UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20F
ANNUAL REPORT PURSUANT TO SECTION 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934 OF A FOREIGN CORPORATION
FOR FISCAL YEAR ENDED MARCH 31, 1999
LEADER MINING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 0000850765
Alberta, Canada (N/A)
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 Fifth Avenue, S.W., Suite 530, Calgary, Alberta T2POL6
(Address of principal executive offices) (Zip Code)
(403) 234-7501
Registrant's telephone number, including area code
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class to be so registered: None
Name of each exchange on which each class is to be registered: None
Securities to be registered pursuant to Section 12(g) of the Act:
Title of class
Common Unlimited Shares of Common Stock
A total of 16,818,565 shares of common stock of Registrant were issued and
outstanding as of March 31, 1999. No other classes of stock were issued and
outstanding.
Indicated by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
Indicate by check mark which financial statement item the Registrant has elected
to follow: Item 17 __X__ Item 18 ______
<PAGE>
TABLE OF CONTENTS
PART I
Page
Item 1. Description of Business......................................5
Item 2. Description of Property.....................................12
Item 3. Legal Proceedings...........................................18
Item 4. Security Ownership of Certain Beneficial Owners
and Management (Control of Registrant)......................20
Item 5. Nature of Trading Market
Market Price of and Dividends on
Registrants Common Equity and
Related Stockholder matters.................................21
Item 6. Exchange Controls and Other Limitations Affecting Security
Holders.....................................................22
Item 7. Taxation....................................................22
Item 8. Selected Financial Information..............................24
Item 9. Management Discussion and Analysis..........................28
of Financial Condition and Results of Operations
Item 10. Directors and Executive Officers ...........................31
Item 11. Compensation of Officers and Directors......................33
Item 12. Options to Purchase Securities from Registration or
Subsidiaries................................................35
Item 13. Interest of Management in Certain Transactions..............36
Item 14. Description of Securities ..................................37
Item 15. Defaults upon Senior Securities.............................37
Item 16. Changes in Securities, Changes in Security for Registered
Securities..................................................38
Item 17. Financial Statements........................................38
Item 18. Financial Statements (Not applicable) ......................38
<PAGE>
Item 19. Financial Statements, Exhibits, and Supplementary Data .....39
Exhibit Index......................................49
Signatures.........................................42
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) The Company
Leader Mining International Inc. ("Leader," "Company," or "Registrant") was
incorporated on June 22, 1987 as Durga Resources Ltd. ("Durga"), under the
Business Companys Act (Alberta). By a Certificate of Amalgamation dated March
31, 1993 Durga amalgamated with Durvada Resources Ltd. and resulted in new Durga
Resources Ltd. By a Certificate of Amendment dated September 24, 1993, Durga
changed its name to Leader Mining Company ("LMC"). By a Certificate of Amendment
dated July 18, 1994. It consolidated its shares (reverse split) in 1994 by one
for five shares, and it changed its name to the Leader Mining International Inc.
The Registrant was listed on the Alberta Stock Exchange on December 18, 1987.
Leader is extraprovincially registered in the Province of Saskatchewan by a
Certificate of Registration dated November 21, 1996, under The Business
Corporations Act (Saskatchewan) and in the Province of Manitoba by a Certificate
of Registration dated November 20, 1996, under The Business Corporations Act
(Manitoba).
The registered office of the Company in Alberta is at 1600, 407 - 2nd Street
S. W., Calgary, Alberta, T2P 2Y3. The head office and records office of the
Corporation is at 530, 400-5th Avenue S. W., Calgary, Alberta, T2P 0L6.
The Company is a reporting company in the Province of British Columbia and
in the Province of Alberta. The Corporation's shares are listed and posted for
trading on the Alberta Stock Exchange (ASE) under the symbol "LMN" and quoted on
National Quotation Bureau "Pink Sheets."
The Company was formed by Mr. Yashvir (Jasi) Nikhanj, the current President and
a director, to pursue the principal business of exploration, and development of
gold, silver and base metals projects.
From 1987 to 1994, the Company was engaged in mineral exploration for gold,
copper, zinc and diamonds in the Northwest Territories and Saskatchewan, Canada.
The Company was also exploring for gold in the state of Nevada. The Company had
minimal capitalization during such period, and its activities were very limited.
The Company's strategy with respect to its mineral exploration related
activities is to identify geological areas in which the Company may invest or
participate in non-producing or producing mineral prospects or joint ventures
for development, and where the company may acquire prospects for mineral
exploration through staking claims
During the last five (5) fiscal years, the Company conducted
exploration activities on certain mineral prospects as follows:
<PAGE>
Voisey's Bay; Labrador, Canada, 1998
Approximately $55,000 expended for land acquisition and prospecting and ground
geophysics to explore for magnetic segregation nickel deposits.
Ariel Resources Ltd.; Costa Rica, 1998
Approximately $250,000 expended to perform due diligence and
technical feasibility studies to ascertain the viability of corporate
merger.
Nighthawk Lake; Ontario, Canada, 1996-1998
Approximately $275,000 expended for land acquisition and
prospecting; ground geophysics; and diamond drilling to test potential
gold targets.
Bristol; Ontario, Canada, 1996-1997
Approximately $125,000 expended for land acquisition and
prospecting; ground geophysics; and diamond drilling to test potential
gold targets.
Steephill Lake; Saskatchewan Canada, 1997
Approximately $300,000 expended for land acquisition and
prospecting; airborne geophysics; and diamond drilling to test
potential base metal targets in volcanogenic massive sulphide (VMS).
Nettogami Lake; Ontario, Canada, 1996
Approximately $1,278,000 expended on land acquisition and
prospecting, airborne and ground geophysics, and diamond drilling to
test potential sedimentary exhalitive (Sed Ex) base metal targets.
Merendon Mining Corporation; Honduras, 1996
Approximately $750,000 expended for land acquisition, due
diligence, and technical studies to ascertain the attractiveness of
venture participation.
Blower Investments AVV and Condor Resources AVV; Peru, 1996
Approximately $430,000 expended for land acquisition, due
diligence, and technical studies to ascertain the attractiveness of
venture participation.
Rioux Lake; Saskatchewan, Canada, 1994-1995
Approximately $50,000 expended for geological and geochemical
surveys to identify polymetallic base metal potential.
<PAGE>
Candle Lake; Saskatchewan, Canada, 1994
Prospective diamond claims acquired.
The Company hires third-party companies to conduct drilling, testing, and to
provide services and evaluation on a negotiated contract basis, except that a
company, Nikhanj and Associates Geo Consulting, owned by the Company's President
and largest shareholder, Y.S. (Jasi) Nikjanj provides management, geological,
and exploration consulting services to the Company for $10,000 per month.
The Company is not carrying any reserve values of any prospects due to the lack
of any measurable reserves.
(b) Current Business
The focus of the Company is to find, delineate, and exploit mineral deposits in
under explored terrain within jurisdictions that are politically stable and
actively pursue mineral exploration and development. The Company currently has
two major prospects, which are the Knife Lake Project (located in Saskatchewan,
Canada) and the Karmel Diamond Project (located in the Republic of South
Africa).
As of March 31, 1999, the Company has spent $7.3 million (Canadian) exploring
for base and precious metals within the Scimitar Complex of northeastern
Saskatchewan and delineating the Knife Lake copper deposit. Over the next three
years expenditure of an additional $3.3 million (Canadian) is anticipated for
geological reconnaissance ground geophysics, drilling, and development
engineering.
As of March 31, 1999, the Company has spent $0.185 million (Canadian) exploring
the Karmel Diamond Project for diamonds. The Company can earn a 75% working
interest in the project by spending an additional $1.315 million (Canadian) over
the next 3 years.
The Company is always searching for high quality grass roots exploration
opportunities, which can be acquired at low cost. Identification of targets of
opportunity represent the Company's focus for growth, and annual expenditures of
$0.25 million (Canadian) are anticipated for evaluation, acquisition, and
initial testing of new projects.
Corporate overhead is held to a minimum. Expenditure for office rent, office
supplies, travel, and administration are expected to continue at the current
level of $0.9 million (Canadian) per year.
A summary of the Company's proposed expenditures is presented below:
<PAGE>
<TABLE>
<CAPTION>
EXPLORATION BUDGETS
($Canadian x 1000)
<S> <C> <C> <C> <C>
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Fiscal year, March 31 2000 2001 2002 Total
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Knife Lake Project
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Geological Reconnaissance 300 100 50 450
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Geophysics 300 100 50 450
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Drilling 500 800 700 2000
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Engineering 100 300 400
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Sub-Total 1,100 1,100 1,100 3,300
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Karmel Project
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Geological Reconnaissance 70 30 30 130
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Drilling 150 100 50 300
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Sampling 70 300 100 470
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Engineering 25 70 320 415
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Sub-Total 315 500 500 1,315
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Opportunity Targets 250 250 250 750
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Overhand and Administration 700 700 700 2,100
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
Grand Total (CAN $) 2,365 2,550 2,500 7,465
- ------------------------------------------------------- -------------- ---------------- --------------------- ---------------------
</TABLE>
The Company's current business plan is in mineral exploration including foreign
mineral joint ventures, in Canada and South Africa. The Company has determined
that it must build an asset base through grass roots exploration, and
acquisition by exchange of stock for other mineral companies, leases, and
mineral prospects for exploration or development if the opportunity arises. The
Company believes that debt will rarely be desirable to acquire any prospect or
company. The Company may acquire other assets by exchange of stock or cash.
The Company has not established, and does not intend to formally establish,
criteria for the selection or evaluation of mineral prospects or participations.
When a prospect is located which in management's opinion, holds potential for
the Company, an attempt will be made to secure an option, or lease, in the
prospects. Shareholder approval will not be sought for prospect acquisitions.
Therefore, shareholders will be dependent upon the judgment of management in
selecting prospects (see "Management"). If such an interest is acquired, the
Company will then expend funds for preliminary exploration and testing of the
prospect to determine the feasibility of production of such prospect. Based on
the results of such preliminary testing, the Company will decide, without
shareholder approval, whether to acquire or abandon the prospect. A prospect or
interest may be acquired by outright purchase; by earning an interest through
participation with other companies; or by exchange of the shares for leases or
interests in prospects.
The Company may expend funds to rework, explore or test any prospects
its acquires to determine the economic production feasibility of such prospects.
The Company will rely on its own management and outside consultants engaged for
specific work on a limited basis, prospect by prospect, to provide competent
evaluation and recommendations concerning prospects or interests in prospects to
be considered for acquisition or exploration. The Company has agreements with
several third party companies for providing specific limited services related to
prospects, such as mapping, geochemical, sampling, or drilling. Based upon the
results of such exploration and tests, as interpreted by management, the Company
will then determine whether such prospects should be acquired, explored further,
sold or leased to a third party, held for possible later development or
<PAGE>
abandoned; or whether development to production should be attempted by the
Company either by itself or through joint venture or other business arrangements
with other companies or entities.
The Company may agree to assign rights in certain prospects to be explored to
the general or managing partner of a partnership or joint venture, which thereby
becomes the owner of the working interest in the prospect. The Company may also
agree to supervise and manage all activities on the prospect and to obtain,
through subcontractors, all necessary related services and equipment. The
Company actively reviews prospects for putting together exploration or
development joint ventures.
Parents and Subsidiaries
Parent
LEADER MINING INTERNATIONAL, INC.
Subsidiaries
None.
The Company's principal areas of exploration are described herein below under
"Description of Properties."
