SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2002
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 0-13078
LEADVILLE MINING & MILLING CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA 13-3180530
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
76 Beaver Street, New York, NY 10005
(Address of principal executive offices)
Issuer's telephone number: (212) 344-2785
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.
Class Outstanding at December 16, 2002
--------------------------------------- --------------------------------
Common Stock, par value $.001 per share 41,543,121
Transitional Small Business Format (check one); Yes |_| No |X|
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying financial statements are unaudited for the interim
periods, but include all adjustments (consisting only of normal recurring
accruals), which we consider necessary for the fair presentation of results for
the three months ended October 31, 2002.
Moreover, these financial statements do not purport to contain complete
disclosure in conformity with generally accepted accounting principles and
should be read in conjunction with our audited financial statements at, and for
the fiscal year ended July 31, 2002.
The results reflected for the three months ended October 31, 2002 are not
necessarily indicative of the results for the entire fiscal year.
2
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
OCTOBER 31, 2002
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 248,176
Receivable From Sale of Subsidiary 994,754
Loans Receivable - Others 18,040
Accrued Interest Receivable 10,988
Marketable Securities 75,000
Other Current Assets 2,756
------------
Total Current Assets 1,349,714
------------
Mining, Milling and Other Property and Equipment
(Net of Accumulated Depreciation of $358,230) 344,780
------------
Other Assets:
Mining Reclamation Bonds 42,150
Security Deposits 8,435
------------
Total Other Assets 50,585
------------
Total Assets $ 1,745,079
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 92,456
Accrued Expenses 218,829
------------
Total Current Liabilities 311,285
------------
Minority Interest (16,460)
------------
Commitments and Contingencies
Stockholders' Equity:
Common Stock, Par Value $.001 Per Share;
Authorized 150,000,000 shares; Issued and
Outstanding 40,652,880 Shares 40,653
Capital Paid In Excess of Par Value 21,381,168
Deficit Accumulated in the Development Stage (19,979,650)
Accumulated Other Comprehensive Income 8,083
------------
Total Stockholders' Equity 1,450,254
------------
Total Liabilities and Stockholders' Equity $ 1,745,079
============
The accompany notes are an integral part of the financial statements.
3
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Three For The Period
Months Ended September 17, 1982
July 31, (Inception)
------------------------------- To
2002 2001 October 31, 2002
------------ ------------ ------------------
Revenues:
Sales $ -- $ -- $ --
Interest Income 21,166 640 738,743
Miscellaneous 7,701 -- 33,977
------------ ------------ ------------
Total Revenues 28,867 640 772,720
------------ ------------ ------------
Costs and Expenses:
Mine Expenses 163,599 152,575 5,274,184
Write-Down of Mining, Milling and Other Property and
Equipment -- -- 999,445
Selling, General and Administrative Expenses 139,105 114,271 7,538,683
Stock Based Compensation -- -- 8,554,347
Depreciation -- 581 367,726
------------ ------------ ------------
Total Costs and Expenses 302,704 267,427 22,734,385
------------ ------------ ------------
Loss Before Other Income (Expense) (273,837) (266,787) (21,961,665)
------------ ------------ ------------
Other Income (Expense):
Gain on Sale of Property and Equipment -- -- 46,116
Gain on Sale of Subsidiary -- -- 1,907,903
Option Payment -- -- 70,688
Loss on Write-Off of Investment -- -- (10,000)
Loss on Joint Venture -- -- (101,700)
------------ ------------ ------------
Total Other Income (Expense) -- -- 1,913,007
------------ ------------ ------------
Loss Before Minority Interest (273,837) (266,787) (20,048,658)
Minority Interest in Net Loss of Subsidiary 14,465 -- 69,008
------------ ------------ ------------
Net Loss $ (259,372) $ (266,787) $(19,979,650)
============ ============ ============
Net Loss Per Common Share - Basic and Diluted $ (.01) $ (.01)
============ ============
Weighted Average Common Shares Outstanding 40,640,365 34,401,366
============ ============
The accompanying notes are an integral part of the financial statements.
