PHASE I EXPLORATION PROGRAM
Estimated Cost 18
References 19
FIGURES
1. Location Map of Harrison Lake
2. Claim Block & Access Roads 2
3. Regional Geology & Mine Locations 5
4. Geology of Doctors Point Area 10
5. Schematic Section Show Quartz Veins 11
6. Property Geology 13
APPENDIX
A: Certificate of Qualification after text
B: Introduction to Talc & Pyrophyllite Deposits in B.C.
<PAGE>
LOCATION AND ACCESS
The Hi-Ho 1- 10 mineral claims are located on Garnet Creek on the north
side of the Fraser River some 13 kilometers west of Hope, British Columbia.
National Topographic Series (N.T.S.) Map reference 92 H/5E, latitude 49 23' 30'
N, longitude 121 36' W.
Access to the property is by a dirt road which parallels the east side of Ruby
Creek and runs north from Highway 7 at a point 12 kilometers south west of the
juncture of Highway 7 and the Trans Canada Highway (Figure 1).
PROPERTY STATUS
The property consists of 10 contiguous mineral claims comprising 225
hectares in the New Westminster Mining Division. Map Number: 92H5W Mining
claims (Figure 1).
<TABLE>
<CAPTION>
Claim Name Record Expiry Date
<S> <C> <C>
Hi-Ho #l . 367666 January 17, 2002
Hi-Ho #2 . 367667 January 17, 2002
Hi-Ho #3 . 367668 January 17, 2002
Hi-Ho #4 . 367669 January 17, 2002
Hi-Ho #5 . 367670 January 17,2002
Hi-Ho #6 . 367671 January 17,2002
Hi-Ho #7 . 367672 January 17,2002
Hi-Ho #8 . 367673 January 17, 2002
Hi-Ho #9 . 367674 January 17, 2002
Hi-Ho #10. 367675 January 17, 2002
</TABLE>
<PAGE>
MAP 092H05E - HI-HO PROPERTY
[OMITTED]
<PAGE>
HISTORY & DISCOVERIES
The Hi-Ho claims are situated between two quite different mining camps.
The first camp to be discussed is the Harrison Lake group which lies a couple of
miles to the west of the Hi-Ho claims. The second mining camp is the Pride of
Emory-Giant Nickel Mine which lies to the northeast and again is within 10 miles
of the Hi-Ho claims.
The Empress property minfile number 092HSW008, located on the south slope of
Bear Mountain is 4 miles west of the Hi-Ho claims. Considerable development
work was done on the property between 1915 and 1917. About 181.4 tonnes of ore
was shipped from the property between 1916 and 1917. A representative sample
from the ore dump containing chalcopyrite in a gangue of mangnetite and
granetite analyzed trace gold, 48.0 grams per tonne silver and 5.3 per cent
copper M.M.A.R. 1917, page 287.
Northeast of the Hi-Ho claims, the small mines along Emory Creek have been
developed since the 1920's here the commodities include nickel, copper,
chromium, gold, platinum and palladium. Seventeen main ore bodies from these
early works were later mined by the Giant Nickel mine which was in operation
from 1958 to 1974 inclusive. Nickel and copper were the prime metallic products
with cobalt as a byproduct, however chrome oxide, platinum, gold and silver were
also reported.
REGIONAL GEOLOGY
The Harrison Lake fracture system forms a major, southeasterly trending
dislocation over 100 kilometers in length, which in parts passes along, and
parallel to, Harrison Lake. The system separates highly contrasting geological
regimes (Roddick, 1951; Monger 1970). To the northeast, the rocks include
well-formed supracrustals of the Pennsylvanian to Permian Chilliwack Group
(Monger, 1966), as well as highly foliated gneissic rocks and some younger
granites. By contrast, the rocks on the southwestern side of the fracture are
generally younger, are less deformed, and have suffered lower metamorphic grade;
they include a variety of volcanic, volaniclastic, and sedimentary rocks, as
well as intrusive granitic rocks and migmatites (Figure 2). These supracrustals
are separable into a number of different groups of Jurassic/Cretaceous age. The
most important regarding gold mineralization are the Fire Lake and Harrison Lake
Groups which are well developed respectively northwest and southwest of Harrison
Lake. The Fire Lake Group (Roddick, 1965) comprises a variety of coarse to
fine-grained sedimentary rocks with lesser greenstone volcanic rocks, while the
Harrison Lake Group (Crickmay, 1925; Roddick, 1965) is predominantly a volcanic
sequence of andesitic to dacitic composition, with lesser amounts of
volcaniclastic and sedimentary rocks. Both groups are intruded by younger
plutonic rocks ranging from granite to diorite.
The Harrison Lake fracture system is associated with regional hot spring
activity; this includes two hot springs along the Lillooet River valley,
northwest of the lake, as well as one situated at Harrison Hot Springs on the
southeastern extremity of the lake. The gold mineralization along the system is
hosted in rocks of various ages and lithologies. The Fire Lake gold camp,
situated approximately 20 kilometres northwest of Harrison Lake, includes six
mineralized
<PAGE>
MAP - FIGURE 2 - REGIONAL GEOLOGY OF HARRISON LAKE
[OMITTED]
<PAGE>
occurrences, all of which are found in quartz-rich veins that cut the Fire Lake
Group. Five of these veins are hosted in greenstones and carry chalcopyrite and
native gold. These quartz veins are not continuous but form lenses and gash
fillings. The sixth mineral occurrence in the camp, the Dandy (Mineral
Inventory 92G/NE-10), is hosted in brecciated sedimentary rocks and carries
lead-zinc mineralization in a quartz-calcite vein.
At the RN mine (Geo), situated close to Harrison Hot Springs, the gold is
hosted in sulphide-bearing quartz veins that cut both highly deformed
metasedimentary rocks of the Chilliwack Group and intrusive diorite plutons.
HISTORICAL PRODUCTION AND EXPLORATION RESERVES
The RN gold mine was evaluated by Abo Oil Corporation who reported that a I
00-tonne test bulk sample averaged 45 grams gold per tonne (1.32 ounces gold per
ton). The gold is hosted in quartz veins cutting a diorite-quartz-diorite
pluton, close to its intrusive contact with hornfelsed, deformed slaty pelitic
metasedimentary rocks. The latter are believed to belong to the Chilliwack
Group. The Hill Stock discovery had diamond drill Hole-130 intersect
significant gold mineralization near several vertical zones. Major
intersections were at the following intervals.
Interval Length Gold Silver
200'-213' 13.lft 0.25 oz/ton 0.40 oz/ton
512- 538 26.3 ft 0.25 oz/ton 0.40 oz/ton
<PAGE>
A second significant drill intercept was made on the breccia zone which is west
of the Hill Stock zone. Hole DD H - 127 intersected a sulphide zone which
occurs within a 250 foot wide breccia with a strike length of 1,500 feet. The
sulphide zone contains pyrrhotite, pyrite with chalcopyrite and sphalerite.
Interval From Hole 127
Interval Length Gold Silver Zinc
430'-453' 23 feet 0. I oz/ton 0.30 oz/ton 1.2%
The Portal stock at the RN mine intersected high grade gold contained
within the footwall zone.