RISK FACTORS
Risks of Exploration and Development
Resource exploration and development is a speculative business and involves a
high degree of risk. The marketability of natural resources which may be
acquired or discovered by the Company will be affected by numerous factors
beyond its control. These factors include commodity price and currency
volatility, the proximity and capacity of natural resource markets and
processing equipment, and government regulations and changes thereto, including
regulations relating to prices, taxes, royalties, land tenure, importing and
exporting of minerals and environmental protection. In addition, few mineral
exploration properties become commercially viable mines, nor can there be any
assurances that exploration work carried out by the Company will be successful.
The exact effect of these factors cannot be accurately predicted, but the
combination of these factors may result in the Company not receiving an adequate
return on invested capital.
Recovery of Reserves
In carrying on its mineral exploration and development activities, the Company
may rely upon calculations as to potential ore reserves and corresponding ore
grades on the Company's prospects which by their nature are not exact. Until ore
is actually mined and processed, ore reserves and ore grades must be considered
as estimates only. The quantity of economic reserves will also vary depending on
mineral prices which have historically been highly cyclical and dependent upon
numerous factors beyond the Company's control including changes in investment
trends and international monetary systems, political events and changes in the
supply and demand for minerals on public and private markets. Any material
changes in reserves, ore grades or stripping ratios will affect the economic
viability of any prospects which might be developed. Further, short term
<PAGE>
operating factors relating to the prospect development, including a need for
orderly development the processing of new or different ore grades may affect
profitability in any particular accounting period. There can be no assurance
that mineral recoveries or other mineral recoveries in small scale laboratory
tests will be duplicated under on site conditions or during production.
Fluctuation of Mineral Prices
The Company's mining operations if any are ever undertaken will be subject to
the normal risks of mining and profits are subject to fluctuations in mineral
prices, in particular the market price of the mineral to be sought in
production. The price of minerals has fluctuated widely in recent years and is
affected by numerous factors beyond the Company's control including
international economic and political trends, expectations of inflation, interest
rates, global or regional consumptive patterns, speculative activities and
increased production due to new mine developments and improved mining and
production methods. The effect of these factors on the price of minerals cannot
be accurately predicted.
Competition
The Company competes with major mining companies and other smaller natural
resources companies in the acquisition, exploration, financing and development
of new properties and projects. Some of these companies are more experienced,
larger and better capitalised than the Company. The Company's competitive
position will depend upon its ability to successfully and economically explore,
acquire and develop new and existing mineral resource properties or projects.
Factors which allow producers to remain competitive in the market over the long
term are the quality and size of the ore body, if any, cost of production, and
proximity to market. Because of the number of companies and variables involved,
no individual or group of producers can be pointed to as being in direct
competition with the Company.
Capitalisation and Commercial Viability
The Company has limited financial resources and there is no assurance that
additional funding would be available to the Company for further exploration or
development of its properties or to fulfil its obligations under any applicable
agreements. Although the Company has been successful in the past in obtaining
financing through the sale of equity securities, there can be no assurance that
the Company will be able to obtain adequate financing in the future or that the
terms of such financing will be favourable. Failure to obtain such additional
financing could result in delay or indefinite postponement of further
exploration and development of the Company's prospects with the possible loss of
exploration or exploitation permits.
The commercial viability of production on a particular prospect will be affected
by factors that are beyond the Company's control, including the particular
attributes of the deposit, the fluctuation in mineral prices, the costs of
constructing and operating a mine, processing facilities, the availability of
economic sources of energy, government regulations including regulations
relating to prices, royalties, restrictions on production, quotas on exportation
of minerals, as well as the costs of protection of the environment and
agricultural lands.
It is impossible to assess with certainty the impact of these factors.
Uninsurable Risks
Mining operations generally involve a high degree of risk. Hazards such as
unusual or unexpected formations, power outages, labour disruptions, flooding,
<PAGE>
explosions, cave-ins, landslides, inability to obtain suitable or adequate
machinery equipment or labour and other risks are involved. The Company may
become subject to liability for pollution, cave-ins or hazards against which it
cannot insure or against which it may elect not to insure. The payment of such
liabilities may have a material, adverse effect on the Company's financial
position.
Compliance with Governmental Regulations
The Company's exploration and mining operations are subject to mining, health,
labour and environmental regulations, changes in which could result in
additional expenses and capital expenditures, availability of capital,
competition, reserve uncertainty, potential conflicts of interest, title risks,
dilution and restrictions and delays in operations, the extent of which cannot
be predicted.
Conflicts of Interest
Certain of the directors and officers of the Company are also directors,
officers and shareholders of certain other companies engaged in natural resource
exploration and development and conflicts of interest may arise.
ITEM 2: DESCRIPTION OF PROPERTIES
The Company owns no properties. It has mineral prospects which consist of mining
claims or contractual exploration agreements which may be evolved to development
if the Company so decides. For all purposes in this description, Registrant is
referred to as "Leader."
Knife Lake Prospect, Saskatchewan, Canada
Location and History
The Knife Lake Prospect is located in northeastern Saskatchewan close to the
Manitoba border. Knife Lake itself is located in the southeastern portion of the
project area at latitude 55 degrees 54' N and longitude 102 degrees 43' W. The
project is operated from a well-equipped bush camp on Knife Lake, 136-km
north-northwest of Flin Flon, Manitoba (approximate population 7,600) and 180 km
northeast of La Ronge, Saskatchewan. The property, whose NTS reference is
63-M-15E, can be found on the Gilbert Lake, 63M15 claim map, available from
Saskatchewan Energy, Mines and Resources in Regina.
Leader holds, or has a right to earn subject to NSR payments, a 100 percent
interest in all of the claims and mining leases comprising the Knife Lake
Project, except for the eleven Consolidated Pine Channel Gold Corp.
claims. On these claims, Leader can earn up to a 90 percent interest.
Leader is the operator in all the option agreements covering all claims in the
project area. It is currently proceeding with, or making preparations for,
exploration it has planned or is required to do under the option agreements. All
the field exploration, on all mineral lands in which Leader has, or is earning,
an interest and which are described in this summary is carried out for Leader by
its own field staff or contractors directly under its control.
The Knife Lake prospect, optioned by Leader from CopperQuest in March, 1996,
initially consisted of mining lease ML 5269. It is 648 ha in size and covers the
known copper showing and soil geochemistry anomaly as well as the projected
<PAGE>
strike extents. During 1996 and 1997, additional claims were staked by the
Company and optioned from consolidated Pine Channel Gold Corporation. Net
Smelter Royalties become payable if and when commercial production occurs from
the claims. Such royalties shall be payable to either CopperQuest or
Consolidated Pine Channel Gold Corporation in accordance with the land
ownership.
Leader Mining, anticipating the potential of this area, developed a strong land
position, conducted numerous geophysical surveys and collected extensive
geological data. The data sets consist of two airborne surveys, a regional
gravity survey, extensive drilling and mapping with accompanying
lithogeochemical sampling. To further evaluate the area, it was necessary to
synthesize Leader's geophysical data and known geology with the aim to identify
areas on the property with the highest potential to host various Volcanogenic
Massive Sulphide (VMS) style sulphide deposits.
At Knife Lake, Leader now owns or controls 109 mining claims and 1 mining lease
with a total land area of approximately 95,144 hectares. The claims are held
directly by Leader or by private individuals and other companies, which have
leased the prospect to Leader. This list of claims is attached as Table 1.
Mineral exploration and production in the Flin Flon Mining area has been active
for 80 years. Only recently has new geological modeling recognized that the
favorable Amisk Volcanics extend to the north from the Flin Flon Domain and
includes the former Hanson, Glennie, Scimitar and Kissenew Domains. These
domains have been explored intermittently by Hudson Bay Mining, Noranda, and
Cominco. With the current geological understanding, these volcanic domains are
highly prospective for VMS style mineralization. Leader's Knife Lake
Volcanogenic Massive Sulphide (VMS) Deposit conforms well within the context of
the newly defined model for the Flin Flon-Glennie Domain. Recent government
mapping has shown the Knife Lake property to lie within the newly recognized
Flin Flon-Glennie Lake Domain, which hosts the Flin Flon/Snow Lake VMS deposits.
The claims have received little mineral exploration and have no production
history, but appear to be an extension of the volcanic terrain which hosts the
base metal mineralization of the prolific Flin Flon mining area. The Amisk
Volcanics in Flin Flon are host to significant amounts of Volcanogenic Massive
Sulphide style, base metal mineralization.
Since 1968, prospecting and mapping in the area of Knife Lake and Scimitar Lake
has resulted in the discovery of several copper occurrences. The largest and
most significant of these occurrences is the Knife Lake copper-gold deposit. The
mineralization is located on the west side of the Knife Lake, less than 100
metres west of the shoreline, in the southern portion of Leader's property.
Infrastructure on the Knife Lake property is limited to the bush camp and winter
road access. Water for mineral processing and other needs is available in
abundance in the project area. The Island Falls hydroelectric power generating
station is located on the Churchill River at Sandy Bay. This station was
constructed to provide power to the town of Flin Flon. However, in the mid
1990's, the Government of Saskatchewan constructed a new high-tension power line
to deliver the power to the uranium mines of the Athabasca Basin in northern
Saskatchewan and all of the station's power output is now devoted to this
purpose. The transmission line comes within 20km of the southwestern corner of
the Knife Lake property.
While the Sandy Bay-Flin Flon has been explored for base and precious metals at
various times over the past 80 years, the earliest records of work in the
immediate area of Knife Lake are dated October 1968. From 1968, through 1972,
<PAGE>
Straus Exploration conducted extensive exploration work, consisting of
horizontal loop, vertical loop and Turam EM ground geophysical surveys, ground
magnetometer surveys, geochemical soil sampling, geological mapping, trenching,
sampling and diamond drilling, over a gossanous copper-gold showing on the
western shore of Knife Lake. Approximately 4.7 square km of grid was
geologically mapped at a scale of 1:6,000 over the copper prospect area. A
slightly smaller area was covered by geochemical and geophysical surveys. D.E.
Pearson, as part of his 1971 mapping project, mapped in detail a portion of the
grid on a scale of 1:7,200. A diamond drill program consisting of 87 holes (2
Winkie and 85 XT sized core), totaling approximately 8,484m, was completed. As a
result of the exploration work, a mining lease was taken out, covering the
copper showing and surrounding geochemical anomaly.
Hudson Bay Exploration and Development, the wholly-owned exploration division of
Hudson Bay Mining and Smelting, conducted a regional airborne EM survey in 1980
and 1982. During 1989 and 1990 Cominco performed line cutting, geological and
geochemical surveys, on property approximately 2 km north of Knife Lake. Results
of these programs are not available.
The Knife Lake copper showing remained inactive until early 1989 when
CopperQuest was formed. CopperQuest commissioned Standing Geophysics Ltd.
(Standing) to re-establish Staus' grid over the copper prospect and to conduct
horizontal-loop EM and proton magnetometer surveys. Standing Geophysics
completed 77.6 line-km of magnetic surveying and 101 line-km of EM surveying in
February 1989. In completing the EM surveying, Standing used different cable
lengths (coil separations) over the copper prospect in an attempt to locate
areas where the copper mineralization may have been thickened due to folding.
Three such areas were located and recommended for diamond drilling. In addition,
three other conductive zones were identified outside of the immediate copper
prospect area. A total of 1,829m of drilling in 24 holes, was recommended but
never carried out.
