UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FORM 10-KSB
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1999
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____ to ______.
Commission file number 0-26669
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Can-Cal Resources Ltd.
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(Name of Small Business Issuer in its charter)
Nevada 88-0336988
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1505 Blackcombe St., Bldg. 2, Unit #203, Las Vegas, NV 89128
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, ( 702 ) 240 - 6565
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.001,
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(Title of class)
Preferred stock, par value $.001, non-voting, 5% cumulative
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to filed such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES x NO ___
Indicate by check mark if disclosure of delinquent filers, pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [x]
Registrant's revenues in fiscal year 1999 were $3,700.
Aggregate market value of the voting stock held by non-affiliates as of
March 20, 2000: $18,205,047.00.
Number of common shares outstanding as of March 20, 2000: 8,753,782.
Documents incorporated by reference: None. However, exhibits are incorp-
orated. See Item 13.
Transitional Small Business Disclosure Format: YES ____ NO X
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ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
(a)(1) Form and Year of Organization
Can-Cal Resources, Ltd., a Nevada corporation ("the Company"), was
originally incorporated in the state of Nevada on March 22, 1995 under the name
of British Pubs USA, Inc. as a wholly owned subsidiary of 305856 B.C., Ltd. dba
N.W. Electric Carriage Company ("NWE"), a Company formed under the laws of
British Columbia, Canada ("NWE"). On April 12, 1995, NWE exchanged shares of
British Pubs USA, Inc. for shares of NWE held by its existing shareholders, on a
share for share basis. Its name was changed to Can-Cal Resources, Ltd. on July
2, 1996. This transaction is believed to have been exempt pursuant to Section
3(a)(9) of the Securities Act of 1933.
This transaction occurred prior to present management's involvement with
the company. It is present management's understanding that shares of British
Pubs USA, Inc. were exchanged for shares of NWE held by its existing
shareholders exclusively where no commission or other enumeration was paid or
given directly or indirectly for soliciting such exchange. It is management's
understanding that after the exchange the shareholders of British Pubs USA were
identical to the shareholders of NWE.
The Company's common stock and preferred stock was registered with the
Securities and Exchange Commission under Section 12(g) of the Securities
Exchange Act of 1934, in October, 1999. (Sec. File No. 000-26669).
(a)(2) Any Bankruptcy, Receivership or Similar Proceeding
None.
(a)(3) Any Material Reclassification, Merger, Consolidation, or Purchase or Sale
of a Significant Amount of Assets not in the Ordinary Course of Business
On December 3, 1997, the shareholders of Can-Cal approved the
acquisition of the assets of Aurum LLC ("Aurum"), a California limited liability
company, which consisted of the Volcanic Cinders property at Pisgah, California,
and the cancellation of indebtedness to Aurum, in exchange for 2,181,752
restricted shares of its common stock (see Item 12, Certain Relationship and
Related Transactions).
On January 29, 1999, the Company sold its Canadian subsidiary, Scotmar
Industries, Inc. (See Item 12, Certain Relationships and Related Transactions).
(b) Business of Issuer
The Company is a mining company in the exploration stage. Since about
May 1996, the Company has been devoting its resources to examining various
mineral properties prospective for precious metals and minerals and acquiring
those which it deems promising. It has determined that
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its focus is to attempt to locate and acquire properties prospective for
precious metals and minerals in the southwestern United States, principally in
the states of California, Arizona, and Nevada. The Company owns, leases or has
an interest in four properties. All properties which the Company has reviewed,
and those which it has acquired, are "grass roots" properties, in that they are
not known to contain any proven reserves of precious metals or minerals. In 1999
the Company had been conducting testing of various materials utilizing
independent contractors, at the Tyro Mill (near Bullhead City, Arizona) a
facility owned and controlled by other persons. However, the Company is informed
that all activities have ceased at the Tyro Mill and the Company has
discontinued utilizing that facility. At December 31, 1999 the Company was owed
$53,500 plus interest by Tyro, Inc. and its two owners. This amount is included
in the "Other Assets" recorded on the Company's Balance Sheet at December 31,
1999. See Item 3, Legal Proceedings.
However, the Company has done an extensive amount of preliminary testing
and assaying on four of its properties which indicate the existence of precious
metals on those properties. An assay is a test performed on a sample of minerals
to determine the quantity of one or more elements contained in the sample. The
Company has performed in excess of 1000 "in-house" assays on mineral samples
from those properties and has caused a significant number of assays to be
performed by independent assayers, which has principally consisted of performing
fire assays. The Company's policy is to acquire those properties which its
assaying, or assaying by others, indicate the presence of precious metals. The
Company contracts with persons who are experienced in performing assays, but are
not independent assayers, to conduct "in-house" assays using equipment provided
by the Company, on material from properties it is considering acquiring or which
it has acquired. It may also send samples of materials on which it obtains the
most promising assays to outside independent assayers for assays. However, even
if assays indicate the existence of precious metals, a very substantial amount
of additional testing and drilling is necessary to determine whether a property
contains a sufficient amount of precious metals to constitute "reserves," and
whether any such reserves are capable of economic production.
The Company has retained S. Bruce Ballantyne, a Geologist and Geochemist
from Vancouver, British Columbia, as a consultant, in the Company's exploration
operations. He is not an officer or director of the Company. Mr. Ballantyne has
supervised the trenching and sampling program on the Owl Canyon property and has
been actively involved in the evaluation of the Company's volcanic cinders
property. The Company will continue to use Mr. Ballantyne and possibly other
consultants to aid in all phases of evaluation and exploration of its
properties. On April 12 1999, the Company hired Terry Rice as its Vice-President
- - Operations. Mr. Rice is a metallurgical engineer and has 24 years of
experience in the mining industry. Mr. Rice was in charge of all the Company's
mining and mineral operations. None of the Company's other officers or directors
has had any prior experience in mining. Until Mr. Rice was hired, the Company
had been relying upon consultants and other persons experienced in mining with
whom the Company had contracted with respect to the identity of properties to be
investigated, reviewed and tested for possible acquisition, in the actual
testing of the properties, and in the attempted production from mineralized
material and ores obtained from others. Mr. Rice resigned his position on
December 2, 1999 because the Company completed its trenching and sampling
program at Owl Canyon and the Company did not have sufficient work to justify a
full time employee. However, Mr. Rice continued to perform some services for the
Company on a per diem basis until about mid-December, 1999, when he secured full
time employment elsewhere.
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S. Bruce Ballantyne is currently self-employed as President and owner of
YKNAU RESOURCES, INC., an economic geology and applied geochemistry exploration
service and consulting firm based in Vancouver. The firm advises and implements
mineral exploration programs for major and mid-tier producers as well as junior
mining companies and prospecting syndicates. Prior to his current status of
independent consulting for several clients, his firm was under exclusive
contract to Eldorado Gold Corp from 1996 to December, 1997. While with Eldorado
Gold Corp., during this period, he was Senior Geochemist and member of their
Vancouver Exploration Dept., responsible for exploration activities for gold and
copper in Mexico, Brazil, Turkey, West Africa and Argentina.
Mr. Ballantyne was employed by the Geological Survey of Canada in Ottawa
for 23 years, from 1973 to 1996, as an Applied Geochemist. As a member of the
GSC's Mineral Resources Division, Resource Geophysics and Geochemistry Section,
his scientific career included programs in Nova Scotia, NWT, Alberta, British
Columbia and the Yukon. In 1976, he designed and implemented the stream sediment
and water sampling surveys known as the National Geochemistry Reconnaissance
(NGR) Survey for British Columbia and the Yukon. These programs are still active
today and constitute the largest publically available database of its kind in
the world. As such his focus of research has been the mineral deposits of the
Yukon and British Columbia (1975-1996).
During this period he was author of numerous abstracts, maps, open
files, reports, papers and workshop volumes concerning applied geochemical
prospecting methods and interpretation. As a result of his research endeavors he
was invited to present oral papers at the International Symposia including
Finland, Brazil, and Peoples Republic of China (1984). He annually spoke or
presented Poster Displays at the Whitehorse Forum, B.C. Geological Roundup,
Prospectors and Developers Conference, GSC. Forum, was well as at CIM, GAC, MEG
and Geochemical Conferences held in Canada. He actively supported research as an
advisor to under graduate students and Masters thesis studies at Carlton and
Ottawa Universities.
Mr. Ballantyne received a Bachelor of Science Degree with a major in
Earth Science from the University of Guelph in 1973.
Ronald D. Sloan, the Company's President, has worked for the Company on
a full time basis since May 1996.
On March 2, 1999, the Company purchased a reverse circulation drill rig
capable of drilling to a depth of approximately 150 feet and began a drilling
program on the Owl Canyon properties. The Company utilized that rig to drill
exploratory holes on its Owl Canyon property owned and operated by the S & S
Joint Venture, in which the Company owns a 50% interest. The Joint Venture has
also acquired a core drill rig and has drilled exploratory holes on the Owl
Canyon properties. The Joint Venture, as of December 31, 1999, had drilled
approximately 58 holes on the Owl Canyon Property. During 1999 the Joint Venture
also conducted a trenching and sampling program at Owl Canyon. Mr. Ballantyne
has completed a comprehensive report with respect to Owl Canyon. His report
recommends a 6 hole, 700 meter drilling program. The Company has begun to
introduce the analytical data from its exploratory work on Owl Canyon to other
mining companies with a view to entering into an agreement whereby another
mining company would fund the costs of the drilling program in exchange for an
interest in the property or a similar arrangement. No such agreement
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has been reached and there is no assurance that any such agreement will be
reached. See the "S & S Joint Venture." The Company is actively engaged in a
testing program on volcanic cinders from its volcanic cinders property at
Pisgah, California. (See Item 2, The Volcanic Cinders Property - Testing of the
Volcanic Cinders). In the event that testing indicates positive results, the
Company will likely pursue additional testing.
The Company intends to conduct a drilling program on its Cerbat
property.
On March 16, 1999, the Company purchased a newly developed
"concentrator" from its Canadian inventor which produces concentrates from loose
material on placer claims. The concentrator is capable of concentrating
approximately 50 tons of material per hour. The Company also purchased a truck
which it utilized to transport the concentrator from Washington state to its
properties, and will use in its operations. The Company intends to attempt to
produce precious metals from placer material on its properties and from placer
material or properties belonging to others. Placer material is an unconsolidated
deposit of sand and gravel laid down in river beds, flood plains, lakes or at
the base of mountain slopes and estuaries. The Company is seeking suitable
placer material for the concentrator.
In the event that drilling and/or testing by the Company indicates the
presence of precious metals or minerals on a property which may be able to be
produced on an economic basis, and the cost of doing so and/or the expertise
needed is beyond the Company's capabilities, the Company intends to attempt to
form a joint venture with a larger mining company to develop and operate the
property, where the larger mining company would pay the exploratory and, if
warranted, development costs. Alternatively, the Company may attempt to sell a
portion, or possibly all, of that property to a larger mining company. There is
no assurance that the Company will be able to enter into any such arrangement.
During 1999 the Company relinquished its Hassyampa property placer
claims, consisting of 960 acres of BLM claims near Tonopah, Arizona.
The Company attempted to produce precious metals utilizing an
independent contractor and the facilities of the Tyro Mill near Bullhead City,
Arizona. In March 1999, after several months of testing and processing various
materials, the Company produced 16.8 ounces of gold from concentrates obtained
from a third party and received $3,654.88 after paying refining costs and fees.
The Company does not consider the production of precious metals from those
concentrates economic and has discontinued utilizing the Tyro Mill.
Through Scotmar Industries, Inc., a Canadian subsidiary, the Company was
also engaged in the business of purchasing damaged trucks from insurance
companies and dismantling the vehicles for the sale of guaranteed truck parts to
others. This business was not profitable.
(b)(1) On January 29, 1999, the Company sold Scotmar Industries, Inc., its
Canadian subsidiary, which was engaged in the business of purchasing damaged
trucks from insurance companies and dismantling the vehicles for the sale of
guaranteed truck parts for repair shops, collision repair shops, and the retail
public.
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(b)(2) The Company has shipped two dore bars to a California refinery to
separate into precious metals for sale. The Company received $3,654.88 from the
sale of the 16.8 ounces of gold produced.
(b)(3) The Company has not publicly announced any new product(s) or service(s).
(b)(4) The evaluation and acquisition of precious metals, mining properties and
mineral properties is very highly competitive, as there are numerous companies
involved in the mining and minerals business.
Exploration for and production of minerals is highly speculative and
involves greater risks than exist in many other industries. Many exploration
programs do not result in the discovery of mineralization and any mineralization
discovered may not be of a sufficient quantity or quality to be profitably
mined. Also, because of the uncertainties in determining metallurgical
amenability of any minerals discovered, the mere discovery of mineralization may
not warrant the mining of the minerals on the basis of available technology.
The Company's decision as to whether any of the mineral properties it
now holds, or which it may acquire in the future, contain commercially mineable
deposits, and whether such properties should be brought into production, will
depend upon the results of the exploration programs and/or feasibility analysis
and the recommendation of engineers and geologists. The decision will involve
the consideration and evaluation of a number of significant factors, including,
but not limited to: 1. the ability to obtain all required permits; 2. costs of
bringing the property into production, including exploration and development or
preparation of feasibility studies and construction of production facilities; 3.
availability and costs of financing; 4. ongoing costs of production; 5. market
prices for the metals to be produced; and 6. the existence of reserves or
mineralization with economic grades of metals or minerals. No assurance can be
given that any of the properties the Company owns, leases or acquires contain
(or will contain) commercially mineable mineral deposits, and no assurance can
be given that the Company will ever generate a positive cash flow from
production operations on such properties. Although many companies and
individuals are engaged in the mining business, including large, established
mining companies, there is a limited supply of minerals land available for claim
staking, lease or other acquisition in the southwestern United States, where the
Company conducts its activities.
(b)(5) The Company has processed ores and mineralized materials and produced a
limited amount of precious metals on a testing basis. Those materials have come
from various sources, none of which is material to the Company.
(b)(6) The Company is not dependent upon one or a few major customers.
(b)(7) The Company holds no patents, trademarks, licenses, franchises,
concessions, or royalty agreements, and has no labor contracts.
(b)(8) Mining operations are subject to statutory and agency requirements which
address various issues, including: (i) environmental permitting and ongoing
compliance, including plans of operations which are supervised by the Bureau of
Land Management ("BLM"), the Environmental
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Protection Agency ("EPA") and state and county regulatory authorities and
agencies (e.g., state departments of environmental quality) for water and air
quality, hazardous waste, etc.; (ii) mine safety and OSHA generally; and (iii)
wildlife (Department of Interior for migratory fowl, if attractive standing
water is involved in operations). See (b)(11) below. The Company has been added
by San Bernadino County as a party to the Approved Mining/Reclamation Plan and
related permits. See Item 2, Description of Properties - Volcanic Cinders
Property - Mining Lease Agreement with Twin Mountain Rock Venture.
(b)(9) Because any mining operations of the Company would be subject to the
permitting requirements of one or more agencies, the commencement of any such
operations could be delayed, pending agency approval (or a determination that
approval is not required because of size, etc.), or the project might even be
abandoned due to prohibitive costs (for example, water treatment facilities for
mine water discharge might be too expensive to build).
Generally, the effect of governmental regulations on the Company cannot
be determined until a specific project is undertaken by the Company.
(b)(10) The Company has expended funds on research and development activities.
The Company does consider testing or assaying of material or processing of
material as research and development activities.
(b)(11) Federal, state and local provisions regulating the discharge of material
into the environment, or otherwise relating to the protection of the
environment, such as the Clean Air Act, Clean Water Act, the Resource
Conservation and Recovery Act, and the Comprehensive Environmental Response
Liability Act ("Superfund") affect mineral operations. For mining operations,
applicable environmental regulation includes a permitting process for mining
operations, an abandoned mine reclamation program and a permitting program for
industrial development and siting. Other non-environmental regulations can
impact mining operations and indirectly affect compliance with environmental
regulations. For example, a state highway department may have to approve a new
access road to make a project accessible at lower costs, but the new road itself
may raise environmental issues. Compliance with these laws, and any regulations
adopted thereunder, can make the development of mining claims prohibitively
expensive, thereby frustrating the sale or lease of properties, or curtailing
profits or royalties which might have been received therefrom. In 1997, the S &
S Joint Venture spent approximately $32,000 to clean up areas of the Owl Canyon
properties as requested by the BLM. This work has been completed. The Company
cannot anticipate what the further costs and/or effects of compliance with any
environmental laws might be. The Company has not spent any more money on
reclamation costs since 1997.
(b)(12) The Company's President, Ronald D. Sloan is the Company's only full-time
employee. The Company contracts with other persons to perform services as
independent contractors. At the present time, an independent contractor is
performing consulting services for the Company. The Company paid approximately
$147,200 to independent consultants in 1998 and $125,700 in 1999.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company owns or has an interest in four properties, one which it
owns in fee (the Volcanic Cinders property) and one which it leases with an
option to purchase (the Cerbat property). This does not include an option on the
Wikieup claims and the Rose claim. (See the Volcanic Cinders Property - Testing
of the Volcanic Cinders - Current Testing). The remaining properties are
unpatented mining claims acquired through filings with the BLM. Each placer
claim covers 160 acres; a placer claim covers the placer material located inside
the surface boundaries of the placer claim and on or beneath the surface within
the boundaries. Each lode claim covers 20 acres; a lode claim covers the
minerals located inside the lode mining claim boundaries and on or beneath the
surface within the boundaries and also the extensions of veins of minerals which
extend down and outside the lode claim boundaries. The Company is obligated to
pay a holding fee or spend $100.00 in work per claim each year in order to
maintain the claims.
Unpatented claims are located upon federal public land pursuant to
procedure established by the General Mining Law. Requirements for the location
of a valid mining claim on public land depend on the type of claim being staked,
but generally include posting thereon of a location notice, marking the
boundaries of the claim with monuments, and filing a certificate of location
with the county in which the claim is located and with the BLM. If the statutes
and regulations for the location of a mining claim are complied with, the
locator obtains a valid possessory right to the contained minerals. To preserve
an otherwise valid claim, a claimant must also annually pay certain rental fees
to the federal government (currently $100 per claim) and make certain additional
filings with the county and the BLM. Failure to pay such fees or make the
required filings may render the mining claim void or voidable. Because mining
claims are self-initiated and self-maintained, they possess some unique
vulnerabilities not associated with other types of property interests. It is
impossible to ascertain the validity of unpatented mining claims solely from
public real estate records and it can be difficult or impossible to confirm that
all of the requisite steps have been followed for location and maintenance of a
claim. If the validity of an unpatented mining claim is challenged by the
government, the claimant has the burden of proving the present economic
feasibility of mining minerals located thereon. Thus, it is conceivable that
during times of falling metal prices, claims which were valid when located could
become invalid if challenged. Disputes can also arise with adjoining property
owners for encroachment or under the doctrine of extralateral rights.
The U.S. Congress has, in legislative sessions in recent years, actively
considered several proposals for major revision of the General Mining Law, which
governs mining claims and related activities on federal public lands. If any of
the recent proposals become law, it could result in the imposition of a royalty
upon production of minerals. It remains unclear whether the current Congress
will pass such legislation and, if passed, the extent such new legislation will
affect existing mining claims and operations. The effect of any revision of the
General Mining Law on the Company's operations cannot be determined conclusively
until such a revision is enacted.
THE S & S JOINT VENTURE'S OWL CANYON PROPERTY
As of September 13, 1996, the Company entered into a Joint Venture
Agreement with the Schwarz family covering approximately 425 acres of unpatented
placer and lode mining claims in
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the Silurian Hills of California, known as Owl Canyon. An unpatented placer
claim is a claim located under the mining laws of the United States. The Locator
obtains a possessory right to any contained minerals. The S & S Joint Venture
has since increased its holdings to approximately 1,600 acres of placer claims,
of which 740 acres are also covered by lode claims and five acres by a mill site
claim. These claims are deemed to be prospective for precious metals and some
base metals. The property is located approximately 23 miles northeast of Baker,
California. The property is accessible by a road which consists of nine miles of
paved surface and fourteen miles of dirt surface. Pursuant to the terms of the
Agreement, the Company and the Schwarz family each have a 50% interest in the S
& S Joint Venture which is operated by the Management Committee, comprised of
Mr. Sloan the Company's president, and Ms. Robin Schwarz, a member of the
Schwarz family. Pursuant to the terms of the Joint Venture Agreement, the
Company has been and is funding the Joint Venture's operations. Any income from
the Joint Venture will first be paid to the Company to repay monies advanced to
the Joint Venture or spent on its account, with any additional income divided
50% to the Company and 50% to the Schwarz family.
As the acquisition price of its 50% interest in the S & S Joint Venture,
the Company issued 500,000 shares of its common stock to the Schwarz family,
subject to investment restrictions. The shares may only be sold in compliance
with United States securities laws, including Rule 144. Appropriate stop
transfer instructions have been issued to the Company's transfer agent. The
shares were issued with "No Sale" restrictions, all of which have expired. As of
December 31, 1999, the Company had a total investment of approximately
$1,219,700 in the S & S Joint Venture. However, the carrying value of this
investment is $19,000 on the Company's books.
The S&S Joint Venture transaction was negotiated at arms length between
the Company and the Schwarz family. The Schwarz family insisted upon receiving
500,000 shares of the Company's common stock in exchange for a 50% interest in
their mining claims in Owl Canyon. The Company had numerous assays performed on
surface samples from the Owl Canyon property and determined that the Owl Canyon
property could have significant value. Therefore, the Company, as of September
13, 1996, entered into a Joint Venture Agreement with the Schwarz family which
provided that the Company issue 500,000 Can-Cal common shares in the name of the
Schwarz family to be held in escrow pending determination by Can-Cal, at its
sole discretion, whether precious metals exist on the Owl Canyon properties and
whether it was economically feasible to produce them. Can-Cal had until
September 30, 1997 to make that determination. The Company made the
determination and delivered the 500,000 shares to the Schwarz family.
There was no trading market for the Company's common stock when this
transaction was negotiated. Since there was no trading in the shares of the
Company when the Company agreed to enter into the S&S Joint Venture, the shares
issued to the Schwarz family were, for financial statement purposes, valued at
the book value of the shares as of December 31,1996, which was $.038 per share,
for a total valuation for financial statement purposes of $19,000.
The Joint Venture has the following equipment and facilities, all of
which are used but operational: a refurbished 8-level screen classifier which
separates various grades of ores; five concentrate tables to obtain concentrates
from the "in-house" processed ore; a fire assay furnace so that the Venture is
able to assay ores and concentrates at its own facility without using
independent sources; a smelting furnace for the production of precious metals;
an impact mill which is used for
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crushing rock; a conveyor feeding system, built for quantity, fed by a front end
loader which was purchased in 1998 to process mineralized material from lode
mining claims; an additional screening system constructed for the processing of
placer material; several platforms designed and constructed to access the
furnaces and ore loading areas; two 400 lb. capacity furnaces, (five total
furnaces on the property); sediment tanks, with two additional 3,000 gallon
tanks, run by pumps for recycling thousands of gallons of water used for
concentrating shaker tables; plumbing and PVC installed underground to move
water from four levels of the property; a self contained trailer to facilitate
the transportation of water to Owl Canyon; two air compressors, one a portable
for jack hammering on the hillside, the second on a trailer for portability up
and down the canyon; a core drill capable of drilling to about 80' for further
testing; and rebuilt engines and new engines for the milling facility. A new
generating power plant has also been added. New roads have been constructed
throughout the canyon to allow accessibility to the various deposits. The
Venture spent approximately $32,000 to clean up all areas of the property to the
BLM's satisfaction.
In connection with the trenching and sampling program S. Bruce
Ballantyne prepared an updated report incorporating the results of that program.
Mr. Ballantyne's report describes the rock formations and mineralization as
follows:
GENERAL GEOLOGY OF THE SILURIAN HILLS
The available geologic literature for the geologic setting of the
Silurian Hills is limited to Kupfer (1954, 1960) and Fife and Brown
(1988). As these authors provide the only significant geologic work for
the Silurian Hills area, it is necessary to review their mapping,
structural and stratigraphic data interpretations.
The general geology of the Silurian Hills is well represented
within the Owl Canyon Mineral Property. In general, the property is
dominated by an abundance of Precambrian and Paleozoic rocks.
The Precambrian is comprised of an older and abundant group of
foliated metasedimentary rock and gneiss and generally course-grained to
porphyritic textured, variably colored, granite. The younger Precambrian
rocks are marien clastic sedimentary rocks (11,000 feet thick; Kupfer,
1960) which may contain fine- grained clastics and carbonate rocks. This
thick Precambrian section is known as the Pahrump Group or series.
Kupfer (1960) traced distinctive members of the Pahrump Group from
unmetamorphosed sedimentary rocks in the west to intensely metamorphosed
equivalents in the east portions of the Silurian Hills. The older
Precambrian gneissic-granite complex is in minor fault contact with the
grey colored Pahrump Group (Fife and Brown 1988).
At the Owl Canyon Mineral Property the next most abundant group
of rocks are the Paleozoic recrystallized carbonate rocks known locally
in the Silurian Hills as the Riggs Formation. Massive beds of dolomite
dominate the Riggs Formation, which is light buff or grey in color in
contrast to the less abundant blue-grey to white limestone. These Riggs
formation interbeds are unfossiliferous, estimated to be 2500 feet thick
and probably are late Paleozoic in age (Kupfer, 1960).
