AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
AUGUST 8, 2006
REGISTRATION NO. 333-135633
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO 1 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GOLDEN RIVER RESOURCES CORPORATION
(formerly BAY RESOURCES LTD)
(name of small business issuer in its charter)
DELAWARE 1040 98-0079697
------------------------------- ------------------------- --------------------
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
------------------------------- -------------------------- --------------------
Mr. Peter Lee
GOLDEN RIVER RESOURCES CORPORATION
Level 8, 580 St Kilda Road
Melbourne Victoria 3004
Australia
Telephone: 613-8532-2860
Facsimile: 613-8532-2805
(Name, address, including zip code, and
telephone number, including
area code, of agent for service)
Copies of communications to:
R. Brian Brodrick, Esq.
Phillips Nizer LLP
666 Fifth Avenue
New York NY
Telephone: 212-841-0700
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering.
[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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, as amended, or until the
Registration Statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be
changed. The selling stockholder may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
PROSPECTUS
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION,
DATED AUGUST 8, 2006
GOLDEN RIVER RESOURCES CORPORATION
30,000,000 SHARES OF COMMON STOCK
This prospectus relates to the sale of up to 30,000,000 shares of
Golden River Resources' common stock by a selling stockholder. The shares are
issuable upon exercise of currently outstanding warrants. Please refer to
"Selling Stockholder" beginning on page 12.
Golden River Resources is not selling any shares of common stock in
this offering and therefore will not receive any proceeds from this offering.
Golden River Resources will, however, receive proceeds from the sale of common
stock upon exercise of warrants to the extent they are exercised for cash. All
costs associated with this registration will be borne by Golden River Resources.
Our common stock is quoted on the Over-the-Counter Bulletin Board under
the symbol "GORV." On August 7, 2006, the last reported sale price of our common
stock was US$0.25 per share.
The selling stockholder may sell the shares from time to time in public
or private transactions occurring on or off the over-the-counter Bulletin Board,
at prevailing market prices or at negotiated prices. Sales may be made directly
to purchasers or through brokers or dealers who are expected to receive
customary commissions or discounts.
Brokers or dealers effecting transactions in these shares should
confirm that the shares are registered under the applicable state law or that an
exemption from registration is available.
These securities are speculative and involve a high degree of risk.
Please refer to "Risk Factors" beginning on page 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY HAVE THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this prospectus is August 8, 2006.
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TABLE OF CONTENTS
Page No.
Information Regarding Forward Looking Statements 3
Prospectus Summary 4
Risk Factors 7
Use of Proceeds 12
Determination of Offering Price 12
Selling Stockholder 12
Plan of Distribution 13
Legal Proceedings 15
Directors, Executive Officers, Promoters and Control Persons 15
Security Ownership of Certain Beneficial Owners and Management 18
Description of Securities 20
Interest of Named Experts and Counsel 20
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities 20
Organization Within Last Five Years 20
Description of Business 21
Management's Discussion and Analysis of Plan of Operations 37
Description of Property 44
Certain Relationships and Related Transactions 44
Market for Common Equity and Related Stockholder Matters 47
Executive Compensation 48
Financial Statements 51
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 51
Legal Matters 51
Experts 51
How To Get More Information 52
Index to Financial Statements 53
Appendix A-Glossary A-1
Appendix B-List of Mining Claims B-1
We have not authorized anyone to provide information different from
that contained in this prospectus. Neither the delivery of this prospectus nor
the sale of shares of common stock means that information contained in this
prospectus is correct after the dates of this prospectus. This prospectus is not
an offer to sell or a solicitation of an offer to buy these shares of common
stock in any circumstances under which the offer or solicitation is unlawful.
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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains numerous forward-looking statements relating to
our business. Such forward-looking statements are identified by the use of words
such as believes, intends, expects, hopes, may, should, plan, projected,
contemplates, anticipates or similar words. Actual production, operating
schedules, results of operations, gold ore reserve and mineral deposit estimates
and other projections and estimates could differ materially from those projected
in the forward-looking statements. The factors that could cause actual results
to differ materially from those projected in the forward-looking statements
include:
o The risk factors set forth herein,
o The possibility that we do not find gold or that the gold we find is not
commercially economical to mine,
o The risks and hazards inherent in the gold mining business (including
environmental hazards, industrial accidents, weather or geologically
related conditions),
o Changes in the market price of gold,
o The uncertainties inherent in our production, exploratory and developmental
activities, including risks relating to permitting and regulatory delays,
o The uncertainties inherent in the estimation of gold ore reserves,
o The effects of environmental and other governmental regulations, and
o Uncertainty as to whether financing will be available to enable further
exploration and mining operations.
Investors are cautioned not to put undue reliance on forward-looking
statements. We disclaim any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information, future
events or otherwise.
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PROSPECTUS SUMMARY
This summary is not complete and does not contain all of the
information that you should consider before investing in our common stock. This
summary highlights selected information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, including the more detailed
information regarding our company, the risks of purchasing our common stock
discussed under "Risk Factors", and our financial statements and the
accompanying notes, before making an investment decision.
Our Business.
Our name is Golden River Resources Corporation and we sometimes refer
to ourselves in this Prospectus as "Golden River Resources", the "Company" or as
"we," "our," or "us." We changed our name from Bay Resources Ltd to Golden River
Resources in March 2006. We are an exploration stage mining company. Our
objective is to exploit our interest in the mineral claims in Nunavut, Canada
which are in the Slave Craton and in the Committee Bay Greenstone Belt. Our
principal exploration target is for gold and we are seeking to determine whether
adequate gold reserves are present on the property covered by our claims to
develop an operating mine. We are in the initial stages of our exploration
program and have not yet identified any ore reserves.
We hold the interests in the Slave Craton directly and our wholly owned
subsidiary named "Golden Bull Resources Corporation" (formerly 4075251 Canada
Inc.) holds the interests in the Committee Bay Greenstone Belt. Our wholly-owned
subsidiary is referred to in this Prospectus as `Golden Bull."
We sometimes refer to our claims collectively in this prospectus as
either the "Slave Properties" or the "Committee Bay Properties". Our claims are
registered in the Mining Recorders Office in the Mining District of Nunavut and
give us the right to explore and mine minerals from the property covered by the
claims.
We were incorporated in the State of Delaware on February 1, 1973. We
commenced our mineral exploration activities in 2002. Prior thereto, we were
engaged in a number of other business activities that have been discontinued.
Our executive offices are at Level 8, 850 St. Kilda Road, Melbourne, Victoria
3004 Australia and we have an office at 1 Yonge Street, Suite 1801, Toronto,
Ontario M5E 1W7, Canada. Our website location is www.goldenriverresources.com.
Information included on our website shall not be deemed to be incorporated in
this prospectus. Our wholly owned subsidiary, Golden Bull, was incorporated on
May 27, 2002 in the Province of Ontario, Canada and is licensed to do business
in the Northwest Territories and Nunavut Canada.
Currency.
We use the Australian dollar as our reporting currency, since we are
headquartered in Australia and our administrative expenses are incurred in
Australian dollars. References to dollars are to Australian dollars (A$) unless
otherwise indicated as being Canadian dollars (CDN$) or United States dollars
(US$). As of June 30, 2006, the currency exchange rate was approximately US$1.00
equals A$1.3701, and US$1.00 equals CDN $1.1201, as published by Bloomberg at
www.Bloomberg.com. For the convenience of the reader, the Australian Dollar
figures for the year ended June 30, 2005 and the nine months ended March 31,
2006 have been translated into United States Dollars ("US$) using the rate of
exchange at June 30, 2005 of A$1.00=US$0.7620 and at March 31, 2006 of
A$1.00=US$0.7110.
The Offering.
This offering relates to the sale of 30,000,000 shares of common
stock by a selling stockholder. The shares are issuable upon exercise of
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warrants. Our shares are quoted on the "over-the-counter" ("OTC") Bulletin Board
maintained by the National Association of Securities Dealers, Inc. The shares
may be sold at prevailing market prices or privately negotiated prices.
Risk Factors.
You should read the "RISK FACTORS" section as well as the other
cautionary statements throughout this prospectus so that you understand the
risks associated with an investment in our securities. Any investment in our
common stock should be considered a high-risk investment because of the nature
of mineral exploration. Only investors who can afford to lose their entire
investment should invest in these securities.
Use of Proceeds.
We will not receive any proceeds from the shares offered by the
selling stockholder. See "Use of Proceeds." We will, however, receive proceeds
from the sale of common stock upon exercise of warrants to the extent they are
exercised for cash. We are paying all of the expenses relating to the
registration of the shares for the selling stockholder.
Defined Terms.
A number of technical and industry terms, as well as other defined
terms used in this prospectus, are defined in the GLOSSARY at the end of this
prospectus. Generally, we have provided a definition of each such defined term
in the first instance that it is used in this prospectus and again in the
GLOSSARY.
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Summary Financial Data
The following summary financial data should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated Financial Statements and Notes thereto included
elsewhere in this Prospectus.
Year Ended Convenience Nine Months Convenience
June 30, Translation Ended March Translation
2005 US$000's 31, 2006 US$000's
A$000's A$000's
--------------------------------------------------
Statement of Operations Data:
Revenue - - - -
Operating Expenses 2,603 1,984 968 688
--------------------------------------------------
Net Loss (2,600) (1,982) (1,004) (714)
--------------------------------------------------
Balance Sheet Data:
Current Assets 210 160 186 132
--------------------------------------------------
Total Assets 227 173 198 141
--------------------------------------------------
Current Liabilities 605 460 700 498
--------------------------------------------------
Total Liabilities 1,577 1,201 2,391 1,700
--------------------------------------------------
Stockholders' Equity (Deficit) (1,350) (1,029) (2,193) (1,559)
--------------------------------------------------
Pro-Forma Balance Sheet - March 31, 2006
Proforma(1)
March 31, 2006 Convenience
A$000's Translation
US$000's
Balance Sheet Data:
Current Assets 2,495 1,774
--------------------------------------
Total Assets 2,507 1,782
--------------------------------------
Current Liabilities 700 498
--------------------------------------
Total Liabilities 700 498
--------------------------------------
Stockholders' Equity 1,807 1,284
--------------------------------------
(1) The pro-forma balance sheet gives effect to (i) the receipt of A$300,000
(US$256.000) in loans from Wilzed Pty Ltd. in April to May 2006; (ii) the
issuance of shares of common stock and warrants as repayment of a debt of
A$2 million (US$1,542,000) to Wilzed in May, 2006; and (iii) the issuance
of Special Warrants and Warrants to RAB Special Situations (Master) Fund
Limited for a consideration of A$2 million (US$1,542,000) in June, 2006.
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(2) RISK FACTORS
You should carefully consider each of the following risk factors and
all of the other information provided in this prospectus before purchasing our
common stock. An investment in our common stock involves a high degree of risk,
and should be considered only by persons who can afford the loss of their entire
investment. The risks and uncertainties described below are not the only ones we
face. There may be additional risks and uncertainties that are not known to us
or that we do not consider to be material at this time. If the events described
in these risks occur, our business, financial condition and results of
operations would likely suffer. Additionally, this prospectus contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ significantly from the results discussed in the
forward-looking statements. This section discusses the risk factors that might
cause those differences.
Risk Factors
Risks of Our Business
We Lack an Operating History And Have Losses Which We Expect To Continue Into
the Future.
To date we have no source of revenue. We have no operating history as a
mineral exploration or mining company upon which an evaluation of our future
success or failure can be made. Our ability to achieve and maintain
profitability and positive cash flow is dependent upon:
- exploration and development of the property covered by our mineral claims;
- our ability to locate economically viable mineral reserves in the property
covered by our mineral claims;
- our ability to raise the capital necessary to conduct exploration and
preserve our interest in the mineral claims, increase our interest in the
mineral claims and continue as an exploration and mining company; and
- our ability to generate revenues and profitably operate a mine on the
property covered by our mineral claims.
We Have No Known Gold Or Other Mineral Reserves And We Cannot Assure You That We
Will Find Such Reserves. If We Develop A Gold Or Other Mineral Reserve, There Is
No Guarantee That Production Will Be Profitable.
We have not identified any gold or other commercial mineral reserves on
the properties covered by our mineral claims and we cannot guarantee we will
ever find any. Also, to the extent that commercial mineral reserves have been
identified by other companies on properties that are adjacent to or within the
same geographic region as our exploration properties, this does not mean that we
will be successful in identifying commercial mineral reserves on our properties.
Even if we find a gold or other commercial minerals reserve, there is no
assurance that we will be able to mine them. Even if we develop a mine, there is
no assurance that we will make a profit. If we do not find gold or other
commercial minerals you could loose part or all of your investment.
We Will Need Additional Financing To Determine If There Is Gold Or Other
Commercial Minerals And To Maintain The Mineral Claims.
Our success will depend on our ability to raise additional capital. We
have met our legal exploration commitments on the Committee Bay Properties until
2012 and Tahera is required to fulfill the minimum exploration commitments on
the Slave Properties. However, at this time, we have not found a gold deposit
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and further exploration is required. There is no assurance whatsoever that funds
will be available from any source or, if available, that they can be obtained on
terms acceptable to us to make these investments. If funds are not available in
the amounts required to maintain an interest, we will be unable to proceed
further on the Committee Bay Properties and Slave Properties and our operations
would be severely limited, and we would be unable to reach our objective. This
could cause the loss of all or part of your investment.
There Are Risks Associated With Our Agreement With Tahera
The agreement with Tahera dated March 7, 2002 gives us rights of access
to exploration data of Tahera covering gold, silver and base metal potential on
properties held by Tahera or properties which are adjacent to or in the area of
the Tahera properties. If during our exploration for gold, silver or base
metals, we discover diamonds, Tahera retains the rights to the diamonds. Under
the agreement, if we wish to conduct exploration on the properties, we need to
seek access to the properties and enter into an access agreement with Tahera,
suitable to Tahera, which sets out the terms of our access. Our access cannot
interfere with Tahera's operations on the properties. Tahera has the sole and
unfetted discretion to sell, transfer, assign, encumber, mortgage, pledge,
hypothecate, allow to lapse, forfeit, surrender or in any way dispose of its
interest in the properties. If Tahera were to sell, transfer or assign the
properties, we would have to negotiate access with the new owners of the
properties and there can be no assurance we would receive access. We undertake
exploration at our sole risk. Subject to Tahera's rights, we have the right to
exploit opportunities for gold, silver or base metals on the properties. We have
granted Tahera a 2% net smelter return royalty.
The Report Of Our Independent Registered Public Accounting Firm Contains An
Explanatory Paragraph Questioning Our Ability To Continue As A Going Concern.
The report of our independent registered public accounting firm on our
consolidated financial statements as of June 30, 2005 and for the years ended
June 30, 2005 and 2004 and for the period July 1, 2002 (inception of exploration
stage) through June 30, 2005 includes an explanatory paragraph questioning our
ability to continue as a going concern. This paragraph indicates that we have
not yet commenced revenue producing operations and have a retained deficit of
A$31,406,000 which conditions raise substantial doubt about our ability to
continue as a going concern. Our consolidated financial statements do not
include any adjustment that might result from the outcome of this uncertainty.
We Are A Small Operation And Do Not Have Significant Capital.
Because we will have limited working capital, we must limit our
exploration. If we are unable to raise the capital required to undertake
adequate exploration, we may not find gold or other commercial minerals even
though our property may contain gold or other commercial minerals. If we do not
find gold or other commercial minerals we may be forced to cease operations and
you may lose your entire investment.
We May Not Find Any Ore Reserves That Are Economical
If we are unable to raise the required capital or we do not find gold
or other commercial minerals on the properties or we cannot remove the gold or
other commercial minerals discovered economically, we may have to look for other
mineral rights on other properties in Canada or other parts of the world.
Alternatively, we may cease operations altogether and you may lose your entire
investment.
8
Weather Interruptions In Nunavut May Affect And Delay Our Proposed Exploration
Operations.
We can only work above ground at our mineral claims in Nunavut, Canada
from late May until early October of each year. Once we are able to work
underground, we plan to conduct our exploration year round, however, it is
possible that snow or rain could cause roads leading to our claims to be
impassible. This could impair our ability to meet our objectives and may
increase our costs beyond our ability, if any, to secure financing, which would
adversely affect the value of your investment and our ability to carry on
business.
If Our Officers And Directors Stopped Working For Us, We Would Be Adversely
Impacted.
Our Vice President Exploration is employed on a full time basis . Other
than this officer, none of our other officers or directors works for us on a
full-time basis. There are no proposals or definitive arrangements to compensate
our officers and directors or to engage them on a full-time basis. They each
rely on other business activities to support themselves. They each have a
conflict of interest in that they are officers and directors of other companies.
You must rely on their skills and experience in order for us to reach our
objective. We have no employment agreements or key man life insurance policy on
any of them. The loss of some or all of these officers and directors could
adversely affect our ability to carry on business and could cause you to loose
part or all of your investment.
We Could Encounter Delays Due To Regulatory And Permitting Delays.
We could face delays in obtaining mining permits and environmental
permits. Such delays, could jeopardize financing, if any, in which case we would
have to delay or abandon work on the properties.
Gold Price Fluctuations.
If we are successful in developing a gold ore reserve, our ability to
raise the money to put it into production and operate it at a profit will be
dependant on the then existing market price of gold. Declines in the market
prices of gold may render reserves containing relatively low grades of ore
uneconomic to exploit, and we may be required to discontinue exploration,
development or mining on the properties, or write down our assets. If the price
of gold is too low we will not be able to raise the money or produce any
revenue. We cannot predict the future market price of gold. A sustained decline
in the market price of gold could cause a reduction in the value of your
investment and you may lose all or part of your investment.
There Are Uncertainties Inherent In The Estimation Of Gold Or Other Mineral
Reserves.
Based upon our preliminary study of the properties we believe that the
potential for discovering gold reserves exists, but we have not identified such
gold reserves and we are not able to estimate the probability of finding
recoverable gold ore. Such estimates cannot be calculated from the current
available information. Reserve estimates, including the economic recovery of
gold ore, will require us to make assumptions about recovery costs and gold
market prices. Reserve estimation is, by its nature, an imprecise and subjective
process and the accuracy of such estimates is a function of the quality of
available data and of engineering and geological interpretation, judgment and
experience. The economic feasibility of the properties will be based upon our
estimates of the size and grade of ore reserves, metallurgical recoveries,
production rates, capital and operating costs, and the future price of gold. If
such estimates are incorrect or vary substantially it could effect our ability
to develop an economical mine and would reduce the value of your investment.
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If We Define An Economic Ore Reserve And Achieve Production, It Will Decline In
The Future. An Ore Reserve Is A Wasting Asset.
Our future ore reserve and production, if any, will decline as a result
of the exhaustion of reserves and possible closure of any mine that might be
developed. Eventually, at some unknown time in the future, all of the
economically extractable ore will be removed from the properties, and there will
be no ore remaining. This is called depletion of reserves. Ultimately, we must
acquire or operate other properties in order to continue as an on going
business. Our success in continuing to develop reserves, if any, will affect the
value of your investment.
There Are Significant Risks Associated With Mining Activities.
The mining business is generally subject to risks and hazards,
including quantity of production, quality of the ore, environmental hazards,
industrial accidents, the encountering of unusual or unexpected geological
formations, cave-ins, flooding, earthquakes and periodic interruptions due to
inclement or hazardous weather conditions. These occurrences could result in
damage to, or destruction of, our mineral properties or production facilities,
personal injury or death, environmental damage, reduced production and delays in
mining, asset write-downs, monetary losses and possible legal liability. We
could incur significant costs that could adversely affect our results of
operation. Insurance fully covering many environmental risks (including
potential liability for pollution or other hazards as a result of disposal of
waste products occurring from exploration and production) is not generally
available to us or to other companies in the industry. What liability insurance
we carry may not be adequate to cover any claim.
We Are Subject To Significant Environmental And Other Governmental Regulations
That Can Require Substantial Capital Expenditure, And Can Be Time-Consuming.
We are required to comply with various Canadian laws and regulations
pertaining to exploration, development and the discharge of materials into the
environment or otherwise relating to the protection of the environment, all of
which can increase the costs and time required to attain operations. We will
have to obtain exploration, development and environmental permits, licenses or
approvals that may be required for our operations. There can be no assurance
that we will be successful in obtaining, if required, a permit to commence
exploration, development and operation, or that such permit can be obtained in a
timely basis. If we are unsuccessful in obtaining the required permits it may
adversely affect our ability to carry on business and cause you to lose part or
all of your investment.
Mining Accidents Or Other Adverse Events At Our Property Could Reduce Our
Production Levels.
If and when we reach production it may fall below estimated levels as a
result of mining accidents, cave-ins or flooding on the properties. In addition,
production may be unexpectedly reduced if, during the course of mining,
unfavorable ground conditions or seismic activity are encountered, ore grades
are lower than expected, or the physical or metallurgical characteristics of the
ore are less amenable to mining or processing than expected. The happening of
these types of events would reduce our profitably or could cause us to cease
operations which would cause you to lose part or all of your investment.
The acquisition of gold mineral properties is subject to substantial
competition. If we must pursue alternative properties, companies with greater
financial resources, larger staffs, more experience, and more equipment for
exploration and development may be in a better position than us to compete for
properties. We may have to undertake greater risks than more established
companies in order to compete which could affect the value of your investment.
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We are substantially dependent upon AXIS To Carry Out Our Activities
We are substantially dependent upon AXIS for our senior management,
financial and accounting, corporate legal and other corporate headquarters
functions. For example, each of our officers (other than Mr. Alford) is employed
by AXIS and, as such, is required by AXIS to devote substantial amounts of time
to the business and affairs of the other shareholders of AXIS.
Pursuant to a services agreement, AXIS provides us with office
facilities, administrative personnel and services, management and geological
staff and services. No fixed fee is set in the agreement and we are required to
reimburse AXIS for any direct costs incurred by AXIS for us. In addition, we pay
a proportion of AXIS indirect costs based on a measure of our utilization of the
facilities and activities of AXIS plus a service fee of not more than 15% of the
direct and indirect costs. To date, AXIS has not charged us a service fee but
there can be no assurance that AXIS will not charge a fee in the future. This
service agreement may be terminated by us or AXIS on 60 days' notice. See
"Certain Relationships and Related Party Transactions."
Future Sales of Common Stock Could Depress The Price Of Our Common Stock
Future sales of substantial amounts of common stock pursuant to Rule
144 under the Securities Act of 1933 or otherwise by certain stockholders could
have a material adverse impact on the market price for the common stock at the
time. There are presently 22,955,659 outstanding shares of our common stock held
by stockholders which are deemed "restricted securities" as defined by Rule 144
under the Securities Act. Under certain circumstances, these shares may be sold
without registration pursuant to the provisions of Rule 144. In general, under
rule 144, a person (or persons whose shares are aggregated) who has satisfied a
one-year holding period may, under certain circumstances, sell within any
three-month period a number of restricted securities which does not exceed the
greater of one (1%) percent of the shares outstanding or the average weekly
trading volume during the four calendar weeks preceding the notice of sale
required by Rule 144. In addition, Rule 144 permits, under certain
circumstances, the sale of restricted securities without any quantity
limitations by a person who is not an affiliate of ours and has satisfied a
two-year holding period. Any sales of shares by stockholders pursuant to Rule
144 may have a depressive effect on the price of our common stock.
Our Common Stock Is Traded Over the Counter, Which May Deprive Stockholders Of
The Full Value Of Their Shares
Our common stock is quoted via the Over The Counter Bulletin Board
(OTCBB). As such, our common stock may have fewer market makers, lower trading
volumes and larger spreads between bid and asked prices than securities listed
on an exchange such as the New York Stock Exchange or the NASDAQ Stock Market.
These factors may result in higher price volatility and less market liquidity
for the common stock.
A Low Market Price May Severely Limit The Potential Market For Our Common Stock
Our common stock is currently trading at a price substantially below
$5.00 per share, subjecting trading in the stock to certain SEC rules requiring
additional disclosures by broker-dealers. These rules generally apply to any
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions (a "penny stock"). Such rules require the delivery, prior to
any penny stock transaction, of a disclosure schedule explaining the penny stock
market and the risks associated therewith and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and institutional or wealthy investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to the sale. The broker-dealer also must disclose the
commissions payable to the broker-dealer, current bid and offer quotations for
the penny stock and, if the broker-dealer is the sole market maker, the
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broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Such information must be provided to the customer orally or in
writing before or with the written confirmation of trade sent to the customer.
Monthly statements must be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in penny
stock. The additional burdens imposed upon broker-dealers by such requirements
could discourage broker-dealers from effecting transactions in our common stock.
The Market Price Of Your Shares Will Be Volatile.
The stock market price of gold mining exploration companies like us has
been volatile. Securities markets may experience price and volume volatility.
The market price of our stock may experience wide fluctuations that could be
unrelated to our financial and operating results. Such volatility or
fluctuations could adversely affect your ability to sell your shares and the
value you might receive for those shares.
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be
offered and sold from time to time by the selling stockholder. There will be no
proceeds to us from the sale of shares of common stock in this offering. In
addition, any proceeds that we receive from the exercise of warrants to the
extent they are exercised for cash will be used for working capital and general
corporate purposes.
DETERMINATION OF OFFERING PRICE
The Offering Price is estimated solely for purposes of calculating the
registration fee in accordance with Rule 457(c) under the Securities Act of
1933, as amended (the "Act"), and is based on the average of the closing bid and
asked prices for the common stock as reported on the OTC Bulletin Board on June
30, 2006.
SELLING STOCKHOLDER
The following table sets forth as of June 30, 2006 the number of shares
of our common stock owned by the selling stockholder and the number of such
shares included for sale in this prospectus.
The shares being offered by the selling stockholder are issuable upon
exercise of securities that were issued in connection with the following
transaction:
On June 9, 2006, we entered into a Subscription Agreement with RAB
Special Situations (Master) Fund Limited ("RAB") pursuant to which we issued to
RAB in a private placement transaction (the "Private Placement") for an
aggregate purchase price of A$2,000,000 (US$1,542,000); (i)10,000,000 special
warrants (the "Special Warrants"), each of which is exercisable at any time
until June 9, 2016 to acquire, without additional consideration, one share of
common stock, at which time all special warrants that have not been exercised
will automatically convert into shares of common stock, and (ii) warrants (the
"Warrants") for the purchase of 20,000,000 shares of common stock, at an
exercise price of A$0.20 (US$0.1542) to be exercisable until April 30, 2011. The
Warrants contain a cashless exercise provision whereby the holder, at its
option, may exercise the Warrants by surrender and cancellation of a portion of
the shares of our common stock issuable upon the exercise of the Warrants based
on the then current market price of our common stock. If the holders of the
Warrants elected to exercise the Warrants pursuant to this provision, we would
not receive any proceeds from the exercise of the Warrants.
12
The Company has agreed to prepare and file with the Securities and
Exchange Commission a registration statement, of which this prospectus forms a
part, covering the resale of the shares of common stock issuable upon exercise
of the Special Warrants and the Warrants.
Beneficial Ownership Beneficial Ownership
Prior to Offering After Offering
------------------------- ---------------------------------
Percentage Percentage
of of
Outstanding Shares Outstanding
Selling Common Common Being Common Common
Stockholder Stock Stock* Offered Stock Stock*
-------------------- ------------- ----------- ----------
RAB Special 31,670,000(2) 55.8% 30,000,000 1,670,000 2.9%
Situations (Master)
Fund Limited (1)
1 Adam Street
London WC2N 6LE
England
------------------
* Based upon 26,711,630 shares outstanding at June 30, 2006.