4
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For The Three For The Period
Months Ended September 17, 1982
October 31, (Inception)
------------------------- To
2002 2001 October 31, 2002
--------- --------- ------------------
Cash Flow From Operating Activities:
Net Loss $(259,372) $(266,787) $(19,979,650)
Adjustments to Reconcile Net Loss to
Net Cash Provided (Used) By Operating Activities:
Depreciation -- 581 367,726
Gain on Sale of Subsidiary -- -- (1,907,903)
Minority Interest in Net Loss of Subsidiary (14,465) -- (69,008)
Write-Down of Impaired Mining, Milling and Other
Property and Equipment -- -- 999,445
Gain on Sale of Property and Equipment -- -- (46,116)
Loss on Write-Off of Investment -- -- 10,000
Loss From Joint Venture -- -- 101,700
Value of Common Stock Issued for Services -- -- 2,755,602
Stock Based Compensation -- -- 8,554,347
Changes in Operating Assets and Liabilities:
Increase in Accrued Interest Receivable (10,988) -- (10,988)
(Increase) Decrease in Other Current Assets 568 (3,462) (2,756)
Increase in Security Deposits -- -- (8,435)
Increase (Decrease) in Accounts Payable (90,576) 61,701 84,649
Increase in Accrued Expenses 33,766 363 96,275
--------- --------- ------------
Net Cash (Used) By Operating Activities (341,067) (207,604) (9,055,112)
--------- --------- ------------
Cash Flow From Investing Activities:
Purchase of Mining, Milling and Other Property and
Equipment -- -- (1,705,650)
Proceeds on Sale of Mining, Milling and Other Property
and Equipment -- -- 83,638
Proceeds From Sale of Subsidiary 497,377 -- 1,136,862
Expenses of Sale of Subsidiary -- -- (101,159)
Advance Payments - Joint Venture -- -- 98,922
Investment in Joint Venture -- -- (101,700)
Investment in Privately Held Company -- -- (10,000)
Net Assets of Business Acquired (Net of Cash) -- -- (42,130)
Increase (Decrease) in Option Payment Payable -- -- --
Purchase of Marketable Securities (50,000) -- (50,000)
--------- --------- ------------
Net Cash Provided (Used) By Investing Activities 447,377 -- (691,217)
--------- --------- ------------
The accompanying notes are an integral part of the financial statements.
5
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Continued)
For the Three For The Period
Months Ended September 17, 1982
October 31, (Inception)
------------------------- To
2002 2001 October 31, 2002
--------- --------- ------------------
Cash Flow From Financing Activities:
(Increase) Decrease in Loans Receivable -
Related Party $ -- $ 3,000 $ --
Increase (Decrease) in Loans Receivable - Others (3,040) (1,500) (18,040)
Increase in Loans Payable - Officers -- -- 18,673
Repayment of Loans Payable - Officers -- -- (18,673)
Increase in Note Payable -- -- 11,218
Payments of Note Payable -- (1,179) (11,218)
Proceeds From Issuance of Common Stock 1,500 175,210 10,403,271
Commissions on Sale of Common Stock -- -- (5,250)
Expenses of Initial Public Offering -- -- (408,763)
Capital Contributions - Joint Venture Subsidiary -- -- 74,192
Purchase of Certificate of Deposit - Restricted -- -- (5,000)
(Purchase) Sale of Mining Reclamation Bond -- -- (37,150)
--------- --------- ------------
Net Cash Provided By Financing Activities (1,540) 175,531 10,003,260
--------- --------- ------------
Effect of Exchange Rate Changes (6,027) -- (8,755)
--------- --------- ------------
Increase In Cash and Cash Equivalents 98,743 (32,073) 248,176
Cash and Cash Equivalents - Beginning 149,433 63,920 --
--------- --------- ------------
Cash and Cash Equivalents - Ending $ 248,176 $ 31,847 $ 248,176
========= ========= ============
Supplemental Cash Flow Information:
Cash Paid For Interest $ -- $ -- --
========= ========= ============
Cash Paid For Income Taxes $ -- $ -- $ 28,060
========= ========= ============
Non-Cash Financing Activities:
Issuances of Common Stock as Commissions
on Sales of Common Stock $ -- $ -- $ 440,495
========= ========= ============
Issuance of Common Stock as Payment for Mining,
Milling and Other Property and Equipment $ -- $ -- $ 4,500
========= ========= ============
Transfer of Joint Venture Advance Payments into
Joint Venture Capital $ 98,922 $ -- $ 98,922
========= ========= ============
The accompanying notes are an integral part of the financial statements.
