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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
NEVADA STAR RESOURCE CORP.
(Name of Small Business Issuer in its charter)
State of Washington 98-0155690
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10735 Stone Avenue North
Seattle, WA 98133
(Address of principal executive offices) (Zip Code)
(206) 367-2525
(Issuer's telephone number, including area code)
Securities to be registered under Section 12(b) of the Act: None
Title of each class Name of each exchange on which each
to be so registered class is to be registered
None None
Securities registered under Section 12(g) of the Act:
Common Stock,
(Title of class)
This space intentionally left blank.
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Submission page 1 of 82
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NEVADA STAR RESOURCE CORP.
FORM 10 SB
DESCRIPTION SUBMISSION PAGE
PART I
ITEM 1 DESCRIPTION OF BUSINESS 3
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION 4
ITEM 3 DESCRIPTION OF PROPERTY 6
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 17
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS 18
ITEM 6 EXECUTIVE COMPENSATION 19
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 19
ITEM 8 DESCRIPTION OF SECURITIES 20
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS 21
ITEM 2 LEGAL PROCEEDINGS 21
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 21
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES 22
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS 23
PART F/S 24
PART III
ITEM 1 INDEX TO EXHIBITS 53
ITEM 2 DESCRIPTION OF EXHIBITS 53
SIGNATURES 54
EXHIBIT EX-3.(i) 55
EXHIBIT EX-3.(ii) 56
EXHIBIT EX-3.(iii) 75
EXHIBIT EX-21 81
EXHIBIT EX-27 82
Submission page 2 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Nevada Star Resource Corp.. (together with its subsidiaries, "NSR" or the
"Company"), is engaged in the business of acquiring, exploring and developing
mineral properties, primarily those containing copper, gold, silver and
associated base and precious metals. All of the Company's properties are
currently in the exploration stage, which is in the stage of determining
feasibility for development. No reserves have been identified on any of the
NSR properties.
The Company was incorporated under the laws of the Company Act of British
Columbia, Canada on April 29, 1987. On June 17, 1998 the Company was
continued into the Yukon under Section 190 of the Yukon Business Corporation
Act. The Company conducts its operations through its wholly-owned
subsidiaries, Nevada Star Resource Corp. (U.S.), a Nevada corporation and
Nevada Star Resource de Mexico, S.A. de C.V., a wholly-owned subsidiary of
Nevada Star Resource Corp. (U.S.). The Company's executive offices are
located at 10735 Stone Avenue North, Seattle, WA 98133, Tel. (206) 367-2525.
Unless otherwise noted, all dollar amounts are quoted in Canadian Dollars.
Employees
At December 31, 1998, the Company had one full-time employee. NSR relies
primarily upon the use of consultants to accomplish its exploration
activities. The Company's employee is not subject to a union labor contract
or collective bargaining agreement. None of the Company's executive officers
are employed full-time by the Company. Management services are provided on an
"as-needed" basis.
Competition
There is aggressive competition within the minerals industry to discover and
acquire properties considered to have commercial potential. The Company
competes for the opportunity to participate in promising exploration projects
with other entities, many of which have greater resources than the Company.
In addition, the Company competes with others in efforts to obtain financing
to explore and develop mineral properties.
Government Regulation and Environmental Concerns.
The Company is committed to complying and, to its knowledge, is in compliance
with all governmental and environmental regulations. Permits from a variety
of regulatory authorities are required for many aspects of mine operation and
reclamation. The Company cannot predict the extent to which future
legislation and regulation could cause additional expense, capital
expenditures, restrictions, and delays in the development of the Company's
U.S. properties, including those with respect to unpatented mining claims.
Submission page 3 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
The Company's activities are not only subject to extensive federal, state and
local regulations controlling the mining of and exploration for mineral
properties, but also the possible effects of such activities upon the
environment. Future legislation and regulations could cause additional
expense, capital expenditures, restrictions and delays in the development of
the Company's properties, the extent of which cannot be predicted. Also, as
discussed above, permits from a variety of regulatory authorities are
required for many aspects of mine operation and reclamation. In the context
of environmental permitting, including the approval of reclamation plans, the
Company must comply with know standards, existing laws and regulations that
may entail greater or lesser costs and delays depending on the nature of the
activity to be permitted and how stringently the regulations are implemented
by the permitting authority. The Company is not presently aware of any
specific material environmental constraint affecting its properties that
would preclude the economic development or operation of any specific
property.
If the Company becomes more active on its U.S. properties, it is reasonable
to expect that compliance with environmental regulations will increase costs
to the Company. Such compliance may include feasibility studies on the
surface impact of the Company's proposed operations; costs associated with
minimizing surface impact; water treatment and protection; reclamation
activities, including rehabilitation of various sites; on-going efforts at
alleviating the mining impact on wildlife; and permits or bonds as may be
required to ensure the Company's compliance with applicable regulations. It
is possible that the costs and delays associated with such compliance could
become so prohibitive that the Company may decide to not proceed with
exploration, development, or mining operations on any of its mineral
properties.
Offshore Regulation.
The Company is aware of comparable environmental regulation in offshore
counties where it operates. The Company is committed to full compliance with
the regulations and has engaged legal counsel in Mexico who will, in part,
assist the Company to assure compliance.
The Company is prepared to engage additional professionals, if necessary, to
ensure regulatory compliance but in the near term expects its activities to
require minimal regulatory oversight. If the Company expends the scope of
its activities in the future it is reasonable to expect expenditures on
compliance to rise. Based upon the experience of other companies with which
the Company is familiar, management believes the costs of environmental
regulation offshore will be somewhat lower than costs typical in the United
States.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Plan of Operation
NSR's plan of operation for the next twelve months will consist of property
maintenance and exploration work on its properties in the Milford District in
Beaver County, Utah and its Alaska Nickel-Platinum-Copper property. The
Company is currently negotiating joint-venture or lease-option agreements
with unaffiliated third parties on its La Cienega, Yaqui Placer and Gold Hill
properties.
Submission page 4 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
The Company anticipates that it will utilize the services of independent
consultants to accomplish its maintenance and exploration work and therefore
does not anticipate that there will be a significant increase in the number
of employees.
In order to meet its cash requirements for the nest twelve months NSR will be
required to raise additional funds. The Company expects to accomplish this
through the sale of additional equity.
Although the Company intends to aggressively seek to acquire additional
exploration properties of merit, at the present time the Company has no
specific current plans, arrangements, agreements or undertakings to acquire
any additional exploration properties.
Year 2000 Issues
Throughout the information technology industry, the use of two-digit fields
was common practice in the design of hardware, systems software proprietary
applications and system interfaces. The Year 2000 problem is pervasive and
complex. The issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures and has assessed Year 2000
risks. This assessment has included the identification of necessary changes
to computer hardware and software applications that will attempt to ensure
availability and integrity of the Company's information systems and the
reliability of its financial and operational systems.
The Company has reviewed its financial, information and operational systems
in order to identify those products, services or systems that are not Year
2000 compliant. As a result of this review, the Company has determined that
only nominal modification or replacement of certain information systems may
be required to ensure that the Company will be Year 2000 compliant. These
modifications and replacements are being, and will continue to be, made in
conjunction with the Company's overall systems upgrading. The total cost of
these Year 2000 compliance activities is not anticipated to be material to
the Company's financial position or its results of operations
Based on available information, the Company does not believe any material
exposure to significant business interruption exists as a result of Year 2000
compliance issues. These costs and the timing in which the Company plans to
complete its Year 2000 modifications are based on management's best
estimates. However, there can be no assurance that the Company will timely
identify and remediate all significant Year 2000 problems, that remedial
efforts will involve significant time and expense, or that such problems will
not have a material adverse effect on the Company's business, results of
operations or financial position.
Submission page 5 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
The Company also faces risk to the extent that its vendors, service providers
and others with whom the Company transacts business may not comply with Year
2000 requirements. The Company will initiate formal communications with
significant borrowers, vendors and service providers to determine the extent
to which the Company is vulnerable to these third parties failure to
remediate their own Year 2000 issues. In the event any such third parties
are not Year 2000 compliant, the Company's results of operations could be
materially adversely affected.
ITEM 3. DESCRIPTION OF PROPERTY.
MILFORD DISTRICT
Property Location and Accessibility
The Milford District property consists of 55 patented mining claims, 232
unpatented mining claims, five Utah State leases, and 93 acres of fee land,
aggregating approximately 8,200 acres. The Company has two exploration
targets in the district, the Cortex and OK properties.
The property lies within approximately10 miles northwest of the town of
Milford in Beaver County, Utah. Milford has a population of 1,200 and is a
major division point on the Union Pacific Railroad. Milford has typical
facilities for a town of its size. NSR owns a railroad spur right of way 9
miles east of the property where sulfuric acid can be received and trucked to
the property, where copper cathodes can be loaded and shipped to market.
Electric power adequate to service the processing facility is available 5
miles from the property.
The property can be accessed from Milford by traveling 4 miles west-northwest
on Utah State Highway 21, then 6 miles north-northwest on a graveled county-
maintained road. Access is excellent year round.
The property lies at an elevation of 5,000 to 6,200 ft. in moderately rugged
hills surrounded by alluvial pediment. Climate is typical of the Great
Basin: temperatures range from 0(F to 100(F, with average highs in the
summer of 80(F; lows in the summer of 50(F; average highs in winter of
40(F; and average lows in winter of 25(F. Precipitation averages 10 inches
annually with approximately 50% coming as snow.
History
The Milford district was organized in 1872 but had only small and
intermittent production prior to 1962. Most of the early production was from
the Old Hickory tungsten mine and the Montreal iron mine. The pre-1962
production had a total value of less than $3 million.
Early in the 1960's a group of former US Steel geologists recognized that
copper in this district was intimately associated with magnetite. An
extensive ground magnetic survey of the district showed several strong
magnetic anomalies, most of them buried beneath alluvium. Subsequent
drilling demonstrated that most of the anomalies were associated with
significant copper deposits.
Submission page 6 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
Several companies partially mined the deposits delineated by the drilling.
These deposits included the Bawana deposit, located on ground presently
controlled by other parties, and the Hidden Treasure and Maria deposits, now
optioned to Nevada Star. A flotation plant was constructed to process the
ores and later and acid leach circuit was added. The copper concentrate and
cement copper produced from the leaching process was sold to copper smelters
for final processing.
According to NSR, the OK property was mined and, according to published
figures, produced 900,000 tons of copper ore grading 1.25% copper from 1967
until 1974. The ore was processed at the Essex mill, located 3 miles west-
northwest of Milford. The mill was a combination flotation and acid vat
leach facility sized at 850 tons per day, built to process OK intrusion-
hosted ores as well as skarn ores from the Cortex property. Production from
the entire district is reported as 22,300 tons of copper contained in
2,010,000 tons of ore grading 1.59% Cu..
The property lay idle until the early 1990s, when Cortex acquired the Hidden
Treasure Mine and deposit, Maria mine and deposit, Copper Ranch deposit, and
surrounding ground. Cortex conducted confirmation drilling on the Copper
Ranch deposit and did extensive sampling and metallurgical test work on the
Maria deposit. The copper appears to be acid leachable in the Maria ores.
Cortex agreed in late 1997 to sell the property to Nevada Star rather than
develop it itself.
The OK properties lay idle until the early 1990's when Centurion acquired the
OK Mine and surrounding ground and conducted confirmation drilling on the OK
mine. The program also drilled eastward along trend defining additional
copper mineralization in the vicinity of the Mary I mine about one mile to
the east. Centurion decided in late 1997 to option the property to NSR
rather than develop it.
Geology
Much of the geologic work and geologic interpretations done in the district
were conducted by Peter Joraleman in the 1970's and reported in Copper
Resources of the Rocky District, Beaver County, Utah, 1980, prepared for the
Toledo Mining company. Much of the discussion given below is from his report
and augmented by more recent data compiled by NSR and MDA.
The Milford district lies within an east-trending belt of altered granite to
diorite intrusives. Mineralization is dated at Cretaceous through late
Tertiary. Regional controls on mineralization are thought to be deep-seated
crustal structures. The area is on the eastern leading edge of a Late
Mesozoic to Early Tertiary Sevier thrust system with the mountains comprising
the hanging wall of the eastern Mineral Mountains complex. The Mineral
Mountains complex consists of thick Palezoic through mid-Mesozoic carbonate
and clastic rocks. Geology of the Milford district is structurally complex,
as it has been subjected to compression and later extension from the Mesozoic
Period through the Tertiary Period.
Oligocene volcanic rocks consisting of andesite flows and pyroclastic rocks
were extruded over much of the area, and these rocks were then intruded by a
series of Oligocene rocks related to the Mineral Mountain batholith.
Submission page 7 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
The Southern corner of the project is underlain by a fine to medium-grained
grondiorite stock composed of plagioclase, quartz, and biotite with minor
orthoclase, hornblende, and magnetite. there are also small outcrops of
quartz monzonite of the Rocky Mountain Stock.
To the north and northeast of the OK mine, there are several altered
porphyritic dikes which contain abundant magnetite and chalcopyrite within a
zone of disseminated and vein-controlled mineralization. Two small outcrops
of quartz monzonite occur west of the OK within the volcanic rocks.
Mineralization
Mineral Deposit Descriptions
Copper deposits in the Milford district occur as four distinct types:
Type 1 copper deposits occur in pipe-shaped deposits entirely contained in
silicified quartz monzonite or granodiorite; the best example of this is the
OK deposit. Nearby on trend is the Mary I deposit which is similar though
less silicified. Chalcopyrite and bornite occur with minor molybedenite.
About 75% of the sulfide minerals have been oxidized to tenorite,
chrysocolla, malachite and azurite. Gold and silver are present, but are not
of economic significance when acid leaching is used to recover the copper.
This type 1 deposit is known to occur only on the OK property. The OK
deposit has been explored with nearly 200 holes drilled by several operators
from 1964 until 1997. The OK deposit is approximately 1,200 ft. long,
averages 100 ft. wide, and has been delineated by drilling to a depth of up
to 500 ft. Preliminary pit designs by NSR take the pit to a depth of 400 ft.
The Mary I deposit has been explored with approximately 50 drill holes. The
deposit, as presently defined, is 600 ft. long, 150 ft. wide and has been
delineated by drilling to a depth of 150 ft.. These deposits have been
delineated on approximately 100 ft. spacing or closer though the deposit is
not completely drilled out.
Type 2 copper deposits occur in bodies of garnet-magnetite skarn adjacent to
quartz monzonite. These deposits form elongated tabular zones of irregular
orientation. Deposits of this type include the Hidden Treasure, Maria, and
Copper Ranch deposits. These deposits are not as continuous as Type I and
require closer drill hole spacing.
Type 3 deposits consist of remobilized copper occurring in sediments and
associated with calcite. Currently the Sunrise deposit is the only known
example of this type. The Sunrise deposit is not related to skarn
mineralization, and is low in magnetite. The Sunrise deposit occurs partly
on Cortex property and partly on claims controlled by others.
Type 4 deposits, which are of no apparent economic importance, are iron
deposits consisting of magnetic skarn with no associated copper.
Submission page 8 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
Feasibility Study
In 1998 NSR commissioned a feasibility study to evaluate the Company's
properties in the Milford District. Three independent engineering companies
evaluated the property. The Company spent approximately $800,000 on the
studies including data confirmation, ore reserve calculation, pit design,
metallurgical test work, engineering studies and capital cost estimation. The
feasibility study concludes that "open pit mining, acid leaching and solvent
extraction-electrowinning can produce LME grade A cathode copper at the
property and provide positive economic returns at sale prices above $0.75 per
pound copper.
The Company plans to continue property maintenance and exploration during
1999, but will not commence plant construction or mine development until the
price of copper improves and the status of the resource can be upgraded from
mineralization to reserves.
Terms of Acquisition
By an agreement dated November 7, 1997 between the Company and Centurion
Mines Corporation (the "Vendor"), the Company will purchase copper properties
in four townships in Beaver County, Utah. Consideration will be the issuance
of 2 million common shares of the Company over five years. The vendor also
retains a 12% net profits interest to apply to all copper production coming
from any claims. Deferred exploration and development expenditures of
$597,003 have been incurred to date by the Company on the property.
By an agreement dated November 4, 1997 between the Company and Cortex Mining
& Exploration Co. Inc. (the "CME"), the Company will purchase mining claims
in Beaver County, Utah. Consideration will be 2 million common shares of the
Company issued in two tranches: one million shares upon closing and another
one million upon the Company's successful completion of a favourable
feasibility study or upon commencement of commercial production. The CME
also retains a 2% net smelter return royalty which will not exceed 3 million
dollars (U.S.) in aggregate. The Company will also grant to Cortex one
million warrants for the Company's common shares, price at $1.00 U.S. per
share.
A finder's fee of 225,000 shares at a deemed price of $0.65 CDN. is payable.