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Fife and Brown (1988) suggest that the Riggs fault is a
detachment fault, which separates the Paleozoic Riggs carbonate
formation into upper plate rocks while the lower plate rocks are
Precambrian Pahrump Group. Kupfer interpreted the Riggs fault as a
thrust (1960).
In the Silurian Hills most mineralization is hosted in the Riggs
fault upper plate rocks in a detachment terrain or above the thrust.
However, high-angle faulting in a north-south direction or trend would
appear to this author to be of greater importance as hosts to mineral
carrying solutions than the thrust or detachment fault (Riggs fault
within the Owl Canyon Mineral Property).
Locally pinkish colored aplitic to porphyritic rock of granite to
quartz monzonite intrudes older and younger Precambrian rocks and the
Paleozoic Riggs rock types. These granite phases may be Cretaceous or
Tertiary in age (Kupfer, 1960). Within the Owl Canyon Mineral Property
these units are minor and of no importance to the mineralization
distribution.
Suspected Tertiary-aged volcanics of latite composition and
volcanic sandstones and conglomerates are found in the northeast corner
of the Silurian hills (Kupfer, 1960). At the Owl Canyon Mineral Property
red sandstones and possibly lapilli tuffs of red to purple coloration
are found exposed in washes north of Papa Hill in OCL #1 claim. Very
locally in this area vesicular basalt float and minor outcrops are also
found in place. Because Tertiary (?) to Quaternary sand and gravel fans
and Quaternary terrace gravels and alluvium overlie much of the area,
the distribution and geologic setting of the volcanic tuffs and basalt
is unknown.
It may be suggested that extensional tectonics and Tertiary
structural features are related to the geologically active Death Valley
and Garlock fault zones. Earthquakes are common in the region with the
latest being the Hector Mine fault and quake of the summer of 1999.
Kupfer (1960) assigned a late Pliocene age for the Riggs thrust fault.
All of these regional and more local secondary structural features are
believed by the report's author to have influenced the volcanism, heat
flow, and fluid flow responsible for the Silurian Hills rear surface
epithermal spring activity. These features are prominently evident by
multi-episodic events of brecciation and silicification at the Papa Hill
discovery outcrop in the Silurian Hills.
OWL CANYON ASSAYS
Although the Joint Venture has the capability to, and does, perform its
own fire assays, it has sent both samples and whole rocks taken from the surface
of the property to independent laboratories for fire assays. Most of the samples
from the lode claims have been sent to Cone Geochemical, Inc., Denver, Colorado,
an assay firm. Of the most promising surface samples taken, Cone Geochemical,
Inc. reported the following assay results:
11
<PAGE>
<TABLE>
<CAPTION>
Sample ID Location Assay Results
--------- -------- -------------
<S> <C> <C> <C>
SQHO Owl Canyon 0.577 oz/ton gold/86 oz/ton silver
SQ Rock 3 Owl Canyon 0.559 oz/ton gold/19.8 oz/ton silver
SQH 0300 Owl Canyon 1.396 oz/ton gold/311 oz/ton silver
SSQ Head Ore Screen Owl Canyon 0.690 oz/ton gold/118 oz/ton silver
</TABLE>
In order to determine if those values continued below the surface,
approximately 15 tons of material was removed to a depth of 3 to 4 feet to
expose a continuation of one of the veins. Following that vein structure 8 feet,
a sample was removed from a depth of approximately 3 to 4 feet, and the sample
was again sent for an independent assay. Cone Geochemical, Inc. reported the
following assay on that sample:
<TABLE>
<S> <C> <C> <C>
8FTSOQ 11-24 Owl Canyon 1.351 oz/ton gold/66.5 oz/ton silver
</TABLE>
Wilmarth & Associates a consulting geological firm selected four
surface samples from different areas of the lode claims which they sent to Cone
Geochemical, Inc. for fire assay. The results were as follows:
SAMPLE OZ/TON GOLD OZ/TON SILVER
W-1 0.257 5.08
W-2 0.002 0.35
W-3 0.009 0.2
W-4 0.274 1.94
The Joint Venture also had another mining Company perform assays on
surface samples which it took from the surface of another area of its lode
claims. That mining Company reported the following results:
Owl Canyon ssq rock & crushed (Super Quartz) 0.400 oz/ton gold/13.855
oz/ton silver Super Quartz "Owl Canyon" 0.590 oz/ton gold/84.545 oz/ton
silver
The Joint Venture also sent a surface sample to Dr. Ralph Pray, an
assayer, who reported the following results:
RRXX Owl Canyon 2.41 oz/ton gold/24.5 oz/ton silver
The Joint Venture has performed in excess of 1000 "in-house"assays from
surface samples on its Owl Canyon lode claims, over 90% of which produced gold
and/or silver beads in varying sizes. Although the work to date indicated that
there are mineralized materials on the property, the extent, grade and ease of
processing of those materials has not been established.
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<PAGE>
Following two years of extensive exploration work, testing, and assaying
on the claims, the management committee determined there was sufficient evidence
to continue further exploration of the property, including both lode and placer
areas. Following this determination, the Joint Venture acquired two drill rigs,
one reverse circulation rig, and one core rig, which have drilled a series of
exploratory holes. 58 exploratory holes have been drilled to date in two small
sections of the properties under the direction of the geologists and others with
whom the Company contracts. Samples were taken from each hole for testing,
assaying and analysis. This process is ongoing. In addition, in April and May
1999, the Joint Venture conducted two blasting operations in which it opened up
areas of the property which it believes contain a vein or veins with precious
metal content.
In November and December, 1999, the Joint Venture conducted a trenching
and sampling program under the supervision of Mr. Ballantyne. The program
involved a trenching and sampling of four separate areas described as Papa Hill,
Superquartz, 48 Zone and Ammo Ridge. The trenching program was approved and Mr.
Ballantyne has completed a comprehensive report with respect to Owl Canyon.
The following are excerpts from Mr. Ballantyne's report:
The program used a portable gas operated Ponjar rock-drill,
"plugger" to drill 185 three-foot holes. A total of 19 trenches were
completed on the hill using holes spaced from 2 to 3 feet apart. Some
trenches consisted of only one or two holes to blast and test minor
exposures of silica. The nineteen trenches vary in length from 3 to 81
feet long. A total of 170 composite chip samples were collected over
three foot sample intervals. After the two to three foot wide and deep
trenches were mucked out with debris piled on the trenches edge, the
composite chips were collected from the floor and walls of the trench
over three-foot long sequential sample intervals.
Aluminum sample tag numbers and measured distance were
systematically positioned and nailed along the course of each trench for
future reference and mapping. Each sample weighed approximately 2
kilograms. Sample batches were shipped to ACME Labs in Vancouver.
* * *
Some of the trenches were structured to sample successively lower
levels in elevation of the terraces and/or stratigraphy, Both tuffa-rich
and silica-rich zones or strata were encountered during drilling and
exposed by trenching. No attempt was made to further drill deeper
through a tuffa zone into underlying rocks. All trenches were surveyed
from the established grid on Papa Hill where BL and 0 + 00 lines run E-W
and N-S respectively. Grid points are located in the field at 50 x 50
foot stations.
* * *
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<PAGE>
The trenching program at Papa Hill was designed as first phase of
surface exploration to establish the tenor of precious metal
mineralization and its distribution of trends.
* * *
Mineralization in the trenches can be visually located as grey to
black fine- granted minerals disseminated in tiny vugs or more commonly
on fractured seams or surfaces often appear green to rare blue stain
accompanies these grey or black minerals. Rare occurrences of fresh
galena were also noted. Pyrite is notably absent. White barite which is
sometimes chalky in texture occurs as blotches or as ragged blades.
Blasting improved the recognition of silica addition which is near
massive in some areas. Hydrothermal brecciation is significant and some
would appear to have been related to boiling i.e. open coarse textures
and vugs. The relationship of brecciation to areas and trends of more
massive silicification is not clear nor is the timing of the episodic
events.
A strong linear NNW trend for both gold and silver runs from
trench 16 and 17 in the south through to trench 11 and 12 in the north
located along the cliff face. This 350-foot long mineralization trend
tracks on surface as a significant drill target which requires testing
of the precious metal system at depth.
Trench 1 reports separate 9-foot and 18-foot zones which contain
739PPB and 382PPB gold. Significant silver content across three feet
were as high as 12.6 and 9.1 ounce per tonne for each respective zone.
Trench 3 contains a 6-foot section averaging 1362PPB gold (0.04 opt Au).
Trench 5 contains a 9-foot section averaging 500PPB gold and 3.75 opt
silver. Trench 6 located 100 feet from trench 5 contains a 12-foot
section with an average grade of 1242PPB gold. Trench 8 reports an
average of 185PPB gold over a trench length of 15 feet. Trench 9 has one
9-foot interval averaging 295PPB gold and another averaging 164PPB gold.
Trench 10 has the highest interval sampled at Papa Hill namely, a
5119PPB gold and 11.52 opt silver zone. Trench 11 at the cliff face
reports a 9-foot section averaging 902PPB gold and 3.82 opt silver. This
northern portion of the mineralization trend is 350 feet from the most
southern trench 17, which reported a 3-foot interval of 1489PPB gold and
2.98 opt silver. Trench 18 is located on the eastern edge of the cliff
approximately 175 feet east of the western edge of trench number 12 and
12C. The west end of trench 12 confirmed the early results found in the
boiling zone breccia area in its gold and silver ratio. Trench 12 from
63 feet to 712 feet and trench 12C for a six foox sample interval (all
breccia samples) average 280PPB gold and just 1.2PPM silver. Trench 18
across a six foot sample length reported 128PPB gold and 14.5PPM silver.
This area of Papa hill and the cliff ledge should have more trenching
completed as the black silica rind zone is well developed. Trench 13
west and downslope from Barite Hill sample (45951) contains anomalous
silver as compared to the Barite Hill which contains 227PPB gold and
10.3 grams of silver. Trench 16 approximately 60 feet south of the 28
foot deep shaft was only a short three foot sample interval which
contains 3.22 opt silver and 816PPB gold.
14
<PAGE>
The following are additional results of the program:
The Superquartz mineralized zone was characterized by 2.0 grams gold
across 24 feet in trench 1; 1.8 grams gold across 18 feet in trench 2; 4.9 grams
gold and 2.65 ounces per tonne silver across 15 feet in trench 3 including one
three foot sample interval containing 4 ounces per tonne of silver and 12.1
grams of gold per tonne; and trench 4 with 2.5 grams of gold and 1.09 ounces per
tonne of silver across 15 feet.
The 48 Zone epithermal mineralization reported numerous three foot
sample intervals ranging from 100 to 586 ppb gold. The highest sample interval
contained 1.89 grams of gold and 3.79 ounces per tonne silver.
The Ammo Ridge epithermal system returned a 36 foot section in trench 5
averaging 0.712 grams of gold including a nine foot wide interval averaging 1.19
grams of gold and a three foot interval averaging 1.89 grams of gold. The
highest values for silver in trench 5 included a 6 foot interval averaging 4.64
ounces per tonne and a three foot interval averaging 6.63 ounces per tonne.
Other shorter trenches at Ammo Ridge reported values as high as 0.972 grams of
gold across six feet and 4.65 ounces per tonne silver across five feet.
The Ammo Ridge precious metal mineralization is also characterized by
highly anomalous contents of the geochemical pathfinders antimony, bismuth and
mercury namely 885 ppm, 183 ppm and 6.6 ppm respectively. All analyses were
supplied by ACME Laboratories in Vancouver using 30-gram sample weights and
ICP-MS analyses and fire assay methods.
The Papa Hill has been described by Mr. Ballantyne as a bona fide drill
target. A six hole, 700 meter drilling program costing about $70,000 to further
define the epithermal mineralized system at depth and along strike has been
recommended.
Can-Cal has begun to introduce the analytical data to other mining
companies with a view to entering into an agreement in which another mining
company would fund the costs of the recommended drilling program on Papa Hill in
exchange for an interest in the property or a similar arrangement. No such
agreement has been reached and there is no assurance that any such agreement
will be reached.
THE CERBAT PROPERTY
On March 12, 1998, the Company entered into a Lease and Purchase Option
Agreement covering six patented mining claims in the Cerbat Mountains, Hualapai
Mining District, Mojave County, Arizona. The patented claims cover approximately
120 acres. The Company has paid $10,000 as the initial lease payments and is
obligated to pay the sum of $1,500 per quarter as minimum advance royalties. To
date, the Company has made all minimum advance royalty payments required. The
Company has the option to purchase the property for $250,000, less payments
already made. In the event the Company produces precious metals from the Cerbat
Property prior to the exercise of the Purchase Option, it is required to pay to
the lessor a production royalty of 5% of the gross returns received by the
Company from the sale or other disposition of metals produced. The exploratory
drilling program scheduled for 1999 on the claims was delayed
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<PAGE>
in order to complete exploratory work on the Owl Canyon property and testing of
the Volcanic Cinders Property.
The Company has been informed that the property contains several mine
shafts of up to several hundred feet in length and tailing piles containing
thousands of tons of tailings. The Company has also been informed that the
Cerbat Property has not produced since the late 1800's. However, prior to its
entering into the Lease and Purchase Option Agreement, the Company received
assays of samples taken from tailings and near the entrance of the mine shafts,
as well as engineering reports from reputable assayers and engineers indicating
the presence of precious metals in what may be commercial amounts. The Company
also performed "in-house"assays on samples taken from the property, with similar
results. Extensive additional testing will be necessary to determine whether the
property contains any reserves.
CERBAT GEOLOGY
The Company's geologic information regarding the Cerbat claims comes
from a report prepared by a consulting engineer in 1943. The relevant
information contained in that report is as follows:
Veins:
The vein system of the Cerbat Group consists of two
parallel veins which are approximately 70 feet apart at the New
Discovery shaft on the Rolling Wave claim. The eastern branch is,
in my opinion, the southern exposure of the main Cerbat vein on
which the principal development work has been done to a vertical
depth of 250 feet. This is a strong Mineralization outcropping at
intervals for approximately 3000 feet in the Cerbat, Red Dog and
Rolling Wave claims. The vein is steeply dipping and varies in
width from 4.5 feet in its most southerly exposure to an average
of 5.5 feet in the main workings of the Cerbat mine some 3000
feet to the north. The vein material is limonite in a quartz
gangue carrying cerrusite with occasional bunches of very high
grade galena. The accompanying metals are gold and silver. The
western branch of these parallel veins shows only a short segment
exposed at and near the New Discovery shaft. The hanging wall of
this vein is well formed and sharply defined but the footwall as
exposed in the superficial workings of this shaft is a series of
short slips parallel to the strike of the vein, N55W. They have
created what is apparently a false wall which is soft and "drumy"
indicating a talcose condition. Insufficient work has been done
in the single short, superficial drift to determine what extent
these slips may have affected the continuity of the ore both
horizontally and longitudinally. If the Cerbat workings had been
available for study a more definite conclusion could probably be
reached. The primary ore minerals in evidence are galena,
sphalerite and occasional small showings of pyrite.
Location:
The Cerbat Group of claims is located in the Hualapai
Mining District about 15 miles north from Kingman which is the
nearest railroad and
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<PAGE>
supply point. The state highway from Kingman to Boulder Dam and
Las Vegas passes within four miles of the property and a good
County road connects the state highway with the mine. The County
road passes through the Rolling Wave and Red Dog claims making
transportation available to the lower workings. An old road
connects the New Discovery shaft with the Cerbat workings near
the crest of the hill. Because of disuse this road needs some
minor repairs to effect truck transportation to the upper Cerbat
workings. This group of claims is favorably situated for trucking
and transportation purposes.
THE VOLCANIC CINDERS PROPERTY
During December 1997, the Company acquired fee title to the Volcanic
Cinders property at Pisgah, San Bernardino County, California. The property is
comprised of approximately 120 acres, containing a very large hill of volcanic
cinders, with easy road access from Interstate 40. Garvin Surveying Sciences, a
California based company, completed a survey of the property estimating
approximately 13,500,000 tons of volcanic cinders above the surface. The Company
has not verified any tonnage existing below the surface. Approximately 3,000,000
tons of the cinders have been screened and stockpiled. The following equipment
is located on the property: a large ball mill (which crushes the cinders), truck
loading pads, two buildings, large storage tanks, conveyors to load trucks, ore
silos and grizzly screening equipment. The Company has caused independent assays
to be performed for gold, silver, and platinum group metals. Those assays (fire
assay for gold and nickel sulfide assays for platinum group metals) indicated
only trace amounts of those metals. The Company has taken samples from 30
different locations on the surface of the cinder hill and performed "in-house"
assays. Of the samples, 28 proved positive for the existence of gold and silver
in varying, although small, amounts.
Mining Lease Agreement with Twin Mountain Rock Venture: In order to
generate cash for its operations, the Company, effective May 1, 1998, entered
into a Mining Lease Agreement on its Volcanic Cinders property with Twin
Mountain Rock Venture, a California general partnership ("Twin Mountain"), which
is an indirect subsidiary of Peter Kiewit & Sons, Inc. of Omaha, Nebraska. The
Agreement is for an Initial Term of ten years, with an option to allow Twin
Mountain to renew the Lease for an Additional Term of ten years. The Company has
agreed to make 600,000 tons of volcanic cinders available to Twin Mountain
during the Initial Term, and an additional 600,000 tons during the Additional
Term, which Twin Mountain will process and sell primarily as decorative rock.
The Agreement provides for minimum annual royalty payments by Twin Mountain of
$22,500 per year for the Initial Term and $27,500 per year for the Additional
Term. Twin Mountain is also obligated to pay the Company a monthly production
royalty for all material mined, processed, consumed, and/or sold or removed from
the premises, calculated as follows: i. the greater 5% of gross sales F.O.B.
Pisgah Crater, or $.80 per ton for material used for block material; and ii. 10%
of gross sales F.O.B. Pisgah Crater for all other material; and iii. Twin
Mountain receives a credit against the amount of any production royalty payment
for minimum royalty payments previously made. The Company received the initial
payment of $22,500 from Twin Mountain upon execution of the Agreement. Twin
Mountain has not yet removed any material from the property and has indicated to
the Company that it is unlikely it will remove any such material for a period of
about two years. However, Twin Mountain does not have the right to remove or
17
<PAGE>
extract any precious metals from the property. Twin Mountain has agreed to use
its good faith efforts to cause its mining permit, reclamation permit, and air
quality permit to be issued in the name of both Twin Mountain and the Company.
The process has been completed. The company has been added to the Approved
Mining/Reclamation Plan and related permits. The Company has posted a cash bond
in the amount of $1,379 which is 1% of the total reclamation bond. Twin Mountain
has posted the remainder of the bond. The Company has agreed to give Twin
Mountain advance notice of any plans to remove in excess of 250 tons of cinders.
Financing Based on the Twin Mountain Lease Agreement: On February 12,
1998, in order to obtain additional funds for its operations, the Company
entered into a Loan Agreement with a lender in which the lender agreed to loan
the Company up to $150,000, subject to the Company entering into a Mining Lease
Agreement with Twin Mountain which was acceptable to the lender. The Mining
Lease Agreement with Twin Mountain was acceptable to the lender. That Agreement
was amended on June 1, 1998, to reduce the maximum amount of the loan to
$127,500. $25,000 was advanced to the Company by the lender on signing. The
lender has loaned the Company a total of $77,500 and the Company does not
anticipate that any additional amounts will be loaned. The loan bears interest
at the rate of 8% and is due and payable on July 31, 2001. As security for the
loan, the Company has granted the lender a first deed of trust on the Volcanic
Cinders property at Pisgah and has assigned all payments due it from Twin
Mountain to the lender until such time as the loan and interest are paid in
full. In May 1999, Twin Mountain made the second payment of $22,500 to the
lender pursuant to the assignment of payments.
On May 10, 1998, the Company sold 100,000 shares of its common stock to
James Dacyszyn, a citizen and resident of Canada, at $.45 per share ($45,000).
Mr. Dacyszyn was elected a director of the Company on February 8, 1999. Mr.
Dacyszyn had the option at the end of the year to return the 100,000 shares in
exchange for the Company's Promissory Note due one year from the date of
issuance, with interest at 8%, secured by a second mortgage on the Company's
Volcanic Cinders property. Mr. Dacyszyn has elected to retain his shares. The
price of $.45 per share was determined based on the approximate price at which
the Company's common shares were then trading in the marketplace.
Testing of the Volcanic Cinders
Plasma Furnacing Testing: In the summer of 1998, the Company engaged in
a testing program in which the volcanic cinders were subjected to plasma
furnacing. The Company has submitted samples of volcanic cinders to a third
party which has informed the Company that it has developed a proprietary plasma
furnace, including proprietary plasma furnacing techniques. The Company does not
have access to the plasma furnace or any related technology. It is the Company's
general understanding, however, that, among other things, plasma furnacing
includes heating the cinders to extremely high temperatures, far in excess of
those utilized in conventional assay procedures, and then treating that material
utilizing proprietary techniques to separate any precious metals from the
cinders. The plasma furnacing was conducted exclusively by the third party to
whom the Company submits samples and from whom it receives the treated material.
The Company has caused treated material from the surface of the Volcanic
Cinders property and also from concentrates of its volcanic cinders obtained
from plasma furnacing to be analyzed
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<PAGE>
by a highly experienced independent assayer selected by it who utilizes Induced
Coupled Plasma assaying equipment. The analytical reports received to date from
the assayer indicate the presence of precious metals. However, all testing was
performed on small quantities of the volcanic cinders, e.g., three ounce
samples. These analytical procedures are not equivalent to conventional fire
assay tests. The Company has been informed that the plasma furnacing equipment
is still under development and is not presently capable of treating large
amounts of cinders. As a result, the Company has not been able to have any of
its volcanic cinder material plasma furnaced by this party since the fall of
1998. The Company has abandoned its attempts to pursue this arrangement.
Reductive Fusion Testing: In May 1999, the Company engaged a California
company which indicated that it had developed a proprietary Reductive Fusion
process to extract precious metals from materials containing those metals. The
Company had tests run on 90 gram samples of its volcanic cinders and
concentrates therefrom which had been treated by the Reductive Fusion Process.
The analytical results indicated the presence of precious metals. The Company
then had the California company process 400 lbs. of its volcanic cinders which
it had processed and obtained concentrates. Those concentrates are currently
being further tested to determine whether, in fact, they contain any precious
metals and if they do contain any precious metals, whether they can be extracted
on an economic basis. There is no assurance that any precious metals exist in
the volcanic cinders, or that if they do exist, that they can be profitably
extracted. Additional tests are being made on cinders treated by this reductive
fusion process.
Current Testing
On December 6, 1999, the Company entered into an Agreement with two
individuals who represented that they had developed a proprietary smelting
process and proprietary solvent extraction process for extracting precious
metals from materials containing such metals. Prior to entering into that
Agreement, the Company had its consultant, Bruce Ballantyne, review the results
obtained by those persons in treating other metal bearing materials. In
addition, certain of the Company's officers and directors met with those
individuals and chemists employed by them. Based upon Mr. Ballantyne's
recommendation and the results obtained in treating other material, the Company
determined that its volcanic cinders material might be amenable to the processes
developed by those individuals. The Company therefore entered into an Agreement
to test the Company's volcanic cinders materials with those processes.
Pursuant to the terms of the Agreement, the Company loaned one of the
individuals, personally, $48,000 for the sole purpose of conducting smelting and
processing operations on Company's volcanic cinder material and material from
the Wikieup lode claims, which belong to one of those individuals and an
associate of theirs. The Company received Promissory Notes in the amount of
$48,000, without interest, from that individual. As collateral, the Company
received a quitclaim deed to a 20 acre Wikieup lode claim.
The Agreement provides that if the Company is satisfied that the
processes covered by the Agreement successfully extracted precious metals either
from the Company's volcanic cinders material or the Wikieup material, the
Company has an option to acquire the proprietary smelting process and solvent
extraction process, as well as four additional 20 acre Wikieup lode claims and
one 160 acre placer claim. In the event that the Company exercises its option,
it would issue
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<PAGE>
400,000 shares of its common stock to those two individuals. All shares, if and
when issued, would be restricted securities subject to Federal and State
Securities Laws. Those individuals would be required as a condition of issuance
of those shares to execute appropriate documentation acknowledging and agreeing
to limitations imposed on the resale of those shares by all applicable laws. In
addition, the Company has agreed to pay to the Company owed by the two chemists
and another individual an aggregate of 12% net processing profits royalty
whenever the smelting and solvent extraction processes were utilized in any and
all materials by the Company. Further, any net processing profits from the
Company's volcanic cinders material would be divided 92% to the Company and 8%
to the two individuals and any net processing profits from the Wikieup material
would be divided 70% to the Company and 30%to the two individuals. The two
individuals agreed to attempt to make available to the Company a portion of a
building containing a facility utilized by them and agreed to use their best
efforts to obtain the necessary permits and bonding to enable the Company to
utilize that facility for the purpose of smelting and processing materials for
the production of precious metals.
In the event the Company determines not to exercise the option, the
Promissory Notes will be due 120 days from issuance to the Company. If the
$48,000 is repaid to the Company within 60 days of the Company's decision not to
exercise its option to require the processes, the Company will return the 20
acre Wikieup lode claim by executing a quitclaim deed to that claim.
It was anticipated that the initial testing period would take
approximately four weeks. The Agreement provides that the Company shall exercise
its option within 60 days beginning on the last day of the initial testing
period. The Company, however, determined to test these volcanic cinders material
prior to the Wikieup material. As a result, certain adjustments were apparently
required to be made in the processes since they had been utilized primarily for
the Wikieup material. As a result the option period as well as the dates that
the Promissory Notes are due have been orally extended by the parties. No new
dates have been set since the testing is still being conducted by all parties.