6
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2001
(Unaudited)
NOTE 1 - Basis of Presentation
The consolidated financial statements include the accounts of Leadville
Mining & Milling Corp. (the "Company") and its subsidiaries, all of which are
wholly-owned. All significant inter-company accounts and transactions have been
eliminated in consolidation.
In the opinion of the Company's management, the accompanying consolidated
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the consolidated financial
position and results of operations and cash flows for the periods presented.
These financial statements are unaudited and have not been reported on by
independent public accountants.
Results of operations for interim periods are not necessarily indicative
of the results of operations for a full year.
NOTE 2 - Marketable Securities
The Company accounts for its investments in marketable securities in
accordance with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
Management determines the appropriate classification of all securities at
the time of purchase and re-evaluates such designation as of each balance sheet
date. The Company classified its marketable equity securities as available for
sale securities are recorded at fair value. The Company uses the specific
identification method to determine realized gains and losses. Unrealized holding
gains and losses are excluded from earnings and, until realized, are reported in
a separate component of stockholders' equity.
Marketable securities are classified as current assets and are
summarized as follows:
Marketable equity securities, at cost $ 50,000
========
Marketable equity securities, at fair value $ 75,000
========
NOTE 3 - Other Comprehensive Income (Loss) - Supplemental Non-Cash Investing
Activities
Other comprehensive income (loss) consists of accumulated foreign
translation gains and losses and net unrealized gain on available-for-sale
securities and is summarized as follows:
Balance - July 31, 2002 $ (7,246)
Equity Adjustments from Foreign
Currency Translation (9,671)
Unrealized Gain on Available-for-
Sale Securities 25,000
--------
Balance - October 31, 2002 $ 8,083
========
7
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2001
(Unaudited)
NOTE 4 - Subsequent Events
During December 2002, the Company received the pay off of principle and
interest on the receivable on sale of subsidiary.
NOTE 5 - Related Party Transactions
During the quarter ended October 31, 2002, the Company purchased
marketable equity securities of a related company (see Note 2).
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Cautionary Statement on Forward-Looking Statements
Some information contained in or incorporated by reference into this report on
Form 10-QSB may contain "forward-looking statements," as defined in Section 21E
of the Securities and Exchange Act of 1934. These statements include comments
regarding exploration and mine development and construction plans, costs, grade,
production and recovery rates, permitting, financing needs, the availability of
financing on acceptable terms or other sources of funding, and the timing of
additional tests, feasibility studies and environmental permitting. The use of
any of the words "anticipate," "continue," "estimate," "expect," "may," "will,"
"project," "should," "believe" and similar expressions are intended to identify
uncertainties. We believe the expectations reflected in those forward-looking
statements are reasonable. However, we cannot assure you that these expectations
will prove to be correct. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of the risk factors
set forth below and other factors set forth in, or incorporated by reference
into, this report:
o worldwide economic and political events affecting the supply of and
demand for gold;
o volatility in market prices for gold and other metals;
o financial market conditions, and the availability of debt or equity
financing on terms acceptable to our company;
o uncertainties as to whether additional drilling, testing and
feasibility studies will establish reserves at any of our
properties;
o uncertainties associated with developing a new mine, including
potential cost overruns and the unreliability of estimates in early
states of mine development;
o uncertainties as to title to our properties and the availability of
sufficient properties to allow for planned activities at Leadville
in Colorado and at El Chanate in Mexico.
o variations in ore grade and other characteristics affecting mining,
crushing, milling and smelting operations and mineral recoveries;
o geological, metallurgical, technical, permitting, mining and
processing problems;
o the availability and timing of acceptable arrangements for power,
transportation, mine construction, contract mining, water and
smelting; the availability, terms conditions and timing of required
government approvals;
o uncertainties regarding future changes in tax and foreign-investment
legislation or implementation of existing tax and foreign-investment
legislation;
o the availability of experienced employees; and
o political instability, violence and other risks associated with
operating in a country like Mexico with a developing economy.
9
Many of those factors are beyond our ability to control or predict. You should
not unduly rely on these forward-looking statements. These statements speak only
as of the date of this report on Form 10-QSB. Except as required by law, we are
not obligated to publicly release any revisions to these forward-looking
statements to reflect future events or developments. All subsequent written and
oral forward-looking statements attributable to our Company and persons acting
on our behalf are qualified in their entirety by the cautionary statements
contained in this section and elsewhere in this report on Form 10-QSB and other
periodic reports filed by us with the Securities and Exchange Commission.