(1) RAB is organized under the laws of the Cayman Islands. Phillip Richards has
sole investment and voting control over the securities owned by RAB.
(2) Includes 10,000,000 shares of common stock issuable upon exercise of
Special Warrants, without the payment of any additional consideration and
20,000,000 shares of common stock issuable upon exercise of Warrants at an
exercise price of US$0.1542 per share. The Special Warrants and Warrants
are registered in the name of Credit Suisse Client Nominees (UK) Limited,
as depository for RAB. Notwithstanding anything contained therein to the
contrary, the Special Warrants and Warrants are not exercisable by the
holder, in whole or in part, and the Company shall not give effect to any
such exercise of the Special Warrants and Warrants, if, after giving effect
to such exercise, the holder, together with any affiliate of the holder
(including any person or company acting jointly or in concert with the
holder) would in the aggregate beneficially own, or exercise control or
direction over that number of voting securities of the Company which is
9.99% or greater of the total issued and outstanding voting securities of
the Company, immediately after giving effect to such exercise; provided,
however, that upon a holder of the Special Warrants or Warrants providing
the Company with sixty-one (61) days notice that such holder would like to
waive this limitation with regard to any or all shares of common stock
issuable upon exercise of the Special Warrants or Warrants, this limitation
will be of no force or effect with regard to all or a portion of the
Special Warrant or Warrants referenced in the waiver notice.
PLAN OF DISTRIBUTION
General
The selling stockholder and any of its pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholder may use any one or more of the
following methods when selling shares:
|X| ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
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|X| block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
|X| purchase by a broker-dealer as principal and resale by the broker-dealer
for its account;
|X| an exchange distribution in accordance with the rules of the applicable
exchange;
|X| privately negotiated transactions;
|X| short sales;
|X| broker-dealers may agree with the selling stockholder to sell a specified
number of such shares at a stipulated price per share;
|X| a combination of any such methods of sale; and
|X| any other method permitted pursuant to applicable law.
The selling stockholder may also sell shares under Rule 144 under the
Securities Act of 1933, as amended, if available, rather than under this
prospectus. The selling stockholder may also engage in short sales against the
box, puts and calls and other transactions in our securities or derivatives of
our securities, and may sell or deliver shares in connection with these trades.
The selling stockholder may pledge its shares to its brokers under the margin
provisions of customer agreements. If the selling stockholder defaults on a
margin loan, the broker may, from time to time, offer and sell the pledged
shares.
Broker-dealers engaged by the selling stockholder may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholder (or, if any broker-dealer acts as
agent for the purchase of shares, from the purchaser) in amounts to be
negotiated. The selling stockholder does not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholder and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
We are required to pay all fees and expenses (excluding selling
expenses) incident to the registration of the shares being registered herein. We
have agreed to indemnify the selling stockholder against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act.
Blue Sky Laws. Under the securities laws of certain states, the shares
of common stock may be sold in such states only through registered or licensed
brokers or dealers. The selling stockholder is advised to ensure that any
underwriters, brokers, dealers or agents effecting transactions on behalf of the
selling stockholder are registered to sell securities in all fifty states. In
addition, in certain states the shares of common stock may not be sold unless
the shares have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied with.
Costs of Registration. We will pay all the expenses incident to the
registration, offering and sale of the shares of common stock to the public
hereunder other than commissions, fees and discounts of underwriters, brokers,
dealers and agents. We estimate that the expenses of the offering to be borne by
us will be approximately US$25,674. The offering expenses consist of: a SEC
registration fee of US$674, accounting fees of US$10,000, legal fees of
US$10,000 and miscellaneous expenses of US$5,000.
14
Regulation M. The selling stockholder should be aware that the anti
manipulation provisions of Regulation M under the Exchange Act will apply to
purchases and sales of shares of common stock by the selling stockholder, and
that there are restrictions on market-making activities by persons engaged in
the distribution of the shares. Under Regulation M, the selling stockholder or
its agents may not bid for, purchase, or attempt to induce any person to bid for
or purchase, shares of our common stock while such selling stockholder is
distributing shares covered by this prospectus. The selling stockholder is not
permitted to cover short sales by purchasing shares while the distribution is
taking place. The selling stockholder is advised that if a particular offer of
common stock is to be made on terms constituting a material change from the
information set forth above with respect to the Plan of Distribution, then, to
the extent required, a post- effective amendment to the accompanying
registration statement must be filed with the Securities and Exchange
Commission.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding or litigation and
none of our property is the subject of a pending legal proceeding.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS
The following table sets forth our directors and officers, their ages
and all offices and positions with our company. Officers and other employees
serve at the will of the Board of Directors.
Name Age Position(s) Held
Joseph Gutnick 54 Chairman of the Board, President, Chief
Executive Officer and Director
David Tyrwhitt 68 Director
Peter Lee 48 Director, Secretary, Chief Financial
Officer and Principal Accounting Officer
Mordechai Gutnick 28 Director
Craig Alford 44 Vice President Exploration
Joseph Gutnick
Mr Gutnick has been Chairman of the Board, President and Chief
Executive Officer since March, 1988. He has been a Director of numerous public
listed companies in Australia specialising in the mining sector since 1980 and
is currently a Director of Astro Diamond Mines N.L., Great Gold Mines N.L., and
Quantum Resources Limited and President and CEO of Legend International Holdings
Inc, a US corporation listed on the OTC market. Mr. Gutnick was previously
Executive Chairman of Tahera Diamond Corporation, a company that is listed on
Toronto Stock Exchange from May 2000 to October 2003 and has previously been a
Director of the World Gold Council. He is a Fellow of the Australasian Institute
of Mining & Metallurgy and the Australian Institute of Management and a Member
of the Australian Institute of Company Directors.
15
David Tyrwhitt
Dr Tyrwhitt was appointed a Director in November 1996. He is a
geologist, holding a Bachelor of Science and PhD degrees and has 40 years
experience in mineral exploration and management development and operation of
gold mines in Australia. Since 1996, Mr. Tyrwhitt has served as a consulting
geologist through David S. Tyrwhitt & Associates (June 2002 to present) and
Auminex Sdn. Bhd. (1996 to June 2002). Dr Tyrwhitt has been a Director of
numerous public listed companies in Australia in the mining industry and is
currently a Director of Astro Diamond Mines N.L., Great Gold Mines N.L., and
Quantum Resources Limited listed on the Australian Stock Exchange and Legend
International Holdings Inc, a US corporation listed on the OTC market.
Peter Lee
Mr Lee has been Chief Financial Officer and Principal Accounting
Officer since August 1989 and was appointed a Director in February 1996. Mr Lee
is a Member of the Institute of Chartered Accountants in Australia, a Fellow of
Chartered Secretaries Australia Ltd., a Member of the Australian Institute of
Company Directors and holds a Bachelor of Business (Accounting) from Royal
Melbourne Institute of Technology. He has over 25 years commercial experience
and is currently General Manager Corporate and Company Secretary of several
listed public companies in Australia and CFO and Secretary of Legend
International Holdings Inc, a US corporation listed on the OTC market.
Mordechai Gutnick
On September 14, 2005, Mr Gutnick was elected a non-executive Director.
He is a businessman and long-term investor in the mining industry. From April
2001 to June 2002, Mr. Gutnick served as a project advisor for AXIS, which
provides services to the Company; from July 2002 to April 2003, Mr. Gutnick was
a private investor; and since May 2003, Mr. Gutnick has served as a
non-executive director of the following companies: Astro Diamond Mines N.L.'
Great Gold Mines N.L.; and Quantum Resources Limited. Mr Gutnick has been
appointed to the Audit and Remuneration Committee's, effective September 14,
2005. Mr Mordechai Gutnick is the son of Mr Joseph Gutnick.
Craig Alford
In April 2004 the Company appointed Mr. Craig Alford as Vice President
Exploration. From February 1996 through February 2002, Mr. Alford served as
senior project geologist for Teck Cominco, from February 2002 through January
2003, Mr. Alford served as manager of All-Tech Services; and from January 2003
through April 2004, Mr. Alford was employed as a geologist for Cabra Consulting.
Mr. Alford has over 20 years of experience in the exploration business including
5 years as Senior Geologist to District Manager for Teck Cominco's exploration
programs in Kyrgyzstan, Argentina and Chile. Most recently Mr. Alford
participated in various successful exploration programs within Canada and the
former Soviet Union, including as a Geologic Consultant for Placer Dome, one of
the world's largest gold mining companies. Mr. Alford has worked in exploration
for several major and junior mining companies including Falconbridge, Golden
Star Resources, Granges, and Homestake Minerals. In addition, he has worked with
the Geologic Survey of Canada.
Mr. Alford holds a Masters degree with Commendation in Geology from
Lakehead University. He has extensive exploration experience in many
commodities, including gold, silver, copper, lead, zinc, oil, and diamonds. Mr.
Alford's exploration experience is throughout Canada and several other countries
including Venezuela, Guyana, Chile, Argentina, Suriname, and Kyrgyzstan.
Mr. Alford is responsible for overseeing Golden River Resources' gold
exploration in the Slave Craton and on the Committee Bay Greenstone Belt in
Canada. He will also be actively involved in continuing Golden River Resources'
strategy of acquiring high potential, early-stage gold properties worldwide.
16
All Directors have been appointed for a one-year term which expires in
March 2007.
Board, Audit Committee and Remuneration Committee Meetings
Our Board of Directors consists of four members, of whom two have been,
and continue to be, independent under applicable regulations. During fiscal
2005, our Board of Directors met three times. The Board of Directors also uses
resolutions in writing to deal with certain matters and during fiscal 2005, five
resolutions in writing were signed by all Directors.
We do not have a nominating committee. Historically our entire Board
has selected nominees for election as directors. The Board believes this process
has worked well thus far particularly since it has been the Board's practice to
require unanimity of Board members with respect to the selection of director
nominees. In determining whether to elect a director or to nominate any person
for election by our stockholders, the Board assesses the appropriate size of the
Board of Directors, consistent with our bylaws, and whether any vacancies on the
Board are expected due to retirement or otherwise. If vacancies are anticipated,
or otherwise arise, the Board will consider various potential candidates to fill
each vacancy. Candidates may come to the attention of the Board through a
variety of sources, including from current members of the Board, stockholders,
or other persons. The Board of Directors has not yet had the occasion to, but
will, consider properly submitted proposed nominations by stockholders who are
not directors, officers, or employees of Golden River Resources on the same
basis as candidates proposed by any other person.
Audit Committee
Dr David Tyrwhitt and Mr. Mordechai Gutnick constitute our Audit
Committee. It is the opinion of the Board of Directors that each of them is an
independent director as defined in Rule 10A-3 of the Securities Exchange Act of
1934. In addition, the Board believes that Mr Tyrwhitt would meet the director
independence requirements of the Nasdaq Stock Market if we were listed on such
Market, but that Mr. Mordechai Gutnick would not meet such Nasdaq independence
requirements in light of his family relationship with Mr. Joseph Gutnick who is
our Chief Executive Officer. Our Audit Committee does not include a "financial
expert" as defined in Item 401 (e) of Regulation S-B. The Company only has two
independent Directors and neither of these independent Directors has a finance
background. The Audit Committee met once during fiscal 2005 and the Chair of the
Audit Committee met with the external auditors on three occasions during fiscal
2005 in respect to quarterly reports prior to the reports being filed.
Remuneration Committee
The Board has a Remuneration Committee comprised of two independent
directors. During fiscal 2005, the Remuneration Committee met once. During the
year, the Remuneration Committee reviewed employment agreements and salary
levels of our executive officers were considered.
Code of Ethics
We have adopted a Code of Conduct and Ethics and it applies to all
Directors, Officers and employees. A copy of the Code of Conduct and Ethics is
posted on our website and we will provide a copy to any person without charge.
If you require a copy, you can download it from our website or alternatively,
contact us by facsimile or email and we will send you a copy.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, our
Directors, executive officers and beneficial owners of more than 10% of the
outstanding Common Stock are required to file reports with the Securities and
17
Exchange Commission concerning their ownership of and transactions in our Common
Stock and are also required to provide to us copies of such reports. Based
solely on such reports and related information furnished to us, we believe that
in fiscal 2005 all such filing requirements were complied with in a timely
manner by all Directors and executive officers except (i) Mr Althaus (our former
chief operating officer) filed a Form 3 and nine Form 4's after the due dates
and has not yet filed a Form 4 with respect to the grant of options to him; (ii)
Mr Alford filed a Form 3 after the due date; (iii) Mr Lee filed a Form 4 after
the due date; and (iv) Dr Tyrwhitt filed a Form 4 after the due date.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of our common stock by each person or entity known by us to
be the beneficial owner of more than 5% of the outstanding shares of common
stock, each of our directors and named executive officers, and all of our
directors and executive officers as a group as of June 30, 2006.
Title of Name and Address Amount and nature Percentage
Class of Beneficial Owner* of Beneficial Owner of class
--------------------------------------------------------------------------------
Shares of common Joseph and Stera Gutnick 41,200,224 (2)(3)(4) 87.3
stock (5)(6)(7)
Shares of common RAB Special Situations 31,670,000 (9) 55.8
stock (Master) Fund Limited
1 Adam Street
London WC2N 6LE
United Kingdom
Shares of common David Stuart Tyrwhitt 50,000 (2)(3)(8) **
stock
Shares of common Mordechai Zev Gutnick - (3)(10)
stock
Shares of common Peter James Lee 250,000 (2)(3)(8) **
stock
Shares of common Craig Alford 150,000 (3)(11) **
stock
--------------------------------------------------------------------------------
All officers and Directors 41,650,224 (12) 87.3
as a group
--------------------------------------------------------------------------------
* Unless otherwise indicated, the address of each person is c/o Golden River
Resources Corporation, Level 8, 580 St. Kilda Road, Melbourne, Victoria
3004 Australia
** less than 1%
Notes:
(1) Based on 26,711,630 shares outstanding as of June 30, 2006.
(2) Does not include:
(i) 8,949 shares of Common Stock beneficially owned by Great Gold Mines NL
or
18
(ii) 1,918 shares of Common Stock beneficially owned by Quantum Resources
Limited or
(iii) 229,489 shares of Common Stock beneficially owned by AXIS,
of which companies Messrs JI Gutnick, Lee, and Dr. Tyrwhitt are officers
and/or Directors, as they disclaim beneficial ownership of those shares.
(3) Does not include 2,500 shares of Common Stock beneficially owned by us.
(4) Includes 5,394,590 shares of Common Stock owned by Edensor Nominees Pty
Ltd., 1,753,984 shares of Common Stock owned by Kerisridge Pty Ltd.,
1,500,000 shares of Common Stock owned by Surfer Holdings Pty Ltd,
30,000,000 shares of Common Stock owned by Fast Knight Nominees Pty Ltd
(including 20,000,000 shares issuable upon exercise of warrants at an
exercise price of US$0.1542 per share), 2,000,000 shares of Common Stock
owned by Kalycorp Pty Ltd and 26,000 shares of Common Stock owned by
Pearlway Investments Proprietary Limited, of which Mr Joseph Gutnick, Stera
M. Gutnick and members of their family are officers, Directors and
principal stockholders.
(5) Includes 500,000 shares issuable upon exercise of stock options owned by
Mr. Gutnick of which 333,334 are vested and 166,666 vest on July 27, 2006.
(6) Joseph Gutnick is the beneficial owner of 25,650 shares of Common Stock
that are registered in his own name.
(7) Joseph Gutnick and Stera Gutnick are husband and wife.
(8) Issuable upon exercise of stock options of which 66.6% are vested and the
remaining 33.4% will vest on July 27, 2006.
(9) RAB owns 1,670,000 shares of common stock and warrants exercisable to
acquire an additional 30,000,000 shares of common stock, including
10,000,000 shares of common stock issuable upon exercise of Special
Warrants, without the payment of any additional consideration and
20,000,000 shares of common stock issuable upon exercise of Warrants with
an exercise price of US$0.1542 per share. Notwithstanding anything
contained therein to the contrary, the Special Warrants and Warrants are
not exercisable by the holder, in whole or in part, and the Company shall
not give effect to any such exercise of the Special Warrants and Warrants,
if, after giving effect to such exercise, the holder, together with any
affiliate of the holder (including any person or company acting jointly or
in concert with the holder) would in the aggregate beneficially own, or
exercise control or direction over that number of voting securities of the
Company which is 9.99% or greater of the total issued and outstanding
voting securities of the Company, immediately after giving effect to such
exercise; provided, however, that upon a holder of the Special Warrants or
Warrants providing the Company with sixty-one (61) days notice that such
holder would like to waive this limitation with regard to any or all shares
of common stock issuable upon exercise of the Special Warrants or Warrants,
this limitation will be of no force or effect with regard to all or a
portion of the Special Warrant or Warrants referenced in the waiver notice.
(10) Does not include:
(i) 8,949 shares of Common Stock beneficially owned by Great Gold Mines
N.L. or
(ii) 1,918 shares of Common Stock beneficially owned by Quantum Resources
Limited
19
of which companies Mr MZ Gutnick is a Director as he disclaims beneficial
ownership of these shares.
(11) Includes 150,000 stock options which are exercisable.
(12) Includes 800,000 shares that are issuable upon exercise of stock options,
of which 533,333 are vested, and the remaining 266,667 will vest on July
27, 2006.
20
DESCRIPTION OF SECURITIES
The following description of our common stock is a summary of the
material terms of our common stock. This summary is subject to and qualified in
its entirety by our Certificate of Incorporation as amended, our Bylaws and by
the applicable provisions of the State of Delaware law.
Our authorized capital stock consists of 100,000,000 shares of common
stock having a par value of $0.0001 per share, of which 26,711,630 shares were
issued and outstanding as of June 30, 2006.
There is no cumulative voting for the election of directors. There are
no preemptive rights to purchase shares. The holders of shares of common stock
are entitled to dividends, out of funds legally available therefore, when and as
declared by the Board of Directors. The Board of Directors has never declared a
dividend and does not anticipate declaring a dividend in the future. Each
outstanding share of common stock entitles the holder thereof to one vote per
share on all matters. In the event of liquidation, dissolution or winding up of
our affairs, holders are entitled to receive, ratably, our net assets available
to shareholders after payment of all creditors. All of our issued and
outstanding shares of common stock are duly authorized, validly issued, fully
paid, and non-assessable. To the extent that our unissued shares of common stock
are subsequently issued, the relative interests of existing shareholders may be
diluted.
Transfer Agent
The Transfer Agent and Registrar for our common stock is The Bank of
New York, 101 Barclay Street, New York, New York.
INTEREST OF NAMED EXPERTS AND COUNSEL
Not applicable
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
The Delaware Business Corporation Act and our by-laws, provide that we
shall indemnify our officers and directors and hold harmless each person who
was, is or is threatened to be made a party to or is otherwise involved in any
threatened proceedings by reason of the fact that he or she is or was our
director or officer, against losses, claims, damages, liabilities and expenses
actually and reasonably incurred or suffered in connection with such proceeding.
However, the statutory indemnity does not apply to: (a) acts or omissions of the
director finally adjudged to be intentional misconduct or a knowing violation of
law; (b) unlawful distributions; or (c) any transaction with respect to which it
was finally adjudged that such director personally received a benefit in money,
property, or services to which the director was not legally entitled. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to our directors, officers and controlling persons pursuant to the
forgoing provisions or otherwise, we have been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in that Act and is, therefore, unenforceable
ORGANIZATION WITHIN LAST FIVE YEARS
Not Applicable
21
DESCRIPTION OF BUSINESS
Introduction
We are an exploration stage company engaged in the identification,
acquisition, exploration and development of mining prospects believed to have
gold mineralization. The main objective is to explore, identify, and develop
commercially viable prospects over which we have rights that could produce
revenues. These types of prospects may also contain mineralization of metals
often found with gold, such as platinum and silver and other `base metals'
(copper, nickel, lead, zinc) which also may be worth processing. Exploration and
development for commercially viable mineralization of any metal includes a high
degree of risk which careful evaluation, experience and factual knowledge may
not eliminate, and therefore, we may never produce any revenues.
We hold properties in Nunavut, Canada. Golden River Resources holds
interests in the Slave Craton area within Nunavut and our currently owned 100%
subsidiary; Golden Bull Resources holds various prospects in the Committee Bay
Greenstone Belt in Nunuvut.
We are in the initial stages of exploration programs and have not yet
identified any ore reserves.
Please note that the Glossary in Appendix A to the prospectus contains
definitions for the geological and other specialized terms used in this section.
Slave Craton Properties
During 2002, we reached an agreement with the Canadian company, Tahera
Diamond Corporation, to explore for gold on Tahera's extensive properties on the
Slave Craton in Nunavut, Canada. At that time, Tahera's Slave land package
included 177 properties and 11 Inuit Owned Land ("IOL") Concessions covering
approximately 471,000 acres. Tahera is an diamond mining company conducting
diamond exploration in the northern Slave Craton and brought its Jericho diamond
pipe into production in 2006.
Tahera has an extensive database of data to which we have access,
including geophysical surveys, overburden and bedrock mapping, overburden
sampling and drilling data. We have agreed to pay them a two percent net smelter
return royalty on any production from gold and base metals we discover having
used Tahera's extensive database.
We believe there are some exceptional gold targets on Tahera's ground;
principally in the High Lake Volcanic Belt, and in the Contwoyto Formation.
Within the High Lake Volcanic Belt, the target is silicified
shear-hosted gold, similar to the 565,000 ounce ULU gold deposit which borders
the Tahera properties.
The Contwoyto properties lay in close proximity to the Lupin gold mine,
which is a high grade gold deposit of over three million ounces. We believe that
there is significant potential for gold mineralization, similar to that found at
Lupin, on the Contwoyto properties.
We have included a list of the mining properties that are covered under
our agreement with Tahera in Appendix B to this prospectus.
The agreement with Tahera dated March 7, 2002 gives us rights of access
to exploration data of Tahera covering gold, silver and base metal potential on
properties held by Tahera or properties which are adjacent to or in the area of
the Tahera properties. If during our exploration for gold, silver or base
metals, we discover diamonds, Tahera retains the rights to the diamonds. Under
the agreement, if we wish to conduct exploration on the properties, we need to
seek access to the properties and enter into an access agreement with Tahera,
22
suitable to Tahera, which sets out the terms of our access. Our access cannot
interfere with Tahera's operations on the properties. Tahera has the sole and
unfetted discretion to sell, transfer, assign, encumber, mortgage, pledge,
hypothecate, allow to lapse, forfeit, surrender or in any way dispose of its
interest in the properties. Should Tahera sell, transfer, assign the properties,
we would then need to negotiate access with the new holder of the properties. We
undertake exploration at our sole risk. Subject to Tahera's rights, we have the
right to exploit opportunities for gold, silver or base metals on the
properties. We have granted Tahera a 2% net smelter return royalty.
We entered into an access agreement with Tahera for the 2004
exploration program.
Each of the properties has minimum exploration expenditure commitments
on an annual basis to retain the rights for the property. The minimum
commitments can be met by actual exploration expenditure or by making a cash
payment in lieu of exploration expenditure. Expenditure by both Tahera and us is
counted towards the commitment. In 2004 and 2005, the commitments were met by a
mixture of exploration expenditure and cash payments by both Tahera and us. As a
result, the properties are available for exploration in 2006 and subject to the
commitments being met in 2006, will be available for exploration in 2007.
Location
Hood River Ground
The Hood River mineral properties and Inuit Owned Land Concessions are
in the High Lake Volcanic Belt located in the northwest section of the Slave
Structural Province in the Mackenzie District of Nunavut. The land holdings
include 4 mining properties totalling 10,330 acres, and 5 contiguous IOL
concessions totalling 21,381 acres. Only the IOL concessions are within the
greenstone component of the High Lake Volcanic Belt and therefore of exploration
interest to us. The approximate center of the Inuit Concessions is about 45
kilometers north of the Arctic Circle, and 530 kilometers north-northeast of
Yellowknife. The IOL Concessions are held 50:50 by Benachee Resources Inc. and
Snowpipe Resources Ltd. (both wholly owned by Tahera). There are no known
encumbrances on the concessions.
Contwoyto Lake Ground
The CO-08 IOL Concession is underlain by the Contwoyto Formation on the
east side of Contwoyto Lake. The original C0-08 Concession Agreement totaled
65,250 acres and is located in the Mackenzie District of Nunavut. The
approximate center of the C0-08 Concession is about 100 kilometers south of the
Arctic Circle, 100 kilometers north-northwest of Lac de Gras, and 380 kilometers
north-northeast of Yellowknife. The C0-08 Concession Agreement is held 50:50 by
Benachee Resources Inc. and Snowpipe Resources Ltd. (both wholly owned by
Tahera). There are no known encumbrances on the concessions.
Access, Infrastructure, Local Resources
Access to all the areas in the Slave Craton is by aircraft. In summer
months, float equipped aircraft may land on local lakes of appropriate size
including Contwoyto Lake, Napatulik Lake, Penthouse Lake (unofficial name), and
Carat Lake. In addition, airstrips are available for fixed wing aircraft
equipped with tundra tires at the Lupin mine site, the Ulu mine site, and
Tahera's Carat Camp (Jericho). Helicopter support is needed to mobilize
personnel from camp sites to the property areas. The winter road which links
Yellowknife to the Lupin mine site on Contwoyto Lake has historically been used
for economical transportation of supplies in winter months. This road has since
been extended to Tahera's Carat Camp.
Tahera's properties are located in the treeless Arctic within the zone
of permafrost. The weather in the property areas is typical of the continental
barren lands which experience cool summers and extremely cold winters. Winter
temperatures can reach -45 degrees. Summer temperatures are generally in the 5
23
to 10 degree Celsius range but can reach the high 20's degrees Celsius. Average
annual snowfall rarely exceeds 1 meter, most of which falls during autumn and
spring storms. Small lakes are clear of ice usually by the third week in June
and start freezing over again in late September.
The topography of the area consists of low rolling hills with areas of
low-lying swampy muskeg. Local relief is low, rarely exceeding 150 meters.
The closest community with regularly scheduled air service is Kugluktuk
(formerly Coppermine) which is 145 kilometers northwest of the
Anuri/Rockinghorse concessions and 200 kilometers northwest of the Hood River
concessions. First Air has scheduled flights everyday from Yellowknife to
Kugluktuk. The main centre for transportation to the properties is through
Yellowknife, 530 kilometers southwest of the Hood River concessions, and 410
kilometers southwest of the Contwoyto concessions. Fixed wing and helicopter
charter services are available in Yellowknife, as are all supplies (groceries,
lumber, fuel, etc.) and expediting services. Additional existing infrastructure
to help service the land holdings includes Tahera's Jericho minesite and
Woldens' Lupin and Ulu minesites.
Exploration History
All previous work reported by companies is quoted from open file
government assessment reports. For the Slave Craton land holdings non
diamond-related exploration activities are emphasized as these relate to our
interest and exploration agreement with Tahera. Specifically, previous
exploration work on the Hood River/High Lake and Contwoyto Lake land holdings
are detailed as these are deemed to be most prospective for gold.
Hood River/ High Lake Belt
Exploration around and directly within the Hood River properties began
in 1965 and over the years has included sampling, mapping, trenching, and
drilling, as well as ground and airborne geophysical surveys.
