<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FREMONT GOLD CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 1041 65-0110447
(State of Incorporation) (Primary Standard (I.R.S. Employer
Industrial Classification Identification No.)
Code Number)
777 HORNBY STREET, SUITE 2000
VANCOUVER, B.C., CANADA, V6Z 1S4
(604) 682-4606
(Address and telephone number of principal executive offices)
EDWARD M. TOPHAM
777 HORNBY STREET, SUITE 2000
VANCOUVER, B.C., CANADA, V6Z 1S4
(604) 682-4606
(Name, address, and telephone number of agent for service)
with copies to:
CHRISTIAN J. HOFFMAN, III, ESQ.
SHAWN E. SHEARER, ESQ.
STREICH LANG, P.A.
RENAISSANCE ONE
TWO NORTH CENTRAL AVENUE
PHOENIX, ARIZONA 85004
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
CLASS OF SECURITIES TO BE REGISTERED REGISTERED PRICE OFFERING PRICE FEE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units, each consisting of one share of Common Stock and one..... 3,600,000 $ .50 $1,800,000 $ 620.89
Redeemable Common Stock Warrant
Common Stock included in Units ........................ 3,600,000 -- -- --
Redeemable Common Stock Warrants included in Units..... 3,600,000 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock issuable upon exercise of Warrants included in
Units ..................................................... 3,600,000 $1.50(1) $5,400,000(1) $1,862.07
- ------------------------------------------------------------------------------------------------------------------------------------
Total .............................. -- -- $7,200,000(1) $2,482.96
====================================================================================================================================
</TABLE>
(1) Estimated for purpose of calculating registration fee.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
FREMONT GOLD CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO REGULATION C UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
FILED AS PART OF REGISTRATION STATEMENT
<TABLE>
<CAPTION>
ITEM NUMBER
IN FORM SB- CAPTION IN PROSPECTUS ITEM CAPTION
- ----------- --------------------- ------------
<S> <C> <C>
1 Front of Registration Statement and Outside Front Outside Front Cover Page of Prospectus
Cover of Prospectus
2 Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages of
Prospectus Prospectus; Available Information
3 Summary Information and Risk Factors Prospectus Summary; Risk Factors
4 Use of Proceeds Use of Proceeds
5 Determination of Offering Price Risk Factors; Determination of Offering Price
6 Dilution Risk Factors; Dilution
7 Selling Securities Holders Inapplicable
8 Plan of Distribution Outside Front and Inside Front Cover Pages of
Prospectus; Plan of Distribution
9 Legal Proceedings Business of the Company -- Litigation
10 Directors, Executive Officers, Promoters and Management; Management -- Certain
Control Persons Relationships and Related Transactions; Risk
Factors; Security Ownership of Certain
Beneficial Owners and Management
11 Security Ownership of Certain Beneficial Owners Security Ownership of Certain Beneficial Owners
and Management and Management
12 Description of Securities Description of Securities
13 Interest of Named Experts and Counsel Inapplicable
14 Disclosure of Commission Position on Management -- Indemnification
Indemnification for Securities Act Liabilities
15 Organization Within Last Five Years Inapplicable
16 Description of Business Prospectus Summary; Risk Factors; The
Company; Business of the Company
17 Management's Discussion and Analysis or Plan of Plan of Operation
Operation
18 Description of Property Prospectus Summary; Business of the Company
-- The Properties; Business of the Company --
Chile
19 Certain Relationships and Related Transactions Management -- Certain Relationships and
Related Transactions
20 Market for Common Equity and Related Outside Front Cover Page ; Risk Factors;
Stockholder Matters Dividend Policy; Shares Eligible for Future Sale
21 Executive Compensation Management -- Executive Compensation
22 Financial Statements Financial Statements
23 Changes in and Disagreements with Accountants on Change in Accountants
Accounting and Financial Disclosure
</TABLE>
<PAGE> 3
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
DATED: FEBRUARY 12, 1997 SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS
[LOGO]
FREMONT GOLD CORPORATION
3,600,000 UNITS
EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK AND
ONE DETACHABLE REDEEMABLE COMMON STOCK WARRANT
------------------------
The securities offered hereby are units ("Units"), each Unit consisting
of one share (each a "Share" and together the "Shares") of common stock, par
value $.001 (the "Common Stock"), of Fremont Gold Corporation, a Delaware
corporation (the "Company"), and one Detachable Redeemable Common Stock Purchase
Warrant (each a "Warrant" and together the "Warrants"). All 3,600,000 Units are
available for issuance upon conversion of the Company's outstanding Series A
Convertible Promissory Notes (the "Series A Notes"). Each Series A Note is
convertible into one Unit for each $.50 of principal outstanding thereunder.
Other than retirement of the converted Series A Notes, the Company will not
receive any proceeds from this Offering. The Common Stock is presently traded on
the OTC-Bulletin Board ("OTC-BB") under the symbol "FGLD". On February 6, 1997,
the last reported sales price of the Common Stock was $1.56. See "Determination
of Offering Price."
The Shares are subject to certain restrictions on transfer pursuant to
a Pooling Agreement previously executed by the holders of the Series A Notes.
See "Description of Securities--Voluntary Pooling Agreements." Each Warrant is
exercisable, for a term expiring September 30, 1997, to purchase one share of
Common Stock at a price equal to the greater of $1.50 or seventy-five percent
(75%) of the average closing bid price for the Common Stock on the OTC-BB, as
reported by a generally accepted reporting service, for the 10 trading days
preceding the exercise of the Warrant. The Company may redeem the Warrants, at a
price of $.10 per Warrant, at any time upon fifteen (15) days' written notice to
the Warrant holders. The Warrants are not transferable except with the prior
written consent of the Company. The Company does not intend to list the Units or
Warrants on any national securities exchange or NASDAQ. See "Description of
Securities."
-----------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" AT PAGE 9 AND "DILUTION" FOR
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OF ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Underwriting Discounts
Price to Public and Commissions(1) Proceeds to Company(2)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit $.50 $.0375 $.4625
- ------------------------------------------------------------------------------
Total $1,800,000 $135,000 $1,665,000
- ------------------------------------------------------------------------------
</TABLE>
Footnotes appear on inside cover page.
The date of this Prospectus is February 12, 1997.
<PAGE> 4
(1) All 3,600,000 Units are offered for the conversion of the Series A Notes.
No commissions or remuneration was paid for the private placement of the
Series A Notes. Upon conversion of the Series A Notes, selected
Broker/Dealers who agree to act as soliciting agents for the Company may be
paid a selling commission of up to 7.5%.
(2) Represents cancellation of indebtedness represented by the Series A Notes
upon conversion into Units, before deducting offering expenses payable by
the Company estimated at approximately $50,000.
-----------------
The Company is unaware of any specific plan of distribution of the Units,
Shares, Warrants or Common Stock issuable upon exercise of the Warrants by the
holders of the Series A Notes (the "Series A Note Holders") following
conversion; however, the Company believes the Units, Shares, Warrants and Common
Stock underlying the Warrants will be sold to or through brokers or agents in
one or more transactions at varying prices determined at the time of sale or at
a fixed or negotiated price. The Company will not receive any proceeds from such
sales. The Company is paying all of the expenses in connection with the
preparation of this Prospectus and the related Registration Statement and the
qualification of the Units, Shares, Warrants and Common Stock underlying the
Warrants under applicable state law.
-----------------
This offering is being made without using the services of an underwriter.
Upon conversion of the Series A Notes, the Series A Note Holders and any
broker-dealers, agents or underwriters that participate with the Series A Note
Holders in distributing the Units, Shares, Warrants and Common Stock underlying
the Warrants may be deemed "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Act"), in which event any commission received by
such broker-dealers, agents or underwriters and any profit on the resale of the
Units, Shares or Warrants by them may be deemed to be underwriting commissions
or discounts under the Act.
-----------------
The Company publishes its consolidated financial statements in U.S.
dollars. It is anticipated, however, that because the location of the Company's
executive offices is in Canada and the Company's primary operation is in Chile,
significant portions of the Company's revenues, when and if earned, and expenses
may be collected and paid in Canadian dollars or Chilean pesos. Transactions
recorded in currencies other than U.S. dollars will be translated (i) income and
expense items will be translated at the weighted average exchange rate
prevailing during the period, (ii) monetary assets and liabilities will be
translated at the rates prevailing at the balance sheet date and (iii)
non-monetary assets and liabilities will be translated at historical rates. All
references to "$" are to United States currency and all monetary amounts are
presented in U.S. dollars.
-----------------
Information contained in this Prospectus contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, which can be identified by the use of forward-looking terminology such
as "may," "will," "expect," "anticipate," "estimate," or "continue" or the
negative thereof or other variations thereon or comparable terminology. The
statements in "Risk Factors" beginning on page 9 of the Prospectus constitute
cautionary statements identifying important factors, including certain risks and
uncertainties with respect to such forward-looking statements that could cause
actual results to differ materially from those reflected in such forward-looking
statements.
-2-
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. THE SECURITIES OFFERED HEREBY INVOLVE A
HIGH DEGREE OF RISK AND WILL BE SUBJECT TO IMMEDIATE SUBSTANTIAL DILUTION. Each
prospective investor should carefully read this Prospectus in its entirety and
carefully consider, among other things, the information set forth under the
heading "RISK FACTORS."
THE COMPANY
Current Business Operations
Fremont Gold Corporation (the "Company"), is engaged in the
acquisition, exploration and development of mineral properties, primarily gold
and copper properties located in Latin America. Through the Company's officers'
and directors' extensive mineral exploration experience and Latin American
knowledge and contacts, the Company is continuously assessing new opportunities
for the acquisition of properties with the potential to be significant gold and
copper producers. Although the Company is currently in negotiations to acquire,
and/or is assessing the advisability of entering into negotiations to acquire,
several mineral properties, the Company has no present commitments or agreements
with respect to any property acquisitions other than those discussed below.
The Company's principal mineral property interests consist of mining
concessions located on three exploration properties in Chile. The Resguardo
Property, the Cenizas Property and the Santa Eloisa Property mining concessions
are currently held through existing leases and purchase options. See "Business
of The Company -- The Properties." The Company's mineral property interests are
held by a Chilean operating company, Minera Fremont Gold S.A., a Chilean
corporation ("MFG"), of which Flagship Holding Ltd., a Barbados corporation and
a wholly owned subsidiary of the Company ("FHL"), owns 99% of the issued and
outstanding shares of common stock. Unless otherwise indicated, the term
"Company" means collectively Fremont Gold Corporation, FHL and MFG.
The Resguardo Property covers an area of over 6,000 hectares (15,000
acres) along 12 kilometers of the highly productive Atacama Fault System in
Region III of northern Chile. The property is on the same structural trend and
about 10 kilometers south of the Mantoverde Mine operated by the Anglo-American
Company. The property is accessible by paved and well maintained dirt roads in
approximately a 20 kilometers drive from the coastal town of Chanoval and is
approximately 100 km from Copiapo, a town with a population of about 150,000.
Recent sampling completed by the Company and a series of small surface mine
workings has indicated gold mineralization at Resguardo Property along a zone
which appears to be at least 3.5 kilometers long. See "Business of The
Company--The Properties--Resguardo Property".
The Cenizas Property covers an area of approximately 5,700 hectares
(14,250 acres), on the West Fissure Fault, a regional geological structure that
controls much of the known gold and copper mineralization in northern Chile.
Located midway between, and on the same structural trend as, the major copper
deposits of La Escondida and El Salvador, the property is 20 kilometers south of
the Guanaco gold mine operated by Amax Gold. The property is in Region II of
northern Chile at an altitude of approximately 3,000 meters in the southern
Atacama desert and is easily reached in a three hour drive from the coastal town
of Taltal. Gold mineralization, first discovered in the area by RTZ Mining and
Exploration Limited ("RTZ") with a regional geochemical survey, occurs on the
property in Tertiary volcanics and diorite intrusives. Subsequent work by RTZ
has consisted of geophysical surveys, trenching, numerous short rotary drill
holes to define gold mineralization under shallow gravel cover and the drilling
of 23 reverse-circulation drill holes. Results of this work have shown highly
anomalous to ore grade gold mineralization in trenches and drill holes in
several areas on the property. See "Business of The Company--The
Properties--Cenizas Property."
The Santa Eloisa Property covers approximately 5,300 hectares (13,250
acres) in the Maricunga Gold Mining District located in Region II of northern
Chile. The geological setting of the Santa Eloisa Property is similar to that of
-3-
<PAGE> 6
several large porphyry style gold deposits that have been discovered in the
Maricunga District over the past several years. The property is at an altitude
of between 4,200 and 5,300 meters and can be reached in about a five hour drive,
along mostly dirt roads, from the nearby town of Copiapo. The Company has an
option to acquire a 50% interest in the mining concessions on the Santa Eloisa
Property by making payments totaling $500,000 to the mining concession owners
and completing $1,000,000 of exploration work on the property before March 31,
1999. After the Company has satisfied its payment and exploration commitments,
and if the mining concession owners do not contribute on a proportionate basis
to further exploration and feasibility expenses, the Company can increase its
ownership interest to 75% by funding and completing a feasibility study. The
Company's interest in the Santa Eloisa Property is held by MFG. See "Business of
the Company--The Properties--Santa Eloisa Property."
History and Prior Activities
The Company was incorporated under the laws of the State of Florida as
Tri-Way Industries, Inc. on June 27, 1986, for the purpose of seeking,
investigating and acquiring business opportunities. The Company did not engage
in any meaningful operations until on or about November 22, 1989, when the
Company acquired The Rothchild Group, Inc. ("Rothchild Group") as its wholly
owned subsidiary. Following the acquisition, the Company changed its name to The
Rothchild Companies, Inc.
From November of 1989 until mid-1993, the Company, through the
Rothchild Group, operated as a full service advertising agency engaged in the
advertising, marketing and public relations businesses. On October 20, 1993,
however, the Rothchild Group filed for bankruptcy protection under Chapter 7 of
the United States Bankruptcy Code in the Bankruptcy Court for the Southern
District of Florida. After the Chapter 7 liquidation of the Rothchild Group, the
Company did not engage in any meaningful business or commercial activities.
On July 12, 1994, an investment group ("Investment Group") completed
the purchase of an aggregate of 315,598 shares of the Company's Common Stock
representing, at that time, approximately 60% of the Company's issued and
outstanding Common Stock. In addition, the Investment Group provided sufficient
funds in the form of loans to ensure the Company's viability and permit the
Company to pursue possible business combinations, mergers or similar
transactions. These loans were subsequently converted into 419,656 shares of
Common Stock of the Company on December 30, 1994.
On April 8, 1996, via a merger into a corporation formed for that
purpose, the Company completed the transfer of its state of incorporation from
Florida to Delaware. Accordingly, the Company is now a Delaware corporation.
On April 15, 1996, the board of directors of the Company and holders of
a majority of the outstanding Common Stock of the Company authorized a
one-for-twenty (1-for-20) reverse split of the Company's Common Stock, pursuant
to which each 20 shares of the Company's Common Stock outstanding immediately
prior to April 30, 1996 were converted into one share of the Company's Common
Stock. In connection with the reverse split, the Company maintained the par
value of its Common Stock at $.001 per share, and the total number of shares of
Common Stock authorized to be issued by the Company remained unchanged at
20,000,000 shares. The number of issued and outstanding shares of the Company's
Common Stock after the reverse split was 1,000,000 shares. All references to
shares of Common Stock herein have been adjusted to reflect this reverse split.
On June 4, 1996, Laminco Resources, Inc., a British Columbia
corporation engaged in the business of mineral exploration and development
("Laminco"), in a privately negotiated transaction purchased 600,000 shares of
the Company's Common Stock (representing 60% of the Company's issued and
outstanding Common Stock as of the date of the acquisition) from the Investment
Group. In connection with the completion of the share acquisition by Laminco,
the Company's board of directors and management were reconstituted and the
Company implemented a new business plan discussed above under "Current Business
Operations" and hereinafter under "Business of The Company."
-4-
<PAGE> 7
On July 25, 1996, the Board of Directors of the Company and holders of
a majority of the outstanding shares of the Common Stock of the Company,
authorized the Company, by written consent, to take a series of actions. These
actions included: i) changing the Company's name to Fremont Gold Corporation to
better reflect the proposed business of the Company, ii) approval of an Amended
and Restated Certificate of Incorporation, iii) approval and adoption of a Stock
Option Plan to allow the Company to attract and retain the best available
personnel for positions of responsibility within the Company and to provide
additional incentive to employees of the Company in order to promote the success
of the Company's business; and iv) making certain management and director
changes and forming the Company's Compensation and Audit Committees.
On July 30, 1996 the Company completed a private placement of 1,000,000
shares of Common Stock at an offering price of $.20 aggregating $200,000 in
proceeds to the Company. Michael J. Hopley, a director, president and chief
executive officer of the Company, Edward M. Topham, a director and chief
financial officer of the Company and David Shaw, a director of the Company,
purchased 154,000, 73,310 and 138,603 shares of Common Stock, respectively, in
this private placement. "Management -- Certain Relationships and Related
Transactions."
On July 31, 1996, the Company acquired 3,560,000 of the issued and
outstanding shares of FHL common stock not previously owned by the Company. The
shares of FHL common stock were acquired directly from the FHL shareholders in
exchange for 3,560,000 newly issued shares of the Company's Common Stock. Upon
completion of the share exchange, the Company directly owned all of the issued
and outstanding shares of FHL's common stock. Michael J. Hopley, a director,
president and chief executive officer of the Company, Edward M. Topham, a
director and chief financial officer of the Company and David Shaw, a director
of the Company, received 418,000, 256,000 and 372,000 shares, respectively, of
the Company's Common Stock in the exchange. These interests in FHL were
disclosed to the members of the Company's board and the acquisition of FHL was
approved by the holders of a majority of the issued and outstanding shares of
Common Stock of the Company. The acquisition of FHL by the Company has been
accounted for at historical cost in a manner similar to pooling of interest
accounting. See "Management -- Certain Relationships and Related Transactions."
On August 1, 1996 the Company completed a private placement of 500,000
shares of its Common Stock to Laminco in consideration of $140,000.
On August 21, 1996, the Company commenced an offering of $1,800,000
principal amount of 10.5% Series A Convertible Notes. On September 30, 1996 the
Company had accepted subscriptions totaling $740,000. In December 1996, the
Company completed the offering of Series A Notes and accepted subscriptions
aggregating $1,800,000. Each Series A Note is convertible, at the option of the
Series A Note Holder, into Units at any time after the Issue Date (as defined in
the Series A Note) prior to the close on the Maturity Date (as defined in the
Series A Note) at the rate of $.50 of principal per Unit. Each Unit is composed
of one share of Common Stock and one Warrant. Each Warrant is exercisable to
purchase one share of Common Stock at the greater of $1.50 or 75% of the ten day
average closing prices, as quoted on the OTC-BB, immediately preceding the
notice of exercise. The Warrants issued as a component of the Units will be
redeemable by the Company at any time after issuance, upon 15 days written
notice to the Warrant holders, at a redemption price of $.10 per Warrant. The
holders of the Series A Notes, if any, issued Units upon conversion without an
effective Registration Statement under the Securities Act of 1933, as amended
("Act"), covering such Units, the Common Stock included in the Units, and the
Common Stock underlying the Warrants included in the Units, shall have the
right, at any time, to join with the Company to register the Units, the Common
Stock and Warrants included in the Units, and the Common Stock underlying the
Warrants in any Registration Statement under the Act filed by the Company. Each
purchaser of the Series A Notes has entered into a Voluntary Stock Pooling
Agreement ("Pooling Agreement"). See "Description of Securities and Voluntary
Stock Pooling Agreements". Under the terms of the Pooling Agreement each
recipient of Units pursuant to conversion of the Series A Notes has agreed with
the Company, the Trustee (as defined in the Pooling Agreement) and each with the
other, that they will deliver the certificates representing their Shares
included in the Units to the Trustee. The shares of Common Stock issuable upon
exercise of the Warrants will not be subject to the Pooling Agreement. Pursuant
to the Pooling Agreement the Trustee shall hold all certificates subject to
release, on a pro-rata basis, as set forth below:
-5-
<PAGE> 8
<TABLE>
<CAPTION>
PRO-RATA SHARES OF COMMON STOCK RELEASE DATE
- ------------------------------- ------------
<S> <C>
25% of Common Stock purchased April 1, 1997
25% of Common Stock purchased July 1, 1997
25% of Common Stock purchased October 1, 1997
the balance of Common Stock purchased January 1, 1998
</TABLE>
On August 23, 1996, the Company's indirectly owned Chilean operating
subsidiary changed its name from Inversiones Mineras Ayl S. A. to Minera Fremont
Gold Chile S.A.
On December 30, 1996, certain unaffiliated shareholders of the Company,
pursuant to an agreement entered into with Laminco, agreed to transfer to
Laminco, an affiliate of the Company, 1,497,000 shares of Common Stock.
On December 31, 1996, Laminco, pursuant to a Share Purchase and Sale
Agreement, sold 2,597,000 of the Company's Common Stock, representing 100% of
the Common Stock owned by Laminco. Each of the purchasers of these shares
entered into Stockholders Agreement with the Company, the terms of which
restrict the transferability of the shares purchased until December 20, 1997.
The Company's registered office and headquarters is 777 Hornby Street,
Suite 2000, Vancouver, British Columbia V6Z 1S4, its telephone number is
604-682-4606. While its headquarters are in Vancouver, the Company has
established an office in Santiago, Chile from which its Chilean exploration
activities are directed.
-6-
<PAGE> 9
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Securities Offered:......................................... 3,600,000 Units, each Unit consisting of one
Share and one Warrant
Common Stock Outstanding Before Offering:................... 6,060,000 (1) (2)
Common Stock Outstanding After Offering:.................... 9,660,000 (1) (2)
Common Stock Outstanding (assuming full exercise of the
Warrants)................................................... 13,260,000(1)(2)(3)
Warrant Terms
Expiration Date.................................... September 30, 1997 (exercisable immediately
commencing on the date of issuance)
Exercise Price..................................... The greater of $1.50 or 75% of the average
closing bid price on OTC-BB for the Company's
Common Stock over the 10 trading days
immediately prior to exercise
Redemption......................................... Redeemable by the Company at $.10 per share
underlying the Warrants upon 15 days' written
notice
Voluntary Pooling........................................... Each of the Series A Note Holders, as a condition
precedent to his/her purchase of the Series A
Notes, entered into a Voluntary Stock Pooling
Agreement. See "Description of Securities --
Voluntary Stock Pooling Agreements."
OTC-BB Symbol Common Stock.................................. FGLD
</TABLE>
- -----------------
1. Does not include 1,000,000 shares of Common Stock reserved for issuance
upon exercise of options granted pursuant to the Company's Stock Option
Plan. As of January 1, 1997, 955,000 options had been granted under the
Stock Option Plan. See "Management - Stock Option Plan."
2. Does not include 400,000 shares of Common Stock issuable upon exercise of
warrants granted to Laminco in connection with a $200,000 loan made by
Laminco to the Company. See "Management -- Certain Relationships and
Related Transactions."
3. Includes only those Warrants included in the Units offered hereby. The
Company may redeem the Warrants at any time after issuance upon 15 days
written notice.
-7-
<PAGE> 10
PLAN OF DISTRIBUTION
All 3,600,000 Units are being offered to the Series A Note Holders upon
conversion of the Series A Notes. The Company is unaware of any specific plan of
distribution of the Series A Note Holders following the conversion of the Series
A Notes, but believes that the Units, Shares, Warrants and Common Stock
underlying the Warrants, will be sold at prevailing market prices on the OTC-BB,
without the payment of any underwriting commissions or discounts other than
ordinary brokerage transaction fees. See "Plan of Distribution." The Company is
paying all of the expenses in connection with the preparation of this Prospectus
and the related Registration Statement.
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE, INVOLVE A HIGH DEGREE OF
RISK AND SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF
THEIR INVESTMENT. SEE "RISK FACTORS."
SUMMARY FINANCIAL INFORMATION
The following selected financial information is derived from the
financial statements of the Company included elsewhere herein, and should be
read in conjunction with such financial statements and notes thereto. The
financial statements of the Company and its recent acquisition, FHL, are
presented on a combined basis as of the periods presented. The financial
statements of FHL for the period ended June 30, 1996 have been audited by KPMG.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA: NINE MONTHS ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
1996(1) 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income .............. $ 2,152 $ -- $ -- $ --
Net loss ..................... 284,049 8,606 9,862 7,570
Loss per common share ........ $ 0.11 $ 0.01 $ 0.01 $ 0.01
Weighted average common shares
outstanding .................. 2,534,872 1,000,000 1,000,000 565,204
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------
BALANCE SHEET DATA: DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1996 AS ADJUSTED(2)
-----------------------------------------------------
<S> <C> <C> <C>
Working capital (deficit) ... $(3,965) $ (330,947) $1,284,053
Total assets ................ 1,035 1,194,178 2,069,178
Total Liabilities ........... 5,000 1,100,806 360,806
Stockholders Equity (deficit) $(3,965) $ 90,872 $1,705,872
</TABLE>
1. Reflects operating results of FHL from July 1, 1996, the effective date of
its acquisition. The acquisition of FHL by the Company has been accounted
for at historical cost in a manner similar to pooling of interest
accounting. See "Financial Statements.''
2. As adjusted to give effect to i) completion of $1,060,000 Series A Notes
privately placed after September 30, 1996, ii) the conversion of $1,800,000
in Series A Note principal and iii) the payment of commissions and
estimated offering costs. Does not give effect to (i) exercise of the
Warrants included in the Units offered pursuant to this Prospectus, (ii)
the exercise of warrants to purchase Common Stock granted to Laminco or
(iii) options to purchase 955,000 shares of Common Stock granted pursuant
to the Company's Stock Option Plan.
-8-
<PAGE> 11
RISK FACTORS
The securities offered hereby are speculative, involve a high degree of risk and
should not be purchased by anyone who cannot afford the loss of his or her
entire investment. In addition to the other information in this Prospectus,
prospective investors should carefully consider the following risk factors in
evaluating an investment in the Securities.
NATURE OF MINERAL EXPLORATION AND DEVELOPMENT. The exploration for mineral
deposits and development of mineral properties entails significant financial
risks which even a combination of careful evaluation, experience and knowledge
may not eliminate. While the discovery of an orebody may result in substantial
rewards, few properties which are explored are ultimately developed into
producing mines. Major expenses may be required to establish ore reserves by
drilling, constructing mining and processing facilities at a site, developing
metallurgical processes and extracting metals from the ore. It is impossible to
ensure that the proposed exploration and development programs of the Company
will result in a profitable commercial mining operation.
Whether a mineral deposit will be commercially viable depends on a number of
factors, some of which are the particular attributes of the deposit, such as
size, grade and proximity to infrastructure, as well as, metal prices which are
highly cyclical and government regulations, including regulations relating to
prices, taxes, royalties, land tenure, land use, importing and exporting of
minerals and environmental protection. The exact effect of these factors cannot
be accurately predicted, but any of these factors could have a material adverse
effect on the business, financial condition and results of operation of the
Company and may result in the Company not receiving an adequate return on
invested capital.
NO RECENT OPERATING HISTORY; ANTICIPATED LOSSES; FLUCTUATING RATES OF GROWTH.
The Company did not commence its current business operations until June 1996.
Accordingly, the Company has no meaningful operating history upon which an
evaluation of the Company and its prospects can be based. The Company and its
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies engaged in the acquisition, exploration and
development of mineral properties. To address these risks, the Company must,
among other things, respond to competitive developments, attract, retain and
motivate qualified personnel, as well as implement and successfully execute its
acquisition, exploration and development programs. Because of the inherent
processes involved in developing a prospective mineral property, it is
anticipated that the Company will record losses until the properties become
operational and/or sold, if ever. There can be no assurance that the Company
will be successful in addressing such risks.
RISKS OF FOREIGN OPERATIONS. In certain countries in which the Company may
obtain mineral rights (whether held directly or indirectly), mineral exploration
and mining activities may be affected in varying degrees by political stability
and government regulations relating to the mining industry. Any changes in
regulations or shifts in political conditions are beyond the control of the
Company and may adversely affect its business, financial condition and results
of operations.
RISK OF CHILEAN OPERATIONS. Currently, the Company's primary mineral properties
are located in Chile. Chile has a presidential system of government with a
bicameral legislature consisting of the Senate and the Chamber of Deputies. The
next nationwide congressional election is scheduled for December 1997. The
official monetary unit of Chile is the peso. The exchange rate for the peso is
determined by market prices. The Chilean Central Bank is an independent body
charged with sole control over monetary policy and has the goal of controlling
inflation and maintaining the value of the currency. The foreign investment
statute (also know as Decree Law No. 600) regulates various aspects of foreign
investment in Chile and is intended to ensure non-discrimination in relation to
the rights and benefits conferred upon national investors. The statute applies
to foreign individuals and legal entities and to Chilean citizens who reside out
of the country and who transfer foreign capital into Chile. The 1980
Constitution establishes that the State is the owner of all mineral resources,
but permits the exploration and exploitation of mineral deposits by private
parties through mining concessions. It also establishes that these mining
concessions will be granted by the courts and will have rights and obligations
determined by a Constitutional Organic Law. The 1982 Mining Law, Constitutional
Organic Law No.
-9-
<PAGE> 12
18097 of 1982 and the Constitution provide the legal framework for the
exploration and exploitation of mining concessions. This law can only be changed
with the approval of 60 percent of both houses of Congress. Currently, the
political, monetary and economic environment in Chile is stable. In addition,
the current state of foreign investment statutes and mining laws are clear and
considered liberal in relation to other South American countries. However, there
are no assurances that political, monetary or economic changes may not adversely
affect the Company. Also, there are no assurances that future changes in foreign
investment statutes or mining laws will not have a material adverse effect on
the Company's business. See "Business of the Company - Chile."
CHILEAN MINING CONCESSIONS. Chile's 1982 Mining Law, Constitutional Organic Law
No. 18097 of 1982 and the Chilean Constitution provide the legal framework for
the exploration and exploitation of minerals in Chile. Upon proper filing by a
claimant, mining concessions are granted by the Chilean courts. Mining
concessions constitute interests in real property that are distinct and
independent of the ownership of the surface land on which the concession is
granted. Mining concessions can be mortgaged or transferred separate from the
surface rights. An owner of a mining concession has the right to defend
ownership of that concession against the State and third parties.
Mining concessions may be either exploration concessions or exploitation
concessions. An exploration concession is the right to explore the defined area
and to later obtain an exploitation concession over the area. Exploration
concessions are granted for a two-year period and may be renewed once for an
additional two years provided that upon such renewal one-half of the area
covered by the original concession is surrendered. An exploitation concession is
the exclusive right to explore for and exploit minerals from the defined area
for an indefinite period. See "Business of the Company--Chile--Mining
Concessions."
The courts will grant an exploration or exploitation concession regardless of
the existence of any preexisting concession covering the area. A claimant may
file on top of ("top filed") an existing concession holder, meaning applying for
a concession on an area for which a previous concession has already been
granted. Pursuant to Chilean law, if this top filed claim is in proper form, the
courts will grant a concession to the top filed claimant, notwithstanding the
existence of the prior concession. Once claims are filed, they are gazetted
(published) in the Mining Bulletin which is printed monthly and subscribed to by
the Company. If a claim holder is top filed, the top filer does not have a
preferential right to the mining concession on the area unless the original
concession holder allows the prior granted concession to lapse. Concessions can
lapse, and a top filer gain priority, in the following primary ways: (i) an
exploration concession expires after two years if it is not renewed or converted
to an exploitation concession; (ii) if an exploration concession is renewed and
one-half of the original claim is abandoned as required, a top filer gains
priority on the abandoned portion of the concession; (iii) failure to pay any
patents for the concession and the top filer is the high bidder at the high
public auction of the concession; or (iv) failure to defend an exploration
concession against a top filed claim for a period of four years following
publication of the grant of the top filed concession.
Although the Company has implemented programs to review monthly (i) the aging
status of its exploration concessions, (ii) the annual patents due on its
exploration and exploitation concessions and (iii) newly published claims which
may have been filed on top of the Company's concessions, there can be no
assurance that the Company will be granted an exploitation concession upon
application made for aging exploration concessions or that it will be successful
in defending its concessions against a claim which is filed on top of its
existing concessions. A failure to effectively defend a concession, depending
upon the characteristics of the particular property, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company attempts to minimize its exposure to claims litigation and loss by
completing a diligent review of all claims it seeks to acquire and by
maintaining one full time employee who is responsible to maintain the integrity
of the Company's concession portfolio. However, there can be no assurance that
these policies will be sufficient to protect all of the Company's Chilean mining
concessions.
The State may expropriate a concession, upon payment of indemnification to the
concession holder, when the law specifically authorizes, usually for public
policy, national security or national interest reasons. If the State takes such
-10-
<PAGE> 13
action, the concession owner has an opportunity to make a claim regarding the
legality of the State's action. The Company does not believe expropriation of
its current mining concessions is likely; however, there can be no assurances in
that regard. The expropriation of a mining concession, depending upon the
characteristics of the property, could have a material adverse effect on the
business, financial condition and results of operations of the Company.
CAPITALIZATION AND COMMERCIAL VIABILITY. The exploration and development of
mineral properties is a capital intensive enterprise. As a result, the Company
expects it will be necessary to obtain additional funding to continue its
operations. The Company has limited financial resources and there can be no
assurance that additional funding will be available to the Company for
exploration or development of properties it may acquire or to fulfill its
obligations under any applicable agreements. There also can be no assurance that
the Company will be able to obtain adequate financing in the future or that the
terms of such financing will be favorable, or that joint ventures will be
available for the Company's properties once acquired. Failure to obtain such
additional financing could result in delay or indefinite postponement of
exploration and development of acquired properties with the possible loss of
such properties. Such delays or loss could have a material adverse effect on the
Company's business, financial condition and results of operation.
If the Company proceeds to production on a particular property, commercial
viability will be affected by certain factors that are beyond the Company's
control, including the specific attributes of the deposit, the fluctuation in
metal prices, the costs of constructing and operating a mine in a specific
environment, the cost and availability of processing and refining facilities,
the availability of economical sources of energy and water, government
regulations including regulations relating to prices, royalties, duties, taxes,
restrictions on production, quotas on exportation of minerals, as well as the
costs of protection of the environment and agricultural lands. Individually or
in combination, these factors could have a material adverse effect on the
Company's business, financial condition and results of operations.
REQUIREMENT FOR PERMITS AND LICENSES. The operations of the Company may require
licenses and permits from various governmental authorities. Management believes
that the Company can obtain all necessary licenses and permits to carry on the
activities which it anticipates conducting under applicable laws and regulations
in respect of properties acquired. There can be no assurance, however, that the
Company will be able to obtain or maintain in force all necessary licenses and
permits that may be required to conduct exploration or commence construction or
operation of mining facilities at properties under exploration. The failure to
obtain or maintain a necessary license could have a material adverse effect on
the Company's business, financial condition or results of operations.
Further, many of the mineral rights and interests the Company may acquire may be
subject to government approvals. In all such cases, approval is, as a practical
matter, subject to the discretion of the appropriate governments or governmental
officials. Management of the Company has no reason to believe that such
approvals will not be granted. However, no assurance can be given that the
Company will be successful in obtaining any or all of such approvals. A failure
to obtain such approvals could have a material adverse effect on the Company's
business, financial condition and results of operations.
COMPETITION. The mineral exploration and mining business is competitive in all
of its phases. The Company competes with numerous other companies and
individuals in a search for and the acquisition of attractive mineral
properties. Many of these companies possess greater financial and technical
resources. The Company's ability to develop reserves in the future will depend
not only on its ability to develop its present properties, but also on its
ability to select and acquire suitable prospects for mineral exploration. There
can be no assurance that the Company can effectively compete in this
environment.
ELECTION NOT TO CONVERT BY SERIES A NOTE HOLDERS. Pursuant to the terms of the
Series A Notes, each Series A Note Holder, in his/her sole discretion, may elect
not to convert into the Units offered by this Prospectus. The Company believes
that it will be successful in obtaining conversion of all of the Series A Notes.
There is no assurance, however, in that regard. An election by a Series A Note
Holder not to convert would result in the Company being required to repay the
principal amount of the unconverted Series A Note, together with accrued and
unpaid interest, on March 1,
-11-
<PAGE> 14
1997. The Company has been utilizing the proceeds of the Series A Notes in
connection with its business operations. Therefore, if any of the Series A Note
Holders elect not to convert the Company may be required to use any or all of
the remaining proceeds from the offering of the Series A Notes to repay
principal and interest to those Series A Note Holders who elect not to convert.
There can be no assurance that the Company will have sufficient remaining
proceeds to repay those Series A Note Holders who elect not to convert. The
Company may be required to seek outside sources of capital to meet its financial
obligations under the Series A Notes if a sufficient number of Series A Note
Holders elect not to convert. The failure to procure such financing on
acceptable terms could have a material adverse effect on the Company's business,
financial condition and results of operations.
REGISTRATION STATEMENT NOT EFFECTIVE BY MARCH 1, 1997. The Company has exercised
its right, pursuant to the terms of the Series A Notes, to extend the Maturity
Date (as defined in the Series A Note) to March 1, 1997. In the event the
Registration Statement, of which this Prospectus is a part, is not effective by
March 1, 1997, the Company will be required to seek approval from the Series A
Note Holders for an addition extension of the Maturity Date. It is highly
unlikely the Series A Note Holders will elect to convert without an effective
Registration Statement. An election by a Series A Note Holder not to extend the
Maturity Date would result in the Company being required to repay the principal
amount of the Series A Note, together with accrued and unpaid interest, on March
1, 1997. The Company has been utilizing the proceeds of the Series A Notes in
connection with its business operations. Therefore, if any of the Series A Note
Holders elect not to extend the Maturity Date the Company may be required to use
any or all of the remaining proceeds from the offering of the Series A Notes to
repay principal and interest to those Series A Note Holders who elect not to
extend the Maturity Date. There can be no assurance that the Company will have
sufficient remaining proceeds to repay those Series A Note Holders who elect not
to extend the Maturity Date. The Company may be required to seek outside sources
of capital to meet its financial obligations under the Series A Notes if a
sufficient number of Series A Note Holders elect not to extend the Maturity
Date. The failure to procure such financing on acceptable terms could have a
material adverse effect on the Company's business, financial condition and
results of operations.
NEED FOR ADDITIONAL CAPITAL; SUBSEQUENT OFFERINGS. The Company anticipates that
the funds raised through its placement of the Series A Notes will be adequate
for its cash requirements for six months from the date of this Prospectus.
Thereafter, the Company will require substantial additional capital to finance
its proposed business activities and operations described herein. There can be
no assurance that the Company will be able to obtain additional funds on
acceptable terms once it has expended the proceeds of the Series A Note
offering. The failure to procure such financing on acceptable terms could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company presently intends to sell additional securities at a price
sufficient to raise approximately $2,000,000 to $4,000,000, either pursuant to a
registration statement or an exemption from registration under the Securities
Act of 1933 (as amended) within 12 months after the date of this Prospectus. The
Board of Directors, in its sole discretion, may decide to increase or decrease
the amount of funds required and determine the class and amount of the
securities offered and the manner by which they are offered in such an offering.
There is no assurance, however, that the proposed offering will be completed.
The Company believes it can continue operations for a period of six months from
the date of the Prospectus without the proceeds of the proposed offering.
Nevertheless, the Company will not be able to finance the development of its
proposed business at the rate contemplated by management if such funding is not
available.
UNINSURABLE RISKS. In the course of exploration, development and production of
mineral properties, several risks, and in particular, unusual geological or
unexpected operating conditions, including failure of pit walls or dams, fires
and flooding, may occur. The Company may also incur liability as a result of
pollution and other casualties. The Company may not be able to insure fully, if
at all, against such risks due to political or other reasons, or the Company may
decide not to take out insurance against such risks as a result of high premiums
or other reasons. Paying compensation for obligations resulting from such
liability may entail significant costs for the Company and could have a material
adverse effect on the Company's business, financial condition or results of
operations.