Results of Operation
General
Sonora, Mexico
During the quarter ended October 31, 2002, we continued to analyze the El
Chanate concessions in Mexico. As of October 31, 2002, we had reduced our
property holdings to a coherent package of 12 contiguous, high priority
concessions totaling approximately 3,506 hectares (8,663 acres or 13.5 square
miles). Further exploration and development of the El Chanate project, assuming
it is economically feasible, will mostly occur on these concessions owned by us.
We also own outright 466 hectares (1,151 acres or 1.8 square miles) of surface
rights at El Chanate (except for our joint venture agreement with Grupo Minero
FG S.A. de C.V.) and no third party ownership or leases exist on this fee land
or the El Chanate concessions.
Currently, and during the quarter ended October 31, 2002, through our
engineering consultants and with Grupo Minero FG S.A. de C.V. ("FG"), we are
continuing metallurgical tests to determine the most optimal and economically
feasible crushing and or grinding sizes for processing the El Chanate deposit.
Management believes that these studies showed that El Chanate deposits are
generally suited for treatment using dilute cyanide solutions, and ore grade
samples from El Chanate have shown recoveries from rock tested after crushing to
minus 1/2 and 1 inch size. The result of the crushing and grinding studies show
that the gold recovery increases significantly as the rock is reduced to finer
particle sizes. Test work was conducted at Resources Development Inc. in Wheat
Ridge, Colorado and in Mexico at the La Colorada mine laboratory, which is owned
by FG, our joint venture partner. In November the Company employed Metcon Inc.,
of Tucson, Arizona to conduct further metallurgical testing on Chanate ores.
In August 2002, we retained SRK Consulting to conduct a Scoping Study of the
proposed project at El Chanate. The Scoping Study was recently completed and we
have received the definitive report. Based on our review of the Scoping Study,
we believe that the prospects for a surface/heap leach mining operation at El
Chanate remain positive. The Study indicated that additional metallurgical
testing would be necessary to allow for preparation of a feasibility study. In
addition, SRK indicated that it did not have sufficient historical information
to determine the adequacy of the equipment fleet, availability of a sufficient
water supply. The Study recommended additional drilling to further define the
deposit. We are addressing each of these issues. Further exploratory drilling
may be conducted, assuming adequate funding is available, to expand the known
deposit by further infill and off set drilling, which will concentrate the
present drill pattern and increase the density of drill holes. Additional core
hole drilling will be conducted for geotechnical reasons. Upon completion of our
evaluation, provided the results are satisfactory, and that adequate financing
is available, we hope to be ready for further development and subsequent
production.
10
Leadville, Colorado
During the quarter ended October 31, 2002, as during the fiscal year ended July
31, 2002, activity at our Leadville, Colorado properties consisted principally
of mine maintenance. Primarily as a result of our focus on El Chanate, we
temporarily reduced to a minimum activities in Leadville, Colorado.
On November 1, 2002, we conditionally acquire 56 properties in Leadville,
Colorado having a gross acreage of approximately 594 acres. Some of the
properties are classified as residential and others are classified as mining.
All were purchased at the Lake County, Colorado, tax sale for the back taxes due
on the properties. We paid an aggregate of approximately $13,000 for the
properties.
If a property owner does not pay his property taxes the county treasurer has the
right to put the property up for auction at an advertised county tax sale.
Sometimes, the property owner will ask the treasurer to postpone the auction of
the property for a year with the promise to pay soon. If taxes are still not
paid, the auction bidder will be required to pay two years of taxes. If we pay
the 'back taxes' and then 'current year' taxes for four consecutive years our
ownership of a given property purchased at tax sale is final, and the deed is
transferred to us. If the property owner can pay the back taxes, he is required
to pay us the back taxes plus interest. The current back tax interest rate is
12% in Lake County.
We acquired these properties, especially the residential properties, as an
investment. We are not required to commit to any work or maintenance on any of
the properties at this time. Management believes that these are good
investments. The mining properties are located in the general area of our other
mining properties. There is a possibility that at some future date the zoning
for the mining claims will be changed to allow residential development.