In 1989 the Ulu gold deposit was discovered. Previous efforts directly
on our Hood properties have outlined several key areas of anomalous gold
mineralization which include the Penthouse, Blackridge, Crown and the North Fold
Nose areas.
In 1999 the Nunavut Land Claims Agreement came into effect and granted
surface ownership of about 360,000 square kilometers of land to the Inuit, of
which they have the subsurface rights for approximately 37,500 square
kilometers. Nunavut Tungavik Incorporation ("NTI") is the entity through which
these subsurface rights are administered. The areas around Ulu that in the Hood
River (CROWN, DEN, FIDO and ULU) were ultimately incorporated into NTI lands,
with the exception of the original ULU claim.
In March, 2003, Strongbow Resources Inc. and Nunavut Tungavik
Incorporated announced an agreement whereby Strongbow could explore a large
parcel of land which covers all the south half of the High Lake Greenstone Belt
and borders Tahera's IOL concession on the east, south, and west.
Contwoyto Formation
Following the discovery of the Lupin Mine on the western shore of
Contwoyto Lake in 1960, exploration for additional Lupin-style banded iron
formation hosted gold deposits commenced throughout the Contwoyto Formation.
This resulted in the discovery of a number of prospects many of which occur on
Tahera's Contwoyto properties.
24
Significant results that substantiate the gold prospectivity of the
region have been reported on several key areas which include the R43-R45, the
R44-R47, the 5-5, and the Ox prospects.
Diamond exploration began in the area in 1993. Discovery of several
kimberlite bodies prompted a helicopter-borne EM and magnetic survey over 110
square kilometers in the Contwoyto Lake area. A part of the Tahera data set this
survey has delineated a number of prospective iron formations.
Geological Setting
The Slave Structural Province encompasses an elliptical area 500
kilometers wide by 750 kilometers long and is located between Great Slave Lake
to the south and Coronation Gulf to the north.
The Yellowknife Supergroup, important for ore deposits, occurs as
twenty-six linear volcanic belts surrounded by granitic batholiths. These belts
are typically isoclinally folded and largely range in age from 2715-2671 million
years. The belts have been divided in the literature into mafic
volcanic-dominated (Yellowknife type) and felsic volcanic-dominated (Hackett
River type). Yellowknife-type volcanic belts are dominated by massive to
pillowed basalt flows with lesser amounts of felsic volcanic and volcaniclastic
rocks, clastic sedimentary rocks and occasionally synvolcanic conglomerate and
carbonate units. The Hackett River-type belts are defined by the abundance of
calc-alkaline felsic and intermediate volcanic rocks intercalated with
turbidite.
At least five episodes of Proterozoic diabase dyke "swarms" (2400
million years - 600 million years) have been recorded in the Slave Structural
Province. These dyke sets form local positive relief where they intrude easily
eroded lithologies such as the metaturbidites and negative relief in areas where
they are juxtaposed with granites and gneisses.
No known mineral reserves are known on our land. All previous programs
have been exploratory in nature.
Prospects
Hood River Ground
High grade gold prospects are found within a 9 by 7 kilometer block in
the west-central portion of the High Lake belt. Four main mineralized areas
occur; the North Fold Nose, Penthouse, Crown and Blackridge. The mineral
prospects on the properties occur in rocks of the same age and nature as at the
Ulu gold deposit where gold occurs in brecciated basaltic wallrock clasts which
are replaced by acicular arsenopyrite + quartz + K-feldspar.
There is a spatial relationship between the gold bearing zones of the
Ulu deposit with the axial trace of the ULU anticline. The properties cover the
northern most two kilometers of this important fold axis. Several gold bearing
zones have been previously identified in this area. In one area along the axis,
a one meter wide quartz vein, outcrops for over 40 meters and contains
arsenopyrite, pyrite, pyrrhotite, chalcopyrite, and native copper. Highly
anomalous silver and bismuth were also returned from these samples.
Further mineralized zones were discovered in the central fold of the
North Fold Nose. A gold value of 176 gpt gold was produced within the prospect
area from narrow quartz-pyrite vein rubble.
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Previous exploration has outlined five zones of gold mineralization on
the Crown prospect (now largely within the properties). At the "Main Zone",
several highly anomalous gold values to 24 gpt were returned from an 800 meter
long silicified basalt/biotite schist contact. Seven trenches were dug in the
Main Zone area. Silicified zones up to 6 meters wide with arsenopyrite were
noted. The "B" zone is parallel to and 80 meters east of the Main Zone. The
structural setting and mineralogy here is similar to the Main Zone. Gold values
of 12.4 gpt and 8.7 gpt gold are found along 450 meters and the zone is reported
open to the north. Gold values to 1.8 and 4.6 gpt gold were reported from grab
samples of silicified basalt and sediments with arsenopyrite in the "Western
Zone." Anomalous gold values were also reported in the folded stratigraphy of
the "Eastern" and "Fold" zone.
To the northwest of the Crown prospects are the Penthouse prospects.
The original sampling on the South Penthouse grid returned values of 23.9 to
220.1 gpt gold. The highest grade sample was from a silicified north-trending
shear zone which was traceable for 200 meters. A northeast trending shear,
traceable for 250 meters on the North Penthouse area returned significant gold
result from narrow arsenopyrite bearing veins. Additional highly prospective
zones of mineralization have been identified in the Penthouse area.
Polymetallic quartz veins in the area contain highly elevated silver
values up to 473 gpt along with anomalous zinc, lead, cadmium, and antimony
values. This style of mineralization is very similar to the auriferous
polymetallic quartz vein at the Northern Fold Nose on the historic ULU 2 claim.
Five principal styles of mineralization were identified by BHP on the
Penthouse grid, namely i) Auriferous silicified zones with arsenopyrite in
sediments; ii) Auriferous arsenopyrite bearing quartz veins at mafic
volcanic-sediment contacts; iii) Auriferous polymetallic quartz veins
transecting the mafic volcanic stratigraphy; iv) Stratabound massive sulphide
mineralization at the mafic volcanic-sediment contact; and v) Auriferous
polymetallic quartz veins hosted by sediments adjacent to the same mafic
volcanic-sediment contact.
Massive sulphide mineralization is present as discontinuous pods up to
1.5 meters thick along the western basalt-sediment contact on the south
Penthouse grid. Values of up 4.8% zinc, 0.5% lead, 0.5% copper, 40 gpt silver
and 0.5 gpt gold were returned from surface sampling. No drilling was carried
out on this prospect.
South of the Crown prospects, across the southeastern edge of a
granitic intrusion is the Blackridge prospect last worked by Aber Resources Ltd.
The mineralization consists of an altered and locally brecciated gabbro-hosted
silicified zone. The principal mineralized zone has been traced for at least 700
meters northeast and is 2.5 - 3.5 meters wide. The highest surface grades
include a chip sample of 7.5 gpt gold/ 9 meters.
Contwoyto Property
More than 100 iron formation-hosted gold occurrences occur in the Point
Lake - Contwoyto Lake meta-sediment sequence. The most notable gold-bearing iron
formation in the vicinity is the Lupin gold mine. Mineralization specific to the
properties includes a number of significant iron formation hosted gold prospects
including the R43-R45, the R44-R47, the 4-2 grid, the Ox, and the 5-5 grid
prospects.
The R43-R45 prospect is hosted by a Z-shaped folded iron formation up
to 10 meters wide and traceable for over 1.3 kilometers. The area is mainly
unsampled. The geology, mineralization, alteration and structure are extremely
similar to the Lupin gold mine (located just 28 kilometers to the west) where
gold mineralization is in a "Z" folded iron formation with pyrrhotite and
arsenopyrite. The R43-R45 "Z" fold is of the same magnitude as Lupin. No
drilling has ever been reported here.
26
The R44-R47 prospect is hosted by an iron formation up to 5 meters wide
and traceable on surface for 1.9 kilometers. Significant gold values have been
returned from surface sampling However, no drilling was reported.
On the 4-2 prospect, previous explorers have traced a sulphide-rich
iron formation, in boulders up to 2 meters in size, on surface for 200 meters.
Significant gold assays have returned however, no follow-up drilling appears to
have been done.
Within the Ox prospect, sampling of the iron formation returned gold
values from a pyrrhotite-rich boulder. One drill hole was conducted at the
prospect and intersected two separate iron formation horizons, 8.2 meters apart.
Both the upper and lower iron formation returned gold from assays.
On the 5-5 prospect, several east-west trending, 300 to 2,700 meters
long EM conductors have been outlined. A total of six iron formations have been
identified, four of which are coincident with the EM conductors. Sulphide rich
boulders of iron formation at the southwest section of Grid 5-5 yielded gold
values. The "Fox A" prospect is also within the 5-5 Grid area and the iron
formation is 33 meters wide and 220 meters long and has returned gold values.
Drilling in 1987 on the 5-5 prospect included 8 holes totaling 942 meters. All
eight holes intersected iron formation and returned gold from a section
containing pyrite, arsenopyrite and pyrrhotite. Four short drill holes on the
5-5 grid in 1988 tested a folded iron formation as outlined by an IP survey. DDH
88-4, drilled 225 meters west of an earlier high grade intercept, intercepted a
further significant gold intersection in pyrite-rich siliceous iron formation. A
further high grade surface prospect in arsenopyrite and quartz- rich iron
formation boulders was apparently not drilled. The other drill holes intersected
siliceous +/- sulphidic iron formation ranging from 5.7 to 15.0 meters thick.
Work Programs
The first phase of the Company's planned exploration programs over the
Hood River and Contwoyto IOL claim groups was carried out in August 2004 and
consisted of exploration mapping, sampling and prospecting. This initial program
was designed to follow up and assess geophysical and geological anomalies
reported by previous workers with a focus on targeting and expanding areas for
phase two work.
Hood River Ground
Golden River Resources spent $104,446 on exploration on the Hood River
IOL Concessions. Four key areas warrant further investigation.
Northern Fold Nose - This zone is located approximately 3 kilometers
north of the ULU deposit and is thought to be part of the major fold structure
which hosts the ULU deposit. Further mineralized zones were discovered within
the Northern Fold Nose area than previously described. Acicular arsenopyite was
noted in narrow shears within silicified basalt just south of the Northern Fold
Nose. Chip sampling of the exposed veins during the 2004 field season yielded
several samples of anomalous gold values. Gold values obtained from this work
ranged from 22.9 gpt to 495 ppb.
Penthouse - The Penthouse prospects are underlain by a geologically and
structurally complex package of mafic volcanic and metasediments. The
metasediments are thought to form the conduit for mineralizing fluids. Gabbroic
sills occur within the mafic volcanics and sediments and form marker horizons
outlining the structural complexity of the area.
A total of 65 samples were taken in the North Penthouse area with gold
values ranging from 0.98 gpt to 12.82 gpt in chip and grab samples. A total of
36 per cent of samples taken from this area yielded anomalous assays.
27
A total of 53 samples were taken from the South Penthouse area with 15
per cent returning anomalous values. These samples yielded the same arsenic-gold
relationship with values ranging from 1.95 gpt to a high of 30.32 gpt gold.
Analysis of airborne geophysical data suggests that the South and North
Penthouse areas are actually one zone that is over 2 kilometers in strike
length.
Crown - The 2004 field work consisted largely of examining and sampling
of the trenches in this area. A total of 60, 1.0 meter to 1.5 meter chip samples
were taken from these trenches. Results returned gold values from 5.78 gpt to
0.51 gpt with 32 per cent of the samples returning anomalous results.
East of the trenched area, several anomalous zones were located
including a new zone that extended off the properties to the north for over 1
kilometer. This zone is roughly parallel to the Crown trench area and may
perhaps be part of a large scale folded stratigraphy.
A total of 30 samples were taken on the east portion of the Crown area.
The gold values ranged from 2.75 gpt to 0.02 gpt.
Blackridge area - The main prospect occurs along a gabbro-sediment
contact. The previously described linear mineralized contact zone was extended
to slightly over 750 meters.
Anomalous results were returned from siliceous metavolcanics and
metasediments with the highest values returned from trenches cut into the gabrro
- metavolcanic/metasediment contact. A total of 39 samples were taken from this
area. Gold values ranged from 37.78 gpt to 2.5 gpt gold. Elevated copper values
were also noted. A total of 40 per cent of the samples taken returned anomalous
gold values. Overall, our 2004 results were an improvement over the reported
historical results.
Contwoyto IOL Concessions
We spent CDN$109,057 on exploration on the Contwoyto IOL Concessions.
Some key areas that warrant further investigation include:
Grid 5-5 Area - Field work revealed the area to be underlain by a
package of amphibole rich silicate facies iron formations. This area produced
the best gold results in the Contwoyto concessions with values ranging from 1.5
to 6.98 gpt gold from the iron formation. Geophysics indicated the zone trends
west, off shore, into the lake proximal to the Grid 5-5 zone.
Ox Prospect - The area is underlain by a sulphide poor silicate facies
iron formation, 100 meters wide and extending over 150 meters to the northeast.
To the north of the claim block occur interbedded turbidites, biotite
schists/greywacke and coarse to fine grained heavily oxidized amphipobilite.
Mineralization is largely fine grained pyrite, pyrrhotite with minor
chalcopyrite and rare malachite, in trace to 5 percent abundance. The sampling
program on the Ox grid fold zone yielded consistent anomalous gold values.
An airborne geophysical survey has outlined a number of strong magnetic
anomalies that have no surface expression. These areas require further
investigation.
Further Exploration
After the 2004 program the IOL concession area at Contwoyto was
dramatically reduced down from 65,250.8 acres to 21,533.1 acres. All prospective
ground was retained. The area reduction was done in conjunction with Tahera and
it served to also greatly reduce the amount of exploration requirement for this
area. A program of approximately $63,300 would be required to maintain the
ground into 2006. A small portion of the Hood River IOL Concession area was also
reduced with all prospective ground retained for further exploration. Due to
large exploration expenditures by Tahera within these concessions, there was no
required spending in 2005 to conduct exploration to maintain this ground.
28
As a result of the 2004 field season, several areas have emerged as
having a strong potential for gold based on geological, mineralogical and
structural criteria and as such require further examination. A program of
detailed structural mapping is planned in order to understand the complex
structural environment. Further work will include detailed sampling and ground
geophysics over key anomalous areas with a follow up drilling. The ULU deposit
was discovered within two years through a similar approach.
The most immediate target area for drilling will be the Penthouse
prospect in the Hood River area. The two `north' and `south' zones have been
shown to be actually one zone by the airborne geophysical data. The prospect
contains anomalous gold values and is likely part of the same structure as hosts
the Ulu gold deposit to the west.
Currently no immediate drill targets exist on the Contwoyto ground and
we plan to undertake selective mapping and ground geophysical surveys during
2006 to develop future drill targets, particularly over the R43-R45 prospect as
outcrop in the area is extremely limited, before drilling would commence.
Committee Bay Belt
In June 2002, we staked land in the highly prospective Committee Bay
Greenstone Belt.
The Committee Bay Greenstone Belt is located approximately 240
kilometers northeast of Baker Lake in Nunavut, Canada and is believed to
represent the largest under-explored greenstone belt in North America, with
potential to host world-class gold deposits.
The geology is highly prospective for banded iron formation hosted gold
(as in the 3 million ounce Meadowbank and the 4.6 million ounce Meliadine gold
deposits to the south). Our properties protect several auriferous iron
formations. In addition to the banded iron formation hosted gold targets, this
Belt has potential for shear-hosted lode gold, Witswaterstrand style gold,
komatiite hosted stratiform nickel-copper (Kambalda analogy), and platinum group
elements ("PGE's") in layered igneous complexes (Laughland Lake Anorthosite
Suite).
Originally 29 properties were staked comprising a land area of 71,694
acres in the Committee Bay Greenstone Belt in central Nunavut, Canada. These
properties were recorded on October 16, 2002. From the original area we retained
a total of 49,439.48 acres on 21 properties. To keep the properties in good
standing, we needed to spend a total of CDN$197,798 of assessment work by
October 16, 2004. A total of CDN$98,879 (CDN$2 per acre) is required in each
subsequent year up to 2012 (at which point a decision to bring the properties to
lease must be made). During the 2004 field season, we spent CDN$1.567 million on
exploration and all amounts in excess of the commitment can be offset against
future commitments. As a result of the amount we spent during 2004, we have
already met the expenditure commitment until 2012. We have included a list of
our mining properties in the Committee Bay Greenstone Belt in Appendix B to this
prospectus.
Location
The Committee Bay Claims are located 245 to 365 kilometers northeast of
the town of Baker Lake (Qamani'tuaq), Nunavut, Canada, or 210 to 320 kilometers
west to southwest of the town of Repulse Bay (Ngoldjat). The community of
Kagaaruk (formerly Pelly Bay) is 190 to 305 kilometers northeast of the claim
groups. Our land holdings in the Committee Bay Greenstone Belt include 21
properties in 10 claim blocks. These properties total approximately 49,439.48
acres and all were recorded on October 16, 2002.
29
Access, Infrastructure, Local Resources
Access to the properties is by fixed wing aircraft. Alternatively,
float equipped planes have the option of landing at some of the larger lakes
(Laughland Lake for example) or on sections of the Hayes River. Helicopter
support is required to mobilize personnel from camp to the property areas.
The Committee Bay Greenstone Belt lies within the zone of permafrost.
The mean annual temperature of -20oC reflects its Arctic location (the Arctic
Circle transects the property area). The climate is typical of the Eastern
Arctic with average temperatures in the winter months of -30oC to -35oC, and
+10oC to +12oC in the summer. The ground remains snow covered for more than 250
days a year (generally September to June). Rivers break up in June and lakes are
ice bound until mid July.
The project area is on the northern section of the Wager Plateau, a
shield area that has been significantly modified by glacial processes.
Elevations range from 122 meters above sea level in the southwest to 560 meters
above sea level in the northeast.
The closest community with regularly scheduled air service is Baker
Lake, about 350 kilometers to the southwest. Canadian North and First Air
flights arrive from Yellowknife and Iqaluit. Calm Air flies from Winnipeg to
Rankin Inlet (Kangiqliniq) and then on to Baker Lake daily except Sundays.
Kivalliq Air flies from Cambridge Bay (Qaluktuuttiaq) to Baker Lake enroute to
Rankin Inlet. Fuel and expediting services are available in Baker Lake. There is
little infrastructure in the claim area apart from the Committee Bay Resources
Hayes River camp which has a winter airstrip and fairly regular supply flights.
Property History
All previous work reported by companies is quoted from open file
government assessment reports.
Following the release of Heywood's original geology map of the area in
1961, several exploration companies performed work in the Committee Bay
Greenstone Belt. The nickel-copper potential of ultramafic rocks was the primary
target of this first exploration wave. In 1969 to 1970, explorers mapped,
sampled and conducted limited geophysical surveys on areas now covered by our A
and E properties. This program outlined several electromagnetic conductors
coincident with surface mineralization. The best trench value occurred on the
"E" properties of 0.51% nickel on a 1.46 kilometer long conductor.
Further exploration was undertaken during the general nickel-copper
reconnaissance in 1970 and 1974 and more detailed work in 1975 and 1976.
Geologic mapping, ground magnetic and EM surveys were conducted in the Hayes
River area. Although prospective rock units with nickel and copper values were
found, no further follow up was recommended.
In 1986, reconnaissance rock samples were taken within the current
Pickle properties area.
Southwest of the central tonalite, in the area of our Pickle
properties, several permits were granted to the Committee Bay Joint Venture
(CBJV) in 1993. Sampling by CBJV returned gold values in sheared banded iron
formation with pyrite + arsenopyrite. Although CBJV's Pickle 1 claim was staked
in 1995, no follow-up work was reported. The iron formation at this site is
70-100 meters thick and traceable for 1.5 kilometers.
30
In 1992, reconnaissance sampling in the Committee Bay area was
undertaken on behalf of the CBJV. Several highly anomalous gold values were
returned from rock samples taken. Follow-up work was performed in 1993. High
gold values corresponded with banded iron formation with quartz veining and/or
silicification, and pyrite + pyrrhotite +/- arsenopyrite. In 1995, further rock
samples were taken, and eight drillholes totaling 811.41 meters completed. This
work exclusively focused on the Bluff properties in Hayes River area and the
Inuk area further to the northeast. In 1996, the CBJV flew a 13,262 line
kilometer detailed geophysical survey (magnetics and VLF), collected additional
rock samples and drilled 6 holes at Three Bluffs. Approximately CDN$5.4 million
was collectively spent on the Committee Bay Greenstone Belt between 1992 and
2001 by explorers. This exploration focused on three areas: Laugh land Lake,
Hayes River and Curtis River.
Numerous gold occurrences were discovered by the CBJV between 1992 and
2001. Of particular note are the Pickle, Four Hills, Cop, Ghost Coyote, Ridge,
Bluff group and West Plains prospects.
Our five Wrench properties were previously within prospecting permits
granted to the CBJV in 1994. Reconnaissance sampling by the CBJV returned a
series of gold anomalies over approximately three kilometers in sheared oxide
banded iron formation in their northern part of their BLUFF claim block.
The Committee Bay Greenstone Belt was the subject of two separate 3
year (2000-2003) government targeted geoscience inititive ("TGI"). These TGIs
are a collaboration between the Geological Survey of Canada, Canada-Nunavut
Geoscience Office and university partners. The stated objective of TGI was to
increase the level and cost-effectiveness of private sector exploration for
mineral resources. Government work in the Committee Bay Greenstone Belt included
1:100,000 scale geologic mapping, prospecting, surficial mapping, drift
prospecting, and airborne geophysics. Airborne magnetic surveys (400 meter
flight line spacing) were carried out and released as total field maps in 2002.
Quaternary research involved multimedia sampling for gold and base metals and
this drift prospecting/sampling was carried out between 2001 and 2003.
Committee Bay Resources Limited ("CBR") is the largest landholder in
our claim area. At Three Bluffs, CBR's drilling defined gold mineralization for
at least one kilometer along strike and to a depth of 320 meters from surface. A
near surface high grade inferred mineral resource of 1.9 million tonnes grading
8.0 gpt gold for 487,000 ounces was defined by 49 drill holes. Using a lower
cutoff grade, this inferred mineral resource is expanded to 5.1 million tonnes
grading 4.0 gpt gold for 657,000 ounces. This information can be found on the
CBR website.
The government aeromagnetic survey shows a continuation of the Three
Bluffs iron formation for at least three kilometers onto our Wrench properties.
Government sampling in 2001 on this trend returned gold intersections from
sulphide bearing (pyrite + pyrrhotite), quartz-veined intervals of oxide banded
iron formation.
Numerous other prospective gold targets (West Plains, Four Hills,
Coyote, etc) are the subject of ongoing investigation by CBR. Our properties
border or are along strike of CBR's prospects.
Geologic Setting
The Prince Albert Group ("PAG") incorporates a series of Archean aged
greenstone belts that stretch approximately 600 kilometers northeast from the
Aylmer Shear Zone in the south to the eastern tip of Melville Peninsula in the
north. A 300 kilometers long section southwest of Committee Bay is referred to
as the Committee Bay Greenstone Belt.
31
The stratigraphy of the Committee Bay Greenstone Belt includes banded
iron formation up to 50 meters thick, komatiite volcanic flows, basalts,
intermediate to felsic tuffs, and quartz-cobble conglomerates. Deformation is
recorded by major shear zones, second order faults, complex folding, and felsic
intrusions. Numerous gold prospects are spread out over a 260 x 40 kilometer
area including the Inuk zone in northeast Committee Bay and the Three Bluffs
zone in the Hayes River area.
The approximate age of the Committee Bay Greenstone Belt ranges from
2.718 billion years to 2.732 billion year old.
Younger plutonic intrusions include the 1830 Million year old Hudson
monzogranites. Laterally continuous northeast trending quartz-feldspar porphyry
dykes, 0.5 meter to 10 meter wide, are traceable for hundreds of meters in the
Three Bluffs area. Age dates for these porphyry dykes are not currently
available.
Prospects
The Committee Bay Greenstone Belt is prospective for a number of
mineral deposit types including banded iron formation hosted gold, shear-hosted
lode gold, komatiite hosted stratiform nickel-copper (Kambalda analogy), and
platinum group elements in layered igneous complexes.
Examples of iron formation hosted gold include our Wrench properties
where government sampling in 2001 returned gold intersections from sulphide
bearing (pyrite + pyrrhotite), quartz-veined intervals of oxide banded iron
formation. This section of iron formation is over 6.5 kilometers long.
Additional kilometer-scale segments of iron formation with anomalous gold are
present further to the east within the Wrench claim block.
Other iron formation hosted gold examples include mineralization on our
Pickle properties. The iron formation here is 70-100 meters thick and traceable
for 1.5 kilometers. The gold values are found in sulphide rich sections
(arsenopyrite and pyrite) of the sheared oxide + silicate banded iron formation
over a distance of 1.35 kilometers. In addition gold values in iron formation
are also found on our NN1 and NN2 properties.
An example of shear-hosted gold in the Committee Bay Greenstone Belt is
CBR's Coyote prospect where high grade gold values were returned from intensely
sheared gabbro with quartz veins, pyrite + pyrrhotite + chalcopyrite + visible
gold. The hosting structure is a splay off the east-west Walker Lake Shear Zone
and is a classic setting for shear-hosted gold. We have a claim on either side
of the Coyote claim prospect.
Komatiite hosted (Kabalda-style) nickel potential exists on our three
EE properties (EE 1-3). These properties cover nickel values from 0.2% to 0.5%
spread over 930 meters of a contact between a thick ultramafic body and
sediments. The highest copper value was 0.2%. A second ultramafic/sediment
contact on the western edge of the western E claim also has anomalous nickel
over a similar strike length. The folded stratigraphy in the centre of the EE
claim block is also prospective for gold (samples to 200 ppb).
The Laughland Lake Anorthosite Suite ("LLAS") has good PGE potential.
Rusty zones defined by sulphide gossans of up to 100 meters wide and 500 meters
long have been reported in this area. Values to 185 ppb Pt, 41 ppb Pd, 1530 ppm
nickel, and 1.35% copper have originated from these zones.
Work Program
A total of CDN$1.567 million was spent on our Committee Bay Greenstone
Belt 2004 program. A large portion of the expense went to establishing a
re-usable base-camp into this fairly remote location. All field, office, and
camp supplies, as well as fuel, were flown in. All field activities were
helicopter supported.
32
Between June 2004 and early September 2004, a regional, grassroots-type
prospecting/mapping program was undertaken to explore all of our mineral
properties in the Committee Bay Greenstone Belt. Each of our 21 properties holds
significant promise of a mineral deposit. In some localities outcrop was not
abundant or observed, however, many of the claim sites were selected to cover
key magnetic anomalies identified from the government regional airborne survey.
A total of 1,476 rock samples were removed and analyzed from the 21
properties. In addition, a small soil grid was established on the Wrench
property and 658 soil samples were collected. Anomalous to ore grade gold was
returned from sampling on several of the claim areas. Of particular note were
the results from the Wrench property which cover an area adjacent to the CBR's
Three Bluffs deposit and were found to hold identical structures and
lithologies. Sampling along exposed banded iron formation produced high gold
values of up to 100.45 gpt gold and anomalous values were returned from a 1.5
kilometer strike length of the target iron formation horizon.
Our exploration program began in late May 2004 with a geophysical
program on the Wrench property. This is covered in the "Geophysical Surveys"
section.