During the end of February and March, 2000, the Company's volcanic
cinders material was tested utilizing these processes. The tests were conducted
by and in the presence of Bruce Ballantyne and all samples were obtained by him
and were in his care, custody and control throughout the testing process. The
resulting metals have been and will continue to be sent (March, 2000) to
independent laboratories for analysis. Additional testing is contemplated.
The Company has not yet made a decision whether to exercise its option.
The Company anticipates that it will not make any such decision until the
analyses of all test results are complete, which is expected in the near future.
THE LIMESTONE PROPERTY
This property consists of 460 acres of lode claims on BLM property ,
which the Company regards as prospective for use in cement. The property is
located 18 miles southeast of Lucerne Valley, California, off highway 247. The
first 12 miles is paved surface and the next six miles is excellent dirt road.
The deposit is contained in a very large hill, with the deposit rising from the
ground level to several hundred and possibly a thousand feet up within the hill.
There are dirt roads
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to the top of the property. The Company is informed that the property was
previously mined by a cement company which discontinued its mining operation
around 1981. There are other companies currently mining limestone deposits in
the same general area. The Company has initiated discussions with companies
engaged in the cement business with respect to the possible sale of the property
to them, but has not yet reached any agreement to do so. There is no assurance
that those companies have any interest in acquiring the property or that the
Company will be able to reach any agreement to sell it. The Company does not
intend to attempt to mine the property itself.
SCOTMAR INDUSTRIES, INC., dba TRUCK CITY
Truck City, which was owned and operated by a wholly owned Canadian
subsidiary of the Company, Scotmar Industries, Inc., engaged in the business of
purchasing damaged trucks from insurance companies and dismantling the vehicles
for the sale of guaranteed truck parts to repair shops, collision repair shops
and the retail public. When Truck City was purchased, management decided to
convert it to the specialized field of General Motors trucks only. The Company
was prepared to sustain some losses until the conversion was complete. However,
the conversion required substantial additional funding. The Company determined
to sell Scotmar Industries because it believed that its available funds could be
better utilized in acquiring mineral and testing properties and because Scotmar
Industries would likely continue to incur losses unless and until it obtained
significant additional financing. On January 29, 1999, the Company sold Scotmar
Industries to an unaffiliated British Columbia Company (see Item 12. Certain
Relationships and Related Transactions).
ITEM 3. LEGAL PROCEEDINGS
On March 30, 1998, the Company filed a lawsuit in the District Court for
Clark County, Nevada, against Tyro, Inc., a/k/a Tyro Precious Metals Processing
Center, and two individuals seeking to collect the $50,000, plus interest and
attorneys fees, for breach of an agreement to pay that amount to Can-Cal. Each
of the Defendants has executed a Confession of Judgment. The Company has filed
the Confession of Judgment in Court, has obtained judgments and is currently
pursuing collection proceedings. As of March 8, 2000 the Company had recovered
approximately $4,500.00 pursuant to the Judgments which has been applied to the
Attorney's fees and costs of collections. The Company has been advised by its
counsel that it is likely that the balance of the Judgment can be recovered.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the Company's security holders during the
final quarter of the most recently completed fiscal year.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the NASDAQ OTC Electronic
Bulletin Board under the trading symbol CCRE.
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The following table sets forth in United States dollars the high and low
bid quotation for such shares. Such bid quotations reflect inter-dealer prices,
without retail mark-up, mark-down, or commissions, and do not necessarily
represent actual transactions. The source of the following information is the
National Association of Securities Dealers, Inc.'s NASDAQ Electronic Bulletin
Board.
COMMON STOCK
1997 LOW HIGH
----
First Quarter No trades No trades
Second Quarter No trades No trades
Third Quarter $1.375 $1.625
Fourth Quarter $0.321 $2.63
1998 LOW HIGH
----
First Quarter $0.375 $0.930
Second Quarter $0.406 $1.125
Third Quarter $0.375 $1.00
Fourth Quarter $0.281 $0.600
1999 LOW HIGH
----
First Quarter $0.375 $0.812
Second Quarter $0.406 $1.875
Third Quarter $0.75 $4.125
Fourth Quarter $0.906 $1.75
2000
First Quarter (through March 8) Low High
$.875 $5.00
Penny Stock Rules: The Securities and Exchange Commission has
promulgated rules pursuant to the Securities Exchange Act of 1934 which may
adversely affect the market for the Company's common stock. The Company's common
stock is a "penny stock," as that term is defined by both statute and rule.
Generally, a penny stock is a security that:
o is priced under five dollars;
o is not traded on a national stock exchange or on NASDAQ (the NASD's
automated quotation system for actively traded stocks);
o may be listed in the "pink sheets" or the NASD OTC Bulletin Board;
22
<PAGE>
o is issued by a company that has less than $5 million in net
tangible assets and has been in business less than three years, or
by a Company that has under $2 million in net tangible assets and
has been in business for at least three years, or by a Company that
has revenues of $6 million in three years.
The penny stock rules approval procedure and related rules may have a
negative effect on the market and the market price for the Company's common
stock. In order to approve a person's account for transactions in penny stocks,
a broker-dealer must first obtain from the person information concerning the
person's financial situation, investment experience, and investment objectives
(Rule 15g-9(b)(1)). The broker-dealer is to use this information to make a
reasonable determination that transactions in penny stocks are suitable for the
person, and that the person (or the person's independent adviser) has sufficient
knowledge and experience in financial matters that the person or the adviser
reasonably may be expected to be capable of evaluating the risks of transactions
in penny stocks (Rule 15g-9(b)(2)).
The broker-dealer is then required to deliver to the person a written
statement setting forth the basis on which the broker-dealer made the
determination regarding suitability of penny stock transactions (Rule
15g-9(b)(3)(i)). A manually signed and dated copy of this written statement must
be obtained from the person by the broker-dealer (Rule 15g-9(b)(4)).
The written statement is to explain, in highlighted format, that it is
unlawful for the broker- dealer to effect a transaction in a penny stock subject
to the provisions of Rule 15g-9(a)(2) unless the broker-dealer has received from
the person, prior to the transaction, a written agreement to the transaction
(Rule 15g-9(b)(3)(ii)).
Also in highlighted format, immediately preceding the customer signature
line, the written statement must explain that the broker-dealer is required to
provide the person with the written statement and that the person should not
sign and return the written statement if it does not accurately reflect the
person's financial situation, investment experience, and investment objectives
(Rule 15g-9(b)(3)(iii)).
(b) Holders
The Company has approximately 254 shareholders of record.
(c) Dividends
The Company has never paid any dividends. There are no legal
restrictions which limit the Company's ability to pay dividends but, based on
its present financial situation, it is extremely unlikely to do so in the near
future.
RECENT SALES OF UNREGISTERED SECURITIES
In the last three years, the Company has sold unregistered securities as
set forth below. No underwriters were involved in these transactions. All of the
shares were sold in 1997, 1998, 1999,and 2000 at prices which reflected a
discount from the then prevailing market prices; the
23
<PAGE>
discount reflected the restricted status of the shares. When shares were issued
for property or services, in each instance the valuation of the property or
services was based on the board of directors determination of the value received
for the shares.
2000: On February 25, 2000 the Board of Directors authorized the sale of
300,000 shares of the Company's common stock at $.75 per share to Messrs.
Dacyszyn, Amies, and Reschreiter, each of whom is a director of the Company and
Robin Schwarz, a member of the Schwarz family, which owns a 50% interest in the
S&S Joint Venture. Those shares were sold only to persons involved with the
daily operations of the Company in order to expedite obtaining funds for the
Company. At the time of the resolution, the Company's stock was trading at about
$1.50. Of those shares, 134,000 shares were sold on March 9, 2000 to Raven Rock
Products, Ltd., a Canadian corporation, owned by Mr. Dacyszyn, for $100,500;
21,000 shares were sold on March 9, 2000 to Amies Holdings, Ltd., a Canadian
corporation owned in part by Mr. Amies for $15,750; 45,000 shares were sold to
Mr. Reschreiter on March 2, 2000 for $37,750; and 100,000 shares were sold to
Robin Schwarz on February 27, 2000 for $75,000.
Messrs. Dacyszyn, Amies and Reschreiter are all citizens and residents
of Canada. All shares issued to them are subject to the investment restrictions
of Rule 144 and the provisions of Regulation S. The Certificates are legended
and appropriate instructions have been issued to the Company's transfer agent.
The shares may be resold only pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from registration.
For these sales, the Company relied on the exemptions provided by Regulation S
and Section 4(2) of the Securities Act of 1933.
Ms. Schwarz is a US citizen. All shares issued to her are subject to the
investment restrictions of Rule 144. The certificate is legended and appropriate
instructions have been issued to the Company's transfer agent. The shares may be
resold only pursuant to an effective registration statement under the Securities
Act of 1933 or pursuant to an exemption from registration from registration. For
this sale the Company relied on the exemption provided by Section 4(2) of the
Securities Act of 1933.
On February 27, 2000 the Board of Directors authorized the sale of
200,000 shares of the Company's common stock at $.75 per share to an offshore
trust. At the time of the resolution of the Company's stock was trading at about
$1.50 per share. On February 27, 2000 the trust purchased the 200,000 shares for
$150,000. The shares issued are subject to investment restrictions of Rule 144
and the provisions of Regulation S. The certificates are legended and
appropriate instructions have been issued to the Company's transfer agent. The
shares may be resold only pursuant to an effective registration statement under
the Securities Act of 1933 or pursuant to an exemption from registration. For
this sale the Company relied on the exemption provided by Regulation S and
Section 4(2) of the Securities Act of 1933.
1999: During 1999, the Company sold an aggregate of 925,500 shares of
its common stock in Canada to citizens and residents of Canada. Of those shares,
62,500 shares were sold on February 18, 1999 to Amies Holdings Ltd., a company
owned by Barry E. Amies, an Officer and Director of the Company, for $.40 per
share, for a total price of $25,000. On May 14, 1999, 15,000 shares were sold to
Amies Holding, Ltd. for $.50 per share for a total price of $7,500.00. On June
22, 1999,
24
<PAGE>
50,000 shares were sold to Aimes Holding Ltd. for $.50 per share for a total
price of $25,000.00. On November 9, 1999, 10,000 shares were sold to Josef
Reschreiter, a citizen and resident of Canada for $.50 per share for a total
price of $5,000. Mr. Reschreiter subsequently became a director of the Company.
On February 18, 1999, the Company sold 70,000 shares to James Dacyszyn,
a Director of the Company, for $.40 per share, for a total price of $28,000 and
on May 14, 1999, sold an additional 100,000 shares to Mr. Dacyszyn at $.50 per
share, for a total price of $50,000 and on June 22, 1999 sold 60,000 shares to a
Canadian company owned by Mr. Dacyszyn for $.50 per share for a total price of
$30,000.00. 40,000 shares, valued at $.50 per share, were issued to a Canadian
citizen and resident as payment for a Ford one ton diesel truck on or about
March 17, 1999. The remaining shares were sold for $.50 per share. All
purchasers are residents and citizens of Canada and the offers and sales were
made in Canada. All the purchasers were relatives, friends and/or business
associates of officers and directors of the Company.
For the transactions set forth above, the Company relied on the
exemption provided by Regulation S promulgated pursuant to the Securities Act of
1933. All shares issued are subject to the investment restrictions of Rule 144
and the provisions of Regulation S. The certificates are legended and
appropriate instructions have been issued to the Company's transfer agent. The
shares may be resold only pursuant to an effective registration statement under
the Securities Act of 1933 or pursuant to an exemption from registration.
In 1998, the Company contracted with an organization to perform services
in connection with the Company's at the Tyro Mill. That organization requested
that the Company pay 25% of the monies due it by issuing the Company's common
stock, subject to investment restrictions. That organization requested that
shares due it be distributed directly to persons who performed the services. On
April 19, 1999, the Company issued 32,121 shares of its common stock to five
individuals, all of whom are U.S. persons. Robin Schwarz, an owner of the S & S
Joint Venture, received 8,000 shares. All those persons are fully familiar with
the Company's properties and operations. Each of those persons has worked on the
Company's properties and/or tested material from those company's properties for
at least one year. They are fully familiar with the Company's properties, assay
results, testing results and with the materials from the Company's properties.
Each of those persons has many years of experience in the mining business.
Shares were issued to those persons at their request.
On April 1, 1999, the Company issued 1,000 shares of its common stock
valued at $.50 per share to a U.S. person in partial payment for a computer and
software equipment. That person has a long term relationship with the Schwarz
family and is familiar with the Company's properties and operations. On March
15, 1999, the Company sold 6,000 shares of its common stock to two U.S. persons,
a husband and wife, at $.50 per share for a total purchase price of $3,000.
Those persons are personal friends of James Dacysyzn, a Director of the Company,
and were furnished with information regarding the Company. They are accredited
investors.
All shares are subject to investment restrictions. The certificates are
legended and appropriate instructions have been issued to the Company's transfer
agent. The shares may be resold only pursuant to an effective registration
statement under the Securities Act of 1933 or pursuant to
25
<PAGE>
any exemption from registration. The Company relied upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, for the
transactions stated in the preceding two paragraphs.
1998: During 1998, the Company sold a total of 557,509 shares, for a
total consideration of $211,800. All but one of the purchasers are citizens and
residents of Canada and the sales were made in Canada. Of those shares, 300,000
were sold to James Dacyszyn, who was subsequently elected a director of the
Company. 100,000 shares were sold to Mr. Dacyszyn on or about May 10, 1998, at a
price of $.45 per share, for a total price of $45,000. The remaining 200,000
shares were sold to Mr. Dacyszyn on or about December 24, 1998, at $.35 per
share, for a total consideration of $70,000. 65,000 shares were sold to Amies
Holdings, Ltd., on or about October 29, 1998, at a price of $.50 per share, for
a total consideration of $32,500, and an additional 38,571 shares were sold to
Amies Holdings on or about December 24, 1998, at a price of $.35 per share, for
a total price of $13,499.85. 109,450 shares were sold at a price of $.40 per
share, in September and/or October of 1998. On or about December 10, 1998,
22,049 shares were sold to two individuals who are citizens and residents of
Canada, at a price of $.41 U.S. per share. Each of the purchasers is a relative,
friend and/or business associate of the officers and directors of the Company.
On or about December 10, 1998, 2,439 shares were sold to a U.S. person for a
price of $.41 per share, for a total purchase price of $1,000. That person is a
close friend of the Schwarz family, which owns 50% of the S & S Joint Venture
and asked to purchase shares.
With respect to all offers and sales of shares to persons who are
residents and citizens of Canada, stated in the preceding paragraph, the Company
relied on the exemption provided by Regulation S. All shares are issued subject
to investment restrictions and Regulation S. The certificates are legended and
appropriate instructions have been issued to the Company's transfer agent. The
shares may be resold only pursuant to an effective registration statement under
the Securities Act of 1933 or pursuant to an exemption from registration. None
of those shares have been sold.
With respect to the one U.S. person who purchased 2,439 shares at $.41
U.S. per share, those shares are subject to investment restrictions and Rule
144. The certificate evidencing ownership of those shares is legended and
appropriate instructions have been issued to the Company's transfer agent. That
person is familiar with the Company and its properties and its business and
operations. The Company relied upon the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. The shares may be resold only
pursuant to an effective registration statement under the Securities Act of 1933
or pursuant to an exemption from registration. None of the shares issued have
been sold.
1997: In January 1997, the Company issued 200,000 shares of its common
stock in exchange for all the outstanding shares of Scotmar Industries, Inc., a
British Columbia corporation. Mr. Sloan's wife and son-in-law were the only
shareholders of Scotmar and each received 100,000 shares of the Company's common
stock. Both are citizens and residents of Canada. The shares issued are subject
to investment restrictions and Rule 144. The shares may only be resold pursuant
to an effective registration statement or pursuant to an exemption from
registration. The Company relied on the exemption provided by Regulation S
promulgated pursuant to the Securities Act of 1933. None of those shares have
been sold.
26
<PAGE>
In October 1997, the Company exercised its option to acquire a 50%
interest in the S & S Joint Venture and, in consideration for the acquisition of
that 50% interest, issued 500,000 shares of its common stock to six members of
the Schwarz family, all of whom are U.S. persons. In issuing those shares, the
Company relied on the exemption from registration provided by Section 4(2) of
the Securities Act of 1933. The Securities are legended and appropriate
instructions have been issued to the Company's transfer agent. The shares may be
resold only pursuant to an effective registration statement or pursuant to an
exemption from registration.
On December 3, 1997, the Company issued 2,181,752 shares of its common
stock to Aurum LLC, a California limited liability company. Messrs. Sloan and
Wolfe, officers and directors of the Company, each owed 36% of the beneficial
interest in Aurum. All shares are subject to investment restrictions and Rule
144. The shares may be resold only pursuant to an effective registration
statement under the Securities Act of 1933 or pursuant to an exemption from
registration. The Company relied on the exemption provided by Section 4(2) of
the Securities Act of 1933. None of the shares issued have been sold. (See Item
12. Certain Relationships and Related Transactions).
On December 4, 1997, the Company issued 40,000 shares and 2,000 shares
respectively of its common stock to two individuals in consideration for
rendering geologic assaying and related services to the Company in connection
with its mining properties, particularly the S & S Joint Venture. Both
individuals were fully familiar with the Company, its properties and all other
material matters relating to its operations. The person to whom 40,000 shares
were issued is a U.S. person who spent months at the Owl Canyon property and was
actively engaged in surveying, testing and assaying activities on Owl Canyon. He
also recommended the filing of additional claims. The person to whom the 2,000
shares were issued is a citizen and resident of Canada. He is a personal friend
of Ronald D. Sloan and performed services for the Company on the Owl Canyon
property. All shares issued are subject to investment restrictions and Rule 144.
With respect to the issuance of shares to the Canadian citizen, the Company
relied on the exemption provided by Regulation S. With respect to the issuance
of shares to the U.S. person, the Company relied upon the exemption from
registration provided by section 4(2) of the Securities Act of 1933. The
certificates are legended and appropriate instructions have been issued to the
Company's transfer agent. The shares may be resold only pursuant to an effective
registration statement under the Securities Act of 1933 or pursuant to an
exemption from registration.
In September and/or October 1997, the Company sold 77,108 shares of its
common stock to 24 persons, 16 of whom were citizens and residents of Canada and
eight of whom were U.S. persons. 59,528 shares were sold to Canadian citizens
and residents for $44,641. 16,180 shares were issued to U.S. persons for $12,244
and services valued at $3,053. The value of the shares was determined by
applying a discount to the price at which shares were trading in the
marketplace, to reflect the fact that the shares were subject to investment
restrictions. All certificates evidencing ownership of the shares are legended
and subject to the provisions of Rule 144. Appropriate instructions have been
issued to the Company's transfer agent. The shares may be resold only pursuant
to an effective registration statement under the Securities Act of 1933 or
pursuant to an exemption from registration. The Company relied on the exemption
from registration provided by Regulation S for the sales to the Canadians. One
of the U.S. persons was Aylward Schwarz, an owner of the S & S Joint Venture.
The other U.S. persons are friends of the Schwarz family. Each of those persons
became aware of the Schwarz family's relationship with the Company and the fact
27
<PAGE>
that the Company owns a 50% interest in the Owl Canyon property and asked to
purchase shares. One person received 1,500 shares for fabricating services
rendered on the S & S Joint Venture's Owl Canyon properties. In November 1997,
the Company issued 5,475 shares to individuals for services. Robin Schwarz, an
owner of the S & S Joint Venture, received 2,975 shares. 2,000 and 500 shares
respectively were issued to two persons who performed other services for the
Company. One person also received the 1,500 shares for fabricating services.
Both of those persons requested shares of the Company's common stock. Those
persons were familiar with the Company's properties and operations. For the
sales to U.S. persons, the Company relied on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. The shares may be resold
only pursuant to an effective registration statement under the Securities Act of
1933 or pursuant to an exemption from registration.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(a) Plan of Operation.
As anticipated, the Company has completed the drilling and trenching
programs at the S&S Joint Venture' Owl Canyon property in which it owns a 50%
interest in December, 1999. The company has received a report from its
consulting geologist S. Bruce Ballantyne (see Item 2, Description of Property).
The Company has initiated discussions with several mining companies to determine
whether it is able to enter into an agreement in which another mining company
would fund the costs of the recommended drilling program on the Papa Hill
prospect (with an estimated cost of approximately $70,000.00) in exchange for an
interest in the Owl Canyon property or such similar agreement. No such agreement
has been reached to date and there is no assurance that any such agreement will
be reached. In the event such an agreement can be reached on terms acceptable to
the company it is likely that the Company would enter into such agreement. In
the event that the Company is unable to enter into such an agreement with
another mining company, the Company would then determine whether or not to
pursue the proposed drilling program on its own or to seek to sell an interest
in the property.
The Company intends to continue its current programs of testing volcanic
cinders from its property at Pisgah, California to determine whether they
contain any precious metals, and if they do contain any precious metals, whether
they can be profitable extracted. In the event that the Company, through its
current testing programs is successful at identifying and extracting precious
metals from its volcanic cinders, the Company anticipates that it would dedicate
the bulk of its efforts towards additional testing from the volcanic cinders,
and, if warranted, production. However, there is no assurance that any precious
metals exist in the volcanic cinders or, if they do, that they can be profitably
extracted.
Depending upon the success of its efforts with respect to its Owl Canyon
property and the results of the testing of its volcanic cinders, the Company
intends to conduct a drilling program on its Cerbat properties, which it leases
with an option to purchase (see Item 2). The purpose of such a drilling program
would be to determine the nature and extent of mineralization existing on the
property. Since the Company has not performed any drilling operations on that
property, it is as yet unable to state the nature and extent or cost of the
drilling it will undertake.
28
<PAGE>
The Company also intends to concentrate various placer material
available to it using its "concentrator." The Company has conducted a
significant number of "in-house" assays on various placer materials available to
it and, based upon those assays, believes that the placer material contains
precious metals which the Company believes may exist in sufficient amounts to be
mined commercially. If the testing continues to be promising, the Company may
seek to claim other placer properties. However, since its concentrating
activities have only recently been initiated, there is no assurance that
precious metals exist in the placer material in commercial quantities, or that
the Company can produce it at a profit.
It is not anticipated that the Company will purchase (or sell) any
significant amount of equipment or other assets, or experience any significant
change in the number of personnel who work for the Company, during the 12 months
ending March 2001.
The Company believes it has sufficient funds to satisfy its cash
requirements through March 2001. Should it be necessary for the Company to
obtain additional funds, the Company may attempt to sell an interest in one or
more of its properties or borrow funds from outside sources. The Company
believes that it may be possible for it to borrow additional funds, using its
Volcanic Cinders property as collateral, but there are no loan facilities in
place to date.
The Company has discontinued utilizing the Tyro Mill for testing. Assays
are performed by independent assayers.
(b) Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussions and analyses should be read in conjunction
with the consolidated financial statements of the Company and the notes thereto,
included elsewhere in this Form 10-KSB.
Can Cal Resources, Ltd. (the "Company") holds an interest in four
mineral properties in the southwestern United States. None of these properties
has any proven or probable reserves and none of these properties is in
production. As of December 31, 1999 the Company had invested approximately
$1,219,700 in the Owl Canyon joint venture. All expenditures on this property
are expensed, not capitalized.
December 31, 1999 compared with December 31, 1998.
Year ended December 31
1999 1998
------------ -------
Sales $ 3,700 ---
Costs of goods sold ---- ---
Gross Profit 3,700 ---
Net income (loss) ($322,100) ($353,000)
29
<PAGE>
The Company had only $3,700.00 in income from its mineral operations
during 1999. That income resulted from the production of 16.8 ounces of gold
which it produced from concentrates obtained from a third party. The Company
does not consider the production of gold from those concentrates economic and
has abandoned attempts to continue production from those concentrates.
Liquidity
The following table summarizes working capital and total assets.
Year ended December 31
1999 1998
------------ -------
Working capital $65,700 $117,900
Total Assets $888,500 $877,700
The Company sustained a loss from continuing operations of $612,800 for
1999 compared to a loss from continuing operations of $261,800 for 1998. The
increase in the loss was substantially accounted for by the following items: a
bad debt expense of $152,100 resulting from the sale of Scotmar Industries,
Inc., a subsidiary; an increase in exploration expense from $30,300 to $152,200
which was largely accounted for by work on the Owl Canyon properties; accounting
and legal expenses increased from $22,900 to $45,600 largely as a result of
becoming a reporting company; miscellaneous expenses, including property and
freight, and document processing costs, increased from $1,200 to $31,200; travel
expenses including automobile expenses and business travel increased from
$11,800 to $29,100; insurance expenses increased from $700 to $18,300 as a
result of increased insurance coverage. Office rent increased from $11,600 to
$16,000 because the Company leased a field office near Bull Head City, Arizona
to be closer to certain of its operations.
Unless the Company is able to establish the economic viability of its
mining properties, the Company will continuing writing off its expenses of
exploration and testing of its properties. Therefore, losses will continue
unless the Company locates and delineates reserves. If that occurs, the Company
may capitalize certain of those expenses. There is no assurance that this will
occur.
The Company's need for additional funds arose, in part, because in
December, 1999, the Company entered into an Agreement for further testing of its
volcanic cinders material, and, in connection therewith, loaned $48,000 to an
individual for the purpose of financing those testing operations. The Company
has also incurred additional consulting expenses since it is actively
participating in the testing. In addition, the note receivable from Tyro, Inc.
and its principals in the amount of $53,300 was not timely paid and the Company
however was compelled to engage in collection procedures which are ongoing.