Management believes that, at such time, these properties will most likely become
more valuable due to their scenic location. In the time prior to any zoning
change, these properties may have mineral value; however, we have no current
plans to explore these mining properties.
Revenues
We generated no revenues from mining operations during the three months ended
October 31, 2002 and 2001. There were de minimis non-operating revenues during
the three months ended October 31, 2002 and 2001 of $28,867 and $640,
respectively. The non-operating revenues for the three months ended October 31,
2002 primarily represent interest earned on the proceeds from the sale of our
subsidiary, Minera Chanate.
Costs and Expenses
Over all, costs and expenses during the three months ended October 31, 2002
($302,704) increased by $35,277 (approximately 13.2%) from the three months
ended October 31, 2001 ($267,427).
Mine expenses during the three months ended October 31, 2002 ($163,579)
increased by $11,024 (approximately 7.2%) from the three months ended October
31, 2001 ($152,575). We believe that the increase in mine expenses resulted
primarily from work at our Mexican properties.
Selling, general and administrative expenses during the three months ended
October 31, 2002 ($139,105) increased by $24,834 (approximately 21.7%) from the
three months ended October 31, 2001 ($114,271). We believe that the increase was
due to available capital.
11
There was no stock based compensation during the three months ended October 31,
2002 and October 31, 2001.
Net Income
As a result, our net loss for the three months ended October 31, 2002 was
$259,372 which was $7,415 less than our $266,787 loss for the three months ended
October 31, 2001.
Liquidity and Capital Resources
As of October 31, 2002, we had working capital of $1,038,429. Our plans over the
next 12 months include the costs of administration, and exploration related
activities in both Colorado and Mexico. In this regard, as noted in our
quarterly report of form 10-QSB for the period ended January 31, 2002, we
entered into a joint venture agreement with Grupo Minero FG S.A. de C.V. ("Grupo
Minero") in Hermosillo to explore, evaluate and develop certain of our Mexican
properties in five phases. We estimate that the balance of our portion of the
costs for the first phase (anticipated to be completed by November 2002) and the
second phase (anticipated to be competed by March 2003) will be approximately
$500,000. We plan to pay for a significant portion of our anticipated expenses
related to phases one and two with the proceeds from the sale of our subsidiary,
Minera Chanate, S.A. de C.V. As explained in our annual report on form 10-KSB,
historically, we have not generated any material revenues from operations and
have been in a precarious financial condition. No assurance whatsoever can be
given that we will be able to generate any significant revenues in the near
future or, after we have depleted the proceeds from the sale of our subsidiary,
that we will be able to continue as a going concern or that any of our plans
with respect to our gold properties will, to a material degree, come to
fruition. In order to continue our program if and when we have depleted the
proceeds from the sale of our subsidiary, we will need to obtain substantial
financing. While we plan to seek such financing through bank financing, private
placement of our shares, joint venture partners and other arrangements, there is
no assurance that we will be successful.
In addition, during the three months ended October 31, 2002, we raised
approximately $1,500 through the sale of common stock.
Environmental Issues
Management does not expect that environmental issues will have an adverse
material effect on our liquidity or earnings. Before any additional exploration
or any development or mining or construction of milling facilities could begin
at our Leadville properties, it would be necessary to meet all environmental
requirements and to satisfy the regulatory agencies in Colorado that our
proposed procedures fell within the boundaries of sound environmental practice.
We currently are bonded to insure reclamation of any areas disturbed by our past
activities. The current amount of this bond is $42,150. In Mexico, we are not
aware of any significant environmental concerns or existing reclamation
requirements at the El Chanate properties. However, we will be required to
obtain various environmental and related permits in order to engage in our
planned activities at El Chanate. This has presently been undertaken. The costs
and any delays associated with obtaining these required permits could have an
impact on our ability to timely complete our planned activities at El Chanate
and ultimately on the feasibility of opening a mine.
Part of the Leadville Mining District has been declared a federal Superfund site
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, and the Superfund Amendments and Reauthorization Act of 1986. Several
mining companies and one individual were declared defendants in a possible
lawsuit. We were not named a defendant or Possible Responsible Party. We did
respond in full detail to a lengthy questionnaire prepared by the Environmental
Protection Agency ("EPA") regarding our proposed procedures and past
12
activities in November 1990. To our knowledge, the EPA has initiated no further
comments or questions.