EAGLE (RIO YAQUI) PROPERTY
Property Location and Availbility
The Yaqui placer gold property is located in southeastern Sonora State,
Mexico, about 160 kilometers east-southeast of Hermosillo, the state capital
and the main supply and trading centre in the State. The property consists
of the Eagle, Eagle I, Eagle II and Yaqui I claims comprising 392 hectares
(Has) or approximately 944 acres.
Submission page 9 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
Nevada Star Resource Corp. (Nevada) obtained an option through an agreement
dated October 29, 1992 as amended March 16, 1993 between Nevada and Monty D.
Moore whereby Nevada obtained an option to acquire a 100% interest, subject
to a 2% net smelter return royalty, in certain placer gold concessions
situated in Mexico known as the Eagle Property. Consideration is $95,000
(U.S.) as reimbursement of the vendor's costs and issuance of 200,000 shares
of Nevada in four equal stages, of which 50,000 shares were issued upon
Vancouver Stock Exchange acceptance for filing on March 30, 1993. Further
issuance's are based on completion of phased work programs and filing of
acceptable engineering reports recommending additional work on the property.
This Phase One report details work in the form of three testing programs,
carried out on the property during June 1992 and October 1993.
The Eagle property on the Yaqui River, is located in a very extensive gold-
bearing gravel district comprising the deposits from ancient and recent Yaqui
River systems. Widespread areas of hand mining operations by generations of
Gambusinos is evidence of the potential profitability of the gravels.
Practically no well engineered modern mining methods or equipment have been
used and the deposits are still largely intact. The property is cut by and
nearly half surrounded by, the Yaqui River in its southward course from the
Sierra Madre Mountains to the Gulf of California. Hydroelectric power dams
lie along the Yaqui River and a major transmission line passes near the
property. A branch substation which taps the major line is located on the
property.
Access to the claims is by good, paved, two land highway (No. 16) from
Hermosillo to the Yaqui River and then by desert road two kilometers to the
property.
Physiographically the property is in the Sierras and Llanurus Province, the
strip of basin and range structure which separates the Sierra Madre Mountains
from the main Sonora Desert to the west.
Because of the location of the property at the intersection of a main highway
and a major river, the Eagle property has been provided with excellent access
and hydroelectric power available for hookup in the immediate area where
mining, if proven feasible, will probably commence.
Previous Work
In the general area of the Eagle property there is much evidence of ancient
mining, including old abandoned Spanish communities and mine structures as,
for example at El Aguaje. Mining activity dates back more than two hundred
years and most of this activity has been by labor-intensive methods.
Extensive areas of hand mining by Gambusinos can be seen, evidenced by
thousands of hand-dug shafts and the associated waste piles, throughout the
district and on the property. Gambusinos are still actively working the
placer gravels of the Yaqui River system by the traditional hand methods
Submission page 10 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
Geology
Regional Setting
Evidence of three periods of Yaqui River development are represented in the
general. The earliest, assumed to be of early Tertiary age, is represented
by gold-bearing, well-indurated conglomerate gravels which are conspicuously
displayed to the north and east of the property.
The second Yaqui River development, possible of middle to late Tertiary age,
is the source of most of the terrace deposits in the broad river valley
system. Development of this broad river valley with its extensive gravel
deposits, was the product of a very long period. Several of these remnant
terraces exist upstream from the Eagle property .
The third Yaqui River development is represented by the present river, which
has cut below the base of the earlier valleys and lies in a much
narrower valley. The modern valley winds along the earlier (middle or late
Tertiary valley) in a general way, but in places leaves it for several
kilometers to cut a new channel through bedrock before re-entering the old
valley.
Property Setting
The large area of alluvial gravels that comprises the Eagle property is
situated on the eastern side of the earlier (middle to late Teriary) Yaqui
valley, immediately west of a point where the present Yaqui valley leaves the
old valley and cuts its way through a bedrock canyon for several kilometers
on its southward course. These departures of the modern river from the old
valley were probable caused by major northeast-southwest faulting at the time
of the modern river development.
The Eagle property gravels and the terrace deposit gravels 10 to 20 km north
are all well rounded and are made up primarily of granitic and volcanic
rocks, quartzites and quartz boulders, cobbles and gravel. The gravels and
the accompanying flattened gold are products of a collection process that is
regional in size and has been through at least two periods of valley
development during geologic time, hence, the widespread presence of gold
values throughout all the gravels in the Yaqui River system.
Whereas the terrace deposits ten to twenty kilometers upstream are completely
non-bedded, heterogeneous mixtures of silts, sands, gravels, cobbles and
boulders that were deposited from a flooding river, the deposits on the Eagle
property have a crude bedding. This indicates that although the main gravel
beds are not significantly different than the terrace deposits to the north,
there has been some reworking of the gravels on the property.
It seems likely that the reason such a hugh reserve of gravel has been
preserved on the Eagle property is that when the faulting occurred that
forced the river to cut a new canyon in bedrock, the property area was the
downthrown side of the fault.
Submission page 11 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
Terms of Acquisition
By a Letter of Agreement dated October 29, 1992 (as amended) the Company may
earn a 100% interest (subject to a 2% net smelter returns royalty) in the
rights to extract gold from mining claims known as Eagle, Eagle I, Eagle II,
and Yaqui located in the Soyopa and Onaves mining districts, State of Sonora,
Mexico. Consideration consists of:
* a cash payment of $95,500 U.S. for reimbursement of the vendor's out-of-
pocket costs, payable on the earliest occurrence of the following events:
(1) the Company completing a $1,000,000 financing, (2) the first positive
cash flow being generated from the project, or (3) no later than July 31,
1997. (Paid)
* the issuance of 200,000 shares of the Company's capital stock as follows:
50,000 shares upon the acceptance of the Agreement by regulatory authorities
(issued in fiscal 1994) and 50,000 shares each at the time of filing of the
next three engineers' reports recommending work programs of minimum $25,000
U.S. each on the project. The first work program was completed in fiscal
1995 and 50,000 shares were issued.
LA CIENEGA
Property Location And Access
The camp at la Cienega is located about 90 miles south of the Arizona
border in the State of Sonora, Mexico. The nearest accessible border town,
Nogales, Arizona, is about two and one half hours by well graded and paved
roads.
Trincheras, the nearest town, is about 50 kilometers away over a well
graded dirt road. The nearest railroad and telephone are also here. The
largest nearby city is Caborca about 75 kilometers northwest. It has a
population of approximately 50,000 people.
The area is Sonoran desert and the rainfall averages less than 10 inches
per year. Day time summer temperatures are well over 110 degrees F and this
heat is a major cause of decreased efficiency.
The area is without electrical service, potable water, sewage disposal,
telephones, grocery or fuel stores. The nearest supply center of any size is
Caborca about one hour away.
The camp is a collection of trailers that has been set up near an old
ranch building. An old arrastrar and several concrete tanks and wells are
central to the camp site. A dug well about 30 feet deep with 5 feet of water
has been set up with a gasoline pump near the well. After several attempts
at priming, the pump will deliver about 300 gallons to the concrete pond
before sucking air. Several hours are required for recovery. the well needs
cleaning and deepening.
Submission page 12 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
Terms of Acquisition
By an agreement dated February 28, 1994 between the Company and Pacific
Rainier de Mexico ("PRM"), the Company can earn a 90% interest in mining
claims known as the Rainier 1 through Rainier 6 located in the Golden
Triangle District, State of Sonora, Mexico. Consideration will be repayment
of substantiated costs of $913,099 U.S. expended by PRM on the property, and
the issuance of 1,400,000 shares of the Company when a mine is developed and
commences production provided that an independent valuation report confirms a
net present value (net of all costs and previous consideration) for the 90%
interest of at least $1,190,000 CDN. This is a non-arm's length transaction.
The out-of-pocket costs of $913,099 U.S. were settled by the issuance of a
two-year convertible debenture bearing interest at 6% and convertible at
$0.85 CDN. per share in the first year and at $0.98 CDN. per share in the
second year. Exchange in the conversion is fixed at $1.40 CDN. for $1.00
U.S. The debenture was converted into 1,596,215 shares at $0.85 CDN. per
share.
A letter of intent was signed February 16, 1994 with K.L.S. Enviro Resources
Inc. (formerly K.L.S. Gold Mining Company ("KLS")) to form a joint venture
with the Company to explore and develop the Rainier (La Cienega) Property and
the Eagle (Rio Yaqui) claims. KLS was to have earned a 55% interest in the
properties by spending a minimum of $1,000,000 U.S. on exploration of the
properties over the next 21/2 years.
In 1995, the agreement with KLS was renegotiated. Under the terms of the new
agreement, KLS will earn a 50% interest in the Rainier (La Cienega) Property.
The Eagle (Rio Yaqui) claims have been excluded from this new agreement. To
earn this interest, KLS must pay to PRM $90,000 U.S. in holding costs, one-
half in cash and one-half in KLS stock. In addition, KLS must pay $120,000
U.S. of the total $150,000 U.S. advance royalty owing on the Ryan Lode
project should the pre-feasibility study prove positive. The Company will be
required to pay the remaining $30,000 U.S. at this time. Upon payment of the
$120,000 U.S. for the Ryan Lode Project and payment of the $90,000 U.S. to
PRM, KLS will have earned its 50% interest in the Rainier (La Cienega)
Property claims.
The Company paid the costs of the pre-feasibility study on the Ryan Lode
Project of $117,218 CDN.
KLS did not complete their portion of the agreement to this point,
consequently they lost their interest in the Rainier (La Cienega) property.
Deferred exploration and development expenditures of $ 327,656 have been
incurred to date by the Company on the property.
The Company owns 100% right, title and interest in and to Mineral Concession
#199518 La Esperanza within the Rainier II claim, Sonora State of Mexico.
The property was acquired on June 6, 1994 by issuing 100,000 shares of the
Company (deemed value $80,000), payment of $9,809 U.S. cash and the retention
by Edward Ingham of a 2% net smelter return.
Submission page 13 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
The Company owns 100% right, title and interest in and to Mineral Concession
#199397 La Japonesa within the Rainier I claim, Sonora State of Mexico. The
property was acquired on June 6, 1994 by issuing 100,000 shares of the
Company (deemed value $80,000), payment of $8,649 U.S. cash and the retention
by Donald Randolph of a 2% net smelter return.
GOLD HILL
Nevada Star Resources has recently optioned the Gold Hill property in Nye
County, Nevada. The property is located six miles north of the Round
Mountain Gold Mine, about 48 miles northeast of Tonapah, Nevada. Claims
acquired from Mr. Manly include 53 unpatented claims and in addition, NSR
claimed, and is in the process of filing, an additional 54 unpatented claims.
The option agreement has been reviewed, there has been a preliminary title
search, and a subcontractor to Mine Development Associates (MDA) helped stake
the claim.
Nevada Star Resources (NSR) requested that Mine Development Associates
(MDA) conduct a resource and reserve evaluation on the Gold Hill Project, Nye
County, Nevada for Nevada Star's due diligent and to define a work program.
The property is located about six miles north of Round Mountain, Nevada. The
Round Mountain Mine is presently producing 420,000 ounces of gold per year
and has a reserve or eight million ounces.
The Gold Hill property consists of 104 unpatented claims (3 placer and 101
lode) of which 53 were optioned from Mr. Buzz Manley of Beatty, Nevada in
April, 1995. Fifty-four claims were staked by NSR but are presently held
under a different name. Since that time NSR has been accumulating data,
reviewing the data and geology, and has performed a resource and reserve
analysis on the Gold Hill gold deposit. The object of the work was to define
the needs of the project for the next phase of work.
Production in the 1930's showed a sharp increase in the Round Mountain
district, principally reflecting production from the Gold Hill Mine. There
was also some sporadic production between 1950 and 1964. Total production at
Gold Hill was $987,000 at $35 per ounce or about 28,000 ounces. Others
report production of over 34,000 ounces of gold and 200,00 ounces of silver.
Grades are estimated to have been about 0.3 oz Au/ton. All of this
production came from the Gold Hill vein and to a lesser extent associated
veins.
Gold Hill had been controlled for the last decade by the Round Mountain Gold
Company, a joint venture of Echo Bay Mining, Homestake and Case Pomeroy.
They have conducted extensive exploration including surface mapping,
geochemistry (rock, soil vegetation), geophysics (resistivity, gravity, and
IP), and a structural evaluation. Their work culminated in drilling,
metallurgical test work, and a resource and reserve evaluation. In 1988, they
defined a mineral inventory of 3.1 million tons grading 0.05 oz Au/ton at
0.025 oz Au/ton cutoff.. The mineralization is not economic to develop at
current gold prices.
Submission page 14 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
The host rocks at Gold Hill are densely welded rhyolite tuff of the Mount
Jefferson Caldera. The Mount Jefferson tuff lies over the Moores Creek tuff
which in turn lies over the Round Mountain tuff, the host of the Round
Mountain mine. These Tertiary volcanic rocks overlie a volcanic mega-breccia
that in turn overlies Paleozoic mestasediments. The Mount Jefferson Tuff has
been broken down by previous workers (principally L. McMasters of Homestake)
into the upper gray tuff and maroon upper tuff. There also exist quartz
latite dikes, a crystal tuff which may be a part of the Mount Jefferson tuff,
lithic tuffs, waterlain tuff and Tertiary conglomerates. Though these units
were mapped by McMasters, they were not evident in the log RVC or Core. MDA
feels that if the resource is to be well-defined, these unites must be
distinguished and separated for recognition of the structure in the areas.
The youngest rock in the area is the Quaternary-Tertiary pediments. These
units are generally composed of cobbles of the younger maroon tuff and are
always completely barren.
The alteration in the area ranges from non-existent to propylitic to argillic
to advanced argillic to silicified. It appears that the gold mineralization
is related to both quartz veining in argillized rock and silicification. The
principal feature in the area is the Gold Hill vein and its sub-parallel
veins. These all strike N75(W and dip variably but steeply. In general, the
veins dip southerly near the surface but dip back to the north at depth.
These veins are banded quartz, but can also be composed of crushed quartz and
rhyolite. These veins branch and coalesce and where two period of veining
intersect, higher-grade pods generally exist. The two period of quartz
mineralization are younger, grayer, dense and banded chalcedonic quartz which
contains gold of generally higher grades. The Silver vein, part of the later
mineralization, is lower-grade, dips steeply to the north at the surface and
intersects the Gold Hill vein at about 300 to 400 ft in depth. Where these
veins intersect they produce high-grades of gold and silver. The entire zone
is up to 400 ft wide and is 1,500 ft long, extending from beyond the range
front fault on the west (where it remains open) to near Toquima shaft on the
east. The mineralization extends to the west of the range front fault where
one hole hit about 80 ft of about 0.11 Au/ton.
Structurally, the area is difficult to define due to the lack of
distinct lithologic units. Aside from the prominent N75(W mineralized
structure there are north-trending basin and range faults that drop the
stratigraphy to the west. The general dip of the units is difficult to
determine but McMaster (oral comm., 1995) claims that they dip westerly.
Mineralization which is apparently stratigraphically-controlled suggests a
southwest dip. Previous workers have recognized two styles of
mineralization; near vertical structurally-controlled mineralization,
including veining, and shallow-dipping strata-bound mineralization.
The principal mineralization is the Gold Hill and associated veins.
These were exploited starting in the 1930's. The vein width averages several
feet and had sharp contacts with the wall rock. In other areas, the material
can best be described as a stockwork or sheeted zone filled with quartz
veinlets. It is difficult to further define the mineralization with the
available information, though it is believed to also be disseminated at least
in part. In several locations low-temperature banded silica was encountered
which may represent at-surface deposits. These are generally barren of
precious metal mineralization. The mineralization is found in both advance
argillic rock as well as silicified material.
Submission page 15 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
Terms of Acquisition
By an amended agreement dated September 26, 1997 between the Company and
Everett L. Manley (the "Vendor"), the Company has an option to purchase 53
mining claims in the Round Mountain Mining District, Nye County, Nevada
located four miles north of Round Mountain in consideration of $1,010,000
U.S. over 101/2 years. As at May 31, 1998, the Company has paid $130,000
U.S. to the Vendors.
By an agreement dated December 4, 1997 between the Company and Hagel Augen.
Hagel Augen will earn a 75% working interest in the Gold Hill Property.
Hagel Augen is committed to the following payments and investments on the
property:
* a cash payment of $10,000 U.S. (paid) upon execution of the agreement.
* a cash payment of $43,000 U.S. (paid) within 90 days of execution of the
agreement.
* a cash investment of $447,000 U.S. in the property which includes year 1998
property maintenance payments on or before December 31, 1998.
* a cash investment of $500,000 U.S. in the property which includes year 1999
property maintenance payments on or before December 31, 1999.
* a cash investment of $500,000 U.S. in the property which includes year 2000
property maintenance payments on or before December 31, 2000.
* a cash investment of $500,000 U.S. in the property which includes year 2001
property maintenance payments on or before December 31, 2001.
* a cash investment of $500,000 U.S. in the property which includes year 2002
property maintenance payments on or before December 31, 2002.
