SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
January 21, 2004 (January 7, 2004)
CAPITAL GOLD CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 0-13078 13-3180530
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
76 Beaver Street, New York, NY 10005
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 344-2785
Item 5. Other Events and Regulation FD Disclosure.
On January 7, 2004, Minera Santa Rita S. de R.L. de C.V. ("MSR"), one of our
wholly-owned Mexican affiliates, executed an amendment to its joint venture
agreement with Grupo Minero FG S.A. de C.V. ("FG") with regard to the El Chanate
project in Mexico. Pursuant to this amendment, FG has reduced its interest in
the venture from 31% to 30% and waived its right to earn up to an additional 14%
interest in the venture and agreed to pay us $10,850 (representing 30% of
certain funds provided by us that MSR spent on Phase Two in excess of the
approved budget for Phase Two). In return, MSR has waived FG's obligation to
contribute $106,401, waived FG's obligation to contribute certain equipment
(Phase Three), waived MSR's right to dilute or to buy out FG's interest for FG's
failure to make the above Phase Two $106,401 payment. MSR has not waived its
right to dilute FG for FG's failure to make requisite future contributions.
In addition, Phase Two will conclude on receipt of the first funds from Royal
Gold, with whom we are currently negotiating a financing arrangement for the El
Chanate Project, or Royal Gold's determination not to proceed with the funding,
whichever occurs first. With the elimination of Phase Three, Phase Four will
commence the day following receipt of the first funds from Royal Gold and Phase
Five will commence on the date "Optimal Level of Production" is achieved at the
El Chanate Project, as defined by MSR and FG.
If funding for Phase Four is not obtained from Royal Gold or another lender
willing to provide funding for Phase Four (the "Lender") on or before March 31,
2004, the joint venture will terminate unless MSR and FG (the "Venturers") elect
to continue funding the joint venture. If the joint venture terminates, title to
the concessions and the surface land at the El Chanate Project will remain in
Oro de Altar, another of our wholly-owned subsidiaries.
Unless otherwise agreed to by the Venturers, until the commencement of Phase
Four, the Venturers will contribute to the venture in proportion to their
venture interest (30/70) in cash or in work or services, at the election of the
contributing party. Pursuant to the amendment, once Phase Four commences and
until the beginning of Phase Five, the Venturers will pay in cash only, in
proportion to their venture interests, expenditures and costs that cannot be
covered with funds from the Lender. During Phase Five, Venturers will contribute
proportionately cash only if expenditures and costs cannot be covered by income
generated in operation of the mine. In the 2004 budget, the Venturers have
varied slightly the periods during calendar 2004 when Venturers are permitted to
contribute work or services in lieu of cash. A failure of a Venturer to make its
required additional cash contributions will result in a dilution of that
Venturer's interest in the venture. A failure of a Venturer who contributes work
or services to timely provide such work or services will result in interest
accruing in favor of the other Venturer at the LIBOR rate plus 5.45 percent and
could result in dilution of that Venturer's interest in the venture.
MSR has granted FG a right of first refusal to carry out certain works and
services required by the project provided FG at least matches the best bid
received for such works and services in terms of price, time and quality.
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To facilitate obtaining funding from a Lender, MSR has agreed that its operating
rights will be subject to the loan agreement with the Lender and the Lender will
be permitted to participate on the Technical Committee. The Technical Committee
provides non-binding technical advice on the project and currently consists of
three members from MSR and two members from FG. In addition, the Venturers have
agreed that (i) required payments to the seller from whom we purchased the
Mexican company that originally owned the El Chanate concessions and surface
lands and (ii) required payments to the Lender will be made prior to
distribution of profits to the Venturers.
The foregoing discussion is qualified in its entirety by reference to the full
text of the amendment which is filed as Exhibit 10.1 to this Report and
incorporated herein by reference.
Although Phase Three, FG's contribution of equipment, has been eliminated from
the agreement, we are aware of alternate sources of equipment that appear to be
well suited for processing at the El Chanate project. We are currently looking
at whether this equipment is available for acquisition and the costs that would
be associated with such acquisition. We cannot assure that we will be able to
acquire this or comparable equipment at a reasonable price.
Item 7. Financial Statement and Exhibits.
(c) Exhibits.
10.1 English version of Amendment to joint venture agreement between Minera
Santa Rita S. de R.L. de C.V. and Grupo Minero FG S.A. de C.V.
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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.
CAPITAL GOLD CORPORATION
By: /s/ Gifford A Dieterle
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Gifford A Dieterle
President/Treasurer
Date: January 22, 2004
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