We do include in all our internal revenue and cost projections a certain amount
for environmental and reclamation costs on an ongoing basis. This amount is
determined at a fixed amount of $1.50 per ton of material to be milled on a
continual, ongoing basis to provide for further tailing disposal sites and to
reclaim the tailings disposal sites in use. At this time, there do not appear to
be any environmental costs to be incurred by us beyond those already addressed
above. No assurance can be given that environmental regulations will not be
changed in a manner that would adversely affect our planned operations.
Issues And Uncertainties
The following issues and uncertainties, among others, should be considered in
evaluating our financial outlook.
We have not generated any operating revenues. If we are unable to
commercially develop our mineral properties, we will not be able to
generate profits and our business may fail.
We are an exploration company engaged in the acquisition and exploration of
mineral exploration properties. To date, we have no producing properties. As a
result, we have no current source of operating revenue and we have historically
operated and continue to operate at a loss. Our ultimate success will depend on
our ability to generate profits from our properties. Our viability is largely
dependent on the successful commercial development of a mine at least one of our
properties.
We lack operating cash flow and rely on external funding sources. If we
are unable to continue to obtain needed capital from outside sources, we
will be forced to reduce or curtail our operations.
We do not generate any positive cash flow from operations and we do not
anticipate that any positive cash flow will be generated for some time. Aside
from the proceeds from the sale of Minera Chanate we have limited financial
resources. Leases and licenses which we hold as well as our joint venture
agreement with FG, impose financial obligations on us. We cannot assure that
additional funding will be available to allow us to fulfill such obligations.
Further exploration and development of the mineral properties in which we hold
interests depends upon our ability to obtain financing through
o bank or other debt financing,
o equity financing, or
o other means.
Failure to obtain additional financing on a timely basis could cause us to
forfeit all or parts of our interests in some or all of (i) the El Chanate
concessions, (ii) the joint venture with FG and (iii) our Leadville properties,
and reduce or terminate our operations.
As a mineral exploration company, our ability to commence production and
generate profits is dependent on our ability to discover viable and
economic mineral reserves. Our ability to discover such reserves is
subject to numerous factors, most of which are beyond our control and are
not predictable.
13
Exploration for gold is speculative in nature, involves many risks and is
frequently unsuccessful. Any gold exploration program entails risks relating to
o the location of economic ore bodies,
o development of appropriate metallurgical processes,
o receipt of necessary governmental approvals and
o construction of mining and processing facilities at any site chosen
for mining.
The commercial viability of a mineral deposit is dependent on a number of
factors including:
o the price of gold,
o exchange rates,
o the particular attributes of the deposit, such as its
o size,
o grade and
o proximity to infrastructure, o financing costs,
o taxation,
o royalties,
o land tenure,
o land use,
o water use,
o power use,
o importing and exporting gold and
o environmental protection.
The effect of these factors cannot be accurately predicted.
All of the mineral properties in which we have an interest or right are in the
exploration stages only and are without reserves of gold or other minerals. We
cannot assure that current or proposed exploration or development programs on
properties in which we have an interest will result in the discovery of gold
mineralization reserves or will result in a profitable commercial mining
operation.
We have a limited number of prospects. As a result, our chances of
commencing viable mining operations are dependent upon the success of one
project.
Our only current properties are the El Chanate concessions and our Leadville
properties. At present, we are not doing any substantive work at our Leadville
properties. While the El Chanate concessions are owned by one of our
subsidiaries, FG, our joint venture partner, has a 31% interest with a right to
increase its interest to 45%. We currently do not have operations on either of
our properties, and we must commence such operations to receive revenues.
Accordingly, we are dependent upon the success of the El Chanate concessions.
14
Gold prices can fluctuate on a material and frequent basis due to numerous
factors beyond our control. If and when we commence production, our
ability to generate profits from operations could be materially and
adversely affected by such fluctuating prices.
The profitability of any gold mining operations in which we have an interest
will be significantly affected by changes in the market price of gold. Gold
prices fluctuate on a daily basis and are affected by numerous factors beyond
our control, including:
o the level of interest rates,
o the rate of inflation,
o central bank sales,
o world supply of gold and
o stability of exchange rates.