Drill Hole Interval Length Gold
88-76 299"-325' 26 feet 0.3 1 oz/ton
88-83 856'-866' 10 feet 0.60 oz/ton
The RN Deposit is calculated to have between 3.0 and 5.0 million tons at a
grade of 0.10. to 0.12 oz/ton of gold. Based on a mining study, gold production
cost is forecast at roughly $190.00 (US) per ounce at a production rate of 1,000
tons per day.
At this rate of production the mine would produce 35,400 ounces per year with a
ten year mine life.
The Seneca Deposit which is situated on the north side of the Chehalis River, 12
kms from the village of Harrison Hot Springs was discovered in 1950 and
initially called the 'Luck Jim' (Figure 3). The Seneca showing is a stratabound
occurrence of massive sulphides along a flow contact between acidic and basic
lavas. A shipment of 287 tons to the Britannia Concentrator in 1961 assayed
<PAGE>
Cu 1.55%' Zn 8.15%; Au 0.12 oz/ton; Ag 3.15 oz/ton. The Seneca deposit is
very similar in type to the rich Archaean massive sulphides of the Canadian
Shield, and also similar to the Miocene Kuroko ores in Japan. The Seneca
eventually became a joint venture (50-50%) between International Curator
Resources Ltd. And Chevron Canada Ltd., they developed at least 1.6 million
tons of polymetallic mineralization.
Seneca Tonnage Grade Au Ag Cu Pb Zn
1,660,600 0.024 oz/ton 1.2 oz/ton 0.63% 0.15% 3.57%
990,000 0.032 oz/ton 1.62 oz/ton 0.84% 5.17%
Diamond Drill Hole 85-12 was the discovery hole for the "T" or "Vent" zone
at Seneca. This drill hole intercepted 31 feet averaging 4. 1 % Zinc, 1.45%
Lead, 0.25% Copper, 0.96 oz/ton Silver and 0.024 oz/ton gold. The new zone was
situated 1.5 km northwest of the Seneca deposit.
DOCTORS POINT AREA
There are two interesting gold prospect's at Doctor's Point, on the
southwest shore of Harrison Lake approximately 45 kilometers north-northeast of
Harrison Hot Springs (Figure 2). The first deposit is the old Providence Mine.
It is situated close to the shore of Harrison Lake, on the northside of Davidson
Creek, approximately 5 kilometers southeast of Doctors Point (Figure 2)
The mine was worked at the turn of the century and is covered by Crown
grants (lots 1737 and 1738). The Annual Report of the Minister of Mines for
1897 described the property as containing 'three distinct lodes', the middle one
being vertical and the other two converging toward the middle lode with depth.
A 45 metre shaft was sunk over the middle lode and over 75 metres of tunneling
completed. Approximately 180 tonnes of ore was stockpiled and in 1896, three
car loads of this material were shipped to the smelter;
<PAGE>
these averaged $27 per ton in gold and silver. However, individual assays
varied from $1 to $2,000 per ton. The ore was described as containing about 40
per cent free gold, making it partially free milling. The geology around the
Providence mine consists primarily of massive, dark green andesites, with lesser
amounts of andesitic volcanic breccia. Adjacent to the mine is a major,
north-northwest-trending fault which passes along Davidson Creek. The
mineralization at the mine is controlled by several fractures which are either
subparallel to or represent splays from, the Davidson Creek fault.
The Nagy Gold occurrence - in the 1970's Mr. G. Nagy discovered gold-silver
mineralization at Doctor's Point (Figure 2). In 1981, Rhyolite Resources Inc.
purchased the Nagy claims and subsequently, conducted an exploration program
involving geological mapping, soil sampling, trenching, and drilling. This
program intersected gold-silver-bismuth mineralization in sulphidebearing quartz
veins; the best intersections were in holes 81 R-8 and 81 R-1 I which
respectively intersected 3.2 metres of 7.1 grams gold per tonne (0.21 ounce gold
per ton) and 3.9 metres of 4.2 grams gold per tonne (0.125 ounce gold per ton).
Rhyolite Resources Inc., completed 60 diamond-drill holes totaling 4570 metres
and had drill indicated and probable mineralization reserves of 450,000 tonnes
grading 3.1 grams gold per tonne (0. I ounce gold per ton) and 3 1 grams silver
per tonne (I ounce silver per ton). The simplified geology of the area is shown
on Figure 3. The southern part is underlain by a variety of generally,
moderately dipping volcanic, volcaniclastic, and sedimentary rocks that probably
belong to the Middle Jurassic Harrison Lake Group. To the north, these
supracrustals are intruded by five dioritequartz diorite bodies that vary in
size from only 25 metres in diameter to over 1 kilometer across. The
gold-silver mineralization at Doctors Point is hosted in long, narrow, gently
dipping (10 to 30 degrees) quartz-sulphide veins that cut both the diorites and
the adjacent hornfelsic rocks.
Figure 3 - Geology of the Doctors Point area, Harrison Lake.
- ----------------------------------------------------------------------
<PAGE>
On surface, these veins vary from a few centimeters to 0.75 metre wide, but
drilling has reportedly intersected veins over 2 metres in width. The veins
include both clear and white vuggy quartz (Figure 4). Pyrite and arsenopyrite
are the commonest sulphides; in part the veins comprise coarse, massive sulphide
material in which quartz is subordinate. Analysis show that the gold-silver
mineralization at Doctor's Point is generally associated with anomalous amounts
of bismuth, antimony, mercury, copper and lead, and occasionally associated with
anomalous values of zinc and tungsten.
Figure 4 - Schematic section showing mineralized quartz veins, Doctors Point,
- --------------------------------------------------------------------------------
Harrison Lake.
- ---------------
<PAGE>
PROPERTY GEOLOGY
The Hi-Ho Property is mainly underlain by lower Pennsylvanian to lower
permian basic volcanic rocks and pelites of the Chilliwack Group. On the east
side of Ruby Creek a small band of rocks described by Mr. Monger as schist and
amphibolite are separated from the Chilliwack volcanics by a north south
trending fault. There rocks are in contact to the east with quartz diorite of
the late cretaceous spuzzum pluton.
The B.C. Geological Survey Branch has a minfile report on the Clover Leaf
showing at Ruby Creek (Figure 5). The Clover Leaf showing is on the south west
bank of Ruby Creek. The talc exposure is 70 metres thick with a strike length
of 10 metres, contained within north striking, steeply dipping chloritic
phyllite. The talc is believed to be completely altered ultramafic body, as
many such bodies are seen in the vicinity, including a bluff of pyroxenite north
of the talc showing. The talc is cream to dark greenish grey and weathers rust
and green. The surface is highly fractured and slickensided, and the talc has a
north trending foliation. In thin section, the talc ore consists of 25 per cent
tremolite-actinolite and 5 per cent magnetite. It yields an off-white to grey
powder. The property has been drilled, first in 1964 and again in 1970. The
later drilling intersected about 60 metres of talc in a hole angling 33 degrees
north, along strike, indicating the depth of talc but not the true thickness.
Pyrrhotite, carrying values in nickel and copper is also reported. Up to
100 grains per tonne, silver was obtained from pack rock drill samples.
<PAGE>
MAP - Figure 5 - Geology of Ruby Creek
<PAGE>
MAP
[filed in paper format under Form SE]
<PAGE>
PROPERTY HISTORY
The earliest recorded work in the claim area was conducted by Black
Mastoden Mining Ltd., on the Clover Leaf mineral claims located one mile north
of the mouth of Ruby Creek.
