<PAGE> 1
As filed with the Securities and Exchange Commission on ___________,
1998. Registration No. 333-_____.
=====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------------------------
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------------------
GRAND CENTRAL SILVER MINES, INC.
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(Exact name of Registrant specified in charter)
Utah 6795 87-0429204
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(State of (Primary Industrial (I.R.S. Employer
Incorporation) Classification) I.D. Number)
1010 Ironwood Drive
Suite 105
Coeur d'Alene, Idaho 83814
Tel: (208) 769-7340
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(Address, including zip code of principal place of business and
telephone number, including area code of Registrant's principal
executive offices.)
Conrad C. Lysiak
Attorney and Counselor at Law
West 601 First Avenue, Suite 503
Spokane, Washington 99204
(509) 624-1475
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(Name, address, including zip code and telephone number, including
area code of agents for service.)
Approximate date of commencement date or proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box [x].
=====================================================================
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Proposed Proposed
Title of Maximum maximum
each class of offering aggregate Amount of
securities to Amount to be price per offering registration
be registered registered Share [1] price fee
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of 1,012,500 $2.375 $2,404,687.50 $728.70
Common Stock
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TOTAL REGISTRATION FEE $2,404,687.50 $728.70
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</TABLE>
[1] Estimated solely for the purpose of calculating the
registration fee.
The Registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that the registration statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall
be come effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
<PAGE> 3
GRAND CENTRAL SILVER MINES, INC.
CROSS REFERENCE SHEET PURSUANT TO
RULE 404 (a) AND ITEM 501 (b) OF REGULATION S-B
Form S-B Item #
and Caption Caption in Prospectus
- -------------------------------------------------------------------
1 Front of Registration
Statement and Outside Front
Cover of Prospectus FACING PAGE; CROSS REFERENCE
SHEET; OUTSIDE FRONT COVER PAGE
2 Inside Front and
Outside Back Cover of
Pages of Prospectus INSIDE FRONT COVER PAGE;
OUTSIDE BACK COVER PAGE
3 Summary Information and
Risk Factors PROSPECTUS SUMMARY; RISK
FACTORS; THE COMPANY
4 Use of Proceeds PROSPECTUS SUMMARY; USE OF
PROCEEDS
5 Determination of
Offering Price OUTSIDE FRONT COVER PAGE; PLAN
OF DISTRIBUTION
6 Dilution NOT APPLICABLE
7 Selling Securityholders SELLING SHAREHOLDERS
8 Plan of Distribution INSIDE FRONT COVER PAGE; PLAN
OF DISTRIBUTION
9 Legal Proceedings BUSINESS
10 Directors, Executive
Officers, Promoters
and Control Persons MANAGEMENT
11 Security Ownership of
Certain Beneficial
Owners and Management MANAGEMENT
12 Description of
Securities OUTSIDE FRONT COVER PAGE;
DESCRIPTION OF SECURITIES; PLAN
OF DISTRIBUTION
13 Interest of Named Experts
and Counsel LEGAL MATTERS; EXPERTS
<PAGE> 4
Form S-B Item #
and Caption Caption in Prospectus
- ------------------------------------------------------------------
14 Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities BUSINESS
15 Organization Within
Last 5 Years THE COMPANY; BUSINESS
16 Description of Business PROSPECTUS SUMMARY; BUSINESS
17 Management's Discussion
and Analysis or Plan of
Operation MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
18 Description of Property BUSINESS
19 Certain Relationships and
Related Transactions MANAGEMENT
20 Market for Common Equity
and Related Stockholder
Matters DIVIDEND POLICY; PRINCIPAL
SHAREHOLDERS; SHARES AVAILABLE FOR
FUTURE SALES
21 Executive Compensation MANAGEMENT
22 Financial Statements FINANCIAL STATEMENTS
23. Changes In and Disagreements
with Accountants on
Accounting and Financial
Disclosures NOT APPLICABLE
<PAGE> 5
PROSPECTUS
GRAND CENTRAL SILVER MINES, INC.
This Prospectus relates to the sale of 1,012,500 shares of the
Company's Common Stock offered by Pines International Resorts, Inc.,
Edward Kanner and 21st Century Investments, collectively hereinafter
referred to as the "Selling Shareholders."
Grand Central Silver Mines, Inc. is traded on NASDAQ under the
symbol "GSLM." On May 11, 1998, the closing per share bid price for
the Company's Common Stock, as reported on NASDAQ was $2.35. This
price does not represent a transaction price and there is no
assurance that a significant quantity of the Common Stock could be
sold at this price.
FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE COMMON
STOCK. SEE "RISK FACTORS" located on page 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE COMPANY IS REQUIRED TO DELIVER AN ANNUAL REPORT TO SECURITY
HOLDERS PURSUANT TO SECTION 14 OF THE SECURITIES EXCHANGE ACT OF
1934, CONTAINING AUDITED FINANCIAL STATEMENTS WITH A REPORT THEREON
BY ITS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS AS WELL AS QUARTERLY
REPORTS FOR THE FIRST THREE QUARTERS OF EACH FISCAL YEAR CONTAINING
UNAUDITED FINANCIAL INFORMATION.
UNTIL ________________________, (NINETY DAYS AFTER THE EFFECTIVE
DATE OF THIS PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
The date of this Prospectus is ____________________, 1998.
<PAGE> 6
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PROSPECTUS SUMMARY
- ---------------------------------------------------------------------
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
The Company GRAND CENTRAL SILVER MINES, INC. (the "Company")
formerly known as Centurion Mines Corporation, is
a U.S. mineral resource company incorporated
under the laws of the State of Utah. The Company
is engaged in the business of acquiring and
exploring mineral properties containing silver,
gold, copper, and other mineralization, with a
primary emphasis on silver. See "Business."
The Company's offices are located at 1010
Ironwood Drive, Suite 105, Couer d'Alene, Idaho
83814. The Company's telephone number is (308)
769-7340.
The Offering The Selling Shareholders are selling up to
1,012,500 shares of the Company's Common Stock
(the "Shares"). See "Description of Securities."
The foregoing Shares are currently outstanding.
The Company has 6,062,517 shares of Common Stock
outstanding as of the date of this Prospectus.
Use of Proceeds The Company will not receive any proceeds from
the sale of the Shares. See "Use of Proceeds"
and "Proposed Business."
Risk Factors Investment in the Shares should be considered
highly speculative. The Company has limited
operating history and is subject to all of the
inherent risks of a developing business
enterprise. The Company is in need of additional
capital and has no revenues. There are non-arms
length transactions with affiliates involving
conflicts of interest. The Company does not
anticipate paying any dividends on its Common
Stock.
Selected Financial
Information The Company has no operating history and maybe
considered a developmental enterprise. The
Company has no revenues and there is no assurance
that the Company will ever have material revenues
or that its operations will be profitable. The
following financial data summarizes certain
information concerning the Company is based upon
the financial statements and notes, thereto,
contained in this Prospectus. See "Financial
Statements."
<PAGE> 7
<TABLE>
March 31, 1998
Balance Sheet Data: (Unaudited)
<S> <C>
Assets
Current Assets . . . . . . $ 320,221
Total Assets . . . . . . . $12,903,327
Current Liabilities . . . . . $ 1,176,742
Stockholders' Equity . . . . . $11,616,857
Total Liabilities
& Stockholders' Equity . . . . . $12,903,327
Net Tangible Book Value Per Share . . . $ 1.94
Income Statements Data:
Revenue . . . . . . . . $ -0-
Operating expenses . . . . . . $ 591,453
Other expenses . . . . . . $ 1,993,183
Net loss . . . . . . . . $ 2,584,636
Net loss per share . . . . . . $ (0.17)
</TABLE>
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RISK FACTORS
- ---------------------------------------------------------------------
THE SECURITIES BEING OFFERED INVOLVE A HIGH DEGREE OF RISK AND,
THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. THEY SHOULD
NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE POSSIBILITY OF THE
LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD READ
THE ENTIRE PROSPECTUS AND CAREFULLY CONSIDER, AMONG THE OTHER FACTORS
AND FINANCIAL DATA DESCRIBED HEREIN, AND THE FOLLOWING RISK FACTORS:
1. Status as a Public Reporting Company. The Company is a
fully reporting public company. The Company has no current operating
history and is subject to all risks inherent in a developing business
enterprise. The likelihood of success of the Company must be
considered in light of the problems, expenses, difficulties,
complications, and delays frequently encountered in connection with a
new business in general and those specific to the natural resource
industry and the competitive and regulatory environment in which the
Company will operate.
2. Exploration Stage Company. Mineral exploration,
particularly for gold and silver, is highly speculative in nature,
frequently is nonproductive, and involves many risks, often greater
than those involved in the discovery of mineralization. Such risks
can be considerable and may add unexpected expenditures or delays to
the Company's plans. There can be no assurance that the Company's
mineral exploration activities will be successful or profitable. Once
mineralization is discovered, it may take a number of years from the
initial phase of drilling until production is possible, during which
time the economic feasibility of production may change. A related
factor is that exploration stage companies use the evaluation work of
professional geologists, geophysicists, and engineers for estimates
in determining whether to acquire an interest in property or to
commence exploration or development work. These estimates generally
<PAGE> 8
rely on scientific estimates and economic assumptions, and in some
instances may not be correct, and could result in the expenditure of
substantial amounts of money on a property before it can be
determined whether or not the property contains economically
recoverable mineralization. The economic viability of a property
cannot be determined until extensive exploration and development has
been conducted and a comprehensive feasibility study performed. The
Company currently does not have any such feasibility studies, and has
not yet prepared feasibility studies on any of its properties.
Moreover, the market prices of any minerals produced are subject to
fluctuation, which may negatively affect the economic viability of
properties on which expenditures have been made. The Company is not
able to determine at present whether or not, or the extent to which,
such risks may adversely affect the Company's strategy and business
plans.
3. Lack of Revenue. The Company needs additional capital but
currently has no revenues. Substantial expenditures are required to
establish ore reserves through drilling, to determine metallurgical
processes to extract the mineralization from the ore and, in the case
of new properties, to construct mining and processing facilities.
The Company lacks a constant and continual flow of revenue. The
Company currently holds certain royalty interests in several mining
properties previously sold, but there is no assurance that the
Company will receive royalty payments, or that the Company will
otherwise receive adequate funding to be able to finance its
exploration activities. The Company is looking for revenue sources
on an on-going basis, but there can be no assurance that such sources
can be found or that, if available, the terms of such financing will
be commercially acceptable to the Company. Because of the Company's
need for additional capital to fund its present operations, to
complete the acquisition of certain mineral rights, and to provide
for further exploration and development, the lack of consistent
revenue could be a detrimental factor in the progress of the Company.
4. Realization of Investments in Mineral Properties and
Additional Capital Needs. The ultimate realization of the Company's
investments in mineral properties is dependent upon the success of
future property sales, the existence of economically recoverable
reserves, the ability of the Company to obtain financing or make
other arrangements for development and upon future profitable
production. The Company expects to finance its operations for Fiscal
1998 through the sale of equity securities, joint venture
arrangements (including project financing), and the sale of interests
in mineral properties. The Company does not have sufficient capital
of its own to explore and develop its mineral properties and there
can be no assurance that the Company will be successful in obtaining
the required funds to finance its long-term capital needs.
5. Retention and Attraction of Key Personnel. The Company's
success will depend, in large part, on its ability to retain and
attract highly qualified personnel. The Company's success in
retaining its present staff and in attracting additional qualified
personnel will depend on many factors, including its ability to
<PAGE> 9
provide them with competitive compensation arrangements, equity
participation and other benefits. There is no assurance that the
Company will be successful in retaining or attracting highly
qualified individuals in key management positions.
6. Regulatory Concerns. Environmental and other government
regulations at the federal, state and local level pertaining to the
Company's business and properties may include: (a) surface impact;
(b) water acquisition; (c) site access; (d) reclamation; (e) wildlife
preservation; (f) licenses and permits; and, (e) maintaining the fees
for unpatented mining claims. See "Business - Government Regulation
and Environmental Concerns."
7. Working Capital Deficits; Accumulated Deficit; Working
Capital Deficit; Auditor's Report. Although it commenced operations
more than two years ago, the Company remains in the development
stage. At December 31, 1997, the Company had working capital deficit
of $254,536 and an accumulated deficit of $12,648,995, which deficits
and losses are expected to continue for the foreseeable future. The
Company's operations are subject to numerous risks associated with
the mining industry.
8. Reliance Upon Directors and Officers. The Company is wholly
dependent, at the present, upon the personal efforts and abilities of
its Officers and Directors who exercise control over the day to day
affairs of the Company. There can be no assurance as to the volume
of business, if any, which the Company may succeed in obtaining, nor
that its proposed operations will prove to be profitable. See
"Proposed Business" and "Management."
9. Indemnification of Officers and Directors for Securities
Liabilities. The Bylaws of the Company provide that the Company may
indemnify any Director, Officer, agent and/or employee as to those
liabilities and on those terms and conditions as are specified in the
Nevada Business Corporation Act. Further, the Company may purchase
and maintain insurance on behalf of any such persons whether or not
the corporation would have the power to indemnify such person against
the liability insured against. The foregoing could result in
substantial expenditures by the Company and prevent any recovery from
such Officers, Directors, agents and employees for losses incurred by
the Company as a result of their actions. Further, the Company has
been advised that in the opinion of the Securities and Exchange
Commission, indemnification is against public policy as expressed in
the Securities Act of 1933, as amended, and is, therefore,
unenforceable.
10. Cumulative Voting, Preemptive Rights and Control. There
are no preemptive rights in connection with the Company's Common
Stock. The shareholders purchasing in this offering may be further
diluted in their percentage ownership of the Company in the event
additional shares are issued by the Company in the future.
Cumulative voting in the election of Directors is not provided for.
Accordingly, the holders of a majority of the shares of Common Stock,
present in person or by proxy, will be able to elect all of the
Company's Board of Directors. See "Description of the Securities."
<PAGE> 10
11. Public Shareholders will Suffer the Greatest Losses if the
Company is Unsuccessful. If the Company's future operations are
successful, the present shareholders will realize substantial
benefits from the Company's growth. If the Company's future
operations are unsuccessful, the persons who purchase the Shares
offered hereby will sustain the principal losses of such cash
investment. See "Dilution."
12. Potential Future Sales Pursuant to Rule 144. Approximately
6,062,517 shares of Common Stock presently issued and outstanding of
which 3,545,486 shares are "Restricted Securities" as that term is
defined in Rule 144 promulgated under the Securities Act of 1933, as
amended. In general, under Rule 144, a person (or persons whose
shares are aggregated) who has satisfied a one year holding period,
may sell within any three month period, an amount which does not
exceed the greater of 1% of the then outstanding shares of Common
Stock or the average weekly trading volume during the four calendar
weeks prior to such sale. Rule 144 also permits the sale of shares,
under certain circumstances, without any quantity limitation, by
persons who are not affiliates of the Company and who have
beneficially owned the shares for a minimum period of two (2) years.
Hence, the possible sale of these restricted shares may, in the
future dilute an investors percentage of free-trading shares and may
have a depressive effect on the price of the Company's securities and
such sales, if substantial, might also adversely effect the Company's
ability to raise additional equity capital. See "Description of
Securities - Shares Eligible for Future Sale."
13. No Dividends. The holders of the Common Stock are entitled
to receive dividends when, as and if declared by the Board of
Directors out of funds legally available therefore. To date, the
Company has not paid any cash dividends. The Board does not intend
to declare any dividends in the foreseeable future, but instead
intends to retain all earnings, if any, for use in the Company's
business operations. As the Company will be required to obtain
additional financing, it is likely that there will be restrictions on
the Company's ability to declare any dividends. See "Dividend
Policy" and "Description of Securities."
FOR ALL OF THE AFORESAID REASONS AND OTHERS SET FORTH HEREIN,
THE PURCHASE OF THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. ANY PERSON CONSIDERING AN INVESTMENT IN THE SHARES OFFERED
HEREBY SHOULD BE AWARE OF THESE AND OTHER FACTORS SET FORTH IN THIS
PROSPECTUS. THE SHARES SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN
AFFORD TO ABSORB A TOTAL LOSS OF THEIR INVESTMENT IN THE COMPANY AND
HAVE NO NEED FOR A RETURN ON THEIR INVESTMENT.
<PAGE> 11
- ---------------------------------------------------------------------
SELECTED FINANCIAL DATA
- ---------------------------------------------------------------------
The selected financial data presented below has been derived
from the financial statements of the Company, which financial
statements have been examined by Jones, Jensen + Company, independent
public accountants, as indicated in their report included elsewhere
herein. The information below should be read in conjunction with the
Company's Financial Statements and the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations." For the reasons set forth in the "Prospectus
Summary - Risk Factors" the information shown below may not be
indicative of the Company's future results of operations.
This table has been split for EDGAR transmission.
<TABLE>
<CAPTION>
03/31/98 03/31/97
<S> <C> <C>
RESULTS OF OPERATION:
Revenues $ 0 $ 0
Net Income (loss) (2,584,636) (332,609)
Net income (loss)
per common share (.17) (.01)
Balance Sheet Data:
Total assets $12,903,327 $10,249,679
Working capital (deficit) (856,521) (115,711)
Long-term debt 77,004 106,436
Stockholders'equity $11,616,349 $ 9,691,884
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATION:
Revenues $ 0 $ 0 $ 0 $ 0 $ 0
Net Income (loss) (1,659,875) (1,660,483) (2,635,655) (2,372,790) (1,142,513)
Net income (loss)
per common share (.06) (.07) (.11) (.12) (.06)
Balance Sheet Data:
Total assets $10,412,074 $ 9,770,328 $ 8,658,470 $ 8,492,800 $ 4,161,162
Working capital
(deficit) (186,958) 16,695 (51,771) 637,171 290,104
Long-term debt 93,045 106,436 0 0 0
Stockholders'
equity $ 9,851,349 $ 9,256,926 $ 8,265,862 $ 7,940,307 $ 3,828,689
</TABLE>
<PAGE> 12
- ---------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------------------------------
Please read this discussion and analysis together with the
Company's audited financial statements located at the end of this
report on Prospectus. This is management's analysis of the Company's
present financial status. It is not a forecast of what may occur in
the future. There are some statements below that discuss future
events involving risks and uncertainties that could result in
materially different outcomes than those projected. However, the
Company cannot control or predict many of these risks and
uncertainties. We have tried to describe these and other risks and
uncertainties in our SEC filings, but please do not overly rely on
forward-looking statements made by the Company.
Comparison of Results of Operations in 1997, 1996 and 1995.
Historically, the Company has not had revenues, and had none in
1997, 1996 and 1995. Instead, it receives operating funds from income
sources other than revenue, such as the option and sale of property
and royalty interests, the sale of equity securities, and interest on
investments. The income from these sources fluctuates irregularly
from year to year, causing a significant impact on operating results.
During 1997, 1996 and 1995 the Company did not receive any income
from advance mineral royalties, reimbursements related to venture
properties, or from the sale of properties. Consequently, there was
no corresponding cost of mineral properties sold. However, the
Company was successful in 1997, 1996 and 1995 in obtaining additional
equity investments and in acquiring various mineral properties.
Therefore, management of the Company believes the nature and level of
general and administrative expenditures is appropriate, given the
lack of operating revenue.
In summary, the Company's total operating costs decreased 25
percent in 1997 ($1.88 million) as compared to 1996 ($2.29 million),
primarily because of cutbacks in personnel and other overhead costs,
after increasing by 10 percent from 1995 ($2.09 million) to 1996. The
1997 decrease in operating costs, however, was offset by an equal
decrease in non-revenue income from 1996. The 1996 increase in
operating costs over 1995, on the other hand, was more than offset by
the added income from securities sales and absence of losses from
investments that were experienced in 1995. These changes resulted in
a net loss for the Company of $1.66 million in each of 1997 ($0.06
per share) and 1996 ($0.07 per share), compared with a net loss of
$2.64 million in 1995 ($0.11 per share).
General and administrative expenses decreased from $1,886,451 in
1996, to $1,471,975 in 1997. The decrease is primarily the result of
reductions in personnel and payroll expense, which had increased from
1995 to 1996. Accounting fees decreased from $51,209 in 1996 to
$39,371 in 1997, which was a significant decrease from 1995
($118,000). These decreases resulted from continued reductions in the
<PAGE> 13
number and value of common shares issued to accounting personnel for
services, the reduction of personnel in the accounting department,
and in the fees paid to the Company's independent public accountants.
Also, fees paid to consultants for technical, promotional and
administrative work decreased from $476,975 in 1996 to $360,953 in
1997, which also was a significant decrease from 1995 ($679,000).
These decreases resulted from continued reductions in the
number of consultants engaged by the Company. Office leasing costs
have increased from 1995 ($51,000) and 1996 ($76,600) to 1997
($119,968) due to the expansion of field offices and the increasing
need for additional office space for technical and support services.
In an effort to preserve cash, the Company has traditionally
paid some of its expenses by issuing shares of common stock. The
Company paid directors' fees in 1997, 1996 and 1995 by issuing shares
of common stock and accounting for accruals of unissued shares. The
value of the shares issued and accrued, however, varies from year to
year because their valuation is determined directly by the market
price on the issuance date. Also, 1995 was the final year in which
the value of share issuances by Royal Silver to its directors was
added to the Company's general and administrative expense due to the
non-consolidation of Royal Silver's accounts following its
reorganization in 1995 with a non-related company.
The difference in interest and other income from 1996 ($155,946)
to 1997 ($87,748) was due to a one-time option to purchase stock that
occurred in 1996. On the other hand, interest and other income
greatly increased from 1995 ($29,956) to 1996, primarily because of
receipts from joint venture payments, increases in management
consulting fees paid to the Company, and from the sale of an option
regarding the Company's Royal Silver stock holdings.
During 1996 and 1997, the Company did not incur any loss from
dilution of equity investment in any of its subsidiaries, in contrast
to 1995, in which the Company experienced a loss of $686,809 on its
investments accounted for under the equity method, due to the
reduction in its ownership in Royal Silver to 21.1 percent brought
about as a result of its reorganization with a non-related company.
In fiscal 1997 and 1996, the Company recognized a gain from the
sale of securities it held in Royal Silver common stock. In 1995, the
Company did not sell any of its securities and there was no such
gain.
In 1997 and 1995, unlike 1996, the Company experienced a loss
from the disposition of assets. The 1997 loss resulted from the
abandonment of a leasehold interest, and the 1995 loss resulted from
the abandonment of property held by a subsidiary of the Company.
<PAGE> 14
Financial Condition.
In summary, at September 30, 1997, the Company had a cash
balance of $30,080 and accounts receivable of $26,312, of which
$25,012 was collected subsequent to year end, and negative working
capital of $186,958. In comparison, at September 30, 1996, the
Company had a cash balance of $133,556 and accounts receivable of
$33,842, with a positive working capital of $16,695. The Company
funded its cash expenditures in 1997 and 1996 primarily by issuing
common stock for cash. In 1997, the Company received $1,219,559 from
the sale of its common stock at an average price of $0.43 per share,
and $1,578,266 in 1996 at an average price of $1.03 per share. These
funds were used for current and past operating expenses. The Company
did not expend any cash in 1997 or 1996 to acquire interests in
subsidiary companies. The Company's long-term debt of $93,045 is in
the form of notes payable to purchase equipment and a promissory note
to purchase mining claims.
The amount of cash used by the Company's operations decreased
from $521,981 in 1996, to $444,665 in 1997, by focusing resources and
reducing overhead costs. The amount of cash used by the Company on
acquisition and exploration of mineral properties increased from
$506,262 in 1996 to $793,418 in 1997, primarily due to the increase
in personnel and resources to hasten the completion of the permitting
and construction for the OK Copper Mine project. The Company expended
$155,043 in 1997, and $250,551 in 1996, to acquire property and
equipment.
The Company's long term debt is partially related to the lease
of equipment that was acquired during fiscal 1996. The other
multi-year obligations of the Company are note payments on mining
claims the Company has purchased, and payments on mining claim leases
that are cancelable at the Company's option. Moreover, if the Company
is not successful in raising additional equity capital, selling some
of its equipment, land, or equity securities, or negotiating
beneficial joint venture business arrangements, the Company will
reduce the level of expenditures by releasing some properties,
thereby eliminating their associated costs to match the Company's
cash flow position.
Management expects the Company's consolidated cash expenditures,
in addition to those associated with the OK Copper Mine, which are
expected to be borne in full by Nevada Star Resource Corp., will
approximate $530,000 during fiscal 1998. The anticipated cash
expenditures consist of the following: $80,000 for exploration and
development activities; $50,000 for production-related activities;
$10,000 for acquisition of mineral properties; $30,000 for property
lease payments; and $360,000 for general and administrative expenses.
These cash expenditures are expected to be primarily funded from:
$200,000 from the private sale of the Company's common stock; $70,000
from the sale of surplus equipment and land; $200,000 from the sale
of Nevada Star common stock and/or the partial liquidation of Royal
common stock; and $60,000 from joint venture business activities.
<PAGE> 15
Results of Operations - March 31, 1998 compared with March 31, 1997.
The Company posted losses of $2,584,636 and $2,956,748 for the
three months and six months ending March 31, 1998, respectively. The
principal component of each loss was the write-down in March 1998 of
$2,000,000 of mineral properties considered by management to have
less value than originally recorded cost. There were no revenues
during the first six months of fiscal 1997 or fiscal 1998.
Operating expenses for the six months ending March 31, 1998 were
$977,335, down almost $100,000 from the corresponding period of the
prior year primarily as a result of greatly reduced mineral lease
expenditures. General and administrative expenses of $832,098 for the
first six months of fiscal 1998 compared favorably with $845,086 for
the same period of the preceding year.
These condensed consolidated financial statements include the
following companies, with the state of incorporation and percentage
of ownership as shown: Centurion Mines Corporation, Utah, 100%;
Centurion Exploration Incorporated, Utah, 100%; Dotson Exploration
Company, Nevada, 100%; Mammoth Mining Company, Nevada, 81.8%; The
Gold Chain Mining Company, Utah, 61.1%; and Tintic Coalition Mines
Corporation, Utah, 80%.
Liquidity and Capital Resources.
In comparing the Company's financial condition at the end of
fiscal years 1997, 1996 and 1995, management determined that for
fiscal 1998 it would be in the Company's best interests to reorganize
its corporate and financial structure by acquiring the assets of
Royal Silver Mines, Inc., through the tender offer of Centurion
shares, while continuing its business arrangement with Nevada Star to
complete the mining copper production facility and begin operations
at the OK Copper Mine project, which upon completion, is expected to
result in significant cash flow to the Company.
The Company's accounts receivable at the end of fiscal 1997, of
$26,312, was due from a non-interest bearing advance made by the
Company to a related party. The $5,000 receivable at September 30,
1996, was for a routine item due the Company. Prepaid mining leases
decreased primarily due to a net relinquishment of leased mineral
properties. Mineral properties, however, increased from $8,849,485 at
September 30, 1996, to $9,648,747 at September 30, 1997, as a result
of investments in and the acquisition and exploration of properties
and of equity investments in cash.
Accounts payable increased from $206,622 as of September 30,
1996, to $295,301 as of September 30, 1997, primarily because of
reduced cash flow. The accrued expenses payable decreased from
$45,587 as of September 30, 1996 to $24,029 as of September 30, 1997.
For fiscal 1996, this expense item was the result of the accrual of
employees' salaries, associated taxes and workers compensation
<PAGE> 16
insurance. Directors' fee shares are issued only upon the fulfillment
of certain conditions, but the fees are recorded on the Company's
books at the earliest time that fees could become due, even though
all of the conditions may not be met until a later date.
During the years ended September 30, 1997 and 1996, the Company
made non-interest bearing advances to related parties of $50,000 and
$25,000, respectively, and received payments from related parties of
$49,164 and $193,997, respectively. During the years ended September
30, 1997 and 1996, the Company received advances from a shareholder
of $2,000 and $5,961, respectively, and made payments of $3,646 and
$32,800, respectively, on those and prior advances.
At March 31, 1998, there was deficit working capital of
$(856,521) compared to deficit working capital of $(186,958) at
September 30, 1997. This change is primarily the result of mineral
property acquisitions funded with short-term debt.
At March 31, 1998, the Company owned 1,091,267 shares of Royal
Silver Mines, Inc. common stock, which was approximately seven
percent of the total shares outstanding as of March 31, 1998. The
current market value of this stock is about $0.46 per share (see Note
3).
The Company's total assets consist primarily of interests in
mineral properties. This asset increased from $9,648,747 at
September 30, 1997, to $11,084,400 as of March 31, 1998. The
increase is due primarily to the acquisition from Royal Silver Mines,
Inc., of certain Coeur d'Alene silver properties and patented mining
claims and a working interest in a joint venture. The acquisition
cost of these properties of $3,435,653 was largely offset by the
Company's writedown of $2,000,000 of other mineral properties
considered by management to have less value than their recorded cost.
During the six months ended March 31, 1998, the Company's
operations provided $8,946 of cash, as compared to using $77,933 of
cash during the same period in the preceding year. While expenses
paid through the issuance of common stock during the first six months
of each fiscal year remained roughly consistent, there were
substantially more acquisitions of mineral properties and investments
in 1998, almost all of which were financed by the issuance of common
stock (which aggregated $2,549,550), and to a smaller extent by
promissory notes ($750,000). By contrast, there was no funding in
the first six months of 1997 from notes or lenders, although cash
generated by stock sales was $763,700 in the first six months of 1997
as opposed to only $75,646 in the first half of fiscal year 1998.
There was a receivable of $1,125,000 generated in March 1998 from the
sale of common stock, with the first portion of the cash funding
($300,000) from this transaction received in early April 1998.
<PAGE> 17
The Company does not have sufficient capital to fully explore
and develop its mineral properties, nor does the Company currently
have continuing revenues. The Company plans to continue financing
its exploration activities through joint ventures, production
activities, equity or debt funding, or by selling properties and
retaining royalty interests. In addition, the Company holds royalty
interests on properties sold during fiscal years 1992 and 1997 that
are currently under exploration and development by other, larger
mining companies.
Other Matters.
The Company believes its operations are presently in substantial
compliance with the comprehensive federal, state and local
requirements applicable to air and water quality, environmental
safety, and similar matters. Failure to comply with these laws,
regulations and permits could result in delays in operations,
injunctive actions, damages, and civil and criminal penalties. As
the Company expands, changes or adds operations it may be required to
obtain amended or additional permits or authorizations, and will
continue to seek full compliance.
Given management's significant reliance on the issuance of
capital stock for various purposes, the following table summarizes by
category the number of shares and the total value assigned to the
shares for each of the fiscal years 1997, 1996 and 1995. All shares
issued to affiliates of the Company are assigned a dollar value on
the books at their market value. Nonrestricted, free-trading shares
issued to non-affiliates are also valued at market. The value
assigned is determined based on the average of the bid and ask price
on the date of issuance. By comparison, the value assigned to
restricted shares is determined based on other issuances of
restricted shares for cash, which generally has been 66 percent of
the value of nonrestricted shares on the date of issuance.
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USE OF PROCEEDS
- ---------------------------------------------------------------------
The Company will not receive any proceeds from the sale of the
Shares by the Selling Shareholders.
- ---------------------------------------------------------------------
DIVIDEND POLICY
- ---------------------------------------------------------------------
The Company has never paid a cash dividend on its Common Stock
and does not expect to pay a cash dividend in the foreseeable future,
but intends to devote all funds to the operations of its business.
See "Risk Factors - No Dividends Anticipated."
<PAGE> 18
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GLOSSARY
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Acid Mine Drainage Acidic run-off water from mine waste dumps
mill tailings ponds containing sulfide
minerals. Also refers to ground water
pumped to surface from mines.
Adit An opening driven horizontally into the side
of a mountain or hill for providing access
to a mineral deposit.
Alteration Any physical or chemical change in a rock or
mineral subsequent to its formation. Milder
and more localized than metamorphism.
Anticline An arch or fold in layers of rock shaped
like the crest of a wave.
Assay A chemical test performed on a sample of
ores or minerals to determine the amount of
valuable metals contained.
Backfill Waste material used to fill the void created
by mining an orebody.
Ball Mill A steel cylinder filled with steel balls
into which crushed ore is fed. The ball
mill is rotated, causing the balls to
cascade and grind the ore.
Basement Rocks The underlying or older rock mass. Often
refers to rocks of Precambrian age which may
be covered by younger rocks.
Base Metal Any non-precious metal (e.g. copper, lead,
zinc, nickel, etc.).
Bedding The arrangement of sedimentary rocks in
layers.
Block Caving An inexpensive method of mining in which
large blocks of ore are undercut, causing
the ore to break or cave under its own
weight.
Breccia A rock in which angular fragments are
surrounded by a mass of fine-grained
minerals.
Bulk Mining Any large-scale, mechanized method of mining
involving many thousands of tons of ore
being brought to surface per day.
<PAGE> 19
Cathode A rectangular plate of metal, produced by
electrolytic refining, which is melted into
commercial shapes such as wirebars, billets,
ingots, etc.
Chalcocite A sulfide mineral of copper common in the
zone of secondary enrichment.
Channel Sample A sample composed of pieces of vein or
mineral deposit that have been cut out a
small trench or channel, usually about ten
cm wide and two cm deep.
Chute An opening, usually constructed of timber
and equipped with a gate, through which ore
is drawn from a stope into mine cars.
Complex Ore An ore containing a number of minerals of
economic value. The term often implies that
there are metallurgical difficulties in
liberating and separating the valuable
metals.
Cone Crusher A machine which crushes ore between a
gyrating cone or crushing head and an
inverted, truncated cone known as a bowl.
Concentrate A fine, powdery product of the milling
process containing a high percentage of
valuable metal.
Conglomerate A sedimentary rock consisting of rounded
water-worn pebble or boulders cemented into
a solid mass.
Contact A geological term used to describe the line
or plane along which two different rock
formations meet.
Core The long cylindrical piece of rock, about an
inch in diameter, brought to surface by
diamond drilling.
Crosscut A horizontal opening driven from a shaft and
(or near) right angles to the strike of a
vein or other orebody.
Cut-and-fill A method of stopping in which ore is removed
in slices, or lifts, and then the excavation
is filled with rock or other waste material
(backfill), before the subsequent slice is
extracted.
<PAGE> 20
Cyanidation A method of extracting exposed gold or
silver grains from crushed or ground ore by
dissolving it in a weak cyanide solution.
May be carried out in tanks inside a mill or
in heaps of ore out of doors.