Geophysical Surveys
Wrench Property
An eighty six line grid was established over the Wrench Claims by
Aurora Geosciences Ltd of Yellowknife, NT. Grid point control was accomplished
using GPS technology. Lines were spaced every one hundred meters and in total
the grid was comprised of 176.46 line kilometers. Subsequently, two geophysical
surveys were undertaken. Total field magnetic surveying was carried out with
readings obtained at 6.25 meter stations. Horizontal loop electromagnetic (HLEM)
surveying was also undertaken. Readings for this survey were spaced at twenty
five meter intervals.
The Wrench claim group comprises five contiguous properties covering
approximately 4,900 hectares. A government aeromagnetic survey confirms that the
Wrench iron formation is directly connected with and along strike of CBR's Three
Bluffs iron formation hosted gold deposit.
The geophysical program served a number of purposes. The magnetics
accurately traced the iron formation and delineated important structural
information such as faulting and folding. The HLEM component highlighted where
the conductive pyrrhotite-rich sections of the iron formation are and, in
conjunction with the magnetics, may define trenching and drill targets.
The magnetic survey outlined a strong, six kilometer long
northeast-trending magnetic anomaly along the western half of the grid. In the
southeastern portion of the grid, two additional strong, parallel, magnetic
anomalies were recorded. The HLEM survey outlined 17 distinct conductive
trends/anomalies, most of which are coincident with, or flank very strong
magnetic features.
Field verification of the magnetic anomalies indicated that the
magnetic anomalies are a result of the presence of continuous banded iron
formation units that underlie the grid area.
Proposed Work
With the large assessment credit excess from the 2004 program, we have
already met our expenditure commitments until 2012 for most properties (see
Appendix B). However due to the gold potential and interest in the Committee Bay
Greenstone Belt, further work is being planned.
33
Future exploration programs will involve further geophysical surveys,
mapping, prospecting, sampling, and drilling. Identifying and defining drill
targets will be the primary objective.
Three areas present themselves as likely drill targets, the Wrench
prospect (gold values up to 100 gpt) which is along strike of CBR's Three Bluffs
deposit; the Pickle claim IF which has the thickest intervals of sheared banded
iron formation and the West claim which has the same geophysical anomalies as
CBR's West Plains drill area.
Regulation
Mining in Canada
The mining industry in Canada operates under both federal and
provincial or territorial legislation governing the exploration, development,
production and decommissioning of mines. Such legislation relates to the method
of acquisition and ownership of mining rights, labour, health and safety
standards, royalties, mining and income taxes, exports, reclamation and
rehabilitation of mines, and other matters. The mining industry in Canada is
also subject to legislation at both the federal and provincial or territorial
levels concerning the protection of the environment. Legislation imposes high
standards on the mining industry to reduce or eliminate the effects of waste
generated by extraction and processing operations and subsequently deposited on
the ground or emitted into the air or water. The design of mines and mills, and
the conduct of extraction and processing operations, are subject to the
regulatory restrictions. The exploration, construction, development and
operation of a mine, mill or refinery require compliance with environmental
legislation and regulatory reviews, and the obtaining of land use and other
permits, water licenses and similar authorizations from various governmental
agencies. Legislation is in place for lands under federal jurisdiction or
located in certain provinces and territories that provide for the preparation of
costly environmental impact assessment reports prior to the commencement of any
mining operations. These reports require a detailed technical and scientific
assessment as well as a prediction of the impact on the environment of proposed
mine exploration and development.
Failure to comply with the requirements of environmental legislation
may result in regulatory or court orders being issued that could result in the
cessation, curtailment or modification of operations or that could require the
installation of additional facilities or equipment to protect the environment.
Violators may be required to compensate those suffering loss or damage by reason
of mining activities and the violators, including our officers and directors,
may be fined or, in some cases, imprisoned if convicted of an offence under such
legislation. Provincial and territorial mining legislation establishes
requirements for the decommissioning, reclamation and rehabilitation of mining
properties that are closed. Closure requirements relate to the protection and
restoration of the environment and the protection of public safety. Some former
mining properties must be managed for a long time following closure in order to
fulfill regulatory closure requirements. The cost of closure of existing and
former mining properties and, in particular, the cost of long-term management of
open or closed mining properties can be substantial.
Government Regulations
We are committed to complying and, to our knowledge, are in compliance
with all governmental and environmental regulations. Permits from a variety of
regulatory authorities are required for many aspects of mine operation and
reclamation. Our exploration work is subject to the Mining Land Use Regulations
of the Indian and Northern Affairs Canada Mining Act. This Act requires us to
obtain permits prior to performing significant exploration programs.
34
We cannot predict the extent to which future legislation and regulation
could cause additional expense, capital expenditures, restrictions, and delays
in the development of our Canadian properties, including those with respect to
mining properties. Our activities are not only subject to extensive federal,
provincial and local regulations controlling the mining of and exploration for
mineral properties, but also the possible effects of such activities upon the
environment. We will be obligated to take steps to ensure that such streams
draining the property do not become contaminated as a result of our activities
on the property. We are not aware of any environmental problems on the property
as of the date of this prospectus.
The mining industry in Nunavut, where our exploration properties are
situated, operates under Canadian federal and territorial legislation governing
prospecting, development, production, environmental protection, exports, income
taxes, labour standards, mine safety and other matters. We believe our Canadian
operations are operating in substantial compliance with applicable law.
Our exploration works is subject to environmental regulation primarily
by the Federal Department of Indian Affairs and Northern Development and the
Nunavut Water Board. The Department of Fisheries & Oceans (Canada) and the
Department of the Environment (Canada) have an enforcement role in the event of
environmental incidents, but presently have no direct regulatory role in
relation to exploration activity.
On April 1, 1999, the Nunavut Land Claims Agreement, dated May 28,
1993, between the Inuit of Canada's eastern arctic region and Her Majesty the
Queen in right of Canada, came into force. Under this agreement, the Inuit were
granted ownership of approximately 360,000 square kilometers of land in an area
referred to as the Nunavut Settlement Area, including ownership of subsurface
rights in approximately 37,500 square kilometers of those lands. Third party
interests in lands in the Nunavut Settlement Area created prior to April 1, 1999
are protected under the Nunavut Land Claims Agreement. Where a third party was
granted a mining lease under the Canada Mining Regulations in lands comprising
the Nunavut Settlement Area, that interest continues in accordance with the
terms and conditions on which it was granted, including any rights granted under
the legislation that give rise to the interest. However, where any successor
legislation has the effect of diminishing the rights afforded to the federal
government, it will not bind the Inuit without its consent. The Inuit are
entitled to receive whatever compensation is payable by the interest holder for
the use of exploitation of mineral rights. The federal government continues to
administer the third party interest on behalf of the Inuit, unless the third
party and the Inuit enter into an agreement under which the third party agrees
to the administration of their interest by the Inuit. In the event such an
agreement is reached, the applicable legislation will cease to apply to the
third party interest. Subsurface interests in such lands continue to be
administered in accordance with applicable legislation relating to those
interests and are not affected by the Nunavut Land Claims Agreement.
Third party interests in lands in the Nunavut Settlement Area created
on or after April 1, 1999 are granted, in the case of surface rights, by the
appropriate regional Inuit association and, in the case of subsurface rights, by
Nunavut Tungavik Incorporated. Which will hold subsurface title to Inuit owned
lands and will be additionally responsible, in consultation with the appropriate
regional Inuit associations, for the administration and management of those
subsurface rights.
Government Requirements for Maintenance of Claims
Slave Craton
Fees and exploration expenditures associated with the maintenance of
Tahera Corporation's ground covered under the Slave Craton Agreement with Golden
River Resources is the responsibility of Tahera.
35
Committee Bay Greenstone Belt
The Nunavut Government has granted our interest in the 21 mineral
properties in the Committee Bay Greenstone Belt described in this Report.
To keep the 21 properties in good standing, we were required to spend a
total of CDN$197,798 of qualifying assessment work by October 16, 2004.
Assessment work must be filed with the Mining Recorder within 30 days of the
claim's anniversary date or within 60 days of the lapsing notice date.
A total of CDN$98,879 (CDN$2 per acre) is required in each subsequent
year up to 2012 (at which point a decision to bring the properties to lease must
be made).
In 2004 we spent a total of CDN$1,566,962 of on our properties. All
assessment work was filed and the excess of CDN$1,369,164 was used to offset the
expenditure requirement in following years. As a result we have already met our
commitment until 2012 for most properties (see Appendix B).
Gold Price Volatility
The volatility of the market price of gold is illustrated by the
following table which sets forth for the periods indicated the high and low of
the London PM (afternoon) fix of the gold price in U.S. dollars per ounce
(rounded to the nearest dollar), as published by Kitco Precious Metals
Company of Canada at www.Kitco.com. Gold Prices Per Ounce (US$)
Year High Low
1998 $ 313 $ 273
1999 $ 325 $ 252
2000 $ 312 $ 263
2001 $ 293 $ 255
2002 $ 349 $ 277
2003 $ 412 $ 321
2004 $ 453 $ 375
2005 $ 537 $ 411
As of June 26, 2006, the London PM fix of the gold price was US$613.50.
Employees
We have a Vice President Exploration who is a full time employee. We
also use temporary employees in our field exploration programme. The services of
our Chief Executive Officer, Joseph Gutnick and Chief Financial Officer and
Secretary, Peter Lee, as well as clerical employees are provided to us on a
part-time as needed basis pursuant to a Service Agreement dated November 25,
1988 (the "Service Agreement") between us and AXIS Consultants Pty Limited
("AXIS"). AXIS also provides us with office facilities, equipment,
administration and clerical in Melbourne Australia pursuant to the Service
Agreement. The Service Agreement may be terminated by written notice by either
party.
Other than this, we rely primarily upon consultants to accomplish
our exploration activities. We are not subject to a union labour contract or
collective bargaining agreement.
36
Competition
There is aggressive competition within the minerals industry to
discover and acquire properties considered to have commercial potential. We
compete for the opportunity to participate in promising exploration projects
with other entities, many of which have greater resources than we do. In
addition, we compete with others in efforts to obtain financing to explore and
develop mineral properties.
History
Our predecessor corporation, Bayou Oil, was incorporated under the laws
of Minnesota in 1973 and since that time it had a number of activities that have
been ceased.
On February 13, 1998, we incorporated a 100% owned subsidiary, Bayou
Australia Pty Ltd, a corporation incorporated under the laws of Australia.
On June 29, 1999 we undertook a reverse stock split on a 1:20 basis and
amended our Articles of Incorporation to amend the par value of our shares from
US$0.15 cents to US$0.0001 cents per share. On September 27, 1999 we changed our
name from Bayou International, Ltd to Baynet, Ltd.
In May 2000, we commenced work on the development of a B2B mining
portal however, this was abandoned as it was considered uneconomic.
On July 13, 2000 we changed the name of our subsidiary, Bayou Australia
Pty Ltd to Baynex.com Pty Ltd. On August 21, 2000 we incorporated a new wholly
owned subsidiary, Baynet International Pty Ltd, a corporation incorporated under
the laws of Australia. In October 2000, we changed our name to Bay Resources
Ltd.
During fiscal 2001, we conducted a due diligence review of St. Andrew
Goldfields Ltd ("St. Andrew") with a view to taking a substantial investment in
St. Andrew. Following the conclusion of the review, we decided not to proceed
with the investment.
During the 2002 fiscal year we continued to expand our gold exploration
business by:
(i) entering into an agreement to explore for gold on Tahera's extensive
property interests on the Slave Craton in northern Canada; and
(ii) making application via a new 100% owned subsidiary, Golden Bull
(previously known as 4075251 Canada Inc), for properties in the highly
prospective Committee Bay Greenstone Belt in Nunavut, Canada.
In October 2002 we entered into an agreement (via our wholly owned
subsidiary Bay Resources (Asia) Pty Ltd) with the Tibet Bureau of Geology and
Minerals Exploration Development, China to earn a minimum 51% interest in the
Xigaze copper belt running in a 200 kilometer east-west trend either side of
Lhasa. However, in February 2003 we decided to withdraw from these arrangements
as a result of further hurdles being placed before us by the Chinese authorities
that were not known at the time of entering into the agreement.
It is the policy of our Board of Directors that we will not engage in
any activities which would subject us to registration and reporting requirements
of the Investment Company Act of 1940.
37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
General
The following discussion and analysis of our financial condition and
plan of operation should be read in conjunction with the Financial Statements
and accompanying notes and the other financial information appearing elsewhere
in this prospectus. This prospectus contains numerous forward-looking statements
relating to our business. Such forward-looking statements are identified by the
use of words such as believes, intends, expects, hopes, may, should, plan,
projected, contemplates, anticipates or similar words. Actual operating
schedules, results of operations, ore grades and mineral deposit estimates and
other projections and estimates could differ materially from those projected in
the forward-looking statements.
We are an exploration stage mining company. Our objective is to exploit
our interest in the mineral claims in Nunavut, Canada. Our principal exploration
target is for gold and we are seeking to determine whether adequate gold
reserves are present on the property covered by our claims to develop an
operating mine. We are in the initial stages of our exploration program and we
have not yet identified any ore reserves. We have not generated any revenues
from operations.
Consolidated Statement of Operations Data
(in thousands, except per share data)
Year ended Conv. Nine Months Ended Conv.
June 30 Transl. March 31, Transl.
2004 2005 2005 2005 2006 2006
A$ A$ US$ A$ A$ US$
Revenues - - - - - -
-------------------------------------------------------------------------
Costs and expenses 1,722 2,603 1,984 2,180 968 804
-------------------------------------------------------------------------
Loss from operations (1,722) (2,603) (1,984) (2,180) (968) (804)
-------------------------------------------------------------------------
Other income (loss) (1) 3 2 5 (36) (30)
-------------------------------------------------------------------------
Profit (loss) before income
taxes (1,723) (2,600) (1,982) (2,175) (1,004) (834)
-------------------------------------------------------------------------
Provision for income taxes - - - - - -
-------------------------------------------------------------------------
Net profit (loss) from
Continuing Operations (1,723) (2,600) (1,982) (2,175) (1,004) (834)
Net loss from
Discontinued Operations - - - - - -
-------------------------------------------------------------------------
Net profit (loss) (1,723) (2,600) (1,982) (2,175) (1,004) (834)
-------------------------------------------------------------------------
A$ A$ US$ A$ A$ US$
Net profit (loss) per share
On continuing operations (.18) (.16) (.12) (.13) (.06) (.05)
On discontinued - - - - - -
-------------------------------------------------------------------------
operations
(.18) (.16) (.12) (.13) (.06) (.05)
------------------------------------------------------------------------
38
Weighted average number
of shares outstanding (000's) 9,385 16,714 16,714 16,714 16,714 16,714
-------------------------------------------------------------------------
Consolidated Balance Sheet Data
A$ A$ US$ A$ A$ US$
Total assets 1,466 227 173 245 198 164
Total liabilities 599 1,577 1,201 1,297 2,391 1,985
-------------------------------------------------------------------------
Stockholders' equity (deficit) 867 (1,350) (1,029) (1,052) (2,193) (1,821)
-------------------------------------------------------------------------
Foreign Currency Translation
The majority of our administrative operations are in Australia and, as
a result, our accounts are reported in Australian dollars. The income and
expenses of its foreign operations are translated into Australian dollars at the
average exchange rate prevailing during the period. Assets and liabilities of
the foreign operations are translated into Australian dollars at the period-end
exchange rate. The following table shows the period-end rates of exchange of the
Australian and Canadian dollar compared with the US dollar during the periods
indicated.
Year ended June 30, 2004 A$1.00 = US$0.6903
CDN$1.00 = US$0.7433
Year ended June 30, 2005 A$1.00 = US$0.7620
CDN$1.00 = US$0.9279
9 months ended March 31, 2005 A$1.00 = US$0.78
9 months ended March 31, 2006 A$1.00 = US$0.7110
9 months ended March 31, 2005 A$1.00 = CDN$0.94
9 months ended March 31, 2006 A$1.00 = CDN$0.8302
The exchange rate between the A$ and US$ has moved by 10.4% between
June 30, 2004 and 2005. Accordingly, a direct comparison of costs between fiscal
2004 and 2005 is not necessarily a true comparison.
Plan of Operation
We have A$2,131,000 in cash at June 19, 2006.
During fiscal 2004 and 2005, we undertook a field exploration program
on our Committee Bay and Slave Properties at a cost of A$2,228,000. Our Slave
Properties are held by Tahera and we have the right to conduct gold and base
metal exploration on these properties. Tahera has the legal obligation to meet
the minimum required expenditure. To date, this has been met. In respect to the
Committee Bay Properties, we expended more than the minimum required
expenditure. As a result, we do not have a legal obligation to undertake further
exploration on our Committee Bay Properties during their life. However, we will
be required to expend substantial amounts in order to determine whether there
are commercial mineral deposits on our exploration properties.
We plan to conduct exploration on the Slave Properties during 2006. At
this stage, we have not prepared a budget for the 2006 exploration program.
However, we believe the budget will be approximately A$1,000,000. Our budget for
general and administration for fiscal 2005 is A$0.8 million. On June 14, 2006,
we closed an equity raising of A$2.0 million (US$1.542 million) and this will
provide cash for our exploration program, general and administration expenses
and working capital.
39
As set out in "Business-Employees" we have a Vice President
Exploration, use temporary employees in our field exploration program and the
services of our Chief Executive Officer and Chief Financial Officer as well as
certain clerical employees are provided by AXIS. At the current time, we have no
plans to change these arrangements or employ any further persons.
Results of Operations
Nine Months Ended March 31, 2006 vs. Nine Months Ended March 31, 2005.
Costs and expenses decreased from A$2,180,000 in the nine months March
31, 2005 to A$968,000 in the nine months ended March 31, 2006. The Company's
financial statements are prepared in Australian dollars (A$). A number of the
costs and expenses of the Company are incurred in US$ and CDN$ and the
conversion of these costs to A$ means that the comparison of the nine months
March 31, 2006 to the nine months March 31, 2005 does not always present a true
comparison. The decrease in expenses is a net result of:
i. an increase in interest expense (net) from A$24,000 for the nine months
ended March 31, 2005 to A$99,000 for the nine months ended March 31, 2006.
AXIS provides management and geological services to the Company pursuant to
a Service Deed dated November 25, 1988. AXIS charged A$20,000 in interest
on outstanding amounts at a rate of 9.35% for the nine months to March 31,
2006 compared to $8,000 (an interest rate of 10.60% to 10.85%) for the nine
months to March 31, 2005. Wilzed loaned further funds to the Company during
the nine months and charged A$71,000 in interest. A$8,000 general interest
was charged on outstanding accounts payable liabilities.
ii. a decrease in legal, accounting and professional expense from A$117,000 for
the nine months ended March 31, 2005 to A$78,000 for the nine months ended
March 31, 2006. In the nine months period to March 31, 2005, legal fees
were incurred in relation to discussions with external financiers and
preparation of a listing of the Company's securities on the Toronto Venture
Exchange. The additional legal costs incurred in the nine months to March
31, 2006 were for revision of the listing application.
iii. a decrease in administrative costs including salaries from A$555,000 in the
nine months ended March 31, 2005 to A$461,000 in the nine months ended
March 31, 2006. In the nine month period to March 31, 2005 external
consultants were used to undertake work in respect to the Company's listing
on the Toronto Venture Exchange in Canada. No such costs were incurred in
nine months ended March 31, 2006. Salaries charged to the Company by AXIS
decreased by A$21,000 and insurance costs incurred by the Company reduced
by A$37,000.
iv. a decrease in the exploration expenditure expense from A$1,233,000 for the
nine months ended March 31, 2005 to A$162,000 for the nine months ended
March 31, 2006. The cost for the nine months ended March 31, 2006
represents the salary and benefits of the Vice President, Exploration and
maintenance costs. No field exploration has been undertaken during the 2005
field season due to the high level of field exploration in the 2004 field
season and limited funding.
v. a decrease in stock based compensation from A$251,000 for the nine months
ended March 31, 2005 to A$168,000 for the nine months ended March 31, 2006.
Following shareholder approval on January 27, 2005 the Company issued
1,400,000 options pursuant to the 2004 Stock Option Plan. Of the total
1,400,000 options issued, 350,000 vested immediately following shareholder
approval, 50,000 vested on March 31, 2005, 333,331 vested on July 27, 2005,
333,334 vested on January 27, 2006 and the balance of 333,335 will vest on
July 27, 2006. If the additional 500,000 options are granted, 250,000 will
vest immediately and 250,000 on December 31, 2006. The exercise price of
US$1.00 was derived from the issue price of common stock from the Company's
placement of shares on March 31, 2004 and was considered by the Company's
Directors to be the fair value of the common stock.
40
The Company has calculated the fair value of the 1,400,000 options issued
in January 2005 using the Black Scholes valuation method using a share
price of US$1.00, strike price of US$1.00, maturity period of 5 years 7 1/2
months, risk free interest rate of 5.15% and volatility of 20%. This
equates to a value of US31.85 cents per option or a total of A$575,100. Of
this amount, A$168,000 has been amortized and charged to operations for the
nine month period to March 31, 2006.
As a result of the foregoing, the loss from operations decreased from
A$2,180,000 for the nine months ended March 31, 2005 to A$968,000 for the nine
months ended March 31, 2006.
The net loss was A$1,004,000 for the nine months ended March 31, 2006
compared to a net loss of A$2,175,000 for the nine months ended March 31, 2005.
Year ended June 30, 2005 versus Year ended June 30, 2004
Total costs and expenses have increased from A$1,722,000 for the year
ended June 30, 2004 to A$2,597,000 (US$1,979,000) for the year ended June 30,
2005. The increase was a net result of:
i) An increase in exploration expenditure written off from A$951,000 in fiscal
2004 to A$1,277,000 (US$973,000) in fiscal 2005. In fiscal 2005, we
completed our summer season field program on the Committee Bay and Slave
Properties. These properties are in Nunavet in an isolated area and
exploration can only be undertaken between June and August each year due to
ground conditions. Exploration is costly as we were required to hire and
construct a temporary camp which also had to be transported by charter
flight. All supplies and casual employees also needed to be transported to
the temporary camp by charter flights and/or helicopter. The properties are
located approximately 100 kilometers from the camp and employees are
transported by helicopter daily from camp to the exploration site. In
addition, our Vice President Exploration was employed for a full twelve
months compared to three months in fiscal 2004. In fiscal 2004 (April
2004), we appointed a Vice President Exploration in Canada and commenced
the exploration program on the Committee Bay Properties. During the 2003
fiscal year, the Company entered into a mineral exploration arrangement in
Tibet in China. This arrangement was subsequently cancelled however the
Company incurred exploration expenditure totalling A$109,000 in the form of
salaries, consulting fees, travel and accommodation and legal expenses.
There was no comparable transaction in the 2004 fiscal year.
ii) A decrease in interest expense from A$122,000 in fiscal 2004 to A$44,000
(US$34,000) in fiscal 2005. During fiscal 2005, we borrowed A$644,633
(US$491,210) from Wilzed, a company which our President and CEO is a
Director and shareholder. Wilzed charged us A$31,235 (US$23,801) in
interest. Wilzed charged interest at a rate between 9.10% and 9.35% during
fiscal 2005. AXIS provides management and geological services to us
pursuant to a Service Deed dated November 25, 1988. AXIS charged interest a
rate between 10.60% and 10.85% for fiscal 2005. In March 2004, we repaid
all in debt owing to Chevas Pty Ltd and AXIS. During the 2004 year, an
interest rate of 8.60% was charged on outstanding amounts by Chevas. Chevas
is a company associated with Mr. J.I. Gutnick, our President, which
provided funding for the Company's operations during the year. AXIS charged
interest at a rate between 10.10% and 10.60% for fiscal 2004.
iii) An increase in legal, accounting and professional costs from A$112,000 in
fiscal 2004 to A$189,000 (US$144,000) in fiscal 2005. During fiscal 2005,
we incurred legal expenses of A$58,874 (US$44,862) in relation to the
proposed listing on Toronto Venture Exchange and A$40,763 (US$31,061) in
relation to financing documents and general legal work; audit related fees
41
of A$56,369 (US$42,953) being A$52,061 (US$39,670) for the professional
services in relation to the financial statements in the quarterly Form
10-QSB's and annual Form 10-KSB and $4,308 (US$3,282) for professional
services in relation to the listing application on Toronto Venture
Exchange; and A$32,826 (US$23,668) in costs from our stock transfer agent
for management of the share register. During fiscal 2004, we incurred legal
expenses of A$31,500 which relates to the preparation of documentation for
a dual listing on Toronto Venture Exchange; A$23,000 being legal costs
involved in the preparation of a registration statement for the purpose of
registering shares of common stock and warrants issued to RAB in the
placement that occurred in April 2004; and general legal expenses to do
with the normal activities of the Company. We also changed independent
accountants during the fiscal 2003 year and as a result, incurred
additional costs of A$5,000 during fiscal 2004.
iv) An increase in administrative costs from A$537,000 in fiscal 2004 to
A$716,000 (US$546,000) in fiscal 2005. During fiscal 2005, the management
fee charged by AXIS to us was A$120,000 (US$91,440); AXIS charged us
A$224,065 (US$170,737) for Director's fees and salaries incurred on behalf
of the Company which relates to fees paid to independent Directors and the
cost of the President and Chief Executive Officer, Director, Secretary and
Chief Financial Officer and other staff of AXIS who provided services to
the Company. One independent Director charged the Company directly
amounting to A$20,000 (US$15,240). The Company paid A$68,000 in insurance
premiums and there was no comparable amount in fiscal 2004 as the insurance
policies were only taken out when the operations in Canada commenced at the
end of fiscal 2004. In November 2004, we appointed a Chief Operating
Officer and we paid his salary totalling A$82,823 (US$63,111). Prior to
that date, the current Chief Operating Officer had provided consulting
services and we had paid him A$51,132 (US$38,962). In addition, we have
paid A$35,732 (US$27,228) to Cannacord who have agreed to sponsor our
listing on Toronto Venture Exchange. During fiscal 2004, the management fee
charged by AXIS to the Company was A$100,000. In fiscal 2004, AXIS charged
the Company A$205,000 for Director's fees and salaries incurred on behalf
of the Company which related to fees paid to independent Directors and the
cost of the President and Chief Executive Officer, Director, Secretary and
Chief Financial Officer and other staff of AXIS who provided services to
the Company. One Independent Director charged the Company directly from
January 1, 2004 and this amounted to A$11,000. The Company incurred
A$56,000 in travel and accommodation costs in relation to travel by
Directors and officers on capital raising trips and trips in relation to
the proposed dual listing of the Company's securities on the Toronto
Venture Exchange; A$131,000 for consultants, a majority of which related to
the costs of the Vice President Investor Relations and Business
Development, who was a consultant during the year; and A$19,000 for
lodgement costs of filings with the SEC.
v) an increase in stock based compensation from A$nil for fiscal 2004 to
A$377,000 (US$287,000) for fiscal 2005. Following shareholder approval on
January 27, 2005 the Company issued 1,400,000 options (and up to a further
500,000 options) at an exercise price of US$1.00 per option pursuant to the
2004 Stock Option Plan. Of the total 1,400,000 options issued, 350,000
vested immediately following shareholder approval, 50,000 vested on March
31, 2005, 333,331 vested on July 27, 2006, 333,334 vested on January 27,
2006 and the balance will vest on July 27, 2006. If the additional 500,000
options are granted, they will vest 250,000 on October 31, 2005 and 250,000
on December 31, 2006. The exercise price of US$1.00 was derived from the
issue price of common stock from the Company's placement of shares on March
31, 2004 and is considered by the Company's Directors to be the fair value
of the common stock.
