SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-12
Bay Resources Ltd
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined)
--------------------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
5. Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
--------------------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
3. Filing Party:
--------------------------------------------------------------------------------
4. Date Filed:
--------------------------------------------------------------------------------
TO OUR STOCKHOLDERS:
You are cordially invited to attend our 2004 Annual Stockholders' Meeting to be
held at Level 8, 580 St Kilda Road Melbourne Victoria 3004 Australia on January
27, 2005, at 3.00pm.
We have attached a Notice of Annual Meeting of Stockholders and Proxy Statement
that discuss the matters to be presented at the meeting.
At this year's meeting, we will be asking our stockholders to elect Joseph Isaac
Gutnick, David Stuart Tyrwhitt, Peter James Lee and Paul Lawrence Ehrlich as
directors, to approve an increase in our authorized shares of common stock, and
to approve the adoption of our 2004 Share Option Plan.
We hope that you will come to the Annual Meeting in person. Even if you plan to
come, we strongly encourage you to vote now. Instructions on voting by facsimile
or mail are shown on your proxy and in the Proxy Statement. If for any reason
you desire to revoke your proxy, you can do so at any time before it is voted.
Your vote is important and will be greatly appreciated.
If you have any questions about the matters to be voted on at the Annual Meeting
or you need help voting your shares, please either Mr. Pini Althaus at (718) 953
6340 (email pini@bayresourcesltd.com) or me at (613) 8532 2860 or
peter@bayresourcesltd.com
/s/ Peter Lee
-------------
Peter Lee
Secretary
BAY RESOURCES LTD
NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS
Time
3.00pm. on January 27, 2005.
Place
Level 8, 580 St Kilda Road Melbourne Victoria 3004 Australia
Purposes
To elect four members of the Board of Directors to serve a one year term.
To approve an amendment to our Certificate of Incorporation to increase the
authorized number of shares of common stock from 25,000,000 to 50,000,000
shares.
To approve the 2004 Share Option Plan.
To transact any other business that properly comes before the Meeting or any
adjournment of the Meeting.
Record Date
You can vote if you were a stockholder of record at the close of business on
December 15, 2004.
By order of the Board of Directors
/s/ Peter Lee
-------------
Peter Lee
Secretary
November 11, 2004
Melbourne, Victoria, Australia
HOW TO VOTE
Your vote is important. You may vote by using a traditional proxy card and
returning it to us by facsimile on (613) 8532 2805 or by mail to PO Box 6315 St
Kilda Road Central, Melbourne, Victoria, 8008 Australia
BAY RESOURCES LTD
Proxy Statement
--------------------------------------------------------------------------------
Table Of Contents Page
--------------------------------------------------------------------------------
General Information about the Solicitation 1
--------------------------------------------------------------------------------
Election of Directors 3
--------------------------------------------------------------------------------
Executive Compensation 9
--------------------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners and Management and 12
Related Stockholder Matters
--------------------------------------------------------------------------------
Approval to Increase the Authorised Shares of Common Stock 16
--------------------------------------------------------------------------------
Approval of the 2004 Share Option Plan 18
--------------------------------------------------------------------------------
Requirements, Including Deadlines, for Submission of Stockholder 21
Proposals and Nominations of Directors
--------------------------------------------------------------------------------
Other Matters 22
--------------------------------------------------------------------------------
Audit Committee Charter Annex A
--------------------------------------------------------------------------------
2004 Share Option Plan Annex B
--------------------------------------------------------------------------------
PROXY STATEMENT
GENERAL INFORMATION ABOUT THE SOLICITATION
We are sending you these proxy materials in connection with the solicitation by
the Board of Directors of Bay Resources Ltd (OTCBB: BYRE) of proxies to be used
at Bay Resources Annual Meeting of Stockholders to be held on ThursdayJanuary
27, 2005, and at any adjournment or postponement of the Meeting. "We", "our",
"us" and the "Company" all refer to Bay Resources. The proxy materials are first
being mailed on or about December 22, 2004.
Who may vote
You will only be entitled to vote at the Annual Meeting if our records show that
you held your shares on December 10, 2004. At the close of business on November
16, 2004, a total of 16,714,130 shares of our common stock were outstanding and
entitled to vote. Each share of common stock has one vote.
How to vote
If your shares are held by a broker, bank or other nominee, it will send you
instructions that you must follow to have your shares voted at the Annual
Meeting. If you hold your shares in your own name as a record holder, you may
instruct the proxy agents how to vote your shares as described below.
Vote by mail
If you choose to vote by facsimile or mail, simply mark your proxy, date and
sign it, and return it to us in the envelope provided. If the envelope is
missing, please mail your completed proxy card to Bay Resources, PO Box 6315 St
Kilda Road Central Melbourne Victoria 8008 Australia.
Voting at the Annual Meeting
The method by which you vote will not limit your right to vote at the Annual
Meeting if you decide to attend in person. If your shares are held in the name
of a bank, broker or other holder of record, you must obtain a proxy, executed
in your favor, from the holder of record to be able to vote at the Meeting.
All shares that have been properly voted and not revoked will be voted at the
Annual Meeting. If you sign and return your proxy card but do not give voting
instructions, the shares represented by that proxy will be voted as recommended
by the Board of Directors.
How to revoke your proxy
You may revoke your proxy at any time before it is voted. If you are a record
stockholder, you may revoke your proxy in any of the following ways:
o by giving notice of revocation at the Annual Meeting.
o by timely delivery of written instruction revoking your proxy to the
Secretary of Bay Resources , PO Box 6315 St Kilda Road Central Melbourne
Victoria 8008 Australia.
1
o by voting in person at the Annual Meeting.
How votes will be counted
The Annual Meeting will be held if a quorum, consisting of a majority of the
outstanding shares of common stock entitled to vote, is represented at the
Meeting. If you have returned a valid proxy or are a record holder and attend
the Meeting in person, your shares will be counted for the purpose of
determining whether there is a quorum, even if you wish to abstain from voting
on some or all matters introduced. Abstentions and broker "non-votes" are also
counted in determining whether a quorum is present. A "broker non vote" occurs
when a broker, bank or nominee that holds shares for a beneficial owner does not
vote on a particular proposal because it does not have discretionary voting
power for that proposal and has not received voting instructions from the
beneficial owner.
If a quorum is not present at the Annual Meeting, a majority of the shares
present, in person or by proxy, has the power to adjourn the Meeting from time
to time until a quorum is present. Other than announcing at the Annual Meeting
the time and place of the adjourned Meeting, no notice of the adjournment will
be given to stockholders unless required because of the length of the
adjournment.
Directors will be elected by a plurality of the votes cast.
The affirmative vote of a majority of the outstanding shares of our common stock
is required to approve the proposed amendment of our certificate of
incorporation.
The votes cast "for" must exceed the cast "against" to approve each other matter
voted on at the Meeting.
Abstentions and broker "non-votes" are not counted in the election of directors
or the approval of any other matter.
Votes that are withheld or shares that are not voted will have the same legal
effect as a vote against the proposed amendment of our certificate of
incorporation but will have no effect on the outcome of any other matter voted
on.
List of stockholders
The names of stockholders of record entitled to vote at the Annual Meeting will
be available at the Annual Meeting and for ten days prior to the Meeting for any
purpose germane to the Meeting, between the hours of 9.00 a.m. and 5.00 p.m., at
our principal executive offices at Level 8, 580 St Kilda Road Melbourne Victoria
3004 Australia.
Cost of this proxy solicitation
We will pay the cost of preparing, assembling and mailing the notice of meeting,
proxy statement and enclosed proxy card. In addition to the use of mail, our
employees may solicit proxies personally and by telephone. Our employees will
receive no compensation for soliciting proxies other than their regular
salaries. We may request banks, brokers and other custodians, nominees and
fiduciaries to forward copies of the proxy materials to their principals and to
request authority for the execution of proxies. We may reimburse such persons
for their expenses incurred in connection with these activities.
2
PROPOSAL 1
ELECTION OF DIRECTORS
General
Our By-laws provide that the number of Directors of the Company initially shall
be six and that the number of directors which shall thereafter constitute the
whole Board shall be determined by the Board of Directors. The Board has
determined that the number of Directors constituting the whole Board shall be
four.
Directors need not be stockholders of the Company or residents of the State of
Delaware. Directors are elected for an annual term and generally hold office
until the next Directors have been duly elected and qualified. Directors may
receive compensation for their services as determined by the Board of Directors.
A vacancy on the Board may be filled by the remaining Directors even though less
than a quorum remains. A Director appointed to fill a vacancy remains a Director
until his successor is elected by the Stockholders at the next annual meeting of
Shareholder or until a special meeting is called to elect Directors.
Our Board of Directors currently has four members who hold office for a period
of one year.
Your proxy will be voted FOR the election of the four nominees named below,
unless you withhold authority to vote for any or all of the nominees. Management
has no reason to believe that a nominee will be unwilling or unable to serve as
a director. However, if a nominee is unwilling or unable to serve, your proxy
will be voted for another nominee designated by our Board of Directors.
Director nominees
The following are management's director nominees
Name Director Since
Joseph Isaac Gutnick March 1988
David Stuart Tyrwhitt November 1996
Peter James Lee February 1996
Paul Lawrence Ehrlich November 2001
Directors and executive officers
The following table lists our directors and executive officers.
Name Age Position(s) Currently Held with the Company
Joseph Gutnick 52 Chairman of the Board, President, Chief
Executive Officer and Director
David Tyrwhitt 64 Vice President and Director
Peter Lee 47 Director, Secretary and Chief Financial Officer
Paul Ehrlich 46 Director
Pinchas Althaus Chief Operating Officer
Craig Alford Vice President Exploration
3
Biographical information provided to us by our directors and executive officers
is as follows.
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 Mining N.L., Great Gold Mines N.L.,. and Quantum Resources
Limited. Mr. Gutnick was previously Executive Chairman of Tahera 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.
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. Dr Tyrwhitt has been a Director of numerous public listed companies
in Australia in the mining industry and is currently a Director of Astro Mining
N.L., Great Gold Mines N.L., and Quantum Resources Limited.
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 20 years commercial experience and is
currently General Manager Corporate and Company Secretary of several listed
public companies in Australia.
Paul Ehrlich
Mr. Ehrlich is an attorney of 20 years experience in the fields of commercial
law and commercial litigation. From 1989 to 2001 Mr. Ehrlich was a partner in a
major national Australian law firm. He has expertise in a range of corporate
areas including mergers and acquisition (with an emphasis on public company
takeovers, litigation and trade sales), securities law, public raisings, IPO's,
government privatisation, corporate reconstructions and the negotiation and
drafting of complex contractual and commercial arrangements. Mr. Ehrlich
specialises in areas of complex corporate litigation and has conducted such
litigation on behalf of clients in the Supreme Courts of Victoria, New South
Wales, South Australia, Western Australia and in the Federal Court of Australia
and in the High Court of Australia. He also specialises in all areas of mining
resource law and project finance.
Pinchas (Pini) Althaus
Mr Althaus has 9 years business experience in insurance, sales, business
development and investor relations. More recently Mr Althaus was Director of
Business Development for Ambient Corporation (February 2000 to February 2003), a
company providing power line communications technology. In this role, Pini
initiated and maintained relationships with U.S. & International electrical
utilities and power companies, and managed and initiated relationships with
strategic and business development partners. He played a major role in Ambient
completing two successful rounds of funding, acted as liaison between Ambient
and its investors/financial community, managed public relations and corporate
communications duties, including press releases and media interviews, and
created and delivered presentations for Ambient. He joined Tahera Corporation, a
diamond exploration company, in February 2003 as Director of Investor Relations
& Business Development where he managed public relations and investor relations
activities, including press releases, conducting media interviews, responding to
shareholder inquiries and representing Tahera at conferences.
4
In October 2003, Pini left Tahera and since that time, has provided consulting
services to Bay Resources and its subsidiary company covering investor relations
and public relations activities, including fund raising, press releases, media
interviews, and shareholder inquiries. In addition to this, he has coordinated
road-shows and delivered presentations on the Company's behalf. On October 15,
2004, he was appointed Chief Operating Officer of Bay Resources Ltd.
Craig Alford
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.
Executive officers of Bay Resources are appointed by the Board of Directors and
serve at the discretion of the Board, subject to the terms of applicable
employment agreements. There are no family relationships among any of the
directors or executive officers of Bay Resources.
Mr. Gutnick was formerly the Chairman of the Board, Dr. Tyrwhitt was formerly an
independent Director and Mr. Lee was formerly Company Secretary of Centaur
Mining & Exploration Ltd., an Australian corporation, which commenced an
insolvency proceeding in Australia in March 2001.
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 2004,
our Board of Directors met three times. The Board of Directors also uses
resolutions in writing to deal with certain matters and during fiscal 2004, five
resolutions in writing were signed by all Directors.
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 Bay Resources on the same basis as candidates proposed by any other
person. Stockholders can make proposals as provided below under the caption
"Requirements, Including Deadlines, for Submission of Stockholder Proposals and
Nominations of Directors."
5
Audit Committee:
Dr David Tyrwhitt and Mr. Paul Ehrlich constitute our Audit Committee. It is the
opinion of the Board of Directors that each of them is an independent director
as defined in applicable regulations. 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 three times during fiscal
2004.
The Board's current written charter for its Audit Committee is a statement
attached as Annex A to this proxy statement.
6
Report of the Audit Committee
Management is responsible for Bay Resources' financial reporting process,
including its system of internal control, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. Bay Resources' independent auditors are responsible for
auditing those financial statements.
In performing our oversight duties we rely on management's representation that
the financial statements have been prepared with integrity and objectivity and
in conformity with accounting principles generally accepted in the United
States. We also rely on the representations of the independent auditors included
in their report on Bay Resources' financial statements.
Our oversight does not provide us with an independent basis to determine that
management has maintained appropriate accounting and financial reporting
principles or policies, or appropriate internal controls and procedures.
Furthermore, our contacts with management and the independent auditors do not
assure that:
|X| Bay Resources' financial statements are presented in accordance with
generally accepted accounting principles,
|X| the audit of Bay Resources' financial statements has been carried out in
accordance with generally accepted auditing standards or
|X| Bay Resources' independent accountants are in fact "independent."
In connection with the inclusion of the audited financial statements in Bay
Resources' 2004 annual report on Form 10-KSB, the Audit Committee:
|X| reviewed and discussed the audited financial statements with management,
|X| discussed with our independent auditors the materials required to be
discussed by SAS 61,
|X| reviewed the written disclosures and the letter from our independent
auditors required by Independent Standards Board Standard No. 1 and
discussed with our independent auditors their independence, and
|X| based on the foregoing review and discussion, recommended to the Board of
Directors that the audited financial statements be included in Bay
Resources' 2004 annual report on form 10-KSB.
David S Tyrwhitt, Audit Committee Chairman
Paul L Ehrlich., Audit Committee Member
Remuneration Committee
The Board has a Remuneration Committee comprised of two independent directors.
During fiscal 2004, the Remuneration Committee met once. During the year, the
Remuneration Committee reviewed employment agreements and salary levels of our
executive officers were considered.
7
Stockholder Communications with the Board
Stockholders who wish to communicate with the Board of Directors should send
their communications to the Chairman of the Board at the address listed below.
The Chairman of the Board is responsible for forwarding communications to the
appropriate Board members.
Mr. Peter Lee Bay Resources Ltd.
PO Box 6315
St Kilda Road Central
Melbourne, Victoria 8008
Australia
Annual Meeting Attendance
The Company encourages all Directors to attend the Annual Meeting of
Stockholders either in person or by telephone.
8
EXECUTIVE COMPENSATION
Summary compensation table
The following table shows compensation paid for the years ended June 30, 2004,
2003, and 2002 to Bay Resources' Chief Executive Officer and its other highest
paid executive officers who earned more than $100,000 in fiscal 2004.
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 2004 $ 76,000(1)(2) $ 16,484(1) -- --
2003 $ -(1)(2) $ 28,553(3) -- --
2002 $ 108,000(1)(2) $ - -- --
___________________________________
1. The amounts listed were paid by us to AXIS, which provides the services of
Mr. Gutnick and Mr. Lee as well as certain other officers and employees to
us.
2. Excludes options granted to Edensor of which Mr. J.I. 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.
Option grants in last fiscal year
Nil
Director compensation
In 2004, Directors who were not officers or employees of Bay Resources were paid
fees of A$20,000 per annum.
Employment agreements
Mr. Craig Alford has an employment agreement with Bay Resources. The agreement
with Mr. Alford expires March 31, 2005, and provides for his employment as Vice
President Exploration of Bay Resources. He is required to spend his full
business time performing his duties and his annual salary is currently
CDN$120,000. The employment agreement entitles the officer to participate in the
health, insurance, pension and other benefits, if any, generally provided to our
employees.
Bay Resources can terminate the employment of Mr. Alford for cause. If
terminated for cause, Bay Resources is not required to make any payment to Mr.
Alford other than entitlements up to the date of termination.
If the employment of Mr. Alford is terminated by Bay Resources without cause,
Bay Resources must provide 2 weeks notice of termination (or payment in lieu of
notice).
9
On October 15, 2004, the Company appointed Mr. Pinchas Althaus as Chief
Operating Officer.
The appointment was effective May 1, 2004 and the employment agreement with Mr.
Althaus expires on December 31, 2006. Mr. Althaus shall be paid a salary of
US$110,000 exclusive of bonus benefits and other compensation. The Company has
agreed to provide Mr. Althaus with executive benefits comparable to those
provided by the Company to other executives of the Company generally and shall
permit Mr. Althaus to participate in any bonus place, share purchase plan,
retirement plan or similar plan offered by the Company to its executives
generally in the manner and the extent authorized by the Remuneration Committee
of the Company. In addition, Mr. Althaus will be able to participate in such
extended health, medical, disability insurance and other benefit plans
established by the Company and made available to other executives of the
Company.
The Company has agreed to grant Mr. Althaus options to purchase 750,000 shares
of common stock of the Company at an exercise price of US$1.00 per option which
will vest as follows:-
o 250,000 shall vest immediately;
o a further 250,000 will vest at the mid term date of the contract; and
o the remaining 250,000 will vest on December 31, 2006.
The options will be issued subject to applicable securities laws, the
availability of options within the Company stock option plan and may be subject
to whole periods.
In the case of the change of control, all options then outstanding will
immediately vest for the purpose of such transaction.
The Company may terminate the employment of Mr. Althaus without notice or any
payment in law of notice for cause. The agreement may also be terminated by the
Company upon 30 days written notice to Mr. Althaus if Mr. Althaus becomes
permanently disabled and the agreement shall terminate without notice upon the
death of Mr. Althaus. If Mr. Althaus' employment is terminated during the term
for cause or by voluntarily termination by Mr. Althaus, Mr. Althaus shall not be
entitled to any severance payment other than pro rata entitlements up to the
date of termination.
Mr. Althaus may terminate his employment with the Company at any time upon the
occurrence of any one of the following:-
(i) A reduction of diminution in Mr. Althaus' authority, duties or
responsibilities (including without limitation, with respect to office
or title) hereunder,
(ii) Any reduction in the then applicable base salary or Mr. Althaus'
eligibility to participate in any executive benefits program,
retirement plan or executive incentive bonus programs,
(iii) Unless without his prior consent, his place of work is relocated to
more than 30 miles from New York,
(iv) Any other material failure on the part of the Company to comply with
any other provision of this agreement or any stock option agreement
executed by the parties as contemplated herein.
If Mr. Althaus' employment is terminated for other than cause, Mr. Althaus will
be entitled to receive the lesser of the total of three months salary at the
applicable base salary rate and the present value of the salary of Mr. Althaus
during the next 24 months.
If Mr. Althaus' employment is terminated as a result of permanent disability or
death, a payment will be made to Mr. Althaus or his estate of the balance of the
base salary that would otherwise have been paid to Mr. Althaus during the
remainder of the term of the agreement.
10
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 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
2004 all such filing requirements were complied with in a timely manner by all
Directors and executive officers.
Securities authorized for issuance under equity compensation plans
During fiscal 2004, no securities were authorised for issuance under equity
compensation plants.
On October 15, 2004, the Remuneration Committee and Board of Directors adopted
the 2004 Share Option Plan, subject to stockholder approval (refer section on
Approval of the 2004 Share Option Plan).
On October 15, 2004, the Remuneration Committee and Board of Directors agreed to
issue 1,600,000 options under the Share Option Plan, subject to stockholder
approval of the 2004 Share Option Plan.
11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets out, to the best of our knowledge, the numbers of
shares in us beneficially owned as at November 16, 2004 by:
(i) each of our present Executive Officers and Directors,
(ii) each person (including any "group" as that term is defined in Section
13(d)(3) of the Securities Exchange Act) who beneficially owns more
than 5% of our common stock, and
(iii) all of our present Directors and officers as a group.
Name Number of Shares Owned(1) Percentage of
Shares (*)
Edensor Nominees
Pty Ltd 8,894,590 48.2
Kerisridge Pty Ltd 3,507,968 19.0
Joseph Gutnick 12,454,208 (2)(3) 67.4
(4)(5)(6)(7)
Stera Gutnick 12,428,558 (4)(5)(6)(7) 67.3
Delkern Investments Ltd 3,050,778 18.2
David Tyrwhitt - (2) -
Peter Lee - (2) -
Paul Ehrlich - -
Craig Alford - -
Pini Althaus 900 -
----------------------------------------------------
All officers and Directors
As a group 12,455,108 74.5
----------------------------------------------------
Notes:
(*) Based on 16,714,130 shares outstanding as of November 16, 2004
(1) Does not include shares issuable upon exercise of options that have
been granted to certain officers, subject to the approval by
stockholders of the 2004 Share Option Plan.
(2) Does not include:
(i) 8,949 shares of common stock beneficially owned Great Gold Mines
NL or
12
(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 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 8,894,590 shares of common stock owned by Edensor Nominees,
1,753,984 shares of common stock owned by Kerisridge and 26,000 shares
of common stock owned by Pearlway Investments Proprietary Limited, of
both of which Mr Joseph Gutnick, Stera M. Gutnick and members of their
family are officers, Directors and principal stockholders.
(5) Includes 1,753,984 shares issuable upon exercise of stock purchase
warrants owned by Kerisridge.
(6) Joseph Gutnick is the beneficial owner of 25,650 shares of common
stock.
(7) Joseph Gutnick and Stera Gutnick are husband and wife.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We are one of five affiliated companies of which four are Australian public
companies listed on Australian Stock Exchange. 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
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.
13
The Service Agreement may be terminated by AXIS or ourselves 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$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, A$201,688 for the
fiscal year ended June 30, 2003 and A$169,770 for the fiscal year ended June 30,
2002. At June 30, 2002, 2003 and 2004, the Company owed AXIS A$389,000,
A$486,000 and A$104,000 respectively for services provided in accordance with
the Service Agreement. During fiscal 2002, 2003 and 2004, AXIS Consultants
charged interest of A$29,198, A$46,642 and A$42,742 respectively on outstanding
balances. AXIS charged interest at rates between 9.60% and 10.10% for fiscal
2002, 9.60% and 10.10% for fiscal 2003 and 10.10% and 10.60% for fiscal 2004.
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, 2002 we had a liability to Chevas of A$783,743. During
the 2003 fiscal year, Chevas loaned a further A$369,155 and charged A$86,417 in
interest to us on the loan account. 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 2003 fiscal year was 8.60% and 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%.
On January 20, 2000, we issued 8,000,000 options over fully paid shares in our
capital at an issue price of US$0.01 per option and an exercise price of US$1.00
per option to Edensor. The options had a term of 5 years with a non-exercise
period of 2 years subject to a further board approval for Edensor, either
directly of indirectly, to exercise options in the case we required to raise
further working capital. On March 22, 2001, the Directors agreed to extend the
term of the options from 5 years to 10 years. Edensor advised us in June 2003
that it had sold 2,000,000 options to Delkern Investments Ltd. In March 2004, we
received notification from Edensor that it was exercising all of the options it
held utilising the cashless exercise feature of the terms and conditions of the
options. As a result of the exercise of the options, we issued 5,142,857 shares
to Edensor.
14
In mid 2002, we entered into an agreement to explore for gold on properties owed
by Tahera Resources Ltd.. Mr Gutnick, our President, was Executive Chairman of
Tahera and his family company, Edensor Nominees, who are our controlling
stockholder, was 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 in late 2002 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.
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 Bay 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 favorable to us than
the terms available from non-affiliated third parties or are otherwise deemed to
be fair to us at the time authorized.
15
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES
OF COMMON STOCK FROM 25,000,000 TO 50,000,000 SHARES
Introduction
Our Certificate of Incorporation currently authorizes the issuance of
twenty-five million (25,000,000) shares of common stock, par value $0.0001 per
share. In October, 2004, the Board of Directors adopted a resolution proposing
that our Certificate of Incorporation be amended to increase the authorized
number of shares of common stock to fifty million (50,000,000), subject to
stockholder approval of the amendment.
Current Use of Shares
We currently have on issue 16,714,130 shares of common stock and 3,423,984
warrants exercisable into 3,423,984 shares of common stock, leaving 4,861,886
shares of common stock available for future issuance. In addition, we propose to
issue 1,600,000 options under the 2004 Share Option Plan. We will continue to
require additional shares of common stock for the purposes discussed below and
accordingly, we propose to increase the authorized number of shares we can issue
to 50 million shares of common stock, par value US$0.0001 per common share.