The Company has, during February and March, 2000, sold 500,000 shares of
its common stock at $.75 a share for net proceeds of $375,000 to obtain
financing for its continued operations.
30
<PAGE>
The Company believes it has sufficient funds to satisfy its cash
requirements through March, 2001. Should it be necessary for the Company to
obtain additional funds, the Company may attempt to sell an interest in one or
more of its properties or borrow funds from outside sources. The Company
believes that it may be possible for it to borrow additional funds using its
volcanic cinders property as collateral, but there are no loan facilities in
place to date.
The Company has no material commitments for capital expenditures other
than expenditures it chooses to make with respect to exploration of its mineral
properties.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements meeting the requirements of Regulation S-B
follow.
31
<PAGE>
CAN-CAL RESOURCES, LTD.
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
CONTENTS
PAGE
Independent auditors' report 33
Financial statements:
Balance sheets 34
Statements of operations 35
Statements of changes in stockholders' deficit 36
Statements of cash flows 37
Notes to financial statements 38-45
Supplementary schedule:
Supplemental schedule I-- Operating, general and
administrative expenses 46
32
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Can-Cal Resources, Ltd.
Las Vegas, Nevada
We have audited the accompanying balance sheets of Can-Cal Resources, Ltd. (a
Nevada corporation) as of December 31, 1999 and 1998, and the related statements
of operations, changes in stockholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with 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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Can-Cal Resources, Ltd. as of December 31, 1999 and
1998, and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on page 46
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Murphy, Bennington & Co.
Las Vegas, NV
March 2, 2000
33
<PAGE>
CAN-CAL RESOURCES, LTD.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(Rounded to the nearest hundred, except share data)
<TABLE>
<CAPTION>
ASSETS 1999 1998
--------------- -------------
<S> <C> <C>
Current assets:
Cash $ 51,800 $ 41,600
Accounts receivable - 6,900
Notes receivable, related parties (Note 2) 44,700 41,600
Inventory - 72,500
Prepaid expenses 1,200 6,600
Current portion of note receivable 48,000 -
Other current assets - 100
------------- -------------
Total current assets 145,700 169,300
Property and equipment, net (Notes 1 and 3) 61,400 27,000
Other assets (Note 4) 95,300 95,300
Long-term investments (Note 5) 586,100 586,100
------------- -------------
$ 888,500 $ 877,700
============= =============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C> <C>
Current liabilities:
Bank line of credit $ - $ 12,400
Accounts payable 7,100 12,800
Accrued expenses 56,300 26,200
Due to related parties 14,800 -
Notes payable, current portion 6,800 -
------------- -------------
Total current liabilities 85,000 51,400
Note payable, (Note 6) 55,000 77,500
Notes payable, related parties (Note 7) - 243,500
------------- -------------
140,000 372,400
------------- -------------
Commitments (Note 9) - -
Stockholders' deficit:
Common stock, $.001 par value; authorized,
15,000,000 shares; issued and outstanding,
8,253,782 shares 8,200 7,000
Preferred stock, $.001 par value; authorized,
10,000,000 shares; none issued or outstanding - -
Additional paid-in-capital 2,460,200 1,887,600
Cumulative translation adjustment 8,500
Accumulated deficit (1,719,900) (1,397,800)
------------- -------------
748,500 505,300
------------- -------------
$ 888,500 $ 877,700
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
34
<PAGE>
CAN-CAL RESOURCES, LTD.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(Rounded to the nearest hundred, except share data)
<TABLE>
<CAPTION>
1999 1998
--------------- -------------
<S> <C> <C>
Sales $ 3,700 $ -
Cost of goods sold - -
------------- -------------
Gross profit 3,700 -
Operating, general and administrative expenses 614,600 253,300
------------- -------------
Loss from operations (610,900) (253,300)
Other income (expenses):
Other income - 5,700
Interest income 7,200 6,600
Interest expense (9,100) (3,800)
------------- -------------
Net income(loss) from continuing operations (612,800) (261,800)
============= =============
Income (loss) from discontinued operations:
Income (loss) from discontinued
automobile salvage division 116,400 (91,200)
Gain on disposal of automobile
salvage division (net of taxes) 174,300 -
------------- -------------
Net income (loss) $ (322,100) $ (353,000)
============= =============
</TABLE>
<TABLE>
<CAPTION>
Net income (loss) per share of common stock and common stock
equivalents:
<S> <C> <C>
Basic EPS
Net loss from continuing operations $ (0.04) $ (0.05)
============= =============
Weighted average shares outstanding 7,907,054 6,546,149
============= =============
Diluted EPS
Net loss from continuing operations $ (0.04) $ (0.05)
============= =============
Weighted average shares outstanding 7,907,054 6,546,149
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
35
<PAGE>
CAN-CAL RESOURCES, LTD.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1999 AND 1998
(Rounded to the nearest hundred, except share data)
<TABLE>
<CAPTION>
Additional Cumulative Total
paid-in Accumulated translation stockholders'
Common Stock capital Deficit adjustment equity
------------------------ ------------- -------------- ----------- -------------
Shares Amount
----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 6,447,652 $ 6,400 $ 1,676,400 $ (1,044,800) $ - $ 638,000
Issuance of common stock 557,509 600 211,200 - - 211,200
Foreign currency translation adjustment - - - - 8,500 8,500
Net income (loss) for the year - - - (353,000) - (353,000)
----------- ----------- ------------- -------------- ---------- -------------
Balance, December 31, 1998 7,005,161 7,000 1,887,600 (1,397,800) 8,500 505,300
Issuance of common stock 1,248,621 1,200 572,600 - - 573,800
Foreign currency translation adjustment - - - - (11,800) (11,800)
Realized foreign currency translation loss - - - - 3,300 3,300
Net income (loss) for the year - - - (322,100) - (322,100)
----------- ----------- ------------- -------------- ---------- -------------
Balance, December 31, 1999 8,253,782 $ 8,200 $ 2,460,200 $ (1,719,900) $ - $ 748,500
=========== =========== ============= ============== ========== =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
36
<PAGE>
CAN-CAL RESOURCES, LTD.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(Rounded to the nearest hundred)
<TABLE>
<CAPTION>
1999 1998
------------ -------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (322,100) $ (353,000)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 18,700 5,900
Bad debt expense 152,100 -
Gain on disposal of facility (116,400) -
Undistributed earnings of affiliate (174,300) -
Gain on foreign currency translation 8,500 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (4,000) 800
(Increase) decrease in inventories 100 43,600
(Increase) decrease in prepaid expenses - (800)
(Increase) decrease in other assets - (41,900)
Increase (decrease) in accounts payable and
other current liabilities 34,100 29,400
------------ -------------
Net cash provided (used) by operating activities (403,300) (316,000)
------------ -------------
Cash flow from investing activities:
Purchase of property and equipment (57,400) (14,500)
Proceeds from sale of assets 65,300 2,100
------------ -------------
Net cash provided by investing activities 7,900 (12,400)
------------ -------------
Cash flow from financing activities:
Decrease in related party debt (148,500) 50,800
Principal payments on note payable (55,200) (24,600)
Proceeds from issuance of common stock 574,000 191,800
Proceeds from debt issuance 35,300 129,300
------------ -------------
Net cash used by financing activities 405,600 347,300
Net change in cumulative translation adjustment - 8,500
Net increase (decrease) in cash 10,200 27,400
Cash at beginning of year 41,600 14,200
------------ -------------
Cash at end of year $ 51,800 $ 41,600
============ =============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ - $ -
============ =============
Income taxes $ - $ -
============ =============
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
37
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1. Summary of significant accounting policies:
Organization and nature of business:
Can-Cal Resources, Ltd. ( the "Company") is a corporation formed under the
laws of the State of Nevada on March 22, 1995. The company is engaged
in the precious metal processing industry and other investment
opportunities.
Revenue recognition:
Sales revenues are recognized at the point of sale.
Basis of accounting:
The Company prepares its financial statements in accordance with generally
accepted accounting principles.
Cash:
Forpurposes of preparing the statement of cash flows, unrestricted
currency, demand deposits, and money market accounts are considered
cash and cash equivalents.
Property, equipment and depreciation:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided on the straight-line method over the estimated
useful lives of the assets. The amounts of depreciation provided are
sufficient to charge the cost of the related assets to operations over
their estimated useful lives.
The cost of maintenance and repairs is charged to expense as incurred.
Expenditures for betterments and renewals are capitalized. Upon sale or
other disposition of depreciable property, cost and accumulated
depreciation are removed from the accounts and any gain or loss is
reflected in income.
38
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 and 1998
1. Summary of significant accounting policies (continued):
Concentration of credit risk:
A majority of the Company's business activity is with customers primarily
located in the metropolitan area of Las Vegas, NV.
The company maintains multiple cash balances at financial institutions
located in Las Vegas, NV. The accounts are insured by the Federal
Deposit Insurance Corporation ("FDIC") up to $100,000. As of December
31, 1998, the Company had no funds in excess of FDIC limits.
Income taxes:
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This
statement requires an asset and liability approach to account for
income taxes. The Company provides deferred income taxes for temporary
differences that will result in taxable or deductible amounts in future
years based on the reporting of certain costs in different periods for
financial statement and income tax purposes.
Use of 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.
Reclassifications:
Certain financial statements from prior years have been reclassified to
conform with current year presentation.
Foreign currency translation:
Assets and liabilities of the Company's Foreign operations are translated
into U.S. dollars at the exchange rate in effect at the balance sheet
date, and revenue and expenses are translated at the average exchange
rate for the period. Translation gains or losses of the Company's
foreign subsidiary are not included in net income but are reported as a
separate component of stockholders' equity. The functional currency of
the subsidiary is the primary currency in which the subsidiary
operates. The Company typically does not enter into foreign exchange
transactions to hedge balance sheet and intercompany balances against
movements in foreign exchange rates.
39
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 and 1998
1. Summary of significant accounting policies (continued):
Net income (loss) per share of common stock:
In 1997 the Company adopted Statement of Financial Accounting Standards
No. 128 ("SFAS 128"), "Earnings Per Share," which sets forth the basis
for the computation of "basic" earnings per share and "dilutive"
earnings per share. Basic EPS excludes dilution and is computed by
dividing income (loss) available to common stockholders by the
weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that would then share in the earnings of the entity. Diluted EPS is
computed on the basis of the weighted-average shares of Common Stock
outstanding plus common equivalent shares arising from the effect of
cumulative convertible Preferred Stock, using the if-converted method,
and dilutive stock options, using the treasury-stock method. All EPS
amounts for prior years have been restated to conform to these new
standards, and the effect of the restatement was not significant.
Recent accounting pronouncements:
In 1997, the Financial Accounting Standards Board issued Statement No. 130
("SFAS 130"), "Reporting Comprehensive Income". SFAS 130 requires that
all items that are required to be recognized under accounting standards
as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The statement requires that an enterprise classify items of
other comprehensive income by their nature in a financial statement and
to display the accumulated balance of other comprehensive income
separately from retained earning earnings and additional paid-in
capital in the equity section of a statement of financial position.
SFAS 130 is effective for fiscal years beginning after December 15,
1997.
2. Notes receivable (related parties):
Notes receivable, related parties, at December 31, 1999 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Note receivable from S&S Joint Venture, a joint venture partner,
unsecured, interest imputed at 8%, due on demand $ 28,000 $ 28,000
Note receivable from an individual, unsecured, interest imputed
at 8%, due on demand 12,000 12,000
Accrued interest receivable 10,500 7,200
----------- -----------
50,500 47,200
Allowance for uncollectible accounts 5,800 5,600
----------- -----------
$ 44,700 $ 41,600
=========== ===========
</TABLE>
40
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 and 1998
3. Property and equipment:
Property and equipment at December 31, 1999 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Machinery and equipment $ 81,700 $ 36,100
Transportation equipment - 27,800
Office equipment and furniture 4,000 3,800
----------- -----------
85,700 67,700
Less accumulated depreciation (24,300) (40,700)
----------- -----------
$ 61,400 $ 27,000
=========== ===========
</TABLE>
Depreciation expense for the year ended December 31,1999 totaled $18,700.
4. Other assets:
Other assets at December 31, 1999 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Note receivable from Tyro, Inc., and principals,
a corporation, secured by equipment,
interest accrued at 6% per annum, due on demand $ 53,300 $ 53,300
Deposits 5,600 5,600
Mining claims 36,400 36,400
----------- -----------
$ 95,300 $ 95,300
=========== ===========
</TABLE>
5. Long-term investments:
Long-term investments at December 31, 1998 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Pisgah property $ 567,100 $ 567,100
Investment in S&S Joint Venture 19,000 19,000
----------- -----------
$ 586,100 $ 586,100
=========== ===========
</TABLE>
41
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 and 1998
6. Notes payable:
Notes payable at December 31, 1999 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Note payable to lender; secured by 1st deed of trust; interest
at 8.00% per annum, matures July 31, 2001 $ 55,000 $ 77,500
Note payable to lender; unsecured; interest
at prime plus 1.00% per annum, matures September, 2000 5,100 -
Note payable to lender; unsecured; interest at
prime plus 1.00% per annum, matures March, 2000 1,700 -
----------- -----------
61,800 77,500
Less current portion 6,800 -
----------- -----------
$ 55,000 $ 77,500
=========== ===========
</TABLE>
7. Note payable, related parties:
Notes payable, related parties, at December 31, 1999 consisted
of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Note payable to shareholder; unsecured; interest
at prime plus 1.00% per annum, due on demand $ 14,800 $ 43,800
Note payable to shareholder; unsecured; interest
at prime plus 1.00% per annum, due on demand - 127,100
Note payable to shareholder; unsecured; interest
at prime plus 1.00% per annum, due on demand - 34,000
Note payable to shareholder; unsecured; interest at
prime plus 1.00% per annum, due on demand - 38,600
----------- -----------
$ 14,800 $ 243,500
=========== ===========
</TABLE>
42
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 and 1998
8. Stockholders' equity:
Common stock:
On February 1, 1999, the Board of Directors approved the Sale of 62,500
shares of Can-Cal common stock to a Board member.
On February 8, 1999 the Board approved the sale of 70,000 shares of
Can-Cal common stock to a Board member.
On March 1, 1999 the Board approved the issuance of 32,121 shares of
Can-Cal common stock in return for services rendered.
On March 15, 1999 the Board approved the sale of 86,000 shares of Can-Cal
common stock to various investors.
On March 17, 1999 the Board approved the issuance of 40,000 shares of
Can-Cal common stock in return for equipment.
On March 10, 1999 the Board approved the sale 295,500 shares of Can-Cal
common stock to various investors.
On April 1, 1999 the Board approved the sale of 1,000 restricted common
stock in return for equipment.
On July 21, 1999 the Board approved the sale of 357,500 shares of common
stock to various investors.
On August 24, 1999 the Board approved the sale of 274,000 shares of common
stock to various investors.
On September 7, 1999 the Board approved the sale of 20,000 shares of
common stock to an investor.
On November 9, 1999 the board approved the issuance of 10,000 shares of
common stock to an investor.
9. Commitments:
Lease commitments:
Auto leases:
The Company entered into three operating leases for automobiles that
expire during the year 2000. The monthly lease payments currently total
$1,274 per month. Lease payments for the year ended December 31, 1999
totaled $5,500.
43
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 and 1998
10. Commitments (continued):
Lease commitments (continued):
Auto leases (continued):
Minimum future rental payments for operating leases for the next five
fiscal year ends are as follows:
Year ending
December 31,
----------------
2000 $ 11,400
2001 11,400
2002 9,500
2003 3,700
2004 2,500
Thereafter -
--------------
$ 38,500
==============
11. Income taxes:
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the Company's assets
and liabilities. The temporary difference that gave rise to the
deferred tax asset is primarily as follows:
<TABLE>
<S> <C>
Net operating loss carry forward - December 31, 1999 $ 322,100
Net operating loss carry forward - December 31, 1998 353,000
Net operating loss carry forward - December 31, 1997 1,044,700
-----------
1,719,700
Deferred tax assets 497,500
Total valuation allowance recognized for deferred tax assets (497,500)
-----------
Net deferred tax assets $ -
-----------
</TABLE>
12. New accounting standard:
On January 1, 1998, the Company adopted Statement of Financial/Accounting
Standards No. 130 ("SFAS 130") "Reporting Comprehensive Income", which
requires companies to report all changes in equity during a period,
except those resulting from investment by owners and distribution to
owners. The components for comprehensive income are as follows:
1999 1998
------------- -------------
Net income (loss) $ (322,100) $ (353,000)
Translation adjustment 3,300 (8,500)
------------- -------------
Comprehensive income $ (318,800) $ (344,500)
============= =============
44
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 and 1998
13. Translation adjustment:
<TABLE>
<S> <C>
Balance, Beginning of year $ 8,500
Aggregate adjustment resulting from translation of financial
statements into U.S. Dollarss, and gains and losses
on certain hedge transactions and intercompany balances (11,800)
Realized loss on foreign currency translation 3,300
-----------
$ -
===========
</TABLE>
14. Fair value of financial instruments:
Thefollowing table presents the carrying amounts and estimated fair value
of the Company's financial instruments at December 31, 1999:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
------------- -------------
<S> <C> <C>
Financial assets:
Loans receivable-related party $ 44,700 $ 44,700
Note receivable 48,000 48,000
Property and equipment 61,400 61,400
Long-term investments 95,300 95,300
Financial liabilities: 586,100 586,100
Notes payable, related parties 14,800 14,800
Note payable 55,000 55,000
</TABLE>
The carrying amounts of cash, prepaid expenses, accounts payable and
accrued expenses approximate fair value because of the short maturity
of those instruments.
45
<PAGE>
CAN-CAL RESOURCES, LTD.
SUPPLEMENTAL SCHEDULE I --
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
Operating, general and administrative expenses:
<S> <C> <C>
Exploration $ 152,200 $ 30,300
Bad debt expense 152,100 -
Consulting 125,700 147,200
Accounting and legal 45,600 22,900
Miscellaneous 31,200 1,200
Travel 29,100 11,800
Depreciation expense 18,800 4,400
Insurance 18,300 700
Office rent 16,000 11,600
Office expense 9,500 9,000
Telephone 7,000 6,400
Lease expense 5,500 -
Advertising and promotion 1,800 2,500
Utilities 800 800
Bank charges 500 -
Repairs and maintenance 500 4,400
Supplies - 100
---------- ----------
$ 614,600 $ 253,300
========== ==========
</TABLE>
46
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
(a)(1)(2)(3) Identification of Directors and Executive Officers.
Members os the Registrant's Board of Directors are elected to hold office until
the next annual meeting of shareholders and until their successors are elected
or appointed and qualified. Officers are appointed by the Board of Directors
until a successor is elected and qualified or until resignation, removal or
death. The Registrant's executive officers and directors are listed below:
NAME AGE POSITION AND TENURE
---- --- -------------------
Ronald D. Sloan 59 President, Treasurer and a Director since
May, 1996
Brian John Wolfe 46 Secretary and a Director since May, 1996
Barry E. Amies 55 Vice President and Director since October, 1998
James Dacyszyn 68 Director since February, 1999
Josef Reschreiter* 32 Director since February, 2000
*Mr. Reschreiter was elected to fill a vacancy on the board.
No arrangement exists between any of the above officers and directors
pursuant to which any one of those persons was elected to such office or
position. The Company does not have an audit committee.
Ronald Daniel Sloan, is President and Treasurer, and a Director of the
Company. Mr. Sloan has been employed full time with the Company since May 2,
1996. For the past 10 years, Mr. Sloan, through a number of companies, has been
engaged in the automotive brokerage business, dealing with total loss vehicles
for insurance companies. Since 1994, Mr. Sloan has owned Canadian Auto Market
Trends Ltd., a Company engaged in that business. From approximately 1986 to
1996, Mr. Sloan owned Knight Auto Recyclers Ltd., an automotive parts company
which dismantled total loss vehicles and sold guaranteed parts to automotive
dealers, collision repair shops and the retail public. From 1992 until 1996, Mr.
Sloan worked at Truck City, Inc., which is engaged in the business of purchasing
damaged trucks from insurance companies and dismantling the vehicles for the
sale of parts. Until approximately 1990, Mr. Sloan was a director and secretary
of Save-On Used Auto and Truck Parts Ltd., which was sold to unaffiliated
persons. He was elected President on May 2, 1996 and a Director on May 3, 1996.
47
<PAGE>
Brian John Wolfe, is Secretary and a Director of the Company. He was
elected Secretary on May 2, 1996 and a Director on May 3, 1996. Mr. Wolfe has,
since 1987, owned Wolfe & Associates Appraisal Services, which appraises damages
sustained by vehicles, recreation vehicles, motorcycles and equipment after an
accident, for insurance companies throughout North America. Prior to 1987, Mr.
Wolfe managed Collision Repair Shops in the Vancouver, B.C. area.
Barry E. Amies, has been Vice President and a Director of the Company
since October 14, 1998. Mr. Amies has extensive experience in financing,
insurance and mining. He started Baron Insurance Agency in 1968 and built it
from a one-man operation to 45 employees, when he sold it in 1994. He also
started Baron Financial, which was added to the insurance business to
incorporate financial investments. Mr. Amies was the President of the Insurance
Brokers of British Columbia, Director and Vice President of Insurance Brokers of
Canada, President/Chairman for the Centre for the Study of Insurance Operations
of Canada, and was Chairman of the Insurance Council of British Columbia, which
is a regulatory body for brokers. In 1990, he was the Insurance Marketer of the
Year for North America. Since 1980, Mr. Amies has been President of Zalmac
Mines, Ltd., which has properties in Canada prospective for gold, silver,
molybdenum, and other metals.
James Dacyszyn, was elected as a Director of the Company on February 8,
1999. Mr. Dacyszyn is a Canadian citizen who is semi-retired and is a member of
the association of professional engineers, geologists and geophysicists of
Alberta, Canada. Mr. Dacyszyn currently owns and operates several concrete
transit mix plants and gravel operations in central Alberta, Canada. The
companies are now being managed by his son, a professional engineer, and Mr.
Dacyszyn is retained in a consulting capacity. Mr. Dacyszyn brings his
experience in materials engineering, including drill testing and engineering
evaluation of fine grained soils, sands and gravels.
Josef Reschreiter, since 1993, Mr. Reschreiter has been the owner of JR
Group Holdings, Inc., a Canadian federal corporation. JR Group Holdings, Inc.,
is engaged in business consulting and development that is distribution of pipe
line accessories, e-commerce activities, business assessments for
computerization and the construction of a hotel. From March, 1989 to May, 1993,
he was a partner in a horse farm operation in Grindrod, British Columbia. From
May 1996 through June, 1999, Mr. Reschreiter was Vice President of Sales and
Marketing from Avcan Systems Corporations high tech helicopter based aerial
survey equipment. In 1989 he founded Baron Enterprises, Ltd. which exported
whirlpools and tech-mountain bikes. In 1990 he founded Recon P.V.F., Inc. which
imported thermoplastic pipes, valves and jointing systems. From 1989 to 1993,
Mr. Reschreiter was a resident of Austria. Mr. Reschreiter has a business degree
from private business school in Salzburg, Austria. Mr. Reschreiter is a member
of the American Water Works Association, the International Association of
Plumbing & Mechanical Officials, has been a guest speaker and lecturer at the
University of Victoria Business Degree Class and a speaker on business at
Okanagan University in British Columbia.
Messrs. Sloan and Wolfe may be deemed promoters of the Company in its
present business and operations.
48
<PAGE>
(b) Identification of Certain Significant Employees.
Not applicable.
(c) Family Relationships.
Not applicable.
(d) Involvement in Certain Legal Proceedings.
During the past five years, no director, person nominated to become a
director, or executive officer of Registrant:
(1) has filed or had filed against him, a petition under the federal bankruptcy
law or any state insolvency law, nor has any court appointed a receive, fiscal
agent or similar officer by or against any business of which such person was a
general partner, or any corporation or business association of which he was an
executive officer within two years before the time of such filing;
(2) was convicted in a criminal proceeding or is the named subject of a pending
criminal (excluding traffic violations and other minor offenses);
(3) was the subject of any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring or suspending him from, or
otherwise limiting his involvement in, any type of business, securities or
banking activities, or
(4) was found by a court of competent jurisdiction in a civil action or by the
Securities and Exchange Commission or the Commodity Futures Trading Commission
to have violated any federal or state securities or commodities law, and the
judgment in such civil action or finding by the Commission has not been
subsequently reversed, suspended or vacated.
Based upon a review of Forms 3 and 4 furnished to the Registrant pursuant to
Rule 16a-3(a) since June 1, 1996 and written representations referred to in Item
405(b)(2)(i) of Regulation S-K, no directors, officers, beneficial owners of
more than ten percent of the Registrant's common stock, or any other person
subject to Section 16 of the Exchange Act failed for the period from October 6,
1999 (the date the Company became a reporting company) through March 20 , 2000
to file on a timely basis, the reports required by Section 16(a) of the Exchange
Act with the exception of the Form 3, required to be filed by Mr. Reschreiter on
March 4, 2000 was filed on March 13, 2000.
ITEM 10. EXECUTIVE COMPENSATION
No Officer or Director of the Company, receives any compensation and no
officer or director has any options or other rights to purchase any shares of
the Company. They are reimbursed for out of pocket expenses incurred on behalf
of the Company. Mr. Sloan, a resident of Vancouver, British Columbia, spends
virtually all of his time on the Company's business both in the United States
and
49
<PAGE>
Canada and is reimbursed for the costs of maintaining an apartment in Las Vegas
(which also serves as the Company's executive office). There are no directors
fees.