In March 1996, Leader Mining acquired the mining leases, after entering into an
agreement with CopperQuest. Leader has access to the CopperQuest, and most of
the Straus, exploration data. A summary of Leader's expenditures on the prospect
is presented below:
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Summary of Exploration Expenditures (June 1996 to December 1998)
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Prospecting and 1,172 man days $342,600
Geological Mapping
- ---------------------------------------- ------------------------------------- -------------------------------------
Line Cutting 313 line km $119,400
- --------------------- ------------------ ------------------------------------- -------------------------------------
Geophysics Airborne 12,689 line km $753,700
- --------------------- ------------------ ------------------------------------- -------------------------------------
Ground 427 line km $243,300
- --------------------- ------------------ ------------------------------------- -------------------------------------
Geochem Soil 2,374 $23,300
- --------------------- ------------------ ------------------------------------- -------------------------------------
Assay 8597 (588 whole rock) $164,200
- ---------------------------------------- ------------------------------------- -------------------------------------
Trenching 180m3 $48,400
- ---------------------------------------- ------------------------------------- -------------------------------------
Drilling 30,866 m $2,960,500
- ---------------------------------------- ------------------------------------- -------------------------------------
Other (staking, logistics, $2,656,200
transportation)
- --------------------------------------------------------------------------------------------------------------------
TOTAL = $7,311,000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The Knife Lake Deposit is interpreted by the Company to be a remobilized
fraction of a larger primary VMS deposit. It is hosted within an altered
pegmatite, high in Na, K, Sr, and Ba which geochemistry has shown is derived
from alkali rich sedimentary rocks. To date, a total of 26,397 metres of diamond
drilling among 308 drill holes have been completed on the Knife Lake Deposit and
a digital geological model has been constructed. The mineralization is outlined
over a distance of 4,300 metres and to a depth of 100 metres. Internal
Geological modeling has generated sufficient indications to cause the Company to
continue exploration work.
GEOLOGICAL DESCRIPTION
Knife Lake lies within the Scimitar Complex, a structural domain within what is
generally known as the Churchill Structural Province of the Canadian Shield. The
Churchill Province is lower Proterozoic (Aphebian) in age. The Scimitar Complex
is highly deformed, multiple-folded terrain dominated by middle to upper
amphibolite facies, hornblende-biotite plagioclase-quartz gneisses of generally
intermediate composition and gneissic felsic intrusives. The lithologies have
been divided into gneissic granodiorites and subordinate metavolcanic and
metasedimentary rocks. Mafic volcanics and meta-gabbros are less common, but
present. The lithologies frequently exhibit pegmatitic textures due to partial
melting of up to 30 percent of the rock, in the case of ampholite metamorphic
grade. Original sedimentary and/or volcanic textures and structures, other than
gross lithologic layering, are rare.
Another prospective area is the boundary between geophysics distinguished rock
units A&B, which hosts the Linda-McCullum copper showing that has similarities
to the "Cypress" type hosted VMS model; a thick succession of mafic to
intermediate volcanics with isolated, linear conductive horizons at the "top" of
the sequence. This horizon has potential in light of the recent ophiolitic
models.
In all, fourteen primary target areas are identified which exhibit typical VMS
geophysical/geological signatures (conductivity with favorable magnetics and
geology). Numerous additional targets exist, located along boundaries and other
favorable geological horizons. At some point these will have to under go further
investigation.
<PAGE>
The copper-gold mineralization occurs in, and adjacent to, an apparently
stratabound, "green pegmatite." This pegmatite lies on the contact between a
pink footwall gneiss, believed to be a metasediment, and a hanging wall package
comprised of tholeiitic amphibolies, believed to be a sequence of meta-volcanics
and meta-volcaniclastic sediments. This sequence terminates both southeast and
northwest of Knife Lake, but is repeated 4 kilometres to the east of Scimitar
Lake, where two other copper showings are known. The "green pegmatite" is a
relatively fine- to medium-grained, milky green, pegmatoidal felsic gneiss
composed of various proportions of green plagioclase, K-feldspar, biotite and
amphibole.
Recent whole rock geochemistry work by Leader's consultants indicates that there
are at least two major groups of rocks present in the Knife Lake copper deposit.
The first group comprises the pink "footwall gneiss" and the "green pegmatite"
(high Na, K, Sr, Ba). These were determined to be alkali-rich sedimentary rocks
and pegmatites, which also contained elevated phosphorous and titanium contents,
suggesting sedimentary rocks derived from alkalic/shoshonitc source material.
The four samples of the "green pegmatite," which hosts the Knife Lake copper
mineralization, have a composition similar to the pink gneiss, indicating that
they are derived from the footwall gneisses.
The second group includes tholeiitc (iron-rich) volcanic derived rocks such as
amphibolites and quartz-feldspar +garnet+biotite schists (high, Fe, low Na, K,
Sr, Ba) which constitute the hanging wall of the deposit. Of the twelve whole
rock samples analyzed, five were determined to be, in part, highly altered
volcanic rocks of rhyolitic, dioritic, and basaltic/gabboric composition. One of
the samples came from a strongly altered chloritic- to cunningtonite-rich zone,
whose strong iron and magnesium enrichment and sodium depletion is typical of
VMS-type, footwall alteration.
The mineralization itself is comprised of pyrrhotite, chalcopyrite, and pyrite,
with minor amounts of sphalerite and rare native copper. No native gold is noted
but, since most of the gold is free milling, the gold must be present as small
grains adjacent to and intermixed with the sulphides. The sulphides occur as
disseminations or net-textured stringers within the pegmatoidal texture or as
large clots occasionally appearing at gangue-mineral grain boundaries. There is
little or no conspicuous wall rock alteration associated with the copper-gold
mineralization. A prominent gossan zone marks the surface expression of the
mineralization "green pegmatite."
Recent diamond drilling just south of the Knife Lake deposit discovered
extensive strong native silver mineralization within east-west and
northwest-southeast trending faults. Mineralization style and setting indicative
of late stage low temperature hydrothermal emplacement, which is superimposed on
the copper mineralization noted at Knife Lake.
Results of exploration work carried out by Leader Mining International Inc.
in Knife Lake - Scimitar Lake area, between April 1998 and August 1999.
The property is located approximately 136 km NNW of Flin Flon, Manitoba and
includes 102 mineral claims and a mining lease, covering an area of 86630 ha.
The exploration work consisted of geological mapping and reconnaissance,
geochemical surveys, geophysical surveys and diamond drilling within 18 mineral
claims. The purpose of the work was two fold:
o Examine the continuity of Knife Lake deposit stratigraphic horizon
to south and to east, through the Scimitar Lake area, and assess its
geological potential to host further VMS-style mineralization.
o Follow-up the silver mineralization discovered at the end of 1998
winter drilling program along an east-west fault structure, south of
Knife Lake.
The exploration program carried out on the property confirmed the continuation
of the stratigraphic package that hosts Knife Lake copper deposit toward
Scimitar Lake. Two favorable horizons that comprise felsic to intermediate
volcanic rocks were mapped southeast of Knife Lake. Diamond drilling results
indicated the presence of pyrrhotite and pyrite with trace chalcopyrite at 1800m
southeast of the Knife Lake deposit. The occurrence of alterations in the
volcanic rocks and the Co/Ni ratios that show a volcanic origin for the
sulphides, indicate that both horizons are prospective for VMS-style
mineralization.
Stratigraphically below the previously described copper showing, a rusty
amphibolites horizon yielded Ni values up to 1400 ppm. These rocks were
interpreted to represent lower ultramafic-mafic platform basalts that underlie
tholeiite-calcalkaline terrains that host exhalative Cu-Zn ores.
Widespread hydrothermal alterations associated with precious +/- base metals
mineralization were identified along fault structures, on the property. The
mineralization yielded values up to 3400g/t Ag, 110 ppb Au, 8600ppm Cu, 3000 ppm
Pb and 2200 ppm Zn in drill cuttings samples. It appears to be associated with
propylitic (chlorite-epidote-carbonate) alteration, hematitization and
illitization/sericitization of the amphibolite facies gneisses. Native silver
was observed along grain boundaries and in fine fractures cutting the gneissic
foliation. The mineralization occurs as very fine disseminations in the
alteration zones, and appears to be washed out during the drilling. As a result,
no elevated precious or base metals values were encountered in core.
A planned further exploration program for VMS-style mineralization includes
reconnaissance mapping south of Scimitar Lake and at Gilbert Lake, deep
penetration TEM survey at Scimitar Lake, and follow-up diamond drilling. A
detailed petrographic study, geothermometry and geobarometry, compilations and
diamond drilling, are proposed as a follow-up work for the fault hosted precious
+/- base metals mineralization identified on the property. The cost of
implementing the recommendations is estimated at $478,800.
KARMEL PROSPECT, ORANGE FREE STATE SOUTH AFRICA
The Karmel prospect is an exploration attempt to find a gem quality
diamond deposit. The area has not been previously explored with modern
exploration techniques. Leader has conducted an aerial magnetic survey and
limited ground testing and drilling to date. In the event gem quality diamonds
are not found in sufficient quantity, the project will be abandoned because
industrial diamonds are uneconomic to produce in a new mine.
The 7,500-ha Karmel property is located about 100 km east of the
agricultural community of Bloemfontein, near the Lesotho border. The terrain is
<PAGE>
rolling farmland (currently an ostrich ranch) with an interspersion of rocky
kops (hillocks). Poplar Resources, Ltd. holds a 100% interest in the Karmel
Project through a wholly owned South African subsidiary, Karmel Diamond Holdings
(Pty.), under a three-year prospecting agreement which entails an annual payment
equivalent to about C$60,000; and an option to enter into a mineral lease
agreement, the mineral rights holders would have a 4% interest in pre-tax mine
operating profits.
Leader has entered into an Option/Joint Venture Agreement whereby
Leader may earn a 75% interest in the Karmel prospect by expending $500,00 (Cdn)
per year for three years in exploration costs. Upon expenditure of the required
amounts by Leader, if warranted, a joint venture between Leader and Karmel in
which Leader will own 75% interest and Karmel a 25% interest, Leader has
expended approximately $185,000 (Cdn) since January 1999 on exploration
expenses.
The project can be described as a complex kimberlite fissure system
with potential to host 8 km of fissure strike length, and a small previously
mined pipe and a potential blow. There are two east-west fissures exposed on the
property: the Southern Fissure where very limited small-scale mining was carried
out by an open cut, and the Dundee Fissure which is exposed 5 km to the east in
a creek bed. The Dundee fissure outcrop has a width of about 2 m and does not
appear to have been test sampled. A small pipe (known as the Carmel Pipe) was
mined by a farmer/landowner circa 1950 to a relatively shallow (yet to be
determined) depth, but typically very little information is available. To
management's knowledge, no geophysical surveying was carried out to trace the
strike extent of the known fissures or to attempt to identify new
fissures/blows/pipes on the property. Low-level, high-sensitivity, airborne
and/or ground magnetic surveying would entail only a nominal costs. Bulk
sampling of the known Southern and Dundee fissures could also be completed
easily with material possibly processed on site with a mobile hand plant.
Drilling off the depth extension of the Karmel pipe could also be an early
endeavor in this project.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently involved in only one contractual dispute, involving
legal proceedings, with a private Saskatchewan company, and the outcome of such
proceeding, if adverse to the Company, would not be material and involves money
damages less than $25,000.
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (CONTROL
OF REGISTRANT)
(a) Beneficial owners of five percent (5) or greater, of the
Registrant's Common Stock and Warrants: No Preferred Stock is outstanding at the
date of this offering. The following sets forth information with respect to
ownership by holders of more than five percent (5%) of the Company's Common
Stock known by the Company based upon 16,826,065 shares outstanding at May 20,
1999.
<TABLE>
<CAPTION>
- ------------------------ ---------------------------------- ----------------------------------- ----------------------
<S> <C> <C> <C>
Title of Class Name Beneficial of Owner Amount and Nature of Beneficial Percent of Class
Ownership
- ------------------------ ---------------------------------- ----------------------------------- ----------------------
Common Stock Y.S. Jasi Nikhanj 1,500,000 Shares (1) 8.9%
320 Pumphill Cr. S.W. Calgary,
Alta T2V 4M1
- ------------------------ ---------------------------------- ----------------------------------- ----------------------
</TABLE>
(1) Includes 207,000 shares owned by spouse, Aski Nikhanj.
b) The following sets forth information with respect to the Company's
Common Stock beneficially owned by each Officer and Director, at March 31, 1999.