Each of these factors can cause significant fluctuations in gold prices. Such
external factors are in turn influenced by changes in international investment
patterns and monetary systems and political developments. The price of gold has
historically fluctuated widely and, depending on the price of gold, revenues
from mining operations may not be sufficient to offset the costs of such
operations.
Changes in regulatory or political policy could adversely affect our
exploration and future production activities.
Any changes in government policy may result in changes to laws affecting:
o ownership of assets,
o land tenure,
o mining policies,
o monetary policies,
o taxation,
o rates of exchange,
o environmental regulations,
o labor relations,
o repatriation of income and
o return of capital.
Any such changes may affect our ability to undertake exploration and development
activities in respect of present and future properties in the manner currently
contemplated, as well as our ability to continue to explore, develop and operate
those properties in which we have an interest or in respect of which we have
obtained exploration and development rights to date. The possibility,
particularly in Mexico, that future governments may adopt substantially
different policies, which might extend to expropriation of assets, cannot be
ruled out.
Compliance with environmental regulations could adversely affect our
exploration and future production activities.
With respect to environmental regulation, environmental legislation generally is
evolving in a manner which will require:
o stricter standards and enforcement,
o increased fines and penalties for non-compliance,
o more stringent environmental assessments of proposed projects and
o a heightened degree of responsibility for companies and their
officers, directors and employees.
15
There can be no assurance that future changes to environmental legislation and
related regulations, if any, will not adversely affect our operations. We could
be held liable for environmental hazards that exist on the properties in which
we hold interests, whether caused by previous or existing owners or operators of
the properties. Any such liability could adversely affect our business and
financial condition.
Mining Risks and Potential Inadequacy of Insurance Coverage could
adversely affect us.
If and when we commence mining operations at any of our properties, such
operations will involve a number of risks and hazards, including:
o environmental hazards,
o industrial accidents,
o labor disputes,
o metallurgical and other processing,
o unusual and unexpected rock formations,
o ground or slope failures,
o cave-ins,
o acts of God,
o mechanical equipment and facility performance problems and
o the availability of materials and equipment.
Such risks could result in:
o damage to, or destruction of, mineral properties or production
facilities,
o personal injury or death,
o environmental damage,
o delays in mining,
o monetary losses and
o possible legal liability.
Industrial accidents could have a material adverse effect on our future business
and operations. Although as we move forward in the development of any of our
properties we plan to maintain insurance within ranges of coverage consistent
with industry practice, we cannot be certain that this insurance will cover the
risks associated with mining or that we will be able to maintain insurance to
cover these risks at economically feasible premiums. We also might become
subject to liability for pollution or other hazards which we cannot insure
against or which we may elect not to insure against because of premium costs or
other reasons. Losses from such events could have a material adverse effect on
us.
Calculation of reserves and metal recovery dedicated to future production
is not exact, might not be accurate and might not accurately reflect the
economic viability of our properties.
All of the mineral properties in which we have an interest or right are in the
exploration stages only and are without reserves of gold or other minerals. If
and when we can prove such reserves, reserve estimates may not be accurate.
There is a degree of uncertainty attributable to the calculation of reserves,
resources and corresponding grades being dedicated to future production. Until
reserves or resources are actually mined and processed, the quantity of reserves
or resources and grades must be considered as estimates only. In addition, the
quantity of reserves or resources may vary depending on metal prices. Any
material change in the quantity of reserves, resource grade or stripping ratio
may affect the economic viability of our properties. In addition, there can be
no assurance that mineral recoveries in small scale laboratory tests will be
duplicated in large tests under on-site conditions or during production.
16
We are dependent on the efforts of certain key personnel and contractors,
the loss of whose services could have a materially adverse effect on our
operations.
We are dependent on a relatively small number of key personnel, the loss of any
one of whom could have an adverse effect on us. In addition, while certain of
our officers and directors have experience in the exploration and operation of
gold producing properties, we will remain highly dependent upon contractors and
third parties in the performance of our exploration and development activities.
As such there can be no guarantee that such contractors and third parties will
be available to carry out such activities on our behalf or be available upon
commercially acceptable terms.
There are uncertainties as to title matters in the mining industry. We
believe that we have good title to our properties; however, defects in
such title could have a material adverse effect on us.