The Company does not have any stock option or similar plan or any
annuity, pension, retirement incentive, deferred compensation or any
arrangements whereby any of its officers or directors have been paid or may
receive compensation from the Company. In the event the Company's financial
condition becomes adequate to provide for the payment of compensation, the
Company will consider the issue at that time.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Set forth in the table below is the number of equity securities of the
Company beneficially owned by all officers and directors as of March 20, 2000.
There were 8,753,782 shares of common stock outstanding on that date. There are
no persons other than those listed below who, to the Company's knowledge, own
more than 5% of the Company's common shares.
50
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature
Title of Class Beneficial Owner of Beneficial Owner Percent of Class
-------------- ---------------- ------------------- ----------------
<S> <C> <C> <C>
Common stock, par Ronald D. Sloan*, 785,431 8.97%
value $.001 4312-212 Street,
Langley, B.C.,
Canada
Common stock, par John Brian Wolf, 785,431 8.97%
value $.001 3157 Silverthrone
Drive, Coquitlam,
B.C., Canada
Common stock, par Barry E. Amies, 311,071 3.55%
value $.001 14198 Tamarack
Drive,
Vernon, B.C.,
Canada
Common stock, par James Dacysyzn, 706,500 8.07%
value $.001 #64, 9703-41
Avenue, Edmonton,
B.C., Canada
Common stock, par Josef Reschreiter 97,000 1.1%
value $.001 3501 - 27th Street
Vernon B.C., Canada
Common stock, par All Officers and 2,685,433 30.67%
value $.001 Directors as a group
</TABLE>
* Mr. Sloan's wife owns 100,000 shares of the Company's common stock.
Mr. Sloan disclaims any beneficial ownership in those shares.
There are no arrangements which may result in a change in control of the
Company. There are no warrants or options outstanding to purchase any shares of
the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Acquisition of Assets From Aurum LLC
- ------------------------------------
During 1997, the Company's operations were financed in part by funds
loaned by Aurum LLC ("Aurum"), a California limited liability Company. Messrs.
Sloan and Wolfe, Directors of the Company, each owned 36% of Aurum. As of
October 27, 1997, Aurum had loaned $315,045.98 to the Company. The Company was
unable to repay those funds because it has been using all its available funds in
connection with its mining activities, principally the S & S Joint Venture.
51
<PAGE>
In October 1997, the Directors of the Company, including Messrs. Sloan
and Wolfe, determined that it would be in the Company's best interests to
acquire the Pisgah Volcanic Cinders property from Aurum, as well as to seek
cancellation of the Company's indebtedness to Aurum and seek possible additional
financing from Aurum on an equity, as opposed to the debt, basis.
The Company determined that by acquiring the Pisgah Volcanic Cinders
property and cancellation of its indebtedness for stock, it would become debt
free, and it would give the Company a significant positive book value and would
make it far more likely that it would be able to obtain financing to continue
its exploration on the S & S Joint Venture property (Owl Canyon), as well as
test the Pisgah Volcanic Cinders property.
Aurum indicated it believed that it could sell its Volcanic Cinders
property, which it acquired from the Burlington Northern Santa Fe Foundation on
December 19, 1996, for a price in excess of its cost. However, Aurum agreed, in
order to facilitate the transaction and to insure its fairness to the Company,
to sell the Pisgah Volcanic Cinders property to the Company at its out-of-
pocket cost of $553,716.94, plus legal fees and related costs of $25,755.59
incurred in acquiring the property, for a total acquisition cost of $579,472.53,
cancel the indebtedness of $315,045.98, for a total cost of $894,518.51, and not
charge the Company any interest for the use of funds that it had invested in the
Volcanic Cinders property or the money it had loaned the Company. In addition,
Aurum agreed to use its best efforts to provide additional equity financing to
the Company in amounts that the Company may reasonably request.
It was determined by the Directors to value the Company's restricted
shares issued to Aurum at $.41 per share and that, therefore, based on the total
cost of $894,518.51, a total of 2,181,752 shares of the Company's common stock
would be issued to Aurum. The shares were valued at $0.41 to reflect all aspects
of the transaction, including the fact that the shares were valued at a discount
to the price at which shares had traded in the marketplace because of the
investment restrictions. However, the valuation of $.41 per share may be
considered to be arbitrary. The Company's book value per share as of December
31, 1996, was approximately $.038 per share. The Board of Directors also took
into account the following factors: Its interest in the S & S Joint Venture and
other operations; the fact that the Company would obtain cancellation of all its
indebtedness to Aurum (which would leave the Company debt free) and obtain the
Pisgah Volcanic Cinders property, which was deemed to have significant potential
value and which the Company believed could be used as collateral for additional
financing; the belief that this transaction would make it more likely to attract
additional financing; the fact that trading in the Company stock had been
limited for an extended period of time; and the fact that the shares issued to
Aurum would be a long- term investment and illiquid and could not be sold for a
considerable period of time, and then only in very limited amounts.
The Directors, including Messrs. Sloan and Wolfe, unanimously passed a
resolution to this effect and, on October 27, 1997, an agreement was entered
into with Aurum providing for the acquisition of the Pisgah Volcanic Cinders
property by the Company and cancellation of the $315,045.98 of indebtedness by
the Company to Aurum in exchange for 2,181,752 shares of the Company's common
stock subject to investment restrictions, and Aurum agreeing to use its best
efforts to provide additional equity financing as reasonably requested by the
Company by purchasing additional restricted shares of the Company's common stock
at the same price. This transaction was
52
<PAGE>
submitted to and approved by the Company's shareholders at the Company's annual
meeting on December 3, 1997. The Company has not requested Aurum to provide any
additional equity financing. Following shareholder approval of this transaction,
Aurum distributed the shares to the owners of its beneficial interests. Messrs.
Sloan and Wolfe each received 785,431 shares. All shares are subject to
investment restrictions and Rule 144. None of the shares distributed have been
sold.
Scotmar Industries, Inc.
- ------------------------
On February 13, 1997, Scotmar Industries, Inc.("Scotmar") was acquired
by the Company from Mr. Sloan's wife and son-in-law, both citizens and residents
of Canada, for 200,000 shares of the Company's common stock, which are subject
to investment restrictions. None of those shares have been sold. Scotmar, a
Canadian Company operating under the name of Truck City, engaged in the business
of purchasing damaged trucks from insurance companies and dismantling the
vehicles for the sale of guaranteed truck parts to repair shops, collision
repair shops, and the retail public. It was the intention of management to
expand Truck City by opening new outlets which would specialize in specified
product lines. The Company advanced a total of $84,820 to Scotmar to finance its
operations. Mr. Sloan's wife and son-in-law advanced a total of $132,000 to
Scotmar. However, the operations of Scotmar proved to be unsuccessful. Effective
January 29, 1999, the Company sold Scotmar to an unaffiliated person for
$65,300. In order to consummate this sale and avoid bank foreclosure, Mr.
Sloan's wife paid approximately $16,500 of Scotmar's bank loans and was
reimbursed at the initial closing. It is anticipated that substantially all the
balance of the proceeds will be used to pay Scotmar's obligations.
The purchase price the Company paid for Scotmar was based on oral
indications of interest received by Scotmar from third parties to acquire it for
approximately $100,000 U.S. The Company utilized a value of $.50 U.S. for its
shares in making this acquisition.
Loans by Ronald D. Sloan
- ------------------------
As of December 31, 1999, Mr. Sloan had loaned the Company an aggregate
of $14,800 to finance its operations. The loan is unsecured, due on demand, and
bears interest at 1% over prime.
Purchases of Stock From the Company
- -----------------------------------
Barry E. Aimes has made the following purchases of stock from the
Company.
Date Number of Shares Price
---- ---------------- -----
10-28-98 63,000 $.50 per share
12-24-98 38,571 $.35 per share
02-18-99 62,500 $.40 per share
05-14-99 15,000 $.50 per share
06-22-99 50,000 $.50 per share
03-09-00 21,000 $.75 per share
53
<PAGE>
Mr. Dacyszyn made the following purchases of stock from the Company:
Date Number of Shares Price
---- ---------------- -----
05-10-98 100,000 $.45 per share
12-24-98 200,000 $.35 per share
02-18-99 70,000 $.40 per share
05-14-99 100,000 $.50 per share
06-22-99 60,000 $.50 per share
03-09-00 134,000 $.75 per share
Josef Reschreiter has made the following purchases of stock from the
Company.
Date Number of Shares Price
---- ---------------- -----
06-22-99 32,000 $.50 per share
06-22-99 10,000 $.50 per share
03-02-00 45,000 $.75 per share
The prices paid by Messrs. Aimes, Dacyszyn and Reschreiter were based on
the prices at which shares were trading in the marketplace less a discount
because the shares were subject to investment restrictions. All shares purchased
are subject to investment restrictions contained in Regulation S and Rule 144.
All shares were sold by the Company to obtain funds to finance its operations.
FORWARD LOOKING STATEMENTS
- --------------------------
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 provide a "safe harbor" for forward looking
statements that are based on current expectations, estimates and projections,
and management's beliefs and assumptions. Words such as "believes," "expects,"
"intends," "plans," "estimates," "may," "attempt," "will," "goal," "promising,"
or variations of such words and similar expressions are intended to identify
such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks and uncertainties which are difficult or
impossible to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward- looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statement whether as a result of new information, future events
or otherwise.
Such risks and uncertainties include, but are not limited to, the
availability of ore, negative test results, the existence of precious metals in
the ore available to the Company in an amount which permits their production on
an economic basis; the Company's ability to drill holes and properly test and
assay samples, and its ability to locate and acquire mineral properties which
contain sufficient grades of precious metals and/or minerals; the Company's
ability to sell a portion or all of any of its properties to larger mining
companies, to enter into agreements with larger mining companies to explore and
possibly develop its properties, to produce precious metals on a commercial
basis, the prices of precious metals, obtaining a mill or refinery to extract
precious metals on an economic basis, the Company's ability to maintain the
facilities it currently utilizes; obtain permitting requirements for any mining
and milling operations and pay the costs thereof; have good title to claims and
equipment, and the Company's ability to obtain financing necessary to maintain
its operations.
54
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.
CAN-CAL RESOURCES, Ltd.
(Registrant)
Date: March 23, 2000. By: /s/ Ronald D. Sloan
-----------------------------------------
Ronald D. Sloan, President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: March 23, 2000 By: /s/ Ronald D. Sloan
-----------------------------------------
Ronald D. Sloan, Director
Date: March 23, 2000 By: /s/ John Brian Wolfe
-----------------------------------------
John Brian Wolfe, Director
Date: March 23, 2000 By: /s/ James Dacyszyn
-----------------------------------------
James Dacyszyn, Director
Date: March 23, 2000 By: /s/ Barry E. Amies
-----------------------------------------
Barry E. Amies, Director
Date: March 23, 2000 By: /s/ Josef Reschreiter
-----------------------------------------
Josef Reschreiter, Director
55
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
---------------------------------
Sequential
Exhibit No. Title of Exhibit Page No.
- ----------- ---------------- --------
Exhibit 3.0 Articles of Incorporation.....................................**
Exhibit 3.1 Amendment to the Articles of Incorporation....................**
Exhibit 3.2 By-Laws.......................................................**
Exhibit 10.0 Joint Venture Agreement between Robin Schwarz,
Aylward Schwarz, S&S Mining, a Nevada corporation,
and Can-Cal Resources, Ltd....................................**
Exhibit 10.1 Mining Lease Agreement between Can-Cal Resources, Ltd.
and Twin Mountain Rock Venture dated May 1, 1998..............**
Exhibit 10.2 Loan Agreement between Owen Sequoia, Inc.
and Can-Cal Resources, Ltd....................................**
Exhibit 10.3 Amendment to Loan Agreement dated June 9, 1998................**
Exhibit 10.4 Second Amendment to Loan Agreement ...........................**
Exhibit 10.5 Deed of Trust, Security Agreement, Financing Statement,
and Fixture Filing with Assignment of Rents...................**
Exhibit 10.6 Lease and Purchase Option Agreement dated March 12, 1998
between Arthur James Good and Wanda Mae Good
and Can-Cal Resources, Ltd....................................**
Exhibit 10.7 Agreement between Can-Cal Resources, Ltd.
and Aurum, LLC dated October 27, 1997.........................**
Exhibit 10.8 Quit Claim Deed from Aurum, LLC to Can-Cal Resources, Ltd.....**
Exhibit 10.9 Agreement between Tyro, Inc., Dean Willman,
Roland S. Ericsson, and Can-Cal Resources, Ltd................**
56
<PAGE>
Sequential
Exhibit No. Title of Exhibit Page No.
- ----------- ---------------- --------
Exhibit 10.12 Agreement between Can-Cal Resources, Ltd.,
545538 B.C., Ltd., a body incorporated under
the laws of the Province of British Columbia,
and Ronald Daniel Sloan dated January 29, 1999................**
Exhibit 10.13 Agreement between Can-Cal Resources, Ltd.,
Cameron Miller and James R. Ardoin, dated
December 6, 1999..............................................58
Exhibit 11.0 Statement re: Computation of per share earnings...............**
Exhibit 16.0 Letter from David E. Coffey on change of
certifying accountant.........................................**
Exhibit 23.0 Consent of Independent Auditors, Murphy, Bennington & Co......65
Exhibit 27.0 Financial Data Schedule.......................................66
Exhibit 99.0 Preliminary Report, Papa Hill, Owl Canyon
Mineral Property by S. B. Ballantyne, December 1999.........67
** Incorporated by reference from the like numbered exhibit from the company's
Form 10-SB
(b) Reports on Form 8-K.
During the fourth quarter of the last fiscal year that Company
did not file any reports on Form 8-K.
57
EXHIBIT 10.13
AGREEMENT
This Agreement entered into by and between Can-Cal Resources, Ltd.
("Can-Cal"), Cameron G. Miller ("Miller"), and James R. Ardoin ("Ardoin").
WHEREAS Miller and Ardoin have developed a proprietary smelting process
and a proprietary solvent extraction process for extracting precious metals, and
Whereas Miller and Ardoin have located and claimed the Wikieup ore
material from which they have extracted precious metals using their proprietary
process, and
Whereas Can-Cal owns a volcanic cinders deposit which the parties
believe may be amenable to Miller and Ardoin's process, and
Whereas Can-Cal desires to test and obtain those proprietary processes
and claims covering the Wikieup ore material and obtain claims to the Wikieup
ore materials, and
Whereas the parties desire to enter into a business arrangement with an
option to continue that arrangement.
NOW THEREFORE it is agreed as follows:
1. Proposed Facilities Rated by Capacity to Recover Precious Metals
----------------------------------------------------------------
a) 10 ounce per day -- Existing facility being used to test
and develop the processes.
b) 100 ounce per day -- Proposed facility that will be built
if Can-Cal exercises its option in this Agreement.
c) 1,000 ounce per day -- Minimum capacity of the next
facility that Can-Cal agrees to build if the 100-ounce per
day facility is successful, in the sole judgment of
Can-Cal.
2. Representations and Warranties of Miller and Ardoin.
--------------------------------- -----------------
a) That they have developed and own a proprietary process for
smelting materials prospective for precious metals and no
other person has any claim or right to this process.
b) That they have developed and own a proprietary solvent
extraction process, which isolates and precipitates
individual precious metals contained in ore materials and
no other person has any claim or right to this process.
Page 1 of 7 Can-Cal /s/ RS Ardion /s/ JRA Miller /s/ CM
------ ------- ------
58
<PAGE>
c) That initial testing of the ore material taken from the
Wikieup claims utilizing their proprietary process has
resulted in the precipitation of sponge gold and combined
platinum/palladium in a powdered form as well as possible
recoveries of other precious metals.
d) That they have the use of the laboratory facilities in a
building on private property in Pahrump, Nevada which is
rented by Volcana Technology Co. and contains equipment
capable of smelting and processing ore materials and
extracting precious metals contained therein utilizing
their proprietary smelting and solvent extraction
processes. They have available to them and/or employ
personnel, including Daryl Freter and Joe Lynde, capable
of operating these laboratory facilities at Pahrump
utilizing their proprietary processes. The personnel and
equipment have the present capacity to produce up to 10
ounces of precious metals per day.
e) They have the right to enter into this Agreement and
commit the use of the Pahrump facilities and personnel to
this Agreement.
f) Ardoin and Howard Sadlier, an associate of Ardoin's, have
good and sufficient title to five (5) lode claims to the
Wikieup ore material, each claim consisting of 20 acres,
which claims have been designated by Ardoin and agreed to
by Can-Cal. Ardoin represents and warrants that all
necessary payments have been made and/or all work
obligations have been performed, so that the claims are
currently in good standing with the Bureau of Land
Management ("BLM"). Those claims are attached to Exhibit A
hereto.
g) Ardoin has good and sufficient title to one placer claim
covering 160 acres of the Rose ore deposit. Ardoin
warrants that the claim is in good standing and is
included on Exhibit A hereto.
h) All proposed operations contemplated by this Agreement
will be in full compliance with all federal, state and
municipal laws, regulations, permits and rules.
3. The Can-Cal Loan. Delivery of Promissory Note and Wikieup Claims
----------------------------------------------------------------
Based on the representations and warranties as set forth in
paragraph 1. hereof, Can-Cal hereby agrees to loan to Cameron
Miller, personally, $48,000 for the sole purposes of conducting
smelting and processing operations on Can-Cal's Wikieup ore
material and Can-Cal's volcanic cinder material. Can-Cal shall
loan Miller $12,000 each week for four consecutive weeks.
Page 2 of 7 Can-Cal /s/ RS Ardion /s/ JRA Miller /s/ CM
------ ------- ------
59
<PAGE>
Upon the initial loan of $12,000 from Can-Cal to Miller,
a) Ardoin will deliver to Can-Cal as collateral in the form
of a fully executed quitclaim deed to the first Wikieup
claim listed on Exhibit A, which Can-Cal shall have the
right to record and have reissued in Can-Cal's name.
b) Miller will deliver a Promissory Note(s) for the full
$12,000 to Can-Cal. The promissory note shall not bear
interest but shall be due 120 days after delivery to
Can-Cal; the form of promissory note is Exhibit B hereto.
Miller shall issue to Can-Cal similar notes for each
$12,000 loan upon receipt of the funds by Miller.
c) Miller and Ardoin agree that Can-Cal will own the above
Wikieup claim free of any claim by Ardoin, Sadlier, or
Miller unless Can-Cal fails to exercise their option and
Miller repays the loan within 60 days of Can-Cal's
decision not to exercise its option to continue this
Agreement. Upon repayment of this loan within the 60-day
period, Can-Cal agrees to return the claim by fully
executing a quitclaim deed to Ardoin and Howard Sadlier.
4. Obligations of Miller and Ardoin During the Initial Four Week Period
--------------------------------------------------------------------
a) During the initial four-week period, Miller and Ardoin
shall continue testing Can-Cal's Wikieup ore material and
shall also test Can-Cal's volcanic cinders material and
use their best efforts to extract any precious metals that
may be contained in those materials. Miller and Ardoin
will use their best efforts to assist in the smelting and
processing of Can-Cal's Wikieup material and the volcanic
cinders at the Pahrump facility or such other facility as
may be agreed upon by Can-Cal, Miller and Ardoin.
b) Can-Cal will deliver such amount of volcanic cinders to
the Pahrump facility as may be required for smelting
and/or processing. Can-Cal shall also deliver to the
Pahrump facility such amount of its Wikieup material as
may be required for smelting and processing or, at its
option, may choose to utilize any Wikieup material at
Pahrump, which shall be deemed to belong to Can-Cal.
c) Miller and Ardoin agree to pay all the expenses of
operating the Pahrump facility, Including the salary of
Daryl Freter and Joe Linde, as well as all out-of-pocket
expenses required for the operation of the Pahrump
facility from the Can-Cal loans. Miller and Ardoin
represent that the $10,000 a week during the first four
weeks will be sufficient to pay all out-of-pocket expenses
required for the operation of the Pahrump facility to
determine whether or not precious metals are able to be
extracted from the Wikieup material and the volcanic
cinders material.
Page 3 of 7 Can-Cal /s/ RS Ardion /s/ JRA Miller /s/ CM
------ ------- ------
60
<PAGE>
d) Miller and Ardoin will direct any revenue from the first
processing circuit that is completed during the first four
weeks to whoever it sees fit. Can- Cal will not receive
any of this revenue.
e) The proposed "100 ounce per day" processing circuit will
be funded by Can-Cal and this operation will be subject to
the profit-sharing conditions of this Agreement.
f) The four-week period will begin on the day after this
document is signed and the first portion of the loan is
delivered to Miller.
5. Can-Cal's Option
a) At the end of the initial four-week period, in the event
that Can-Cal is, in its sole discretion, satisfied with
the extraction results, Can-Cal shall have the option to
elect to continue this Agreement.
b) Can-Cal shall have a period of 60 days, beginning on the
last day of the initial four week period, in which to
exercise its option. If Can-Cal exercises its option, it
shall issue to Miller and Ardoin 400,000 shares of its
common stock, par value of $.001 as further consideration
for the acquisition of their proprietary smelting process
and solvent extraction process. Those shares, if and when
issued, will be restricted securities and subject to
federal and state securities laws. Miller and Ardoin will
be required, as a condition of issuance of those shares,
to execute appropriate documentation acknowledging and
agreeing to the limitations imposed on the resale of those
shares by all applicable laws.
c) In the event that Can-Cal exercises its option, Miller and
Ardoin will deliver to Can-Cal a full and complete
detailed description and explanation of their proprietary
smelting process and their proprietary solvent extraction
process (subject to adjustments arising from the
continuing development). Miller and Ardoin represent that
upon delivery of the processes to Can-Cal, Can-Cal will
own rights to those processes and have the full and
complete legal ability to utilize those processes in any
manner they deem fit without claims made by other persons.
Miller and Ardoin hereby agree to indemnify Can-Cal
against any and all claims from other persons claiming an
interest in the ownership of those processes or in any way
attempting to interfere with Can-Cal's complete use and
enjoyment of those processes. Can-Cal's rights to those
processes are subject only to the conditions of this
Agreement.
d) As further consideration for the issuance of those shares,
Ardoin and Howard Sadlier will deliver to Can-Cal fully
executed quitclaim deeds for the four Wikieup claims
listed on Exhibit A which were not delivered as collateral
for the Can-Cal loan. Can-Cal shall retain ownership of
the one claim initially transferred to it.
Page 4 of 7 Can-Cal /s/ RS Ardion /s/ JRA Miller /s/ CM
------ ------- ------
61
<PAGE>
e) As further consideration for the issuance of those shares,
Ardoin will deliver to Can-Cal a fully executed quitclaim
deed for one placer claim for the Rose ore deposit as
listed on Exhibit A.
f) If Can-Cal exercises its option it shall have the right,
in its sole discretion, to build a facility capable of
producing 100 ounces of precious metals per day at Pahrump
or such location as it deems suitable.
g) It is anticipated that Miller and Ardoin will operate
Can-Cal's facility. That smelting and processing operation
shall have a proposed capacity of 100 ounces of precious
metals per day. In the event Can-Cal exercises this
option, Miller and Ardoin will attempt to make available
to Can-Cal a portion of the Building No. 2 in the Pahrump
facility and will use their best efforts to obtain the
necessary permits and bonding to enable Can-Cal to utilize
that facility for the purpose of smelting and processing
materials for the production of precious metals.
h) As further consideration for the exercise of the option,
Can-Cal will issue to Volcana Technology (owned by Daryl
Freter and Joseph Lynde), and B.J. Bouldin, a one percent
net processing profits royalty, each, to be paid from net
processing profits (as that term is defined by generally
accepted accounting principles) whenever the smelting and
solvent extraction process is utilized with any and all
ores by Can-Cal.
i) In the event that Can-Cal exercises the option, and
determines that the 100-ounce per day facility is able to
produce precious metals on an economic basis, it will
continue such production on terms and conditions that is,
in its sole judgement, deems appropriate. However, Can-Cal
has the right to build a facility that has a capacity of
1,000 ounces of precious metals per day and if built, that
the 100-ounce per day operation will be moved into this
facility.
j) That all net processing profits from its Wikieup material
will be divided 70 percent to Can-Cal and 30% for Miller
and Ardoin.
k) That all net processing profits from its volcanic cinders
material, and any other material using the said processes
will be divided 92 percent to Can-Cal and 8% for Miller
and Ardoin.
l) Can-Cal will notify Miller and Ardoin in writing, during
the 60-day period, that they intend to exercise their
option or that they do not intend to exercise their
option.
m) The 60-day period will begin the day after the first
four-week period (28 days) ends.
Page of 7 Can-Cal /s/ RS Ardion /s/ JRA Miller /s/ CM
------ ------- ------
62
<PAGE>
7. Termination
In the event that Can-Cal does not exercise its option, this
Agreement will be terminated and Miller's promissory notes will
be due and payable according to their terms and the one claim
assigned to Can-Cal as collateral will have a value of $100 for
purposes of determining the amount owed by Miller to Can-Cal. In
any event, upon Miller repaying in full the loan from Can-Cal,
Can-Cal agrees to quitclaim the first Wikieup claim back to
Ardoin and Howard Sadlier.
8. Arbitration
In the event any dispute arises between the parties, arising out
of this Agreement, the dispute shall be submitted to the American
Arbitration Association and shall be heard and resolved in
accordance with their arbitration rules for commercial disputes.