* a cash investment of $500,000 U.S. in the property which includes year 2003
property maintenance payments on or before December 31, 2003.
ALASKA NICKEL-PLATINUM-COPPER PROPERTY
Nevada Star has recently acquired approximately 8,000 acres of mining claims
in the Nicolai nickel-platinum-copper belt in the southern Alaska Range of
Alaska. The Company recently completed a geological mapping and sampling
program on its claims and is awaiting results of the samples and reports from
its consulting geologists before planning its next program of exploration.
The program may include a $120,000 aeromagnetic-EM survey over the claims to
better define the mineralized trends.
Submission page 16 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security Ownership of certain beneficial owners
The following table sets forth information regarding any person known to the
Company to be the beneficial owner of more than five percent of any class of
the Company's voting securities.
<TABLE>
(1) (2) (3) (4)
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
- ----------- ------------------------- ------------------------ ---------
<S> <C> <C> <C>
Common Monty D. Moore (1) 3,534,247(2) 13.95%
10735 Stone Ave.
Seattle, WA 98133
Common Grand Central Silver Mines,
Inc. 2,000,000 7.9%
862 South 500 West St.
Salt Lake City, Utah 84110
Common Robert Angrisano 2,145,000 8.5%
2533 - 226th Pl. NE
Redmond, WA 98053
</TABLE>
(1) Includes 713,550 shares owned by Pacific Rainier, Inc. a Corporation
controlled by Mr. Moore
(2) Does not include options expiring March, 12, 1999 to acquire 115,040
shares of Common Stock at a price of $0.55 per share or options expiring
November 20, 1999 to acquire 330,855 shares of Common Stock at a price
of $0.49 per share
b) Security ownership of management
The following table sets forth certain information as of February 23, 1999
regarding the number and percentage of shares of common Stock of the Company
or any of its parents or subsidiaries beneficially owned (as such term is
defined in Rule 13d-3 under the Exchange Act) by each director, each of the
named executive officers and directors and officers as a group
<TABLE>
(1) (2) (3) (4)
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
- ----------- ------------------------- ------------------------ ---------
<S> <C> <C> <C>
Common Monty D. Moore 3,534,297(1) (2) 13.9%
Common Richard W. Graeme 100,000 0.4%
Common Stuart Havenstrite ` 226,349 0.9%
Common Richard S. Havenstrite 110,000(3) 0.4%
Common Robert Angrisano 2,145,000 8.45%
Common Kevin Weaver 13,500 0.05%
Common Total of all officers
and directors
(9 individuals): 6,129,146(4) 24.2%
</TABLE>
Submission page 17 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
(1) Includes 713,550 shares owned by Pacific Rainier, Inc. a
Corporation controlled by Mr. Moore
(2) Does not include options expiring March, 12, 1999 to acquire 115,040
shares of Common Stock at a price of $0.55 per share or options expiring
November 20, 1999 to acquire 330,855 shares of Common Stock at a price of
$0.49 per share.
(3) Does not include options expiring November 20, 1999 to acquire 100,000
shares of common stock at a price of $0.49 per share.
(4) Does not include options held by two directors expiring March 12, 1999
to acquire a total of 100 shares of Common Stock at a price of $0.55 per
share.
(c) Changes in Control
There are no arrangements known to the Registrant the operation of which may
at a subsequent time result in the change of control of the Registrant.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
<TABLE>
Name Age Office with the Company Appointed to Office
- ------------------------ --- ----------------------- -------------------
<C> <S> <S> <S>
Monty D. Moore 62 Director and President 1993
Richard W. Graeme 56 Director
Stuart Havenstrite 66 Director
Richard S. Havenstrite 40 Director 1998
Robert Angrisano 44 Director 1999
Barry Nimetz 60 Director 1995
Kevin Weaver Director
Beverly J. Bullock 49 Secretary
</TABLE>
Monty D. Moore has been the President and a Director of the Company since
1993. Since 1971 Mr. Moore has been the owner and President of Pacific
Rainier Roofing, Inc., Seattle, Washington. Mr. Moore is a member of the
Northwest Mining Association.
Richard W. Graeme, a Director of the Company, is graduated from the
University of Arizona with a Bachelor of Science Degree with a major in
Geological Engineering. From 1996 to the present Mr. Graeme has been the
Vice-president of Operations for Golden Queen Mining Company, Mojave,
California. Mr. Graeme's responsibilities have included permitting and
bringing the Soledad Mountain project into production. From 1993 to 1996 Mr.
Graeme was employed as an Engineer by Mine Development Associates, Reno
Nevada. Mr. Graeme is a member of the American Institute of Mining,
Metallurgical and Petroleum Engineers ("AIME").
Submission page 18 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
Stuart Havenstrite, a Director of the Company, has been the owner and sole
employee of HMS Company, a geological and management company located in
Sandy, Utah. Mr. Havenstrite is graduated from Stanford University with a
B.S. Degree in Geology. Mr. Havenmstrite is a member of AIME. Mr. Havenstrite
is the father of Rick Havenstrite.
Rick Havenstrite, a Director of the Company, has been the Manager of the
Company's OK copper project since joining the Company in 1997. From 1996
until joining the Company Mr. Havenstrite was the Vice-President of
Operations for Centurion Mines Corporation and the manager of the OK copper
project. From 1992-1996 Mr. Havenstrite was employed by Arimetco, Inc. as the
General Manager of the Yerington Project. Mr. Havenstrite was responsible for
permitting, geology, engineering, construction and operation of this 15
million ton per year low grade SX/EW copper project. Mr. Havenstrite, a
member of AIME is graduated from the University of Nevada, Reno with a B.A.
Degree in Mine Engineering.
Barry Nimetz, a Director of the Company since 1995, has been employed by
Industry Canada since 1982. Mr. Nimetz is currently Senior Project manager.
His primary duties in such position are the negotiation of international
investment agreements
Kevin Weaver, a Director of the Company since 1995, is a land developer and
since 1992 has been the President of Songhees Retirement Park and Seicam
Management, Victoria, Canada..
Robert Angrisano, a Director of the Company, is graduated from Portland State
University with a degree in business. Mr. Angrisano has been employed by
Microsoft Corp. since 1993. Mr. Angrisano is currently the Director of
Technology for Microsoft.
Beverly J. Bullock, the Corporate Secretary, has been the owner of VanWest
Administrative Services, Ltd., Surrey, B.C. since 1991. VanWest provides
administrative consulting services to private and public companies.
ITEM 6. EXECUTIVE COMPENSATION.
The Chief Executive Officer of the Company receives no compensation for his
services rendered to the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Monty Moore, a shareholder, officer and director has made advances to the
Company which were outstanding in whole or in part at the year ended August
31, 1998 in the amount of $CDN 718,606. There have been no other ransactions
or series of transactions, or proposed transactions during the last two years
to which the registrant is a party in which any director, nominee for
election as a director, executive officer or beneficial owner of five percent
or more of the registrants common stock, or any member of the immediate
family of the foregoing had or is to have a direct or indirect material
interest exceeding $60,000.
Submission page 19 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
ITEM 8. DESCRIPTION OF SECURITIES.
Common Stock
The Company is authorized to issue one hundred million (100,000,000) shares
of its no par value Common Stock. There are presently 25,331,679 shares
issued and outstanding held by approximately 90 shareholders of record.
All shares of Common Stock are equal to each other with respect to voting,
liquidation, dividend and other rights. Owners of shares of Common Stock are
entitled to one vote for each share of Common Stock owned at any
Shareholders' meeting. Holders of shares of Common Stock are entitled to
receive such dividends as may be declared by the Board of Directors out of
funds legally available therefor; and upon liquidation, are entitled to
participate pro rata in a distribution of assets available for such a
distribution to Shareholders. There are no conversion, preemptive, or other
subscription rights or privileges with respect to any shares. The Common
Stock of the Company does not cumulative voting rights which means that the
holders of more than fifty percent (50%) of the shares voting in an election
of directors may elect all of the directors if they choose to do so. In such
event, the holders of the remaining shares aggregating less than fifty
percent (50%) would not be able to elect any directors.
Stock Options
At the end of the last fiscal quarter (November 30, 1998), the following
stock options were outstanding.
<TABLE>
Expiration Date Exercise Price Number of Shares
- -------------------------- --------------- ------------------
<S> <C> <C>
December 12, 1998 0.22 150,000*
March 12, 1999 0.55 215,040
November 20, 1999 0.64 430,855
July 20, 2000 0.49 358,065
* expired unexercised
</table
Share Purchase Warants
At the end of the last fiscal quarter (November 30, 1998), the following share
purchase warrants were outstanding
</TABLE>
<TABLE>
Expiration Date Exercise Price Number of Shares
- -------------------------- --------------- ------------------
<S> <C> <C>
February 19, 1999 $ 0.057 per share 1,000,000*
February 15, 2000 Year 1 - $ 0.55 per share 1,013,418
Year 2 - $ 0.70 per share
June 4, 2000 $ 1.00 per share 1,000,000
* expired unexercised
</TABLE>
Submission page 20 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
The Common Stock of the Company is traded on the Vancouver Stock exchange
under the symbol "NEV". The following table shows the high and low sales
prices for the Common Stock during each quarter since January 1, 1996. The
sales prices are set forth in Canadian dollars. At February 16, 1999 the U.S.
dollar equivalent as quoted in the Wall Street Journal was $.6691.
<TABLE>
Calendar Year High Closing Low Closing
- ------------------------------------ ------------- ------------
<S> <C> <C>
1996:
First Quarter (January 1- March 31) .75 .32
Second Quarter .75 .43
Third Quarter .65 .40
Fourth Quarter .58 .36
1997:
First Quarter .64 .37
Second Quarter .52 .30
Third Quarter .60 .23
Fourth Quarter .66 .45
1998:
First Quarter .70 .26
Second Quarter .52 .27
Third Quarter .43 .20
Fourth Quarter .30 .11
1999 At February 17 .15 .15
</TABLE>
As of December 31, 1998 there were approximately 90 shareholders of record
of the Company's common stock..
The Company has never paid any dividends and does not anticipate the payment
of dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS.
Neither the Registrant not its property is a party to or the subject of any
pending legal proceeding or any contemplated proceeding of a governmental
authority.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
During the Registrant's two most recent fiscal years and any later interim
periods neither the principal accountant nor a significant subsidiary's
independent accountant on whom the principal accountant expressed reliance in
its report, resigned (or declined to stand for re-election) or was dismissed.
Submission page 21 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In October, 1998 704,727 shares were sold to an unaffiliated third party at a
deemed price of $0.55 per share pursuant to a shares for debt transaction.
In April, 1998 the Company offered and sold 578,328 units at a price of CDN
$0.55 per unit to eleven U.S. residents. Each unit consisted of one share of
Common Stock and one non-transferable share purchase warrant. Each warrant is
exercisable for a two year period to purchase one share of common stock at a
price of CDN $0.55 per share if exercised during the first year and at a
price of CDN $0.70 per share if exercised during the second year.
In February, 1997 the Company offered and sold 550,000 units at a price of
CDN $0.50 per unit to six U. S. residents. Each unit consisted of one share
of Common Stock and one non-transferable share purchase warrant. Each warrant
is exercisable for a two year period to purchase one share of common stock at
a price of CDN $0.50 per share if exercised during the first year and at a
price of CDN $0.575 per share if exercised during the second year.
In May, 1996 the Company offered and sold 224,000 units at a price of CDN
$0.50 per unit to three U. S. residents. Each unit consisted of one share of
Common Stock and one non-transferable share purchase warrant. Each warrant is
exercisable for a two year period to purchase one share of common stock at a
price of CDN $0.50 per share if exercised during the first year and at a
price of CDN $0.58per share if exercised during the second year. The
President of the Company purchased 182,600 of the 224,000 shares sold to U.S.
residents.
Each of the above offerings was made pursuant to exemptions from registration
under the Securities Act of 1933, as amended, pursuant to Sections 3(b) and
4(2) and Regulation D promulgated thereunder. Each of the certificates issued
in connection with the above offerings contained restrictive language on its
face and each certificate had a restrictive legend in substantially the
following form:
The securities represented by this certificate have not been registered under
the Securities Act of 1933 (the "Act") and may not be offered for sale, sold
or otherwise transferred except pursuant to an effective registration
statement under the Act or pursuant to an exemption from registration under
the Act, the availability of which is to be established by opinion of counsel
satisfactory to the Company to the effect that in the opinion of such counsel
such registration in not required
None of the shares were offered by means of advertising or general
solicitation. No commissions were paid directly or indirectly to any person
in connection with the offer or sale of any of the securities to U.S.
residents.
Submission page 22 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 68 of the Company's Articles provides that:
"The board may cause the Company to provide indemnity by way of insurance or
otherwise to any director, officer, employee or other person who has taken or
is about to undertake any liability on behalf of the Company or any
corporation controlled by it and to secure such director, officer, employee
or other person against loss by mortgage and charge upon the whole or any
part of the real and personal property of the Company and any action taken by
the board under this paragraph will not require approval or confirmation by
the members."
Section 69 of the Company's Articles provides that:
"No director, officer or employee for the time being of the Company will be
liable for the acts, receipts, neglects or defaults of any other director,
officer or employee, or for joining in any receipt or act for the sake of
conformity, or for any loss, damage or expense happening to the Company
through the insufficiency of deficiency of title to any property acquired by
order of the board for or on behalf of the Company, or for the insufficiency
or deficiency of any security in or upon which any of the monies of or
belonging to the Company are placed out or invested or for any loss or
damages arising from the bankruptcy, insolvency or wrongful act of any
person, firm or corporation with whom or which any monies, securities or
effects are lodged or deposited or for any other loss, damage or misfortune
whatsoever which may happen in the execution of the duties of his respective
office or trust or in relation thereto unless the same happens by or through
his own wilful neglect or default."
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
(This space left intentionally blank.)
Submission page 23 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
PART F/S
NEVADA STAR RESOURCE CORP.
Consolidated Financial Statements
August 31, 1998 and 1997
(Canadian Dollars)
<TABLE>
INDEX Page
<S> <C>
Auditors' Report to the Shareholders 1
Consolidated Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Operations and Deficit 3
Consolidated Statements of Changes in Financial Position 4
Consolidated Statements of Investments In and Expenditures
on Resource Properties 5
Notes to Consolidated Financial Statements 6-17
</TABLE>
Submission page 24 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Nevada Star Resource Corp.
as at August 31, 1998 and 1997 and the consolidated statements of operations
and deficit, changes in financial position and investments in and expenditures
on resource properties for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Canada which do not differ in any material respects from auditing
standards generally accepted in the United States.
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 August 31, 1998
and 1997 and the results of its operations, the changes in its financial
position and the investments in and expenditures on resource properties for the
years then ended in accordance with generally accepted accounting principles in
Canada. Accounting principles generally accepted in Canada differ in certain
significant respects from accounting principles in the United States and are
discussed in note 10 to the consolidated financial statements.
"Smythe Ratcliffe"
Chartered Accountants
Vancouver, British Columbia
December 15, 1998
1
Submission page 25 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Consolidated Balance Sheets
August 31,
(Canadian Dollars)
<TABLE>
1998 1997
--------------- ---------------
<S> <C> <C>
ASSETS
Current
Cash $ 217,524 $ 89,467
Accounts receivable 4,105 1,827
Prepaid assets - 313
--------------- ---------------
221,629 91,607
Investments in and Expenditures on Resource
Properties (notes 3 and 4) 5,946,032 3,310,715
Capital Assets (note 5) 5,573 7,190
--------------- ---------------
$ 6,173,234 $ 3,409,512
=============== ===============
LIABILITIES
Current
Accounts payable $ 18,148 $ 11,658
Loan payable (note 9(a)) 387,600 -
Subscription payable 381,129 -
Due to shareholder (note 7) 718,606 400,077
--------------- ---------------
1,505,483 411,735
SHAREHOLDERS' EQUITY
Capital Stock (note 6) 9,704,111 6,367,317
Deficit (5,036,360) (3,369,540)
--------------- ---------------
4,667,751 2,997,777
--------------- ---------------
$ 6,173,234 $ 3,409,512
=============== ================
</TABLE>
Approved on behalf of the Board:
/s/ Monty Moore /s/ Richard W. Graeme
- ------------------------------------ ----------------------------
Monty Moore, Director Richard W. Graeme, Director
See notes to consolidated financial statements.