<TABLE>
<CAPTION>
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
<S> <C> <C> <C>
Title of Class Name Beneficial of Owner Amount and Nature of Beneficial Percent of Class
Ownership
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Y.S. Jasi Nikhanj (1) Pres/Diretor 1,500,000 shares (1) 8.9%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Ueli Schurch Diretor 500,000 shares 3.0%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Manish Bindal Diretor 80,000 shares (2) 0.4%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Roland Kesselring V.P. 590,000 shares (3) 3.5%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Raymond Lai V.P. 285,000 shares (4) 1.6%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Total amount owned by officers and directors as a group.
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Title of Class Name Beneficial of Owners Amount and Nature of Beneficial Percent of Class
Ownership
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Directors 2,080,000 shares 12.35%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Officers 2,375,000 shares 14.1%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
Common Combined 2,955,000 17.6%
- ---------------------- ----------------------------------- ------------------------------------ ----------------------
</TABLE>
(1) Includes 207,000 shares owned by spouse, Aski Nikhanj.
(2) Includes 50,000 shares owned by spouse Sehra Bindal.
<PAGE>
(3) Includes 590,000 shares owned by spouse Manuela Kesselring.
(4) Includes 195,000 shares owned by spouse, Amond Lai.
ITEM 5. (a) MARKET PRICE OF AND DIVIDENDS ON REGISTRANTS COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is listed and traded on the Alberta Stock
Exchange and is quoted in the National Quotation Bureau "Pink Sheets" when
trades are made. The following table sets forth high and low closing prices of
the Company's common stock for the three (3) years ended September 30, 1999,
1998, and 1997 on the Alberta Stock Exchange as follows:
Closing
(Canadian $)
High Low
1999
First Quarter 1.19 0.50
Second Quarter 1.05 0.65
Third Quarter 0.89 0.57
1998
First Quarter 5.10 3.40
Second Quarter 4.00 2.95
Third Quarter 3.15 0.54
Fourth Quarter 0.85 0.30
1997
First Quarter 9.45 4.00
Second Quarter 7.45 5.25
Third Quarter 6.20 2.80
Fourth Quarter 3.85 3.30
The Company has been unable to obtain a reliable history of pink sheet activity.
(b) As of September 30, 1999, the Company had an estimated 900 shareholders of
record of the common stock, including those held in brokerage accounts in
"street name."
(c) No dividends on outstanding common stock have been paid within the last two
fiscal years, and interim periods. The Company does not anticipate or intend
upon paying dividends for the foreseeable future.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
There are currently no limitations imposed by Canadian federal or provincial
laws on the rights of non-resident or foreign owners of Canadian securities to
<PAGE>
hold or vote the securities held. There are also no such limitations imposed by
the Company's articles and bylaws with respect to the common shares of the
Company.
Under the Investment Canada Act, the acquisition of certain "businesses" by
"non-Canadians" or "Americans" are subject to review by Investment Canada, a
federal agency, and will not be allowed unless they are found likely to be of
"net benefit" to Canada. An acquisition will be reviewable by Investment Canada
only if the value of the assets of the Canadian business being acquired is CDN
$5 million or more in the case of a "direct" acquisition or CDN $50 million or
more in the case of an "indirect" acquisition. Under the Free Trade Agreement
between Canada and the United States, an acquisition by an American is
reviewable only if it involves the direct acquisition of a Canadian business
with assets of CDN $160 million or more. If the foregoing thresholds are not
reached, the acquisition of a Canadian business by a non-Canadian will not be
subject to review unless it relates to Canada's cultural heritage or national
identity. Even if the transaction is not reviewable, a non-Canadian must still
give notice to Investment Canada of the acquisition of a Canadian business
within 30 days after its completion.
ITEM 7. TAXATION
Certain Canadian Federal Income Tax Considerations
The following summarizes the principal Canadian federal income tax
considerations applicable to the holding and disposition of a common share by a
holder (the "Holder") of one or more common shares who is resident in the United
States of America and holds the common share as capital property. This summary
is based on the current provisions of the Income Tax Act (Canada) (the "Tax
Act"), the regulations thereunder and all amendments to the Tax Act publicly
proposed by the government of Canada to the date hereof. It is assumed that each
such amendment will be enacted as proposed and there is no other relevant change
in any governing law, although no assurance can be given in these respects.
Every Holder is liable to pay a withholding tax on every dividend that is or is
deemed to be paid or credited to him on his common shares. Under the
Canada-United States Income Tax Convention (1980) (the "Treaty"), the rate of
withholding tax is 10% of the gross amount of the dividend where the Holder is a
company that owns at least 10% of the voting stock of the Company and
beneficially owns the dividend, and 15% in any other case. A Protocol amending
the Treaty was ratified by the representatives of the Canadian and United States
governments. Effective in December, 1995 one of the amendments in the Protocol
reduces the 10% withholding rate on dividends to 6% in 1996 and 5% in 1997.
Under the Tax Act, a Holder will not be subject to Canadian tax on any capital
gain realised on an actual or deemed disposition of a common share, including a
deemed disposition at death, provided that he did not hold the common share as
capital property used in carrying on a business in Canada, and that neither he
nor persons with whom he did not deal at arm's length, alone or together, owned
25% or more of the issued shares of any class of the Company at any time in the
five years immediately preceding the disposition.
A Holder who otherwise would be liable for Canadian tax in respect of a capital
gain realised on an actual or deemed disposition of a common share will be
relieved under the Treaty from such liability unless
<PAGE>
(1) the common share formed part of the business property of a
permanent establishment in Canada that the Holder had within the twelve-month
period preceding the disposition; or (1) the common share formed part of the
business property of a permanent establishment in Canada that the Holder had
within the twelve-month period preceding the disposition; or(1) the common share
formed part of the business property of a permanent establishment in Canada that
the Holder had within the twelve-month period preceding the disposition; or(1)
the common share formed part of the business property of a permanent
establishment in Canada that the Holder had within the twelve-month period
preceding the disposition; or(1) the common share formed part of the business
property of a permanent establishment in Canada that the Holder had within the
twelve-month period preceding the disposition; or(1) the common share formed
part of the business property of a permanent establishment in Canada that the
Holder had within the twelve-month period preceding the disposition; or
(2) the Holder
(a) was resident in Canada for 120 months during any 20-year period
preceding the disposition, and
(b) was resident in Canada at any time during the 10 years immediately
preceding the disposition, and
(c) owned the common share when he ceased to be a resident of Canada
ITEM 8. SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from the accompanying
audited financial statements of the Company to March 31, 1999. Financial
statements of the Company included elsewhere herein should be read in
conjunction with those financial statements and the footnotes thereto. The
financial statements have been prepared in accordance with Canadian generally
accepted accounting principles ("GAAP"). For United States GAAP reconciliation,
see attached financial statements and notes. Reference should also be made to
Item 9 Management's Discussion and Analysis of Financial Conditions and Results
of Operations."
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Information for 5 Years (in Cdn$)
Fiscal Year Ended March 31st
1999 1998 1997 1996 1995
---- ---- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C>
Interest 49,044 152,1320 28,702 0 0
Other 0 0 27,445 0
- - - - -
------- ------ ------ ------
Total Revenue 49,044 152,132 28,702 27,445 0
------- ------ ------- ------ -
General & Administrative Expenses 898,873 1,358,156 640,618 234,960 0
Exploration Costs Written Off 1,848,313 561,500 1,506,392 1,306,276 0
Amortization 11,282 27,082 12182 0 0
Other Expenses 139,840 0 0 0 0
Loss for the Period (2,847,147) (1,887,026) (2,130,497) (468,902) (1,513,791)
----------- ----------- ----------- --------- -----------
Loss per Share (.20) (0.17) (0.20) (0.08) (0.47)
----------- ------ ------ ------ ------
Weighted average shares outstanding 14,446,458 13,911,958 10,924,623 5,961,296 2,670,284
----------- ---------- ---------- --------- ---------
Balance Sheet Data:
Current Assets 696,996 3,011,601 6,729,786 1,510,715 11,438
Capital Assets 32,579 155,645 68,834 28,326 203,402
Mineral Properties & Deferred 8,100,426 8,957,965 4,440,824 1,065,975 0
---------- --------- --------- --------- -------
Exploration Costs
Total Assets 8,830,001 12,125,211 11,239,444 2,605,016 214,920
---------- ---------- ---------- --------- -------
Current Liabilities 277,590 1,820,664 1,117,428 545,535 41,074
Due to Related Parties 22,800 8,553 231,243 202,346 490,013
Long Term Liabilities 0 0 0 0 62,500
Capital Stock 20,346,416 19,265,652 16,973,405 7,011,614 4,104,566
Deficit (11,816,805) (8,969,658) (7,082,632) (4,952,135) (4,483,233)
---------- ----------- ----------- ----------- -----------
(4,952,135)
Total Equity & Liabilities 8,830,001 12,125,211 11,239,444 2,605,016 214,920
---------- ---------- ---------- --------- -------
</TABLE>
Loss for the period and deficit as determined in accordance with Canadian GAAP
differ from those determined in accordance with U.S. GAAP, due principally to
the deferral under Canadian GAAP of exploration costs and the exclusion of
compensation expense arising from the issue of options at a discount from their
fair value. Under U.S. GAAP the exploration costs would have been expensed when
incurred, and the compensation expense would have been recorded.
Foreign currency translation
The Company follows the temporal method of translation whereby all monetary
assets and liabilities denominated in a foreign currency are translated into
Canadian dollars at the rate of exchange in effect at the balance sheet date.
Non-monetary assets and exploration expenditures are translated at the rates
prevailing when they are acquired or incurred. Exchange gains or losses are
included in net loss for the year.
<PAGE>
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND CHANGES
IN FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has no primary income source at this time. Funding for the Company's
operation is mainly from private placements, options and warrant exercise. The
following chart summarizes all the funding raised in the past 5 years.
RESULTS OF OPERATIONS
The Company has no primary income source at this time. All working capital is
obtained from equity financing such as private placements, options and warrants
exercising. The revenue reported in FY 1999, FY 1998, and FY 1997 is from
interest earned from working capital invested in secured short-term money
markets. The major expenditure for the Company is acquiring mineral properties
and conducting exploration programs on those properties. These exploration
expenditures are capitalized as intangible assets. If no economical mineral
resource is found on a certain property after an extensive exploration program,
the capitalized value is written off as an expense in the income statement. The
Company also does not have any long-term debt. The only liability of the Company
is accounts payable incurred during its on-going exploration operations. The
amounts due to related parties are mainly funds advanced from the Directors and
Officers to the Company when the Company is short in funding. Such debt is non
interest bearing and has no fixed terms of repayment.
CHANGES IN FINANCIAL CONDITION AS AT MARCH 31, 1999
At year-end 1999 the Company's assets decreased to $8,830,001 compared to
$12,125,211 at March 31, 1998. The decrease was a result of written off
exploration costs for the acquisition and exploration of the Knife Lake Project
in Canada.
The liabilities of the Company, nearly all of which are current liabilities,
decreased significantly as a result of payment of cash for expenditures for
prospect exploration. At March 31, 1999, current liabilities were $300,390, a
decrease of $1,528,827 over the March 31, 1998 year end liabilities of
$1,829,217.