-12-
<PAGE> 15
CONTROL OF THE COMPANY. Assuming full conversion of all the outstanding Series A
Notes, the exercise of all the Warrants and the exercise of options granted
pursuant to the Company's Stock Option Plan, the current officers and directors
of the Company will own a total of 1,722,282 shares of Common Stock. These
shares will represent approximately 13% of the outstanding voting securities of
the Company after full conversion of the Series A Notes. See "Security Ownership
of Certain Beneficial Owners and Management."
SUBSTANTIAL DILUTION TO INVESTORS. The 6,060,000 shares of the Company's Common
Stock outstanding on September 30, 1996 had a net tangible book value of
($322,722), or ($.05) per share. After giving effect to the issuance of
3,600,000 Shares as part of the Units offered hereby, the receipt of the
proceeds from the Series A Note offering and the payment of commissions and
estimated offering costs, the pro forma net tangible book value of the Company's
outstanding Common Stock on that date would be $1,292,278, or $.13 per share.
Therefore, the Series A Note Holders receiving the Shares included in the Units
offered hereby will suffer an immediate dilution of approximately $.36 per share
and the present stockholders of the Company will receive an immediate increase
of $.18 per share in the net tangible book value of the Common Stock held by
them. If the Series A Notes are fully converted into the Units offered hereby,
the contribution by the Series A Note Holders will constitute approximately 83%
of the total contributions to the capital of the Company and the shares of
Common Stock included in the Units will only constitute 37% of the outstanding
stock of the Company. Accordingly, the Series A Note Holders receiving the Units
offered hereby will bear a disproportionately high share of the total risk. See
"Dilution."
DEPENDENCE ON KEY PERSONNEL. The success of the Company is dependent on the
services of Michael J. Hopley, Edward M. Topham and Roberto Partarrieu, each a
member of senior management. The experience of these individuals will be a
factor contributing to the Company's continued success and growth. The loss of
one or more of these individuals could have a material adverse effect on the
Company's business, financial condition, results of operations and business
prospects. The Company does not currently have key man life insurance on any of
these individuals. See "Management."
NO ASSURANCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to the
date of this Prospectus, there has been only a limited market for the Common
Stock and no market for the Warrants. There can be no assurance that such a
market for the Common Stock will develop or that, if developed, such market will
be sustained. The conversion price of the Series A Notes was arbitrarily
determined by the Company and it is not necessarily related to the Company's
asset value, net worth or other established criteria of value. Market prices for
the Common Stock upon conversion of the Series A Notes will be influenced by a
number of factors, including exploration results obtained from the Company's
mineral properties, the Company's ability to acquire additional mineral
properties, quarterly variations in the financial results of the Company and its
competitors, changes in earnings, estimates by analysts, conditions in the
natural resource markets, the overall economy and financial markets and
political factors.
FORWARD LOOKING STATEMENTS AND ASSOCIATED RISK. This Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
statements regarding, among other items, (i) the Company's growth strategies,
(ii) the anticipated production of the Company's properties, and exploration
results from the Company's current and future mineral properties. These
forwardlooking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, certain of which are beyond
the Company's control. Actual results could differ materially from these
forward-looking statements as a result of the factors described herein,
including, among others, exploration results or economic influence. In light of
these risks and uncertainties, there can be no assurance that the
forward-looking information in this Prospectus will in fact transpire or prove
to be accurate.
USE OF PROCEEDS
In December 1996, the Company completed a private placement of its Series A
Notes in the aggregate amount of $1,800,000 in original principal. As of January
1, 1997, $1,800,000 in principal remained outstanding and $47,903.88 in interest
on the Series A Notes was accrued but unpaid. For a period expiring March 1,
1997, the Series A Notes can
-13-
<PAGE> 16
be converted into Units. Upon conversion, the Company will issue one Unit for
each $.50 of converted principal. All accrued interest at the time of conversion
will be paid by the Company. All of the Units registered as part of the
Registration Statement of which this Prospectus is a part are reserved for
issuance upon conversion of the Series A Notes. Other than retiring the
converted Series A Notes, the Company will receive no proceeds from the Units
offered hereby. The Company has used, and intends to continue to use, the
proceeds from the private placement of the Series A Notes to finance initial
geological mapping, geophysical surveys, sampling, trenching, and limited core
drill exploration programs on its Resguardo, Cenizas and Santa Eloisa
properties, costs associated with identification and acquisition of additional
mineral properties and for general working capital. See "Business of the
Company."
PLAN OF DISTRIBUTION
This Prospectus describes the offering of 3,600,000 Units, each Unit
consisting of one Share and one Warrant. All 3,600,000 Units are offered only to
Series A Note Holders upon conversion of their outstanding Series A Notes during
the time which the Registration Statement of which this Prospectus is a part is
effective. Therefore, the Units are offered to the Series A Note Holders on a
"best efforts" no minimum basis.
The offering period will commence on the date the Company receives
approval from the Securities and Exchange Commission and the appropriate state
regulatory bodies and will terminate with the termination of the Registration
Statement's effectiveness.
The Company is unaware of any specific plan of distribution of the
Series A Note Holders following the conversion of the Series A Notes, but
believes that the Units, Shares, Warrants and Common Stock underlying the
Warrants, will be sold at prevailing market prices, without payment of any
underwriting commissions or discounts other than ordinary brokerage transaction
fees. The Company will not receive any proceeds from such sales.
DETERMINATION OF OFFERING PRICE
Prior to any conversions of the Series A Notes, the Common Stock of the
Company traded on the OTC-BB. The conversion price of the Series A Notes was
determined by management and does not necessarily bear any direct relation to
the current market price, asset value or net book value of the Company, the
Common Stock or the Units.
DILUTION
"Dilution" represents the difference between the offering price of the
Common Stock and the pro forma net tangible book value per share of Common Stock
immediately after the completion of an offering. "Net tangible book value" is
the amount that results from subtracting the total liabilities of the Company
from its total tangible assets. In this Offering, the level of dilution will be
increased as a result of the negative tangible book value of the Company's
issued and outstanding Common Stock. The net tangible book value of the Company
as of September 30, 1996 was a deficit of $322,722, or $.05 per share of Common
Stock. Net tangible book value per common share is determined by dividing the
number of common shares outstanding into the tangible net worth of the Company.
Giving effect to the sale of 3,600,000 Shares included in the Units offered
hereby at an offering price of $.49 per Share, the full and complete conversion
of the Series A Notes and the payment of commissions and estimated offering
costs, the pro forma net tangible book value at September 30, 1996 would have
been $1,292,278, or $.13 per share of Common Stock. This represents an immediate
increase in net tangible book value of $.18 per Share of Common Stock to
existing shareholders and an immediate dilution of $.36 per Share of Common
Stock to new investors. The foregoing figures give effect to the issuance of the
Shares pursuant to conversion of the Series A Notes, but do not include the
assigned purchase price of $.01 per Warrant included in the Units. The following
table illustrates this per share dilution:
-14-
<PAGE> 17
<TABLE>
<S> <C> <C>
Offering price per Share ..................................... $.49
Net tangible book value per common share at September 30,
1996.......................................................... $(.05)
Increase in net tangible book value per common share
attributable to new investors on Common Stock................. .18
-----
Pro forma net tangible book value per common share after
offering of Common Shares..................................... .13
----
Dilution in net tangible book value per common share to new
investors..................................................... $.36
----
Dilution per share as a percentage of offering price.......... 73 %
====
</TABLE>
The following table sets forth on a pro forma basis at September 30,
1996, the differences between existing shareholders and new investors assuming
full conversion of the Series A Notes with respect to the number of shares of
Common Stock purchased from the Company, the total consideration paid to the
Company and the average price paid per share:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Per Share
Amount % Amount %
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Existing shareholders...... 6,060,000 62.7% $ 869,986 32.6% $.14
New investors.............. 3,600,000 37.3% 1,800,000 67.4% $.49
--------------------------------------------------------------------
Total...................... 9,660,000 100.0% $2,669,986 100%
======================================================
</TABLE>
The foregoing table assumes no exercise of i) 400,000 warrants granted
to Laminco, ii) 955,000 options granted pursuant to the Company's 1996 Stock
Option Plan and iii) 3,600,000 Warrants included in the Units. As of the date of
this Prospectus there are no options or warrants outstanding to purchase shares
of Common Stock at prices less than the conversion price of the Series A Notes
offered hereby.
DIVIDEND POLICY
The Company has never paid cash dividends and it is not anticipated
that any cash dividends will be paid in the foreseeable future. While the
Company's dividend policy will be based on the operational results and capital
needs of the business, it is anticipated that all future earnings, if any, will
be retained to finance the expansion of the Company's business. Therefore,
purchasers who need immediate and consistent income from cash dividends should
not convert their Series A Notes into the Units offered hereby.
CAPITALIZATION AND SELECTED FINANCIAL DATA
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1996 and as adjusted to give effect i) completion of $1,060,000
Series A Notes privately placed after September 30, 1996, ii) the full and
complete conversion of the Series A Notes into the 3,600,000 Units offered
pursuant to this Prospectus and iii) payment of commissions and estimated
offering costs.
-15-
<PAGE> 18
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
ACTUAL AS ADJUSTED(1)
--------------------------
<S> <C> <C>
Series A Notes........................................... $ 740,000 --
Non-controlling interest................................. 2,500 2,500
Shareholders' equity:
Common Stock, $.001 par value, 20,000,000 authorized;
6,060,000 issued and outstanding; 9,660,000 shares as
adjusted(1).............................................. 48,386 51,986
Additional paid in capital............................... 821,600 2,433,000
Retained earnings........................................ (779,114) (779,114)
------------------------
Total shareholder' equity........................... 90,872 1,705,872
------------------------
Total Capitalization..................................... $ 833,372 1,708,372
========================
</TABLE>
- -----------------------
1. Does not include Common Stock issuable upon exercise of i) 400,000
shares of Common Stock issuable upon exercise of a warrant granted to
Laminco, ii) 955,000 options granted pursuant to the Company's Stock
Option Plan and iii) 3,600,000 Warrants offered as part of the Units
pursuant to this Prospectus.
SELECTED FINANCIAL DATA
The following selected financial information is derived from the
financial statements of the Company included elsewhere herein, and should be
read in conjunction with such financial statements and notes thereto.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA: NINE MONTHS ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
1996(1) 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income.......................... $ 2,152 $ -- $ -- $ --
Net loss................................. 284,049 8,606 9,862 7,570
Loss per common share.................... $ 0.11 $ 0.01 $ 0.01 $ 0.01
Weighted average common shares
outstanding.............................. 2,534,872 1,000,000 1,000,000 565,204
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------
BALANCE SHEET DATA: DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1996 AS ADJUSTED(2)
-----------------------------------------------------
<S> <C> <C> <C>
Working capital (deficit)............ $(3,965) $(330,947) $1,284,053
Total assets......................... 1,035 1,194,178 2,069,178
Total Liabilities.................... 5,000 1,100,806 360,806
Stockholders Equity (deficit)........ $(3,965) $ 90,872 $1,705,872
</TABLE>
1. Reflects operating results of FHL from July 1, 1996, the effective date
of its acquisition. The acquisition of FHL by the Company has been
accounted for at historical cost in a manner similar to pooling of
interest accounting. See "Financial Statements."
2. As adjusted to give effect to i) completion of $1,060,000 Series A
Notes privately placed after September 30, 1996, ii) the conversion of
$1,800,000 in Series A Note principal and iii) the payment of
commissions and estimated offering costs. Does not give effect to (i)
exercise of the Warrants included in the Units offered pursuant to this
Prospectus, (ii) the exercise of warrants to purchase Common Stock
granted to Laminco or (iii) options to purchase 955,000 shares of
Common Stock granted pursuant to the Company's Stock Option Plan.
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<PAGE> 19
PLAN OF OPERATION
The Company is, and plans to continue to be, engaged in the
acquisition, exploration and development of mineral properties, primarily gold
and copper properties located in Latin America. The Company's near term
operational plan is to complete exploration on its three principal mineral
property interests and to pursue the identification and acquisition of
additional mineral properties. The Company has implemented an aggressive plan to
assess new opportunities for the acquisition of additional mineral properties
with the potential to be significant gold and copper producers.
During the next twelve months the Company will be required to pay
$405,000 in lease and purchase option payments in connection with its Resguardo,
Cenizas and Santa Eloisa properties. See "Business of the Company -- The
Properties." In addition, the Company is required to expend $200,000, $300,000
and $500,000 in conducting exploration on its Cenizas Property during 1997, 1998
and 1999, respectively, and $1,000,000 in conducting exploration on its Santa
Eloisa Property before April 30, 1999.
The Company also intends to expend significant additional funds on i)
exploration in excess of contractual commitments, ii) identification and
acquisition of additional mineral properties and iii) general and administrative
costs associated with the implementation of its operational plan. The Company
has the ability to exercise control over the amount and timing of a significant
portion of these additional costs.
It is anticipated that the proceeds from the Series A Notes will
satisfy the Company's cash requirements for six months from the date of this
Prospectus. The Company may extend this date through reducing its current
exploration budget and acquisition activities. To the extent the additional
financial resources discussed below are not available to the Company, the
Company may be required to substantially reduce or eliminate its exploration and
or acquisition activities.
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<PAGE> 20
The Company's current operational plan relies upon the full conversion
of all Series A Notes. In addition, to maintain the Company's current level of
exploration and acquisition activities, the Company will need a significant
portion of the Warrants to be exercised during the second quarter of 1997. The
Company currently anticipates that it will sell additional securities at a price
sufficient to raise approximately $2 million to $4 million, either pursuant to
registration or an exemption from registration under the Securities Act of 1933
(as amended) within 12 months of the date of this Prospectus. If the Company is
successful in obtaining proceeds from a significant number of Warrant exercises
and it is successful in selling additional securities, the Company likely will
expand its property acquisition program and accelerate exploration work on its
current properties.
The Company has experienced operating losses since inception, resulting
in an accumulated deficit position. The Company's financial position and
operating results raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are discussed
above.
During the next 12 months the Company will focus its human and
financial resources on i) exploration of its existing properties, ii)
identification and acquisition of additional mineral properties and iii)
exploration of mineral properties subsequently acquired. The Company does not
anticipate any significant purchases or sales of plants or equipment during the
next twelve months.
Currently, the Company has 11 full time employees. The Company also has
one full time and several part time geological consultants. The Company
anticipates hiring one additional full time employee during the first half of
1997. To the extent the Company is successful in acquiring additional mineral
properties, it may hire one or more employees or consultants on a full time
basis in the technical field.
THE COMPANY
The Company was incorporated under the laws of the State of Florida as
Tri-Way Industries, Inc. on June 27, 1986, for the purpose of seeking,
investigating and acquiring business opportunities. The Company did not engage
in any meaningful operations until on or about November 22, 1989, when the
Company acquired The Rothchild Group, Inc. ("Rothchild Group") as its wholly
owned subsidiary. Following the acquisition, the Company changed its name to The
Rothchild Companies, Inc.
From November of 1989 until mid-1993, the Company, through the
Rothchild Group, operated as a full service advertising agency engaged in the
advertising, marketing and public relations businesses. On October 20, 1993,
however, the Rothchild Group filed for bankruptcy protection under Chapter 7 of
the United States Bankruptcy Code in the Bankruptcy Court for the Southern
District of Florida. After the Chapter 7 liquidation of the Rothchild Group, the
Company did not engage in any meaningful business or commercial activities.
On July 12, 1994, an investment group ("Investment Group") completed
the purchase of an aggregate of 315,598 shares of the Company's Common Stock
representing, at that time, approximately 60% of the Company's issued and
outstanding Common Stock. In addition, the Investment Group provided sufficient
funds in the form of loans to ensure the Company's viability and permit the
Company to pursue possible business combinations, mergers or similar
transactions. These loans were subsequently converted into 419,656 shares of
Common Stock of the Company on December 30, 1994.
On April 8, 1996, via a merger into a corporation formed for that
purpose, the Company completed the transfer of its state of incorporation from
Florida to Delaware. Accordingly, the Company is now a Delaware corporation.
On April 15, 1996, the board of directors of the Company and holders of
a majority of the outstanding Common Stock of the Company authorized a
one-for-twenty (1-for-20) reverse split of the Company's Common Stock, pursuant
to which each 20 shares of the Company's Common Stock outstanding immediately
prior to April 30, 1996 were converted into one share of the Company's Common
Stock. In connection with the reverse split, the Company maintained the par
value of its Common Stock at $.001 per share, and the total number of shares of
Common Stock authorized to be issued by the Company remained unchanged at
20,000,000 shares. The number of issued and outstanding shares of the Company's
Common Stock after the reverse split was 1,000,000 shares. All references to
shares of Common Stock herein have been adjusted to reflect this reverse split.
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<PAGE> 21
On June 4, 1996, Laminco Resources, Inc., a British Columbia
corporation engaged in the business of mineral exploration and development
("Laminco"), in a privately negotiated transaction purchased 600,000 shares of
the Company's Common Stock (representing 60% of the Company's issued and
outstanding Common Stock as of the date of the acquisition) from the Investment
Group. In connection with the completion of the share acquisition by Laminco,
the Company's board of directors and management were reconstituted and the
Company implemented a new business plan discussed hereinafter under "Business of
The Company."
On July 25, 1996, the Board of Directors of the Company and holders of
a majority of the outstanding shares of the Common Stock of the Company,
authorized the Company, by written consent, to take a series of actions. These
actions included: i) changing the Company's name to Fremont Gold Corporation to
better reflect the proposed business of the Company, ii) approval of an Amended
and Restated Certificate of Incorporation, iii) approval and adoption of a Stock
Option Plan to allow the Company to attract and retain the best available
personnel for positions of responsibility within the Company and to provide
additional incentive to employees of the Company in order to promote the success
of the Company's business; and iv) making certain management and director
changes and forming the Company's Compensation and Audit Committees.
On July 30, 1996 the Company completed a private placement of 1,000,000
shares of Common Stock at an offering price of $.20 aggregating $200,000 in
proceeds to the Company. Michael J. Hopley, a director, president and chief
executive officer of the Company, Edward M. Topham, a director and chief
financial officer of the Company and David Shaw, a director of the Company,
purchased 154,000, 73,310 and 138,603 shares, respectively, of the Company's
Common Stock in the private placement. "Management -- Certain Relationships and
Related Transactions."
On July 31, 1996, the Company acquired 3,560,000 of the issued and
outstanding shares of FHL common stock not previously owned by the Company. The
shares of FHL common stock were acquired directly from the FHL shareholders in
exchange for 3,560,000 newly issued shares of the Company's Common Stock, in the
aggregate. Upon completion of the share exchange, the Company directly owned all
of the issued and outstanding shares of FHL's common stock. Michael J. Hopley, a
director, president and chief executive officer of the Company, Edward M.
Topham, a director and chief financial officer of the Company and David Shaw, a
director of the Company, received 418,000, 256,000 and 372,000 shares,
respectively, of the Company's Common Stock in the exchange. These interests in
FHL were disclosed to the members of the Company's board and the acquisition of
FHL was approved by the holders of a majority of the issued and outstanding
Common Stock of the Company. See "Management -- Certain Relationships and
Related Transactions."
On August 1, 1996 the Company completed a private placement of 500,000
shares of its Common Stock to Laminco in consideration of $140,000.
On August 21, 1996, the Company commenced an offering of $1,800,000
principal amount of 10.5% Series A Convertible Notes. On September 30, 1996 the
Company had accepted subscriptions totaling $740,000. In December 1996, the
Company completed the offering of Series A Notes and accepted subscriptions
aggregating $1,800,000. Each Series A Note is convertible, at the option of the
Series A Note Holder, into Units at any time after the Issue Date (as defined in
the Series A Note) prior to the close on the maturity date (March 1, 1997) at
the rate of $.50 of principal per Unit. Each Unit is composed of one share of
Common Stock and one Warrant. Each Warrant is exercisable to purchase one share
of Common Stock at the greater of $1.50 or 75% of the ten day average closing
prices, as quoted on the OTC-BB, immediately preceding the notice of exercise.
The Warrants issued as a component of the Units will be redeemable by the
Company at any time after issuance, upon 15 days written notice to the Warrant
holders, at a redemption price of $.10 per Warrant. The holders of the Series A
Notes, if any, issued Units upon conversion without an effective Registration
Statement under the Securities Act of 1933, as amended ("Act"), covering such
Units, the Common Stock included in the Units, and the Common Stock underlying
the Warrants included in the Units, shall have the right, at any time, to join
with the Company to register the Units, the Common Stock and Warrants included
in the Units, and the Common Stock underlying the Warrants in any Registration
Statement under the Act filed by the Company. Each purchaser of the Series A
Notes has entered into a Voluntary Stock Pooling Agreement ("Pooling
Agreement"). See
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<PAGE> 22
"Description of Securities and Voluntary Stock Pooling Agreements". Under the
terms of the Pooling Agreement each recipient of Units pursuant to conversion of
the Series A Notes has agreed with the Company, the Trustee (as defined in the
Pooling Agreement) and each with the other, that they will deliver the
certificates representing their Shares included in the Units to the Trustee. The
shares of Common Stock issuable upon exercise of the Warrants will not be
subject to the Pooling Agreement. Pursuant to the Pooling Agreement the Trustee
shall hold all certificates subject to release, on a pro-rata basis, as set
forth below:
<TABLE>
<CAPTION>
PRO-RATA SHARES OF COMMON STOCK RELEASE DATE
- ------------------------------- ------------
<S> <C>
25% of Common Stock purchased April 1, 1997
25% of Common Stock purchased July 1, 1997
25% of Common Stock purchased October 1, 1997
the balance of Common Stock purchased January 1, 1998
</TABLE>
On August 23, 1996, the Company's indirectly owned Chilean operating
subsidiary changed its name from Inversiones Mineras Ayl S. A. to Minera Fremont
Gold Chile S.A.
On December 30, 1996, certain unaffiliated shareholders of the Company,
pursuant to an agreement entered into with Laminco, agreed to transferred to
Laminco, an affiliate of the Company, 1,497,000 shares of Common Stock.
On December 31, 1996, Laminco, pursuant to a Share Purchase and Sale
Agreement, sold 2,597,000 of the Company's Common Stock, representing 100% of
the Common Stock owned by Laminco. Each of the purchasers of these shares
entered into a Stockholders Agreement with the Company, the terms of which
restrict the transfer ability of the shares purchased until December 20, 1997.
The Company's registered office and headquarters is 777 Hornby Street,
Suite 2000, Vancouver, British Columbia V6Z 1S4, its telephone number is
604-682-4606. While its headquarters are in Vancouver, the Company has
established an office in Santiago, Chile from which its Chilean exploration
activities are directed.
BUSINESS OF THE COMPANY
GENERAL
The Company is engaged in the acquisition, exploration and development
of mineral properties, primarily gold and copper properties located in Latin
America. Through the extensive mineral exploration experience and Latin American
knowledge and contacts of the Company's officers and directors, the Company is
continuously assessing new opportunities for the acquisition of properties with
the potential to be significant gold and copper producers. Although the Company
is currently in negotiations to acquire, and/or assessing the advisability of
entering into negotiations to acquire, several mineral properties, the Company
has no present commitments or agreements with respect to any property
acquisitions other than those discussed below.
The Company's principal mineral property interests consist of mining
concessions located on three exploration properties in Chile. The Resguardo
Property, the Cenizas Property and the Santa Eloisa Property mining concessions
are currently held through existing leases and purchase options. See "Business
of The Company -- The Properties." The Company's mineral property interests are
held by a Chilean operating company, MFG, of which FHL, a wholly owned
subsidiary of the Company, owns 99% of the issued and outstanding shares of
common stock. Unless otherwise indicated, the term "Company" means collectively
Fremont Gold Corporation, FHL and MFG.
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<PAGE> 23
THE PROPERTIES
Resguardo Property
Summary -- The Resguardo Property covers an area of over 6,000 hectares
(15,000 acres) along 12 kilometers of the highly productive Atacama Fault System
in Region III of northern Chile. The property is on the same structural trend
and about 10 kilometers south of the Mantoverde Mine operated by the
Anglo-American Company. The property is accessible by road, approximately 20
kilometers from the coastal town of Chanoval, and approximately 100 kilometers
from Copiapo, a town with a population of about 150,000. Recent sampling
completed by the Company and the Company's inspection of a series of small
surface mine workings has indicated gold mineralization at Resguardo along a
zone which appears to be at least 3.5 kilometers long. The Company's interest in
the property is held by MFG and consists of a 99-year lease of the mining
concessions on the property owned of record by the Hochschild family of Copiapo.
See "Resguardo Property -- Acquisition of Property."
General Information-- The Resguardo Property consists of 201 separate
mining concessions owned by the Hochschild family of Copiapo. Mining concessions
consist of either exploration concessions or exploitation concessions. See
"Chile -- Mining Concessions." The mining concessions underlying the Company's
lease interest consist of a combination of both exploration and exploitation
concessions. Under the lease, the concession owners retain primary
responsibility for defending the mining concessions leased by the Company
against competing claims. However, because of the Company's interest in those
mining concessions, the Company reviews the status of the concessions on a
monthly basis and, with the cooperation of the owners, makes application for
exploitation status for those exploration concessions which approach their
expiration and assists in the defense of mining concessions against competing
claims.
The property lies in the southern part of the Atacama Desert which is
an extremely arid area with typically little or no precipitation recorded each
year. Therefore, there is only the most sparse vegetation on the property
consisting mostly of small tufts of grass.
Topographically, the property consists of a series of moderately rugged
hills rising from the flat desert floor at an altitude of about 1,000 meters to
peaks of 1,500 to 1,700 meters. The property is easily reached from Chanoval by
automobile in 40 minutes on paved and well maintained dirt roads. In addition,
the property can be easily reached from Copiapo in about two hours by four-wheel
drive vehicles along mostly dirt roads.
Geology and Mineralization-- Selective parts of the property have been
geologically mapped by the Company and the previous concession holders. There
are a series of volcanic and intrusive rocks, mostly andesites and diorites,
outcropping on the property. Adjacent limestones have been subject to varying
degrees of recrystallization and locally, the development of skarn type
mineralization. The local north-south orientation of the Atacama fault system
dominates the structural trends of the property as seen by faulting, fault
breccias and vein mineralization.
The Manoverde Mine, a heap-leach copper mine recently brought into
production by the Anglo-American Company, appears to be on the same structural
trend some 10 kilometers to the north of the property.
Preliminary field examination and a review of previous exploration data
has shown that there are five primary areas of interest on the property, the
Pamelita, Carbonate Hill, Main Zone, Resguardo Norte and Santa Rosa areas.
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<PAGE> 24
Pamelita and Carbonate Hill
The Pamelita and Carbonate Hill areas are located where the east-west
faults and shears intersect the main north-south structural trends. The
north-south structural zone is about 100 meters wide in an east-west direction,
but the northern and southern limits of the mineralization are unknown; however,
small prospect pits continue for several hundred meters to the north of the
structural intersection. In addition, there are numerous prospect pits down
slope for several hundred meters west from the main area of structural
intersection.
Host rocks for the mineralization at Pamelita and Carbonate Hill
include brecciated mylonites, limestones, skarns, altered andesite, and other
rock types. Attitudes, distributions and spatial relationships among the various
rock types are unknown. As on other areas of the Resguardo Property, mafic
volcanic rocks occur west of the limestone/skarn rocks. At least part of the
gold mineralization occurs with quartz veinlets, course crystalline calcite and
secondary iron oxide minerals after pyrite in close spaced shear zones which
both cement and enclose breccia fragments. The widths of the individual zones
vary from about one to five meters. No primary sulfide minerals have been
recognized. The elevated molybdenum values seen in the geochemical samples are
indicative of a hydrothermal system driven by a nearby igneous source.
Main Zone and Resguardo Norte
As in the Pamelita and Carbonate Hill areas, these areas are
characterized by a north-south trending structural zone which appears to be
approximately 50 meters wide consisting of a close spaced fault and breccia
zones cutting skarn and recrystallized limestone. Principal skarn mineralogy in
these areas includes epidote, chlorite, specular hematite, siderite, and lesser
amounts of calcite. No sulfide minerals were observed. Rocks along the west side
of the skarn include basalt and/or aphanitic diorite and gabbro. There is
evidence in the areas that small scale mineral mining and production has been
undertaken in these areas in the past. However, the type of mineralizations
which were being explored and mined is not clear.
Santa Rosa
This area is located about five kilometers south of the Pamelita area
along the southward projection of the main north-south zone. Spatial
relationships among various structural features in this area are not clear.
Brecciated skarn and other types of argillic altered and silicified rocks occur
over a distance of seventy five to 100 meters in an east-west direction. Large
amounts of specular hematite and lesser earthy hematite and small quartz
veinlets occur within fault and/or shear zones and cemented breccia fragments.
Secondary copper oxide and silicate minerals are associated with the hematite
breccias. Grab samples from this area were not conclusive, but did contain
elevated molybdenum which is indicative of fluid emplaced mineralization from a
close magmatic source, similar to the Pamelita area.
Exploration Potential-- The Company believes the Resguardo Property may
present a significant gold target based on its initial surface sampling program.
The apparent strength of the gold mineralization in this area is evident from
the recently taken surface rock samples. The dimensions of the outcrop may
indicate that a substantial resource is possible. If the structure extends to
significant depth, and more than a few hundred meters along strike, the
potential may be large. The physical layout seems amenable to both bulk surface
and underground mining techniques.
Although the Company believes that the Resguardo Property structures
may host an economically minable resource, exploration programs are ongoing and
there can be no assurances that any portion of the Resguardo Property will be
brought into production.
Exploration Program-- The Company continues its initial exploration
program consisting of air photo interpretation, geological mapping and
geophysical surveys of all three areas within the Resguardo Property. In
addition, the Company continues to sample outcrops, extending sample grids as
results warrant, and trenching to extend
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<PAGE> 25
bedrock in certain areas. Based on the results from its ongoing exploration, the
Company has initiated a diamond drill program to enable it to better understand
the geological controls and association of gold mineralization.
As of January 1, 1997, 1,300 rock chip samples have been taken along 25
east-west oriented traverses in the central part of the Resguardo Property. Rock
chip samples were taken at approximately five meter intervals, the traverses
cover a strike length of three kilometers, over the Pamelita, Carbonate Hill,
Main Zone and Resguardo Norte areas. Rock type and geological features are being
noted at each interval.
The assay results from the rock chip samples show zones 15 to 60 meters
in width with highly anomalous to ore grade gold mineralization (assumed to be
one gram of gold per tonne (1 g/t) and above), spread over a three kilometer
strike length. A number of these intervals are open to the east or west.
Earth moving equipment has been on site since the second week of
November 1996, to extend the exposure of bedrock for sampling and to build new
roads and drill pads.
On December 10, 1996, the Company commenced its initial drilling
program. The Company anticipates drilling four initial diamond drill holes under
mineralized locations identified during its surface sampling program. The
Company expects that the diamond drill core samples from this program will
enable its geological staff to better understand both the controls and
association of the gold mineralization.
Acquisition of Property-- On July 17, 1996, MFG entered into a 99-year
lease of the mining concession on the Resguardo Property. Lease payments are to
be made to the concession owners as follows: $75,000 was paid upon execution of
the lease agreement; $60,000 is payable on the lease's first anniversary;
$60,000 is payable on the lease's second anniversary; and $80,000 is payable on
the lease's third anniversary. During the term of the lease, the Company has the
exclusive right to exploit, benefit, explore, develop and smelt minerals from
the property.
The concession owners also are entitled to a net smelter return
production royalty equal to 5% on gold production and 1 1/2% on all other
mineral production from the property during the term of the lease.
No payments to the owners are required between the third and seventh
anniversary of the lease. If financing is not obtained to enable the Company to
place an ore body into production on the Resguardo Property before the lease's
seventh anniversary, the Company will begin paying minimum advance royalties to
the concession owners. These advance royalties will increase annually from
$150,000 per year to $250,000 per year. The first minimum advance royalty
payment may be credited to future net smelter return production royalties due
the owners.
Cenizas Property
Summary-- The Cenizas Property covers an area of approximately 5,700
hectares (14,250 acres), on the West Fissure Fault, a regional geological
structure that controls much of the known gold and copper mineralization in
northern Chile. Located midway between, and on the same structural trend as, the
major copper deposits of La Escondida and El Salvador, the property is 20
kilometers south of the Guanaco gold mine operated by Amax Gold. The property is
in Region II of northern Chile at an altitude of approximately 3,000 meters in
the southern Atacama desert and is easily reached in a three hour drive from the
coastal town of Taltal. Gold mineralization, first discovered in the area by RTZ
Mining and Exploration Limited ("RTZ") with a regional geochemical survey,
occurs on the property in Tertiary volcanics and diorite intrusives. RTZ's
exploration program has consisted of geophysical surveys, trenching, numerous
short rotary drill holes to define gold mineralization under shallow gravel
cover and the drilling of 23 reverse-circulation drill holes. Results of this
work have shown highly anomalous to ore grade gold mineralization in trenches
and drill holes in several areas on the property. The Company's interest in the
mining concessions is held by MFG. See "Cenizas Property - Acquisition of
Property."
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<PAGE> 26
General Information-- The property consists of 15 mining concessions
owned by RTZ. Mining concessions may be either exploration concessions or
exploitation concessions. See "Chile - Mining Concessions". The mining
concessions underlying the Company's interest consist of both exploration and
exploitation concessions. The Company reviews the status of the mining
concessions underlying its interest in the Cenizas Property on a monthly basis
and makes application for exploitation status for those exploration concessions
which approach their expiration period and assists in the defense of those
concessions against competing claims.
Geology and Mineralization-- Gold mineralization occurs in several
broad areas on the Cenizas Property in association with quartz-sericite and
quartz-chlorite-epidote-magnetite alteration in Tertiary age diorite intrusives
and volcanics. The dominant structural controls of the mineralization appear to
be related to the proximity of the north-northeast oriented West Fissure Fault
system.
Exploration Potential-- The Company's management believes that the
Cenizas Property has the potential to host one or more large scale, bulk
minable, gold deposits. This belief is based on the results of the RTZ
exploration work on the property and the field observations of the Company's
technical staff. Strong to moderate strength gold mineralization has been seen
in areas of the property despite the fact that rock outcrops are limited due to
significant areas of the property being covered by a layer of colluvium one to
three meters in depth. These areas of cover largely remain untested by previous
work.
Exploration Program-- The Company has commenced a program of geological
mapping, aerial photography, trenching and sampling. After this initial phase of
work is complete, the Company plans to start a reverse-circulation drilling
program in March or April 1997.
Acquisition of Property-- The Company signed a Letter of Intent with
RTZ on December 13, 1996 whereby the Company can earn an initial 51% interest in
the Cenizas Property mining concessions by making cash payments totaling
$350,000 and completing at least $1,000,000 of exploration work over three
years. Payments to RTZ during the first year total $50,000 with a first year
exploration commitment by the Company of $200,000. The Company will also grant
to RTZ options to purchase shares of its Common Stock as follows: by June 13,
1997 an option to purchase 150,000 shares of Common Stock at a price of $1.50
per share, by December 13, 1997 an additional option to purchase 150,000 shares
of Common Stock at a price of $2.00.
Upon completion of the required payments to RTZ and satisfaction of the
Company's exploration commitments, the Company will be entitled to a 51%
interest in the Cenizas Property mining concessions. At that time, the project
will convert into a joint venture between the Company and RTZ with the Company
serving as manager of the joint venture. It is presently contemplated that at
such time a new entity (the exact form of which has not been specified) will be
formed to hold title to the mining concessions with the Company initially owning
51% of the entity. If at any point after the formation of the joint venture
either the Company or RTZ chooses not to contribute pro-rata to the financial
requirements of the venture, its interest can be diluted to a 2% Net Smelter
Royalty with a maximum value of $3,000,000. Within 90 days of the Company
earning its 51% interest in the Cenizas Property mining concessions, RTZ has an
option to obtain a 51% interest in the joint venture, with the Company retaining
a 49% interest, by committing to fund and complete a bankable feasibility study
within a 30 month period.
Santa Eloisa Property
Summary-- The Santa Eloisa Property covers approximately 5,300 hectares
(13,250 acres) in the Maricunga Gold Mining District located in Region II of
northern Chile. The geological setting of the Santa Eloisa Property is similar
to that of several large porphyry style gold deposits that have been discovered
in the Maricunga District over the past several years. The property is at an
altitude of between 4,200 and 5,300 meters and can be reached in about a five
hour drive, along mostly dirt roads, from the nearby town of Copiapo. The
Company's interest in the Santa Eloisa Property is held by MFG. See "Santa
Eloisa Property--Acquisition of Property."
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<PAGE> 27
General Information-- The property consists of 25 exploration mining
concessions covering approximately 5,300 hectares (13,250 acres). The Company is
responsible for maintaining these mining concessions, and will review their
status on a monthly basis and will make application for exploitation status for
those concessions which approach their expiration period and defend the
concessions against competing claims. See "Chile--Mining Concessions."
The property lies in the southern part of the Atacama Desert which is
very arid area with the minimal annual precipitation occurring mostly as snow in
the winter months (May to October). There is only very sparse vegetation, mostly
consisting of small tufts of grass.
Topographically, the property is very variable but generally consists
of moderately steep, to very steep, hill slopes rising to elevations of a
maximum of about 5,300 meters from valleys at elevations of about 4,200 meters.
Geology and Mineralization-- The Santa Eloisa Property is on the
western slopes of the Jotabeche volcanic complex and therefore geologically the
area is dominated by a sequence of volcanic flows that have been intruded by a
series of Tertiary age sub-volcanic intrusives of mostly diorites and dacite
composition. Strong hydrothermal alteration, particularly argillic alteration,
has been observed over some areas of the property.
Exploration Potential-- The geological setting of the Santa Eloisa
Property is similar to the geological setting of the Refugio Mine some 20
kilometers to the north, operated by Bema Gold Corporation and Amax Gold Inc.,
and the Cerro Casale prospect some 5 kilometers to the south, and the Cerro
Roman prospect 5 kilometers to the east currently being drilled by Arizona Star
Resources Corporation and Bema Gold Corporation. These are porphyry style gold
deposits, with large gold resources in the case of Refugio and Cerro Casale,
typical of a number of deposits that have been discovered in the Maricunga
District over the past several years. Furthermore, a series of gold mineralized
veins have been actively explored from both surface and underground by several
operators on the Santa Cecilia property to the north and adjacent to the Santa
Eloisa Property.
Exploration Program-- A property-wide exploration program is planned to
start in February 1997 and will consist of reconnaissance geological mapping, as
well as rock and geochemical sampling. This work will be guided by the use of
satellite-generated imagery. The initial phase of this work should be completed
by the end of February with follow-up work taking place in March.
Acquisition of Property-- On January 22, 1997 the Company entered into
an agreement ("Santa Eloisa Agreement") with certain mining concession owners
("Santa Eloisa Owners"). Pursuant to the Santa Eloisa Agreement, the Santa
Eloisa Owners will cause a new Chilean corporation to be formed, Minera Santa
Eloisa S.A. ("MSE"), and title to all of the mining concessions on the property
held by the Santa Eloisa Owners will be transferred to MSE. In return, the Santa
Eloisa Owners will receive, in the aggregate, 500 MSE series A shares and 1,500
MSE series B shares, together representing 100% of MSE's equity. The Company,
pursuant to the Santa Eloisa Agreement, will receive: (i) 500 MSE series A
shares from the Santa Eloisa Owners upon payment of $500,000 to the Santa Eloisa
Owners ("Purchase Option Payment"); $30,000 paid on January 22, 1997, $135,000
payable on April 30, 1997, $135,000 payable on November 30, 1997, $100,000
payable on March 31, 1998 and $100,000 payable on March 31, 1999, and (ii) 1,000
newly issued MSE series A shares upon its completion of funding a $1,000,000
exploration work program ("Exploration Commitment") on or before March 31, 1999.