Proposed Amendment to Certificate of Incorporation
The Board of Directors has adopted resolutions setting forth (i) the proposed
amendment to Article VIII of the Company's Certificate of Incorporation; (ii)
the advisability of the amendment; and (iii) a call for submission of the
amendment for approval by the Company's stockholders at the annual meeting.
The following is the text of Article VIII of the Certificate of Incorporation of
the Company, as proposed to be amended:
"VIII. The corporation shall be authorized to issue a total of fifty
million (50,000,000) shares of common stock, par value $.0001 per
share."
Common Stock
The shares of common stock shall be alike and equal in all respects and shall
have one vote for each share. Dividends payable in cash or in any other medium
may be declared by the Board of Directors and paid on the shares of common
stock. In the event of voluntary or involuntary liquidation, dissolution,
distribution of assets or winding-up of the Corporation, the holders of the
common stock shall be entitled to receive all of the remaining assets of the
Corporation of whatever kind available for distribution to shareholders ratably
in proportion to number of shares of common stock held by them respectively.
Purpose and Effect of the Proposed Amendment
The Board of Directors believes that the availability of additional authorized
but unissued shares will provide the Company with the flexibility to issue
common stock for a variety of corporate purposes, such as to raise capital, make
acquisitions, effect future stock splits and stock dividends and to adopt
additional employee benefit plans or to reserve additional shares for issuance
under such plans.
16
Other than as described above, the Board of Directors has no immediate plans,
understanding, agreements or commitments to issue additional common stock for
any purposes. No additional action or authorization by the Company's
stockholders would be necessary prior to the issuance of such additional shares,
unless required by applicable law or the rules of any stock exchange or national
securities association trading system on which the common stock is then listed
or quoted. The Company reserves the right to seek a further increase in
authorized shares from time to time in the future as considered appropriate by
the Board of Directors.
Under the Company's Certificate of Incorporation, the Company's stockholders do
not have preemptive rights with respect to common stock. Thus, should the Board
of Directors elect to issue additional shares of common stock, existing
stockholders would not have any preferential rights to purchase such shares. In
addition, if the Board of Directors elects to issue additional shares of common
stock, such issuance could have a dilutive effect on the earnings per share,
voting power and shareholdings of current stockholders.
The issuance of the additional shares of common stock could have the effect of
diluting earnings per share and book value per share, which could adversely
affect the Company's existing stockholders. Issuing additional shares of common
stock may also have the effect of delaying or preventing a change of control of
the Company. The Company's authorized but unissued common stock could be issued
in one or more transactions that would make it more difficult or costly, and
less likely, a takeover of the Company. The proposed amendment to the
Certificate of Incorporation is not being recommended in response to any
specific effort of which the Company is aware to obtain control of the Company,
and the Board of Directors has no present intention to use the additional shares
of common stock in order to impede a takeover attempt.
If the proposed amendment is adopted, it will become effective upon filing of a
Certificate of Amendment to the Company's Certificate of Incorporation with the
Delaware Secretary of State. However, if the Company's stockholders approve the
proposed amendment to the company's Certificate of Incorporation, the Board
retains discretion under Delaware law not to implement the proposed amendment.
If the Board exercised such discretion, the number of authorized shares would
remain at current levels.
Vote Necessary to Approve the Amendment
The affirmative vote of the holders of a majority of the outstanding shares of
common stock entitled to vote at the annual meeting, assuming a quorum is
present, is necessary for approval of the amendment.
Recommendation of the Board
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK FROM TWENTY-FIVE MILLION (25,000,000) TO FIFTY MILLION
(50,000,000).
17
PROPOSAL 3
APPROVAL OF THE 2004 SHARE OPTION PLAN
Reasons for the 2004 Plan
Effective October 15, 2004, our Board of Directors unanimously adopted the 2004
Bay Resources Ltd Share Option Plan (the "2004 Plan"), subject to stockholder
approval at the Annual Meeting.
The Board believes it is critical for Bay Resources' continued success to be
able to offer employees, officers, directors and consultants of outstanding
ability, who are eligible to participate in the 2004 Plan, equity interests in
Bay Resources parallel to that of Bay Resources' stockholders. Our board of
directors strongly prefers stock incentives over cash bonus payments as ways to
attract and retain our key personnel. We can use the cash for other purposes and
can also further align the interests of management with our stockholders as we
continue to meet our goals of increasing shareholder value by improving our
performance and increasing our profitability.
The following summary of the 2004 Plan is qualified in its entirety by the full
text of the 2004 Plan, a copy of which is attached hereto as Annex B.
General
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.
On November 16, 2004, the last sales price of our common stock, as reported by
the OTC-Bulletin Board, was US$7.00.
Administration
The 2004 Plan will be administered by the Remuneration Committee of the Board
comprised solely of directors who are not employees or consultants to Bay
Resources or any of its affiliated entities.
Eligibility
Any employee, director, officer, consultant of or to Bay 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 Bay Resources or an affiliated entity. As of October 15, 2004,
approximately four employees or consultants and our four non-employee directors
would be eligible to participate in the 2004 Plan. 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.
18
Term, price and method of payment for stock underlying options
Options granted under the 2004 Plan are to purchase Bay 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.
Non-transferability/assignability
No award is transferable, or assignable by the participant except upon his or
her death.
Amendment
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.
Termination
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.
Federal income tax consequences
The following is a general and brief summary of the federal income tax treatment
of stock options granted under the 2004 Plan. This discussion is not complete
and its application may vary in particular circumstances or as a result of
changes in federal income tax laws and regulations.
A participant generally will not incur any U.S. federal income tax liability as
a result of the grant of an option.
A participant will recognize ordinary income for federal income tax purposes
when the participant exercises an option. The amount of income recognized upon
exercise of an option is the fair market value of the shares of common stock
acquired upon exercise (determined as of the date of exercise) reduced by the
amount the participant paid for the shares. The participant's tax basis in the
shares will equal the fair market value of the shares on the date of exercise
and the participant's holding period will begin on the date after the date of
exercise. Any gain or loss upon sale of the shares will be treated as a capital
gain or loss. The capital gain or loss will generally be treated as long-term
gain or loss if the shares are held for more than one year.
The Company is generally entitled to a business expense deduction on its federal
income tax return with respect to stock options in the same amount and at the
same time that participant recognizes ordinary income with respect to the stock
option. Amounts treated as capital gain to the participant are not deductible by
the Company.
19
Planned grants
Options to purchase the following shares of common stock have been issued as
follows:-
Name Quantity Exercise Price
J. I. Gutnick 500,000 US$1.00
P.J. Lee 250,000 US$1.00
D S Tyrwhitt 50,000 US$1.00
P L Ehrlich 50,000 US$1.00
P. Althaus 750,000 US$1.00
C. Alford 150,000 US$1.00
None of the proposed recipients have received any stock options or other equity
based forms of compensation from us for at least the last three years.
Other than the issue of these Options, there are no other current plans or
arrangements to grant any options under the 2004 Plan.
Required vote
The approval of the 2004 Plan requires the affirmative vote of a majority of the
votes cast at the Meeting on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE 2004 PLAN.
20
REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF STOCKHOLDER
PROPOSALS AND NOMINATIONS OF DIRECTORS
Stockholder proposals that are intended to be included in our proxy statement
for our 2005 Annual Meeting pursuant to Proxy Rule 14a-8 must be received by us
no later than July 2, 2005, and must otherwise comply with that rule.
21
OTHER MATTERS
We know no other matters to be submitted to the Annual Meeting. If any other
matters properly come before the Annual Meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the shares they represent as
the Board of Directors recommends.
By order of the Board of Directors,
/s/ Peter J Lee
---------------
Peter J Lee
Secretary
November 16, 2004
22
ANNEX A
BAY RESOURCES LTD
Audit Committee Charter
Terms of Reference
1. Objective:
To assist the Board of Directors in (i) fulfilling its responsibilities
relating to accounting and reporting practices of Bay Resources Ltd; (ii)
improving the quality of internal reporting; and (iii) monitoring,
examining and where appropriate recommending action in relation to the
Company's risk management including such areas as insurance and the use of
derivatives.
2. Representation
To ensure compliance with the proposed Bulletin Board Exchange corporate
governance rules, at least one of the Directors on the Committee must be
independent.
3. Quorum
The quorum for a meeting of the Audit Committee shall be two Directors, one
of which must be an independent Director.
4. Frequency And Conduct Of Meetings
The Committee will hold at least two regular meetings per year, and such
additional meetings as the Chairman shall decide in order to fulfill its
duties. The Secretary or other appropriate executive will act as Secretary
of the Committee and shall be responsible, in conjunction with the
Chairman, for drawing up the agenda and circulating it, supported by
explanatory documentation to Committee members prior to each meeting.
The Committee shall conduct its proceedings in the manner set out for the
Board in the By-Laws except as provided in these Terms of Reference.
The Secretary will also be responsible for keeping the minutes of meeting
of the Committee, and circulating them to Committee members and to the
other members of the Board of Directors.
5. Access:
The Committee shall have unlimited access to the external auditors and to
senior management of the Company. The Committee shall also have the ability
to consult independent experts where they consider it necessary to carry
out their duties.
23
6. Duties and Responsibilities
The duties and responsibilities of the Audit Committee should be read in
conjunction with the objective set out in 1 above and are as follows:
o Discuss the audit plan of the external auditors and evaluate the
effectiveness of the annual audit.
o Decide and implement any internal investigations thought appropriate,
including internal audit.
o Monitor the adequacy and effectiveness of the Company's
administrative, operating and accounting policies.
o Monitor the adequacy of the Company's internal control system.
o Review the Form 10-K and 10-Q financial statements where applicable
and recommend acceptance to the Board of Directors.
o Recommend to the Board of Directors the appointment of the external
auditors.
o Review proposed audit fees and make recommendations to the Board of
Directors.
o Determine that no management restrictions are being placed upon the
external auditors.
o Review any regulatory reports submitted to the Company and monitor
management's response to them.
o Require reports from management and external auditors on any
significant proposed regulatory, accounting or reporting issue and to
assess the potential impact upon the Company's financial reporting
process.
o Review and approve all significant accounting policy changes.
o Receive and consider the external auditor's management letter(s) in
relation to their audit of the Company's accounts.
o Assessing the performance of financial management.
o Review of risk management practices including use of derivatives,
insurance coverage and environmental matters that may have a material
impact on financial results.
o Review all related party transactions to ensure they are at arms
length and in the best interests of the Company.
24
ANNEX B
BAY RESOURCES LTD 2004
Incentive Stock Plan
25
BAY RESOURCES LTD
(the "Company")
2004 SHARE OPTION PLAN
Dated for Reference October 15, 2004.
ARTICLE 1
PURPOSE AND INTERPRETATION
Purpose
1.1 The purpose of this Plan is to advance the interests of the Company by
encouraging equity participation in the Company through the acquisition of
Common Shares of the Company. It is the intention of the Company that this
Plan will at all times be in compliance with the laws applicable to the
Company.
Definitions
1.2 In this Plan Affiliate means a company that is a parent or subsidiary of
the Company, or that is controlled by the same entity as the Company;
Associate has the meaning assigned by law;
Board means the board of directors of the Company or any committee thereof
duly empowered or authorized to grant Options under this Plan;
Change of Control includes situations where after giving effect to the
contemplated transaction or series of transactions and as a result of such
transaction or series of transactions:
(i) any one Person holds a sufficient number of voting shares of the
Company or resulting company to affect materially the control of the
Company or resulting company, or,
(ii) any combination of Persons, acting in concert by virtue of an
agreement, arrangement, commitment or understanding, hold in total a
sufficient number of voting shares of the Company or its successor to
affect materially the control of the Company or its successor,
where such Person or combination of Persons did not previously hold a
sufficient number of voting shares to affect materially control of the
Company or its successor. In the absence of evidence to the contrary, any
Person or combination of Persons acting in concert by virtue of an
agreement, arrangement, commitment or understanding, holding more than 20%
of the voting shares of the Company or its successor is deemed to
materially affect the control of the Company or its successor;
A Change of Control will also include a situation whereby individuals who,
as of the date of this Plan, constitute the Board of Directors of the
Company (or similar body elected to manage the affairs of the Company)
cease for any reason to constitute at least a majority of the Board of
Directors (or similar body) as constituted from time to time; or the sale
or other disposition of all or substantially all of the assets of the
Company or any subsidiary in one transaction or series of related
transactions,
26
Common Shares means common shares in the capital of the Company means the
company named at the top hereof and includes, unless the context otherwise
requires, all of its Affiliates and successors according to law;
Consultant means an individual or Consultant Company, other than an
Employee, Officer or Director that:
(i) provides on an ongoing bona fide basis, consulting, technical,
managerial or like services to the Company or an Affiliate of the
Company, other than services provided in relation to a Distribution;
(ii) provides the services under a written contract between the Company or
an Affiliate and the individual or the Consultant Company;
(iii) in the reasonable opinion of the Company, spends or will spend a
significant amount of time and attention on the business and affairs
of the Company or an Affiliate of the Company; and
(iv) has a relationship with the Company or an Affiliate of the Company
that enables the individual or Consultant Company to be knowledgeable
about the business and affairs of the Company;
Consultant Company means for an individual consultant, a company or
partnership of which the individual is an employee, shareholder or partner;
Directors means the directors of the Company as may be elected from time to
time;
Disinterested Shareholder Approval means approval by a majority of the
votes cast by all the Company's shareholders at a duly constituted
shareholders' meeting or pursuant to an action by written consent,
excluding votes attached to Common Shares beneficially owned by Service
Providers or their Associates;
Distribution has the meaning assigned by the Canadian Securities Act, and
generally refers to a distribution of securities by the Company from
treasury;
Effective Date for an Option means the date of grant thereof by the Board;
Employee means:
(a) an individual who is considered an employee under the Canadian Income
Tax Act (i.e. for whom income tax, employment insurance and CPP
deductions must be made at source);
(b) an individual who works full-time for the Company or a subsidiary
thereof providing services normally provided by an employee and who is
subject to the same control and direction by the Company over the
details and methods of work as an employee of the Company, but for
whom income tax deductions are not made at source; or
(c) an individual who works for the Company or its subsidiary on a
continuing and regular basis for a minimum amount of time per week
providing services normally provided by an employee and who is subject
to the same control and direction by the Company over the details and
methods of work as an employee of the Company, but for whom income tax
deductions need not be made at source;
27
Exercise Price means the amount payable per Common Share on the exercise of
an Option, as determined in accordance with the terms hereof;
Expiry Date means the day on which an Option lapses as specified in the
Option Commitment therefor or in accordance with the terms of this Plan;
Insider means an insider as defined in the TSX Venture Policies or as
defined in securities legislation applicable to the Company;
Investor Relations Activities has the meaning assigned by Policy 1.1 of the
TSX Venture Policies, and means generally any activities or communications
that can reasonably be seen to be intended to or be primarily intended to
promote the merits or awareness of or the purchase or sale of securities of
the Company;
Management Company Employee means a Person employed by another Person or a
corporation providing management services to the Company which are required
for the ongoing successful operation of the business enterprise of the
Company, but excluding a Person engaged primarily in Investor Relations
Activities;
Officer means a Board appointed officer of the Company;
Option means the right to purchase Common Shares granted hereunder to a
Service Provider;
Option Commitment means the notice of grant of an Option delivered by the
Company hereunder to a Service Provider and substantially in the form of
Schedule A hereto;
Optioned Shares means Common Shares that may be issued in the future to a
Service Provider upon the exercise of an Option;
Optionee means the recipient of an Option hereunder;
Outstanding Shares means at the relevant time, the number of issued and
outstanding Common Shares of the Company from time to time;
Participant means a Service Provider that becomes an Optionee;
Person means a company, any unincorporated entity, or an individual;
Plan means this share option plan, the terms of which are set out herein or
as may be amended;
Plan Shares means the total number of Common Shares which may be reserved
for issuance as Optioned Shares under the Plan as provided in ss.2.2;
Regulatory Approval means the approval of and any securities regulatory
authority that may have lawful jurisdiction over the Plan and any Options
issued hereunder;
Service Provider means a Person who is a bona fide Director, Officer,
Employee, Management Company Employee, Consultant or Company Consultant,
and also includes a company, of which 100% of the share capital is
beneficially owned by one or more Service Providers;
Share Compensation Arrangement means any Option under this Plan but also
includes any other stock option, stock option plan, employee stock purchase
plan or any other compensation or incentive mechanism involving the
issuance or potential issuance of Common Shares to a Service Provider;
Shareholder Approval means approval by a majority of the votes cast by
eligible shareholders of the Company at a duly constituted shareholders'
meeting or pursuant to an action by written consent;
28
Gender
1.3 Words importing the masculine gender include the feminine or neuter, words
in the singular include the plural, words importing a corporate entity
include individuals, and vice versa.
ARTICLE 2
SHARE OPTION PLAN
Establishment of Share Option Plan
2.1 The Plan is hereby established to recognize contributions made by Service
Providers and to create an incentive for their continuing assistance to the
Company and its Affiliates.
Maximum Plan Shares
2.2 The maximum aggregate number of Plan Shares that may be reserved for
issuance under the Plan at any point in time is 10% of the Outstanding
Shares at the time Plan Shares are reserved for issuance as a result of the
grant of an Option, less any Common Shares reserved for issuance under
share options granted under Share Compensation Arrangements other than this
Plan.
Eligibility
2.3 Options to purchase Common Shares may be granted hereunder to Service
Providers from time to time by the Board. Service Providers that are not
individuals will be required to undertake in writing not to effect or
permit any transfer of ownership or option of any of its securities, nor
issue more of its securities (so as to indirectly transfer the benefits of
an Option), as long as such Option remains outstanding, unless the written
permission of the Company is obtained.
Options Granted Under the Plan
2.4 All Options granted under the Plan will be evidenced by an Option
Commitment in the form attached as Schedule A, showing the number of
Optioned Shares, the term of the Option, a reference to vesting terms, if
any, and the Exercise Price.
2.5 Subject to specific variations approved by the Board, all terms and
conditions set out herein will be deemed to be incorporated into and form
part of an Option Commitment made hereunder.
Limitations on Issue
2.6 Subject to ss.2.9, the following restrictions on issuances of Options are
applicable under the Plan:
no Service Provider can be granted an Option if that Option would result
in the total number of Options, together with all other Share Compensation
Arrangements granted to such Service Provider in the previous 12 months,
exceeding 5% of the Outstanding Shares;
29
no Options can be granted under the Plan if the Company is inactive;
the aggregate number of Options granted to Service Providers conducting
Investor Relations Activities in any 12-month period must not exceed 2% of
the Outstanding Shares, calculated at the time of grant; and
the aggregate number of options granted to any one Consultant in any
12-month period must not exceed 2% of the Outstanding Shares, calculated at
the time of grant.
Options Not Exercised
2.7 In the event an Option granted under the Plan expires unexercised or is
terminated by reason of dismissal of the Optionee for cause or is otherwise
lawfully cancelled prior to exercise of the Option, the Optioned Shares
that were issuable thereunder will be returned to the Plan and will be
eligible for re-issue.
Powers of the Board
2.8 The Board will be responsible for the general administration of the Plan
and the proper execution of its provisions, the interpretation of the Plan
and the determination of all questions arising hereunder. Without limiting
the generality of the foregoing, the Board has the power to
(a) allot Common Shares for issuance in connection with the exercise of
Options;
(b) grant Options hereunder;
(c) amend, suspend, terminate or discontinue the Plan, or revoke or alter
any action taken in connection therewith, except that no general
amendment or suspension of the Plan will, without the prior written
consent of all Optionees, alter or impair any Option previously
granted under the Plan;
(d) delegate all or such portion of its powers hereunder as it may
determine to one or more committees of the Board, either indefinitely
or for such period of time as it may specify, and thereafter each such
committee may exercise the powers and discharge the duties of the
Board in respect of the Plan so delegated to the same extent as the
Board is hereby authorized so to do; and
(e) may in its sole discretion amend this Plan (except for previously
granted and outstanding Options) to reduce the benefits that may be
granted to Service Providers (before a particular Option is granted)
subject to the other terms hereof.
Terms or Amendments Requiring Disinterested Shareholder Approval
2.9 The Company will be required to obtain Disinterested Shareholder Approval
prior to any of the following actions becoming effective:
(a) the Plan, together with all of the Company's previous Share
Compensation Management, could result at any time in:
(i) the aggregate number of Common Shares reserved for issuance under
Options granted to Insiders exceeding 10% of the Outstanding
Shares in the event that this Plan is amended to reserve for
issuance more than 10% of the Outstanding Shares;
30
(ii) the number of Optioned Shares issued to Insiders within a
one-year period exceeding 10% of the Outstanding Shares in the
event that this Plan is amended to reserve for issuance more than
10% of the Outstanding Shares; or,
(b) any reduction in the Exercise Price of an Option previously granted to
an Insider.
ARTICLE 3
TERMS AND CONDITIONS OF OPTIONS
Exercise Price
3.1 The Exercise Price of an Option will be set by the Board at the time such
Option is allocated under the Plan.
Term of Option
3.2 An Option can be exercisable for a maximum of 10 years from the Effective
Date.
Option Amendment
3.3 Subject to ss.2.9(b), the Exercise Price of an Option may be amended only
if at least six (6) months have elapsed since the later of the date of
commencement of the term of the Option, or the date of the last amendment
of the Exercise Price.
3.4 An Option must be outstanding for at least one year before the Company may
extend its term, subject to the limits contained in ss.3.2.
3.5 Any proposed amendment to the terms of an Option must be approved by the
Board prior to the exercise of such Option.
Vesting of Options
3.6 Subject to ss.3.7 and 3.8, vesting of Options is otherwise at the
discretion of the Board, and will generally be subject to:
(a) the Service Provider remaining employed by or continuing to provide
services to the Company or any of its Affiliates as well as, at the
discretion of the Board, achieving certain milestones which may be
defined by the Board from time to time or receiving a satisfactory
performance review by the Company or any of its Affiliates during the
vesting period; or
(b) remaining as a Director of the Company or any of its Affiliates during
the vesting period.
Vesting of Options Granted for Investor Relations Activities
3.7 Notwithstanding ss.3.6 and 3.8, Options granted to Consultants conducting
Investor Relations Activities will vest:
31
(a) over a period of not less than 12 months as to 25% on the date that is
three months from the date of grant, and a further 25% on each
successive date that is three months from the date of the previous
vesting; or
(b) such longer vesting period as the Board may determine.
Change of Control
3.8 Notwithstanding ss.3.6, in the case of a Change of Control all options then
outstanding will immediately vest for the purpose of such transaction.
Optionee Ceasing to be Director, Employee or Service Provider
3.9 No Option may be exercised after the Service Provider has left the
employ/office or has been advised his services are no longer required or
his service contract has expired, except as follows:
(a) in the case of the death of an Optionee, any vested Option held by him
at the date of death will become exercisable by the Optionee's lawful
personal representatives, heirs or executors until the earlier of one
year after the date of death of such Optionee and the date of
expiration of the term otherwise applicable to such Option;
(b) Options granted to a Service Provider conducting Investor Relations
Activities will expire within 30 days of the date the Optionee ceases
to conduct such activities, but only to the extent that such Optionee
was vested in the Option at the date the Optionee ceased to conduct
such activities,
(c) Options granted to an Optionee other than one conducting Investor
Relations Activities will expire within 90 days after the Optionee
ceases to be employed with or provide services to the Company, but
only to the extent that such Optionee was vested in the Option at the
date the Optionee ceased to be so employed or to provide services to
the Company; and (d) in the case of an Optionee being dismissed from
employment or service for cause, such Optionee's Options, whether or
not vested at the date of dismissal will immediately terminate without
right to exercise same.
Non Assignable
3.10 Subject to ss.3.9, all Options will be exercisable only by the Optionee to
whom they are granted and will not be assignable or transferable.