The showing is reported as pyrrhotite carrying some nickel and copper value in
the talc enveloped in a serpentinite shear zone. In the period from 1966 to
1973 the British Columbia Annual Minister of Mines Reports describe the work
done on the property surface trenching, open pits, 17 surface diamond drill
holes totaling 1115 feet and 2 underground diamond drill holes totaling 550
feet.
A geochemical survey consisting of soil sampling was done on the Hi-Ho property
between September and October 1978. 1213 soil samples were taken from the Rub 1,
2 and 3 mineral claims. Samples were taken at 25 metre spacing along lines 500
metres apart and along a section of road (see maps in pocket).
The samples were taken to Min-E Laboratories Ltd. of North Vancouver where they
were analyzed for gold using a gold Aqua-Regia Atomic Adsorption process.
A representative number of samples, 128 out of 1213 had an arithmetic mean of 5
ppb and ranged in value from the detection limit of less than 5 ppb. Contour
intervals of 15 to 30 ppb and greater than 30 ppb outlined various small
anomalies and one 200 metre wide and open to the south on line 2500 S. A
prospector employed to traverse up Ruby Creek sampled 5 different locations.
The results are summarized below:
Sample No. Width Au oz/t Ag oz/t Pt
477 (No. 1) 20 feet 0.08 .001 .00
478 (No. 3) 10 feet 0.04 .002 . 00
479 (No. 2) 20 feet 0.02 .02 . 00
7380 grab 0.01 .02 ---
7381 grab 0.14 .07 ---
<PAGE>
CONCLUSION & RECOMMENDATIONS
The Hi-Ho property has a dual potential as a mining prospect. First
previous property work and near by mines make it a good bet as a precious metal
property. Secondly, the large high quality talc deposit on the property gives
the Hi-Ho claims the potential to be developed as an industrial mineral deposit
(Appendix B, open file 1988-19).
The Hi-Ho property has not been developed for approximately 10 years. The low
elevation and warm wet climate means the foliage undergrowth grows very quickly
and will effectively cover the known showings and previous grid work.
High grade gold mineralization, soil geochemistry Au anomaly (maps in pocket)
and a drilled talc deposit all occur on the claim group. This area should get a
thorough reconnaissance that will relocate these geological features.
A base map should be produced that will accurately relate these features to the
claim block. Shallow hand trenching will probably be necessary before sulphide
mineralization carrying gold values can be verified. Old reports state that
there are 550 feet of underground diamond drilling. The location of an adit or
cave is no longer known, this is obviously another important part of the
property history that one wants to relocate. The talc deposit should be
carefully cleaned off so that the deposit can be sampled.
Once an initial reconnaissance is complete the claim block which is open to
the West, North and East may be enlarged. I recommend that two men, a geologist
and a prospector spend 7 days examining, mapping, hand trenching, sampling, and
possibly staking more ground at the Hi-Ho claims.
A report following the first phase of exploration would fulfill the work
requirement to hold the Hi-Ho Claims in good standing for 3 to 4 years. The
direction a second phase of exploration would take depends on the economics of
developing either an industrial mineral property or a precious metal property.
<PAGE>
ESTIMATED COST OF PHASE I EXPLORATION PROGRAM:
Geologist - 7 days @ $500/day
including room & Board $3,500.00
Prospector - 7 days @ $400/day $2,800.00
25 rock samples @ $15/sample $ 375.00
Geological Report Writing
1.5 days @ $400/day $ 600.00
Truck Rental
7 days @ $75.00/day $ 525.00
Contingency (includes cost of staking
and recording additional claims) $ 700.00
Total cost of Phase 1 $8,495.00
<PAGE>
REFERENCES
Crickmay, C.H. (1925): The Geology and Paleontology of the Harrison Lake
District, unpub.
Ph. D. Thesis, Stanford University, Ohio, California.
Huber, D, (1983): Prosperity Looming for ABO, with Alberta Oil and Gold at
Harrison British
Columbia, "Prospector", May-June, 1983, p.p. 13-15
Monger, V.W.H. (1966): The Stratigraphy and Structure of the Type Area of the
Chilliwack Group,
Southwestern British Columbia, unpub. Ph D. Thesis, University of B.C.
Monger, V.W.H. (1970): Hope Map - Area, West Half (92H wl/:z), British Columbia,
Geol. Surv., Canada, Paper 69-47,
Ray, G.E. (1983): The Nagy Gold Occurrences, Doctors Point, Harrison Lake
(92Wl2W), B. C. Ministry of Energy, Mines and Pet, Res., Geological Fieldwork,
1982, Paper 1983 - lp.p. 55-61.
Roddick, J.A. (1965): Vancouver North, Coquitlam, and Pitt Lake Map-Areas,
British Columbia,
Geol. Surv., Canada, Mem.335.
Map 737A: (1970) Geological Survey of Canada
- ---------: (1978) Geological and Geochemical Report on the Rub Claims, British
Columbia Ministry of Mines, Assessment Report 7109
- ---------:(1995) MINFILE NUMBER: 092HSW 067, Ministry of Energy, Mines and
Petroleum Resources, Province of B.C.
MacLean M. (1988): Open file 1988-19 Talc & Pyrophyllite Deposits in B.C.
<PAGE>
STATEMENT OF QUALIFICATIONS FOR DOUGLAS H. HOPPER
1. I attended the Haileybury School of Mining during the years 1962 to 1966
studying Mining Technology.
2. Since the year 1964 I have worked with Hudson Bay Exploration, Kennecot
Exploration, Sumitome Exploration and a number of other exploration companies as
a field geologist, underground geologist, Diamond Drillsupervision and other
related duties concerning mining.
March 10, 1999
Douglas H. Hopper
<PAGE>
Appendix B
INTRODUCTION
At the present time there are no operating talc mines in British Columbia;
all of the province's talc is imported, mostly from Montana. In the past there
has been intermittent small-scale production from four talc properties and three
pyrophyllite properties.
In British Columbia the greatest demand for talc comes from the pulp and paper
industry where it is used for pitch control, and as a filler for paper coating.
The twenty-five pulp mitts in the province and five mills in Alberta use as much
as 2.3 tonnes of talc per day. Tens of thousands of tonnes of talc are required
by the industry each year.
The geology of British Columbia offers potential for the discovery of a
quality talc deposit. Generally, the highest purity talc is derived from
deposits associated with magnesium carbonate rocks, and the talcs of lesser
purity come from altered ultrabasic igneous rocks (Winkler, 1976). Most of the
past British Columbia production has come from deposits hosted in schists, which
tend to yield talc of the lowest quality. one of the producers, the View
property west of Creston, is hosted in dolomite (Table 1). Two properties
studied by the industry in recent years have identified talc meeting the pulp
and paper industry standards.
<TABLE>
<CAPTION>
TABLE 1
HISTORICAL PRODUCTION OF TALC AND PYROPHYLLITE
Name Map NTS Years of Tonnes
No. Production
<S> <C> <C> <C> <C>
Eagle . . . . . . . . . . T20 92E/5 1923 250
Lucky Jane. . . . . . . . T23 92J/9 1917-1935 455
Gisby . . . . . . . . . . T24 92H/13 pre-1923 (?)
View. . . . . . . . . . . T32 92F/2 1984 (?)