The Company has accounted for all options issued in 2005 based upon their
fair market value using the Black Scholes pricing model. There were no
options issued by the Company prior to 2005.
42
The Company has calculated the fair value of the options using the Black
Scholes valuation method using a share price of US$1.00, strike price of
US$1.00, maturity period of 5 years 7 1/2 months, risk free interest rate
of 5.15% and volatility of 20%. This equates to a value of US31.85 cents
per option. The total value of the options equates to A$575,100
(US$438,200) and has been reflected as Deferred Compensation Expense within
the Shareholders Equity Statement. The gross fair value is amortized into
operations over the vesting period. For fiscal 2005, the amortization
amounted to $377,210.
Accordingly, the loss from operations increased from A$1,723,000 for
the year ended June 30, 2004 to A$2,603,000 (US$1,984,000) for the year ended
June 30, 2005.
The net loss amounted to A$2,600,000 (US$1,982,000) for the year ended
June 30, 2005 compared to a net loss of A$1,723,000 for the year ended June 30,
2004. The net loss per common equivalent share in 2005 was A$0.16 cents
(US$0.12) compared with a net loss with a common equivalent share of A$0.18
cents in the prior year.
Liquidity and Capital Resources
We have A$2,131,000 in cash at June 19, 2006.
For the nine months ended March 31, 2006, net cash used in operating
activities was A$622,000 primarily consisting of the net loss of A$1,004,000
partially offset by increases in accounts payable and accrued expenses of
A$52,000; a decrease in receivables of A$41,000; stock based compensation of
A$168,000; and accrued interest added to principal of A$76,000.
As of March 31, 2006 the Company had short-term obligations of
A$700,000 comprising accounts payable and accrued expenses.
During the nine months to March 31, 2006, Wilzed, a company associated
with our President and Chief Executive Officer provided A$643,000 in loan funds
to allow us to meet our financial obligations. Effective as of May 8, 2006, we
agreed to issue 10 million shares of Common Stock and options to purchase 20
million shares of Common Stock at an exercise price of U.S. $0.1542 per share
and an expiration date of April 30, 2011, in repayment of A$2.0 million
(US$1,542,000) in loans to the Company from Wilzed.
During fiscal 2004 and 2005, we undertook a field exploration program
on our Slave and Committee Bay Properties. Our Slave Properties are held by
Tahera and we have the right to conduct gold and base metal exploration on these
properties. Tahera has the legal obligation to meet the minimum required
expenditure to retain the properties. To date, this has been met.
In respect to our Committee Bay Properties, we spent more than the
minimum required expenditure. As a result, we do not have a legal obligation to
undertake further exploration on our properties during their life. However we
will be required to expend substantial amounts in order to determine whether
there are commercial mineral deposits on our exploration properties.
We plan to conduct exploration on the Slave Properties during 2006. At
this stage, we have not prepared a budget for the 2006 exploration program.
However, we believe the budget will be approximately A$1,000,000. Our budget for
general and administration for fiscal 2006 is A$0.8 million. On June 14, 2006,
we closed an equity raising of A$2.0 million (US$1.542 million) and this will
provide cash for our exploration program, general and administration expenses
and working capital.
We will require further funding in the future to continue our
exploration program after this season, and for the general and administration
expenses. The amount of future funding will be dependant on the future
exploration program which cannot be determined until we see the results from
this season's. There can be no assurance that such a capital raising will be
successful, or that even if an offer of financing is received by the Company, it
is on terms acceptable to the Company.
43
We have been preparing a listing application for the dual listing of
our shares of common stock on Toronto Venture Exchange. The listing application
was lodged with TSX in June 2004 and we are currently in the process of
responding to questions raised by TSX. We believe that a dual listing of our
shares of common stock will provide liquidity in our shares. There can be no
assurance that the dual listing on TSX will eventuate or that such listing will
create an increase in the volume of trading of our shares of common stock.
Recent Issuances of Securities
On February 19, 2004 Edensor Nominees Pty Ltd advised us in writing
that it wished to exercise the 6,000,000 options over common stock it held using
the cashless exercise feature. Pursuant to this request, we issued 5,142,857
common stock to Edensor Nominees Pty Ltd on March 3, 2004.
On March 17, 2004 Delkern Investments Ltd. advised us in writing that
it wished to exercise the 2,000,000 options over common stock in the Company it
held using the cashless exercise feature. Pursuant to this request, we issued
1,800,200 common stock to Delkern Investments Ltd.
On March 31, 2004 we entered into a subscription agreement with RAB
Special Situations LP ("RAB") pursuant to which RAB agreed to subscribe for
1,670,000 shares of common stock at a price of US$1.00, raising US$1.67 million.
As part of the placement, 1,670,000 warrants were issued to RAB. These warrants
expired unexercised. On March 31, 2004 we reached agreement with Kerisridge Pty
Ltd ("Kerisridge") to convert all debt owed by us to Kerisridge, being
US$1,753,984) into equity. We issued 1,753,984 units of common stock and
1,753,984 warrants over common stock, with a 2 year exercise period and an
exercise price of US$1.30, in satisfaction of the conversion of debt into
equity. These warrants expired unexercised.
On May 8, 2006, we announced the issue of up to 10 million shares of
common stock at an issue price of A$0.20 (US$0.1542) and 20 million options with
an exercise price of A$0.20 (US$0.1542) and a latest exercise date of April 30,
2011 to Fast Knight Nominees as repayment of a debt of A$2 million
(US$1,542,000) from Wilzed. Wilzed, a company associated with our President and
Chief Executive Officer has provided loan funds over a period of time to enable
us to conduct our exploration programs in Canada and to meet our working capital
needs. The issue of the shares of common stock and options will repay this debt.
On June 9, 2006, we entered into a subscription agreement with RAB
pursuant to which the Company issued to RAB for an aggregate purchase price of
US$1,542,000: (i)10,000,000 Special Warrants, each of which is exercisable at
any time to acquire, without additional consideration, one share of common
stock, and (ii) Warrants for the purchase of 20,000,000 shares of common stock,
at an exercise price of US$0.1542 to be exercisable until April 30, 2011.
The issuances of shares and warrants described above were exempt from
the registration requirements of the Securities Act of 1953, as amended,
pursuant to Section 4(2) thereof.
Impact of Australian Tax Law
Australian resident corporations are subject to Australian income tax
on their non-exempt worldwide assessable income (which includes capital gains),
less allowable deductions, at the rate of 30%. Foreign tax credits are allowed
where tax has been paid on foreign source income, provided the tax credit does
not exceed 30% of the foreign source income.
44
Under the U.S./Australia tax treaty, a U.S. resident corporation such
as us is subject to Australian income tax on net profits attributable to the
carrying on of a business in Australia through a "permanent establishment" in
Australia. A "permanent establishment" is a fixed place of business through
which the business of an enterprise is carried on. The treaty limits the
Australian tax on interest and royalties paid by an Australian business to a
U.S. resident to 10% of the gross interest or royalty income unless it relates
to a permanent establishment. Although we consider that we do not have a
permanent establishment in Australia, it may be deemed to have such an
establishment due to the location of its administrative offices in Melbourne. In
addition we may receive interest or dividends from time to time.
Impact of Australian Governmental, Economic, Monetary or Fiscal Policies
Although Australian taxpayers are subject to substantial regulation, we
believe that our operations are not materially impacted by such regulations nor
is it subject to any broader regulations or governmental policies than most
Australian taxpayers.
Impact of Recent Accounting Pronouncements
For a discussion of the impact of recent accounting pronouncements on
the Company's financial statements, see Note 2 to the Company's 2005
Consolidated Financial Statements which are included herein.
Quantitative and Qualitative Disclosures about Market Risk
Golden River Resources is exposed to interest rate risk primarily
through its loan facilities. The Company utilizes these borrowings to meet its
working capital needs.
At March 31, 2006, the Company had outstanding borrowings of
approximately $1,691,000 under its Loan Facilities. In the event that interest
rates associated with these facilities were to increase 100 basis points, the
impact on future cash flows would be a decrease of approximately $16,910
annually.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
DESCRIPTION OF PROPERTY
We occupy certain executive and office facilities in Melbourne,
Victoria, Australia which are provided to us pursuant to a service agreement
with AXIS Consultants. See "Certain Relationships and Related Transactions." The
Company believes that its administrative space is adequate for its current
needs. In addition, we have an office in North America at Suite 1801, 1 Younge
Street, Toronto ON Canada.
For information about our mineral claims, see "Description of Business
and Appendix B."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We are one of five affiliated companies of which three are Australian
public companies listed on Australian Stock Exchange and a further company is
listed on the over-the-counter market in the USA. Each of the companies have
some common Directors, officers and shareholders. In addition, each of the
companies owns equity in and is substantially dependent upon AXIS for its senior
management and certain mining and exploration staff. The Company owns 9.09% of
the outstanding shares of AXIS. A number of arrangements and transactions have
45
been entered into from time to time between such companies. It has been the
intention of the affiliated companies and respective Boards of Directors that
each of such arrangements or transactions should accommodate the respective
interest of the relevant affiliated companies in a manner which is fair to all
parties and equitable to the shareholders of each. Currently, there are no
material arrangements or planned transactions between the Company and any of the
other affiliated companies other than AXIS.
AXIS is paid by each company for the costs incurred by it in carrying
out the administration function for each such company. Pursuant to the Service
Agreement, AXIS performs such functions as payroll, maintaining employee records
required by law and by usual accounting procedures, providing insurance, legal,
human resources, company secretarial, land management, certain exploration and
mining support, financial, accounting advice and services. AXIS procures items
of equipment necessary in the conduct of the business of the Company. AXIS also
provides for the Company various services, including but not limited to the
making available of office supplies, office facilities and any other services as
may be required from time to time by the Company as and when requested by the
Company.
We are required to reimburse AXIS for any direct costs incurred by AXIS
for the Company. In addition, we are required to pay a proportion of AXIS's
overhead cost based on AXIS's management estimate of our utilisation of the
facilities and activities of AXIS plus a service fee of not more than 15% of the
direct and overhead costs. AXIS has not charged the 15% service fee to us.
Amounts invoiced by AXIS are required to be paid by us. We are also not
permitted to obtain from sources other than AXIS, and we are not permitted to
perform or provide ourselves, the services contemplated by the Service
Agreement, unless we first requests AXIS to provide the service and AXIS fails
to provide the service within one month.
The Service Agreement may be terminated by AXIS or us upon 60 days
prior notice. If the Service Agreement is terminated by AXIS, we would be
required to independently provide, or to seek an alternative source of
providing, the services currently provided by AXIS. There can be no assurance
that we could independently provide or find a third party to provide these
services on a cost-effective basis or that any transition from receiving
services under the Service Agreement will not have a material adverse effect on
us. Our inability to provide such services or to find a third party to provide
such services may have a material adverse effect on our operations.
In accordance with the Service Agreement AXIS provides the Company with
the services of our Chief Executive Officer, Chief Financial Officer and
clerical employees, as well as office facilities, equipment, administrative and
clerical services. We pay AXIS for the actual costs of such facilities plus a
maximum service fee of 15%. The Company paid AXIS A$487,535 (being A$383,535 in
respect to the current year and A$104,000 being the amount owing at June 30,
2004) in respect of the Service Agreement for the fiscal year ended June 30,
2005 and A$759,410 (being A$335,987 in respect to the current year and A$486,000
in respect to prior years) in respect of the Service Agreement for the fiscal
year ended June 30, 2004. During 2005, AXIS loaned the Company A$249,500. At
June 30, 2004 and 2005, the Company owed AXIS A$104,000 and A$296,764
respectively for services provided in accordance with the Service Agreement.
During fiscal 2004 and 2005, AXIS Consultants charged interest of A$42,742 and
A$13,879 respectively on outstanding balances. AXIS charged interest at rates
between 10.10% and 10.60% for fiscal 2004 and 10.60% and 10.85% for fiscal 2005.
During the nine months ending March 31, 2006 and 2005 AXIS advanced us
A$94,250 and A$243,000 respectively including services provided in accordance
with the service agreement of A$286,141 and A$313,697 respectively and we
reimbursed AXIS A$562,569 and A$478,513 respectively for outstanding amounts
including carried forward outstanding amounts. During the nine months ending
March 31, 2006 and 2005 AXIS charged interest of A$19,918 and A$7,665,
respectively, on outstanding balances. The interest rate charged by AXIS for the
nine months ended March 31, 2006 was 9.35% compared to between 10.60% and 10.85%
for the nine months ended March 31, 2005. At March 31, 2006 the Company owed
AXIS A$134,504.
46
Chevas, a company associated with our President, Joseph Gutnick, has
provided loan funds to enable us to meet our liabilities and has paid certain
expenses on our behalf. At June 30 2003, we owed Chevas A$1,239,315. During the
2004 fiscal year, Chevas loaned a further A$187,122 and charged A$82,776 in
interest to us on the loan account. During fiscal 2004, we repaid the loan in
full. Chevas charged interest to us on outstanding balances of the loan account
at the ANZ Banking Group Limited reference rate for overdrafts over A$100,000
plus 1%. In accordance with this formula, the actual interest rate charged
during the 2004 fiscal year was 8.60% to 9.10%.
Edensor Gold Pty Ltd, a company associated with our President, Joseph
Gutnick, provided loan funds during fiscal 2004 to enable us to meet our
liabilities. During the 2004 fiscal year, Edensor Gold loaned A$69,000 and
charged A$670 in interest to us on the loan account. During fiscal 2004, we
repaid the loan in full. Edensor Gold charged interest to us on outstanding
balances of the loan account at the ANZ Banking Group Limited reference rate for
overdrafts over A$100,000 plus 1%. In accordance with this formula, the actual
interest rate charged during the 2004 fiscal year was 8.85% to 9.10%.
Wilzed Pty Ltd, a company associated with the President of the Company,
Joseph Gutnick, has provided loan funds to enable the Company to meet its
liabilities. During the 2005 fiscal year, Wilzed loaned A$644,633 and charged
A$31,235 in interest. We repaid $396. At June 30, 2005, the Company owed Wilzed
A$675,472. Wilzed charged interest during fiscal 2005 at rates between 9.10% and
9.35%.
During the nine months ending March 31, 2006, Wilzed loaned the Company
A$809,999 and charged interest of A$71,156. The interest rate charged by Wilzed
for the nine months was 9.35%. At March 31, 2006, the Company owed Wilzed
A$1,556,627.
Effective as of May 8, 2006, we agreed to issue to Fast Knight Nominees
10 million shares of common stock and options to purchase 20 million shares of
common stock at an exercise price of A$0.20 per share and an expiration date of
April 30, 2011, in repayment of A$2 million in loans from Wilzed to the Company.
Wilzed has agreed to accept the shares and options as satisfaction of the loan
and has instructed us to issue the shares and options to Fast Knight Nominees, a
company that is also associated with Mr. Gutnick.
As described in the section headed "Canadian Exploration Properties" we
entered into an agreement to explore for gold on properties owed by Tahera. Mr
Gutnick, our President, was formerly Executive Chairman of Tahera and his family
company, Edensor Nominees, who are our controlling stockholder, was formerly a
shareholder of Tahera. During fiscal 2002, Tahera incurred certain exploration
and administration costs in Canada on our behalf amounting to A$36,365 and this
amount was owing to Tahera at June 30, 2002. During fiscal 2003, Tahera incurred
further exploration and administration costs in Canada on our behalf amounting
to A$65,314. During fiscal 2003, Mr. J.I. Gutnick and Chevas paid Tahera
A$47,368 and A$53,350 respectively on our behalf. During fiscal 2002 and 2003,
Tahera did not charge us interest on amounts outstanding. At June 30, 2003, we
owed Tahera A$1,361 (US$900) and Mr. J.I. Gutnick A$47,368 (US$31,594). During
fiscal 2004 we paid Mr J I Gutnick the amount in full and Tahera advised the
Company in writing that there was no monies owing to it by the Company.
Quantum Resources Limited incurred certain costs on our behalf
amounting to A$43,941 (US$29,308) in respect to our activities in Tibet China
(See Item 1 - Business - General) as a result of Quantum's contacts in China.
This amount was outstanding at June 30, 2003. During fiscal 2004, we repaid the
principal in full.
47
Kerisridge Pty Ltd, a company associated with our President, Mr J I
Gutnick, loaned us A$2,273,186 in March 2004 for the purpose of repaying our
long term debt. On March 31, 2004, Kerisridge agreed to convert all of the debt
we owed to it into common stock and warrants in us. We issued 1,753,984 shares
of common stock and 1,753,984 warrants exercisable at US$1.30 and at any time up
to March 31, 2006 in full repayment of the amount owing to Kerisridge.
Transactions with Management.
We have a policy that we will not enter into any transaction with an
Officer, Director or affiliate of Golden River Resources or any member of their
families unless the transaction is approved by the Audit Committee and the Audit
Committee determines that the terms of the transaction are no less favourable to
us than the terms available from non-affiliated third parties or are otherwise
deemed to be fair to us at the time authorized.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded in the over-the-counter market and quoted on
the OTC-Bulletin Board under the symbol "GORV". The trading for the common stock
has been sporadic and the market for the common stock cannot be classified as an
established trading market.
The following table sets out the high and low bid information for the
common stock as reported by the OTC Bulletin Board for each period/quarter
indicated in US$:
Calendar Period High Bid(1) Low Bid(1)
--------------- ----------
2003
First Quarter 3.50 1.01
Second Quarter 2.25 1.75
Third Quarter 2.50 1.50
Fourth Quarter 3.20 2.25
2004
First Quarter 10.01 2.40
Second Quarter 9.50 9.50
Third Quarter 9.50 8.00
Fourth Quarter 8.00 1.50
2005
First Quarter 2.50 1.01
Second Quarter 1.75 0.65
Third Quarter 1.25 1.00
Fourth Quarter 1.25 1.00
2006
First Quarter 1.75 0.40
Second Quarter 0.50 0.16
(1) The quotations set out herein reflect inter-dealer prices without retail
mark-up, mark-down or commission and may not necessarily reflect actual
transactions.
As of the date of this prospectus, there are 26,711,630 shares of
common stock outstanding, held by 130 shareholders of record. We have 10,000,000
special warrants on issue that expire on June 9, 2016, each of which is
exercisable at any time without the payment of further consideration and
40,000,000 warrants outstanding which expire on April 30, 2011, each of which is
exercisable to purchase one share of common stock for a purchase price of A$0.20
(US$0.1542). We are registering 30,000,000 shares of our common stock that are
issuable upon exercise of warrants in this prospectus which will be available
48
for sale when this prospectus becomes effective. We have outstanding 25,041,630
shares of common stock, not covered by this prospectus, that could be sold by
the respective holders of such shares at any time pursuant to Rule 144 under the
Securities Act of 1933, subject to certain volume limitations in the case of
10,700,224 shares owned by officers, directors and affiliates (including
10,000,000 shares of common stock that have been held by the holders for less
than one year and which cannot be freely re-sold by the holders as of the date
of this prospectus but which may be freely re-sold at a future date). Other than
the shares covered by this prospectus, we have not agreed to register any of our
securities under the Securities Act for sale by stockholders.
To date we have not paid any dividends on our common stock and we do
not expect to declare or pay any dividends on our common stock in the
foreseeable future. Payment of any dividends will depend upon our future
earnings, if any, our financial condition, and other factors deemed relevant by
the Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth the annual salary, bonuses and all other
compensation awards and pay outs on account of our Chief Executive Officer for
services rendered to us during the fiscal year ended June 30, 2005, 2004 and
2003 and any other executive officer who received more than US$100,000 per annum
during this period.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
------------------- ----------------------
Securities
Other Annual Restricted Underlying
Name and Principal Position Year Salary Compensation Stock Awards Options
------ ------ ------------ ------------ ----------
Joseph Gutnick, Chairman
of the Board and CEO 2005 $91,667(1)(2) $18,935(3) -- 500,000(4)
2004 $76,000(1)(2) $16,484(3) -- --
2003 $-(1)(2) $28,553(3) -- --
Pini Althaus, Chief Operating
Officer 2005 US$110,000(5) -- -- 250,000(6)
Craig Alford, Vice President
Exploration 2005 CDN$120,000 3,722 -- 150,000(7)
--------------------------------------------------------
1. The amounts listed were paid by us to AXIS, which provides the services of
Mr. J I Gutnick and Mr. Lee as well as certain other officers and employees
to the Company.
2. Excludes options granted to Edensor of which Mr. JI Gutnick is a Director
and Shareholder (see Certain Relationships and Related Party Transactions)
3. Includes amounts paid by AXIS to an accumulation superannuation plan on
behalf of Joseph Gutnick.
4. Includes 333,334 options that are vested and 166,667 options that will vest
on July 27, 2006.
5. Mr. Althaus was a consultant for the period to October 2004 and at that
time was appointed as an employee. The salary disclosed includes the
consulting fees for the period July to October 2004 and the salary for the
period November 2004 to June 2005. Mr. Althaus resigned as the Chief
Operating Officer in April, 2006.
6. Includes 250,000 options that are vested. Mr Althaus resigned on April 4,
2006 and the options expired on July 4, 2006.
7. Includes 150,000 options that are vested.
49
We have a policy that we will not enter into any transaction with an
officer, Director or affiliate of the Company or any member of their families
unless the transaction is approved by the Audit Committee and the Audit
Committee determines that the terms of the transaction are no less favourable to
us than the terms available from non-affiliated third parties or are otherwise
deemed to be fair to the Company at the time authorised.
Option Grants in Last Fiscal Year
Number of Shares Percent of Total Market
of Common Stock Options Granted to Price on
Underlying Employees in Fiscal Exercise Date of Expiration
Name Options Granted Year Price Grant Date
-----------------------------------------------------------------------------------------------------------
Joseph Gutnick 500,000 35.7% US$1.00 US$1.01 10/15/2014
Pini Althaus* 250,000 17.9% US$1.00 US$1.01 10/15/2014
Craig Alford 150,000 10.7% US$1.00 US$1.01 10/15/2014
* Mr Althaus resigned on April 4, 2006 and the options expired on July 4, 2006.
Aggregated Option Exercises in Fiscal 2005 and Fiscal 2005 Year-End Option
Values
The person listed in the following table did not exercise any options
in 2005.
Number of Shares of Common Value of Unexercised
Stock Underlying Unexercised In-The-Money
Options at June 30, 2005 Options at June 30, 2005(1)
Name Exercisable Unexercisable Exercisable Unexercisable
-------------------------------------------------------------------------------------------------
Joseph Gutnick 166,667 333,333 US$208,334 US$416,666
Pini Althaus 250,000 -- US$312,500 --
Craig Alford 150,000 -- US$187,500 --
(1) Based on US$1.25 per share, the June 30, 2005 closing price reported on the
OTC Bulletin Board.
2004 Stock Option Plan
The 2004 Plan provides for the granting of options. The maximum number
of shares available for awards is 10% of the issued and outstanding shares of
common stock on issue at any time. If an option expires or is cancelled without
having been fully exercised or vested, the remaining shares will generally be
available for grants of other awards.
The 2004 Plan is administered by the Remuneration Committee of the
Board comprised solely of directors who are not employees or consultants to
Golden River Resources or any of its affiliated entities.
Any employee, director, officer, consultant of or to Golden River
Resources or an affiliated entity (including a company that becomes an
affiliated entity after the adoption of the 2004 Plan) is eligible to
participate in the 2004 Plan if the Committee, in its sole discretion,
determines that such person has contributed significantly or can be expected to
contribute significantly to the success of Golden River Resources or an
affiliated entity. During any one year period, no participant is eligible to be
granted options to purchase more than 5% shares of our issued and outstanding
common stock or if they provide investor relations activities, or are a
consultant to the Company, 2% of the issued and outstanding shares of common
stock in any 12 month period.
50
Options granted under the 2004 Plan are to purchase Golden River
Resources common stock. The term of each option will be fixed by the
Remuneration Committee, but no option will be exercisable more than 10 years
after the date of grant. The option exercise price is fixed by the Remuneration
Committee at the time the option is granted. The exercise price must be paid in
cash. Options granted to participants vest and have a term of 10 years.
No award is transferable, or assignable by the participant except upon
his or her death.
The Board may amend the 2004 Plan, except that no amendment may
adversely affect the rights of a participant without the participant's consent
or be made without stockholder approval if such approval is necessary to qualify
for or comply with any applicable law, rule or regulation the Board deems
necessary or desirable to qualify for or comply with.
Subject to earlier termination by the Board, the 2004 Plan has an
indefinite term except that no ISO may be granted following the tenth
anniversary of the date the 2004 Plan is approved by stockholders.
Compensation Pursuant to Plans.
The Company does not have any pension or profit sharing plans. The
Company's Vice President Exploration and temporary staff employed in the
exploration programme in Canada are subject to Canadian requirements for
contributions to pension plans. At June 30, 2005, the Company has an obligation
to pay A$13,570. Contributions to employee benefit or health plans during the
year ended June 30, 2005 were A$7,196.
Compensation to Directors
It is our policy to reimburse Directors for reasonable travel and
lodging expenses incurred in attending Board of Directors meetings. Independent
Directors are paid Directors fees of A$20,000 per annum.
Securities authorized for issuance under equity compensation plans
The following table sets forth, as of June 30, 2005, information
regarding options under our 2004 stock option plan, our only active plan. The
2004 stock option plan has been approved by our stockholders. Outstanding
options under this plan that are forfeited or cancelled will be available for
future grants. All of the options are for the purchase of our common stock.
51
Number of securities
remaining available for
future issuances under
Number of securities to Weighted average equity compensation plans
be issued upon exercise Exercise price of (excluding securities
of outstanding options outstanding options reflected in column (a)
Plan Category (a) (b) (c)
-------------------------- -------------------------- ----------------------- ----------------------------
Equity compensation
plans approved by
security holders 1,400,000(1) US$1.00 271,163(2)
Equity compensation
plans not approved
by security holders - - -
-------------------------- ----------------------- ----------------------------
Total 1,400,000(1) US$1.00 271,163(2)
========================== ============================
Mr Althaus resigned on April 4, 2006 and his 250,000 options expired on
July 4, 2006.
The maximum number of shares available for issuance under the 2004
stock option plan is equal to 10% of the issued and outstanding shares of common
stock, at any time.
Principal Officers Contracts
Craig Alford
In April 2004 the Company appointed Mr. Craig Alford as Vice President
Exploration. Mr Alford's contract is for one year until March 31, 2005 and since
that time has been operating on a month to month basis. Discussions are being
held between the parties with a view to renewing the contract. The contract sets
out a salary of CDN$120,000 per annum and the issue of 150,000 stock options
pursuant to a Stock Option Plan. If the Company terminates the contract without
cause the Company is required to pay Mr Alford a payment equivalent to two weeks
salary.
Compensation Pursuant to Plans.
The Company does not have any pension or profit sharing plans. The
Company's Vice President Exploration and temporary staff employed in the
exploration programme in Canada are subject to Canadian requirements for
contributions to pension plans.
FINANCIAL STATEMENTS
See the Consolidated Financial Statements beginning on page F-1, "Index
to Consolidated Financial Statements"
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
LEGAL MATTERS
The validity of the common stock offered in this prospectus has been
passed upon by Phillips Nizer LLP of New York, New York
EXPERTS
The financial statements of Golden River Resources for the year ended
June 30, 2005 and 2004 have been audited by PKF, Certified Public Accountants, a
Professional Corporation, as set forth in their report thereon appearing in this
prospectus, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
52
HOW TO GET MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2 under the Securities Act with respect to the
securities offered by this prospectus. This prospectus, which forms a part of
the registration statement, does not contain all the information set forth in
the registration statement, as permitted by the rules and regulations of the
Commission. For further information with respect to us and the securities
offered by this prospectus, reference is made to the registration statement.
