SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K/A
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(FEE REQUIRED)
For the fiscal year ended December 31, 1995.
Commission file number 0-10104.
LA TEKO RESOURCES LTD.
(Name of small business issuer in its charter)
PROVINCE OF BRITISH COLUMBIA, CANADA 87-0483319
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 East 2100 South, Suite 204
Salt Lake City, Utah 84115
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (801) 466-1437
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock Without Par Value
(Title of Class)
Indicate by check mark whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
---
Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in definite
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ].
As of March 20, 1996, the aggregate market price of the voting stock held
by non-affiliates was approximately $69,950,000.
As of March 20, 1996, the Company had outstanding 23,318,478 shares of its
common stock, no par value.
DOCUMENTS INCORPORATED BY REFERENCE. If the following documents are
incorporated by reference, briefly describe them and identify the part of Form
10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1)
any annual report to security holders; (2) any proxy or information statement;
and (3) any prospectus filed pursuant to rule 424(b) or (c) under the Securities
Act of 1933 ("Securities Act"): The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 31, 1990). None
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTY
GENERAL
La Teko Resources Ltd. ("La Teko Ltd." or the "Company") was formed on November
27, 1968 under the statutes of British Columbia. The registered office of the
Company is Suite 800, 889 West Pender Street, Vancouver, B.C. V6C 3B2. The head
office and principal place of business of the Company is 180 East 2100 South,
Suite 204, Salt Lake City, Utah 84115. La Teko Ltd., with its wholly-owned
operating subsidiaries, La Teko Resources, Inc., (the Nevada property-holding
entity), and Ryan Lode Mines, Inc., the Alaska operating entity, is a mining
exploration, development and production company currently focusing its efforts
on the development of gold properties in various stages of advancement.
This report contains references to both Canadian and U.S. dollar amounts. See
"ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION" for a table
setting forth the exchange rates for the past three years. Accounting records
have been accumulated in U.S. dollars since January 1, 1991. In accordance with
SFAS No. 52, "Foreign Currency Translation," Canadian dollar amounts, where
applicable, for asset acquisition, deferred exploration costs and operating
statement expenses have been converted at average rates prevailing at the time
of expenditure during the respective years involved.
TRUE NORTH PROPERTY, FAIRBANKS, ALASKA
Location, Property Description
The True North property, located approximately 17 miles northeast of Fairbanks,
Alaska, is accessed via the Steese Highway to within five miles of the site and
thereafter by graveled road for two miles and graded dirt road for three miles.
There are no nearby power lines and the Company expects that power for heap-
leach operation will be supplied by generators. The depth of the water table is
more than 300 feet, however, water from wells could supply operations. There is
no plant or equipment currently located on the True North site.
During August 1993, the Company negotiated with AMAX Gold Exploration, Inc.,
respecting an earn-in agreement on the True North mining property comprising 86
leased Alaska state mining claims aggregating 2,284 acres on the north side of
Pedro Dome. During December, 1993 and January, 1994 the Company conducted
further negotiations with AMAX to purchase the True North leases. Pursuant to a
new agreement, La Teko was obligated to spend $250,000 each year during 1994 and
1995 for development of the property. These commitments were satisfied.
Effective June 9, 1995, the Company's wholly-owned subsidiary, La Teko
Resources, Inc., holding the True North property, entered into a joint-venture
agreement with Newmont Exploration Limited ("Newmont"), for further development
of the property. As of December 31, 1995, the Company had received $3.5 million
from Newmont with an additional $2.5 million cash payment due by December 31,
1996, if Newmont continues with the project. In consideration of the initial
$2.5 million cash payment, the Company conveyed to Newmont a 65% undivided
interest in the True North property. In addition to the cash payments,
aggregating $6 million, if Newmont elects to continue development of the
project, as well as a $1 million property development requirement for 1995, it
is to provide $2 million for property maintenance and exploration and
development for 1996 and the first $18 million required to place the property
into production. Development expenses in excess of $3 million during 1995 and
1996 will be credited against the $18 million requirement for production
facilities. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION."
Newmont has advised the Company that it is planning substantial additional
exploration and development work during 1996.
After Newmont's $27 million expenditure, any additional funds required to place
the property into production are to be borne by Newmont and the Company in
proportion to their respective interests in the project. La Teko has no
obligation for funding of the True North project until Newmont has expended its
$27 million for acquisition and development of the property.