Decline An underground passageway connecting one or
more levels in a mine, providing adequate
traction for heavy, self-propelled
equipment. Such underground openings are
often driven in an upward or downward
spiral, much the same as a spiral staircase.
Development Work carried out for the purpose of opening
up a mineral deposit and making the actual
ore extraction possible.
Development Drilling Drilling to establish accurate estimates of
mineral reserves.
Diamond Drill A rotary type of rock drill that cuts a core
of rock that is recovered in long
cylindrical sections, two centimeters or
more in diameter.
Dilution (mining) Rock that is, by necessity, removed along
with the ore in the mining process,
subsequently lowering the grade of the ore.
Dip The angle at which a vein, structure or rock
bed is inclined from the horizontal as
measured at right angles to the strike.
Disseminated Ore Ore carrying small particles of valuable
minerals spread more or less uniformly
through the hose rock.
Dore Unparted gold and silver poured into molds
when molten to form buttons or bars.
Further refining is necessary to separate
the gold and silver.
Drift A horizontal underground opening that
follows along the length of a vein or rock
formation as opposed to a cross-cut which
crosses the rock formation.
Drill-Indicated Reserves The size and quality of a potential orebody
as suggested by widely spaced drill holes;
more work is required before reserves can be
classified as probable or proven.
<PAGE> 21
Due Diligence The degree of care and caution required
before making a decision; loosely, a
financial and technical investigation to
determine whether an investment is sound.
Electrolytic Refining The process of purifying metal ingots that
are suspended as anodes in an electrolytic
bath, alternated with refined sheets of the
same metal which act as starters or
cathodes.
Environmental Impact
Study A written report, compiled prior to a
production decision, that examines the
effects proposed mining activities will have
on the natural surroundings.
Epithermal Deposit A mineral deposit consisting of veins and
replacement bodies, usually in volcanic or
sedimentary rocks, containing precious
metals, or, more rarely, base metals.
Exploration Work involved in searching for ore, usually
by drilling or driving a drift.
Face The end of a drift, crosscut or stope in
which work is taking place.
Fissure An extensive crack, break or fracture in
rocks.
Float Pieces of rock that have been broken off and
moved from their original location by
natural forces such as frost or glacial
action.
Flotation A milling process in which valuable mineral
particles are induced to become attached to
bubbles and float, and others sink.
Footwall The rock on the underside of a vein or ore
structure.
Fracture A break in the rock, the opening of which
allows mineral bearing solutions to enter.
A "cross-fracture" is a minor break
extending at more-or-less right angles to
the direction of the principal fractures.
Free Milling Ores of gold or silver from which the
precious metals can be recovered by
concentrating methods without resort to
pressure leaching or other chemical
treatment.
<PAGE> 22
Galena Lead sulfide, the most common ore mineral of
lead.
Gossan The rust-colored capping or staining of a
mineral deposit, generally formed by the
oxidation or alteration of iron sulfides.
Grab Sample A sample from a rock outcrop that is assayed
to determine if valuable elements are
contained in the rock. A grab sample is not
intended to be representative of the
deposit, and usually the best-looking
material is selected.
Grade The average assay of a ton of ore,
reflecting metal content.
Hangingwall The rock on the upper side of a vein or ore
deposit.
Head Grade The average grade of ore fed into a mill.
Heap Leaching A process involving the percolation of a
cyanide solution through crushed ore heaped
on an impervious pad or base to dissolve
minerals or metals out of the ore.
High Grade Rich ore. As a verb, it refers to selective
mining of the best ore in a deposit.
Host Rock The rock surrounding an ore deposit.
Hydrometallurgy The treatment of ore by wet processes (e.g.,
leaching) resulting in the solution of a
metal and its subsequent recovery.
Intrusive A body of igneous rock formed by the
consolidation of magma intruded into other
rocks, in contrast to lavas, which are
extruded upon the surface.
Lagging Planks or small timbers placed between steel
ribs along the roof of a stope or drift to
prevent rocks from falling, rather than to
support the main weight of the overlying
rocks.
Lens Generally used to describe a body of ore
that is thick in the middle and tapers
towards the ends.
<PAGE> 23
Level The horizontal openings on a working horizon
in a mine; it is customary to work mines
from a shaft, establishing levels at regular
intervals, generally about 50 meters or more
apart.
Limestone A bedded, sedimentary deposit consisting
chiefly of calcium carbonate.
Lode A mineral deposit in solid rock.
Metamorphic Rocks Rocks which have undergone a change in
texture or composition as the result of heat
and/or pressure.
Mill A processing plant that produces a
concentrate of the valuable minerals or
metals contained in an ore. The concentrate
must then be treated in some other type of
plant, such as a smelter, to affect recovery
of the pure metal.
Milling Ore Ore that contains sufficient valuable
mineral to be treated by the milling
process.
Mineable Reserves Ore reserves that are known to be
extractable using a given mining plan.
Mineral A naturally occurring homogeneous substance
having definite physical properties and
chemical composition and, if formed under
favorable conditions, a definite crystal
form.
Mineralized Material
or Deposit A mineralized body which has been delineated
by appropriate drilling and/or underground
sampling to support a sufficient tonnage and
average grade of metal(s). Under SEC
standards, such a deposit does not qualify
as a reserve until a comprehensive
evaluation, based upon unit cost, grade,
recoveries, and other factors, conclude
economic feasibility.
Muck Ore or rock that has been broken by
blasting.
Native Metal A metal occurring in nature in pure form,
uncombined with other elements.
<PAGE> 24
Net Profit Interest A portion of the profit remaining after all
charges, including taxes and bookkeeping
charges (such as depreciation) have been
deducted.
Net Smelter Return A share of the net revenues generated from
the sale of metal produced by a mine.
Open Pit A mine that is entirely on surface. Also
referred to as open-cut or open-cast mine.
Ore Material that can be mined and processed at
a positive cash flow.
Ore Pass Vertical or inclined passage for the
downward transfer of ore connecting a level
with the hoisting shaft or a lower level.
Orebody A natural concentration of valuable material
that can be extracted and sold at a profit.
Ore Reserves The calculated tonnage and grade of
mineralization which can be extracted
profitably; classified as possible, probable
and proven according to the level of
confidence that can be placed in the data.
Oreshott The portion, or length, of a vein or other
structure, that carries sufficient valuable
mineral to be extracted profitably.
Oxidation A chemical reaction caused by exposure to
oxygen that results in a change in the
chemical composition of a mineral.
Participating Interest A company's interest in a mine, which
entitles it to a certain percentage of
profits in return for putting up an equal
percentage of the capital cost of the
project.
Patent The ultimate stage of holding a mineral
claim in the United States, after which no
more assessment work is necessary because
all mineral rights have been earned.
Patented Mining Claim A parcel of land originally located on
federal lands as an unpatented mining claim
under the General Mining Law, the title of
which has been conveyed from the federal
government to a private party pursuant to
the patenting requirements of the General
Mining Law.
<PAGE> 25
Pillar A block of solid ore or other rock left in
place to structurally support the shaft,
walls or roof of a mine.
Porphyry Any igneous rock in which relatively large
crystals, called phenocrysts, are set in a
fine-grained groundness.
Precambrian Shield The oldest, most stable regions of the
Earth's crust, the largest of which is the
Canadian Shield.
Prospect A mining property, the value of which has
not been determined by exploration.
Proven and Probable
Mineral Reserves Reserves that reflect estimates of the
quantities and grades of mineralized
material at a mine which the Company
believes could be recovered and sold at
prices in excess of the cash cost of
production. The estimates are based largely
on current costs and on projected prices and
demand for such mineralized material.
Mineral reserves are stated separately for
each such mine, based upon factors relevant
to each mine. Proven and probable mineral
reserves are based on calculations of
reserves provided by the operator of a
property that have been reviewed but not
independently confirmed by the Company.
Changes in reserves represent general
indicators of the results of efforts to
develop additional reserves as existing
reserves are depleted through production.
Grades of ore fed to process may be
different from stated reserve grades because
of variation in grades in areas mined from
time to time, mining dilution and other
factors. Reserves should not be interpreted
as assurances of mine life or of the
profitability of current or future
operations.
Propable Reserves Resources for which tonnage and grade and/or
quality are computed primarily from
information similar to that used for proven
reserves, but the sites for inspection,
sampling and measurement are farther apart
or are otherwise less adequately spaced.
The degree of assurance, although lower than
that for proven reserves, is high enough to
assume continuity between points of
observation.
<PAGE> 26
Proven Reserves Resources for which tonnage is computed from
dimensions revealed in outcrops, trenches,
workings or drill holes and for which the
grade and/or quality is computed from the
results of detailed sampling. The sites for
inspection, sampling and measurement are
spaced so closely and the geologic character
is so well defined that size, shape, depth
and mineral content of reserves are well
established. The computed tonnage and grade
are judged to be accurate, within limits
which are stated, and no such limit is
judged to be different from the computed
tonnage or grade by more than 20 percent.
Raise A vertical or inclined underground working
that has been excavated from the bottom
upward.
Rake The trend of an orebody along the direction
of its strike.
Reclamation The restoration of a site after mining or
exploration activity is completed.
Recovery The percentage of valuable metal in the ore
that is recovered by metallurgical
treatment.
Replacement Ore Ore formed by a process during which certain
minerals have passed into solution and have
been carried away, while valuable minerals
from the solution have been deposited in the
place of those removed.
Reserves That part of a mineral deposit which could
be economically and legally extracted or
produced at the time of the reserve
determination. Reserves are customarily
stated in terms of "Ore" when dealing with
metalliferous minerals.
Resources The calculated amount of material in a
mineral deposit, based on limited drill
information.
Rib Samples Ore taken from rib pillars in a mine to
determine metal content.
Rockbolting The act of supporting openings in rock with
steel bolts anchored in holes drilled
especially for this purpose.
<PAGE> 27
Rockburst A violent release of energy resulting in the
sudden failure of walls or pillars in a
mine, caused by the weight or pressure of
the surrounding rocks.
Rock Mechanics The study of the mechanical properties of
rocks, which includes stress conditions
around mine openings and the ability of
rocks and underground structures to
withstand these stresses.
Room-and-Pillar Mining A method of mining flat-lying ore deposits
in which the mined-out area, or rooms, are
separated by pillars of approximately the
same size.
Rotary Drill A machine that drills holes by rotating a
rigid, tubular string of drill rods to which
is attached a bit. Commonly used for
drilling large-diameter blastholes in open
pit mines.
Royalty An amount of money paid at regular intervals
by the lessee or operator of an exploration
or mining property to the owner of the
ground. Generally based on a certain amount
per ton or a percentage of the total
production or profits. Also, the fee paid
for the right to use a patented process.
Run-of-Mine A loose term used to describe ore of average
grade.
Sample A small portion of rock or a mineral
deposit, taken so that the metal content can
be determined by assaying.
Secondary Enrichment Enrichment of a vein or mineral deposit by
minerals that have been taken into solution
from one part of the vein or adjacent rocks
and redeposited in another.
Shaft A vertical or steeply inclined excavation
for the purpose of opening and servicing a
mine. It is usually equipped with a hoist
at the top which lowers and raises a
conveyance for handling personnel and
materials.
Shear or Shearing The deformation of rocks by lateral movement
along unnumberable parallel planes,
generally resulting from pressure and
producing such metamorphic structures as
cleavage and schistosity.
<PAGE> 28
Shrinkage Stopping A stopping method which uses part of the
broken ore as a working platform and as
support for the walls of the stope.
Siderite Iron carbonate, which when pure, contains
48.2% iron; must be roasted to drive off
carbon dioxide before it can be used in a
blast furnace. (Roasted product is called
sinter.)
Skarn Name for the metamorphic rocks surrounding
an igneous intrusive where it comes in
contact with a limestone or dolomite
formation.
Solvent Extraction-Electrowinning
G(SX/EW) A metallurgical technique, so far applied
only to copper ores, in which metal is
dissolved from the rock by organic solvents
and recovered from solution by electrolysis.
Sphalerite A zinc sulfide mineral; the most common ore
mineral of zinc.
Step-out Drilling Holes drilled to intersect a mineralization
horizon or structure along strike or down
dip.
Stockpile Broken ore heaped on surface, pending
treatment or shipment.
Stope Underground excavation from which ore has
been extracted either above or below mine
level.
Stratigraphy Strictly, the description of bedded rock
sequences; used loosely, the sequence of
bedded rocks in a particular area.
Strike The direction, or bearing from true north,
of a vein or rock formation measured on a
horizontal surface.
Stringer A narrow vein or irregular filament of a
mineral or minerals traversing a rock mass.
Stripping Ratio The ratio of tons removed as waste relative
to the number of tons or ore removed from an
open pit mine.
Sublevel A level or working horizon in a mine between
main working levels.
Sulfide A compound of sulfur and some other element.
<PAGE> 29
Tailings Material rejected from a mill after more of
the recoverable valuable minerals have been
extracted.
Tailings Pond A low-lying depression used to confine
tailings, the prime function of which is to
allow enough time for heavy metals to settle
out or for cyanide to be destroyed before
water is discharged into the local
watershed.
Trend The direction, in the horizontal plane, or a
linear geological feature (for example, an
ore zone), measured from true north.
Troy Ounce Unit of weight measurement used for all
precious metals. The familiar 16-ounce
avoirdupois pound equals 14.583 Troy Ounces.
Unpatented Mining Claim A parcel of property located on federal
lands pursuant to the General Mining Law and
the requirements of the state in which the
unpatented claim is located, the paramount
title of which remains with the federal
government. The holder of a valid,
unpatented lode mining claim is granted
certain rights including the right to
explore and mine such claim under the
General Mining Law.
Vein A mineralized zone having a more or less
regular development in length, width and
depth which clearly separates it from
neighboring rock.
Volcanogenic A term used to describe the volcanic origin
of mineralization.
Vug A small cavity in a rock, frequently lined
with well-formed crystals. Amethyst
commonly forms in these cavities.
Wall Rocks Rock units on either side of an orebody.
The hanging-wall and footwall rocks of an
orebody.
Waste Barren rock in a mine, or mineralized
material that is too low in grade to be
mined and milled at a profit.
Winze An internal shaft.
Zone of Oxidation The upper portion of an orebody that has
been oxidized.
<PAGE> 30
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BUSINESS
- ---------------------------------------------------------------------
REORGANIZATION OF THE COMPANY
Since filing its last Form 10-K for the period ended September
30, 1997, the Company has undergone significant changes in both its
management and corporate and capital structure. On January 30, 1998,
the shareholders of the Company approved a name change from Centurion
Mines Corporation, under which the Company had been conducting its
business for over ten years, to Grand Central Silver Mines, Inc. (the
"Company"). Also, on the same date, the shareholders approved a 1
for 10 reverse split of the capital stock of the Company which became
effective on January 30, 1998. All information contained herein
reflects the foregoing 1 for 10 reverse split.
On February 5, 1998, Dr. Spenst Hansen resigned as Chairman of
the Board and was replaced by Mr. Howard Crosby. Also, Dr. Hansen
resigned as CEO/President, a position he occupied for the last
decade, and was replaced by Mr. John Ryan. Effective April 15, 1998,
Dr. Hansen resigned entirely from the Board of the Company to pursue
his retirement. The Company has initiated legal action against Dr.
Hanson as a result of his activity while an officer and director of
the Company. See "Litigation." These changes will be noted and
reflected in this filing and in the upcoming Form 10-Q.
This Prospectus incorporates these changes by referring to the
Company under its new name "Grand Central Silver Mines," or simply
the "Company." In some instances the name Centurion will remain
primarily for purposes of clarity. Also, this filing will refer to
share issuances made after January 30, 1998 as "post-split", and will
for the most part leave share issuances prior to that date
unadjusted. If an adjustment is made, the notation "post-split" will
be added.
DESCRIPTION OF THE COMPANY
Background.
The Company (formerly "Centurion Mines Corporation"), including
its subsidiaries, is a U.S. mineral resource company actively engaged
in the acquisition and exploration of mineral properties containing
gold, silver, copper, and other mineralization. In addition to its
activities for its own account, the Company conducts business through
its subsidiaries. The Company operates its business as an exploration
and development mining company, meaning that it receives and
generally intends to receive income from property sales, joint
ventures or other business arrangements with larger companies, as
well as, if warranted, developing and placing its own properties into
production.
The Company controls considerable mining and mineral exploration
properties through leases, options, and mining claims in the States
of Utah and Nevada and in Mexico. It holds production royalties on
<PAGE> 31
one additional mineral property in Utah. In Utah, these properties
primarily lie in two geographical regions, the Millard/Beaver
Counties area, westerly from Milford, Utah, and the Tintic mining
district, including the West Tintic area, about 70 miles
southwesterly from Salt Lake City, Utah. In Nevada, these properties
are located in Churchill County. In Mexico, the Company has a joint
venture on a property located in Coahuila state on the Chihuahua
border, about 200 km south of the Big Bend of Texas.
History.
The Company's predecessor company was formed in 1979 as the
Tintic Joint Venture partnership and subsequently was incorporated in
Utah in 1984. The Company was accepted as a "Small Cap Company" for
listing on the National Association of Securities Dealers Automated
Quotations System (NASDAQ) in November 1988. As Centurion Mines
Corporation, the Company traded under the symbol "CTMC." The
Company's current trading symbol is "GSLM".
Since its incorporation, the Company operated as an exploration
and mining property development company, and has held joint ventures
and exploration contracts with a number of major mining companies.
Centurion Mines carried out exploration and development activities
throughout Utah and also in the State of Washington.
In late 1997, Centurion management made a decision to reorganize
based on several factors. First, due to changes implemented by the
NASD, the Company faced a potential de-listing since its common stock
was trading below $1 per share, and the NASD had informed the Company
that the stock needed to trade above $1 by the end of February 1998.
Second, the Company had consistently had difficulty raising financing
in the capital markets, and due to its existing capital structure and
low share price, this situation was not expected to improve. Third,
the Company had significant accounts payable, and although the
Company held substantial mineral property assets, these were for the
most part illiquid. Hence, the growing burden of accounts payable, if
not resolved, could conceivably result in some of the mineral
property assets being foreclosed to satisfy claims of creditors. This
result would have had a serious impact on the Company's business plan
and long-term strategy.
RECENT DEVELOPMENTS.
In November 1997, Centurion management made the decision to
explore a possible merger with Royal Silver Mines, Inc. ("Royal
Silver") by a tender of Centurion shares, and thereby direct the
Company's focus to high grade silver properties held by each company.
Also in November, the Company entered into a business arrangement
with Nevada Star Resources to proceed with the Company's plan to
begin mine production at its properties at the OK Mine project.
<PAGE> 32
As a result of discussions with Royal Silver, management
formulated a plan to reorganize by undertaking a reverse split, name
change, and to re-focus the operations of the Company on projects
which had a high potential for the discovery of silver. On January
30, 1998 the company held its annual shareholders meeting at which
the shareholders approved a 1 for 10 reverse stock split effective
February 2, 1998 and name change to Grand Central Silver Mines, Inc.
Shortly thereafter, the Company's common stock began trading under a
new symbol, "GSLM" on the NASDAQ Small Cap. After the reverse split,
the share price has been well above the $1 minimum mark required by
NASDAQ.
On February 5, 1998 the Company held its annual Board of
Directors meeting for the purpose of naming new officers and
appointing a new Chairman. At this meeting, Mr. Howard Crosby was
named Chairman, John Ryan was named President, and Carlos Chavez was
retained as Secretary and Treasurer. Ms. Shari Garber was named
Assistant Secretary and is also the Administrator of the Company. Mr.
Ryan has since appointed Mr. Jerry Stacey as General Manager, and Mr.
Barry Katona has been retained as Manager of Utah operations.
Operational personnel in Utah were reduced by over 60% and the
Company has finalized moving its headquarters to Coeur d'Alene,
Idaho. It should be noted that Mr. Crosby, Mr. Ryan, Mr. Stacey, and
Ms. Garber are also Directors, Officers, and/or employees of Royal
Silver Mines, and this management change at the Company is ostensibly
the first step toward an eventual combination of the two companies.
Focus on Silver Properties.
As noted above, the Company began exploring a possible merger
with Royal Silver in late-1997 and is still in the process of
evaluating this combination. This combination was intended to enhance
the Company's emphasis on silver. Although such merger has not been
fully consummated, the Company has acquired several projects formerly
controlled by Royal Silver and has proceeded to acquire other new
mining properties with known silver reserves or potential. There is
no assurance, however, that a merger with Royal Silver will ever take
place.
The Company acquired the Coeur d'Alene Syndicate property in the
Coeur d'Alene mining district in December 1997 from Royal Silver in
exchange for 500,000 shares of Common Stock. The Company also
acquired a 35% working interest in the Sierra Mojada Project located
in Coahuila, Mexico from Royal Silver in February 1998 in exchange
for 735,000 shares of common stock and a note payable within one year
for $350,000. The Company has also entered into an option to joint
venture the Wonder Mine in Nevada with Arizuma Resources of Toronto.
These acquisitions as well as its properties located in the Tintic
District give the Company a silver focus.
<PAGE> 33
Progress at the OK Open Pit Copper Mine Project.
This project is focused on the construction of a copper
production facility and the subsequent production of electrolytic
grade copper by the solvent-extraction/electrowinning process (SX/EW)
at the site of the historic OK open pit copper mine about 10 miles
northwest of Milford, Utah.
In November 1997, the Company entered into a business
arrangement related to its OK Copper mine project with Nevada Star
Resources Corp. (Vancouver Stock Exchange symbol: NEV) of Seattle,
Washington, which should facilitate continued construction of the
SX/EW copper refining plant. Completion of the plant is expected in
late 1998. Under the terms of the arrangement, the Company will
receive 2 million shares of Nevada Star common stock with a current
market value of about $700,000, plus a 12% net profits royalty
applicable to all copper production. Mineral resources containing 96
million pounds of copper are currently being estimated and the
reserves are being expanded by an ongoing drilling program. There is
no assurance, however, that the Company will receive the foregoing 2
million shares of Common Stock or that the market value will remain
at $700,000.
Although the market price of copper has been falling over the
last year, and as of April 17, 1998, was approximately $0.80 per
pound, the cash copper production costs for this project are
estimated at below $0.40 per pound, making the project profitable
even at current reduced prices.
The Company may exercise, through July 1, 1998, a 30%
participation "back in" option on favorable terms. If the Company
exercises such option, it will be responsible for 30% of the costs of
constructing the plant and other expenses. It will also be required
to tender back to Nevada Star 1,200,000 shares of Nevada Star stock.
Management does not intend to make its final decision on this option
until mid-June 1998, but will likely not exercise the option.
However, the Company expects to receive significant royalty income
from the project once capital costs are recovered by Nevada Star, and
expects to be able to generate cash flow from sales of Nevada Star
stock once the property is in production.
GENERAL DEVELOPMENT OF THE COMPANY'S BUSINESS
Strategy.
The Company's corporate strategy from its beginning has been
directed toward the acquisition and control of land and mineral
rights for exploration and development in established mining
districts that have had large and profitable production histories.
This approach is referred to in the mining industry as "headframe
geology," which is defined as concentrating exploration and
development efforts near previously known, profitable ore deposits.
<PAGE> 34
The Company explores for and seeks to develop mineral resources
in conjunction with other larger and better financed companies. The
Company is aware that major companies generally have established
minimum criteria for the projects they choose to invest their
financial and human resources in. Management therefore must choose
projects with a likelihood of meeting these minimum criteria if its
goal of eventually joint venturing the project has a likelihood of
being achieved.
By pursuing projects which appeal to major companies, the
Company expects in this way to achieve a major increase in the value
of its assets and to eventually obtain production income with a
minimum financial risk and dilution of its capital stock since
typically, major companies are able to obtain debt financing for
development expenditures and construction of the project for
production.
In addition to focusing on established mining districts, the
Company also has sought to explore and develop mineral properties in
areas that have not had previous production or were, until recently,
mostly unexplored. These areas include Kings Canyon and Blue Mountain
in Utah. At Kings Canyon, for example, the Company has participated
in the discovery of a new gold deposit and controls mining claims and
mineral leases that Company geologists believe have potential for
further gold discoveries. The Company seeks to make new discoveries
as well as expand historic mining areas using modern geologic science
and technology.
The Company also has compiled an extensive technical library on
properties that it holds, consisting of geological reports,
historical data and maps. The Company has recently added for the
first time a property outside the United States by acquiring a
participating interest in the Sierra Mojada Project in Mexico. Also,
if the Company proceeds with its acquisition of Royal Silver Mines,
Inc., the Company will be a participant in major international mining
developments through Royal Silver's Mocha Copper Project in Chile,
under contract with Teck Corporation, based in Vancouver, British
Columbia. Further, Royal Silver holds a silver/zinc project in
Nayarit, Mexico. It is possible that the Company may further expand
its operations outside the United States.
BUSINESS PLAN.
The long-term business goal of the Company continues to be the
discovery of significant reserves on its mineral properties by
advancing their exploration and development potential. The Company's
intermediate plan for funding and accomplishing this goal is multi-faceted:
1. The Company expects to develop a positive cash flow in
late 1998 from the proceeds of sales of stock of Nevada Star
Resources acquired from its sale of the OK Mine Project holdings, or
from royalties and profits that are expected to result from its
current business arrangement for production at the OK Copper Project.
<PAGE> 35
The Company intends to add to its projected positive cash flow by
developing and operating a zinc oxide deposit which is believed to be
a resource in excess of 500,000 tons with a grade in excess of 20%
zinc located at Sierra Mojada, Mexico. It is believed that both of
these projects will be placed into production by using construction
debt financing as a major component, rather than issuing substantial
new equity shares.
2. The Company also owns or controls two halloysite clay
deposits in Utah and which have attracted the interest of both
English China Clay Company and New Zealand Clay Company. Halloysite
clay is used in fine bone china and porcelain, and few high-quality
deposits are known worldwide. The Company is seeking to either sell
or joint venture these deposits, which could result in cash flow to
the Company in the near term.
3. The Company intends to simultaneously carry out exploration
to develop ore reserves which can be sold, joint ventured, or mined
by the company at a profit. This would include its mines in the Main
Tintic Mining District, including the Bullion Beck, Centennial
Eureka, Mammoth, the Company and other nearby mines. Also, the
Company's recently acquired properties in Nevada fall into the
exploration category, as does a portion of the Sierra Mojada project,
not containing the zinc reserve referred to above. The exploration
potential of these properties will be explained in more detail in a
later section.
4. The Company intends to obtain funds for carrying out these
development and production activities from capital investment
sources, or from participation in joint venture business
arrangements. The Company is essentially seeking capital to advance
these business goals on an ongoing basis and will be doing so until
the cash flow from the OK Mine Project, Sierra Mojada Zinc Project or
other projects are sufficient to fund the Company's activities.
While the Company intends to implement the foregoing projects,
there is no assurance that any of the foregoing will occur or any
revenues generated therefrom.
GOVERNMENT REGULATION OF ENVIRONMENTAL CONCERNS.
The Company is committed to complying with the various federal,
state and local provisions that regulate the discharge of materials
into the environment and govern the conduct of mining activities for
the protection of the environment. To its knowledge, the Company was
in full compliance during fiscal 1997, with the exception of some
reclamation of drill holes, drill sites and drill roads in the State
of Utah. The Company is in close contact with State of Utah officials
to resolve these issues.
To fulfill its environmental compliance obligations, the Company
must attend to the complex requirements of laws encompassing
jurisdictional authority over matters affecting land, mineral rights
and/or the surface under which mining activities are proposed. Such
<PAGE> 36
compliance may materially affect the Company's capital expenditures,
earnings and competitive position. The Company complies with a
multitude of environmental regulations in the following general
categories: 1) surface impact, 2) water acquisition, 3) site access,
4) reclamation, 5) wildlife preservation, and 6) permit and license
qualification. To date, compliance has not had a material financial
effect on the Company because the Company's activities likewise have
not had a significant impact on the environment.
As the Company becomes more active on its properties it is
reasonable to expect that compliance with environmental regulations
will substantially increase costs to the Company. Such compliance
may include: feasibility studies on the surface impact of the
Company's proposed operations; costs associated with minimizing
surface impact; water treatment and protection; reclamation
activities including rehabilitation of various sites; and on-going
efforts at alleviating the mining impact on wildlife. Moreover,
permits or bonds have been and may continue to be required to ensure
the Company's compliance with applicable regulations.
During fiscal 1997, the Company completed the permitting
necessary to initiate production plans at the OK Copper Project, and
completed preliminary permitting for mine exploration and development
activities at various Company-owned mines in the Main Tintic mining
district. The costs for reclamation bonding at the OK Copper project
will be approximately $350,000 during fiscal 1998 and $105,000 during
fiscal 1999, and will be borne by the operating company Nevada Star,
rather than the Company, as part of the projected operating expenses
in developing the OK Copper Project. The Company does not anticipate
that any additional reclamation bonding will be required during the
estimated period of operation of the OK Project.
With respect to its other mining projects, the Company
anticipates capital expenditures not to exceed $100,000 for
environmental reclamation for the remainder of fiscal 1998.
Nevertheless, future costs of compliance with respect to the
remainder of the Company's mining properties may depend upon the
extent and type of exploration and testing required. There is no
assurance that the Company will be able to comply with all
requirements imposed on such future development, nor that the Company
will be able to economically operate or pursue exploration and
development activities under future regulatory provisions.
OTHER BUSINESS FACTORS
Competitive Conditions in the Industry.
The mining industry is very competitive. Mining companies
compete to obtain favorable mining properties and to evaluate
exploration prospects for drilling, exploration, development, and
mining. The Company encounters competition from other
similarly-situated junior mining companies in connection with the
acquisition of properties capable of profitably producing gold,
silver, copper and other mineralization.
<PAGE> 37
The Company is unable to ascertain the exact number of such
competitor companies. However, the Company believes that with the
development of its projects at the OK Copper Mine and in Sierra
Mojada, its competitive position should improve. Nevertheless, the
Company may be unable to acquire or develop attractive mining
properties on terms it considers acceptable. Accordingly, there can
be no assurance that such competition, although customary in the
industry, will not result in delays, increased costs, or other types
of negative consequences affecting the Company, or that the Company's
programs will yield commercially mineable ore reserves.
General Business Risk.
There is considerable business risk in any mining venture, and
there can be no assurance that the Company's operations will be
successful or profitable. Exploration for commercially mineable ore
deposits is highly speculative and involves risks greater than those
involved in simply the discovery of mineralization. Although
mineralization is commonly found in the earth's crust, mineralization
which can be profitably extracted (termed "ore") is rare.
Even after extensive exploration and development work has been
performed, economic feasibility cannot be finally determined until a
detailed and comprehensive economic feasibility study has been
concluded. Further, there is no assurance that a determination of
economic feasibility will apply over time because it is based partly
on assumptions and factors that are subject to fluctuation and
uncertainty, such as metal prices, production costs, and the actual
quantity and grade of ore recoverable. In many instances, mining
properties which grew unprofitable in one era due to low metal prices
or difficult conditions, become economic again at a later time due to
improved metal prices, advances in technology, or new ore
discoveries. It is therefore common in the industry to re-evaluate
formerly producing mines, to determine if they can be re-opened at a
profit.
Mining companies use the evaluation work of professional
geologists, geochemists, geophysicists and engineers in determining
the exploration and development potential of a specific property or
project. These professional evaluations generally rely on scientific
estimates and economic assumptions, and in some instances may result
in the expenditure of substantial amounts of money on a property
before it is possible to make a final determination as to whether or
not the property contains economically mineable ore bodies. For
example, from inception to the end of fiscal 1997, the Company has
incurred a deficit of approximately 12.3 million dollars in
implementing its acquisition, exploration and development activities.
Patents, Trademarks, Licenses, Franchises.
The Company does not own any patents, trademarks, licenses,
franchises, or concessions, except for patented mining claims,
granted by governmental authorities and private land owners.
<PAGE> 38
Seasonability.
The Company's business is generally not seasonal in nature
except to the extent that weather conditions at certain times of the
year may affect the Company's access to some of its properties at
higher elevations.
Number of Employees.
The Company currently has 8 full time and 2 part time employees.
The Company also has contract arrangements with 3 geological
consultants. The Company may also contract with additional
consultants from time to time, as required by its operations.
Consultants are treated as independent contractors.
Securities Issuance.
During fiscal 1997, the Company issued 281,420 shares of Common
Stock for cash, at prices ranging from $2.30 to $7.90 per share for a
total of $1,219,559. No shares were issued through the exercise of
stock options in fiscal 1997. Since the end of fiscal 1997 the
Company has issued 3,033,020 shares of Common Stock.
SUBSIDIARIES AND RELATED COMPANIES
Mammoth Mining Company and its Subsidiary, The Gold Chain Mining
Company.
In May 1994, the Company acquired control of approximately 58.6
percent of Mammoth Mining Company ("Mammoth"), which itself
controlled approximately 53 percent of The Gold Chain Mining Company
("Gold Chain"), a Mammoth subsidiary. Mammoth and Gold Chain own land
and leasehold interests in the Tintic Mining District, including the
Mammoth Mine. Following the acquisition of Mammoth and Gold Chain,
the Company purchased additional shares of common stock from their
respective shareholders and received shares from Mammoth and Gold
Chain to cancel debt provided by the Company to finance certain of
their respective operations. To date, the Company has invested a
total of approximately $1,552,760 in Mammoth and $23,200 in Gold
Chain, and controls approximately 96 percent and 61 percent of their
respective shares.
Dotson Exploration Company.
On February 9, 1994, the Company entered into an agreement to
purchase 41,000 shares of Dotson Exploration Company ("Dotson
Exploration", sometimes referred to as "DEC"), from Mark Dotson, the
sole shareholder, for $350,000. These shares gave the Company 51
percent ownership of Dotson Exploration. That agreement also
permitted the Company to acquire newly-issued shares by converting
dollars spent on the development of Dotson Exploration properties and
leases at a rate of $12 per share.
<PAGE> 39
Subsequently, the Company acquired 100 percent of the
outstanding shares of Dotson Exploration through purchase and the
conversion of debt on January 12, 1995. At that time, Dotson
Exploration became a 100 percent, wholly owned subsidiary of the
Company. Dotson Exploration has land and lease ownership, including
the OK Copper Project properties, in the Milford Area Projects,
located in Beaver County, Utah.
Tintic Coalition Mines Corporation.