2
Submission page 26 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Consolidated Statements of Operations and Deficit
Years ended August 31,
(Canadian Dollars)
<TABLE>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
GENERAL AND ADMINISTRATIVE EXPENSES
Consulting $ 55,155 $ 55,398 $ 62,169
Property management 47,055 - -
Professional fees 31,852 21,235 15,343
Office and miscellaneous 21,597 15,374 25,299
Transfer agent fees 13,771 5,250 5,300
Shareholder relations 11,489 15,385 90,021
Listing and filing fees 10,937 9,003 10,515
Property examinations 8,737 3,423 117,218
Travel 7,668 19,944 21,755
Telephone 5,511 8,060 20,164
Bank charges and interest 1,165 983 929
Directors' meeting fees 860 1,743 1,542
Rent - 23,979 30,623
Management fees - 12,000 36,500
Debenture interest - - 48,443
Finder's fee - - 32,850
Amortization 1,617 2,117 3,176
--------------- --------------- ---------------
217,414 193,894 521,847
OTHER ITEMS
Loss on abandonment of
Mineral properties 1,459,495 439,455 60,293
Loss (gain) on translation of
Foreign currencies (7,471) 18,588 6,127
Interest income (2,618) (1,276) (8,145)
--------------- --------------- ---------------
NET LOSS FOR YEAR 1,666,820 650,661 580,122
DEFICIT, BEGINNING OF YEAR 3,369,540 2,718,879 2,138,757
--------------- --------------- ---------------
DEFICIT, END OF YEAR $ 5,036,360 $ 3,369 540 $ 2,718,879
=============== =============== ===============
LOSS PER SHARE $ 0.09 $ 0.04 $ 0.04
=============== =============== ===============
WEOGJTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 19,291,567 16,410,919 13,090,425
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
3
Submission page 27 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Consolidated Statements of Changes in Financial Position
Years Ended August 31,
(Canadian Dollars)
<TABLE>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash Provided By (Used In) Operating
Activities
Net loss $ (1,666,820) $ (650,661) $ (580,122)
Items not involving cash
Amortization 1,617 2,117 3,176
Loss on abandonment of mineral
Properties 1,459,495 439,455 60,293
--------------- --------------- ---------------
(205,708) (209,089) (516,653)
--------------- --------------- ---------------
Changes in Non-Cash Working
Capital
Accounts receivable (2,278) 1,681 503
Prepaid expenses 313 1,750 5,300
Accounts payable 6,480 (37,291) (47,533)
Subscriptions payable 381,129 - -
Loan payable 387,600 - -
Advances from shareholders 318,529 167,176 60,391
--------------- --------------- ---------------
1,091,783 133,316 18,661
--------------- --------------- ---------------
Investing Activities
Acquisition of mineral properties (2,182,744) (765,933) (140,038)
Deferred exploration and
development costs (1,912,068) (278,258) (490,617)
--------------- --------------- ---------------
(4,094,068) (1,044,191) (630,617)
--------------- --------------- ---------------
Financing Activities
Convertible debenture - - (1,278,340)
Issuance of shares
For cash 1,240,544 610,740 1,144,314
For mineral properties 2,096,250 - 11,500
For debt settlement - 228,928 1,234,257
--------------- --------------- ---------------
3,336,794 839,668 1,234,257
--------------- --------------- ---------------
Increase (Decrease) in Cash 128,057 (280,296) 105,610
CASH, BEGINNING OF YEAR 89,467 369,763 264,153
--------------- --------------- ---------------
CASH, END OF YEAR $ 217,524 $ 89,467 $ 369,763
=============== =============== ===============
See notes to consolidated financial statements.
4
Submission page 28 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Consolidated Statements of Investments in and Expenditures on Resource
Properties
Years Ended August 31,
(Canadian Dollars)
</TABLE>
<TABLE>
BEGIN 9PT TYPE
Forty-Seven Eagle Rainier La Viraen Gold Hill OK/
Creek (Rio Yaqui) (La Cienega) Property, Property Beaver Lake
Project Claims, Property, Mexico Nevada Property
Alaska Mexico Utah Total
------------ ------------ ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
8/31/96 $ 439,211 $ 197,033 $ 1,656,666 $ 106,124 $ 305,951 $ - $2,704,985
Expendi-
tures
for 1997
Acquisi-
tion
costs - - - 398,933 67,000 - 765,933
Labour - 614 3,959 54,745 3,564 - 62,882
Financing - - - 25,313 - - 25,313
Property
Tax - 351 45,592 7,011 - - 52,954
Travel - - 731 27,955 6,782 - 35,468
Accomoda-
tions
and
meals - - 1,832 10,196 3,057 - 15,085
Recording
Fee - - - - 49,711 - 49,711
Consult-
Ing - - - 7,500 3,345 - 10,845
Supplies - - 626 3,070 983 - 4,679
Assays - - - 15,771 - - 15,771
Misc. - - 904 2,857 572 - 4,333
Storage - - - - 1,967 - 1,967
Loss on
Abandon-
ment of
property (439,211) - - - - - (439,211)
------------ ------------ ------------ ------------ ------------ ------------ ----------
(439,211) 965 53,644 853,351 136,981 - 605,730
------------ ------------ ------------ ------------ ------------ ------------ ----------
</TABLE>
END 9PT TYPE
See notes to consolidated financial statements.
5
Submission page 29 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Consolidated Statements of Investments in and Expenditures on Resource
Properties (Continued)
Years Ended August 31,
(Canadian Dollars)
BEGIN 9PT TYPE
<TABLE>
Forty-Seven Eagle Rainier La Viraen Gold Hill OK/
Creek (Rio Yaqui) (La Cienega) Property, Property Beaver Lake
Project Claims, Property, Mexico Nevada Property
Alaska Mexico Utah Total
------------ ------------ ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
Aug. 31,
1997 - 197,998 1,710,310 959,475 442,932 - 3,310,715
------------ ------------ ------------ ------------ ------------ ------------ ----------
Expendi-
tures
for 1998
Acquisi-
tion
costs - - - - 4,739 2,178,006 2,182,745
Labour - - 414 70,147 3,564 - 62,882
Financing - - - - - - -
Property
Tax - 374 100,011 56,059 - - 156,443
Travel - 461 6,008 17,424 - 130,059 153,952
Accomoda-
tions
and
meals - 165 3,237 3,060 - 56,199 62,661
Recording
Fee - - - 5,851 - 22,280 28,131
Consulting - - 57,153 74,270 - 136,615 268,038
Supplies - - 9,465 749 - 102,642 112,857
Assays - - - 18,439 - 256,505 274,944
Misc. - 38 5,827 9,584 (745) 8,601 23,305
Storage - - - - - 43 1,967
Drilling - - - 244,437 - 236,056 480,493
Legal - - - - - 111,504 111,504
Loss on
Abandon-
ment of
property - - - (1,459,495) - - (1,459,495)
------------ ------------ ------------ ------------ ------------ ------------ ----------
- 1,038 182,115 (959,475) 3,994 3,407,645 2,635,317
------------ ------------ ------------ ------------ ------------ ------------ ----------
Balance,
Aug. 31,
1998 $ - $ 199,036 $ 1,892,425 $ - $ 446,926 $ 3,407,645 $5,946,032
============ ============ ============ ============ ============ ============ ==========
</TABLE>
END 9PT TYPE
See notes to consolidated financial statements.
5 (continued)
Submission page 30 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
1. NATURE OF OPERATIONS
The Company was incorporated under the laws of British Columbia and was
continued into the Yukon Territory of Canada in 1998. The principal business
activity is the exploration and development of natural resource properties.
These consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Nevada Star Resource Corp. (U.S.), a Nevada
corporation, and Nevada Star Resource de Mexico, S.A. de C.V., a wholly-owned
subsidiary of Nevada Star Resource Corp. (U.S.). All significant intercompany
balances and transactions have been eliminated.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Investments in and expenditures on resource properties
Acquisition costs of mineral properties, rights and options together with
direct exploration and development expenditures thereon are deferred in the
accounts on a property-by-property basis. The expenditures related to a
property from which there is production, together with the costs of
production equipment, will be depleted and depreciated using the
unit-of-production method based upon the estimated proven reserves. When
there is little prospect of further work on a property being carried out by
the Company or when minerals cannot be economically removed due to the
current market price of the minerals, the costs of the property are charged to
operations.
(b) Amortization
Amortization of capital assets is calculated on a declining balance basis at
the following annual rates:
Office equipment - 20%
Computer equipment - 30%
(c) Financial instruments
The Company's financial instruments consist of cash, accounts receivable,
accounts payable, loan payable, subscription payable and due to shareholder.
It is management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial instruments.
The fair value of these financial instruments approximate their carrying
value, unless otherwise noted.
(d) Loss per share
Loss per share computations are based on the weighted average number of
common shares outstanding during the year.
6
Submission page 31 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(e) Foreign Currency Translation
Amounts recorded in foreign currency are translated into Canadian dollars as
Follows:
(i) Monetary assets and liabilities at the rate of exchange in effect as at
the balance sheet date;
(ii) Non-monetary assets at the exchange rates prevailing at the time of the
acquisition of the assets; and,
(iii) Revenues and expenses (excluding amortization which is translated at
the same rate as the related asset), at the average rate of exchange for
the year.
Gains and losses arising from this translation of foreign currency are included
in net loss.
3. REALIZATION OF ASSETS
The Company's investments in and expenditures on resource properties comprise
significantly all of the Company's assets. Realization of the Company's
investments in and expenditures on these properties is dependent on the
attainment of successful commercial production or from the proceeds of their
disposal.
4. INVESTMENTS IN AND EXPENDITURES ON RESOURCE PROPERTIES
(a) Forty-Seven Creek Project, Alaska
By a Letter of Agreement dated October 2, 1991, the Company has the right to
earn a 50% interest in sixty-three (63) mineral claims located in the Kuskokwim
District, State of Alaska, for consideration of
- - $10,000 U.S. (paid) on acceptance of the Agreement by regulatory
authorities;
- - 200,000 shares of the capital stock of the Company to be issued as to
50,000 shares on acceptance of the Agreement by regulatory authorities
(issued at a deemed price of $0.23 per share), and 50,000 shares at the
end of each of the three phases of recommended work programs. At August
31, 1997, three work phases were completed and all shares were issued.
In addition, a finder's fee was payable on the acquisition totalling 25,000
shares of the Company's capital stock. 10,000 shares were issued in fiscal 1994
at a deemed price of $0.23 per share on acceptance of the Agreement by
regulatory authorities and 5,000 shares were to be issued at the end of each of
the three phases of recommended work programs. The issuance of the 15,000
shares resulting from the completion of three work phases has not been done due
to a dispute over work performed by the Finder.
The expenditures on this property have been charged to operations in the 1997
fiscal year as there is no intention to perform any further work on this
property.
7
Submission page 32 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
4. INVESTMENTS IN AND EXPENDITURES ON RESOURCE PROPERTIES (Continued)
(b) Eagle (Rio Yaqui) Claims, Sonora, Mexico
By a Letter of Agreement dated October 29, 1992 (as amended) the Company may
earn a 100% interest (subject to a 2% net smelter returns royalty) in the
rights to extract gold from mining claims known as Eagle, Eagle I, Eagle II,
and Yaqui located in the Soyopa and Onaves mining districts, State of
Sonora, Mexico. Consideration consists of
- - a cash payment of $95,500 U.S. for reimbursement of the vendor's
out-of-pocket costs (paid).
- - the issuance of 200,000 shares of the Company's capital stock as follows:
50,000 shares upon the acceptance of the Agreement by regulatory authorities
(issued in fiscal 1994) and 50,000 shares each at the time of filing of the
next three engineers reports recommending work programs of minimum
$25,000 U.S. each on the project. The first work program was completed in
fiscal 1995 and 50,000 shares were issued.
Deferred exploration and development expenditures of $48,110 have been incurred
to date by the Company on the property.
(c) Rainier (La Cienega) Property, Sonora, Mexico
By an agreement dated February 28, 1994 between the Company and Pacific Rainier
de Mexico ("PRM"), the Company can earn a 90% interest in mining claims known
as the Rainier 1 through Rainier 6 located in the Golden Triangle District,
State of Sonora, Mexico. Consideration will be repayment of substantiated costs
of $913,099 U.S. expended to date by PRM on the property, and the issuance of
1,400,000 shares of the Company when a mine is developed and commences
production provided that an independent valuation report confirms a net present
value (net of all costs and previous consideration) for the 90% interest of at
least $1,190,000 Cdn. This is a non-arm's length transaction. The out-of-pocket
costs of $913,099 U.S. were settled by the issuance of a two-year convertible
debenture bearing interest at 6% and convertible at $0.85 Cdn. per share in the
first year and at $0.98 Cdn. per share in the second year. Exchange in the
conversion is fixed at $1.40 Cdn. for $1.00 U.S. The debenture was converted
into 1,596,215 shares at $0.85 Cdn. per share in fiscal 1996.
By an amended agreement with KLS in 1995, KLS will earn a 50% interest in the
Rainier (La Cienega) Property. To earn this interest, KLS must pay to PRM
$90,000 U.S. in holding costs, one-half in cash and one-half in KLS stock. In
addition, KLS must pay $120,000 U.S. of the total $150,000 U.S. advance royalty
owing on the Ryan Lode project should the pre-feasibility study prove positive.
The Company will be required to pay the remaining $30,000 U.S. at this time.
Upon payment of the $120,000 U.S. for the Ryan Lode Project and payment of the
$90,000 U.S. to PRM, KLS will have earned its 50% interest in the Rainier
(La Cienega) Property claims.
8
Submission page 33 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
4. INVESTMENTS IN AND EXPENDITURES ON RESOURCE PROPERTIES (Continued)
KLS did not complete their portion of the agreement to this point, consequently
they lost their interest in the Rainier (La Cienega) property.
Deferred exploration and development expenditures of $427,319 Cdn. have been
incurred to date by the Company on the property.
The Company owns 100% right, title and interest in and to Mineral Concession
#199518 La Esperanza within the Rainier II claim, Sonora State of Mexico. The
property was acquired on June 6, 1994 by issuing 100,000 shares of the Company
(deemed value $80,000), payment of $9,809 U.S. cash and the retention by
Edward Ingham of a 2% net smelter return.
The Company owns 100% right, title and interest in and to Mineral Concession
#199397 La Japonesa within the Rainier I claim, Sonora State of Mexico. The
property was acquired on June 6, 1994 by issuing 100,000 shares of the Company
(deemed value $80,000), payment of $8,649 U.S. cash and the retention by Donald
Randolph of a 2% net smelter return.
(d) La Virgen, Michoacan, Mexico
On June 12, 1996, the Company signed an option to acquire a copper oxide
property consisting of 1,500 acres of Mexican mining claims controlled by
Minera Virgo SA de C.V. under a renewable 25 year mining exploration license
granted to Minera Virgo in December, 1990.
The agreement provides for a total of $3 million U.S. to be paid to Minera
Virgo over a 3.5 year period and a 3% net smelter royalty on production of
the first 50 million pounds of copper as follows:
<TABLE>
Payment (U.S.) Due date
- -------------------- ---------------------------
<S> <C>
$25,000 Paid
250,000 Paid
225,000 Paid
500,000 February 19, 1998
1,000,000 February 19, 1999
1,000,000 February 19, 2000
- ------------------
$3,000,000
</TABLE>
9
Submission page 34 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
4. INVESTMENTS IN AND EXPENDITURES ON RESOURCE PROPERTIES (Continued)
The royalty escalates as additional copper is discovered and produced and is
capped at 7% after 300 million pounds of copper have been produced.
During 1996, the Company paid Minera Virgo $25,000 U.S. for an exclusive 75 day
option on the property, during which time the Company conducted its due
diligence review. Subsequent to the review, the Company transferred $250,000
U.S. into trust to be released after the vendor fulfils its obligations as part
of the $3 million U.S. payment. The $250,000 U.S. was paid from trust on
various dates during October 1996 with the remaining portion being paid in
January 1997. In addition, on February 19, 1997 an additional $225,000 U.S.
was paid to Minera Virgo.
The Company had expected to invest approximately $4.8 million U.S. in plant and
equipment on the property and spend $500,000 U.S. in exploration, reserve
certification and condemnation work on the property during and after the due
diligence period.
A finder's fee was payable as follows
Common shares
(i) 50,000 common shares in the capital stock of the Company upon
acceptance by the Vancouver Stock Exchange of the acquisition of the
property. (Issued)
(ii) 50,000 common shares in the capital stock of the Company on February
19, 1997. (Issued)
(iii) 100,000 common shares in the capital stock of the Company on February
19, 1998.
Share Purchase Warrants
(iv) 50,000 non-transferable share purchase warrants, exercisable at a price
of $1 per share after VSE acceptance to June 4, 1997. (Issued)
(v) 50,000 non-transferable share purchase warrants, exercisable at a price
of $1 per share from February 19, 1997 to June 4, 1997. (Issued)
(vi) 100,000 non-transferable share purchase warrants, exercisable at $1.50
per share from February 19, 1998 to June 4, 1998.
In the event the Company arranged plant financing, estimated at $5 million U.S.
and the plant was 75% complete as confirmed by an independent engineer, all of
the unissued common shares and share purchase warrants were to be issued to the
finder.
Since the property acquisition payment due on February 19, 1998 was not paid,
the Company is in default and loses all rights to the claims, consequently all
expenditures on this property have been charged to operations in the 1998
fiscal year.