Kyoquot Sound . . . . . . P1 92L/3 1910-1914, 1937 'several hundred'
Riverside . . . . . . . . P2 921/14 1950 82 (test)
Pyro Group. . . . . . . . P3 92H/7 <1958,. 'small shipment'
1972 --- > present -200 tonnes/year
</TABLE>
<PAGE>
There are many ultramafic belts in British Columbia (see map in pocket)
which are ideal settings for a higher purity talc deposit. other favourable host
rocks which warrant exploration are also outlined on the map.
All past talc production has been from short-lived, low-tonnage operations;
often a specific order would be fitted, after which the property would be
abandoned. Upgrading, by flotation or other processing, was not employed.
The number of known talc occurrences, together with favourable geology and
laboratory research, indicates that talc meeting the industry's standards can be
produced in British Columbia.
The intent of this publication is to aid prospectors and the industry in general
in the discovery and development of a Local talc resource to rep t ace the
present imported product. The. report outlines the known occurrences of talc
and pyrophyllite in British Columbia, and provides information and references
that wilt be useful as guides to exploration.
PROPERTIES OF TALC AND PYROPHYLLITE
Talc is a soft, fissile and commonly pale-coloured mineral which is easily
ground to a fine powder. It is a hydrous magnesium phyllo-silicate, with the
chemical formula Mg Si 0 OH) Pure talc has a unique combination of properties;
it is chemically inert, white coloured, nonabrasive, fine grained, and very soft
(hardness of 1). In a natural setting however, talc is rarely found exhibiting
all these characteristics simultaneously.
The theoretical composition of pure talc is 63.5 per cent SiO 2, 31.7 per
cent Mgo and 4.8 per cent water; these percentages seldomly if ever occur
naturally, as impurities are generally present. The most common mineral
impurities are chlorite, iron sulphides (usually pyrite), calcite, dolomite and
magnesite, amphiboles and silica. Chemical impurities involve the replacement
of magnesium in the crystal lattice by iron or manganese. impurities affect the
colour of the talc, which may range from apple green through greyish white to
dark grey-green.
Pyrophyllite is a hydrous aluminum phyllo-silicate with the chemical formula
Al2Si 4 010 (OH)2 The name 'pyrophyllite' is derived from the Greek meaning
'fire' and 'leaf' which describes the way it exfoliates when heated.
Pyrophyllite is very similar to talc in appearance, it has the same pearly to
greasy lustre and ranges in colour from white to apple green to grey or brown,
and has a
<PAGE>
hardness of 1 to 2. The theoretical composition of pyrophyllite is 28.3 per
cent Al203, 66.7 per cent.Si02 and 5 per cent water. It may also contain excess
aluminum, potassium (K20), and iron oxide (Fe203).
Talc and pyrophyllite both consist of alternating brucite and silicate
layers, that is, octahedral sheets sandwiched between tetrahedral ( sheets which
are joined by weak van der Waal's bonds (Figure 1). The layers are electrically
neutral and hence the minerals are chemically inert. The weak bonding accounts
for the excellent cleavage and greasy feet.
Pyrophyllite and talc can usually be distinguished by their geological
setting and associated mineral assemblages. in the Laboratory they are
distinguished by moistening a fragment with cobalt-nitrate and heating
intensely. Talc will turn to a pale violet colour while pyrophyllite will
become blue (Hurlbut and Klein, 1977).
Talc in its massive compact form may be termed either 'steatite' or 'soapstone'.
The original connotation of 'steatite' was a massive talc of high purity, but
this definition is not always implied. 'Soapstone' is used to describe talc of
carving quality which may be contaminated by carbonate and chlorite.
<PAGE>
------
Figure 1. Theoretical structure of talc (after GILL, 1984)
----------------------------------------------------------
Another type of talc ore is 'hard talc', containing abundant tremolite,
with anthophyllite, calcite, dolomite and serpentine. 'Soft talc' implies platy
foliated talc, , the most common type. In industry, the name 'talc' is used
very generally to describe a wide range of mineral mixtures which may in fact
contain very little talc.
SPECIFICATIONS - TALC
Each talc deposit is unique and the degree to which it must be processed
depends on the end use of the product. The physical and chemical properties are
tested and the importance or applicability of each test depends on the
specifications of the consumer.
The physical properties considered when evaluating powdered talc are slip,
grittiness, brightness, grain size, colour, specific gravity, absorbtive
abilities and reaction to heat.
Slip is the general smoothness or greasiness of the mineral, tested in
powdered form.
The softness of talc allows it to be easily pulverized into a fine
non-abrasive powder, which is useful as a duster or filler. Since it is
chemically inert, it is used as a dilutant drugs and cosmetics. Grittiness,
that is, material Larger than the grain size of the ground talc, causes
abrasion. Grit may form due to contamination by quartz or aluminosilicate
minerals. The 'grittiness' is measured by the Valley Abrasion Test which
indicates, in milligrams, the wear on a piece of wire testing cloth (Lefond,
1983).
The brightness of talc is a measure of reflectivity as compared to a pure
magnesium oxide standard. It is also called the 'GE' brightness, referring to
the General Electric Company, which developed the instruments used in its
measurement (Berg, 1979).
The grain size is measured by passing the powdered talc through standard wire
screens, the most common size is 200 mesh. Mesh sizes are often quoted in
specifications.
The colour is often important and is caused by impurities. Iron causes
discolouration, which is most often undesirable, especially in filter
applications in the paper industry. When powdered, the colour of talc usually
lightens, therefore increased or repeated grinding may improve the measured
brightness of the sample. Talc purity is determined through X-ray diffraction,
which reveals the presence of talc as well as any other impurities.
<PAGE>
The specific gravity of talc ranges from 2.55 to 2.78; this varies with the
shape of the grains and with the amount of impurities. When finely powdered,
talc exhibits colloidal properties and surface tension prevents it from
settling, which may or may not be desirable. The platy surface of talc is
hydrophobic but the edge surface is hydrophilic, allowing it to disperse easily
in a hydrous system.
Talc has the ability to adsorb organic compounds, which is useful in controlling
pitch that is released during the pulping process. The talc adheres to the
pitch and prevents settling which damages machinery and stains the final paper
product. Fine-grained talc is also used as an adsorbent in paints; it keeps the
pigments mixed and its colloidal nature inhibits settling.
The reaction to heat is important for some talc uses, especially in the ceramics
industry where talc's Low shrinkage characteristics improve the dimensional
stability of products during firing. Massive talc is renowned for its poor
conductivity, and powdered talc is also used as a fire retardant or insulator.
impurities may destroy the ability of the talc to retain or resist heat and it
may react by swelling.
SPECIFICATIONS - PYROPHYLLITE
Grading pyrophyllite depends, like talc, on the ore mineralogy and on the
consumers' requirements.
Pyrophyllite is slightly harder than talc, 1 to 2 versus 1 on Moh's scale of
hardness. It may be substituted for talc in many applications, but pyrophyllite
is a much less common mineral in nature.
Massive, compact pyrophyllite is commonly used as a refractory and testing for
this purpose involves firing at a range of temperatures to check the dilatancy
properties. Refractory potential is measured using a Pyrometric Cone Equivalent
(PCE) test. Cones made of material which fuses at a known temperature are fired
along with a 'cone, of the material being tested. By noting which cone deforms
simultaneously with the sample, the fusion temperature of the sample is
determined and the corresponding cone number is quoted. Cones range up to No.
38 which indicates a temperature of fusion of 1835 C (Klinefelter and Hamlin,
1957; Lites and Heystek, 1977). Foliated or micaceous pyrophyllite has a very
tow coefficient of thermal expansion and is often used in making ceramic tiles.