Tintic Coalition Mine Corporation ("Tintic Coalition") is a Utah
corporation organized by the Company for the purpose of acquiring
control of the land and royalty rights to 680 acres of mining claims
in the Tintic Mining District from Tintic Mountain Mining Company and
its subsidiary Tintic Precious Metals, Inc. Tintic Coalition
acquired 100 percent ownership of the land and royalty rights to the
mining claims by issuing 1,000,000 Tintic Coalition shares to Tintic
Precious Metals, and issuing and conveying 4,510,000 Tintic Coalition
shares to the Company, 3,996,450 of which were in exchange for the
Company's acquisition from Tintic Mountain Mining of the royalty
rights and approximately 25.5 million Tintic Precious shares. The
Company acquired control of land and royalty rights to the 680 acres
for approximately $26,700 in cash and 25,000 shares of common stock
(valued at the then-market price of $1.00 a share). Tintic Coalition
is operated by the Company as a consolidated subsidiary.
Centurion Exploration Incorporated.
Centurion Exploration Incorporation ("Centurion Exploration")
was incorporated in Utah in fiscal 1993 as a wholly-owned subsidiary
of the Company. Centurion Exploration currently is engaged in various
activities and in carrying out business and corporate purposes for
the Company.
Royal Silver Mines, Inc.
During fiscal years 1991 and 1992, the Company acquired a 37.2
percent controlling interest in Royal Silver Mines, Inc., a Utah
corporation ("Royal") formerly known as Consolidated Royal Mines,
Inc. and Royal Minerals, Inc. Royal shares are traded on the OTC
Bulletin Board under the symbol "RSMI." At the time that the Company
acquired Royal, Royal's principal asset consisted of mining
properties in Utah.
During fiscal 1993, the Company acquired an additional 5,400,000
Royal shares, giving an 82.3 percent controlling interest in Royal
and making it a consolidated subsidiary of the Company. During fiscal
1995, Royal completed a reorganization and share exchange with a
company unaffiliated with the Company, resulting in a decrease in the
Company's ownership to approximately 21.6 percent. During the third
quarter of fiscal 1996, Royal ended its fiduciary affiliation with
the Company and terminated its agreement with Centurion Exploration,
Inc. for the provision of administrative services and sharing of
office expenses. By the end of fiscal year 1996, Company ownership
<PAGE> 40
had declined to approximately 15 percent. In November 1997, the
boards of directors of the Company and Royal granted approval to
explore a merger between the two companies. This evaluation is still
in progress, although it is not expected that any definitive plans
will be developed in the near future.
JOINT VENTURES
Nevada Star Resources Corp./Grand Central Joint Venture
In November 1997, the Company signed a letter agreement with
Nevada Star Resource Corp. ("Nevada Star") (Vancouver Stock
Exchange: NEV), based in Seattle, WA with the objective of unitizing
the OK district and achieve construction of a solvent-extraction
electrowinning (SX/EW) copper recovery plant. From the copper
resources mined in the project area, the plant will produce
electrolytic grade copper cathodes for sale to manufacturers and
commodity brokers. Under the agreement with Nevada Star, the Company
will initially receive 2 million shares of Nevada Star stock plus a
royalty consisting of 12 percent of the cash operating profits
applicable to all copper production coming from the 144 square mile
"area of joint interest" centered at the OK Mine site.
Metalline Mining Company/Grand Central Joint Venture
In February 1998, the Company purchased from Royal a 35%
participating interest in the Sierra Mojada Project located in
Coahuila, Mexico. The project area consists of approximately 6,000
hectares and consists of several exploration concessions obtained
through the Mexican government and a number of privately owned mining
concessions which are under purchase contract. The Joint Venture is
currently exploring the District for base metals and silver and is
also evaluating a known high-grade zinc oxide resource of major
magnitude for production. The Company anticipates spending about
$350,000 in 1998 on exploration, project evaluation, and land
payments as its portion of the joint venture expenditures.
Arizuma Resources of Canada/Grand Central Option to Joint Venture
In April 1998, the Company signed an option to joint venture
agreement with Arizuma Resources of Canada on Arizuma's holdings in
the Wonder Mining District, Churchill County, Nevada. The Company has
a limited time to evaluate data and do some preliminary exploration
prior to signing a joint venture agreement. If the Company proceeds,
the joint venture will control about 2,200 acres in the heart of the
Wonder District. Arizuma has reserved the near-surface (open-pit)
potential for itself. The joint venture will be exploring for
mineralized zones at depths of 500 feet or more.
<PAGE> 41
San Miguel Mining Corporation/Grand Central Joint Venture
In March 1998, the Company did an exchange of shares with San
Miguel Mining Corporation ("San Miguel") resulting in the Company
becoming a 19% shareholder of San Miguel. San Miguel is a British
Virgin Islands Corporation set up for the purpose of acquiring and
developing mining concessions principally in Mexico, Peru, and
Bolivia. The other shareholders of San Miquel are Euronet, Inc., a
company with substantial business interests in the Commonwealth of
Independent States (formerly, the Soviet Union) and in Russia;
EuroAmerican Corporation, a financial and holding company based in
New York; and China State Construction Engineering Corporation
(CSCEC), a direct subsidiary of the largest state owned construction
company in China. CSCEC is charged with finding and developing
mineral resources for eventual export to China in order to develop
long-term supplies of metals for the growing Chinese economy.
Currently, San Miquel has an option to acquire a 50% equity
interest in Minera Metalurgica San Miguel, a Mexican corporation
whose primary asset is a 500 ton per day producing mine located near
Zimapan, Hidalgo, Mexico. The mine produces zinc, silver, lead, and
copper and is capable of being expanded to 1000 tons per day with
capital improvements to the mine and mill plant. It is possible that
100% of the project could be acquired under certain conditions. The
Company's initial evaluation of the project is positive and is doing
additional evaluation with the view of acquiring a portion of or 100%
of the project through an assignment of the San Miquel option, or a
joint venture with San Miquel.
Additionally, CSCEC has offered its full complement of
engineers, geologists, metallurgists, and other technicians as well
as equipment support for San Miguel projects. Although the primary
focus of CSCEC is on the countries listed above, the Company has been
informed by the President of San Miguel that CSCEC is also interested
in projects in the United States.
BHP Minerals International Exploration, Inc./Grand Central Joint
Venture.
On August 29, 1997, BHP Minerals International Exploration, Inc.
("BHP"), terminated the Option for Joint Venture agreement it had
signed with the Company in January of 1996. The joint venture was
directed towards exploration of a large bulk, porphyry-type
copper/gold prospect at the "Little Bingham" property in the West
Tintic mining district, about 20 miles westerly from Eureka, Utah.
Prior to exercising the option in July 1996, BHP had advised the
Company that its preliminary results were favorable.
Following the option exercise, BHP performed geological mapping,
geochemical, and geological surveying. During the period of the joint
venture, BHP drilled 5 exploratory drill holes totaling 6,235 feet,
and made periodic cash payments to the Company totaling $35,000. In
August 1997, however, BHP determined that the exploration results did
not meet its criteria and terminated the joint venture.
<PAGE> 42
Upon termination, BHP assigned to the Company the mineral
properties that BHP had acquired on behalf of the joint venture.
These fully-paid properties consisted of 78 unpatented mining claims
(totaling 1,560 acres), and one Utah State Mineral Lease of 640
acres. It is the opinion of Company geologists that the geological
environment of the "Little Bingham" is suggestive of an extensive
porphyry copper/gold mineralized deposit, which will require
additional exploration to further define the target area. Company
management and geologists are currently evaluating the exploration
results developed by BHP.
PROPERTIES
Utah.
The Company owns, or controls through leases and mining claims,
42,460 acres of mining and mineral exploration properties within the
state of Utah. The properties are categorized into project areas.
During fiscal 1997, the Company significantly decreased the size of
its holdings in federal unpatented mining claims because of the
effect on its holding and future exploration costs brought about by
recent additions to the federal mining regulations.
Nevada.
The Company has signed an Option to Joint Venture mining
properties in the Wonder District located in Churchill County, Nevada
and consisting of 2,200 acres of patented and unpatented mining
claims.
Mexico.
The Company is in a joint venture with Metalline Mining Company
based in Coeur d'Alene. Idaho. The Project is located in the Sierra
Mojada District in Coahuila, Mexico and consists of 6,600 hectares of
government and privately owned mining concessions which are
controlled by virtue of the Mexican mining law or under purchase
agreements with their owners.
THE EFFECT OF REGULATORY CHANGES ON HOLDING UNPATENTED MINING CLAIMS
In fiscal 1997, the United States Bureau of Land Management
("BLM") promulgated new regulations regarding hardrock unpatented
mining claims (see 43 CFR3809). Compliance with these regulations is
both time-consuming and costly. As of the date of this filing, these
regulations are being challenged in federal court by two mining
associations representing U.S. and international mining concerns.
However, because the Company concentrates its exploration and
development activities primarily on privately-owned lands and State
Mineral Leases, management expects that these new BLM regulations
will have little effect on the Company's activities. Consequently,
the Company made a determination to decrease even further its
activities on federal unpatented mining claims following the
publication of these regulations.
<PAGE> 43
The Company decreased its total acreage from approximately
99,020 acres at the end of fiscal 1996, to 42,460 acres at the end of
fiscal 1997, primarily as a consequence of the regulations described
above. (The Company reduced its holdings of unpatented mining claims
from 58,260 acres to 6,200 acres because of the regulations.)
COMPANY DRILLING AND ASSAYING CAPABILITY
In fiscal 1995, the Company purchased a track-mounted percussion
drill with a depth capability of 250 feet. During fiscal 1996, the
Company purchased three additional exploration drill rigs and
accessory equipment: a Longyear Model 44 diamond core drill that has
a depth capability in excess of 2,000 feet; a CP 650 drill, which is
a truck-mounted reverse circulation rotary drill that has a depth
capability of 1500 feet; and a Bazooka drill, which is an air-powered
drill designed for drilling core underground and has a depth
capability of 200 feet. At the time of those purchases, the Company
also acquired accessory equipment including two water trucks, two air
compressors, drill steel, tools and four support trucks.
In March 1998, the Company began negotiations with West Hills
Excavating to sell its reverse circulation drill for exclusive use at
the OK Copper Project near Milford, Utah. The Company has reached a
working understanding with West Hills and anticipates signing a final
agreement by May 1998. There is no assurance, however, that the
agreement will be signed.
COMPANY PROJECTS
The Company's projects hold potential for significant mineral
discoveries. During fiscal 1997 the Company focused considerable time
and money on mineral exploration at the OK Copper Mine and Kings
Canyon projects. Also during fiscal 1997, the Company continued with
its evaluation of the Tintic Project, and completed a final summary
of potential ore targets.
Since assuming control in February 1998, new management has
shifted the focus of the Company away from Utah and towards silver
exploration projects in both Nevada and Mexico. The Company's
business strategy now envisions selling or establishing joint
ventures on all Utah properties, and focusing the Company's own
exploration efforts on the Nevada and Mexico projects.
The Company has an additional goal of establishing cash flow
from production at one of its properties. The Company believes that
the OK Copper Mine Project holds the best potential for generating
cash flow in 1998 from mine production, but such cash flow is not
likely to benefit the Company unless the Company exercises its option
to participate in the Project as a joint venture partner, rather than
as a passive royalty holder. It is more likely that the Company could
receive cash flows from sales of common shares of Nevada Star during
1998.
<PAGE> 44
Over the next two to three years, additional cash flow could be
generated from the Sierra Mojada zinc oxide ore body in Mexico, from
the Company's halloysite clay deposits located at the Dragon Mine in
the Tintic District, and at the Silver Island clay project in Tooele
County, Western Utah, and also from royalty income from the OK Mine
after Nevada Star recovers its capital costs of construction. Another
source of revenues are those that could result from an outright sale
of some of the Company's mineral properties to other companies.
While the Company intends to proceeds with the foregoing
projects, there is no assurance that any of the objectives set forth
above will be accomplished.
OK Open Pit Mine - South Utah Copper (OK Mine Project):
The Company's 7,079 acre OK Mine Project is located about 10
miles northwest of Milford, Utah. The project property is centered
around the Company-owned OK Mine which contains significant oxide
copper resources. In November 1997 the Company signed a letter
agreement with Nevada Star with the objective of unitizing the OK
district and achieve construction of a solvent-extraction electro-
winning (SX/EW) copper recovery plant. From the copper mineral mined
in the project area, the plant will produce electrolytic grade copper
cathodes for sale to manufacturers and commodity brokers.
Under the agreement with Nevada Star, the Company will initially
receive 2 million shares of Nevada Star stock plus a royalty
consisting of 12 percent of the cash operating profits applicable to
all copper production coming from the 144 square mile "area of joint
interest" centered at the OK Mine site. The Company will contribute
its 4,172 acres of mining property, which has copper resources
containing 47.7 million pounds of contained copper at an average
grade of .50% copper. Nevada Star will contribute the 2,907 acres of
mining property it controls, which has copper resources containing
48.9 million pounds of contained copper at an average grade of 1.5%
copper.
The combined copper resources from the Company and Nevada Star
total 6.4 million tons of mineralized material containing 96.6
million pounds of copper at an average grade of .75% copper. These
mineral resources, with a 75 percent copper recovery, will provide a
mine life of at least 5 years. However, project geologists believe
that the likelihood of additional copper mineralization being
acquired or discovered is excellent, and that the mine life can be
significantly extended. The foregoing is an estimate and there is no
assurance that the foregoing projections will be achieved.
The Company retains a 30% participation "back in" option
provision exercisable through July 1, 1998. It is not likely that the
Company will exercise this option unless the exercise period is
extended. Nevada Star must complete construction of the SX/EW plant
and confirm the plant's successful operation as part of its "earn in"
commitment. The Company had previously completed the necessary
metallurgical test work and preliminary mine and plant design.
<PAGE> 45
The Company has also obtained all the necessary operating and
environmental permits including the following: the Air Quality Permit
and the Ground Water Discharge Permit from the Utah Department of
Environmental Quality; the Reclamation Plan Permit from the Utah
Department of Oil, Gas and Mining; the Special Use Permit from Beaver
County, Utah; the Power Line Right-of-Way Permit from the US Bureau
of Land Management and the Utah Highway Department; and the Ground
Water Usage Permit from the Utah Department of Environmental Quality.
Under the Groundwater Usage Permit, the Company has completed two
water wells for the Project. Water supply at the Project site is
plentiful and more than adequate for the planned SX/EW operation. The
Company has authorization to complete a third water well when needed.
To the Company's knowledge, no federal permits are required for
either air quality, reclamation or ground water because the OK will
operate on the Company's Dotson Exploration-owned private property.
Dotson Exploration has completed all state-required archeological and
environmental surveys for the OK Project. The State of Utah requires
no further archeological, plant and wildlife studies because no
archeological sites or endangered species of plants or animals are
currently known to exist in the Project area.
During early 1997, the Company commenced construction on the
copper heap leach pads. Nevada Star will operate the project and has
committed to provide the estimated $6 million necessary for mine and
plant construction. The plant design provides for the production of
40,000 pounds per day of high grade electrolytic copper at a total
cash production cost of less than 40 cents per pound.
The Company estimates that the construction of the SX/EW plant
can be completed within six months of commencement of construction of
the copper refining plant. Cash flow from sales of copper cathode are
expected to be generated within the first quarter of operations. The
provisions of the joint venture agreement provides that Nevada Star
will receive preferential payment of net profits until capital costs
of constructing the plant are recovered, Thereafter, the Company
anticipates that it will receive cash flow from its 12% net profits
royalty.
The Sierra Mojada District.
Location and Access.
The Sierra Mojada Mining district is located in the west-central
part of the state of Coahuila, Mexico, near the Chihuahua border some
200 kilometers south of the Big Bend of Texas. The principal mining
area extends for some 5 kilometers in an east-west direction along
the base of the precipitous, 1,000 meter high Sierra Mojada Range.
The small towns of Sierra Mojada and Esmeralda are north of and below
the mines near the center of an approximately 3 kilometer wide valley
that is bounded to the north by the Sierra Planchada Range.
<PAGE> 46
The towns are served by a rail line, first built to the district
from Escalon in 1891, and later connected to Monclova. Vehicle
access from Torreon is by 150 kilometers on paved road to the Penoles
chemical plant at Laguna del Rey and then another 58 kilometers of
gravel road north to Sierra Mojada.
History of Mining.
The initial discovery of rich silver ore was made in 1879. Over
the next 12 years numerous small mines developed, for over 5
kilometers, along a continuous, oxidized silver lead ore body known
as the "lead manto."
In September 1891, the Mexican Northern Railroad completed its
spur line from Escalon to the district; it is said that ore coming
from the district and loaded on trains at the advancing railhead had
already paid for construction before the line was completed. Rail
access stimulated development and the period from 1891 to the late
1920's was the peak of productivity of the district.
Production records for the district are incomplete and much of
the production was never recorded. The Joint Venture has acquired
voluminous data from Penoles, a past operator in the district, as
well as other historical data available from past producers and the
Mexican government.
Published data indicates that the lead manto was mined out in
1905. Discovery of orebodies containing copper-silver, silver,
silver-lead and oxide zinc more than made up the difference. Between
1922 and 1931 additional silver-lead ore was discovered and mined to
the south for some 1,400 meters under the range. These orebodies
were later mined more than 2 kilometers to the south. From the
available data it is apparent that the district has produced in
excess of ten million tons of very high grade, direct shipping ore
that graded at least 30% lead, 20% zinc and 1,000 to 2,000 grams/ton
silver.
In early 1992 USMX Inc., based in Denver, CO., undertook a
reconnaissance exploration program in North Central Mexico. Results
of this work were positive and one of the areas identified as having
high potential was the Sierra Mojada District. USMX Inc., through
their Mexican subsidiary MXUS S.A. de C.V., located a large
concession over the entire range in early 1993 containing 4767.3
hectares. Minera Kennecott shortly afterward claimed more territory
to the east, north and west of the USMX ground. USMX then joint
ventured their property to Kennecott. Neither Kennecott nor USMX
attempted to purchase or explore any of the older historic mining
concessions. Kennecott returned the property to USMX in the Spring
of 1996.
Metalline Mining signed a joint venture agreement with USMX in
July of 1996 and took operational control of the USMX concession
along with part of the area located by Kennecott to the north and
west of the mine area. This joint venture agreement called for
<PAGE> 47
Metalline to spend $2 million in exploration or property payments
over seven years. At that point, USMX would have the right to
participate at 35%, paying a percentage of all costs going forward.
The USMX concessions are called the Sierra Mojada and the Sierra
Mojada III and total 6456.5 hectares. Metalline also purchased the
Esmeralda, Esmeralda I, Fortuna, Nortenos, and La Blanca in the
historic mining district. These latter purchases became part of the
area of interest for purposes of the joint venture agreement.
USMX was acquired by Dakota Mining in May 1997, and thus Dakota
inherited rights under the existing joint venture agreement. By the
end of 1997 it had become apparent that Dakota Mining had little
interest in pursuing the Sierra Mojada Project due to other
commitments and corporate difficulties caused primarily by the fall
in the price of gold. Royal Silver successfully negotiated with
Dakota to buy Dakota's 35% "back-in" participation right for $100,000
cash, 200,000 restricted shares of Metalline Mining stock held by
Royal (acquired as an investment in April 1997), and 100,000 free-
trading shares of Royal Silver. Dakota has reverted to a Net Smelter
Return Royalty of approximately 2% which will be paid out of
production from the district. There are no advance royalty payments
required.
In February 1998, as part of the Company's corporate strategy of
combining with Royal Silver, the Company acquired this 35%
participating interest from Royal Silver for 735,000 shares of common
stock and a $350,000 note payable in one year and bearing interest at
8% per annum.
Geology and Exploration
The Sierra Mojada District is located along the southern margin
of the Sabinas Basin, a large east-west trending rift basin in
northeastern Mexico which formed during Late Jurassic and Early
Cretaceous time. Jurassic marine carbonates and shales are overlain
by a Early Cretaceous red bed clastic sequence composed of coarse
grained conglomerates with volcanic and intrusive rock clasts and
tuffaceous finer grained sediments. The red beds are overlain by
Early Cretaceous marine carbonates.
A majority of the silver production during the later years of
production came from disseminated, silver sulfide and sulfosalt
minerals in carbonate rocks; the so called "limey silver" ore.
Bedded, disseminated silver, copper-silver and zinc-silver sulfide
ore that extended laterally was recognized and the high grade
deposits, such as the San Jose (3% to 4% copper and 1-3 kg silver/mt)
were mined. Mineralization with grades lower than that required for
direct shipping ore was left unmined.
Mineralization.
Metalline geologists have been evaluating two distinct
disseminated and massive sulfide silver, copper, lead, and zinc ore
body types in the north side of the district. One is located in a red
<PAGE> 48
bed-sandstone-carbonate sedimentary contact zone. The second is
hosted in carbonate units stratigraphically below the above contact
zone mineralization. The north side ores are an extensive sedimentary
system that is open to additional discovery within and vertically
below the historic mines and both laterally and vertically north and
west of the historic mines.
Recent geologic mapping has established the presence of a
reverse fault over the entire length of the district which separates
the north side sulfide mineralization, deposited in the Taraises
Formation, from the south side manto and chimney oxide mineralization
deposited in the Aurora Formation. This fault, named the Sierra
Mojada fault, strikes near east-west, and dips 65 degrees to 70
degrees north. The most recent movement on the fault shows post
mineral reverse movement with the south side down relative to the
north side.
Therefore, the highly productive ore zones north of the fault
are down thrown on the south side of the fault and are located
stratigraphically below the deepest levels of mining south of the
fault. Both north side ore types are potentially present south of
the fault and present the potential for discovery of large and high
grade sulfide reserves such as those mined historically from north of
the fault. It is important to emphasize that the Sierra Mojada fault
is not located on the red bed/carbonate contact. The fault is
discordant to the contact, not concordant, and down faults the red
bed section on the south.
Examples of the north side ore are: sample Prov-6 from a
limestone bed in the west end of the Providencia mine which assayed
772 grams silver per tonne, 0.23% copper; sample SJ-5 from the lower
levels of the San Jose mine which assayed 315 grams silver per tonne,
1.5% copper, 1.28% lead, and 8.37% zinc; and sample SJ-9 from the
west part of the Fortuna mine, a 1.7 meter face sample assaying 345
grams silver per tonne and 0.56% copper; 23 dump and underground
samples from the Veta Rica mine averaged 347 grams silver per tonne,
0.61% copper, 1.46% lead and 8.44% zinc; thirteen samples taken from
the Tiro Once and the Oriental dumps averaged 127 grams silver per
tonne, 0.77% copper, 4.48% lead and 13.77% zinc; sample Once-4
assayed 394 grams silver per tonne, 5.05% copper, 1.46% lead and
12.42% zinc; the highest grade sample is a massive lead-zinc sulfide
from the San Salvador Mine, 97021804, which assayed 4,136 grams (129
ounces) silver per tonne, 70.20% lead and 12.40% zinc (over US$1500
per tonne).
Highlight samples of the contact zone ore are: sample SJ-10,
from the northernmost part of the San Jose mine, a 3 meter face
sample, which assayed 3,572 grams silver per tonne, 5.71% copper,
2.41% zinc, and 329 grams cobalt per tonne; sample SB-31 from the San
Buena mine which assayed 2,871 grams silver per tonne, 10.49% copper,
2.19% lead, 11.67% zinc and 215 grams cobalt per tonne; sample Vul -
7 from the Vulcano dump which assayed 506 grams silver per tonne,
0.23% copper, and 152 grams germanium per tonne and 97020709, also
from the Vulcano, assayed 1,107 grams silver per tonne, 1.34% copper,
and 1,175 grams cobalt per tonne.
<PAGE> 49
Cobalt is a potential economic credit for the district ores.
Eleven samples with cobalt assays greater than 300 grams per tonne
came from the Diez, Encantada, Poder de Dios and Vulcano mines, these
samples averaged 489 grams silver per tonne, 0.62% copper and 620
grams cobalt per tonne.
Historic data acquired on the district indicated that samples
from the Oriental dump contained high germanium values. 25 samples
were collected from mine dumps spaced throughout 5 kilometers of the
district for germanium assay. The samples averaged 177 grams
germanium per tonne with a germanium high of 420 grams per tonne.
Other samples with germanium values are: VR-2 from the Veta Rica mine
which assays 47 grams silver per tonne, 0.10% copper, 4.90% lead,
6.70% zinc and 240 grams germanium per tonne; and M-2 from the
Monterrey mine dump which assays 180 grams silver per tonne, 0.66%
copper, 0.35% lead, 5.64% zinc and 110 grams germanium per tonne.
Present analytical results indicate that significant by-product
amounts of germanium and cobalt are present and further evaluation of
this potential as well as the metallurgical requirements for
extraction of these metals is of high priority.
Project geologists have collected and assayed a total of 378
samples from underground workings and mine dumps which average 173
grams (5.6 ounce) silver per tonne, 0.37% copper, 1.82% lead, and
3.62% zinc. 228 samples are considered to be above an underground
mineable grade and average 263 grams (8.5 ounce) silver per tonne,
0.54% copper, 2.92% lead and 5.84% zinc.
To date, less than 20% of the historic workings under the
control of the joint venture have been examined. The presence of
over 80 kilometers of underground workings has allowed project
personnel to gain a more complete understanding of this large and
complicated mineral system and will continue to do so during future
work.
The Joint Venture believes the Sierra Mojada concessions host
large tonnage sulphide resources of silver, copper, cobalt, lead,
zinc, germanium and gallium ore deposits that will be highly
profitable to be mined using modern mining techniques.
Mineros Nortenos Concession.
Metalline Mining signed a purchase agreement on the Mineros
Nortenos concession in August 1997. This purchase includes the
following mining properties: San Salvador, Encantada, Esmeralda,
Fronteriza, Nuevo Alamaden, Parrena, La Suiza, Atalaya, and Vulcano.
In addition to the mineral properties, the agreements also convey
surface ownership, water rights, and extensive surface facilities
including warehouses, shops, office facilities, living quarters, and
three operating shafts with hoists. The San Salvador, Encantada,
Esmeralda, and Fronteriza contain the historic high-grade
silver-lead-zinc "main manto" zone which was responsible for about 5
million tonnes of production at grades between 1-3 kg/tonne silver
and 20-30% lead.
<PAGE> 50
Extensive evaluation in the 1970's by the Consejo de Recursos no
Renonvables (non-renewable resources division of the Mexican
Government) credits this zone with an existing known resource of
slightly over two million tonnes of oxide zinc ore. These results
are tabulated below:
<TABLE>
Approximate
Average
Mine Percent
Positive Probable Possible Total Zinc
(tonnes) (tonnes) (tonnes) (tonnes) Grade
<S> <C> <C> <C> <C> <C>
San Salvador 465,038 282,520 4,256 751,814 20.5
La Encantada 107,912 5,210 69,675 182,797 17.5
Fronteriza 664,308 201,796 205,793 1,071,897 18.5
TOTAL 1,237,258 489,526 279,724 2,006,508 19.0
</TABLE>
Assuming that these resources can be verified, this ore block
could be a very valuable asset of the joint venture. This is a
resource of approximately 838,000,000 pounds of zinc having a gross
metal value at current prices ($.53 per pound) of approximately
$444,000,000. However, metallurgical techniques to successfully
recover zinc oxide are limited and dependent upon factors which the
joint venture has not conclusively determined.
The joint venture has engaged N.A. Degerstrom of Spokane,
Washington to undertake testing to determine the best methodology to
treat this ore. Several prominent and skilled companies which
specialize in zinc oxide deposits have visited the site, toured the
workings, and taken bulk samples to test the amenability of treating
the ore. An alternative would be to direct-ship the ore to nearby
smelters. This alternative would require substantially less up-front
capital to begin mining since a metallurgical plant would not have to
be constructed.
The Company has also made contact with several other
metallurgical consultants who have suggested alternative treatment
techniques which include:
[1] Acid leach followed by electro-winning to recover
direct-to-market electrolytic zinc;
[2] Sulfidization followed by flotation to produce a zinc
concentrate to be shipped to a zinc smelter;
[3] Utilization of a zinc fuming plant to produce a high-grade zinc
oxide product to be shipped to a zinc smelter.
The oxide resources cited by the Mexican Government and
tabulated above are important and are potentially highly valuable,
but an equally important reason for the purchase of the Nortenos
concession is to gain control of the down-faulted southern extension
of the copper-silver-zinc sulfide mineralization found north of the
fault and which lies untested to the south at depth below the
<PAGE> 51
historic workings. This exploration concept is discussed in detail in
the above section titled "Mineralization." Management believes that
this dropped block has the potential for discovery of very large
tonnages of both high-grade and bulk mineable mill-grade ore, and
represents the highest priority exploration target developed to date
in the district.
Property Payments; Sierra Mojada District
The following table estimates annual payments due going forward. Note
that all payments are optional, and that all purchase agreements may
be terminated by notification to the underlying property owner.
However, failure to maintain payments, or cancellation, will result
in forfeiture of past payments and termination of the Joint Venture's
interest in the underlying mining properties. (All amounts in U.S.
dollars.)
Property 1997 1998 1999 2000
Esmeralda 30,000 80,000 100,000
Esmeralda I 15,000 15,000 20,000 30,000
Fortuna 10,000 25,000 30,000
La Blanca 10,000 20,000 20,000 60,000
Nortenos 110,000 192,500 3,170,000
TOTALS $240,000 $357,500 $3,210,000 $90,000
* Note that the Company is responsible for IVA taxes on the
Esmeralda I only in addition to the above payments.
Summary
The Sierra Mojada project can be summarized as follows:
1. The old mining area comprises a very large mineralized
center by itself and mineralization is not confined to that area;
small mines and prospects abound to the west and east within the
joint venture holdings. There has been production from an area
called San Francisco Canyon approximately 4 kilometers to the
northwest along the range front, and a massive sulfide was drilled by
Penoles at the Palomas Negras area 10 kilometers northwest at the
northwest end of the range. Both these areas are in-holdings owned
by individuals, and are surrounded by the Sierra Mojada concession.
There is excellent potential for additional discovery outside of the
old district, within the Sierra Mojada concession.
2. Sierra Mojada has produced in excess of 10 million tons of
very high grade silver, copper, lead, and zinc ore. Cobalt is known
to have been a by-product of some of the copper-silver ore bodies.
Ore grade occurrences of germanium and gallium have been documented.
The cobalt and germanium-gallium content may be important by-product
metals.
<PAGE> 52
3. The district has never had a mill, and the fact that all
ore had to bear both high shipping cost and high royalties makes it a
certainty that lower grade material present was not mined. Review of
old data, examination and sampling of underground workings and dumps
indicates that mill grade mineralization is present and abundant.
4. Even when controlled by Penoles and ASARCO, the district
was operated as a series of individual small mines and leases,
assuring that no systematic district wide exploration and development
was ever done. This lack of coordination between properties makes it
likely that they overlooked ore within the trend.
5. Previous exploration was guided by an epigenetic intrusive
related hydrothermal geologic model. Reinterpretation of the ore as
a product of syngenetic sedimentary processes will in all probability
lead to the discovery of additional deposits.
6. Because of excellent access provided by the old mines, it
will be possible to obtain an enormous amount of information at a
relatively small cost by mapping and sampling the old workings. Data
generated by the initial phase of work will guide a second phase of
drilling from underground and on surface.
7. Conditions are excellent for underground development and
mining. The rock is very competent and the mines are dry and
relatively shallow. Topography makes it feasible to drive a decline
into and under the old ore zone and to develop laterally and
vertically along the old workings to extract any ore proven within
and adjacent to the old mines by high productivity, mechanized
methods. The maze of interconnected workings comprise a band 5
kilometers long, at least 3 kilometers wide, and 200 to 500 meters in
vertical extent. Adequate ventilation is assured, and numerous
shafts and openings to the surface will expedite the installation of
mine services to any part of the zone.
Project Objectives.
The objective of the Sierra Mojada Joint Venture is to develop
the reserves necessary to justify the construction of a mill and to
initiate production at Sierra Mojada. The priorities listed below
are subject to change as data are acquired, but will serve to
illustrate the scope of the project.
1. Develop reserves by mapping, sampling, and by drilling from
surface and the existing workings. Considerable effort will be
allocated to a more complete understanding of the nature,
distribution and ore controls of the mineral systems and the use of
this information as a guide during drilling and reserve development.
2. Verify the zinc oxide reserve by drilling and begin a pre-
feasibility study to determine the economics of mining this mineral
resource. Collect information comparing the feasibility of shipping
this material directly to a smelting plant versus construction of a
milling and SX/EW extraction plant to produce direct-to-market zinc
cathodes.
<PAGE> 53
3. Conduct metallurgical studies of the ores, including the
cobalt and germanium-gallium content to determine the milling
characteristics of the oxide, sulphide, and mixed oxide-sulphide
ores.
4. Complete the acquisition of Unification Mineros Nortenos
and additional concessions of interest
5. Explore within, adjacent to and outside of the main mining
zone for additional orebodies.
There is no assurance that this project will become operational
and in the event that the project becomes operational, that the
Company will receive any revenues therefrom.
Wonder District Project.
The Company signed an option to joint venture agreement in April
1998 with Arizuma Resources Inc. ("Arizuma") Vancouver Stock
Exchange: ARZM) on Arizuma's holdings in the Wonder Mining District,
Churchill County, Nevada. There is no assurance that the Company
will exercise its option and in the event the option is exercised
that the project will generate any revenues for the Company.
The joint venture, if entered into, will explore for and develop
all oxide silver-gold and silver-rich base metal sulfide deposits
below open-pit mineable depths (500 feet) in this famous silver
district, located in the Clan Alpine Mountains 50 miles east of
Fallon, Nevada. The joint venture will control approximately 2,200
acres in the heart of the district, of which nearly 1,000 acres are
patented claims, and include the Nevada Wonder, Queen, and Jackpot
Mines, and the unmined Silver Center Vein.
The Wonder District was discovered in 1906, and caused one of
the last great mining rushes in the West. From 1907 to 1942, the
district produced approximately 6.7 million ounces of silver and
71,600 ounces of gold from 413,000 tons of ore. Average grades were
16.2 ounces per ton (opt) of silver and 0.17 opt gold. Of these
productions totals, nearly 90% is credited to the historic Nevada
Wonder Mine. The majority of production from the district occurred
between 1911, when a mill was commissioned, and 1919, when Congress
repealed the Pittman Act causing silver prices to drop 50%.
The Wonder vein system has a strike length of nearly 6,000 feet,
of which only 2,000 feet have been explored and partially mined.
Mining widths up to 40 feet were reported from two larger ore shoots,
one of which was explored to over 2,000 feet in depth. The vein
system is strongly oxidized to 1,300 feet, and contains two zones of
high-grade, secondarily enriched ore from 500-700 feet and from
1,100-1,300 feet.