Upon the Company's payment of the Purchase Option and funding its Exploration
Commitment, the Company will own 50% of the capital of MSE in the form of series
A shares, and the Santa Eloisa Owners will own 50% of the capital of MSE in the
form of series B shares. Thereafter, the total number of series B shares cannot
be diluted below 25% of the total equity interest in MSE.
If the Company's exploration results justify, MSE, the Company and the
Santa Eloisa Owners will jointly implement and fund a feasibility study program
("Feasibility Study"). Upon completion of the Feasibility Study, MSE will issue
an aggregate of 3,000 series A shares to the Company and the Santa Eloisa Owners
in proportion to their relative contributions to the costs of the Feasibility
Study.
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<PAGE> 28
Upon completion of the Feasibility Study, MSE and the Company will
jointly seek third-party debt financing of production facilities sufficient to
bring the mining concessions into production. Should a third-party financing
source require the shareholders of MSE to provide additional capital in the form
of subordinated debt or additional equity, the Company has agreed to contribute
on behalf of the series B shareholders their proportionate share of said
additional capital ("Carried Interest"). The Carried Interest will bear an
interest rate of LIBOR plus 5% and will be repaid by the series B shareholders
out of distributions made on the series B shares by MSE. The Company will
receive all series B distributions until the Carried Interest plus accrued and
unpaid interest is paid in full.
The Company will manage the business affairs and daily operations of
MSE and will appoint its directors in proportion to its relative ownership
percentage of MSE.
Notwithstanding the above described structure for bringing the Santa
Eloisa Property into production, there can be no assurances that the Company's
exploration program will identify an ore body capable of economical production.
If at any time the Company determines to cease exploration on the property or
elects not to make payments towards to option, the Company would lose its rights
to explore and develop the property and would forfeit any Purchase Option
Payment installments already made to the Santa Eloisa Owners. During the term of
the Santa Eloisa Agreement, the Company has the exclusive right to exploit,
benefit, explore, develop and smelt minerals from the property.
CHILE
The following information has been compiled by the Company from
governmental and private publications, and advice of the Company's Chilean
counsel.
General Information
Chile is located on the west coast of South America and extends 4,720
kilometers along the Pacific Ocean from the continent's southernmost tip to its
northern border with Peru. To the east, it is bordered by Bolivia and Argentina.
The country is divided into 12 regions and a metropolitan area and covers
756,946 square kilometers. The population is approximately 13.8 million, with
over 5 million people residing in the metropolitan area of Santiago. The
official language of Chile is Spanish.
Governmental Organization
Chile has a presidential system of government with a bicameral
legislature consisting of the Senate and the Chamber of Deputies. The president
is elected directly by the electorate for a term of six years. The Senate
consists of 36 elected and nine appointed senators. Of the nine appointees,
three are selected by the president, two by the Supreme Court, and one by each
of the four Armed Forces. Senators serve for eight years. The Chamber of
Deputies consists of 120 members who serve for four years.
The governmental system is based on the Constitution adopted during the
rule of General Augusto Pinochet. After General Pinochet failed to secure a
further eight-year term as President in a plebiscite held in October 1988,
constitutional reforms were negotiated and then adopted in July 1989. The
reforms received the support of all significant political parties. Under these
reforms, the number of elected Senators was increased from 24 to 36, thereby
diluting the power of the nine appointed Senators. Other reforms included the
reduction of the president's term of office from eight to four years (later
increased to six), increased civilian representation on the National Security
Council and the simplification of amending procedures for the Constitution. The
Constitution was subsequently amended in 1991 to provide for the first election
of municipal councilors and mayors.
General Pinochet's term of office ended March 1990 upon the
inauguration of Mr. Patricio Aylwin who had been elected in December 1989 by
capturing 55% of the vote. Mr. Aylwin was a member of the Christian Democrats
and the candidate of the centre-left coalition, the Democratic Coalition. Mr.
Eduardo Frei was elected president in the
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<PAGE> 29
December 1993 election. Mr. Frei is also a member of the Christian Democrats and
was the chosen candidate of the Democratic Coalition. The next nationwide
congressional election is scheduled for December 1997.
Currency
The official monetary unit of Chile is the peso. The average 1995
nominal exchange rate at 396.5 pesos to the U.S. dollar and the comparable 1994
rate was 420.1 pesos to the U.S. dollar. On January 1, 1997, the exchange rate
was approximately 425.6 pesos to the U.S. dollar. The exchange rate for the peso
is determined by market prices.
The Chilean Central Bank is an independent body charged with sole
control over monetary policy and has the goal of controlling inflation and
maintaining the value of the currency. The current policy of the Central Bank is
to maintain the value of the peso within a band of 10% around an official
reference rate based on a basket of currencies which includes the U.S. dollar,
the Yen and the Deutschmark. The official reference rate is adjusted to take
into account domestic inflation rates and the inflation rates of Chile's major
trading partners.
With a few significant exceptions, foreign currency is freely tradable
in an informal market, the participants in which include individuals, business
entities and exchange houses. The informal market is not available to obtain
foreign exchange for imports, to convert foreign exchange into pesos or to
repatriate profits and capital. Instead, a formal exchange market, comprised of
banks which have received the requisite authorization from the Central Bank,
must be used for these purposes.
The repatriation of profits and capital by investors subject to a
foreign investment regime may require the prior authorization of the Central
Bank. Authorization is routinely granted and it guarantees investors access to
foreign currency through the formal foreign exchange market. See "Foreign
Investment and Tax."
Foreign Investment and Tax
Chile's foreign investment laws are considered to be liberal in
relation to other South American countries. Chile's foreign investment statute
(also know as Decree Law No. 600) regulates various aspects of foreign
investment in Chile and is intended to ensure non-discrimination in relation to
the rights and benefits conferred upon national investors. The statute applies
to foreign individuals and legal entities and to Chilean citizens who reside out
of the country and who transfer foreign capital into Chile. Decree Law No. 600
applies to investments made with freely convertible foreign currency, tangible
assets, technology which may be capitalized, loans associated with foreign
investments and capitalized convertible foreign currency loans.
Investments in Chile by individuals or entities subject to Decree Law
No. 600 which either: (a) exceed U.S. $5 million or the equivalent in other
currencies; (b) relate to sectors or activities normally developed by the
government; (c) concern the social communications media; or (d) are undertaken
by foreign governments, must be approved by the Foreign Investment Committee.
The members of the Foreign Investment Committee include the Minister of the
Economy, the Minister of Finance, the Minister of Foreign Affairs, the Minister
of National Planning, the President of the Central Bank, and, for investments
which relate to ministries which are not represented above, by that
corresponding minister. Other types of investments may be approved by the
Executive Vice President of the Committee with the consent of the Ministry of
Economy.
After approval, the Chilean government, represented by the Minister of
the Economy or by the Executive Vice President of the Committee, and the
investor enter into a contract establishing the terms under which the foreign
investor may transfer capital into Chile. The Company has applied for and
received approval under Decree Law No. 600 to make foreign investments in Chile
up to $5,000,000 over an indefinite period of time. As a result, Foreign
Investment Committee approval of the Company's investments is not yet required.
If and when the Company decides to invest in excess of $5,000,000 in its Chilean
operation such approval will be necessary. The Company is not aware of any
reason
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<PAGE> 30
at this time why such approval would not be granted upon request; however, there
can be no assurances in this regard and if approval is not granted, the Company
operations in Chile would suffer a material adverse effect.
Investments in mining and industrial activities totaling U.S. $50
million or more may obtain the benefit of locking in certain advantages for a
period of 10 to 20 years, including tax laws in effect at the time of the
investment relating to the depreciation of assets, loss carry forwards and
organization expenses. Official authorization may be granted to maintain
accounting records in foreign currencies. The contract with the Foreign
Investment Committee relating to such investments could also confer upon the
investor the right to be governed by the laws and regulations concerning the
free export of goods that are in force at the time the contract is signed and
such additional benefits as the use of offshore accounts to maintain export
proceeds for certain payments, including principal and interest on loans,
charges for supplies, fees for technical assistance and profits. It is possible
for exporters to deposit foreign exchange earnings outside the country and to
remove profits and dividends when required, subject to the balance being brought
back into Chile.
Foreign currency investments are governed by Chapter XIV of the Foreign
Exchange Regulations. Chapter XIV regulates individuals, corporations and other
entities bringing foreign exchange into Chile. Under Chapter XIV, the Central
Bank approves the contribution and issues a certificate. This certificate
permits the holder to dispose of foreign exchange through commercial banks or
other entities within limitations established by the Central Bank. Under Chapter
XIV, profits may be repatriated annually and capital may be repatriated after
one year. Under Decree Law No. 600, profits and interest earned may be remitted
at any time, and capital may be repatriated after one year. As a result,
clearance under Decree Law No. 600 provides some advantage to foreign investors
in Chile, such as the Company.
Foreign investors may carry on business in Chile as individuals or
through one of the various types of entities permitted under Chilean law,
including corporations, limited liability companies, branches of foreign
corporation, limited liability or silent partnerships, general partnerships and
joint ventures. There is no limit on ownership for a foreign party investing in
a Chilean company.
Foreign investors are also granted the option under the Foreign
Investment Statute to choose to pay tax on the profits at the same rate as local
companies, currently estimated to be 35%, but subject to future changes, or at a
rate of 42%, which is guaranteed to remain unchanged for ten years.
Mining Industry
Chile is rich in a wide variety of mineral resources, including copper,
molybdenum, cobalt, silver and gold. Mining accounted for 7.2% of Chile's gross
domestic product in 1995, which was up from 6.7% in 1994.
Of all the minerals with which Chile is endowed, copper is the most
significant. Chile possesses an estimated one-quarter of the world's copper
reserves and is the largest producer of copper in the western world. The largest
single copper producer in Chile is the state-owned corporation, Codelco (Chilean
Copper Corporation). Over the years, copper production has increased
significantly. Copper production was 2.5 million tons in 1995, up significantly
from 2.2 million tons in 1994. Gold production is expected to reach 51.5 tons in
1996, up from 1994 gold production of 38.6 tons, representing a 10% increase in
production over 1993 figures. The 1996 increase is a result of the opening of
three new mines: Refugio in the Region II; Andacollo Oro in the Region IV; and
Fachinal in Region XI. These mines should produce 9.5 tons of gold this year.
Chilean gold production nearly trebled between 1985 and 1995 reaching 44.5 tons
yielding $428.5 million in export earnings.
The Pinochet government encouraged foreign investors to develop copper
mining. In addition, a new mining code came into force in 1983. While Codelco's
production has fallen slightly in the 1990's, increased private participation
and increased foreign investment in the non-state owned sector has increased in
significance.
The export of copper from Chile is authorized by the Chilean Copper
Commission.
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<PAGE> 31
Mining Concessions
Following a longstanding legal tradition, the 1980 Constitution (the
"Constitution") established that the State is the owner of all mineral
resources, but permits the exploration and exploitation of mineral deposits by
private parties through mining concessions. The Constitution also established
that mining concessions are to be granted by the courts with such concessions
having the rights and obligations determined by a Constitutional Organic Law.
For those minerals that are specifically excluded from mining concessions, such
as hydrocarbons, lithium, and ores located offshore or in areas deemed important
to national security, the Constitution provides that exploration and
exploitation can be carried out directly by the State by administrative
concessions or by operating contracts. These administrative concessions and the
operating contracts can be terminated by the State at any time, provided the
corresponding indemnity is paid. The Company does not hold any administrative
concessions.
The 1982 Mining Law, Constitutional Organic Law No. 18097 of 1982 and
the Constitution provide the legal framework for the exploration and
exploitation of minerals in Chile. This law can only be changed with the
approval of 60 percent of both houses of Congress.
Under the 1982 Mining Law, mining concessions may be granted only by
the courts and such concessions constitute interests in real property that can
be mortgaged or transferred. The concession holder also has the right to defend
ownership of the mining concession against the State and third parties.
A Chilean mining concession is a property right, distinct and
independent of the ownership of land on which it is located, even though both
may belong to the same person or entity. If a mining concession is filed on land
owned by third-party, the mining concession holder must negotiate a
"servidumbre" (right of way) with the land owner. If reasonable compensation for
the right of way cannot be negotiated with the land owner, the concession holder
may seek remedies from the local court having jurisdiction in the area in which
the mining concessions are located. There is a strong body of law in Chile which
gives concession owners the right of access and the right to explore and develop
mining concessions.
Mining concessions may be either exploration concessions or
exploitation concessions. The annual fee for an exploration concession is
approximately U.S. $1.00 per hectare and for an exploitation concession
approximately U.S. $5.00 per hectare. An exploration concession is the right to
explore the defined area and to later obtain an exploitation concession over the
area. The application process for an exploration concession (a Pedimentos) takes
approximately six months. Exploration concessions are granted for a two-year
period and may be renewed once for an additional two years provided that upon
such renewal one-half of the area covered by the original concession is
surrendered by the concession holder. It is generally the Company's policy to
file for exploration concessions on properties which have had little or no
exploration work completed. An exploitation concession is the exclusive right to
explore for and exploit minerals from the defined area for an indefinite period.
The application process for an exploitation concession (a Manifestaciones) takes
approximately 18 months to complete. However, the filing of an exploitation
concession by an exploration concession holder prior to expiration of the two
year exploration concession is sufficient to preserve the owner's interest in
the concessions until the exploration concession is granted or denied. The
applicant has the right to proceed with exploration immediately upon filing an
application for a mining concession. It is not necessary to have an exploration
concession prior to an exploitation concession. However, if an exploration
concession is not renewed or an application for an exploitation concession filed
prior to the expiration of an exploration concession, the exploration concession
is lost. Also, exploitation activities are impermissible without an exploitation
concession. If exploitation activities occur prior to the grant of an
exploitation concession, the existing exploration concession could be lost.
Under the Chilean claims system, a claimant may file on top of ("top
filed") an existing concession. All claims filed under the claims procedure
gazetted (published) in the Mining Bulletin which is printed monthly and
subscribed to by the Company. If a claim holder is top filed, the top filer does
not have a preferential right to the concession unless the original concession
holder lets the concession lapse for lack of payment of patents or lack of
defense. All claim filings can be challenged when made and, with respect to an
exploitation concession, an annulment may be requested
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<PAGE> 32
by the holder of preexisting claims for a period of four years from the date of
publication of the grant. If a top filed claim is not challenged, the prior
granted concession loses priority upon lapse. Concessions can lapse, and a top
filer gain priority, in the following primary ways: (i) an exploration
concession expires after two years if it is not renewed or converted to an
exploitation concession; (ii) if an exploration concession is renewed and
one-half of the original claim abandoned as required, a top filer gains priority
on the abandoned portion of the concession; (iii) failure to pay any patents for
the concession; or (iv) failure to defend an exploration concession against a
top filed claim for a period of four years following publication of the grant of
the top filed concession. Even if a concession is defended, there is a potential
for the prior concession to lose priority to the top filed claim if the courts
determine that the prior concession had been improperly filed under the claims
procedures.
The Company has instigated a program to review, on a monthly basis, all
newly-published claims against the Company's claims to determine if a top filing
situation exists. If a top filing situation is found during the Company's
systematic review of newly-published claims, the Company is prepared to take
appropriate action to defend its claims position. The Company is not aware of
any additional material third party top filing situations on its properties.
Environmental Regulation
Environmental matters are governed by a new environmental policy system
which includes permitting or licensing procedures. Part of the new environmental
policy requires mining companies to submit an environmental impact statement to
the State for approval prior to bringing a mine into production. In addition,
prior to commencing production mining, companies must assume liability for
environmental damage caused by the producing mine.
ENVIRONMENTAL POLICY
The Company is committed to balancing good stewardship in the
protection of the environment with the need for economic growth. In particular,
it is the Company's policy to measure, maintain and improve its compliance with
environmental laws and regulations, to place a high priority on environmental
considerations in planning, exploring, constructing, operating and closing
facilities. Also, the Company places primary responsibility for compliance with
environmental laws with operations management. In the absence of any regulation,
the Company's policy is to recognize environmental risks and manage these risks
in a cost-effective manner that protects the environment and the Company's
economic future. It is also the Company's policy to promote employee involvement
in implementing its environmental policy and to encourage employee reporting of
suspected environmental problems. There are no environmental regulation issues
which to the Company's knowledge have an adverse impact on the current
exploration programs of the Company. To the Company's knowledge, its proposed
operations are in compliance with applicable environmental laws.
COMPETITION
The mineral exploration and mining businesses are competitive in all of
their phases. The Company competes with numerous other companies and individuals
in a search for and the acquisition of attractive mineral properties. Many of
these companies possess greater financial and technical resources. The Company's
ability to develop reserves in the future will depend not only on its ability to
develop its present properties, but also on its ability to select and acquire
suitable prospects for mineral exploration.
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<PAGE> 33
EMPLOYEES
At January 1, 1997, the Company employed 11 individuals on a full time
basis. In addition, the Company has one full time and several part time
geological consultants. The Company anticipates hiring one additional full time
employee during the first half of 1997. To the extent the Company is successful
in acquiring additional mineral properties, it may hire one or more employees or
consultants on a full time basis in the technical field. The Company intends to
utilize the services of outside technical and professional firms and individuals
on a contractual basis to perform specific work.
LITIGATION
There are no material pending legal proceedings to which the Company is
or is likely to be a party or of which any of its subsidiaries or properties are
or are likely to be the subject.
MANAGEMENT
The following table sets forth the names, ages and positions of the
directors and executive officers of the Company. A summary of the background and
experience of each of these individuals is set forth after the table.
NAME AGE POSITION
- ---- --- --------
Michael J. Hopley 49 Chairman of the Board, Chief
Executive Officer and President
Edward M. Topham 39 Director, Chief Financial Officer,
Secretary, Treasurer
David Shaw 44 Director
Roberto L. Partarrieu 40 General Manager - Minera
Fremont Gold Chile, S.A.
Roberto Ossandon 39 President - Minera Fremont Gold
Chile, S.A.
Michael J. Hopley, has been a Director, Chief Operating Officer and
President of the Company since June 4, 1996. On July 23, 1996, Mr. Hopley become
the Company's Chief Executive Officer. From 1989 to May 1996, Mr. Hopley served
as Vice President of Exploration and Corporate Development for Bema Gold
Corporation, a publicly held exploration and development company with operations
in Chile, Argentina, Venezuela and the United States. Mr. Hopley is a geologist
with over 25 years experience in gold exploration worldwide. After graduating in
1970 with an honors degree in geology from London University he spent eight
years with Consolidated Gold Fields in Great Britain, the United States and
Canada.
Edward M. Topham, has been Chief Financial Officer, Secretary and
Treasurer since August 1, 1996 and a Director since January 22, 1997. From March
of 1995 through March 1996, Mr. Topham was a director and chief financial
officer of Range Star Telecommunications, Ltd., a publicly held wireless
communications company. Mr. Topham is co-founder of Motorsports Development
Corporation and served as director and chief financial officer from January 1994
through March 1996. From June 1992 through January 1994, Mr. Topham was
executive vice president, chief financial officer and a director of Action
Performance Companies, Inc., a publicly held company engaged in manufacturing
and marketing of motor sports related products. From April 1989 to June 1992,
Mr. Topham was a principal in the investment banking firm of Kachina Capital
Corporation. From March 1988 to April 1989, he was president and director of
International Leisure Enterprises, Inc., a publicly held company engaged in the
development,
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<PAGE> 34
ownership and sales of resort properties. From December 1984 to March 1988, he
was vice president of corporate finance of Fitzgerald De Armann and Roberts,
Inc. and its predecessor, Century Capital Corporation, an investment banking and
securities brokerage firm. Prior to that time, Mr. Topham was engaged in public
accounting with Peat Marwick Mitchell & Co. (now KPMG Peat Marwick).
David Shaw, has been a Director of the Company since June 4, 1996. From
December 1995, to present Mr. Shaw has served as President of Yuma Gold Mines,
Inc., a publicly held exploration and development company. In addition, Mr. Shaw
holds board positions with Kilimantan Gold Ltd. and Keylock Resources Ltd., both
publicly held exploration and development companies. From November 1993 to
December 1995, Mr. Shaw served as Senior Mining Analyst, Corporate Finance,
Natural Resource Group, Yorkton Securities Ltd. From August 1991 to November
1993, Mr. Shaw served as President of Bema Resource Management Ltd. a mineral
exploration and development company. From January 1990, to November 1991, Mr.
Shaw was in independent consultant providing technical and financial evaluation
services of base and precious metal exploration and development projects.
Previously Mr. Shaw served eight years with Chevron Canada Resources Ltd. Mr.
Shaw graduated with a B.S. from the University of Sheffield, U.K. and Ph.D.
Structural Geology from Carlton University, Ottawa, Canada.
Roberto E. Partarrieu, has been General Manager and director of Minera
Fremont Gold Chile S.A. since January 1996. From June 1992 to present, he has
been a director of a consulting group that assists North American companies
locate business opportunities in Latin America. Mr. Partarrieu, from May 1995 to
May 1996, was general manager of Minera Valle Dorado Ltd., a subsidiary of Yuma
Gold Mines Ltd., a publicly held natural resource company. From 1986 to 1992 Mr.
Partarrieu was commercial officer at the Canadian Embassy in Santiago, Chile and
assisted Canadian mining companies invest and commence business operations in
Chile, with country risk analysis, as well as, introductions to local businesses
and government officials. Mr. Partarrieu has a B.A. and M.A. in Economics from
George Mason University located in the United States and is fluent in English,
Spanish and French.
Roberto Ossandon, has been President and Director of Minera Fremont
Gold Chile S.A. since January 1996. Mr. Ossandon, since January 1981, has been
senior partner of the law firm Ossandon, Uribe & Hubner located in Santiago,
Chile. Mr. Ossandon's law firm is legal counsel to Placer Dome Sud America
Limited, Baker Hughes Corporation (Houston), Citibank N.A., Data General S.A.,
Keystone Food Corporation (Pennsylvania), Kintetsu World Express (New York),
McDonalds Corporation and Merrill Lynch Multinational Investment Portfolio
(Luxemburgo). Mr. Ossandon is a member of the Chilean Bar Association,
International Bar Association and the International Association of Young Lawyers
(AIYA). Mr. Ossandon is a board member of numerous corporations and former
General Secretary and currently Vice President of Renovacion National political
party in Chile. Mr. Ossandon is a member of the American and Canadian Chamber of
Commerce. Mr. Ossandon graduated from the University of Chile Law School (LL.B.
Maximum Distinction.).
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
received for services rendered in all capacities to the Company for the years
ended December 31, 1994 and 1995, and for the nine months ended September 30,
1996 by Michael J. Hopley, current CEO and President and Mr. Norman Becker,
former President. No other executive officers compensation exceeded $100,000
during these time periods. No restricted stock awards, stock options, long term
incentive plan payouts or stock appreciation rights were granted for the years
ended December 31, 1994 and 1995.
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<PAGE> 35
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payments
------ --------
Securities
Restricted Underlying
Name of Individual Other Annual Stock /Options/ LTIP All Other
and Principal Position Year Salary Bonus Compensation Award(s) SARs Payouts Compensation
- ---------------------- ---- ------ ----- ------------ -------- ---- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael J. Hopley(1) 1996(2) $45,993 -0- -0- -0- 150,000 -0- -0-
President, CEO
Norman H. Becker 1996(4) -0- -0- -0- -0- -0- -0- -0-
President(3) 1995 -0- -0- -0- -0- -0- -0- -0-
1994 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
- ----------
1. Mr. Hopley has been an executive officer of the Company since June 4,
1996.
2. Represents nine months ended September 30, 1996.
3. Mr. Becker resigned as President of the Company on June 4, 1996.
4. Represents compensation for period ending June 4, 1996.
No options were granted during the fiscal year ended December 31, 1995.
The following table sets forth the options granted to the Company's executive
officers during 1996 pursuant to its 1996 Stock Option Plan. See "Management --
Stock Option Plan".
OPTION GRANTS DURING FISCAL YEAR 1996
<TABLE>
<CAPTION>
Number of Shares % of Total Options
Underlying Granted in Fiscal Exercise Price
NAME Options Year 1996 ($/sh) Expiration Date
---- ------- --------- ------ ---------------
<S> <C> <C> <C> <C>
Michael J. Hopley 150,000 15.7% $1.28 11/11/01
Edward M. Topham 150,000 15.7% $1.28 11/11/01
Roberto Partarrieu 100,000 10.5% $1.17 09/27/01
</TABLE>
EMPLOYMENT AGREEMENTS
On June 4, 1996, the Company entered into an employment agreement with
Michael J. Hopley. The agreement is for a one year term and provides for the
payment of an annual salary of $97,200 to Mr. Hopley. After one year the
agreement may be terminated without cause by either party. Mr. Hopley may
terminate upon 30 days notice. The Company may terminate subject to a severance
salary equal to one months salary for each two months of engagement to a maximum
of six months salary. Further, the agreement provides for the payment of a two
years salary if Mr. Hopley is terminated without cause in connection with a
change in control, as defined by the agreement, of the Company and related
change in the constitution of the member of the board of directors of the
Company.
On November 20, 1996, MFG entered into an employment agreement with
Robert Partarrieu. The agreement may be terminated by either part upon 30 days
written notice. Further, the agreement provides for an annual salary of $80,000
and a severance salary of one month salary for each year employment if the
agreement is terminated by Mr. Partarrieu and six months salary if terminated by
MFG.
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<PAGE> 36
DIRECTORS FEES
Directors do not receive compensation for serving as members of the
Company's Board of Directors, but are reimbursed for their expenses in attending
meetings of the Board.
STOCK OPTION PLAN
The Company's stockholders have adopted the 1996 Incentive Stock Plan
(the "Plan") which allows the Board of Directors to provide the Company's key
employee with incentive compensation commensurate with their positions and
responsibilities. The Plan permits the grant of incentive equity awards covering
up to 1,000,000 shares of Common Stock and will be administered by the
Compensation Committee of the Board of Directors (the "Committee"), two or more
members of which will be independent directors. The Plan provides for the grant
of non-qualified stock options and incentive stock options (collectively, the
"Incentive Awards"). Key employees of the Company and its subsidiaries,
including officers who are not also members of the Board of Directors, will be
eligible to participate in the Plan.
The Board of Directors may at any time amend the Plan in any respect;
provided, that, without the approval of the Company's shareholders, no amendment
may (i) increase the number of shares of Common Stock that may be issued under
the Plan, (ii) materially increase the benefits accruing to individuals holding
Incentive Awards, or (iii) materially modify the requirements as to eligibility
for participation in the Plan.
Except in certain limited cases, the exercise price of each incentive
stock option ("ISO") granted under the Plan will be the fair market value (as
defined in the Plan) of a share of Common Stock on the date on which such ISO is
granted. The exercise price of each non-qualified stock option ("NQO") granted
under the Plan will be determined by the Committee. NQO's and ISO's are referred
to herein as "Options". Except in certain limited cases regarding grants of
ISO's, each ISO and NQO is exercisable for a period not to exceed ten years. The
Committee will establish (i) the term of each Option and (ii) the time or period
of time in which the Option will vest.
On a change in control of the Company (a "Change in Control"), all
Options then issued and outstanding will become immediately exercisable. A
Change in Control is (i) a "change in control" as that term is defined in the
federal securities laws, (ii) the acquisition by any person, after the effective
date of the Plan, of 20% or more of the shares of voting securities of the
Company, (iii) certain changes in the composition of the Board of Directors as a
result of a contested election for positions on the Board of Directors or (iv)
any other event which the Committee determines to constitute a change in control
of the Company.
INDEMNIFICATION
The Company's Amended and Restated Certificate of Incorporation and
Bylaws require the Company to indemnify each of its past, present and future
officers and directors against liabilities and reasonable expenses incurred in
any action or proceeding by reason of such persons being or having been an
officer or director of the Company, of any other corporation for which he of she
serves as such at the request of the Company, to the fullest extent permitted by
Delaware law, including those circumstances in which indemnification would
otherwise be discretionary. However, indemnification is limited to officers and
directors who have acted in good faith and in a manner they reasonably believed
to be in the best interest of the Company and with respect to any criminal
action had no reasonable cause to believe the conduct was unlawful.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 4, 1996, Laminco Resources, Ltd. ("Laminco"), in a privately
negotiated transaction, purchased 600,000 shares of the Company's Common Stock
(representing 60% of the Company's issued and outstanding Common Stock) from
unaffiliated group of individuals. In connection with the completion of this
share acquisition, the
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<PAGE> 37
Company's board of directors and management were reconstituted and the Company
implemented a new business plan discussed above under "The Company--Current
Business Operations" and "Business of The Company."
On June 4, 1996, the Company entered into an employment agreement with
Michael J. Hopley. The agreement is for a one year term and provides for the
payment of an annual salary of $97,200 to Mr. Hopley. See "Management--
Employment Agreements."
On June 14, 1996, FHL, now a wholly owned subsidiary of the Company,
entered into an employment agreement with Michael J. Hopley. The agreement was
for a one year term and provided for the payment of an annual salary of $60,000.
Further, the agreement provided for a $15,000 one time bonus, payable upon
execution of the employment agreement by FHL. The agreement also provided for
the issuance of 418,000 shares of FHL stock in lieu of the bonus payment. In
connection with the Company's July 31, 1996 acquisition of FHL, Mr. Hopley
agreed to waive payment of any salary under the employment agreement for the
remainder of its term.
On June 14, 1996, Edward M. Topham, a director and chief financial
officer of the Company, advanced FHL $60,487 pursuant to a Loan Agreement. The
loan agreement provided for repayment upon demand with interest accruing at 10%
per annum. In consideration of this loan, Edward M. Topham was issued 60,000
shares of FHL's common stock. On July 31, 1996, the Company acquired 100% of
FHL. On December 5, 1996, December 6, 1996 and January 15, 1997 the Company, on
behalf of FHL, its wholly owned subsidiary, paid $12,000, $12,000 and $12,000
respectively plus $1,065.20 accrued interest to Mr. Topham.
On June 4, 1996 and June 20, 1996, Laminco, a significant shareholder
of the Company until December 31, 1996, advanced an aggregate of $200,000
pursuant to a loan agreement with the Company. Pursuant to the Loan Agreement,
the Company issued Laminco a promissory note repayable upon demand with interest
accruing at the rate of 10% annually. As additional consideration, the Company
issued Laminco a warrant to purchase 400,000 shares of the Company's Common
Stock for a period of two years at a price of $1.00 per share and granted
Laminco certain rights to participate in all future financing completed by the
Company on the same terms offered third parties, subject to termination under
certain conditions relating to changes in control and management of Laminco. On
both July 31, 1996 and October 3, 1996 the Company repaid $100,000 plus
$2,547.60 accrued interest to Laminco.
On June 20, 1996, the Company advanced $125,000 pursuant to a loan
agreement to FHL. The Loan Agreement provided for repayment upon demand with
interest accruing at 10% per annum. In consideration of this loan, the Company
was issued 125,000 shares of FHL's common stock.
On June 30, 1996, the Company entered into a letter of intent to
acquire 100% of the issued and outstanding shares of common stock FHL.
On July 30, 1996 the Company completed a private placement of 1,000,000
shares of Common Stock at an offering price of $.20 aggregating $200,000 in
proceeds to the Company. Michael J. Hopley, a director, president and chief
executive officer of the Company, Edward M. Topham, a director and chief
financial officer of the Company and David Shaw, a director of the Company,
purchased 154,000, 73,310 and 138,603 shares, respectively, of the Company's
Common Stock.
On July 30, 1996, Laminco purchased 500,000 shares of the Company's
Common Stock for an aggregate purchase price of $140,000.
On July 31, 1996, the Company acquired 3,560,000 of the issued and
outstanding shares of FHL common stock not previously owned by the Company. The
shares of FHL common stock were acquired directly from the FHL shareholders in
exchange for 3,560,000 shares of the Company's Common Stock which were issued to
FHL stockholders. All 3,560,000 shares of Common Stock issued by the Company
were subject to restrictions on transfer pursuant to a pooling arrangement
between the FHL shareholders and the Company. See "Description of
Securities--
-35-
<PAGE> 38
Voluntary Pooling Agreements." Upon completion of the share exchange, the
Company directly owned all of the issued and outstanding shares of FHL's common
stock. Michael J. Hopley, a director, president and chief executive officer of
the Company, Edward M. Topham, a director and chief financial officer of the
Company and David Shaw, a director of the Company, received 418,000, 256,000 and
372,000 shares, respectively, of the Company's Common Stock in the exchange.
These interests in FHL were disclosed to the members of the Company's board and
the acquisition of FHL was approved by the holders of a majority of the issued
and outstanding Common Stock of the Company.
In September 3, 1996, MFG paid Roberto L. Partarrieu, general manager
of MFG, $140.000 as reimbursement of costs incurred over the period April 1994
through July 31, 1996 associated with identifying mineral property acquisition
targets in Chile. The expense reimbursement was used by Mr. Partarrieu to repay
advances made by Laminco to Mr. Partarrieu to perform those services.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of January 1, 1997, and as
adjusted to reflect the conversion of the Series A Notes and issuance of the
Shares and Warrants included in the Units by i) each director and executive
officer, ii) all directors and officers as a group, and iii) each person known
by the Company to own more than 5% of the Common Stock. Shares are beneficially
owned by a person if he, she or it currently owns such Shares or has or will
have the right to acquire such Shares within 60 days of the date of this
Prospectus.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
----------------------------------------------------------------------
PERCENTAGE PERCENTAGE
SHARES BEFORE THE BEFORE THE SHARES AFTER THE AFTER THE
NAME AND ADDRESS (1) OFFERING OFFERING OFFERING (2) OFFERING
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael J. Hopley (3)(4) 635,139 10.3% 705,972 6.8%
Edward M. Topham (5) 468,810 7.6% 468,810 4.8%
Roberto L. Partarrieu (6) 325,000 5.3% 445,000 4.5%
Roberto Ossandon -0- -0- 40,000 0.4%
David Shaw (7) 523,103 8.5% 523,103 5.4%
Tom Wikstrom 406,000 6.7% 706,000 7.2%
Robertson Stephens Orphan Fund (8) 400,000 6.6% 2,400,000 22.5%
Regional Investments, Inc. 556,000 9.2% 556,000 5.8%
Rapid Capital, Inc. 372,000 6.1% 372,000 3.9%
Private Banking Advisory Services Ltd. -0- -0- 1,000,000 9.8%
------------------------------------------------------------------
All directors and executive officers and 3,686,052 56.9% 7,179,385 53.9%
5% shareholders as a group (10 persons)
</TABLE>
1. Except as otherwise noted below, each person or entity named in the
table has the sole voting and investment power with respect to all
Common Stock shown as beneficially owned, subject to applicable
community property laws.
2. Includes shares of Common Stock included in the offered Units and
shares of Common Stock issuable upon exercise of Warrants included in
the offered Units, and assumes full conversion of the Series A Notes
into the Units offered hereby.
3. Includes a one-third interest in shares of Common Stock held by HRG, an
investment vehicle one-third of which is beneficially owned by Mr.
Hopley.
4. Includes 112,500 shares of Common Stock issuable upon exercise of stock
options granted pursuant to the Company's 1996 Stock Option Plan.
5. Includes 112,500 shares of Common Stock issuable upon exercise of stock
options granted pursuant to the Company's 1996 Stock Option Plan.
6. Includes 75,000 shares of Common Stock issuable upon exercise of stock
options granted pursuant to the Company's 1996 Stock Option Plan.
-36-
<PAGE> 39
7. Includes 112,500 shares of Common Stock issuable upon exercise of stock
options granted pursuant to the Company's 1996 Stock Option Plan.
8. Includes shares of Common Stock owned by Robertson Stephens Offshore
Orphan Fund, an affiliate of Robertson Stephens Orphan Fund.
DESCRIPTION OF SECURITIES
The following descriptions are qualified in their entirety by reference
to the detailed provisions of the Company's Amended and Restated Certificate of
Incorporation, Bylaws and form of Warrant to be issued as part of the Units,
copies of which will be furnished to any prospective investor upon written
request.
COMMON STOCK
The Company's authorized capital consists of 20,000,000 shares of
Common Stock, $.001 par value, of which 6,060,000 are issued and outstanding as
of January 1, 1997. Assuming full conversion of the Series A Notes into the
Units offered hereby, 9,660,000 shares will be issued and outstanding, 3,600,000
shares will be reserved for issuance upon the exercise of the Warrants included
in the Units, 1,000,000 shares will be reserved for issuance upon exercise of
options granted under the Company's Stock Option Plan, 400,000 shares will be
reserved for issuance upon the exercise of warrants issued to Laminco in
connection with a Loan Agreement dated June 20, 1996 and 300,000 shares will be
reserved for issuance pursuant to options which have been or will be issued
pursuant to a Letter of Intent with RTZ.
Holders of shares of Common Stock are entitled to one vote for each
share of Common Stock held of record on all matters submitted to a vote of
shareholders. Each share of Common Stock is entitled to receive dividends as may
be declared by the Company's Board of Directors out of funds legally available.
In the event of liquidation, dissolution of winding up of the Company, the
holders of Common Stock are entitled to share ratable in all assets remaining
after payment in full of all creditors of the Company. The issued and
outstanding shares of Common Stock are, and the shares of Common Stock included
in the Units and issuable upon exercise of the Warrants, when issued will be,
fully paid and non-assessable.
WARRANTS
General. Each Warrant is exercisable to purchase one share of Common
Stock at an exercise price equal to the greater of $1.50 or 75% of the average
closing price for the Company's Common Stock on the OTC-BB during the ten
trading days preceding the exercise of the Warrant. Each Warrant will be
immediately exercisable upon issuance and will expire September 30, 1997. The
Company will not issue fractional shares upon exercise of the Warrants but
instead will pay the cash value of any fractional shares otherwise issuable upon
exercise. The exercise price, number and kind of shares and other securities
purchasable upon exercise of the Warrants are subject to adjustment under
certain circumstances, including stock splits, mergers, reclassifications and
stock dividends. The Company may redeem the Warrants at a price of $.10 per
Warrant, commencing upon the date of the effectiveness of the Registration
Statement of which this Prospectus is a part, upon fifteen (15) days' written
notice to the Warrant holders.
The holders of the Warrants are protected against dilution of their
interests in the event of stock splits, mergers, reclassifications and stock
dividends. In the event of liquidation, dissolution or winding-up of the Company
prior to exercise of the Warrants, the Warrant holders are not entitled to
participate in any distribution of assets, but would receive notice thereof.
Holders of Warrants will not have any voting power, preemptive rights, or any
right to consent to or receive notice as stockholders in respect of any meeting
of stockholders or other rights as stockholders of the Company and are not
entitled to dividends.
The Warrants are in registered form and when detached from the Unit
they may be presented for transfer, exchange or exercise at any time on or prior
to their expiration, at which time the Warrants become wholly void and
-37-
<PAGE> 40
of no value. However, the Warrants can not be assigned, sold, hypothecated or
otherwise transferred in any manner without the Company's prior written consent.
The Company does not plan to list the Warrants on any securities exchange.
Tax Consequences. The following summary is a general discussion of the
anticipated federal income tax and other consequences of ownership of the
Warrants. This summary does not include all of the tax consequences that may be
relevant to a particular investor in light of his or her circumstances or to
certain types of investors subject to special treatment under the United States
federal income tax laws (such as tax exempt entities, insurance companies and
foreign persons), neither does it discuss state, local or foreign income tax or
other tax laws that may affect ownership of these securities. Purchasers of the
Warrants should consult their own tax advisers with respect to the specific tax
consequences to such purchasers of the purchase, ownership, exercise and
disposition of the Warrants.
The assigned purchase price for the Warrants is $.01 per Warrant. The
sale of a Warrant will result in capital gain or loss, provided it is a capital
asset to the holder and the shares underlying the Warrant would be a capital
asset to the holder, if acquired by him or her. Such capital gain or loss will
be long-term if the Warrant has been held for more than one year at the time of
sale or exchange.