The Company's deficit at March 31, 1999 was $11,816,805, an increase of 32% over
the 1998 deficit of $8,969,658. The deficit will continue to increase as a
result of the Company's continuing effort to explore for economical mineral
resources. Consequently, additional funding from equity financing is essential
for the Company to continue its exploration efforts until it has found one or
more economical mineral resources in its mineral properties.
COMPARISON OF RESULTS OF OPERATIONS FOR THE FISCAL YEARS
ENDED MARCH 31, 1999 AND 1998
The Company had no operating revenue in either the fiscal year ended March 31,
1999 or 1998 except interest income of $49,044 (1999) and $152,132 (1998) from
working capital invested in secured short-term money market investments.
The per-share loss amounted to $(0.20) at March 31, 1999 as compared to ($.17)
at March 31, 1998.
<PAGE>
In the fiscal year ended March 31, 1999, the Company incurred $898,873 in
general and administrative expenses as compared to the prior year in which
$1,358,156 in general and administrative expenses were incurred. The Company had
$1,848,313 in the written off exploration costs in the year ended March 31,
1999, as compared to $561,500 in the year ended March 31, 1998. The Company had
no site restoration/abandonment costs in the year ended March 31, 1999, but in
the year ended March 31, 1998, the Company incurred $68,250 in such costs. The
Company had a loss for write down of marketable securities in year ended March
31, 1999 of $139,840 as compared to none in the prior year. The Company had a
net loss on operations of ($2,847,147) for the year ended March 31, 1999 as
compared to a net loss of ($1,887,026) for year ended March 31, 1998.
The increased losses were as a result of increased expenditures for the
evaluation and testing of the Knife Lake project in Canada. The Company expects
that losses will continue because the Knife Lake project requires further
evaluation, and no production exists or can be predicted. The Company is not
currently conducting any mining operations.
The Company incurred operating expenses, most of which are Exploration
expenditures, totaling $990,774 in 1999 as compared to $5,078,641 in 1998.
Exploration Costs Written Off were $1,848,313 in 1999 an increase from $561,500
in 1998. The Company had an increase in operating losses to $2,896,191 in 1999
from $2,039,158 in 1998.
The other major item in the operating expenses is General and Administrative
costs which decreased in 1999 to $898,873 from $1,358,156 in 1998. The decrease
is mainly due to a decrease in legal expenses and costs related to travel and
promotion.
The per-share loss amounted to $(0.20) in 1999 as compared to ($0.17) in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The principal sources of funding for the Company's operation in the
past 5 years have been issuance of securities for cash and as consideration for
certain acquisitions, exercise of director and employee stock options and loans
from directors and officers. At March 31, 1999, the Company had $456,425 in cash
and current liabilities of $500,390.
<PAGE>
The following chart summarizes all capital funding raised in the past
five years.
<TABLE>
<CAPTION>
FUNDING SUMMARY
FROM APRIL 1995 TO SEPTEMBER 99
(in Canadian dollars)
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Year Total Shares Issued Share Price Total Amount
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
<S> <C> <C> <C> <C>
1995
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Exercise of Options 496,000 $0.23 $115,000
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1995 Total 496,000 $0.23 $115,000
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1996 Private Placement 1,150,000 $1.65 $1,900,000
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Exercise of Options 543,000 $0.47 $ 255,750
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1996 Total 1,693,000 $1.27 $2,155,750
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1997 Private Placement 1,362,000 $4.07 $5,543,790
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Flow Through 425,000 $4.70 $1,997,500
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Exercise of Options 628,000 $2.63 $1,652,200
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Exercise of Warrants 1,025,000 $1.77 $1,811,500
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1997 Total 3,440,000 $3.20 $11,004,990
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1998 Private Placement 500,000 $3.78 $1,889,500
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1998 Total 500,000 $3.78 $1,889,500
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
1999 Private Placement 2,000,000 $0.35 $ 700,500
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
(up to Sept. 30, 1999) Exercise of Options 922,000 $0.43 $395,660
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
Exercise of Warrants 2,500 $0.45 $1,125
- ----------------------- ------------------------------ ----------------------------- ------------------ ---------------------
1999 Total 2,924,500 $0.38 $1,096,785
- ----------------------- ------------------------------ ----------------------------- ------------------ ----------------------
</TABLE>
The principal uncertainty that could affect the Company's liquidity is
the interest or lack thereof shown by capital markets in Mining Industry which
is beyond the control of the Company.
On a short term basis, the Company is planning to raise $1 million in
1999 through private placements and the exercise of options and warrants which
is expected to cover all its 1999 exploration programs in Knife Lake, Canada and
Karmel Project, S. Africa. There is no assurance that funds will be raised.
On a long-term basis, the Company does not have any assured certain
source of additional working capital and the continuation of operations is
subject to its ability to raise more equity money and its success in the
exploration of the Knife Lake and Karmel Projects.
Impact of the Year 2000
The year 2000 issue arises from computer systems using two digit date fields
rather that four to refer to a particular year. This means that a computer
system might not properly recognize "00" as the Year 2000, but instead as the
Year 1900, which could result in operational and financial disruption, and
possibly systems failures. The Company is taking appropriate steps to identify
and remediate the Year 2000 issue before the end of 1999, and does not expect
the costs of these efforts to be material. The Company does not believe that
there will be an adverse effect on its business, operating results or financial
position as a result of the Year 2000 Issue. However, there can be no assurance
that the Year 2000 readiness efforts by the Company's suppliers and business
partners will be successful, therefore it remains uncertain to what extent, if
any, the Company may be affected.
ITEM 10. DIRECTORS AND OFFICERS OF THE COMPANY
The names, residences, terms, and periods of service within the past
five years of each of the directors and executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
Position
Name and Within Period of Service
Residence the Company Term
<S> <C> <C> <C>
Present Occupations and
Yashvir (Jasi) Nikhanj (1,2) President and Director Annual 1987 to date
Calgary, Alberta
Ulrich Schurch1 Director Annual 1996 to date
Switzerland
Manish Bindal (2) Secretary and director Annual 1996 to date
Calgary, Alberta
Raymond Lai Vice president Finance Annual 1996 to date
Calgary, Alberta
Roland Kesselring (2) Vice president Annual 1997
Switzerland Corporate Affairs
</TABLE>
(1) Member of the audit committee.
(2) Member of Nomination and Compensation Committee.
Yashvir Nikhanj, age 53, has been President and director of the Registrant since
1987. He obtained a Bachelor of Science in Geology from Ranchi University,
Bikar, India in 1968. He received a MSc in Earth Sciences from Massachusetts
Institute of Technology in 1970 and a MSc in Applied Geology from McGill
University in 1972. He also has been President and principal shareholder of
Nikhanj and Associates Consulting of Calgary, Canada since 1975.
Ulrich Schurch, age 37, is a director of the Registrant. He received a
Commercial Diploma as a banker in 1981 in Switzerland. In 1993, he received a
"Diplomaster" betribsokonom BVS" in Switzerland at St. Grallen. From 1992 to
1996, he was Vice President and a partner at Moscom Finary in Zurich,
Switzerland. From 1996 to 1998, he was President and Partner of Schwich Asset
Management BmDH, St Gallen, Switzerland. From 1998 to date he has been with
Credit Swisse Zurich as a Portfolio Manager - Special Mandates.
Manish Bindal, age 35, is a director and General Counsel to the Company. Mr.
Bindal received a Bachelor of Science in 1984 and a Bachelor of Law in 1987 from
Kurukashetra University in India. From August 1987 to May 1991 Mr. Bindal was
engaged in private practice of law at Chandigarh, India. From May 1991 to
September 1994 Mr. Bindal was a law student in Calgary, Canada. He was employed
as a student-at-law at the firm of Howard Mackie, Nova Corp. and Alberta
Securities Commission from October 1994 to October 1995. He has been in private
law practice since November, 1995. Other than the Registrant, Mr. Bindal has
been a director of Canex Energy, Inc. and Aspen Energy Corp., both oil and gas
companies listed on the Albert Stock Exchange.
Raymond Lai, age 48, is Vice President of Finance and Administration for the
Registrant and has been since 1995. Mr. Lai received his B.Sc. degree in 1971
from the University of Calgary. He became a Certified Management Accountant in
1979. From 1993 to 1995, Mr. Lai was controller of Mission Packaging, Inc. in
Calgary.
Ronald Kesselring, age 36, is V.P Corporate Affairs - Europe since 1996. He
completed Banking School in Switzerland in 1982. He is CEO of Mascon Finance,
Ltd. of Ermatingen, Switzerland and has been since 1995 a Managing Director.
From April 1992 to 1995, he was a Managing Director at the institutional sales
desk of Swiss Bank Corp. Zurich, Switzerland.
The directors of the Company are elected by the shareholders at each annual
general meeting and typically hold office until the next annual general meeting
at which time they may be re-elected or replaced. Casual vacancies on the board
are filled by the remaining directors and the persons filling those vacancies
hold office until the next annual general meeting at which time they may be
re-elected or replaced. The senior officers are appointed by the board and hold
office indefinitely at the pleasure of the board.
Within the five years proceeding the date of this filing document, none of the
directors, officers or promoters of the Company have been a director, officer or
promoter of other reporting companies other than as follows:
Mr. Bindal has been a director of Canex Energy, Inc. and Aspen Energy
Corp., both oil and gas companies listed on the Alberta Stock Exchange,
since 1996.
No director, officer or promoter of the Company has, within the ten years
preceding the date of this filing document, been the subject of any penalties or
sanctions by a court or securities regulatory authority relating to trading in
securities, the promotion, formation or management of a publicly-traded company
or involving theft or fraud, other than as follows:
<PAGE>
In 1996, Mr. Nikhanj entered into a Settlement Agreement and
Understanding with the Alberta Securities Commission because he had not
timely filed insider reports for purchases and sales of shares in
Leader Mining International with the Alberta Securities Commission. The
Settlement resulted in a $5,000 penalty and an Agreement to be
diligent in complying with the responsibility to report trades.
There are no understandings or arrangements pursuant to which any
officers or director was selected or appointed to such position.
(b) Identification of Certain Significant Employees.
There are no employees other than the executive officers disclosed
above who make, or are expected to make, significant contributions to the
business of the Company, the disclosure of which would be material.
(c) Family Relationships. Spouses of Yashvir (Jasi) Nikhanj and Raymond
Lai are currently employed on a part time basis with the Company in
non-executive positions.
ITEM 11. COMPENSATION OF OFFICERS AND DIRECTORS
(a) Cash Compensation.
Compensation paid by the Company for all services provided during the
fiscal year ended March 31, 1999, (1) to each of the Company's five most highly
compensated executive officers whose cash compensation exceeded $30,000 and (2)
to all officers as a group is set forth below under directors.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Awards
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
<S> <C> <C> <C> <C> <C> <C>
Name and Principal Year ended Salary ($) Bonus ($) Other Annual Restricted Stock Securities Underlying
Position March 31, Compensation ($) Award(s)($) Options/SARs(#)
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
Y.S. Jasi Nikhanj 1999 0 0 120,000 (1) 0 840,000 shares
President and Director
----------- -------------- ------------ ----------------------- ------------------ ======================
1998 0 0 120,000 (1) 0 250,000 shares
----------- -------------- ------------ ----------------------- ------------------ ======================
1997 0 0 120,000 (1) 0 355,000 shares
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
Manish Bindal 1999 0 0 37,200 (2) 0 25,000 shares
Secretary and Director
----------- -------------- ------------ ----------------------- ------------------ ======================
1998 0 0 37,200 (2) 0 50,000 shares
----------- -------------- ------------ ----------------------- ------------------ ======================
1997 0 0 37,200 (2) 0 25,000 shares
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
Raymond Lai 1999 60,000 0 0 0 85,000 shares
V.P. Finance &
Administration
----------- -------------- ------------ ----------------------- ------------------ ======================
1998 60,000 0 0 0 50,000 shares
----------- -------------- ------------ ----------------------- ------------------ ======================
1997 36,000 0 0 0 25,000 shares
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
========================== ----------- -------------- ------------ ----------------------- ------------------ ======================
Roland Kesselring 1999 0 0 0 0 shares 0 shares
V.P. Corporate
Affairs-Europe
----------- -------------- ------------ ----------------------- ------------------ ======================
1998 0 0 0 $175,000 100,000 shares
=========== ============== ============ ======================= ================== ======================
1997 0 0 0 0 175,000 shares
========================== =========== ============== ============ ======================= ================== ======================
</TABLE>
(1) Paid as consulting fees to Nikhanj and Associates Geoconsulting.