Adjustment of the Number of Optioned Shares
3.11 The number of Common Shares subject to an Option will be subject to
adjustment in the events and in the manner following:
(a) in the event of a subdivision of Common Shares as constituted on the
date hereof, at any time while an Option is in effect, into a greater
number of Common Shares, the Company will thereafter deliver at the
time of purchase of Optioned Shares hereunder, in addition to the
number of Optioned Shares in respect of which the right to purchase is
then being exercised, such additional number of Common Shares as
result from the subdivision without an Optionee making any additional
payment or giving any other consideration therefor;
32
(b) in the event of a consolidation of the Common Shares as constituted on
the date hereof, at any time while an Option is in effect, into a
lesser number of Common Shares, the Company will thereafter deliver
and an Optionee will accept, at the time of purchase of Optioned
Shares hereunder, in lieu of the number of Optioned Shares in respect
of which the right to purchase is then being exercised, the lesser
number of Common Shares as result from the consolidation;
(c) in the event of any change of the Common Shares as constituted on the
date hereof, at any time while an Option is in effect, the Company
will thereafter deliver at the time of purchase of Optioned Shares
hereunder the number of shares of the appropriate class resulting from
the said change as an Optionee would have been entitled to receive in
respect of the number of Common Shares so purchased had the right to
purchase been exercised before such change;
(d) in the event of a capital reorganization, reclassification or change
of outstanding equity shares (other than a change in the par value
thereof) of the Company, a consolidation, merger or amalgamation of
the Company with or into any other company or a sale of the property
of the Company as or substantially as an entirety at any time while an
Option is in effect, an Optionee will thereafter have the right to
purchase and receive, in lieu of the Optioned Shares immediately
theretofore purchasable and receivable upon the exercise of the
Option, the kind and amount of shares and other securities and
property receivable upon such capital reorganization,
reclassification, change, consolidation, merger, amalgamation or sale
which the holder of a number of Common Shares equal to the number of
Optioned Shares immediately theretofore purchasable and receivable
upon the exercise of the Option would have received as a result
thereof. The subdivision or consolidation of Common Shares at any time
outstanding (whether with or without par value) will not be deemed to
be a capital reorganization or a reclassification of the capital of
the Company for the purposes of this ss.3.11;
(e) an adjustment will take effect at the time of the event giving rise to
the adjustment, and the adjustments provided for in this Section are
cumulative;
(f) the Company will not be required to issue fractional shares in
satisfaction of its obligations hereunder. Any fractional interest in
a Common Share that would, except for the provisions of this ss.3.11,
be deliverable upon the exercise of an Option will be cancelled and
not be deliverable by the Company; and
(g) if any questions arise at any time with respect to the Exercise Price
or number of Optioned Shares deliverable upon exercise of an Option in
any of the events set out in this ss.3.11, such questions will be
conclusively determined by the Company's auditors, or, if they decline
to so act, any other firm of Chartered Accountants, in Vancouver,
British Columbia (or in the city of the Company's principal executive
office) that the Company may designate and who will have access to all
appropriate records and such determination will be binding upon the
Company and all Optionees.
33
ARTICLE 4
COMMITMENT AND EXERCISE PROCEDURES
Option Commitment
4.1 Upon grant of an Option hereunder, an authorized officer of the Company
will deliver to the Optionee an Option Commitment detailing the terms of
such Options and upon such delivery the Optionee will be subject to the
Plan and have the right to purchase the Optioned Shares at the Exercise
Price set out therein subject to the terms and conditions hereof.
Manner of Exercise
4.2 An Optionee who wishes to exercise his Option may do so by delivering
(a) a written notice to the Company specifying the number of Optioned
Shares being acquired pursuant to the Option; and
(b) cash or a certified cheque payable to the Company for the aggregate
Exercise Price for the Optioned Shares being acquired.
Delivery of Certificate and Hold Periods
4.3 As soon as practicable after receipt of the notice of exercise described in
ss.4.2 and payment in full for the Optioned Shares being acquired, the
Company will direct its transfer agent to issue a certificate to the
Optionee for the appropriate number of Optioned Shares. Such certificate
issued will bear a legend stipulating any resale restrictions required
under applicable securities laws.
ARTICLE 5
GENERAL
Employment and Services
5.1 Nothing contained in the Plan will confer upon or imply in favour of any
Optionee any right with respect to office, employment or provision of
services with the Company, or interfere in any way with the right of the
Company to lawfully terminate the Optionee's office, employment or service
at any time pursuant to the arrangements pertaining to same. Participation
in the Plan by an Optionee will be voluntary.
No Representation or Warranty
5.2 The Company makes no representation or warranty as to the future market
value of Common Shares issued in accordance with the provisions of the Plan
or to the effect of the income tax act in either the country of which the
Optionee is a resident or the country in which the Company is resident or
any other taxing statute governing the Options or the Common shares
issuable thereunder or the tax consequences to a Service Provider.
Compliance with applicable securities laws as to the disclosure and resale
obligations of each Participant is the responsibility of such Participant
and not the Company.
34
Interpretation
5.3 The Plan will be governed and construed in accordance with the laws of the
State of Delaware.
Amendment of the Plan
5.4 The Board reserves the right, in its absolute discretion, at any time to
amend, modify or terminate the Plan with respect to all Common Shares in
respect of Options which have not yet been granted hereunder. Any amendment
to any provision of the Plan will be subject to any necessary Regulatory
Approvals unless the effect of such amendment is intended to reduce (but
not to increase) the benefits of this Plan to Service Providers or unless
the amendment is merely cosmetic in nature and will not negatively affect
the holders of Common Shares of the Company.
Continuation of Plan
5.5 The Plan will become effective from and after October 15, 2004, and will
remain effective for a period of 10 years.
Tax Withholding
5.6 An Option holder shall, upon notification of the amount due and prior to or
concurrently with delivery to such holder of a certificate representing
such Common Shares, pay promptly any amount necessary to satisfy applicable
federal, state, local or other tax requirements.
35
SCHEDULE A
SHARE OPTION PLAN
OPTION COMMITMENT
Notice is hereby given that, effective this ________ day of ________,__________
(the "Effective Date") Bay Resources Ltd (the "Company") has granted to
___________________________________________ (the "Service Provider") , an Option
to acquire ______________ Common Shares ("Optioned Shares") up to 5:00 p.m.
Melbourne Australia Time on the __________ day of ____________________,
__________ (the "Expiry Date") at a Exercise Price of US$____________ per share.
Optioned Shares will vest and may be exercised as follows:
____________ In accordance with the vesting provisions set out in Schedule B of
the Plan
or
____________ As follows:
The grant of the Option evidenced hereby is made subject to the terms and
conditions of the Company's Plan, the terms and conditions of which are hereby
incorporated herein.
To exercise your Option, deliver a written notice specifying the number of
Optioned Shares you wish to acquire, together with cash or a certified cheque
payable to the Company for the aggregate Exercise Price, to the Company. A
certificate for the Optioned Shares so acquired will be issued by the transfer
agent as soon as practicable thereafter and will bear a non-transferability
legend from the date of this Option Commitment, if required by law or any
applicable stock exchange. The Company and the Service Provider represent that
the Service Provider under the terms and conditions of the Plan is a bona fide
Service Provider of the Company, entitled to receive Options under applicable
laws.
Bay Resources Ltd
_________________________________
Authorized Signatory
36
SCHEDULE B
SHARE OPTION PLAN
VESTING SCHEDULE
1. Options granted pursuant to the Plan to Directors, Officers and all Employees
and Consultants employed or retained by the Company for a period of more than
six months at the time the Option is granted will vest as follows:
(a) 1/3 of the total number of Options granted will vest six months after
the date of grant;
(b) a further 1/3 of the total number of Options granted will vest one
year after the date of grant; and
(c) the remaining 1/3 of the total number of Options granted will vest
eighteen months after the date of grant.
2. Options granted pursuant to the Plan to an Employee or a Consultant who has
been employed or retained by the Company for a period of less than six months at
the time the Option is granted will vest as follows:
(a) 1/3 of the total number of Options granted will vest one year after
the date of grant;
(b) a further 1/3 of the total number of Options granted will vest
eighteen months after the date of grant; and
(c) the remaining 1/3 of the total number of Options granted will vest two
years after the date of grant.
3. Options granted to Consultants retained by the Company pursuant to a short
term contract or for a specific project with a finite term, will be subject to
such vesting provisions determined by the Board of Directors of the Company at
the time the Option Commitment is made.
4. Options granted to Service Providers involved in Investor Relations
Activities shall vest in accordance with Section 3.7 of the Plan.
37
BAY RESOURCES LTD
To Vote Your Proxy by Mail
--------------------------
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
--------------------------------------------------------------------------------
PROXY
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
Please mark
your votes
like this
|X|
FOR AGAINST ABSTAIN
1. To elect four directors:
Joseph Isaac Gutnick [ ] [ ] [ ]
David Stuart Tyrwhitt [ ] [ ] [ ]
Peter James Lee [ ] [ ] [ ]
Paul Lawrence Ehrlich [ ] [ ] [ ]
2. Proposal To Approve Amendment Of Certificate
Of Incorporation To Increase The Number Of [ ] [ ] [ ]
Authorized Shares Of Common Stock
3. Proposal To Approve The 2004 Incentive Stock [ ] [ ] [ ]
Plan.
4. To Transact Such Other Business As May
Properly Come Before The Meeting Or Any [ ] [ ] [ ]
Adjournment.
Company Id:
Proxy Number:
Account Number:
38
Signature ______________________________ Signature _____________________________
Date_____________
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership
Bay Resources Ltd
2004 ANNUAL MEETING OF STOCKHOLDERS
(Thursday January 27, 2005 at 3:00 p.m.)
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
BAY RESOURCES LTD
The undersigned appoints Joseph I. Gutnick and Peter Lee, and each of them, as
proxies, each with the power to appoint his substitute, and authorizes each of
them to represent and to vote, as designated on the reverse hereof, all of the
shares of common stock of Bay Resources Ltd held of record by the undersigned at
the close of business on December 15, 2004 at the 2004 Annual Meeting of
Stockholders of Bay Resources Ltd to be held on January 27, 2005 or at any
adjournment thereof.
The Board unanimously recommends that stockholders vote FOR each director
nominee and proposals 2, 3 and 4.
39
United States
Securities and Exchange Commission
Washington D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
(Mark one)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 2004 or
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----- -----
Commission File Number 0-16097
-------
BAY RESOURCES LTD.
(Exact name of Registrant as specified in its charter)
Delaware 98-0079697
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organisation) Identification No.)
Level 8, 580 St Kilda Road Melbourne, Victoria, 3004, Australia
------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 011 (613) 8532 2860
-------------------
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange
on which registered
N/A N/A
--- ---
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.0001 per share
----------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)
Yes No X
--- ---
State Issuer's Revenues for its most recent fiscal year.
None
The aggregate market value based on the average bid and asked price on the
over-the-counter market of the Registrant's common stock, ("Common Stock") held
by non-affiliates of the Company was US$17,540,579 as at June 30, 2004.
There were 16,711,630 outstanding shares of Common Stock as of September 22,
2004.
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable
Transitional Small Business Issuer Yes: No:
---- ----
2
TABLE OF CONTENTS PAGE
PART I
Item 1 Business 4
Item 2 Properties 36
Item 3 Legal Proceedings 36
Item 4 Submission of Matters to a Vote of Security Holders 36
PART II
Item 5 Market for Common Equity and Related Stockholder Matters 37
Item 6 Management's Discussion and Analysis of 38
Financial Condition or Plan of Operation
Item 7 Financial Statements 44
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Statement Disclosure 44
Item 8A Controls and Procedures 45
PART III
Item 9 Directors and Executive Officers of the Registrant 46
Item 10 Executive Compensation 48
Item 11 Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters 49
Item 12 Certain Relationships and Related Transactions 50
Part IV
Item 13 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 53
Item 14 Principal Accounting Fees and Services 53
Signatures 54
Exhibit Index 56
Appendix A - Glossary A-1
Appendix B - List of Mining Interests B-1
3
PART I
Item 1 Business
General
Our name is Bay Resources Ltd. and we sometimes refer to ourselves in this
annual report as "Bay Resources", the "Company" or as "we," "our," or "us." 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 Committee Bay
Greenstone Belt and in the Slave Craton. 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 interest in the Slave Craton 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 annual report as `Golden Bull."
We sometimes refer to our claims collectively in this annual report as either
the "Committee Bay Properties" or the "Slave 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.bayresourcesltd.com and you can send an
email to us at peter@bayresourcesltd.com. 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 September 22, 2004, the currency exchange rate was approximately
US$1.00 equals A$1.4171, and US$1.00 equals CDN $1.2878, as published by
Bloomberg at www.Bloomberg.com. For the convenience of the reader, the
Australian Dollar figures for the year ended June 30, 2004 have been translated
into United States Dollars ("US$) using the rate of exchange at June 30, 2004 of
A$1.00=US$0.6903.
4
History of the Company
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 changed
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 is no longer proceeding 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, it changed its name to Bay Resources (Asia)
Pty 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 commenced 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 Gold Bull, 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.
Description Of Business
We are an exploration stage mining company. Our objective is to exploit our
interest in the mineral claims in Nunavut, Canada. We hold interests in the
Slave Craton and our wholly owned subsidiary, Golden Bull holds interests in the
Committee Bay Greenstone Belt in Nunavut. 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.
5
Slave Craton Project
During 2002, we reached an agreement with Tahera Corporation, a Canadian
corporation to explore for gold on Tahera's extensive properties on the Slave
Craton in Nunavut, Canada. Tahera's Slave land package includes 177 claims and
11 Inuit Land Concessions covering approximately 471,000 acres. Tahera is a
diamond exploration company conducting diamond exploration in the northern Slave
Craton. Tahera has put together an extensive database of information and
geological samples to explore for diamonds and does not wish to conduct
exploration for gold and base metals. Under the agreement, they will allow us to
use the database to explore for gold. 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 samples and database.
The diamond exploration data to which we have access, includes electromagnetic
geophysical surveys, overburden and bedrock mapping, overburden sampling and
drilling data. The overburden samples cover some 60,000 square kilometers of the
northern Slave Craton with some 17,000 samples being potentially available for
gold and base-metal analysis. The overburden samples have been taken on a
reconnaissance scale with line intervals at 2.5-5.0 kilometers with some
detailed surveys at 50-100 meter sample spacings. The samples cover areas of
known gold mineralisation including in the vicinity of the Lupin and Ulu gold
deposits.
We believe there are some exceptional gold targets on Tahera's ground;
principally in the High Lake Volcanic Belt, and in the Contwoyto Formation near
Lupin. In the High Lake Volcanic Belt, several high grade gold showings on the
ground include surface samples of 24 grams per tonne ("gpt gold"), 130 gpt gold,
176 gpt gold, and 220 gpt gold, and drillhole intersections to 25.5 gpt gold /
1.54 meters. The target is silicified shear-hosted gold, similar to the 565,000
ounce ULU gold deposit located 3-5 kilometers away.
Tahera's Jericho and Contwoyto properties lie in close proximity to the Lupin
gold mine, which is a large, high grade, gold deposit. Over three million ounces
of gold have been produced here to date. We believe that this shows there is
significant potential for gold mineralization, similar to that found at Lupin,
on Tahera's Jericho and Contwoyto properties. Research of previous work reveals
surface gold values of 11 gpt, 15 gpt, 21 gpt, and 28 gpt gold in Banded Iron
Formation ("BIF"). The geology is very similar to the nearby Lupin gold mine
(2-3 kilometers to the west) where gold mineralization is in a "Z" folded iron
formation. The R43-R45 target on Tahera's ground is a 10 meters wide, 1.3
kilometers long iron formation, that has an unsampled "Z" fold of the same
magnitude as Lupin.
We have included a list of the mining claims that are covered under our
agreement with Tahera in Appendix B to this report.
Committee Bay Greenstone Belt Project
In June 2002, we staked land in the highly prospective Committee Bay Greenstone
Belt.
6
The Committee Bay Greenstone Belt is located approximately 240 kilometers
northeast of Baker Lake in Nunavut, Canada and is believed to represent one of
the largest unexplored greenstone belts in North America, with potential to host
world-class gold deposits. The Baker Lake area is best known for the Meliadine
gold Project, currently in the pre-feasibility stage.
We hold 29 claims totalling a land area of 71,694 acres in the Committee Bay
Greenstone Belt in central Nunavut, Canada. These claims were recorded on
October 16, 2002. To keep the claims in good standing, we need to spend a total
of CDN$286,776 of assessment work by October 16, 2004. CDN$143,388 (CDN$2 per
acre) is required in each subsequent year up to 2012 (at which point a decision
to bring the claims to lease must be made). We have included a list of our
mining claims in the Committee Bay Greenstone Belt in Appendix B to this report.
The Canadian Government completed a Targeted Geoscience Initiative ("TGI")
between 2000-2003 in the Archean Committee Bay Greenstone Belt. Total government
funding for the Committee Bay Greenstone Belt TGI area was approximately CN$3.5
million. The stated objective of the 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 (400 meter flight line spacing). A joint government-industry
(GSC - DeBeers Exploration Canada Ltd.) partnership initiated in 2001, involves
heavy-mineral analysis of esker samples for diamond indicator minerals. We may
access this data as it is released.
The stratigraphy of the Committee Bay Greenstone Belt includes BIF 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
showings are spread out over a 260 x 40 kilometer area including the Inuk zone
(12.8 gpt gold over 5 meters) in northeast Committee Bay and the Three Bluffs
zone (27.41 gpt gold over 9.44 meters) in the Hayes River area.
Our Wrench claim group adjoins the Bluff claim block, where the mine grade/width
intersections of 27.41 gpt gold over 9.44 meters and 61.6 gpt gold over 4.84
meters were announced in September 2003 by Committee Bay Resources Ltd ("CBR"),
a company listed on the Toronto Venture Exchange with a large landholding in the
Committee Bay Greenstone Belt. The government airborne magnetic survey shows
that oxide iron formation (the host at the Three Bluffs discovery) strikes
northeast from their showing onto our Wrench claims. A number of gold
occurrences are known on this trend, including a 9.7 gpt gold sample taken in an
area of folded oxide iron formation, quartz veining and pyrite + pyrrhotite on
our Wrench claim.
The geology is highly prospective for BIF hosted gold (as in the 3 million ounce
Meadowbank and the 4.6 million ounce Meliadine gold deposits to the south). Our
claims protect several auriferous iron formations with surface values to 9.7 gpt
gold. In addition to the BIF 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). Samples from
previous work in the Committee Bay area returned samples up to 245 gpt gold,
0.5% nickel, and 0.8% copper.
The region is best known for the Meliadine Gold Project, which is currently in
the pre-feasibility stage, as well as the Meadowbank Project of Cumberland
Resources, which is in post feasibility stage. These two projects host 7.5
million ounces of gold resources. The Committee Bay Greenstone Belt is also
7
situated in the same general area as the developing diamond play currently being
explored by De Beers, BHP-Billiton, and Stornoway Ventures Ltd. We have
accumulated a large landholding in the Belt.
CBR signed a letter of intent with Gold Fields Explorations Ltd, in June 2003,
to form a joint venture, whereby Gold Fields Exploration will take an equity
position in CBR and will spend US$10 million on exploration to earn a 65%
interest in that project.
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 provides 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.
8
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. We are currently conducting
exploration under a Land Use Permit, which is valid until June 20, 2006.
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
claims. 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.
9
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
Committee Bay Greenstone Belt
The Nunavut Government has granted our interest in the 29 mineral claims in the
Committee Bay Greenstone Belt described in this Report.
To keep the 29 claims in good standing, we need to spend a total of CDN$286,776
of assessment work by October 16, 2004. An assessment report detailing these
expenditures will need to be filed CDN$143,388 (CDN$2 per acre) is required in
each subsequent year up to 2012 (at which point a decision to bring the claims
to lease must be made).
Slave Craton
Fees and exploration expenditures associated with the maintenance of Tahera
Corporation's ground covered under the Slave Craton Agreement with Bay Resources
is the responsibility of Tahera.
Description Of Exploration Properties
Please note that the Glossary at the end of this Report contains definitions for
the geological and other specialized terms used in this section.
Property Location And Description
Slave Craton
Hood River Ground
The Hood River mineral claims 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 (Figure 1) on NTS Map Sheets:
76L/10, 14, and 15 and 76M/3. The land holdings here include 4 mining claims
(Hod 3, 4, 12, and 14) totalling 10,330 acres, and 5 contiguous IOL concessions
(CO 20-00-01, CO 20-00-03a, CO 20-00-03b, CO 20-00-04, and CO 20-01-01)
totalling 21,381.64 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 NNE of Yellowknife at 66o 54' 37"
N, 110 o 55' 12"W. The Inuit Concessions are held 50:50 by Benachee Resources
Inc. and Snowpipe Resources Ltd. (both wholly owned by Tahera). The total cost
to maintain these concessions will be $51,918.9 for 2004 (January 1, 2005 next
anniversary date). This includes $17,306.30 in fees and $34,612.60 in
exploration expenditures. The IOL concessions are not surveyed. There are no
known encumbrances on the concessions. Tahera's land use permits are in effect
for 2004 and will cover proposed exploration work by us.
10
Contwoyto Lake Ground
The CO-08 IOL Concession underlain by the Contwoyto Formation on the east side
of Contwoyto Lake contains blocks (CO 08-00-01, CO 08-00-02, CO 08-00-03, CO
08-00-05, and CO 08-00-06). The C0-08 Concession Agreement totals 65,250.8 acres
and is located in the Mackenzie District of Nunavut (Figure 1) on NTS Map
76E/15. These concessions are all contiguous except for CO 08-00-01 which is
approximately 1-2 kilometers west of the main block, separated by the northeast
arm of Contwoyto Lake. 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 NNE of Yellowknife at 65o 49' 23" N, 111 o 13' 08"W.
The C0-08 Concession Agreement is held 50:50 by Benachee Resources Inc. and
Snowpipe Resources Ltd. (both wholly owned by Tahera). The total cost to
maintain these concessions will be $316,884 in 2004 (December 31, 2004 is the
next anniversary date). This includes $52,814 in fees and $264,070 in
exploration expenditures. The IOL concessions are not surveyed and there are no
known encumbrances on the concessions. Tahera's land use permits for 2004 are in
effect and will cover proposed exploration work by us.
Committee Bay Greenstone Belt
Our 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. The
centre of the claim area is approximately 66(degree) 37'N, 92(degree) 00'W.
Our land holdings in the Committee Bay Greenstone Belt include 29 claims in 12
claim blocks on NTS (National Topographic System) sheets 56 K, 56 J, and 56 O.
These claims total approximately 71,576 acres and all were recorded on October
16, 2002. To keep the claims in good standing, a total of CDN$286,304 of
assessment work is required to be completed by the anniversary date of October
16, 2004. CDN$143,152 ($2 per acre) is required in each subsequent year up to
2012 (at which point a decision to bring the claims to lease must be made).
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. These
claims have not been legally surveyed.
Access, Infrastructure, Local Resources
Slave Craton
Access to all the areas in the Slave Craton is by aircraft. In summer months,
float equipped aircraft can utilize 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 Kinross' Lupin mine site, Wolfden's Ulu gold deposit, and
Tahera's Carat Camp (Jericho). Helicopter support is needed to mobilize
personnel to and within 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.
11
Tahera's properties are located in the treeless Arctic within the zone of
permanent permafrost. Vegetation consists primarily of lichen and moss. The
weather in the property areas is typical of the continental barrenlands which
experience cool summers and extremely cold winters. Winter temperatures can
reach -45 degrees Celsius occasionally accompanied by high winds creating
extreme wind chill conditions and extensive drifting snow. Summer temperatures
are generally in the 5 to 10 degree Celsius range but can reach the high 20's
degrees Celsius. Minimum and maximum temperatures recorded at the nearest
permanent weather stations are -530 C at the Lupin mines site, and +320 C at
Coppermine. The ground remains snow covered for more than 250 days a year. Snow
accumulation begins in September and remains into June. 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 (though ice on
the larger lakes can persist into the middle of July) and start freezing over
again in late September. Wind speeds have been recorded in excess of 100
kilometers per hour.
The topography of the C0-08 Concession Agreement consists of low rolling hills
with areas of low-lying swampy muskeg near Contwoyto Lake at the south end of
the concessions. Local relief is low, rarely exceeding 150 meters. On the C0
20-01-01 Hood River Concession, there is about 115 meters of relief in the form
of deeply incised linears and steep cliffs. The basalt units form topographic
plateaus, elevated over the sediments and granitic rocks. Outcrop density here
is typically 50 - 60%, with the cover consisting of north-trending lakes, grassy
swamps, and boulder-strewn glacial drift.
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 land holdings 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. The only infrastructure that exists
to service the land holdings includes Tahera's 40 person Carat Camp (Jericho
site), the 20 person camp at Tahera's Rockinghorse property, the 12 person
Tahera camp northwest of the Hood River concession, and possibly the Wolfden
camp on the ULU claim. A limited network of approximately 3.5 kilometers of
roads connects the airstrip, camp, fuel farm, and Jericho mine site on the
Jericho claim area northwest of Contwoyto Lake.
Committee Bay Greenstone Belt
Access to the claims is by fixed wing aircraft equipped with tundra tires able
to land on short natural features such as eskers. Alternatively, float equipped
planes have the option of landing at some of the larger lakes (Laugh land Lake
for example) or on sections of the Hayes River. 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 no infrastructure in the claim
area.
The Committee Bay Greenstone Belt lies within the zone of permanent 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
12
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. In the summer and fall, the temperature differential
between the warm land and the cooler ocean can create fog blankets in low lying
areas. Wind speeds have been recorded in excess of 100 kilometers per hour.
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 Hayes River and its tributaries flow northwest into Chantrey
Inlet. In the southwest, the Brown River flows into northwestern Hudson Bay. The
Arrowsmith River, to the north, flows into the Gulf of Boothia.
Property History
Slave Craton
The following section deals with historic exploration on Tahera's land holdings.
Non diamond-related exploration activities are emphasized as these relate to
Bay's 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
Borealis Exploration conducted a field program in 1970 in the "Penthouse" area
(now part of Tahera's Concession CO 20-00-01). The program consisted of mapping,
trenching, sampling and drilling. Trenching on the "Penthouse gossan" returned
values up to 1.37 g/t gold, 92.57 g/t silver, 6.48% copper, and 1.10% palladium.
An X-ray sized drillhole drilled under the trench intersected 1.37 g/t gold,
15.09 g/t silver, and 0.18% palladium over 0.9 meters. The PH 1-13 claims were
staked over this showing and these had lapsed by 1983.