Statements contained in this prospectus as to the contents of any contract or
other document that we have filed as an exhibit to the registration statement
are qualified in their entirety by reference to the exhibits for a complete
statement of their terms and conditions. The registration statement and other
information may be read and copied at the Commission's Public Reference Room at,
100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains a web site at http://www.sec.gov that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission.
53
INDEX TO FINANCIAL STATEMENTS
Page
Consolidated Interim Financial Statements (unaudited)
Balance Sheet as of March 31, 2006 F-2
Statement of Operations for nine months ended March 31, 2006 and
2005 and cumulative period from July 1, 2002 to March 31, 2006 F-3
Statement of Changes in Stockholders' Equity (Deficit) from July 1, 2002
to March 31, 2006 F-4
Statement of Cash Flows for nine months ended March 31, 2006 and
2005 and cumulative period from July 1, 2002 to March 31, 2006 F-5
Notes to Financial Statements F-6
to F-9
Consolidated Annual Financial Statements
Report of Independent Registered Public Accountants F-11
Balance Sheet as of June 30, 2005 F-12
Statement of Operations for years ended June 30, 2005 and 2004
and cumulative period from July 1, 2002 to June 30, 2005 F-13
Statement of Changes in Stockholders' Equity (Deficit) from July 1, 2002
to June 30, 2005 F-14
Statement of Cash Flows for years ended June 30, 2005 and 2004
and cumulative period from July 1, 2002 to June 30, 2005 F-15
Notes to Consolidated Financial Statements F-16
to F-24
54
INTERIM FINANCIAL STATEMENTS
Introduction to Interim Financial Statements.
The interim financial statements included herein have been prepared by
Golden River Resources Corporation ("Golden River Resources" or the "Company")
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (the "Commission"). Certain information and footnote
disclosure normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. These
interim financial statements should be read in conjunction with the financial
statements and notes thereto included herein.
In the opinion of management, all adjustments, consisting of normal
recurring adjustments and consolidating entries, necessary to present fairly the
financial position of the Company and subsidiaries as of March 31, 2006, the
results of its operations for the nine month periods ended March 31, 2006 and
March 31, 2005, and the changes in its cash flows for the nine month periods
ended March 31, 2006 and March 31, 2005, have been included. The results of
operations for the interim periods are not necessarily indicative of the results
for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
UNLESS OTHERWISE INDICATED, ALL FINANCIAL INFORMATION PRESENTED IS IN
AUSTRALIAN DOLLARS.
F-1
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Balance Sheet
March 31, 2006
(Unaudited)
A$000's
------------
ASSETS
Current Assets
Cash 23
Receivables 85
Prepayments and Deposits 78
------------
Total Current Assets 186
------------
Non Current Assets
Property and Equipment, net 12
------------
Total Non Current Assets 12
------------
Total Assets 198
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable and Accrued Expenses 700
------------
Total Current Liabilities 700
------------
Non Current Liabilities
Long-term Advance - Affiliate 1,691
------------
Total Non Current Liabilities 1,691
------------
Total Liabilities 2,391
------------
Stockholders' Equity (Deficit):
Common Stock: $.0001 par value
50,000,000 shares authorized,
16,714,130 issued 2
Less Treasury Stock at Cost, 2,500 shares (20)
Additional Paid-in-Capital 30,245
Other Comprehensive Loss (10)
Retained Deficit during exploration stage (6,008)
Retained Deficit prior to exploration stage (26,402)
------------
Total Stockholders' Equity (Deficit) (2,193)
------------
Total Liabilities and Stockholders' Equity (Deficit) 198
============
See Notes to Consolidated Financial Statements
F-2
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Operations
Nine Months Ended March 31, 2006 and 2005 and for the cumulative period
July 1, 2002 (inception of exploration activities) to March 31, 2006
(Unaudited)
Nine Months Nine Months July 1, 2002
Ended March Ended March to
31, 2006 31, 2005 March 31, 2006
A$000's A$000's A$000's
---------------------------------------------
Revenues: $- $- $-
---------------------------------------------
Costs and Expenses:
Stock Based Compensation 168 251 545
Exploration Expenditure 162 1,233 2,588
Interest Expense, net-
related entity 91 24 390
Interest Expense, other 8 - 8
Legal, Accounting and
Professional 78 117 441
Administrative 461 555 2,002
---------------------------------------------
968 2,180 5,974
---------------------------------------------
(Loss) from Operations (968) (2,180) (5,974)
Foreign Currency Exchange
Gain (Loss) (36) 5 (34)
---------------------------------------------
(Loss) before Income Tax (1,004) (2,175) (6,008)
Provision for Income Tax - - -
---------------------------------------------
(1,004) (2,175) (6,008)
Net (Loss)
---------------------------------------------
Basic net (Loss) Per
Common Equivalent
Shares $(0.06) $(0.13) $(0.50)
---------------------------------------------
Weighted Number of Common
Equivalent Shares
Outstanding (000's) 16,714 16,714 12,002
---------------------------------------------
See Notes to Consolidated Financial Statements
F-3
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
March 31, 2006
and for the cumulative period July 1, 2002
(inception of exploration activities) to March 31, 2006
(Unaudited)
Retained Retained
Earnings Earnings
Treasury (Deficit) (Deficit) Other
Common Stock, Additional(during the (prior to DeferredCompre-
Stock at Paid-in Exploration Exploration Compen-hensive
Shares Amount Cost Capital stage) stage) sation Loss Total
-------------------------------------------------------------------------------
000'sA$000's A$000's A$000's A$000's A$000's A$000'sA$000's A$000's
Balance June 30, 2002 6,347 $1 $(20) $25,175 - $(26,402) - - $(1,246)
Net loss - - - - $(681) - - - (681)
-------------------------------------------------------------------------------
Balance June 30, 2003 6,347 $1 $(20) $25,175 $(681) $(26,402) - - $(1,927)
Issuance of 1,753,984 shares and warrants
in lieu of debt repayment 1,754 - - $2,273 - - - - $2,273
Sale of 1,670,000 shares and warrants 1,670 - - $2,253 - - - - $2,253
Issuance of 6,943,057 shares on cashless
exercise of options 6,943 $1 - $(1) - - - - -
Net unrealized loss on foreign exchange - - - - - - - $(9) $(9)
Net (loss) - - - - (1,723) - - - $(1,723)
-------------------------------------------------------------------------------
Balance June 30, 2004 16,714 $2 $(20) $29,700 $(2,404) $(26,402) - $(9) $867
Issuance of 1,400,000 options under 2004
stock option plan - - - $575 - - $(575) - -
Amortization of 1,400,000 options under
2004 stock option plan - - - - - - $377 - $377
Net unrealized gain on foreign exchange - - - - - - - $6 $6
Net/(loss) - - - - (2,600) - - - $(2,600)
-------------------------------------------------------------------------------
Balance June 30, 2005 16,714 $2 $(20) $30,275 $(5,004) $(26,402) $(198) $(3)$(1,350)
To eliminate deferred compensation
against Additional Paid-In Capital - - - $(198) - - $198 - -
Amortization of 1,400,000 options under
2004 stock option plan - - - $168 - - - - $168
Net unrealized gain on foreign exchange - - - - - - - $(7) $(7)
Net/(loss) - - - - $(1,004) - - - $(1,004)
-------------------------------------------------------------------------------
Balance March 31, 2006 16,714 $2 $(20) $30,245 $(6,008) $(26,402) $0 $(10)$(2,193)
-------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
F-4
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
Nine Months Ended March 31, 2006 and 2005 and for the cumulative period
July 1, 2002 (inception of exploration activities) to March 31, 2006
(Unaudited)
2006 2005 July 1, 2002
A$000's A$000's to March 31,
2006
A$000's
---------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) (1,004) (2,175) (6,008)
Adjustments to reconcile net (loss) to net cash
used
in Operating Activities
Foreign Currency Exchange Loss/(Gain) 36 (5) 33
Depreciation of Plant and Equipment 5 7 15
Stock based compensation 168 251 545
Accrued interest added to principal 76 24 260
Net Change in:
Receivables 41 (45) (85)
Staking Deposit - - 23
Prepayments and Deposits 4 148 (78)
Accounts Payable and Accrued Expenses 52 (5) 208
Short Term Advance - Affiliates - - (36)
---------------------------------------------
Net Cash (Used) in Operating Activities (622) (1,800) (5,123)
---------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
- (6) (27)
Purchase of Plant and Equipment
---------------------------------------------
Net Cash (Used) in Investing Activities - (6) (27)
---------------------------------------------
CASH FLOW PROVIDED BY FINANCING ACTIVITIES
Net Borrowings from Affiliates 643 689 646
Sale of Shares of Common Stock - - 2,253
Proceeds from Loan Payable - - 2,273
---------------------------------------------
Net Cash Provided by Financing Activities 643 689 5,172
---------------------------------------------
Net Increase (decrease) in Cash 21 (1,117) 22
Cash at Beginning of Period 2 1,118 1
---------------------------------------------
Cash at End of Period 23 1 23
---------------------------------------------
Supplemental Disclosures
Interest Paid 15 - 270
NON CASH FINANCING ACTIVITY
Debt repaid through issuance of shares - - 2,273
Stock Options recorded as Deferred Compensation - 575 575
See Notes to Consolidated Financial Statements
F-5
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
March 31, 2006
(1) Organisation
Golden River Resources Corporation ("Golden River Resources"), formerly
Bay Resources Ltd, is incorporated in the State of Delaware. The principal
shareholder of Golden River Resources is Edensor Nominees Proprietary Limited
("Edensor"), an Australian corporation. Edensor owned 32.3% of Golden River
Resources as of March 31, 2006. During fiscal 1998, Golden River Resources
incorporated a further subsidiary, Baynex.com Pty Ltd (formerly Bayou Australia
Pty Ltd), under the laws of Australia. Baynex.com Pty Ltd has not traded since
incorporation. On August 21, 2000, Golden River Resources incorporated a new
wholly owned subsidiary, Bay Resources (Asia) Pty Ltd (formerly Bayou
International Pty Ltd), a corporation incorporated under the laws of Australia.
In June 2002, the Company incorporated a new wholly owned subsidiary, Golden
Bull Resources Corporation (formerly 4075251 Canada Inc), a corporation
incorporated under the laws of Canada. Golden Bull Resources Corporation is
undertaking exploration activities for gold in Canada. On March 8, 2006,
shareholders approved the change of the Company's name to Golden River
Resources.
(2) Affiliate Transactions
Golden River Resources advances to and receives advances from various
affiliates. All advances between consolidated affiliates are eliminated on
consolidation.
During the nine months ending March 31, 2006 and 2005 AXIS Consultants
Pty Ltd ("AXIS") an affiliated management company advanced Golden River
Resources A$94,250 and A$243,000 respectively including services provided in
accordance with the service agreement of A$286,141 and A$313,697 respectively
and reimbursed AXIS A$562,569 and A$478,513 respectively for outstanding amounts
including carried forward outstanding amounts. During the nine months ending
March 31, 2006 and 2005 AXIS charged interest of A$19,918 and A$7,665,
respectively, on outstanding balances. The interest rate charged by AXIS for the
nine months ended March 31, 2006 was 9.35% compared to between 10.60% and 10.85%
for the nine months ended March 31, 2005. At March 31, 2006 the Company owed
AXIS A$134,504. These entities are affiliated through common management and
ownership.
Wilzed Pty Ltd, a company associated with the President of the Company,
Joseph Gutnick, provided loan funds to enable the Company to meet its
liabilities and has paid certain expenses on behalf of the Company. During the
nine months ending March 31, 2006, Wilzed loaned the Company A$809,999 and
charged interest of A$71,156. The interest rate charged by Wilzed for the nine
months was 9.35%. At March 31, 2006, the Company owed Wilzed A$1,556,627.
Interest expense incurred on loans and advances due to affiliated
entities approximated A$91,075 and A$23,752 in the nine months ended March 31,
2006 and 2005, respectively.
A$000's
2006
(3) Long-Term Advance - Affiliate
Loan from AXIS, a corporation affiliated with the President of Golden River 134
Resources. Interest accrued at 9.35% being the ANZ Banking Group Limited
rate for overdrafts over $100,000.
Loan from Wilzed Pty Ltd, a corporation affiliated with the President of
Golden River Resources. Interest accrued at 9.35% per annum. 1,557
--------------------
1,691
====================
Refer footnote 8.
F-6
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
March 31, 2006
(4) Going Concern
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplates
continuation of Golden River Resources as a going concern. Golden River
Resources is in the exploration stage, has sustained recurring losses and has a
net working capital deficiency which raises substantial doubts as to its ability
to continue as a going concern. However, Golden River Resources anticipates that
it will be able to defer repayment of obligations until it has sufficient
liquidity to enable these loans to be repaid or other arrangements to be put in
place. In addition Golden River Resources has historically relied on loans and
advances from corporations affiliated with the President of Golden River
Resources. Based on discussions with these affiliate companies, Golden River
Resources believes this source of funding will continue to be available. Other
than the arrangements noted above, Golden River Resources has not confirmed any
other arrangement for ongoing funding. As a result Golden River Resources may be
required to raise funds by additional debt or equity offerings in order to meet
its cash flow requirements during the forthcoming year.
The accumulated deficit of the Company from inception through March 31,
2006 amounted to A$32,410,000 of which A$6,008,000 has been accumulated from
July 2002, the date the Company entered the Exploration Stage, through March 31,
2006.
(5) Income Taxes
Golden River Resources should have carry forward losses of
approximately US$19.4 million as of June 30, 2005 which will expire in the
various years through 2024. Golden River Resources will need to file tax returns
for those years having losses on which returns have not been filed to establish
the tax benefits of the net operating loss carry forwards. Due to the
uncertainty of the availability and future utilization of those operating loss
carry forwards, management has provided a full valuation against the related tax
benefit.
(6) Employment Contract
In October 2004, the Company entered into an employment agreement with
a new Chief Operating Officer. The agreement expires on December 31, 2006 and
provides for an annual salary of US$110,000. As part of this employment
contract, the Company granted options to purchase 750,000 shares of the Company
common stock at US$1.00 per share (see Note 7). The 750,000 options vest as
follows: 250,000 immediately, 250,000 on September 1, 2005 and 250,000 on
December 31, 2006. The issue of the second 250,000 and third 250,000 options are
subject to availability of options in the Stock Option Plan.
(7) Issue of Options under Stock Option Plan
In October 2004, the Board of Directors and Remuneration Committee of
the Company adopted a Stock Option Plan and agreed to issue 1,400,000 options
and up to a further 500,000 options to acquire shares of common stock in the
Company, at an exercise price of US$1.00 per option, subject to shareholder
approval which was subsequently received on January 27, 2005. Of the total
1,400,000 options issued, 350,000 vested immediately following shareholder
approval, 50,000 vested on March 31, 2005, 333,331 vested on July 27, 2005,
333,334 vested on January 27, 2006 and the balance of 333,335 will vest on July
27, 2006. If the additional 500,000 options are granted, 250,000 will vest
immediately and 250,000 on December 31, 2006. The exercise price of US$1.00 was
derived from the issue price of common stock from the placement of shares on
March 31, 2004 and is considered by the Company's Directors to be the fair value
of the common stock. The options expire on October 15, 2014.
F-7
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
March 31, 2006
(7) Issue of Options under Stock Option Plan (Cont'd)
The Company has accounted for all options issued in 2006 based upon
their fair market value using the Black Scholes pricing model. There were no
options issued by the Company in 2005.
The Company has calculated the fair value of the options issued in
January 2006 using the Black Scholes valuation method using a share price of
US$1.00, strike price of US$1.00, maturity period of 5 years 7 1/2 months, risk
free interest rate of 5.15% and volatility of 20%. This equates to a value of
US31.85 cents per option. The total value of the options equates to A$575,100
(US$445,900) and is being amortized over the vesting period. For the three and
nine months ended March 31, 2006, the amortization amounted to A$32,699 and
A$168,297 respectively.
On January 1, 2006, the Company adopted revised SFAS No.123,
Share-Based payment, which addresses the accounting for share-based payment
transactions in which a company receives employee services in exchange for (a)
equity instruments of that company or (b) liabilities that are based on the fair
value of the company's equity instruments or that may be settled by the issuance
of such equity instruments. Because the Company had previously adopted the fair
value recognition provisions of SFAS No. 123, the revised standard did not have
a material impact on its financial statements.
Consistent with the provisions of APB No.25, the Company recorded the
fair value of stock option grants in stockholders equity and an offsetting
deferred compensation amount within stockholders equity for the unearned stock
compensation cost. Under SFAS No.123R an equity instrument is not considered to
be issued until the instrument vests. Accordingly, as provided in SFAS No.123R,
the Company has reversed the unamortized restricted stock compensation included
in stockholders equity for the unvested portions of stock option grants awarded
prior to the effective date of SFAS No.123R.
During the nine months ended March 31, 2006, 50,000 options lapsed when
Mr P. Ehrlich resigned as a Director.
A summary of the options outstanding and exercisable at March 31, 2006
are as follows:
Outstanding Exercisable
Number of options 1,350,000 716,666
Exercise price US$1.00 US$1.00
Expiration date October 15, 2014 October 15, 2014
(8) Events Subsequent to Balance Date
Effective as of May 8, 2006, the Company agreed to issue to Fast
Knight Nominees Pty Ltd (FKN), 10 million shares of common stock and options to
purchase 20 million shares of common stock at an exercise price of A$0.20 per
share and an expiration date of April 30, 2011, in repayment of A$2 million in
loans from Wilzed Pty Ltd to the Company. Wilzed is a company that is associated
with the President of the Company, Mr. J. I. Gutnick. Wilzed has agreed to
accept the Shares and Options as satisfaction of the loan and has instructed
the Company to issue the Shares and Options to FKN, a company that is also
associated with Mr. Gutnick.
On June 9, 2006, we entered into a Subscription Agreement with RAB
Special Situations (Master) Fund Limited ("RAB") pursuant to which we issued to
RAB in a private placement transaction (the "Private Placement") for an
aggregate purchase price of A$2,000,000 (US$1,542,000); (i)10,000,000 special
F-8
warrants (the "Special Warrants"), each of which is exercisable at any time to
acquire, without additional consideration, one share of common stock, and (ii)
warrants (the "Warrants") for the purchase of 20,000,000 shares of common stock,
at an exercise price of A$0.20 (US$0.1542) to be exercisable until April 30,
2011. The Warrants contain a cashless exercise provision whereby the holder, at
its option, may exercise the Warrants by surrender and cancellation of a portion
of the shares of our common stock issuable upon the exercise of the Warrants
based on the then current market price of our common stock. If the holders of
the Warrants elected to exercise the Warrants pursuant to this provision, we
would not receive any proceeds from the exercise of the Warrants.
We plan to conduct exploration on the Slave Properties during 2006. At
this stage, we have not prepared a budget for the 2006 exploration program.
However, we believe the budget will be approximately A$1,000,000. Our budget for
general and administration for fiscal 2006 is A$0.8 million. On June 14, 2006,
we closed an equity raising of A$2.0 million (US$1.542 million) and this will
provide cash for our exploration program, general and administration expenses
and working capital.
F-9
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(formerly Bay Resources Ltd)
(An Exploration Stage Company)
Consolidated Financial Statements
June 30, 2005 and 2004
(with Report of Independent Registered Public Accounting Firm)
F-10
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Golden River Resources Corporation (formerly Bay Resources Ltd)
We have audited the accompanying consolidated balance sheet of Golden
River Resources Corporation and Subsidiaries (An Exploration Stage Company) as
of June 30, 2005, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the years ended June 30, 2005
and 2004 and the cumulative period from July 1, 2002 (inception of exploration
activities) through June 30, 2005. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we 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. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Golden River
Resources Corporation and Subsidiaries at June 30, 2005, and the results of its
operations and its cash flows for the years ended June 30, 2005 and 2004 and the
cumulative period from July 1, 2002 (inception of exploration activities)
through June 30, 2005 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As described in note 1,
at June 30, 2005 the Company had not yet commenced revenue producing operations
and had a retained deficit of A$31,406,000 (US$23,931,000). These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Management's plans in
regard to these matters are also discussed in note 1.
New York, NY PKF
September 6, 2005 Certified Public Accountants
A Professional Corporation
F-11
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Balance Sheet
June 30, 2005
Convenience
Translation
A$000's US$000's
2005 2005
------------------------------
ASSETS
Current Assets:
Cash 2 2
Receivables 126 96
Prepayments and Deposits 82 62
------------------------------
Total Current Assets 210 160
------------------------------
Non Current Assets:
Property and Equipment, net 17 13
------------------------------
Total Non Current Assets 17 13
------------------------------
Total Assets 227 173
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable and Accrued Expenses 605 460
------------------------------
Total Current Liabilities 605 460
------------------------------
Non Current Liabilities
Long-Term Advance - Affiliate 972 741
------------------------------
Total Non Current Liabilities 972 741
------------------------------
Total Liabilities 1,577 1,201
------------------------------
Stockholders' Equity (Deficit):
Common stock: $.0001 par value
50,000,000 shares authorized,
16,714,130 shares issued 2 2
Less Treasury Stock, at Cost, 2,500 shares (20) (15)
Additional Paid-in-Capital 30,275 23,068
Deferred Compensation (198) (151)
Other Comprehensive loss (3) (2)
Retained Deficit during exploration stage (5,004) (3,813)
Retained Deficit prior to exploration (26,402) (20,118)
------------------------------
Total Stockholders' Equity (deficit) (1,350) (1,029)
------------------------------
Total Liabilities and Stockholders' Equity 227 172
==============================
See Notes to Financial Statements
F-12
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Operations
For the years ended June 30, 2004 and 2005
and for the cumulative period July 1, 2002
(inception of exploration activities) to June 30, 2005
Convenience July 1, 2002
Translation to June 30,
A$000's A$000's US$000's 2005
2004 2005 2005 A$000's
---- ---- ---- -------
$- $- $- $-
Revenues
-------------- ----------------- ------------------ ---------------
Cost and expenses
Stock Based Compensation - 377 287 377
Exploration Expenditure 951 1,277 973 2,426
Interest Expense net - related entity 122 44 34 299
Legal, Accounting and Professional 112 189 144 363
Administrative 537 716 546 1,541
-------------- ----------------- ------------------ ---------------
1,722 2,603 1,984 5,007
-------------- ----------------- ------------------ ---------------
(Loss) from Operations (1,722) (2,603) (1,984) (5,007)
Foreign Currency Exchange Gain (Loss) (1) 3 2 (3)
-------------- ----------------- ------------------ ---------------
(Loss) before Income Tax (1,723) (2,600) (1,982) (5,004)
- - - -
Provision for Income Tax
-------------- ----------------- ------------------ ---------------
Net (Loss) $(1,723) (2,600) (1,982) (5,004)
============== ================= ================== ===============
Basic net (Loss) per Common Equivalent Shares $(.18) $(.16) $(.12) $(.38)
============== ================= ================== ===============
Weighted Number of Common Equivalent
Shares Outstanding (000's) 9,385 16,714 16,714 12,932
============== ================= ================== ===============
See Notes to Financial Statements
F-13
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
June 30, 2004 and 2005
and for the cumulative period July 1, 2002
(inception of exploration activities) to June 30, 2005
Shares Common TreasuryAdditional Retained Retained Deferred Other Total
Stock Stock, Paid-in Earnings Earnings Compen-Compr-
Amount at Capital (Deficit) (Deficit) sation hensive
Cost (during the (prior to Loss
Exploration Exploration
stage) stage)
-------------------------------------------------------------------------------
000's A$000's A$000's A$000's A$000's A$000's A$000's A$000'sA$000's
Balance June 30, 2002 6,347 $1 $(20) $25,175 - $(26,402) - - $(1,246)
Net loss - - - - (681) - - - (681)
-------------------------------------------------------------------------------
Balance June 30, 2003 6,347 $1 $(20) $25,175 $(681) $(26,402) - - $(1,927)
Issuance of 1,753,984 shares and warrants
in lieu of debt repayment 1,754 - - 2,273 - - - - 2,273
Sale of 1,670,000 shares and warrants 1,670 - - 2,253 - - - - 2,253
Issuance of 6,943,057 shares on cashless
exercise of options 6,943 1 - (1) - - - - -
Net unrealized loss on foreign exchange - - - - - - - (9) (9)
Net (loss) - - - - $(1,723) - - - (1,723)
-------------------------------------------------------------------------------
Balance June 30, 2004 16,714 $2 $(20) $29,700 $(2,404) $(26,402) - (9) $867
Issuance of 1,400,000 options under 2004
stock option plan - - - 575 - - (575) - -
Amortization of 1,400,000 options under
2004 stock option plan - - - - - - 377 - 377
Net unrealized gain on foreign exchange - - - - - - 6 6
Net/(loss) - - - - (2,600) -0) (2,600)
-------------------------------------------------------------------------------
Balance June 30, 2005 16,714 $2 $(20) 30,275 $(5,004) (26,402) (198) (3) (1,350)
-------------------------------------------------------------------------------
See Notes to Financial Statements
F-14
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
For the Years Ended June 30, 2004 and 2005
and for the cumulative period July 1, 2002
(inception of exploration activities) to June 30, 2005
Convenience July 1, 2002
Translation to June 30,
A$000's A$000's US$000's 2005
2004 2005 2005 A$000's
---- ---- ---- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $(1,723) $(2,600) $(1,981) $(5,004)
Adjustments to reconcile net (loss) to net cash (used) in
operating activities
Foreign Exchange (9) 6 4 (3)
Depreciation of plant and equipment 1 9 7 10
Stock based compensation - 377 287 377
Accrued interest added to principal 1 50 38 184
Net Change In :
Receivables (84) (39) (30) (126)
Staking Deposit - - - 23
Prepayments and Deposits (241) 159 121 (82)
Accounts Payable and Accrued Expenses 338 110 84 156
Short-Term Advance - Affiliates 103 (104) (79) (36)
---------------- ------------- ------------------ ----------------
Net Cash used in Operating Activities (1,614) (2,032) (1,549) (4,501)
---------------- ------------- ------------------ ----------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of Plant and Equipment (21) (6) (4) (27)
---------------- ------------- ------------------ ----------------
Net Cash used in Investing Activities (21) (6) (4) (27)
---------------- ------------- ------------------ ----------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Net borrowing (repayments) from Affiliates (1,774) 922 703 3
Sale of Shares of Common Stock 2,253 - - 2,253
Proceeds from loan payable 2,273 - - 2,273
---------------- ------------- ------------------ ----------------
Net Cash Provided by Financing Activities 2,752 922 703 4,530
---------------- ------------- ------------------ ----------------
Net Increase (Decrease) in Cash 1,117 (1,116) (850) 1
Cash at Beginning of Year 1 1,118 852 1
---------------- ------------- ------------------ ----------------
Cash at End of Year 1,118 2 2 2
================ ============= ================== ================
Supplemental Disclosures
Interest Paid $122 - - 255
NON CASH FINANCING ACTIVITY
Debt repaid through issuance of shares $2,273 - - 2,273
Stock Options recorded as Deferred Compensation
- $575 $438 $575
See Notes to Financial Statements
F-15
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(1) ORGANIZATION AND BUSINESS
Golden River Resources Corporation ("Golden River Resources" or
the "Company", formerly Bay Resources Ltd) is incorporated in the State
of Delaware. The principal shareholder of Golden River Resources is
Edensor Nominees Proprietary Limited ("Edensor"), an Australian
corporation. Edensor owned 32.3% of Golden River Resources as of June 30,
2005. During fiscal 1998, Golden River Resources incorporated a
subsidiary, Baynex.com Pty Ltd (formerly Bayou Australia Pty Ltd), under
the laws of Australia. Baynex.com has not traded since incorporation. On
August 21, 2000 the Company incorporated a new wholly owned subsidiary,
Bay International Pty Ltd, (now known as Bay Resources (Asia) Pty Ltd), a
corporation incorporated under the laws of Australia. In June 2002, the
Company incorporated a new wholly owned subsidiary, Golden Bull Resources
Corporation ("Golden Bull") (formerly 4075251 Canada Inc), a corporation
incorporated under the laws of Canada. Golden Bull is the vehicle that
will be used by the Company to undertake exploration activities for gold
in Canada.