10
Submission page 35 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
4. INVESTMENTS IN AND EXPENDITURES ON RESOURCE PROPERTIES (Continued)
(e) Gold Hill Property, Nevada
By an amended agreement dated September 26, 1997 between the Company and
Everett L. Manley (the "Vendor"), the Company has an option to purchase 53
mining claims in the Round Mountain Mining District, Nye County, Nevada
located four miles north of Round Mountain in consideration of $1,010,000
U.S. over 101/2 years. As at August 31, 1998, the Company had paid $130,000
U.S. to the Vendors.
By an amended agreement dated June 2, 1998 between the Company and Hagel
Augen, the latter will earn a 100% working interest in the Gold Hill
Property. Hagel Augen is committed to the following payments and
investments on the property:
- - a cash payment of $53,000 U.S. (paid) upon execution of the agreement.
- - a cash investment of $147,000 U.S. in the property which includes 1998
property maintenance payments on or before December 31, 1998.
- - a cash investment of $400,000 U.S. in the property which includes 1999
property maintenance payments on or before December 31, 1999.
- - a cash investment of $500,000 U.S. in the property which includes year
2000 property maintenance payments on or before December 31, 2000.
- - a cash investment of $500,000 U.S. in the property which includes year
2001 property maintenance payments on or before December 31, 2001.
- - a cash investment of $500,000 U.S. in the property which includes year
2002 property maintenance payments on or before December 31, 2002.
- - a cash investment of $500,000 U.S. in the property which includes year
2003 property maintenance payments on or before December 31, 2003.
Deferred exploration and development expenditures of $306,766 have been
incurred to date by the Company on the property.
(f) OK Copper Mine, Utah
By an agreement dated November 7, 1997 between the Company and Centurion
Mines Corporation (the "Vendor"), the Company purchased copper properties
in four townships in Beaver County, Utah. Consideration is the issuance of
2 million common shares of the Company (issued). The vendor also retains a
12% net profits interest to apply to all copper production coming from any
claims. Deferred exploration and development expenditures of $1,229,639 have
been incurred to date by the Company on the property.
A finder's fee of 150,000 shares at a price of $0.65 Cdn. was paid in fiscal
1998.
11
Submission page 36 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
4. INVESTMENTS IN AND EXPENDITURES ON RESOURCE PROPERTIES (Continued)
(g) Beaver Lake, Utah
By an agreement dated November 4, 1997 between the Company and Cortex Mining &
Exploration Co. Inc. (the "Vendor"), the Company purchased mining claims in
Beaver County, Utah. Consideration is 2 million common shares of the Company
issued in two tranches: one million shares upon closing (issued) and another
one million upon the Company's successful completion of a favourable feasibility
study or upon commencement of commercial production. The Vendor also retains
a 2% net smelter return royalty which will not exceed 3 million dollars (U.S.)
in aggregate. The Company also granted Cortex one million warrants for the
Company's common shares exercisable at $1.00 per share.
A finder's fee of 75,000 shares at a price of $0.65 Cdn. each was paid in
fiscal 1998.
5. CAPITAL ASSETS
1998
Accumulated
Cost Depreciation Net
-------------- ------------- --------------
Office Equipment $ 15,021 $ 10,701 $ 4,320
Computer equipment 6,234 4,981 1,253
-------------- ------------- --------------
$ 21,255 $ 15,682 $ 5,573
============== ============= ==============
1997
Accumulated
Cost Depreciation Net
-------------- ------------- --------------
Office Equipment $ 15,021 $ 9,621 $ 5,400
Computer equipment 6,234 4,444 1,790
-------------- ------------- --------------
$ 21,255 $ 14,065 $ 7,190
============== ============= ==============
12
Submission page 37 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
6. CAPITAL STOCK
(a) Authorized
100,000,000 Common shares without par value
(b) Issued
<TABLE>
1998 1997
-------------------------------- --------------------------------
Number Number
of Shares Amount of Shares Amount
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
Beginning of Year 17,421,685 $ 6,367,317 15,647,182 $ 5,527,649
Issued during year
For cash, private
Placements 1,013,418 557,380 1,135,417 565,000
For cash on exercise
of share
purchase options 1,293,823 509,530 80,000 32,240
For cash on exercise
of share
purchase warrants 507,812 189,299 42,188 13,500
For resource property
acquisition
(note 4(f)(g)) 3,000,000 1,950,000 0 0
For finder's fee 225,000 146,250 100,000 58,000
For settlement of debt 0 0 416,898 170,928
Listing costs 0 (15,665) 0 0
--------------- --------------- --------------- ---------------
6,040,053 3,336,794 1,774,503 839,668
--------------- --------------- --------------- ---------------
Balance, End of Year 23,461,738 $ 9,704,111 17,421,685 $ 6,367,317
</TABLE>
(c) At August 31, the following share purchase options were outstanding
<TABLE>
Exercise Number of Shares
Expiration Date Price 1998 1997
---------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
March 6, 1998 $ 0.40 0 620,030
June 3, 1998 $ 0.58 0 514,108
December 21, 1998 $ 0.22 150,000 150,000
March 12, 1999 $ 0.55 215,040 240,040
November 20, 1999 $ 0.64 430,855 0
July 20, 2000 $ 0.49 1,550,279 0
</TABLE>
13
Submission page 38 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
6. CAPITAL STOCK (Continued)
(d) At August 31, the following share purchase warrants were outstanding
<TABLE>
Exercise Number of Shares
Expiration Date Price 1998 1997
---------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
November 10, 1997 $ 0.37 year 2 0 507,812
April 16, 1998 $ 0.58 year 2 0 1,000,000
September 16, 1998 $ 0.55 year 2 135,417 135,417
June 4, 1998 $ 1.50 year 1 0 100,000
February 15, 1999 $ 0.70 year 1 1,013,418 0
February 19, 1999 $ 0.575 year 2 1,000,000 1,000,000
June 4, 2000 $ 1.00 year 1 1,000,000 0
7. RELATED PARTY TRANSACTIONS
Related party transactions consist of the following
(a) Management fees of $Nil (1997 - $12,000; 1996 - $36,500) paid to
directors, officers and shareholders. Directors' fees of $2,600 were paid
in 1998.
(b) Office and miscellaneous expense includes $Nil
(1997 - $6,000; 1996 - $18,000) paid to a director for secretarial services.
(c) Consulting fees of $32,500 (1997 - $30,000; 1996 - $30,000) paid to an
officer.
(d) An option to acquire a 100% interest in the Eagle (Rio Yaqui) Claims
(note 4(b)) and an agreement to acquire a 90% interest in the Rainier claims
in Mexico (note 4(c)) are both from a director and officer.
(e) Investment in and expenditures on resource properties includes $77,735
(1997 - $30,538; 1996 - $45,795) paid in the year to directors and/or
Companies controlled by directors for geological consulting services
and labour.
(f) A shareholder and director has made advances to the Company which were
outstanding in whole or in part at the year-end in the amount of $718,606
(1997 - $400,077, 1996 - $238,320). These advances are non-interest bearing.
14
Submission page 39 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
8. INCOME TAX LOSSES
The Company has operating losses which may be carried forward to apply against
future years' income for Canadian income tax purposes. The tax effect has not
been recorded in the financial statements. These losses expire as follows:
Available to 1998 1997
- ------------------------ --------------- ---------------
1998 $ 0 $ 161,000
1999 245,000 245,000
2000 184,000 184,000
2001 211,000 211,000
2002 338,000 338,000
2003 321,000 321,000
2004 214,000 214,000
2005 204,000 0
- ------------------------ --------------- ---------------
$ 1,717,000 $ 1,674,000
=============== ===============
9. SUBSEQUENT EVENTS
Subsequent to August 31, 1998:
(a) the Company issued 704,727 shares at a price of $0.55 per share for
settlement of a loan payable of $387,600.
(b) 1,165,214 share purchase options were exercised at a price of $0.49
per share for proceeds of $570,955.
10. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (GAAP)
(a) Statement of changes in financial position
The Statements of Changes in Financial Position have been prepared in
accordance with Canadian GAAP.
Under Canadian GAAP, cash and equivalents is defined as cash net of short-term
borrowings. Under U.S. GAAP, short-term borrowings are considered a financing
activity.
Under U.S. GAAP, financing and investing activities that do not result in cash
flow would be excluded from the Statement of Changes in Financial Position and
disclosed separately. The following items that are included in the Statements of
Changes in Financial Position would be disclosed separately under U.S. GAAP.
15
Submission page 40 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
10. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (GAAP) (Continued)
1997 1997 1997
--------------- --------------- ---------------
Acquisition of mineral properties $ (2,096,250) $ 0 $ (11,500)
Shares issued for mineral interest 2,096,250 0 11,500
--------------- --------------- ---------------
$ 0 $ 0 $ 0
=============== =============== ===============
(b) Accounting for the impairment of long-lived assets and for long-lived
assets to be disposed of
The Financial Accounting Standards Board of the United States has issued
Statement 121, which is effective for fiscal years beginning after December
15, 1995. The standards require that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
Canadian accounting standards require that in the event of an impairment in value,
the assets are to be written down to the net recoverable amount of the asset,
which is defined as the expected future net cash flow from the asset on a non-
discounted basis. Statement 121 will require that the assets be written down
to their fair value, which may be based on discounted cash flows. There is no
material difference between Canadian and United States GAAP in the amounts
reported in these financial statements on the application of this standard.
(c) Recent accounting pronouncements
(i) Earnings per share
In February 1997, the Financial Accounting Standards Board issued SFAS 128,
"Earnings Per Share:, and SFAS 129, "Disclosure of Information about Capital
Structure". SFAS 128, which is effective for fiscal years ending after
December 15, 1997, including interim periods, requires the presentation of
basic and diluted earnings per share ("EPS"). The Company's adoption of
SFAS 128 for U.S. GAAP purposes results in no difference in net loss disclosure.
16
Submission page 41 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Years Ended August 31, 1998 and 1997
(Canadian Dollars)
10. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (GAAP) (Continued)
(ii) Income tax
Under Canadian GAAP, the future tax benefit related to the non-capital loss carry
forwards have not been recorded in the accounts. Under U.S. GAAP, companies must
follow the requirements of Statement of Financial Accounting Standards No. 109
(SFAS 109) which requires the use of the asset/liability method for measurement
of tax liabilities, wherein deferred tax assets are recognized as well as deferred
tax liabilities.
The Company has significant non-capital loss carryforwards (note 8). SFAS 109
would require the recognition of a long-term tax asset for the future benefit
expected from the application of these carryforwards to future profitable years.
If it is expected that the entire amount of non-capital loss carryforwards will
not be utilized, then a valuation allowance is applied to the asset to reasonably
state the asset at its expected value. Under SFAS 109, disclosure of the amount
of the valuation allowance is required. As at August 31, 1998, the valuation
allowance is equal to 100% of the deferred tax asset.
(iii) Other items
SFAS 130, "Reporting Comprehensive Income" and SFAS 131, "Disclosures About
Segments of an Enterprise and Related Information" were also issued in 1997.
These standards became effective in 1998, expand or modify disclosures and,
accordingly, have no effect on the Company's consolidated financial position,
results of operations or cash flows.
17
Submission page 42 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Consolidated Financial Statements
November 30, 1998
(Unaudited - Prepared by Management)
</TABLE>
<TABLE>
INDEX Page
<S> <C>
Consolidated Financial Statements
Consolidated Balance Sheets 1
Consolidated Statements of Operations and Deficit 2
Consolidated Statements of Changes in Financial Position 3
Consolidated Statements of Investments In and Expenditures
on Resource Properties 4
Notes to Consolidated Financial Statements 5-9
</TABLE>
Submission page 43 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Consolidated Balance Sheet
November 30
(Unaudited - Prepared by Management)
<TABLE>
1998 1997
--------------- ---------------
<S> <C> <C>
ASSETS
Current
Cash $ 41,154 $ 249,661
Accounts receivable 4,866 1,930
Prepaid assets - 312
--------------- ---------------
46,020 251,903
Investments in and Expenditures on Resource
Properties (notes 2) 6,281,587 3,497,905
Capital Assets 5,265 7,191
--------------- ---------------
$ 6,332,872 $ 3,756,999
=============== ===============
LIABILITIES
Current
Accounts payable $ 18,521 $ 41,711
Due to shareholder 718,606 509,643
--------------- ---------------
737,127 551,354
SHAREHOLDERS' EQUITY
Capital Stock (note 6) 10,662,666 6,615,556
Deficit (5,066,921) (3,409,911)
--------------- ---------------
5,595,745 3,205,645
--------------- ---------------
$ 6,332,872 $ 3,756,999
=============== ================
</TABLE>
See notes to consolidated financial statements.
1
Submission page 44 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Consolidated Statement of Operations and Deficit
Three Month Period Ended November 30
(Unaudited - Prepared by Management)
<TABLE>
1998 1997
--------------- ---------------
<S> <C> <C>
GENERAL AND ADMINISTRATIVE EXPENSES
Consulting $ 9,754 $ 16,515
Shareholder relations 5,436 1,782
Property expenses 3,975 -
Professional fees 3,668 5,317
Listing and filing fees 1,897 780
Office and miscellaneous 1,735 8,399
Bank charges and interest 226 201
Telephone 205 368
Directors' meeting fees - 6,305
Travel - 626
Transfer agent - 495
Amortization 309 -
--------------- ---------------
27,205 40,788
Interest income (126) (388)
Foreign Currencies Exchange (Gain) Loss 3,482 (31)
--------------- ---------------
NET LOSS FOR PERIOD 30,561 40,369
DEFICIT, BEGINNING OF YEAR 5,036,360 3,369,542
--------------- ---------------
DEFICIT, END OF YEAR $ 5,066,921 $ 3,409 911
=============== ===============
LOSS PER SHARE $ $
=============== ===============
WEOGJTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
=============== ===============
</TABLE>
See notes to consolidated financial statements.
2
Submission page 45 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
Consolidated Statements of Changes in Financial Position
Three Month Periods Ended November 30
(Unaudited - Prepared by Management)
<TABLE>
1998 1997
--------------- ---------------
<S> <C> <C>
Cash Used In Operating
Activities
Net loss $ (30,561) $ (40,369)
Items not involving cash
Amortization 309 -
--------------- ---------------
(30,252) (40,369)
--------------- ---------------
Changes in Non-Cash Working
Capital
Accounts receivable (761) (104)
Loan payable (387,600) -
Subscriptions payable (381,129) -
Accounts payable 373 30,053
Advances from shareholders - 109,565
--------------- ---------------
(769,117) 139,514
--------------- ---------------
(799,369) 99,145
--------------- ---------------
Investing Activities
Acquisition of mineral properties (53,563) (48,729)
Deferred exploration and
development costs (281,993) (138,461)
--------------- ---------------
(335,556) (187,190)
--------------- ---------------
Financing Activities
Issuance of shares
For cash 570,955 248,239
For debt 387,600 -
--------------- ---------------
958,555 248,239
--------------- ---------------
Increase (Decrease) in Cash (176,370) 160,194
CASH, BEGINNING OF YEAR 217,524 89,467
--------------- ---------------
CASH, END OF YEAR $ 41,154 $ 249,661
=============== ===============
See notes to consolidated financial statements.
3
Submission page 46 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Consolidated Statements of Investments in and Expenditures on Resource
Properties
Three Month Period Ended November 30
(Unaudited - Prepared by Management)
</TABLE>
<TABLE>
1998 1997
--------------- ---------------
<S> <C> <C>
Balance August 31 $ 5,946,032 $ 3,310,715
Equipment 141,308 -
Acquisition costs 53,563 48,729
Materials and supplies 47,195 4,914
Labour 30,907 17,225
Drilling 19,890 30,053
Assays 15,284 7,793
Recording fees 14,813 508
Geological consulting 7,759 14,896
Legal 2,272 154
Travel 1,623 29,124
Miscellaneous 932 9,251
Accommodation and meals 9 5,851
Property taxes - 44,352
Reimburse staking costs - (25,660)
--------------- ---------------
335,555 187,190
--------------- ---------------
Balance, November 30, 1998 $ 6,281,587 $ 3,497,905
=============== ===============
See notes to consolidated financial statements.
4
Submission page 47 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Three Month Period Ended November 30
(Unaudited - Prepared by Management)
1. NATURE OF OPERATIONS
The Company is incorporated under the laws of British Columbia and was
continued into the Yukon Territory of Canada in 1998. The principal business
activity is the exploration and development of natural resource properties.
These consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Nevada Star Resource Corp. (U.S.), a Nevada
corporation and Nevada Star Resource de Mexico, S.A. de C.V., a wholly-owned
subsidiary of Nevada Star Resource Corp. (U.S.). All significant intercompany
balances and transactions have been eliminated.