(2) Paid as legal fees for services.
(b) Compensation Pursuant to Plans.
None.
(c) Other Compensation.
None. No stock appreciation rights or warrants exist to management
(d) Compensation of Directors.
Each member of the Board of Directors of the Company receives
$500.00 plus reasonable outside travel expenses for each Board meeting he
attends and for each Committee meeting he attends during the fiscal year.
Directors who are also officers of the Company receive no compensation for
services as a director.
Compensation paid by the Company for all services provided during
the fiscal year ended March 31, 1999, (1) to each of the Company's directors
whose cash compensation exceeded $30,000 and (2) to all directors as a group is
set forth below:
<TABLE>
<CAPTION>
DIRECTOR'S COMPENSATION FOR LAST FISCAL YEAR
(Except for compensation of Officers who are also Directors whose Compensation
is listed in Summary Compensation Table of Executives)
Cash Compensation Security Grants
======================= --------------------- ------------------ --------------------- ----------------- =========================
<S> <C> <C> <C> <C> <C>
Name Number of Securities
Annual Retainer Meeting Fees Consulting Fees/ Number of Underlying Options/SARs
Fees ($) ($) Other Fees ($) Shares (#) (#)
======================= --------------------- ------------------ --------------------- ----------------- =========================
A. Director 0 0 0 0 0
Ulrich Schurch
======================= --------------------- ------------------ --------------------- ----------------- =========================
B. Director 0 0 0 0 0
Y.S. Nikhanj
- ----------------------- --------------------- ------------------ --------------------- ----------------- -------------------------
C. Director 0 0 0 0 0
Manish Bindal
- ----------------------- --------------------- ------------------ --------------------- ----------------- -------------------------
</TABLE>
(e) Termination of Employment and Change of Control Arrangements.
None
(f) Stock Option Plan
The Company has adopted a stock option plan covering officers,
consultants, key employees. The plan is administered by the Board of Directors
and is limited to 10% of the total outstanding shares, in the aggregate, except
if approval is granted by the Alberta Stock Exchange (the "Exchange). Option
prices shall not be lower than the market price of the shares on the date of
grant of the option less the maximum discount permitted under the By-Laws and
policies of the Alberta Stock Exchange. The options may be granted by the Board
under provisions which may be established by the Board of Directors from time to
time. The options may not be granted for an exercise period of more than five
years.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT
Stock Options and Warrants Outstanding October 30, 1999
The Company has, from time to time, granted stock options to purchase common
shares to its directors and employees. The options have been granted on various
terms resulting from negotiation between the Company and such persons and the
exercise price per share was based on the average trading price of the Company's
shares pursuant to the policies of the Alberta Stock Exchange (the "Exchange").
The exercise price for all options currently issued by the Company is equal to
or in excess of the market price of the Company's stock at the date of issuance
less the maximum discount permitted under the by-laws and polices of The Alberta
Stock Exchange (or any stock exchange on which the Shares are then listed). The
options are non-assignable and have been granted as incentives and not in lieu
of any compensation for services. Outstanding options to its directors and
employees to purchase an aggregate of 1,290,000 common shares are as follows:
<TABLE>
<CAPTION>
Share Price Amount
- ------------------------------------------ ---------------------- ------------------------- ------------------------
<S> <C> <C> <C>
Outstanding Options 100,000 $0.43 $ 43,000
- ------------------------------------------ ---------------------- ------------------------- ------------------------
240,000 $0.35 $84,000
- ------------------------------------------ ---------------------- ------------------------- ------------------------
950,000 $0.54 $513,000
- ------------------------------------------ ---------------------- ------------------------- ------------------------
Total Options 1,290,000 $640,000
- ------------------------------------------ ---------------------- ------------------------- ------------------------
</TABLE>
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
The directors, senior officers, holders of greater than 10% of the common shares
of the Company and any associate or affiliate of such persons of the Company
have no other interest in any material transactions in which the Company has
participated in the preceding year or intends to participate in at this time,
except as follows:
a) Y.S. (Jasi) Nikhanj, President and a Director, has a consulting
Agreement through his company, Nikhanj and Associates Geo
Consulting, by which he provides his services as President and
Director to manage the Company and exploration and development of
prospects for the Company for a fee of $10,000 per month. Mr.
Nikhanj is not paid a salary or other compensation as an officer
or Director.
b) The President assumed Company debts of $389,622, made expenditures
on behalf of the Company of $78,120, and received net advances of
$157,887. These amounts total $309,855.
c) The President and his wife exercised options for 677,000 shares at
a cost of $291,110. This amount was settled from amounts owed by
the Company.
<PAGE>
PART II
ITEM 14. DESCRIPTION OF SECURITIES
The Company is authorized to issue an unlimited number of Common
Shares without nominal or par value, and an unlimited number of
Preferred Shares, issuable in series, of which, of March 31, 1999 was,
16,818,565 Common Shares and no Preferred Shares are issued and
outstanding as fully-paid and non-assessable. As of September 30, 1999
17,056,065 common shares were issued and outstanding.
Common Shares
The holders of Common Shares are entitled to dividends if, as and when
declared by the directors, to one (1) vote per share at meetings of the
holders of Common Shares of the Company and, upon liquidation, to
receive such assets of the Company as are distributable to the
holders of the Common Shares. All of the Common Shares to be
outstanding upon completion of this offering will be fully-paid and
non-assessable.
Preferred Shares
The Preferred Shares may be issued from time to time in one or more
series. each series consisting of a number of Preferred Shares as
determined by the board of directors of the Company who may also fix
the designation, rights, privileges, restrictions and conditions
attaching to the shares of each series of Preferred Shares. There are
no Preferred Shares issued and outstanding.
The Preferred Shares of each series shall, with respect to payment of
dividends and distribution of assets in the event of liquidation,
dissolution or winding-up of the Company, whether voluntary or
involuntary, or any other distribution of the assets of the Company
among its shareholders for the purpose of winding-up its affairs, rank
on a parity with the Preferred Shares of every other series and shall
be entitled to preference over the Common Shares and the shares of any
other class ranking junior to the Preferred Shares.
<PAGE>
TRANSFER AGENT
The transfer agent for the company shares is Montreal Trust, 600,
530-8th Avenue SW, Calgary, Alberta T2P3S8 (403) 267-6872.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
There have been no defaults by the Company upon Senior Securities
during the fiscal year 1998 to date of this registration statement.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES
There have been no changes in securities or changes in security for the
registered securities to date of this Annual Report.
PART IV
ITEM 17. FINANCIAL STATEMENTS
The following documents are filed as a part of this report:
1) Financial Statements: (See Financial Exhibits Index below
and Financial Exhibits furnished as Pages F-1 through F-18).
2) Financial Statement Schedules: None
ITEM 18. NOT APPLICABLE.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
a) INDEX TO FINANCIAL STATEMENTS
AND SUPPORTING SCHEDULES
Page
Reports of Independent Public Accountants F-2
I. Financial Statements:
Consolidated Balance Sheets at March 31,
1999, 1998, and 1997 F-3
Consolidated Statements of Loss & Deficit for
the period ended March 31, 1999, 1998, 1997 F-4
Statement of Cash Flows for the period ended
March 31, 1999, 1998, and 1997 F-6
Notes to Consolidated Financial Statements F-6 - F-18
II. Exhibits
SK#
27 Financial Data Schedules
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DATED: December 8, 1999
LEADER MINING INTERNATIONAL, INC.
By: Y.S. Nikhanj
------------------------------
President
Directors:
/s/ Manish Bindal
---------------------------------
Secretary and Director
/s/ Ulrich Schurch
---------------------------------
Director
/s/ Y.S. Nikhanj
---------------------------------
Director
/s/ Raymond Lai
---------------------------------
Vice President of Finance
/s/ Roland Kesselring
---------------------------------
Vice President of Corporate Affairs
<PAGE>
PricewaterhouseCoopers
Leader Mining Inernational, Inc.
Consolidated Financial Statements
March 31, 1999, 1998, and 1997
<PAGE>
PricewaterhouseCoopers
PricewaterhouseCoopers, LLP
425 1st Street SW Suite
1200 Calgary Alberta Canada
T2P 3V7 Telephone +1 (403)
509-7500 Facsimile +1 (403)
781-1825
June 25, 1999
Auditors' Report
To the Shareholders of
Leader Mining International Inc.
We have audited the consolidated balance sheets of Leader Mining International
Inc. as at March 31, 1999, 1998 and 1997 and the consolidated statements of loss
and deficit and cash flows for the three years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at March 31, 1999,
1998 and 1997 and the results of its operations and the changes in its cash
flows for the three years then ended in accordance with Canadian generally
accepted accounting principles.
(signed)
"PricewaterhouseCoopers LLP"
Chartered Accountants
F-2
<PAGE>
<TABLE>
<CAPTION>
Leader Mining International, Inc.
Consolidated Balance Sheets
As at March 31, 1999, 1998, and 1997
1999 1998 1997
$ $ $
Assets
<S> <C> <C> <C>
Current assets
Cash and short-term deposits 456,425 2,724,319 6,250,389
Accounts receivable 3,214 15,214 3,214
Marketable securities - at market 22,942 - -
Goods and Services Tax receivable 34,642 136,662 196,700
Deposits and prepaid expenses 179,773 135,406 142,983
Subscriptions receivable - - 136,500
-------------------------------------------------------------
696,996 3,011,601 6,729,786
Capital assets (note 3) 32,579 155,645 68,834
Mineral properties and deferred exploration costs (note 4) 8,100,426 8,957,965 4,440,824
-------------------------------------------------------------
8,830,001 12,125,211 11,239,494
-------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 277,590 1,820,664 1,117,428
Due to related parties (note 5) 22,800 8,553 231,243
-------------------------------------------------------------
300,390 1,829,217 1,348,671
-------------------------------------------------------------
Shareholders' equity
Capital stock (note 6) 20,346,416 19,265,652 16,973,405
Deficit (11,816,805) (8,969,658) (7,082,632)
-------------------------------------------------------------
8,529,611 10,295,994 9,890,773
-------------------------------------------------------------
8,830,001 12,125,211 11,239,444
</TABLE>
Commitments and contingencies (note 7)
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
Leader Mining International, Inc.
Consolidated Statements of Loss and Deficit
For the year ended March 31, 1999, 1998, and 1997
1999 1998 1997
$ $ $
Revenue
<S> <C> <C> <C>
Interest 49,044 152,132 28,702
-------------------------------------------------------------
Expenses
General and administrative 898,873 1,358,156 640,618
Exploration costs written off (note 4) 1,848,313 561,500 1,506,392
Amortization 11,282 27,082 12,189
Loss (gain) on disposal of capital assets (2,117) 24,170 -
Loss on write-down of marketable securities 139,840 - -
Site restoration and abandonment costs - 68,250 -
-------------------------------------------------------------
2,896,191 2,039,158 2,159,199
-------------------------------------------------------------
Net loss for the year (2,847,147) (1,887,026) (2,130,497)
Deficit - Beginning of year (8,969,658) (7,082,632) (4,952,135)
-------------------------------------------------------------
(11,816,805) (8,969,650) (7,082,632)
Deficit - End of year
-------------------------------------------------------------
Loss per share (0.20) (0.17) (0.20)
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Leader Mining International, Inc.