Provided that a Warrant is a capital asset in the hands of an investor
(and the shares underlying the Warrant would be a capital asset to the investor
if acquired by him or her), the repurchase or redemption of a Warrant by the
Company should be treated as a sale or exchange of a capital asset, and any gain
or loss recognized on the transaction should be capital gain or loss.
An adjustment to the conversion ratio with respect to a Warrant or the
exercise price of the Warrants, or the failure to make such adjustment, may,
under certain circumstances, be deemed a taxable distribution to the holder of
the Warrant under Section 305 of the Internal Revenue Code, as amended. Due to
the anti-dilution and other provisions contained in the Warrants, no assurance
can be given that a subsequent adjustment to the exercise price of the Warrants
or to the number of shares issuable upon exercise of the Warrants, or the
failure to make such an adjustment, will not be deemed a taxable distribution to
the holders of Warrants.
A Holder of the Warrants will not recognize any capital gain or loss
upon exercise of the Warrants. The adjusted basis of a share acquired upon
exercise of a Warrant would be equal to the adjusted basis of the Warrant plus
the exercise price. The holding period of shares acquired upon exercise of the
Warrants will begin on the date of exercise of the Warrants, and will not
include the period during which the Warrants were held. On the lapse of a
Warrant without exercise, the holder will recognize a loss to the extent of the
holder's adjusted basis in the lapsed Warrant. Such a loss will be a capital
loss if the Warrant is a capital asset in the hand of the holder and if the
shares underlying the Warrant would be a capital asset in the hands of the
holder if acquired by him or her.
THE ABOVE DISCUSSION DOES NOT ADDRESS ALL THE TAX CONSIDERATIONS THAT
MAY BE RELEVANT TO A PARTICULAR PURCHASER. ACCORDINGLY, ALL PROSPECTIVE
PURCHASERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE WARRANTS.
VOLUNTARY STOCK POOLING AGREEMENTS
Each purchaser of the Series A Notes, as a condition precedent to his,
her or its purchase, entered into a Voluntary Pooling Agreement ("Pooling
Agreement"). Under the terms of the Pooling Agreement each purchaser of Series A
Notes severally agreed with the Company, the Trustee (as defined in the Pooling
Agreement) and each with the other, that they will deliver the certificates
representing their respective shares of Common Stock issued as part of the Units
upon conversion of the Series A Notes to the Trustee. Pursuant to the Pooling
Agreement the Trustee will hold all certificates representing the Shares subject
to release, on a pro-rata basis, as set forth below:
-38-
<PAGE> 41
<TABLE>
<CAPTION>
PRO-RATA SHARES OF COMMON STOCK RELEASE DATE
- ------------------------------- ------------
<S> <C>
25% of Common Stock purchased April 1, 1997
25% of Common Stock purchased July 1, 1997
25% of Common Stock purchased October 1, 1997
the balance of Common Stock purchased January 1, 1998
</TABLE>
Shares of Common Stock held by the Trustee are not transferable. However the
owners of such shares will continue to possess all other rights, including the
right to vote, attendant to their shares.
In connection with the Company's acquisition of FHL, all FHL
shareholders executed a Pooling Agreement (the "FHL Pooling Agreement') with the
Company which restricted the transfer of the 3,560,000 shares of the Company's
Common Stock issued in the acquisition (the "Acquisition Shares"). Pursuant to
the FHL Pooling Agreement, transfer of the Acquisition Shares was prohibited.
However, on a quarterly basis commencing February 1, 1997, 25% of the
Acquisition Shares are to be released from the transfer limitations imposed by
the FHL Pooling Agreement. On November 1, 1997, all of the Acquisition Shares
will have been released. Once released, however, the Acquisition Shares may only
be transferred pursuant to an effective registration statement or an available
exemption from registration under the Act.
On December 31, 1996, in connection with a Share Purchase and Sale
Agreement between Laminco and an unaffiliated syndicate of purchasers, Laminco
sold 2,597,000 shares of the Company's Common Stock; 1,497,000 of such shares
had been released early by the Company from the transfer restrictions of the FHL
Pooling Agreement. Each purchaser in this transaction entered into a
Stockholders' Agreement with the Company, the terms of which restrict the
transferability of the shares purchased until December 20, 1997.
SHARES ELIGIBLE FOR FUTURE SALE
Assuming full conversion of the Series A Notes into the 3,600,000 Units
offered hereby, 9,660,000 shares of Common Stock will be issued and outstanding.
Of these shares i) 22,752 shares were sold pursuant to a Form S-18 Registration
Statement filed with the Commission on September 15, 1986 and are freely
transferable without restriction or further registration under the Securities
Act ii) 2,212,248 shares were sold pursuant to an exemption from registration
under Section 4(2) of the Securities Act and Regulation D promulgated thereunder
and accordingly are "Restricted Shares", as the term is defined in Securities
and Exchange Commission (the "Commission") Rule 144 adopted under the Securities
Act ("Rule 144"), iii) 3,211,000 shares were issued pursuant to Commission
Regulation S and transfer of these securities is prohibited except in accordance
with the provision of Regulation S, iv) 614,000 were issued by FHL under Rule
701 of the Securities Act and subsequently exchanged for the Company's shares,
and accordingly are "Restricted Shares", as the term is defined in Rule 144 and
v) 3,600,000 shares of Common Stock were sold as part of Units pursuant to this
Prospectus and, except for the restriction imposed by the Pooling Agreement,
will be freely transferable without restriction or further registration under
the Securities Act, except that any shares purchased by an existing "affiliate"
of the Company (as that term is defined under the Securities Act) will be
subject to certain resale limitations of Rule 144. In addition, 3,600,000 shares
of Common Stock will be reserved for issuance upon exercise of the Warrants
included in the Units offered hereby. 1,000,000 shares of Common Stock will be
reserved for issuance upon exercise of options granted under the Company's Stock
Option Plan, 400,000 shares of Common Stock will be reserved for issuance upon
exercise of warrants issued to Laminco and 300,000 shares of Common Stock will
be reserved for issuance pursuant to options which have been or will be issued
to RTZ.
In general, under Rule 144 as currently in effect, any person (or
persons whose shares are aggregated) who has beneficially owned shares for at
least two years is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of 1% of the then outstanding shares of
the Company's Common Stock or the average weekly public trading volume of the
Company's Common Stock during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Sales under Rule 144 are
also subject to certain manner of sale
-39-
<PAGE> 42
provisions, notice requirements and the availability of current public
information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the three months preceding a sale and who is deemed to have owned
shares, as provided in Rule 144, for at least three years, is entitled to sell
such shares under Rule 144(k) without regard to the volume limitations, manner
of sale provision, public information or notice requirements. Under Rule 701,
shares privately issued under certain compensatory stock-based arrangements may
be resold under Rule 144 by non-affiliates subject only to the manner of sale
requirements, and by affiliates without regard to the two-year holding
requirement, commencing 90 days after the Company becomes subject to the
periodic reporting requirements of the Securities Exchange Act of 1934, as
amended. Under Regulation S, shares of the Company's Common Stock offered or
sold, under specified conditions, in an "offshore transaction" (as defined in
Regulation S) are eligible for offer and sale in the United States upon
expiration of a 40-day "restricted period" (as defined in Regulation S).
The Company has reserved 1,000,000 shares for future option grants
under the Stock Option Plan. See "Management -- Stock Option Plan". As of
January 1, 1997, there were 955,000 options to purchase shares of Common Stock
outstanding under the Company's Stock Option Plan. The Company intends to file a
Form S-8 registration statement under the Securities Act to register all of the
shares of Common Stock reserved for issuance under its Stock Option Plan. Such
registration statement will become effective automatically upon filing. Shares
issued upon exercise of options after the Form S-8 registration statement is
filed may thereafter be sold in the open market, subject, in the case of various
holders, to the Rule 144 volume limitations applicable to affiliates.
TRANSFER AGENT
The transfer agent, registrar and dividend disbursing agent to the
Common Stock is American Stock Transfer & Trust Company, 40 Wall Street, New
York, NY 1005 (212) 936-5100.
LEGAL MATTERS
Certain legal matters will have been passed upon for the Company by
Streich Lang, P.A., Phoenix, Arizona.
EXPERTS
The financial statements of the Company included in this Prospectus
have been examined by Thomas W. Klash, independent certified public accountant,
for the periods indicated in his report thereof. The financial statements of FHL
included in this Prospectus have been examined by KPMG, chartered accountants,
for the period indicated in their report.
-40-
<PAGE> 43
Such reports have been included herein in reliance upon the reports for such
firms given upon their authority as experts in accounting and auditing.
CHANGE IN ACCOUNTANTS
On February 12, 1997, the Board of Directors of the Company dismissed
Thomas W. Klash as its principal accountant to audit its financial statements.
Mr. Klash served as principal accountant during, and audited the registrant's
financial statements for, the fiscal years ended December 31, 1994 and 1995.
This dismissal arose out of Laminco's acquisition of control of the Company on
June 4, 1996 and the subsequent relocation of the Company's headquarters from
Florida to Vancouver, British Columbia, Canada. Other than expressing
substantial doubt as to the ability of the registrant to continue as a going
concern, Mr. Klash's report on the financial statements for fiscal years 1994
and 1995 did not contain an adverse opinion or a disclaimer of opinion and such
reports were not qualified or modified as to uncertainty, audit scope, or
accounting principles. During fiscal years 1994 and 1995 and for the interim
period ending December 5, 1996, (i) there were no disagreements with the former
accountant on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure and (ii) there were no
"reportable events" (as defined in Securities and Exchange Commission Regulation
S-K Item 304).
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
Section 13 of the Securities Exchange Act of 1934, as amended, and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission ("Commission"). Such reports, proxy
statements and other information may be inspected and copied at the Public
Reference Room of the Commission, 450 Fifth Street, N.W. Washington, D.C. 20549,
or from the Los Angles Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los
Angeles, California 90036, upon payment of the fees prescribed by the
Commission. The Commission maintains a World Wide Web site on the Internet that
contains reports, proxy and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission. The address of such site is: http://www.sec.gov.
The Company will furnish annual reports to shareholders which contain
audited financial statements and such other periodic reports as the Company may
determine to be appropriate or as may be required by law.
The Company Common Stock is listed and traded on the OTC-BB. Reports
and proxy statement and other information can be inspected at the offices of the
Company at 777 Hornby Street, Suite 2000, Vancouver, B.C., Canada, V6Z 1S4.
-41-
<PAGE> 44
FREMONT GOLD CORPORATION AND
FLAGSHIP HOLDING LTD.
INDEX TO FINANCIAL STATEMENTS
FREMONT GOLD CORPORATION:
<TABLE>
<S> <C>
Year End Financial Statements:
Report of Independent Public Accountants........................................... F-3
Balance Sheet, December 31, 1995................................................... F-4
Statement of Operations, for the years ended December 31, 1995 and 1994............ F-5
Statement of Cash Flows, for the years ended December 31, 1995 and 1994............ F-7
Interim Financial Statements:
Consolidated Balance Sheets, September 30, 1996 and December 31, 1995.............. F-12
Consolidated Statement of Operations, for the nine months ended September 30,
1996 and 1995..................................................................... F-13
Consolidated Statement of Cash Flows, for the nine months ended
September 30, 1996 and 1995....................................................... F-14
Notes to Financial Statements...................................................... F-15
FLAGSHIP HOLDING LTD:
Report of Independent Public Accountants........................................... F-25
Consolidated Balance Sheet as of June 30, 1996.................................... F-26
Consolidated Statement of Operations, for inception (June 14, 1996) to June 30,
1996............................................................................. F-27
Consolidated Statement of Cash Flows for inception (June 14, 1996) to June 30,
1996............................................................................. F-28
Notes to Financial Statements...................................................... F-29
</TABLE>
F-1
<PAGE> 45
FREMONT GOLD CORPORATION
YEAR END FINANCIAL STATEMENTS
DECEMBER 31, 1995
F-2
<PAGE> 46
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Fremont Gold Corporation
(Formerly known as The Rothchild Companies, Inc.)
Vancouver, B.C., Canada
I have audited the balance sheets of Fremont Gold Corporation (formerly
known as The Rothchild Companies, Inc.) as of December 31, 1995, and the related
statements of operations, shareholders' equity and cash flows for the years
ended December 31, 1995 and 1994. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audits.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Fremont Gold
Corporation (formerly known as The Rothchild Companies, Inc.) as of December 31,
1995, and the results of operations and its cash flows for the years ended
December 31, 1995 and 1994, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note E to the
financial statements, the Company has experienced operating losses since
inception, resulting in an accumulated deficit position. The Company's financial
position and operating results raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
discussed in Note E. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Thomas W. Klash
Thomas W. Klash, C.P.A.
Hollywood, Florida
February 11, 1997
F-3
<PAGE> 47
FREMONT GOLD CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
1995
---------
<S> <C>
CURRENT ASSETS:
Cash $ 1,035
---------
TOTAL ASSETS $ 1,035
=========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIENCY)
NON-CURRENT LIABILITIES:
Loans payable - related parties $ 5,000
---------
TOTAL LIABILITIES 5,000
---------
CONTINGENCIES:
SHAREHOLDER'S EQUITY (DEFICIENCY)
Common stock; $.001 par value,
20,000,000 shares authorized;
20,000,000 shares issued and
outstanding at December 31,
1995 20,000
Additional paid-in capital 471,100
Accumulated deficit (495,065)
---------
TOTAL SHAREHOLDERS'
EQUITY (DEFICIENCY) (3,965)
---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,035
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 48
FREMONT GOLD CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Revenue $ -- $ 10
Operating Expenses 9,862 7,580
----------- -----------
Net Loss $ (9,862) $ (7,570)
=========== ===========
Net loss per Common Share $ -- $ --
----------- -----------
Weighted average number of common shares
outstanding 20,000,000 11,304,089
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 49
FREMONT GOLD CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
TWO YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock
$.0001 Par Value Additional
------------------------- Paid-In Accumulated
Shares Amount Capital (Deficit) Total
---------- ------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1993 11,387,936 11,388 453,395 (477,633) (12,850)
Cancellation of shares previously (381,055) (381) 381 -- --
issued
Issuance of common shares as
repayment of notes payable 8,393,119 8,393 16,166 -- 24,559
Issuance of common shares for
services rendered 600,000 600 1,158 -- 1,758
Net loss -- -- -- (7,570) (7,570)
---------- ------- -------- --------- --------
Balance December 31, 1994 20,000,000 20,000 471,100 (485,203) 5,897
Net loss -- -- -- (9,862) (9,862)
---------- ------- -------- --------- --------
Balance December 31, 1995 20,000,000 $20,000 $471,100 $ 495,065 $ (3,965)
========== ======= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 50
FREMONT GOLD CORPORATION
STATEMENTS OF CASH FLOWS
TWO YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995 1994
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(9,862) $ (7,570)
Adjustments to reconcile net loss to
net cash used by operating
activities
Effect of non-monetary
transactions on net loss -- 2,667
Increase (decrease) in
accounts payable -- (12,850)
------- --------
NET CASH USED BY
OPERATING ACTIVITIES (9,862) (17,753)
------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Common stock issued -- --
Cash advances from shareholders 5,000 23,650
------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 5,000 23,650
------- --------
NET INCREASE (DECREASE) IN
CASH (4,862) 5,897
CASH AT BEGINNING OF YEAR 5,897 --
------- --------
CASH AT END OF YEAR $ 1,035 $ 5,897
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 51
FREMONT GOLD CORPORATION
STATEMENTS OF CASH FLOWS
SUPPLEMENTAL INFORMATION
DECEMBER 31, 1995
1. Interest expense amounted to $909 in 1994.
2. Advances from shareholders ($23,650) and accrued interest ($909) were
repaid by the issuance of 8,393,119 shares of Common Stock.
3. Professional fees ($1,758) were paid by the issuance of 600,000 shares
of Common Stock.
F-8(a)
<PAGE> 52
FREMONT GOLD CORPORATION
NOTES TO FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 1995
NOTE A - THE COMPANY AND BASIS OF PRESENTATION
Business - The Rothchild Companies, Inc. (the "Company") was
incorporated on June 27, 1986 as Tri-Way Industries, Inc. On April 7,
1989, the Company name was changed to Tri-Way Media and communications,
Inc. The Company changed its fiscal year-end from May 30 to April 30
and then to December 31. The Company, from inception until April 7,
1989, operated in the business of seeking merger and/or acquisition
opportunities. On April 3, 1989, the Company acquired Federal Medical
Holdings Corp., which had acquired the assets of M.C. Media, a media
buying agency. On September 16, 1989, Federal Medical Holdings Corp.
was merged into Tri- Way Media and Communications, Inc.
As part of the acquisition agreement, the assets of Tri-Way Media and
Communications, Inc. were distributed to creditors to satisfy part of
its outstanding obligations. The operations of the Company as a media
buying agency were also discontinued.
On November 22, 1989, the Company acquired The Rothchild Group, Inc., a
full service advertising agency engaged in the public relations agency
business. At that time, the name of the Company was changed to The
Rothchild Companies, Inc. On October 20, 1993, The Rothchild Group,
Inc. entered into Chapter 7 bankruptcy proceedings at which time
control of the subsidiary was transferred to a court appointed trustee.
As a result, the financial statements include the assets, liabilities
and operations of The Rothchild Companies, Inc. only.
During 1995 and 1994, and through the date of this financial statement,
the Company was inactive.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income and loss per share - Income and loss per share is computed by
dividing the net income or loss by the weighted average number of
common shares outstanding during the applicable year.
NOTE C - INCOME TAXES
At December 31, 1995, the Company has net operating tax loss
carryforwards amounting to $405,771. The losses expire at various
intervals through the year 2010.
Deferred tax benefit, as described in Financial Accounting Standard No.
109 has not been recorded in the accompanying financial statements
because of a valuation allowance. The realizability of the related tax
benefit is contingent upon the Company's ability to generate profitable
operations in the future.
NOTE D - COMMON STOCK TRANSACTIONS
The Company issued 600,000 common share to its former president as
compensation for professional services rendered during 1994.
On July 5, 1994, an adjusted net total of 381,055 common shares were
cancelled resulting from non-payment by subscribers.
On December 30, 1994, the Company issued 8,393,119 common shares to
certain shareholders in payment of 8% notes payable ($23,650) and
accrued interest ($909).
F-9
<PAGE> 53
NOTE E - CONTINGENCIES
The company has incurred operating losses amounting to $495,065 since
its inception on June 27, 1986. During 1995, the only source of working
capital resulted from non-interest bearing shareholder advances. These
factors raise certain questions regarding the Company's continued
ability to exist. The accompanying financial statements do not include
any adjustments which might relate to this uncertainty.
Management's plans are to seek business combination opportunities
whereby the Company would receive an infusion of working capital
sufficient to meet costs and expenses resulting from the commencement
of business operations. The Company's continued existence may be
dependent on management's ability to execute its plans.
NOTE F - RELATED PARTY TRANSACTIONS
At the present time, the Company's administrative costs are being paid
by certain shareholders and other affiliated entities. The financial
statements do not include these costs. No estimate has been made as to
the effect these costs would have on reported results of operations.
F-10
<PAGE> 54
FREMONT GOLD CORPORATION
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
F-11
<PAGE> 55
FREMONT GOLD CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
September 30, 1996 December 31, 1995
(unaudited)
---------------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 752,233 $ 1,035
Accounts receivable 17,626 --
----------- ---------
769,859 1,035
Investment in mineral properties (Note 2) 413,594 --
Property, plant and equipment (net of depreciation) 10,725 --
TOTAL ASSETS $ 1,194,178 $ 1,035
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 38,171 $ --
Due to related parties (Note 3) 322,635 --
Loans payable -- 5,000
Notes payable (Note 4) 740,000 --
----------- ---------
Total Current Liabilities 1,100,806 5,000
Minority interest 2,500 0
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.001 par value; 20,000,000 authorized; 1,000,000 and 6,060,000
issued and outstanding at December 31, 1995 and September 30, 1996 respectively
(Note 6) 48,386 20,000
Additional paid-in capital 821,600 471,000
Accumulated deficit (779,114) (495,065)
----------- ---------
Total Stockholders' Equity (Deficiency) 90,872 (3,965)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY) $ 1,194,178 $ 1,035
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE> 56
FREMONT GOLD CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1996 September 30, 1995
-------------------- --------------------
<S> <C> <C>
REVENUES:
Net sales $ -- $ --
Interest income 2,152 --
----------- -----------
2,152 --
GENERAL AND ADMINISTRATIVE EXPENSES
Consulting $ 157,760 $ --
Depreciation 308 --
Foreign exchange 8,267 --
Legal & accounting 45,344 --
Office 42,104 8,608
Shareholder information 6,325 --
Transfer agent & filing fees 3,034 --
Travel & public relations 23,059 --
----------- -----------
286,201 8,608
Net Loss $ (284,049) $ (8,608)
=========== ===========
Weighted average number of shares
outstanding 2,534,872 1,000,000
=========== ===========
Net loss per common share $ (.11) $ (.01)
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-13
<PAGE> 57
FREMONT GOLD CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss for the period $ (284,049) $(8,608)
Adjustments to reconcile net loss to net
cash used in operating activities:
Non-cash expenditure - depreciation 308 --
Increase (decrease) in
Accounts receivable (17,626) --
Accounts payable 38,171 --
Net cash flow from operating activities (263,196) (8,608)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of shares for cash and
subscription deposits 340,000 --
Due to related parties 322,635 --
Loans payable (5,000) 5,000
Forgiveness of debt 12,000 --
Issuance of Notes (Note 4) 740,000 --
----------- -------
Net cash flow from financing activities 1,409,635 5,000
CASH FLOW FROM INVESTMENT
ACTIVITIES:
Investment in mineral properties (413,594) --
Acquisition of Flagship Holding Ltd. 26,886 --
Minority interest 2,500 --
Investment in property, plant &
equipment (11,033) --
----------- -------
Net cash flow from investing activities (395,241) --
Net increase (decrease) in cash 751,198 (3,608)
Cash and cash equivalents, beginning of
period 1,035 5,897
----------- -------
Cash and cash equivalents, end of period
$ 752,233 $ 2,289
=========== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-14
<PAGE> 58
FREMONT GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
1. THE COMPANY AND BASIS OF PRESENTATION
History and Prior Activities
Fremont Gold Corporation (the "Company") was incorporated under the
laws of the State of Florida as Tri-Way Industries, Inc. on June 27, 1986, for
the purpose of seeking, investigating and acquiring business opportunities. The
Company did not engage in any meaningful operations until on or about November
22, 1989, at which time the Company acquired the Rothchild Group, Inc., at which
time it changed its name to The Rothchild Companies, Inc.
Until mid-1993, the Company, through its wholly-owned subsidiary, The
Rothchild Group, Inc., operated as a full service advertising agency engaged in
the advertising, marketing and public relations agency business. On October 20,
1993, however, the Company's subsidiary, The Rothchild Group, Inc., filed
bankruptcy protection under Chapter 7 of the U.S. Bankruptcy Code in the
Bankruptcy Court for the Southern District of Florida. Other than the business
operation of the Rothchild Group, Inc., the Company was not engaged in any other
meaningful commercial activities until the acquisition of control by Laminco
Resources, Inc., more fully discussed below.
On July 12, 1994, an investment group ("Investment Group") completed
the purchase of an aggregate of 315,598 shares of the Company's Common Stock
representing approximately 60% of the Company's issued and outstanding Common
Stock as of the date of the acquisition. In addition the Investment Group
provided sufficient funds in the form of loans to insure the Company's viability
and permit the Company to pursue a possible business combination, merger or
similar transaction. These loans were subsequently converted into 419,656 shares
of Common Stock of the Company on December 30, 1994.
On April 8, 1996, the Company completed the transfer of its state of
incorporation from Florida to Delaware. Accordingly, the Company is now a
Delaware corporation.
On April 15, 1996, the board of directors of the Company and holders of
a majority of the outstanding Common Stock of the Company authorized the
Company, by written consent, to take a series of actions related to its
authorized and outstanding Common Stock. These actions included a one-for-twenty
(1-for-20) reverse stock split of the Company's Common Stock, pursuant to which
each twenty (20) shares of the Company's Common Stock outstanding immediately
prior to April 30, 1996 was converted into one (1) share of the Company's Common
Stock. In connection with the reverse split the Company maintained the par value
of its Common Stock at $.001 par value per share, and the total number of shares
of Common Stock authorized to be issued by the Company remained unchanged at
20,000,000 shares. The number of issued and outstanding shares of the Company's
Common Stock after the reverse split was 1,000,000 shares. All references to
shares of Common Stock herein have been adjusted to reflect this reverse split.
In May 1996, the Company's Board of Directors approved a private
placement of 1,000,000 shares of Common Stock at an offering price of $.20
aggregating $200,000 to the Company. This private placement was closed on July
30, 1996.
On June 4, 1996, Laminco Resources, Inc. ("Laminco") completed the
purchase of an aggregate of 600,000 of the Company's Common Stock representing
approximately 60% of the Company's issued and outstanding Common Stock as of the
date of the acquisition. These shares were purchased from the Investment Group.
In connection with the completion of the share acquisition by Laminco, the
Company's board of directors and management was
F-15
<PAGE> 59
reconstituted and the Company implemented a new business plan discussed
hereinafter under "Current Business Operations".
On June 4, 1996, and June 20, 1996, Laminco advanced the Company an
aggregate amount of $200,000 pursuant to a loan agreement. In consideration of
these loans, the Company granted Laminco warrants to purchase 400,000 shares of
the Company's Common Stock at a purchase price of $1.00 for a period of two (2)
years. In addition, the Company granted Laminco certain rights to participate in
all future financing completed by the Company on the same terms offered third
parties. In August 1996 and October, 1996, payments of $100,000 and $100,000
respectively were made to Laminco.
On June 20, 1996, the Company advanced Flagship Holding Ltd. ("FHL"), a
Barbados corporation which owns 99% of Inversiones Mineras Ayl S.A. ("IMSA"), a
Chilean corporation which owns exploration mineral property interests, $125,000
pursuant to a loan agreement. In consideration of this loan the Company was
issued 125,000 shares of FHL's common stock.
On June 30, 1996, the Company entered into a Letter of Intent to
acquire Flagship Holding, Inc.
On July 25, 1996, the Board of Directors of the Company and holders of
a majority of the outstanding shares of the common stock of the Company,
authorized the Company, by written consent, to take a series of actions. These
actions included: i) The Change of Corporate Name to Fremont Gold Corporation to
better reflect the proposed business of the Company, ii) The Adoption of Amended
and Restated Certificate of Incorporation, iii) Adoption of Stock Option Plan to
allow the Company to attract and retain the best available personnel for
positions of responsibility within the Company and to provide additional
incentive to employees of the Company in order to promote the success of the
Company's business; and iv) Make Certain Management and Director Changes,
Expansion of the Board of Directors and Formation of Compensation and Audit
Committees.
On July 31, 1996, the Board of Directors of the Company and holders of
a majority of the outstanding shares of the common stock of the Company,
authorized the Company, by written consent, to acquired 100% of FHL stock not
previously owned by the Company. The Company completed this acquisition in
consideration of the exchange of 3,560,000 shares of its Common Stock pursuant
to exemptions from registration, of these 614,000 were issued by FHL under Rule
701 of the Securities Act and subsequently exchanged for the Company's shares,
and accordingly are "Restricted Shares", as the term is defined in Rule 144 and
2,946,000 shares were issued pursuant to Regulation S Rule 903 and transfer of
these securities is prohibited except in accordance with the provision of
Regulation S. Michael J. Hopley, a director, president and chief executive
officer of the Company, David Shaw, a director of the Company, and Edward M.
Topham, chief financial officer of the Company, received 418,000, 372,000 and
381,000 shares, respectively, of the Company's Common Stock in the exchange.
The acquisition of FHL by the Company has been accounted for at historical cost
in a manner similar to pooling of interest accounting.
On July 30, 1996, the Company completed a private placement of 500,000
shares of its Common Stock to Laminco in consideration of $140,000.
On August 1, 1996, Mr. David Alexander resigned as a director,
treasurer and chief financial officer of the Company. Replacing Mr. Alexander,
Edward M. Topham was appointed vice president, treasurer and chief financial
officer of the Company.
On August 21, 1996, the Company commenced an offering of $1,800,000
principal amount of 10.5% Series A Senior Convertible Notes ("Series A Notes").
On September 30, 1996 the Company had accepted subscriptions totaling $740,000.
In December the Company completed the offering of Series A Notes and accepted
subscriptions aggregating $1,800,000. Each Series A Note is convertible, at the
option of the Holder into Equity Units at any time after the Issue Date prior to
the close on the Maturity Date at the rate of $.50 per Equity Unit. Each Equity
Unit is composed of one share of the Company's Common Stock, par value $.001 per
share, and one Redeemable Common Stock Purchase Warrant ("Warrant"). The Warrant
is exercisable to purchase one share of Common Stock at the greater of $1.50 or
75% of the ten day average closing prices, as quoted on the NASDAQ Bulletin
Board, immediately
F-16
<PAGE> 60
preceding the notice of exercise. The Warrants issued in connection with the
conversion of the Series A Notes as a component of the Equity Unit will be
redeemable by the Company beginning January 1, 1997, upon 15 days notice to the
Warrant holder, at a redemption price of $.10 per warrant. The Holders of the
Series A Notes, Warrants or Common Stock issued to Holders without an effective
Registration Statement under the Securities Act of 1933, as amended, ("Act")
shall have the right, at any time, to join with the Company to register the
Common Stock and the Common Stock underlying the Series A Notes and Warrants in
any Registration Statement under the Act filed by the Company with the
Securities and Exchange Commission. The Company anticipates filing a
Registration Statement on Form S-B with the Securities and Exchange Commission
during the fourth quarter of 1996. Such Registration Statement will include the
Common Stock underlying the Series A Notes and Warrants. Each purchaser of the
Series A Notes, as a condition precedent to his, her or its conversion into
Equity Units, must enter into a Voluntary Stock Pooling Agreement ("Pooling
Agreement"). See Note 4 "Notes Payable" for a description of the Pooling
Agreement.
On August 23, 1996, the Company's indirectly owned Chilean operating
subsidiary changed its name from Inversiones Mineras Ayl S. A. to Minera Fremont
Gold Chile S.A.
Current Business Operations
The Company is engaged in the acquisition, exploration and development
of mineral properties, primarily gold and copper properties located in Latin
America.
Subsequent to its July 31, 1996, acquisition of FHL, the Company's
principal mineral property interests consists of three exploration properties
located along the historically productive Atacama Fault System in Chile. The
Resguardo Property, the Los Leones Property and the Remolino Property interests
are currently held through existing leases and purchase options. See Note 2
"Mineral Properties" for a description of the lease and purchase options. The
Company's mineral property interests are held by a Chilean operating company,
Minera Fremont Gold Chile S.A., a Chilean corporation, a 99% subsidiary of its
wholly owned subsidiary Flagship Holding Ltd., a Barbados corporation. Unless
otherwise indicated, the term "Company" means collectively Fremont Gold
Corporation, Flagship Holding, Ltd and Minera Fremont Gold Chile S.A.
The Company is continuously assessing new opportunities for the
acquisition of properties with the potential to be significant gold and copper
producers through its extensive knowledge and contacts in Latin America,
garnered from the over 100 years of collective exploration experience of the
Company's principals.
The Resguardo Property covers an area of over 4,000 hectares (10,000
acres) along 6 kilometers of the highly productive Atacama Fault System of
northern Chile. The property is on the same structural trend and about 10
kilometers south of the Mantoverde Mine operated by the Anglo-American company.
The property is accessible by road, approximately 100 km from Copiapo, a town
with a population of about 150,000. A series of surface mine workings and recent
surface sampling by the Company indicate extensive gold mineralization.
The Los Leones Property covers an area of approximately 6,000 hectares
(15,000 acres) along highly productive Atacama Fault System of central Chile.
Cambior Chile S.A. ("Cambior"), the previous owner, has conducted exploration
work on the property since April 1994, and has defined extensive areas of copper
and gold mineralization. The property is accessible by road, approximately 25 km
from Combarbala, a town with a population of about 30,000.
The Remolino Property covers an area of approximately 1,200 hectares
(3,000 acres) along the highly productive Atacama Fault System of central Chile.
Local small miners are currently active on the property exploiting a series of
high grade vein structures and Cambior, the previous owner, has conducted
exploration work on the property since mid-1994. This activity has shown the
potential for high grade polymetallic deposits and low grade, bulk tonnage
polymetallic deposits of copper-gold-silver. The property is accessible by road,
approximately 45 minutes from Illapel and 3 1/2 hours from the capital city of
Santiago.
F-17
<PAGE> 61
In August 1996, the Company commenced an exploration program consisting
of air photo interpretation, geological mapping, geophysical surveys, sampling,
trenching and limited core drill holes, primarily over obvious mineralized
areas, concentrating on identifying the controlling structures and the
interrelationships between the base and precious metals in the systems.
The Company has experienced operating losses since inception,
resulting in an accumulated deficit position. The Company's financial position
and operating results raise substantial doubt about its ability to continue as
a going concern.
The Company's registered office and headquarters is 777 Hornby Street,
Suite 2000, Vancouver, British Columbia V6Z 1S4, its telephone number is
604-682-4606. While its headquarters are in Vancouver, the Company has
established an office in Santiago, Chile from which its Chilean exploration
activities are directed.
Basis of Presentation
The balance sheet as of September 30, 1996, the statement of operations
for the nine months ended September 30, 1996 and September 30, 1995, and the
statement of changes in financial position for the nine months ended September
30, 1996, and September 30, 1995, have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring accruals) necessary to present fairly the financial position and
results of operations at September 30, 1996, and for all periods presented have
been made.
The unaudited financial statements are based on certain estimates and
are presently subject to year-end adjustments. The operations for the nine
months ended September 30, 1996 are not necessarily indicative of the results of
operations to be expected for the Company's fiscal year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the Company's December 31, 1995 audited
financial statements and the June 30, 1996 audited financial statements of
Flagship Holding Ltd.
Accounting Treatment of Flagship Holding Ltd. Acquisition
Flagship Holding Ltd. ("FHL"), a Barbados corporation, was formed on
June 14, 1996 to facilitate registration pursuant to Chilean Decree Law 600 to
enable direct investment into Chile and acquire three mineral property interests
through investment in Minera Fremont Gold Chile S.A. ("MFG") formerly
Inversiones Mineras Ayl S.A., a Chilean corporation.
Pursuant to a Share Purchase Agreement dated July 31, 1996, with an
effective date of July 1, 1996, the Company acquired 100% of the issued and
outstanding shares of FHL it did not previously own. The Company completed this
acquisition in consideration of the exchange of 3,560,000 shares of its Common
Stock.
The Company has treated the acquisition of FHL as if it were an
acquired business accounted for using the pooling of interests method.
Accordingly, the statements of operations and cash flows for the nine months
ended September 30, 1996 include the results of FHL from inception (June 14,
1996) to September 30, 1996. The effect of the acquisition of FHL on the number
of shares and capital accounts of the Company is shown in note 6.
F-18
<PAGE> 62
2. MINERAL PROPERTIES
a) Accumulated costs in respect to the Company's interest in
mineral claims under option consist of the following:
<TABLE>
<CAPTION>
Balance
Balance Expenditures Written off September 30,
Property January 1, 1996 during period during period 1996
- ------------------------- ------------------ ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Resguardo Property $ -- $372,538 $ -- $372,538
Remolino Property $ -- 15,000 -- 15,000
Los Leones Property -- 26,056 -- 26,056
$ -- $413,594 $ -- $413,594
======== ======== ======== ========
</TABLE>
Remolino Property
On June 17, 1996, the Company entered into a mining option. Under the
terms of the agreement, the Company shall pay a total consideration of $105,000
plus all costs to keep the property in good standing. The $105,000 is payable
$15,000 upon execution of the mining option; $15,000 in 6 months; $25,000 on the
first anniversary of the mining option; and $50,000 on the second anniversary of
the mining option. Additional option payments totaling $135,000 as follows:
$10,000 upon execution of the mining option; $20,000 on September 10, 1996;
$50,000 on December 10, 1996; and $55,000 on March 10, 1997. A net smelter
royalty of 3% must be paid to a maximum of $5 million if the property commences
commercial production.
Los Leones Property
On June 17, 1996, the Company entered into a mining option. Under the
terms of the agreement, the Company shall pay a total consideration of $100,000
plus all costs to keep the property in good standing. The $100,000 is payable
$10,000 upon execution of the mining option; $15,000 in 6 months; $25,000 on the
first anniversary of the mining option; and $50,000 on the second anniversary of
the mining option. A net smelter royalty of 3% must be paid to a maximum of $5
million if the property commences commercial production.
Resguardo Property
On July 17, 1996, the Company entered into a 99 year Lease Agreement on
a Chilean property known as the Resguardo Property. Lease payments are as
follows: $75,000 upon execution of the Lease Agreement; $60,000 payable on each
of the lease's first and second anniversary; and $80,000 payable on the lease's
third anniversary. The Company has the exclusive right to exploit, benefit,
explore, develop and smelt minerals from the 10,000 acre property located on the
Atacama Fault System of northern Chile. The owners retain a net smelter return
production royalty, equal to 5% on gold and 2% on all other mineral production
from the lease. Subsequent to the third anniversary of the lease, the Company
must complete a feasibility study and obtain project financing to begin
production on or before the seventh anniversary of the lease. No payments to the
owners are required during this period. If production financing has not been
obtained during this period, the Company must pay advance royalty payments that
increase annually from $150,000 per year to $250,000 per year, of which the
first payment may be credited to future net smelter return production royalty.
3. DUE TO RELATED PARTIES
On June 4, 1996, and June 20, 1996, Laminco, affiliate of the Company,
advanced the Company an aggregate amount of $200,000 pursuant to a loan
agreement. In consideration of these loans the Company granted Laminco warrants
to purchase 400,000 shares of the Company's Common Stock at a purchase price of
$1.00 for a period of two (2) years. In addition, the Company granted Laminco
certain rights to participate in all future financing completed by the Company
on the same terms offered third parties. These loans are repayable upon demand
with an interest rate of 10%. In August 1996 and October 1996, payments of
$100,000 and $100,000 respectively were made to Laminco.
On June 14, 1996, the Company borrowed $60,847 from Edward M. Topham,
an officer of the Company, pursuant to a Loan Agreement. This loan is repayable
upon demand with interest accruing at 10%.
F-19
<PAGE> 63
In connection with the identification and acquisition of the Remolino,
Los Leones and Resguardo properties, expenses totaling $138,650 were incurred by
Mr. Roberto Partarrieu. The Company, in connection with the acquisition of these
properties has agreed to reimburse Mr. Partarrieu. Mr. Partarrieu is an officer
of Minera Fremont Gold Chile, S.A.
4. NOTES PAYABLE
On August 21, 1996, the Company commenced an offering of $1,800,000
principal amount of 10.5% Series A Convertible Notes ("Series A Notes") pursuant
to Section 4(2) of the Securities and Exchange Act of 1933, as amended. On
September 30, 1996 the Company had accepted subscriptions totaling $740,000. In
December 1996, the Company completed the offering of Series A Notes and accepted
subscriptions aggregating $1,800,000. Each Series A Note is convertible, at the
option of the Holder into Equity Units at any time after the Issue Date prior to
the close on the Maturity Date at the rate of US$.50 per Equity Unit. Each
Equity Unit is composed of one share of the Company's Common Stock, par value
$.001 per share, and one Redeemable Common Stock Purchase Warrant ("Warrant").