The Blackridge area was first investigated between 1965 and 1970 by Borealis
Exploration. Borealis conducted an airborne electromagnetic ("EM")/magnetic
gamma ray spectrometer survey over their Permit 62 (NTS 76L/15). The actual
auriferous zone was discovered in 1974 by Long Lac Minerals during regional
prospecting in the Hood River area. This showing is now within Tahera's
Concession 20-00-04. A claim was staked here in 1975 and surface grab samples of
6.2 g/t gold and 8.4 g/t gold were reported. Noranda Exploration Ltd. is
reported to have done airborne geophysics with follow up ground work in 1981.
Aber Resources Ltd. was the next company to have filed assessment work for the
showing, having staked the Blackridge claim in 1983, along with a contiguous
claim BR1-2. A program of gridding, geophysical surveys (magnetics and very low
frequency "VLF"), and drilling (6 holes totalling 199 meters) was undertaken in
1985. The principal mineralized zone was traced for at least 700 meters
northeast in a 2.5-3.5 meter wide zone within gabbro at a gabbro/sediment
contact. The highest surface grades included a chip sample of 7.5 g/t gold/ 9
meters and the best intersection from drilling was 10.3 g/t gold / 1.07 meters.
Hy-Tech Resources Ltd. conducted an exploration program in 1988 on the HY 17-19
claims to the west of Aber's claims. These claims which belonged to Expeditor
Resource Group Ltd. were staked on January 13, 1988. The work by Hy Tech
13
included 113 rock samples and 60 soil samples. The best value was 610 parts per
billion ("ppb") gold (with 4.3 % arsenic) at a volcanic -sediment contact in the
southeast corner of historic HY 17. BHP Minerals Ltd. evaluated the HY 17-19
claims in an agreement with the claim owners (Consolidated Envirowaste
Industries Inc.) in 1992. Nineteen rock samples and one soil sample was taken.
The best result was 2.87 g/t gold.
BHP Minerals Ltd. staked the CROWN and CROWN 2 claims in 1987 following the
discovery of auriferous mineralization during reconnaissance traversing. Samples
of silicified material with mineralization at a sediment/volcanic contact
returned values to 4 g/t gold. This "Main zone" was traced for 800 meters.
Further work on the Crown claims in 1988 and 1989 included 63 kilometers of
gridding, geological mapping, rock chip sampling (181 samples), limited soil
geochemical sampling (4 samples), 55 kilometers of ground magnetics-VLF surveys
and 77.5 meters of trenching.
Aber Resources staked the DEN 1 - 16, 19, 20 claims in 1987 to the west of BHP's
CROWN claims. Covello, Bryan, and Associates then staked the JEB 1-3 and FIDO
1-3 claims in 1988 to be included in this Aber claim group. Work by Covello,
Bryan, and Associates in 1988 included gridding, mapping, sampling and
geophysics. High values (up to 15.63 oz/t gold from grab samples) were returned
from these claims prompting BHP to enter into a joint venture with Aber on this
land package. From 1989 to 1991 BHP drilled 951.87 meters in eighteen drillholes
and took 253 core samples, 1,109 rock samples and 573 soil samples. Along the 55
kilometers of gridding they performed a number of geophysical surveys.
Following discovery of the ULU gold deposit in 1989, BHP mapped the core ULU
claims (including part of Tahera's current IOL Concession 20-01-01) at 1:5,000
scale and select areas were mapped at 1:1,000. Geochemical surveying included
humus and B horizon soil samples. A limited trenching program exposed
mineralisation in a 45 meter x 15 meter section in the northwest portion of the
main deposit (the "Flood" Zone). Geophysical surveys over the mineralised zones
included Total Field Magnetics, VLF-EM, VLF-Resistivity, Induced Polarisation,
Applied Potential, and Radiometrics.
The 1993 Nunavut Land Claims Agreement came into effect on April 1, 1999. Under
this agreement the Inuit were granted surface ownership of about 360,000 square
kilometers of land, 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 that BHP
worked on in the Hood River (CROWN, DEN, FIDO and ULU) were ultimately
incorporated into NTI lands, with the exception of the original ULU claim which
was brought to lease by Echo Bay Mines Ltd.
In March, 2003, Strongbow Resources Inc. and Nunavut Tungavik Incorporated
announced an agreement whereby Strongbow could explore 604,723 hectares of Inuit
Owned Lands in 28 non-contiguous parcels within the West Kitikmeot region of
Nunavut. Their IOL parcel CO-27 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 BIF hosted gold deposits
commenced throughout the Contwoyto Formation. This resulted in the discovery of
a number of showings including Fingers Lake, Butterfly, Raft, (143 g/t gold
14
surface grab), Pan (34 g/t gold surface grab, 11.31 g/t gold/3.11meters
trenching), Musk (8.4 g/t gold/10 meters surface grab), Mud (14.1 g/t gold/15.8
meters), Esker Lake, Brad (11.3 g/t gold/ 4.82 meters drilling) , Striker (9.39
g/t gold/3 meters surface, 47.3 g/t gold/3.4 meters drilling), Troy, and Donut
(24.41 g/t gold /3 meters surface grab). The bulk of this work was done in two
stages; (i) after the discovery of the "Main Showing" (later to become the Lupin
mine) in 1960 by Canadian Nickel Company; and (ii) after Echo Bay Mines Ltd.
optioned the Lupin showing in 1979 and started mining in 1982. Limited
exploration for BIF hosted gold targets continued to 1995, after which much of
the ground was staked over for diamond exploration.
Gold exploration specific to the Tahera-Bay agreement on the northeast side of
Contwoyto Lake started in 1962 with Canico (Canadian Nickel Company Limited).
Canico held Prospecting Permit 35 which covered NTS sheets 76E/10 and 76E/15.
From 1962 to 1964 they preformed mapping, prospecting, trenching, and airborne
and ground magnetometer surveys.
Echo Bay mapped and sampled their C1 - C4 claims on the northeast border of the
northeastern arm of Contwoyto Lake in 1983, retaining just the C2 claim in 1984.
During the course of taking 97 grab samples on the C2 claim in 1983, they
discovered the R43-R45 and R44-R47 showings which returned values up to 11.1 g/t
gold. Limited follow up surface sampling in 1984 did not yield anomalous
results. Echo Bay used a syngenetic gold model at this time, and this sampling
therefore would not have been properly focused on important structural
considerations (such as quartz veining in fold hinges) crucial to locating the
gold bearing rock.
Hecla Mining optioned a total of 33 claims over the northeastern arm of
Contwoyto Lake in 1985 from Contwoyto Goldfields. A helicopter-borne EM,
magnetics, and VLF-EM survey was conducted over these claims by Dighem Surveys
in 1985. This was followed in 1986-1989 with both ground and airborne
geophysics, surface mapping and sampling, geochemical soil and till surveys,
trenching and diamond drilling. The claims were transferred to Hecla in 1986. In
1986, Hecla investigated 74 of the 363 airborne anomalies. 327 rock samples were
taken and 57 silicate-facies iron formations were mapped. Drilling by Hecla on
the 5-5 grid (currently within Tahera's Contwoyto Concession CO 08-00-02)
included eight holes totalling 942 meters in 1987 and four holes totalling 352.9
meters in 1988.
Cominco performed sampling, geophysics, and drilling on their Coco 6 and 15
claims from 1988 to 1990. They discovered the Ox showing by surface sampling in
1988 and this was followed up by more sampling (9.65 g/t gold/ 3 meters chip)
and drilling. Gold bearing iron formations were intersected (see mineralization
section).
Hecla acquired and merged into Acadia Mineral Ventures Ltd. Acadia and Contwoyto
Goldfields optioned the main Contwoyto property to Kingswood Ventures Ltd in
1992. Their ground position covered all of the main gold showings known on
Tahera's Contwoyto Concessions. Drilling by Hecla in 1987 on the 5-5 land grid
included 8 holes totalling 942 meters. All eight holes intersected iron
formation with five of the eight holes intersecting sulphide-rich and/or
siliceous sulphidic iron formation. The best intercept was 2.31 g/t gold/ 7.85
meters (6.27 meters true width).
Four short drill holes on the 5-5 grid in 1988 tested a folded iron formation as
outlined by an IP survey. Diamond drillhole ("DDH") 88-4 tested 225 meters west
of the 2.31 g/t gold/ 7.85 meter intercept in DDH 87-6. DDH 88-4 intercepted
2.88 g/t gold/ 3.9 meters in a pyrite-rich siliceous iron formation. Excalibur
International Consultants were contracted to perform a review of previous work
on the property. Excalibur recommended a seven-hole drill program after
reviewing the database. Two of the seven drillholes were recommended for the 5-5
grid area which is on Tahera's current concession CO 08-00-02.
15
Tahera's predecessors started exploring the northern Slave Stuctural Province
for diamonds in 1993. (Tahera was the result of the amalgamation of Lytton
Minerals Ltd and New Indigo Resources Inc. in 1999.) 4.3 million hectares were
staked encompassing a significant portion of the northern Slave Craton. More
than 37,000 till samples and 11,000 square kilometers of airborne geophysics
were collected since exploration commenced in 1993. This work resulted in the
discovery of 20 kimberlite bodies on various Tahera properties.
Additional geophysical surveys in 1995-1997 included a helicopter-borne VLF EM
and magnetic survey over a 110 square kilometers in the Contwoyto Lake area. A
total of 1,500 square kilometers was covered in a helicopter-borne survey over
the Jericho and Contwoyto Lake land holdings in 1998. Survey line spacings were
at 50 meters with a sensor height of 30 meters.
Committee Bay Greenstone Belt
The Committee Bay Greenstone Belt was the subject of two separate 3 year
(2000-2003) government 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 within three 1:250,000-scale NTS map sheet areas (56K,
56J/9-16, 56O/1-8, and 56P) 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.
Following the release of Heywood's original geology map 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. King Resources staked 400 claims in the Committee Bay
Greenstone Belt (NTS 56I, 56J, 56K, 56O, 56P) in 1969/1970. They mapped the "A"
claims that year (site of our current "A" claim) and conducted trenching, and
geophysical surveys. This program outlined several electromagnetic conductors
coincident with surface mineralization. Values up to 0.18% nickel were returned
from trenching. King Resources also mapped, trenched, and conducted geophysical
surveys on the "E" claims (site of our current "E" claim) and identified several
similar conductors. The best trench value on the "E" claims was 0.51% nickel on
a 1.46 kilometer long conductor. King Resources also spent time on their "B"
claims evaluating a prospective rusty zone of rocks with disseminated and
locally massive of pyrite and pyrrhotite with trace chalcopyrite. King Resources
conducted geophysical surveys looking for nickel on the "B" claims in 1969. A
VLF conductor was outlined coincident with rusty zones in sedimentary rocks
adjacent to ultramafic rocks. The ground magnetic survey revealed a strong
anomaly at least one kilometer long. Mapping and trenching over the zone
produced a high of 0.19% nickel.
Aquitaine Company staked 347 claims in 56J and 56K in 1970. This claim package
included the HAR claims over the Laugh land Lake Anorthosite Suite or LLAS (site
of our current "ANOR" claim). Aquitane preformed airborne and ground geophysical
surveys over the LLAS in 1971. A weak airborne EM response was generated. A
sulphide-bearing oxide facies BIF, traceable for 2 kilometers along the northern
16
border of the LLAS was drilled with eight Winkie holes totalling 175 meters in
1971. Intervals of pyrite + pyrrhotite +/- chalcopyrite were encountered in the
BIF (including 2 meters of massive pyrrhotite). The highest value was 0.7%
copper, and 0.2% nickel. Gold was not analyzed for. The anorthosite itself was
apparently not drilled.
Cominco undertook 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 over permit 349 (granted April 1, 1975) on 56J/13 in the Hayes
River area. Although prospective rock units with nickel and copper values were
found, no further follow up was recommended. Some rock geochemistry was done by
Cominco on their "OX" grid and other sulphide showings. The Ox grid is 1
kilometers north of King Resources "A" Claims.
In 1992, R.A Olson Consulting Ltd. ("ROACL") conducted reconnaissance in the
Committee Bay area on behalf of the Committee Bay joint venture (CBJV). Several
highly anomalous gold values were returned from the 392 rock samples taken, with
a high of 121 gpt gold (Williamson, 1993). ROACL preformed follow-up work in
1993, taking 348 samples, mapping, prospecting. Higher gold values corresponded
with BIF with quartz veining and/or silicified, and pyrite + pyrrhotite +/-
arsenopyrite. In 1995, 505 rock chip and grab samples were taken, and eight
drillholes totalling 811.41m completed (producing 596 samples core samples).
This work exclusively focused on the Bluff 1-7 claims (Hayes River area, 56J),
and the Inuk area further to the northeast. Part of the geological crew was from
Cyprus Canada, who had entered into the Committee Bay joint venture. In 1996,
the CBJV collected 447 rock samples, drilled 6 holes totalling 781 meters (at
Three Bluffs), and flew a 13,262 line kilometers detailed geophysical survey
(magnetics and VLF). This survey covered an area between the current KIM claims
over to the Bluff 1-7 claims. Approximately CDN$5.4 million was collectively
spent on the Committee Bay Greenstone Belt between 1992 and 2001 by Committee
Bay North Ltd., Echo Bay Mines Ltd., and Apex Geoscience. This exploration
focused on three areas: Laugh land Lake, Hayes River and Curtis River.
Numerous gold occurrences were discovered by the CBJV on the Laughland Lake
(56K) 1:250,000 sheet between 1992 and 2001. Initial reconnaissance sampling by
the CBJV in the now Bay Pickle Claim area returned values of 5.77 and 8.61 gpt
gold.
More than 677 rock samples were taken on two showings, "Four Hills" and "Cop"
further to the north. Gold values included highs of 28.02 and 48.07 gpt gold.
Additional work included airborne and ground geophysical surveying, gridding,
and detailed geologic mapping. Four claims (Cop 1-4) totalling 10,330 acres are
still held here by Apex Geoscience and Committee Bay North Ltd. CBR completed a
227 kilometer helicopter-borne Time Domain Electromagnetic geophysical survey
over the Four Hills and Cop showings in 2003.
Further to the south, the CBJV discovered the Ghost and West Plains showings.
within their Prospecting Permits 1333, and 1485 (granted to CBJV on February 1,
1993 and February 1, 1994 respectively). gold values to 13.37 gpt gold are found
within complexly folded silicate IF. The Ghost 1 claim was staked here by the
CBJV in 1995. Reconnaissance sampling 10 to 15 kilometers further south by the
CBJV in 1992-1994 (within their Prospecting Permits 1333 and 1484) returned
values of up to 6.95 gpt gold. The Plains 1 claim was staked in 1995. CBJV
reports the gold assays were from high strain zones in silicate iron formation
with sulfides. CBR completed a 180 kilometers helicopter-borne Time Domain
Electromagnetic geophysical survey over the West Plains claims in 2003.
17
Numerous gold occurrences were also discovered by the CBJV on the 56J 1:250,000
sheet between 1992 and 2001. These include the Coyote, Ridge, and Bluff group of
showings. Reconnaissance sampling in the Coyote area was first done by CBJV in
1995 (within their Permit 1981) and then again in 1996. Values to 246 gpt gold
were returned from intensely sheared gabbro with quartz veins, pyrite +
pyrrhotite + chalcopyrite + visible gold. CBR completed an 86 kilometer
helicopter-borne geophysical survey over their single Coyote claim in 2003.
The Ridge showing was discovered in 1995 on CBJV's Permit 1771. Gold values to
2.34 gpt gold were returned from silicified, intensely folded oxide + silicate
BIF. Quartz veins with up to 10% disseminated pyrrhotite + pyrite are found
within "Z-shaped" fold noses. The BIFs are traceable on surface for 500 meters,
and on the magnetics for several kilometers. Only limited follow-up work (11
samples) was done in 1996, and the prospecting permit was allowed to lapse. The
stratigraphy and structure is similar to the Meadowbank's North Portage deposit.
The showings were recently restaked by CBR with 13 claims (HYR 1-12, and HYR 15,
recorded August 30, 2002). CBR completed a 225 kilometer helicopter-borne Time
Domain Electromagnetic geophysical survey over these Ridge claims in 2003.
Recent sampling results to 27 gpt gold.
The Bluff 1 to 7 Claims in the Hayes River area (56 J) cover four main gold
showings. These 7 claims, totalling 18,077.5 acres, were staked in 1995. They
are now held by Committee Bay North Ltd and have an anniversary date of October
12, 2005. Exploration work included rock chip sampling, detailed ground
magnetics (5 meter x 20 meter stations), 1:500 scale mapping, and drilling of
lower amphibolite-grade, highly folded BIF (oxide, silicate, and sulphide
facies). Surface grab samples returned 26 rock samples greater than 10 gpt gold.
Some visible gold was discovered in chloritic and silicified oxide IF. The four
main showings are "Three Bluffs", "Antler", "Hayes", and "Ledge."
At Three Bluffs (on the Bluff 3 claim), the BIF is 10-55 meters wide, and was
originally traceable for at least 1.9 kilometers. The best chip samples were
6.81 gpt gold /21.00 meters, 11.61 gpt gold/4.80 meters, and 19.04 gpt gold/3.90
meters. The best results from 12 drillholes in 1994-1996 included 11.52 gpt
gold/1.89 meters, 8.58 gpt gold/2.55 meters, and 6.31gpt gold/4.15 meters.
Follow up drilling here in 2003 included 6 holes totalling 694 meters. This work
extended the known mineralization approximately 240 meters and returned
spectacular intercepts of 19.93 gpt gold/5 meters, 61.6 gpt gold/4.84 meters,
and 27.41 gpt gold/9.44 meters. The iron formation has now been traced for 6
kilometers along strike and mineralization in the form of sulphides and
silicification is reported to increase towards the northeast (towards our Wrench
claims). Chip samples taken in the central and eastern portions of the iron
formation included 11.6 gpt gold/4.8 meters and 19.04 gpt gold/3.9 meters. Also
in 2003, a helicopter-borne time domain electromagnetic survey was undertaken
totaling 214.1 line kilometers at 120/60 meter spacing.
Another gold occurrence on the BLUFF 3 claim is the Ledge showing. A 10 meters
wide oxide BIF has been traced for 1.2 kilometers. The best grab sample result
was 21.43 gpt gold from a pyrrhotite + pyrite bearing sections of the BIF. A
ground magnetic survey in 1996 showed continuation of the magnetic signature to
the northeast.
The Antler showing is on the BLUFF 2 claim. Sheared oxide BIF with
sulphide-rich, silicified quartz arenite, is traceable for approximately 420
meters. Mineralisation includes quartz veins and brecciated BIF with pyrrhotite
+ pyrite. A high of 120.82 gpt gold was returned from grab sampling. The best
result from the two holes drilled in 1994 was 6.72 gpt gold/0.75 meters.
18
The Hayes showing on BLUFF 1 claim contains a 4-5m wide sulphidic (pyrrhotite +
pyrite) BIF with narrow sheared and siliceous intervals traceable for 260
meters. Rock chip samples included 11.67 gpt gold/0.60 meters and 23.38 gpt
gold/0.30 meters.
The CBJV also discovered several gold showings in the Curtis
River area (56 P). These included the "Inuk", "Mist", and "Koffy" showings with
gold assays to 1,894 gpt, 31 gpt and 334 gpt gold respectively, in BIF.
Shearing, silicification, quartz veining, and pyrite plus pyrrhotite are
present. Some of the current claims were previously covered by CBJV Permit 1772.
An airborne magnetic survey was completed over these showings in 1996. Ground
geophysical surveys (total field magnetic and VLF-EM) and 773.6 meters in six
drillholes was completed on the Inuk showing (56 P/7) in 1997. A high value of
12.81 g/t gold over 4.99 meters was obtained from mineralized iron formation. 5
holes totalling 544 meters of drilling were completed at the Inuk showing in
2003. The best intersection was 16 gpt gold / 12.6 meters. 12.4 line-kilometers
of gridding and 3.0 line kilometers of ground geophysical surveying (total field
magnetics and VLF-EM) were performed in 1997 over the Mist-Koffy Grid. Rock
samples returned values to 12.04 gpt gold. Additional sampling in 2001 included
an assay of 31.29 gpt gold. Surface channel sampling in 2003 yielded an assay of
334.15 gpt gold over 0.8 meters. Three drillholes totaling 238.9m were completed
at the Koffy showing in 2003. The highest grade intersection was 3 gpt gold /
3.4 meters. Also in 2003, a helicopter-borne time domain electromagnetic survey
was undertaken totaling 108 line kilometers.
CBR, a company with landholding in the Committee Bay area, signed a letter of
intent with an affiliate of Gold Fields Explorations Ltd in February 2003, to
form a joint venture, whereby Goldfields Exploration will earn a 65% equity
position in CBR upon spending US$10 million on exploration over 8 years.
Our five Wrench claims (WREN 1-5) were previously within Prospecting Permits
1477, 1481, and 1482 granted to the Committee Bay Joint Venture (CBJV) on
February 1, 1994. Reconnaissance sampling by the CBJV in 1993 returned a series
of gold anomalies (high of 3.68 gpt gold) over approximately three kilometers in
sheared oxide BIF in their northern part of their BLUFF claim block (BLUFF 7).
The government aeromagnetic survey shows a continuation of this auriferous iron
formation for at least three kilometers onto the Wrench claims. Government
sampling in 2001 on this trend returned a high of 9.7 gpt gold from sulphide
bearing (pyrite + pyrrhotite), quartz-veined intervals of oxide BIF. Additional
kilometer-scale segments of IF with anomalous gold are present further to the
east within the Wrench claim block.
In 1986, Wollex Exploration Ltd. of Calgary (division of Comaplex) took
reconnaissance rock samples within the current Pickle claims area. The highest
values were 908 ppb gold and 0.5% nickel from a 13 meter wide gossanous shear
zone in a folded ultramafic flow. No further work was done here by Wollex. Our
current three Pickle claims (PICK 1-3) are found southwest of the Central
Tonalite. This claim area was investigated as Prospecting Permits 1332 and 1333
which were granted to the Committee Bay Joint Venture (CBJV) on February 1,
1993. Reconnaissance sampling by CBJV returned values of 5.77 and 8.61 gpt gold
in sheared BIF with pyrite + arsenopyrite. Although the Pickle 1 claim was
staked in 1995, no follow-up work was filed. The IF is 70-100 meters thick and
traceable for 1.5 kilometers. The gold values are found in sulphidic sections
(arsenopyrite and pyrite) of the sheared oxide + silicate BIF over a distance of
1.35 kilometers.
19
The developing Eastern Arctic diamond plays currently being explored by De
Beers, BHP-Billiton, Northern Empire Minerals Ltd., and Stornoway Ventures Ltd.
are to the northeast and southeast of the Committee Bay Greenstone Belt.
Impressive diamond results were returned from the Melville Island kimberlites.
The Churchill diamond play north of Rankin Inlet intersected 11 kimberlites in
their first drill program in the spring/summer of 2003.
Geological Setting
Slave Craton
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. Rocks within the Slave Structural Province are
assigned to three lithotectonic assemblages identified as: an early assemblage
of granitic rocks, gneisses and quartz arenites; Yellowknife Supergroup
sediments, volcanic rocks and synvolcanic intrusions; and a younger
sedimentary-plutonic assemblage of clastic sediments and granitic rocks. The
distribution of ultramafic rocks in the Slave is volumetrically insignificant
when compared to Archean cratons of a similar age (e.g. the Superior Province).
Another significant difference is the greater percentage of turbidite domains
within the Slave.
The earliest assemblage includes the ca. 4.03 Ga Acasta gneisses, 2.82 Ga - 3.15
Ga granitoid gneisses as well as a 2.85 Ga quartzite-banded iron formation group
generally found west of 111(Degree). The Yellowknife Supergroup is exposed as
twenty-six linear volcanic belts surrounded by granitic batholiths. These
volcanic belts are typically isoclinally folded and largely range in age from
2715-2671 Ma. 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. A late (2.62 - 2.60 Ga) volcanic and sedimentary assemblage
consisting of felsic to intermediate volcanic rocks associated with conglomerate
and sandstone ("Timiskaming-type") has been identified overlying some of the
volcanic belts. A pan-Slave deformation event is recorded in all supracrustal
rocks by the presence of at least greenschist facies mineral assemblages. Higher
metamorphic grades, indicated by the presence of cordierite and andalusite, are
recognised in some belts.
Granitoid rocks that are coeval with, or postdate the supracrustal assemblages
comprise greater than 50% of the Slave Province. Synvolcanic granitoid rocks are
typically tonalites, diorites, and granodiorites, and these have been dates at
2.70 to 2.64 Ga. Late to post-deformational granitoids include megacrystic
biotite granodiorite and two-mica granites and range in age from 2605 to 2580
Ma.
At least five episodes of Proterozoic diabase dyke "swarms" (2400 Ma - 600 Ma)
have been recorded in the Slave Structural Province. These include the
northeasterly trending 2.23 Ga Malley dikes, the east-west Mackay suite of 2.21
Ga, the north trending 2.02 Ga Lac de Gras dikes (2.02 Ga) and the
north-northwest trending 1.27 Ga Mackenzie set. 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.