During the 2002 fiscal year, Golden River Resources expanded its
gold exploration business by entering into an agreement to explore for
gold on extensive property interests in northern Canada held by Tahera
Corporation; and making application via a new 100% owned subsidiary,
Golden Bull Resources Corporation, for properties in the highly
prospective Committee Bay Greenstone Belt in Nunavut, Canada.
Golden River Resources originally applied for 29 claims totaling
71,694 acres in the Committee Bay Greenstone Belt in central Nunavut,
Canada. These claims were recorded on October 16, 2002. From the original
area, Golden River Resources retained a total of 49,439.48 acres on 21
claims. To keep the claims in good standing, Golden River Resources
needed to spend a total of CN$197,798 of assessment work was required to
be completed by the anniversary date of October 16, 2004. A total of
CDN$98,879 is required in each subsequent year up to 2012 (at which point
a decision to bring the claims to lease must be made). Golden River
Resources spent more than the minimum requirement and the excess spent
can be used to offset the expenditure requirements in following years. As
a result, Golden River Resources has already met its commitment until
2012.
The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in
the United States of America, which contemplates continuation of Golden
River Resources as a going concern. However, Golden River Resources is an
exploration stage company which has not yet commenced revenue producing
operations and has sustained recurring losses since inception.
In addition, Golden River Resources has historically relied on
loans and advances from corporations affiliated with the President of
Golden River Resources and fund raising through the sale of equity
instruments. Based on discussions with these affiliate companies Golden
River Resources believes this source of funding will continue to be
available.
The Company's ability to continue operations through fiscal 2006
is dependent upon future funding from affiliated entities, capital
raisings, or its ability to commence revenue producing operations and
positive cash flows.
The Company raised A$2,253,000 in April 2004 through the
issuance of shares under a Private Placement and has used their funding
to commence exploration activity in Canada.
F-16
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(2) RECENT ACCOUNTING PRONOUNCEMENTS
In December 2002, the Financial Accounting Standards Board
("FASB") approved Statement of Financial Accounting Standards No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure.
SFAS No. 148 amends Statement of Financial Accounting standards No.
123, "Accounting for Stock-Based compensation" (SFAS No. 123) to
provide alternative methods of transition for a voluntary change
to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used
on reported results. SFAS No. 148 was effective for the Company fiscal
year ended June 30, 2003.
In May 2003, the FASB issued SFAS No. 150 "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities
and Equity". SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an
issuer classify a financial instrument that is within its scope as a
liability (or an asset is some circumstances). The requirements of SFAS
No. 150 apply to issuer's classification and measurement of freestanding
instruments, including those that comprise more than one option or
forward contract. SFAS No. 150 does not apply to features that are
embedded in a financial instrument that is not a derivative in its
entirety. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003,
except for mandatory redeemable financial instruments of non-public
entities. It is to be implemented by reporting the cumulative effect of a
change in an accounting principle for financial instruments created
before the issuance date of SFAS No. 150 and still existing at the
beginning of the interim period of adoption. The adoption of this new
standard had no effect on the Company's financial position.
In December 2004, the FASB issued Statement of Financial
Accounting Standards No. 153 (SFAS 153), "Exchanges of Nonmonetary
Assets." SFAS 153 amends the guidance in APB No. 29, "Accounting for
Nonmonetary Assets." APB No.29 was based on the principle that exchanges
of nonmonetary assets should be measured on the fair value of the assets
exchanged. SFAS 153 amends APB No. 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not have
commercial substance if the future cash flows of the entity are expected
to change significantly as a result of the exchange. SFAS 151 is
effective for financial statements issued for fiscal years beginning
after June 15, 2005.
The adoption of SFAS 153 is not expected to have a material
effect on the Company's financial position or results of operations.
In December 2004, the FASB revised Statement of Financial
Accounting Standards No. 123 (SFAS 123(R)), "Accounting for Stock-Based
Compensation." The SFAS 123(R) revision established standards for the
accounting for transactions in which an entity exchanges its equity
instruments for goods or services and focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based
payment transactions. It does not change the accounting guidance for
share-based payment transactions with parties other than employees. For
public entities that do not file as small business issuers, the revisions
to SFAS 123 are effective as of the beginning of the first interim or
annual reporting period that begins after June 15, 2005. For public
entities that file as small business issuers, the revisions
F-17
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(2) RECENT ACCOUNTING PRONOUNCEMENTS (continued)
to SFAS 123(R) are effective as of the beginning of the first interim or
annual reporting period that begins after December 15, 2005.
For non-public entities, the revisions to SFAS 123 are effective
as of the beginning of the first annual reporting period that begins
after December 15, 2005. The adoption this statement will not have an
effect on the Company's financial position or results of operations as
the Company already applies the provisions of FASB No.123 and accounts
for stock options under the fair value method
In March 2005, the FASB issued FASB Interpretation ("FIN") No.
47, "Accounting for Conditional Asset Retirement Obligations." FIN No. 47
clarifies the meaning of the term CONDITIONAL ASSET RETIREMENT OBLIGATION
as used in SFAS 143, "Accounting for Asset Retirement Obligations" and
clarifies when an entity would have sufficient information to reasonably
estimate the fair value of an asset retirement obligation. This
interpretation is effective no later than the end of fiscal years ending
after December 15, 2005 (December 31, 2005 for calendar-year companies).
Retrospective application of interim financial information is permitted
but is not required. The adoption of this statement is not expected to
have a material effect on the Company's consolidated financial position,
results of operations or cash flows.
In May 2005, the FASB issued SFAS no. 154, "Accounting Changes
and Error Corrections ("SFAS No. 154") which replaces APB Opinion No. 20,
"Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in
Interim Financial Statements-An Amendment of ABP Opinion No. 28. SFAS No.
154 provides guidance on the accounting for and reporting of accounting
changes and error corrections. Specially, this statement requires
"retrospective application" of the direct effect for a voluntary change
in accounting principle to prior periods' financial statements, if it is
practical to do so. SFAS No. 154 also strictly defines the term
"restatement" to mean the correction of an error revising previously
issued financial statements. SFAS No. 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning after
December 15, 2005 and is required to be adopted by the Company in the
first quarter of fiscal year 2007. Although we will continue to evaluate
the application of SFAS No. 154, management does not currently believe
adoption will have a material impact on our results of operations,
financial position or cash flows.
(3) ACCOUNTING POLICIES
The following is a summary of the significant accounting
policies followed in connection with the preparation of the consolidated
financial statements.
(a) Consolidation
The consolidated financial statements include the
accounts of Golden River Resources and the 100% interest it holds
in Baynex.com Pty Ltd, Bay Resources (Asia) Pty Ltd and Golden
Bull Resources Corporation. All significant intercompany
transactions and balances have been eliminated in consolidation.
(b) Foreign Currency Translation
The majority of Golden River Resources' administrative
operations are in Australia and as a result the reporting currency
of its consolidated accounts are maintained in Australian dollars.
The functional currency of the Company Canadian subsidiary is the
Canadian dollar. The income and expenses of operations are
translated into Australian dollars at the average exchange rate
prevailing during the period. Assets and liabilities of the
Canadian subsidiary are
F-18
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(3) ACCOUNTING POLICIES (continued)
translated into Australian dollars at the period-end exchange
rate. The resulting translation adjustments are accumulated in a
separate component of Stockholders Equity. Foreign currency
translation adjustments have not been material for all periods
presented.
(c) Financial Instruments
The Company's cash, receivables, payables and short term
borrowings represent financial instruments whose carrying amounts
reasonably approximate their fair value.
(d) Comprehensive Income (Loss)
The Company follows Financial Accounting Standards No.
130 (SFAS 130) "Reporting Comprehensive Income". SFAS 130
requires a company to report comprehensive income (loss) and its
components in a full set of financial statements. Comprehensive
income (loss) is the change in equity during a period from
transactions and other events and circumstances from non-owner
sources, such as unrealized gains (losses) on foreign currency
translation adjustments. Changes in unrealized foreign currency
translation gains or (losses) during fiscal 2005 and 2004
amounted to A$6,000 and (A$9,000), respectively. Accordingly,
comprehensive loss for the years ended June 30, 2005 and 2004
amounted to A$2,594,000 and A$1,732,000, respectively.
(e) Property and Equipment
Property and equipment is stated at cost. Depreciation is
computed over a period covering the estimated useful life of the
applicable property and equipment. Accumulated depreciation and
depreciation expense as of and for the year ended June 30, 2005
amounted to A$2,654 (2004 A$1,052) and A$1,602 (2004 $1,052)
respectively.
(f) Cash Equivalents
Golden River Resources considers all highly liquid
investments with an original maturity of three months or less at
the time of purchase to be cash equivalents. For the periods
presented there were no cash equivalents.
(g) Income Tax
Income taxes are provided on financial statement income.
For the periods presented there was no taxable income. There are
no deferred income taxes resulting from temporary differences in
reporting certain income and expense items for income tax and
financial accounting purposes. Golden River Resources at this
time is not aware of any net operating losses which are expected
to be realised.
F-19
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(3) ACCOUNTING POLICIES (continued)
(h) Loss per share
Basic (loss) per share is computed based on the weighted
average number of common shares outstanding during the period.
Dilutive loss per share has not been presented as the effects of
common stock equivalents are anti-dilutive.
(i) Exploration Expenditure
Exploration expenditure consisting of prospecting and
exploration costs are written off into operations as incurred.
(j) Accounting for Stock Options
For the issuances of stock options, the Company follows
the fair value provisions of Financial Accounting Standards No.
123 "Accounting for Stock Based Compensation". SFAS 123 requires
the company to measure the cost of employee services received in
exchange for an award of equity instruments based on grant date
fair value. The cost will be recognised over the period during
which an employee is required to provide service in exchange for
the award - usually the vesting period. In the case where there
is no required service period, the fair value of the equity
instruments is expensed immediately.
(k) Pension Plans
The Company does not have any pension or profit sharing
plans. The Company's Vice President Exploration and temporary
staff employed in the exploration programme in Canada are
subject to Canadian requirements for contributions to pension
plans. At June 30, 2005, the Company has an obligation to pay
A$13,570. Contributions to employee benefit or health plans
during the year ended June 30, 2005 were A$7,196.
(l) Convenience Translation to US$
The consolidated financial statements as of and for the
year ended June 30, 2005 have been translated into United States
dollars using the rate of exchange of the United States dollar
at June 30, 2005 (A$1.00=US$0.7620). The translation was made
solely for the convenience of readers in the United States.
(m) Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results
could differ from those estimates. Significant estimates
required to be made by management include the fair value of
options and other equity instruments issued.
(n) Comparative Figures
Where necessary, comparative figures have been restated
to be consistent with current year presentation.
F-20
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(4) INVESTMENT SECURITIES
The Company has several small historical cost based investments
that it has provided a full valuation for diminution and carry's at a
$nil value (2004 $nil).
A$000's
2005
(5) LONG-TERM ADVANCE - AFFILIATE
Loan from AXIS Consultants, a corporation affiliated with the 297
President of Golden River Resources. Interest accrued at 10.60% to
10.85% being the National Australia Bank rate plus 1.5% for overdrafts
over $100,000.
Loan from Wilzed Pty Ltd, a corporation affiliated with the President 675
of Golden River Resources. Interest accrued at 9.10% to 9.35% being
the rate.
--------------------
972
====================
(6) AFFILIATE TRANSACTIONS
Golden River Resources advances to and receives advances from
various affiliates. All advances between consolidated affiliates are
eliminated on consolidation.
Included in short term advances and accounts payable and accrued
liabilities at June 30, 2004 was A$104,000 due to AXIS, an affiliated
management company. This entity is affiliated through common management
and ownership. The Company paid AXIS A$487,535 (being A$383,535 in
respect to the current year and A$104,000 being the amount owing at June
30, 2004) in respect of the Service Agreement for the fiscal year ended
June 30, 2005 and A$759,410 (being A$335,987 in respect to the current
year and A$486,000 in respect to prior years) in respect of the Service
Agreement for the fiscal year ended June 30, 2004 During 2005, AXIS
loaned the Company A$249,500.At June 30, 2004 and 2005, the Company owed
AXIS A$104,000 and A$296,764 respectively for services provided in
accordance with the Service Agreement. During fiscal 2004 and 2005, AXIS
Consultants charged interest of A$42,742 and A$13,879 respectively on
outstanding balances. AXIS charged interest at rates between 10.10% and
10.60% for fiscal 2004 and 10.60% and 10.85% for fiscal 2005.
Chevas Pty Ltd, a company associated with the President of the
Company, Joseph Gutnick, has provided loan funds to enable the Company to
meet its liabilities and has paid certain expenses on behalf of the
Company. At June 30 2002, the Company owed Chevas A$783,743. During the
2003 fiscal year, Chevas loaned a further A$369,155 and charged A$86,417
in interest to the Company on the loan account. At June 30, 2003, the
Company owed Chevas A$1,239,315. During the 2004 fiscal year, Chevas
loaned a further A$187,122 and charged A$82,776 in interest to the
Company on the loan account. During the 2004 fiscal year the Company
repaid the loan in full amounting to A$1,509,214. Interest rates charged
in fiscal 2004 ranged between 8.6% to 9.10%.
Edensor Gold Pty Ltd, a company associated with the President of
the Company, Joseph Gutnick, provided loan funds during fiscal 2004 to
enable the Company to meet its liabilities. During the 2004 fiscal year,
Edensor Gold loaned A$69,000 and charged A$670 in interest. During fiscal
2004, we repaid the loan in full. Edensor Gold charged interest on
outstanding balances of the loan account at the ANZ
F-21
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(6) AFFILIATE TRANSACTIONS (continued)
Banking Group Limited reference rate for overdrafts over A$100,000 plus
1%. In accordance with this formula, the actual interest rate charged
during the 2004 fiscal year was 8.85% to 9.10%.
Wilzed Pty Ltd, a company associated with the President of the
Company, Joseph Gutnick, has provided loan funds to enable the Company to
meet its liabilities. During the 2005 fiscal year, Wilzed loaned
A$644,633 and charged A$31,235 in interest. We repaid $396. At June 30,
2005, the Company owed Wilzed A$675,472. Wilzed charged interest during
fiscal 2005 at rates between 9.10% and 9.35%.
At June 30, 2002, the Company owed Tahera A$36,365. During
fiscal 2003, Tahera incurred certain exploration and administration costs
in Canada on behalf of the Company amounting to A$65,314 and Mr. J.I.
Gutnick and Chevas paid Tahera A$47,368 and A$53,350 respectively on
behalf of the Company. During fiscal 2003 and 2004, Tahera did not charge
the Company interest on amounts outstanding. At June 30, 2003, the
Company owed Tahera A$1,361 and Mr. J.I. Gutnick A$47,368. During fiscal
2004, Mr J I Gutnick was paid in full and Tahera advised the Company in
writing that there were no monies owing to it by the Company.
Quantum Resources Limited incurred certain costs on behalf of
the Company amounting to A$43,941 during fiscal 2003 in respect to the
Company's activities in Tibet China as a result of Quantum's contacts in
China. This amount remained outstanding and was included in accounts
payable and accrued expenses at June 30, 2003. During fiscal 2004, this
amount was repaid in full.
Kerisridge Pty Ltd, a company associated with the President of
the Company, Mr J I Gutnick, loaned us A$2,273,186 in March 2004 for the
purpose of repaying our long term debt. On March 31, 2004, Kerisridge
agreed to convert all of the debt owed to them into common stock and
warrants of the Company. The Company issued 1,753,984 shares of common
stock and 1,753,984 warrants exercisable at US$1.30 and at any time up to
March 31, 2006 in full repayment of the $2,273,186 owing to Kerisridge.
On February 19, 2004 Edensor Nominees Pty Ltd ("Edensor")
advised the Company that it was exercising the 6,000,000 options for
common stock of the Company it held utilizing the cashless exercise
feature of the terms and conditions of the issue of the options. The
Company issued 5,142,857 shares of common stock to Edensor on March 3,
2004 as a result of the exercise of the options. (See note 9)
Interest expense incurred on loans and advances due to
affiliated entities approximated A$45,000 and A$122,000 in fiscal 2005
and 2004, respectively.
(7) CONTINGENT LIABILITY
The Company has received an invoice from a corporation that
conducted the pegging of the claims in Canada on behalf of the Company. A
number of claims that were pegged were not ultimately issued to the
Company due to a number of errors by the pegging Company. The Company had
advised the pegging company that it does not believe any further payments
are due to the pegging company as a result of the economic loss incurred
by Golden River Resources. The Company believes that if it is
unsuccessful in defending any claim that is brought against it, the
maximum potential liability is C$59,000. No accrued liability has been
recorded in the accompanying financial statement pending the ultimate
disposition of this matter.
F-22
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(8) INCOME TAXES
Golden River Resources files its income tax returns on an
accrual basis. Golden River Resources should have carry forward losses of
approximately US$19.4 million as of June 30, 2005 which will expire in
the years 2006 through 2024. Golden River Resources will need to file tax
returns for those years having losses on which returns have not been
filed to establish the tax benefits of the net operating loss carry
forwards. Due to the uncertainty of the availability and future
utilization of those operating loss carryforwards, management has
provided a full valuation against the related tax benefit. The valuation
allowance increased from US$6.8 million at June 30, 2004 to US$7.5
million at June 30, 2005.
(9) STOCKHOLDERS EQUITY
In February and March 2004, holders of options to acquire
8,000,000 shares of the common stock informed the Company of their
intentions to exercise the cashless exercise feature of their option
agreement. As a result the Company issued 6,943,057 shares of its common
stock.
In March 2004, the Company raised US$1,670,000 (A$2,253,000)
through a private placement by issuing 1,670,000 shares of common stock
and warrants to purchase 1,670,000 shares of common stock at US$1.30 per
share. The warrants expire in two years from the date of issuance.
In March 2004, the Company received a loan from an affiliated
entity in the amount of A$2,273,000 (US$1,754,000) which was used to
repay other outstanding amounts due to affiliated entities. This loan was
later satisfied through the issuance of 1,753,984 shares of common stock
and warrants to purchase 1,753,984 shares of common stock at $1.30 per
share. The warrants expire in two years from the date of issuance.
At June 30, 2005 the Company has outstanding stock options as
detailed in footnote 11. At June 30, 2005 the Company had warrants
outstanding to purchase 3,423,984 shares of common stock at US$1.30 per
share. All of the warrants expire in 2006.
(10) ISSUE OF OPTIONS UNDER STOCK OPTION PLAN
In October 2004, the Board of Directors and Remuneration
Committee of the Company adopted a Stock Option Plan and agreed to issue
1,400,000 options and up to a further 500,000 options to acquire shares
of common stock in the Company, at an exercise price of US$1.00 per
option, subject to shareholder approval which was subsequently received
on January 27, 2005. Of the total 1,400,000 options issued, 350,000 vest
immediately following shareholder approval, 50,000 vest on March 31,
2005, 333,331 vest on July 27, 2005, 333,334 vest on January 27, 2006 and
the balance of 333,335 vest on July 27, 2006. If the additional 500,000
options are granted, they will vest 250,000 on October 31, 2005 and
250,000 on December 31, 2006. The exercise price of US$1.00 was derived
from the issue price of common stock from the placement of shares on
March 31, 2004 and is considered by the Company's Directors to be the
fair value of the common stock. The options expire on October 15, 2014.
The Company has accounted for all options issued in 2005 based
upon their fair market value using the Black Scholes pricing model. There
were no options issued by the Company in 2004.
F-23
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(10) ISSUE OF OPTIONS UNDER STOCK OPTION PLAN (continued)
The Company has calculated the fair value of the 1,400,000
options using the Black Scholes valuation method using a share price of
US$1.00, strike price of US$1.00, maturity period of 5 years 7 1/2
months, risk free interest rate of 5.15% and volatility of 20%. This
equates to a value of US31.85 cents per option. The total value of the
options equates to A$575,100 (US$438,200) and has been reflected as
Deferred Compensation Expense within the Shareholders Equity Statement.
The gross fair value is amortized into operations over the vesting
period. For fiscal 2005, the amortization amounted to A$377,210
(US$287,434). Subsequent to June 30, 2005, and as a result of the
resignation of one of the Company's Directors, 50,000 options were
relinquished.
A summary of the options outstanding and exercisable at June 30,
2005 are as follows:
Outstanding Exercisable
Number of options 1,400,000 733,333
Exercise price US$1.00 US$1.00
Expiration date October 15, 2014 October 15, 2014
F-24
Appendix A
GLOSSARY
In this Prospectus, we use certain capitalized and abbreviated terms,
as well as technical terms, which are defined below.
AMPHIBOLE A family of silicate minerals forming prism or
needlelike crystals. Amphibole minerals generally
contain iron, magnesium, calcium and aluminum in
varying amounts, along with water.
ANOMALY Pertaining to the data set resulting from
geochemical or geophysical surveys; a deviation
from uniformity or regularity.
ANTICLINE An upward-curving (convex) fold in rock that
resembles an arch. The central part contains the
oldest section of rock.
ARCHEAN The time interval between 3800-2500 million years
ago. The Archean is one of the Precambrian time
intervals.
ARSENOPYRITE A tin-white or silver-white to steel-grey mineral
(FeAsS).
ASSAY To analyze the proportions of metals in a specimen
of rock or other geological material. Results of a
test of the proportions of metals in a specimen of
rock or other geological material.
BEDROCK A general term for the rock, usually solid, that
underlies soil or other unconsolidated superficial
material.
BIOTITE A dark brown to dark green or black mica mineral.
BRECCIA A rock that is composed of larger than sand size
angular fragments that are cemented together by a
finer grained matrix; in this sense the
fragmentation is usually a result of movement on
nearby or adjoining fault or fracture zones.
CHALCOPYRITE Copper iron sulfide mineral (CuFeS2). Color is
brassy yellow.
CHIP SAMPLE A sample of a vein or other mineralized
structure that is collected by way of small pieces
of rock taken at regular and frequent intervals on
a transect across the structure; intended to be a
relatively accurate representation of the tenor of
mineralization.
CRATON The relatively stable nucleus of a continent.
Cratons are made up of a shield-like core of
Precambrian Rock and a buried extension of the
shield.
DYKE A tabular igneous intrusion that cuts across the
bedding or foliation of the country rock.
FAULT A fracture or fracture zone in rock along which
there has been displacement of the two sides
relative to each other and parallel to the
fracture plane.
GABBRO A dark, coarse-grained intrusive igeneous rock.
Gabbro is made of calcium-rich plagioclase, with
amphibole and/or pyroxene, and is chemically
equivalent to basalt.
A-1
GEOPHYSICAL SURVEY In mineral exploration, the collection of
seismic, gravitational, electrical, radiometric,
density or magnetic data to aid in the evaluation
of the mineral potential of a particular area.
GRAB SAMPLE A specimen of mineralized bedrock or float,
usually about fist-sized, that may be collected
as a representation of the mineralized zone as
a whole. Because of bias, either unintended or
otherwise, and because of the generally high
natural variability typical of gold-silver
vein mineralization, grades of grab samples
should not be considered as a reliable
estimation of a mineralized zone as a whole but
they nonetheless serve to establish the presence
of mineralization with grades of economic
interest.
GRANITE A coarse grained intrusive igneous rock with at
least 65% silica. Quartz, plagioclase feldspar and
potassium feldspar make up most of the rock and
give it a fairly light color. Granite has more
potassium feldspar than plagioclase feldspar.
GRANODIORITE A coarse grained igneous plutonic rock
intermediate in composition between quartz diorite
and quartz monzonite; containing quartz,
plagioclase, and potassium feldspar, with biotite
and hornblende as the dominant mafic components.
GREENSTONE A metamorphic rock derived from basalt or
chemically equivalent rock such as gabbro.
Greenstones contain sodium-rich plagioclase
feldspar, chlorite, and epidote, as well as
quartz.
GPT Abbreviation for gram per tonne; equivalent to one
part per million (ppm).
IGNEOUS Said of a rock or mineral that solidified from
molten or partly molten material; also applied to
processes leading to, or resulting from the
formation of such rocks.
INTRUSION Emplacement of magma (molten rock) into
pre-existing rock. Dikes, sills and batholiths are
intrusions.
IP A type of geophysical survey method called Induced
Polarisation.
IRON FORMATION A chemical sedimentary rock containing
at least 15% iron and commonly containing chert.
The iron may be present as oxide, silicate,
carbonate, or sulfide.
KOMATIITE An igneous suite of basaltic and ultramafic lavas.
MAFIC Pertaining to or composed dominantly of the
ferromagnesian rock forming silicates; said of
some igneous rocks and their constituent minerals.
MASSIVE Said of a stratified rock that occurs in very
thick, homogenous beds.
METALLIC A mineral chiefly composed of, or containing, one
or more metals as a primary constituent.
MINERALIZATION The process or processes by which a mineral or
minerals are introduced into a rock, resulting in
an enriched deposit; or the result of these
processes.
A-2
MINERALIZED Rock that has undergone the process of
mineralization.
NET SMELTER
RETURN ROYALTY A general term for a residual benefit that
is a percentage of the value for which a smelter
will reimburse the provider of ore to the smelter,
after deduction for various smelting fees and
penalties and, often after cost of transportation
has been deducted.
ORE The naturally occurring material from which a
mineral or minerals of economic value can be
extracted profitably or to satisfy social or
political objectives.
OUTCROP The part of a rock formation that appears at the
surface of the ground.
OVERBURDEN Loose soil, sand, gravel, broken rock, etc. that
lies above the bedrock.
PERMAFROST A permanently frozen layer of soil or subsoil, or
even bedrock, which occurs to variable depths
below the Earth's surface in arctic or subarctic
regions.
PPB Abbreviation for part per billion.
PPM Abbreviation for part per million.
PROSPECTING Pertaining to the search for outcrops or surface
exposures of mineral deposits, primarily by
nonmechanical methods.
PYRITE Iron sulfide mineral (FeS). Forms silvery to
brassy metallic cubes or masses.
QUARTZ A glassy silicate and common rock forming mineral
(SiO2).
RESERVE An estimate within specified accuracy limits of
the valuable metal or mineral content of known
deposit that may be produced under current
economic conditions and with present technology.
RESOURCE Pertaining to the quantity or bulk of mineralized
material without reference to the economic
viability of its extraction (see reserve).
SEDIMENT Fragmental material that originates from
weathering of rocks and that is transported by
air, water, ice or other natural agents, and that
forms in layers on the Earth's surface at ordinary
temperatures in a loose, unconsolidated form; e.g.
silt, sand, gravel, etc.