Staking activity to the west and north of the previous True North property
boundary during February 1995 added 896 acres to the block.
Since Newmont's assumption of development activities at the True North project,
it has negotiated with surrounding property owners and acquired 44 claims
comprising 1,207 acres at the south end of the True North property. These new
claims expand the True North property to 4,387 acres including 170 State of
Alaska mining claims and 4 State of Alaska prospecting sites. La Teko has
reimbursed Newmont $22,950 for its 35% participation in the newly-acquired 44
claims.
Pursuant to the True North joint venture agreement, Newmont has assumed all
royalty and lease obligations to AMAX Gold and the underlying property owners as
follows:
AMAX Gold
April 1, 1996, 1997, 1998 Greater of $250,000
or 1% NSR production
royalties; and
a 1% net smelter returns royalty thereafter with any advanced minimum
royalty payments made in excess of the 1% NSR production royalties in 1996,
1997, and 1998 credited against future 1% NSR production royalties.
Roger Cope (to be adjusted by the Implicit Price Deflator for the GNP as
published by the U.S. Bureau of Economic Analysis)
December 24, 1996 - 2000 $120,000
December 24, 2001 and each year
thereafter 150,000
These payments are to be credited against a 4% NSR royalty when the gold
price is below $500 per ounce and 5% NSR royalty when the gold price is equal to
or above $500 per ounce.
M. Dennis Shepard
January 1, 1996 $ 55,000
January 1, 1997 and each year
thereafter 65,000
These payments are to be credited against a 4% NSR royalty.
Newmont has paid the December 24, 1995 and January 1, 1996
payments to Cope and Shepard.
Newmont may terminate the joint venture at any time in its sole discretion
without further liability, in which case, it would be required to re-convey to
La Teko the 65% interest in the True North property initially acquired from La
Teko and contributed to the joint venture. Newmont will not be entitled to
reimbursement of any amounts paid to La Teko, contributed to the joint venture
or spent on the property prior to termination. Termination of the joint venture
by Newmont would not relieve it of the obligation for exploration, development
or reclamation costs incurred but not yet paid prior to the date of termination.
The Company and Newmont have discussed, very preliminarily, the concept of a
possible business transaction whereby Newmont could increase its ownership
interest and control in the True North project, acquire ownership in La Teko's
other properties or ownership in the Company. These discussions have been broad
and conceptual in nature and there is no understanding, arrangement or agreement
between the companies respecting such matters. There is no assurance that any
further discussions will occur or that any agreement whatsoever will be reached.
Geology of the True North
The True North ore reserves are contained in mica schists, amphibolites, and
eclogites of the Chatanika Terrane. This Terrane is thought to have been thrust
over the Fairbanks Schist and Cleary Sequence that crops out one mile to the
southeast of the mineralization. Pedro Dome is underlain by the Pedro Dome
intrusion, a Cretaceous granodiorite, which is locally altered and mineralized.
The most favorable host rocks are carbonaceous muscovite-quartz schist and
quartzite.
Three types of gold-bearing veins occur on the surface: narrow, drusy, sulfide-
poor quartz veins (less than three inches wide), which can be parallel to
foliation; stockwork druzy quartz veins, which locally resemble a coarse
breccia; and locally larger veins (up to one foot wide) of quartz + arsenopyrite
+ stibnite. These larger veins may also have multiple orientations. Late
calcite fills vein interstices and post-dates quartz-sulfide deposition. Strong
iron staining with calcite and iron carbonates are locally associated with the
gold mineralization. Gold mineralization also occurs in graphitic quartzites
and schists.
Sites of gold deposition are structurally controlled. The structure is
dominated by a complex set of high angle shears and low angle thrusts, both sets
having a predominantly northeast strike and dip to the northwest.
The mineralization is open to depth and along strike; other prospects with ore
grade samples on the surface remain untested to date.
Exploration of the True North
La Teko completed 51,880 feet of reverse-circulation drilling and 2,042 feet of
core drilling during 1994. This is in addition to 8,722 feet of reverse-
circulation drilling done by AMAX and La Teko in 1991, 1992 and 1993. During
1995, Newmont completed 14,945 of reverse-circulation drilling, 13,104 feet of
core drilling and 5,673 feet of trenching on the True North property. This
included 6,520 feet of step-out core drilling undertaken after freezeup in
areas that could not be accessed during warmer weather. Results of the drilling
have significantly expanded the gold resource. Additional in-fill drilling will
be required before the expanded size of the gold resource or proven/ probable
reserves can be determined. However, management believes that the potential
True North resource exceeds two million ounces gold.