PROCESSING
Talc ore beneficiation involves either dry grinding or wet processing.
Grinding requires ceramic machinery as opposed to the conventional steel rod and
ball milling which causes discolouration and contamination of the talc. Wet
processing involves froth-flotation and/or high- intensity magnetic separation
which removes iron impurities. The talc is delaminated into the more useful
form of discrete platelets, as in the process used for mica delamination.
Flotation techniques are facilitated by the natural hydrophobicity of talc and
collector agents are not required.
<PAGE>
USES OF TALC AND PYROPHYLLITE
Talc may substitute for other minerals when they are unavailable, for
example, if the talc is bright enough, it may may take the place of titanium
oxide which is added to brighten paper. Talc is now widely used in place of
asbestos for insulating purposes and very Low grade talc is used in place of
granular silica and dolomite in the roofing industry.
The best known application of talc is in talcum powder, which ironically, is the
Least important in terms of the size of the industry, because of the extremely
high purity of talc required.
The most important uses for talc are in the pulp and paper, paint, and plastics
industries. It is also used in the ceramic, roofing, rubber and pharmaceutical
fields. The List of possible applications is almost endless; talc has been used
in insecticides, crayons, as a bleaching agent, in floor waxes, lubricants,
soaps and textiles, and as a polish for cereal grains and rice.
Talc specifications for the major industrial applications are summarized in
Tables 2, 3 and 4.
THE MARKET
Statistics for 1986 show the pulp and paper industry in Canada used an
increasing amount of talc, and predictions for 1987 indicate that demand from
the plastics industry will increase. At present, Canadian talc comes from
Quebec and Ontario, and pyrophyllite is mined on the Avalon Peninsula in
Newfoundland.
The main markets for Canadian talc are in eastern Canada and in the northeastern
United States. Canada also exports to Europe and Japan. Compared to the
previous year, Canadian exports of talc increased 9.6 per cent in 1986, while
pyrophyllite exports decreased by 23 per cent. The average unit value of talc
increased 13 per cent, and prices of all grades of talc rose 5 per cent in 1986;
the same trends are expected for 1987. The price of talc, as with many other
industrial minerals, is very sensitive to local conditions and is negotiated
between the producer and consumer within a certain generally established range.
The rate will fluctuate according to processing methods, transportation costs,
material quality and specifications. The range in Canadian dollars per short
ton is:
35-70 medium grade
95-160 high grade
180-250 highly beneficiated
1000+ steatite blocks
30-40 pyrophyllite (bulk materials
(Source: Prud'homme, 1987)
<PAGE>
<TABLE>
<CAPTION>
TABLE 2
TALC IN PULP AND PAPER, PAINT AND PLASTICS INDUSTRIES
Desirable Properties of Talc and
Industry Properties Improved in Product Talc Specifications
<S> <C> <C>
- close to 1, finely pulverized, high purity,
PITCH. . . . . . talc absorbs resin and keeps it dispersed in white colour
CONTROL. . . . . pulp
- max. particle size <20 (-200 mesh), 40
talc softness, chemical inertness, high grades also used, fibrous, rather than foliated
PULP & PAPER . . reflectance, hydrophobicity, organophilic, talc, grit free, white, little to no calcite
PAPER FILLER . . particle shape
- paper grades: ultrafine talc
- GE brightness - 90 - 96%,
- preferred grades have Valley abrasion level
<30 mg/3000 cycles; impure grades may be
higher
COATING - particle size <10, soft, grit free, ink accepting
PIGMENT . . . . good coverage, smooth printability
- low carbonate content
- nearly white color
- at least 98.5% must pass through 325-mesh
screen
- talc decreases gloss, aids in adhesion, - foliated & fibrous varieties used
flow, hardness & 'hiding power' of - specific oil absorption needed specifications
paint are established by ASTM (American Society for
PAINTS . . . . . - low specific gravity of talc allows it to Testing & Materials) #605-69(1976)
(extender). . . remain in suspension
PLASTICS
- - polypropelene
- - nylon
- - polyester. . . - improves dimensional stability,
- - thermoplastic. chemical & heat resistivity
resins . . . . . - strength (impact & tensile) - no Fe impurities or 'grit'
- - thermosets . . - good electrical insulator - super fine grained: <8
Minerals Which
May Substitute
Industry for Talc
<S> <C>
PITCH
CONTROL. . . . . pyrophyllite
PULP & PAPER
PAPER FILLER
kaolin, calcite,
COATING. . . . . carbonate,
PIGMENT . . . . pyrophyllite
PAINTS
(extender). . . pyrophyllite
PLASTICS
- - polypropelene
- - nylon
- - polyester. . . mica,
- - thermoplastic. wollastonite,
resins . . . . . carbonate,
- - thermosets . . pyrophyllite
</TABLE>
Sources of information for Tables 2, 3 and 4: Spence (1922), Harben (1978),
Cornish (1983), Gill (1984), Clifton (1985), Prud'homme (1985) and Berg (1979).
<PAGE>
<TABLE>
<CAPTION>
TABLE 3
TALC AND PYROPHYLLITE IN CERAMIC AND REFRACTORY INDUSTRIES
Minerals Which
Desirable Properties of Talc and Properties May Substitute
Industry Improved in Product Talc Specifications for Talc
<S> <C> <C> <C>
- improves firing characteristics,
translucency, strength & aids in crack-free - low Fe, Mn & other impurities
glazing - average grain size 6-14
- permits time reduction in firing cycle - 90%-98% must pass through 325 mesh
- chloritic talc - used for earthenware for (note: in Europe, Electroceramics use only
uniform dilation, fast firing and good nonlaminar, compact talc (steatite), free from
adhesion of glaze to body chlorite)
- pyrophyllite - foliated variety used - pyrophyllite - grade -325 mesh
- has low cooefficient of thermal - minimum quartz & sericite impurities,
expansion foliated or micaceous variety
- high aluminum content aids in good - low shrinkage necessary for products
dying and firing characteristics requiring standard precise size (i.e. tiles)
- high mechanical strength & good - for high frequency insulators uniform
resistance to crazing physical & chemical properties needed
- high sericite-pyrophyllite used as - max. amounts tolerated:
CERAMICS . . . substitute for silica-feldspar mixtures - CaO - 0.5%
- tiles . . . reduces crazing, shrinkage & warping of Fe oxides - 1.5%
- earthenware product Al203 - 4% wollastonite
- pyrophyllite used more than talc
- pyrophyllite expands on heating,
counteracting plastic fraction shrinkage &
has low thermal conductivity
- steatite - not used alone much anymore - pyrophyllite - compact, homogeneious (some
but may be ground to mix with clay to crystalline or radiating varieties used)
produce synthetic cordierite for electric - tested for refractories (see text (Introduction)
insulators re PCE testing) kyanite,
- block steatite - ground to make synthetic - steatite - fine grained, compact, soft, no andalusite,
lava (conversion to clinoenstatite & cleavage or flaws, absent of grit, low iron calcined
REFRACTORIES . quartz) content bauxite
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 4
TALC IN ROOFING AND PHARMACEUTICAL INDUSTRIES
Minerals Which
Desirable Properties of Talc and May Substitute
Industry Properties Improved in Product Talc Specifications for Talc
<S> <C> <C> <C>
pyrophyllite,
actinolite,
low-grade
asbestos,
pyraliolite-
- weather resistant, prevents sticking rensselaerite
(dusting), hydrophobic, good anti - lowest quality talc used (pyroxenes
-caking characteristics, platy structure - often a mix of grit & course talc from talc partially altered
ROOFING. . . . . . . . - protects asphalt, against uv radiation mills as filling - 150 mesh used for surface to talc), in
- - filler,. . . . . . . - prevents oil penetration or migration coating -40 -80 mesh Europe - mixed
coater. . . . . . . . - increases fire resistance - may be impure as colour is not important talc/sand used
PHARMACEUTICAL
- - filled in tablets - EXTREMELY high purity talcs used
- -additive in medical - very fine grained, no impurities, no grit
pastes, creams, soaps - softness, chemical inertness, - white colour
- - talcum powder. . . . hydrophobicity - 'dry' scalp characteristics
</TABLE>
<PAGE>
In the world market, talc is usually only traded between neighbouring countries,
as deposits are widespread and commonly developed; there are 30 talc-producing
countries at the present time. Exceptions are steatite and very pure talc,
which are very expensive and less common, and therefore may compete to a limited
extent in world markets.