SCHIST A strongly foliated rock, formed by dynamic
metamorphism, that can be split into thin flakes
or slabs due to well developed parallelism of more
than 50% of the minerals.
SHEARED A descriptive term for rock that is deformed as a
result of stresses that cause or tend to cause
parts of a body to slide relative to each other
along their plane of contact.
STRIKE The course or bearing of the outcrop of an
inclined bed, vein or fault plane on a level
surface; the direction of a horizontal line
perpendicular to the dip.
A-3
STRUCTURAL MAPPING Geological mapping that focusses in
collection of data pertaining to the orientation
of beds, faults and fractures as well as other
structures that modify the distribution of bedrock
and mineralized zones.
SULPHIDE MINERAL A mineral compound characterized by the
linkage of sulphur with a metal or semimetal.
TRACE Pertaining to assay values; as used in this
report, this term refers to gold grades of less
than 0.01 oz/ton (0.3 gpt).
ULTRAMAFIC Igneous rocks made mostly of the mafic minerals
hypersthene, augite, and/or olivine.
VEIN An epigenetic mineral filling of a fault or other
fracture in a host rock, in tabular or sheetlike
form, often as a precipitate from a hydrothermal
fluid.
A-4
Appendix B
Slave Craton Mining Claims
The following is a list of the mining claims that are covered under our
agreement with Tahera:
Next
Tag# Claim NTS Acres Registered Anniversary Type of Property
Jericho Mining Claims
ML3793 DJB 19 076-L-04 344.0 09-Jun-99 09-Jun-04 Lease
ML3794 JD 94 076-L-04 2524.0 09-Jun-99 09-Jun-04 Lease
ML3795 JD 313 076-L-04 2515.0 09-Jun-99 09-Jun-04 Lease
ML3796 OD 44 076-L-04 422.0 09-Jun-99 09-Jun-04 Lease
ML3797 OD 45 076-L-04 325.0 09-Jun-99 09-Jun-04 Lease
ML3798 OD 61 076-L-04 508.0 09-Jun-99 09-Jun-04 Lease
----------------
6,638.0
----------------
Jericho Group
F31092 JD 92 076-L-04 2,272.60 26-Jan-93 26-Jan-04 Lease Applied For
F31093 JD 93 076-L-04 2,569.60 26-Jan-93 26-Jan-04 Lease Applied For
F31095 JD 95 076-L-04 2,363.10 26-Jan-93 26-Jan-04 Lease Applied For
F31096 JD 96 076-L-04 2,582.50 26-Jan-93 26-Jan-04 Lease Applied For
F31310 JD 310 076-L-03 632.70 26-Jan-93 26-Jan-04 Lease Applied For
F31311 JD 311 076-L-03 890.90 26-Jan-93 26-Jan-04 Lease Applied For
F31312 JD 312 076-L-03 1,144.00 26-Jan-93 26-Jan-04 Lease Applied For
F31314 JD 314 076-L-03 2,118.10 26-Jan-93 26-Jan-04 Lease Applied For
F31315 JD 315 076-L-03 2,117.60 26-Jan-93 26-Jan-04 Lease Applied For
----------------
16,691.10
----------------
F35015 OD 25 076-E-13 2,255.50 18-Jun-93 18-Jun-04 Lease Applied For
F35016 OD 26 076-E-13 2,255.50 18-Jun-93 18-Jun-04 Lease Applied For
F35017 OD 27 076-E-13 2,165.40 18-Jun-93 18-Jun-04 Lease Applied For
F35018 OD 28 076-E-13 375.10 18-Jun-93 18-Jun-04 Lease Applied For
F35019 OD 29 076-E-13 444.20 18-Jun-93 18-Jun-04 Lease Applied For
F35020 OD 30 076-E-13 2,509.60 18-Jun-93 18-Jun-04 Lease Applied For
F35021 OD 31 076-E-13 2,548.70 18-Jun-93 18-Jun-04 Lease Applied For
F35022 OD 32 076-E-13 2,582.50 18-Jun-93 18-Jun-04 Lease Applied For
F35031 OD 41 076-E-13 2,435.90 18-Jun-93 18-Jun-04 Lease Applied For
F35032 OD 42 076-E-13 2,435.90 18-Jun-93 18-Jun-04 Lease Applied For
F35033 OD 43 076-E-13 2,420.80 18-Jun-93 18-Jun-04 Lease Applied For
F35036 OD 46 076-E-13 2,066.00 18-Jun-93 18-Jun-04 Lease Applied For
F35037 OD 47 076-E-13 2,029.90 18-Jun-93 18-Jun-04 Lease Applied For
F35038 OD 48 076-E-13 2,029.90 18-Jun-93 18-Jun-04 Lease Applied For
F35048 OD 58 076-E-14 2,582.50 18-Jun-93 18-Jun-04 Lease Applied For
F35049 OD 59 076-E-14 2,582.50 18-Jun-93 18-Jun-04 Lease Applied For
F35050 OD 60 076-E-14 2,582.50 18-Jun-93 18-Jun-04 Lease Applied For
F35052 OD 62 076-E-14 508.60 18-Jun-93 18-Jun-04 Lease Applied For
F35053 OD 63 076-E-14 2,582.50 18-Jun-93 18-Jun-04 Lease Applied For
F35055 OD 65 076-E-14 2,582.50 18-Jun-93 18-Jun-04 Lease Applied For
F35065 OD 75 076-E-14 2,582.50 18-Jun-93 18-Jun-04 Lease Applied For
----------------
44,558.50
----------------
----------------
F45947 DJB 17 076-L-03 160.10 06-Jul-94 06-Jul-04 Lease Applied For
----------------
B-1
Jericho Exploration
F45635 INU 3 076-E-11 77.50 08-Jun-94 08-Jun-04 Mineral Claim
F44915 INU 5 076-E-11 217.00 08-Jun-94 08-Jun-04 Mineral Claim
F44916 INU 6 076-E-11 77.50 08-Jun-94 08-Jun-04 Mineral Claim
----------------
372.00
----------------
F48871 PT 3 076-M-02 2,066.0 16-Dec-94 16-Dec-04 Mineral Claim
F48872 PT 4 076-M-02 1,833.5 16-Dec-94 16-Dec-04 Mineral Claim
----------------
3,899.5
----------------
----------------
F65378 KIM 1 076-L-04 67.40 04-Sep-98 04-Sep-04 Mineral Claim
----------------
F76144 TA 1 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76145 TA 2 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76146 TA 3 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76147 TA 4 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76148 TA 5 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76149 TA 6 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76150 TA 7 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76151 TA 8 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76152 TA 9 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76153 TA 10 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76154 TA 11 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76155 TA 12 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76156 TA 13 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76157 TA 14 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76158 TA 15 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76159 TA 16 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76160 TA 17 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76161 TA 18 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76162 TA 19 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76163 TA 20 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76164 TA 21 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76165 TA 22 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76166 TA 23 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76167 TA 24 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76168 TA 25 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76169 TA 26 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
F76170 TA 27 86-I-01 2582.5 06-Jun-02 06-Jun-04 Mineral Claim
----------------
69,727.5
----------------
CONTWOYTO INUIT OWNED LANDS
Next
Tag# Claim NTS Acres Registered Anniversary Type of Property
CO-08-00-01 076-E-15 20,968.62 01-Jan-95 31-Dec-04 Mineral Claim
CO-08-00-02 076-E-15 19,518.16 01-Jan-95 31-Dec-04 Mineral Claim
CO-08-00-03 076-E-15 12,181.86 01-Jan-95 31-Dec-04 Mineral Claim
CO-08-00-05 076-E-15 4,971.58 31-Dec-99 31-Dec-04 Mineral Claim
CO-08-00-06 076-E-15 7,610.58 31-Dec-00 31-Dec-04 Mineral Claim
----------------
65,250.80
----------------
B-2
HOOD RIVER CLAIMS
F64824 Hood 3 76-L-10 2582.5 24-Jun-98 24-Jun-06 Mineral Claim
F64825 Hood 4 76-L-10 2582.5 24-Jun-98 24-Jun-06 Mineral Claim
F64828 Hood 12 76-L-13 2582.5 24-Jun-98 24-Jun-08 Mineral Claim
F64829 Hood 14 76-L-13 2582.5 24-Jun-98 24-Jun-08 Mineral Claim
------------------
10,330.00
------------------
------------------
F48875 PT 7 76-L-15 263.37 16-Dec-94 16-Dec-03 Mineral Claim
------------------
CO 20 - 00 - 01 76-L-15 6653.08 01-Jan-97 01-Jan-05 IOL - Mineral Claim
CO 20 - 00 - 03 (a) 76-L-14 3008.90 01-Jan-97 01-Jan-05 IOL - Mineral Claim
CO 20 - 00 - 03 (b) 76-L-15 2164.74 01-Jan-97 01-Jan-05 IOL - Mineral Claim
CO 20 - 00 - 04 76-L-15 2901.85 01-Jan-97 01-Jan-05 IOL - Mineral Claim
CO 20 - 01 - 01 76-L-15 6653.08 01-Jan-97 01-Jan-05 IOL - Mineral Claim
------------------
21,381.64
------------------
ICE CLAIMS
F22432 ICE032 76-E-06 2582.5 01-Apr-92 01-Apr-04 Lease Applied For
F22433 ICE033 76-E-06 2582.5 01-Apr-92 01-Apr-04 Lease Applied For
F22464 ICE064 76-E-06 2582.5 01-Apr-92 01-Apr-04 Lease Applied For
F22534 ICE334 76-E-06 2582.5 01-Apr-92 01-Apr-04 Lease Applied For
F22535 ICE335 76-E-06 2582.5 01-Apr-92 01-Apr-04 Lease Applied For
F22537 ICE337 76-E-06 2582.5 01-Apr-92 01-Apr-04 Lease Applied For
ML3464 ICE336 76-E-06 2665.0 14-Feb-96 14-Feb-04 Lease
------------------
18,160.0
------------------
DOLLY VARDEN CLAIMS
------------------
F23152 DIA 52 76-E-01 2,582.50 28-Apr-04 28-Apr-04 Lease Applied For
------------------
ROCKINGHORSE CLAIMS
F60840 WC 156 86-I-02 413.2 11-Dec-96 11-Dec-04 Mineral Claim
F60841 WC 157 86-I-02 1601.15 11-Dec-96 11-Dec-03 Mineral Claim
F60844 WC 160 86-I-02 826.4 11-Dec-96 11-Dec-06 Mineral Claim
F60846 WC 162 86-I-02 154.95 11-Dec-96 11-Dec-03 Mineral Claim
F60847 WC 163 86-I-02 464.85 11-Dec-96 11-Dec-06 Mineral Claim
------------------
3,460.55
------------------
------------------
F50064 SKY 1 86-I-02 2,582.50 20-Aug-99 20-Aug-09 Mineral Claim
------------------
F58889 PUD 4 86-I-14 2582.5 14-Jun-99 14-Jun-05 Mineral Claim
F58890 PUD 5 86-I-14 2582.5 14-Jun-99 14-Jun-05 Mineral Claim
F56909 PUD 24 86-I-14 2582.5 14-Jun-99 14-Jun-05 Mineral Claim
F66955 PUD 36 86-I-14 2582.5 14-Jun-99 14-Jun-06 Mineral Claim
F67117 PUD 39 86-I-14 2582.5 14-Jun-99 14-Jun-04 Mineral Claim
F67118 PUD 40 86-I-14 2582.5 14-Jun-99 14-Jun-04 Mineral Claim
------------------
15,495.0
------------------
------------------
F58677 DD 24 86-I-13 2,582.50 11-Apr-96 11-Apr-04 Mineral Claim
------------------
F62383 KE 5 86-I-10 447.63 14-May-97 14-May-05 Mineral Claim
F62941 KE 6 86-I-10 416.63 14-May-97 14-May-05 Mineral Claim
F63306 KE 22 86-I-7 378.77 14-May-97 14-May-05 Mineral Claim
------------------
1,243.03
------------------
F85901 KEN 1 86-I-09 2582.5 20-Apr-99 12-Mar-09 Mineral Claim
F66045 KEN 5 86-I-09 2100.35 20-Apr-99 12-Mar-09 Mineral Claim
------------------
4,682.85
------------------
B-3
F74768 NAP 1 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74769 NAP 2 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74770 NAP 3 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74771 NAP 4 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74772 NAP 5 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74773 NAP 6 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74774 NAP 7 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74775 NAP 8 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74776 NAP 9 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74777 NAP 10 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74778 NAP 11 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74779 NAP 12 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74780 NAP 13 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F74781 NAP 14 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75430 NAP 15 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75431 NAP 16 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75432 NAP 17 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75433 NAP 18 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75434 NAP 19 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75435 NAP 20 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75436 NAP 21 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75437 NAP 22 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75438 NAP 23 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75439 NAP 24 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75440 NAP 25 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75441 NAP 26 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75442 NAP 27 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75443 NAP 28 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75444 NAP 29 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75445 NAP 30 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75446 NAP 31 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75447 NAP 32 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75448 NAP 33 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75449 NAP 34 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75450 NAP 35 86-I-10 831.67 11-Jun-02 11-Jun-04 Mineral Claim
F75451 NAP 36 86-I-10 1514.99 11-Jun-02 11-Jun-04 Mineral Claim
F75452 NAP 37 86-I-10 1477.12 11-Jun-02 11-Jun-04 Mineral Claim
F75453 NAP 38 86-I-10 509.58 11-Jun-02 11-Jun-04 Mineral Claim
F75454 NAP 39 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75455 NAP 40 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75456 NAP 41 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75457 NAP 42 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75458 NAP 43 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75459 NAP 44 86-I-10 263.74 11-Jun-02 11-Jun-04 Mineral Claim
F75461 NAP 46 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75462 NAP 47 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75463 NAP 48 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75464 NAP 49 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75465 NAP 50 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
B-4
F75466 NAP 51 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75467 NAP 52 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75468 NAP 53 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75469 NAP 54 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75470 NAP 55 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75471 NAP 56 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75472 NAP 57 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75473 NAP 58 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75474 NAP 59 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
F75475 NAP 60 86-I-10 2582.5 11-Jun-02 11-Jun-04 Mineral Claim
------------------
144,052.10
------------------
F74338 TL 8 86-I-11 2029.57 24-Jun-93 13-Mar-04 Mineral Claim
F74352 TL 22 86-I-11 2582.5 24-Jun-93 13-Mar-04 Mineral Claim
F74353 TL 23 86-I-11 1019.73 24-Jun-93 13-Mar-04 Mineral Claim
F74354 TL 24 86-I-11 378.53 24-Jun-93 13-Mar-04 Mineral Claim
F74355 TL 25 86-I-11 2582.5 24-Jun-93 13-Mar-04 Mineral Claim
F74356 TL 26 86-I-11 2582.5 24-Jun-93 13-Mar-04 Mineral Claim
F74366 TL 36 86-I-11 64.72 24-Jun-93 13-Mar-04 Mineral Claim
F74367 TL 37 86-I-11 255.23 24-Jun-93 13-Mar-04 Mineral Claim
F74368 TL 38 86-I-11 469.09 24-Jun-93 13-Mar-04 Mineral Claim
F74369 TL 39 86-I-11 471.17 24-Jun-93 13-Mar-04 Mineral Claim
------------------
12,435.54
------------------
------------------
CO44 -00-01 86-I-11 414.0 01-Jan-97 01-Jan-05 IOL - Mineral Claim
------------------
F38623 OK 123 86-I-11 2582.5 18-Jun-93 18-Jun-03 Applied for Lease
F38627 OK 127 86-I-11 2582.5 18-Jun-93 18-Jun-03 Applied for Lease
F38628 OK 128 86-I-11 2582.5 18-Jun-93 18-Jun-03 KCEI Lease
F38629 OK 129 86-I-11 2582.5 18-Jun-93 18-Jun-03 Applied for Lease
F38648 OK 148 86-I-11 2169.3 18-Jun-93 18-Jun-03 Applied for Lease
F38649 OK 149 86-I-11 2169.3 18-Jun-93 18-Jun-03 Applied for Lease
F38652 OK 152 86-I-11 2582.5 18-Jun-93 18-Jun-03 Applied for Lease
F38653 OK 153 86-I-11 2582.5 18-Jun-93 18-Jun-03 Applied for Lease
F38654 OK 154 86-I-11 2582.5 18-Jun-93 18-Jun-03 Applied for Lease
F38665 OK 165 86-I-11 2582.5 18-Jun-93 18-Jun-03 Applied for Lease
------------------
24,998.60
------------------
Total 471,765.71
B-5
Committee Bay Greenstone Belt Claims
The following is a list of our claims in the Committee Bay Greenstone
Belt:
Claim name Claim No. NTS Sheet Recording Date Anniversary Date
Pick 1 F54799 56K/03 16-Oct-02 16-Oct-10
Pick 2 F54798 56K/03 16-Oct-02 16-Oct-10
Pick 3 F54760 56K/03 16-Oct-02 16-Oct-10
EE 1 F54757 56K/06 16-Oct-02 16-Oct-11*
EE 2 F54756 56K/06 16-Oct-02 16-Oct-11*
EE 3 F54758 56K/06 16-Oct-02 16-Oct-12*
K 1 F60304 56K/11 16-Oct-02 16-Oct-10*
K 2 F60305 56K/11 16-Oct-02 16-Oct-10*
CAY 1 F60252 56K/09 16-Oct-02 16-Oct-12*
CAY 3 F60254 56K/09 16-Oct-02 16-Oct-12*
AA 1 F60249 56J/13 16-Oct-02 16-Oct-10
AA 2 F60250 56J/13 16-Oct-02 16-Oct-10
NN 1 F60307 56K/16 16-Oct-02 16-Oct-12*
NN 2 F60251 56O/04 16-Oct-02 16-Oct-12*
WREN 1 F60231 56J/11 16-Oct-02 16-Oct-12*
WREN 2 F60232 56J/14 16-Oct-02 16-Oct-12*
WREN 3 F60233 56J/14 16-Oct-02 16-Oct-12*
WREN 4 F60234 56J/14 16-Oct-02 16-Oct-12*
WREN 5 F60235 56J/14 16-Oct-02 16-Oct-12*
WEST F60212 56K/03 16-Oct-02 16-Oct-10
HOST F54800 56K/03 16-Oct-02 16-Oct-10
o as confirmed by the mining recorder
(one small additional claim GB-1 will be ours after Bruce Goad transfers the claim)
B-6
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our by-laws indemnify each person (including the heirs, executors,
administrators, or estate of such person) who is or was a director or officer of
Golden River Resources to the fullest extent permitted or authorized by current
or future legislation or judicial or administrative decision against all fines,
liabilities, costs and expenses, including attorney's fees, arising out of his
or her status as a director, officer, agent, employee or representative. The
foregoing right of indemnification shall not be exclusive of other rights to
which those seeking an indemnification may be entitled. Golden River Resources
may maintain insurance, at its expense, to protect itself and all officers and
directors against fines, liabilities, costs and expenses, whether or not Golden
River Resources would have the legal power to indemnify them directly against
such liability.
Costs, charges, and expenses (including attorney's fees) incurred by a
person referred to above in defending a civil or criminal proceeding shall be
paid by Golden River Resources in advance of the final disposition thereof upon
receipt of any undertaking to repay all amounts advanced if it is ultimately
determined that the person is not entitled to be indemnified by Golden River
Resources and upon satisfaction of other conditions required by current or
future legislation.
If this indemnification or any portion of it is invalidated on any
ground by a court of competent jurisdiction, Golden River Resources nevertheless
indemnifies each person described above to the fullest extent permitted by all
portions of this indemnification that have not been invalidated and to the
fullest extent permitted by law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Golden River Resources pursuant to the foregoing provisions, or otherwise, be
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act of 1933 and is therefore
unenforceable.
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth expenses, incurred or expected to be
incurred by Golden River Resources in connect with the issuance and distribution
of the securities being registered. Items marked with an asterisk (*) represent
estimated expenses. We have agreed to pay all the costs and expenses of this
offering. Selling security holders will not pay any part of these expenses.
SEC Registration Fee $674
Legal Fees and Expenses* 10,000
Accounting Fees and Expenses* 10,000
Printing -
Miscellaneous 5,000
---------------
TOTAL* $25,674
---------------
Item 26. RECENT SALE OF UNREGISTERED SECURITIES
On February 19, 2004 Edensor Nominees advised us that it was exercising
the 6,000,000 options over common stock it held utilizing the cashless exercise
feature of the terms and conditions of the issue of the options. We issued
5,142,857 shares of common stock to Edensor on March 3, 2004 as a result of the
exercise of the options.
On March 31, 2004 Kerisridge agreed to convert all of its debt owing by
us into common stock and warrants. We issued 1,753,984 shares of common stock
and 1,753,984 warrants exercisable at US$1.30 and at any time up to March 31,
2006 in full repayment of the amount owing to Kerisridge.
In April 2004, we completed a private placement of 1,670,000 common
stock at a price of US$1.00 raising US$1.67 million. As part of the private
placement the investor was issued 1,670,000 warrants over common stock with an
exercise price of US$1.30 per warrant and a latest exercise date of March 31,
2006.
On May 8, 2006, we announced the issue of up to 10 million shares of
common stock at an issue price of A$0.20 and 20 million options with an exercise
price of A$0.20 and a latest exercise date of April 30, 2011 to Fast Knight
Nominees as repayment of a debt of A$2 million to Wilzed. Wilzed, a company
associated with our President and Chief Executive Officer has provided loan
funds over a period of time to enable us to conduct our exploration programs in
Canada and to meet our working capital needs. The issue of the shares of common
stock and options will repay this debt.
On June 9, 2006, we entered into a subscription agreement with RAB
Special Situations Fund (Master) Limited ("RAB") pursuant to which the Company
issued to RAB in a private placement transaction (the "Private Placement") for
an aggregate purchase price of US$1,542,000: (i)10,000,000 special warrants (the
"Special Warrants"), each of which is exercisable at any time to acquire,
without additional consideration, one (1) share (the "Special Warrant Shares")
of Common Stock, US$0.001 par value ("Common Stock"), of the Company, and (ii)
warrants (the "Warrants") for the purchase of 20,000,000 shares of Common Stock,
US$0.001 par value (the "Warrant Shares"), at an exercise price of US$0.1542 to
be exercisable until April 30, 2011.
All of the foregoing securities were issued pursuant to the exemption
from registration provided in Section 4(2) of the Securities Act of 1933, as
amended.
Item 27. EXHIBITS
Incorporated by Exhibit
Reference to: No Exhibit
(1) Exhibit 3.1 3.1 Certificates of Incorporation of the Registrant
(1) Exhibit 3.2 3.2 By-laws of the Registrant
(2) Exhibit A 3.3 Amendment to Certificate of Incorporation dated July 17, 1999
(3) 3.4 Amendment to Certificate of Incorporation dated October 17,
2000
3.5 Amendment to Certificate of Incorporation dated April 6, 2005
(9) Exhibit 3.1 3.6 Amendment to Certificate of Incorporation dated March 10,
2006
** 3.7 Amendment to Certificate of Incorporation dated June 20, 2006
** 5.1 Opinion of Phillips Nizer LLP
(5) Exhibit 10.5 10.4 Service Agreement dated November 25, 1988, by and between
the Registrant and AWI Administration Services Pty Limited
(6) Exhibit 10.6 10.5 Agreement with Tahera Corporation
(4) Exhibit 10.6 Subscription Agreement with RAB Special Solutions LP
(7) 10.7 Employment Agreement between the Registrant and C. Alford
(8) 10.8 Employment Agreement between the Registrant and P Althaus.
(7) 10.9 Sponsorship Agreement with Canaccord Capital
(10) Exhibit 99.2 Subscription Agreement with RAB Special Solutions (Master)
Fund Limited
(10) Exhibit 99.3 Special Warrant
(10) Exhibit 99.4 Warrant
** 21 List of Subsidiaries as at June 30, 2005.
** 23.1 Consent of Phillips Nizer LLP (included in Exhibit 5)
** 23.2 Consent of PKF, Certified Public Accountants, A Professional
Corporation
*Filed herewith
** Previously filed
(1) Registrant's Registration Statement on Form S-1 (File No. 33-14784).
(2) Registrant's Definitive Information Statement dated August 11, 1999.
(3) Registrant's Definitive Information Statement dated October 17, 2000.
(4) Registrant's Form 8-K filed on April 8, 2004.
(5) Registrant's Annual report on Form 10-K for the fiscal year ended June 27,
1989.
(7) Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31,
2002.
(8) Registrant's Annual Report on Form 10-KSB for the year ended June 30, 2004.
(9) Registrant's Annual Report on Form 10-KSB for the year ended June 30, 2005.
(10) Registrant's Quarterly Report on Form 10-OSB for the quarter ended March
31, 2006.
(11) Registrant's Current Report on Form 8-K filed on June 15, 2006.
Item 28. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(4) For determining liability under the Securities Act to any
purchaser in the initial distribution of the securities, in a primary
offering of securities pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser,
if the securities are offered or sold to such purchaser by means of any of
the following communications, the undersigned will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any preliminary prospectus or prospectus relating to the
offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of or used or referred to by the
undersigned;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about the
undersigned or its securities provided by or on behalf of the
undersigned; and
(iv) Any other communication that is an offer in the offering
made by the undersigned to the purchaser.
(5) 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 Commission such indemnification is against public policy as
expressed in the Securities Act of 1933, and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
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
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
(6) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424 (b)(1) or (4), or 497(h) under the Securities Act of 1933, shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(7) 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 of those
securities.
(8) For the purpose of determining liability under the Securities
Act to any purchaser:
(i) Each prospectus filed pursuant to Rule 424(b)(3) shall be
deemed to be part of this registration statement as of the date the
filed prospectus is deemed part of and included in this registration
statement;
(ii) Each prospectus require to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration statement in
reliance on Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (vii), or (x) for the purpose of providing the
information required by Section 10(a) of the Securities Act shall be
deemed to be part of and included in this registration statement as
of the earlier date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided
in Rule 430B, for liability purposes of the issuer and any person
that is at that date an underwriter, such date shall be deemed to be
a new effective date of the registration statement relating to the
securities in the registration statement to which that prospectus
relates, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof. Provided,
however, that no statement shall be made in a registration statement
or prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in
any such document immediately prior to such effective date; or
(iii) Each prospectus filed pursuant to Rule 424(b) as part of
a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it
is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is
part of the registration statement or made in any document
incorporated or deemed incorporated by reference into the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such
document immediately prior to such date of first use.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the State of Victoria, Australia on August 8, 2006.
GOLDEN RIVER RESOURCES CORPORATION
By: Peter Lee
Name: Peter Lee
Title: Director, CFO & Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Peter Lee and Brian Brodrick and each of
them, as 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 this Registration Statement and any or all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, 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 to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute, may lawfully do or cause to be done by virtue thereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE TITLE DATE
President, Chairman of the Board and Chief August 8, 2006
---------------------------------- Executive Officer
/s/ Joseph I Gutnick
Joseph I Gutnick
Director, Secretary, Chief Financial Officer and August 8, 2006
---------------------------------- Principal Accounting Officer
/s/ Peter Lee
Peter Lee
---------------------------------- Director August 8, 2006
/s/ David Tyrwhitt
David Tyrwhitt
---------------------------------- Director August 8, 2006
/s/ Mordechai Gutnick
Mordechai Gutnick