Ore Reserves of the True North
On February 2, 1995, Mine Development Associates, Inc. (MDA), an independent
engineering firm based in Reno, Nevada, released a report titled "Resources and
Reserves For The True North Project." It quotes proven and probable reserves and
mineralized material as follows (based on 0.015 oz/ton cutoff):
Proven and Probable Reserves Mineralized Material
Tons Grade Tons Grade
(000's) (oz/ton) Ounces (000's) (oz/ton)
6,870 0.065 445,800 8,055 0.059
The above reserves have not been adjusted for the metallurgical recoveries
discussed below. Ratio of overburden to ore is 2.14/1.
It was previously announced that True North reserves were contained in two
separate ore bodies, the Hindenburg and the Shepard, which are aligned along a
series of northeast-trending flat-lying structures that may be related to a
thrust zone that is a regional feature in the Fairbanks Mining District.
Newmont's 1995 drilling has shown that the Hindenburg and the Shepard prospects
represent one continuous ore body.
Management and MDA believe that the style of mineralization, geologic setting,
and the historic production on other properties in the region, suggest that the
True North deposit, as presently defined, represents only a portion of the total
potential of the property.
Metallurgy of the True North
Column leach testing by a University of Alaska metallurgist was started in early
1995; the tests were recently completed under Newmont supervision. Four six-
inch columns were filled with ore crushed to minus 1.5 inches. The columns were
leached for 40 days, then were allowed to rest for four months and then were
leached for an additional sixty days. Data relative to the columns follows:
PARAMETER COLUMN A COLUMN B COLUMN C COLUMN D
Depth of ore 0 - 100' 100 - 200' +200' Composite
Calculated head grade, opt 0.115 0.089 0.116 0.088
Tailings grade, opt 0.009 0.007 0.039 .007
Recovery, % 92 92 66 92
Lime consumption, lbs/ton 0.06 0.50 0.50 0.60
Cyanide consumption 1.2 1.2 1.3 1.5
Column C recovery was lower, as expected, due to the depth of sample; however,
the results are not disappointingly low. About 6% of the defined ore is below
the 200-foot depth.
Newmont is currently performing additional column leach tests at its Denver
facility.
RYAN LODE PROPERTY, FAIRBANKS, ALASKA
Location, Property Description
The Ryan Lode Mine property is located on the southeast flank of Ester Dome,
approximately eight miles west of Fairbanks, Alaska. The Ester Dome is cut by
the Ryan shear, a northeast trending shear zone which extends at least one mile
across the Company's property. Drilling by prior companies has located several
semi-continuous gold veins within the shear zone. Trenching has exposed a
mineralized zone over 160 feet wide with favorable gold assays. Trenching also
encountered an additional large shear zone, parallel to the main Ryan Lode
shear, with gold value across a width of approximately 70 feet. In 1989, the
Company confirmed the presence of an intrusive body and a gold-bearing structure
within the mineralized igneous or volcanic intrusive known as the Curlew
Intrusive, which outcrops at the surface.
The Ryan Lode property contained, as of February, 1994, proven and probable gold
reserves of 14,576,000 tons of ore with an average grade of 0.056 ounces of gold
per ton, for a total of 822,200 ounces of gold, according to independent
engineering studies. The metallurgical recovery of 82% has not been deducted
from the ounces shown above. The Company did no drilling on its Ryan Lode
property during either 1994 or 1995.
The principal portion of the Ryan Lode property, the Ryan Lode claim group, is
comprised of 10 patented and 15 unpatented lode claims aggregating approximately
700 acres. The current lease agreement provides for a primary term of 20 years
commencing January 1, 1993 and for optional renewals with continuing advance
minimum payments of $150,00 each year for 1996 through 2012, $200,000 per year
for each of the years 2013 through 2017, $250,000 for each of the years 2018
through 2022, $300,000 annually for the years 2023 through 2027 and $350,000 per
year thereafter with the provision that the lessee may extend on an annual basis
after the year 2032.
The required minimum royalty payments will apply against a 5% production royalty
applicable to the gross value of minerals mined and removed from the base Ryan
Lode property and a 3% royalty payable to the Ryan Lode lessor on production
from the Bar and St. Patrick claims. The payment of advance royalty payments on
the primary lease applies to current-year production only and excess minimum
payments over required percentage royalties cannot be carried or applied to a
subsequent year's production obligation.