<PAGE> 54
Historic data shows that of the two main ore shoots, the
southerly, or Extension shoot was stoped nearly continuously for
hundreds of feet to the 1300 level. Exploration in the sulfide zone
continued to the 2000 level, where good grades were still reported,
and the mine remained dry. Because the milling operation could only
treat oxide ores, no sulfide ore was produced. The northerly and
larger of the two main ore shoots, the Nevada Wonder, was stoped
nearly continuously from the surface to the 500 level, and only
sporadically lower to the 1600 level.
The Company conduct surface exploration in April 1998 and mobile
a drill crew and equipment to the district for a 5,000 foot initial
program to begin in May. This program will test both the strike
potential and depth potential of the Wonder vein system. Depending
upon the results of this work, the Company will make a decision to
proceed with the joint venture.
In addition to the Wonder property, the Company has acquired
exploration options on three other silver exploration properties in
Western Nevada which it intends to evaluate during the coming field
season.
Tintic Project:
The Tintic mining district lies about 70 miles southwest of Salt
Lake City. The value of past production of gold, silver, copper, lead
and zinc from the district in today's dollars is close to $2 billion.
During the period between 1979 and the present, Centurion acquired
the lands that were the asset base of dozens of former mining
companies. These acquisitions included the purchase of the Centennial
Eureka and Bullion Beck Mines, which were the flagship mines of U.S.
Smelting and Refining Company. While the acquisition may have been
profitable for U.S. Smelting and Refining Company, there is no
assurance they will be profitable for the Company.
Also acquired were the Mammoth, Gold Chain, the Company, and
Victoria Mines, as well as many others. The patented mining claims
(privately owned mining properties) now owned by the Company in
Tintic total 11,133 acres, and have had past production of over 100
million ounces of silver, 2 million ounces of gold, 100 million
pounds of copper, 1 billion pounds of lead and 100 million pounds of
zinc. Most of this production was from oxidized ore above the water
table, and it appears that substantial potential remains at depth
below the water table in the sulphide ore zone in many of these
mines.
The Company believes exploitable mineral resources exist in the
Mammoth Mine. Mammoth mine records show that the shaft pillar, a
mineralized zone proximal to the mine shaft from the 150 foot level
to the 550 foot level, contains an estimated 42,000 tons of probable
ore grading 0.18 ounces per ton gold, 23 ounces per ton silver, and
4.5 percent copper. Mine records also show that the New Park Mining
Company developed mineral resources on the 2400 to 2600 foot levels
of the Mammoth Mine during the 1970's which were left in place when
<PAGE> 55
operations were terminated by New Park Mining Company. This resource
is estimated to contain 116,000 tons grading 0.284 ounces per ton
gold, 15.2 ounces per ton silver and 1.3 percent copper.
In fiscal 1997, Company geologists completed a series of reports
which outline and summarize several dozen surface and underground
exploration targets on Centurion's Tintic properties. These reports
culminate work which began in 1993. The targets have been developed
from geochemical sampling, surface and underground geologic mapping,
and previous drilling. There are several targets which could be
explored from the surface and which the Company will consider
drilling if and when funding is available.
To properly explore the underground targets, the Company would
have to refit and refurbish at least two of the existing shafts at
either the Mammoth, the Company, Centennial Eureka or Bullion Beck
mines, and would have to refurbish substantial mine workings, and
establish compressed air, water, and electric services underground.
This would permit access for underground diamond drills to be placed
in existing mine workings for exploration and development drilling
near the bottom of these mines at about the 2000 level. The costs of
rehabilitating these shafts and workings is beyond the scope of the
financial capabilities of the Company at this time, and thus the
Company is actively seeking a major joint venture partner for the
project.
Management believes that due to the poly-metallic nature of
these orebodies, recent upward movements in the silver price, coupled
with a re-vitalized interest by major companies in underground mines,
the Tintic holdings are of high interest to a number of prospective
partners. The Company is in active discussions with at least one
major company which is conducting an initial review of Company data.
Management continues to believe that the mines it owns in the Tintic
district have the potential to support highly profitable underground
mining operations.
Kings Canyon Project:
Kings Canyon is a large, gold exploration property first
identified in 1988. The Company's project area of 2,560 acres lies
about 60 miles west of the town of Delta, Utah, and is accessible by
US Highways 6 and 56 and by improved gravel and dirt roads. The
property has no previous mining history. Electrical and water supply
are available near or within the project area for mining operations.
The Kings Canyon area is host to widespread gold mineralization
and geochemical anomalies over 50 square miles. Although Kings Canyon
initially was a grass-roots project, thus far the Main Discovery Area
contains a drilled out, shallow gold deposit which contains more than
200,000 ounces of gold upon which the Company owns a 4 percent
production royalty interest. Cash costs for this discovery were less
than $10 per ounce of contained gold.
<PAGE> 56
Comprehensive geologic studies of the Kings Canyon area since
1992 have established that the Discovery Area is only one of the
favorable drill targets on the property. The Company conducted a 9
hole, 5,550 foot drilling program on the property in fiscal 1997. In
August 1996, drill hole CKC-96-10, tested an area several miles south
of the Main Discovery and intercepted encouraging gold
mineralization. As of the date of this filing, the Company has not
confirmed commercial gold mineralization by offset drilling at this
location. There is no assurance that this property will be
commercially developed or if developed will be profitable.
Adjacent to the Company's 100 percent controlled properties, the
Company owns a 4 percent production royalty on all minerals produced
from 82 unpatented lode mining claims on 1,600 acres, representing a
drilled out shallow gold deposit containing at least 200,000 ounces
of gold owned by an unrelated company. The Company also owns a 1.5
percent production royalty on approximately 7,000 acres of Utah State
Mineral Leases and unpatented lode mining claims held by another
company.
For the past several years, concern about the nearby King Top
wilderness study area ("WSA") has delayed exploration of a portion of
the Kings Canyon property. However, the Main Discovery deposit and
the CKC-96-10 gold discovery zone are both outside the WSA, as are
most of the promising exploration targets. Management believes that
the WSA will not be approved for permanent inclusion within the
wilderness system. All of the present exploration targets are
outside the present King Top WSA.
Dragon Mine and Silver Island Halloysite Clay Deposits.
The Company owns the Dragon Mine in the Tintic District, near
Eureka, Utah, and controls the Silver Island property through a state
mineral lease. Both of these properties have potential for the
development of halloysite clay deposits of commercial grade.
Halloysite is used in ceramics and bone china and is found in
commercial quantities of high purity only in a few selective sites
worldwide. There is no assurance that this property will ever be
commercially developed or in the event that it is developed that it
will be commercially profitable to operate.
The Dragon Mines has been exploited as recently as the 1960s for
its halloysite when the product was being used as a filtering
component. At present, based upon a review of old mine maps and
data, it appears the Dragon contains a major haloysite resource in
excess of 100,000 tons. There is no assurance that the foregoing is
accurate or that the property will be developed.
The Silver Island deposit is located near the Utah/Nevada border
near the town of Wendover, Utah. It is in the exploration phase.
The Company has removed several high-quality halloysite samples from
Silver Island, and based upon the geology of the area, believes a
significant halloysite resource might by developed. The project will
require additional exploration by drilling.
<PAGE> 57
The Company has had numerous discussions and has received site
visits from two major halloysite clay processors - English China Clay
Company and New Zealand Clay Company. Both of these companies have
made an initial review of the projects and are proceeding with
additional studies of the deposits and testing of the clay material.
The Company has rehabilitated access down the Dragon shaft and
has installed ladders at Silver Island in order to facilitate
sampling and study of the two deposits.
Other Projects
The Company's other projects include the Blue Mountain property.
This project consists of 3,339 acres located in the Milford/Beaver
area, about 40 miles westerly from Milford, Utah. Disseminated
copper mineralization is widespread across the Blue Mountain property
with numerous small locations that contain ore grade bearing rock at
the surface. Geological evidence suggests a porphyry copper
environment and, possibly, related gold deposits may be present. The
Company drilled 5 holes during 1996 totaling 2300 feet with
inconclusive results, but no holes were drilled during 1997.
As discussed above, on August 29, 1997, BHP Minerals
International Exploration, Inc., terminated the Option For Joint
Venture agreement it had signed with the Company in January of 1996.
The joint venture was directed towards exploration and commercial
development of a large bulk, porphyry-type copper/gold system at the
"Little Bingham" property in the West Tintic mining district of Utah.
For more information about the termination of this joint venture,
please refer to the aforementioned discussion.
The project entitled "West Tintic" consists of 12,614 total
acres of private mineral rights, Utah State Mining Leases and federal
mining claims that the Company holds, and was not part of the "Little
Bingham" property in the West Tintic mining district that comprised
the BHP/Grand Central joint venture property. This property is
situated about 20 miles westerly from Eureka, Utah. The Company did
not conduct any exploration or development work on these properties
during fiscal 1997 for its own account, and none is planned for
fiscal 1998.
<PAGE> 58
- ---------------------------------------------------------------------
MANAGEMENT
- ---------------------------------------------------------------------
The following table sets forth the name, age and position of
each Officer and Director of the Company:
Name Age Position
Howard M. Crosby 45 Chairman of the Board of Directors
John Ryan 35 President and member of the Board of
Directors
Orson Mabey, III 34 Vice President and a member of the Board of
Directors
Carlos Chavez 57 Secretary/Treasurer
J.D.H. Morgan 59 Member of the Board of Directors
Mike Mason 53 Member of the Board of Directors
No family relationships exist among any directors or officers of
the Company.
The authorized number of directors of the Company is presently
fixed at ten. Each director serves for a term of one year that
expires at the following annual shareholders' meeting. Each officer
serves at the pleasure of the Board of Directors and until a
successor has been qualified and appointed. There are no family
relationships, or other arrangements or understandings between or
among any of the directors, executive officers or other person
pursuant to which such person was selected to serve as a director or
officer.
Set forth below is certain biographical information regarding
each director and executive officer of the Company:
Howard Crosby - Chairman of the Board of Directors
Since February 5, 1998, Mr. Crosby has been the Chairman of the
Board of Directors. Since February 1994, Mr. Crosby has been the
President and a member of the Board of Directors of Royal Silver
Mines, Inc., since February 1994. Since 1989, Mr. Crosby has been
president of Crosby Enterprises, Inc., a family-owned business
advisory and public relations firm. From September 1992 to May 1993,
Mr. Crosby was employed by Digitran Systems, Inc., of Logan, Utah, in
the marketing department. In May of 1993, Mr. Crosby entered into a
business consulting relationship with Centurion and has served as
president and a director of two of the Company's subsidiaries,
Mammoth Mining Company and The Gold Chain Mining Company. Mr. Crosby
received a B.A. degree from the University of Idaho in 1974.
<PAGE> 59
John Ryan - President and a member of the Board of Directors
Since February 5, 1998, Mr. Ryan has been the President and a
member of the Board of Directors of the Company. Since June 1996,
Mr. Ryan has been President and a Director of Metalline Mining
Company. Since April 1997, Mr. Ryan has been a member of the Board
of Directors of Royal Silver Mines, Inc., and its Vice President of
Corporate Development since September 1996. Mr. Ryan is a
professional mining engineer. Mr. Ryan has served as a consultant in
mining engineering services, and will continue in these activities
during his tenure, if elected. In addition to his professional degree
in Mining Engineering, which he received from the University of
Idaho, Mr. Ryan also holds a juris doctorate (J.D.) law degree from
the Boston College of Law.
Orson Mabey, III - Vice President and a member of the Board of
Directors
Since June 1993, Mr. Mabey has been Vice President and a member
of the Board of Directors of the Company. Mr. Mabey is a Senior
Trading Analyst developing commercial trading applications for Tosco
Corporation, the largest independent petroleum refiner on the eastern
coast of the United States. From 1987 to 1993, Mr. Mabey was employed
by Amerada Hess Corporation as Senior Trading Analyst. Mr. Mabey has
a Masters degree in international management from the American
Graduate School of International Management in Glendale, Arizona, and
a B.A. degree in Finance from the University of Utah, Salt Lake City,
Utah.
Carlos Chavez - Secretary/Treasurer
Mr. Chavez has served as Corporate Secretary of the Company
since July 1994 and Treasurer since January 1998. He has been
principally employed as the Company's in-house corporate counsel
since March 1994. Mr. Chavez received his Juris Doctor in 1980 from
Stanford Law School, Palo Alto, California, and has been admitted to
the Utah State Bar and the Bar of the District of Columbia. From
1991 to his employment with the Company, Mr. Chavez was employed with
two firms in Salt Lake City, Utah. During 1989 and 1990, Mr. Chavez
was a visiting assistant professor of law at Whittier College School
of Law in Los Angeles, California. Previously, Mr. Chavez served as
an assistant attorney general of Utah and associate legal counsel for
the University of Utah, where he later taught as an adjunct professor
of law.
J.D.H. (David) Morgan - Member of the Board of Directors
Since April 1991, Mr. Morgan has been a member of the Board of
Directors of the Company. Mr. Morgan has been principally employed
by Lehman Brothers during the last five years. Mr. Morgan has worked
in the metals industry for over 25 years. He holds an engineering
degree from Cambridge University and a Masters degree in mineral
processing from the Royal School of Mines, London University. He is a
Chartered Engineer and a member of the Institution of Mining and
<PAGE> 60
Metallurgy. For the past ten years, Mr. Morgan has been a securities
analyst specializing in mining equities covering North America and
most of the world's other main mining markets. He is a member of the
International Stock Exchange, London, and the Institute of Investment
Management and Research. From 1985 to 1994, he was a Director of
Equity Research with Lehman Brothers International. Currently, he is
an independent mining share specialist based in London.
Michael T. Mason - Member of the Board of Directors
Since January 30, 1998, Mr. Mason has been a member of the Board
of Directors of the Company. Mr. Mason has been Managing Partner of
Minerals Services, LLC. since 1997, providing technical, commercial,
risk management, marketing and financial support to the international
minerals industry. From 1995 to 1997, Mr. Mason was Managing
Director, Senior Trader for AIOC Corporation, an international
commodities trading firm. He has held senior management positions in
metals commodities trading for over 17 years. Mr. Mason acquired
extensive knowledge of international minerals production and
marketing while employed by Asarco, Inc., where he rose through the
ranks from Junior Engineer to Senior Ore Buyer. He has a Master's
degree in business administration, specializing in finance, from the
University of California at Los Angeles. His Bachelor of Science
degree is in metallurgical engineering from the University of
Arizona.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities and Exchange Act of 1934
requires officers, directors, and persons who own more than ten
percent of a registered class of a company's equity securities to
file initial reports of beneficial ownership and to report changes in
ownership of a those securities with the Securities and Exchange
Commission and the National Association of Securities Dealers. They
are also required to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely on
review of the copies of Forms 3, 4, and 5 furnished to the Company or
written representations that no other transactions were required, the
Company has determined that the pertinent officers, directors, and
principal shareholders have complied with all applicable Section
16(a) requirements during fiscal 1997.
Indemnification
At the April 19, 1991, annual shareholders meeting, the
shareholders approved an amendment to the Company's Articles of
Incorporation, limiting the personal liability of directors to the
Company and its shareholders, to the extent allowed by Utah law. In
effect, the shareholders approved the adoption of statutory
provisions which permit a Utah corporation to eliminate the personal
liability of directors for monetary damages for breach of fiduciary
duty.
<PAGE> 61
The Company has been advised that in the opinion of the
Securities and Exchange Commission indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and
is, therefore, unenforceable.
- ---------------------------------------------------------------------
CERTAIN TRANSACTIONS
- ---------------------------------------------------------------------
Certain of the directors and/or officers of the Company also
serve as directors and/or officers of other companies involved in
natural resource exploration and development and, consequently, there
exists the possibility for such directors and officers to be in a
position of conflict. Any decision made by such directors and
officers involving the Company, as the case may be, will be made in
accordance with their duties and obligation to deal fairly and in
good faith with the Company and such other companies. In addition,
such directors and officers are required to declare and refrain from
voting on any matter in which such directors and officers may have a
conflict of interest. In this respect, Howard Crosby, who was the
President of Celebration and of the Company at the time of the
Reorganization, refrained from voting on any matter related to the
Reorganization or any other matter pertaining to both companies.
The Company has engaged in transactions with its officers,
directors and principal shareholders, including the issuance of the
initial shares of the Company. Such transactions may be considered
as not having occurred at arm's length. The Company may be engaged
in transactions with management and others involving conflicts of
interest, including conflicts on salaries and other payments to such
parties, as well as business opportunities which may arise. In this
regard, the directors of the Company are involved in other companies
and may have conflicts of interest in allocating time between the
Company and other entities to which they are affiliated.
Relationships and Transactions Pertaining to the Company.
The Company had leased certain technical geological equipment
and field vehicles from Axis Geophysics Company ("Axis"), a sole
proprietorship operated by Spenst Hansen, an officer, director, and
principal shareholder of the Company. Upon review of these
transactions it appears the Company may have been mislead in some or
all of such transactions. The Company has initiated a civil suit
against Spenst Hansen. See "Litigation."
Also, prior to December 1994, Keystone Surveys, Inc.
("Keystone"), a corporation owned by Mr. Hansen, leased
non-management personnel to the Company.
On January 30, 1998, the Company affected a 1 for 10 reverse
stock-split of the Company's common shares; approved the issuance of
250,000 shares of Common Stock pursuant to the Company's 1991 Stock
Option and Award Plan; and, changed the Company's name to Grand
Central Silver Mines, Inc.
<PAGE> 62
- ---------------------------------------------------------------------
MANAGEMENT REMUNERATION
- ---------------------------------------------------------------------
SUMMARY COMPENSATION
Compensation of Directors.
No contractual arrangements with any member of the Board of
Directors. Directors receive for their services a retainer fee
payable in shares of the Company's Common Stock, currently at the
rate of 500 shares earned per quarter of completed service. During
fiscal 1997, 8,000 shares were earned, of which 6,000 were issued
during fiscal 1997, and 2,000 were issued during the first quarter of
fiscal 1998.
As additional compensation, directors receive options to
purchase Company stock at $1.50 per share, vesting at a rate of
10,000 options per quarter. See footnote 2 to the "Summary
Compensation Table", below. During fiscal 1997, 16,000 options
vested, of which 12,000 were issued during fiscal 1997, and 4,000
were issued during the first quarter of fiscal 1998. No options were
exercised during fiscal 1997. During fiscal 1997, the Company
approved an entitlement to authorize at a later date a one-time grant
of out-of-the-money options to purchase Common Stock, but only upon
the satisfaction of certain terms and conditions. The grant,
vesting, and issuance of these options is conditional upon the market
price of the stock achieving, before the end of fiscal 1999, an
average price for 30 or more consecutive trading days of at least
$1.20, which is 25% greater than the market price of the stock on the
date of Board approval ($0.96 per share).Upon meeting that condition,
the authorization to grant the options would be triggered and, upon
subsequent vesting, the options would have had an exercise price of
$1.44 per share, set at 150% of the closing price on the Board
approval date. These out-of-the-money options would then be
exercisable until September 30, 2001. To date, the conditions have
not been met and, therefore, no out-of-the-money options have been
authorized, vested, or exercised.
Compensation of Executive Officers.
The following table sets forth the compensation paid by the
Company during each of the last three fiscal years to its Chief
Executive Officer, and to the other four most highly compensated
officers and executive officers, but only if the total annual salary
and bonus of any such executive officer exceeded $100,000 for Fiscal
1997 (the "Named Executive Officers"). This information includes the
dollar value of base salaries, bonus awards and number of stock
options granted, and certain other compensation, if any.
<PAGE> 63
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Securities
Name and ------------------- Other Annual Underlying
Principal Position Year Salary Compensation[1] Options/SARS[2]
<S> <C> <C> <C> <C>
Spenst Hanson 1997 $72,000 $44,531 42,000
1996 36,000 92,812 0
1995 36,000 97,500 27,000
</TABLE>
[1] Represents the dollar value of all awards of stock received
under the Company's 1991 Stock Option and Award Plan, as
amended, as part of non-cash compensation that Mr. Hansen earned
during each of fiscal 1997, 1996, and 1995 in lieu of fees of
5,000 shares per quarter for service in each of three positions,
as director, as president and as CEO of the Company, for a total
quarterly award of 1,500 shares. The aggregate number of shares
that have been authorized and reserved under this award to Mr.
Hansen, but which had not vested, and thus had not been issued,
as of September 30, 1997, was 13,500 shares, and their fair
market value at the end of fiscal year 1997 was $46,440, based
on the closing price of $0.344 on September 30, 1997. Of the
13,500 shares that remained unissued at the end of fiscal year
1997, 1,500 shares vested on, and were issued subsequent to,
October 1, 1997. The remaining 12,000 shares will vest quarterly
in blocks of 1,500 shares each on the following dates (all of
which are less than three years from January 30, 1997, the grant
date): January 1, April 1, July 1, and October 1 of 1998; and
January 1, April 1, July 1, and October 1 of 1999. Vesting is
immediate upon a change of control. No dividends are paid on
any of the awards of stock reported.
[2] This amount is a combination of options including: (i) 12,000
vested, but unexercised options that were renewed and extended
on March 31, 1997; (ii) 3,000 options that vested on July 1,
1997; (iii) 3,000 options that vested on October 1, 1997; and
24,000 options that will vest January 1, April 1, July 1, and
October 1 of 1998; and January 1, April 1, July 1, and October 1
of 1999. These options vest at a quarterly rate of 3,000
options, consisting of three awards of 1,000 options each for
service as director, president, and CEO, respectively, of the
Company. Vesting is immediate upon a change of control. The
options are exercisable through September 30, 2000, at a price
of $1.50 per share, the closing price on the grant date.
Other than the Company's incentive Stock Option Plan, there are
no retirement, pension, or profit sharing plans for the benefit of
the Company's officers and directors.
Option/SAR Grants Table.
Information concerning individual grants of stock options,
whether or not in tandem with stock appreciation rights ("SARs"), and
freestanding SARs made during fiscal 1997 to each of the Named
Executive Officers is reflected in the table below.
<PAGE> 64
Option/SAR Grants in Fiscal 1997
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual Alternative
Rates of Stock to 5% and
Price Appreciation 10% Grant
Individual Grants for Option Term Date Value
_______________________________________________________________________________
Percent of
Number of Total Grant
Securities Options/SARs Date
Underlying Granted to Exercise Expir- Present
Options/SARs Employees or Base ation Value
Name Granted (#) in Fiscal Yr Price Date 5%($) 10%($) ($)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Spenst
Hansen 30,000 [1] 50 percent $1.50 09/30/2000 $ 0 $ 0 $ 0
</TABLE>
[1] See footnote 2 to the "Summary Compensation Table" above.
Aggregated Option/SAR Exercises and Fiscal 1997 Year-End Option/SAR
Value Table.
The following table sets forth certain information with respect
to each exercise of stock options and SARs during fiscal 1997 by each
of the Named Executive Officers, and the fiscal 1997 year-end value
of unexercised options and SARs. The dollar values are calculated by
determining the difference between the exercise or base price of the
options and the fair market value of the underlying stock at the time
of exercise and at fiscal year-end if unexercised, respectively. The
unexercised options, some of which may be exercisable, have not been
exercised and it is possible they might never be exercised. Actual
gains realized, if any, on stock option exercises and common stock
holdings are dependent on the future performance and value of the
Common Stock and overall stock market conditions. There can be no
assurance that the projected gains and values shown in this Table
will be realized.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1997
AND OPTION/SAR VALUES AT SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money at FY-End
Options/SARsOptions/SARs (#) at FY-END ($)
Shares Dollar
Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized Unexercisable Unexercisable
______________________________________________________________________________
<S> <C> <C> <C> <C>
Spenst
Hansen 0 N/A 15,000/27,000 [1] N/A [2]
</TABLE>
[1] The 15,000 exercisable options consist of 12,000 vested options
renewed on March 31, 1997, and 3,000 options that vested on July
1, 1997. The 27,000 unexercisable options had not vested prior
to the end of fiscal 1997, but 3,000 of those options vested on
October 1, 1997.
<PAGE> 65
[2] None of the options that were unexercised at fiscal year-end had
any in-the-money value at that date.
Long-Term Incentive Plan Awards.
The Company does not have any formalized long-term incentive
plans, excluding restricted stock, stock option and SAR plans, which
provide compensation intended to serve as incentive for performance
to occur over a period longer than one fiscal year, whether such
performance is measured by reference to financial performance of the
Company or an affiliate, the Company's stock price, or any other
measure.
Compensation Committee Interlocks and Insider Participation.
There are no compensation committee interlocks. With respect to
insider participation, Spenst Hansen and Orson Mabey, III,
participated in deliberations of the Company's Board
of Directors during fiscal 1997 concerning executive officer
compensation.
- ---------------------------------------------------------------------
PRINCIPAL SHAREHOLDERS
- ---------------------------------------------------------------------
The following table sets forth, as of the effective date of this
offering, the outstanding Common Stock of the Company owned of record
or beneficially by each person who owned of record, or was known by
the Company to own beneficially, more than 5% of the Company's Common
Stock, and the name and shareholdings of each Officer and Director
and all Officers and Directors as a group.
Currently, there are 6,062,517 shares of Common Stock are
presently issued and outstanding. Of the foregoing 6,062,517 shares
outstanding, 3,545,486 are "Restricted Securities" as that term is
defined under Rule 144 of the Securities Act of 1933, as amended,
and, as such, may not be sold in the absence of registration under
the Securities Act of 1933, as amended, or the availability of an
exemption therefrom.
The following table sets forth the Common Stock ownership of
each person known by the Company to be the beneficial owner of five
percent or more of the Company's Common Stock, each director
individually and all officers and directors of the Company as a
group. Each person has sole voting and investment power with respect
to the shares of Common Stock shown, and all ownership is of record
and beneficial.
<PAGE> 66
<TABLE>
<CAPTION>
Name and address Number of Percent
of owner Shares Position of Class
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Howard M. Crosby 65,000 Chairman of the 1.07%
105 N. First, Suite 232 Board
Sandpoint, ID 83864
John Ryan 0 President and 0.00%
1010 Ironwood Drive Member of the Board
Suite 105
Couer d'Alene, ID 83814
Orson Mabey, III [3] 37,334 Vice President and 0.62%
264 Nineth Street a member of the Board
Suite 3H
Jersey City, NJ 07302
Carlos Chavez 6,500 Secretary/Treasurer 0.11%
815 Yale Avenue
Salt Lake City, UT 84105
J.D.H. Morgan [4] 34,000 Member of the Board 0.56%
1 Tamplin Grove
London, U. K. W84 J6
Mike Mason 0 Member of the Board 0.00%
142 Stratford
Garden City, NY 11530
All Officers and
Directors as a
Group (6 Persons) [5] 142,834 2.36%
Spenst M. Hansen 222,057 [2] 3.66%
860 South 500 West Street
Salt Lake City, UT 84101
Pines International 900,000 14.85%
Mining Corporation
505 Park Avenue
14th Floor
New York, New York 10022
Royal Silver Mines, Inc. 1,235,000 20.37%
10220 North Nevada, Suite 270
Spokane, Washington 99218
San Miquel Mining Corp. 382,000 6.31%
505 Park Avenue
14th Floor
New York, New York 10022
</TABLE>
[1] In determining beneficial ownership, for purposes of this table
only, the amount reported for each individual or group listed
above includes all shares that such person or group has the
right to acquire within 60 days of September 30, 1997, such as,
but not limited to, all awards of shares that will vest within
such 60-day period, and all shares purchasable through the
exercise of options, warrants or rights within such 60-day
period. Unless otherwise noted, all shares are owned
beneficially and of record.
<PAGE> 67
[2] Includes 1,500 shares for director and CEO fees that vested on
October 1, 1997, and options to purchase 18,000 shares, of which
15,000 have vested and are currently exercisable, and of which
3,000 will vest on January 1, 1998, and become immediately
exercisable within 60 days. Mr. Hanson resigned from the Board
of Directors on April 15, 1998. The Company initiated a civil
suit against Mr. Hansen on April 28, 1998. See "Litigation."
[3] Includes 500 shares for director fees that vested on October 1,
1997, and options to purchase 18,000 shares, of which 17,000
have vested and are currently exercisable, and of which 1,000
will vest on January 1, 1998, and become immediately exercisable
within 60 days.
[4] Includes 500 shares for director fees that vested on October 1,
1997, and options to purchase 18,000 shares, of which 17,000
have vested and are currently exercisable, and of which 1,000
will vest on January 1, 1998, and become immediately exercisable
within 60 days.
[5] Includes 4,020 shares for director, and officer service fees,
and for awards of shares that vest within 60 days, and options
to purchase 68,000 shares, of which 62,000 have vested and are
currently exercisable, and of which 6,000 will vest and become
immediately exercisable within 60 days.
All shares are owned beneficially and of record, unless
otherwise noted. The aforementioned reflects the q for 10 reverse
stock split which occurred on January 30, 1998.
- ---------------------------------------------------------------------
SELLING SHAREHOLDERS
- ---------------------------------------------------------------------
The following table sets forth certain information with respect
to beneficial ownership of the Common Stock as of the date of this
Prospectus and as adjusted to reflect the sale of the shares of
Common Stock offered by the Selling Shareholders. Except as
indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them.
<PAGE> 68
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Prior Shares Owned After
Beneficial to Offering to be Offering
Owner Number Percent Sold Number Percent
<S> <C> <C> <C> <C> <C>
Pines International 900,000 14.85% 900,000 -0- 0.00%
Resort, Inc.
505 Park Avenue
14th Floor
New York, New York 10022
Edward Kanner 12,500 0.21% 12,500 -0- 0.00%
106 Daltree Court
Marietta, Georgia 30068
21st Century 100,000 1.65% 100,000 -0- 0.00%
Investments
136 Heber Street
Suite 204
Park City, Utah 84060
</TABLE>
The aforementioned reflects the 1 for 10 reverse stock split
that occurred on January 30, 1998.
- ---------------------------------------------------------------------
DESCRIPTION OF THE SECURITIES
- ---------------------------------------------------------------------
The Company is presently authorized to issue up to 40,000,000
shares of its $0.01 par value Common Stock. Presently 6,062,517
shares are issued and outstanding. The holders of the Company's
Common Stock are entitled to one vote per share on each matter
submitted to a vote at any meeting of shareholders.
Rights of Common Stock Shareholders
Shares of Common Stock do not carry cumulative voting rights
and, therefore, a majority of the outstanding Common Stock will be
able to elect the entire Board of Directors and, if they do so,
minority shareholders would not be able to elect any members to the
Board of Directors. See "Risk Factors - Cumulative Voting,
Preemptive Rights and Control."
Shareholders of the Company have no preemptive rights to acquire
additional shares of Common Stock or other securities. The Common
Stock is not subject to redemption and carries no subscription or
conversion rights. In the event of liquidation of the Company, the
shares of Common Stock are entitled to share equally in corporate
assets after satisfaction of all liabilities. The shares of Common
Stock, when issued, will be fully paid and non-assessable.
There are no outstanding options, warrants or rights to
purchase shares of the Company's Common Stock, other than as
disclosed in this Prospectus. See "Management Remuneration."
<PAGE> 69
Shares Eligible for Future Sale
The offering the Company has outstanding 6,062,517 shares of
Common Stock. Of the remaining shares 2,517,031 are freely tradeable
without restriction and 3,545,486 are "restricted" securities as
defined in Rule 144 of the Act. See "Plan of Distribution."
In general, under Rule 144, a person (or persons whose shares
are aggregated) who has satisfied a one (1) year holding period may
sell in ordinary market transactions through a broker or with a
market maker, within any three (3) month period a number of shares
which does not exceed the greater of one percent (1%) of the number
of outstanding shares of Common Stock or the average of the weekly
trading volume of the Common Stock during the four calendar weeks
prior to such sale. Sales under Rule 144 require the filing of Form
144 with the Securities and Exchange Commission. If the shares of
Common Stock have been held for more than two (2) years by a person
who is not an affiliate, there is no limitation on the manner of sale
or the volume of shares that may be sold and no Form 144 is required.
Sales under Rule 144 may have a depressive effect on the market price
of the Company's Common Stock.
Transfer Agent
The Company's Transfer Agent is:
OTC Stock Transfer, 231 East 2100 South, Salt Lake City,
Utah 84115 is the transfer agent for the Company's $0.01 par value
Common Stock.
The Company's Shares are traded as a "Small Cap Company" by the
National Association of Securities Dealers, Inc. under the symbol
"GSLM." The prices listed below were obtained from the National
Quotation Bureau, Inc., and are the highest and lowest bids reported
during each fiscal quarter for the period December 31, 1995, through
March 31, 1998. These bid prices are over-the-counter market
quotations based on interdealer bid prices, without markup, markdown,
or commission and may not necessarily represent actual transactions:
<TABLE>
Fiscal Quarter Ended High Bid ($) Low Bid ($)
- -------------------- ------------ -----------
<S> <C> <C>
December 31, 1995 2.06 1.44
March 31, 1996 2.06 1.38
June 30, 1996 1.88 1.31
September 30, 1996 1.69 0.88
December 31, 1996 1.38 0.75
March 31, 1997 0.94 0.50
June 30, 1997 0.75 0.38
September 30, 1997 0.69 0.31
December 31, 1997 5.93 1.56
March 31, 1998 3.00 1.50
</TABLE>
<PAGE> 70
On May 4, 1998, the average of the high bid and low ask
quotation for the Company's common shares as quoted on the NASDAQ
was $2,375.
The approximate number of holders of common stock of record on
May 5, 1998, was 764.
Since its inception, the Company has not paid any dividends on
its common shares. The Company does not anticipate that dividends
will be paid in the foreseeable future.
- ---------------------------------------------------------------------
PLAN OF DISTRIBUTION
- ---------------------------------------------------------------------
The distribution of the offered by the Selling Shareholders may
be effected by one or more transactions that may take place in the
over-the-counter market, including ordinary brokers' transactions,
privately negotiated transactions, or through sales to one or more
dealers for resale of such securities as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by
the Selling Shareholders. The Company will not receive any proceeds
from the sale of the shares of Common Stock.
- ---------------------------------------------------------------------
LITIGATION
- ---------------------------------------------------------------------
The Officers and Directors of the Company certify that to the
best of their knowledge, neither the Company nor any of its Officers
and Directors are parties to any legal proceeding or litigation other
than as described below. Further, the Officers and Directors know of
no threatened or contemplated legal proceedings or litigation other
than as described below. None of the Officers and Directors have
been convicted of a felony or none have been convicted of any
criminal offense, felony and misdemeanor relating to securities or
performance in corporate office. To the best of the knowledge of the
Officers and Directors, no investigations of felonies, misfeasance in
office or securities investigations are either pending or threatened
at the present time.