/s/ Ronald D. Sloan Dec. 6, 1999
------------------------------------ ----------------
Can-Cal Resources, Ltd. Date
/s/ Cameron G. Miller Dec. 6, 1999
------------------------------------ ----------------
Cameron G. Miller Date
/s/ James R. Ardoin Dec. 6, 1999
------------------------------------ -----------------
James R. Ardoin Date
Page 6 of 7 Can-Cal /s/ RS Ardion /s/ JRA Miller /s/ CM
------ ------- ------
63
<PAGE>
EXHIBIT A
THIS IS A LISTING OF CLAIMS OWNED BY ARDOIN AND HOWARD SADLIER OR ONLY ARDOIN
THAT ARE AVAILABLE FOR QUITCLAIM AND TRANSFER TO CAN-CAL ACCORDING TO THE TERMS
AND CONDITIONS OF THE ATTACHED AGREEMENT BETWEEN CAN-CAL, ARDOIN AND MILLER
DATED DECEMBER 6,1999.
1 CLAIM AS COLLATERAL FOR $48,000 LOAN PARAGEAPH - 3. a)
- ------------------------------------------------------------
20 ACRE WIKIEUP CLAIM "BROWN DERBY 25" - LODE - AMC#335708
5 CLAIMS IN EXCHANGE FOR SHARES PARAGRAPH - 5. d) & e)
- ------------------------------------------------------------------
20 ACRE WIKIEUP CLAIM "BROWN DERBY 24" - LODE-- AMC#335707 20 ACRE
WIKIEUP CLAIM "J.S. 1" LODE - AMC#340648 20 ACRE WIKIEUP CLAIM "OLD
TIMER 3" - LODE - AMC#331609 20 ACRE WIKIEUP CLAIM "OLD TIMER 13" - LODE
-- AMC#331619 160 ACRE ROSE CLAIM "JBT" - PLACER - - AMC#342780
* * * * * * * * * * * * * * * *
Can-Cal Ardion Miller /s/ CM
------ ------- ------
64
Exhibit 11.0
Computation of Earnings Per Share
Year Ended December 31, 1999
(Rounded to the nearest hundred dollars, except share data)
Weighted average number of common shares outstanding 7,907,054
-------------
Common stock equivalents - stock options 0
Common stock equivalents - preferred stock 0
-------------
Average common and common stock equivalents outstanding 7,907,054
-------------
Net income (loss) $ (322,100)
-------------
Earnings per share(1) $ (0.04)
-------------
(1) Fully diluted earnings per share have not been presented because the
effectsare not material
65
EXHIBIT 23.0
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the publication of our report dated March 2, 2000 on the
financial statements in the Annual Report on form 10-KSB of Can-Cal Resources,
Ltd. for the years ended December 31, 1999 and 1998.
MURPHY, BENNINGTON & CO.
/s/ Murphy, Bennington & Co.
March 21, 2000
66
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
accompanying financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001083848
<NAME> Can-Cal Resources Ltd.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 51,800
<SECURITIES> 0
<RECEIVABLES> 44,700
<ALLOWANCES> 5,800
<INVENTORY> 0
<CURRENT-ASSETS> 145,700
<PP&E> 85,700
<DEPRECIATION> 18,700
<TOTAL-ASSETS> 888,500
<CURRENT-LIABILITIES> 85,000
<BONDS> 0
0
0
<COMMON> 8,200
<OTHER-SE> 740,300
<TOTAL-LIABILITY-AND-EQUITY> 888,500
<SALES> 3,000
<TOTAL-REVENUES> 3,700
<CGS> 0
<TOTAL-COSTS> 610,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,100
<INCOME-PRETAX> (322,100)
<INCOME-TAX> 0
<INCOME-CONTINUING> (612,800)
<DISCONTINUED> 290,700
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (322,100)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
EXHIBIT 99.0
PRELIMINARY REPORT
PAPA HILL, OWL CANYON
MINERAL PROPERTY
SAN BERNARDINO COUNTY, CALIFORNIA
Silver-Gold Epithermal Mineralization
By S. B. Balantyne
Consultant to Can-Cal Resources, Ltd.
CAN-CAL RESOURCES LTD.
1505 Blackcombe Street
Building 2, Unit 203
Las Vegas, Nevada 89128
(702) 240-6565 - Phone
(702) 758-4279 - Fax
-------------------
Stock Trading Symbol: CCRE
WEBSITE: www.can-cal.com
E-MAIL: [email protected]
68
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TABLE OF CONTENTS
(Page numbers reflect pages in original report and do not correspond to page
numbers in this Annual Report on Form 10-K. Maps and photos are not filed.)
<TABLE>
<CAPTION>
BETWEEN
PAGE PAGE
<S> <C> <C>
INTRODUCTION 1
GENERAL OUTLINE 2 - 10
LOCATION 2
ACCESS 2
MAP ONE: Road Access 2 - 3
MAP TWO: Location Papa Hill, Silurian Hills 2 - 3
TOPOGRAPHY 3
CLIMATE and VEGETATION 3
OWL CANYON TOPOGRAPHIC MAP, 7.5 Minute 3 - 4
PHOTOS: Papa Hill and Owl Canyon Topography, Vegetation 3 - 4
TITLES and OWNERSHIP 4
MAP THREE: Owl Canyon Mineral Property Claims and Sections 4 - 5
OWL CANYON: Mineral Property claims and Topography Map 4 - 5
PERMITTING 5
PHOTOS: Permitted Trenching and Owl Canyon Access, Silurian Hills 5 - 6
HISTORY OF PROPERTY AND THE SILURIAN HILLS DISTRICT,
San Bernardino, California 6, 7
GENERAL GEOLOGY OF SILURIAN HILLS 8, 9
PHOTOS: Paleozoic Silurian Hills Riggs formation;
Carbonates Hosts Papa Hill Discovery 9 -10
</TABLE>
69
<PAGE>
TABLE OF CONTENTS (Continued)
<TABLE>
<CAPTION>
BETWEEN
PAGE PAGE
<S> <C> <C>
DETAILED OUTLINE OF MINERALIZATION 10-14
INTRODUCTION 10
EPITHERMAL FEATURES and MINERALOGY 10, 11
GENERAL FEATURES AND GEOLOGY MAP, OLC #4 Mineral Claim 10 -11
DETAILED MINERAOLOGY: CANMET REPORT 12, 13
PAPA HILL CANMET SEM MINERALOGY, BSE IMAGES (7C-9E) 12 -13
INTERPRETATION OF CANMET & ACME DATA 14-17
UNDERGROUND SAMPLING PAPA HILL SHAFT 15
FOLD OUT DETAILED GEOLOGY MAP: Papa Hill 15 -16
SURFACE BRECCIA DEPOSITS 16, 17
TABLE A, TABLE B Geochemical Data 16 -17
PAPA HILL PHASE ONE TRENCHING PROGRAM 17-21
PHOTOS PAPA HILL TRENCHING 17 - 18
TRENCHING PAPA HILL (Gold Data: 50 ppb to >1g) 20 - 21
TRENCHING PAPA HILL (Gold Data: >1g) 20 - 21
TRENCHING PAPA HILL (Silver Data: 5g to > 99.9g) 20 - 21
TRENCHING PAPA HILL (Silver Data: >3 opt) 20 - 21
CONCLUSIONS and RECOMMENDATIONS 22
MAP OF PAPA HILL PROPOSED DRILL SITES 22
TABLES 1 to 18: DETAILED GEOCHEMICAL DATA
FOR PAPA HILL TRENCHES 1 to 18
REFERENCES
</TABLE>
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<PAGE>
PRELIMINARY REPORT
PAPA HILL, OWL CANYON MINERAL PROPERTY
SAN BERNARDINO COUNTY, CALIFORNIA
Silver-Gold Epithermal Mineralization
By S.B. Ballantyne
Consultant to Can-Cal Resources LTD
Prepared December, 1999
INTRODUCTION
The Papa Hill epithermal, precious metal discovery is located in the Silurian
Hills, in the Mojave Desert some 20 miles north of Baker California and about 20
miles southeast of Death Valley. The Silurian Hills lie just to the east of the
Death Valley fault zone and graben and its junction with another tectonically
active structure, the Garlock fault zone. These regional structures may have
helped in part control the episodes of late Tertiary volcanism and hydrothermal
associated channeling and fluid flow in the region. The Papa Hill near-surface,
epithermal, gold and silver mineraliza-tion has manifestations and features of
hot spring activity. The Silurian Hills have historically been host to numerous
lead-silver ores in the structurally deformed terrain. Potential for shallow,
high-level, bonanza gold and silver epithermal mineralization was previously
unrecognized prior to our discovery at Papa Hill.
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GENERAL OUTLINE
LOCATION:
Specifically, the Silurian Hills are located in the Silurian Hills 15-minute
quadrangle. The property is located in the northeastern corner of the 7.5 minute
series topographic map entitled North of Baker Quadrangle California - San
Bernardino County in Section 9, Township 16N, Range 9E. It is centered along the
topographic feature known as Owl Canyon (See map 1, 2).
The area lies within the California Desert Conservation Area administered by the
U.S. Bureau of Land Management (BLM). This agency identified the Silurian Hills
as having high mineral potential for silver (1980) which led the County of San
Bernardino to zone the area for mining and mineral exploration (Ely, 1982).
ACCESS
From Interstate 15 at Baker, California, access is via California State Highway
127 for a distance of nine miles north of the service center town of Baker. At
the Powerline Road junction turn right and travel on a USGS class 3 road
generally under the Power Transmission Line for a further 9 miles. At this point
turn to the left and head north to the Silurian Hills until metal gates are
reached after 5 miles of slow, track-road, travel. This is the eastern boundary
of the Owl Canyon Mineral Property. Travel to the Papa Hill discovery is through
the Owl Canyon (wash) track road going generally west for a distance of
approximately one-mile.
A second access route to the Papa Hills discovery is also from the Power Trans-
mission Line Road on a longer secondary road and track leading to the west and
then northeast to Papa Hill. It is this route which would be suitable for
drilling equipment access to the project, as the discovery is located at the
western end of the Owl Canyon Wash. From the natural gas substation on the Power
Line Transmission Road turn to the left from
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this main road and travel west. At 0.7 miles keep to the right at the "Y" and go
east towards the talc mines seen in the hills directly ahead. At a further 0.2
of a mile at the "Y" go left heading NW towards the dry lake bed in the valley.
At a distance of 0.4 miles further stay to the left as the road to the right
goes to the talc mine. At a further 1.0 miles another road goes to the right to
talc mines so bear to the left. At a further 0.2 miles another road turns to the
right but stay to the left. At a distance of 3.2 miles turn to the right heading
to the east and travel a distance of 1.5 miles to the Papa Hill discovery
outcrop on the left or south side of the Owl Canyon Wash.
TOPOGRAPHY
Relief at the Owl Canyon Mineral Property area ranges from 650 meters to about
775 meters (elevation 2,000 to 3,000 feet above sea level). Locally, topographic
relief is on the order of 1,000 feet in less than one half a mile along the Owl
Canyon topographic feature.
Papa Hill is located on the western boundary of the Owl Canyon Mineral Property.
It is a separate outcrop, which rises some 60 to 100 feet in height, well above
the surrounding Rigg's Wash gravels and sand. Its shape is somewhat "wedge-like"
in appearance with the steep edge to the north as a cliff-former above the Owl
Canyon Wash (see photo).
CLIMATE and VEGETATION
The area is typical of Southwestern California Desert. Temperatures reach 116*F
in the summer and little rain or snow falls in winter. The property can be
worked on a year-round basis. Vegetation is sparse generally limited to the dry
washes. It is typical of the Lower Sonoran life zone. Drinking water is trucked
in from Baker California. A water well of unknown capacity is located near the
eastern property boundary. It may be possible that a supply of drilling water
could be obtained from this source.
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TITLES AND OWNERSHIP
The Papa Hill discovery is located on OCL #4 lode mineral claim which is part of
the thirty-seven lode mineral claims which were staked in the fall of 1999 to
constitute the Owl Canyon Mineral Property (See Map 3). U.S. Military lands abut
the western claim boundary and no mineral staking is allowed to the west of
OCL#4.
The property is held by right of discovery and location. The titles are regular
in every way. All requirements provided by California and Federal Law necessary
to acquire and hold lode mining claims have been complied with. Records-forms
were duly filed at San Bernardino County offices and the U.S. Bureau of Land
Management. All location fees, service charges and maintenance fees at the
County and BLM have been paid in full.
All claims of the Owl Canyon Mineral Property have been staked short of the
1,500 feet length and the 600-foot width and are less than 20 acres in size to
ensure that no fractions have been left unstaked. Wooden posts and rock
monuments surrounding the posts have been erected at each corner and at the
discovery monument. Aluminum tags naming claim(s) and corner(s) are affixed to
each post. Location notices are attached to each post by means of a glass jar
and lid attached to the wooden post. All posts are flagged with tape and the
boundaries of the claims have been flagged so that they can be readily traced in
the field.
In the case of Papa Hill lode mineral claim, OCL #4, the length of the claim is
east-west (1,500 ft) and the width (600 ft) is north-south in direction. The
Papa Hill discovery was duly staked September 1, 1999 (i.e. date of location)
and filed at San Bernardino, at the County of San Bernardino, California,
Recorder Larry Walker at 8:35am 09,01,1999, document Number 1990371131. BLM
filing resulted in recording and issuance of CAMC #276022 for OCL #4. (See
attached Notice of Mining Claim Appendix A).
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Ownership of the claim is divided equally under a joint venture agreement
between S & S Mining (The Schwarz Family, 16008 Ash Street, Hesperia,CA 92345)
and Can-Cal Resources LTD. (1505 Blackcombe St., Building 2,Unit 203, Las Vegas,
Nevada 89128). The claim is located in the name of S & S Mining and Can-Cal
Resources LTD. All of the 37 newly staked lode mineral claims (Owl Canyon
Mineral Property) are owned and located by these two parties.
Within the Owl Canyon Mineral Property area three patent claims and one Mill
Site claim are also located and remain in good standing.
PERMITTING
The Papa Hill discovery warranted exploration activity. Consequently, S & S
Mining and Can-Cal Resources LTD. filed a Notice of Disturbance Form with the
BLM at their field office in Barstow, California. A meeting had been held with
United States Department of Interior, Bureau of Land Management, Geologist Mr.
Ken Schulte prior to the Notice filing. A suggested format for a Notice Form was
subsequently filed on September 22, 1999 in Barstow, California.
Prior to granting the Notice of Disturbance application the Papa Hill discovery
and OCL#4 mineral claim were visited by three staff of the BLM Field Office of
Barstow, California. BLM Geologist, Mr. Larry Monroe led the visit and a
Biologist and Archeologist also attended. Mr. Monroe verified the validity of
the mineral claim OCL #4 as a locatable deposit and verified the erection of
corner and discovery posts etc. The Biologist examined the sparsely vegetated
outcrops at Papa Hill. The Archeologist examined the remnants of historic
exploration around the "old timer" 28-foot deep shaft at Papa Hill and noted the
absence of native artifacts at the site. This inspection by the BLM staff led to
the acceptance of the Notice of Disturbance for the purposes of our proposed
drilling, blasting and trench sampling exploration program. The exploration team
and the BLM staff have an
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excellent rapport and working relationship. Subsequently, this has led to the
acceptance of more filings of Disturbances for other claims within the Owl
Canyon Mineral Property area.
Approved and permitted powder magazines for the purpose of explosive storage are
in place and being used on the Mill Site claim during the blasting phase of
exploration. Further permitting for exploration and drilling at the Papa Hill
discovery are expected to be easily fulfilled by the BLM.
HISTORY OF THE PROPERTY AND THE
SILURIAN HILLS DISTRICT, SAN BERNARDINO,
CALIFORNIA
The history of Mojave Desert mining goes back to developments as early as 1850.
San Bernardino County is the most important non-hydrocarbon mineral-producing
County in California. According to Fife and Brown (1988) in their "Review of the
geology and mineral resources of the Silurian Hills; A model for
mineralization", 30 - 40 percent of California's mineral production comes from
this County. These facts suggest that a valuable property in San Bernardino
County should receive favorable acceptance from all agencies in regards to
future mining development and operations (i.e. Papa Hill Discovery).
Within the region, the largest silver producing area was at Red Mountain located
about 100 miles west of the Silurian Hills and at Calico about 60 miles to the
southwest.
Mining silver and talc began as early as 1890 in the Silurian Hills. The Riggs
Mine was the largest silver producer in the Silurian Hills. The Papa Hill
discovery is located about 4.5 miles southeast of the Riggs Mine. According to
Tucker (1921) the ore was hosted in limestone and occurred as native silver,
galena and silver chlorobromides. Highest grades
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were associated with barite in irregular lenses, up to four feet wide, along a
series of north-south striking parallel faults and fissures. Apparently in the
1880's and 1890's mining had begun with the most recent production being 1931
(Vredenburgh et al, 1980). These authors report shipments of $500 to $4000 per
ton but Wright et al (1953) reported an ore intersection of 11 percent lead and
5 ounces per ton silver. These authors estimated that 200,000 ounces of silver
were produced to 1920 at the Riggs Mine.
Because of the significant number of previously worked silver mines and the
number of mineral occurrences found in the Silurian Hills, the BLM (1980) panel
of expert mineral exploration specialists ranked it as having favorable to very
favorable metallic mineral deposit potential (Marcus, 1980).
Silurian Hills deposits-mines were predominately lead-silver veins commonly
associated with barite and thus similar to those high-grade deposits at the
Calico district near Barstow, California (Kupfer, 1960; Fife and Brown, 1998).
These authors suggest a late tertiary age for both the Calico and Silurian Hills
deposits. Around Calico the structurally deformed terrain was the target for
Asarco's development of large, disseminated low-grade silver deposits (Webber,
1980).
Within the Owl Canyon Mineral Property numerous pits, tunnels and shafts have
been located during staking. It is suspected that these also date from early
mining exploration efforts during the early 1900's. Outside of development on
the patent claims, tunnels do not exceed 100 feet and shafts 30 feet. Work would
appear to have been with pick, shovel, hand steel and burrow. It is for this
reason that no records of production from the patent claims or tunnels etc. on
the newly located mineral claims of the Owl Canyon Mineral Property are
available. It is suspected that lead and silver ores hosted in cerussite-galena
and silver chlorobromide minerals were the targets of the early exploration at
Owl Canyon as elsewhere in the Silurian Hills Mineral District. At Papa Hill one
small hand-blasted pit
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and a 28-foot deep shaft with 6-foot drift were developed probably during the
early 1900's. From the condition of the dump it would appear that no ore was
extracted or shipped. Development was in a hot spring tuffa-like zone where
digging was easy. Underground hand steeling probably ceased when the drift ran
into a solid silica ledge. Most of the exposure at Papa Hill features silica
caps or ledges at variable elevations in the silica replaced and brecciated
limestone-dolomite host formation.
The lack of galena (silver-bearing) and electrum-gold in particle sizes amenable
to crushing and hand-panning techniques lead to the abandonment of the Papa Hill
by the early prospectors. No further exploration work by anyone has occurred at
Papa Hill until our recent trenching program.
GENERAL GEOLOGY OF THE SILURIAN HILLS
The available geologic literature for the geologic setting of the Silurian Hills
is limited to Kupfer (1954, 1960) and Fife and Brown (1988). As these authors
provide the only significant geologic work for the Silurian Hills area, it is
necessary to review their mapping, structural and stratigraphic data
interpretations.
The general geology of the Silurian Hills is well represented within the Owl
Canyon Mineral Property. In general, the property is dominated by an abundance
of Precambrian and Paleozoic rocks.
The Precambrian is comprised of an older and abundant group of foliated
metasedimentary rock and gneiss and generally course-grained to porphyritic
textured, variably colored, granite. The younger Precambrian rocks are marine
clastic sedimentary rocks (11,000 feet thick; Kupfer, 1960) which may contain
fine-grained clastics and carbonate rocks. This thick Precambrian section is
known as the Pahrump Group or series. Kupfer (1960) traced
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distinctive members of the Pahrump Group from unmetamorphosed sedimentary rocks
in the west to intensely metamorphosed equivalents in the east portions of the
Silurian Hills.
The older Precambrian gneissic-granite complex is in minor fault contact with
the grey colored Pahrump Group (Fife and Brown 1988).
At the Owl Canyon Mineral Property the next most abundant group of rocks are the
Paleozoic recrystallized carbonate rocks known locally in the Silurian Hills as
the Riggs Formation. Massive beds of dolomite dominate the Riggs Formation,
which is light buff or grey in color in contrast to the less abundant blue-grey
to white limestone. These Riggs formation interbeds are unfossiliferous,
estimated to be 2500 feet thick and probably are late Paleozoic in age (Kupfer,
1960).
Fife and Brown (1988) suggest that the Riggs fault is a detachment fault, which
separates the Paleozoic Riggs carbonate formation into upper plate rocks while
the lower plate rocks are Precambrian Pahrump Group. Kupfer interpreted the
Riggs fault as a thrust (1960).
In the Silurian Hills most mineralization is hosted in the Riggs fault upper
plate rocks in a detachment terrain or above the thrust. However, high-angle
faulting in a north-south direction or trend would appear to this author to be
of greater importance as hosts to mineral carrying solutions than the thrust or
detachment fault (Riggs fault within the Owl Canyon Mineral Property).
Locally pinkish colored aplitic to porphyritic rock of granite to quartz
monzonite intrudes older and younger Precambrian rocks and the Paleozoic Riggs
rock types. These granite phases may be Cretaceous or Tertiary in age (Kupfer,
1960). Within the Owl Canyon Mineral Property these units are minor and of no
importance to the mineralization distribution.
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Suspected Tertiary-aged volcanics of latite composition and volcanic sandstones
and conglomerates are found in the northeast corner of the Silurian Hills
(Kupfer, 1960). At the Owl Canyon Mineral Property red sandstones and possibly
lapilli tuffs of red to purple coloration are found exposed in washes north of
Papa Hill in OCL #1 claim. Very locally in this area vesicular basalt float and
minor outcrops are also found in place. Because Tertiary(?) to Quaternary sand
and gravel fans and Quaternary terrace gravels and alluvium overlie much of the
area, the distribution and geologic setting of the volcanic tuffs and basalt is
unknown.
It may be suggested that extensional tectonics and Tertiary structural features
are related to the geologically active Death Valley and Garlock fault zones.
Earthquakes are common in the region with the latest being the Hector Mine fault
and quake of the summer of 1999. Kupfer (1960) assigned a late Pliocene age for
the Riggs thrust fault. All of these regional and more local secondary
structural features are believed by this reports author to have influenced the
volcanism, heat flow, and fluid flow responsible for the Silurian Hills rear
surface epithermal spring activity. These features are prominently evident by
multi-episodic events of brecciation and silicification at the Papa Hill
discovery outcrop in the Silurian Hills.
DETAILED OUTLINE OF MINERALIZATION AT PAPA HILL
INTRODUCTION:
The "old timers" shaft and drift are the only evidence of attempted exploration
at Papa Hill. The epithermal features recognizable at Papa Hill lay "dormant"
until our discovery in the summer of 1999. The prospect was staked on Sept. 1,
1999 after receiving assay results and mineralogical characterization of two
grab samples collected from the "old workings" pit and shaft dump material.
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EPITHERMAL FEATURES AND MINERALOGY
The Papa Hill discovery is distinctly epithermal in texture and features
exhibited at the surface outcrops. Silica replacement would appear to be the
dominant feature of the overall alteration present due to the host dolomite and
limestone rocks inability to react to low temperature hydrothermal fluids. (i.e.
no skarnification). Surface outcrops are stained black and exhibit a
non-weathering silica rind where silica flooding has been most intense. These
surface outcrops are extremely hard and difficult to break. Differential
weathering of silica, limestone and dolomite often exhibit a net or boxwork-like
texture on the surface of outcrops. The addition of silica stands out as black
ridges or rib networks. Areas of intense brecciation are present where the
silica replacement or flooding is the most intense. In other exposures boiling
zones of vuggy silica are developed which in some cases rise above the present
day surface outcrops. In general breccias are extremely vuggy with crustiform
quartz crystals of variable sizes formed within the vugs and open spaces. Colors
of these zones in freshly broken or blasted rocks range from grey, steel grey to
strongly developed pink to red hematite colors. In all zones the quartz ranges
from clear, to white-buff in color. Limestone or dolomitic breccia fragments are
found in the brecciated zones and along cross-cutting fractures in the
interbeds. These variable sized, carbonate fragments and pieces range in color
from pink to brown and grey. In the most intensely silicified zones they are
rarely found preserved. White barite blades are noted in some alteration zones.
Within boiling zones complete replacement of both barite and calcite crystals
with quartz is suspected as open-space filling textures are well developed.
Throughout the Papa Hill exposure, beds or layers of Tuffa spring deposits are
found. They may range up to 14 inches wide and in some cases they are limey and
soft and in others they are partially silicified. Possible circular spring vents
in the limestone and along fractures also are suspected. The Tuffa layers maybe
capped by silica-rich ledges and then followed by silica enrichment underneath
as evidenced in portions of our trenching and the
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"terraced" appearance of Papa Hill. This would suggest that in the Papa Hill
near-surface spring environment, deposition of low temperature silica and
carbonate spring precipitates was episodic with changes in the boiling and
ground water regimes. Multiple pulses of spring and hydrothermal activity can
easily be envisaged when examining the exposures at Papa Hill.
In June of 1999, Can-Cal contracted Natural Resources Canada, Canada Centre for
Mineral and Energy Technology (CANMET) to examine and characterize the
mineralization present at the Owl Canyon Mineral Property. Two samples collected
from Papa Hill were part of the 15-sample study conducted by the notable
precious metal expert mineralogist Dr. Louis Cabri.