A prior lease provided for payments to a predecessor in interest based on future
net profits as follows:
a. LAC Minerals, U.S.A., a predecessor in interest of $5,000,000 payable
only from net profits, as defined, after the Company has recovered certain pre-
production costs. The amount is payable at the following rates of net profits:
i. 5%, after recovery of pre-production costs:
ii. 10%, after recovery of two times pre-production
costs.
iii. 20%, after recovery of three times pre-production
costs.
The Company is currently in compliance with the foregoing obligations.
During the years 1990 through 1993, the Company expanded its Ryan Lode
properties with the acquisition of the 360-acre Bar and St. Patrick claims
together with 356 additional acres adjacent to the Ryan Lode claim group. These
claims are generally subject to 3%-4% net smelter return royalties based on
mineral product mined and removed from the properties.
On March 17, 1993, the Company acquired the 122-acre Mohawk lease which
comprised nine patented claims located adjacent to the Ryan Lode. These claims
were abandoned during 1995 and $454,305 capitalized exploration costs were
written off.
Geology of the Ryan Lode
The principal rock unit in the Ryan Lode area is the Cleary Sequence member of
the Fairbanks Schist. The gold in both the Ryan and Curlew ore bodies occurs in
mineralized quartz veins, breccias, and gouge zones associated with shearing.
The Ryan shear is composed of one main shear, usually in the hanging wall, and
several smaller shears. This shear zone, which locally reaches 150 feet in
thickness, has been traced by drilling for over a mile and is contained in
metasedimentary and metavolcanic rocks of the Cleary Sequence. The Curlew
shear, which may be an offset, southern continuation of the Ryan Shear is
composed of one principal shear ranging up to 180 feet in thickness and lesser
shears in the footwall and the hanging wall. Other sub-parallel shears also
occur on the property and although these are currently poorly defined, they
could add to the future resource base.
The Cleary Sequence contains varied rock types including a high percentage of
metavolcanics, along with marbles, calcareous quartz-mica schists and
carbonaceous units. Felsic intrusions in the area are principally concentrated
near and within the Curlew deposit. Geologic relationships obtained by drilling
suggest that these intrusions have both fault and intrusion contacts.
Gold deposition in the Ryan Lode occurs in at least two events. Cross cutting
relationships indicate five stages of quartz deposition, with the gold deposited
in the third and fifth episodes. In the Curlew the sequence is simpler, with
gold deposition occurring in a single event, with quartz and arsenopyrite with
or without stibnite.
Age dating indicates the Ryan shear predates the Curlew intrusion and may have
guided its emplacement. The Ryan and Curlew shears were reactivated shortly
after the emplacement of the Curlew intrusion and hydrothermal mineralizing
fluids flowed along the shears at this time. The gold associated with the fifth
event on the Ryan shear, and the gold deposition in the Curlew, can be
correlated with the intrusive event.
Diamond core and reverse-circulation drilling both demonstrate that the Ryan and
Curlew ore bodies have higher grade ore next to the hanging wall, with lower
grade mineralization below this.
Oxidation depth is usually 200 to 300 feet, with an enriched zone for 50 to 100
feet below this. An increase in grade of the mineralization occurs at the
oxidation boundary, and leachable sulfide ore exists below this boundary. The
leachability of the mineralization decreases at increasing depths below the
enriched zone.
Exploration, Development and Anticipated Future Production
Exploration and development drilling of the Ryan Lode project was suspended at
the end of the 1993 drilling season pending further development of the Company's
True North property and placing the True North project into production,
currently estimated to be 1998. The Company's continuing development of the
Ryan Lode includes baseline studies regarding air and water control, noise
levels and other environmental factors and accelerated efforts to obtain permits
required prior to placing the Ryan Lode property into production. Future
production is contingent upon obtaining the necessary permits and capital
required to fund the permitting and construction phases of the project. The
Company does not now have the funds which would be required to place the Ryan
Lode into production. The Company will seek a joint-venture partner to assist
with the Ryan Lode project and/or will rely principally on the sales of
securities and debt financing to meet its future Ryan Lode capital requirements.
There is no assurance that a joint venture partner will be obtained or that
funds for these purposes will be available. See "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION."