On January 20, 1998, Thomas F. Miller, James Kontes and United
Silver Mines, Inc., ("Plaintiffs") filed suit against Royal Silver
Mines, Inc., Celebration Mining Company, Howard Crosby, and John Does
1 through 50 (the "Defendants") in the First Judicial District Court
in and for Box Elder County, State of Utah, Case No. 980100049 to
recover the Vipont Mine together with incidental and consequential
damages or in the alternative, consequential, incidental and
compensatory damages together with punitive damages, costs and
attorney's fees. Messrs. Miller and Kontes and United Silver Mines
allege that Royal Silver Mines, Inc. did not issue 2,000,000 shares
<PAGE> 71
of its common stock which were due United Silver Mines and James
Kontes as part of the consideration for the acquisition of the Vipont
Mines. Royal Silver believes the foregoing is totally without merit
and Royal Silver intends to defend the foregoing action vigorously.
On January 22, 1998, Joan G. Rounds, individually and as
custodian for Justin Rounds and Kelly Rounds, and as trustee for John
N. Gromer, JGR Ventures, a Colorado partnership, Norman P. Rounds for
his individual retirement account, Standord Square, LLLP, Oversight
Management Company, Christine M. Fenimore, Michael Fleming, R. David
Preston, and Patricia Brooks ("Plaintiffs") filed suit against Royal
Silver Mines, Inc., Metalline Mining Company, Crosby Enterprises,
Inc., Howard Crosby, Robert E. Jorgensen, John Ryan, Merlin Bingham,
and Daniel Gorski ("Defendants") in the United States District Court
for the District of Colorado, Case No. 98-WY-122. The plaintiffs'
seek to recover the dollar amount of their investments, together with
interest, attorney's fees and costs, as a result of the defendants'
failure to disclose material information and in making misleading
statements in connection with public trading of Royal Silver's common
stock during the period May 1996 through August 1997. Royal Silver
and its officers and directors deny the foregoing allegations and
intend to defend the foregoing action vigorously.
On April 28, 1998, the Company filed a civil action in the
United States District Court for the District of Utah, Central
Division, Case No. 2:98cv00300S against Spenst Hansen, Keystone
Survey, Inc., a Utah corporation, West Tintic Mining Company, a Utah
corporation, South Iron Blossom Mining Company, a Utah corporation,
and Axis Development Corporation, a Utah corporation, Defendants.
The civil action alleges that: 1) the defendants violated Section
16(b) of the Securities Exchange Act of 1934; 2) Spenst Hansen
breached the fiduciary duties owed to the Company; and, 3) Spenst
Hansen converted assets belonging to the Company. The Company seeks
an accounting; recovery of short swing profits; disgorgement of
proceeds; return of stock; not less than $247,000 in actual damages;
not less than $750,000 in punitive damages; an injunction; and, costs
and attorney's fees. On May 5, 1998, the court entered a temporary
restraining order and on May 8, 1998, the parties agreed to extend
the temporary restraining order indefinitely. Mr. Hansen has not yet
filed a response to the allegations of the complaint.
- ---------------------------------------------------------------------
LEGAL MATTERS
- ---------------------------------------------------------------------
Legal matters in connection with the Common Stock of the Company
being sold by the Selling Shareholders will be passed upon by Conrad
C. Lysiak, Attorney and Counselor at Law, West 601 First Avenue,
Suite 503, Spokane, Washington 99201.
<PAGE> 72
- ---------------------------------------------------------------------
EXPERTS
- ---------------------------------------------------------------------
The financial statements of the Company appearing in this
Prospectus and the Registration Statement have been examined by the
accounting firm of Jones, Jensen & Company, Certified Public
Accountants, 50 South Main Street, Suite 1450, Salt Lake City, Utah
84144, as indicated in its report contained herein. Such financial
statements are included in this Prospectus in reliance upon the said
report, given upon such firm's authority as an expert in auditing and
accounting.
- --------------------------------------------------------------------
ADDITIONAL INFORMATION
- ---------------------------------------------------------------------
The Company has filed with the Securities and Exchange
Commission, 450 Fifth Street, N.W. Washington D.C. 20549, a
registration statement under the Act, as amended with respect to the
Units offered hereby. This Prospectus does not contain all of the
information set forth in the registration statement, exhibits and
schedules thereto. For further information with respect to the
Company and the Units, reference is made to the registration
statement, exhibits and schedules, copies of which may be obtained
from the Commission's principals officers in Washington, D.C., upon
payment of the fees prescribed by the Commission.
<PAGE> 73
CENTURION MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
CENTURION MINES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
C O N T E N T S
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
<PAGE> 74
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Centurion Mines Corporation and Subsidiaries
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheets of
Centurion Mines Corporation and Subsidiaries as of September 30, 1997
and 1996 and the related consolidated statements of operations, cash
flows and stockholders' equity for the years ended September 30,
1997, 1996 and 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatements.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated 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, the consolidated financial statements referred to
above present fairly, in all material respects the financial position
of Centurion Mines Corporation and Subsidiaries as of September 30,
1997 and 1996 and the results of their operations and their cash
flows for the years ended September 30, 1997, 1996 and 1995 in
conformity with generally accepted accounting principles.
Jones, Jensen & Company
November 26, 1997
<PAGE> 75
CENTURION MINES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
ASSETS
<TABLE>
<CAPTION>
September 30,
1997 1996
<S> <C> <C>
CURRENT ASSETS
Cash $ 30,080 $ 133,556
Accounts receivable - 5,000
Accounts receivable - related
parties (Note 9) 26,312 28,842
Prepaid mining leases 41,606 76,578
Marketable securities (Note 5) 150,000 150,000
Total Current Assets 247,998 393,976
MINERAL PROPERTIES (Note 3) 9,648,747 8,849,485
PROPERTY AND EQUIPMENT (Note 2)
Furniture and office equipment 249,000 240,717
Field equipment 580,999 441,756
Leasehold improvements 7,517 8,845
Vehicles 125,151 125,151
Leased automobiles and equipment 84,620 84,620
Less - accumulated depreciation
and amortization (547,436) (385,412)
Total Property and Equipment 499,851 515,677
OTHER ASSETS 15,478 11,190
TOTAL ASSETS $ 10,412,074 $ 9,770,328
</TABLE>
<PAGE> 76
CENTURION MINES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30,
1997 1996
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 295,301 $ 206,622
Accrued expenses 24,029 45,587
Payable to related party (Note 9) 476 6,074
Advances from shareholder (Note 9) 84,315 6,561
Leases payable - current portion (Note 7) 30,835 31,895
Notes payable - current portion (Note 6) - 80,542
Total Current Liabilities 434,956 377,281
LONG-TERM DEBT
Leases payable (Note 7) 22,041 32,445
Note payable - related party (Note 9) - 35,530
Notes payable (Note 6) 71,004 38,461
Total Long-Term Debt 93,045 106,436
Total Liabilities 528,001 483,717
MINORITY INTEREST IN
CONSOLIDATED SUBSIDIARIES 32,724 29,685
COMMITMENTS AND CONTINGENCIES
(Notes 10, 11, and 12) - -
STOCKHOLDERS' EQUITY
Common stock, $.01 par value;
40,000,000 shares authorized,
30,575,796 and 26,081,077 shares
issued and outstanding, respectively 305,758 260,811
Additional paid-in capital 21,871,474 19,673,873
Accumulated deficit (12,314,383) (10,654,508)
Receivable related to sale of
common stock (11,500) (23,250)
Total Stockholders' Equity 9,851,349 9,256,926
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $10,412,074 $ 9,770,328
</TABLE>
<PAGE> 77
CENTURION MINES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION> For the Years Ended September 30,
1997 1996 1995
<S> <C> <C> <C>
REVENUES
Operating revenue $ - $ - $ -
Total Revenues - - -
OPERATING COSTS
General and administrative 1,394,512 1,829,076 1,737,027
General and administrative -
related party (Note 9) 77,460 57,375 39,849
Mineral leases 235,811 266,152 204,821
Depreciation and amortization 170,869 136,282 106,328
Total Operating Costs 1,878,656 2,288,885 2,088,025
LOSS FROM OPERATIONS (1,878,656) (2,288,885) (2,088,025)
OTHER INCOME (EXPENSE)
Interest and other income 87,748 155,946 29,956
Interest expense (17,703) (11,013) (2,501)
Loss on investments accounted for
under the equity method - - (686,809)
Sale of securities 319,471 482,413 -
Gain (loss) from disposition
of assets (167,696) - (154,431)
Total Other Income
(Expense) 221,820 627,346 (813,785)
NET LOSS BEFORE
MINORITY INTERESTS (1,656,836) (1,661,539) (2,901,810)
MINORITY INTERESTS IN
(GAIN) LOSS OF
CONSOLIDATED SUBSIDIARIES (3,039) 1,056 266,155
NET LOSS $(1,659,875) $(1,660,483) $(2,635,655)
NET LOSS PER
COMMON SHARE $ (.06) $ (.07) $ (.11)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 28,206,128 24,599,843 23,266,388
</TABLE>
<PAGE> 78
CENTURION MINES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Receivable
Additional Sale Related
Common Stock Paid-in Accumulated to Sale of
Shares Amount Capital Deficit Common Stock
<S> <C> <C> <C> <C> <C>
Balance,
09/30/94 22,157,921 $ 221,579 $14,400,348 $ (6,358,370) $ (323,250)
Issuance of shares
to employees, officers
and consultants for
services at prices
ranging from $1.25 to
$2.25 per share 280,750 2,808 689,002 - -
Issuance of shares for
directors fees at prices
ranging from $1.25 to
$2.13 per share 143,000 1,430 201,870 - -
Issuance of shares for
cash at prices ranging
from $1.07 to $1.62
per share 1,110,000 11,100 1,555,900 - -
Issuance of shares in
lieu of outstanding
debt at prices
ranging from $1.53
to $1.72 per share 8,000 80 12,970 - -
Issuance of shares for the
purchase of equity
investments at $1.77
per share 105,000 1,050 185,000 - -
Stock subscription
received - - - - 300,000
Net loss for the year
ended September 30,
1995 - - - (2,635,655) -
Balance,
09/30/95 23,804,671 $ 238,047 $17,045,090 $(8,994,025) $ (23,250)
</TABLE>
<PAGE> 79
CENTURION MINES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Receivable
Additional Sale Related
Common Stock Paid-in Accumulated to Sale of
Shares Amount Capital Deficit Common Stock
<S> <C> <C> <C> <C> <C>
Balance,
09/30/95 23,804,671 $ 238,047 $17,045,090 $ (8,994,025) $ (23,250)
Issuance of shares
to employees, officers
and consultants for
services at prices
ranging from $1.00
to $1.87 per share 311,250 3,112 440,874 - -
Issuance of shares for
directors fees at prices
ranging from $1.21 to
$1.84 per share 245,000 2,450 339,525 - -
Issuance of shares for
cash at prices ranging
from $0.66 to $1.50
per share 1,538,656 15,387 1,562,879 - -
Issuance of shares
in lieu of outstanding
debt at prices ranging
from $1.25 to $1.87
per share 25,000 250 38,510 - -
Issuance of shares
for the purchase of
property at prices
ranging from $1.31
to $1.84 per share 156,500 1,565 246,995 - -
Net loss for the
year ended
September 30, 1996 - - - (1,660,483) -
Balance,
09/30/96 26,081,077 $ 260,811 $19,673,873 $(10,654,508) $ (23,250)
</TABLE>
<PAGE> 80
CENTURION MINES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Receivable
Additional Sale Related
Common Stock Paid-in Accumulated to Sale of
Shares Amount Capital Deficit Common Stock
<S> <C> <C> <C> <C> <C>
Balance
09/30/96 26,081,077 $ 260,811 $19,673,873 $(10,654,508) $ (23,250)
Issuance of shares
to employees, officers
and consultants for
services at prices
ranging from $0.25 to
$1.25 per share 1,134,819 11,348 696,851 - -
Issuance of shares
for directors fees
at prices ranging
from $0.53 to $1.00
per share 135,000 1,350 99,900 - -
Issuance of shares
for cash at prices
ranging from $0.23 to
$0.79 per share 2,810,420 28,104 1,191,455 - -
Issuance of shares
for purchase of
mineral properties
at prices ranging
from $0.38 to $0.50
per share 371,080 3,711 169,829 - -
Issuance of shares
in lieu of outstanding
debt at $0.92
per share 43,400 434 39,566 - -
Stock subscription
received - - - - 11,750
Net loss for the
year ended September
30, 1997 - - - (1,659,875) -
Balance,
09/30/97 30,575,796 $ 305,758 $21,871,474 $(12,314,383) $ (11,500)
</TABLE>
<PAGE> 81
CENTURION MINES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended September 30,
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,659,875) $ (1,660,483) $ (2,635,655)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Compensation and other expenses paid
through issuance of common stock 708,199 443,986 691,810
Issuance of common stock to directors
for compensation 101,250 341,975 203,300
Loss (gain) on disposition of assets 167,696 (6,799) -
Depreciation and amortization 170,869 136,282 106,328
Minority interests 3,039 (1,056) (266,155)
Changes in assets and liabilities
net of effect of acquisitions:
Accounts receivable 5,000 - (5,000)
Accounts receivable - related parties 2,530 168,997 (114,771)
Marketable securities - (150,000) -
Prepaid mining leases 34,972 13,169 9,927
Other assets (4,288) (5,300) 5,156
Accounts payable and related
party payables 47,551 163,479 125,002
Accrued expenses (21,558) 33,769 (106,232)
Net Cash Used by
Operating Activities (444,615) (521,981) (1,986,290)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (155,043) (250,551) (266,556)
Acquisition and exploration of
mineral properties (793,418) (506,262) (307,220)
Net Cash Used by
Investing Activities $ (948,461) $(756,813) $(573,776)
</TABLE>
<PAGE> 82
CENTURION MINES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
For the Years Ended September 30,
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash $ 1,219,559 $ 1,578,266 $ 1,867,000
Proceeds on leases payable 18,000 - -
Payments on leases payable (29,464) (14,394) -
Payments on notes payable (7,999) (142,193) -
Cash received on subscription receivable 11,750 - -
Advances from shareholder 84,315 5,961 33,400
Payments to shareholder (6,561) (32,800) (32,850)
Net Cash Provided by
Financing Activities 1,289,600 1,394,840 1,867,550
NET INCREASE (DECREASE) IN CASH (103,476) 116,046 (692,516)
CASH, BEGINNING OF YEAR 133,556 17,510 710,026
CASH, END OF YEAR $ 30,080 $ 133,556 $ 17,510
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes $ 600 $ 600 $ 700
Interest $ 17,703 $ 11,013 $ 2,248
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the year ended September 30, 1997, Centurion issued 371,080
shares of common stock valued at $173,540 for the acquisition of
mineral properties. Centurion also issued 43,400 shares of common
stock valued at $40,000 in lieu of a cash payment on a note owed for
the acquisition of mineral properties.
During the year ended September 30, 1996, Centurion issued 25,000
shares of common stock valued at $38,760 in lieu of cash payments for
outstanding debt. Centurion also issued 156,500 shares of common
stock for the acquisition of mineral properties and field equipment
valued at $248,560.
During the year ended September 30, 1996, Centurion acquired mineral
properties valued at $161,196 and property and equipment valued at
$78,734 through the issuance of promissory notes and lease agreements
(See Notes 6 and 7).
During the year ended September 30, 1995, Centurion issued 8,000
shares of common stock valued at $13,050 in lieu of cash payments for
outstanding debt. Centurion also issued 105,000 shares of common
stock valued at $186,050 for equity positions in subsidiaries.
<PAGE> 83
CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Centurion Mines Corporation (" Centurion") was incorporated on
June 21, 1984 under the laws of the State of Utah. Centurion
and its subsidiaries (collectively the "Company") operate as a
mineral resource company actively engaged in the acquisition and
exploration of mineral properties containing gold, silver,
copper and other metals. The Company conducts its business as a
"junior" natural resource company, meaning that it intends to
receive income from property sales or joint ventures with larger
companies.
A majority of the $9,648,747 of mineral properties included in
the accompanying consolidated balance sheet as of September 30,
1997 is related to exploration properties. The Company has not
determined whether the exploration properties contain ore
reserves that are economically recoverable. The ultimate
realization of the Company's investment in exploration
properties is dependant upon the success of future property
sales, the existence of economically recoverable reserves, the
ability of the Company to obtain financing or make other
arrangements for development and upon future profitable
production. The ultimate realization of the Company's
investment in exploration properties cannot be determined at
this time and, accordingly, no provision for any asset
impairment that may result, in the event the Company is not
successful in developing or selling these properties, has been
made in the accompanying consolidated financial statements.
The Company has incurred operating losses from inception to date
and as of September 30, 1997 has an accumulated deficit of
$12,314,383. During the year ended September 30, 1997, the
Company's operations used $444,615 of cash and the Company used
$948,461 of cash in investing activities. The Company's cash
was provided from the sale of 2,810,420 shares of common stock
at an average price of $0.43 per share for $1,219,559.
Management expects that the Company's cash expenditures for the
fiscal year ended September 30, 1998 will consist of the
following: $80,000 for exploration activities, $50,000 for
production related activities, $10,000 for acquisition of
mineral properties, $30,000 for property lease payments, and
$360,000 for general and administrative expenses. Management
also expects that the Company's cash receipts for the fiscal
year ended September 30, 1998 will consist of the following:
$200,000 from the sale of common stock, $70,000 from the sale of
surplus equipment and land, $200,000 from the sale of Nevada
Star common stock and the partial liquidation of Centurion's
ownership in Royal Silver Mines, Inc. stock, and $60,000 from
joint venture business activities.
<PAGE> 84
CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS continued
Although at September 30, 1997, the Company had a negative
working capital of $186,958, the Company is currently
negotiating to sell additional properties and contemplates
financing further exploration of its mineral properties through
joint venture arrangements. Subsequent to the end of fiscal
1997, the Company signed a Letter of Intent with Nevada Star
Resources Corp. to bring about the completion of construction
and begin operation of the SX/EW copper production facility at
the site of the Company's OK Copper Mine project, in exchange
for stock and royalties, any of which may result in additional
capital to the Company (see Note 12). Nevertheless, if the
Company is not successful in raising additional equity capital,
is not able to sell some of its mineral properties, is not able
to negotiate joint venture arrangements, or does not receive
additional capital from its business ventures, the Company will
reduce the level of expenditures to match its cash flow
position.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the
accounts of Centurion and its subsidiaries, Centurion
Exploration Incorporated ("CEI") and Dotson Exploration Company
("DEC"), wholly-owned subsidiaries; Mammoth Mining Company
("MMC") , an 81.8 percent-owned subsidiary; The Gold Chain
Mining Company ("GCMN"), a 61.1 percent-owned subsidiary; and
Tintic Coalition Mines Corporation ("TCM"), an 80 percent-owned
subsidiary. All significant intercompany transactions and
accounts have been eliminated in consolidation. Centurion
acquired its interests in MMC, GCMN, and DEC during the year
ended September 30, 1994. Centurion acquired its interests in
CEI and TCM during the year ended September 30, 1993. (See Note
4).
a. Accounting Method
The Company's financial statements are prepared using the
accrual method of accounting. The Company has elected a
September 30 year end.
b. Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
<PAGE> 85 CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
c. Mineral Properties
Costs of acquiring, exploring and developing mineral properties
are capitalized by project area. Costs to maintain the mining
mineral rights and leases are expensed as incurred. When a
property reaches the production stage, the related capitalized
costs will be amortized, using the units of production method on
the basis of periodic estimates of ore reserves. Mineral
properties are assessed at least annually to determine if a
property has been disproved or should be abandoned based on
other economic factors. The assessment is based on the
Company's evaluation of the geological information gathered on
the property and management's evaluation of the property's
future expectation of profitability. Should a property be
disproved or abandoned, its capitalized costs are charged to
operations. The Company charges to operations the allocable
portion of capitalized costs attributable to properties sold.
Capitalized costs are allocated to properties sold based on the
proportion of claims sold to the remaining claims within the
project area.
d. Property and Equipment
Property and equipment are recorded at cost. Major additions and
improvements are capitalized, while minor replacements,
maintenance and repairs that do not increase the useful life of
the assets are expensed as incurred.
Depreciation of property and equipment is determined using the
straight-line method over the expected useful lives of the
assets as follows:
Description Useful Lives
Furniture and equipment 5 years
Field equipment 5 years
Leasehold improvements Life of lease
Vehicles 5 years
Depreciation expense for the years ended September 30, 1997,
1996 and 1995 was $170,869, $136,282 and $106,328, respectively.
e. Capitalized Interest
Interest costs that relate to the acquisition and development of
mining properties that are not in production are capitalized.
Interest costs related to operations are expensed as incurred.
During the years ended September 30, 1997, 1996, and 1995, the
Company capitalized $0, $0 and $0, respectively, of interest
costs to mineral properties and expensed $17,703, $11,013, and
$2,501, respectively.
<PAGE> 86 CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
f. Net Loss Per Common Share
Net loss per common share has been calculated based on the
weighted average number of shares of common stock outstanding
during the period. Common stock options and other common stock
equivalents were excluded from the calculation of the weighted
average number of shares outstanding for the years ended
September 30, 1997, 1996 and 1995 since they were antidilutive.
No material dilution resulted from common stock equivalents
outstanding for the year ended September 30, 1997.
g. 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.
h. Reclassifications
Certain 1996 and 1995 amounts have been reclassified to conform
to the 1997 financial statement presentation.
NOTE 3 -MINERAL PROPERTIES
The following summarizes the Company's investments in
significant mineral properties as of September 30, 1997 and 1996
and briefly describes the properties and activity related to
each property.
1997 1996
---------- ---------
Utah Gold Belt Properties $ 254,002 $ 254,002
Tintic Districts 6,900,515 6,659,089
Kings Canyon Project 411,488 234,034
OK Copper Mine Area 1,556,771 1,008,693
Other 525,971 693,667
---------- ----------
$9,648,747 $8,849,485
<PAGE> 87 CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 3 -MINERAL PROPERTIES continued
a. Utah Gold Belt Properties
The Utah Gold Belt is a major mineralized structural zone in the
Oquirrh Mountain range situated on the west side of the Salt
Lake Valley which has been a major producer of copper, gold, and
silver. The Company has mineral rights to approximately 33
acres of land. During the fiscal year ended September 30, 1992,
the Company sold a portion of its Utah Gold Belt properties to
Kennecott Utah Copper Corporation ("Kennecott Copper") and
retained mineral royalties on the properties ranging from 2.5 to
5 percent. One of the properties sold to Kennecott Copper,
known as Barney's Canyon South, is currently under development
by Kennecott Copper.
The Company's investment in these properties decreased during
the year ended September 30, 1995 since the Company's ownership
interest in Royal Silver Mines, Inc. decreased to 21% at
September 30, 1995 causing it to no longer be a consolidated
subsidiary of the Company (See Note 4). Royal Silver Mines,
Inc. holds properties at the Utah Gold Belt.
During the years ended September 30, 1997, 1996 and 1995, the
Company expended $0, $625 and $581, respectively, on exploration
of these properties.
b. Tintic Districts
The Main Tintic project covers approximately 14,756 acres of
land which are held in a combination of forms, including private
mining leases, state mineral leases, patented and unpatented
mining claims situated approximately 70 miles southwest of Salt
Lake City, Utah. The area includes various historic mines which
produced large amounts of gold, silver and other metals. The
project area contains several zones of known gold mineralization
that were not explored or developed by the early miners.
Centurion's current targets on the Main Tintic project include
breccia-pipe deposits of gold, silver, and copper.
During the years ended September 30, 1997, 1996 and 1995, the
Company expended $241,426, $292,023 and $542,802, respectively,
on exploration and development of these properties. The
expended $0, $238,321 and $32,100 on acquisition of additional
properties in the Tintic Districts during fiscal years 1997,
1996 and 1995, respectively.
<PAGE> 88 CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 3 -MINERAL PROPERTIES continued
c. Kings Canyon Project
The Kings Canyon project includes approximately 3,840 acres of
Utah state mineral leases situated in the Confusion Mountain
Range of West-Central Utah, about 60 miles west of Delta, Utah.
This project represents a newly discovered district of precious
metal mineralization, with evidence for economic gold deposits
over a 50 square mile area. Exploration efforts to date have
delineated a substantial gold resource.
The Company owns a 4% production royalty on all minerals
produced from 82 claims (1,600 acres) and owns a 1.5% production
royalty on an additional 12 Utah state mineral leases (5,500
acres) held by another company.
During the years ended September 30, 1997, 1996 and 1995, the
Company expended $177,454, $103,429 and $39,186, respectively,
on exploration related to the project.
d. OK Copper Mine Area
The OK Copper Mine property consists of approximately 8,700
acres of privately owned land and unpatented mining claims in
Beaver County, Utah. The claims have proven copper reserves.
During the years ended September 30, 1997, 1996, and 1995, the
Company expended $548,078, $240,995 and $452,773, respectively,
on exploration of these claims.
NOTE 4 -INVESTMENTS IN SUBSIDIARIES AND OTHER MINING COMPANIES
The following describes the specific transactions and activity
related to each of the consolidated subsidiaries as of September
30, 1997 and 1996.
a. Tintic Coalition Mines Corporation
TCM was incorporated on April 27, 1993 for the purpose of
acquiring, exploring and developing mineral properties in the
southern portion of the Tintic Mining District. The original
capital investment of $1,020 was loaned to the Company by Dr.
Spenst Hansen, which was subsequently reimbursed, and 102,000
shares of Tintic Coalition common stock were issued to the
Company for that initial investment.
<PAGE> 89 CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 4 -INVESTMENTS IN SUBSIDIARIES AND OTHER MINING COMPANIES
continued
During April 1993, Centurion acquired a partial interest in 680
acres of mineral property by issuing 25,000 shares of common
stock, valued at $25,000, and paying $14,965 in cash. On May 12,
1993, Centurion exchanged its interest in the mineral property
for 3,996,450 shares of common stock of TCM. Also, on May 12,
1993, TCM agreed to exchange 1,000,000 shares of its common
stock for the remaining interest in the 680 acres of mineral
property.
On June 23, 1993, Centurion acquired an additional 411,550
shares of TCM's common stock for $8,231 in cash to increase
Centurion's ownership interest in TCM to 80 percent. The
411,550 shares were acquired at an increased price because TCM
now owned property. In addition, the Company incurred direct
costs of $2,505 in connection with these transactions which have
been included in Centurion's investment in TCM. TCM provides
personnel and payroll services to the Company.
b. Mammoth Mining Company and its Subsidiary
In May of 1994, Centurion purchased Jefferson Pacific Corp.
(JPC), which owned 58.6 percent of Mammoth Mining Company. In
the following months, Centurion purchased additional shares of
MMC from its shareholders, bringing Centurion's ownership of MMC
to 81.8 percent.
MMC has land and lease ownership in the Tintic Mining District.
It also has a 61.1 percent ownership in a separate subsidiary
company, The Gold Chain Mining Company. The Gold Chain Mining
Company is currently inactive.
c. Dotson Exploration Company
On February 9, 1994, Centurion entered into an agreement to
purchase 41,000 shares of Dotson Exploration Company, (DEC),
from Mark Dotson, the sole shareholder, for $350,000. These
shares gave Centurion 51 percent ownership of DEC. According to
the original agreement, Centurion was given the ability to
convert dollars spent on the development of DEC properties and
leases at a rate of $12 for each share. By September 30, 1994,
DEC had issued an additional 32,667 shares of its stock, giving
Centurion a total of 64.8 percent ownership in DEC. During the
year ended September 30, 1995, Centurion issued 105,000 shares
of common stock at $1.77 per share to acquire the remaining
outstanding shares of DEC making it a 100 percent owned
subsidiary of Centurion at September 30, 1995, 1996 and 1997.
<PAGE> 90 CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 4 -INVESTMENTS IN SUBSIDIARIES AND OTHER MINING COMPANIES
continued
c. Dotson Exploration Company continued
Dotson Exploration Company has land and lease ownership in the
Milford, Utah Mining District. Exploration activities by
Centurion on these properties have confirmed the existence of
copper ore reserves.
d. Centurion Exploration Incorporated
On July 15, 1993, Centurion formed CEI as a wholly-owned
subsidiary for the purpose of participating in a joint venture
agreement with Kennecott. Centurion transferred certain mineral
properties to CEI at its historical cost basis. CEI has
provided personnel and payroll services to the Company (other
than management personnel).
NOTE 5 -MARKETABLE SECURITIES
The Company currently owns 1,091,267 shares of Royal Silver
Mines, Inc. (Royal) common stock, a related company, which is
approximately 8% of the total outstanding shares at September
30, 1997. 100,000 shares of the total amount owned were
purchased on July 12, 1996 at a cost of $150,000. The Company
carries these marketable securities at the lower of cost or
market value of $150,000 and $150,000 at September 30, 1997 and
1996, respectively. The Company also received $50,000 from
Royal during the year ended September 30, 1996 which granted
Royal a two-year option to repurchase up to 800,000 of their
shares at a price equal to $1.75 per share. This $50,000 has
been recorded in the accompanying consolidated financial
statements as other income. Royal had not exercised any of this
option at September 30, 1997. The Company is currently in
discussions with Royal to enter into a business arrangement that
if implemented may include, among other actions, exchanging
Company common stock to acquire certain of Royal's U.S. silver
properties, or significant amounts of the outstanding common
stock of Royal (see Note 12).
NOTE 6 -NOTES PAYABLE
Notes payable consisted of the following at September 30, 1997
and 1996:
<PAGE> 91 CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 6 -NOTES PAYABLE
<TABLE>
<CAPTION>
September 30,
1997 1996
<S> <C> <C>
Purchase note payable for patented mining
claims in the Bradshaw Mining District,
non-interest bearing, payable in $40,000
worth of free-trading Centurion stock in
semi-annual increments (see below). $ 71,004 111,003
Purchase note payable for patented mining
claims in the Chrysocolla Mining District,
non-interest bearing, payable in $8,000
annual increments. - 8,000
Total Notes Payable 71,004 119,003
Less: Current Portion - (80,542)
Long-Term Notes Payable $ 71,004 $38,461
</TABLE>
Maturities of long-term debt are as follows:
Year Ending
September 30, Amount
---------------------- -----------------
1998 $ -
1999 71,004
2000 -
2001 -
2002 and thereafter -
Total $71,004
The $71,004 payable is currently in dispute. Management is
vigorously contesting the claim and believes that there is a
remote likelihood of having to pay the debt. Accordingly, the
debt is recorded as long-term.
NOTE 7 -LEASES PAYABLE
The Company leases certain equipment and vehicles. Obligations
under these capital leases have been recorded in the
accompanying consolidated financial statements at the present
value of future minimum lease payments. The capitalized cost of
$84,620 less accumulated depreciation of $29,343 is included in
property and equipment in the accompanying consolidated
financial statements. Depreciation expense for these assets for
the years ended September 30, 1997, 1996 and 1995 was $16,928,
$12,415 and $0, respectively.
<PAGE> 92
CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 7 - LEASES PAYABLE (Continued)
Leases payable consisted of the following at September 30, 1997
and 1996:
<TABLE>
<CAPTION>
September 30,
1997 1996
<S> <C> <C>
Lease payable to a leasing company,
secured by property, interest at 11.5%,
payable in monthly installments of $462,
final payment due July, 2001. $ 17,430 $ 20,499
Lease payable to a leasing company,
secured by property, non-interest bearing,
payable in monthly installments of $626,
final payment due February, 1997. - 3,759
Lease payable to a leasing company,
secured by automobile, interest at 11.5%,
payable in monthly installments of $379,
final payment due April, 1998. 3,357 6,653
Lease payable to a leasing company,
secured by automobile, interest at 11.0%,
payable in monthly installments of $470,
final payment due June, 1998. 5,024 8,893
Lease payable to a leasing company,
secured by automobiles, interest at 11.5%,
payable in monthly installments of $835,
final payment due August 1999. 17,165 -
Lease payable to a leasing company,
secured by automobile, interest at 11.0%,
payable in monthly installments of $1,485,
final payment due March 1998. 9,900 24,536
Total Leases Payable 52,876 64,340
Less: Current Portion (30,835) (31,895)
Long-Term Leases Payable $ 22,041 $ 32,445
</TABLE>
<PAGE> 93
CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 7 - LEASES PAYABLE (Continued)
The future minimum lease payments under these capital leases and
the net present value of the future minimum lease payments are
as follows:
Year Ending September 30, Amount
------------------------- ______________
1998 $ 36,293
1999 14,734
2000 5,548
2001 4,623
2002 and thereafter -
--------------
Total future minimum lease payments 61,198
Less, amount representing interest (8,322)
Present value of future minimum
lease payments $ 52,876
=========
NOTE 8 -INCOME TAXES
As of September 30, 1997, the Company had net operating loss
carryforwards available to offset future taxable income of
approximately $11,750,000. For federal income tax purposes,
only a portion of the tax net operating loss can be utilized in
any given year if the company which generated the loss has had a
more than 50 percent change in ownership or if such a change
occurs in the future as defined in the Internal Revenue Code.
The following summarizes the periods for which the net operating
loss carryforwards will expire.
Expiration Date
1999 $ 178,000
2000 101,000
2001 230,000
2002 346,000
2003 457,000
2004 727,000
2005 534,000
2006 -
2007 141,000
2008 1,027,000
2009 1,774,000
2010 2,215,000
2011 1,760,000
2012 1,794,000
=================
TOTAL $ 11,284,000
<PAGE> 94
CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 9 -RELATED PARTY TRANSACTIONS
The Company paid compensation to officers, directors and others
by issuing, on certain occasions, restricted shares of its
common stock. The value of the restricted shares issued as
compensation has been recorded at 67 percent of the quoted
market value of the trading common stock on the date the shares
were issued.
Officers and directors of the Company were issued common stock
for compensation as follows:
Year Ended September 30, 1997 1996 1995
Compensation
------------------------ --------- --------- ---------
Value of common shares issued $ 259,279 $ 341,975 $ 203,300
Number of shares issued 388,300 245,000 143,000
The Company made non-interest bearing advances to shareholders
and companies whose shareholders and officers are also
shareholders and officers of the Company. As of September 30,
1997, and 1996, $26,312 and $28,842, respectively, was due to
the Company as a result of these advances.
The Company also has received advances from an officer,
director, and principal shareholder of the Company in order to
pay minimal operating expenses. As of September 30, 1997 and
1996, $84,315 and $6,561, respectively, was due from the Company
as a result of these advances. As of September 30, 1997 and
1996, $476 and $6,074, respectively, was due to other related
parties as a result of operating expense advances.