The Warrant is exercisable to purchase one share of Common Stock at the greater
of $1.50 or 75% of the ten day average closing prices, as quoted on the OTC
Bulletin Board, immediately preceding the notice of exercise. The Warrants
issued in connection with the conversion of the Series A Notes as a component of
the Equity Unit will be redeemable by the Company beginning January 1, 1997,
upon 15 days notice to the Warrant holder, at a redemption price of $.10 per
warrant. The Holders of the Series A Notes, Warrants or Common Stock issued to
Holders without an effective Registration Statement under the Securities Act of
1933, as amended, ("Act") shall have the right, at any time, to join with the
Company to register the Common Stock and the Common Stock underlying the Series
A Notes and Warrants in any Registration Statement under the Act filed by the
Company with the Securities and Exchange Commission. The Company anticipates
filing a Registration Statement on Form S-B with the Securities and Exchange
Commission during the fourth quarter of 1996. Such Registration Statement will
include the Common Stock underlying the Series A Notes and Warrants. Each
purchaser of the Series A Notes, as a condition precedent to his, her or its
conversion into Equity Units, must enter into a Voluntary Stock Pooling
Agreement ("Pooling Agreement"). Under the terms of the Pooling Agreement each
recipient of Common Stock pursuant to conversion of the Series A Notes will
severally agree with the Company, the Trustee (as defined in the Pooling
Agreement) and each with the other, that they will deliver or cause to be
delivered to the Trustee certificates representing their respective shares of
Common Stock received in the conversion. The shares of Common Stock issuable
upon exercise of the Warrants will not be subject to the Pooling Agreement.
Pursuant to the Pooling Agreement the Trustee shall hold all certificates
subject to release, on a pro-rata basis, as set forth below:
<TABLE>
<CAPTION>
PRO-RATA SHARES OF COMMON STOCK RELEASE DATE
- ------------------------------- ------------
<C> <C>
25% of Common Stock purchased April 1, 1997
25% of Common Stock purchased July 1, 1997
25% of Common Stock purchased October 1, 1997
the balance of Common Stock purchased January 1, 1998
</TABLE>
5. INCOME TAXES
At December 31, 1995, the Company has net operating tax loss carry
forwards, amounting to approximately $405,771. The losses expire at various
intervals through the year 2010. No deferred tax benefit has been recorded due
to the uncertainty of the Company realizing these benefits through profitable
operation in the future.
6. COMMON STOCK
On April 15, 1996, the board of directors of the Company and holders of
a majority of the outstanding Common Stock of the Company authorized the
Company, by written consent, to take a series of actions related to its
authorized and outstanding Common Stock. These actions included a one-for-twenty
(1-for-20) reverse stock split of the Company's Common Stock, pursuant to which
each twenty (20) shares of the Company's Common Stock outstanding immediately
prior to April 30, 1996 was converted into one (1) share of the Company's Common
Stock.
F-20
<PAGE> 64
In connection with the reverse split the Company maintained the par value
of its Common Stock at $.001 par value per share, and the total number of shares
of Common Stock authorized to be issued by the Company remained unchanged at
20,000,000 shares. The number of issued and outstanding shares of the Company's
Common Stock after the reverse split was 1,000,000 shares. All references to
shares of Common Stock herein have been adjusted to reflect this reverse split.
In May 1996, the Company's Board of Directors approved a private
placement of 1,000,000 shares of Common Stock at an offering price of $.20
aggregating $200,000 to the Company. This private placement was closed on July
30, 1996.
On July 31, 1996, the Board of Directors of the Company and holders of
a majority of the outstanding shares of the common stock of the Company,
authorized the Company, by written consent, to acquired 100% of FHL stock not
previously owned by the Company. The Company completed this acquisition in
consideration of the exchange of 3,560,000 shares of its Common Stock. Michael
J. Hopley, a director, president and chief executive officer of the Company,
David Shaw, a director of the Company and Edward M. Topham, chief financial
officer of the Company, received 418,000, 372,000 and 381,000 shares,
respectively, of the Company's Common Stock in the exchange.
On July 30, 1996, the Company completed a private placement of 500,000
shares of its Common Stock to Laminco in consideration of $140,000.
<TABLE>
<CAPTION>
Additional Paid in
Number of Shares Par Value of Shares Capital
---------------- ------------------- ------------------
<S> <C> <C> <C>
As at December 31, 1995 1,000,000 $ 20,000 $471,100
June 6, 1996 forgiveness of debt -- -- 12,000
July 30, 1996 private placement 500,000 500 139,500
July 30, 1996 private placement 1,000,000 1,000 199,000
July 31, 1996 acquisition of Flagship
Holding Ltd. 3,560,000 26,886 --
---------- -------- --------
6,060,000 $ 48,386 $821,600
</TABLE>
7. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These consolidated financial statements have been prepared in
accordance with Generally Accepted Accounting Principles as applied in the
United States.
Income and loss per share -- Income and loss per share is computed by
dividing the net income or loss by the weighted average number of common shares
outstanding during the applicable period.
Principles of Consolidation -- The consolidated statements include the
accounts of the Company and its 100% owned subsidiary, Flagship Holding Ltd. for
the period presented.
Mineral Properties -- The Company capitalizes the cost of acquiring
mineral claims and exploration costs which are directly related to specific
mineral claims until such time as the extent of mineralization has been
determined and the mineral claims are either developed, abandoned or allowed to
lapse.
Foreign Currency Translation -- Transactions recorded in Chilean pesos
and Barbados pounds are translated as follows:
Monetary assets and liabilities at the rate prevailing at the
balance sheet date.
i) Non-monetary assets and liabilities at historic rates.
F-21
<PAGE> 65
ii) Income and expenses at the average rate in effect during
the year. Exchange gains or losses are recorded in the
consolidated statement of loss and deficit.
8. SUBSEQUENT EVENTS
a) In December 1996 the Company elected to discontinue exploration on
its Remolino Property and elected not to make any further payments under its
June 17, 1996 option to purchase. Accordingly, the Company has no further
financial obligations to nor ownership interest in the Remolino Property.
b) The Company signed a Letter of Intent with RTZ on December 13, 1996
whereby the Company can earn an initial 51% interest in the Cenizas Property
mining concessions by making cash payments totaling $350,000 and completing at
least $1,000,000 of exploration work over three years. Payments during the first
year total $50,000 with a first year exploration commitment by the Company of
$200,000. The Company will also grant to RTZ options to purchase shares of its
Common Stock as follows: by June 13, 1997 an option to purchase 150,000 Shares
of Common Stock at a price of $1.50 per share, by December 13, 1997 an
additional option to purchase 150,000 Shares of Common Stock at a price of
$2.00.
Upon completion of the required payments to RTZ and satisfaction of the
Company's exploration commitments, the Company will be entitled to a 51%
interest in the Cenizas Property mining concessions. At that time, the project
will convert into a joint venture between the Company and RTZ with the Company
serving as manager of the joint venture. It is presently contemplated that at
such time, a new entity (the exact form of which has not been specified) will be
formed to hold title to the mining concessions with the Company initially owning
51% of the entity. (If either the Company or RTZ chooses not to contribute
pro-rata, their interest can be diluted to a 2% Net Smelter Royalty with a
maximum value of $3,000,000.) Within 60 days of the Company earning its 51%
interest in the Cenizas Property mining concessions, RTZ has an option to obtain
a 51% interest in the mining concessions by committing to fund and complete a
bankable feasibility study within a 30 month period.
c) On January 22, 1997 the Company entered into an agreement
("Santa Eloisa Agreement") with certain mining concession owners ("Santa Eloisa
Owners"). Pursuant to the Santa Eloisa Agreement the Santa Eloisa Owners will
cause a new Chilean corporation to be formed, Minera Santa Eloisa S.A. ("MSE")
and 100% of the mining concessions transferred to MSE in consideration of 500
series A shares and 1,500 series B shares representing 100% of MSE. The Company,
pursuant to the Santa Eloisa Agreement may: (i) purchase 500 series A shares
from the Santa Eloisa Owners upon payment to the Santa Eloisa Owners of $500,000
("Purchase Option"); $30,000 paid on January 22, 1997, $135,000 payable on April
30, 1997, $135,000 payable on November 30, 1997, $100,000 payable on March 31,
1998 and $100,000 payable on March 31, 1999, and (ii) purchase from MSE 1,000
series A shares in consideration of funding a $1,000,000 exploration work
program ("Exploration Commitment") on or before March 31, 1999. Upon the
Company's exercise of its Purchase Option and funding its Exploration Commitment
the Company will own 50% of the share capital of MSE in the form of series A
shares, the Santa Eloisa Owners will own 50% of the share capital of MSE in the
form of series B shares. The series B shares cannot be diluted below 25% of the
total share capital of MSE.
MSE, the Company and the Santa Eloisa Owners will jointly implement a
program, the result of which will be a feasibility study ("Feasibility Study").
The Company and Santa Eloisa Owners will jointly fund the Feasibility Study.
Upon completion of the Feasibility Study, MSE will issue an aggregate of 3,000
series A shares to the Company and the Santa Eloisa Owners in proportion to each
relative contribution to the costs of the Feasibility Study.
Upon completion of the Feasibility Study MSE and the Company will
jointly seek third party debt financing of production facilities sufficient to
bring the mining concessions into production. Should a third party financing
source require the shareholders of MSE to provide additional capital in the form
of subordinated debt or additional equity, the Company has agreed to contribute
on behalf of the series B shareholders their proportionate (25%) share of said
additional capital ("Carried Interest"). The Carried Interest will bear an
interest rate of LIBOR plus 5% and will be repaid by the series B shareholder
out of distributions made by MSE to its series A and B shareholders. The Company
will receive all series B distributions until the Carried Interest plus accrued
and unpaid interest is paid in full.
F-22
<PAGE> 66
The Company will manage the business affairs and daily operations of
MSE and will appoint its directors in proportion to its relative ownership
percentage of MSE.
d) Subsequent to September 30, 1996 the Company repaid $36,000 together
with $1,065.20 accrued interest to Edward M. Topham. See Note 3.
e) In January 1997, the Company elected to discontinue exploration on
its Los Leones Property and elected not to make further payments under its June
17, 1996 option to purchase the Los Leones mining concessions. Accordingly, the
Company has no further financial obligations for, or ownership interest in, the
Los Leones Property.
F-23
<PAGE> 67
CONSOLIDATED FINANCIAL STATEMENTS OF
FLAGSHIP HOLDING LTD.
Period from Incorporation on June 14, 1996 to June 30, 1996
F-24
<PAGE> 68
AUDITORS' REPORT
To the Board of Directors
Flagship Holding Ltd.
We have audited the consolidated balance sheet of Flagship Holding Ltd. as at
June 30, 1996 and the consolidated statements of operations and deficit and
changes in cash flows for the period from incorporation on June 14, 1996 to June
30, 1996. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at June 30, 1996 and
the results of its operations and the changes in its cash flows for the period
from incorporation on June 14, 1996 to June 30, 1996 in accordance with
generally accepted accounting principles in the United States.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
August 23, 1996
COMMENTS BY AUDITORS FOR U.S. READERS
ON CANADA - U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph following the opinion paragraph when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
note 1 to the consolidated financial statements. Our report to the shareholders
dated August 23, 1996 is expressed in accordance with Canadian reporting
standards which do not permit a reference to such events and conditions in the
auditors' report when these are adequately disclosed in the financial
statements.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
August 23, 1996
F-25
<PAGE> 69
FLAGSHIP HOLDING LTD.
Consolidated Balance Sheet
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
June 30, 1996
- --------------------------------------------------------------------------------
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 189,112
Accounts receivable 681
---------
189,793
Investment in Mineral properties (note 3) 208,275
---------
$ 398,068
=========
Liabilities and Deficiency in Assets
Current liabilities:
Accounts payable and accrued liabilities $ 201,800
Due to related parties (note 4) 200,743
---------
402,543
Non-controlling interest 2,500
Deficiency in assets:
Share capital (note 5) 26,886
Deficit (33,861)
---------
(6,975)
Nature of operations (note 1)
Commitments (note 3)
Subsequent events (notes 3 and 9)
$ 398,068
---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE> 70
FLAGSHIP HOLDING LTD.
Consolidated Statement of Operations and Deficit
(Expressed in U.S. Dollars)
Period from Incorporation on June 14, 1996 to June 30, 1996
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
Expenses:
Consulting $ 2,400
Foreign exchange (622)
Legal, accounting and audit 8,463
Office 2,020
--------
Loss for the period, being deficit at end of period $ 33,861
--------
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE> 71
FLAGSHIP HOLDING LTD.
Consolidated Statement of Cash Flows
(Expressed in U.S. Dollars)
Period from Incorporation on June 14, 1996 to June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Cash provided by (used in):
Operations:
Loss for the period $ (33,861)
Expenses paid by the issuance of shares, a non-cash item 24,000
Change in non-cash operating working capital:
Accounts receivable (681)
Accounts payable and accrued liabilities 8,463
---------
(2,079)
Financing:
Issuance of shares for cash 2,886
Increase in non-controlling interest 2,500
Due to related parties 200,743
---------
206,129
Investments:
Investment in mineral properties, net of related accounts payable (14,938)
---------
Increase in cash, being at end of period $ 189,112
---------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-28
<PAGE> 72
FLAGSHIP HOLDING LTD.
Notes to Consolidated Financial Statements, page 1
(Expressed in U.S. Dollars)
Period from Incorporation on June 14, 1996 to June 30, 1996
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS:
The Company was incorporated under the Companies Act of Barbados on
June 14, 1996 and its principal business activity is the acquisition
and exploration of mineral properties.
The Company is currently in the process of exploring its mineral
properties, and as such has not established the existence of
economically recoverable mineral reserves. Continuing operations of the
Company and the recoverability of amounts shown for mineral properties
are dependent upon the discovery of economically recoverable reserves
in its mineral properties, obtaining additional financing to complete
exploration and development, and attaining profitable production or
proceeds from the disposition thereof.
The Company's working capital at June 30, 1996 is not sufficient to
meet the exploration objectives as presently planned. Management
recognizes that the Company must generate additional resources to
enable it to continue operations. Subsequent to the year end, the
Company has been acquired by Fremont Gold Corporation (note 9(a)).
Fremont Gold Corporation is actively pursuing the sale of equity
securities with any funds raised being made available to the Company.
Management expects these factors will result in additional resources to
the Company. However, no assurance can be given that Fremont Gold
Corporation and the Company will be successful in raising additional
capital. Further, there can be no assurance, assuming Fremont Gold
Corporation and the Company successfully raise additional funds, that
the Company will achieve profitability or positive cash flows.
Management's plans also include consideration of alliances or other
partnership agreements with entities interested in and resources to
support the Company's exploration program, or other business
transactions which would generate sufficient resources to assure
continuation of the Company's operations and exploration program.
If the Company is unable to obtain adequate additional financing or
enter into business alliances, management will be required to curtail
the Company's exploration programs.
F-29
<PAGE> 73
FLAGSHIP HOLDING LTD.
Notes to Consolidated Financial Statements, page 2
(Expressed in U.S. Dollars)
Period from Incorporation on June 14, 1996 to June 30, 1996
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in
the United States.
(b) Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
(c) Principles of consolidation:
The consolidated statements include the accounts of the
Company and its 99% owned Chilean subsidiary Inversiones
Mineras AYL S.A.
(d) Cash and cash equivalents:
Cash and cash equivalents consist of highly liquid investments
that are readily convertible to known amounts of cash and
generally have original maturity values of three months or
less.
(e) Mineral properties:
All mineral claim acquisition costs and exploration and
development expenditures in the pre-production stage relating
to mineral properties, net of any recoveries, are capitalized.
General exploration expenditures which do not relate to
specific resource properties are expensed in the period
incurred.
The amounts shown as deferred mineral property costs represent
net costs to date and do not necessarily represent present or
future values.
On an on-going basis, the Company evaluates each property
based on exploration results to date to determine the nature
of exploration work that is warranted in the future. If there
is little prospect of further work on a property being carried
out the deferred costs related to that property are written
down to the estimated amount recoverable.
The deferred exploration and development costs related to a
property from which there is production will be depleted on
the unit-of-production method based upon estimated proven and
probable reserves.
F-30
<PAGE> 74
FLAGSHIP HOLDING LTD.
Notes to Consolidated Financial Statements, page 3
(Expressed in U.S. Dollars)
Period from Incorporation on June 14, 1996 to June 30, 1996
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(f) Foreign currency translation:
The Company and its subsidiary use the U.S. Dollar as their
functional currency. Transactions recorded in Chilean pesos
and Barbados pounds are translated as follows:
(i) Monetary assets and liabilities at the rate
prevailing at the balance sheet date.
(ii) Non-monetary assets and liabilities at
historic rates.
(iii) Income and expenses at the average rate in
effect during the period.
Exchange gains or losses are recorded in the consolidated
statement of operations and deficit.
(g) Income taxes:
The Company accounts for income taxes by an asset and
liability method. Under the asset and liability method,
deferred income taxes are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The
effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment
date.
F-31
<PAGE> 75
FLAGSHIP HOLDING LTD.
Notes to Consolidated Financial Statements, page 4
(Expressed in U.S. Dollars)
Period from Incorporation on June 14, 1996 to June 30, 1996
- --------------------------------------------------------------------------------
3. MINERAL PROPERTIES:
(a) Accumulated costs in respect to the Company's interest in
mineral claims under option consist of the following:
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balance Written off Balance
June 14, Expenditures during June 30,
Property 1996 during period period 1996
- ------------------------------------------- ---------------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C>
Remolino Property, Chile
Acquisition $ -- $ 20,000 $ -- $ 20,000
Exploration -- 31,639 -- 31,639
Los Leones Property, Chile
Acquisition -- 10,000 -- 10,000
Exploration -- 30,310 -- 30,310
Deposit on Resguardo Property, Chile -- 116,326 -- 116,326
-------- -------- -------- --------
$ -- $208,275 $ -- $208,275
-------- -------- -------- --------
</TABLE>
(b) Remolino Property:
The Company entered into a mining option agreement to purchase
the Remolino mineral property located in Chile's Fourth
Region. Under the terms of the agreement, the Company must pay
total consideration of $105,000 plus all costs to keep the
property in good standing. The $105,000 is payable as to
$15,000 upon signing (accrued at June 30, 1996 and paid
subsequent to June 30, 1996); $15,000 by December 12, 1996;
$25,000 by June 12, 1997; and $50,000 by June 12, 1998.
In addition, the Company is responsible for pre-existing
option payments totaling $135,000 as to $5,000 by June 10,
1996 (accrued at June 30, 1996 and paid subsequent to June 30,
1996); $5,000 by September 10, 1996; $10,000 by December 10,
1996; $10,000 by March 10, 1997; $20,000 by June 10, 1997;
$20,000 by September 10, 1997; and $65,000 by December 10,
1997.
A net smelter royalty of 3% must be paid to a maximum of $5
million if the property commences commercial production.
F-32
<PAGE> 76
FLAGSHIP HOLDING LTD.
Notes to Consolidated Financial Statements, page 5
(Expressed in U.S. Dollars)
Period from Incorporation on June 14, 1996 to June 30, 1996
- -------------------------------------------------------------------------------
(c) Los Leones Property:
The Company entered into a mining option agreement to purchase
the Los Leones mineral property located in Chile's Fourth
Region. Under the terms of the agreement, the Company must pay
total consideration of $100,000 plus all costs to keep the
property in good standing. The $100,000 is payable as to
$10,000 upon signing (accrued); $15,000 by December 12, 1996;
$25,000 by June 12, 1997; and $50,000 by June 12, 1998. Option
payments accrued were paid subsequent to June 30, 1996.
A net smelter royalty of 3% must be paid to a maximum of $5
million if the property commences commercial production.
(d) Resguardo Property:
During the period, the Company paid a $116,326 property
payment for the Resguardo property (note 9(b)). This payment
was made to a shareholder of the Company's subsidiary.
4. DUE TO RELATED PARTIES:
On June 20, 1996, the Company borrowed $125,000 from Fremont Gold
Corporation which is repayable upon demand with interest at 10% per
annum. As compensation for granting the loan, the Company issued
125,000 shares to Fremont Gold Corporation.
On June 14, 1996, the Company borrowed $60,847 from one of its
directors which is repayable upon demand with interest at 10% per
annum. As compensation for granting the loan, the Company issued 60,000
shares to the director.
During the period, the Company incurred costs of $14,896 owing to a
shareholder of the Company's subsidiary. These costs are payable on
demand and are non-interest bearing.
F-33
<PAGE> 77
FLAGSHIP HOLDING LTD.
Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. Dollars)
Period from Incorporation on June 14, 1996 to June 30, 1996
- --------------------------------------------------------------------------------
5. SHARE CAPITAL:
Authorized:
Unlimited number of common shares
Issued:
Common shares issued and outstanding since incorporation on June 14,
1996 to June 30, 1996 are as follows:
<TABLE>
<CAPTION>
Consideration Number of Shares Amount
- ------------------------- ---------------- ------
<S> <C> <C>
For cash 2,886,000 $ 2,886
For finders fees on loans 125,000 --
For finders fees on loans 60,000 --
For wages 614,000 24,000
3,685,000 $26,886
---------- -------
</TABLE>
The Shares issued for finders fees on loans are valued at a nil amount
due to the immaterial value of the Shares at time of issuance.
6. SEGMENTED INFORMATION:
Substantially all of the assets of the Company relate to the mining
industry and are located in Chile.
7. INCOME TAXES:
The tax effects of temporary differences that give rise to deferred tax
assets at June 30, 1996 are presented below:
<TABLE>
<S> <C>
Net operating loss carryforwards:
Barbados $ 800
Chile 200
-------
1,000
Less valuation allowance (1,000)
-------
Total deferred tax asset $ --
-------
</TABLE>
F-34
<PAGE> 78
FLAGSHIP HOLDING LTD.
Notes to Consolidated Financial Statements, page 7
(Expressed in U.S. Dollars)
Period from Incorporation on June 14, 1996 to June 30, 1996
- -------------------------------------------------------------------------------
8. DISCLOSURES ABOUT FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities and loans payable approximate
fair value because of the short maturity of those instruments.
9. SUBSEQUENT EVENTS:
(a) On July 31, 1996, control of the Company was acquired by
Fremont Gold Corporation from existing shareholders of the
Company on a share for share basis.
(b) On July 17, 1996, the Company entered into a 99 year lease
agreement for a Chilean mineral property known as the
Resguardo Property. Lease payments are $75,000 upon execution
of the lease agreement; $60,000 payable on each of the lease's
first and second anniversary; and $80,000 payable on the
lease's third anniversary. In addition to the aforementioned
lease payments, the Company was also required to pay, as a
finders fee, a $116,326 property payment on the property to a
shareholder of the Company's subsidiary (note 3).
The Company has the exclusive right to exploit, benefit,
explore, develop and smelt minerals from the 1,400 acre
property located in the Atacama Fault System of northern
Chile. The owners retain a net smelter return production
royalty, equal to 5% on gold and silver and 1.5% on all other
mineral production from the property, and a minimum annual
royalty payment of $300,000 is payable when the property is in
production.
Subsequent to the third anniversary of the lease, the Company
must complete a feasibility study and obtain project financing
to begin production on or before the seventh anniversary of
the lease, however, no payments to the owner are required
during this period. If production financing has not been
obtained during this period and construction of the mine has
not begun by the seventh anniversary, the Company must pay
advance royalty payments of $150,000 in the first year of
delay; $200,000 in the second year of delay; $250,000 in the
third year of delay; and 15% annual incremental increases for
subsequent delays. The first advance royalty payment may be
credited to future net smelter return production royalty.
F-35
<PAGE> 79
THIS PAGE INTENTIONALLY BLANK
F-36
<PAGE> 80
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PROSPECTUS SUMMARY................................................................................................3
The Company..................................................................................................3
Current Business Operations..............................................................................3
History and Prior Activities.................................................................................4
The Offering.................................................................................................7
Plan of Distribution.........................................................................................8
Risk Factors.................................................................................................8
Summary Financial Information................................................................................8
RISK FACTORS......................................................................................................9
Use of Proceeds..................................................................................................13
Plan of Distribution.............................................................................................14
Determination of Offering Price..................................................................................14
Dilution.........................................................................................................14
Dividend Policy..................................................................................................15
Capitalization and Selected Financial Data.......................................................................15
Plan of Operation................................................................................................17
The Company......................................................................................................18
Business of the Company..........................................................................................20
General.....................................................................................................20
The Properties..............................................................................................21
Chile.......................................................................................................26
Environmental Policy........................................................................................30
Competition.................................................................................................30
Employees...................................................................................................31
Litigation..................................................................................................31
Management.......................................................................................................31
Security Ownership of Certain
Beneficial Owners and Management.................................................................................36
Description of Securities........................................................................................37
Legal Matters....................................................................................................40
Experts..........................................................................................................40
Available Information............................................................................................40
Change in Accountants............................................................................................40
Available Information............................................................................................41
Financial Statements............................................................................................F-1
</TABLE>
3,600,000 UNITS
FEBRUARY 12, 1997
F-37
<PAGE> 81
FREMONT GOLD CORPORATION
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Amended and Restated Certificate of Incorporation and Bylaws
require the Company to indemnify each of its past, present and future officers
and directors against liabilities and reasonable expenses incurred in any action
or proceeding by reason of such person being or having been an officer or
director of the Company, of any other corporation for which he or she serves as
such at the request of the Company, to the fullest extent permitted by Delaware
law, including those circumstances in which indemnification would otherwise be
discretionary. However, indemnification is limited to officers and directors who
have acted in good faith and in a manner they reasonably believed to be in the
best interest of the Company and with resect to any criminal action had no
reasonable cause to believe the conduct was unlawful. 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 Company pursuant
to the foregoing provisions, or otherwise, the Company 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.
Article 10 of the Certificate of Incorporation of the Registrant provides
as follows:
10.1 Limitation of Liability. A person who is or was a Director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the Director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the Delaware General
Corporate Law; or (iv)for any transaction from which the Director derived
an improper personal benefit. If the Delaware General Corporate Law is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of the Directors of the
Corporation shall be eliminated or limited to the fullest extent permitted
by the Delaware General Corporate Law, as so amended. The elimination and
limitation of liability provided herein shall continue after a Director has
ceased to occupy such position as to acts or omissions occurring during
such Director's terms or terms of office, and no amendment or repeal of
this Article 10.1 shall apply to or have any effect on the liability or
alleged liability of any Director of the Corporation for or with respect to
any acts or omissions of such Director occurring prior to such amendment or
repeal.
10.2 Indemnification. The Corporation shall indemnify, to the fullest
extent permitted by applicable law and pursuant to the Bylaws, each person
who is or was a Director or officer of the Corporation, and may indemnify
each employee and agent of the Corporation and all other persons whom the
Corporation is authorized to indemnify under the provisions of the Delaware
General Corporate Law.
Section 102(b)(7) and Section 145 of the General Corporation Law of
Delaware, as amended, applies to the Registrant and provide as follows:
Section 102. Certificate of incorporation; contents
(b) In addition to the matters required to be set forth in the
certificate of incorporation by subsection (a) of this section, the
certificate of incorporation may also contain any or all of the following
matters -
. . .
(7) A provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision shall
not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intention
II-1
<PAGE> 82
misconduct or a knowing violation of law, (iii) under section 174 of this
Title, or (iv) for any transaction from which the director derived an
improper personal benefit. No such provision shall eliminate or limit the
liability of a director for any act or omission occurring prior to the date
when such provision becomes effective. All references in this subsection to
a director shall also be deemed to refer to a member of the governing body
of a corporation which is not authorized to lease capital stock.
The official commentary on Section 102(b)(7) states, as follows:
"This provision enables a corporation in its original certificate of
incorporation or an amendment thereto validly approved by stockholders to
eliminate or limit personal liability of members of its board of directors
or governing body for violations of a director's fiduciary duty of care.
However, the amendment makes clear that no such provision shall eliminate
or limit the liability of a director for breaching his duty of loyalty,
failing to act in good faith, engaging in intentional misconduct or
knowingly violating a law, paying a dividend or approving a stock
repurchase which was illegal under Del.C Section 174, or obtaining an
improper personal benefit. This provision would have no effect on the
availability of equitable remedies, such as an injunction or rescission,
for breach of fiduciary duty."
As indicated above, the Company has included in its Certificate of
Incorporation a provision limiting director liability in accordance with the
statute.
Section 145. Indemnification of Officers, Directors, Employees and
Agents; Insurance.
(a) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party or any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal act or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) A corporation shall have the power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
II-2
<PAGE> 83
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b), or
in defense of nay claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered
by a court shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in subsections (a) and
(b). Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in this
Section . Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as a to
action in his official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer employee or agent of another
corporation, partnership joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under the provisions of this section.
(h) For purposes of this Section , references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Section with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
(i) For purposes of this Section , references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
employee befit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; references
to "serving at the request of the corporation" shall include any service as
a director, officer, employee or agent of the corporation" shall include
any service as a director, officer, employee or agent of the corporation
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section .
II-3
<PAGE> 84
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
As indicated above, the Registrant has included in its Bylaws and
Certificate of Incorporation, provisions which limit the personal liability of
members of the board of directors for breaches of the director's fiduciary duty
of care and require it to indemnify its officers, directors, employees and
agents in all circumstances permitted by Delaware law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of all expenses in connection with
the issuance and distribution of the securities to be registered. These expenses
will be deducted from the gross proceeds of the offering. The information
contained below is subject to future contingencies. An asterisk to the right of
a dollar figure denotes that the figure is an estimate and the exact amount to
be expended for that category is not yet known.
<TABLE>
<S> <C>
Registration Fee ............................ $ 2,483
Transfer Agent's Fee ........................ $ 800*
Legal Fees .................................. $32,000*
Accounting Fees ............................. $ 6,000*
Blue Sky Fees and Expenses .................. $ 1,517*
Printing and Engraving Costs ................ $ 7,200*
Total .................................. $50,000
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On July 12, 1994, an investment group ("Investment Group") completed
the purchase of an aggregate of 315,598 shares of the Company's Common Stock
representing, at that time, approximately 60% of the Company's issued and
outstanding Common Stock. In addition, the Investment Group provided sufficient
funds in the form of loans to ensure the Company's viability and permit the
Company to pursue possible business combinations, mergers or similar
transactions. These loans were subsequently converted into 419,656 shares of
Common Stock of the Company on December 30, 1994.
Pursuant to a Private Placement Memorandum dated May 24, 1996, the
Company completed a private placement, pursuant to the exemption from
registration provided by Section 4(2) and Regulation D of the Act, of 1,000,000
shares of its Common Stock at an offering price of $.20 per share aggregating
$200,000 in proceeds to the Company.
On July 31, 1996, the Company acquired 3,560,000 of the issued and
outstanding shares of FHL common stock not previously owned by the Company
pursuant to the exemption from registration provided by Section 4(2) of the Act
and Regulation S promulgated under the Act. The shares of FHL common stock were
acquired directly from the FHL shareholders in exchange for 3,560,000 shares of
the Company's Common Stock which were issued to FHL stockholders. Of those FHL
shares acquired, 614,000 were issued by FHL pursuant to Rule 701 of the Act and
II-4
<PAGE> 85
exchanged for Company shares one-for-one. Upon the completion of the share
exchange, the Company directly owned all of the issued and outstanding shares of
FHL's common stock.
On August 1, 1996 the Company completed a private placement of 500,000
shares of its Common Stock to Laminco pursuant to Regulation S in consideration
of $140,000.
On August 21, 1996, the Company commenced an offering of $1,800,000
principal amount of 10.5% Series A Convertible Notes pursuant to Regulation D
and Regulation S of the Securities Exchange Act of 1933, as amended. On
September 30, 1996 the Company accepted subscriptions totaling $740,000. In
December 1996, the Company completed the offering of Series A Notes and accepted
subscriptions aggregating $1,800,000.
Other than the foregoing transactions, the Registrant has not offered
or sold any unregistered securities within the last three years.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. Exhibits. The following Exhibits are included pursuant to Regulation
SB, Item 601.
<TABLE>
<CAPTION>
No. Description Reference
- ----------- ----------------------------------------------------------------------------------- -------------
<S> <C> <C>
2.1 Stock Purchase Agreement between Laminco Resources, Inc., The Rothchild (1)
Companies, Inc. and the Selling Shareholders listed therein dated June 6, 1996
2.2 Stock Purchase Agreement by and between Fremont Gold Corporation, Flagship (3)
Holding Ltd. and the Selling Shareholders listed therein dated July 31, 1996
3.1 Certificate of Incorporation of Fremont Gold Corporation, as amended and restated (2)
3.2 Bylaws of Fremont Gold Corporation *
4.1 Form of Common Stock Certificate *
4.2 Form of Common Stock Warrant *
4.3 Form of 10.5% Series A Convertible Note (4)
5 Opinion of Streich Lang, P.A. (includes Consent) *
10.1 Fremont Gold Corporation Stock Option Plan (3)
10.2 Bases of Agreement between Minera Fremont Gold Chile, S.A. and Alejandro *
Moreno P. and Others, dated January 22, 1997 (Santa Eloisa Property)
10.3 Letter of Intent between RTZ Mining and Exploration Limited and Fremont Gold *
Corporation, dated December 12, 1996 (Cenizas Property)
10.4 Agreement by and between Sali Hochschild S.A. and Inversiones Mineras AyL S.A., *
dated July 19, 1996 (Resguardo Property)
10.5 Employment Agreement, dated June 4, 1996, by and between Fremont Gold *
Corporation and Michael J. Hopley
</TABLE>
II-5
<PAGE> 86
<TABLE>
<CAPTION>
No. Description Reference
- ----------- ----------------------------------------------------------------------------------- -------------
<S> <C> <C>
10.6 Employment Agreement, dated November 20, 1996, by and between Minera *
Fremont Gold Chile, S.A. and Roberto E. Partarrieu
22 List of Subsidiaries of Fremont Gold Corporation *
23.1 Consent of Streich Lang - Included in Item 5.1 *
23.2 Consent of Thomas W. Klash, Certified Public Accountant *
23.3 Consent of KPMG, Chartered Accountants *
24. Powers of Attorney
</TABLE>
* Filed herewith
(1) Filed with current report on Form 8-K, dated June 7, 1996.
(2) Filed with current report on Form 8-K, dated July 29, 1996.
(3) Filed with Form 10-Q quarterly report, dated June 30, 1996.
(4) Filed with Form 10-Q quarterly report, dated September 30, 1996.
ITEM 28. UNDERTAKINGS.
e. Request for acceleration of effective date.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
f. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form
of prospectus filed as part of a registration statement in
reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities
II-6
<PAGE> 87
Act shall be deemed to be part of this registration statement
as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
ITEM 29. FINANCIAL STATEMENTS AND SCHEDULES.
The financial statements of the Company are included in the Prospectus
beginning at page F-1. All schedules are included in the financial statements of
the Company or are included in Part II of the Registration Statement.
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<PAGE> 88
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Vancouver, British
Columbia, Canada, on February 12, 1997.
FREMONT GOLD CORPORATION
By /s/ Michael J. Hopley
-----------------------------------
Michael J. Hopley, President
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature and Title Date
------------------- ----
<S> <C>
/s/ Michael J. Hopley February 12, 1997
- ---------------------------------------------------------
Michael J. Hopley, Chairman of the Board, Chief
Executive Officer and President
/s/ Edward M. Topham February 12, 1997
- ---------------------------------------------------------
Edward M. Topham, Director, Chief Financial Officer,
Secretary and Treasurer
* February 12, 1997
- ---------------------------------------------------------
David Shaw, Director
</TABLE>
Date: February 12, 1997 *By: /s/ Edward M. Topham
--------------------
Edward M. Topham
Attorney-in-Fact
H-8
<PAGE> 1
EXHIBIT 3.2
AMENDED BY-LAWS OF
THE ROTHCHILD COMPANIES, INC.
ARTICLE I.
MEETINGS OF SHAREHOLDERS
SECTION 1.1 ANNUAL MEETING. The annual meeting of the shareholders of
this corporation shall be held on the 21st day of April of each year or at such
other time and place designated by the Board of Directors of the corporation.
Business transacted at the annual meeting shall include the election of
directors of the corporation. If the designated day shall fall on a Sunday or a
legal holiday, then the meeting shall be held on the first business day
thereafter.
SECTION 1.2 SPECIAL MEETINGS. Special meetings of the shareholders
shall be held when directed by the President or the Board of Directors or when
requested in writing by the holders of not less than 10% of all of the shares
entitled to vote at the meeting. A meeting requested by shareholders shall be
called for a date not less than 10 nor more than 60 days after the request is
made, unless the shareholders requesting the meeting designate a later date. The
call for the meeting shall be issued by the Secretary, unless the President,
Board of Directors of shareholders requesting the meeting shall designate
another person to do so.
SECTION 1.3 PLACE. Meetings of shareholders shall be held at the
principal place of business of the corporation or at such other place as may be
designated by the Board of Directors.
SECTION 1.4 NOTICE. Written notice stating the place, day and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered no less than 10 nor more than 60
days before the meeting, either personally or by first class mail, by or at the
director of the President, Secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at this address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
SECTION 1.5 NOTICE OF ADJOURNED MEETING. When a meeting is adjourned
to another time or place, it shall not be necessary to give notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. If, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this Article to each shareholder
of record on the new record date entitled to vote at such meeting.
<PAGE> 2
SECTION 1.6 SHAREHOLDER QUORUM AND VOTING. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders.
If a quorum is present, the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders of the corporation.
SECTION 1.7 VOTING OF SHARES; EXCLUSION OF CONTROL-SHARE ACQUISITION
LIMITATIONS. Each outstanding share of the corporation's Common Stock shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders or disposed by shareholder action in lieu of a meeting,
notwithstanding the control-share acquisition voting limitations provided by
Florida Statutes Section 607.0902 (1993) which provisions do not, and shall not,
apply to control-share acquisitions of shares of this corporation. Furthermore,
control-share acquisition dissenter's rights otherwise provided by Florida
Statutes Section 607.0902(11) (1993) do not, and shall not, apply in the event
of control-share acquisitions of shares of this corporation.
Shares of the corporation's Preferred Stock shall be non-voting and
entitled to preference to dividends, distributions and distributions upon
dissolution.
SECTION 1.8 PROXIES. A shareholder may vote either in person or by
proxy executed in writing by the shareholder or his/her duly authorized
attorney-in-fact. No proxy shall be valid after eleven (11) months from the date
thereof unless otherwise provided in the proxy.
SECTION 1.9 ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action
required or enabled by law, these Amended Bylaws, or the Articles of
Incorporation of this corporation, to be taken at any annual or special meeting
of shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding Common Stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
ARTICLE II.
DIRECTORS
SECTION 2.1 FUNCTION. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of the Board of Directors.
-2-
<PAGE> 3
SECTION 2.2 QUALIFICATION. Directors need not be residents of this
state or shareholders of this corporation.
SECTION 2.3 COMPENSATION. The shareholders shall have authority to fix
the compensation of directors.
SECTION 2.4 PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
he/she votes against such action or abstains from voting in respect thereto
because of an asserted conflict of interest.
SECTION 2.5 NUMBER. This corporation shall have a minimum of one (1)
director. The number of directors may be increased from time to time by
amendment of the Bylaws.
SECTION 2.6 ELECTION AND TERMS. Each person appointed or elected as a
member of the Board of Directors shall hold office until the next annual meeting
of shareholders, and until his/her successor shall have been elected and
qualified or until his/her earlier resignation, removal from office or death.
At each annual meeting, the shareholders shall elect directors to hold
office until the next succeeding annual meeting. Each director shall hold office
for a term for which he/she is elected and until his/her successor shall have
been elected and qualified or until his/her earlier resignation, removal from
office of death.
SECTION 2.7 VACANCIES. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors even though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
SECTION 2.8 REMOVAL OF DIRECTORS. At a meeting of the shareholders,
called expressly for that purpose, or by written action of the shareholders in
lieu of a special meeting, any director or the entire Board of Directors may be
removed, with or without cause, by a vote or consent, as applicable, of the
holders of a majority of the shares then entitled to vote in an election of
directors.