In August 1995, the Company entered into an option agreement with KLS Enviro
Resources ("KLS") and Nevada Star Resource Corp. ("Nevada Star") which provided
KLS/Nevada Star with joint participation rights in the further development of
the Ryan Lode. Under the agreement, KLS/Nevada Star had 90 days to complete a
pre-feasibility study at their expense to determine the viability of the Ryan
Lode project. KLS/Nevada Star completed the prefeasi- bility study and asked
for a 10-day extension on the option agreement. La Teko declined the request
for extension of time.
JUNIPER PROPERTY
In February 1995, the Company located 104 state of Alaska prospecting sites on
approximately 16,131 acres approximately 30 miles north northeast of Fairbanks,
Alaska. These sites allow the Company to prospect for up to one year with the
right to renew for a second year, during which time it may elect to convert the
sites into state mining claims. During 1995, the Company commenced initial
exploration efforts on this property, including geo-chemical sampling, the
results of which suggest that further exploration may be warranted. Limited
exploration is planned for this property during 1996.
STATE OF ALASKA MINING LICENSE TAX, PRODUCTION ROYALTY AND CLAIM
RENTAL
The State of Alaska levies a mining license tax based on net income reported to
the federal government and royalties from Alaska mining property at the
following rates: there is no tax on taxable income under $40,000, however, if
taxable income exceeds $40,000, and is less than $50,000, the tax is 3% of the
total taxable income; $50,001 to $100,000 - $1,500 plus 5% of excess over
$50,000; $100,001 or over - $4,000 plus 7% of excess over $100,000. The State
of Alaska also charges a production royalty of 3% of net income. Pertinent only
to the unpatented claims, an annual rental fee must be paid to the State of
Alaska for each state claim or fraction thereof. The rent is $20 per claim for
the first five years held; $40 per claim for the second five years held; and
$100 per claim thereafter. Claims staked before 1989 are considered to be
staked in 1989 for the purposes of this law.
MARGARITA PROPERTY
The Margarita property consists of 77 unpatented federal lode mining claims
totaling about 1,500 acres. The property is located approximately 75 miles
south of Tucson, Arizona, in the Oro Blanco Gold District, approximately three
miles from the Mexican border. The property can be reached by traveling 10
miles east from Arivaca on a graded county road. The claims are owned by James
Sorrell of Tucson. La Teko Resources' lease with Sorrell calls for a 3% NSR
royalty; in addition, prior lessees will receive a 10% net profit interest on
the first 20,000 ounces of production and 5% thereafter.
During January 1996, the Company commenced preliminary drilling on the Margarita
property and completed 14 holes comprising 4,040 feet of reverse-circulation
drilling, at an estimated cost of $67,500. The assay results from the current
drilling did not increase the estimated 30,000-ounce resource.
Geology of the Margarita Property
The property is underlain by a thick sequence of Jurassic age rhyolite flows,
which contain one or more 50-foot thick beds of siliceous tuff. This volcanic
sequence was intruded in the early Tertiary period by quartz monzonite porphyry.
Coincident with this event, the tuff beds were selectively replaced by massive
silica which, in one location at minimum, contains ore grade gold. The
siliceous bodies are mesothermal in origin. Some earlier geologists have
identified them as hot springs sinters; however, they lack the trace elements,
such as mercury, associated with this type of deposit. The siliceous beds
resist erosion and form ridges in the district.
Three geochemical soil sampling programs have been conducted, totalling over
1,000 samples. The sampling identified at least 12 areas containing anomalous
gold. Over 300 drill holes have been drilled, most less than 100 feet deep.
The drilling has concentrated on one of the anomalies. The other 11 anomalies
are essentially untested. The drilling has identified about 500,000 tons of
mineralization containing 30,000 ounces of gold, averaging 0.06 OPT gold. The
Company believes that the property has a good potential to develop reserves.
Locating additional mineralization at depth, and around the other anomalies,
should expand known ore grade mineralization.
Column cyanide leach testing of minus 1/2 inch crushed ore provided recoveries
in the range of 75% to 85%.
FREEGOLD INTERESTS
On July 19, 1994, La Teko Resources, Inc., a wholly-owned subsidiary of La Teko
Resources Ltd., entered into an agreement with International Freegold Mineral
Development, Inc. respecting the acquisition of Freegold stock and a continuing
right of first refusal to provide Freegold with operating capital to develop its
Golden Summit project in the Fairbanks Mining District, Fairbanks, Alaska.