2. INVESTMENT IN AND EXPENDITURES ON RESOURCE PROPERTIES
(a) Eagle (Rio Yaqui) Claims, Sonora, Mexico
By a Letter of Agreement dated October 29, 1992 (as amended) the Company may
earn a 100% interest (subject to a 2% net smelter returns royalty) in the
rights to extract gold from mining claims known as Eagle, Eagle I, Eagle II,
and Yaqui located in the Soyopa and Onaves mining districts, State of Sonora,
Mexico. Consideration consists of
- - a cash payment of $95,500 U.S. for reimbursement of the vendor's
out-of-pocket costs (paid)
- - the issuance of 200,000 shares of the Company's capital stock as follows:
50,000 shares upon the acceptance of the Agreement by regulatory authorities
(issued in fiscal 1994) and 50,000 shares each at the time of filing of the
next three engineers reports recommending work programs of minimum $25,000
U.S. each on the project. The first work program was completed in fiscal
1995 and 50,000 shares were issued.
Deferred exploration and development expenditures of $48,110 have been
incurred to date by the Company on the property.
5
Submission page 48 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Three Month Period Ended November 30
(Unaudited - Prepared by Management)
2. INVESTMENT IN AND EXPENDITURES ON RESOURCE PROPERTIES (Continued)
(b) Rainier (La Cienega) Property, Sonora, Mexico
By an agreement dated February 28, 1994 between the Company and Pacific
Rainier de Mexico ("PRM"), the Company can earn a 90% interest in mining
claims known as the Rainier 1 through Rainier 6 located in the Golden
Triangle District, State of Sonora, Mexico. Consideration will be repayment
of substantiated costs of $913,099 U.S. expended to date by PRM on the
property, and the issuance of 1,400,000 shares of the Company when a mine is
developed and commences production provided that an independent valuation
report confirms a net present value (net of all costs and previous
consideration) for the 90% interest of at least $1,190,000 Cdn. This is a
non-arm's length transaction. The out-of-pocket costs of $913,099 U.S. were
settled by the issuance of a two-year convertible debenture bearing interest
at 6% and convertible at $0.85 Cdn. per share in the first year and at
$0.98 Cdn. per share in the second year. Exchange in the conversion is fixed
at $1.40 Cdn. for $1.00 U.S. The debenture was converted into 1,596,215
shares at $0.85 Cdn. per share in fiscal 1996.
By an amended agreement with KLS in 1995, KLS will earn a 50% interest in the
Rainier (La Cienega) Property. To earn this interest, KLS must pay to PRM
$90,000 U.S. in holding costs, one-half in cash and one-half in KLS stock.
In addition, KLS must pay $120,000 U.S. of the total $150,000 U.S. advance
royalty owing on the Ryan Lode project should the pre-feasibility study prove
positive. The Company will be required to pay the remaining $30,000 U.S. at
this time. Upon payment of the $120,000 U.S. for the Ryan Lode Project and
payment of the $90,000 U.S. to PRM, KLS will have earned its 50% interest in
the Rainier (La Cienega) Property claims.
KLS did not complete their portion of the agreement to this point,
consequently they lost their interest in the Rainier (La Cienega) property.
Deferred exploration and development expenditures of $431,533 Cdn. have been
incurred to date by the Company on the property.
The Company owns 100% right, title and interest in and to Mineral Concession
#199518 La Esperanza within the Rainier II claim, Sonora State of Mexico. The
property was acquired on June 6, 1994 by issuing 100,000 shares of the Company
(deemed value $80,000), payment of $9,809 U.S. cash and the retention by
Edward Ingham of a 2% net smelter return.
The Company owns 100% right, title and interest in and to Mineral Concession
#199397 La Japonesa within the Rainier I claim, Sonora State of Mexico. The
property was acquired on June 6, 1994 by issuing 100,000 shares of the Company
(deemed value $80,000), payment of $8,649 U.S. cash and the retention by
Donald Randolph of a 2% net smelter return.
6
Submission page 49 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Three Month Period Ended November 30
(Unaudited - Prepared by Management)
2. INVESTMENT IN AND EXPENDITURES ON RESOURCE PROPERTIES (Continued)
(c) Gold Hill Property, Nevada
By an amended agreement dated September 26, 1997 between the Company and
Everett L. Manley (the "Vendor"), the Company has an option to purchase 53
mining claims in the Round Mountain Mining District, Nye County, Nevada
located four miles north of Round Mountain in consideration of $1,010,000 U.S.
over 101/2 years. As at November 30, 1998, the Company has paid $130,000 U.S.
to the Vendors.
By an amended agreement dated June 2, 1998 between the Company and Hagel
Augen, the latter will earn a 100% working interest in the Gold Hill
Property. Hagel Augen is committed to the following payments and investments
on the property:
- - a cash payment of $53,000 U.S. (paid) upon execution of the agreement.
- - a cash investment of $147,000 U.S. in the property which includes 1998
property maintenance payments on or before December 31, 1998.
- - a cash investment of $400,000 U.S. in the property which includes 1998
property maintenance payments on or before December 31, 1999.
- - a cash investment of $500,000 U.S. in the property which includes year
2000 property maintenance payments on or before December 31, 2000.
- - a cash investment of $500,000 U.S. in the property which includes year
2001 property maintenance payments on or before December 31, 2001.
- - a cash investment of $500,000 U.S. in the property which includes year
2001 property maintenance payments on or before December 31, 2002.
- - a cash investment of $500,000 U.S. in the property which includes year
2001 property maintenance payments on or before December 31, 2003.
Hagel Augen did not complete their portion of the agreement to this point,
consequently they lost their interest in the Gold Hill property.
Deferred exploration and development expenditures of $308,838 have been
incurred to date by the Company on the property.
(d) OK Copper Mine, Utah
By an agreement dated November 7, 1997 between the Company and Centurion
Mines Corporation (the "Vendor"), the Company purchased copper properties
in four townships in Beaver County, Utah. Consideration is the issuance of
2 million common shares of the Company (issued). The Vendor also retains a
12% net profits interest to apply to all copper production coming from any
claims.
A finder's fee of 150,000 shares at a price of $0.65 Cdn. was paid in
fiscal 1998.
7
Submission page 50 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Three Month Period Ended November 30
(Unaudited - Prepared by Management)
2. INVESTMENT IN AND EXPENDITURES ON RESOURCE PROPERTIES (Continued)
(e) Beaver Lake, Utah
By an agreement dated November 4, 1997 between the Company and Cortex Mining
& Exploration Co. Inc. (the "Vendor"), the Company purchased mining claims in
Beaver County, Utah. Consideration is 2 million common shares of the Company
issued in two tranches: one million shares upon closing (issued) and another
one million upon the Company's successful completion of a favourable
feasibility study or upon commencement of commercial production. The Vendor
also retains a 2% net smelter return royalty which will not exceed 3 million
dollars (U.S.) in aggregate. The Company also granted Cortex one million
warrants for the Company's shares exercisable at $1.00 per share.
A finder's fee of 75,000 shares at a price of $0.65 Cdn. each was paid in
fiscal 1998.
3. CAPITAL STOCK
(a) Authorized
100,000,000 Common shares without par value
(b) Issued
</TABLE>
<TABLE>
1998 1997
-------------------------- --------------------------
Number Number
of Shares Amount of Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, Beginning of Period 23,461,738 $ 9,704,111 17,421,685 $ 6,367,317
Issued for cash
Exercise of share
purchase options 1,165,214 570,955 147,349 58,940
Exercise of share
purchase warrants 0 0 507,812 189,299
Issued for debt
Settlement 704,727 387,600 0 0
------------ ------------ ------------ ------------
1,869,941 958,555 655,161 248,239
------------ ------------ ------------ ------------
Balance, End of Period 25,331,679 $10,662,666 18,076,846 $ 6,615,556
============ ============ ============ ============
</TABLE>
8
Submission page 51 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
NEVADA STAR RESOURCE CORP.
Notes to Consolidated Financial Statements
Three Month Period Ended November 30
(Unaudited - Prepared by Management)
3. CAPITAL STOCK (Continued)
(c) At November 30, the following share purchase options were outstanding
<TABLE>
Exercise Number
Expiration Date Price of Shares
- -------------------- ------------ ---------------
<S> <C> <C>
December 21, 1998 $ 0.22 150,000
March 12, 1999 $ 0.55 215,040
July 20, 2000 $ 0.49 385,065
November 20, 1999 $ 0.64 430,855
</TABLE>
(d) At November 30, the following share purchase warrants were outstanding
<TABLE>
Exercise Number
Expiration Date Price of Shares
- -------------------- ------------ ---------------
<S> <C> <C>
February 15, 1999 $ 0.70 year 1 1,013,418
February 19, 1999 $ 0.575 year 2 1,000,000
June 4, 2000 $ 1.00 year 1 1,000,000
4. RELATED PARTY TRANSACTIONS
(a) Consulting fees of $5,000 (1997 - $7,500) paid to an officer.
(b) An option to acquire a 100% interest in the Eagle (Rio Yaqui) Claims
(note 2(a)) and an agreement to acquire a 90% interest in the Rainier claims
in Mexico (note 2(b)) are both from a director and officer.
(c) Investment in and expenditures on resource properties includes $29,412
(1997 - $22,517) paid in the year to directors and/or Companies controlled by
directors for geological consulting services, labour and travel.
9
Submission page 52 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
PART III
ITEM 1. INDEX TO EXHIBITS.
(1) Underwriting agreement N/A
(2) Plan of acquisition, reorganization arrangement, liquid,
or succession. N/A
(3) (i) Certificate and Memorandum of Incorporation Page 55
(ii) Articles Page 56
(iii) Certificate and Articles of Continuance Page 75
(4) Instruments defining the rights of holders,
including indentures N/A
(5) Opinion re: legality N/A
(6) No exhibit required N/A
(7) [Removed and reserved] N/A
(8) Opinion re: tax matters N/A
(9) Voting trust agreement N/A
(10) Material contracts
(i) Gold Hill Project Agreements "P"
(ii) Milford District Agreements "P"
(iii) La Cienega (Rainier) Agreements "P"
(11) Statement re: computation of per share earnings N/A
(12) No exhibit required N/A
(13) Annual or quarterly reports, Form 10-Q N/A
(14) [Removed and reserved] N/A
(15) Letter on unaudited interim financial information N/A
(16) Letter on change in certifying accountant N/A
(17) Letter on director resignation N/A
(18) Letter on change in accounting principles N/A
(19) Reports furnished to security holders N/A
(20) Other documents or statements to security holders N/A
(21) Subsidiaries of the registrant Page 81
(22) Published report regarding matters submitted to vote N/A
(23) Consent of experts and counsel N/A
(24) Power of attorney N/A
(25) Statement of eligibility of trustee N/A
(26) Invitations for competitive bids N/A
(27) Financial Data Schedule Filed Electronically Only Page 82
(28) [Removed and reserved]
[Reserved (29) through (98)]
(99) Additional Exhibits N/A
ITEM 2. DESCRIPTION OF EXHIBITS.
Not Applicable
Submission page 53 of 82
<PAGE>
NEVADA STAR RESOURCE CORP.
FORM 10 SB
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
NEVADA STAR RESOURCE CORP.
Date: February 26, 1999 By: /s/ Monty D. Moore
-----------------------------
Monty D. Moore, President
54
</TABLE>
Memorandum of Incorporation
COMPANY ACT
MEMORANDUM
NEVADA STAR RESOURCE CORP.
I wish to be formed into a Company with limited liability under the Company Act
in pursuance of this Memorandum.
1. The name of the Company "NEVADA STAR RESOURCE
CORP."
2. The authorized capital of the Company consists of 100,000,000 Common shares
without par value.
3. I agree to take the number of shares in the Company set opposite my name
below.
FULL NAME, RESIDENT ADDRESS NUMBER OF SHARES
AND OCCUPATION OF SUBSCRIBER TAKEN BY SUBSCRIBER
One Common Share
Jill Gamley without par value
#9 35 West 3rd Avenue
Vancouver, B.C.
V6J lL4
Corporate Records Assistant
TOTAL SHARES TAKEN: One Common Share
without par value
DATED at Vancouver, British Columbia, this 24th day of April, 1987.
55
EXHIBIT (3)(ii)
Articles of Nevada Star Resource Corp.
'COMPANY ACT'
ARTICLES
OF
NEVADA STAR RESOURCE CORP.
TABLE OF CONTENTS
PART ARTICLES PAGES
1 DEFINITIONS AND CONSTRUCTION 1 - 3 1
2 SHARE CAPITAL 4 - 8 2
3 REGISTRATION OF MEMBERS AND
SHARE CERTIFICATES 9 - 13 2 - 4
4 TRANSFER AND TRANSMISSION OF
SHARES AND DEBENTURES 14 - 22 4 - 7
5 GENERAL MEETINGS 23 - 41 7 - 11
6 DIRECTORS 42 - 61 11-15
7 MANAGEMENT OF THE COMPANY 62 15
8 BORROWING AND MORTGAGING 63 - 65 15
9 SAFEGUARDING, INDEMNITY, ETC.
OF DIRECTORS 66 - 69 16
10 EXECUTION OF DOCUMENTS 70 - 73 17
11 DIVIDENDS 74 - 80 17
12 NOTICES 81 - 84 18 - 19
Submission page 56 of 82
<PAGE>
'COMPANY ACT'
ARTICLES
OF
NEVADA STAR RESOURCE CORP.
PART I - DEFINITIONS AND CONSTRUCTION
1. In these Articles, except as the context otherwise requires:
(a) "board" means the board of directors for the time being of
the Company;
(b) "Company Act" means the Company Act (British Columbia) and
regulations thereunder from time to time in force;
(c) "registered address" of a member means the address of the member
as recorded in the Company's register of members;
(d) "registered address" of a director means the address of the director
as recorded in the Company's register of directors;
(e) words or expressions contained in these Articles bear the same meaning
as in the Company Act or any statutory modification thereof in force on
the date on which these Articles come into effect;
(f) expressions referring to writing include printing, typewriting,
lithography, photography and any other means of presenting language in
visible and lasting form; and
(g) words importing the singular include the plural and vice versa, words
importing a male person include a female, and words importing an individual
include a corporation.
2. If any provision of these Articles is in whole or in part void, illegal or
invalid, the remaining provisions will be construed and take effect as if every
provision or part thereof which so offends had been omitted.
3. If there is any conflict between the provisions of these Articles and the
Memorandum of the Company, the provisions of the Memorandum will govern.
3
Submission page 57 of 82
<PAGE>
PART 2 - SHARE CAPITAL
4. The Company may allot and issue its shares at such times, in such manner
and to such persons, or class of persons, as the directors determine.
5. The board will determine the price or consideration at or for which the
shares are to be allotted and issued.
6. The Company may by resolution of the board purchase any of its issued
shares.
7. The Company may by ordinary resolution alter its Memorandum to increase
its authorized capital by:
(a) creating shares with par value or shares without par value or both;
(b) increasing the number of shares of any class with par value or shares
of any class without par value or both; or
(c) increasing the par value of a class of shares with par value, if no
shares of that class are issued.
8. The Company may, to the extent permitted by law, pay a commission or
allow a discount to any person in consideration of his subscribing or agreeing
to subscribe, whether absolutely or conditionally, or procuring or agreeing to
procure subscriptions, whether absolute or conditional, for shares in the
capital of the Company.
PART 3 - REGISTRATION OF MEMBERS AND SHARE CERTIFICATES
9. Except as these Articles otherwise provide, the Company and its directors,
officers and agents may treat the registered holder of a share as the absolute
owner thereof, and will not, except as required by statute or as ordered by a
court of competent jurisdiction, be bound to recognize even when having notice
thereof, any claim to, interest in, or right in respect of such share on the
part of any other person.
10. A share held in the names of two or more persons will be deemed to be held
jointly.
11. Except in the case of the personal representatives of, or trustees of the
estate of, a deceased member, the Company may refuse to register more than
three persons as joint holders of a share.
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Submission page 58 of 82
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12. A share certificate may be delivered to a member entitled thereto by
mailing it by prepaid registered post in the manner provided in these Articles
for the giving of notices, or otherwise as directed by the member in writing,
and neither the Company nor its transfer agent will be liable for any loss
occasioned to a member or person claiming through a member by reason that a
share certificate so mailed or so otherwise sent is not received by the
addressee.
13. A certificate for a share registered in the names of two or more persons
may be delivered to or to the direction of any one of them.
PART 4 - TRANSFER AND TRANSMISSION OF SHARES AND DEBENTURES
14. For the purpose of countersigning, issuing, registering, transferring,
canceling and certifying the shares and share certificates of the Company, the
Company may appoint
(a) a registrar;
(b) one or more transfer agents, one of whom may be the registrar; and
(c) one or more branch transfer agencies and securities registrars both
in and outside British Columbia.
15. For the purpose of these Articles "instrument of transfer" means:
(a) such form of transfer as may appear on the back of the share
certificate representing the share proposed to be transferred; or
(b) such form of separate transfer document as may from time to time
be in general use.