20
Proterozoic metasedimentary cover rocks, having limited aerial extent in the
Slave Structural Province, are located near Rockinghorse Lake and northeast of
Contwoyto Lake, straddling the Burnside River, and extending to Bathurst Inlet.
These rocks comprise the Goulburn and Epworth groups and represent cratonic and
marginal geosynclinal environments and lie unconformably on Archean basement.
Committee Bay Greenstone Belt
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. The 300
kilometers long section southwest of Committee Bay is referred to here as the
Committee Bay Greenstone Belt. This diverse supracrustal assemblage includes
iron formation (oxide + silicate facies), semipelite, quartzite, komatiite,
basalt and intermediate to felsic tuffs. Synvolcanic intrusions include gabbro,
quartz diorite, tonalite, granite and granodiorite. An anorthosite complex
intrudes the sequence northeast of Laughland Lake. Based on stratigraphic and
age similarities, the PAG is interpreted to be correlative with the Woodburn
Lake Group, on the order of 100 kilometers to the southwest. The Mary River
Group, 230 kilometers northeast of the Melville Peninsula on Baffin Island, may
represent the northern continuation of the PAG. The 2.718 to 2.732 Ga age of the
Committee Bay Greenstone Belt places it in the Timmins (2.70 - 2.725 Ga) to Red
Lake (2.73 - 2.99 Ga) range.
Government mapping in conjunction with the regional aeromagnetic survey has
outlined three predominant crustal domains in the central Committee Bay
Greenstone Belt: (i) the central domain comprises northeast-striking,
tightly-folded, amphibolite-facies supracrustal belts, cored by younger plutons;
(ii) the northern domain comprises high-grade metasedimentary and plutonic rocks
separated from the central domain by shallowly-dipping, high-strain zones and;
(iii) the southeastern domain includes a large northeast-striking foliated,
K-feldspar-magnetite granodiorite batholith, intrusive into the central domain.
The approximate supracrustal stratigraphic sequence in Committee Bay from the
base up is basalt (~2.73 Ga), porphyritic felsic rocks, komatiite, and oxide
iron formation (~2.722 - 2732 Ga), psammite and quartzite (~2.718 - 2.722 Ga),
intermediate volcaniclastic rocks interlayered with psammite and komatiite
(~2706 - 2711 Ga) and wacke/semipelite with oxide iron formation (~<2.706 Ga -
<2.691 Ga). The lower volcanic dominated supracrustal sequence is intruded by a
2.718 Ga foliated biotite- and hornblende- tonalite called the Central Tonalite.
Other synvolcanic intrusions include plagioclase phyric quartz diorite and
biotite+titanite granodiorite.
The sedimentary sequences of the PAG include siliciclastics rocks, conglomerate,
quartz arenite and iron formation. The siliciclastics rocks are dominated by
interbedded fine grained, biotite psammite and semi pelite. Conglomeratic rocks
include polymictic matrix-supported conglomerates with angular to subrounded
clasts of quartzite, felsic volcanics, and mafic to ultramafic volcanics. Quartz
cobble conglomerates have also been noted. Quartz arenites form prominent ridges
and are well bedded. The deposition of oxide and silicate-facies iron formation
is recorded at two major stratigraphic horizons between 2.73 Ga and 2.71 Ga
interbedded with semipelitic rocks as well as quartz arenite and komatiite.
Garnet and grunerite are common in the silicate facies, and magnetite and chert
comprise the oxide facies. Minor sulphide facies iron formation has been noted.
21
The komatiite bodies are generally thick spinifex-textured, pillowed, and
cumulate dominated peridotitic flows. Rare amount of basalt and komatiitic
basalt are found associated with the main komatiite flows. The total aggregate
thickness of komatiite in the lower sequence is on the order of 300 meters
thick. The largest and best preserved exposures of komatiite are to the
northeast of the Central Tonalite, where the sequence is 5 to 10 kilometers wide
and up to 25 kilometers long. Basaltic rocks include thin chlorite schist units
interlayered with oxide and silicate iron formation. A large exposure of
pillowed and massive basaltic flows is exposed north and east of the Central
Tonalite. Felsic volcanic rocks appear to be confined to laminated lapilli,
crystal, and lithic tuff units found associated with komatiite and semipelite.
The supracrustal stratigraphy and associated synvolcanic plutons were intruded
by voluminous, 2610-2593 Ma granodiorite and tonalite plutons. The 2610 Ma
Walker Lake intrusive complex, a 300 kilometer long, northeast trending,
K-feldspar megacrystic, biotite-hornblende-magnetite granodiorite batholith is
found along the belt's southeastern margin. Biotite + titanite tonalite and
monzogranite are also contained within the Walker Lake intrusive complex. The
Laughland Anorthosite Suite is a layered mafic complex of gabbroic anorthosite
northeast of Laughland Lake. Mafic phases include gabbroic anorthosite,
pyroxenite, and layered gabbro-pyroxenite. Meter-scale igneous layering occurs
between anorthosite and coarse-grained plagioclase megacrystic gabbro
(gabbroic-anorthosite). Contacts are poorly exposed, though alteration of the
Prince Albert Group along the margins indicates that the LLAS is younger. In NTS
56 0 (northern Committee Bay) biotite- and K-feldspar-granodiorite intrudes the
upper sedimentary sequence at ~ 2.580 Ga.Younger plutonic intrusions include the
~ 1830 Ma equigranular biotite + magnetite +/- fluorite Hudson monzogranites,
also found along the belt's southeastern margin, especially in the Laughland to
Walker Lake region. Laterally continuous northeast trending quartz-feldspar
porphyry dykes, 0.5m to 10m wide, are traceable for hundreds of meters in the
Three Bluffs area. Age dates for these porphyry dykes are not currently
available.
Deposit Types
Slave Craton
Ulu Deposit
The Flood Zone on Wolfden Resources' ULU claim is approximately 1.2 kilometers
west of Tahera Concession CO 20-00-01's western boundary. It is the best example
of the target being explored for in the High Lake area. The Flood Zone was
estimated by Echo Bay in their 1998 Ulu feasibility study update to host a
geological resource of 1,368,953 tonnes grading 12.91g/t gold (approximately
565,000 ounces of gold between surface and the 360 meter level) using a 5 g/t
cut-off grade and a 1.5 meter minimum mining width (Wolfden Resources Press
Release December 3, 2003).
At the Ulu gold deposit, the Flood Zone is a southeast trending,
shear-controlled vein system in basalt at the core of the Ulu anticline. Several
anatomizing gold zones comprise the deposit which has been traced on surface for
435 meters, and ranges in true width from 2.0 to 17.9 meters. BHP's drill
program on the Flood Zone from 1989 - 1992 outlined a series of mineralised
zones 320 meters along strike and down to a depth of 620 meters.
22
Lupin Gold Mine
The Lupin Mine, having produced 3,275,000 ounces of gold at an average grade of
9.5 g/t gold from 1982 to 2003, is the largest example of the target in the
Contwoyto area. The stratabound auriferous ores at Lupin are largely confined to
a single continuous horizon of amphibolitic (silicate-facies) iron formation
which has been traced in excess of 3 kilometers along strike and more than 1.2
kilometers downdip.
The ore grade mineralization is concentrated in a distinct "Z" fold with an
overall strike length of approximately 1.07 kilometers and a downdip projection
of 1.85 kilometers. This isoclinal "Z"fold plunges 75 - 80 degrees to the north
and is part of a larger anticlinorium. The highest gold values and sulphide
concentrations are within 1 meter of quartz vein-iron formation contacts.
Committee Bay Greenstone Belt
The Committee Bay Greenstone Belt is interpreted to correlate with the Woodburn
Lake Group, on the order of 100 kilometers southwest, which hosts the 3.0 M
ounce gold iron formation hosted Meadowbank deposit. The similar Committee Bay
geology is also highly prospective for BIF hosted gold. There are several such
showings already discovered in the Belt including "Three Bluffs" (61.6 gpt gold
/ 4.84 meters, and 27.41 gpt gold / 9.44 meters from drilling) and "Inuk" (12.81
gpt gold / 5 meters from drilling). Auriferous iron formations on our claims
include those found on the Wrench, Pickle, NN1, NN2, and Goose claims.
Mineralization
No known mineral reserves are known on our land. The program proposed is
exploratory in nature.
Slave Craton
Hood River Property
High grade gold showings are found within a 9 by 7 kilometer block in the
Ulu-Crown-Blackridge area in the west-central portion of the High Lake belt. The
mineralisation style is best illustrated 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 close spatial association of the gold bearing zones on the original
ULU claims with the axial trace of the ULU anticline. Tahera's Concession
20-01-01 includes the previous ULU 2 claim which covers the northernmost two
kilometers of this important fold axis. Several gold bearing zones were
identified by BHP in this area. The exploration drilling outside of the main
deposit included drilling on the "Northern Fold Nose" ("NFN") zone, which is now
part of Tahera's land holdings. Values of 27.7 and 66.0 g/t gold were obtained
from surface grab samples of a 1 meter wide quartz vein containing arsenopyrite,
pyrite, pyrrhotite, chalcopyrite, and native copper. Highly anomalous silver and
bismuth were also returned from these samples. This quartz vein is variably
exposed over 40 meters at the volcanic-sediment contact on the east limb of the
fold. Two drill holes tested this vein. The first drillhole returned 25.63 g/t
gold/1.54 meters (estimated true width of 1.49 meters) at a vertical depth of 60
meters in 1990. The second hole was drilled underneath the first hole the
23
following year and intersected 54.94 g/t gold/0.95 meters (estimated true width
of 0.80 meters) at a vertical depth of 95 meters below surface. The vein remains
concordant to the contact which changes dip from -45 degrees west at the 60
meter level to 73 degrees west at the 95 meter level. This mineralization is
open at depth.
Further mineralized zones were discovered in the core of the NFN. A gold value
of 176 g/t gold was produced from narrow quartz-pyrite vein rubble taken from
within a northeast linear. Coarse acicular arsenopyrite was noted in narrow
shears within silicified basalt just south of the NFN. The best value in this 50
meters x 70 meters area was 11.7 g/t gold. This area is within Tahera's land
holdings (Concession CO 20-01-01).
BHP outlined five zones of gold mineralization on their Crown claims (now
largely within Tahera's Concessions). At the "Main Zone", several highly
anomalous gold values to 24 g/t were returned from along 800 meters of a
silicified basalt/biotite schist contact. In addition to the 24.35 g/t gold /
1.00 meter chip sample, values of 13.6 and 5.6 g/t gold were returned from grab
samples. Seven trenches were dug in the Main Zone area. Silicified zones up to 6
meters wide with arsenopyrite were noted. The best value returned was 14.4 g/t
gold / 0.8 meters. The "B" zone is parallel to, and 80 meters east of the Main
Zone. The structural setting (NE-trending basalt/sediment contact) and
mineralogy here is similar to the Main Zone. Gold values (including highs of
12.4 and 8.7 g/t gold) are found along 450 meters and the zone is reported open
to the north. gold values to 1.8 and 4.6 g/t 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 immediate northwest of BHP's historic Crown claims are the Penthouse
showings on the historic DEN 16 and 19, and Fido 3 and 6 claims. The original
sampling for Aber Resources Ltd. on the Penthouse grid returned values of 23.9
to 220.1 g/t gold. The highest sample taken by Aber here was from a silicified
north-trending shear zone which was discontinuously traceable for 200 meters on
the south part of their Longspur grid (South Penthouse). A northeast trending
shear, traceable for 250 meters on the north part of their Longspur grid (North
Penthouse) produced a value of 130.1 g/t gold from narrow (0.1 - 0.5 meter wide)
arsenopyrite bearing veins. Several zones of mineralization were identified by
BHP on the Penthouse grid. Sediment-hosted mineralization was found in narrow
intercalations (1.0 - 4.5 meters wide) within basalt along 750 meters of the
main western sediment-basalt contact on Den 16 and 19. BHP reports that gold
values for this style were "generally in the 2-10 g/t range with an isolated
value of 33.1 g/t that came from a massive arsenopyrite sample on the southern
Penthouse grid." The Spent showing is at the south edge of the South Penthouse
grid. Here a 1 meter wide black quartz vein with fine grained arsenopyrite was
traced on surface for 200 meters. The selvages of the vein were also silicified
up to 30 centimeters and beyond into the host basalt. The best grab samples were
9.6 and 32.0 g/t gold. There is no indication in the assessment reports that the
SPent Zone was drilled. Drilling by BHP on the South Penthouse area in 1989
included 235 meters of NQ core in 3 drillholes testing surface anomalies to 33
g/t gold. These holes intersected silicified sediment intercalations within
basalt. The highest assay value returned from drill core was 1.5 g/t gold.
Four "gopher" drill holes tested anomalous value on the North Penthouse area in
1989. gold values to 1.97 g/t gold were returned from silicified sediment
intercalations with 1-7% arsenopyrite. Feldspar porphyry was intersected in the
last 1989 drill hole and a value of 2.3 g/t gold was returned from an intensely
silicified interval at the lower contact of the porphyry. BHP mentions a 76.8
24
g/t gold sample from North Penthouse in their 1992 report. Five drillholes
tested recessive linears, anomalous surface results (to 15 g/t gold) and VLF
conductors in 1991. The best value was 7.8 g/t gold / 0.5 meters from
sulphides-rich (7% arsenopyrite and pyrite) selvages to quartz veins.
Polymetallic quartz veins became the focus of exploration for BHP in 1990.
Average gold values were reported to range from 2-9 g/t with highs up to 21.2
g/t. Highly elevated silver values up to 473 g/t were noted in the galena-rich
samples 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. The 21.2 g/t gold
sample was from a silicified shear at a basalt-gabbro contact and contained 10%
acicular arsenopyrite with strong actinolite alteration. Several other showings
of fine grained acicular arsenopyrite mineralization were discovered including
grab samples of 3.29 and 4.28 g/t gold on the North Penthouse grid and 9.6 and
20.4 g/t gold along an 80 meter strike on the Southern Penthouse grid.
Five drillholes totalling 171.5 meters tested anomalies on the small FIDO 3
claim in 1990. The majority of these holes intersected narrow zones of
silicification +/- brecciation with up to 5% arsenopyrite + pyrrhotite. The best
value returned from drill core was 1.92 g/t gold.
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% palladium, 0.5% copper, 40 g/t silver and 0.5
g/t gold were returned from surface sampling. No drilling was carried out on
this showing by BHP, though they noted that it had been trenched by previous
workers. This may be from Borealis Exploration's work in 1970 which returned
trench values of 1.37 g/t gold, 92.57 g/t silver, 6.48% copper, and 1.10%
palladium%.
South of the historic Crown claims, across the southeastern edge of a granitic
intrusion is the North Mare/Blackridge showing last worked by Aber Resources
Ltd. The mineralization consists of an altered, and locally brecciated
gabbro-hosted silicified zone with up to 20% arsenopyrite and 10% pyrite +/-
pyrrhotite. The principal mineralized zone was traced on surface for at least
700 meters northeast in a 2.5 - 3.5 meter wide zone. The highest surface grades
included a chip sample of 7.5 g/t gold/ 9 meters and the best intersection from
drilling was 10.3 g/t gold / 1.07 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
Tahera held ground includes a number of significant iron formation hosted gold
showings including the R43-R45, the R44-R47, the 4-2 grid, the Ox, and the 5-5
grid showings.
The R43-R45 showing is hosted by a Z-shape folded silicate iron formation up to
10 meters wide and traceable for over 1.3 kilometers. A surface grab sample
returned 4.69 g/t gold, however the area is mainly unsampled. The geology,
mineralisation, 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 was reported here.
25
The R44-R47 showing is hosted by a banded garnet-silicate iron formation up to 5
meters wide and traceable on surface for 1.9 kilometers. The best gold values
returned from surface sampling have been 2.98 and 11.1 g/t gold. No drilling was
reported here.
Siliceous and sulphide-rich boulders of iron formation up to 2 meters in size
were traced on surface for 200 meters on Helca's 4-2 grid. The best gold assay
was 14.7 g/t gold. No follow-up drilling appears to have been done.
Cominco's Ox showing was discovered by surface sampling in 1988 on the lakeshore
along the northern boundary of the historic Coco 6 claim. This area is now part
of Tahera's IOL concession CO 08-00-05. The initial sampling of iron formation
produced values of 3.29 g/t gold/ 4.0 meters. Follow up chip sampling in 1990
returned a value of 9.65 g/t gold/ 3 meters from a pyrrhotite-rich boulder.
DDH-CC-89-4 was drilled underneath the showing and intersected two separate iron
formation horizons 8.2 meters apart. The upper iron formation assayed 2.12 g/t
gold/ 2.02 meters. The lower iron formation averaged 2.4 g/t gold/ 1.81 meters.
Several 080-0900 trending, 300 - 2700 meters long EM conductors were identified
on Hecla Grid 5-5. A total of six iron formations were identified here, four of
which were coincident with the EM conductors. Sulphide rich boulders of iron
formation at the southwest section of Grid 5-5 yielded values to 28 g/t gold.
The "Fox A" Canico showing is also within the Hecla 5-5 Grid area. Here the iron
formation is 33 meters wide and 220 meters long and returned values to 5.1 g/t
gold. Camico's "Grid 60" covered the shoreline on the west end of Hecla's Grid
5-5. A pyrite-bearing amphibolite iron formation sample on the shore of
Contwoyto Lake assayed 11.0 g/t gold. This amphibolite unit trends westward into
the lake.
Drilling by Hecla in 1987 on the 5-5 land grid included 8 holes totalling 942
meters. All eight holes intersected iron formation with five of the eight holes
intersecting sulphide-rich and/or siliceous sulphidic iron formation. The best
intercept was 2.31 g/t gold/ 7.85 meters (6.27 meters true width) from a section
of 15% pyrite +/- arsenopyrite and pyrrhotite in DDH 87-6. Drillhole 87-15 is
reported to have tested 30 meters below this intercept and only a narrow
interval of iron formation was encountered. Faulting was interpreted to explain
the change. DDH 87-8 was collared close to the baseline at L 9+00E and
intersected 25.57 g/t gold/0.30 meters in garnet-bearing siliceous iron
formation with <5% pyrrhotite. Several other intervals of iron formation, <1.0 -
5.5 meters wide were intersected in this hole. The surface samples values
targeted for each drillhole were not explicitly given, although a value of 20.81
g/t gold was noted from surface sampling of a sulphidic siliceous iron formation
35 meters south of the collar for DDH 87-17. An 11.73 g/t gold surface sampling
value within sulphidic iron formation was located approximately 75 meters east
of the collar for DDH 87-17 and may have been the target of DDH 88-3.
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 tested 225 meters west of the 2.31 g/t gold/
7.85m intercept in DDH 87-6. DDH 88-4 intercepted 2.88 g/t gold/ 3.9m in
pyrite-rich siliceous iron formation. DDH 88-3 tested an area 370 meters
southeast of the 28 g/t gold surface sample and intersected 5.9 meters of
siliceous and garnet-bearing iron formation with 1-2% pyrite. The bottom 1.7
meters of this unit contained 20% pyrite and assayed 4.2g/t gold /1.7 meters.
The actual high grade surface showing (28 g/t gold in arsenopyrite and quartz-
rich iron formation boulders) was apparently not drilled. DDH 88-5 tested still
further to the southeast (several hundred meters away). Three iron formations
were intersected and the uppermost unit returned 2.07 g/t gold / 0.9 meters from
a pyritiferous upper contact. DDH 88-2 intersected six horizons of siliceous +/-
sulphidic iron formation ranging from 5.7 to 15.0 meters thick. The best value
was 3.2g/t gold/1.4 meters.
26
Committee Bay Greenstone Belt
The Committee Bay Greenstone Belt is prospective for a number of mineral deposit
types including BIF hosted gold, shear-hosted lode gold, Witwatersrand style
gold, komatiite hosted stratiform nickel-copper (Kambalda analogy), and PGEs in
layered igneous complexes.
Examples of iron formation hosted gold include our Wrench claims where
government sampling in 2001 returned a high of 9.7 gpt gold from sulphide
bearing (pyrite + pyrrhotite), quartz-veined intervals of oxide BIF. This
section of iron formation is over 6.5 kilometers long. Additional
kilometer-scale segments of IF with anomalous gold (200 -390 ppb gold) are
present further to the east within the Wrench claim block.
Other iron formation hosted gold examples include mineralisation on our Pickle
claims. The IF 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 BIF over a distance of 1.35 kilometers. In addition
gold values in iron formation are also found on our NN1 and NN2 claims.
An example of shear-hosted gold in the belt is CBR's Coyote showing where values
to 246 gpt gold 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 showing.
Another shear-hosted target is our Goose Claims where a value of 1.6 gpt gold
was reported in a folded sequence of sheared mafic and ultramafic volcanics.
Sulphides (pyrrhotite + arsenopyrite + pyrite) are found with oxide +/- silicate
BIF, and quartz veins. The stratigraphy and structure has parallels to the Red
Lake camp.
Komatiite hosted (Kabalda-style) nickel potential exists on our three EE claims
(EE 1-3). These claims 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 fro these zones.
Our "ANOR" claim group protects the north portion of the LLAS.
Exploration
Slave Craton
To date, we have not commenced any exploration work on the Slave Craton
agreement (Tahera land).
27
Committee Bay Greenstone Belt
We started an exploration program on our Committee Bay claims in late May 2004.
This is covered in the "Geophysical Surveys" section.
Geophysical Surveys
Committee Bay Greenstone Belt
We completed a 195 line-kilometer ground magnetic and Horizontal Loop
Electromagnetic ("HLEM") survey on its Wrench claims in early June 2004. The
geophysical survey was conducted by Aurora Geosciences and will form the basis
for our detailed examination of the area during its summer exploration program.
The Wrench claim group comprise five contiguous claims covering approximately
4,900 hectares. The claims are underlain by metasediments and over 10 kilometers
of strike length of a folded and faulted BIF. A government aeromagnetic survey
confirms that the signature of the Wrench iron formation is directly connected
with and along strike of CBR's Three Bluffs high grade iron formation (45.4
grams per tonne ("gpt") gold over 6.9 meters) discovered in 2003.
Government sampling in 2001 on what is now the Wrench claims, returned a high of
9.7 gpt gold from sulphide-bearing (pyrite and pyrrhotite) iron formation in the
west portion of the claim group.
The geophysical program served a number of purposes. The magnetics accurately
trace the iron formation and delineate important structural information such as
faulting and folding. The HLEM component highlights where the conductive
pyrrhotite-rich sections of the iron formation are and, in conjunction with the
magnetics, may define trenching and drill targets.
Further Exploration
Committee Bay Greenstone Belt
The 2004/2005 exploration program involves geophysical surveys, mapping,
prospecting, sampling, and drilling. Identifying and defining high-grade
showings with mine-scale dimensions will be the primary objective. Given the
high grade results (61.6 gpt gold / 4.84m, and 27.41 gpt gold / 9.44m) from
CBR's recent drilling on the Three Bluff's showing, on strike to the southeast,
our Wrench showing (values to 9.7 gpt gold) is a possible drill target. The
series of gold anomalies (up to 8.61 gpt gold) found in sheared BIF with pyrite
+ arsenopyrite over 1.35 kilometers on the Pickle claims also represents an
excellent drill target.
A budget of CDN$1.52 million is proposed for our Committee Bay Greenstone Belt
2004 program. This would involve a 10 person crew working for two months. All
field, office, and camp supplies, as well as fuel, must be purchased and shipped
to a transfer site prior to being flown into this fairly remote location. Given
the absence of roads, all activities must be helicopter supported.
28
Slave Craton
The Phase 1 program recommended for 2004 (June 2004 - May 2005) would involve a
field examination of all significant mineralized zones on the Hood River and
Contwoyto Lake Concessions. The locations of existing grids, trenches, and
drillholes will be established. Mapping and prospecting in and around the higher
priority area is recommended. More detailed sampling (especially on the
Contwoyto R43-R45 and R44-R47 zones, and the Hood River Spent showing) and
structural analysis is recommended to define drill targets for 2005. Phase 1 at
an estimated cost of approximately CDN $300,000 would involve a five person
field crew working for three weeks based out of Tahera's Carat Camp and
supported by helicopter.
Contingent on a successful Phase 1 program, a Phase 2 field program estimated to
cost $700,000 should occur in the summer of 2005 and would involve a ten person
crew working for six weeks. A 1,500 meter drill program is included in the
proposed activities to test the highest priority showings identified in the 2004
program. Mapping and prospecting should continue into new areas of interest
developed from Phase 1. For both phases, field, office, and camp supplies, as
well as fuel must be purchased and shipped to a transfer site prior to being
flown to the camp location. Given the absence of roads, all activities must be
helicopter supported.
Employees
We have a Vice President Exploration who is a full-time employee. We also use
casual employees in our field exploration program and we have a consultant who
provides Investor Relations and Business Development services. The services of
our Chief Executive Officer and Chief Financial Officer as well as clerical
employees are provided to us on a part-time basis pursuant to a Service
Agreement dated November 25, 1988 (the "Service Agreement") by and between AXIS
Consultants Pty Limited and ourselves. AXIS also provides office facilities,
equipment, administration and clerical services to the Company pursuant to the
Service Agreement. The Service Agreement may be terminated by written notice
from the parties thereto.