SECTION 2.9 QUORUM AND VOTING. A majority of the incumbent directors
shall constitute a quorum for the transaction of business. A majority vote of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
SECTION 2.10 EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by majority vote of the directors, may designate from among
its members an executive
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<PAGE> 4
committee and one or more other committees each of which, to the extent provided
in such resolution shall have and may exercise all the authority of the Board of
Directors.
SECTION 2.11 PLACE OF MEETING. Regular and special meetings of the
Board of Directors shall be held as determined by the Board of Directors.
SECTION 2.12 TIME, NOTICE AND CALL OF MEETINGS. Regular meetings of the
Board of Directors shall be held without notice on the 21st day of April of each
year. Written notice of the time and place of special meetings of the Board of
Directors shall be delivered to each director at least two days before the
meeting or by notice mailed to the director at least five days before the
meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
A majority of the directors present, whether or not a quorum exists may
adjourn the meeting of the Board of Directors to another time and place. Notice
of such adjourned meeting shall be given to the directors who were not present
at the time of the adjournment and, unless the time and place of the adjourned
meeting are announced at the time of the adjournment, to the other directors.
Meetings of the Board of Directors may be called by the chairman of the
board, by the President of the corporation or by any director.
Members of the Board of Directors may participate in a meeting of such
board by conference telephone or similar communications system by means of which
system all persons participating in the meeting can hear each other, at the same
time. Participation by such means shall constitute presence in person at a
meeting.
SECTION 2.13 ACTION WITHOUT A MEETING. Any action required to be taken
at a meeting of the Board of Directors, or any action which may be taken at a
meeting of the Board of Directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, signed
by a majority of the directors, or all the members of the committee, as the case
may be, is filed among the minutes of the proceedings of the board or of the
committee. Such consent shall have the same effect as a meeting vote.
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<PAGE> 5
ARTICLE III.
OFFICERS
SECTION 3.1 OFFICERS. The officers of this corporation shall consist of
a president, a secretary and a treasurer, each of whom shall be elected by a
majority of the Board of Directors. Such other officers and assistant officers
and agents as may be deemed necessary may be elected or appointed by a majority
of the Board of Directors from time to time. Any two or more offices may be held
by the same person.
SECTION 3.2 DUTIES. The officers of this corporation shall have the
following duties:
The President shall be the chief executive officer of the corporation,
shall have general and active management of the business and affairs of the
corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the shareholders and Board of Directors.
The Secretary shall have custody of, and maintain all of the corporate
records except the financial records; shall record the minutes of all meetings
of the shareholders and Board of Directors, send all notices of all meetings and
perform such other duties as may be prescribed by the Board of Directors or the
President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts of receipts and disbursements thereof at any annual meetings of
shareholders and whenever else required by the Board of Directors or the
President, and shall perform such other duties as may be prescribed by the Board
of Directors or the President.
SECTION 3.3 REMOVAL OF OFFICERS. An officer or agent elected or
appointed by the Board of Directors may be removed by the Board whenever in its
judgment the best interests of the corporation will be served thereby.
Any vacancy in any office may be filled by the Board of Directors.
ARTICLE IV.
STOCK CERTIFICATES
SECTION 4.1 ISSUANCE. Every holder of shares in this corporation shall
be entitled to have a certificate representing all shares to which he/she is
entitled. No certificate shall be issued for any share until such share is fully
paid.
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<PAGE> 6
SECTION 4.2 FORM. Certificates representing shares in this corporation
shall be signed by the President or Vice President and the Secretary or an
Assistant Secretary and may be sealed with the seal of this corporation or
facsimile thereof.
SECTION 4.3 TRANSFER OF STOCK. The corporation shall request a stock
certificate presented to it for transfer and be properly endorsed by the holder
of record or by his/her duly authorized attorney.
SECTION 4.4 LOST, STOLEN OR DESTROYED CERTIFICATE. If the shareholders
shall claim to have a lost, stolen or destroyed certificate of shares issued by
the corporation, a new certificate shall be issued upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed, and at the discretion of the Board of Directors, upon
the deposit of a bond or other indemnity in such amount and with such sureties,
if any, as the board by reasonably require.
ARTICLE V.
BOOKS AND RECORDS
SECTION 5.1 BOOKS AND RECORDS. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders, Board of Directors and committees of directors.
This corporation shall keep at its registered office or principal place
of business a record of its shareholders, giving the names and addresses of all
shareholders and the number of the shares held by each.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
SECTION 5.2 SHAREHOLDERS' INSPECTION RIGHTS. Any person who shall have
been a holder of record of shares or of voting trust certificates thereof, at
least six months immediately preceding his/her demand or shall be the holder of
record of, or the holder of record of voting trust certificates for, at least
five percent (5%) of the outstanding shares of the corporation, upon written
demand stating the purpose thereof, shall have the right to examine, in person
or by agent or attorney, at any reasonable time or times, for any proper purpose
its relevant books and records of accounts, minutes and records of shareholders
and to make extracts therefrom.
SECTION 5.3 FINANCIAL INFORMATION. Not later than three months after
the close of each fiscal year, this corporation shall prepare a balance sheet
showing in reasonable detail the financial condition of the corporation as of
the close of its fiscal year, and a profit and loss statement showing the
results of the operations of the corporation during its fiscal year. The
financial reports indicated need not be audited statements.
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<PAGE> 7
Upon the written request of any shareholder or holder of voting trust
certificates for shares of the corporation, the corporation shall mail to each
shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement.
The balance sheets and profit and loss statements shall be filed in the
registered office of the corporation in this state, shall be kept for at least
five years, and shall be subject to inspection during business hours by any
shareholder or holder of voting trust certificates, in person or by agent.
ARTICLE VI.
DIVIDENDS
The Board of Directors of this corporation may, from time to time,
declare, and the corporation may pay, dividends on its shares in cash, property
or its own shares, except when the corporation is insolvent or when the payment
thereof would render the corporation insolvent, subject to the provisions of the
Florida Statutes.
ARTICLE VII.
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be in
circular form.
ARTICLE VIII.
AMENDMENT
These Bylaws may be altered, amended or repealed, and new Bylaws may be
adopted by either the Board of Directors or the shareholders, but the Board of
Directors may not alter, amend or repeal any bylaw adopted by the shareholders
if the shareholders specifically prescribe in such bylaw that it shall not be
altered, amended or repealed by the directors.
-END-
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<PAGE> 1
EXHIBIT 4.1 COMMON STOCK CERTIFICATE
The Common Stock Certificate of Fremont Gold Corporation is a standard
size certificate with blue coloring. Across the top of the certificate is the
word "FREMONT" in block print. Under the word Fremont is the registrant's logo,
a profile of an eagle facing left inside of a blue triangle pointed down. To the
left of the logo is the certificate number space indicating certificate number
"FG ___". To the right of the logo is the space provided for the number of
shares represented by the certificate. Below the number of share block are the
words "Common Stock". Below the logo is the following in block print
"Incorporated under the laws of the State of Delaware" and below that in bold
block print is "FREMONT GOLD CORPORATION". The CUSIP number indicated on the
certificate is "CUSIP 35728C 10 O". In the center of the certificate is space
provided to indicate the certified owner of the certificate. Below this space is
standard language regarding fully paid, non-assessable and specifying the par
value of the shares as $.001. Below this language relating to the
transferability of the shares on the books of the Company by the holder or a
duly authorized Attorney upon surrender of the certificate properly endorsed and
that the certificate is not valid unless countersigned by the transfer agent.
The Certificate is executed by Edward M. Topham as Secretary and Michael J.
Hopley as President and Chief Executive Officer. In the bottom center is the
seal of Fremont Gold Corporation. The reverse side of the certificate contains
standard endorsement and transfer language with a signature guaranty space
provided.
<PAGE> 1
Exhibit 4.2
THIS WARRANT IS SUBJECT TO RESTRICTIONS ON TRANSFER AND MAY NOT BE OFFERED, SOLD
OR TRANSFERRED EXCEPT WITH THE PRIOR WRITTEN CONSENT OF FREMONT GOLD
CORPORATION.
FREMONT GOLD CORPORATION
REDEEMABLE COMMON STOCK PURCHASE WARRANT
Fremont Gold Corporation ("Company"), a Delaware corporation, hereby
certifies that, for value received of $.01 per share initially subject to this
Warrant, ____________________________, a ____________ corporation ("Holder"),
whose address is _______________________, ______________, _____, is entitled,
subject to the terms set forth below at any time or from time to time after the
date hereof and before the Expiration Date (as defined below), to purchase from
the Company _____ shares ("Shares") of Common Stock ("Common Stock"), par value
$.001 per share, at a purchase price per Share equal to the greater of $1.50 or
seventy-five percent (75%) of the average closing bid price for the Common
Stock, on the OTC-Bulletin Board, as reported by a generally accepted reporting
service, for the 10 trading days preceding exercise of this Warrant pursuant to
Section 1.2 hereof (the purchase price per Share, as adjusted from time to time
pursuant to the provisions hereunder set forth, is referred to in this Warrant
as the "Purchase Price").
This Warrant is being issued to the Holder pursuant to conversion of
the Series A Convertible Promissory Note previously issued by the Company to
Holder.
1. TERM OF THE WARRANT.
1.1 Time of Exercise. Subject to the provisions of Sections 1.5,
"Transfer and Assignment," this Warrant may be exercised at any time and from
time to time after its issuance but no later than 5:00 p.m., M.S.T., September
30, 1997 ("Expiration Date"), at which point it shall become void and all rights
under this Warrant shall cease.
1.2 Manner of Exercise.
1.2.1 The holder of this Warrant ("Holder") may exercise this
Warrant, in whole or in part, upon surrender of this Warrant with the form of
subscription attached hereto duly executed, to the Company at its corporate
office at 777 Hornby Street, Suite 2000, Vancouver, British Columbia, Canada V62
1S4, together with the full Purchase Price for each Share to be purchased in
lawful money of the United States, or by certified check, bank draft or postal
or express money order payable in United States dollars to the order of the
Company, and upon compliance with and subject to the conditions set forth in
this Warrant.
1.2.2 Upon receipt of this Warrant with the form of
subscription duly executed and accompanied by payment of the aggregate Purchase
Price for the Shares for which this Warrant is then being exercised, the Company
shall cause to be issued certificates or other evidence of ownership, for the
total number of whole Shares for which this Warrant is being exercised in such
denominations as are required for delivery to the Holder, and the Company shall
thereupon deliver such documents to the Holder or its nominee.
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<PAGE> 2
1.2.3 If the Holder exercises this Warrant with respect to
fewer than all of the Shares that may be purchased under this Warrant, the
Company shall execute a new Warrant for the balance of the Shares that may be
purchased upon exercise of this Warrant and deliver such new Warrant to the
Holder.
1.2.4 The Company covenants and agrees that it will pay when
due and payable any and all taxes which may be payable in respect of the issue
of this Warrant, or the issue of any Shares upon the exercise of this Warrant.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance or delivery of this Warrant
or of the Shares in a name other than that of the Holder at the time of
surrender, and until the payment of such tax, the Company shall not be required
to issue such Shares.
1.3 Exchange of Warrant. This Warrant may be split-up, combined or
exchanged for another Warrant or Warrants of like tenor to purchase a like
aggregate number of Shares. If the Holder desires to split-up, combine or
exchange this Warrant, he shall make such request in writing delivered to the
Company at its corporate office and shall surrender this Warrant and any other
Warrants to be so split-up, combined or exchanged, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange which will result in the issuance of a Warrant entitling
the Holder to purchase upon exercise a fraction of a Share. The Company may
require the Holder to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any split-up, combination or
exchange of Warrants. The term "Warrant" as used herein includes any Warrants
issued in substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction of reasonably
satisfactory indemnification, including a surety bond if required by the
Company, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will cause to be executed and delivered a new Warrant of like tenor and
date. Any such new Warrant executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not this Warrant
so lost, stolen, destroyed, or mutilated shall be at any time enforceable by
anyone.
1.4 Holder as Owner. Subject to the limitations on transfer pursuant to
Section 1.5 hereof, prior to due presentment for registration of transfer of
this Warrant, the Company may deem and treat the Holder as the absolute owner of
this Warrant (notwithstanding any notation of ownership or other writing hereon)
for the purpose of any exercise hereof and for all other purposes, and the
Company shall not be affected by any notice to the contrary. Irrespective of the
date of issue and delivery of certificates for any Common Stock issuable upon
the exercise of the Warrant, each person in whose name any such certificate is
issued shall be deemed to have become the holder of record of the Shares
represented thereby on the date on which all or a portion of the Warrant
surrendered in connection with the subscription therefor was surrendered and
payment of the purchase price was tendered. No surrender of all or a portion of
the Warrant on any date when the stock transfer books of the Company are closed,
however, shall be effective to constitute the person or persons entitled to
receive Shares upon such surrender as the record holder of such Shares on such
date, but such person or persons shall be constituted the record holder or
holders of such Shares at the close of business on the next succeeding date on
which the stock transfer books are opened. Each person holding any Shares
received upon exercise of Warrant shall be entitled to receive only dividends or
distributions payable to holders of record on or after the date on which such
person shall be deemed to have become the holder of record of such Shares.
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<PAGE> 3
1.5 Transfer and Assignment. This Warrant may not be sold,
hypothecated, assigned or transferred in any other manner except with the prior
written consent of the Company. All requests for the Company's written consent
to the sale, hypothecation, assignment or transfer, in any manner (each a
"Transfer") of this Warrant shall be made in a writing delivered to the Company
at its corporate office located at 777 Hornby Street, Vancouver, British
Columbia, Canada V62 1S4. The Company shall be entitled, for any reason or no
reason, to refuse to grant consent to the Transfer of this Warrant and nothing
contained herein shall be deemed to obligate the Company, in any manner, to
grant its consent to any Transfer of this Warrant.
1.6 Method for Assignment. Any Transfer permitted under this Warrant
shall be made by surrender of this Warrant to the Company at its corporate
office with the form of assignment attached hereto duly executed and funds
sufficient to pay any transfer tax. In such event, the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee designated
in such instrument of assignment and this Warrant shall promptly be canceled.
This Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation thereof at the corporate office of the Company together
with a written notice signed by the Holder, specifying the names and
denominations in which such new Warrants are to be issued.
1.7 Rights of Holder. Nothing contained in this Warrant shall be
construed as conferring upon the Holder the right to vote or consent or receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights whatsoever as
a stockholder of the Company. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:
1.7.1 The Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings; as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
1.7.2 The Company shall offer to the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
1.7.3 There shall be proposed any capital reorganization or
reclassification of the Common Stock, or a sale of all or substantially all of
the assets of the Company, or a consolidation or merger of the Company with
another entity; or
1.7.4 There shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall cause to be mailed to
the Holder, at the earliest practicable time (and, in any event, not less than
thirty (30) days before any record date or other date set for definitive
action), written notice of the date on which the books of the Company shall
close or a record shall be taken to determine the stockholders entitled to such
dividend, distribution, convertible or exchangeable securities or subscription
rights, or entitled to vote on such reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be. Such notice shall also set forth such facts as shall indicate the effect of
such action (to the extent such effect may be known at the date of such notice)
on the Purchase Price and the kind and amount of the Common Stock and other
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<PAGE> 4
securities and property deliverable upon exercise of this Warrant. Such notice
shall also specify the date as of which the holders of the Common Stock of
record shall participate in said distribution or subscription rights or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, sale, consolidation,
merger, dissolution, liquidation or winding up, as the case may be (on which
date, in the event of voluntary or involuntary dissolution, liquidation or
winding up of the Company, the right to exercise this Warrant shall terminate).
Without limiting the obligation of the Company to provide notice to the holder
of actions hereunder, it is agreed that failure of the Company to give notice
shall not invalidate such action of the Company.
1.8 Lost Warrant Certificate(s). If this Warrant is lost, stolen,
mutilated or destroyed, the Company shall, on such reasonable terms as to
indemnity or otherwise as it may impose, which shall, in the case of a mutilated
Warrant, include the surrender thereof, issue a new Warrant of like denomination
and tenor as, and in substitution for, this Warrant, which shall thereupon
become void. Any such new Warrant shall constitute an additional contractual
obligation of the Company, whether or not the Warrant so lost, stolen, destroyed
or mutilated shall be at any time enforceable by anyone.
2. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE UPON
EXERCISE.
2.1 Recapitalization. If the Company shall, while this Warrant remains
unexercised, in whole or in part, and in force effect a recapitalization of such
character that the Shares purchasable hereunder shall be changed into or become
exchangeable for a larger or smaller number of Shares, then, after the date of
record for effecting such recapitalization, the number of Shares which the
Holder hereof shall be entitled to purchase hereunder shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason such recapitalization, and of
the Purchase Price, whether or not in effect immediately prior to the time of
such recapitalization, of such recapitalized Common Stock shall in the case of
an increase in the number of such Shares be proportionately reduced, and in the
case of a decrease in the number of such Shares shall be proportionately
increased. For the purposes of this Section 2.1, a stock dividend, stock
split-up or reverse split shall be considered as a recapitalization and as an
exchange for a larger or smaller number of shares, as the case may be.
2.2 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the Company into, any other corporation, or in case
of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then, as a condition of such consolidation, merger or sale or
conveyance, adequate provision shall be made whereby the Holder shall thereafter
have the right to purchase and receive, upon the basis and upon the terms and
conditions specified in this Warrant and in lieu of Shares immediately
theretofore purchasable and receivable upon the exercise of the rights
represented by this Warrant, such shares of stock or securities as may be issued
in connection with such consolidation, merger, or sale or conveyance with
respect to or in exchange for the number of outstanding shares of Common Stock
equal to the number of Shares immediately theretofore purchasable and receivable
upon the exercise of the rights represented by this Warrant had such
consolidation, merger, sale or conveyance not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the Holder of this Warrant to the end that the provisions of this Warrant shall
be applicable as nearly as may be in relation to any Shares thereafter
deliverable upon the exercise hereof.
2.3 Notice of Dissolution or Liquidation. Except as otherwise provided
in Section 2.2, "Merger or Consolidation," in the case of any sale or conveyance
of all or substantially all of the assets
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<PAGE> 5
of the Company in connection with a plan of complete liquidation of the Company,
or in the case of the dissolution, liquidation or winding-up of the Company, all
rights under this Warrant shall terminate on a date fixed by the Company, such
date so fixed to be not earlier than the date of the commencement of the
proceedings for such dissolution, liquidation or winding-up and not later than
thirty (30) days after such commencement date. Notice of such termination of
purchase rights shall be given to the Holder at least thirty (30) days prior to
such termination date.
2.4 Statement of Adjustment. Any adjustment pursuant to the provisions
of this Section 2 shall be made on the basis of the number of Shares which the
Holder would have been entitled to acquire by exercise of this Warrant
immediately prior to the event giving rise to such adjustment and, as to the
Purchase Price in effect immediately prior to the rise to such adjustment.
Whenever any such adjustment is required to be made, the Company shall forthwith
determine the new number of Shares which the Holder hereof shall be entitled to
purchase hereunder and/or such new Purchase Price and shall prepare, retain on
file and transmit to the Holder within ten (10) days after such preparation a
statement describing in reasonable detail the method used in calculating such
adjustment.
2.5 No Fractional Shares. The Company shall not issue any fraction of a
Share in connection with the exercise of this Warrant, and in any case where the
Holder would, except for the provisions of this Section 2.5, be entitled under
the terms of this Warrant to receive a fraction of a Share upon such exercise,
the Company shall upon the exercise and receipt of the Purchase Price, issue the
largest number of whole Shares purchasable upon exercise of this Warrant. The
Company shall not be required to make any cash or other adjustment in respect of
such fraction of a Share to which the Holder would otherwise be entitled. The
Holder, by the acceptance of this Warrant, expressly waives his right to receive
a certificate for any fraction of a Share upon exercise hereof.
2.6 No Change in Form Required. The form of Warrant need not be changed
because of any change pursuant to this Section 2 in the Purchase Price or in the
number of Shares purchasable upon the exercise of a Warrant, may state the same
Purchase Price and the same number of shares of Common Stock as are stated in
the Warrants initially issued pursuant to the Agreement.
3. REDEMPTION. The Company may redeem all or a portion of this Warrant, at $.10
per Share subject to the Warrant so redeemed, commencing upon its issuance, upon
not less than 15 days prior written notice. Notice of redemption shall be mailed
by the Company to the address of the registered Holder of this Warrant on the
Company's ledger.
4. RESERVATION OF SHARES. The Company shall at all times reserve, for the
purpose of issuance on exercise of this Warrant such number of shares of Common
Stock or such class or classes of capital stock or other securities as shall
from time to time be sufficient to comply with this Warrant and the Company
shall take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized and unissued shares of Common Stock or such
other class or classes of capital stock or other securities to such number as
shall be sufficient for that purpose. All Shares issued upon exercise of this
Warrant shall be duly authorized, validly issued and outstanding, fully paid and
non-assessable.
5. SURVIVAL. All agreements, covenants, representations and warranties herein
shall survive the execution and delivery of this Warrant and any investigation
at any time made by or on behalf of any parties hereto and the exercise, sale
and purchase of this Warrant (and any other securities or property) issuable on
exercise hereof.
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<PAGE> 6
6. REMEDIES. The Company agrees that the remedies at law of the Holder, in the
event of any default or threatened default by the Company in the performance or
compliance with any of the terms of this Warrant, may not be adequate and such
terms may, in addition to and not in lieu of any other remedy, be specifically
enforced by a decree of specific performance of any agreement contained herein
or by an injunction against a violation of any of the terms hereof or otherwise.
7. OTHER MATTERS.
7.1 Binding Effect. All the covenants and provisions of this Warrant by
or for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.
7.2 Notices. Notices or demands pursuant to this Warrant to be given or
made by the Holder to or on the Company shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid,
and addressed, until another address is designated in writing by the Company, as
follows:
Fremont Gold Corporation
777 Hornby Street
Suite 2000
Vancouver, British Columbia, Canada V62 1S4
Attn: Chief Financial Officer
Notices to the Holder provided for in this Warrant shall be deemed given or made
by the Company if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at the Holder's last
known address as it shall appear on the books of the Company.
7.3 Governing Law. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of Delaware.
7.4 Parties Bound and Benefitted. Nothing in this Warrant expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company and the Holder any right, remedy or claim under promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements contained in this Warrant shall be for the sole and exclusive benefit
of the Company and its successors and of the Holder, its successors and, if
permitted, its assignees.
7.5 Headings. The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the _____ day of ______________, 1997.
FREMONT GOLD CORPORATION
By:_____________________________________
Michael J. Hopley, President
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<PAGE> 7
FREMONT GOLD CORPORATION
ASSIGNMENT
FOR VALUE RECEIVED, and with the prior written consent of Fremont Gold
Corporation, hereby sells, assigns and transfers unto __________________________
_____________________ the within Warrant and the rights represented thereby, and
does hereby irrevocably constitute and appoint
__________________________________________ Attorney, to transfer said Warrant on
the books of the Company, with full power of substitution.
Dated:___________________________
Signed:_______________________________
Print Name:___________________________
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<PAGE> 8
SUBSCRIPTION FORM
FREMONT GOLD CORPORATION
777 HORNBY STREET
SUITE 2000
VANCOUVER, BRITISH COLUMBIA, CANADA V62 1S4
The undersigned hereby irrevocably subscribes for the purchase of _____
shares of Common Stock ("Shares"), pursuant to and in accordance with the terms
and conditions of this Warrant, and herewith makes payment, covering the
purchase of the Shares, which should be delivered to the undersigned at the
address stated below, and, if such number of Shares shall not be all of the
Shares purchasable hereunder, then a new Warrant of like tenor for the balance
of the remaining Shares purchasable under this Warrant be delivered to the
undersigned at the address stated below.
Dated: ________________________ Signed: ________________________________
Address:________________________________
________________________________________
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<PAGE> 1
Exhibit 5
[STREICH LANG, P.A. LETTERHEAD]
February 12, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Fremont Gold Corporation
Ladies and Gentlemen:
This firm is counsel for Fremont Gold Corporation, a Delaware
corporation (the "Company"). As such, we are familiar with the Certificate of
Incorporation and Bylaws of the Company. We have also acted as counsel for the
Company with respect to certain matters in connection with the preparation of
the Registration Statement on Form SB-2 registering 3,600,000 Units (the
"Units"), each Unit comprised of one share of Common Stock, $.001 par value (the
"Shares") and one Redeemable Common Stock Purchase Warrant (the "Warrants"),
3,600,000 Shares included in the Units, 3,600,000 Warrants included in the Units
and 3,600,000 shares of Common Stock underlying the Warrants, under the
Securities Act of 1933. In addition, we have examined such documents and
undertaken such further inquiry as we consider necessary for rendering the
opinion hereinafter set forth below.
Based upon the foregoing, it is our opinion that:
1. The Company is a corporation duly organized and validly
existing under the laws of the State of Delaware.
2. The Shares, when issued, will be duly and validly
issued, fully paid and nonassessable.
3. The Warrants, when issued, will be duly and validly
issued.
4. The shares of Common Stock underlying the Warrants, when
issued, will be duly and validly issued, fully paid and
nonassessable.
We acknowledge that we are referred to under the heading "Legal
Matters" of the Prospectus which is part of the Registration Statement and we
hereby consent to the use of our name in such Registration Statement. We further
<PAGE> 2
consent to the filing of this opinion as Exhibit 5 to the Registration
Statement and with the state regulatory agencies in such states as may require
such filing in connection with the registration of the Units, Shares, Warrants
and shares of Common Stock underlying the Warrants for offer and sale in such
states.
Very truly yours,
/s/ Christian J. Hoffmann, III
--------------------------------
Christian J. Hoffmann, III
FOR THE FIRM
<PAGE> 3
EXHIBIT 10.2
CERTIFICATE PURSUANT TO REGULATION S-T SECTION 237.306
The undersigned certifies that he is secretary of Fremont Gold Corporation, a
Delaware corporation (the "Company") and that as such he is duly authorized to
execute and deliver this certificate on behalf of the Company, and further
represents that:
1. Attached hereto is a fair and accurate English translation of that certain
Bases of Agreement between Minera Fremont Gold Chile S.A.AND Alejandro Moreno P.
And Others, dated January 22, 1997.
IN WITNESS WHEREOF, I have affixed my signature this 6th day of February, 1997.
/s/ Edward M. Topham
- --------------------------
Edward M. Topham
Secretary
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<PAGE> 1
[TRANSLATED FROM SPANISH TO ENGLISH]
BASES OF AGREEMENT
BETWEEN
MINERA FREMONT GOLD CHILE S.A.
AND
ALEJANDRO MORENO P. AND OTHERS
In Santiago, Chile on 22 January 1997, between the representatives of
Minera Fremont Gold Chile S.A., Messrs. Roberto Ossandon Irarrazabal and Roberto
Partarrieu Leon, all domiciled for this purpose at 400 San Crescente Street, Las
Condes, as the first party, hereinafter "the Company," and as the other party,
hereinafter "the Proprietors," Messrs. Alejandro Morano Prohens, Juan Ignacio
Perez Walker and Cristian Correa Searle, all domiciled, for this purpose, at
2740 Ebro Street, office 604, Las Condes, it has been agreed that the bases will
be established for an agreement of mining exploration and operation, under the
terms mentioned hereinafter:
FIRST: Mr. Alejandro Morano Prohens, Mr. Juan Ignacio Perez Walker and
Mr. Christian Correa Searle are owners of or own rights in twenty-three (23)
mining properties and two (2) overlapping mining properties located in the
sector of Aldebarran in the Maricunga mountain chain. The individualization of
these mining properties and their plans are included in Annex 1 attached hereto
and which for all purposes must be understood to be part and parcel of same.
SECOND: On its part, Minera Fremont Gold Chile S.A. is a company that
has the financial and technical resources that permit it to explore the mining
properties mentioned in the previous clause, and if the reports confirm the
existence of ore in them, to develop an operation project according to the
potential that may be established.
THIRD: Taking the statements of the previous clauses into
consideration, the Proprietors have agreed with the Company that at this time
they will establish the basic conditions and set up a procedure that will allow
them to become partners or stockholders in one same company, intended for the
mining of the mineral ores that may be discovered.
FOURTH: For this purpose, the parties hereto hereby agree to proceed as
follows:
A. Organization of the Partnership.
1. The Proprietors must organize a stock company or
contractual mining company within the time period of ninety(90) days counted
from this date, to which the mentioned twenty-five (25) mining properties must
be contributed and the future rights on the application for water rights that is
in the pipeline according to file ND 0302428 order number 495. At the moment of
the organization, a stockholders' pact must be signed that considers all the
agreements established in this document.
<PAGE> 2
2. The capital stock shall be U.S. $3,000,000 of which U.S.
$2,000,000 will be equivalent to the price of the mining properties and U.S.
$1,000,000 the value of the works that the Company must execute. These amounts
will be capitalized through the subscription of cash shares for the same value.
3. The Proprietors will sell to the Company five hundred (500)
Series A shares of the new Partnership in the amount of U.S. $500,000 according
to the payment formula mentioned hereinafter (number 7 below).
4. As a result of the sale of shares and the valuation of the
exploration work capitalized, the stockholders of the Partnership shall be the
Proprietors and the Company, each one with fifty percent (50%) of the shares.
5. The Partnership will issue 3,000 shares of which 1,500 will
be Series A and 1,500 shall be Series B.
6. The Series B shares will always receive a percentage of the
patrimony and rights in the Company (right to vote at the stockholders'
meetings) equivalent to twenty-five percent (25%) of the total.
7. The U.S. $500,000 mentioned in number 3 above, equivalent
to 500 Series A shares, will be paid by the Company on the following dates:
a. U.S. $30,000 when this Agreement is signed;
b. U.S. $135,000 on or before 30 April 1997;
c. U.S. $135,000 on or before 30 November 1997;
d. U.S. $100,000 on or before 31 March 1998;
and
e. U.S. $100,000 on or before 31 March 199.
The shares will be transferred on the same date and on the same
occasion when the quota mentioned in letter "e" is paid. Non-payment of one of
the quotas will give the sellers the right to consider this Agreement finished,
and this does not imply that the Proprietors must pay back to the Company the
amount of the quotas that has already been paid.
The cancellation of the U.S. $135,000 mentioned in letter "b" will be
subject to the Partnership being organized by that date. The mentioned payment
will only be made once the mentioned Partnership and the Stockholders' Agreement
that picks up the terms of this Agreement have been established.
B. Obligations of the Company in the Preliminary Stages.
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1. To be able to have access to the option to subscribe 1,000
Class A cash shares of the new Partnership, the Company must execute the work
specified hereinafter at its own expense, valued at approximately $1,000,000.
2. The mentioned works shall consist of the following:
a. Period January 1997 - April 1997
(1) Geological survey and mapping
(2) Study of satellite images
b. Period September 1997 - March 1998
(1) Geophysical survey
(2) Geochemical surveys
(3) Sampling and prospect pits
(4) First phase of drilling program
with RC (3,000 meters or its
equivalent in diamantine)
(5) Laboratory analysis of rock
sampling, reverse air drilling
and/or diamantine drill cores
c. Period September 1998 - March 1999
(1) Second phase of drilling program
with RC (6,000 meters or its
equivalent in diamantine)
(2) Laboratory analysis of rock
sampling, reverse air drilling
and/or diamantine drill cores
d. Period February 1997 - March 1999
(1) Maintenance costs for patents,
measurements and water rights
included.
It is hereby put on record that the amount of U.S. $1,000,00 for the
works specified above is merely an estimate, and may vary for or against the
Company, but this is no reason for a variation in the number of cash shares
which must be issued once the above-described works are concluded.
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<PAGE> 4
The parties hereto also agree that the number of surveys may vary
depending on the result of each one of the stages. The decision as to the
technology to be used shall be the responsibility of and will depend on the
criteria of the Company.
The work period may be put forward or be delayed for climatic reasons.
If the calendar of the period should be modified, the payments indicated in the
fourth clause of A7 will be put forward or postponed simultaneously.
C. Patents, Measurements and Applications for Water Rights.
All expenses during the currency of the exploration period until the
option to subscribe cash shares that originate in patents and costs of
measurements and water feasibilities, shall be chargeable to the Company. These
amounts will be allocated to the U.S. $1,000,000 considered as a cost of the
works to be executed.
On the other hand, the Proprietors will be responsible for the judicial
protection of the mining properties and they will be responsible for advising
the Company of the date on which taxes or rights chargeable to the Company must
be paid. This notice must be sent by letter to the legal place of business of
the Company at least thirty (30) days prior to the date of payment.
If the Company, having been correctly notified of its obligation to
make a payment of those mentioned above, does not do so within the proper time,
and odes not give the Proprietors fifteen (15) days prior notice before the
expiry date of the payment of their intention not to fulfill said obligation,
not only will this cause the Company to lose its share option, but the Company
may also be subject to the payment of damages as may be determined by the
arbitrating arbiter.
If the Company is not notified correctly of the need to make any of the
above-mentioned payments, this being understood to mean an indication of the
amount and moment of the payments, and because of this fact this should cause
the Company some damages, the arbiter will be authorized to determine the amount
of said damages and may demand the respective indemnity from the Proprietors.
D. Unilateral Waiver.
The Company, if it wishes, may waive, unilaterally and with
explanation, the option to subscribe the above-mentioned cash shares, as well as
the possibility of purchasing the five- hundred (500) shares under the
conditions indicated in letter A number 7.
The Company must execute the waiver of the option by means of a letter
addressed to the legal place of business of the Proprietors.
If the waiver of the option and purchase of shares should take place,
the Company must give the Proprietors all the objective information which has
been produced as a result of the execution of the exploration work.
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<PAGE> 5
E. Advance Closing of the Option.
1. The Company will be considered as having lost the right to
the option to purchase shares and subscribe cash shares, under the
above-mentioned conditions, if it does not execute the works mentioned in the
fourth clause letter B number 2, does not comply with the payments described in
the same fourth clause letter A number 3, nor pays within the time period agreed
upon for the purchase of shares, as established in clause four letter A number
7.
In spite of the above, the Company may delay the payments for a maximum
period of sixty (60) days counted from the date on which they should have been
made, and this delay shall not imply for the Company the loss of the options to
purchase or subscribe cash shares.
Assuming that the Company requests the extension of the deadlines for
payment, this mere fact will place it under the obligation to pay within the
time period agreed upon, with the risk that it may lose the described options
irremediably. Nevertheless, if the Company does not pay within the time period
agreed upon, the Proprietors must notify the Company of the non-payment of the
amount owed and in this case the Company must proceed with the cash payment of
its obligation within a maximum time period of ten (10) days.
It is also agreed that if the Company does not request an extension of
the time period for payment, it is understood that it is waiving the options.
2. Another cause for the early cancellation of the option is
the fact that the Company does not deliver the information required pursuant to
letter F below; or, if having delivered it, its content has been altered and can
be considered fraudulent. In this event, the arbitrating arbiter appointed
hereinafter will be the one to decide on the cancellation or continuity of the
option based on the antecedents and tests that the claimant gives him.
Notwithstanding the above, the Proprietors will have the right to request that
the arbiter set damages for nonfulfillment by the Company.
F. Information.
The Company undertakes to deliver to the Proprietors all the objective
information produced by the surveys and explorations carried out in the mining
properties that are the subject matter of this Agreement. For this purpose, the
Company, before May 15 of each year, must make a formal presentation to the
Proprietors of the works and surveys executed during the summer season
immediately prior to that date.
It is hereby put on record that technical reports issued by third
parties will not commit the Company with regard to the content of their
conclusions, whether these originate from the same third parties or from the
Company, because for all purposes they must be considered as being for
illustration purposes only.
G. Agreements Subsequent to the Exercising of the Options.
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<PAGE> 6
1. Share Structure. Once the Company has exercised the
mentioned options to purchase and subscribe shares, the share structure of the
mining partnership set up pursuant to letter A1 of this clause will be divided
into 1,500 Series A shares subscribed by the Company and 1,500 Series B shares
subscribed by the Proprietors.
2. Administration. The Company feels that an essential
condition to the signing of this Agreement is that the administration and
operation of the Company to be organized shall be in the hands or and be the
responsibility of Miner Fremont Gold Chile S.A.
3. Board of Directors. Notwithstanding what is stated in the
previous number, the parties hereby agree that the Board of Directors of the
Company shall consist of five members, two chosen by the Company, two chosen by
the Proprietors and one chosen by mutual agreement.
On the other hand, they undertake to establish the administrative
authority invested in the Board of Directors, in order to clearly establish the
framework for said Board of Directors and separate the powers of administration
and management in the new partnership that the Company considers essential for
the future. In effect, the parties agree to establish the following powers for
the Board of Directors:
- Appointment of auditors or other professionals that have to be
hired for an adequate control of the Company's administration.
- Study and develop new business.
- Purchase or rent the goods that are not necessary for the
operation of the Company.
- Sale or rental of the Company's assets.
- Establish liens on the Company's goods to guarantee its own
obligations, except with regard to guaranties granted for the
construction of the plant, where the intent of the Company
will be enough.
- Hold the Partnership liable with the purpose of guaranteeing
third party commitments.
- Indebtedness with banks except to obtain financing for working
capital (including leasing).
- Contracts with future and operations with by-products.
- Institutions with which financial investments can be made.
- Lawsuits with third parties started by the Partnership or
against the Partnership.
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- Distribution of dividends above the legal limitations.
- Operations with companies or related persons.
- Investments that represent more than U.S. $1,000,000 must be
made with a prior public or private call for bids, unless
specifically authorized by the Board of Directors.
4. Mutual Right to First Option. The stockholders of the new
Partnership may freely sell and rent stock with the condition that they must
first offer the other stockholders, in proportion to their stock participation,
a first option of sale or rental under the same conditions that they are being
offered to a third party.
If a third party should prove to be interested in the purchase or
rental of stock, all the stockholders must be notified of the conditions of the
ale or rental in a bona fide offer signed by the interested third party.
In spite of the above, the Proprietors are free to contribute and
without prior notification to the rest of the stockholders, all or part of their
Series A or B block to a holding company.
The norms that will govern the manner in which the offer of stock among
the stockholders, deadlines, etc., will be put into effect shall be established
in the Bylaws of the Company that will be organized.
It is hereby put on record that the norms that will govern the first
option of sale or rental of stock will not apply in the case of transactions
between the stockholders that form part of the Proprietors or of the Company.
5. Financing of Stages Subsequent to Those Indicated in
Letter B Number 2 and Feasibility Studies.
(a) The cost of stages subsequent to those
indicated in clause four letter B number 2
of this Agreement, until the completion of
the feasibility study, will be financed by
the stockholders in proportion to their
share participation, whether they are Series
A or B stockholders.
The parties and in the future stockholders
undertake to take part in the financing
under the mentioned terms. In this respect,
they agree that they must have sufficient
funds to take part in the mentioned
financing, within the time period of 180
days for the first stage and 60 days for the
remaining stages, counted from the
notification which Minera Fremont Gold Chile
S.A. must send to all the stockholders of
the new Partnership, indicating the need to
count on sufficient resources to continue
developing the project.
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<PAGE> 8
(b) Once the feasibility study is finished, it
is agreed that the new Partnership will
issue 3,000 Series A cash shares which may
be subscribed by all the stockholders in
proportion to the percentage contributed
towards the total financing of the mentioned
study.
If the Series B stock does not take part in
the financing of the feasibility study, it
cannot be diluted to less than twenty-five
percent (25%) of the patrimony and company
rights pursuant to stipulations in clause
four letter A number 6.
6. Special Option for B Series Stockholders. Once the
feasibility study is finished, the Series B stockholders will have the option to
exchange all their stock for the right to obtain a net smelter return of three
percent (3%) calculated on the production of all the mineral ore obtained from
the working of the mineral deposit.
The mentioned option will have a duration of one hundred and twenty
(120) days counted from the notification that the Company must make informing
that the feasibility study has been finished. The notification must be
accompanied by a copy of the mentioned study.