Pursuant to that agreement, on July 27, 1994, La Teko entered into a unit
purchase agreement respecting the purchase of 750,000 Freegold units, each unit
comprising 750,000 common shares of Freegold together with warrants to purchase
an additional 750,000 shares of Freegold common stock. The purchase price per
share was $.425 (CAN). The warrants associated with each unit could have been
exercised on or before July 27, 1995 at a price of $.425 (CAN). The Company
opted not to exercise the warrants at that time. However, these warrants may be
exercised on or before July 27, 1996 at a price of $.49 (CAN) per share.
On February 17, 1995, La Teko and Freegold announced a unit purchase agreement
wherein La Teko subscribed for the purchase of 750,000 Freegold units at $.24
(CAN) per share, each unit consisting of 750,000 shares of capital stock and
750,000 non-transferable share purchase warrants. However, this unit purchase
was not approved by the Vancouver Stock Exchange and by mutual agreement among
the parties, was rescinded and the parties agreed that La Teko would no longer
have a continuing right of first refusal to provide Freegold with operating and
development capital.
La Teko continues to own 750,000 shares of Freegold which has a current market
value of approximately $.95 (CAN), $.70 (US) per share and, as indicated above,
has warrants to acquire an additional 750,000 shares of Freegold stock at $.49
(CAN) per share. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION."
OTHER PROPERTIES
In addition to the Company's extended activities with regard to the Ryan Lode,
Juniper and Margarita properties, it has investigated twelve additional mining
projects, has conducted preliminary due diligence activities on six, and will
continue investigating other possibilities of expanding the Company's mineral
property base.
MARKETS FOR METALS MINED
As production is commenced on La Teko properties, the Company intends to produce
a gold silver dore' which will contain approximately 99% combined gold and
silver. This material can be readily marketed to one of several precious metal
refineries, which typically charge about $0.75 per ounce to refine the dore'
into 99.99% pure gold and 99.95% pure silver. Current gold prices approximate
$400 per ounce.
OFFICES
The Company's principal executive offices at 180 East 2100 South, #204, Salt
Lake City, Utah are leased month-to-month for $1,062 per month.
The Company's mine operations office at 2173 University Avenue South, #101,
Fairbanks, Alaska is leased from an unrelated party for $1,340 on a month-to-
month basis.
In the opinion of the Company, the above facilities are adequate for its
foreseeable future needs.
EMPLOYEES
As of March 1996, the Company had 10 employees, none of which is an officer of
the Company. None of the Company's employees is a director. All of the
Company's employees except two administrative personnel at the corporate offices
in Salt Lake City work at the Company's Ryan Lode Mine near Fairbanks, Alaska.
Certain employees are shared with Newmont on the True North venture. The
Company regularly engages consultants and other advisers to provide specific
geological and other professional services.
FOREIGN EXCHANGE CONVERSION
This report contains references to both Canadian and U.S. dollar amounts. See
"ITEM 6. SELECTED FINANCIAL DATA" for a table setting forth the exchange rates
for the past three years. Unless otherwise indicated, all dollar amounts
included in the Company's financial statements and related discussion are in
U.S. dollars. In accordance with SFAS No. 52 "Foreign Currency Translation",
any prior-period adjustments resulting from translation of Canadian dollars into
U.S. dollars have been accumulated and reported as a separate component of
shareholders' equity. Prior to 1990, purchases of Balance Sheet items were
translated at year-end exchange rates except as pertaining to certain asset
acquisitions wherein exchange rates on specific dates of acquisition were used.
Operating statement amounts have been translated at actual rates on dates of
specific transactions since January of 1991 in instances wherein expenditures
have been made in Canadian dollars. Any effects of conversion of Canadian
dollars to U.S. dollars related to either current or prior-period financial
statements are insignificant.
Climate
The climate in the Fairbanks area is variable. The record low temperature is -
54 degrees Celsius (-66 F) and a record summer high of 37 degrees Celsius (99
F). The mean annual temperature is -3 degrees Celsius (26.5 F). The average
temperature for the months of April through September is 10 degrees Celsius
(50.1 F), the average temperature for the months of October through March is -16
degrees Celsius (2.75 F). Temperature rises above 22 degrees Celsius (70 F) 51
days per year and drops below freezing 225 days per year. The rivers in the
region begin to freeze in October and thaw in May. Average annual precipitation
in Fairbanks is approximately 12 inches, which includes an average snowfall of
69.3 inches. Mining operations can be conducted in the region throughout most
of the year.