16. (1) In order to effect a transfer of a share:
a) an instrument of transfer must be executed by the registered
holder of the share, or his attorney duly authorized in writing;
b) unless the proposed transferee has acquired the share through a
registrant, he will, if not a member, execute an acknowledgment
that he agrees to become a member;
c) the execution of the instrument of transfer and any
acknowledgment must be attested and validated as in either case
the board from time to time reasonably requires; and
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Submission page 59 of 82
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d) the certificate representing the share to be transferred, the
instrument of transfer and the acknowledgment, if required,
will be delivered to the Company's transfer agent or, if the
Company has no transfer agent, to the records office of the
Company.
(2) There shall be a separate instrument of transfer for each class of
shares proposed to be transferred.
(3) When the transfer agent or the Company receives for the purpose of a
proposed share transfer a duly executed instrument of transfer, the
Company and its directors, officers and agents, will:
(a) where the instrument of transfer designates the transferee; or
(b) where the instrument of transfer was executed and is delivered in
blank, and the person by or on whose behalf the instrument of
transfer is delivered designates in writing a transferee; be
entitled to treat the person so designated as the beneficial
owner of:
(c) if the instrument of transfer is endorsed on a share certificate,
the number of shares represented by the certificate or such lesser
number as may be specified in the instruments of transfer; or
(d) if the instrument of transfer is not so endorsed, such number of
shares registered in the name of the transferor as are represented
by every unendorsed certificate deposited with the Company or its
transfer agent for the purpose of the transfer, or such lesser
number as may be specified in the instrument of transfer;
and upon compliance with, and subject to all other provisions of
these Articles, the Company will cause the name of the proposed
transferee to be entered in the register of members of the Company
as holder of each such share.
17. A share may be registered in the name of a person as executor,
administrator, guardian, committee, curator or trustee of, or otherwise as
fiduciary for, a named person, trust or estate, and
(a) where application is made to issue or transfer a share to a
fiduciary, the Company will be obliged to inquire into the
authority of the fiduciary, who will be presumed, as against the
Company, to be acting in accordance with his authority unless, in
the case of a transfer of a share, the transfer proposed is from
the person whose estate or interest is sought to be represented;
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Submission page 60 of 82
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(b) in the case of a transfer by a fiduciary, including a transfer by
a fiduciary to himself, the Company will not be obligated to
inquire into the authority of the fiduciary or the propriety of
the transaction or to ascertain whether the fiduciary continues to
occupy his office at the time of transfer;
(c) in all cases the Company will be entitled to act on an order of a
court of record, wherever constituted or having jurisdiction in
proceedings to which the registered holder appears from the order
to have been subject, directing a vesting or declaring the
ownership of shares, as evidenced by a copy of the order of the
court certified as such in accordance with the practice of the
court;
(d) any grant of letters probate or letters of administration or
order appointing a trustee, guardian, committee, curator or
directing a vesting or declaring the ownership of shares, dated
not more than one year before the date on which a copy of the
grant or order, certified in accordance with the practice of the
authority issuing the grant or order, is received by the Company
or its transfer agent, will be deemed to be in full force and
effect and not to have been amended, revoked or reversed, unless
and until there is delivered to the transfer agent of the Company
or, if the Company has no transfer agent, to the records office
of the Company
(i) a certificate of a court of record appearing to have the
required jurisdiction, certified in accordance with the practice
of such court, that proceedings have been commenced by way of
appeal or otherwise to amend, revoke or reserve the grant or
order, or
(ii) a copy of an order of a court of record appearing to have
the necessary jurisdiction certified as aforesaid, by which the
earlier grant or order is amended, revoked or reversed; and
(e) any certificate or a court of record, certified as aforesaid, and
delivered to the transfer agent of the Company or, if the Company
has no transfer agent, to the records office of the Company, to
the effect that any grant or order of that court of the nature
described in clause (d) remains in full force and effect, and has
not been amended, revoked or reversed and that there is not
outstanding with respect to the grant or order any proceeding of
the nature referred to in subclause (d)(i), will create the same
presumption as to the validity of the grant or order as though
the grant or order bore the same date as the certificate.
18. The Company or its registrar or transfer agent may refuse to recognize the
transfer of a share to an infant, bankrupt or person suffering mental
infirmity.
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Submission page 61 of 82
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19. Where a transfer of a share is completed by registration in the register
of members of the Company, the instrument of transfer and any accompanying
acknowledgment will be retained by the Company or its transfer agent but where
the Company declines to complete a proposed transfer of a share the instrument
of transfer, share certificate and other documentation deposited for the
purpose of the transfer will, on demand, be returned to the person depositing
the same, or other person entitled thereto.
20. There must be paid to the Company or its transfer agent in respect of the
registration of any transfer or transmission such fee as the board determines.
21. (1) The personal representative of a deceased member (not being one of
several joint holders) will be the only person recognized by the
Company as having any title to a share registered in the name of the
deceased.
(2) On the death of one of joint registered holders of a share, the
survivor or survivors will be the only person or persons recognized
by the Company as having any title to or interest in the share.
22. The Company may, if authorized by a debenture or any trust indenture
pursuant to which a registered debenture has been issued, cause to be kept one
or more branch registers of its debenture holders.
PART 5 - GENERAL MEETINGS
23. General meetings of the Company will be held at such time and place, in
accordance with the Company Act and these Articles as the board determines.
24. Notice of a meeting is sufficient if it specifies the place, the day and
the hour of the meeting and the general nature of any business to be considered
at the meeting.
25. The accidental omission to give notice of a general meeting to, or the
non-receipt of such notice by, any of the persons entitled to receive the
notice will not invalidate any proceedings of that meeting or any meeting
adjourned therefrom.
26. The quorum for the transaction of business at a general meeting is two
individuals present at the commencement of the meeting holding or representing
by proxy the holder or holders of shares carrying not less than one-twentieth
of the votes eligible to be cast at the meeting.
27. Unless a quorum is present at the commencement of a general meeting, no
business may be transacted other than the selection of the chairman and the
adjournment or termination of the meeting.
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Submission page 62 of 82
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28. If by half an hour after the time appointed for a general meeting a quorum
is not present, the meeting, if convened upon requisition, will be terminated,
and in any other case will stand adjourned to the same day in the next week at
the same time and place, or to such later date, other time or other place as
the chairman specifies on the adjournment, and if at the adjourned meeting a
quorum is not present by half an hour after the time appointed for the meeting,
the meeting will then terminate.
29. The chairman of a general meeting will be:
(a) the chairman of the board, if any; or
(b) if there is no such chairman or if he is absent or unwilling to act,
the president; or
(c) so failing the president, a director present chosen by the directors
present; or
(d) if no such director is chosen and willing to act, any individual
present as a member, proxy holder, or representative of a corporate
member who is duly chosen by the individuals so present.
30. (1) The chairman may, with the consent of the meeting at which
a quorum is present, and will in pursuance of a resolution to that effect,
adjourn the meeting from time to time and from place to place, but no business
will be transacted at an adjourned meeting other than the business left
unfinished at the meeting from which the adjournment takes place.
(2) No notice need be given of an adjournment or of the business to be
conducted at an adjourned meeting unless the meeting is adjourned for more than
31 days, in which case not less than 10 days' notice of the adjourned meeting
must be given.
31. (1) A member entitled to vote at a general meeting may, by means of a
proxy, appoint a proxy holder and such proxy holder will be entitled to attend,
speak, act and vote on a show of hands and on a poll for the member and on his
behalf at the meeting subject only to any limitation imposed on the authority
of the proxy holder by the proxy.
(2) A proxy must be in writing, dated the date on which it is executed,
must be executed by the member or his attorney authorized in writing or if the
member is a corporation, by a duly authorized officer or attorney of the
corporation and, if to apply to less than all the shares registered in the name
of the member, must specify the number of shares to which it is to apply.
(3) A proxy holder may be appointed to act for a member at every annual
or other general meeting, or at one or more annual or other general meetings
that may be held within such period of time from the date of the proxy,
accordingly as the proxy specifies.
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Submission page 63 of 82
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(4) A proxy will, to the extent that it is inconsistent with another proxy of
an earlier date, be deemed to revoke such other proxy.
(5) A vote given in accordance with the terms of a proxy is not invalidated by
the previous death, bankruptcy or mental infirmity of the member giving the
proxy unless written notice of the death, bankruptcy or infirmity is received
by the chairman before the declaration of the result of the vote.
(6) The board may make regulations providing for the deposit of proxies at
specified places and at specified times before meetings and adjourned meetings
of the Company, and providing for particulars of such proxies to be cabled or
telegraphed or sent in writing before the meeting or adjourned meeting to the
Company or to any agent of the Company appointed for the purpose of receiving
such particulars, and providing that particulars so received will be as
effective as though the proxies themselves were deposited.
(7) Every proxy may be revoked by an instrument in writing executed by the
member or his attorney authorized in writing or, where the member is a
corporation, by a duly authorized officer or attorney of the corporation, and
delivered to the records office of the Company at any time up to and including
the last business day preceding the day of the meeting or any adjournment
thereof at which the proxy is to be used, or to the chairman of the meeting or
any adjournment thereof.
32. A proxy, other than one required by law to be in particular form, will be
substantially in the following form:
"The undersigned hereby appoints ___________________________________, of
______________________(or failing him ______________________________, of as
proxy holder for the undersigned to attend, speak and vote for and on behalf of
the undersigned in respect of all (or ____________________ ) shares registered
in the name of the undersigned at the general meeting of the Company to be
held on the ________ day of ________________________, 19___, and at any
adjournment thereof.
Signed this ______________ day of _____________________________,
(Signature of Member)"
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Submission page 64 of 82
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33. A corporation which is a member and is not a subsidiary of the Company
may, by instrument under the hand of its duly authorized officer or attorney,
appoint a representative who, until his appointment is in like manner
terminated, will be entitled to attend meetings, act and vote, both on a show
of hands and on a poll, either in person or by proxy, and other wise exercise
the rights of membership of the corporation appointing him and will, for all
purposes in connection with any meeting of the Company other than the giving
of notice, be reckoned as a member holding the shares registered in the name
of such corporation.
34. Any one of the joint holders of a share may vote in respect of the share
at a general meeting, either personally or by proxy holder, as if he were
solely entitled thereto, and if more than one of the joint holders is present
or represented by proxy holder or corporate representative that one of them
whose name appears first on the register of members in respect of the share,
or his proxy holder or representative, will alone be entitled to vote in
respect thereof.
35. A member for whom a committee has been duly appointed may vote, whether on
a show of hands or on a poll, by his committee and the committee may appoint a
proxy holder.
36. (1) A poll demanded on the election of a chairman or on a question of
adjournment will be taken forthwith and without an intervening adjournment.
(2) The demand for a poll and the carrying out of a poll will not, unless
the chairman so rules, prevent the continuance of a meeting for the transaction
of business other than that on which the poll is demanded.
37. On a poll a person entitled to more than one vote need not use all his
votes or cast all the votes he uses in the same way.
38. In the case of an equality of votes, whether on a show of hands or on a
poll, the chairman may exercise a casting vote in addition to any other vote
which he may have exercised.
39. The chairman may move, propose or second a resolution.
40. The chairman of a meeting of shareholders will have regard to accepted
rules of parliamentary procedure, except that
(a) the chairman will have absolute authority over matters of procedure
and there will be no appeal from his ruling, but if the chairman deems it
advisable to dispense with the rules of parliamentary procedure at any
general meeting or part thereof, he must so state and must state clearly
the rules under which the meeting or the appropriate part thereof will be
conducted;
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Submission page 65 of 82
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(b) any dispute as to the admission or rejection of a vote will be
determined by the chairman and his determination will be final and
conclusive;
(c) if disorder arises which prevents continuation of the business of the
meeting, the chairman may quit the chair and announce the adjournment of
the meeting, and upon his so doing, the general meeting is,
notwithstanding Article 30, immediately adjourned;
(d) the chairman may require anyone to leave the meeting who is not a
registered shareholder entitled to vote at the meeting or proxy holder for
or corporate representative of such a shareholder;
(e) a resolution or motion will be considered for vote only if proposed
by a shareholder, proxy holder or representative of a corporate
shareholder and (except for a nomination for election of directors or
appointment of auditors) seconded by a shareholder, proxy holder, or
representative other than the person who proposed the resolution or
motion.
41. The Company by ordinary resolution may from time to time adopt any Rules
of Order which shall, insofar as not inconsistent with the Company Act or these
Articles, govern the conduct of general meetings.
PART 6 - DIRECTORS
42. The subscribers to the Memorandum shall be the first directors. The
directors to succeed the first directors and the number of directors may be
determined in writing by the subscribers to the Memorandum. The number of
directors may be changed from time to time by ordinary resolution, at an annual
general meeting, or by special resolution at any other meeting at which
directors are to be elected, but shall never be less than one while the Company
is not a reporting company and three if the Company is or becomes a reporting
company.
43. (1) At each annual general meeting of the Company directors will be
elected to hold office commencing at the termination, or earlier adjournment,
of the meeting at which they have been elected.
(2) If the number of eligible persons nominated for election as directors
is equal to or less than the number of directors to be elected, no vote will be
required and those nominated will be deemed elected by acclamation.
(3) A retiring director is eligible for re-election.
44. The office of a director will terminate:
(a) on his resignation;
(b) on his removal from office as provided in the Company Act;
(c) on his ceasing to be qualified as a director under the Company Act; or
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Submission page 66 of 82
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(d) on the adjournment or termination of the annual general meeting which
next follows his election or appointment and at which a director is
elected but he is not elected.
45. (1) The board may appoint any individual qualified to act as a director
to the board to fill any casual vacancy in the board.
(2) A vacancy resulting from an increase in the number of directors will
be deemed not to be a casual vacancy unless, and will be deemed to be a casual
vacancy if, the vacancy is not filled by the shareholders at the meeting at
which the increase is authorized.
(3) Any vacancy on the board that has not been filled by an appointment
made by the board may be filled by an appointment made by ordinary resolution.
(4) The board may appoint one or more additional directors of the Company
but the number of additional directors so appointed shall not exceed one-third
of the number of directors elected or appointed at the last general meeting.
46. A person who is not a member who becomes a director is deemed to have
agreed to be bound by the provisions of these Articles to the same extent as a
member.
47. (1) A director will be paid such reasonable travelling, lodging,
subsistence and other expenses as he incurs in or about the business of the
Company.
(2) The remuneration of the directors may from time to time be fixed by
the board subject to any limitations established by ordinary resolution, and
may, in the case of a director who is also an officer or employee of the
Company, be in addition to any remuneration to which he is entitled as such an
officer or employee.
(3) If a director performs any professional or other service for the
Company that, in the opinion of the board, is outside the ordinary duties of a
director, or if he is otherwise specially occupied in or about the Company's
business, he may be paid a special remuneration to be fixed by the board or, at
the option of the director, by the Company in general meeting.
(4) Remuneration of a director payable on a periodic basis will be deemed
to accrue from day to day.
(5) Except as restricted by ordinary resolution, the board may cause the
Company to pay a gratuity, pension or allowance on retirement to any director
who has held any salaried office or place of profit with the Company, or to his
widow or dependents and may make contributions to any fund for, and pay
premiums for the purchase or provision of, any such gratuity, pension or
allowance.
48. (1) A director (in this Article called "appointor") may appoint another
director as his alternate director.
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Submission page 67 of 82
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(2) An appointment of an alternate will not be effective until an
instrument in writing signed by the appointor, or a telegram, telecopy, telex
or cable dispatched by the appointor, declaring the appointment, is received
by the Company.
(3) An appointor may revoke an appointment of his alternate by notice in
writing, telegram, telecopy, telex or by cable delivered to the Company.
(4) The appointment of an alternate terminates if the appointor or the
alternate ceases to be a director.
(5) A director may act as alternate for more than one director and will
be entitled at a meeting of the board to cast one vote for each director for
whom he is the alternate in addition to the vote to which he is entitled as a
director in his own right.
(6) Unless otherwise determined by the board, an alternate will not be
counted as representing his appointor in determining whether a quorum is
present.
49. The directors may meet together at such places, or convene meetings by
telephone, and adjourn and otherwise regulate their meetings and proceedings as
they see fit.
50. A director may at any time, and the secretary upon the request of the
director will, convene a meeting of the board.
51. (1) Notice of a meeting of the board must be given to each director at
least four days before the time fixed for the meeting unless a majority of the
directors reside outside of the municipality where the meeting is to be held,
in which case notice shall be given at least seven days before the time fixed
for the meeting.
(2) Notice may be given verbally, personally or by telephone, or in
writing, personally or by delivery through the post, or telegraph, or by any
other means of communication in common usage.
(3) When notice of A meeting is given to a director other than
personally, it will be addressed to him at his registered address.
(4) Where the board has established a fixed time and place for holding
regular meetings of the board and holds such a meeting accordingly, no notice
of the next meeting to be so held need be given to any director.
(5) No notice need be given to a director of a meeting of the board at
which he is appointed or which immediately follows a general meeting at which
he is elected or appointed.
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Submission page 68 of 82
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52. The board may act notwithstanding any vacancy in its body, so long as the
number of directors in office is not reduced below the number fixed as the
quorum of the board.