During September 1996, the Company signed a promissory note at
8% interest to a related company for $35,530. The note was paid
off during the year ended September 30, 1997.
During the year ended September 30, 1997, the Company issued
2,426,184 shares of its common stock to related parties for
$1,002,259 in cash (average price of $0.41 per share).
During the year ended September 30, 1996, the Company issued
1,171,959 shares of its common stock to related parties for
$1,099,996 in cash (average price of $0.94 per share).
The Company leases certain buildings and offices located at the
Main Tintic Project Mine from a related company owned and
operated by an officer, director and principal shareholder of
the Company for $6,000 per month. The transaction was not
negotiated at arms-length. Total lease payments during the year
ended September 30, 1997 were $72,000.
<PAGE> 95 CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 10 -COMMITMENTS AND CONTINGENCIES
a. Cancelable Mineral Leases and Royalty Agreements
The Company has entered into various cancelable mining leases
and royalty agreements as a lessee. Future minimum lease and
royalty payments under the Company's current agreements will be
approximately $32,000 annually. Certain leases also have
provisions allowing the Company to purchase all rights to the
properties thereby reducing future commitments for royalty
payments.
The leases have original terms of 3 to 20 years and are
cancelable at the Company's option at any time, which would
terminate any future lease payments or work commitments. The
lease agreements also provide that the lease will remain in
effect as long as exploration or development is being conducted
with reasonable diligence or production continues in commercial
quantities. Most of the above agreements also have provisions
for additional royalty payments based on "net smelter returns"
or gross revenues from mineral sales. These royalties range
from 2 to 8 percent and are applicable only after production and
sales have begun. Minimum annual royalty payments previously
paid will be deducted from the additional royalty payments.
b. Noncancelable Operating Leases
The Company occupies its facilities under noncancelable
operating leases. These leases expire during 1998. Minimum
future payment to be paid under these arrangements will amount
to approximately $13,860 for the year ending September 30,
1998. Rent expense for the years ended September 30, 1997, 1996
and 1995 was approximately $50,570, $76,600 and $45,500,
respectively.
NOTE 11 -COMMON STOCK AND OPTIONS
a. Stock Option and Stock Award Plan
On April 19, 1991, Centurion's shareholders approved the 1991
Stock Option and Stock Award Plan (the Plan). The purpose of
the Plan is to enable Centurion to attract and retain
experienced and able directors, officers and employees. The
Plan will provide incentives to directors, officers and
employees to extend their best efforts for the Company and its
shareholders. Under the provisions of the Plan, the Board of
Directors may grant incentive stock options or stock awards only
to eligible directors, officers or employees. As of September
30, 1997, the shareholders have approved 5,000,000 shares of
stock to be issued and administered under the Plan and the
Company has filed a Form S-8 registration statement and
amendments covering the 5,000,000 shares. As of September 30,
1997, 3,624,296 shares of common stock have been awarded under
the Plan.
<PAGE> 96
CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 11 -COMMON STOCK AND OPTIONS (Continued)
b. Stock Options and Warrants
Beginning with the quarter ended June 30, 1993 and ending March
31, 1995, Centurion granted options to its directors, certain of
its executive officers, and a key consultant to purchase an
aggregate of 560,000 shares of common stock at $1.50 per share,
the fair market value of the Company's common stock on the grant
date. Due to the non-reelection of one of the Company's
directors, 20,000 of the options were forfeited during fiscal
year 1994. From April 1, 1995 to September 30, 1996, Centurion
granted additional options to its directors, certain of its
executive officers, and a key consultant to purchase an
aggregate of 295,000 shares of common stock on the same terms as
the earlier grant of options. As of September 30, 1997, options
to purchase 690,000 shares of common stock remained exercisable.
The options are exercisable through September 30, 2000, or six
months after the option holder ceases to be a director, officer
or consultant to the Company. Stock option activity for the
years ended September 30, 1995, 1996, and 1997 consisted of the
following:
Number Price
of Shares per Share
---------- ----------
Outstanding at September 30, 1994 515,000 $ 1.50
Exercised during the year (210,000) 1.50
---------- ----------
Outstanding at September 30, 1995 305,000 1.50
Granted during the year 295,000 1.50
Exercised during the year (150,000) 1.50
---------- ----------
Outstanding at September 30, 1996 450,000 1.50
Granted during the year 240,000 1.50
Exercised during the year - -
---------- ----------
Outstanding at September 30, 1997 690,000 $ 1.50
========== ==========
The Company granted options to purchase 750,000 shares of common
stock to its directors, president and CEO at $1.44, which
represents 150% of the closing stock price on the grant date.
None of the options will vest until the daily closing price of
the Company's common stock maintains an average level of at
least $1.20 which represents 125% of the closing stock price on
the grant date, for a period of no less than 30 consecutive
trading days, to be achieved on or before September 30, 1998.
The options are exercisable only upon vesting and expire on
September 30, 2001.
<PAGE> 97
CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 11 -COMMON STOCK AND OPTIONS (Continued)
c. Private Placements
Centurion's Board of Directors has, from time to time,
authorized private placements of restricted shares of
Centurion's common stock. During fiscal year 1995, Centurion
sold 1,110,000 shares of common stock to individual investors
for $1,567,000 at prices ranging from $1.25 to $1.62 per share
(average price of $1.41 per share). During fiscal year 1996,
Centurion sold 1,538,656 shares of common stock to individual
investors for $1,215,475 at prices ranging from $0.66 to $1.50
per share (average price of $0.79 per share). During fiscal
year 1997, Centurion sold 2,810,420 shares of common stock to
individual investors for $1,219,559 at prices ranging from $0.23
to $0.79 per share (average price of $0.43 per share).
d. Common Stock Issuances
During the years ended September 30, 1997, 1996, and 1995,
Centurion has issued restricted shares of common stock to
employees, officers and consultants for services provided. The
shares issued have been valued based on other issuances of
restricted shares for cash during the periods.
NOTE 12 - SUBSEQUENT EVENTS
Subsequent to September 30,1997, the following events have
occurred.
a. Nevada Star Resource Corp.
The Company entered into a Letter of Intent agreement with
Nevada Star Resource Corp. that should result in bringing the OK
Copper Mine project near Milford, Utah (USA) into production
before the end of fiscal 1998. The Company expects to receive
significant income from the OK project during fiscal 1998.
Further, with the benefit of cash flow from the OK copper
operations, the Company intends to concentrate on developing the
copper, gold and silver deposits at its Main Tintic mining
district properties near Eureka, Utah. Under the basic terms of
the Letter of Intent, the Company will receive 2,000,000 shares
of Nevada Star common stock, plus a 12 percent production
royalty that applies to all copper production coming from a 144
square mile "area of joint interest" centered at the OK Mine
site. This includes both Company-owned ore deposits, as well as
high grade copper ore reserves Nevada Star presently controls.
Also, the Company retains a 30% "back in" option that may be
exercised through July 1, 1998. Centurion has agreed to assign
its operating and environmental permits immediately, and to
<PAGE> 98
CENTURION MINES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1997 and 1996
NOTE 12 - SUBSEQUENT EVENTS continued
a. Nevada Star Resource Corp. continued
transfer its ownership of mining properties, water wells, and
various other assets to Nevada Star after certain conditions
have been met, including completion of construction of the SX/EW
plant and confirmation that the plant is operational. Nevada
Star has agreed to assume various debt and accounts payable
obligations related to the development work performed to date by
the Company in the OK Mine area. The Company also has the right
to process copper ores and concentrates from its Main Tintic
mining district properties through the SX/EW copper refining
plant, which should provide additional income to the Company.
b. Royal Silver Mines, Inc.
The Company has entered into preliminary discussions with Royal
Silver Mines, Inc., to consider possible business arrangements
between the two companies. The intended purpose of such an
arrangement would be to combine the Company's privately-owned
mining properties in the State of Utah, comprising the OK Copper
SX/EW project, currently under construction, its Tintic mining
district holdings, and its other Utah exploration properties,
with Royal's extensive privately-owned silver properties in the
Coeur d' Alene (Idaho) mining district and Royal's
advanced-stage mining development projects in Mexico and Chile,
including its major copper project in the Mocha mining district
of Chile, presently under contract with Teck Resources, Ltd.
(Canada). In furtherance of this course of action, the Company
has arranged to purchase certain Coeur d'Alene silver properties
plus certain other privately-owned mining properties from Royal.
These properties have an aggregate value of approximately
$1,500,000.
<PAGE>
<PAGE> 99
GRAND CENTRAL SILVER MINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March
31, 1998 September
(Unaudited) 30, 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 64,569 $ 30,080
Accounts receivable 8,562 --
Advances to related parties 83,188 26,312
Prepaid expenses 13,902 41,606
Marketable securities (Note 3) 150,000 150,000
------------ ------------
Total current assets 320,221 247,998
------------ ------------
MINERAL PROPERTIES 11,084,400 9,648,747
------------ ------------
PROPERTY AND EQUIPMENT
Leasehold improvements 7,517 7,517
Furniture and equipment 282,388 249,000
Vehicles 149,271 125,151
Field equipment 488,245 580,999
Leased automobiles & equipment 53,026 84,620
Less: Accumulated depreciation
and amortization (609,361) (547,436)
------------ ------------
Total property and equipment 371,086 499,851
------------ ------------
OTHER ASSETS
Deposits 1,125,830 --
Deposits and other assets 1,790 15,478
------------ ------------
Total other assets 1,127,620 15,478
------------ ------------
TOTAL ASSETS $ 12,903,327 $ 10,412,074
============ ============
<CAPTION>
The accompanying Notes to Condensed Consolidated
Financial Statements are an integral part of
these condensed consolidated statements.
<PAGE> 100
GRAND CENTRAL SILVER MINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
March
31, 1998 September
(Unaudited) 30, 1997
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 408,730 $ 295,301
Accrued expenses 10,493 24,029
Payable to related party 1,000 476
Advances from shareholder 530 84,315
Leases payable - current portion 5,989 30,835
Notes payable - current portion 750,000 --
------------ ------------
Total current liabilities 1,176,742 434,956
------------ ------------
LONG-TERM DEBT
Leases payable 6,000 22,041
Note payable 71,004 71,004
------------ ------------
Total long-term debt 77,004 93,045
------------ ------------
TOTAL LIABILITIES 1,253,746 528,001
------------ ------------
MINORITY INTEREST IN
CONSOLIDATED SUBSIDIARIES 32,724 32,745
------------ ------------
STOCKHOLDERS' EQUITY
Common stock - $.01 par value;
40,000,000 shares authorized;
5,973,917 and 30,575,796 shares
issued and outstanding, respectively 398,624 305,758
Additional paid-in capital 27,614,364 21,871,474
Accumulated deficit (15,271,131) (12,314,383)
Receivable related to sale
of common stock (1,125,000) (11,500)
------------ ------------
Total Stockholders' Equity 11,616,857 9,851,349
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $ 12,903,327 $ 10,412,074
============ ============
</TABLE>
The accompanying Notes to Condensed Consolidated
Financial Statements are an integral part of
these condensed consolidated statements.
<PAGE> 101
GRAND CENTRAL SILVER MINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- -------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
REVENUES
Operating revenue $ -- $ -- $ -- $ --
------------ ------------ ------------ -----------
Total revenues -- -- -- --
------------ ------------ ------------ -----------
OPERATING COSTS
General and administrative 515,666 412,564 832,098 845,086
Cost of property disposals 6,989 5,859 6,989 5,859
Mineral leases 31,256 65,296 57,383 141,827
Depreciation and amortization 37,542 41,865 80,865 82,393
------------ ------------ ------------ -----------
Total operating expenses 591,453 525,584 977,335 1,075,165
------------ ------------ ------------ -----------
LOSS FROM OPERATIONS 591,453 525,584 977,335 1,075,165
------------ ------------ ------------ -----------
OTHER INCOME (EXPENSE)
Interest and other income 6,942 7,268 20,898 9,423
Interest expense (5,585) (4,173) (11,771) (8,225)
Gain on sale of assets 5,460 189,880 11,460 202,313
Loss on impairment
of assets (2,000,000) -- (2,000,000) --
------------ ------------ ------------ -----------
Total other income (1,993,183) 192,975 (1,979,413) 203,511
------------ ------------ ------------ -----------
NET LOSS BEFORE
MINORITY INTERESTS (2,584,636) (332,609) (2,956,748) (871,654)
MINORITY INTERESTS IN
LOSS (INCOME) OF
CONSOLIDATED SUBSIDIARIES -- -- -- --
------------ ------------ ------------ -----------
NET LOSS $ (2,584,636) $ (332,609) (2,956,748) (871,654)
============ ============ ============ ===========
NET LOSS PER COMMON
SHARE (Note 2) $ (0.17) $ (0.01) $ (0.12) $ (0.03)
============ ============ ============ ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 15,311,572 27,670,380 24,503,272 27,154,485
=========== ============ ============ ===========
</TABLE>
The accompanying Notes to Condensed Consolidated
Financial Statements are an integral part of
these condensed consolidated statements.
<PAGE> 102
GRAND CENTRAL SILVER MINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
March 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,956,748) $ (871,654)
Adjustments to reconcile net loss to
net cash used in operating activities:
Compensation and other expenses paid
through issuance of common stock 584,660 540,562
Write-off of mineral properties 2,000,000 --
Depreciation and amortization 80,865 82,393
Changes in assets and liabilities:
Accounts receivable (8,562) 5,000
Receivable from related party (56,876) 21,314
Prepaid expenses 27,704 (16,234)
Other assets 13,688 5,000
Accounts payable 13,429 93,189
Payable to related party 524 18,192
Accrued expenses (13,536) (21,641)
Advances from stockholders (83,785) 22,301
Leases payable (40,887) (19,649)
------------ ------------
Net cash used in operating activities (339,524) (141,227)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (57,508) (73,875)
Acquisition of mineral properties (1,843,388) (580,882)
Acquisition of investments (1,125,830) --
------------ ------------
Net cash used in investing activities (3,026,726) (654,757)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of promissory notes 750,000 --
Issuance of common stock
for mineral properties 1,425,000 --
Issuance of common stock
for investments 1,124,550 --
Issuance of common stock for cash 75,646 763,700
Receivable related to sale
of common stock -- (50,393)
Advances from shareholder -- 2,350
------------ ------------
Net cash provided by
financing activities 3,375,196 766,050
------------ ------------
NET INCREASE (DECREASE) IN CASH 8,946 (77,933)
CASH, BEGINNING OF PERIOD 55,623 133,556
------------ ------------
CASH, END OF PERIOD $ 64,569 $ 55,623
============ ============
</TABLE>
The accompanying Notes to Condensed Consolidated
Financial Statements are an integral part of
these condensed consolidated statements.
<PAGE> 103
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the three months ended March 31, 1998, the Company:
* Issued 47,500 shares of common stock valued at $143,569 for
services of employees and contractors.
* Issued 21,000 shares of common stock valued at $47,250 for
promotional services.
* Issued 150,000 shares of common stock valued at $187,500 as fees
for bridge financing.
* Issued 382,500 shares of common stock valued at $1,124,550 to
acquire an investment in San Miguel Mining Company.
* Issued 735,000 shares of common stock valued at $1,425,900 and a
promissory note for $350,000 to acquire an interest in a minerals
joint venture.
* Issued 900,000 shares of common stock valued at $1,125,000 in
exchange for a short-term receivable.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) The condensed consolidated financial statements included herein
have been prepared by the Company, without audit, in accordance
with generally accepted accounting principles for interim
financial information and pursuant to the rules, regulations and
instructions of the Securities and Exchange Commission pertaining
to Form 10-Q and Article 10 of Regulation S-X. These condensed
consolidated financial statements reflect all adjustments which,
in the opinion of management, are necessary to present fairly the
results of operations for the interim period presented. All
adjustments are of a normal recurring nature. Certain
information, footnotes and disclosures normally included in
complete financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the
Company believes that the following disclosures are adequate. It
is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's annual
report on Form 10-K for the year ended September 30, 1997.
2) Net loss per common share is based on the weighted average number
of common shares outstanding during the period.
These Notes are an integral part of the condensed
consolidated statements.
<PAGE> 104
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3) The Company carries its marketable securities at the lower of cost
or market value (FMV):
COST FMV
--------- ---------
Royal Silver Mines, Inc. $ 150,000 $ 501,983
Fair market value is based on the closing or average price of
Royal common stock of $0.46 per share on March 31, 1998.
4) On February 4, 1998, the Company declared a 1-for-10 reverse stock
split. Before the split, the Company had 37,653,898 outstanding
shares of common stock. After effecting the stock split and
adjusting for rounding, the Company had 3,765,417 shares of common
stock outstanding.
These Notes are an integral part of the condensed consolidated
statements.
<PAGE> 105
UNTIL __________, 1998, (NINETY DAYS AFTER THE EFFECTIVE DATE OF THIS
PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS.
TABLE OF CONTENTS
Prospectus Summary . . GRAND CENTRAL SILVER MINES, INC.
Risk Factors . . .
Selected Financial Data . 1,012,500 Shares
Management's Discussion of Common Stock
and Analysis of
Financial Condition and
Results of Operations .
Use of Proceeds . .
Dividend Policy . .
Glossary . . .
Business . . . . __________________________
Management . . . PROSPECTUS
Certain Transactions . __________________________
Management Remuneration .
Principal Shareholders . DATED: ___________________
Selling Shareholders .
Description of the Securities
Plan of Distribution . . GRAND CENTRAL SILVER MINES, INC.
Litigation . . . 1010 Ironwood Drive
Legal Matters . . . Suite 105
Experts . . . . Coeur d'Alene, Idaho 83814
Additional Information . (208) 769-7340
Financial Statements . F-1
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained
in this Prospectus in connection with the offer contained in this
Prospectus and, if given or made, such information must not be relied
upon as having been authorized by the Company. Neither the deliver nor
any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company
since the date hereof. This Prospectus does not constitute an offer to
sell or the solicitation of an offer to buy an security other than the
shares of Common Stock offered by this Prospectus, nor does it
constitute an offer to sell or a solicitation of an offer to buy the
shares of Common Stock by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so, to any person to
whom it is unlawful to make such offer or solicitation.
<PAGE> 106
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 22. Indemnification of Directors and Officers.
The only statutes, charter provisions, bylaws or other
arrangements under which any controlling person, Director or Officer of
the Registrant is insured or indemnified in any manner against
liability which he may incur in his capacity as such are set forth
below.
The Utah Revised Statutes provides for indemnification where a
person who was or is a party or is threatened to be made a party to any
threatened, pending or contemplated action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than action by
or in right of a corporation), by reason of fact he is or was a
Director, Officer, employee or agent of a corporation or serving
another corporation at the request of the corporation, against expenses
(including attorneys' fees), judgments, fines, and amounts paid in
settlement, actually and reasonably incurred by him if he acted in good
faith and in a manner he reasonably believed to be in or not opposed
to the best interest of the corporation and, with respect to criminal
action or proceeding, had no reasonable cause to believe his conduct
unlawful. Lack of good faith is not presumed from settlement or nolo
contendere plea. Indemnification of expenses (including attorneys'
fees) allowed in derivative actions except in the case of misconduct in
performance of duty to corporation unless the Court decides
indemnification is proper. To the extent any such person succeeds on
the merits or otherwise, he shall be indemnified against expenses
(including attorneys' fees). Determination that the person to be
indemnified met applicable standards of conduct, if not made by the
Court, is made by the Board of Directors by majority vote of quorum
consisting of the Directors not party to such action, suit or
proceeding or, if a quorum is not obtainable or a disinterested quorum
so directs, by independent legal counsel or by the stockholders.
Expenses may be paid in advance upon receipt of undertakings to repay
unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation. The Corporation may purchase indemnity
insurance. In so far as indemnification for liability arising from the
Securities Act of 1933 may be permitted to Directors, Officers or
persons controlling the Company, it has been informed that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.
<PAGE> 107
ITEM 23. Other Expenses of Issuance and Distribution.
The following table sets forth all estimated expenses in
connection with the issuance and distribution of the shares being
registered. All the amounts shown are estimates, except the
registration fee.
<TABLE>
<S> <C>
Registration Fee - SEC . . . . $ 728.70
Printing and Engraving . . . . 1,000.00
Legal Fees and Disbursements . . . 20,000.00
Accounting Fees . . . . . 2,000.00
Transfer Agent Fees . . . . . 271.30
Blue Sky Fees and Expenses . . . 1,000.00
TOTAL . . . . . . . $ 25,000.00
</TABLE>
<PAGE> 108
ITEM 24. Recent Sales of Unregistered Securities.
The following table set forth information as to recent sales of
the Registrant's Common Stock since the formation of the Registrant,
all of which shares were not registered under the Securities Act of
1933, as amended:
<TABLE>
<CAPTION>
144 "RESTRICTED" SECURITIES
Amount
Name Shares Consideration Date of
of Owner Acquired Cash/Other Sale
- -----------------------------------------------------------------
<S> <C> <C> <C>
Spenst Hanson 70,000 Director 10/05/95
44 West Broadway Compensation
Suite 404S $104,300.00
Salt Lake City, UT 84101
Mark Dotson 20,000 Cash 10/06/95
1208 South 200 West $31,800.00
Milford, UT 84751
Roy Cassity 100 Property 12/05/95
777 East 4500 South Exchange
Salt Lake City, UT 84107 $155.00
Spenst Hansen 5,000 Directors 01/24/96
44 West Broadway Compensation
Suite 704S $9,169.00
Salt Lake City, UT 84101
Orson Maybe, III 5,000 Directors 01/24/96
264 9th Street Compensation
Suite 3H $9,169
Jersey City, NJ 07302
Davis J. Morgan 5,000 Directors 01/24/96
1 Tamplin Grove Compensation
London, U.K. W84 J6 $9,169
Mark Dotson 5,000 Directors 01/24/96
1208 South 200 West Compensation
Milford, UT 84751 $9,169
West Tintic Mining 10,000 Consulting 01/26/96
44 West 300 South Services
Suite 704S $18,337.50
Salt Lake City, UT 84101
South Iron Blossom 10,000 Consulting 01/26/96
44 West 300 South Services
Suite 704S $18,337.50
Salt Lake City, UT 84101
Spenst M. Hanson 30,000 Cash 02/14/96
44 West Broadway $44,700.00
Suite 704S
Salt Lake City, UT 84101
Spenst M. Hanson 100,000 Directors 02/14/96
44 West Broadway Compensation
Suite 704S $170,775.00
Salt Lake City, UT 84101
<PAGE> 109
Amount
Name Shares Consideration Date of
of Owner Acquired Cash/Other Sale
- -----------------------------------------------------------------
<S> <C> <C> <C>
Axis Development 60,000 Cash 02/13/96
44 West Broadway $59,400
Suite 704S
Salt Lake City, UT 84101
Axis Development 60,000 Cash 03/01/96
44 West Broadway $59,400.00
Suite 704S
Salt Lake City, UT 84101
Axis Development 75,000 Cash 03/29/86
44 West Broadway $74,250.00
Suite 704S
Salt Lake City, UT 84101
Mark Dotson 15,000 Cash 04/11/96
1208 South 200 West $24,225.00
Milford, UT 84751
Orson Maybe III 5,000 Directors 05/13/96
264 9th Street Compensation
Suite 3H $6,825.00
Jersey City, NJ 07302
Mark Dotson 5,000 Directors 05/13/96
1208 South 200 West Compensation
Milford, UT 84108 $6,825.00
David J. Morgan 5,000 Directors 05/13/96
1 Tamplin Grove Compensation
London, U.K. W84 J6 $6,825.00
Spenst Hansen 15,000 Directors 05/13/96
44 West Broadway Compensation
Suite 704S $20,475.00
Salt Lake City, UT 84101
Spenst M. Hansen 100,000 Directors 05/22/96
44 West Broadway Compensation
Suite 704S $133,375.00
Salt Lake City, UT 84101
Ray Stevens 25,000 Property 06/13/96
P.O. Box 121 Exchange
Hinkley, UT 83645 $40,375.00
Axis Development 46,100 Services 06/28/96
44 West Broadway $45,688.50
Suite 704S
Salt Lake City, UT 84101
Orson Mabey III 5,000 Directors 07/25/96
264 9th Street Compensation
Suite 3H $6,000.00
Jersey City, NJ 07302
Mark Dotson 5,000 Directors 07/25/96
1208 South 200 West Compensation
Milford, UT 84108 $6,000.00
<PAGE> 110
Amount
Name Shares Consideration Date of
of Owner Acquired Cash/Other Sale
- -----------------------------------------------------------------
<S> <C> <C> <C>
David J. Morgan 5,000 Directors 07/25/96
1 Tamplin Grove Compensation
London, U.K. W84 J6 $6,000.00
Spenst Hansen 15,000 Directors 07/25/96
44 West Broadway Compensation
Suite 704S $18,000
Salt Lake City, UT 84101
Bennie Pellum 15,000 Consulting 08/19/96
44 West Broadway Services
Salt Lake City, UT 84110 $15,787.50
Keystone Surveys 8,000 Services 10/01/96
P. O. Box 2365 $7,920.00
Salt Lake City, UT 84110
West Tintic Mining 17,241 Cash 10/11/96
44 West 300 South $9,827.59
Suite 704S
Salt Lake City, UT 84101
Bennie Pellum 68,000 Cash 10/18/96
44 West Broadway $33,320.00
Salt Lake City, UT 84110
West Tintic Mining 30,320 Cash 10/29/96
44 West 300 South $23,696.90
Suite 704S
Salt Lake City, UT 84101
West Tintic Mining 40,715 Cash 10/31/96
44 West 300 South $28,092.85
Suite 704S
Salt Lake City, UT 84101
Bennie Pellum 55,555 Cash 11/05/96
44 West Broadway $39,444.45
Salt Lake City, UT 84110
South Iron Blossom 45,716 Cash 11/06/96
44 West 300 South $31,542.85
Suite 704S
Salt Lake City, UT 84011
South Iron Blossom 15,150 Cash 11/12/96
44 West 300 South $9,848.50
Suite 704S
Salt Lake City, UT 84101
Bennie Pellum 77,419 Cash 11/20/96
44 West Broadway $47,225.81
Salt Lake City, UT 84110
Axis Development 32,258 Cash 11/20/96
44 West Broadway $19,677.42
Suite 704S
Salt Lake City Utah 84101
<PAGE> 111
Amount
Name Shares Consideration Date of
of Owner Acquired Cash/Other Sale
- -----------------------------------------------------------------
<S> <C> <C> <C>
South Iron Blossom 25,862 Cash 11/20/96
44 West 300 South $14,741.38
Suite 704S
Salt Lake City, UT 84101
Axis Development 13,333 Cash 11/22/96
44 West Broadway $7,866.67
Suite 704S
Salt Lake City, UT 84101
Bennie Pellum 34,483 Cash 11/26/96
44 West Broadway $19,655.17
Salt Lake City, UT 84110
Axis Development 12,069 Cash 11/29/96
44 West Broadway $6,879.31
Suite 704S
Salt Lake City, UT 84101
Bennie Pellum 61,724 Cash 12/09/96
44 West Broadway $29,482.76
Salt Lake City, UT 84110
Axis Development 17,241 Cash 12/09/96
44 West Broadway $9,827.59
Suite 704S
Salt Lake City, UT 84101
Axis Development 30,172 Cash 12/13/96
44 West Broadway $17,198.28
Suite 704S
Salt Lake City, UT 84101
Axis Development 27,586 Cash 12/20/96
44 West Broaday $15,724.14
Suite 704S
Salt Lake City, UT 84101
Bennie Pellum 29,310 Cash 12/20/96
44 West Broadway $16,706.90
Salt Lake City, UT 84110
Bennie Pellum 18,965 Cash 12/26/96
44 West Broadway $10,810.35
Salt Lake City, UT 84110
West Tintic Mining 206,897 Cash 12/31/96
44 West 300 South $117,931.03
Suite 704
Salt Lake City, UT 84101
Bennie Pellum 8,620 Cash 12/31/86
44 West Broadway $4,913.80
Salt Lake City, UT 84110
West Tintic Mining 124,000 Cash 01/23/97
44 West 300 South $61,051.00
Suite 704S
Salt Lake City, UT 84101
<PAGE> 112
Amount
Name Shares Consideration Date of
of Owner Acquired Cash/Other Sale
- -----------------------------------------------------------------
<S> <C> <C> <C>
Bennie Pellum 4,460 Cash 01/23/97
44 West Broadway $2,255.40
Salt Lake City, UT 84110
West Tintic Mining 40,680 Cash 01/20/97
44 West 300 South $19,493.20
Suite 704S
Salt Lake City, UT 84101
West Tintic Mining 225,000 Cash 02/27/97
44 West 300 South $103,347.95
Suite 704S
Salt Lake City, UT 84101
West Tintic Mining 22,820 Cash 02/28/97
44 West 300 South $7,771.80
Suite 704S
Salt Lake City, UT 84101
Keystone Surveys 10,000 Services 03/03/97
P. O. Box 2365 $5,900.00
Salt Lake City, UT 84110
West Tintic Mining 43,865 Cash 03/26/97
44 West 300 South $17,761.35
Suite 704S
Salt Lake City, UT 84101
West Tintic Mining 11,700 Cash 03/31/97
44 West 300 South $4,683.00
Suite 704S
Salt Lake City, UT 84101
West Tintic Mining 11,200 Cash 03/31/97
44 West 300 South $4,488.00
Suite 704S
Salt Lake City, UT 84101
South Iron Blossom 36,600 Cash 03/31/97
44 West 300 South $14,634.00
Suite 704S
Salt Lake City, UT 84101
West Tintic Mining 55,400 Cash 04/30/97
44 West 300 South $18,846.00
Suite 704S
Salt Lake City, UT 84101
South Iron Blossom 85,700 Cash 04/30/97
44 West 300 South $29,143.00
Suite 704S
Salt Lake City, UT 84101
Keystone Surveys 10,000 Services 05/01/97
P. O. Box 2365 $5,900.00
Salt Lake City, UT 84110
Elizabeth Knowlton 2,500 Consulting 05/19/97
875 Sundown Lane Services
Todele, UT 84074 $1,100.00
<PAGE> 113
Amount
Name Shares Consideration Date of
of Owner Acquired Cash/Other Sale
- -----------------------------------------------------------------
<S> <C> <C> <C>
Larry and Joe Peil 10,000 Services 05/22/97
5414 West Sunfalls Court $2,700.00
Kearns, UT 84118
West Tintic Mining 15,000 Services 05/30/97
44 West 300 South $4,645.00
Suite 704S
Salt Lake City, UT 84101
South Iron Blossom 117,400 Cash 05/30/97
44 West 300 South $35,226.00
Suite 704S
Salt Lake City, UT 84101
Axis Development 62,500 Cash 05/30/97
44 West Broadway $18,775.00
Suite 704S
Salt Lake City, UT 84101
Elizabeth Knowlton 500 Consulting 06/02/97
875 Sundown Lane Services
Todele, UT 84074 $120.00
Stephen Hash 500 Services 06/02/97
2994 Navajo Circle $120.00
Provo, UT 84604
Richard S. Havenstrite 750 Services 06/02/97
2113 North Cottontail $180.00
Cedar City, UT 84720
Randy Sutherland 750 Services 06/02/97
5742 South 590 West $180.00
Murray, UT 84123
Maynard Moe 6,000 Consulting 06/02/97
2004 West Wellesley Avenue Services
Spokane, WA 99205 $1,400.00
Xythian Trust 35,700 Cash 06/04/97
711 Commerce Street $9,643.00
Suite 200
Tacoma, WA 98402
West Tintic Mining 42,800 Cash 06/30/97
44 West 300 South $14,572.00
Suite 704S
Salt Lake City, UT 84101
Randy W. Sutherland 12,000 Cash 06/30/97
5742 South 590 West $3,980.00
Murray, UT 84123
LaRoy Orr 36,000 Cash 06/30/97
1020 Adams $11,640.00
Ogden, UT 84401
South Iron Blossom 230,450 Cash 06/30/97
44 West 300 South $78,495.00
Suite 704S
Salt Lake City, UT 84101
<PAGE> 114
Amount
Name Shares Consideration Date of
of Owner Acquired Cash/Other Sale
- -----------------------------------------------------------------
<S> <C> <C> <C>
Axis Development 45,500 Cash 06/30/97
44 West Broadway $14,545.00
Suite 704S
Salt Lake City, UT 84101
Elizabeth Knowlton 500 Consulting 07/01/97
875 Sundown Lane Services
Todele, UT 84074 $170.00
Stephen Hash 500 Services 07/01/97
2994 Navajo Circle $120.00
Provo, UT 84604
Richard S. Havenstrite 750 Services 07/01/97
2113 North Cottontail $255.00
Cedar City, UT 84720
Randy Sutherland 750 Services 07/01/97
5742 South 590 West $255.00
Murray, UT 84123
Maynard Moe 4,400 Consulting 07/01/97
2004 West Wellesley Avenue Services
Spokane, WA 99205 $1,456.00
Richard Havenstrite 7,500 Directors 07/01/97
2113 North Cottontail Compensation
Cedar City, UT 84720 $2,550.00
Darbey Sharp 1,335 Services 07/18/97
P. O. Box 118 $459.24
Eureka, UT 84628
South Iron Blossom 249,550 Cash 07/31/97
44 West 300 South $79,854.50
Suite 704S
Salt Lake City, UT 84101
Elizabeth Knowlton 500 Consulting 08/01/97
875 Sundown Lane Services
Todele, UT 84074 $160.00
Stephen Hash 500 Services 08/01/97
2994 Navajo Circle $160.00
Provo, UT 84604
Richard S. Havenstrite 750 Services 08/01/97
2113 North Cottontail $240.00
Cedar City, UT 84720
Randy Sutherland 750 Services 08/01/97
5742 South 590 West $240.00
Murray, UT 84123
Maynard Moe 4,500 Consulting 08/01/97
2004 West Wellesley Avenue Services
Spokane, WA 99205 $1,440.00
Greg Colton 10,000 Services 08/22/97
10026 Ridgegate Circle $3,233.00
Sandy, UT 84092
<PAGE> 115
Amount
Name Shares Consideration Date of
of Owner Acquired Cash/Other Sale
- -----------------------------------------------------------------
<S> <C> <C> <C>
South Iron Blossom 178,000 Cash 08/29/97
44 West 300 South $58,720
Suite 704S
Salt Lake City, UT 84101
Axis Development 13,250 Cash 08/29/97
44 West Broadway $4,367.50
Suite 704S
Salt Lake City, UT 84101
Elizabeth Knowlton 500 Consulting 09/02/97
875 Sundown Lane Services
Todele, UT 84074 $155.00
Stephen Hash 500 Services 09/02/97
2994 Navajo Circle $155.00
Provo, UT 84604
Richard S. Havenstrite 750 Services 09/02/97
2113 North Cottontail $232.50
Cedar City, UT 84720
Randy Sutherland 750 Services 09/02/97
5742 South 590 West $232.50
Murray, UT 84123
Darby J. Sharp 1,800 Services 09/02/97
P. O. Box 118 $1,452.50
Eureka, UT 84628
Maynard Moe 4,750 Consulting 09/02/97
2004 West Wellesley Avenue Services
Spokane, WA 99205 $1,452.50
South Iron Blossom 114,100 Cash 09/30/97
44 West 300 South $24,759.00
Suite 704S
Salt Lake City, UT 84101
Axis Development 86,100 Cash 09/30/97
44 West Broadway $14,339.00
Suite 704S
Salt Lake City, UT 84101
LaRoy Orr 17,630 Cash 09/30/97
1020 Adams $3,823.70
Ogden, UT 84401
Maynard Moe 6,750 Consulting 10/01/97
2004 West Wellesley Avenue Services
Spokane, WA 99205 $1,434.00
Elizabeth Knowlton 500 Consulting 10/01/97
875 Sundown Lane Services
Todele, UT 84074 $110.00
Richard S. Havenstrite 750 Services 10/01/97
2113 North Cottontail $165.50
Cedar City, UT 84720
<PAGE> 116
Amount
Name Shares Consideration Date of
of Owner Acquired Cash/Other Sale
- -----------------------------------------------------------------
<S> <C> <C> <C>
Randy Sutherland 750 Services 10/01/97
5742 South 590 West $165.50
Murray, UT 84123
South Iron Blossom 6,667 Cash 10/31/97
44 West 300 South $1,933.33
Suite 704S
Salt Lake City, UT 84101
Elizabeth Knowlton 500 Consulting 11/03/97
875 Sundown Lane Services
Todele, UT 84074 $77.50
Randy Sutherland 750 Services 11/03/97
5742 South 590 West $116.25
Murray, UT 84123
LaRoy Orr 6,850 Consulting 11/07/97
1020 Adams Services
Ogden, UT 84401 $10,000.00
Daniel Smith 66,667 Services 11/07/97
2624 South Chadwick $4,666.67
Salt Lake City, UT 84106
Carlos Chavez 66,666 Services 11/07/97
815 South Yale Avenue $4,666.66
Salt Lake City, UT 84105
Randy S. Sutherland 66,666 Services 11/07/97
5742 South 590 West
Murray, UT 84123
Spenst M. Hansen 114,545 Services 11/18/97
44 West Broadway $17,754.55
Suite 704S
Salt Lake City, UT 84101
Royal Silver
Mines, Inc. 5,000,000 Property 11/25/97
10200 North Nevada Exchange
Spokane, WA 99218 $1,450,000
Elizabeth Knowlton 500 Consulting 12/02/97
875 Sundown Lane Services
Todele, UT 84074 $75.00
Randy Sutherland 1,000 Services 12/02/97
5742 South 590 West $150.00
Murray, UT 84123
Howard Crosby 200,000 Cash 12/23/97
105 North First Avenue $28,000.00
Suite 232
Sandpoint, ID 83864
Greg Colton 26,000 Services 12/23/97
10026 Ridgegate Circle $2,970.00
Sandy, UT 84092
<PAGE> 117
Amount
Name Shares Consideration Date of
of Owner Acquired Cash/Other Sale
- -----------------------------------------------------------------
<S> <C> <C> <C>
Elizabeth Knowlton 500 Consulting 01/02/98
875 Sundown Lane Services
Todele, UT 84074 $73.12
Randy Sutherland 1,000 Services 01/02/97
5742 South 590 West $146.23
Murray, UT 84123
Elizabeth Knowlton 500 Consulting 01/28/98
875 Sundown Lane Services
Todele, UT 84074 $78.75
Randy Sutherland 1,000 Services 01/28/98
5742 South 590 West $157.50
Murray, UT 84123
Keystone Surveys, Inc. 38,400 Services 12/31/97
P.O. Box 2365 $5,616.00
Salt Lake City, UT 84110
Pines Int'l Resorts 900,000 Cash 02/16/98
3113 Sleepy Hollow $1,125,000.00
Plano, TX 75093
Royal Silver
Mines, Inc. 735,000 Property 02/20/98
10220 North Nevada Exchange
Suite 270 Valued at
Spokane, WA 99218 $1,425,000.00
21st Century Advisory 100,000 Loan 03/03/98
136 Heber Avenue $200,000
Suite 204
Park City, UT 84060
Kokopelli Development 50,000 Loan 03/03/98
4041 North Central $200,000
Suite 850
Phoenix, AZ 85012
SanMiguel Mining Corp. 382,500 Share 03/30/98
505 Park Avenue Exchange
14th Floor
New York, NY 10002
Edward Kanner 12,500 Cash 04/09/98
106 Daltree Court $25,250
Marietta, GA 30068
</TABLE>
<PAGE> 118
* With respect to these shares of Common Stock issued by the
Company, the Company believes that these transactions did not
involve any public offering, in as much as all these shares were
issued to the Company's founders, officers, directors and others,
who purchased the shares for investment purposes only and not with
a view to further public distribution. Further, no commissions
were paid to any persons in connection with such sales, no
advertising of any nature was made in connection with the sale of
said shares, all Company information was made available to said
purchasers, and said purchasers were required to execute a
subscription agreement restating the aforementioned, among other
things. Accordingly, the Company believes that the aforementioned
transactions were exempt from registration pursuant to Section
4(2) or Regulation S of the Securities Act of 1933, as amended.