SOURCES OF INFORMATION
The properties described in this report were researched and without being
examined firsthand in the field; any corrections or information regarding the
deposits is welcome. in a few instances, samples were available which were
analysed by the Ministry's Laboratory with results included in this report. The
main sources of information are personal communications, publications and
property files of the ministry of Energy, Mines and Petroleum Resources and the
Geological Survey of Canada, company reports and graduate theses. The MINFILE
system of the Ministry of Energy, Mines and Petroleum Resources is
cross-referenced; data on each occurrence is accessible through the computer
file.
Locations are plotted on a 1:2 000 000-scale map of British Columbia (in
pocket), as well as on 1:50 000 National Topographic System map sheets, or on
more detailed property maps when available. When only a claim name is given as
a location, the centre of that claim is plotted. Sometimes only a general
geographic Location is available, or the showing may actually cover a Large
area; these factors affect the accuracy of the Locations.
All quoted analyses are as originally published; reliability is uncertain, but
those included are the most recent available.
The talc and pyrophyllite occurrences are categorized according to geological
setting. Only those showings which have sufficient information have been
written up; the rest are Listed in the appendix. The appendix also includes
properties in MINFILE which list talc as an associated or secondary mineral.
<PAGE>
GEOLOGICAL SETTING
Talc and pyrophyllite are secondary minerals, formed as products of
hydrothermal alteration during Low grade regional metamorphism.
TALC
Talc forms as an alteration product of magnesium silicates such as olivine,
pyroxenes and amphiboles, or by the reaction between magnesium and silica.
Minerals commonly associated with talc are chlorite, dolomite, tremolite,
anthophyllite, antigorite, serpentinite, magnesite, magnetite and chromite. The
magnesium and silica required for the formation of talc may both be supplied by
the host rock or the silica may come from hydrothermal solutions emanating from
nearby acid intrusions or from adjacent siliceous beds.
The most common geological settings for talc formation are: (1) within
regionally metamorphosed and/or hydrothermally altered ultramafic rocks, (2) in
association with schists, generally chloritic, (3) with dolomite and magnesite,
or C4) with mafic volcanics.
The talc deposits in British Columbia are classified in this report according to
the host rock. A few deposits could be assigned to more than one category,
particularly those described as schists, which are very Likely sheared and
completely altered serpentinite bodies, for example, the deposits near the
Nahatlatch River, the J & J (T25) and Gisby (T24) properties. The complication
of shearing is common as many occurrences are formed in fault zones.
Altered Ultramafic Rocks
The association with serpentinite and ultramafite is the most common
setting for talc deposits. There are many very small talc occurrences of this
type in the province and only the most promising are described in detail. The
talc has formed as a result of Low temperature alteration of magnesia-bearing
minerals such as olivine, hypersthene enstatite and augite. It is usually
foliated and forms at considerable depths. Talc can form by direct metasomatism
of ultramafic rock or serpentinites. Talc development not associated with
serpentinization requires an especially open circulation system, through
deformation and faulting. Talc is usually found at the margins of ultramafic
bodies or within shear Zones, and is usually associated with abundant carbonate.
Schists
Schists are the second most common host for talc alteration. Three of the
four past producers in British Columbia are of this association. The schists
vary widely in composition, they may be chloritic, quartz-sericite-graphite or
Low grade metamorphic mineral assemblages. The pre-metamorphosed sediments are
the source of magnesia and silica.
Dolomite and Magnesite
Talc may form through direct alteration of dolomitic sedimentary rocks.
Silica is provided by circulating hydrothermal solutions from nearby intrusions
or from an adjacent quartzite bed. The reaction that takes place is as follows
(Winkler, 1974):
3 dolomite + 4 quartz + water ---> talc + 3 calcite + 3 carbon dioxide
This alteration may have an intermediate phase of tremolite or another
magnesium silicate and chlorite is commonly present.
Almost all the talc mined in Montana and in the Madoc district in Ontario is of
this type, but it includes only 15 per cent of the known talc showings in
British Columbia.
Mafic Volcanics
Talc is formed, especially along faults, as a result of magnesia-bearing
solutions circulating through mafic volcanics. The Chu Chua (T38) is the only
occurrence of this type in British Columbia.
PYROPHYLLITE
Pyrophyllite is a relatively rare mineral, found in association with acid
volcanic rocks, as a hydrothermal or metasomatic alteration of feldspars in
rhyoites, dacites and andesites. Associated minerals are kaolinite, alunite,
quartz, sericite, montmorillonite, diaspore, corundum and less commonly, pyrite,
chlorite, feldspar, hematite and magnetite.
The pyrophyllite mined near St. John's, Newfoundland is in hydrothermally
altered, sheared rhyolite. The ore is found in shear zones near granitic
contacts. Of the four British Columbia pyrophyllite showings, the Largest, at
Kyoqout Sound (PI), is hosted in dacitic to andesitic volcanics, with abundant
associated alunite.
Some varieties of pyrophyllite found in other parts of the world are; in South
Africa, wonderstone, with a hardness of 8, consisting of pyrophyllite,
chloritoid, epidote and rutile; and in South Korea, a massive variety of
pyrophyllite called agalmatolite is used for carving.
PROSPECTING REPORT
ON
ROCK SAMPLING
-------------
OVER THE
HI - HO PROPERTY
----------------
GARNET CREEK, HARRISON LAKE AREA
NEW,WESTMINSTER MINING; DIVISION COLUMBIA
PROPERTY LOCATION Hi-Ho 1-10 are 4.0 km @ 347 from Ruby
Creek - Fraser River Confluence
49 23' 30"N
121 36'W
92H/5E
WRITTEN FOR QUILCHENA RESOURCES, INC.