Further detail relating to additional terms of the Service Agreement is included
in "Item 2- Properties", "Item 13- Certain Relationships and Related
Transactions" and "Item 11- Executive Compensation".
We utilize Eugene Flood as a consultant to oversee exploration programs. Mr
Flood is a seasoned exploration geologist with 20 years of gold exploration
experience in northern Canada and abroad. During the 1990's, Mr Flood was a
Senior Project Geologist with BHP Minerals Canada Ltd., where he managed
drilling programs from discovery to deposit delineation. (i.e.Doris and ULU gold
deposits).
Canadian Governmental and Environmental Regulation
The mining industry in the Nunavut Territory, where our exploration properties
are situated, operates under Canadian federal and territorial legislation
governing prospecting, development, production, environmental protection,
exports, income taxes, labor 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 our
exploration activity.
29
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.
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.
30
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. 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 exploration commitments for the 2 years to October 16, 2004 and must spend
CDN$143,388 each year until 2012 otherwise we will not have any interest in the
mineral claims. 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 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.
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, 2004 and for the years ended
June 30, 2004 and 2003 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$28,743,000 (US$19,841,000) 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.
31
Weather Interruptions In Nunavet May Affect And Delay Our Proposed Exploration
Operations.
We can only work above ground at our mineral claims in Nunavet, 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 employment contract
until March 31, 2005. Other than this officer, none of our other officers or
directors work 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
32
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.
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.
33
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..
We May Lose Our Claims If We Do No Maintain A Minimum Level of Work On The
Claims
We are required to carry out a minimum level of work on each claim to maintain
each of our claims in good standing. We are required to spend CDN$2 each year
per acre on exploration and development, for an aggregate of CDN$143,388 as of
June 30, 2004. If we cannot afford to carry out the work or pay the fees we
could lose our interest in the claims. The loss of some or all of our mineral
claims would adversely effect the value of your investment.
On our Slave Craton claims it is the responsibility of Tahera to carry out the
minimum level of work necessary to maintain these claims. If Tahera fails to do
so, we may lose access to these claims.
We are substantially dependent upon AXIS Consultants 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 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."
34
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 approximately 15,661,358 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, there 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. 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
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.
35
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.
Item 2 Properties
The Company occupies certain executive and office facilities in Melbourne,
Victoria, Australia which are provided to it pursuant to the Service Agreement
with AXIS. See "Item 1- Business- Employees" and "Item 12- 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 Yonge Street,
Toronto ON Canada. The office receives mail, couriers and facsimiles on our
behalf and forwards any documents received to us. The lease is for six months
and can be renewed on a month to month basis. We pay a fee of CDN$30 per month.
This is a temporary arrangement whilst we determine whether to open a permanent
office.
Item 3 Legal Proceedings
There are no pending legal proceedings to which the Company is a party, or to
which any of its property is the subject, which the Company considers material.
Item 4 Submission of Matters to a Vote of Security Holders
Effective as of June 27, 2003, Messrs Joseph Gutnick, Peter Lee, Paul Ehrlich
and Dr David Tyrwhitt were re-elected as directors of the Company pursuant to an
action by written consent signed by the holders of more than a majority of the
issued and outstanding shares of Common Stock of the Company.
36
PART II
Item 5 Market for Common Equity and Related Stockholder Matters
Our Common Stock is traded in the over-the-counter market and quoted on the
OTC-Bulletin Board under the symbol "BYRE". The trading for the Common Stock has
been sporadic and the market for the Common Stock cannot be classified as an
established trading market.
The following table sets out the high and low bid information for the Common
Stock as reported by the National Quotation Service Bureau for each
period/quarter indicated in US$:
Calendar Period High Bid (1) Low Bid (1)
--------------- --------- --------
2002
First Quarter 1.20 0.90
Second Quarter 2.25 1.75
Third Quarter 2.50 1.05
Fourth Quarter 3.25 1.75
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
(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.
Shareholders
As of August 31, 2004 the Company had approximately 259 shareholders of record.
Dividend Policy
It is the present policy of the Board of Directors to retain earnings, when
incurred, for use in our business. We have not declared any cash dividends to
the holders of its Common Stock and does not intend to declare such dividends in
the foreseeable future
Transfer Agent
Our United States Transfer Agent and Registrar is The Bank of New York.
Proposed Dual Listing on Toronto Venture Exchange
37
We have lodged an application with TSX-V to dual list our shares of common stock
on TSX-V. Cannacord Capital Corporation, have agreed to act as sponsor for the
listing and may offer to act as agent on a commercially reasonably basis,
following a successful listing, to assist us in raising up to CDN$3 million in
flow through financing to assist us with funding our operations.
Item 6 Management's Discussion and Analysis of Financial Condition
or 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 report. This report contains numerous forward-looking statements relating
to our business. Such forward-looking statements are identified by the use of
words such a s 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 form those projected in the
forward-looking statements.
We are an exploration stage mining company. Our objective is to exploit out
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.
Selected Financial Data
Our selected consolidated financial data presented below for each of the years
in the two-year period ended June 30, 2004, and the balance sheet data at June
30, 2003 and 2004 have been derived from consolidated financial statements,
which have been audited by PKF, Certified Public Accountants, a Professional
Corporation. The selected financial data should be read in conjunction with our
consolidated financial statements for each of the years in the two-year period
ended June 30, 2004, and Notes thereto, which are included elsewhere in this
Annual Report.
38
Consolidated Statement of Operations Data
(in thousands, except per share data)
Year ended June 30
Conv.
Transl.
2003 2004 2004
A$ A$ US$
Revenues - - -
------------------------------------------------
Costs and expenses 684 1,722 1,189
------------------------------------------------
Loss from operations (684) (1,722) (1,189)
Other income (loss) 3 (1) (1)
------------------------------------------------
Profit (loss) before income
taxes (681) (1,723) (1,190)
Provision for income taxes - - -
------------------------------------------------
Net profit (loss) from (681) (1,723) (1,190)
Continuing Operations
Net loss from - - -
Discontinued Operations
------------------------------------------------
Net profit (loss) (681) (1,723) (1,190)
------------------------------------------------
A$ A$ US$
Net profit (loss) per share
On continuing operations (.11) (.18) (.13)
On discontinued - - -
operations ------------------------------------------------
(.11) (.18) (.13)
------------------------------------------------
Weighted average number
of shares outstanding 6,345 9,385 9,385
------------------------------------------------
Consolidated Balance Sheet Data
-------------------------------
A$ A$ US$
Total assets 4 1,466 1,012
Total liabilities 1,931 599 413
------------------------------------------------
Stockholders' equity (1,927) 867 599
------------------------------------------------
39
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
2003 A$1.00 = US$0.667
CDN$1.00 = US$0.7421
2004 A$1.00 = US$0.6903
CDN$1.00 = US$0.7433
Plan of Operation
We have A$1,118,000 in cash at June 30, 2004.We are investigating the
possibility of raising cash flow through money in Canada for exploration
purposes.
Exploration had commenced on the Committee Bay Properties at June 30, 2004 and a
budget of CDN$1.52 million has been approved, of which approximately
CDN$0.8million had been paid by June 30, 2004. Since June 30, 2004, we have also
agreed a budget of CDN$300,000 for the Slave Properties. Our budget for general
and administration for fiscal 2005 is A$0.8 million.
It is our intention to complete the exploration programs set out in Item 1
"Description of Business - Further Exploration". Upon completion we will assess
the results of these programs to determine the appropriate exploration programs
for the next field season. Depending on the success of the current programs, we
may surrender certain claims if we do not believe them to be prospective.
We have leased equipment such as camps and associated infrastructure for the
current field exploration season. Until we plan the 2005 field exploration
program, we are not in a position to determine whether we need to acquire plant
or the value of the 2005 field exploration program.
As set out in Item1 "Employees" we have a Vice President Exploration and a Vice
President Investor Relations and Business Development, 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
Year ended June 30, 2004 versus Year ended June 30, 2003
Total costs and expenses have increased from A$684,000 for the year ended June
30, 2003 to A$1,722,000 (US$1,189,000) for the year ended June 30, 2004. The
increase was a net result of:
40
i) An increase in exploration expenditure written off from A$198,000 in fiscal
2003 to A$951,000 (US$657,000) in fiscal 2004. In fiscal 2004, we appointed
a Vice President Exploration in Canada and commenced the exploration
program on the Committee Bay 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. During the 2003 fiscal year, the Company entered into an
arrangement in Tibet in China (see Item 1 Business - General and History of
the Company). 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. In fiscal
2003, exploration in Canada related to the staking of claims in the
Committee Bay Greenstone Belt at a cost of A$88,000 in the form of staking
costs, consulting fees and miscellaneous costs.
ii) A decrease in interest expense from A$133,000 in fiscal 2003 to A$122,000
(US$84,000) in fiscal 2004 as a result of the decrease in debt owing to
Chevas Pty Ltd and AXIS as the debts due to these companies were repaid in
full in March 2004. During the year, the interest rate of 8.60% was charged
on outstanding amounts by Chevas did not change. Chevas is a company
associated with Mr. J.I. Gutnick, our President, which provided funding for
the Company's operations during the year. AXIS provides management and
geological services to the Company pursuant to a Service Deed dated
November 25, 1988. AXIS charged interest at a rate between 10.10% and
10.60% for fiscal 2004 compared to 9.60% and 10.10% for fiscal 2003.
iii) An increase in legal, accounting and professional costs from A$75,000 in
fiscal 2003 to A$112,000 (US$77,300) in fiscal 2004. During fiscal 2004, we
incurred legal expenses of A$31,500 (US$21,700) which relates to the
preparation of documentation for a dual listing on Toronto Venture
Exchange; A$23,000 (US$15,900) 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. During fiscal 2003, the Company incurred legal
expenses in respect to the proposed exploration in Tibet China (see item 1
- Business - General) amounting to A$12,000 for which there was no
comparable transaction in fiscal 2004. The Company also incurred legal fees
in fiscal 2003 of A$7,000 for advice in respect to a potential listing on
Toronto Venture Exchange and sundry corporate matters We also changed
independent accountants during the fiscal 2003 year and as a result,
incurred additional costs of A$5,000 (US$3,500) during fiscal 2004.
iv) An increase in administrative costs from A$278,000 to A$537,000
(US$371,000). During fiscal 2004, the management fee charged by AXIS to the
Company was A$100,000 (US$69,000). In fiscal 2004, AXIS charged the Company
A$205,000 (US$142,000) for Director's fees and salaries incurred on behalf
of the Company which related to fees paid to independent Directors and the
41
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 (US$7,600). The Company
incurred A$56,000 (US$38,700) 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 (US$90,400) 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
(US$13,000) for lodgement costs of filings with the SEC. There were no
comparable costs during fiscal 2003 for these costs. During fiscal 2003,
the management fee charged by AXIS to the Company was A$120,000. In fiscal
2003, AXIS charged the Company A$94,000 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.
Accordingly, the loss from operations increased from A$684,000 for the year
ended June 30, 2003 to A$1,722,000 (US$1,189,000) for the year ended June 30,
2004.
The net loss amounted to A$1,723,000 (US$1,190,000) for the year ended June 30,
2004 compared to a net loss of A$681,000 for the year ended June 30, 2003. The
net loss per common equivalent share in 2004 was A$0.18 cents (US$0.13) compared
with a net loss with a common equivalent share of A$0.11 cents in the prior
year.
Liquidity and Capital Resources
For the fiscal year 2004, net cash used in operating activities was A$1,614,000
(US$1,114,000) primarily consisting of amounts spent on exploration of A$951,000
(US$657,000), prepayments and deposits of A$241,000 (US$166,000) for the
exploration programme, accounts payable and accrued expenses of A$338,000
(US$233,000) and short term advance - affiliates of A$103,000 (US$71,000); net
cash provided by financing activities was A$2,752,000 (US$1,899,000) made up of
proceeds from sale of shares of common stock of A$2,253,000 (US$1,555,000),
proceeds from loans of A$2,273,000 (US$1,569,000) and net repayments of
borrowings from affiliates of A$1,774,000 (US$1,225,000); and net cash used in
investing activities of A$21,000 (US$14,000) being purchase of plant and
equipment.
As of June 30, 2004 we had short-term obligations of A$599,000 (US$413,000)
consisting mainly of accounts payable and accrued expenses and a short term
advance from an affiliate.
We have A$1,118,000 in cash at June 30, 2004. We are investigating the
possibility of raising cash flow through money in Canada for exploration
purposes. We have lodged an application with TSX-V to dual list our shares of
common stock on TSX-V. Cannacord Capital Corporation, have agreed to act as
sponsor for the listing and may offer to act as agent on a commercially
reasonably basis, following a successful listing, to assist us in raising up to
CDN$3 million in flow through financing to assist us with funding our
operations.
42
Exploration had commenced on the Committee Bay Properties at June 30, 2004 and a
budget of CDN$1.52 million has been approved, of which approximately CDN$.0.8
million had been paid by June 30, 2004. Since June 30, 2004, we have also agreed
a budget of CDN$300,000 for the Slave Properties. The budgets for the Committee
Bay and Slave Properties are for the 2004/2005 summer season. Until we receive
the results from the exploration, we are not able to prepare field programs and
budgets for the 2005/2006 summer season field activities. Our budget for general
and administration for fiscal 2005 is A$0.8 million.
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 have a 2
year exercise period with an exercise price of US$1.30.
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.
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.
Cautionary "Safe Harbour" Statement under the United States Private Securities
Litigation Reform Act of 1995.
Certain information contained in this Form 10-KSB are forward-looking statements
within the meaning of the Private Securities Litigation Act of 1995 ("the Act"),
which became law in December 1995. In order to obtain the benefits of the "safe
harbor" provisions of the Act for any such forward-looking statements, we wish
43
to caution investors and prospective investors about significant factors which,
among others, have in some cases affected our actual results and are in the
future likely to affect our actual results and cause them to differ materially
from those expressed in any such forward-looking statements. This Form 10-KSB
contains forward-looking statements relating to future financial results. Actual
results may differ as a result of factors over which we have no control,
including, without limitation, the risks of exploration and development stage
projects, political risks of development in foreign countries, risks associated
with environmental and other regulatory matters, mining risks and competitors,
the volatility of gold prices and movements in foreign exchange rates.
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.
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 Consolidated
Financial Statements which are attached hereto.
Quantitative and Qualitative Disclosures about Market Risk
We have no interest bearing liabilities and therefore are not exposed to
interest rate risks at the current time and do not believe it will be necessary
to borrow any funds over the next 12 months.
Item 7. Financial Statements
See F Pages
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None
44
Item 8A Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Our principal executive officer and its principal financial officer,
evaluated the effectiveness of our disclosure controls and procedures
as of the end of the period covered by this report. Based on that
evaluation, such principal executive officer and principal financial
officer concluded that, our disclosure controls and procedures as of
the end of the period covered by this report have been designed and
are functioning effectively to provide reasonable assurance that the
information required to be disclosed by us in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and
forms. We believe that a controls system, no matter how well designed
and operated, can not provide absolute assurance that the objectives
of the controls system, no matter how well designed and operated, can
not provide absolute assurance that the objectives of the controls
system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any,
within a company have been detected.
(b) Change in Internal Control over Financial Reporting.
No change in our internal control over financial reporting occurred
during our most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect our internal control over
financial reporting.
45
PART III
Item 9. Directors and Executive Officers of the Registrant
The following table sets out certain information in relation to each person who
held a position of Director and/or executive officer of the Company during the
year ended June 30, 2004.
Name Age Position(s) Held
Joseph Gutnick 52 Chairman of the Board
President, Chief Executive Officer
and Director.
David Tyrwhitt 66 Director.
Peter Lee 46 Director, Secretary, Chief Financial
Officer and Principal Accounting
Officer.
Paul Ehrlich 46 Director
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 Mining N.L., Great Gold Mines N.L.,. and Quantum Resources
Limited. Mr. Gutnick was previously Executive Chairman of Tahera 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.
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. Dr Tyrwhitt has been a Director of numerous public listed companies
in Australia in the mining industry and is currently a Director of Astro Mining
N.L., Great Gold Mines N.L., and Quantum Resources Limited.
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 20 years commercial experience and is
currently General Manager Corporate and Company Secretary of several listed
public companies in Australia.
46
Paul Ehrlich
Mr. Ehrlich is an attorney of 20 years experience in the fields of commercial
law and commercial litigation. From 1989 to 2001 Mr.Ehrlich was a partner in a
major national Australian law firm. He has expertise in a range of corporate
areas including mergers and acquisition (with an emphasis on public company
takeovers, litigation and trade sales), securities law, public raisings, IPO's,
government privatisation, corporate reconstructions and the negotiation and
drafting of complex contractual and commercial arrangements. Mr. Ehrlich
specialises in areas of complex corporate litigation and has conducted such
litigation on behalf of clients in the Supreme Courts of Victoria, New South
Wales, South Australia, Western Australia and in the Federal Court of Australia
and in the High Court of Australia. He also specialises in all areas of mining
resource law and project finance.
Mr. Gutnick was formerly the Chairman of the Board, Dr. Tyrwhitt was formerly an
independent Director and Mr. Lee was formerly Company Secretary of Centaur
Mining & Exploration Ltd., an Australian corporation, which commenced an
insolvency proceeding in Australia in March 2001.
Board of Directors
Our Certificate of Incorporation provides that the number of Directors of the
Company shall be not less than six nor more than nine as shall be fixed in the
by-laws of the Company.
Directors need not be stockholders of the Company or residents of the State of
Delaware. Directors are elected for an annual term and generally hold office
until the next Directors have been duly elected and qualified. Directors may
receive compensation for their services as determined by the Board of Directors.
A vacancy on the Board may be filled by the remaining Directors even though less
than a quorum remains. A Director appointed to fill a vacancy remains a Director
until his successor is elected by the Stockholders at the next annual meeting of
Shareholder or until a special meeting is called to elect Directors.
The executive officers of the Company are appointed by the Board of Directors.
There are no family relationships between any Directors or executive officers of
the Company.
Audit Committee
Our Board of Directors has an Audit Committee comprised of Dr Tyrwhitt and Mr
Ehrlich, both of whom are independent Directors. 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.
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.
47
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 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
2003 all such filing requirements were complied with in a timely manner by all
Directors and executive officers.
Item 10. 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, 2004, 2003 and
2002. No other executive officer received more than US$100,000 per annum during
this period.
Summary Compensation Table
Annual Compensation Long Term Compensation Awards
------------------- -----------------------------
Restricted Securities
Other Annual Stock Underlying
Name and Principal Position Year Salary Compensation Awards Options
---- ------ ------------ ------ ----------
Joseph Gutnick, Chairman
of the Board and CEO 2004 $76,000(1)(2) $16,484(1) -- --
2003 $-(1)(2) $28,553(3) -- --
2002 $108,000(1)(2) $- -- --
1. The amounts listed were paid by us to AXIS, which provides the services of
Mr. 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 Item 13 - Certain Relationships and Related Party
Transactions)
3. Includes amounts paid by AXIS to an accumulation superannuation plan on
behalf of Joseph Gutnick.
For additional information about the Service Agreement and the Consulting
Agreement see "Item 1- Business- Employees" and "Item 12- Certain Relationships
and Related Transactions".
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.
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
48
pension plans. At June 30, 2004, the Company has an obligation to pay CDN$3,930.
This amount was paid in July 2004. Other than this amount, there were no
contributions to any employee benefit or health plans during the year ended June
30, 2004.
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.
Item 11. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.
The following table sets out, to the best of our knowledge, the numbers of
shares in us beneficially owned as at June 30, 2004 by:
(i) each of our present Executive Officers and Directors,
(ii) each person (including any "group" as that term is defined in Section
13(d)(3) of the Securities Exchange Act) who beneficially owns more
than 5% of our Common Stock, and
(iii) all of our present Directors and officers as a group.
Name Number of Shares Owned Percentage of
Shares (1)
Edensor Nominees
Pty Ltd 8,894,590 48.2
Kerisridge Pty Ltd 3,507,968 19.0
Joseph Gutnick 12,454,208 (2)(3) 67.4
(4)(5)(6)(7)
Stera Gutnick 12,428,558 (4)(5)(6)(7) 67.3
Delkern Investments Ltd 3,050,778 18.2
David Tyrwhitt - (2) -
Peter Lee - (2) -
Paul Ehrlich - -
------------------------------------------------
All officers and Directors
As a group 12,454,208 79.4
------------------------------------------------
49
Notes relating to Item 11:
(1) Based on 16,711,630 shares outstanding
(2) Does not include:
(i) 8,949 shares of Common Stock beneficially owned Great Gold Mines NL
or
(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 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 8,894,590 shares of Common Stock owned by Edensor Nominees,
1,753,984 shares of Common Stock owned by Kerisridge and 26,000 shares of
Common Stock owned by Pearlway Investments Proprietary Limited, of both of
which Mr Joseph Gutnick, Stera M. Gutnick and members of their family are
officers, Directors and principal stockholders.
(5) Includes 1,753,984 shares issuable upon exercise of stock purchase warrants
owned by Kerisridge.
(6) Joseph Gutnick is the beneficial owner of 25,650 shares of Common Stock.
(7) Joseph Gutnick and Stera Gutnick are husband and wife.
Item 12. Certain Relationships and Related Transactions
We are one of five affiliated companies of which four are Australian public
companies listed on Australian Stock Exchange. 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
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.
50
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 ourselves 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$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, A$201,688 for the
fiscal year ended June 30, 2003 and A$169,770 for the fiscal year ended June 30,
2002. At June 30, 2002, 2003 and 2004, the Company owed AXIS A$389,000,
A$486,000 and A$104,000 respectively for services provided in accordance with
the Service Agreement. During fiscal 2002, 2003 and 2004, AXIS Consultants
charged interest of A$29,198, A$46,642 and A$42,742 respectively on outstanding
balances. AXIS charged interest at rates between 9.60% and 10.10% for fiscal
2002, 9.60% and 10.10% for fiscal 2003 and 10.10% and 10.60% for fiscal 2004.
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, 2002 we had a liability to Chevas of A$783,743. During
the 2003 fiscal year, Chevas loaned a further A$369,155 and charged A$86,417 in
interest to us on the loan account. 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 2003 fiscal year was 8.60% and during the 2004 fiscal year
was 8.60% to9.10%.
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%.
51
On January 20, 2000, we issued 8,000,000 options over fully paid shares in our
capital at an issue price of US$0.01 per option and an exercise price of US$1.00
per option to Edensor. The options had a term of 5 years with a non-exercise
period of 2 years subject to a further board approval for Edensor, either
directly of indirectly, to exercise options in the case we required to raise
further working capital. On March 22, 2001, the Directors agreed to extend the
term of the options from 5 years to 10 years. Edensor advised us in June 2003
that it had sold 2,000,000 options to Delkern Investments Ltd. In March 2004, we
received notification from Edensor that it was exercising all of the options it
held utilising the cashless exercise feature of the terms and conditions of the
options. As a result of the exercise of the options, we issued 5,142,857 shares
to Edensor.
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 Executive Chairman of Tahera and his family company, Edensor
Nominees, who are our controlling stockholder, was 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.
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 us or any member of their families unless the
transaction is approved by a majority of our disinterested non-employee
Directors and the disinterested majority 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 authorised.
52
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) Consolidated Financial Statements and Notes thereto.
(I) The Consolidated Financial Statements and Notes thereto listed on
the Index at page 58 of this Annual Report on Form 10-KSB are
filed as a part of this Annual Report.
(b) Exhibits
The Exhibits to this Annual Report on Form 10-KSB are listed in the
Exhibit Index at page 19 of this Annual Report.
(c) Form 8-K
Form 8-K dated March 31, 2004 with respect to Item 5.
Item 14. Principal Accounting Fees and Services
The following table shows the audit fees we were billed by PKF and our prior
auditors for fiscal 2004 and 2003.
2004 2003
---- ----
Audit fees $41,121 $25,626
Audit related fees - -
Tax fees - -
---------------- -------------------
Total $41,121 $25,626
================ ===================
Audit fees were for the audit of our annual financial statements, review of
financial statements included in our 10-QSB/10-Q quarterly reports, and services
that are normally provided by independent auditors in connection with our other
filings with the SEC. This category also includes advice on accounting matters
that arose during, or as a result of, the audit or review of our interim
financial statements.
As part of its duties, our Audit Committee pre-approves audit and non-audit
services performed by our independent auditors in order to assure that the
provision of such services does not impair the auditors' independence. Our Audit
Committee does not delegate to management its responsibilities to pre-approve
services performed by our independent auditors.
53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorised.
BAY RESOURCES LTD.
(Registrant)
By: /s/ Peter J Lee
---------------
Peter J Lee
Director, Secretary,
Chief Financial Officer
and Principal Financial
and Accounting Officer
Dated: September 27, 2004
54
FORM 10-KSB Signature Page
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons in the capacities and on the
dates indicated.
Signature Title Date
1. /s/ Joseph Gutnick Chairman of the Board,
------------------ President and Chief Executive
Joseph Gutnick Officer (Principal Executive
Officer), and Director. September 27, 2004
2. /s/ David Tyrwhitt Director. September 27, 2004
------------------
David Tyrwhitt
3. /s/ Peter Lee Director, Secretary,
------------- Chief Financial Officer and
Peter Lee Principal Financial and
Accounting Officer. September 27, 2004
5. /s/ Paul Ehrlich Director September 27, 2004
----------------
Paul Ehrlich
55
EXHIBIT INDEX
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
(4) 99.3 4.1 Warrant to purchase 1,670,000 shares of common stock
(4) 99.4 4.2 Warrant to purchase 1,783,984 shares of common stock
(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
* 10.7 Employment Agreement between the Registrant and C. Alford
* 10.8 Sponsorship Agreement with Canaccord Capital
* 21 List of Subsidiaries as at June 30, 2004.