<PAGE> 119
ITEM 25. Exhibits.
The following documents are incorporated herein by reference to
the Company's Registration Statement on Form 10, as filed with the
Securities and Exchange Commission, dated September 16, 1988.
EXHIBIT DOCUMENT
3.1 Articles of Incorporation
3.2 Articles of Amendment
3.3 Bylaws of the Company
10.1 North Lily Mining Lease
10.2 Sharon Steele Lease
The following document is incorporated herein by reference and was
filed under Form 8-K on May 23, 1990.
10.3 Centurion/Crown Joint Venture Agreement
The following document is incorporated herein by reference and was
filed under Form 10-K, 1991.
4.1 Amendment to Articles of Incorporation Limiting Director
Liability
The following documents are incorporated herein by reference and
were filed under Form 8-K on August 25, 1992 and September 28, 1992.
10.4 Sale of Mining Properties By Royal Minerals, Inc.
10.5 Change of Independent Public Accountants
The following documents are incorporated herein by reference and
were filed under Form 10-K, 1992.
10.6 Deed with Reservation of Mineral Royalty - January 1992 Sale
of 80 acres to Kennecott
10.7 July 1992 Purchase and Sale Agreement of 16,880 acres to
Kennecott
10.8 July 1992 Kennecott Option to Purchase 6,320 acres
10.9 Deed and Assignment with Reservation of Mineral Royalty -
September 1992 Sale of 6,320 acres to Kennecott
10.10 Settlement of Centurion/Crown Litigation
10.11 Consultant Agreement - Barry Katona
The following documents are incorporated herein by reference and
were filed under Form 8-K on March 23, 1993, and June 23, 1993.
10.12 Agreement in Principle to form Kennecott/Centurion Joint
Venture.
10.13 Private Placement of 1,404,000 shares
The following document is incorporated herein by reference and was
filed under Form 8-K, dated April 29, 1994.
<PAGE> 120
10.14 Letter Agreement between Consolidated Royal Mines, Inc. and
Montana Reserves Company, related to the Montanore Project.
The following document is incorporated herein by reference and was
filed under Form 8-K, dated November 3, 1994.
16.1 Letter to the Commission from Arthur Andersen LLP concurring
with disclosures concerning its dismissal as Centurion's
independent auditor.
The following documents are incorporated herein by reference and
were filed under Form 10-K, dated January 13, 1995.
3.2 Articles of Amendment
10.15 Stock Purchase Agreement between Centurion ("CTMC") and
Dotson Exploration Company ("DEC") dated February 9, 1994
10.16 First Amendment to Stock Purchase Agreement between CTMC and
DEC dated March 21, 1994
10.17 Second Amendment to Stock Purchase Agreement between CTMC and
DEC dated March 22, 1994
10.18 Third Amendment to Stock Purchase Agreement between CTMC and
DEC dated April 15, 1994
10.19 Agreement and Plan of Reorganization between CTMC and
Jefferson-Pacific Corp. ("JP") dated May 20, 1994
10.20 First Amendment to Agreement and Plan of Reorganization
between JP and CTMC dated July 14, 1994
10.21 Articles of Share Exchange between JP and CTMC dated
September 30, 1994, filed in the State of Utah
10.22 Articles of Share Exchange between JP and CTMC dated
September 30, 1994, filed in the State of Washington
The following document is incorporated herein by reference and was
filed under Form 8-K, dated August 23, 1995.
99.1 Letter to Registrant from SEC Salt Lake District Office,
dated August 23, 1995, indicating termination of SEC staff
inquiry investigation.
The following documents are filed as Exhibits to this Form SB-2
registration statement:
3.4 Amended Articles of Incorporation.
10.23 Agreement with Royal Silver Mines, Inc.
10.24 Agreement with Nevada Star Resources Corp.
10.25 Agreement with Royal Silver Mines, Inc. - Purchase of
interest in Sierra Mojada Project.
10.26 Option - Arizuma Resources of Canada.
10.27 Agreement with San Miguel Mining Corporation.
23.1 Consent of Jensen, Jones & Company
23.2 Consent of Conrad C. Lysiak
All other schedules and exhibits are omitted, as the required
information is not applicable or is not present in amount sufficient to
require submission of the schedule or because the information required
is included in the financial statements and notes thereto.
<PAGE> 121
ITEM 26. Undertakings.
A. The undersigned Registrant hereby undertakes:
To provide to the Underwriters, if any, at the closing specified
in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriter to permit
prompt delivery to each purchaser.
B. The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and,
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
C. Insofar as indemnification for liabilities arising under the
securities Act of 1933 may be permitted to Directors, Officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Director, Officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by a Director, Officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public
policy as expressed in the Act and shall be governed by the final
adjudication of such issue.
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing of this Form SB-2 Registration
Statement and has duly caused this Form SB-2 Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized,
in Spokane, Washington, on this 20th day of May, 1998.
GRAND CENTRAL SILVER MINES, INC.
BY: /s/ John Ryan, President
KNOW ALL MEN BY THESE PRESENT, that each person whose signature
appears below constitutes and appoints John Ryan as true and lawful
attorney-in-fact and agent, with full power of substitution, for his
and in his name, place and stead, in any and all capacities, to sign
any and all amendment (including post-effective amendments) to this
registration statement, and to file the same, therewith, with the
Securities and Exchange Commission, and to make any and all state
securities law or blue sky filings, granting unto said attorney-in-fact
and agent, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in about the premises,
as fully to all intents and purposes as he might or could do in person,
hereby ratifying the confirming all that said attorney-in-fact and
agent, or any substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Form SB-2 Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
Signature Title Date
/s/ Howard M. Crosby
Howard M. Crosby Chairman of the Board May 20, 1998
of Directors
/s/ John P. Ryan
John Ryan President and a member May 20, 1998
of the Board of Directors
/s/ Orson Mabey, III
Orson Mabey, III Vice President and a May 20, 1998
member of the Board
of Directors
______________________
Carlos Chavez Secretary/Treasurer ________, 1998
/s/ J.D.H. Morgan
J.D.H. Morgan Member of the Board May 20, 1998
of Directors
/s/ Mike Mason
Mike Mason Member of the Board May 20, 1998
of Directors
<PAGE> 122
SEAL FILE STAMP
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CENTURION MINES CORPORATION
(Now Known as "Grand Central Silver Mines, Inc.)
Pursuant to the provisions of the Utah Revised Business
Corporation Act, the undersigned corporation hereby adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation, before the effective
date of these amendments, is CENTURION MINES CORPORATION.
SECOND: The following amendment to the Articles of
Incorporation, as amendment, were duly adopted by the
shareholders of the Corporation at a regularly convened
Annual Meeting of Shareholders held in the State of Utah at
2:00 p.m., on January 30, 1998, upon proper notice and in
accordance with the Corporation's Bylaws, as amended, or
where shareholder action was not required, were adopted by
the Board of Directors acting on behalf of the Corporation:
AMENDMENT NO. 1
Article I of the Articles of Incorporation is amended to
read:
ARTICLE I
CORPORATE NAME
The name of this corporation is GRAND CENTRAL
SILVER MINES, INC.
AMENDMENT NO. 2
Article IV of the Articles of Incorporation is amended to
read:
ARTICLE IV
CAPITAL STOCK
The aggregate number of shares which this
Corporation shall have authority to issue is Forty
Million (40,000,000) common shares. All shares of the
Corporation shall be the same class and shall have the
same rights and preferences. Fully paid shares of this
corporation shall not be liable to any further call or
assessment.
<PAGE> 123
THIRD: Amendment No. 1 was duly adopted and ratified
at the Annual Meeting of Shareholders held January 30, 1998.
On the record date of that meeting, November 26, 1997, a
total of 37,204,648 common shares, being all of the
outstanding common shares of the Corporation, were entitled
to vote on the matters considered at the meeting. A quorum
of 32,196,091 shares were present at the meeting, being
greater than 1.3 of the total shares outstanding on the
record date. "Vote For" were: 26,189,355 Shares, which was
sufficient for approval of the amendment, "Voted Against"
were: 1,719,073 Shares, and "Abstained" were: 5,191,639
Shares.
Dated this 30th day of January, 1998
CENTURION MINES CORPORATION
BY: /s/ Spenst Hansen, President
BY: /s/ Carlos M. Chavez, Secretary
NOTE: Execution of this document constitutes an acknowledgment
under penalties of perjury that the corporate actions set forth
in this document ar the authorized acts and deeds of the
corporation on whose behalf this document is executed and that
the facts stated herein are true and accurate.
<PAGE> 125
CONRAD C. LYSIAK
Attorney and Counselor at Law
601 West First Avenue
Suite 503
Spokane, Washington 99204
(509) 624-1478
FAX (509) 747-1770
May 20, 1998
Securities and Exchange Commission
450 Fifth Avenue N.W.
Washington, D. C. 20549
RE: Grand Central Silver Mines, Inc.
Gentlemen:
Please be advised that, I have reached the following
conclusions regarding the above offering:
1. Grand Central Silver Mines, Inc., (the "Company") is a
duly and legally organized and exiting Utah state corporation,
with its registered office located in Salt Lake City, Utah and
its principal place of business located in Coeur d'Alene, Idaho.
The Articles of Incorporation and corporate registration fees
were submitted to the Utah Secretary of State's office and filed
with the office in 1984. The Company's existence and form is
valid and legal pursuant to the representation above.
2. The Company is a fully and duly incorporated Utah
corporate entity. The Company has one class of Common Stock at
this time. Neither the Articles of Incorporation, Bylaws, and
amendments thereto, nor subsequent resolutions change the
non-assessable characteristics of the Company's common shares of
stock. The Common Stock previously issued by the Company is in
legal form and in compliance with the laws of the State of Utah,
and when such stock was issued it was fully paid for and
non-assessable. The common stock to be sold under this Form SB-2
Registration Statement is likewise legal under the laws of the
State of Utah.
<PAGE> 126
Securities and Exchange Commission
RE: Grand Central Silver Mines, Inc.
May 20, 1998
3. To my knowledge, the Company is not a party to any legal
proceedings nor are there any judgments against the Company, nor
are there any actions or suits filed or threatened against it or
its officers and directors, in their capacities as such, other
than as set forth in the registration statement. I know of no
disputes involving the Company and the Company has no claim,
actions or inquires from any federal, state or other government
agency, other than as set forth in the registration statement. I
know of no claims against the Company or any reputed claims
against it at this time, other than as set forth in the
registration statement.
4. The Company's outstanding shares are all common shares.
No preferred shares are authorized or issued. There are no
liquidation preference rights held by any of the Shareholders
upon voluntary or involuntary liquidation of the Company.
5. The directors and officers of the Company are
indemnified against all costs, expenses, judgments and
liabilities, including attorney's fees, reasonably incurred by or
imposed upon them or any of them in connection with or resulting
from any action, suit or proceedings, civil or general, in which
the officer or director is or may be made a party by reason of
his being or having been such a director or officer. This
indemnification is not exclusive of other rights to which such
director or officer may be entitled as a matter of law.
6. All tax benefits to be derived from the Company's
operations shall inure to the benefit of the Company.
Shareholders will receive no tax benefits from their stock
ownership, however, this must be reviewed in light of the Tax
Reform Act of 1986.
7. By directors' resolutions, the Company has authorized
the issuance of up to 1,012,500 shares of Common Stock.
The Company's Articles of Incorporation presently provide
the authority to the Company to issue 40,000,000 shares of Common
Stock. Therefore, a Board of Directors' Resolution which
authorized the issuance for sale of up to 1,012,500 shares of
Common Stock thereunder, was within the authority of the
Company's directors and would result in the legal issuance of
said shares.
Yours truly,
/s/ Conrad C. Lysiak
<PAGE> 127
PURCHASE AGREEMENT
This Purchase Agreement (the "Purchase Agreement") is made
and entered into effective as of this 25th day of November, 1997,
(the "Effective Date") by and between ROYAL SILVER MINES, INC., a
Utah corporation with an address of 10220 North Nevada, Suite
270, Spokane, Washington 99218 ("Seller") and Centurion Mines
Corporation, a Utah corporation, with offices at 860 South 500
West, Salt Lake City, Utah 84101 ("Buyer").
WITNESSETH:
WHEREAS, Seller is the owner of patented and unpatented
mining claims, situated in Shoshone County, State of Idaho, (the
"Subject Property") and more particularly described in Exhibit
"A," "B," and "C" attached hereto and made a part hereof, and
WHEREAS, Seller desires to sell the Subject Property to
Buyer, and Buyer desires to acquire the Subject Property, all in
accordance with the terms and conditions set forth herein.
NOW THEREFORE, for 5,000,000 (five million) shares of the
Common Stock of the Buyer valued at $1,500,000 (one million five
hundred thousand dollars) and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and in further consideration of the promises and
covenants herein contained, the parties hereto agree as follows:
1. Seller agrees to sell to the Buyer the subject mining
properties located in Shoshone County, Idaho, and more fully
described in Exhibit "A," "B" and "C."
2. Seller hereby agrees upon receipt of the aforesaid
5,000,000 (five million) to execute, acknowledge and deliver to
Buyer good and sufficient Quitclaim Deeds, in the form of the
copy of such instrument which is attached hereto as Exhibit "D."
Seller warrants that it has the power and authority to enter into
and execute said Quitclaim Deeds, and that said Deeds shall be
properly executed and shall be effective for the purposes
intended. Seller also represents and warrants to Buyer that it
is not aware of any liens, encumbrances, third party claims or
outstanding third party interests or rights in or to the Subject
Property or the production of minerals therefrom, that to the
best of Seller's knowledge there are no environmental claims,
liens or other problems affecting or in any way relating to the
Subject Property and that the Subject Property is not a part of
any actual or threatened "superfund" site or otherwise subject to
federal, state or local environmental remediation action or
activities, and that there are no mechanics or materialmens'
liens which affect or which may affect the Subject Property, of
record or otherwise. The representations and warranties set
<PAGE> 128
forth in this Purchase Agreement shall survive the delivery of
the Quitclaim Deeds and the subsequent delivery of the 5,000,000
(five million) shares of common stock. Buyer shall have
possession of the Subject Property on the Effective Date.
3. Seller understand that the shares issued in this
transaction shall be restricted and represents and warrants to
Buyer in connection with this transaction that it understands and
accepts the full legal and economic effect and consequences of
taking restricted stock of Buyer in this transacion, that is has
adequately and fully informed itself as to Buyer's business,
financial condition, stock price and other relevant matters with
respect to Buyer, that is has been provided by Buyer with an
opportunity to review such disclosures concerning the Buyer's
business activities, financial condition and operations as Seller
deems necessary or appropriate, that Seller is a sophisticated
and knowledgeable investor which has utilized such accounting and
legal advice and consultants as it deems necessary or appropriate
to evaluate the terms of and protect its interest in this
transaction, and that it is not relying in any way upon the
promises or representations of Buyer with respect to the future
business activities, stock price, salability of the stock, or
other actions of Buyer. Buyer has not made any representations,
promises or commitments to Seller with respect to any future
release of restrictions on the said 5,000,000 (five million)
shares of Buyer's stock, and Seller understands that said stock
will be issued with a restrictive legend and that as such said
stock will not be marketable or tradeable for the indefinite
future.
4. Seller agrees to deliver to Buyer within thirty (30)
days following the Effective Date, originals or copies of all
data, records and information which it has in its possession or
which are reasonably accessible to it which pertain to the title
to the Subject Property, the geology, mining and exploration
history of the Subject Property, and any other information
relating to the Subject Property.
Dated effective as of the day and year first above written.
ROYAL SILVER MINES, INC.
/s/ Howard M. Crosby, President
CENTURION MINES CORPORATION
BY: ______________________________
Spenst Hansen, President
<PAGE> 129
R E C I T A L S. . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I: DEFINITIONS. . . . . . . . . . . . . . . . . . . . .1
1.1 Agreement. . . . . . . . . . . . . . . . . . . . . . .1
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . .1
1.3 Closing Date . . . . . . . . . . . . . . . . . . . . .1
1.4 Determination Date . . . . . . . . . . . . . . . . . .1
1.5 Dollar . . . . . . . . . . . . . . . . . . . . . . . .1
1.6 Final Termination Date . . . . . . . . . . . . . . . .2
1.7 Purchase Price . . . . . . . . . . . . . . . . . . . .2
ARTICLE 2: PURCHASE AND SALE. . . . . . . . . . . . . . . . . .2
2.1 Properties Purchased . . . . . . . . . . . . . . . . .2
2.2 Retained Interests . . . . . . . . . . . . . . . . . .2
ARTICLE 3: CONSIDERATION AND PAYMENT. . . . . . . . . . . . . .2
3.1 Purchase Price . . . . . . . . . . . . . . . . . . . .2
3.2 Payment of Nevada Star Common Shares . . . . . . . . .2
3.3 Assignment of Net Profits Interest . . . . . . . . . .3
3.4 Payment of Third Party Creditor Claims . . . . . . . .4
ARTICLE 4: PRE-CLOSING OBLIGATIONS OF THE PARTIES . . . . . . .4
4.1 Availability of Information. . . . . . . . . . . . . .4
4.2 Title Information and Examination. . . . . . . . . . .4
4.3 Technical Information. . . . . . . . . . . . . . . . .4
4.4 Other Information and Inspection . . . . . . . . . . .5
4.5 Cooperation in Title Curative Efforts. . . . . . . . .5
4.6 Confidentiality of Data. . . . . . . . . . . . . . . .5
ARTICLE 5: REPRESENTATIONS. . . . . . . . . . . . . . . . . . .6
5.1 Representations of Seller. . . . . . . . . . . . . . .6
5.2 Representations of Nevada Star . . . . . . . . . . . .7
ARTICLE 6: CONDITIONS FOR CLOSING . . . . . . . . . . . . . . .8
6.1 Regulatory Notices . . . . . . . . . . . . . . . . . .8
6.2 Suits. . . . . . . . . . . . . . . . . . . . . . . . .9
6.3 Representations are True . . . . . . . . . . . . . . .9
6.4 Financial Statements . . . . . . . . . . . . . . . . .9
ARTICLE 7: CLOSING. . . . . . . . . . . . . . . . . . . . . . .9
7.1 Date, Time and Place . . . . . . . . . . . . . . . . .9
7.2 Closing Procedures . . . . . . . . . . . . . . . . . .9
7.3 Post-Closing Rights and Obligations. . . . . . . . . 11
ARTICLE 8: TERMINATION OF AGREEMENT. . . . . . . . . . . . 12
8.1 Non-Satisfaction or Non-Waiver of Conditions . . . . 12
8.2 Final Termination Date . . . . . . . . . . . . . . . 12
8.3 Default. . . . . . . . . . . . . . . . . . . . . . . 12
8.4 Effect of Termination. . . . . . . . . . . . . . . . 12
<PAGE> 130
ARTICLE 9: MISCELLANEOUS. . . . . . . . . . . . . . . . . . . 13
9.1 Seller's Ores and Concentrates . . . . . . . . . . . 13
9.2 Commissions. . . . . . . . . . . . . . . . . . . . . 13
9.3 Assignment . . . . . . . . . . . . . . . . . . . . . 13
9.4 Risk of Loss . . . . . . . . . . . . . . . . . . . . 13
9.5 Publication. . . . . . . . . . . . . . . . . . . . . 14
9.6 Governing Law. . . . . . . . . . . . . . . . . . . . 14
9.7 Exhibits . . . . . . . . . . . . . . . . . . . . . . 14
9.8 Captions . . . . . . . . . . . . . . . . . . . . . . 14
9.9 Notices. . . . . . . . . . . . . . . . . . . . . . . 14
9.10 Entire Agreement . . . . . . . . . . . . . . . . . . 15
9.11 Expenses of this Agreement . . . . . . . . . . . . . 15
9.12 Further Assurances . . . . . . . . . . . . . . . . . 15
9.13 Survival . . . . . . . . . . . . . . . . . . . . . . 15
9.14 Severability . . . . . . . . . . . . . . . . . . . . 15
9.15 Successors and Assigns . . . . . . . . . . . . . . . 16
<PAGE> 131
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT ("Agreement") is made as of
the _____ day of _______________, 1998, by and between Grand
Central Silver Mines, Inc. (formerly Centurion Mines
Corporation), a Utah corporation ("Grand Central") and Dotson
Exploration Company, a Utah corporation ("Dotson"), a wholly
owned subsidiary of Grand Central (Grand Central and Dotson
hereinafter collectively referred to as "Seller", whether one or
more), and Nevada Star Resources Corporation, a Nevada
corporation qualified to do business in the State of Utah
("Nevada Star" or "Buyer").
R E C I T A L S:
A. Seller owns and controls certain patented and
unpatented mining claims, mining leases, State of Utah mineral
leases and other real and personal property interests in the
Beaver Lake Rocky Mountain Mining District near the city of
Milford in Beaver County, Utah, all as more particularly
described in Exhibit A attached hereto and made a part hereof for
all purposes (hereafter referred to as "Properties").
B. Buyer desires to purchase and Seller is willing to sell
the Properties to Buyer in accordance with and specifically
subject to all of the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the promises and
covenants contained herein and of the benefits to be derived by
the parties under this Agreement, it is hereby agreed as follows:
ARTICLE I: DEFINITIONS
1.1 Agreement means this Purchase and Sale Agreement.
1.2 Closing means the execution and delivery of all
instruments of transfer by Seller and payment of the Purchase
Price by Buyer upon the terms and conditions hereof.
1.3 Closing Date means within ten (10) days from the
Determination Date.
1.4 Determination Date means the date Nevada Star receives
official notice in writing that the Vancouver B.C. Stock Exchange
accepts the filing of the Agreement and grants regulatory
approval for issuance of the common shares of capital stock of
Nevada Star to Seller contemplated by this Agreement.
1.5 Dollar means lawful currency of the United States.
<PAGE> 132
1.6 Final Termination Date shall have the meaning set forth
in Section 8.2.
1.7 Purchase Price means the consideration to be delivered
to Seller by Buyer set out in Section 3.1.
ARTICLE 2: PURCHASE AND SALE
2.1 Properties Purchased.
Subject to the terms and conditions hereinafter set forth,
on the Closing Date, Seller agrees to sell, assign, convey and
deliver to Buyer, and Buyer agrees to purchase, accept and pay
for all of Seller's right, title and interest in the Properties
described in Exhibit "A" for the agreed Purchase Price.
2.2 Retained Interests.
It is the intention of the parties, that Seller is selling
and Buyer is purchasing assets described in Exhibit "A",
specifically excepting and reserving to Seller rights and
interests described in Schedule 1.
ARTICLE 3: CONSIDERATION AND PAYMENT
3.1 Purchase Price.
Subject to terms and conditions in Section 3.2, the Purchase
Price to be paid by Nevada Star to Seller for the Properties
("Purchase Price") shall be as follows:
(a) two million (2,000,000) of the common shares of
Nevada Star's capital stock;
(b) a twelve percent (12%) net profits interest
defined in Exhibit B attached hereto and made a part hereof
for all purposes; and
(c) payment of certain of Seller's debts to third
party creditors in the amounts set forth in Exhibit C
attached hereto and made a part hereof for all purposes.
3.2 Payment of Nevada Star Common Shares.
Promptly following the Determination Date, Buyer shall cause
stock certificates representing the total of two million
(2,000,000) common shares of the capital stock of Nevada Star to
be issued in Seller's or in the name of Seller's nominee for
delivery to Seller on the Closing Date, valued at a price per
share equal to the average closing price on the Vancouver Stock
Exchange for the ten (10) day period preceding the date of
delivery and it is intended that the said shares of stock shall
be classified as "free trading" on the following schedule:
<PAGE> 133
No. of Shares Date
400,000 1 year after Determination Date;
400,000 1 1/2 years after Determination Date;
400,000 2 years after Determination Date;
400,000 2 1/2 years after Determination Date;
400,000 3 years after Determination Date; and
subject to the following conditions:
(a) that all stock certificates shall bear a
restrictive legend noting that the shares of Nevada Star
common stock to be issued pursuant to the Agreement have not
been and will not be registered under the United States
Securities Act of 1933, as amended, in reliance upon an
exemption applicable thereto under said Act and appropriate
State securities laws and that such shares may not be sold
or otherwise transferred in the absence of registration
under said Act or in compliance with an exemption from
registration, if available;
(b) that upon Seller's compliance with Regulation S of
the United States Securities Act of 1933, the shares may be
sold on the Vancouver Stock Exchange following the date such
shares are issued on the schedule set forth above, but if
the shares do not qualify for such sale, Buyer, at its
expense, agrees to cause registration statements to be filed
in Canada so that said stock shall be free trading on the
Vancouver Stock Exchange by each of the dates indicated;
(c) that Nevada Star's commitment to issue stock is
subject to all applicable regulations of the Vancouver Stock
Exchange and other Canadian as well as United States
regulatory agencies;
(d) execution by Seller of Attachment I to this
Agreement "U.S. Securities Law Representations re: Private
Placement of Common Shares of Nevada Star Resource
Corporation"; and
(e) Seller is to be permitted the opportunity of
designating one member of the Board of Directors of Nevada
Star. The term of office will be continued so long as Grand
Central holds at least one million shares of stock in Nevada
Star. Seller agrees to issue to Monty Moore a voting proxy
for all of Seller's owned shares for a period of two years
following the Closing.
3.3 Assignment of Net Profits Interest.
At the Closing, Nevada Star agrees to execute and deliver an
Assignment of a Twelve Percent (12%) Net Profits Interest in the
form of Exhibit B attached hereto and made a part hereof for all
purposes.
<PAGE> 134
3.4 Payment of Third Party Creditor Claims.
Subject to verification, approval and the delivery of lien
releases within sixty (60) days following the Closing, Nevada
Star agrees to pay certain third party claims to the extent shown
in Exhibit C attached hereto and made a part hereof for all
purposes, representing accrued and past due debts of Seller
affecting the Properties.
ARTICLE 4: PRE-CLOSING OBLIGATIONS OF THE PARTIES.
4.1 Availability of Information.
Upon execution of this Agreement, Seller agrees, if it has
not already done so, to make available to Nevada Star and shall
provide Nevada Star and its officers, employees and
representatives, full opportunity and access at reasonable times
to review and examine data, information, documents and other
material if any exists, as described in Sections 4.2, 4.3, and
4.4, relating to the Properties in Seller's possession or control
or to which Seller has access. Nevada Star shall have the right
to make copies of such contained in the files of Seller or to
which Seller has access, as Nevada Star may reasonably request,
and Seller agrees to provide such written authorization as may be
appropriate and necessary for Nevada Star to review the described
data and information, including but not limited to exploration
data and mineral reserve information in the possession of third
persons, to the extent Seller has the right to do so.
4.2 Title Information and Examination.
Agreements, leases, permits, abstracts, title insurance
commitments, title opinions, status reports and any other title
information material to the title of the Properties, including
but not limited to records, files, maps, and agreements relating
to such title information at Seller's offices. Nevada Star shall
review all such information and data and make such additional
title examination as it deems necessary to satisfy itself as to
the status of Seller's right, title and interest in and to the
Properties.
4.3 Technical Information.
Geological, geochemical, geophysical, drilling, mining and
engineering information and data, reclamation plans, bonds,
exploration and mining permits, environmental reports, surveys,
and mineral reserve reports.
<PAGE> 135
4.4 Other Information and Inspection.
Subject to all regulatory agency requirements, the officers,
employees, and other representatives of Nevada Star shall, at
their own risk, have the right of access during normal business
hours, upon reasonable notice to Seller, to any workings, shafts,
buildings, etc. for the purposes of verifying information and
otherwise inspecting the Properties.
4.5 Cooperation in Title Curative Efforts.
If the agreements, contracts, surface inspections, title
information of Seller, title insurance binders, title opinions,
title reports or any other information or data shall reflect or
Nevada Star learns of the existence of any encumbrance,
encroachment, defect or objection with respect to the title which
Nevada Star desires to have cured, Seller agrees to cooperate
with Nevada Star in endeavoring to cure any such title defect.
4.6 Confidentiality of Data.
Nevada Star and its representatives and affiliates shall
treat all proprietary information of Seller obtained by it as
confidential. Buyer may disclose such information only to: (i)
its consultants and financial brokers and institutions provided
it first secures similar confidentiality commitments from such
entities and persons; (ii) federal, state or local government
pursuant to disclosure requirements; and (iii) to a stock
exchange or similar trading market in accordance with rules and
regulations thereof. In the event this Agreement is terminated
without Nevada Star acquiring title to the Properties, Nevada
Star shall return to Seller all information received from Seller
or third parties at Seller's direction and other data and
information taken from the Properties or Seller's offices in
connection with the proposed transaction, and shall also deliver
to Seller any data and information generated by Nevada Star or
for its account including, but not limited to, abstracts, title
reports and opinions, environmental, geological and mineral
reserve reports, maps and plans (but Seller agrees that Nevada
Star shall have no liability to Seller or third parties resulting
from the use by Seller of any such data and information).