53. The board may from time to time fix the quorum necessary for the
transaction of business and until so fixed the quorum will be a majority of the
number last determined under Article 42.
54. The chairman of the board, if any, or in his absence or if there is no
chairman of the board, the president, will be chairman of each meeting of the
board, but if at any meeting neither the chairman of the board nor the
president is, within fifteen minutes after the time appointed for holding the
meeting, present and willing to act, the directors present may choose one of
their number to be chairman of the meeting.
55. A meeting of directors at which a quorum is present is competent to
exercise all or any of the authorities, powers and discretions for the time
being vested in or exercisable by the board generally.
56. Questions arising at a meeting of the board will be decided by a majority
of votes.
57. In the case of an equality of votes, the chairman will not have a second
or casting vote.
58. A director who is interested in a proposed contract or transaction or
other business to be considered or conducted at a meeting of the board and who
has disclosed his interest in accordance with the provisions of the Company Act
will be counted in the quorum at any meeting of the board at which the proposed
contract or transaction or such other business is considered, approved or
otherwise acted upon.
59. The board may on such terms as it sees fit, delegate any of its powers to
committees each consisting of one or more directors, which will function in
such manner as the board from time to time directs.
60. (1) The board will elect annually from among its number an audit
committee to be composed of not fewer than three directors of whom a majority
shall not be officers or employees of the Company or its affiliates.
(2) The audit committee will review the annual audited financial
statements of the Company before, and will comment thereon when, such
statements are submitted to the board for its approval.
61. (1) All appointments of officers will be made upon such terms and
conditions and at such remuneration, whether by way of salary, fee, commission,
participation in profits, or otherwise as the board determines, and every such
appointment will be subject to termination at the pleasure of the board, but
without prejudice to any right that may thereby arise under any contract.
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Submission page 69 of 82
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(2) The appointment of an officer will not terminate merely by reason
that all or any of the members of the board by which he was appointed have
ceased to be directors at an annual general meeting or otherwise, unless he
has thereby ceased to hold the qualification for his office.
PART 7 - MANAGEMENT OF THE COMPANY
62. The board may exercise all such powers and do all such acts and things as
the Company may exercise and do and which are not by these Articles or
otherwise lawfully directed or required to be exercised or done by the Company
in general meeting, but subject nevertheless to the provision of these
Articles and all laws affecting the Company and to any rules, not inconsistent
with these Articles, made from time to time by the Company in general meeting;
but no such rule will invalidate any prior act of the board that would have
been valid if the rule had not been made.
PART 8 - BORROWING AND MORTGAGING
63. The board may from time to time at its discretion authorize the Company
to borrow any sum of money for the purposes of the Company and may raise or
secure the repayment of such sum or the performance of any other obligation of
the Company in such manner and upon such terms and conditions in all respects
as the board thinks fit, and without limiting the generality of the foregoing,
by the issue of bonds, debentures, or other instruments, or any mortgage or
charge, whether specific or floating, or other security on the undertaking of
the whole or any part of the property of the Company, both present and future.
64. The board may make any such bond, debenture, or other instrument, mortgage
or charge, or any other security by its terms assignable free from any equity
between the Company and the person to whom it is issued, or any other person
who lawfully acquires the same by assignment, purchase or otherwise.
65. The board may authorize the issue of any such bond, debenture, or other
instrument, or mortgage or charge or other security at a discount, premium or
otherwise, and with special or other rights or privileges as to redemption,
surrender, drawings, allotment of or conversion into or exchange for shares,
attendance at general meetings of the Company, and otherwise as the board
determines at or before the time of issue.
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Submission page 70 of 82
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PART 9 - SAFEGUARDING. Indemnity, ETC, OF DIRECTORS
66. A director of the Company may be or become a director or officer of, or
otherwise interested in, any corporation promoted by the Company or in which
the Company is interested, as shareholder or otherwise, or any corporation
which owns or controls shares of the Company, and will not be liable to
account to the Company for any remuneration or other benefit received by him
as a director or officer of, or from his interest in, such other corporation.
67. A director may hold any office or place of profit under the Company in
conjunction with his directorship for such period and on such arrangement as to
remuneration and otherwise as the board determines, and no director or proposed
director is disqualified by that relationship from contracting with the Company
either with regard to his tenure of such other of f ice or place of profit, or
as vendor, purchaser or otherwise, nor is a director so contracting or being so
interested liable to account to the Company for any profit realized by any such
arrangement or contract, by reason only that the director holds that office or
of the fiduciary relationship thereby established.
68. The board may cause the Company to provide indemnity by way of insurance
or otherwise to any director, officer, employee or other person who has
undertaken or is about to undertake any liability on behalf of the Company or
any corporation controlled by it and to secure such director, officer,
employee or other person against loss by mortgage and charge upon the whole or
any part of the real and personal property of the Company and any action taken
by the board under this paragraph will not require approval or confirmation by
the members.
69. No director, officer or employee for the time being of the Company will be
liable for the acts, receipts, neglects or defaults of any other director,
officer or employee, or for joining in any receipt or act for the sake of
conformity, or for any loss, damage or expense happening to the Company through
the insufficiency or deficiency of title to any property acquired by order of
the board for or on behalf of the Company, or for the insufficiency or
deficiency of any security in or upon which any of the monies of or belonging
to the Company are placed out or invested or for any loss or damages arising
from the bankruptcy, insolvency or wrongful act of any person, firm or
corporation with whom or which any monies, securities or effects are lodged or
deposited or for any other loss, damage or misfortune whatever which may
happen in the execution of the duties of his respective office or trust or in
relation thereto unless the same happens by or through his own willful neglect
or default.
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Submission page 71 of 82
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PART 10 - EXECUTION OF DOCUMENTS
70. The board may adopt a common seal for the Company and may, from time to
time, adopt a new common seal and will provide for the safe custody of the
common seal.
71. The Company may have an official seal for use in any other province,
territory, state or country.
72. Neither the common seal nor an official seal will be impressed on any
document or instrument except
(a) pursuant to the authorization of a resolution of the board, which
authorization may extend to the sealing of a particular document or
instrument, one or more documents and instruments meeting a description,
or to all documents and instruments to be executed under seal, or
(b) by the secretary or an assistant secretary for the purpose of
certifying copies of or extracts from the Memorandum or Articles of the
Company, minutes of meetings or resolutions of the shareholders or board
or committees of the board or any instrument executed or issued by the
Company.
73. The signature of any officer or director of the Company, that is, by
authority of the board, printed, lithographed, engraved or otherwise reproduced
upon any instrument or document (including any negotiable instrument) to be
signed, executed or issued by the Company or by any of its officers or
directors, and any instrument or document on which the signature of any such
person is so reproduced, will be as valid as if the signature had been affixed
manually by such person, and will be so valid notwithstanding that, at the time
of the issue or delivery of the instrument or document, the person whose
signature is so reproduced is deceased, has ceased to hold the office giving
rise to his authority or is otherwise incapacitated from personally signing
such instrument or document.
PART 11 - DIVIDENDS
74. Except as otherwise provided by special rights or restrictions attached to
any shares, all dividends will be declared according to the number of shares
held.
75. Dividends may be paid out of any of the surplus accounts of the Company.
76. No notice of the declaration of any dividend need be given to any member,
and no dividend will bear interest against the Company.
18
Submission page 72 of 82
<PAGE>
77. A resolution declaring a dividend may direct payment of the dividend
wholly or partly by the distribution of specific assets or of paid-up shares,
bonds, debentures or debenture stock of the Company, or in any one or more
such ways, and where any difficulty arises in regard to the distribution, the
board may settle the same as it thinks expedient, and in particular may fix
the value for distribution of specific assets, and may determine that cash
payments shall be made to members upon the footing of the values so fixed or
in lieu of fractional shares, bonds, debentures or debenture stock, in order
to adjust the rights of all parties, and may vest any such specific assets in
trustees upon such trusts for the persons entitled as may seem expedient to
the board.
78. The Company may retain the dividends payable on a share in respect of
which a fiduciary is entitled to become a member until the fiduciary becomes
the registered holder of such share.
79. Any dividend or other monies payable in cash in respect of a share may be
paid by check or warrant sent through the post to the registered holder of the
share in like manner as provided in these Articles for the giving of notices,
or to such person and to such address as the holder or joint holders, as the
case may be, in writing direct.
80. Any one of two or more joint holders may give effectual receipts for any
dividend or other monies payable or assets distributable in respect of a share
held by them as joint holders.
PART 12 - NOTICES
81. A notice may be given or a document delivered by the Company to a member
or director, either personally or by sending it through the post to him in a
prepaid letter, envelope or wrapper addressed to the member or director at his
registered address.
82. Notice may be given or a document delivered by the Company to the joint
holders of a share by giving the notice or delivering the document to the joint
holder first named in the register of members in respect of the share.
83. A notice may be given or a document delivered by the Company to a person
claiming entitlement to a share in consequence of the death, bankruptcy or
mental infirmity of a member, by sending it through the post in a prepaid
letter, envelope or wrapper addressed to such person by name, or by suitable
title as representing the deceased, bankrupt or mentally infirm member, at the
address, if any, supplied to the Company for the purpose by such person, or,
until an address has been so supplied, by giving the notice or delivering the
document in any manner in which the same might have been given or delivered if
the death, bankruptcy or mental infirmity had not occurred.
19
Submission page 73 of 82
<PAGE>
84. A notice or document sent through the post to or left at the registered
address of a member will, notwithstanding that the member is then deceased and
whether or not the Company or its agent has notice of his decease, be deemed to
have been duly given or delivered in respect of any share registered in the
name of the member and will for all purposes of these Articles be deemed
sufficiently given or delivered to his personal representatives and to any
person jointly interested with the member in any such share.
NAME, ADDRESS AND OCCUPATION OF SUBSCRIBER
JILL GAMLEY
#9 - 2035 W 3rd Avenue
Vancouver, B. C.
V6J lL4
Corporate Records Assistant
DATED the 24th day of April, 1987.
(This space intentionally left blank.)
74
EXHIBIT (3)(iii)
Certificate and Articles of Continuance
YUKON BUSINESS CORPORATIONS ACT
Justice FORM 3
Certificate of Continuance
NEVADA STAR RESOURCE CORP.
I hereby certify that the above-mentioned corporation was continued into Yukon,
as set out in the attached Articles of Continuance, under section 190 of the
Business Corporations Act.
Corporate Access Number: 26611
Date of Continuance: 1998-06-17 /s/ M. Richard Roberts
Registrar of Corporations
Submission page 75 of 82
<PAGE>
YUKON BUSINESS CORPORATIONS ACT
(Section 190) Form 3-01
ARTICLES OF CONTINUANCE
1. Name of Corporation.
NEVADA STAR RESOURCE CORP.
2. The classes an any maximum number of shares that the corporation is
authorized to issue
The attached Schedule "A" is incorporated into and forms part of the
Articles of Continuance.
3. Restrictions if any on share transfers:
There are no restrictions on the share transfers.
4. Number (or minimum or maximum number) of Directors:
Not less that three (3), not more than fifteen (15)
5. Restrictions if any on business the corporation may carry on.
The Corporation is restricted from carrying on the business of a railway,
steamship, air transport, canal, telegraph, telephone or irrigation company.
6. If change of name effected, previous name: NOT APPLICABLE
7. Details of incorporation:
Incorporated on April 29, 1987 under the laws of the Province of British
Columbia under the name Nevada Star Resource Corp.
8. Other provisions if any:
The attached Schedule "B" is incorporated into and form part of these
Articles of Continuance.
9. Date: June 1, 1998
Signature
Title:
Corporate Secretary
FILED
JUNE 17, 1998
DEPUTY REGISTRAR
OF CORPORATIONS
Submission page 76 of 82
<PAGE>
SCHEDULE "A"
NEVADA STAR RESOURCES CORP.
The classes and any maximum number of share that the Corporation is authorized
to issue:
The Corporation is authorized to issue an unlimited number of shares without
nominal or par value and the authorized capital of the Corporation is to be
divided into:
1. Common shares which have attached thereto the following preferences,
rights, conditions, restrictions, limitation, or prohibitions:
(a) Voting
Holders of Common shares shall be entitled to vote at any meeting of the
shareholders of the Corporation and have one vote in respect of each Common
share held by them.
(b) Dividends
Holders of Common shares shall be entitled to received, out of all profits
or surplus available for dividends, any dividend declared by the
Corporation on the Common shares.
(c) Participation in Assets on Dissolution
In the event of liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, holders of Common shares shall be
entitled to receive the remaining property of the Corporation.
SCHEDULE "B"
NEVADA STAR RESOURCES CORP.
Other provisions, if any:
1. A meeting of the shareholders of the Corporation may, in the directors'
unfettered discretion, be held at any location in North America, South America,
Europe and Asia specified by the directors in the Notice of such meeting.
2. The directors may, between annual general meetings, appoint one of more
additional directors of the Corporation to serve until the next annual general
meeting, but the number of additional directors shall not at any time exceed
one third of the number of directors who held office at the expiration of the
last annual general meeting of the Corporation, provided that the total number
of directors shall not exceed the maximum number of directors fixed pursuant to
the Articles.
Submission page 77 of 82
<PAGE>
YUKON BUSINESS CORPORATIONS ACT
(Sections 107, 114, and 290)
Form 1-03
NOTICE OF DIRECTORS AND OFFICERS OR
NOTICE OF CHANGE OF DIRECTORS AND OFFICERS
1. Name of Corporation: NEVADA STAR RESOURCES CORP.
2. Notice is given that on the day of continuance, the following person(s)
were appointed Director(s):
Name Mailing Address
SEE ATTACHED LIST
3. Notice is given that on the day of . . the following person(s) ceased to
hold office as Director(s):
Name Mailing Address
NOT APPLICABLE
4. The officers of the corporation as this date are:
Name Office(s) Held
Monty D. Moore President
Beverly Bullock Secretary
5.
Date
June 1, 1998
Signature
Title:
Corporate Secretary
FILED
JUNE 17, 1998
DEPUTY REGISTRAR
OF CORPORATIONS
Submission page 78 of 82
<PAGE>
NEVADA STAR RESOURCES CORP.
LIST OF DIRECTORS AS OF CONTINUANCE
Monty D. Moore 10733 Stone Avenue North
Seattle, Washington 98133
Richard W. Graeme 4619 E. Coronado Drive
Tucson, Arizona 85718
Stuart Havenstrite 8111 Malo Drive
Sandy, Utah 84093
Rich Havenstrite 2113 N. Cottontail
Cedar City, Utah 84720
Kevin Weaver 966 Lampson Place
Victoria, B.C. V7M 1P1
Gary Claytens 2404 - 144 W. 14th
North Vancouver, B.C. V7M 1P1
Bary Nimetz 402-30 Charlevoix Street
Vanier, Ontario L1L 8K5
Sashi M. Gupta 110117 Tuxedo Drive
Port Moody, B.C. V3H 1L3
Leo Berezan 11528 Bailey Crescent
Surrey, B.C. V3V 2V3
Submission page 79 of 82
<PAGE>
YUKON BUSINESS CORPORATIONS ACT
(Section 22) Form 1-02
NOTICE OF ADDRESS OR
NOTICE OF CHANGE OF ADDRESS
1. Name of Corporation: NEVADA STAR RESOURCES CORP.
2. Address of Registered Office:
Preston, Willis & Lackowicz
Barristers & Solicitors
2093 Second Avenue
Whitehorse, Yukon
Y1A 1B5
3. Records Address:
Preston, Willis & Lackowicz
Barristers & Solicitors
2093 Second Avenue
Whitehorse, Yukon
Y1A 1B5
4. Post Office Box (address for service by mail):
Not Applicable
5. Date: June 1, 1998
Signature: Title: Corporate Secretary
FILED
JUNE 17, 1998
DEPUTY REGISTRAR
OF CORPORATIONS
80
EXHIBIT (21)
Subsidiaries of the Registrant
The Registrant has two wholly owned subsidiaries.
The Company conducts its operations through, Nevada Star Resource Corp. (U.S.),
a Nevada corporation and Nevada Star Resource de Mexico, S.A. de C.V., a wholly
owned subsidiary of Nevada Star Resource Corp. (U.S.).
81
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets for Nevada Star Resource Corp. at August 31,
1998 and the Consolidated Statements of Operations and Deficit for the
fiscal year ended August 31, 1998 and is qualified in its entirety by
reference to such financial statements. The August 31, 1998 Financial
Statements for Nevada Star Resource Corp. are stated in Canadian Dollars.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> AUG-31-1998
<CASH> 217,524
<SECURITIES> 0
<RECEIVABLES> 4,105
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 221,629
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,173,234
<CURRENT-LIABILITIES> 1,505,483
<BONDS> 0
0
0
<COMMON> 9,704,111
<OTHER-SE> (5,036,360)
<TOTAL-LIABILITY-AND-EQUITY> 6,173,234
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 217,414
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,666,820)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,666,820)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,666,820)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