7. Financing of the Plant.
(a) The financing of the construction of an ore
processing plant, its operation and other
costs related to a mining project under
execution, must be requested by the new
Partnership, and, to guarantee the credits,
it may establish liens on the Company's
assets and, if necessary, the stockholders
must be willing to mortgage their own stock.
(b) The parties hereto agree that additional
investments in the form of an "equity" or
subordinate debt may be required by other
financial institutions in order to ensure
the primary financing of the plant.
(c) The Company assumes the obligation to
finance the capital increases which the
Series B stockholders may be obliged to
make, as described in letter G7b so that the
new Partnership may have sufficient
resources to develop the project.
(d) The Company also undertakes to do its best,
at its own discretion, to obtain the
financing of the other Series A stockholders
on the occasion of increases in the capital
stock of the new Partnership, in order to
develop the mining project that is the
subject matter of this Agreement.
(e) Inasmuch as the Company provides the capital
required by the Series B stock, pursuant to
the provisions of letter G7b, the
-8-
<PAGE> 9
Company may charge the Series B stockholder
an interest rate equal to the LIBOR rate
plus a maximum of five percent (5%).
(f) If the company obtains the financing,
pursuant to the provisions of letter G7b,
for the Series A stockholders in the part
related to the Proprietors, the latter shall
be obliged to pay a rate of two and one half
percent (2.5%) over the sum financed.
(g) If the Proprietors cannot or do not wish to
concur with their obligation to participate
in the financing of the plant under the
terms established in letter G7b, the
Proprietors hereby agree to authorize with
their vote the issuing of a number of Series
A stock which will permit the attraction of
the required capital.
(h) With regard to the payment of investments
subsequent to the feasibility study and
dividend to the stockholders and with the
object of establishing the priority of the
distribution of income, the concept of "net
cash flow" equal to net earnings plus
depreciation plus depletion plus indexing to
inflation minus debts to third parties will
be used. The priority of the net cash flow
must be:
(1) Its distribution among the
stockholders in proportion to their
stock participation.
(2) With regard to the Series B stock,
the respective flow must be paid to
the Company until the latter
receives the total amounts loaned
plus the interest to the owners of
Series B stock.
(3) Finally, with regard to the net cash
flow of the Series A stock, it must
be delivered entirely to the Company
until completion of payment of the
loan which the Company may have
made, plus its interest.
8. Financing of Future Explorations. The financing of future
explorations within the grounds that make up the Santa Eloisa mining properties
must be financed chargeable to the net cash flow defined above.
FIFTH: The parties hereto agree that an essential condition for the
agreements in this document to be put into effect is that legal title to the
mining properties identified in Annex 1, which must be contributed to the
Partnership that will be organized, will comply with the law.
In this respect, the Proprietors will have a time period of thirty (30)
days counted from this date to deliver the respective documents to the Company,
and these shall be studied by the lawyer specializing in mining law, Mr. Horatio
Caffi.
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<PAGE> 10
SIXTH: In consideration of the payment of U.S. $30,000 made in this
act, the parties hereto agree that if the titles to the mining properties do not
comply with the law, the Proprietors must reimburse the mentioned amount. For
this purpose they leave in the hands of the Notary Public, Mr. Juan Ricardo San
Martin Urrajola, a bank document for the equivalent in local currency of the
mentioned amount, with instructions that it is to be delivered to a
representative of Minera Fremont Gold Chile S.A., if it can prove, attaching the
corresponding report issued by the lawyer, Mr. Infante, that the titles to the
mining properties do not comply with the law.
SEVENTH: In addition to the stipulations in the preceding clause, the
parties hereto agree that further to the payment of the U.S. $30,000, the
Proprietors must reimburse the Company for all expenses incurred in patents,
taxes, studies and exploration in the mining properties as of the date and the
date of Mr. Infante's negative legal report.
EIGHTH: All doubts and difficulties that may arise between the parties
as a result of the stipulations of this Agreement, whether they refer to the
appreciation of the existence or nonexistence, validity or nullity, fulfillment
and nonfulfillment, revocation, application, interpretation or any other matters
related directly or indirectly with same, shall be resolved by arbitrating
arbiter or friendly mediator chosen by the parties who will have the most ample
authority, including determining the merits of their own capability establishing
norms of procedure and granting the characteristic of civil obligations to those
that may not assemble these requirements. The arbiter who takes office shall act
without a lawsuit and there shall be no appeal to his resolutions, and the
parties hereto hereby waive their right to appeal. For this arbitration and for
the appointment of the arbiter, the parties agree to apply to the Center of
Arbitration of Santiago, pursuant to the Regulations of the Center of
Arbitration of the Chamber of Commerce, whose provisions are on record in the
public writ dated 10 December 1992, issued by the Office of the notary Public of
Santiago, Mr. Sergio Rodriguez Garcia, and which were published in the Official
Gazette of the 22nd of June 1993 and are part and parcel of this clause and
which the parties hereto declare they accept and are familiar with. Pursuant to
the above, the parties grant a special irrevocable power of attorney to the
Santiago Chamber of Commerce so that, at the request of any one of them, it will
appoint an arbitrating arbiter from among the members of this arbitration
association of the Center of Arbitration of this Chamber. The parties also
establish that the arbitration will be permanently open, so that the arbiter may
carry out his work as many times as may be necessary and in each case will have
a time period of two (2) years in which to carry out his assignment. The arbiter
will always be authorized, if the parties cannot come to an agreement as to
procedure, to establish the procedure as he may wish, including matters
referring to the system of notifications; but the first of these must
necessarily be executed pursuant to the rules of the Section Six of the First
book of the Code of Civil Procedure. The court costs resulting of the
arbitration and the arbiter's fees must always be chargeable to both parties, by
halves.
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NINTH: For all legal purposes of this contract, the parties hereto
establish their domicile in the City of Santiago.
/s/ Roberto Ossandon Irarrazabel /s/ Alejandro Moreno Prohens
- ---------------------------------- ----------------------------------
Minera Fremont Gold Chile S.A. Alejandro Moreno Prohens
/s/Juan Ignacio Perez Walker /s/Cristian Correa Searle
- ---------------------------------- ----------------------------------
Juan Ignacio Perez Walker Cristian Correa Searle
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<PAGE> 1
EXHIBIT 10.3
[FREMONT GOLD CORPORATION LETTERHEAD]
December 12, 1996
RTZ Mining & Exploration Limited
Cruz del Sur 133, Piso 4
Las Condes
Santiago
Chile
ATTENTION: Mr. Thomas C. Patton, Managing Director
Dear Mr. Patton,
Cenizas Property, Region II, Chile
Fremont Gold Corporation ("Fremont") makes the following offer to RTZ Mining &
Exploration Limited ("RTZ") for the Cenizas Property (as described in the
attached Schedule "A"), located in Region II, Chile. All dollar amounts referred
to are U.S. dollars.
1. Fremont will acquire an initial 51% interest in the project over a
maximum of a three year period by making a cash payments totaling $350,000,
grant certain options of Fremont stock to RTZ and commit to expend $1 million in
exploration costs on the Cenizas Property. The schedule would be as follows:
WORK
TIME CASH PAYMENTS STOCK OPTIONS COMMITMENTS
- ---- ------------- ------------- -----------
On Signing $25,000 --- $200,000 1st year
6 months $25,000 150,000 @ $1.50 ---
One Year $50,000 150,000 @ $2.00 $300,000 2nd year
Two Years $100,000 $500,000 3rd year
Three Years $150,000
Totals $350,000 $1,000,000
<PAGE> 2
2. By the end of this three year period (or sooner if Fremont chooses
to advance the schedule), Fremont would have earned a 51% interest and the
Cenizas project will become a joint venture between Fremont and RTZ, with RTZ's
interest being 49%. All further expenditures on the project will be split 51/49%
and Fremont would manage the joint venture and each part will be deemed to have
contributed its portion of the total$3.0 million.
3. If RTZ chooses not to participate in future exploration or
development costs then a dilution formula would apply. This would calculate each
parties interest in the property by using the ratios between each parties deemed
contributions to the property to the total expenditures on the property i.e.
property interest would be Fremont 80%, RTZ 20% after Fremont spends a total of
$6.0 million on the property and RTZ opts not to contribute beyond the initial
deemed expenditure.
4. Within 60 days of Fremont acquiring 51% interest in the Cenizas
Property, RTZ will have the option to regain operatorship of the project and
acquire an additional 2% interest (RTZ 51%, Fremont 49%) by committing to fund
the Cenizas project through a bankable feasibility study to be completed within
a 30 month period.
5. In the event RTZ regains operatorship of the Cenizas property, and
for the purposes of calculating any possible dilution of either parties
interests, at completion of the feasibility study RTZ's deemed expenditure will
be 51$ of the total expenditure on the property and Fremont's deemed expenditure
will be 49% of the total expenditure on the property.
6. Following completion of the feasibility study, RTZ and Fremont will
jointly consider the results and shall advise each other whether it wishes to
proceed to development.
(a) If both parties wish to proceed to development and if RTZ
chooses to become operator of the project, then at Fremont's request,
RTZ will use all reasonable endeavors, within a two-year period from
completion of the feasibility study, to arrange the project finance,
which shall be on customary terms and at an interest rate not exceeding
2 percent over US$LIBOR. The term "arrange"does not imply and
disproportionate financial burden, actual or contingent, on RTZ, and
neither RTZ nor any of its affiliates shall be under any obligation to
provide guarantees or credit enhancement of any kind on Fremont's
behalf. If RTZ is not able to arrange project financing within the
two-
2
<PAGE> 3
year period, then Fremont would become the operator and majority owner
of the Cenizas property (Fremont 51%, RTZ 49%) and the project will
proceed to development with contributions pro-rata and dilution in
effect.
(b) If only one party wishes to proceed to development, the
other party may transfer its pro-rata interest in consideration for the
fair market value of that interest, as determined by the feasibility
study. If for any reason this interest is not transferred, the other
party will retain its pro-rata interest, subject to dilution.
(c) If neither party wishes to proceed, the manager shall
place the project on care and maintenance at minimum cost until such
time as one or both parties develop the project or jointly dispose of
the assets. In this event, pro-rata interests shall remain as they were
at completion of the feasibility study.
7. The party that arranges he production financing will charge a fee to
the other party equivalent to 0.5% of the capital raised.
8. If either party's interest becomes less than 20% then the majority
party would have the option to convert the minority party's interest to a 2% NSR
capped at $3.0 million.
9. Either party has the right to sell its interest in the Cenizas
property, subject to reciprocal rights of first refusal.
10. A full legal agreement to be completed prior to completion of first
year's work commitment.
11. We understand that RTZ holds the property, (as described in the
attached Schedule "A") one hundred percent (100%) free and clear of liens and
encumbrances, including royalties.
12. The actual structure of this transaction will be settled on the
basis of tax efficiency and good business practice in Chile. It may take a
corporate, as opposed to a joint venture form.
3
<PAGE> 4
If the above meets your understanding, please sign below and return one copy to
this office.
AGREED on this 12th day of December, 1996.
FREMONT GOLD CORPORATION
/s/ Michael J. Hopley
- ----------------------------------
Michael J. Hopley, President & CEO
AGREED on this 13th day of December, 1996
/s/ Thomas C. Patton
- -----------------------------------
Thomas C. Patton, Managing Director
4
<PAGE> 5
SCHEDULE "A"
CENIZAS PROPERTY, REGION II, CHILE
CLAIM NAME HECTARES STATUS
---------- -------- ------
Llano 1 1/80 100 Constituted
Llano 2A 1/60 400 Constituted
Llano 2B 1/60 400 Constituted
Llano 3A 1/60 600 Constituted
Llano 3B 1/60 600 Constituted
Llano 4 1/80 398 Constituted
Llano 6 1/75 120 Constituted
Llano 7 1/75 150 Constituted
Llano 12B 1/90 900 Constituted
Llano 13A 1/60 600 Constituted
Llano 13B 1/90 900 Constituted
Llano F 1 In Progress
Llano 16 1/20 200 In Progress
Llano 17 1/30 300 In Progress
Llano 18 1/300 90 In Progress
TOTAL HECTARES 6759
<PAGE> 6
[MAP/SCHEDULE "A"]
<PAGE> 1
EXHIBIT 10.4
CERTIFICATE PURSUANT TO REGULATION S-T SECTION 237.306
The undersigned certifies that he is secretary of Fremont Gold Corporation, a
Delaware corporation (the "Company") and that as such he is duly authorized to
execute and deliver this certificate on behalf of the Company and further
represents that:
1. Attached hereto is a fair and accurate English translation of that
certain Agreement by and between Sali Hochschild S.a. and Inversiones
Minera AyL S.A., dated July 19, 1996.
IN WITNESS WHEREOF, I have affixed my signature this 6th day of
February, 1997.
/s/ Edward M. Topham
-------------------------------
Edward M. Topham
Secretary
<PAGE> 2
REP. No. 548 [TRANSLATED FROM SPANISH TO ENGLISH]
AGREEMENT
BY AND BETWEEN
SALI HOCHSCHILD S.A.
AND
INVERSIONES MINERA AYL S.A.
In Santiago, Chile, on July 19, 1996, before me, ENRIQUE MORGAN TORRES,
attorney-at-law, Notary, Titular of the Second Notarial Office of Santiago,
domiciled at Agustinas 1111 in this city, there appeared: Mr. Walter Hochschild
Kaufmann, Chilean, married, businessman, national identity card No. 1.961.845-5,
and Mr. Joaquin Errazuriz Hochschild, Chilean, married, engineer, national
identity card No. 6.075.332-1, both on behalf of, as shall be evidenced, the
Chilean corporation "SALI HOCHSCHILD S.A.", hereinafter "SALI HOCHSCHILD", all
domiciled at Avda. Presidente Frei Montalva 3077, township of Conchali,
Santiago; and Mr. Roberto Ossandon Irarrazabal, Chilean, married,
attorney-at-law, national identity card No. 7.022.012-1, domiciled in Santiago
at Nueva York 25, 6th floor, on behalf of, as shall be evidenced, the
corporation "INVERSIONES MINERAS AyL S.A.", hereinafter "IMAyL S.A." of the same
domicile thereof; all appearing parties of age, who evidence their identities to
me with the aforesaid identity cards and state:
WHEREAS:
A. SALI HOCHSCHILD is the owner of certain mining claims called
"Resguardo 1 to 53," located in the Third Region of the Republic of Chile that
are described in Section 1.13 and in Appendix A hereof, which identify all
claims and denouncements contemplated herein.
B. IMAyL S.A. wishes to execute successive initial exploration and
assessment work commitments on the set of claims and denouncements referred to
in A above during a period of up to 36 months, on its exclusive account and
risk, in the form and stages to be indicated hereinbelow, in exchange for which
it may exploit the mining properties; and SALI HOCHSCHILD wishes to receive rent
as indicated in Article Eight.
C. Once IMAyL S.A. has completed Initial Work Number Three, the parties
shall implement the lease referred to in Article Eight hereof.
THEREFORE, in consideration of the agreements and covenants contained
herein, SALI HOCHSCHILD and IMAYL S.A. agree to the following:
<PAGE> 3
ARTICLE I
DEFINITIONS
1.1 "Accounting Procedures": means the regular procedures in force used
ordinarily in Chile according to generally accepted accounting practices and
auditing principles.
1.2 "Affiliate": means any person, corporation, association or other
form or organization that directly or indirectly controls, or is controlled by,
or is under common control with a Party. For purposes of the preceding sentence,
"Control" means holding, directly or indirectly, the power to direct or have
directed the management and policies.
1.3 "Agreement": means this exploration, association and lease
agreement, including all modifications and amendments of the same as well as all
appendixes and schedules incorporated hereto.
1.4 "Assets": means the denouncements, Concessions, Properties,
Products and all real estate and chattel, both tangible and intangible, used in
the execution of the Agreement by IMAyL S.A. or SALI HOCHSCHILD.
1.5 "Construction Decision": means the decision adopted by IMAyL S.A.
to undertake the project development and construction as a result of the
feasibility study.
1.6 "Development": means the entire preparation for removal and
recovery of the Products, including the construction and installation of a plant
or any other improvements that will be used in the extraction, handling,
milling, processing or other elaboration of the Products in accordance with the
feasibility study.
1.7 "Exploration": means all activities aimed at verifying the
existence, location, quantity, quality, or commercial value of the substances
contained on the properties, including the preparation of the feasibility study.
1.8 "Initial Work Commitment": means the Operations that IMAyL S.A. may
perform and finance within the maximum period of 36 months as of the effective
date in order for the lease referred to in Article Eight to enter into effect.
1.9 "Operations": means the activities performed hereunder.
1.10 "Parties and Party, Participant and Participator": means IMAyL
S.A. and/or SALI HOCHSCHILD.
1.11 "Products": means all minerals and mineral resources that will be
produced on the properties.
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1.12 "Work Schedule or Schedule": means a description in reasonable
detail of the Exploration activities, which will also contain a description of
the expenses required to perform such activities in the period established in
Articles V and VI.
1.13 "Properties": means, in general and for purposes hereof, the
mining claims and denouncements described in Appendix A. For purposes hereof,
this expression specifically includes the claims of SALI HOCHSCHILD. Properties
shall also mean the mining claims or exploitation concessions into which the
aforesaid mining exploration concessions are converted in due time.
1.14 "Feasibility Study": means the technical and economic assessment
of the possibility of developing a project for the commercial exploitation of
the Properties.
1.15 "Expenses": means those disbursements made on Exploration to
comply with the initial work commitments.
1.16 "Capital Goods": means the physical goods acquired by the operator
that may be easily removed from the land.
ARTICLE II
REPRESENTATIONS AND TITLES
2.1 Capacity of the Parties. Each of the Parties warrants and
represents the following:
(a) that it is a company or corporation duly organized and
existing pursuant to the laws of its respective country;
(b) that it has authorization to enter into and carry out this
Agreement and all transactions contemplated herein and that all other
actions required to authorize it to enter into and carry out this
Agreement have been adopted;
(c) that it shall not violate any other Agreement or
convention by entering into this Agreement;
(d) that this Agreement has been duly subscribed and executed
thereby and is valid and binding thereupon according to its terms.
2.2 Representations. SALI HOCHSCHILD declares:
(a) that it is the owner of its properties;
(b) that it has had and has exclusive and excluding ownership
thereon as well as preemptive or preferred rights to have created
definitive mining property;
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<PAGE> 5
(c) that there are no third-party superpositions or mining
rights of third parties in the area of the claims save as appears in
the appendix describing them;
(d) that they were acquired under good title, in good faith,
pursuant to the law, regulations and other applicable norms; all the
transfers of ownership thereof have also been made legally and no one
could justifiably claim rights or denounce defects;
(e) the creation process thereof was accomplished pursuant to
the law, regulations and other applicable norms;
(f) they are free of mortgages, encumbrances, prohibitions,
promises and options of any nature, lessees and occupants in any way;
(g) the claim fee and all mining permits have been paid when
appropriate and in the corresponding amounts and;
(h) that there are no lawsuits pending nor is it aware of
grounds or causes that might affect the ownership of the owner.
SALI HOCHSCHILD also represents that it shall have the obligation to
defend the ownership of the properties. Also included in this Agreement are the
inherent water rights or those that may correspond under mining concessions as
provided in Article 110 of the Mining Code. IMAyL S.A. represents that it knows
of the status of the title deeds to the claims contemplated herein.
ARTICLE III
PURPOSE AND DURATION
3.1 General. IMAyL S.A. and SALI HOCHSCHILD enter into this Agreement
for the purposes indicated below and agree that all the rights thereof and all
the Operations shall be subject to and governed hereby.
3.2 Purpose. This Agreement is entered into for the following purposes:
(a) Exploration by IMAyL S.A. on its exclusive account and
risk until completing the Initial Work Commitment and the Feasibility
Study.
(b) Eventually, if the Exploration and the assessment have
been successful, the Development and commercial exploitation of the
Properties as described herein.
(c) The execution of any other activity required, appropriate
or incidental to the stipulations hereinabove.
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<PAGE> 6
3.3 Limitation. Unless the parties agree otherwise in writing, the
operations shall be limited to the objectives described in Section 3.2 and
nothing said herein shall be interpreted to expand such objectives.
3.4 The Effective Date and Term. This Agreement shall enter into effect
as of the date of its subscription and shall terminate in the cases and
circumstances indicated in the same agreement.
ARTICLE IV
RELATIONSHIP OF THE PARTICIPANTS
4.1 No Partnership Exists. Nothing contained herein shall be considered
to make a Participant a Partner of the other or, save as indicated expressly
herein, a participant and agent or legal representative of the other nor create
a fiduciary relationship therebetween. The Participants do not intend to create
nor may this Agreement be interpreted to create a mining, business or other
corporation. None of the Participants shall be empowered to act on behalf of or
assume any obligation or liability for account of the other Participant, save as
expressly stipulated herein. The rights, duties, obligations and liabilities of
the Participants shall be individual and not joint or solidary. Each Participant
shall be liable only for its obligations as stipulated herein and shall be
liable only for its share in the cost and expenses as indicated herein.
Consequently, each Participant shall indemnify, defend and hold harmless the
other participant, the directors, officers, employees, agents and
attorneys-in-fact thereof for any loss, claim, damages, compensation and
liabilities that arise from any act or any recognition of liability of another
of the Participants or of any of the directors, officers, employees, agents and
attorneys-in-fact thereof, whether performed or committed, or that have
apparently been performed or committed, on behalf of another Participant, save
specific authorization granted herein or save agreement otherwise in writing
among the Participants.
4.2 Ownership of assets acquired hereunder during the term hereof:
(a) the Capital Goods acquired by IMAyL S.A. to comply with
the Initial Work Commitments shall be the exclusive property thereof
without the price thereof being chargeable to the expenses that
comprise its Initial Work Commitment unless the parties agree otherwise
in writing;
(b) the work and studies performed by IMAyL S.A. shall be the
property of both Parties notwithstanding the risk of forfeiture of the
same in the case of abandonment of the project, whereupon the ownership
of the same shall be transferred to SALI HOCHSCHILD at no charge or
cost.
4.3 Property Maintenance Expenses. All maintenance expenses such as
licenses, permits, mining permits, etc., shall be paid by IMAyL S.A. as long as
this Agreement is in effect, notwithstanding the stipulations in the following
Article. However, all expenses related to the
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<PAGE> 7
legal defense of the Properties, including claims and judicial actions to which
they may be subject, shall be the expense of SALI HOCHSCHILD.
4.4 Other Business Opportunities. Save the specific stipulations
herein, each Participant shall have the separate right to engage in all
commercial activities and to receive all profits arising therefrom, whether or
not competitive with the Operations, without consulting the other Participant.
None of the Participants shall have obligations toward the other regarding any
opportunity to acquire properties on different dates. Unless agreed otherwise in
writing, none of the Participants shall have the obligation to process, treat or
otherwise transform the Products, more or less elaborated, of the other
Participant at any of the facilities it owns or controls.
4.5 Waiver of the Right to Division. The participants hereby waive any
right to division of the Assets that they co-own or sale of the rights therein
or any other operation the purpose of which is to divide common assets.
4.6 Transfer or Termination of Rights to Properties. The parties may
assign the rights arising here from. If this occurs, the assigning party shall
notify the other of its intent to assign its rights at least 60 days in advance,
such notice to contain a clear identification of the assignee as well as of the
principal partners or shareholders thereof. Such notice shall also contain a
copy of the two most recent annual financial statements of the assignee. If such
financial statements do not exist, a copy of the respective financial statements
of the main partners or shareholders thereof shall be submitted.
4.7 Creation or Acquisition of Mining Property in the Area of Interest.
Any act or contract relative to the acquisition of rights in the geographic area
of interest shall be done exclusively in the name of SALI HOCHSCHILD at no
charge whatsoever to this latter, and IMAyL S.A. may not act through third
parties.
4.8 Prohibition to Encumber or Convey. SALI HOCHSCHILD shall execute a
public deed stipulating a prohibition to encumber and convey the properties in
favor of IMAyL S.A. and shall proceed with the registration thereof in the
respective Mines Registrar within a maximum period of 120 days as of the date
hereof. IMAyL S.A., on its part, undertakes to release such prohibition for the
sole purpose of registering the transfer by SALI HOCHSCHILD in favor of a third
party assuming this Agreement.
ARTICLE V
EXPLORATION BY IMAyL S.A.
5.1 Initial Contractual Interest. SALI HOCHSCHILD hereby places its
properties and all studies and information it has thereon at the disposition of
IMAyL S.A., hereby granting the permits necessary in order for IMAyL S.A. to
carry out the work commitments that will enable it to choose to lease the
properties through the execution of successive work schedules within the maximum
period of 36 months.
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<PAGE> 8
Stage I: Detailed Regional and Property Geological
Mapping; Geochemical Studies and, if warranted, geophysical
studies. Furrowing the surface area; initial drilling program.
Stage II: Continuation of the drilling program; if
warranted, a metallurgical study; scope/prefeasibility study,
project viability, economic reserves, etc.
Stage III: Complete the Scope/Prefeasibility Study;
Bank Feasibility Study.
5.1.2 IMAyL S.A. shall deliver a detailed exploration schedule
to SALI HOCHSCHILD no later than 60 days as of the date hereof which IMAyL S.A.
shall direct on Resguardo, specifying the approximate hourly plan and amount of
money that shall be spend on each stage, but in the understanding that this may
need to be modified in accordance with the results of each stage and the
information generated. After 6-month period in the exploration program has
passed, IMAyL S.A. shall submit the results of the work performed in the
respective period to SALI HOCHSCHILD and shall notify in writing the intent of
IMAyL S.A. to continue with the next stage of work or withdraw from the project
and renounce the option. If it continues with the next stage, it shall specify,
with the greatest precision possible, the work to be performed and the cost
thereof.
5.1.3 In order to be able to exercise the option to Resguardo,
IMAyL S.A. hereby pays SALI HOCHSCHILD 75,000 dollars of the United States of
America. IMAyL S.A. shall make a payment to SALI HOCHSCHILD S.A. in the same way
12 months after this Agreement is signed and after giving written notice, in the
amount of 60,000 dollars of the United States of America. 24 months after
signature of the contract, IMAyL S.A. shall pay 60,000 dollars of the United
States of America. Finally, 36 months after signature of this Agreement, it
shall pay the sum of 80, 000 dollars of the United States of America. For
purposes of the payments, the exchange rate contemplated in 8.2 shall be
applicable.
5.1.4 Abandonment by IMAyL S.A. If IMAyL S.A. has chosen to
abandon the Project during the term or upon completion of any of the stages
mentioned in the previous Sections , it shall be understood by such sole event
that it waives all contractual rights it has acquired, which shall lead to
forfeiture of everything spent; in this event, all studies and work performed on
the properties of SALI HOCHSCHILD shall become the property of SALI HOCHSCHILD,
IMAyL S.A. making full delivery thereto of all information.
5.2 The forfeiture of the Contractual Interest of IMAyL S.A. does not
release such participant from liability corresponding thereto for Operations
performed before such forfeiture through the day on which it actually performed
such Operations.
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5.3 If IMAyL S.A. makes an assignment of rights to a Subsidiary, it
shall be responsible for the Subsidiary adhering without restriction to this
Agreement, being subrogated in all rights and obligations of the assignor
regarding the Contractual Interest acquired. This observance shall be
materialized in writing and under prior written notice to SALI HOCHSCHILD.
ARTICLE VI
OPERATOR
6.1 Designation. The Participants designate IMAyL S.A. as the Operator,
with aggregate responsibility for the management of Operations, who shall
operate until the project is abandoned or the lease described in Article VIII is
voided.
6.2 Powers and Obligations of the Operator. Subject to the terms and
provisions hereof, the Operator shall have the following powers and obligations
that shall be applicable in accordance with Schedules adopted:
(a) The Operator shall administer, direct and control the
Operations.
(b) The Operator shall define and implement the Work
Commitments and Schedules contemplated in 5.1.1, and shall make all
expenses required to implement the Schedules adopted and shall
immediately notify SALI HOCHSCHILD if for any cause it cannot comply
with its responsibilities hereunder.
(c) The Operator shall make all payments for its account and
without entitlement to reimbursement that are required for permits,
mining permits, contracts and other agreements related to the Assets.
If the title to the mining rights contemplated herein must be defended,
SALI HOCHSCHILD shall assume such defense and the cost thereof.
(d) The Operator:
(i) shall request all permits, licenses, and
approvals necessary to comply with the Schedules;
(ii) shall comply in all aspects with applicable
laws, in particular regarding the environment;
(iii) shall give immediate notice to SALI HOCHSCHILD
of any violation thereof of which it learns; and
(iv) shall prepare and submit all reports or notices
required to implement the Operations. The Operator shall not
be
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<PAGE> 10
in violation of this provision if a violation of the law has
occurred despite its good faith efforts to comply therewith
and it has corrected or repaired such violation in due time by
the adoption of any suitable measure or by paying fines and
complying with the corresponding sanctions.
(e) The Operator shall pursue and defend all litigation or
administrative proceedings that arise on occasion of the Exploration by
IMAyL S.A. SALI HOCHSCHILD shall be entitled to participate in such
litigation or administrative proceeding at its own cost.
(f) The Operator shall keep and maintain all accounting and
financial records required according to the Accounting Procedure and in
accordance with the customary mining industry cost accounting practices
of the Internal Revenue Service of Chile.
(g) The Operator shall submit semiannual progress reports that
include expense statements for the respective Schedule; (ii)
semi-annual summaries of the information obtained regarding the
Properties; (iii) copies of reports related to Operations; (iv) a final
detailed report within 60 days after completing each Schedule; and (v)
all such reports as may be reasonably requested by SALI HOCHSCHILD. The
technical reports shall not compromise the reporter regarding the
content or exclusions thereof since they shall be illustrative in
nature. Whenever requested, the Operator shall grant SALI HOCHSCHILD
access and the right to inspect and copy all maps, drilling logs, drill
samples, reports, topographical studies, assays, analyses, production
reports, operations, technical, accounting and financial records and
other information acquired in the Operations. SALI HOCHSCHILD may make
observations regarding costs incurred in the contracting of third-party
services used by the Operator and which affect the net smelter return
due to the amount thereof. The Operator shall also allow SALI
HOCHSCHILD, at the exclusive risk and for account of the latter,
subject to reasonable safety regulations, to inspect the Properties and
Operations whenever requested, provided it does not interfere with the
regular development of the operations.
6.3 Due Diligence. The Operator shall perform all operations
efficiently and carefully according to healthy standards and practices in mining
and other applicable industries and in accordance with the terms and provisions
of leases, licenses, permits, contracts and other agreements related to the
Assets. The Operator shall not be liable to SALI HOCHSCHILD for an act or
omission that results in damage, injury or loss, except to the extent it is
caused by or attributable to willful misconduct or slight negligence by the
Operator.
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ARTICLE VII
WORK SCHEDULES
7.1 Operations According to Work Schedules. The Work Schedules referred
to in 5.1.2 should include the Operations to be performed, the expenses to be
made and the Assets to be acquired. The Operations shall adhere to the Schedules
and the Schedules to the purpose of this Agreement. However, IMAyL S.A. may at
any time accelerate the execution of the Work Schedules by defining and
executing new and successive Schedules.
7.2 Presentation of Work Schedules. The Work schedules shall be
prepared by the Operator for a period of 6 months or any other period agreed
upon. During the period of any work Schedule and at least 20 days before
expiration thereof, the operator shall submit a draft Work Schedule for the
following period to SALI HOCHSCHILD in order for SALI HOCHSCHILD to examine and
eventually make technical or financial observations thereto as it deems
pertinent within the period of 30 days.
ARTICLE VIII
EXERCISE OF THE EXPLOITATION OPTION
AND EXECUTION OF LEASE OF MINING PROPERTIES
8.1 IMAyL S.A. may at any time exercise its Option to implement the
exploitation of Resguardo, hereinafter the option, and shall notify SALI
HOCHSCHILD in writing of its decision, simultaneously proposing its work plan
for Project execution. During execution, the rules set forth hereinabove for the
Operator shall be applicable to IMAyL S.A. In conjunction with the exercise of
the Option, IMAyL S.A. shall make payment of the corresponding amount to
complete the sum of 275,000 dollars of the United States of America as
contemplated in 5.1.3.
8.2 Upon exercising the Option and during exploitation, IMAyL S.A.
shall pay SALI HOCHSCHILD a production royalty that shall consist of 5% of the
net smelter return on the production of gold and silver and of 1.5% on the
production of copper or any other metal. The net smelter return shall be set
according to the stipulations in Appendix B. Payment shall be made in the first
15 days of the month of payment according to a settlement to be submitted by
IMAyL S.A. within the first 5 days of the month following the month to be
settled, which shall be approved by SALI HOCHSCHILD in writing within 5 days
thereafter. If it does not do so, the settlement shall be understood approved.
Payment shall be made in national legal tender using the value of the observed
dollar corresponding to the day of payment as defined in No. 6 of Chapter I of
Title I of the Compendium of Foreign Exchange Regulations, and if such exchange
rate does not exist, the value of the selling dollar of Banco de Chile shall be
used that has been applied the day prior to the day of payment. The parties
agree that if IMAyL S.A. decides to make sales at fixed future prices, SALI
HOCHSCHILD should have the power not to accept such price for purposes of the
royalty settlement and in such case, IMAyL S.A. shall submit a settlement for
the corresponding sale using the average value of the month regarding which the
settlement is made as the sale price according to prices on the London Metal
Exchange.
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8.3 From the date when IMAyL S.A. exercises the Option, it shall have a
period of 4 years to complete the financing and construction of the mine. In the
event that the operation of the mine site has not begun in year 5 and 12 months
thereafter, IMAyL S.A. shall pay SALI HOCHSCHILD a minimum royalty of 150,000
dollars of the United States of America on account of future royalties. The
second year of delay, it shall pay a minimum royalty of 200,000 dollars of the
United States of America at 12 months of delay. The third year of delay a
royalty shall be paid amounting to 250,000 dollars of the United States of
America, upon again completing 12 months, and for future subsequent delays, an
annual surcharge of 15% of the last amount paid in each year shall be
applicable. The minimum royalty contemplated in the first year of delay shall be
on account of future production royalties and no charge whatsoever shall be made
against the minimum royalties payable as of the second year of delay.
8.4 Execution of Lease. In the event that IMAyL S.A. has chosen to
exercise the Option, a lease shall enter into effect automatically that shall be
governed by the rules established herein, as far as applicable, by Article 171
of the Mining Code and by the articles in the Civil Code, the lessee owning all
Assets acquired and incorporated to the mine.
8.5 Minimum Obligations.
(a) SALI HOCHSCHILD: Is obligated to lease all Claims
comprising the mining claims identified in Appendix A and which form
part of the Project, free and clear of any mortgage, encumbrance,
purchase option or sale promise, prohibitions, attachments o litigation
pending, and in any case as is on such date, which IMAyL S.A. declares
to know in full.
(b) IMAyL S.A.: Is obligated to make the payments stipulated
in 8.3 and attain the financing required, either through the
incorporation of third parties or in other ways.
(c) MINIMUM PAYMENT BY IMAyL S.A.: As of conclusion of the
fourth year after subscription hereof and provided the mine is in
operation, IMAyL S.A. is obligated to pay SALI HOCHSCHILD an amount no
less than 300,000 dollars of the United States of America as the
minimum royalty. The Parties agree that if the production royalties
paid pursuant to the rules in Article 8.2 hereof do not reach the
minimum stipulated in this letter, IMAyL S.A. shall pay SALI HOCHSCHILD
an amount of money equal to the amount necessary to complete such
amount. This sum, corresponding to the differential between the
production royalties and the minimum royalty, shall be in any case on
account of future production royalties.
8.6 The principle that shall govern the marketing of the products from
the Properties shall be to maximize the profits derived from the sales made by
IMAyL S.A.
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8.7 Timing of Payment of the Production Royalty. The amount payable
shall be paid monthly according to the settlement of sales made, save the case
stipulated in letter (c) of such 8.5, which shall be paid at the end of the
respective year.
ARTICLE IX
TERMINATION
9.1 Termination of the Agreement. This Agreement shall terminate by
written agreement of the parties. It shall also terminate on the following
grounds:
(a) When IMAyL S.A. withdraws as regulated in Article V;
(b) If the prohibition to encumber and convey the properties
referred to in Article IV, No. 4.8 hereof is not registered in the
respective Registry of the corresponding Mines Registrar within a
period of 120 days.
(c) By nullification of the Agreement in the case of serious
default by one of the parties on the obligations imposed thereon by the
Agreement, notwithstanding the right of the other party to sue for
performance, and in both cases with damage compensation. Failure to
make timely payment of the obligations stipulated herein shall not be
considered a serious default if it is made at the end of 60 days as of
non-payment.
(d) At the end of 100 years as of the date hereof or upon
exhaustion of the minerals in the concessions contemplated herein.
9.2 Right to Information after Termination. After this Agreement is
terminated pursuant to Section 9.1, each party shall be entitled, on its own
account and expense, to copies of all information acquired hereunder before the
date when termination becomes effective. The parties agree to state for the
record that the delivery of such information shall be made with no further
responsibility for the party making it and in particular regarding the
interpretation of geological information contemplated therein.
ARTICLE X
ARBITRATION
Any difficulty, doubt or dispute arising among the parties that is
related to the Agreement, the interpretation, performance, default,
nullification, rescission or voidance hereof or which in general arises on
occasion or by reason hereof or of the lease shall be resolved by a mixed
arbitrator, meaning an arbitrator who shall be an arbitrator in terms of
procedure and an arbitrator-at-law in terms of ruling and against whose
resolution no remedy whatsoever shall be available by specific waiver made
herein, save the remedy of compliant. Such arbitrator shall be designated by
mutual consent of the parties. Failing such consent, any doubt or difficulty
arising among the parties on occasion hereof or of the complementary or
modifying documents of the
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<PAGE> 14
same, either referring to the interpretation, performance, validity or
termination hereof or any other cause related hereto shall be resolved by
arbitration according to the regulations of the Center of Arbitrator of the
Chamber of Commerce of Santiago. For this purpose, the parties confer a limited
irrevocable power of attorney upon the Santiago Chamber of Commerce to proceed
to designate the arbitration panel as a mixed arbitrator.
ARTICLE XI
CONFIDENTIALITY
11.1 General. The terms hereof and all information obtained in relation
to the execution of this Agreement shall be the exclusive property of the
parties and save the provisions in Section 11.2, shall not be disclosed to third
parties without prior written consent of the other party, which consent may not
be unjustifiably denied.
11.2 Exceptions. The consent required in Section 11.1 shall not be
applicable to a disclosure:
(a) to an Affiliate, consultant, contractor or subcontractor
on a good faith need-to-know basis;
(b) to a state agency or entity if the disclosing party
believes in good faith that this is required pursuant to the pertinent
laws or regulations and has received notice from its attorneys that
such disclosure is necessary pursuant to rules or regulations;
(c) to pertinent public services if any of the parties trades
its shares on stock exchanges and must provide information included in
11.1;
(d) to the public at large, subject to the same requirements
indicated in letter (b) above;
(e) to the assignee of rights in accordance with the
stipulations in Article IV, No. 4.6 hereof. In all such cases where
this Section 11.2 is applicable, the disclosing party shall give
written notice to the other party before making such disclosure.
Concerning the disclosure referred to in Section 11.2 (a) or (c), only
confidential information that a third party legitimately needs to know
shall be disclosed and such third party shall first agree in writing to
protect the confidential information in order for it not to be
disclosed beyond what the parties are obligated to do under this
Article XI. Concerning a disclosure pursuant to this Section 11.2(a) or
(c) , if the Party to whom notice is given of the intent to make a
disclosure opposes the same, the Party shall negotiate in good faith to
try to modify or alter the content or terms of such disclosure in order
to limit the proposed disclosure as far as possible.