ARTICLE 5: REPRESENTATIONS
5.1 Representations of Seller.
(a) The consummation of the transaction represented by
this Agreement will not result in a breach of any terms and
conditions of or be construed as a default under any
agreement or other instrument to which Seller is a party and
will not violate or conflict with any contracts,
governmental or otherwise, to which Seller is a party or is
bound.
<PAGE> 136
(b) Seller has all requisite corporate power and
authority to enter into this Agreement and to perform its
obligations under this Agreement. The consummation of the
transaction contemplated by this Agreement will not violate,
nor be in conflict with, any provision of its charter or by-
laws, or any agreement or instrument to which it is a party
or is bound.
(c) The execution, delivery and performance of this
Agreement and the transaction contemplated hereby have been
duly and validly authorized by all requisite corporate
action by Seller.
(d) To the best of Seller's knowledge, it obtained and
held all necessary licenses, permits, easements,
authorizations, compliances and similar items required to be
issued or approved by any person or governmental body having
jurisdiction under any statute, rule, regulation or other
directive for conduct of all exploration, development and
mining operations, if any, during the period of its
ownership and possession and Seller is in substantial
compliance therewith, except as may be otherwise described
in Exhibit A to this Agreement.
(e) Except as otherwise described in Exhibit A, no
grantor of a license, permit, easement, authorization, or
application for same has made any claim for payment under,
or breach of any action or failure to act of Seller or any
of Seller's agents.
(f) That the physical condition of the Properties does
not violate any federal, state or local law, ordinance or
regulations relating to the environmental conditions on,
under or about the Properties, including, but not limited
to, soil and groundwater conditions.
(g) Prior to the Closing, Seller will not convey,
assign, transfer, encumber, mortgage or dispose of, or
consent to the conveyance or disposition of, any of the
Properties and will continue to maintain the Properties in
good standing.
(h) Except as otherwise described in Exhibit A, no
suit, administrative enforcement or other proceedings are
pending or threatened before any court or governmental
agency seeking to restrain, prohibit or declare illegal the
operations previously conducted at the Properties; there is
no condemnation, foreclosure, bankruptcy or other creditors'
rights proceeding pending or threatened against the
Properties or any action or proceeding which would prevent
or hinder this transaction.
<PAGE> 137
(I) The execution and delivery of the conveyance
documents (the forms of which are attached as Exhibits D-1
through D-11) will convey all of Seller's right, title and
interest in and to the Properties and to the extent
transferable under those documents, transfer all rights
under existing leases, licenses, permits, easements,
authorizations and applications. The transfer of Properties
is subject to all existing easements, encumbrances and
rights of way and other terms and conditions described in
Exhibit A and further subject to such third party consents
as may be required to confirm and/or approve such
conveyances. Seller agrees to cooperate with and assist
Nevada Star, if requested, to obtain third party consents as
it seeks such third party consents, which Nevada Star
identifies in writing to Seller either prior to or after
Closing.
(j) That the unpatented mining claims described in
Exhibit A are valid and subsisting mining claims under the
laws of the United States and the State of Utah, subject to
the paramount title of the United States; that all leases
and other agreements described in Exhibit A are current and
will remain so for a period of not less than sixty (60) days
after the Closing; that the Properties are free and clear
from all liens or encumbrances and that Seller will defend
its title to the Properties against all persons; that Seller
has not committed any act or acts which will encumber or
cause a lien to be placed against the Properties; and that,
to the best of the belief of Seller, no other person,
association or corporation has any interest or claim to the
Properties.
5.2 Representations of Nevada Star.
Nevada Star represents that:
(a) It is, and following execution of this Agreement
shall continue to be, an entity duly organized, existing and
in good standing under the laws of the State of Nevada and
qualified to do business in the State of Utah.
(b) It has all requisite power and authority to enter
into this Agreement and to perform its obligations under
this Agreement. The consummation of the transaction
contemplated by this Agreement will not violate, nor be in
conflict with, any provision of its charter or by-laws, or
any agreement or instrument to which it is a party or is
bound.
(c) The execution, delivery and performance of this
Agreement and the transaction contemplated hereby have been
duly and validly authorized by all requisite corporate
action of Nevada Star.
<PAGE> 138
(d) Its common shares are listed and traded on the
Vancouver Stock Exchange. Upon execution of this Agreement,
Nevada Star will use its best efforts to obtain regulatory
approval from the Vancouver Stock Exchange for this
Agreement and the transactions herein contemplated.
(e) To the best of its knowledge, no suit or other
proceedings are pending or threatened before any court or
governmental agency seeking to restrain, prohibit or declare
illegal, this transaction.
ARTICLE 6: CONDITIONS FOR CLOSING
Unless waived in writing by the parties, the obligations of
Seller and Nevada Star to close the transaction contemplated
hereby are subject to satisfaction of each of the following
conditions:
6.1 Regulatory Notices.
(a) No federal, state, county or municipal statute,
rule, regulation, proceeding, action or order shall exist or
shall have been adopted or taken, and no judicial or
administrative or Vancouver Stock Exchange decision shall
have been entered (whether preliminary or final), which
would:
(i) prohibit or restrain the transactions
contemplated hereby or make such transactions illegal;
or
(ii) cause the sale, transfer or other conveyance
of any of the Properties to any person other than
Nevada Star.
(b) Official notice has been provided by the Vancouver
Stock Exchange and any other regulatory agency having
jurisdiction accepting and approving this Agreement for
filing and further granting approval for issuance of the
common shares of capital stock of Nevada Star to Seller
contemplated by this Agreement.
6.2 Suits.
No suit or other proceeding shall be pending or threatened
before any court or governmental agency which could restrain,
prohibit or declare illegal the transactions contemplated hereby.
<PAGE> 139
6.3 Representations are True.
All representations of each of the parties contained in
Article 5 of this Agreement shall be true in all material
respects at and as of the Closing Date as if such representations
were made at and as of that date, and each of the parties shall
have performed and satisfied all acts and agreements required by
this Agreement to be performed and satisfied by each of them at
or prior to the completion of the transaction.
6.4 Financial Statements.
Nevada Star has furnished to Seller its audited August 31,
1997 financial statements and an unaudited quarterly statement
for the last complete calendar quarter prior to Closing.
ARTICLE 7: CLOSING
7.1 Date, Time and Place.
Unless otherwise agreed in writing by the parties, the
Closing shall take place at 10:00 a.m., prevailing local time,
within ten (10) days following the Determination Date, at the
offices of Pruitt, Gushee & Bachtell, 1850 Beneficial Life Tower,
Salt Lake City, Utah 84111, or such other date and/or place to
which the parties may agree.
7.2 Closing Procedures.
At the designated date, time and place, the following shall
occur:
(a) Seller shall execute, acknowledge and deliver the
transfer of title documents in the forms of Exhibits D-1
through D-11 necessary to transfer and assign the Properties
listed in Exhibit A to Buyer; and
(b) Seller shall execute, acknowledge and deliver to
Buyer such other instruments of conveyance, assignment and
transfer reasonably necessary to convey Seller's right,
title and interest in and to the Properties to Buyer.
Nothing in this Agreement shall be construed as an attempt
to assign any assets or rights which are nonassignable or
which are assignable only with the consent of another person
and/or government agency (unless and until such consent
shall have been obtained), nor shall Seller have any
liability or obligation to obtain such consents, but Seller
agrees to cooperate as Buyer seeks such consents.
(c) Nevada Star shall deliver to Seller the following:
<PAGE> 140
(i) the certificates for two million (2,000,000)
shares of the capital stock of Nevada Star with the
appropriate legend(s) as required under the terms of
this Agreement or rule or order of the Vancouver Stock
Exchange or Canadian and/or U.S. regulatory agencies;
(ii) the Assignment of Net Profits Interest in the
form of Exhibit B; and
(iii) official evidence of regulatory approval
from the Vancouver Stock Exchange for the issuance of
two million shares (2,000,000) of the capital stock of
Nevada Star as described in Section 3.2 of this
Agreement.
(d) If requested by Buyer, Seller shall provide to
Buyer proof of payment or lien waivers executed by any
contractor, materialman, supplier or other person who has
supplied work, labor, services or materials to the
Properties, at Seller's request, at any time within one
hundred twenty (120) days prior to the Closing Date, or
Seller will provide certification that no contractor,
materialman, supplier or other person has supplied any such
work, labor, services or material within such 120-day
period.
(e) Applicable property taxes, if any, will be paid as
follows:
(i) All outstanding taxes, penalties and interest
due for calendar years prior to 1998, if any, shall be
paid at or prior to the Closing Date by Seller in their
entirety.
(ii) Taxes assessed and either payable or not yet
payable for the calendar year 1998 shall be prorated
between the parties as of the Closing Date. Taxes
assessed and either payable or not yet payable for the
calendar year 1998 subsequent to the Closing Date shall
be borne entirely by Buyer. Seller's prorated share
shall be charged to Seller and credited to Nevada Star
at the Closing Date if ascertainable at that time, or
will be reimbursed thereafter by Seller within thirty
(30) days of receipt of invoice from Nevada Star.
(iii) Buyer shall pay all sales taxes which
may be assessed on the transfer of tangible personal
property, if any, and any other property under this
Agreement included in the Properties.
<PAGE> 141
(iv) Seller or Buyer may defer payment of any tax
in dispute while it is contesting the same, or it may
pay any such tax in dispute under protest and take
action to recover the same. The other party shall have
no interest in any tax so recovered except to the
extent it may have contributed to the same pursuant to
the above prorata provisions in which case it shall be
entitled to receive its prorata share thereof
determined on the same basis.
(v) All taxes, whether on real or personal
property and assessed and payable for the calendar
years after the Closing Date shall be paid by Buyer.
(f) After the Closing Date, Buyer shall make available
to Seller all information as Seller may reasonably require
to defend any tax proceedings or litigation arising from
Seller's ownership in connection with the Properties prior
to that date.
(g) Buyer shall pay (at its own expense) any
documentary, transfer, filing and recording fees (including
lease, permit, license, right-of-way and transfer of title
fees) required in connection with the transactions
contemplated by this Agreement.
7.3 Post-Closing Rights and Obligations.
Seller shall have the right but not the obligation at any
time prior to July 1, 1998 by written notice to Nevada Star, that
it elects to terminate its Twelve Percent (12%) Net Profits
Interest and return 1,200,000 of its Nevada Star shares to the
treasury of Nevada Star and thereby elect a thirty percent (30%)
participating interest in the "Area of Joint Interest". If such
election is made, Seller shall be required to reimburse Nevada
Star for thirty percent (30%) of costs and expenses incurred by
Nevada Star to Seller's date of election for exploration or
development of the Properties and acquisition of any property
subject to the joint venture contract. The parties will then
enter into a "joint venture contract" substantially following the
Rocky Mountain Mineral Law Foundation Form 5. The written notice
of Seller's election to back-in shall be accompanied by: (a) a
certified check in the amount of $300,000 as a good faith deposit
amount of its thirty percent (30%) share of expenditures
reimbursement obligation to Nevada Star; and (b) a certified
financial statement supporting Seller's financial ability to fund
its on-going participating share of joint venture budgets as
reflected in the completed report filed with regulatory
authorities for development and mining the Properties and
construction of a copper leach SX/EW plant, copy of which will be
furnished to Seller.
<PAGE> 142
ARTICLE 8: TERMINATION OF AGREEMENT
8.1 Non-Satisfaction or Non-Waiver of Conditions.
If any condition for Closing described in Article 6 of this
Agreement has not been satisfied or waived prior to or on the
Closing Date, this Agreement shall terminate, unless otherwise
agreed in writing by the parties and the parties shall not be
required to complete the transaction on that date.
8.2 Final Termination Date.
All conditions as set out in Article 6 shall be completed
within 24 months after the date of this Agreement or this
Agreement shall terminate. Each of the parties shall have an
affirmative obligation to complete all conditions in as timely a
fashion as is possible; provided, however, if such conditions
cannot be completed by the date indicated for reasons beyond the
control of the parties, this Agreement may be extended for up to
24 additional months at the election of either party.
8.3 Default.
(a) If any of Buyer's representations hereunder prove
to be untrue in any material respect, which would prohibit
or prevent the contemplated transactions or Buyer fails to
perform any of its obligations hereunder for any reason,
other than Seller's prior default, Buyer will be deemed to
be in default hereunder, and in the absence of waiver by
Seller, this Agreement shall terminate.
(b) If any of Seller's representations hereunder prove
to be untrue in any material respect, which would prohibit
or prevent the contemplated transactions or materially
diminish the value of the assets to be transferred, Seller
will be deemed to be in default hereunder and, in the
absence of waiver by Buyer, this Agreement shall terminate.
8.4 Effect of Termination.
(a) In the event of termination, this Agreement shall
be of no force and effect, and neither party shall have any
further obligation or liability to the other arising under,
resulting from, or attributable to this proposed
transaction, this Agreement or any of the negotiations
relative hereto; provided, however, in the event Buyer has
occupied and/or made use of any facility on the Properties
listed in Exhibit A prior to the Closing Date, then Buyer
agrees to return the same to Seller in the same approximate
condition as existed on the date of this Agreement, ordinary
wear and tear excepted.
<PAGE> 143
(b) Buyer agrees to execute and deliver to Seller any
documents requested to cancel, annul and take any steps
necessary in Seller's sole discretion to provide notice of
termination of this Agreement.
ARTICLE 9: MISCELLANEOUS
9.1 Seller's Ores and Concentrates.
Seller and companies controlled by Seller shall have the
right to provide ores or concentrates from lands not subject to
this Agreement for processing at a copper leach SX/EW plant built
by Buyer pursuant to this Agreement up to a maximum of ten
percent (10%) of the plant capacity; conditioned, however, on
Seller securing and funding any additional permits or
construction necessary to effect the processing of such ores or
concentrates.
9.2 Commissions.
Buyer hereby agrees to protect, indemnify and hold Seller
harmless from and against any liability for any broker's or
finder's fee arising with respect to brokers or finders retained
or engaged by Buyer in respect of the transactions contemplated
by this Agreement. Seller hereby agrees to protect, indemnify
and hold Buyer harmless from and against any and all liability
for any broker's or finder's fee arising with respect to brokers
or finders retained or engaged by Seller in respect of the
transactions contemplated by this Agreement.
9.3 Assignment.
Neither party shall assign this Agreement without the
written consent of the other, which consent shall not be
unreasonably withheld.
9.4 Risk of Loss.
The risk of loss for the Properties shall pass to Buyer at
the Closing. In the event of a material loss in which all or any
portion of the Properties are destroyed by fire or other
casualty, or are taken in condemnation prior to that date, if
that loss is by natural occurrence or circumstances beyond the
control of Seller, then Seller shall not be required to restore
the property involved to a pre-agreement status. Any insurance
proceeds received by Seller shall be retained by Seller if Buyer
elects not to proceed with the purchase of the Properties.
However, such insurance proceeds, if any, shall be delivered to
Buyer if the Closing occurs and Buyer acquires the Properties.
<PAGE> 144
9.5 Publication.
Prior to the Closing, Buyer and Seller agree to keep the
terms of this Agreement confidential, except that nothing shall
prevent Seller or Buyer from disclosing these terms to (i) their
respective employees, officers and directors, (ii) employees,
officers and directors of affiliated companies, (iii) their
attorneys or accountants, (iv) their engineers and consultants,
provided that in each case such parties are advised of the
confidential nature of the information, or (v) a governmental
agency or to the public or to any stock exchange which the
disclosing party believes in good faith is required by pertinent
law or regulation or the rules of any stock exchange. After
Closing, Buyer and Seller and their affiliated companies shall be
permitted to make such public disclosures relating to the sale as
they deem advisable.
9.6 Governing Law.
This Agreement shall be governed by the laws of Utah.
9.7 Exhibits.
Exhibits are hereby incorporated herein by reference as if
set out fully at length within this Agreement and all references
in this Agreement to exhibits shall be deemed to be references to
such exhibits as the same may be amended and supplemented, in
either case with the consent of both parties, through and as of
the Closing Date.
9.8 Captions.
The headings herein are for the convenience of reference
only and shall not modify, define, expand or limit any of the
terms or provisions hereof.
9.9 Notices.
All communications required or permitted under this
Agreement shall be in writing and may be served by depositing the
same in the mail, addressed to the party to be notified at the
address set forth below, postage prepaid, and registered or
certified, with a return receipt requested. Notices deposited in
the mail in the manner hereinabove described shall be deemed to
have been received on the date of delivery as shown on the return
receipt. Written notices served in any other manner shall be
deemed to have been received if and when actually received by the
addressee. Either party may, by written notice so delivered to
the other, change the address to which delivery shall thereafter
be made.
<PAGE> 145
If to Seller: Grand Central Silver Mines, Inc. and
Dotson Exploration Company
1010 Ironwood Drive, Suite 105
Coeur d'Alene, ID 83814
If to Buyer: Nevada Star Resource Corporation
10735 Stone Avenue North
Seattle, WA 98133
Attention: Monty D. Moore, President
9.10 Entire Agreement.
This instrument states the entire Agreement of the parties
and supersedes all prior agreements and understandings between
the parties concerning the subject matter hereof. This Agreement
may be supplemented, altered, amended, modified or revoked only
in writing, signed by both parties.
9.11 Expenses of this Agreement.
Except as otherwise provided herein, each party shall be
solely responsible for all expenses incurred by it in connection
with this transaction (including, without limitation, fees and
expenses of its own counsel and accountants) and shall not be
entitled to any reimbursement therefor from the other party
hereto.
9.12 Further Assurances.
After the Closing, Seller shall, upon request of Buyer,
execute, acknowledge and deliver such further instruments of
conveyance, assignment and transfer, and take such other action
as Buyer may reasonably request, in order more effectively to
convey, assign, transfer and deliver Seller's right, title and
interest to the Properties as contemplated in the consummation of
the transaction under this Agreement.
9.13 Survival.
It is understood and agreed that certain specified rights
and obligations of the parties as set forth in this Agreement
shall survive the Closing and will not be merged into the
instruments of conveyance or other documents executed and
delivered pursuant hereto.
9.14 Severability.
If any provision hereof is invalid or unenforceable, then,
to the extent permitted by law, the other provisions hereof shall
remain in full force and effect and shall be liberally construed
in order to carry out the intentions of the parties as nearly as
may be possible. To the extent permitted by law, the parties
<PAGE> 146
hereby waive the application of any provision of law that would
otherwise render any provision hereof wholly or partially
invalid, illegal or unenforceable in any respect.
9.15 Successors and Assigns.
This Agreement may be signed in counterpart and shall be
binding upon and shall inure to the benefit of the parties and
their respective successors and assigns. Nothing herein,
expressed or implied, is intended to confer or confers upon any
other person any benefits, rights or remedies.
EXECUTED the day and year first set forth above.
SELLER:
GRAND CENTRAL SILVER MINES, INC.
By: ______________________________
DOTSON EXPLORATION COMPANY
By: ______________________________
BUYER:
NEVADA STAR RESOURCE CORPORATION
By: ______________________________
Monty D. Moore, President
<PAGE> 147
LETTER AGREEMENT BETWEEN
GRAND CENTRAL SILVER MINES & ROYAL SILVER MINES
FOR PURCHASE OF SIERRA MOJADA INTEREST
The parties to this agreement are GRAND CENTRAL SILVER MINES,
INC. (hereinafter "GSLM"), a Utah corporation headquartered in
Coeur d'Alene, Idaho, and ROYAL SILVER MINES, INC. (hereinafter
"RSMI"), a Utah corporation headquartered in Spokane, Washington,
or collectively hereinafter "the Parties".
RECITALS
On January 6, 1998, RSMI acquired a 35% participating
interest in the Sierra Mojada District by acquiring rights held
by Dakota Mining. Dakota's rights were created by that certain
Joint Exploration and Development Agreement ("JED Agreement")
signed between USMX and Metalline Mining Company ("MMGG") on July
26, 1996. Dakota acquired its rights under the JED Agreement on
May 31, 1997 by its acquisition of USMX, Inc.
RSMI acquired its 35% participating interest pursuant to a
letter agreement attached as Exhibit A. Such letter agreement
called for RSMI and MMGG to sign a new Joint Venture Agreement to
replace the JED Agreement cited above. Such new agreement has not
yet been completed and executed.
GSLM desires to acquire and RSMI desires to sell the 35%
participating interest cited above and more specifically
described in paragraph (4) of Exhibit A.
NOW THEREFORE, in consideration of the covenants and
agreements contained herein, GSLM and RSMI agree as follows:
RSMI agrees to transfer its 35% participating interest in
the Sierra Mojada District to GSLM, together with all rights,
responsibilities, obligations, and accrued liabilities which may
be owing.
GSLM agrees to transfer to RSMI 735,000 shares of its common
stock and to execute a $350,000 promissory note in favor of RSMI
payable within one year and bearing interest at a rate of 8% per
annum. In the event such note is declared to be in default, GSLM
shall issue to RSMI $700,000 plus accrued interest in the form of
restricted common stock of GSLM at the average market bid price
of the previous twenty days of trading prior to the date the note
is declared in default.
GSLM agrees to fulfill all obligations of RSMI created by
Appendix A including any ongoing responsibilities or liabilities
pursuant to the original JED Agreement.
<PAGE> 148
GSLM agrees to draft and sign a new Joint Venture Agreement
with MMGG as specified by paragraph (7) of Appendix A as soon as
possible.
THE PARTIES, through their executive officers, hereby accept
and agree to the above terms and represent that they are
empowered to make such agreement by their respective Board of
Directors.
_____________________________ ____________________________
John P. Ryan, President Howard Crosby, President
Grand Central Silver Royal Silver Mines, Inc.
Mines, Inc.
Date: __________________ Date: __________________
<PAGE> 149
GRAND CENTRAL SILVER MINES, INC.
1010 Ironwood Drive, Suite 105
Coeur d'Alene, Idaho 83814
OPTION FOR JOINT VENTURE
Option for Joint Venture Between Arizuma Resources, Inc.,
and Grand Central Silver Mines, Inc., on Certain Mining
Properties in the Wonder Mining District, Churchill County,
Nevada.
April 2, 1998
Grand Central Silver Mines, Inc. (GCSMI) proposed, and
Arizuma Resources, Inc. (ARI) has agreed to grant to GCSMI the
option to enter into a Joint Venture (JV) agreement with ARI
regarding exploration and development of mineral deposits below a
vertical depth of 500 feet on certain mining properties
(Properties) in the Wonder Mining district, Churchill County,
Nevada. The proposed agreement will be governed by the following
terms:
1. GCSMI may earn a 70% interest in the JV by spending $1.2
million over a 4 year period. GCSMI will be Operator form
the beginning of the JV. Work, project expenditures, and
payments by ARI during the earn-in period, and while GCSMI
is sole funding work on behalf of the JV, will be as
follows:
A. Upon signing this letter, GCSMI will pay $5,000 to ARI.
B. During the first five months from execution of this
letter agreement, GCSMI will carry out geological,
geochemical, and geophysical surveys, drilling and
other such exploration effects as it deems desirable,
and at GCSMI's sole discretion.
C. During the first month following the execution of this
letter agreement, GCSMI will undertake a compilation of
geologic information and may copy any and all maps and
data in ARI's possession, or obtainable by ARI through
other agreements with third parties. GCSMI will
reimburse ARI for the actual costs of time and
materials attendant to providing information requested
by GCSMI.
D. If GCSMI elects to exercise its option to enter a JV at
the end of five months, it shall pay ARI a further sum
of $5,000, and to retain its right to each an interest
in the Properties, GCSMI must expend at least $100,000
during the calendar year 1998, including four holes
below 500 feet in the old Wonder Mine area. If GCSMI
<PAGE> 150
elects to continue after the first year of the JV,
which is to begin effective five months from the date
of execution of this "Option to Joint Venture
Agreement," it shall pay to ARI $20,000 on the first
anniversary of the JV, $30,000 on the second
anniversary of the JV, $40,000 on the third anniversary
of the JV, and on each anniversary thereafter, until
GCSMI is vested at a 70% participating interest.
E. If GCSMI elects to continue after the first year,
required expenditures by GCSMI will total $250,000,
$350,000, and $500,000 in years 2, 3, and 4,
respectively.
F. During the initial five month option period, and during
the period in the GCSMI is sole funding work on behalf
of the JV, ARI will be responsible for all cash
property lease payments to underlying owners of the
Properties.
2. GCSMI will earn an additional 10% interest in the JV
(totaling 80%) after initial earn-in by paying all costs
through completion of a positive production feasibility
study and notification to ARI of its decision to develop a
mine on the Properties. Upon receipt of such notification,
ARI shall have 90 days within which to elect a 20%
participating interest in the mine, or a 1% gross royalty on
sales from the mine.
3. GCSMI's expenditures which qualify as to satisfaction of its
earn-in requirement will include, but shall not be
necessarily limited to, the following: All expenditures
incurred in connection with work on the JV Properties for
geology, geophysics, geochemistry, drilling, consultants,
construction, engineering, project land maintenance and
acquisition costs including cash payments to underlying
owners of the Properties. Where equipment owned by GCSMI is
used in connection with work on the Properties, it shall be
charged at the rate normally charged by third party US
contractors in the area. Qualifying expenditures shall
exclude legal costs associated with preparing the JV
agreement, payments to ARI, and corporate overhead charges.
4. GCSMI may terminate its participation in the initial five
month option period at any time by giving 30 days notice
provided, however GCSMI shall be obligated to make property
holding payments on unpatented lode mining claims in the JV
area if notice is given after August 1, 1998. GCSMI may
terminate its participation in the JV at any time by giving
60 days notice following which GCSMI's only financial
obligation shall be to make all property lease payments or
holding costs which become due and payable during the 60 day
notice period.
<PAGE> 151
5. A formal agreement incorporating the general terms and
conditions contained herein will be completed as soon as
possible after the end of the five month option period, but
in a time not to exceed four months from the beginning of
the JV. The formal agreement will be substantially similar
to the Rocky Mountain Mineral Law Foundation's Form 5 -
Model Form Mining Venture Agreement.
6. The initial five month option and exploration period
described above will begin on April 2, 1998, and end on
September 2, 1998.
7. The area included in the JV will be as shown on the attached
map (omitted for EDGAR filing). The JV shall include all
mineral deposits developed below a vertical depth of 500
feet on the JV lands. All mineral deposits developed
between the surface and a vertical depth of 500 feet are
reserved exclusively to ARI, unless otherwise agreed by the
parties. All data generated by GCSMI in the JV area shall
be made available to ARI within 30 days of actual
generation, or of its receipt by GCSMI.
8. GCSMI will fund all new property acquisitions within the JV
boundary, and which will be added to the JV. All
acquisition costs of the new properties paid by GCSMI will
count toward earn-in requirements. A list of all properties
currently held by ARI will become part of the formal
agreement.
9. During GCSMI's earn-in, and the subsequent period during
which GCSMI is sole funding work on behalf of the JV,
quarterly meetings will be held with ARI and an annual
report will be provided within three month of the each of
each calendar year.
10. ARI agrees to provide GCSMI with advance copies of any news
releases relating to this "Option to Form a Joint Venture,"
or to activities performed during the term of this option.
Any such news releases must be approved in advance by GCSMI.
In the event the GCSMI does not provide ARI with comments on
any proposed ARI news releases within five business days
after such proposed release draft has been received via
Certified Mail by GCSMI's Coeur d'Alene office, ARI may
assume that such proposed releases are approved by GCSMI,
and ARI shall be free to distribute such proposed news
releases without further delay.
GRAND CENTRAL SILVER MINES, INC.
/s/ John P. Ryan, President
<PAGE> 152
If these terms are agreeable, pleas sign below and return
one executed copy to our Coeur d'Alene office. If you have any
questions or concerns, you may call John Ryan at (208) 769-7340,
or Casey Ross at (345) 438-5771.
ARIZUMA RESOURCES, INC.
/s/ Paul Roberts, President
Dated April 13, 1998
<PAGE> 153
SUMMARY OF TERMS
The following is a summary of the principal terms of the
proposed series of transactions whereby Grand Central Silver
Mines, Inc. (the "Company") will acquire a controlling interest
in each of Eco-Resources International, Inc. ("ECOI") and San
Miguel Mining Corporation ("San Miguel"), in each case, in
exchange for shares of the common stock, par value $0.01 per
share, (the "Common Stock") of the Company. This summary is
intended to set forth only the present intentions of the parties
and is not intended to create any binding obligations on the
parties hereto until, and unless, a definitive agreement(s) has
been executed and delivered by the parties hereto. All of the
transactions set forth herein shall be subject to the prior
approval of each parties' board of directors and shareholders.
Acquisition of
ECOI On a date (the "Closing Date") that is not later
than thirty days after the date hereof, the
Company will exchange 3,500,000 shares of Common
Stock for 3,500,000 shares of the common stock,
par value $0.001 of ECOI; provided that, as of the
Closing Date, ECOI (I) shall have good and
marketable title to each of the mineral properties
described on Schedule I hereto, and (ii) shall
have secured for the Company from a third part a
firm commitment financing (the "Financing") in the
minimum amount of $30 million.
To the extend the exchange shares of the common
stock of ECOI are freely trading shares on the
Closing Date, the shares of common stock for which
they are exchanged shall also be freely trading
shares.
Acquisition of
San Miguel Also on the Closing Date, the Company will
exchange 12,500,000 shares of common stock for
12,500,000 shares of the common stock, par value
$0.01 of San Miguel; provided that, as of the
Closing Date, San Miguel shall have acquired a 50%
equity interest in Cia. Minera Metallurgica San
Miguel, S.A. de C.V. ("Minera").
Use of
Proceeds The parties agree to cause the Company to sue the
proceeds of the Financing (i) up to $20,000,000 to
fund the development and exploitation of Minera's
existing mineral properties, and (ii) the balance,
to fund the development of future mineral
properties, to pay the expense (including, without
limitation, all legal, advisory and consulting
<PAGE> 154
fees and underwriting discounts and commissions,
if any) incurred by the parties in connection with
the transactions contemplated hereby, and for
working capital.
Director The Board of Directors of the Company shall be
expended form six to ten members. The current
board of directors of the Company shall cause two
nominees of ECOI and two nominees of San Miguel to
be elected as directors.
Voting Rights The approval of each of ECOI and San Miguel, which
approval shall not be unreasonably withheld, shall
be required (as long as it respective shares of
common stock are restricted) to:
(i) Authorize the merger, consolidation, or the
sale, lease or other disposition of all or
substantially all of the assets of the
Company;
(ii) Declare or pay any dividend or distribution
on any share capital;
(iii) Make any financial commitment that could
result in a liability greater than $500,000;
(iv) Enter into any material joint venture, joint
marketing or joint development agreement; and
(v) Make any changes to any existing share option
plan, or make any grants of share options or
any other forms of equity or incentive
compensation.
Registration
Rights Each of ECOI and San Miguel may require the
Company to effect up to one (1) registration on
Form S-1 under the Securities Act of 1933 (the
"Securities Act") and up to five registration on
Form S-3, if such form shall be available for use
by the Company.
Each of ECOI and San Miguel shall have rights to
two (2) piggyback registrations of the Company's
securities, prior to and/or concurrently with the
registration of securities of the Company, subject
to customary underwriter cut-backs.
Standstill With the signing of this term sheet, the Company
(including all officers, directors and other
agents) agree to stop all discussions and to enter
into any new discussions with any and all other
potential investors for the period from signing of
this term sheet to September 20, 1998. The
Company will immediately disclose to each of ECOI
<PAGE> 155
and San Miguel any inquiries for financing made to
the Company. Notwithstanding the foregoing,
nothing herein shall restrict the Company from
completing the private placement of 900,000 shares
of Common Stock or the private placement of
$2,500,000 of its convertible debentures.
Expenses The Company will reimburse each of ECOI and San
Miguel for its respective out-of-pocket expenses
associated with due diligence and negotiating a
definitive agreement(s) and the transactions
contemplated hereby (including, without limitation
all attorneys', advisors' and consultants' fees
and underwriting discounts and commissions). Such
reimbursement of expenses will be made from the
proceeds of the private placement of the Company's
convertible debentures. If no closing of such
private placement occurs, the Company will be
responsible for any expenses.
Confidentiality
Except as required by law, no party hereto shall
at any time divulge to any person (other than
Company's officers, directors or other agents)
that negotiations are taking place between the
parties or any other information relating to this
Summary of Terms without the prior written consent
of the other parties.
Other Other terms and conditions customary to venture
capital financing will apply. It is contemplated
that the closing of acquisition of ECOI and the
closing of the acquisition of And Miguel will
occur simultaneously, and the parties understand
that neither ECOI nor San Miguel shall be
obligated to consummate an acquisition unless both
acquisitions are consummated.
Subject to This is not a definitive offer and is not binding,
except for the obligations under the paragraphs
titled "Standstill," "Expenses" and
"Confidentiality" which the parties intend to be
binding, and is subject to:
(i) Successful conclusion of due diligence by the
parties.
(ii) Negotiation of a definitive agreement and
documentation;
(iii) Appropriate representations and warranties
and covenants by the Company; and
(iv) Approval of each parties' Board of Directors
and shareholders
<PAGE> 156
Signed and agreed as of this 20th day of March, 1998 by:
GRAND CENTRAL SILVER MINES, INC.
BY: /s/ John P. Ryan
Title: President
<PAGE> 157
Jones, Jensen & Company
Certified Public Accountants
50 South Main Street
Suite 1450
Salt Lake City, Utah 84144
(801) 328-4408
Facsimile (801) 328-4461
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our audit report dated November 26,
1997, with respect to the consolidated financial statements for
the years ended September 30, 1997 and 1996 of Grand Central
Silver Mines, Inc. (formerly Centurion Mines Corporation and
Subsidiaries), included in and made part of the Grand Central
Silver Mines, Inc.'s Form SB-2 Registration Statement, filed with
the Securities and Exchange Commission.
/s/ Jones, Jensen & Company
Certified Public Accountants
Dated: May 19, 1998
<PAGE> 158
CONRAD C. LYSIAK
Attorney and Counselor at Law
601 West First Avenue
Suite 503
Spokane, Washington 99201
(509) 624-1475
FAX: (509) 747-1770
CONSENT
I HEREBY CONSENT to the inclusion of my name in
connection with the Form SB-2 Registration Statement filed with
the Securities and Exchange Commission as attorney for the
registrant, Grand Central Silver Mines, Inc., and to the
reference to my firm under the subcaption "Legal Matters."
DATED this 19th day of May, 1998.
Yours truly,
/s/ Conrad C. Lysiak