GOVERNMENT REGULATION AND ENVIRONMENTAL CONSIDERATIONS
Ryan Lode
The Ryan Lode property is located eight miles west of Fairbanks, Alaska and 0.5
miles from rural homes. The Company initiated baseline monitoring for the
project in 1993, including air quality, surface water quality, ground water
quality, geohydrology, biological inventory, and acid base accounting. The
Company plans to expand these programs in 1996 and 1997 as well as to initiate
noise level monitoring and vibrations testing. These activities will support
environmental permitting activities which will commence with the development of
an operating plan. A complete Environmental Impact Statement ("EIS") is
considered necessary to avoid delays in the permitting process.
Since 1993, the Company has been collecting baseline data necessary to support
its applications for required permits for the Ryan Lode project, including the
preparation of a full environmental impact statement that will be coordinated
with the development of an operating plan. The Company expects that obtaining
required permits for proposed activities on the Ryan Lode property may be
adversely affected because of its location eight miles from the city of
Fairbanks and approximately one-half mile from rural homes, which exposes the
Company's proposed activities to greater public interest and scrutiny and
increases the potential adverse impacts on humans resulting from the use,
storage or discharge of hazardous materials.
True North
The True North property is located in an uninhabited area and therefore should
not be subject to nuisance factors such as light, noise, dust, and visibility
considerations in receiving permits. The AMAX Gold, Inc. Fort Knox property,
located in close proximity to True North has been issued permits to commence
production without the necessity of providing a full environmental impact
statement. Newmont, as the operator, will have the responsibility of permitting
the True North project in anticipation of production to commence in 1998 or as
soon thereafter as is practicable depending upon the success of current drilling
programs. There is no assurance that Newmont will obtain permits without
substantial delays and/or extensive expense.
Environmental Regulation
There are extensive Federal and state laws and regulations designed to conserve
and prevent the degradation of the environment. These laws and regulations
require obtaining various permits before undertaking certain exploration and
development activities and may result in significant delays, substantial costs,
and the alteration of proposed operating plans. These requirements also
necessitate significant capital outlays and may result in liability to the owner
of the property for damages that may result from specific operations, all of
which may materially and adversely affect the business of the Company and the
financial results of its operations.
The mining and exploration operations of La Teko are also subject to both
Federal and state laws and regulations pertaining to employee health and safety.
Operations on the Ryan Lode Mine and the True North project are specifically
subject to the statutes and related regulations administered by the Alaska
Department of Environmental Conservation ("ADEC").
New permits will have to be obtained from all regulatory agencies having
jurisdiction over the mining industry in Fairbanks, Alaska before production at
either the True North property or the Ryan Lode Mine may commence.
There can be no assurance that all required permits can be obtained timely or on
terms that are favorable to La Teko or that do not impose additional costs. La
Teko will be required to demonstrate substantial financial responsibility
through bonding, deposits, or other means acceptable to ADEC before resuming
operations.
La Teko believes that it is in compliance with all material Federal or state
environmental regulations.
LIMITED TITLE ON UNPATENTED MINING CLAIMS
The Ryan Lode and the Margarita claim groups include Federal unpatented mining
claims. The Ryan Lode and True North groups include Alaska unpatented mining
claims. Such claims are subject to inherent uncertainties. Unpatented mining
claims, when properly located, staked, and posted according to regulation, give
the claimant possessory rights only. Possessory title to an unpatented mining
claim, when validly initiated, endures unless lost through abandonment due to
failure to perform and file proof of annual assessment work or through a
forfeiture which results from an adverse location made while the prior location
is in default with respect to the performance of annual assessment work.
Because many of these factors involve findings of fact, title validity cannot be
determined solely from an examination of the public record. The continuing
validity of these claims is subject to many contingencies, including the
availability of land for location at the time the location was made, compliance
with federal and state regulations for locating claims, the performance of
annual assessment work, the payment of annual rental fees and the making of
required annual filings with the Bureau of Land Management and the appropriate
state authority in which the claims are located. Failure to pay required annual
rentals constitutes a statutory abandonment of the mining claim or site.
The Company believes that it has valid possessory title to all of the unpatented
federal and state mining claims described herein.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf, thereunto
duly authorized.
LA TEKO RESOURCES LTD.
Dated: August 8, 1996 By/s/Robert W. Gentry, President
and Chief Financial Officer