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<PAGE> 15
11.3 Duration of Confidentiality. The provisions in this Article XI
shall be applicable during the term of this Agreement and for two years after
termination of the same pursuant to Section IX, and shall continue to be
applicable to any withdrawing party that is considered to have withdrawn during
two years after the date of such occurrence.
ARTICLE XII
GENERAL PROVISIONS
12.1 Notices. All notices, payments and other communications required
("Notices") to the party shall be made writing and shall be addressed
respectively as follows: Sali Hochschild S.A., Avenida Presidente Frei Montalva
3,077, township of Conchali, Santiago, Chile, Attention: Mr. Joaquin Errazuriz
Hochschild, Fax: 736-9914; Inversiones Mineras AyL S.A., San Crescente 400, Las
Condes, Santiago, Chile, Attention: Mr. Roberto Partarrieu Leon, Fax (562)
231-2942, Telephone: (562) 232-8719. All notices shall be given (i) personally
to a party; or (ii) by electronic communication with a confirmation sent by
registered or certified mail, return receipt requested, or (iii) by registered
or certified mail, return receipt requested. All notices shall be effective and
shall be considered delivered: (i) if personally, on the date of delivery, if
delivered during regular business hours, and if not delivered during regular
business hours, on the business day after delivery; (ii) if by electronic
communication, the business day following receipt of the electronic
communication; and (iii) if only by mail, the business day following actual
receipt. The party may change its address by notice to the other party.
12.2 Waiver. If one party does not insist on strict compliance of any
provision hereof or if it does not exercise a right, power or remedy upon
occurrence of a violation, this shall not constitute a waiver of any of the
provisions hereof nor limit the right of the party thereafter to enforce any
provision or exercise any right.
12.3 Amendment. No amendment hereof shall be valid unless it is in
writing and duly subscribed by the parties.
12.4 Force Majeure. The obligations of a party shall be suspended to
the extent and during the period compliance is prevented for any unforeseeable
reason. For these purposes, the rules on Force Majeure contemplated in the Civil
Code of the Republic of Chile shall be applicable.
12.5 Governing Law. This Agreement shall be governed by and interpreted
according to the laws of the Republic of Chile. All documentation relative
hereto shall also be extended in the Spanish language.
12.6 Additional Assurances. Each of the parties agrees to take such
actions and subscribe the additional instruments that are reasonably necessary
or convenient from time to time to implement and carry out the intent and
purpose of this Agreement.
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<PAGE> 16
12.7 Entire Agreement; Successors and Assigns. This Agreement contains
the entire Agreement of the Parties and supersedes all prior agreements and
understandings thereamong that are related to the subject matter hereof. This
Agreement shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the parties. In the case of any conflict
between this Agreement and any Appendix attached hereto, the terms hereof shall
prevail.
12.8 Interpretation. The words, articles, sections, subsections and
titles contained herein are used for convenience only and are not intended to be
a complete or exact description of the content of the same and shall not be
interpreted as part hereof. "Article", "Section ", "Subsection" or "Appendix"
means and refers, respectively, to the specific Article, Section , Subsection or
Appendix hereof. The word "herein" refers to this Agreement and not to a certain
Article, Section or Subsection. The words in singular include their plural and
vice versa. The words in one gender include all genders.
ARTICLE XIII
The parties agree to state for the record that the documents identified
as Appendix A and Appendix B herein correspond to the documents filed on this
same date at the end of my records and are understood to form an integral part
hereof. The bearer of a certified copy of this deed is empowered to request all
pertinent registrations, subregistrations and annotations in the relevant
registries. Authority--The authority of Mr. Roberto Ossandon Irarrazabal to
represent INVERSIONES MINERAS AyL S.A. is evidenced in the public deed dated May
22, 1996, in the Santiago Notarial Office of Mr. Juan Ricardo San Martin
Urrejola. The authority of Mr. Walter Hochschild Kaufmann and Mr. Joaquin
Errazuriz Hochschild to represent SALI HOCHSCHILD S.A. is evidenced in the
public deed dated October 30, 1995, in the Santiago Notarial Office of Mr. Kamel
Zaquel Zaror. The authority of Mr. Joaquin Errazuriz Hochschild to represent
SALI HOCHSCHILD S.A. is evidenced in the public deed dated October 30, 1995 in
the Santiago Notarial Office of Mr. Kamel Zaquel Zaror.
In witness whereof and after reading, they sign.
/s/ Walter Hochschild Kaufman
/s/ Joaquin Errazuriz Hochschild
/s/ Roberto Ossandon Irarrazabal
/s/ Enrique Morgan Torres
I attest. This deed is annotated in the Repertory under No. 548. There
are the signatures of WALTER HOCHSCHILD KAUFMANN, JOAQUIN ERRAZURIZ HOCHSCHILD,
ROBERTO OSSANDON IRARRAZABAL, ENRIQUE MORGAN TORRES.
TITULAR NOTARY.
THIS COPY IS A TRUE RECORD OF THE ORIGINAL. Santiago, July 19, 1996.
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<PAGE> 17
APPENDIX A Filed under No. 548
on July 19, 1996
Notary Stamp
1. Denouncements
ROCA, 400 hectares, filed January 31, 1996, by Compania Minera
y Comercial Sali Hochschild in the Chanaral Civil Court, roll 24,574,
denouncement thereof registered on Page 71, No. 42 of the Chanaral Discoveries
Registry. Located in the Remolino Sierra, township and province of Chanaral.
Ruling of creation approved, registration pending.
RORO, 300 hectares, filed January 31, 1996, by Compania Minera
y Comercial Sali Hochschild in the Chanaral Civil Court, roll 24,575,
denouncement thereof registered on Page 75, No. 44 of the Chanaral Discoveries
Registry. Located in the Remolino Sierra, township and province of Chanaral.
Ruling of creation approved, registration pending.
RIGO, 300 hectares, filed March 30, 1996, by Compania Minera y
Comercial Sali Hochschild in the Chanaral Civil Court, roll 24,736, denouncement
thereof registered on Page 370, No. 228 of the Chanaral Discoveries Registry.
Located in the Remolino Sierra, township and province of Chanaral. Ruling of
creation will be requested on June 28th.
RITA, 300 hectares, filed March 30, 1996, by Compania Minera y
Comercial Sali Hochschild in the Chanaral Civil Court, roll 24,737, denouncement
thereof registered on the back of Page 368, No. 227 of the Chanaral Discoveries
Registry. Located in the Remolino Sierra, township and province of Chanaral.
Ruling of creation will be requested on June 28th.
ROQUE, 200 hectares, filed March 30, 1996, by Compania Minera
y Comercial Sali Hochschild in the Chanaral Civil Court, roll 24,738,
denouncement thereof registered on Page 372, No. 229 of the Chanaral Discoveries
Registry. Located in the Remolino Sierra, township and province of Chanaral.
Ruling of creation will be requested on June 28th.
2. CLAIMS
REBE 1 to 40. 200 hectares, filed January 31, 1996, by
Compania Minera y Comercial Sali Hochschild in the Chanaral Civil Court, roll
24,573, denouncement thereof registered on Page 73, No. 43 of the Chanaral
Discoveries Registry. Located in the Remolino Sierra, township and province of
Chanaral. Producer of copper, gold, silver and other grantable substances.
Measurement application shall be submitted June 30th.
ROMY 1 to 20. 200 hectares, filed January 31, 1996, by
Compania Minera y Comercial Sali Hochschild in the Chanaral Civil Court, roll
24,572, denouncement thereof registered on the back of Page 76, No. 45 of the
Chanaral Discoveries Registry. Located in the
<PAGE> 18
Remolino Sierra, township and province of Chanaral. Producer of copper, gold,
silver and other grantable substances. Measurement application was filed at the
end of June.
3. MEASUREMENTS MADE.
RESGUARDO 1 TO 50, 265 hectares, located at West Sierra
Remolino or Salitrosa, Township of Caldera, owned by Compania Minera y Comercial
Sali Hochschild the certificate of measurement of which is registered on the
back of Page 472 No. 147 of the 1982 Property Registry of the Copiapo Mines
Registrar.
PAMELITA 1 TO 10, 100 hectares, located at West Sierra
Remolino or Salitrosa, Township of Caldera, owned by Sociedad Legal Minera
Pamelita Una de Sierra Remolino the certificate of measurement of which is
registered on the back of Page 223 No. 76 of the 1988 Property Registry of the
Copiapo Mines Registrar.
SANTA ROSA 1 TO 28, 252 hectares, located at West Sierra
Remolino or Salitrosa, Township of Caldera, owned by Sociedad Legal Minera Santa
Rosa Una de la Sierra Remolino the certificate of measurement of which is
registered on the back of Page 1415 No. 232 of the 1990 Property Registry of the
Copiapo Mines Registrar.
ROSA 1 TO 30, 300 hectares, located at West Sierra Remolino or
Salitrosa, Township of Caldera, owned by Sociedad Legal Minera Rosa 1 de la
Sierra Remolino the certificate of measurement of which is registered on the
back of Page 28 No. 7 of the 1991 Property Registry of the Copiapo Mines
Registrar.
ROSITA 1 TO 30, 300 hectares, located at West Sierra Remolino
or Salitrosa, Township of Caldera, owned by Sociedad Legal Minera Rosa Cuatro
Una de la Sierra Remolino the certificate of measurement of which is registered
on Page 198 No. 60 of the 1991 Property Registry of the Copiapo Mines Registrar.
ROSALIA 1 to 30, 300 hectares, located at West Sierra Remolino
or Salitrosa, Township of Caldera, owned by Sociedad Legal Minera Rosa Tres Una
de la Sierra Remolino the certificate of measurement of which is registered on
Page 100 No. 19 of the 1992 Property Registry of the Copiapo Mines Registrar.
NOTE: It is stated for the record that the extinctive prescription of
voidance actions contemplated in Numbers 6 and 7 of Article 95 of the Mining
Code have taken effect regarding the claims called Maria Emilia, Huascar 1,
Huascar 2, Huascar 3, Huascar 4 and Pepa which are located in the perimeter of
our property Resguardo 1 to 53. Sali Hochschild S.A. has filed judicial suit for
declaration of prescription of the voidance action, a ruling that shall
definitively declare the claims described extinguished because of the
superposition on the superposed portion.
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<PAGE> 19
It is also stated for the record that the claims Rosario, Reforma and
Candelaria are not the property of Sali Hochschild S.A. and are correctly
created although superposed by our denouncement Rita.
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<PAGE> 1
Exhibit 10.5
EMPLOYMENT AGREEMENT
MADE EFFECTIVE JUNE 4, 1996
1
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective the fourth day of June, 1996.
BETWEEN:
FREMONT GOLD CORP., a corporation subsisting under the laws of
the state of Delaware having its principal office at 2380 -
1055 West Hastings, Vancouver V6E 2E9, British Columbia,
Canada.
(the "Company")
AND:
MICHAEL JOHN HOPLEY
("Employee")
WHEREAS:
(A) The Company is engaging the services of Employee as President and Chief
Operating Officer of the Company;
WITNESSES that the parties mutually agree as follows:
PART 1
ENGAGEMENT
SERVICES
1.1 The Company hereby agrees with Employee that Employee shall provide the full
time services of Employee as President and Chief Operating Officer of the
Company effective June 4, 1996 upon and subject to the terms and conditions
hereinafter set forth.
2
<PAGE> 3
TERM
1.2 This Agreement will extend from the effective date of this Agreement for a
period of one year unless earlier terminated as hereinafter provided.
TITLE
1.3 Employee will serve and hold the titles as President and Chief Operating
Officer of the Company.
TERMS OF REFERENCE
1.4 Subject to the lawful instructions and directions of the Chief Executive
Officer of the Company, Employee shall serve as the President and Chief
Operating Officer of the Company. In addition to the duties and responsibilities
ordinarily performed by a chief operating officer, Employee shall have principal
responsibility for the direct supervision and management of the Company's
operations.
PART 2
COMPENSATION
SALARY AND BONUS
2.1 For the first 12 months of the engagement of the Employee by the Company,
Employee will be paid a monthly salary of U.S.$8,100 (yielding an annual salary
of U.S. $97,200) subject to customary amounts held back pursuant to income tax
and social security legislation made pursuant to the terms of this Agreement.
2.2 The Company will provide Employee with a full benefits package as per
employee's previous employment contract with Bema Gold Corporation, dated
January 1, 1995, or be paid a net amount per month of U.S. $755 in lieu of these
benefits.
2.3 In addition the Company will reimburse all reasonable travel expenses
incurred by Employee in connection with carrying out the duties of the Employee
for the Company.
2.4 If Employee dies during the term of this contract all earned options will
immediately be exercisable by the lawful representatives or beneficiary of the
estate of Employee.
3
<PAGE> 4
NO DISENTITLEMENT TO OTHER BENEFITS
2.5 Nothing herein will disentitle Employee from participating in any pension,
stock option, stock purchase, health, medical, insurance or other benefit plan
or retirement right from time to time established by the Company and to which
executives of the Company are from time to time entitled.
PROFIT SHARING
2.6 Employee will be entitled to participate in any stock option plans or bonus
program from time to time established by the Company, to such extent and in such
amounts as the Board may from time to time determine.
HOLIDAYS
2.7 Employee will be entitled to 20 business days of annual holidays to be taken
at such time or times as are reasonably satisfactory to the Company and
Employee.
PART 3
NEGATIVE COVENANTS
NON-COMPETITION
3.1 Without the consent of the Company, Employee will not be permitted, during
the term of this Agreement, to engage in any business (directly or through any
kind of ownership or other arrangement other than ownership of securities of
publicly held corporations) which is primarily involved in mineral exploration
and development, or accept employment with or render service to a person
involved in such a business or take any other action inconsistent with the
fiduciary relationship of a senior executive officer to his corporation but,
subject to such limitation, Employee may make investments for his own account
and raise money for any business or enterprise whatsoever, provided that such
business or enterprise is not involved in mineral exploration and development.
Employee may, with the consent of the Company, such consent not to be
unreasonably withheld, serve as a director of other companies engaged in mineral
exploration and development provided such companies do not directly compete with
the Company.
NOTICE OF CONFLICT
3.2 If the Board acting reasonably determines that Employee is engaged in an
activity which is deemed to be a conflicting activity, the Company will cause
Employee to be so advised in writing, and Employee will thereafter discontinue
such activity within 30 days after such notice, or such longer period as the
Board agrees, and Employee will, within such 30 days or longer period, certify
in writing to the Company that he has discontinued such activity by sale or
other disposition of all interest therein or by the transfer of all such
interests, save a beneficial interest, into a "blind trust" or other
4
<PAGE> 5
fiduciary arrangement over which Employee has no control or direction.
CONFIDENTIALITY
3.3 Notwithstanding anything else in this Agreement, upon termination of
Contractor's employment hereunder for any reason, Employee agrees to keep
strictest and utmost confidentiality with respect to the business affairs,
planned activities, proposed programs and acquisitions, customers, suppliers,
technology, proprietary rights, patents, research, business and assets of the
Company.
COMPANY'S PROPRIETY RIGHTS
3.4 Notwithstanding anything else in this Agreement, it is expressly
acknowledged and understood by Employee that all the work product of Employee
while employed by the Company pursuant to the terms hereof shall vest in the
Company absolutely.
PART 4
DUTIES OF EMPLOYEE
DUTIES
4.1 During the term of this Agreement Employee will
(a) diligently perform his duties as set out hereunder to the best of
his skill and ability, and
(b) attend to his duties on a full time basis, at such specific times
and days as reasonably directed by the Company, excepting holidays,
absence due to sickness and other authorized absences as set out
herein.
PART 5
CHANGE OF CONTROL
5.1 In the event that there is a change in control in the Company and related
change in the constitution on the members of the board of directors of the
Company ("Board") and, if as a result of
5
<PAGE> 6
such change of control Employee is discharged without cause, Employee shall be
entitled to receive two year's salary. For the purposes of this Agreement, a
"change in control of the Company" shall mean an acquisition of beneficial
ownership of the outstanding voting securities of the Company (by a person or
group of persons acting together) equal to or greater than the greater of the
following:
(a) 30% of the outstanding shares of the Company; or
(b) a number of shares equal to or greater than the combined
shareholdings of Employee or any of his respective associates or
affiliates as defined by the Securities Act of of 1933.
and as a result thereof there is a change in the Board sufficient that persons
who were directors of the Company immediately prior to any such change of
beneficial ownership of outstanding shares as aforesaid shall as a result
thereof cease to constitute a majority of the Board or any successor.
PART 6
TERMINATION
TERMINATION BY THE COMPANY FOR JUST CAUSE
6.1 The Company may terminate this Agreement without notice (or compensation in
lieu thereof) for just cause. For the purposes of this section, "just cause"
shall mean any of the following:
(a) any material breach by Employee of the terms of this Agreement;
(b) the willful and continued failure by Employee substantially to
perform Employee's duties with the Company (other than any such failure
resulting from Employee's incapacity due to physical or mental
illness), after a demand for substantial performance is delivered to
Employee by the Board which specifically identifies the manner in which
the Board believes that Employee has not substantially performed
Employee's duties;
(c) the willful engaging by Employee in competitive or gross misconduct
injurious to the Company, subject to foregoing Section 3.2. For
purposes of this paragraph, no act, or failure to act, on Employee's
part shall be considered "willful" unless done, or omitted to be done,
by Employee not in good faith and without reasonable belief that
Employees action or omission was in the best interest of the Company;
(d) conviction of a felony or of any crime involving moral turpitude,
fraud or misrepresentation, or
(e) the bankruptcy or receivership of Employee.
6
<PAGE> 7
TERMINATION WITHOUT CAUSE
6.2 Either party may terminate this Agreement after the initial one year term
and the employment of Employee hereunder, provided that if the Company
terminates this Agreement, the Employee shall be entitled to one month's salary
for every two months of engagement to a maximum of six months' salary. If the
Employee terminates this Agreement it must provide not less than thirty (30)
days notice to the Company.
TERMINATION FOLLOWING CHANGE OF CONTROL
6.3 If the events described in the preceding Section 5.1 constituting a change
in control of the Company shall have occurred, Employee shall be
entitled to the benefits provided for in this Agreement upon any termination of
this Agreement, unless the termination of this Agreement is as a result of:
(a) the death or retirement of Employee; or
(b) termination by the Company of employment for cause or as a result
of the disability or retirement of Employee upon his attaining age 65.
TERMINATION DUE TO DISABILITY OR RETIREMENT
6.4 (a) If, as a result of Employee's incapacity due to physical or mental
illness, Employee shall have been unable for more than six (6) months
to perform Employee's duties with the Company on a full time basis and
within thirty (30) days after written notice of termination is given
Employee shall not have returned to the full time performance of
Contractor's duties, the Company may terminate this Agreement for
"Disability" after the said 30 days without further compensation.
(b) Termination of Employee's employment based on "Retirement" shall
mean retirement at the age of 65 which the parties agree shall be
mandatory when Employee reaches the age of 65;
NOTICE OF TERMINATION
6.5 Any termination by the Company shall be communicated by written Notice of
Termination to the other parties hereto. For purposes of this Agreement, "Notice
of Termination" shall mean a notice specifying the termination provision in this
Agreement relied upon and setting forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Employee's services
under the provision so specified.
DATE OF TERMINATION
6.6 "Date of Termination": shall mean (A) if Employee's services are terminated
for
7
<PAGE> 8
Disability of Employee, thirty (30) days after Notice of Termination is
given (provided that Employee shall not have returned to the performance of
Employee's duties on a full-time basis during such thirty (30) day period), (B)
if the Company terminates Employee's engagement, the date specified in the
Notice of Termination, and (C) if Employee's engagement is terminated for any
other reason except death or Retirement, the date on which Notice of Termination
is given.
RETURN OF PROPERTY
6.7 On the effective date of termination, Employee will deliver up to the
Company, in a reasonable state, all assets, including notes, data, reports,
documents, programs, computers and copies thereof, produced, owned, leased or
bailed to the Company and used by or in the possession of Employee hereunder.
RESIGNATION
6.8 As of the date of termination of this Agreement, Employee will also resign
as an officer or director of the Company and of any subsidiary or affiliate as
the case may be.
PART 7
GENERAL
FURTHER ASSURANCES
7.1 Each party will, at its own expense and without expense to any other party,
execute and deliver such further agreements and other documents and do such
further acts and things as any other party reasonably requests to evidence,
carry out or give full force and effect to the intent of this Agreement.
ASSIGNMENT
7.2 Neither of the parties may assign any right, benefit or interest in this
Agreement without the written consent of the other, and any purported assignment
without such consent will be void.
SEVERABILITY
7.3 If any provision of this Agreement is unenforceable or invalid for any
reason it will be severable from the remainder of this Agreement and, in its
application at that time, this Agreement will be construed as though such
provision was not contained herein and the remainder will continue in full force
and effect and be construed as if this Agreement had been executed without the
invalid or unenforceable provision.
8
<PAGE> 9
WAIVER AND CONSENT
7.4 No consent or waiver, express or implied, by any party to or of any breach
or default by any other party of any or all of its obligations under this
Agreement will be valid unless it is in writing and stated to be a consent or
waiver.
NOTICE
7.5 Every notice, request, demand or direction (each, for the purposes of this
section, a "notice") to be given pursuant to this Agreement by any party to
another will be in writing and will be delivered or sent by registered or
certified mail postage prepaid and mailed in any post office in British Columbia
or by telex, facsimile, telegram, cable, or other similar form of written
communication, in each case, addressed as applicable as follows:
If to Employee:
Michael J. Hopley
1106, West Racine Drive,
Bellingham, Washington 98226
Facsimile: (360) 715-0747
If to the Company at:
Fremont Gold Corporation
2380-1055 West Hastings St.
Vancouver V6E 2E9
British Columbia
Canada
Facsimile: (604) 682-6508
Attention: Chairman of the Board
or to such other address as is specified by the particular party by notice to
the other.
GOVERNING LAW
7.6 This Agreement will be construed in accordance with the laws of the State of
Arizona and will be enforced in the courts of that State.
BINDING EFFECT
7.7 This Agreement will enure to the benefit of and be binding upon the
respective legal representatives and successors. This agreement is
non-assignable and any purported assignment shall be null and void and of no
effect.
9
<PAGE> 10
DISPUTES
7.8 If any dispute arises respecting the relationship of the parties or the
interpretation of this Agreement the parties agree to submit such dispute to
binding arbitration pursuant to the arbitration laws then in effect in the State
of Arizona by way of the appointment of a single arbitrator.
TIME OF ESSENCE
7.9 Time is of the essence in the performance of each obligation under this
Agreement.
COUNTERPARTS
7.10 This Agreement and any other writing delivered pursuant hereto may be
executed in any number of counterparts with the same effect as if all parties to
this Agreement or such other writing had signed the same document and all
counterparts will be construed together and will constitute one and the same
instrument.
ENTIRE AGREEMENT
7.11 This Agreement constitutes the entire agreement between the parties and
supersedes all prior oral or written agreements or understandings between the
parties with respect to the subject matter of this Agreement.
MISCELLANEOUS
7.12 No provision of this Agreement may be modified, waived or discharged except
in writing specifically referring to such provision and signed by Employee and
such officer of the Company as may be specially designated by the Board. No
waiver at any time by any party hereto of the breach of any condition or
provision of this Agreement, or of compliance by the other parties with the
same, shall be deemed a waiver of any other condition or provision at the same
or at any other time.
SURVIVAL OF TERMS
7.13 The provisions of Sections 3.3, 3.4, 6.7, and 7.8 shall survive the
termination of this Agreement.
10
<PAGE> 11
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the 4th
day of June, 1996.
COMPANY:
The Common Seal of
FREMONT GOLD CORP.
was affixed in the presence of:
/s/ Kelsey Boltz
- ---------------------------------
Authorized Signatory
EMPLOYEE:
/s/ Michael J. Hopley
- ---------------------------------
MICHAEL JOHN HOPLEY
in the presence of:
/s/ David Alexander
- ---------------------------------
Witness
David Alexander
- ---------------------------------
Name of Witness
11
<PAGE> 1
Exhibit 10.6
MINERA FREMONT GOLD CHILE S.A.
SAN CRESCENTE 400, SANTIAGO - CHILE
TEL. (56-2)334-9293/334-9899/234-9193
FAX. (56-2)233-8461
To: Mike Hopley DATE: Nov. 20, 1996
Fax (604)682-6508
From: Robert Partarrieu REF: Work Contract
DEAR MIKE:
AS PER OUR DISCUSSION:
This Employment Agreement is made effective on June 6, 1996. Between Minera
Fremont Gold Chile S.A. (The "Company") with address in: San Crescente 400, Las
Condes, Santiago - Chile and Roberto E. Partarrieu ("Employee").
ENGAGEMENT
The Employee shall provide the full time services to Minera Fremont
Gold Chile S.A. a General Manager effective June 6, 1996.
COMPENSATION
Salary: For the first 12 months of the engagement of the Employee by
Minera Fremont Gold Chile S.A., Employee will be paid an annual salary of
US$80,000 paid $6,667 per month, subject to customary amounts held back pursuant
to income tax and social security legislation of Chile.
All reasonable expenses, travel, lodging, etc., incurred by Employee in
connection with carrying out the duties of the Employee for the Company will be
reimbursed.
If Employee dies during the term of this contract all benefits given to
Employee by the "Company" will immediately be exercisable by the lawful
representative or beneficiary of the estate of Employee.
Employee will be entitled to 20 business days of annual holidays to be
taken at such time or times as are reasonably satisfactory to the "Company" and
Employee.
NEGATIVE COVENANTS:
Without the consent of the Company, Employee will not be permitted,
during the term of this agreement, to engage in any business (direct of through
any kind of ownership or other arrangement other than ownership of securities of
publicly held corporations) which is primarily involved in mineral exploration
and development, or accept employment with or render service to a person
involved in such business or take any other action inconsistent with the
fiduciary relationship of an employee to his corporation but, subject to such
limitation, Employee may make investment for his own account and raise money for
any business or enterprise whatsoever, provided that such business or enterprise
is not involved in mineral exploration and development. Employee may, with the
consent of the Company, such consent not to be
<PAGE> 2
unreasonably withheld, serve as a director of other companies engaged in mineral
exploration and development provided such companies do not directly compete with
the Company.
NOTICE OF CONFLICT:
If the Board acting reasonably determines that Employee is engaged in
an activity which is deemed to be a conflicting activity, the Company will cause
the employee to be so advised in writing, and Employee will thereafter
discontinue such activity within 30 days after such notice, or such longer
period as the Board agrees, and Employee will, within such 30 days or longer
period, certify in writing to the Company that he has discontinued such activity
by sale or other disposing of all interest therein or by the transfer of all
such interests, save a beneficial interest, into a "blind trust" or other
fiduciary arrangement over which Employee has no control or direction.
CONFIDENTIALITY:
Notwithstanding anything else in this Agreement, upon termination of
Contractor's employment hereunder for any reason, Employee agrees to keep
strictest and utmost confidentiality with respect to the business affairs,
planned activities, proposed programs and acquisitions, customers, suppliers,
technology, proprietary rights, patents, research, business and assets of the
company.
Notwithstanding anything else in this Agreement, it is expressly
acknowledged and understood by employee that all the work product or Employee
while employed by the Company pursuant to the terms hereof shall vest in the
Company absolutely.
DUTIES OF EMPLOYEE:
During the term of this Agreement Employee will diligently perform his
duties as set out hereunder to the best of his skill and ability, and attend to
his duties on a full time basis, at such specific times and days as reasonably
directed by the Company, excepting holidays, absence due to sickness and other
authorized absences as set out herein.
TERMINATION BY THE COMPANY FOR JUST CAUSE
The Company may terminate this Agreement without the notice (or
compensation in lieu thereof for just cause. For the purpose of "just cause"
shall mean any of the following:
a) Any material breach by Employee of the terms of this Agreement;
b) the willful and continued failure by Employee substantially to
perform Employee's duties with the Company(other than any such
failure resulting from Employee's incapacity due to physical or
mental illness). After a demand for substantial performance is
delivered to Employee by the Board which specifically identifies
the manner in which the Board believed that Employee has not
substantially performed Employee's duties;
c) the willful engaging by Employee in competitive activities against
the Company. For purposes of this paragraph, no act, or failure to
act, on Employee's part shall be considered "willful" unless done,
or omitted to be done, by Employee not in good faith and without
reasonable belief that Employee's action or omission was in the
best interest of the Company.
TERMINATION WITHOUT THE ABOVE MENTIONED CAUSES:
Either party may terminate this Agreement and the employment of the
Employee hereunder. If the Employee terminates this agreement it must provide
not less than thirty (30) days notice to the company and Employee will receive 1
full month payment at his full gross
<PAGE> 3
monthly salary rate for each year worked. Notwithstanding, Employee shall by
entitled t all the benefits provided for by the "Company" in this Agreement upon
any termination of this Agreement.
Any termination by the Company shall be communicated by written Notice
of Termination to the other parties hereto. For purpose of the Agreement,
"Notice of Termination" shall mean a notice reasonably detailing the facts and
circumstance claimed to provide a basis for termination of Employee's services
under the provision so specified. Notwithstanding, Employee shall be entitled to
a minimum of 6 month salaries at the full gross monthly salary rate and all
benefits provided for by the "Company" in this Agreement.
RETURN OF PROPERTY
On the effective date of termination, Employee will deliver up to the
company, in a reasonable state, all assets, including notes, data, reports,
documents, programs, computers and copies thereof, produced, owned leased or
bailed to the Company and used by or in the possession of Employee hereunder.
RESIGNATION
As of the date of termination of this Agreement, Employee will also
resign as an officer or director of the Company and of any subsidiary or
affiliate as the case may be.
/s/ Robert Partarrieu
- -------------------------------
ACKNOWLEDGED AND AGREED
/s/ Michael J. Hopley
- -------------------------------
<PAGE> 4
Exhibit 22
LIST OF SUBSIDIARIES
Flagship Holding Ltd. ("FHL"), a Barbados corporation, owns 99% of
Minera Fremont Gold Chile, S.A. ("MFG"), a Chilean corporation, formerly known
as Inversiones Mineras Ayl S.A.. In turn, FHL is a wholly owned subsidiary of
Fremont Gold Corporation. As a result of this arrangement, MFG is the sole
operating subsidiary of Fremont Gold Corporation.
<PAGE> 5
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
I hereby consent to the incorporation by reference in this Registration
Statement on Form SB-2 of my report dated February 11, 1997 relating to the
financial statements of Fremont Gold Corporation, formerly known as The
Rothchild Companies. Inc. as of December 31, 1995 and for the years ended
December 31, 1995 and 1994. I also consent to the reference to myself under the
caption "Experts" in the Prospectus included in the Registration Statement.
/s/ Thomas Klash
- -------------------------------
Thomas W. Klash
Certified Public Accountant
Hollywood, Florida
February 11, 1997
<PAGE> 6
Exhibit 23.2
INDEPENDENT PUBLIC ACCOUNTANTS' CONSENT
The Board of Directors
Flagship Holding Ltd.
We consent to the use in the Registration Statement and Prospectus on Form SB-2
of Fremont Gold Corporation of our Auditors Report to the Directors dated
August 23, 1996 on the consolidated balance sheet of Flagship Holding Ltd. as
at June 30, 1996 and the consolidated statements of operations and deficit and
changes in cash flows for the period from incorporation on June 14, 1996 to
June 30, 1996 included in this Registration Statement and Prospectus, and to
the reference to our firm under the headings "Experts" in the Prospectus.
Our auditors' report relating to the financial statements referred to in the
preceding paragraph is supplemented by a report entitled "Comments by Auditors
for U.S. Readers on Canada-U.S. Reporting Conflict" that states that Canadian
reporting standards do not permit reference to uncertainties such as the
Company's ability to continue as a going concern as discussed in Note 1 to the
consolidated financial statements, when the uncertainties are adequately
disclosed in the financial statements and accompanying notes. Under United
States reporting standards, such uncertainties would be described in the
auditors' report in an explanatory paragraph following the opinion paragraph.
Chartered Accountants
/s/ KPMG
Vancouver, Canada
February 12, 1997
<PAGE> 7
Exhibit 24
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, constitutes and
appoints Michael J. Hopley and Edward M. Topham, and each of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign a Form SB-2 Registration Statement for filing with the
Securities and Exchange Commission respecting the offer and sale of 3,600,000
units, each unit consisting of one share of Common Stock, par value $.001, of
Fremont Gold Corporation, a Delaware Corporation, and one Detachable, Redeemable
Common Stock Purchase Warrant, together with any and all amendments (including
post-effective amendments) to such Registration Statement, and to file the same
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, or each of
them, may lawfully do or cause to be done by virtue hereof.
DATED: February 6, 1997
/s/ David Shaw
---------------------------
David Shaw
PROVINCE OF BRITISH COLUMBIA )
) ss.
County of Vancouver )
On this 6th day of February, 1997, before me, the undersigned Notary
Public, personally appeared David Shaw, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that he executed
the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ JC
---------------------------
Notary Public
My commission does not expire:
<PAGE> 8
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, constitutes and
appoints Michael J. Hopley his true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign a Form SB-2 Registration Statement
for filing with the Securities and Exchange Commission respecting the offer and
sale of 3,600,000 units, each unit consisting of one share of Common Stock, par
value $.001, of Fremont Gold Corporation, a Delaware Corporation, and one
Detachable, Redeemable Common Stock Purchase Warrant, together with any and all
amendments (including post-effective amendments) to such Registration Statement,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.
DATED: February 6, 1997
/s/ Edward M. Topham
---------------------------
Edward M. Topham
Province of British Columbia )
) ss.
County of Vancouver )
On this 6th day of February, 1997, before me, the undersigned Notary
Public, personally appeared Edward Topham, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that he executed
the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Rod C. McKeem
---------------------------
Notary Public
My commission does not expire
<PAGE> 9
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, constitutes and
appoints Edward M. Topham his true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign a Form SB-2 Registration Statement
for filing with the Securities and Exchange Commission respecting the offer and
sale of 3,600,000 units, each unit consisting of one share of Common Stock, par
value $.001, of Fremont Gold Corporation, a Delaware Corporation, and one
Detachable, Redeemable Common Stock Purchase Warrant, together with any and all
amendments (including post-effective amendments) to such Registration Statement,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.
DATED: February 6, 1997
/s/ Michael J. Hopley
---------------------------
Michael J. Hopley
Province of British Columbia )
) ss.
County of Vancouver )
On this 6th day of February, 1997, before me, the undersigned Notary
Public, personally appeared Michael Hopley, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that he executed
the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Rod C. McKeem
---------------------------
Notary Public
My commission does not expire
<PAGE> 1
Exhibit 22
LIST OF SUBSIDIARIES
Flagship Holding Ltd. ("FHL"), a Barbados corporation, owns 99% of
Minera Fremont Gold Chile, S.A. ("MFG"), a Chilean corporation, formerly known
as Inversiones Mineras Ayl S.A.. In turn, FHL is a wholly owned subsidiary of
Fremont Gold Corporation. As a result of this arrangement, MFG is the sole
operating subsidiary of Fremont Gold Corporation.
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
I hereby consent to the incorporation by reference in this Registration
Statement on Form SB-2 of my report dated February 11, 1997 relating to the
financial statements of Fremont Gold Corporation, formerly known as The
Rothchild Companies. Inc. as of December 31, 1995 and for the years ended
December 31, 1995 and 1994. I also consent to the reference to myself under the
caption "Experts" in the Prospectus included in the Registration Statement.
/s/ Thomas Klash
- -------------------------------
Thomas W. Klash
Certified Public Accountant
Hollywood, Florida
February 11, 1997
<PAGE> 1
Exhibit 23.2
INDEPENDENT PUBLIC ACCOUNTANTS' CONSENT
The Board of Directors
Flagship Holding Ltd.
We consent to the use in the Registration Statement and Prospectus on Form SB-2
of Fremont Gold Corporation of our Auditors Report to the Directors dated
August 23, 1996 on the consolidated balance sheet of Flagship Holding Ltd. as
at June 30, 1996 and the consolidated statements of operations and deficit and
changes in cash flows for the period from incorporation on June 14, 1996 to
June 30, 1996 included in this Registration Statement and Prospectus, and to
the reference to our firm under the headings "Experts" in the Prospectus.
Our auditors' report relating to the financial statements referred to in the
preceding paragraph is supplemented by a report entitled "Comments by Auditors
for U.S. Readers on Canada-U.S. Reporting Conflict" that states that Canadian
reporting standards do not permit reference to uncertainties such as the
Company's ability to continue as a going concern as discussed in Note 1 to the
consolidated financial statements, when the uncertainties are adequately
disclosed in the financial statements and accompanying notes. Under United
States reporting standards, such uncertainties would be described in the
auditors' report in an explanatory paragraph following the opinion paragraph.
Chartered Accountants
/s/ KPMG
Vancouver, Canada
February 12, 1997
<PAGE> 1
Exhibit 24
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, constitutes and
appoints Michael J. Hopley and Edward M. Topham, and each of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign a Form SB-2 Registration Statement for filing with the
Securities and Exchange Commission respecting the offer and sale of 3,600,000
units, each unit consisting of one share of Common Stock, par value $.001, of
Fremont Gold Corporation, a Delaware Corporation, and one Detachable, Redeemable
Common Stock Purchase Warrant, together with any and all amendments (including
post-effective amendments) to such Registration Statement, and to file the same
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, or each of
them, may lawfully do or cause to be done by virtue hereof.
DATED: February 6, 1997
/s/ David Shaw
---------------------------
David Shaw
PROVINCE OF BRITISH COLUMBIA )
) ss.
County of Vancouver )
On this 6th day of February, 1997, before me, the undersigned Notary
Public, personally appeared David Shaw, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that he executed
the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ JC
---------------------------
Notary Public
My commission does not expire:
<PAGE> 2
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, constitutes and
appoints Michael J. Hopley his true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign a Form SB-2 Registration Statement
for filing with the Securities and Exchange Commission respecting the offer and
sale of 3,600,000 units, each unit consisting of one share of Common Stock, par
value $.001, of Fremont Gold Corporation, a Delaware Corporation, and one
Detachable, Redeemable Common Stock Purchase Warrant, together with any and all
amendments (including post-effective amendments) to such Registration Statement,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.
DATED: February 6, 1997
/s/ Edward M. Topham
---------------------------
Edward M. Topham
Province of British Columbia )
) ss.
County of Vancouver )
On this 6th day of February, 1997, before me, the undersigned Notary
Public, personally appeared Edward Topham, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that he executed
the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Rod C. McKeem
---------------------------
Notary Public
My commission does not expire
<PAGE> 3
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, constitutes and
appoints Edward M. Topham his true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign a Form SB-2 Registration Statement
for filing with the Securities and Exchange Commission respecting the offer and
sale of 3,600,000 units, each unit consisting of one share of Common Stock, par
value $.001, of Fremont Gold Corporation, a Delaware Corporation, and one
Detachable, Redeemable Common Stock Purchase Warrant, together with any and all
amendments (including post-effective amendments) to such Registration Statement,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.
DATED: February 6, 1997
/s/ Michael J. Hopley
---------------------------
Michael J. Hopley
Province of British Columbia )
) ss.
County of Vancouver )
On this 6th day of February, 1997, before me, the undersigned Notary
Public, personally appeared Michael Hopley, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that he executed
the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Rod C. McKeem
---------------------------
Notary Public
My commission does not expire
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 752,233
<SECURITIES> 0
<RECEIVABLES> 17,626
<ALLOWANCES> 0
<INVENTORY> 413,594
<CURRENT-ASSETS> 769,859
<PP&E> 10,725
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,194,178
<CURRENT-LIABILITIES> 1,100,806
<BONDS> 0
0
0
<COMMON> 48,386
<OTHER-SE> 42,486
<TOTAL-LIABILITY-AND-EQUITY> 1,194,178
<SALES> 0
<TOTAL-REVENUES> 2,152
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 286,201
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (284,049)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (284,049)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