Consolidated Statements of Cash Flows
For the years ended March 31, 1999, 1998, and 1997
1999 1998 1997
$ $ $
<S> <C> <C> <C>
Cash provided by (used in)
Operating activities
Loss for the year (2,847,147) (1,887,026) (2,130,497)
Items not affecting cash
Exploration costs written off 1,848,313 561,500 1,506,392
Amortization 11,282 27,082 12,189
Loss (gain) on disposal of capital assets (2,117) 24,170 -
Write-down of marketable securities 139,840 - -
Provision for site restoration and abandonment costs - 68,250 -
Employee bonuses paid in shares (111,300) 529,500 18,500
-------------------------------------------------------------
(961,129) (676,524) (593,416)
Change in non-cash working capital balances (note 10) (1,473,421) 690,601 606,032
-------------------------------------------------------------
(2,434,550) 14,077 12,616
Financing activities
Issuance of common shares, net of issue costs 967,064 1,636,998 10,721,305
Payments made from (to) related parties 14,247 (222,690) 23,897
-------------------------------------------------------------
981,311 1,914,308 10,745,202
Investing activities
Mineral properties and deferred exploration costs (990,774) (4,816,392) (5,685,757)
Purchase of capital assets (2,599) (145,163) (52,697)
Proceeds on disposal of capital assets 116,500 7,100 -
Purchase of marketable securities (162,782) - -
-------------------------------------------------------------
Increase (decrease) in cash (1,039,655) (4,954,455) (5,738,454)
Cash and short-term deposits - Beginning of year 2,724,319 6,250,389 1,231,025
-------------------------------------------------------------
Cash and short-term deposits - End of year 231,425 2,724,319 6,250,389
Cash and short-term deposits consists of
Cash 456,425 637,813 4,040,053
Short-term deposits - 2,086,506 2,210,336
-------------------------------------------------------------
456,425 2,724,819 6,250,389
Non-cash financing activities
Issue of shares for
Finders fees - 262,249 61,250
Property acquisition - - 35,000
-------------------------------------------------------------
Non-cash investing activities - 262,249 96,250
Exploration expenditures - (262,249) (96,250)
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
Leader Mining International, Inc.
Notes to Consolidated Financial Statement
March 31, 1999, 1998, and 1997
1 Nature of operations
The Company is in the process of exploring its mineral properties and has
not yet determined whether these properties contain mineral reserves that
are economically recoverable. The recoverability of amounts shown for
mineral properties and deferred exploration costs is dependent upon the
existence of economically recoverable reserves, securing and maintaining
title and beneficial interest in the property, the ability of the Company
to obtain necessary financing to complete the development, and upon future
profitable production or proceeds from disposition of the mineral
properties. The amounts shown as mineral properties and deferred
exploration costs represent net costs to date, less amounts written-off
and do not necessarily represent present or future values.
2 Significant accounting policies
Accounting principles
These consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP").
Significant differences from accounting principles generally accepted in
the United States ("US GAAP") are described in note 12.
Basis of presentation
These consolidated financial statements include the results of the
Company's wholly owned United States inactive subsidiaries, Durvada
Resources Inc. and Durga Resources Inc. The subsidiary wound up effective
April 1, 1998.
Use of estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. The most significant estimates are related to
the recoverability of amounts recorded for mineral properties and deferred
exploration costs. Actual results could differ from those reported.
Mineral properties and deferred exploration costs
Acquisition and exploration costs relating to mineral properties are
deferred until the properties are brought into production, at which time
they are amortized on a unit of production basis, or until the properties
are abandoned or sold or management determines that a mineral property is
no longer economically viable, at which time the deferred costs are
written-off.
Cash
Cash and short-term deposits mature within 90 days of the original date of
acquisition. In order to limit its exposure, the Company deposits its
funds with large financial institutions.
F-6
<PAGE>
Leader Mining Internation, Inc.
Notes to Consolidated Financial Statement
March 31, 1999, 1998, and 1997
Capital assets
Capital assets are recorded at cost. Amortization is provided on a
declining balance basis based on the estimated useful life of the assets
at the following annual rates:
Computer equipment 30%
Furniture and fixtures 20%
Vehicles 30%
Camp equipment 20%
Field office building 4%
Subscriptions receivable
Subscriptions receivable from employees, officers or directors of the
Company are recorded as assets of the Company when collectibility of the
receivable is reasonably assured. When collectibility is not reasonably
assured, the amount receivable is offset against issued share capital.
Subscriptions receivable from third parties are offset against issued
share capital.
Foreign currency translation
The Company follows the temporal method of translation whereby all
monetary assets and liabilities denominated in a foreign currency are
translated into Canadian dollars at the rate of exchange in effect at the
balance sheet date. Non-monetary assets and exploration expenditures are
translated at the rates prevailing when they are acquired or incurred.
Exchange gains or losses are included in net loss for the year.
Per share information
Loss per share has been calculated using the weighted average method.
Marketable securities
Marketable securities are recorded at the lower of cost or market.
<TABLE>
<CAPTION>
3 Capital assets
1999
----------------------------------------------------------------
Accumulated
Cost amortization Net
<S> <C> <C> <C>
$ $ $
Computer equipment 38,425 20,855 17,570
Furniture and fixtures 31,297 21,035 10,262
Camp equipment 9,029 4,282 4,747
----------------------------------------------------------------
78,751 46,172 32,579
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
March 31, 1999, 1998, and 1997
19981999
----------------------------------------------------------------
Accumulated
Cost amortization Net
$ $ $
<S> <C> <C> <C>
Computer equipment 38,424 13,324 25,100
Vehicle 21,843 11,140 10,703
Furniture and fixtures 29,128 18,471 10,657
Camp equipment 8,600 3,095 5,505
Field office building 108,000 4,320 103,680
----------------------------------------------------------------
205,995 50,350 155,645
Accumulated
Cost amortization Net
$ $ $
Computer equipment 7,678 2,569 5,109
Vehicle 21,843 6,552 15,291
Furniture and fixtures 22,713 15,807 6,906
Camp equipment 43,248 1,720 41,528
----------------------------------------------------------------
95,482 26,648 68,834
4 Mineral properties and deferred exploration costs
1999 19981999 1997
$ $ $
a) Balance - Beginning of year 8,957,965 4,440,824 1,065,975
-------------------------------------------------------------
Expenditures capitalized in the year
Acquisition of mineral properties 30,000 70,000 219,000
Exploration costs 960,774 5,008,641 5,563,007
Tax effect of flow-through shares (note 6(c)) - - (900,766)
-------------------------------------------------------------
990,774 5,078,641 4,881,241
Less: Exploration costs written off (1,848,313) (561,500) (1,506,392)
-------------------------------------------------------------
(857,539) 4,517,141 3,374,849
Balance - End of year 8,100,426 8,957,965 4,440,824
-------------------------------------------------------------
</TABLE>
F-8
<PAGE>
Leader Mining International, Inc.
Notes Consolidated Financial Statements
March 31, 1999, 1998, and 1997
b) The breakdown of mineral properties and deferred exploration costs by
property is as follows:
<TABLE>
<CAPTION>
1999
----------------------------------------------------------------
Deferred
Mineral exploration
properties costs Total
$ $ $
<S> <C> <C> <C>
Knife Lake, Saskatchewan 85,000 7,846,179 7,931,179
Karmel, South Africa 30,000 85,247 115,247
Pistol Lake, Saskatchewan 54,000 - 54,000
----------------------------------------------------------------
169,000 7,931,426 8,100,426
----------------------------------------------------------------
1998/1999
----------------------------------------------------------------
Deferred
Mineral exploration
properties costs Total
$ $ $
Knife Lake, Saskatchewan 85,000 7,093,516 7,178,516
Nettogami Lake, Ontario 65,000 1,277,978 1,342,978
Cody Township, Ontario - 224,354 224,354
Other 69,000 143,117 212,117
----------------------------------------------------------------
219,000 8,738,965 8,957,965
----------------------------------------------------------------
1997
----------------------------------------------------------------
Deferred
Mineral exploration
properties costs Total
$ $ $
Knife Lake, Saskatchewan 30,000 2,709,763 2,739,763
Nettogami Lake, Ontario 65,000 1,199,546 1,264,546
Nighthawk Lake, Ontario 149,000 52,928 201,928
Other 64,000 170,587 234,587
----------------------------------------------------------------
308,000 4,132,824 4,440,824
----------------------------------------------------------------
</TABLE>
F-9
<PAGE>
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
March 31, 1999, 1998, and 1997
c) During fiscal year 1999, the Company wrote off $1,848,313 (1998 -
$561,000; 1997 - $137,930) of exploration costs relating to
properties on which no further exploration activities are planned.
d) In March, 1998, to consolidate a land position in Voisey Bay,
Labrador, the Company entered into three separate agreements to
acquire interests in certain mineral claims. In 1999, the Company
terminated the above agreements at no further cost to the Company.
e) The Company has an obligation to pay a 2% net smelter return on its
Knife Lake property to Copper Quest, Inc. and has an option to
purchase a 1% net smelter return for $1 million.
The Company has an option to spend $1,500,000 on its Pistol Lake
property to earn an 80% working interest from Consolidated Pine
Channel Gold Corp. (Consolidated Pine). The Company has an additional
obligation to pay a 2% net smelter return on its Pistol Lake
properties to Consolidated Pine and has an option to purchase an
additional 10% working interest for $10 million and an option to
purchase a 1% net smelter return for $2 million.
f) On January 28, 1999, the Company signed an option agreement with
Karmel Diamond Holdings (Pty.) Ltd. (Karmel) and Poplar Resources
Ltd. (Poplar) to acquire a 75% right, title and interest in the
Karmel Diamond property.
The interest is earned after incurring expenditures of $1,500,000, in
scheduled expenditures of $500,000 each year for the three years
following the agreement date. Should the Company elect to spend less
than the $1,500,000 to a minimum of $500,000, the Company will retain
a 1% Net Smelter Return Royalty on the property so long as Karmel or
Poplar hold an interest.
As part of the above agreement, the Company is obligated to pay a 3%
net profit interest to the property owners. The Company has an option
to purchase a 2% net profit interest for 4 million Rand.
5 Related party transactions
a) Due to related parties
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
$ $ $
i) The Company's president and his wife 22,800 4,055 226,745
ii) Other shareholders, directors - 4,498 4,498
======== ======== =========
22,800 8,553 231,243
</TABLE>
The shareholders' loans have no fixed terms of repayment, are
non-interest bearing and are unsecured.
F-10
<PAGE>
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
March 31, 1999, 1998, and 1997
b) Transactions in the year
During fiscal year 1999, the following transactions were conducted
with related parties:
i) The President assumed Company debts of $389,622, made
expenditures on behalf of the Company of $78,120 and received
net advances of $157,887. These amounts total $309,855.
ii) The President and his wife exercised options for 677,000 shares at a cost
of $291,110. This amount was settled from amounts owed by the Company.
iii) A company owned by the President was paid $120,000 (1998 - $135,000; 1997
- $120,000) for geological consulting services provided during the year.
iv) A director's law firm was paid $36,000 for legal services provided during
the year (1998 - $40,422; 1997 - $41,850).
During fiscal year 1998, the following transactions were conducted
with related parties:
i) The Company advanced the President $348,225 as a short-term
loan. Interest was charged on the loan at bank prime plus
one percent. These advances were repaid in full during the
fiscal year 1998.
ii) Directors received 117,000 shares during the year in
settlement of performance bonuses (1997 - cash payment
$257,250 and 5,000 shares).