In July three Papa Hill samples were collected and sent to ACME Laboratory in
Vancouver for precious metal and geochemical analysis. The CANMET mineralogical
report was received in August and when interpreted with the ACME Lab positive
anomalous data the staking of Papa Hill was initiated and completed on September
1, 1999.
DETAILED MINERALOLOGY: CANMET REPORT
At CANMET the two samples were crushed and ground and then a quarter split of
the -100 +200 mesh size fraction of the material (395g and 900g samples) was
used for heavy liquid separations (3.3S.G.). The sink fraction from the heavy
liquid separation represented 0.7% and 0.1% respectively of the sample weight of
the -100 +200 mesh fraction at recoveries of 98.7% and 92.8% respectively. The
recovered sink fractions were prepared as 3.2 cm polished sections and then
examined by optical microscopy. Grains of interest were marked and further
studied by Scanning Electron Microscope (SEM) and identified using the Energy
Dispersive System (EDS). High average atomic number grains were detected in
backscattered electron (BSE) mode and images of important grains were developed.
(See
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figures 7C-F, 8A-F, and 9A-E). Silver-bearing precious metal minerals and
gold-electrum grains were documented in the two Papa Hill samples studied by
CANMET. ACME geochemical results verified that Papa Hill was a precious
metal-bearing, epithermal, system which contains highly anomalous silver and
gold content at the surface (see Table A).
The first sample examined by CANMET was taken from the "fresh" dump material at
the 28-foot shaft found on Papa Hill. It can be compared to geochemical sample
number 45789. The second sample, comparable to ACME results 45790, was collected
from the "old timers" hand-blasted pit located approximately 65 feet east of the
shaft entrance. The two samples are somewhat different in their mineralogical
makeup and thusly in their geochemical fingerprints.
The shaft sample was found to contain a Pb-Ag sulfide. It is the major silver
carrier and often is associated with galena. Acanthite commonly attached or
intergrown with cerussite was the next most important silver carrier.
Chlorargyrite in veins cutting acanthite- cerussite was also observed. A unique
Ag-Cu-Pb sulfate was noted also to carry silver. The sample was found to
primarily consist of barite, cerussite, quartz and Fe-oxyhydroxides. Minor
amounts of galena, pyrrhotite, zinc oxide and zinc silicate were present. A gold
or electrum bearing phase was not discovered in the -100 +200 mesh sink fraction
examined during the CANMET study. ACME results (45789 and repeat) from similar
material as that first examined by CANMET depict anomalous silver and gold
content associated with Pb, Zn and Ba with lesser anomalous content of As and Mo
(see Table "A" and figures 7C-8E).
The second sample examined in detail by CANMET is quite different from the first
in that it has less barite and cerrusite and the most common silver-bearing
phase is bromine-rich chlorargyrite. Primarily, the sample is composed of
Fe-oxyhydroxides, quartz and Cu-rich silicates. Chlorargyrite occurs generally
as large liberated grains or often it is associated
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with cerussite and native silver. Gold-electrum was noted as very fine-grained
inclusions in chlorargyrite. Acanthite was observed enclosed by quartz grains.
ACME results of a composite of chips (45790) taken from the "old timers" pit
(same location as CANMET specimen) reported 4.35 opt silver and 344PPB gold.
This zone is richer in the base metals Cu, Pb and Zn and not anomalous in Mo or
As as compared to the Papa Hill Shaft sample (see Table "A").
It should be noted that gold-electrum grains or particles may report to the
minus 100 mesh size fraction of the heavy liquid sink fraction in a greater
abundance than the -100 +200 mesh fraction examined by the CANMET mineralogical
study. Larger sized gold-electrum grains often occur at lower or deeper levels
in bonanza grade epithermal systems as compared to higher level surface samples.
INTERPRETATION OF CANMET & ACME DATA
No doubt that the formation and presence of Fe-oxyhydroxides and cerussite and
the Pb-Ag sulphide and Ag-Cu-Sulphate can be attributed to the oxidation of
hypogene minerals such as galena in particular. Supergene processes and
formation of secondary minerals are to be expected in a desert environment where
open spaces and vugs are present in the brecciated mineralized zones. However,
the presence of Cl and Br in some of the mineralization may be a function of the
volatile nature of the Papa Hill spring system. Chlorargyrite as veins could
well be hypogene as is the encapsulation of some acanthite in quartz. The
general lack of As, Sb, Bi, Se, Te and Hg may also suggest that these normal
pathfinders for precious metals have been degassed during the epithermal events
and mineralization formation at Papa Hill. The fact that boiling zone features
and spring vents can be identified in the rocks support this suggestion.
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The intensity of silicification can be measured using a geochemical ratio such
as Ca+ Mg /Al. Aluminum may be considered an immobile element in hydrothermal
alteration processes. The Riggs Formation limestone (Ca) and dolomite (Mg) are
host rocks to the Papa Hill epithermal silica flooding and replacement events.
Addition of quartz (silica) can be used as an alteration vector geochemical
measurement. If Ca + Mg are removed or replaced by silica the Ca + Mg /Al ratio
is a low value generally less than 50, while less altered carbonates report
ratio values in the 100's (See Table "A", "B", etc).
Simplistic models for epithermal precious metal deposits include the two
categories of high sulphidation and low sulphidation deposit types. Papa Hill
does not fit either of these end- member deposit types. The presence of
significant epithermal quartz and barite is a prominent feature of Papa Hill.
Sulphides are rare. The obvious anomalous results in silver content at 4.35opt
and 344PPB gold demanded staking and further exploration at Papa Hill as the
highly anomalous precious metal data is not model dependent.
UNDERGROUND SAMPLING PAPA HILL SHAFT
A 28-foot deep shaft was developed at Papa Hill by the early 1900 prospectors of
the Silurian Hills. Naturally they were attracted to the quartz ledges and
breccia zones outcropping on Papa Hill. The shaft however was dug in a faulted
and tuffa-like zone adjacent to silica flooded ridges. This main digging trend
is approximately N10oW while underground the faults or slips exposed range in
trend from N20oW to N27oW. An approximately 6 foot long drift trending N80oE was
developed at the bottom of the shaft. It ended in a back wall of solid silica on
which slickensides are developed. The slip face of the backwall trends N27oW
with the backwall located to the east of the shaft.
Underground greater and lesser amounts of carbonate is exposed along with narrow
fault gauge and hard silica zones. Colors range from cream and buff fault gauge
to pink and
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reddish colored quartz and silica flooded rock. Some minor tuffa lenses are also
visible in the shaft wall and along faults or slips making some sampling too
dangerous to attempt. However, systematic composite chip samples were collected
from the drift walls with sledgehammer and chisel. The sample widths varied as
per color change, fault zones and degree of silicafication. The chip composites
for each sample weighed from one to two kilograms.
Results for the underground sampling of the drift at the 28-foot shaft at Papa
Hill are presented in Table "B".
Highly anomalous gold values ranging from 13PPB to 695PPB and silver values from
1.4 to 35.1 grams were reported for the 30gram sample weights analyzed by ACME
Labs.
Lead and zinc are generally highly anomalous while copper values are low.
Barium, molybdenum are also anomalous while one sample reports arsenic at
113PPM. The Ca + Mg /Al geochemical alteration ratio again depicts the
significant variability in silica addition to the carbonate rocks. It is
interesting to note that sample 45825 has both the highest gold-silver content
and highest ratio number. This is not a normal occurrence at Papa Hill where low
ratios and higher precious metal values are the norm (i.e. silica addition). The
sample is a mix of fault and breccia. This may imply that repeated fluid flow
events which were precious metal bearing used this fault conduit.
SURFACE BRECCIA DEPOSITS
Further surface sampling at Papa Hill was also conducted in conjunction with the
underground work. Surface exposures of boiling and brecciated zones are exposed
on the cliff former northwestern wedge of the Papa Hill exposure. These breccias
are over 300 feet away from the Papa Hill shaft and old timer pit samples.
Another mound of breccia is
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<PAGE>
exposed to a height of 6 to 9 feet above the present day surface of altered
carbonate and tuffa approximately 250 feet to the west of the shaft. The three
breccias were also sampled as they all exhibit strong silicification,
replacement and vuggy textures. The quartz and the brecciated clasts exhibit
wide color variations. The two breccia samples taken from obvious boiling zones
as exposed on the NW cliff face of the hill reported highly anomalous gold. The
silver values however, are much lower than those reported in Table "A"
mineralization and the underground shaft samples. One sample is highly anomalous
in molybdenum reporting 283.5 PPM. The base metal signature is also much lower
than other non-boiling zone mineralized samples reporting similar gold content.
The trace element pathfinders As, Sb, Bi, and Hg are not enriched but barium is
present. It is important to note that molybdenum as reported in samples from the
shaft, underground and in some breccia samples is highly enriched and maybe
considered a "pathfinder" element on Papa Hill (See Table "A", "B").
Compared to the boiling zone samples 45818, 45819 the prominent mound of
breccia, sample 45817, has no significant gold or silver content (see Table
"B"). This suggests that different epithermal spring events at Papa Hill were
precious metal-bearing, with variable silver to gold ratios while others were
not precious metal bearing at least at the level of exposure now sampled. The
dynamics of epithermal spring systems is often complex and highly variable if
ground water level changes due to boiling and degassing are suspected over the
extended life of the system. It is for this reason that all fluid conduit
expressions must be tested by drilling even if some portions appear to be devoid
of precious metals at the exposure level of sampling. The highly significant
silver and gold values encountered during this phase of sampling required
further systematic surface exploration. The extensive distribution of silica and
the hardness of these exposures required that drilling, blasting and sampling be
conducted during a systematic surface trenching program at the Papa Hill
discovery.
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<PAGE>
PAPA HILL PHASE ONE TRENCHING PROGRAM
Our permitted (BLM) trenching program began in mid November, 1999 and the last
data results for Papa Hill were received December 7th, 1999.
The program used a portable gas operated Ponjar rock-drill, "plugger" to drill
185 three- foot holes. A total of 19 trenches were completed on the hill using
holes spaced from 2 to 3 feet apart. Some trenches consisted of only one or two
holes to blast and test minor exposures of silica. The nineteen trenches vary in
length from 3 to 81 feet long. A total of 170 composite chip samples were
collected over three foot sample intervals. After the two to three foot wide and
deep trenches were mucked out with debris piled on the trenches edge, the
composite chips were collected from the floor and walls of the trench over
three- foot long sequential sample intervals.
Aluminum sample tag numbers and measured distance were systematically positioned
and nailed along the course of each trench for future reference and mapping.
Each sample weighed approximately 2 kilograms. Sample batches were shipped to
ACME Labs in Vancouver.
All of our geochemical analysis utilized a new multi-element geochemical mass
spectrometer package entitled. "Group IF-MS" as offered by ACME. A 30-gram
sample weight for Aqua Regia digestion was selected. Gold and silver results as
well as all of the rest of the reported 34 element concentrations are reported
for a 30-gram sample weight. Those samples containing greater than 99999 PPM Ag
were sub-sampled and a new 30- gram split was fire assayed for silver at ACME
Labs.
These FA-silver values are reported in ounces per tonne because the ICP-MS
method upper-reporting limit is 3opt. Earlier in the Owl canyon Mineral Property
Program samples
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<PAGE>
were treated by ACME's Group IF-MS and splits were also sent to Activation
Laboratories in Ancaster Ontario for Neutron Activation Analysis (NAA). Results
from precious metals and comparative trace elements were checked for NAA and
ICP-MS methodology. Both data sets were comparable in precision and accuracy but
the ICP-MS package provided lower detection limits and included all base metals
and mercury data. ACME Labs was selected to carry out the sample preparation and
geochemical assay and analytical work. To date all unused and prepared sample
pulps are stored at ACME Labs.
ACME Analytical Laboratories LTD. of Vancouver British Columbia has provided
Can- Cal Resources LTD. with "Geochemical Analysis Certificates". All
certificates are signed by Mr. Clarence Leong as a certified B.C. Assayer. ACME
is an ISO9002 accredited company. Each sample batch has certified standard
reference material inserted by ACME into the sample sequence at a rate of one
"control" per 30 - 33 samples. A random "repeat" check of a second split of
Can-Cal Resources sample material is routinely run at a rate of one repeat in a
sequence of twenty samples. When silver content required Fire Assay methods one
of the checks was always repeated with a second Fire Assay for silver 30-gram
split.
Precision and accuracy of the ACME ICP-MS and FA data is considered to be
excellent. The trenching program at Papa Hill was designed as a first phase of
surface exploration to establish the tenor of precious metal mineralization and
its distribution and trends. Much of the exposure at Papa Hill exhibits black
rinds, ridges and knobs of silica in the host Riggs carbonates. Areas which
appeared at surface to have the most intense amounts of silica added (i.e.
ridges and ledges) or to have significant networks of boxwork, black rinds on
the carbonate differentially weathered surface were targets for shallow
trenching. As discussed previously Papa Hill has a terraced, step down
appearance. This manifests itself in elevation drops of 4 to 6 feet at the edges
of ledges or terraces. Some of the terrace
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<PAGE>
formation is a function of the stratigraphic interbeds of the carbonates and
silica introduction along the beds.
Some of the trenches were structured to sample successively lower levels in
elevation of the terraces and/or stratigraphy. Both tuffa-rich and silica-rich
zones or strata were encountered during drilling and exposed by trenching. No
attempt was made to further drill deeper through a tuffa zone into underlying
rocks.
All trenches were surveyed from the established grid on Papa Hill where BL and 0
+ 00 lines run E-W and N-S respectively. Grid points are located in the field at
50 x 50 foot stations.
Mineralization in the trenches can be visually located by grey to black
fine-grained minerals disseminated in tiny vugs or more commonly on fractured
seams or surfaces. Often apple green to rare blue stain accompanies these grey
or black minerals. Rare occurrences of fresh galena were also noted. Pyrite is
notably absent. White barite which is sometimes chalky in texture occurs as
blotches or as ragged blades. Blasting improved the recognition of silica
addition which is near massive in some areas. Hydrothermal brecciation is
significant and some would appear to have been related to boiling i.e. open
coarse textures and vugs. The relationship of brecciation to areas and trends of
more massive silicification is not clear nor is the timing of the episodic
events.
The results for the trenching program are presented in Tables 1-19. A strong
linear NNW trend for both gold and silver runs from trench 16 and 17 in the
south through to trench 11 and 12 in the north located along the cliff face.
This 350-foot long mineralization trend tracks on surface as a significant drill
target which requires testing of the precious metal system at depth.
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<PAGE>
Trench 1 reports separate 9-foot and 18-foot zones which contain 739PPB and
382PPB gold. Significant silver content across three feet were as high as 12.6
and 9.1 ounce per tonne for each respective zone. Trench three contains a 6-foot
section averaging 1362PPB gold (0.04 opt Au). Trench 5 contains a 9-foot section
averaging 500PPB gold and 3.75 opt silver. Trench 6 located 100 feet from trench
5 contains a 12-foot section with an average grade of 1242PPB gold. Trench eight
reports an average of 185PPB gold over a trench length of 15 feet. Trench 9 has
one 9-foot interval averaging 395PPB gold and another averaging 164PPB gold.
Trench 10 has the highest interval sampled at Papa Hill namely, a 5119PPB gold
and 11.52 opt silver zone. Trench 11 at the cliff face reports a 9-foot section
averaging 902PPB gold and 3.82 opt silver. This northern portion of the
mineralization trend is 350 feet from the most southern trench 17, which
reported a 3-foot interval of 1489PPB gold and 2.98 opt silver. Trench 18 is
located on the eastern edge of the cliff approximately 175 feet east of the
western edge of trench number 12 and 12C. The west end of trench 12 confirmed
the early results found in the boiling zone breccia area in its gold and silver
ratio. Trench 12 from 63 feet to 72 feet and trench 12C for a six foot sample
interval (all breccia samples) average 280PPB gold and just 1.2PPM silver.
Trench 18 across a six foot sample length reported 128PPB gold and 14.5PPM
silver. This area of Papa Hill and the cliff ledge should have more trenching
completed as the black silica rind zone is well developed. Trench 13 west and
downslope from Barite Hill sample (45951) contains anomalous silver as compared
to the Barite Hill which contains 227PPB gold and 10.3 grams of silver. Trench
16 approximately 60 feet south of the 28 foot deep shaft was only a short three
foot sample interval which contains 3.22 opt silver and 816PPB gold.
It can be seen from examining the silver data for the 19 trenches that silver
gives a wide plume or halo of 4 to 5 grams silver surrounding the most anomalous
gold and silver values. The Riggs limestone and dolomite appear to be excellent
host rocks to the Papa Hill precious metal epithermal system. The overall wide
distribution of gold and silver enrichment (50PPB and 5000PPM respectively) at
the surface is a significant indication of
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<PAGE>
the strength of the system. It is of interest that pathfinders such arsenic and
antimony rarely exceed 30PPM and 10PPM respectively. Some spotty mercury values
range between 1 and 4PPM in various parts of the system. High molybdenum values
(100PPM or more) also behave erratically in their distribution at the surface.
Geochemical values greater than 500PPM, 1000PPM and 3000PPM may be considered
enriched and anomalous for Cu, Pb and Zn respectively. It is obvious from the
surface trenching data that "so-called toxic" elements and concentrations of
these elements are not a concern at Papa Hill.
The style of alteration and type of host rocks (carbonate) at Papa Hill also do
not usually cause crushing, milling treatment and tailings problems if a
commercial deposit is proven to be present at depth.
CONCLUSIONS AND RECOMMENDATIONS
The Papa Hill discovery and the recent positive results from Phase One surface
exploration has developed the project into a significant drill target. The
accessibility, potential ease of permitting and topography of this system are
expected to be major factors in support of a cost effective drilling program at
Papa Hill. A six-hole 700-meter program is recommended at a projected total cost
of $100.00 US per meter. Minor deepening of some portions of the trenches and
some extensions of trenches near trench 16, 17 and 18 may also be a valid
exploration expense.