We have investigated our rights to explore, exploit and develop our various
properties in manners consistent with industry practice and, to the best of our
knowledge, those rights are in good standing. However, we cannot assure that the
title to or our rights of ownership of either the El Chanate concessions or our
Leadville properties will not be challenged or impugned by third parties or
governmental agencies. In addition, there can be no assurance that the
properties in which we have an interest are not subject to prior unregistered
agreements, transfers or claims and title may be affected by undetected defects.
Any such defects could have a material adverse effect on us.
Should we successfully commence mining operations in the future, our
ability to remain profitable, should we become profitable, will be
dependent on our ability to find, explore and develop additional
properties. Our ability to obtain such additional properties will be
hindered by competition.
The acquisition of gold properties and their exploration and development are
subject to intense competition. 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 such mineral
properties. As a result of such competition, we may not be able to obtain such
additional properties.
Our property interests in Mexico are subject to the risks of doing
business in a foreign country.
We face risks normally associated with any conduct of business in foreign
countries with respect to our El Chanate project in Sonora, Mexico, including
various levels of political and economic risk. The occurrence of one or more of
these events could have a material adverse impact on our efforts or future
operations which, in turn, could have a material adverse impact on our future
cash flows, earnings, results of operations and financial condition. These risks
include the following:
o labor disputes,
o invalidity of governmental orders,
o uncertain or unpredictable political, legal and economic
environments,
o war and civil disturbances,
o changes in laws or policies,
o taxation,
o delays in obtaining or the inability to obtain necessary
governmental permits,
o governmental seizure of land or mining claims,
17
o limitations on ownership,
o limitations on the repatriation of earnings,
o increased financial costs,
o import and export regulations, including restrictions on the export
of gold, and
o foreign exchange controls.
These risks may limit or disrupt the project, restrict the movement of funds or
impair contract rights or result in the taking of property by nationalization or
expropriation without fair compensation.
Gold is sold in the world market in U.S. dollars; however, we may incur a
significant amount of our expenses in Mexican pesos. If and when we sell
gold, if applicable currency exchange rates fluctuate, our revenues and
results of operations may be materially and adversely affected.
If and when we commence sales of gold, such sales will be made in the world
market in U.S. dollars. We may incur a significant amount of our expenses in
Mexican pesos. As a result, our financial performance would be affected by
fluctuations in the value of the Mexican peso to the U.S. dollar. At the present
time, we have no plan or policy to utilize forward contracts or currency options
to minimize this exposure, and even if these measures are implemented there can
be no assurance that such arrangements will be available, be cost effective or
be able to fully offset such future currency risks.
Item 3. Controls and Procedures.
Gifford A Dieterle, our Chief Executive Officer and our Chief Financial Officer,
has conducted an evaluation of the effectiveness of disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation,
taking into account our limited resources and current business operations, he
concluded that the disclosure controls and procedures are effective in ensuring
that all material information required to be filed in this quarterly report has
been made known to him in a timely fashion. There have been no significant
changes in internal controls, or in other factors that could significantly
affect internal controls, subsequent to the date he completed his evaluation.
18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
During the quarter ended October 31, 2002, we issued the following shares of our
Common Stock pursuant to the exemption from registration provided by Section
4(2) of the Securities Act of 1933: We sold an aggregate of 15,000 shares for an
aggregate of $1,500 to one person.
Item 3. Defaults Upon Senior Securities
None.
Item 4 Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On December 10, 2002, we received the final payment of $1,009,904
from our March 20, 2002 sale of all of the issued and outstanding shares of
stock of our wholly-owned subsidiary, Minera Chanate S.A. de C.V. to an
unaffiliated party. The net selling price, after deducting commissions and
adding interest on installment payments, was $1,947,694.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
LEADVILLE MINING & MILLING CORPORATION
Registrant
By: ____________________________________
Gifford A Dieterle
President/Treasurer
Date: December 16, 2002
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CERTIFICATION
I, Gifford A. Dieterle, Chief Executive Officer and Chief Financial Officer of
Leadville Mining & Milling Corporation (the "Registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-QSB of the Registrant;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
Registrant and I have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to me by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
c) presented in this quarterly report my conclusions about the effectiveness of
the disclosure controls and procedures based on my evaluation as of the
Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the Registrant's
auditors and the audit committee of Registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrant's ability to record, process,
summarize and report financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: December 16, 2002
___________________________
Gifford A. Dieterle
Chief Executive Officer and
Chief Financial Officer
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