During fiscal year 1997, the following transactions occurred:
i) The President and his wife made additional non-interest
bearing cash advances to the Company, assumed Company debts
and made expenditures on behalf of the Company totalling
$282,203. The expenditures included certain mining options
acquired on behalf of the Company (note 4) for total
non-cash consideration valued at $134,000. These options
were transferred to the Company at cost. In addition, the
President secured the services of a consulting geologist on
behalf of the Company for non-cash consideration valued at
$75,000. The Company repaid the President and his wife a
total of $458,306 in 1997.
ii) The President sold a mobile home, previously used in the Company's
operations, to Durvada Resources Inc. for proceeds of $34,648, which
equalled the balance of the mortgage owed by the President on the
mobile home.
F-11
<PAGE>
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
March 31, 1999, 1998, and 1997
6 Capital stock
a) Authorized
The authorized share capital of the Company is comprised of an
unlimited number of common and preferred shares.
b) Common shares issued
Changes in the Company's outstanding common share capital are
summarized as follows:
<TABLE>
<CAPTION>
Number of Amount
shares $
<S> <C> <C>
Balance - March 31, 1996 9,606,370 7,011,616
-----------------------------------------
Shares issued
Subscriptions received 50,000 175,000
Exercise of options 628,000 1,652,200
Exercise of warrants 1,025,000 1,811,500
Employee bonus 5,000 18,500
Acquisition of mineral claims 100,000 35,000
Finder's fee 47,115 61,250
Flow-through shares (note 6(c)) 425,000 1,997,500
Private placements for cash 1,362,000 5,543,790
-----------------------------------------
3,642,115 11,294,740
-----------------------------------------
13,248,485 18,306,356
Add: Flow-through warrant issue proceeds - 21,250
Less:Subscriptions receivable (35,256) (136,500)
Share issue costs - (316,935)
Tax effect of flow-through shares (note 6(c)) - (900,766)
-----------------------------------------
Balance - March 31, 1997 13,213,229 16,973,405
Shares issued
Subscriptions received 35,256 136,500
Exercise of options 85,000 331,500
Director and employee bonuses 157,000 529,500
Private placement for cash 500,000 1,889,500
Finder's fees 66,080 262,249
-----------------------------------------
843,336 3,149,249
-----------------------------------------
14,056,565 20,122,654
Less: Share issue costs - (857,002)
-----------------------------------------
Balance - March 31, 1998 14,056,565 19,265,652
-----------------------------------------
</TABLE>
F-12
<PAGE>
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
March 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Number of Amount
Shares $
<S> <C> <C>
Shares issued
Director and employee bonus shares cancelled (157,000) (529,500)
Director and employee bonus shares reissued 157,000 418,200
Exercise of options 687,000 295,410
Legal settlement for Blower & Condor 75,000 225,000
Private placement for cash 2,000,000 700,000
-----------------------------------------
8,762,000 1,109,110
-----------------------------------------
16,818,565 20,374,762
Less: Share issue costs - (28,346)
-----------------------------------------
Balance - March 31, 1999 16,818,565 20,346,416
-----------------------------------------
</TABLE>
The weighted average number of shares outstanding for the year ended
March 31, 1999 was 14,446,458 (1998 - 13,911,958; 1997 - 10,924,623).
c) Flow-through shares
Pursuant to the issuance of flow-through shares, the Company spent
$1,997,500 on qualifying expenditures in fiscal year 1997, the tax
effects of which were renounced to the investors.
d) Share options
The Company has a stock option plan for the officers, directors and
employees. Up to 10% of the issued and outstanding shares are
reserved for issuance. The number of stock options outstanding at
the year-end were as follows:
<TABLE>
<CAPTION>
Number of options
-------------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
Balance - Beginning of year 1,357,000 847,000 965,000
Granted in the year 250,000 810,000 1,150,000
Exercised in the year (687,000) (85,000) (628,000)
Expired / cancelled in the year (200,000) (215,000) (640,000)
-------------------------------------------------------------
Balance - End of year 720,000 1,357,000 847,000
-------------------------------------------------------------
</TABLE>
F-13
<PAGE>
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
March 31, 1999, 1998, and 1997
The options expire as follows:
Number of
options
Exercise at $0.43 expiring July, 1999 220,000
Exercise at $0.43 expiring October, 2000 250,000
Exercise at $0.35 expiring November, 2001 250,000
---------------
720,000
e) Share warrants
The number of share warrants issued during the year in conjunction
with the private share placements and outstanding at the year-end
were as follows:
<TABLE>
<CAPTION>
Number of warrants
-------------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
Balance - Beginning of year 130,000 637,500 950,000
Granted in the year 1,000,000 322,000 712,500
Expired in the year (130,000) (829,500) -
Exercised in the year - - (1,025,000)
-------------------------------------------------------------
Balance - End of year 1,000,000 130,000 637,500
-------------------------------------------------------------
</TABLE>
The 1,000,000 warrants are exercisable at $0.45 by January 18, 2001.
7 Commitments and contingencies
a) Pursuant to an agreement relating to a lease for office premises, the
Company is obligated to pay $24,000 per annum until the year 2001.
b) While the Company was successful in defending a 1998 legal action, the
matter is currently under appeal.
F-14
<PAGE>
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
March 31, 1999, 1998, and 1997
8 Income taxes
The Company has Canadian resource deductions including undepreciated
capital costs of approximately $10,994,000 which may be carried forward
indefinitely in the prescribed manner to reduce taxable income in future
years, and Canadian non-capital tax losses of approximately $4,134,000.
The non-capital tax losses expire as follows:
Amount Available
Year of Loss $ Until
1993 169,000 2000
1994 289,000 2001
1995 164,000 2002
1996 320,000 2003
1997 674,000 2004
1998 1,454,000 2005
1999 1,064,000 2006
------------------
4,134,000
------------------
In addition, the Company has United States net operating losses available
to be carried forward for 15 years commencing in 1989, of approximately
$1,865,000.
The potential income tax benefit associated with the above non-capital
losses have not been recorded in these financial statements.
Differences between income taxes calculated at Canadian statutory rates
and the income tax provision are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
$ $ $
<S> <C> <C> <C>
Income taxes at Canadian statutory rates 1,281,200 849,000 959,000
Tax effect of losses which have not been
recorded (1,281,200) (849,000) (959,000)
----------------------------------------------------------------
Balance - End of period - - -
----------------------------------------------------------------
</TABLE>
9 Financial instruments
The Company's financial instruments recognized in the balance sheet
consist of cash and short-term deposits, accounts receivable, marketable
securities, accounts payable and accrued liabilities, and amounts due to
related parties. The fair values of all financial instruments except the
amounts due to related parties approximate their carrying values due to
their short-term maturity. The fair value of amounts due to related
parties is not determinable.
F-15
<PAGE>
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
March 31, 1999, 1998, and 1997
10 Changes in non-cash working capital balances
<TABLE>
<CAPTION>
1999 1998 1997
$ $ $
<S> <C> <C> <C>
Operating activities
Accounts receivable 12,000 (12,000) (3,214)
Goods and Services Tax receivable 102,020 60,038 (170,302)
Deposits and prepaid expenses (44,367) 7,577 309
Accounts payable and accrued liabilities (1,543,074) 634,986 779,239
----------------------------------------------------------------
(1,473,421) 690,601 606,032
----------------------------------------------------------------
</TABLE>
11 Uncertainty due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
hen information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
12 Differences between Canadian and U.S. generally accepted accounting
principles
Significant differences between Canadian GAAP and U.S. GAAP which would
have an effect on these consolidated financial statements are as follows:
a) Adjustment to net loss
<TABLE>
<CAPTION>
1999 1998 1997
$ $ $
<S> <C> <C> <C>
Loss for the year following Canadian GAAP (2,847,147) (1,887,026) (2,130,497)
Deferred exploration costs (i) 807,539 (4,606,141) (3,328,779)
Stock based compensation (iii) (379,250) (1,107,990) (1,563,550)
----------------------------------------------------------------
Loss for the year following U.S. GAAP (2,418,858) (7,601,157) (7,022,826)
----------------------------------------------------------------
Loss per share under U.S. GAAP (0.17) (0.55) (0.64)
----------------------------------------------------------------
</TABLE>
F-16
<PAGE>
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
March 31, 1999, 1998, and 1997
i) For U.S. GAAP, exploration costs, net of the tax effect of flow-through
shares, related to projects are charged to expense as incurred. As
such, the majority of costs charged to exploration costs written off
under Canadian GAAP would have been charged to earnings in prior
periods under U.S. GAAP. Property acquisition costs are capitalized for
both Canadian and U.S. GAAP.
ii) For U.S. GAAP, subscriptions receivable are recorded as a reduction in
share capital.
iii) Under U.S. GAAP, a grant of stock options and warrants to acquire
shares at a price below the fair market value of the shares at the time
of the grant, is compensatory under APB No. 25 and is accounted for as
compensation expense. This has the effect of increasing capital stock
and deficit under U.S. GAAP.
b) Adjustments to balance sheet
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------- ----------------------------- -----------------------------
Canadian Canadian Canadian
GAAP U.S. GAAP GAAP U.S. GAAP GAAP U.S. GAAP
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
Subscription receivable
(a)(ii) - - - - 136,500 -
Mineral properties and
deferred exploration
costs (a)(i) 8,100,426 169,000 8,957,965 219,000 4,440,824 308,000
Capital stock 20,346,416 24,214,334 19,265,652 22,754,320 16,973,405 19,217,583
Deficit (11,816,805) (23,616,149) (8,969,658) (21,197,291) (7,082,632) (13,596,134)
</TABLE>
c) Shareholders' equity
<TABLE>
<CAPTION>
Under U.S. GAAP, shareholders' equity would be as follows:
1999 1998 1997
$ $ $
<S> <C> <C> <C>
Under Canadian GAAP 8,529,611 10,295,994 9,890,773
U.S. GAAP adjustment to net loss
Current (a)(i) and (a)(iii) 428,289 (5,714,131) (4,892,329)
Cumulative (12,227,633) (6,513,502) (1,621,173)
U.S. GAAP adjustment to capital stock
(a)(ii) - - (136,500)
Current (a)(iii) 379,250 1,244,490 1,563,550
Cumulative 3,488,668 2,244,178 817,128
-------------------------------------------------------------
598,185 1,557,029 5,621,449
-------------------------------------------------------------
</TABLE>
F-17
<PAGE>
Leader Mining International, Inc.
Notes to Consolidated Financial Statements
March 31, 1999, 1998, and 1997
d) Income taxes
Under U.S. GAAP, the Company would be required to initially recognize
an income tax asset arising from the benefit of losses carried
forward. This asset has been reduced to $nil through the application
of a valuation allowance of $4,134,000.
e) Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities" which standardizes the accounting for derivative
instruments. SFAS 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. The effective date was
subsequently changed to all fiscal quarters of all fiscal years
beginning after June 15, 2000. Adopting this standard will not have
a significant impact on the Company's financial position, results of
operations or cash flows.
F-18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 456425
<SECURITIES> 22942
<RECEIVABLES> 3214
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 696996
<PP&E> 8100426
<DEPRECIATION> 0
<TOTAL-ASSETS> 8830001
<CURRENT-LIABILITIES> 277590
<BONDS> 0
0
0
<COMMON> 20346416
<OTHER-SE> (11816805)
<TOTAL-LIABILITY-AND-EQUITY> 8529611
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2896191
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (49044)
<INCOME-PRETAX> (2847147)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2847147)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2847147)
<EPS-BASIC> (.20)
<EPS-DILUTED> (.20)
</TABLE>