101 West 5th Avenue
Vancouver, B.C. V5Y 1H9
WRITTEN BY GERRY DIAKOW
6th Floor, 1100 Melville Street
Vancouver, B.C. V6E 4A6
REVISED . . . . . February 3, 2000
<PAGE>
TABLE OF CONTENTS
Summary 1
Conclusions 1
Recommendations 1
Introduction 2
Location and Access 4
Property Status 4
Physiography 5
History 6
Prospecting Traverses 6
Compilation of Samples 11
Assay Methods and Specifications 12,13,14
Statement of Qualifications 15
LIST OF FIGURES AND MAPS
Figure 1 Claim location map 3
Map 1 - Traverse 'A' Zone 8
Map 2 - Traverse 'B' Zone 10
Map 3 - Map showing all claims In Pocket
<PAGE>
SUMMARY
The Hi-Ho claims were prospected with a focus on the metamorphic rocks on
the southern portion of the claims. One day was spent on a general
reconnaissance and two days specifically prospecting the metamorphic "Settler
Schist" and the schist granite contact. Rocks containing sulfide mineralization
were assayed at Acme Analytical laboratories using a 30 element aqua regia
digestion plus a atomic absorption analysis for gold and platinum.
Two silts which were part of the a regional sampling also came from the Hi-Ho
claims they also had a 30 element ICP plus geochem Au Pt and Pd by Ultra/ICP.
CONCLUSIONS
1. The Hi-Ho claims are underlain by geology similar to the nearby Zofka
Ridge and the past producing Giant Mascot Nickle mine. Massive sulfide float
was observed along the Garnet Creek logging road which connects to the Emory
Creek logging roads where the nickel producing Giant Mascot mine is located
approximately 12 kilometers northeast of the Hi-Ho claims.
2. The granite schist contact located along Garnet Creek contained
appreciable sulfides at the contact zone. Further prospecting is needed to
determine whether any precious metals are associated with the intrusion schist
contact.
RECOMMENDATIONS
1. The remaining Hi-Ho claims that are underlain by granitic rock should be
prospected possibly reconnoitring up to as far as the Zofka Ridge, especially
since recent claim maps show many of the Pride of Emory occurrences unstaked.
<PAGE>
SUMMARY
The Hi-Ho claims were prospected with a focus on the metamorphic rocks on
the southern portion of the claims. One day was spent on a general
reconnaissance and two days specifically prospecting the metamorphic "Settler
Schist" and the schist granite contact. Rocks containing sulfide mineralization
were assayed at Acme Analytical laboratories using a 30 element aqua regia
digestion plus a atomic absorption analysis for gold and platinum.
Two silts which were part of the a regional sampling also came from the Hi-Ho
claims they also had a 30 element ICP plus geochem Au Pt and Pd by Ultra/ICP.
CONCLUSIONS
1. The Hi-Ho claims are underlain by geology similar to the nearby Zofka
Ridge and the past producing Giant Mascot Nickle mine. Massive sulfide float
was observed along the Garnet Creek logging road which connects to the Emory
Creek logging roads where the nickel producing Giant Mascot mine is located
approximately 12 kilometers northeast of the Hi-Ho claims.
2. The granite schist contact located along Garnet Creek contained
appreciable sulfides at the contact zone. Further prospecting is needed to
determine whether any precious metals are associated with the intrusion schist
contact.
RECOMMENDATIONS
1. The remaining Hi-Ho claims that are underlain by granitic rock should be
prospected possibly reconnoitring up to as far as the Zofka Ridge, especially
since recent claim maps show many of the Pride of Emory occurrences unstaked.
3. The steep rugged terrain should be prospected with a helper. A "buddy
system" is necessary in case an accident occurs while traversing the many steep
small cliffs.
INTRODUCTION
This report discusses rock sampling and prospecting carried out at certain
locations within the southern claims of the Hi-Ho claim group. The Hi-Ho claims
are located on Garnet Creek within the Harrison Lake area of British Columbia.
Work was carried out on the following claims:
Hi-Ho #1 - Record #367666
Hi-Ho #2 - Record #367667
Hi-Ho #3 - Record #367668
Hi-Ho #4 - Record #367669
The rock sampling and prospecting-mapping was carried out by Gerry Diakow,
a mineral exploration technician from November 22nd to November 27th 1999.
Three days spent prospecting the Hi-Ho claims resulted in sampling two
interesting sulfide bearing outcrops. Sampling and mapping of these outcrops
resulted in 17 rock samples and two silt samples being sent to Acme analytical
laboratories.
The purpose of the prospecting and mapping was to test for nickel, copper,
chromium, gold and platinum. The pride of Emory - Giant Nickel mine lies 10
miles northeast of the Hi-Ho claims. Here small mines along Emory Creek have
been developed since the 1920's the commodities include nickel, copper,
chromium, gold, platinum and palladium. Seventeen main ore bodies from these
early works were later mined by the Giant Nickel mining company which was in
operation from 1958 - 1974 inclusive. Nickel and copper were the prime metallic
products with cobalt as a byproduct, however chrome oxide, platinum, gold and
silver were also reported
<PAGE>
MAP - FIGURE 1
HIHO 1 - HIHO 10 PROPERTY
map 092H05E
[MAP OMITTED]
<PAGE>
LOCATION AND ACCESS
The Hi-Ho 1 - 10 mineral claims are located on Garnet Creek on the north
side of the Fraser River some 13 kilometers west of Hope, British Columbia.
National Topographic Series (N.T.S.) Map reference 92 H/5E, latitude 49 23'30'
N, longitude 121 36'W.
Access to the property is by a dirt road which parallels the east side of Puby
Creek and runs north from Highway 7 at a point 12 kilometers south west of the
juncture of Highway 7 and the Trans Canada Highway (Figure 1).
PROPERTY STATUS
The property consists of 10 contiguous mineral claims comprising 225
hectares in the New Westminster Mining Division. Map Number: 92H5W Mining
claims (Figure 1).
CLAIM NAME RECORD EXPIRY DATE
Hi-Ho #1 367666 January 17, 2002
Hi-Ho #2 367667 January 17, 2002
Hi-Ho #3 367668 January 17, 2002
Hi-Ho #4 367669 January 17, 2002
Hi-Ho #5 367670 January 17, 2002
Hi-Ho #6 367671 January 17, 2002
Hi-Ho #7 367672 January 17, 2002
Hi-Ho #8 367673 January 17, 2002
Hi-Ho #9 367674 January 17, 2002
Hi-Ho #10 367675 January 17, 2002
<PAGE>
Physiography
The Hi-Ho claims are found within the Southern Coast mountains. The coast
mountains extend for 1700 km, are between 100-200 km wide, and reach elevations
of over 4000m, although summits are only 2000 m, in the vicinity of the claims.
The Hi-Ho claims cover a stretch of Garnet Creek that parallels a major
North-South fault. James W.H. Monger and J. Murray Journeay in the 'Geological
Survey of Canada' open file 2490 have mapped the Garnet Creek-Ruby Creek fault
at approximately one kilometer west of the latter creeks. The coast mountains
are characterized here by steep rugged hillsides and cascading creek flows.
On the Hi-Ho claims, the terrain varies from near flat flood plains and creek
benches to vertical cliff faces up to 300 meters in height. The elevation of
the Hi-Ho claims ranges from 700 feet at Garnet Creek to 2000 feet.
The Hi-Ho claims are completely covered with second growth west coast rain
forest. The original forest was being actively logged in 1946 (personal
communication with Ed Glendinning old time resident of Ruby Creek). The second
growth is mostly cedar-hemlock forest the first growth had a lot more fir trees
as observed from stumps. On a flat along the east side of Garnet Creek on
claims Hi-Ho #3 and Hi-Ho #1 stumps from logging operation were up 2.5 metres in
diameter showing springboards holes and were 1.2 m to 2.5 m high.