* 31.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by
Peter James Lee.
* 31.2 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by
Joseph Isaac Gutnick.
* 32.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by
Joseph Issac Gutnick.
* 32.2 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by
Peter James Lee
*Filed herewith
56
Financial Statements for the years ended June 30, 2003 and 2004.
Bay Resources, Ltd
Audited Consolidated Financial Statements for the Company and its
Subsidiaries for the year ended June 30, 2003 and Audited Consolidated
Financial Statements for the Company for the year ended June 30, 2004.
(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.
(6) Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31,
2002.
57
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Financial Statements
June 30, 2004 and 2003
(with Report of Independent Registered Public Accounting Firm)
CONTENTS
Page
Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheet F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity (Deficit) F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 - F-17
F-1
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
To the Board of Directors and Stockholders of
Bay Resources Ltd.
We have audited the accompanying consolidated balance sheet of Bay Resources
Ltd. and Subsidiaries (An Exploration Stage Company) as of June 30, 2004, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the years ended June 30, 2004 and 2003. 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 Bay Resources, Ltd.
and Subsidiaries at June 30, 2004, and the results of its operations and its
cash flows for the years ended June 30, 2004 and 2003 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, 2004 the Company had not yet commenced revenue producing operations and had
a retained deficit of A$28,806,000 (US$19,885,000). 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
July 23, 2004 Certified Public Accountants
A Professional Corporation
F-2
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Balance Sheet
June 30, 2004
Convenience
Translation
A$000's US$000's
2004 2004
ASSETS ---- ----
Current Assets:
Cash 1,118 772
Receivables 87 60
Prepayments and Deposits 241 166
------------------------------------
Total Current Assets 1,446 998
------------------------------------
Non Current Assets:
Property and Equipment, net 20 14
------------------------------------
Total Non Current Assets 20 14
------------------------------------
Total Assets 1,466 1,012
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses 495 341
Short-Term Advance - Affiliate 104 72
------------------------------------
Total Current Liabilities 599 413
------------------------------------
Total Liabilities 599 413
------------------------------------
Stockholders' Equity:
Common stock: $.0001 par value
25,000,000 shares authorised,
16,714,130 shares issued 2 1
Less Treasury Stock, at Cost, 2,500 shares (20) (14)
Additional Paid-in-Capital 29,700 20,503
Other Comprehensive loss (9) (6)
Retained Deficit (28,806) (19,885)
------------------------------------
Total Stockholders' Equity 867 599
------------------------------------
Total Liabilities and Stockholders' Equity 1,466 1,012
====================================
F-3
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Operations
For the years ended June 30, 2003 and 2004
Convenience
Translation
A$000's A$000's US$000's
2003 2004 2004
---- ---- ----
Revenues $- $- $-
----------------------------------------
Cost and expenses
Exploration Expenditure 198 951 657
Interest Expense net - related entity 133 122 84
Legal, Accounting and Professional 75 112 77
Administrative 278 537 371
----------------------------------------
684 1,722 1,189
----------------------------------------
(Loss) from Operations (684) (1,722) (1,189)
Foreign Currency Exchange Gain (Loss) 3 (1) (1)
----------------------------------------
(Loss) before Income Tax (681) (1,723) (1,190)
Provision for Income Tax - - -
----------------------------------------
Net (Loss) $(681) $(1,723) $(1,190)
========================================
Basic net (Loss) per Common Equivalent $(.11) $(.18) $(.13)
Shares ========================================
Weighted Number of Common Equivalent
Shares Outstanding (000's) 6,345 9,385 9,385
========================================
F-4
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
June 30, 2003 and 2004
Common Treasury Additional Retained Other
Stock Stock, at Paid-in Earnings Comprehensive
Shares Amount Cost Capital (Deficit) Loss Total
------ ------ --------- ------- --------- ---- -----
000's A$000's A$000's A$000's A$000's A$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 $(27,083) - $(1,927)
Issuance of 1,753,984 shares 1,754 - - 2,273 - - 2,273
and warrants in lieu of debt
repayment
Sale of 1,670,000 shares and 1,670 - - 2,253 - - 2,253
warrants
Issuance of 6,943,057 shares 6,943 1 - (1) - - -
on cashless exercise of options
Net unrealised loss on foreign - - - - - (9) (9)
exchange
Net (loss) - - - - (1,723) - (1,723)
------------------------------------------------------------------------------------------
Balance June 30, 2004 16,714 $2 $(20) $29,700 $(28,806) (9) $867
------------------------------------------------------------------------------------------
F-5
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
For the Years Ended June 30, 2003 and 2004
Convenience
Translation
A$000's A$000's US$000's
2003 2004 2004
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $(681) $(1,723) (1,190)
Adjustments to reconcile net (loss) to net cash
(used) in operating activities
Foreign Exchange - (9) (6)
Depreciation of plant and equipment - 1 1
Accrued interest added to principal 133 1 1
Net Change In :
Staking Deposit 23 - -
Receivables (3) (84) (58)
Prepayments and Deposits - (241) (166)
Accounts Payable and Accrued Expenses (292) 338 233
Short-Term Advance - Affiliates (35) 103 71
-------------------------------------------
Net Cash (used in) Operating Activities (855) (1,614) (1,114)
-------------------------------------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES
Purchase of Plant and Equipment - (21) (14)
-------------------------------------------
Net Cash used in Investing Activities - (21) (14)
-------------------------------------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Net borrowing (repayments) from Affiliates 856 (1,774) (1,225)
Sale of Shares of Common Stock - 2,253 1,555
Proceeds from loan payable - 2,273 1,569
-------------------------------------------
Net Cash Provided by Financing Activities 856 2,752 1,899
-------------------------------------------
Net Increase in Cash 1 1,117 771
Cash at Beginning of Year - 1 1
-------------------------------------------
Cash at End of Year 1 1,118 772
===========================================
Supplemental Disclosures
Interest Paid $- $122 $84
NON CASH FINANCING ACTIVITY
Debt repaid through issuance of shares $- $2,273 $1,569
F-6
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2004 and 2003
(1) ORGANIZATION AND BUSINESS
Bay Resources, Ltd. ("Bay Resources" or the "Company") is incorporated in
the State of Delware. The principal shareholder of Bay Resources is
Edensor Nominees Proprietary Limited ("Edensor"), an Australian
corporation. Edensor owned 48.2% of Bay Resources as of June 30, 2004.
During fiscal 1998, Bay 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, Bay 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.
Bay Resources currently holds 28 claims totaling 71,576 acres in the
Committee Bay Greenstone Belt in central Nunavut, Canada. These claims
were recorded on October 16, 2002. To keep the claims in good standing, a
total of CN$286,304 of assessment work is required to be completed by the
anniversary date of October 16, 2004 and the Company has met this
commitment. CN$143,152 (CN$2 per acre) is required in each subsequent
year up to 2012 (at which point a decision to bring the claims to lease
must be made).
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 Bay Resources as a
going concern. However, Bay Resources is an exploration stage company
which has not yet commenced revenue producing operations and has
sustained recurring losses since inception.
In addition, Bay Resources has historically relied on loans and advances
from corporations affiliated with the President of Bay Resources and fund
raising through the sale of equity instruments. Based on discussions with
these affiliate companies Bay Resources believes this source of funding
will continue to be available.
The Company's ability to continue operations through fiscal 2005 is
dependent upon future funding from affiliated entities, capital raisings,
or its ability to commence revenue producing operations and positive cash
flows.
F-7
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2004 and 2003
(1) ORGANIZATION AND BUSINESS (continued)
The Company had recently raised A$2,253,000 through the issuance of
shares under a Private Placement and has used their funding to commence
exploration activity in Canada.
(2) RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 143, Accounting for Asset Retirement Obligations, addresses
accounting and reporting for obligations associated with the retirement
of tangible long-lived assets and the associated asset retirement costs.
SFAS No. 143 was effective for the Company for the fiscal year beginning
July 1, 2002. SFAS No. 143 requires that the fair value of a liability
for an asset's retirement obligation be recorded in the period in which
it is incurred and the corresponding cost capitalised by increasing the
carrying amount of the related long-lived asset. The Company's adoption
of the new standard did not have a material impact on its financial
statements.
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, was effective for the Company on July 1, 2002, and addresses
accounting and reporting for the impairment or disposal of long-lived
assets. SFAS No. 144 supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of and APB Opinion No. 30, Reporting the Results of Operations-Reporting
the Effects of Disposal of a Segment of a Business. SFAS No. 144 retains
the fundamental provisions of SFAS No. 121 and expands the reporting of
discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity and that
will be eliminated from the ongoing operations of the entity in a
disposal transaction. The Company's adoption of the new standard did not
have a material impact on its financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or disposal Activities". The provisions of this
Statement are effective for exit or disposal activities that are
initiated after December 31, 2002. This statement addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Cost Incurred in a
Restructuring)". This Statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. The adoption of this new standard did not have a
material effect on the Company's financial position.
F-8
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2004 and 2003
(2) RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
In December 2002, the 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 principal 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 did not
have a material effect on the Company's financial position.
In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" (FIN 46). FIN 46 clarifies
the application of Accounting Research Bulletin No. 51, "Consolidated
Financial statements" to certain entities in which equity investors do no
have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities
without additional subordinated support from other parties. FIN 46
requires existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries if the entities do not
effectively disperse risks among parties involved. All companies with
variable interests in variable interest entities created after January
31, 2003, shall apply the provisions of FIN 46 to those entities
immediately. FIN 46 is effective for the first fiscal year or interim
period beginning after June 15, 2003, for variable interest entities
created before February 1, 2003. The adoption of this new standard did
not have a material effect on the Company's financial position.
F-9
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2004 and 2003
(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 Bay
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 Bay 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 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
losses during fiscal 2004 and 2003 amounted to A$9,000 and A$nil,
respectively. Accordingly, comprehensive loss for the years ended
June 30, 2004 and 2003 amounted to A$1,732,000 and A$681,000,
respectively.
F-10
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2004 and 2003
(3) ACCOUNTING POLICIES (Continued)
(e) Property and Equipment
Property and equipment is stated at the lower of historical cost
or market, or in the case of acquisitions from related parties, at
the lower of historical cost to the related party or market.
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, 2004 amounted to A$1,052.
(f) Cash Equivalents
Bay Resources considers all highly liquid investments with an
original maturity of three months or less at the time of purchase
to be cash equivalents. For the periods presented there were no
cash equivalents.
(g) Income Tax
Income taxes are provided on financial statement income. For the
periods presented there was no taxable income. There are no
deferred income taxes resulting from temporary differences in
reporting certain income and expense items for income tax and
financial accounting purposes. Bay Resources at this time is not
aware of any net operating losses which are expected to be
realised.
(h) Loss per share
Basis (loss) per share is computed based on the weighted average
number of common shares and common share equivalents outstanding
during the period. Dilutive loss per share has not been presented
as the effects of common stock equivalents are anti-dilutive.
(i) Exploration Expenditure
Exploration expenditure consisting of prospecting and exploration
costs are written off into operations as incurred.
(j) Convenience Translation to US$
The consolidated financial statements as of and for the year ended
June 30, 2004 have been translated into United States dollars
using the rate of exchange of the United States dollar at June 30,
2004 (A$1.00=US$.6903). The translation was made solely for the
convenience of readers in the United States.
F-11
BAY RESOURCES, LTD. AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2004 and 2003
(3) ACCOUNTING POLICIES (Continued)
(k) 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.
(l) Comparative Figures
Where necessary, comparative figures have been restated to be
consistent with current year presentation.
A$000's
2004
(4) INVESTMENT SECURITIES The following is a summary of Investment
Securities:
Investment in SCNV (note 7) $4,516
Investment in AXIS -
-------------------
4,516
Permanent impairment (4,516)
-------------------
Net Carrying Value $-
===================
The Company accounts for its 24% investment in SCNV using the cost method
of accounting (see note 7). During fiscal 2001, management provided for a
full valuation on the SCNV investment. The Company also has a 9% cost
basis investment in AXIS, a related party, which is recorded at no value.
A$000's
2004
(5) SHORT-TERM ADVANCE - AFFILIATE
Loan from AXIS Consultants, a corporation affiliated with the President of
Bay Resources. Interest accrued at 10.10% to 10.60% being the National
Australia Bank rate plus 1.5% for overdrafts over $100,000.
104
===================
F-12
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2004 and 2003
(6) AFFILIATE TRANSACTIONS
Bay 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. During the years ending June 30, 2004 and 2003, Bay
Resources paid management fees to AXIS in the amounts of A$335,987 and
A$201,688, respectively. At June 30, 2004, the Company owed AXIS
A$104,000 for services provided in accordance with the Service Agreement.
During fiscal 2003 and 2004, AXIS charged interest of A$46,642 and
A$42,742 respectively on outstanding balances. During the fiscal 2004
year, the Company paid AXIS A$759,410.
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 year the Company repaid the loan in full amounting to
A$1,509,214.
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 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%.
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 was no monies owing to it by the Company.
F-13
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2004 and 2003
(6) AFFILIATE TRANSACTIONS (Continued)
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.
Interest expense incurred on loans and advances due to affiliated
entities approximated A$122,000 and A$133,000 in fiscal 2004 and 2003,
respectively.
(7) INVESTMENT IN SCNV
Pursuant to a stock purchase agreement dated as of June 5, 1998, the
Company acquired 499,701 shares in SCNV Acquisition Corp ("SCNV"), a
related entity, representing approximately 24% of the issued and
outstanding share capital of SCNV. The 499,701 shares had been valued at
US$2,800,000 or A$4,516,000 and had been accounted for using the lower of
cost or net realisable value method because the Company does not exercise
significant influences over SCNV's operating and financial activities
(see note 4).
SCNV is a Delaware corporation established May 1997 to select, develop
and commercially exploit proprietary technologies, in various stages of
development, invented primary by scientists who have been recently
immigrated to Israel from the USSR and by scientists and institutions in
Russia and other countries that formerly comprised the Soviet Union.
Simultaneously with the SCNV stock acquisition by the Company, SCNV
completed an initial public offering of common stock and warrants.
The Company has been granted certain demand and "piggyback" registration
rights with respect to the SCNV shares. Bay Resources has requested SCNV
to take the necessary steps to register Bay Resources' shareholding in
SCNV. The Company does not currently have any plans to distribute the
shares.
F-14
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2004 and 2003
(8) 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 Bay
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.
(9) INCOME TAXES
Bay Resources files its income tax returns on an accrual basis. Bay
Resources should have carry forward losses of approximately US$20.5
million as of June 30, 2004 which will expire in the years 2005 through
2023. Bay 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$6.3
million at June 30, 2003 to US$6.8 million at June 30, 2004.
(10) 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, 2004 the Company has no outstanding stock options. At June
30, 2004 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.
F-15
BAY RESOURCES LTD AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2004 and 2003
(11) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
FISCAL YEAR ENDED
June 30,2003 June 30,2004
A$000's A$000's
--------------------------------------------------------------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
--------------------------------------------------------------------------------------------
Revenues - - - - - - - -
Loss from Operations (110) (217) (122) (232) (124) (155) (289) (1,155)
(Loss) Before Income (110) (217) (122) (232) (124) (155) (289) (1,155)
Taxes
Net (Loss) (110) (217) (122) (232) (124) (155) (289) (1,155)
(Loss) per Common (.02) (.03) (.02) (.04) (.02) (.02) (.03) (0.12)
Equivalent Share
F-16
GLOSSARY
In this Form 10-KSB, we use certain capitalized and abbreviated terms, as well
as technical terms, which are defined below.
ACTINOLITE A bright to gray-green member of the amphibole
minteral family. In addition to silica, it
contains calcium, magnesium, and iron.
AG Chemical symbol for silver.
AIR PHOTO ANALYSIS Use of aerial photography to
determine or estimate geological features.
ALKALI FELDSPAR Those feldspar minerals composed of
mixtures of potassium feldspar (KalSi3O8) and
sodium feldspar (NaAlSi3O8) with little or no
calcium feldspar (CaAl2Si2O8).
ALTERATION ZONE An area where bedrock has undergone
mineralogical changes as a result of the action of
hydrothermal fluids.
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.
AMPHIBOLITE A rock made up mostly amphibole and plagioclase
feldspar.
ANDESITE Fine-grained, generally dark colored, igneous
volcanic rock with more silica than basalt.
Commonly with visible crystals of plagioclase
feldspar.
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.
AQUA REGIA A very corrosive, fuming yellow liquid made
by mixing nitric and hydrochloric acids, usually
in the proportion of one part by volume of pure
nitric acid with three parts by volume of pure
hydrochloric acid.
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).
AS Chemical symbol for arsenic.
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.
AU Chemical symbol for gold.
A-1
B HORIZON A general term for the near surface part
of the soil profile which is commonly enriched in
iron and other metals, often resulting in a
brownish colour.
BACKGROUND As pertains to geochemical data; the variation in
natural abundance of a particular metal or other
constituent within a specific geological setting.
BEDDING The arrangement of a sedimentary or metamorphic
rock in beds or layers of varying thickness and
character.
BEDDING PLANE FAULT A fault, the fault surface of which is
parallel to the bedding plane of the host rocks.
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.
CHANNEL SAMPLE A sample composed of pieces of vein or
mineral deposit that have been cut out of a small
trench or channel, usually about one inch deep and
4 inches wide.
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.
CHLORITE A group of platy, micaceous, usually greenish
iron-magnesium alumino-silicates that occur in
metamorphic rocks and as alteration products of
ferromagnesium minerals in volcanic and igneous
rocks.
CLAIM POST In Yukon Territory, a 4 inch square, four
foot long wooden post that establishes the legal
location of a mineral claim. Two posts, an Initial
Post and a Final Post are required.
CLAIM TAG In Yukon Territory, a set of small metal tags
are issued by the government, each pair with a
unique grant number assigned for the claim after
the location is recorded. The tags are legally
required to be permanently affixed to the Initial
and Final claim posts at the first reasonable
opportunity after issue of the tags.
COLLAR The start or beginning of a drill hole or the
mouth of an underground working entrance.
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.
CU Chemical symbol for copper.
A-2
DIKE A sheet-like or tabular-shaped igneous intrusion
that cuts across the sedimentary laering,
metamorphic foliation, or other texture of a
pre-existing rock.
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.
FE Chemical symbol for iron.
FOLIATED A general term for a planar arrangement of
mineralogical, textural or structural features in
a rock.
FOLIATION Aligned layers of minerals characteristic of some
metamorphic rocks.
FRACTURE A general term for any break in a rock, whether or
not it causes displacement.
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.
GEOCHEMICAL SAMPLING The collection of soil, silt, vegetation
or rock samples for analysis as a guide to the
presence of areas of anomalous mineral of metal
content in bedrock.
GEOLOGICAL MAPPING In mineral exploration, the collection of
geological data such as the description and
orientation of various types of bedrock.
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.
GLACIAL TILL Dominantly unsorted and unstratified and
generally unconsolidated material deposited
directly by and underneath a glacier without
subsequent reworking by water, and consisting of a
heterogeneous mixture of clay, silt, sand, gravel,
and boulders ranging widely in size and shape.
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.
A-3
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.
GRAPHITIC Containing graphite.
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).
HAND TRENCHING A method of exposing bedrock by hand excavation.
HYDROTHERMAL Of or pertaining to hot water, to the action of
hot water, or to the products of this action, such
as a mineral deposit precipitated from a hot
aqueous solution, with or without demonstrable
association with igneous processes.
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.
IGNEOUS PETROLOGY The occurrence, structure, composition
and character of an igneous rock.
ICP-AES Abbreviation for Inductively Coupled Plasma
Emission Spectroscopy - Atomic Emission
Spectroscopy; an analytical technique in which a
sample solution is introduced into an argon plasma
at very high temperature where individual elements
emit light at specific wavelengths. The light is
collected by the spectrometer and the wavelength
is analyzed to yield individual elemental
concentrations by comparison against standard
solutions with calibrated elemental
concentrations.
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.
LITHOLOGY The character of a rock described in terms of its
structure, colour, mineral composition, grain size
and arrangement of its component parts.
MAFIC Pertaining to or composed dominantly of the
ferromagnesian rock forming silicates; said of
some igneous rocks and their constituent minerals.
A-4
MAGNETITE Iron oxide mineral (Fe3O4). Usually tiny black,
metallic crystals. Magnetite will attract a
magnet.
MASSIVE Said of a stratified rock that occurs in very
thick, homogenous beds.
METADIORITE A general term for a metamorphosed diorite; also
greenstone.
METAGABBRO A general term for a metamorphosed gabbro; also
greenstone.
METALLIC A mineral chiefly composed of, or containing, one
or more metals as a primary constituent.
METALLURGICAL TEST A general term for a number of mechanical or
chemical processes that are employed to test the
amenability of separating metals from their ores.
METAMORPHOSED Rock or mineral that has undergone mineralogical
and/or structural change in response to elevated
pressures, temperatures or changes in chemical
conditions.
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.
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.
ORE SHOOT An elongate pipelike, ribbonlike, or
chimneylike mass of ore within a deposit (usually
a vein), representing the more valuable part of
the deposit.
ORTHOCLASE A member of the feldspar group of minerals
(KAlSi3O8).
OUTCROP The part of a rock formation that appears at the
surface of the ground.
OXIDATION The conversion of sulphide mineral (especially
metallic mineral) species to oxide, sulphate or
hydoxide minerals, typically by the processes of
near surface weathering.
OXIDE MINERAL A mineral formed by the union of an
element with oxygen.
OVERBURDEN Loose soil, sand, gravel, broken rock, etc. that
lies above the bedrock.
OZ/TON Abbreviation for troy ounce per ton.
A-5
PATHFINDER In geochemical exploration, a relatively mobile
element or gas that occurs in association with an
element or commodity being sought, but can be more
easily found because it forms a broader halo or
because it can be detected more readily by
analytical methods.
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.
PETROLOGY See igneous petrology.
PLAGIOCLASE A member of the feldspar group of minerals
((Na,Ca)Al(Si,Al)2O6).
PLUTON A body of medium to coarse grained igneous rock
that formed beneath the Earth's surface by
crystallization of a magma.
PLUTONIC SUITE A group of igneous bodies that are linked by
virtue of similarities in age, petrology, etc.
PLUTONISM A general term for the phenomena associated with
the formation of plutons.
POTASSIUM FELDSPAR See orthoclase.
PPB Abbreviation for part per billion.
PPM Abbreviation for part per million.
PRECAMBRIAN A period of geologic time earlier than 544 million
years before present.
PROSPECTING Pertaining to the search for outcrops or surface
exposures of mineral deposits, primarily by
nonmechanical methods.
PROXIMAL MINERALIZATION Refers to the relative distance of
mineralization from a pluton thought to be related
to or responsible for the deposit. Proximal
deposits form near to the mineralizing pluton.
PYRITE Iron sulfide mineral (FeS). Forms silvery to
brassy metallic cubes or masses.
QUARTZ A glassy silicate and common rock forming mineral
(SiO2).
QUARTZ DIORITE A group of plutonic rocks having the
composition of diorite but with appreciable quartz
and feldspar, i.e. between 5 and 20%.
QUARTZ GABBRO A group of plutonic rocks having the
composition of gabbro but with appreciable quartz.
QUARTZ MONZONITE A medium to coarse grained plutonic rock
containing major plagioclase, orthoclase and
quartz with minor biotite and hornblende.
QUARTZITE A metamorphosed sandstone or rock composed of
quartz grains so completely cemented with
secondary silica that the rock breaks across or
through the grains rather than around them.
A-6
REPLACEMENT Pertaining to a type of mineral deposit that forms
by partial or complete replacement of bedrock
constituents by new minerals, generally by the
action of hydrothermal fluids.
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.
SEDIMENTARY ROCK A rock resulting from the consolidation of
loose sediment.
SELECTED SAMPLE A specimen of a mineralized zone that is
not intended to be representative of the deposit
as a whole.
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.
SILICA A generic term for silicon dioxide (SiO2), the
most common form of which is quartz.
SILL A concordant sheet of igneous rock lying parallel,
or nearly so, to bedding or other planar fabric in
the country rock.
SOIL SAMPLING (see geochemical sampling).
SPLIT A portion of a rock or soil sample that is
separated from the bulk of the original before the
analytical process so as to provide material for
re-analysis as a check of the accuracy of the
original procedure should it be required.
STAIN as in scorodite stain; a thin film of a mineral
deposited as part of the weathering process.
STOCK An igneous intrusion with less than 40 sq. mi.
(100 sq. km.) in surface exposure, usually but not
always discordant with respect to country rock.
STOCKWORK An intersecting three-dimensional network of veins
or veinlets.
SPHALERITE A varicoloured sulphide mineral (ZnS), the most
important source of zinc.
STRATA Beds or layers of rock.
A-7
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.