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<PAGE>
<TABLE>
<CAPTION>
TABLE "A" - PAPA HILL
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
FA
SAMPLE SAMPLE Au Ag Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER DESCRIPTION ppb ppm opt ppm ppm ppm ppm ppm ppm ppm ppm / Al
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45789 Shaft, dump, 3 143.0 23.6 0.75 2177 2238 649 56 4.2 2.1 114.7 2489 17
composite
45789 repeat grabs, fresh, green 132.8 23.2 0.75 2138 2217 650 55 4.2 2.5 114.3 2487 17
stain,
silica intense
- ------------------------------------------------------------------------------------------------------------------------------------
45790 Old timers pit chips, 344.4 99.9 4.35 4946 4150 813 37 12.4 1.3 16.4 2444 68
fresh, green stain
silica intense
- ------------------------------------------------------------------------------------------------------------------------------------
45791 Surface black rind 8.0 1.8 369 529 77 11 1.0 0.2 9.5 2083 120
silica on red dolomite
surface grab
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
93
<PAGE>
<TABLE>
<CAPTION>
TABLE "B" - PAPA HILL
UNDERGROUND AND BRECCIA SURFACE SAMPLES
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INCHES DESCRIPTION ppb ppm ppm ppm ppm ppm ppm ppm ppm ppm / Al
- -----------------------------------------------------------------------------------------------------------------------------------
28 FOOT SHAFT - SOUTHWALL DRIFT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45825 22 Qtz Breccia fault 695 35.1 755 3605 151 6 12.1 1.9 45.9 3326 451
45826 10 Gauge, cream, alteration 118 4.8 755 781 112 113 2.6 0.3 4.2 682 1
45827 35 Qtz Breccia 88 13.8 889 881 62 12 4.5 1.2 21.5 3048 68
45828 12 Black-brown slip fault 185 8.6 1419 2829 147 16 3.8 0.1 31.2 1796 43
45829 42 Pink-brown limestone hard 289 29.3 1429 3346 148 12 6.4 0.3 35.3 3144 107
45830 42 Pink-black limestone 13 1.4 177 163 11 8 0.4 0.0 3.6 781 362
<CAPTION>
BACKWALL DRIFT
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45831 14 East of slip fault 69 8.0 249 359 74 2 4.8 0.2 34.3 1544 16
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
NORTHWALL DRIFT
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45832 14 Pocket 19 2.5 325 1137 55 5 0.8 0.0 3.3 2022 243
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SURFACE BRECCIA DEPOSITS
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45817 West Breccia mound, chips 7 0.2 433 418 17 4 1.8 0.1 20.5 1618 8
grey-white vugs
45818 NW boiling Breccia, 556 1.1 941 49 62 4 16.0 0.1 283.5 3232 8
grey-white vugs
45819 NW boiling Breccia, 412 1.0 143 43 16 3 2.6 0 17.5 2282 10
pink-red vugs
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
94
<PAGE>
<TABLE>
<CAPTION>
TABLE ONE
PAPA HILL - TRENCH 1
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
FA
SAMPLE SAMPLE Au Ag Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb opt ppm ppm ppm ppm ppm ppm ppm ppm / Al
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45509 0 - 03 feet 37.5 7115 270.93 236.9 26.60 6.7 1.07 0.08 3.89 2897.1 274
45510 03 - 06 feet 22.6 5219 82.57 233.3 16.89 4.6 0.35 0.04 2.27 542.5 218
45511 06 - 09 feet 1020.7 99999 4.74 1232.40 189.1 576.68 24.1 46.31 0.41 22.38 2381.0 31
45512 09 - 12 feet 326.2 65945 1127.03 1767.8 229.92 14.1 7.89 0.10 18.41 1426.1 13
45513 12 - 15 feet 872.6 99999 12.66 7928.00 3515.9 724.19 45.9 25.21 0.09 52.75 2302.4 95
- -------------------------------------------------------------------------------------------------------------------------------
45514 15 - 18 feet 37.1 6232 685.05 1060.7 121.11 7.4 0.75 0.06 3.87 1398.4 120
45515 18 - 21 feet 35.2 4596 601.46 998.1 52.54 5.5 0.31 0.05 3.62 2681.3 193
45516 21 - 23 feet 221.1 67523 2121.63 2676.1 217.96 8.4 4.19 0.06 6.05 1183.9 118
45517 24 - 27 feet 409.9 99999 9.12 2391.02 4054.4 411.11 4.0 3.12 0.66 5.28 1632.9 64
45518 27 - 30 feet 235.1 80016 1381.71 5362.8 183.52 6.3 0.68 0.13 6.19 2263.8 71
- -------------------------------------------------------------------------------------------------------------------------------
45519 30 - 33 feet 572.4 99999 4.42 1903.36 1160.2 1903.36 17.2 2.62 0.11 27.47 1146.2 5
45987 33 - 36 feet 640.8 42710 550.69 247.9 154.69 72.9 1.40 0.08 7.91 1386.7 5
45521 36 - 39 feet 217.1 11927 635.30 3605.2 419.35 18.4 1.27 0.36 12.42 2896.0 19
</TABLE>
95
<PAGE>
<TABLE>
<CAPTION>
TABLE TWO
PAPA HILL - TRENCH 2
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm / Al
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45522 00 - 03 feet 27.7 6855 369.58 426.6 53.91 6.4 1.17 0.22 9.57 1534.5 253
45523 03 - 06 feet 6.5 5969 236.34 390.2 31.16 2.8 1.18 0.06 8.43 206.4 271
45524 06 - 09 feet 4.6 3669 252.50 279.4 15.21 6.6 0.96 0.03 4.73 88.2 422
45525 09 - 12 feet 13.5 6657 223.55 292.5 15.31 8.6 0.54 0.03 4.59 2030.1 400
45526 12 - 15 feet 11.7 2059 288.74 248.9 13.66 8.9 0.80 0.05 5.81 3046.9 610
- -----------------------------------------------------------------------------------------------------------------------------------
45527 15 - 18 feet 27.4 6480 5087.34 566.3 49.02 10.1 2.11 0.58 5.81 1687.8 216
45528 18 - 21 feet 95.2 13029 2430.68 645.1 107.23 25.6 3.64 0.75 14.08 1106.3 274
45529 21 - 24 feet 71.1 7206 1232.03 817.7 271.74 23.2 5.18 0.53 8.58 3272.7 135
45530 24 - 27 feet 64.6 9869 1207.66 543.9 177.08 18.2 3.24 0.32 13.02 3115.6 182
45531 27 - 30 feet 66.7 1818 315.08 337.1 37.91 21.6 1.20 0.25 5.96 1640.0 347
- -----------------------------------------------------------------------------------------------------------------------------------
45532 30 - 35 feet 102.3 5170 726.14 593.6 82.50 11.7 4.61 0.43 4.91 2985.3 326
</TABLE>
96
<PAGE>
<TABLE>
<CAPTION>
TABLE THREE
PAPA HILL - TRENCH 3
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm / Al
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45539 00 - 03 feet 1305.2 34200 1544.49 2347.6 1105.13 18.8 14.75 0.20 95.56 1420.7 31
45540 03 - 06 feet 1419.5 20344 1706.71 1422.8 183.65 12.0 6.55 0.14 56.58 1158.7 144
45541 06 - 09 feet 247.0 14302 709.63 781.5 139.93 15.9 5.02 0.21 33.17 2819.4 316
45542 09 - 12 feet 63.4 10487 824.84 1868.3 153.76 23.1 4.54 0.53 45.55 2948.8 269
45543 12 - 15 feet 33.2 18298 1159.59 3585.7 490.62 19.9 10.27 0.62 34.49 3659.6 55
- ---------------------------------------------------------------------------------------------------------------------------------
45544 15 - 18 feet 72.0 20274 1112.59 1522.4 652.88 12.1 8.65 0.39 34.58 3351.1 11
45545 18 - 21 feet 252.0 18850 826.47 1930.0 731.33 9.2 6.49 0.41 12.54 3247.5 57
45546 21 - 24 feet 25.5 10485 1037.31 837.7 312.69 10.7 2.98 0.25 10.20 944.0 113
45547 24 - 27 feet 11.1 3189 369.35 553.4 115.61 11.0 1.23 0.24 9.59 280.2 193
45548 27 - 30 feet 10.7 2793 296.10 503.0 65.56 10.1 1.63 0.36 5.02 238.5 175
- ---------------------------------------------------------------------------------------------------------------------------------
45549 30 - 33 feet 42.5 2976 338.14 403.6 77.65 13.3 1.42 0.40 8.00 209.3 149
45550 33 - 37 feet 3.4 1292 149.75 273.3 28.26 6.3 0.84 0.11 3.68 556.2 319
</TABLE>
97
<PAGE>
<TABLE>
<CAPTION>
TABLE FOUR
PAPA HILL - TRENCH 4
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm / Al
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45551 00 - 03 feet <.2 421 141.47 161.2 8.41 3.8 0.38 0.16 5.20 211.7 468
45552 03 - 06 feet 3.4 695 139.77 139.4 12.60 3.5 0.51 0.17 3.83 1128.9 312
45553 06 - 09 feet 17.4 1198 233.95 318.5 31.90 7.8 1.14 0.27 7.49 742.0 52
45554 09 - 12 feet 38.6 1100 218.09 232.0 17.63 10.2 0.85 0.10 4.58 331.5 30
45555 12 - 15 feet 41.3 1422 239.35 233.8 27.95 8.9 0.96 0.10 5.58 344.4 37
- ----------------------------------------------------------------------------------------------------------------------------------
45556 15 - 18 feet 56.3 1120 143.21 115.8 12.86 7.8 0.74 0.05 2.78 348.8 44
45557 18 - 21 feet 338.4 1618 191.19 260.1 56.81 12.0 1.56 0.10 18.33 906.8 69
45558 21 - 24 feet 70.8 2485 362.61 224.8 48.42 8.7 3.35 0.21 9.16 2702.0 63
45559 24 - 27 feet 77.7 2800 505.52 344.4 74.30 10.6 3.85 0.27 10.43 606.5 57
45560 27 - 30 feet 43.5 3080 715.90 569.6 146.50 9.8 6.92 0.25 7.14 1281.6 171
- ----------------------------------------------------------------------------------------------------------------------------------
45561 30 - 33 feet 26.1 3377 469.05 614.5 72.54 9.2 3.41 0.30 10.70 1697.6 143
45562 33 - 36 feet 90.4 7331 488.12 1329.4 103.68 11.6 9.26 0.24 11.87 2567.7 50
45563 36 - 39 feet 29.6 3126 478.41 687.4 144.65 7.7 5.75 0.22 6.22 2831.2 95
45564 39 - 42 feet 28.3 3863 493.34 706.0 143.50 8.9 10.11 0.16 5.13 3295.7 155
45565 42 - 45 feet 67.5 7870 597.35 990.0 129.42 12.9 12.11 0.16 10.06 3512.1 153
- ----------------------------------------------------------------------------------------------------------------------------------
45566 45 - 48 feet 8.5 1450 114.22 174.8 18.29 5.8 0.80 0.07 4.82 883.9 317
45567 48 - 51 feet 20.7 3375 321.45 748.5 82.75 6.1 2.50 0.19 13.42 3499.1 271
</TABLE>
98
<PAGE>
<TABLE>
<CAPTION>
TABLE FIVE
PAPA HILL - TRENCH 5
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
FA
SAMPLE SAMPLE Au Ag Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb opt ppm ppm ppm ppm ppm ppm ppm ppm /Al
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45569 00 - 03 feet 313.5 99999 3.41 1730.83 11161.9 460.21 11.2 5.34 0.10 50.83 1150.0 96
45570 03 - 06 feet 353.7 58657 1.88 1086.66 3954.5 222.43 13.4 7.36 0.07 53.3 1175.7 84
45571 06 - 09 feet 835.3 99999 5.97 2264.64 5550.8 785.4 25.9 30.71 0.06 140.11 1507.7 21
</TABLE>
99
<PAGE>
<TABLE>
<CAPTION>
TABLE SIX
PAPA HILL - TRENCH 6
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm / Al
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45572 00 - 03 feet 440.9 87700 2334.69 2512.5 396.73 21.4 14.39 0.08 16.97 3161.8 75
45573 03 - 06 feet 2005.9 52333 515.45 553.3 167.42 55.1 5.80 0.08 31.93 2420.3 27
45574 06 - 09 feet 2031.7 80917 589.09 502.6 100.58 38.2 8.60 0.08 103.59 1021.8 8
45575 09 - 12 feet 492.2 29985 350.25 833.5 49.02 12.6 4.68 0.04 31.51 2789.6 90
45576 12 - 15 feet 79.3 19052 637.73 1081.5 53.83 11.2 2.29 0.04 11.73 1327.2 214
- -----------------------------------------------------------------------------------------------------------------------------------
45577 15 - 18 feet 176.5 16931 634.04 2033.1 41.74 15.5 1.95 0.04 21.89 2417.6 217
45578 18 - 21 feet 8.9 1730 181.80 108.7 7.63 4.7 1.00 0.16 9.14 648.1 196
45579 21 - 24 feet 42.6 2315 213.36 133.3 11.89 6.2 0.99 0.09 4.64 566.0 76
45580 24 - 27 feet 45.0 3733 246.88 370.6 15.63 7.1 1.61 0.06 8.66 141.5 66
45581 27 - 30 feet 135.7 11370 376.24 2105.6 48.86 11.3 4.11 0.06 7.62 2698.9 77
- -----------------------------------------------------------------------------------------------------------------------------------
45582 30 - 33 feet 71.1 6309 257.60 701.9 43.84 5.5 5.18 0.04 14.09 480.4 478
45583 33 - 36 feet 56.7 3987 549.89 1215.0 58.37 8.3 5.60 0.08 8.46 1695.7 163
45629 00 - 03 feet 43.5 11632 535.80 1689.6 25.17 6.5 0.89 0.05 6.22 2346.8 140
</TABLE>
100
<PAGE>
<TABLE>
<CAPTION>
TABLE SEVEN
PAPA HILL - TRENCH 7
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm / Al
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45584 00 - 03 feet 10.02 1914 263.37 579.2 19.74 5.1 1.12 0.04 8.11 1628.6 342
45585 03 - 06 feet 38.60 1020 204.78 255.8 15.77 10.8 0.73 0.04 7.30 1200.0 146
45586 06 - 09 feet 26.50 2186 102.52 79.6 12.91 4.0 0.63 0.08 4.75 820.0 192
45587 09 - 12 feet 37.50 3207 135.08 191.7 16.91 5.6 0.91 0.11 3.97 376.7 143
45588 12 - 15 feet 14.70 3411 237.60 290.5 32.14 5.8 1.63 0.08 6.20 667.4 325
- -----------------------------------------------------------------------------------------------------------------------------------
45589 15 - 18 feet 3.20 1794 168.07 150.3 18.65 3.1 0.89 0.09 3.73 352.3 446
45590 18 - 21 feet 22.40 2212 417.61 298.4 35.79 6.2 5.70 0.04 5.85 734.4 490
45591 21 - 24 feet 11.90 2714 62.32 108.4 10.66 3.3 0.52 0.03 2.51 245.4 508
45592 24 - 28 feet 7.10 3372 137.14 243.9 17.77 4.5 0.82 0.03 4.13 1615.9 517
</TABLE>
101
<PAGE>
<TABLE>
<CAPTION>
TABLE EIGHT
PAPA HILL - TRENCH 8
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm / Al
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45593 00 - 03 feet 149.4 10376 451.91 519.2 55.52 10.4 15.89 0.05 5.22 2163.3 39
45594 03 - 06 feet 234.9 11919 558.76 1104.3 88.80 15.3 5.79 0.05 8.52 2896.0 36
45595 06 - 09 feet 122.9 7482 337.42 955.1 61.99 9.7 3.29 0.06 3.75 2864.3 79
45596 09 - 12 feet 171.7 4692 909.35 813.1 117.89 14.7 7.51 0.09 5.19 1501.9 91
45597 12 - 15 feet 247.3 9220 550.67 823.1 112.82 11.2 5.23 0.20 4.81 2309.1 53
- ----------------------------------------------------------------------------------------------------------------------------------
45598 15 - 18 feet 50.8 6027 439.63 558.0 65.33 12.3 2.35 0.07 6.16 892.2 130
45599 18 - 21 feet 54.9 1698 204.60 346.9 28.93 11.8 0.57 0.07 3.36 881.8 110
45600 21 - 24 feet 29.5 1559 276.43 430.4 27.40 8.7 0.75 0.03 4.97 684.0 148
</TABLE>
102
<PAGE>
<TABLE>
<CAPTION>
TABLE NINE
PAPA HILL - TRENCH 9
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm / Al
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45601 00 - 03 feet 52.9 5057 291.68 639.1 56.20 10.0 1.67 0.18 6.94 753.3 208
45602 03 - 06 feet 80.5 3449 131.39 190.9 19.24 7.0 1.71 0.11 2.91 754.6 212
45603 06 - 09 feet 17.8 12640 369.28 1570.3 178.34 10.1 7.13 0.08 12.11 2087.6 273
45604 09 - 12 feet 45.7 2370 95.65 109.0 11.74 8.9 0.57 0.07 2.35 598.0 62
45605 12 - 15 feet 18.8 3528 99.15 190.8 19.06 6.2 0.47 0.07 8.56 628.6 100
- ------------------------------------------ ----------------------------------------------------------------------------------------
45606 15 - 18 feet 536.2 5692 624.96 496.8 75.95 24.8 1.91 0.08 12.43 1718.2 37
45607 18 - 21 feet 208.5 8054 496.30 869.2 115.49 12.4 2.44 0.06 7.72 2604.5 65
45608 21 - 24 feet 442.8 8907 859.10 621.5 165.41 20.6 3.79 0.06 11.44 2121.0 55
45609 24 - 27 feet 24.9 5324 399.10 702.2 73.87 6.3 2.10 0.12 13.51 600.9 190
45610 27 - 30 feet 29.3 4508 201.68 440.5 37.52 5.7 2.66 0.09 8.78 670.4 65
- -----------------------------------------------------------------------------------------------------------------------------------
45611 30 - 33 feet 29.1 4193 316.69 283.5 56.43 6.9 2.77 0.09 5.98 986.5 70
45612 33 - 36 feet 31.2 4941 309.82 250.5 69.35 6.5 1.75 0.08 10.12 2688.0 69
45613 36 - 39 feet 49.9 7289 378.97 321.0 98.10 7.5 2.38 0.06 6.20 854.3 50
45614 39 - 42 feet 134.1 24410 711.43 617.3 80.01 13.1 8.61 0.07 50.73 3097.2 46
45615 42 - 45 feet 126.1 7330 422.38 439.8 72.54 12.1 4.06 0.08 7.59 600.8 54
- -----------------------------------------------------------------------------------------------------------------------------------
45616 45 - 48 feet 233.7 5879 643.13 618.5 115.52 33.3 10.93 0.14 15.44 471.7 30
45617 48 - 51 feet 84.0 5116 690.85 728.0 142.98 21.5 5.08 0.09 4.85 325.1 24
45618 51 - 54 feet 24.8 3092 341.19 447.6 35.89 8.3 0.93 0.05 6.06 335.8 68
45619 54 - 57 feet 47.3 2505 239.98 224.4 25.24 8.0 1.31 0.08 2.81 602.4 54
45620 57 - 60 feet 80.5 1718 219.24 228.6 23.33 10.4 0.76 0.13 3.56 957.3 49
- -----------------------------------------------------------------------------------------------------------------------------------
45621 60 - 63 feet 65.0 1129 208.06 185.4 29.67 11.3 0.96 0.76 3.19 1495.9 30
45622 63 - 66 feet 150.6 1034 157.72 243.3 28.43 14.2 1.04 0.22 6.77 1922.0 34
45623 66 - 69 feet 78.2 1180 266.22 357.5 49.40 16.2 1.41 0.28 10.47 1392.4 101
45624 69 - 72 feet 41.0 981 234.10 358.3 40.44 8.6 1.38 0.54 8.94 777.8 153
45625 72 - 75 feet 52.9 1613 227.56 434.8 42.98 9.0 1.58 0.26 6.52 900.7 123
- -----------------------------------------------------------------------------------------------------------------------------------
45626 63.2 1239 213.24 376.3 30.09 11.5 1.01 0.22 6.98 1213.3 99
45627 58.9 5706 225.28 615.1 55.26 12.3 1.83 0.10 8.31 1903.8 67
45628 78 - 81 feet 33.0 15903 244.69 540.9 57.01 6.6 2.11 0.12 10.98 1905.2 298
</TABLE>
103
<PAGE>
<TABLE>
<CAPTION>
TABLE TEN
PAPA HILL - TRENCH 10
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
FA
SAMPLE SAMPLE Au Ag Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb opt ppm ppm ppm ppm ppm ppm ppm ppm /Al
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45630 0 - 03 feet 5119.1 99999 11.52 10999.54 3295.7 2595.88 160.6 107.07 0.07 242.23 2892.3 115
45631 03 - 06 feet 72.5 2088 0.06 186.97 148.5 24.64 7.8 1.28 0.03 4.4 497 687
45632 06 - 09 feet 382.6 99999 3.92 1778.38 2398.6 207.15 27.7 15.78 0.06 20.29 1349.8 100
</TABLE>
104
<PAGE>
<TABLE>
<CAPTION>
TABLE ELEVEN
PAPA HILL - TRENCH 11
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
FA
SAMPLE SAMPLE Au Ag Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb opt ppm ppm ppm ppm ppm ppm ppm ppm /Al
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45633 0 - 03 feet 1160.7 91631 1013.94 5221.2 309.19 16.4 24.10 0.10 22.89 2772.8 109
45634 1155.7 99999 7.46 2706.52 6761.4 662.67 33.9 88.99 0.27 38.58 2630.2 41
45635 0 - 03 feet 392.9 33351 708.72 4639.6 125.88 13.9 8.98 0.13 6.91 3484.4 254
45636 03 - 06 feet 101.2 17286 478.50 1572.0 85.02 15.0 3.95 0.11 4.60 3704.1 269
</TABLE>
105
<PAGE>
<TABLE>
<CAPTION>
TABLE TWELVE
PAPA HILL - TRENCH 12
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm / Al
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45637 00 - 03 feet 98.9 11520 747.99 2187.0 100.93 12.6 3.64 0.15 4.85 3144.8 75
45638 03 - 06 feet 39.0 9384 516.82 1298.0 53.76 22.2 8.80 0.06 5.11 2127.2 75
45639 06 - 09 feet 123.0 33793 893.72 1016.1 100.52 15.0 2.66 0.23 8.02 1387.0 55
45640 09 - 12 feet 157.1 16679 788.29 1214.5 89.90 14.5 12.56 0.08 2.74 3210.2 22
45641 12 - 15 feet 122.2 49521 908.64 1734.1 124.71 7.9 4.57 0.21 13.76 3467.2 109
- ----------------------------------------------------------------------------------------------------------------------------------
45642 15 - 18 feet 126.2 33609 907.75 1694.0 113.36 12.6 5.49 0.36 15.56 3483.4 58
45647 24 - 27 feet 6.2 6874 543.57 561.7 30.24 6.1 0.78 0.07 5.23 2034.6 117
45648 27 - 30 feet 37.3 6523 401.02 345.7 13.24 12.3 2.65 0.06 4.34 951.4 378
45649 30 - 33 feet 43.8 5029 365.03 1039.8 149.17 7.6 2.81 0.07 4.56 1466.7 30
45650 33 - 36 feet 163.0 5363 1184.23 653.8 99.60 7.7 9.00 0.08 7.06 2742.4 16
- ----------------------------------------------------------------------------------------------------------------------------------
45960 36 - 39 feet 370.9 4984 1366.43 3247.7 287.71 8.7 5.68 0.10 9.16 3560.4 38
45961 39 - 42 feet 59.1 5782 341.72 1897.3 48.22 8.4 4.47 0.10 3.26 3658.8 110
45962 42 - 45 feet 12.6 4015 120.82 208.5 28.00 10.5 0.35 0.07 2.49 364.5 377
45963 45 - 48 feet 17.6 1748 323.04 227.8 45.45 6.7 4.42 0.07 2.93 3209.4 155
45964 48 - 51 feet 113.2 12449 2642.54 1920.3 26.42 8.0 1.09 0.13 13.04 3391.7 649
- ----------------------------------------------------------------------------------------------------------------------------------
45965 51 - 54 feet 78.1 1191 177.49 112.0 26.09 8.2 1.82 0.07 3.73 1239.8 357
56966 54 - 57 feet 41.6 1109 179.41 104.4 37.09 6.3 2.05 0.04 4.13 722.9 218
45967 57 - 60 feet 4.0 445 121.80 121.8 12.93 2.8 0.68 0.09 1.74 342.6 750
45968 60 - 63 feet 6.2 781 68.83 79.1 5.09 3.7 0.36 0.07 2.62 365.9 498
45969 63 - 66 feet 364.6 806 99.03 76.2 14.14 3.2 2.66 0.05 3.50 1834.8 263
- ----------------------------------------------------------------------------------------------------------------------------------
45970 66 - 69 feet 204.3 530 171.44 199.5 33.65 4.2 2.24 0.04 3.83 2674.6 135
45971 69 - 72 feet 366.5 2346 213.17 253.9 45.53 5.3 2.27 0.02 3.98 3327.5 127
</TABLE>
106
<PAGE>
<TABLE>
<CAPTION>
TABLE TWELVE - A
PAPA HILL - TRENCH 12A
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
- ----------------------------------------------------------------------------------------------------------------------------------
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm /Al
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45643 0 - 03 feet 32.8 9668 443.37 610.8 27.77 11.4 1.12 0.10 5.82 3685.5 388
45644 03 - 06 feet 45.7 16302 584.55 1277.9 60.36 9.2 3.68 0.09 3.91 3156.1 110
45645 06 - 09 feet 192.9 50606 1797.34 2178.9 156.85 9.6 4.32 0.18 25.50 986.9 74
45646 09 - 12 feet 53 5251 426.73 990.6 40.88 14.3 3.97 0.32 3.85 1651.8 23
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
107
<PAGE>
<TABLE>
<CAPTION>
TABLE TWELVE - B
PAPA HILL - TRENCH 12B
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
- -----------------------------------------------------------------------------------------------------------------------------------
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm /Al
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45974 0 - 03 feet 127.0 21354 364.64 540.6 39.37 17.0 1.21 0.08 6.49 546.6 489
45975 03 - 06 feet 59.2 23939 1021.98 1691.6 71.99 4.3 1.98 0.07 4.22 3179.7 243
45976 06 - 09 feet 3.2 1575 387.02 586.3 8.27 4.2 0.37 <.02 2.60 3891.1 259
45977 09 - 12 feet 3.1 3350 223.19 852.2 72.34 7.7 1.24 1.05 3.41 2318.3 441
45978 12 - 15 feet 8.5 754 673.15 589.4 25.80 12.2 0.61 0.30 4.29 494.9 224
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
108
<PAGE>
<TABLE>
<CAPTION>
TABLE TWELVE - C
PAPA HILL - TRENCH 12C
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
- ----------------------------------------------------------------------------------------------------------------------------------
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm /Al
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45972 0 - 03 feet 227.5 991 271.13 203.2 53.16 4.8 2.75 0.04 9.92 3569.6 131
45973 03 - 06 feet 243.7 1307 413.46 461.3 51.64 4.8 4.97 0.04 23.71 3043.2 167
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
109
<PAGE>
<TABLE>
<CAPTION>
TABLE THIRTEEN
PAPA HILL - TRENCH 13
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
- -----------------------------------------------------------------------------------------------------------------------------------
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm /Al
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45952 00 - 03 feet 37.3 3364 1457.96 960.7 182.53 17.7 4.53 0.90 8.60 3462.5 437
45953 06 - 09 feet 52.3 5446 800.34 1034.2 169.49 14.0 13.46 0.25 3.93 3772.5 175
45954 09 - 12 feet 14.2 3506 1229.86 530.5 51.49 9.3 1.32 0.51 3.87 3961.5 370
45955 12 - 15 feet 7.2 5610 1463.41 185.3 21.87 7.8 0.67 2.11 4.52 4108.3 666
45956 15 - 18 feet 20.6 4067 1426.41 155.0 16.48 8.1 0.95 0.18 2.46 4009.9 140
- -----------------------------------------------------------------------------------------------------------------------------------
45957 18 - 21 feet 20.0 2629 1124.08 107.4 13.15 13.1 0.76 0.34 4.24 3840.7 152
45958 21 - 24 feet 14.6 3071 1691.91 254.3 75.06 9.7 0.70 0.35 5.31 3538.3 141
</TABLE>
110
<PAGE>
<TABLE>
<CAPTION>
TABLE FOURTEEN
PAPA HILL - TRENCH 14
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
- -----------------------------------------------------------------------------------------------------------------------------
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm /Al
- ------------ ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45979 00 - 03 feet 31.3 295 99.49 101.0 10.18 12.4 0.72 0.11 4.59 2341.9 127
45980 03 - 06 feet <.2 118 15.27 25.2 1.90 2.0 0.19 0.03 2.52 144.1 666
</TABLE>
111
<PAGE>
<TABLE>
<CAPTION>
TABLE FIFTEEN
PAPA HILL - TRENCH 15
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
- ----------------------------------------------------------------------------------------------------------------------------------
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm /Al
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45981 0.7 251 77.97 44.5 3.24 1.2 0.41 0.05 2.29 3475.7 1315
</TABLE>
112
<PAGE>
<TABLE>
<CAPTION>
TABLE SIXTEEN
PAPA HILL - TRENCH 16
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
- ---------------------------------------------------------------------------------------------------------------------------------
FA
SAMPLE SAMPLE Au Ag Ag Pb Zn Cu As Sb Bi Mo Ba
NUMBER INTERVAL ppb ppb opt ppm ppm ppm ppm ppm ppm ppm ppm
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45982 0 - 3 feet 816.9 99999 3.22 2548.2 4732.4 363.8 6.4 4.68 0.08 40.32 3248.4
</TABLE>
113
<PAGE>
<TABLE>
<CAPTION>
TABLE SEVENTEEN
PAPA HILL - TRENCH 17
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
- ----------------------------------------------------------------------------------------------------------------------------------
FA
SAMPLE SAMPLE Au Ag Ag Pb Zn Cu As Sb Bi Mo Ba
NUMBER INTERVAL ppb ppb opt ppm ppm ppm ppm ppm ppm ppm ppm
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45983 0 - 3 feet 1489.6 98670 2.98 8284.88 7707.9 365.71 15.3 8.24 0.05 21.81 3064.6
45984 27.0 1354 160.82 286.6 19.23 6.2 1.61 0.05 4.42 986.4
</TABLE>
114
<PAGE>
<TABLE>
<CAPTION>
TABLE EIGHTEEN
PAPA HILL - TRENCH 18
ACME LABORATORY SELECTED DATA
(30g ICP-MS Aqua Regia Method)
- ----------------------------------------------------------------------------------------------------------------------------------
SAMPLE SAMPLE Au Ag Pb Zn Cu As Sb Bi Mo Ba Ca+Mg
NUMBER INTERVAL ppb ppb ppm ppm ppm ppm ppm ppm ppm ppm /Al
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45985 0 - 6 feet 128.2 14524 871.07 1113.3 129.14 15 9.18 0.3 7.85 2872.7 77
</TABLE>
115
<PAGE>
REFERENCES
1982 Ely, Marion, II; :General Resource Map: San Bernardino General Plan,"
Section 1, Chapter 2, p. 24 - 27
1988 Fife, Donald L. and Brown, Arthur R.; "Review of the Geology and
Mineral Resources of the Silurian Hills: A Model for Mineralization."
In Gregory, Jennifer I, and Baldwin, E. Joan, Eds., Geology of the
Death Valley Region: South Coast Geological Society Annual Field Trip
Guidebook #16, p. 346 - 364.
1954 Kupfer, H. Donald; "Geology of the Silurian Hills, San Bernardino
County." Division of Mines Bulletin 170, Geology of Southern
California,. Map Sheet No. 19.
1980 Marcos, S.M.; "An Evaluation of the Mineral Resources of the Halloran
G-E-M Resource Area": U.S. Bureau of Land Management, Unpublished
Report, Riverside, California
1921 Tucker, W.B., "San Bernardino County", in Mining in California during
1920," California State Mineral Bureau Report 17, of the State
Mineralogist p. 333-374.
1981 Vredenburgh, L.M., Shumway, G and Hartill, R.D., "Desert Fever: An
Overview of Mining in the California Desert", Living West Press, Canoga
Park, California.
1980 Weber, F.H. Jr., "Calico Silver District San Bernardino County,
California," in Fife, D.L. and Brown, A.R., eds., Geology and Mineral
Wealth of the California Desert, South Coast Geological Society, Santa
Ana, California, p. 339-345.
1953 Wright, L.A., Stewart, R.M., Gay, T.E., Jr. and Hazenbush, G.C.; "Mines
and Mineral Deposits of San Bernardino County, California," California
Journal Mines and Geology, vol. 49, p. 49 - 192.
116