Garnet Creek in the month of November has a medium flow and forms a series of
boulder pools and riffles, the creek was 10 meters wide and between 2 meters and
0.5 meter in depth.
Tributary creeks flowing into Garnet Creek have cut deep ravines into the side
hills and are awkward and dangerous to traverse.
<PAGE>
History
The only recorded work near the claim area was conducted by Black Mastodon
Mining Ltd. on the Clover Leaf mineral claims located one mile north of the
mouth of Ruby Creek. The showing is reported as pyrrhotite carrying some nickel
and copper values in talc enveloped in a serpentinite shear zone. In the period
1966 to 1973 the British Columbia Annual Minister of Mines Reports describes the
work done on the property: surface trenching, open pits, 17 surface diamond
drill holes totalling 1115 feet and 2 underground diamond drill holes totalling
500 feet.
Prospecting Traverses
Three traverses were undertaken on the Hi-Ho claims generating two separate
mineralized zones being sampled and mapped. The 'A' showing was located along
the east bank of Garnet Creek on the Hi-Ho 41 claim. The 'B' showings were on a
road traverse on the Hi-Ho #3 - Hi-Ho #4 claim boundary the former logging road
was blasted out along very steep terrain exposing fresh rock over 555 meters.
Traversing parallel and down slope from the road always ended at very steep rock
exposures that necessitated using a rope and having a partner familiar with rock
climbing.
Pyrite mineralization was present in most of the dark metamorphic rocks on the
Hi-Ho claims. J.M. Journcay and J.W.H. Monger, G.S.C. open file 2490 have
mapped the metamorphic rocks on the Hi-Ho claims as a late Cretaceous
metamorphic assemblage named the "Settler Schist". The "Settler Schist" include
granite-biotite, staurolite, sillimanite schist, siliceous schist the whole
package of rocks is described as metamorphosed in mid to early late Cretaceous.
The intrusive rocks are mapped as the 'Spuzzum Pluton' a granodiorite.
The 'A' showing was found by walking downstream along Garnet Creek. A high
voltage transmission line crosses Garnet Creek on the Hi-Ho #5 claim and the old
access road for the powerline was followed down to Garnet Creek. The rocks on
Hi-Ho #5 are coarse grained granites. Leaving the powerline road where it fords
Garnet Creek I traversed south along the east bank of Garnet Creek. Boulders
and coarse yellow-white granite sand was exposed both along the creek side and
also on the adjacent logged flood plain, where high water conditions had cut
numerous channels thus exposing the course granitic sand and boulders.
<PAGE>
The granitic rocks persist to approximately 600 meters below the powerline
ford at which point they came in contact with metamorphic rocks. The 'A'
showing a sulfide bearing garnet schist is located at this contact metamorphic
zone. The showing is water eroded to a greater depth than the black gneiss on
the southern contact of the 'A' showing. The latter black gneiss forms a
promontory which partially dams Garnet Creek forcing the creek to flow westward
(Map #I). The resulting turbulence from redirecting Garnet Creek eroded and
water smoothed the 'A' showing, making it difficult to sample the sculpted
outcrop. The showing is only exposed at the creek shoreline and will not be
visible during freshest water levels. The former bluff strikes at 120' and
continuing east it forms a steep rock face thus terminating the flood plain on
the east side of Garnet Creek. T h e Garnet schist sulfide zone is exposed to
the east approximately 5 to 6 meters before becoming covered by granitic
allevium and the flood plain forests. Sulfides in the 'A' zone varied between 5
to 15 percent with pyrite being the most abundant no other sulfides were
identified in the field.
The sulfide mineralization sampled in the B zone was surveyed and mapped using a
topofil chain and referencing the distance to the Hi-Ho 93 initial claim post.
The traverse started 50 meters south for the former initial post and was chained
to an accuracy of one metre. Sample locations were marked with orange flagging
with the sample number written on the flagging
samples collected for assaying had metallic mineralization between 2 and 30 per
cent. The sampling was selective in as much that only high grade samples were
selected for assaying. The samples do not represent true widths of
mineralization but were intended to assist searching for precious metal
anomalies that would be followed up after the initial analysis. All the Hi-Ho
claims were given a quick look for large quartz veins. VMS boulders were noted
on the claims south of the Hi-Ho however, no VMS float was observed on the Hi-Ho
claims.
<PAGE>
MAP OF GARNET CREEK - 'A' SHOWING
[MAP OMITTED]
<PAGE>
MAP OF GARNET CREEK - 'B' SHOWING
[MAP OMITTED]
<PAGE>
<TABLE>
<CAPTION>
COMPILATION OF SAMPLES
SAMPLE
NUMBER LOCATION OF SAMPLE ELEVATED VALUE COMMENTS
<S> <C> <C> <C>
RII. . . . . . . . outcrops in Garnet Creek Zn garnet schist with sulfides
R12. . . . . . . . outcrop in Garnet Creek quartz vein with sulfides
R13. . . . . . . . outcrop in Garnet Creek 924ppm Ba schist with sulfides
R14. . . . . . . . outcrop in Garnet Creek garnet schist with sulfides
R15. . . . . . . . outcrop in Garnet Creek quartz vein with sulfides
R20. . . . . . . . road cut near IP Hi-Ho #4 Cu sulfide rich meta sediment
R21. . . . . . . . blasted road cut at steep cliff Cu sulfides in gneiss
R22. . . . . . . . road cut at cliff Cu fine grained black gneiss
R23. . . . . . . . road cut at cliff 16.2 ppb Au + Zn black homfelic rock &
sulfides
R24. . . . . . . . road cut at cliff Au sulfides in white dyke
R25. . . . . . . . road cut at cliff quartz vein
R26. . . . . . . . road cut at cliff Cu schist with sulfides
R27. . . . . . . . taken from road bed Pt 7 ppb + Mn & quartz swirl in road bed
Ni
R28. . . . . . . . road cut at cliff talc 1.8m talc - soapstone
R29. . . . . . . . road cut near cliff talc I. Om talc vein
R30. . . . . . . . road cut Ba + 15.16% Fe magnetite vein
R31. . . . . . . . road cut Cu 267 ppm magnetite quartz vein
22.89% Fe
Silt #8. . . . . . Tributory of Garnet 1 1 ppb Au creek drains
granite intrusion
2 ppb Pt Pt is always interesting
Silt 9 . . . . . . Tributory of Garnet Creek
</TABLE>
<PAGE>
ACME ANALYTICAL LABORATORIES LTD.
GEOCHEMICAL ANALYSIS CERTIFICATE
(TWO PAGES)
<PAGE>
ACME
ANALYTICAL LABORATORIES LTD.
- ------------------------------
METHODS AND SPECIFICATIONS FOR ANALYTICAL PACKAGE
GROUP 3A - AU BY WET EXTRACTION
Analytical Process and Comments
<PAGE>
STATEMENT OF QUALIFICATION STEPHEN G. DIAKOW
1. I attended Vancouver City College and the University of British Columbia
completing courses leading to a B. Sc in chemistry.
2. Studied Civil and Structural Engineering at British Columbia Institute of
Technology.
3 . I have worked in Mineral Exploration for the past 34 years . Including
the major companies Union Carbide Mining Exploration, Canadian Superior Mining
Exploration and Anaconda Mining Exploration.
4. 1 have received 3 British Columbia prospector assistance grants, the
first from Dr. Grove in 1975 and last in 1998.