STRINGER A mineral veinlet or veinlets that occur in a
discontinuous subparallel pattern in the host
rock.
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.
SURFICIAL GEOLOGY The study or geological mapping of
surficial, unconsolidated materials.
TALUS Rock fragments of any size or shape (usually
coarse and angular), derived from a steep rocky
slope chiefly by gravitational falling, rolling or
sliding.
THRESHOLD The level, whether determined statistically or
arbitrarily, at which a separation is made between
anomalous and background geochemical values for a
particular data set.
THRUST FAULT A fault with a dip of 45 degrees or less
over much of its extent, on which the hanging wall
appears to have moved upward relative to the
footwall.
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 g/t).
TRANSVERSE FAULT A fault that strikes obliquely or
perpendicular to the general structural trend of
the region.
TRANSVERSE VEIN A vein that strikes obliquely or
perpendicular to the general structural trend of
the region.
TRUEWIDTH The width of a vein or other structure measured
orthogonal to its strike and dip.
ULTRAMAFIC Igneous rocks made mostly of the mafic minerals
hypersthene, augite, and/or olivine.
UPPER PROTEROZOIC The period of geologic time between about 1000 and
544 million years before present.
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.
VEIN A term used in the [Keno Hill] mining camp to
describe quartz vein material and associated fault
gouge that are contained within a fault zone.
A-8
VEINLET A small vein.
VITREOUS As pertains to minerals, a glassy luster.
VLF-EM An abbreviation for the Very Low
Frequency-Electromagnetic geophysical survey
technique.
WALL ROCK The rock adjacent to, enclosing, or including
a vein, layer or dissemination of ore minerals.
WEIGHTED AVERAGE Value calculated from a number of samples,
each of which has been "weighted" by a factor of
the individual sample width.
WORKING A general term for any type of excavation carried
out during the course of mining or mining
exploration.
ZN The chemical symbol for zinc.
A-9
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
Next
Tag# Claim NTS Acres Registered Anniversary Type of Property
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
-----------------
HOOD RIVER CLAIMS - February 2004
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
------------------
B-2
------------------
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 - February 2004
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
------------------
Rockinghorse Claims - February 2004 continued
Next
Tag# Claim NTS Acres Registered Anniversary Type of Property
------------------
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
Rockinghorse Claims - February 2004 continued
Next
Tag# Claim NTS Acres Registered Anniversary Type of Property
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
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
B-4
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
------------------
Next
Tag# Claim NTS Acres Registered Anniversary Type of Property
------------------
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-04
Pick 2 F54798 56K/03 16-Oct-02 16-Oct-04
Pick 3 F54760 56K/03 16-Oct-02 16-Oct-04
EE 1 F54757 56K/06 16-Oct-02 16-Oct-04
EE 2 F54756 56K/06 16-Oct-02 16-Oct-04
EE 3 F54758 56K/06 16-Oct-02 16-Oct-04
K 1 F60304 56K/11 16-Oct-02 16-Oct-04
K 2 F60305 56K/11 16-Oct-02 16-Oct-04
ANOR 1 F60306 56K/07 16-Oct-02 16-Oct-04
ANOR 2 F60296 56K/07 16-Oct-02 16-Oct-04
ANOR 3 F60297 56K/07 16-Oct-02 16-Oct-04
ANOR 4 F60298 56K/08 16-Oct-02 16-Oct-04
ANOR 5 F60299 56K/08 16-Oct-02 16-Oct-04
ANOR 6 F60300 56K/08 16-Oct-02 16-Oct-04
CAY 1 F60252 56K/09 16-Oct-02 16-Oct-04
CAY 3 F60254 56K/09 16-Oct-02 16-Oct-04
AA 1 F60249 56J/13 16-Oct-02 16-Oct-04
AA 2 F60250 56J/13 16-Oct-02 16-Oct-04
NN 1 F60307 56K/16 16-Oct-02 16-Oct-04
NN 2 F60251 56O/04 16-Oct-02 16-Oct-04
9001 F60247 56J/14 16-Oct-02 16-Oct-04
9002 F60248 56J/14 16-Oct-02 16-Oct-04
WREN 1 F60231 56J/11 16-Oct-02 16-Oct-04
WREN 2 F60232 56J/14 16-Oct-02 16-Oct-04
WREN 3 F60233 56J/14 16-Oct-02 16-Oct-04
WREN 4 F60234 56J/14 16-Oct-02 16-Oct-04
WREN 5 F60235 56J/14 16-Oct-02 16-Oct-04
WEST F60212 56K/03 16-Oct-02 16-Oct-04
HOST F54800 56K/03 16-Oct-02 16-Oct-04
Exhibit 21
List of Subsidiaries as at June 30, 2004
Each of the following subsidiaries is wholly-owned by the Registrant.
Baynex.com Pty Ltd
(incorporated in Australia)
Bay Resources (Asia) Pty Ltd
(incorporated in Australia)
Golden Bull Resources Corporation
(incorporated in Canada)
Exhibit 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter James Lee, Chief Financial Officer, certify that:
1. I have reviewed this annual report on Form 10-KSB of Bay Resources Ltd.
(the "registrant");
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) and have:
a) designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed under our
supervision to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this annual report based on such
evaluation; and
c) disclosed in this annual report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: September 27, 2004
By: /s/ Peter Lee
-------------
Name: Peter Lee
Title: Director, Secretary and
Chief Financial Officer
(Principal Financial Officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph Isaac Gutnick, Chief Executive Officer, certify that:
1. I have reviewed this annual report on Form 10-KSB of Bay Resources Ltd.
(the "registrant");
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) and have:
a) designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed under our
supervision to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this annual report based on such
evaluation; and
c) disclosed in this annual report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
c) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
d) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: September 27, 2004
By: /s/ Joseph I. Gutnick
---------------------
Name: Joseph I. Gutnick
Title: Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report on Form 10-KSB of Bay Resources
Ltd. (the "Company") for the fiscal year ended June 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "report"), the
undersigned, Joseph Isaac Gutnick, Chief Executive Officer of the Company,
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 that:
(1) The report fully complies with the requirements of Section 13(a) or
15(d) of the securities Exchange Act of 1934; and
(2) The information contained in the report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.
Date: September 27, 2004
By: /s/ Joseph I Gutnick
--------------------
Joseph Isaac Gutnick
Chairman of the Board, President
and
Chief Executive Officer
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report on Form 10-KSB of Bay Resources Ltd. (the
"Company") for the fiscal year ended June 30, 2004 as filed with the Securities
and Exchange Commission on the date hereof (the "report"), the undersigned,
Peter James Lee, Chief Financial Officer of the Company, certifies pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 that:
(1) The report fully complies with the requirements of Section 13(a) or
15(d) of the securities Exchange Act of 1934; and
(2) The information contained in the report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.
Date: September 27, 2004
By: /s/ Peter Lee
-------------
Peter James Lee
Director, Secretary and
Chief Financial Officer
(Principal Financial Officer)
Exhibit 10.7
EMPLOYMENT AGREEMENT
MADE EFFECTIVE APRIL 1, 2004
BETWEEN
BAY RESOURCES LTD.
AND
CRAIG ALFORD
2
TABLE OF CONTENTS
PART 1 DEFINITIONS AND INTERPRETATION .........................................................................1
PART 2 TERM....................................................................................................2
PART 3 POSITION AND DUTIES.....................................................................................2
PART 4 REPORTING PROCEDURES....................................................................................3
PART 5 REMUNERATION............................................................................................3
PART 6 EXPENSES................................................................................................3
PART 7 VACATION................................................................................................3
PART 8 CONFIDENTIALITY.........................................................................................3
PART 9 PROTECTION OF INTELLECTUAL PROPERTY.....................................................................4
PART 10 TERMINATION............................................................................................5
PART 11 CORPORATION'S PROPERTY.................................................................................6
PART 12 NON SOLICITATION.......................................................................................6
PART 13 GENERAL................................................................................................6
TRADING IN SHARES POLICY..................................................................................6
GOVERNING LAW.............................................................................................6
SEVERABILITY..............................................................................................7
ENFORCEABILITY............................................................................................7
NO ASSIGNMENT.............................................................................................7
SUCCESSORS................................................................................................7
NOTICE....................................................................................................7
FURTHER ASSURANCES........................................................................................8
LEGAL ADVICE..............................................................................................8
TIME IS OF THE ESSENCE....................................................................................9
SCHEDULE A - COMPENSATION AND BENEFITS
SCHEDULE B - DEFINITIONS AND INTERPRETATION
SCHEDULE C - TRADING IN SHARES POLICY
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated effective April 1, 2004 (the "Effective Date")
BETWEEN:
BAY RESOURCES LTD., a Delaware corporation
(the "Corporation")
AND:
CRAIG ALFORD
(the "Executive")
WHEREAS:
(A) The Corporation is engaged in the business of mining and exploration in
Canada.
(B) The Executive is a professional in the field of mineral exploration.
(C) The Corporation wishes to retain the services of the Executive to provide
the services hereinafter described.
NOW THEREFORE in consideration of the mutual covenants and agreements herein
contained and for other good and valuable consideration, the Corporation and
Executive agree as follows:
PART 1
DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, except as otherwise expressly provided for, or as the
content otherwise requires, the capitalized words and terms will have the
meanings given to them in Schedule B.
1.2 In this Agreement, except as otherwise expressly provided for, or as the
content otherwise requires, this Agreement will be interpreted according to the
provisions for interpretation set out in Schedule B.
1.3 The following Schedules are incorporated into, and form part of, this
Agreement:
2
Schedule A - Compensation and Benefits
Schedule B - Definitions and Interpretation
Schedule C - Trading in Shares Policy
PART 2
TERM
2.1 The term of this Agreement will commence on the Effective Date and will
terminate on March 31, 2005, without requirement of further notice to the
Executive or pay in lieu of notice; provide that the Agreement may be terminated
earlier in accordance with Part 10 of this Agreement.
PART 3
POSITION AND DUTIES
3.1 The Executive will serve the Corporation in such capacity and will perform
such duties and exercise such powers as may be determined from time to time by
the board of directors of the Corporation. Without limitation of the foregoing,
the Executive will occupy the office of Vice President Exploration of the
Corporation. The Executive will:
(a) devote his full time and attention and his best efforts to the
business and affairs of the Corporation and will work such hours
required by his position;
(b) ensure that the Corporation's policies and procedures as
communicated to the Executive by the Corporation are followed by the
Executive and his subordinates;
(c) perform those duties that may reasonably be assigned to the
Executive diligently and faithfully to the best of the Executive's
abilities and in the best interests of the Corporation;
(d) use his best efforts to promote, extend and develop the interests
and business of the Corporation; and
(e) assist the Corporation in providing a safe workplace by observing
and assisting to improve all relevant workplace Occupational Health and
Safety policies and procedures.
3.2 The Executive's place of work will be in Thunder Bay, Ontario, provided that
the Executive will travel as required to fulfil his duties, and will relocate
his residence outside of Ontario for the fulfilment of his duties, as required
and determined by the Corporation after consultation with the Executive. The
Corporation will pay reasonable relocation costs in the case of the Executive
relocating to Toronto or Vancouver.
3
PART 4
REPORTING PROCEDURES
4.1 The Executive will report to the person determined by the board of directors
of the Corporation from time to time. The Executive will report fully on the
management, operations and business affairs of the Corporation related to his
position and advise to the best of his ability and in accordance with reasonable
business standards on business matters that may arise from time to time.
PART 5
REMUNERATION
5.1 The annual base compensation payable to the Executive for his services
hereunder will be the amount set out in paragraph 1 of Schedule A. The
Corporation will provide the Executive with employee benefits as set out in
paragraphs 3 and 4 of Schedule A or such other benefits as may be in effect from
time to time as the Corporation determines in its sole discretion.
PART 6
EXPENSES
6.1 The Executive will be reimbursed for all reasonable travel and other
out-of-pocket expenses actually and properly incurred by the Executive from time
to time in connection with carrying out his duties hereunder. For reimbursement
of all such expenses the Executive will, if requested, supply the Corporation
with originals of all invoices or statements in respect of which the Executive
seeks reimbursement.
PART 7
VACATION
7.1 The Executive will be entitled to vacation as described in paragraph 3 of
Schedule A, at a time or times approved in advance by the Corporation, which
approval will not be unreasonably withheld but will take into account the
staffing requirements of the Corporation and the need for the timely performance
of the Executive's responsibilities.
PART 8
CONFIDENTIALITY
8.1 The Executive acknowledges that:
(a) in the course of performing his duties and responsibilities as an
officer of the Corporation, he has access to and is entrusted with
Confidential Information, the disclosure of any of which to competitors
of the Corporation or to the general public, or
4
(b) the use of same by the Executive, for any purpose other than for
the benefit of the Corporation, or use by any competitor of the
Corporation is highly detrimental to the interests of the Corporation;
(c) in the course of performing his duties and responsibilities for the
Corporation, is a representative of the Corporation and as such has
responsibility for maintaining and enhancing the reputation of the
Corporation;
(d) as an officer of the Corporation, he owes fiduciary duties to the
Corporation, including the duty to act in the best interests of the
Corporation during the term of this Agreement and after termination of
this Agreement; and
8.2 In acknowledgement of the matters described in this Part, the Executive will
not directly or indirectly disclose to any person or in any way make use of, in
any manner, any of the Confidential Information, except as follows:
(a) for the benefit of the Corporation;
(b) as required by law;
(c) to his legal or financial advisors for the purpose of obtaining
professional advice.
8.3 The unauthorized disclosure of any Confidential Information during the term
of the Executive's employment will justify the immediate termination of the
Executive's employment by the Corporation for cause, which will not prohibit any
exercise by the Corporation of any other rights or remedies available to it at
law or in equity.
8.4 Any breach by the Executive that may result in the loss of confidentiality
of the Confidential Information will cause irreparable harm for which damages
would not be an adequate remedy. In the event that the Executive breaches these
confidentiality provisions, the Corporation will have the right to seek
injunctive relief without necessity of proof of actual damages. This right to
seek injunctive relief without necessity of proof of damages will be in addition
to any other right which the Corporation may have under this Agreement, or
otherwise at law or in equity.
PART 9
PROTECTION OF INTELLECTUAL PROPERTY
9.1 Any Intellectual Property made or conceived by the Executive during the term
of his employment with the Corporation that is within the scope of the
Executive's employment, or relates to, or arises out of, the Corporation's
business or demonstrably anticipated business is, and will be, the sole and
exclusive property of the Corporation.
9.2 The Executive irrevocably assigns and waives all rights to such Intellectual
Property, including his moral rights in any such Intellectual Property, free and
clear of all liens, claims or reservations.
5
9.3 The Executive will inform the Corporation promptly of all Intellectual
Property which the Executive makes or on which he is working during the term of
his employment by way of written memorandum delivered to the board of directors
of the Corporation from time to time as the Intellectual Property is identified,
along with such documentation as is reasonably necessary to reproclure such
Intellectual Property.
9.4 The Executive will designate, with reasonable precision, any of the
Executive's Intellectual Property included in any items or work products
provided by the Executive to the Corporation. This designation will be made at
the same time, and each time, that the Executive provides such material to the
Corporation. This designation will be have no effect where the Corporation's
Intellectual Property already includes this particular Intellectual Property.
9.5 The Executive hereby grants the Corporation a non-exclusive, royalty-free,
perpetual, irrevocable, worldwide licence (with rights to sub-licence) to make,
use, sell, offer to sell, copy, distribute, modify, and otherwise to practice
and exploit any and all of the Executive's Intellectual Property provided by the
Executive to the Corporation, directly or indirectly.
9.6 The Executive, irrespective of his employment status with the Corporation,
will provide the Corporation with assistance from time to time to confirm the
Corporation's ownership of, and rights in, Intellectual Property developed
during the Executive's employment by the Corporation, including applications for
patents, trademarks, copyright and other registrations.
9.7 The Executive warrants that all Intellectual Property, whether belonging to
the Corporation or the Executive, does not infringe on the rights or property of
the Executive or any other person.
PART 10
TERMINATION
10.1 Upon termination of the Executive's employment by the Corporation in
circumstances that constitute cause, the Executive will not be entitled to any
payment of any kind other than compensation earned by the Executive before the
date of termination calculated pro rata up to and including the date of
termination.
10.2 Upon termination of the Executive's employment by the Corporation without
cause, the Executive will be provided with two weeks notice of termination or
pay in lieu of such notice. The Executive will have no entitlement to any
additional notice of termination or payment of severance in lieu, including
pursuant to contract or common law.
PART 11
CORPORATION'S PROPERTY
11.1 All Confidential Information, or other documents, data, records or
Intellectual Property that may come into the possession or control of the
Executive will at all times remain the property of the Corporation. On
termination of the Executive's employment for any reason, the Executive will
6
deliver promptly to the Corporation all such Confidential Information, or other
documents, data, records or Intellectual Property of the Corporation in the
possession of the Executive or that is, directly or indirectly, under the
control of the Executive and the Executive will not make any use, reproductions
or copies of any such Confidential Information, or other documents, data,
records or Intellectual Property of the Corporation.
PART 12
NON SOLICITATION
12.1 The Executive will not, during the period commencing on the date hereof and
ending one year following the termination of this Agreement, be a party to or
abet, directly or indirectly, any solicitation to transfer business from the
Corporation to any other person, or seek in any way to persuade or entice any
employee, consultant or agent of the Corporation to leave that employment, or
engagement, or to be a party to or abet, directly or indirectly, any such
action.
PART 13
GENERAL
Trading in Shares Policy
13.1 The Executive is required to comply with the Corporation's Trading in
Shares policy attached in its current form as Schedule C, which the Corporation
reserves the right to amend from time to time.
13.2 The Executive acknowledges that any breach of the Trading in Shares policy,
as amended from time to time, will constitute a breach of this Agreement and the
Corporation will have the right to terminate this Agreement immediately upon
learning of the breach.
Governing Law
13.3 This Agreement will be governed by and construed in accordance with the
laws of the Province of British Columbia. The courts of the Province of British
Columbia have exclusive jurisdiction over any matter related to, or arising out
of, the subject matter of this Agreement and the parties hereby attorn to the
jurisdiction of the courts of the Province of British Columbia, except for the
application of any injunctive relief or similar equitable remedy.
Severability
13.4 If any provision of this Agreement is held by any court of competent
jurisdiction to be invalid, illegal or unenforceable, in whole or in part, such
invalidity, illegality or unenforceability will not affect the validity or
enforceability of the remaining provisions, or part thereof, of this Agreement
and such remaining provisions, or part thereof, will remain enforceable and
binding.
7
Enforceability
13.5 The Executive hereby confirms and agrees that the covenants and
restrictions pertaining to the Executive contained in this Agreement are
reasonable and valid and hereby further acknowledges and agrees that the
Corporation would suffer irreparable injury in the event of any breach by the
Executive of his obligations under any such covenant or restriction.
Accordingly, the Executive hereby acknowledges and agrees that damages would be
an inadequate remedy at law in connection with any such breach and that the
Corporation will therefore be entitled in lieu of any action for damages, to
temporary and permanent injunctive relief enjoining and restraining the
Executive from any such breach.
No Assignment
13.6 The Executive may not assign, pledge or encumber the Executive's interest
in this Agreement nor assign any of the rights or duties of the Executive under
this Agreement without the prior written consent of the Corporation.
Successors
13.7 This Agreement will be binding on and enure to the benefit of the
successors and assigns of the Corporation and the heirs, executors, personal
legal representatives and permitted assigns of the Executive.
Notice
13.8 Any Notice or other communication required or permitted to be given
hereunder will be in writing and either delivered by hand or mailed by prepaid
registered mail. At any time other than during a general discontinuance of
postal service due to strike, lock-out or otherwise, a Notice so mailed will be
deemed to have been received three business days after the postmarked date
thereof or, if delivered by hand, will be deemed to have been received at the
time it is delivered. If there is a general discontinuance of postal service due
to strike, lock-out or otherwise, a Notice sent by prepaid registered mail will
be deemed to have been received three business days after the resumption of
postal service. Notices will be addressed as follows:
(a) if to the Corporation at:
P.O. Box 6315, St Kilda Road, Central Melbourne,
Victoria 8008, Australia
Attention: Peter Lee
Facsimile: +61 3 8532 2805
(b) if to the Executive at:
69 Regent Street, Thunder Bay, ON P7A 5G7
Attention: Craig Alford
Facsimile: (807) 345 2904
8
Further Assurances
13.9 The Executive will execute and deliver any additional instruments and will
take any additional steps that may be required to give full effect to this
Agreement.
Legal Advice
13.10 The Executive hereby represents and warrants to the Corporation and
acknowledges and agrees that he had the opportunity to seek and obtain, and was
not prevented nor discouraged by the Corporation from seeking or obtaining
independent legal advice prior to the execution and delivery of this Agreement
and that, in the event that the Executive did not avail himself of that
opportunity prior to signing this Agreement, he did so voluntarily without any
undue pressure and agrees that his failure to obtain independent legal advice
will not be used by him as a defence to the enforcement of his obligations under
this Agreement.
9
Time is of the Essence
13.11 Time will be the essence of this Agreement.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of
the day and year first above written.
Bay Resources Ltd.
Per: /s/ PETER LEE
--------------------------------------------
Peter Lee, Director, CFO and Secretary
Per:
--------------------------------------------
Authorized Signature
Signed by CRAIG ALFORD in the presence of:
)
/S/ BARBARA COLLINS )
-------------------- )
Witness (Signature) )
)
) /S/ CRAIG ALFORD
) ----------------
-------------------- ) CRAIG ALFORD
Name (please print) )
)
-------------------- )
Address )
)
-------------------- )
City, Province )
SCHEDULE A
COMPENSATION AND BENEFITS
1. Base Compensation
The Executive's base compensation will be a salary of $120,000.00 per year,
payable in equal monthly instalments on the 28th day of each month, via direct
deposit, or in such other manner as may be mutually agreed upon in writing,
less, in any case, any deductions or withholdings required by applicable law.
2. Vacation
Commencing 12 months after the effective date of this Agreement, the Executive
will receive 3 weeks of annual paid vacation, pro-rated for partial calendar
years of employment.
3. Stock Option Plan
The Corporation is preparing a Stock Option Plan as part of the dual listing in
the TSX Venture Exchange. Once listed, the Executive may be offered 150,000
stock options, with an exercise price of US$1.00, subject to the approval of the
TSX Venture Exchange and the pricing guidelines set out in the policies of the
TSX Venture Exchange, vesting 1/3 immediately, 1/3 on September 30, 2004 and 1/3
on March 31, 2005.
4. Benefits
The Executive will receive the following benefits:
(a) The Corporation will provide the Executive with a computer and a
mobile phone for the Executive's business use. Any costs for private
use will be at the Executive's own expense.
(b) The Corporation will reimburse the Executive for the cost of a
health plan, which may include medical and dental coverage, or any
other health coverage that the Executive desires, to a maximum of $600.
SCHEDULE B
DEFINITIONS AND INTERPRETATION
Definitions
1. In this Agreement, except as otherwise expressly provided or as the context
otherwise requires
"Agreement" means this employment agreement as from time to time supplemented or
amended by one or more agreements entered into pursuant to the applicable
provisions of this Agreement;
"Confidential Information" means any information used in, related to, or arising
out of the Corporation's business and any such information which ought
reasonably to be considered confidential in the circumstances and includes,
without limitation, Intellectual Property of the Corporation and knowledge or
information concerning the policies, procedures, processes, activities,
business, affairs, property, clients and affiliates of the Corporation.
"Effective Date" means the date first written above;
"Intellectual Property" means all intellectual property that is deemed to be
intellectual property of the Employer, including right, title or other interest
to intellectual property, including, but not limited to data, information,
invention, design, idea, work, copyright or copyrightable material, trademark,
trademark application, patent, patent application, innovation, creation,
material, document, research, compilation of information, analysis, know-how,
trade secret, formula, method, process, system, technique, prototype, sample,
product, business practice and Confidential Information, and including that
created, developed or acquired by the Executive during the term of the
Executive's employment in any way related to or arising out of the Executive's
employment.
Interpretation
2. In this Agreement, except as otherwise expressly provided or as the
context otherwise requires:
(a) headings are solely for convenience of reference and are not intended
to be complete or accurate descriptions of content or to be guides to
interpretation of this Agreement or any part of it,
(b) the word "including", when following a general statement or term, is
not to be construed as limiting the general statement or term to any
specific item or matter set forth or to similar items or matters, but
rather as permitting the general statement or term to refer also to
all other items or matters that could reasonably fall within its
broadest possible scope,
(c) a reference to currency means Canadian currency, unless otherwise
specified,
2
(d) a reference to a statute includes all regulations made thereunder, all
amendments to the statute or regulations in force from time to time,
and every statute or regulation that supplements or supersedes such
statute or regulations,
(e) a reference to an entity includes any successor and affiliate to that
entity,
(f) a word importing the masculine gender includes the feminine, a word in
the singular includes the plural, a word importing a corporate entity
includes an individual, and vice versa,
(g) persons will be considered as dealing with each other at arm's length
if they would be so considered for the purposes of the Income Tax Act
(Canada) in effect on the date hereof, and
(h) a reference to "approval", "authorization" or "consent" means written
approval, authorization or consent.
Exhibit 10.8
*Independent Thinking
September 9, 2004
Bay Resources Ltd.
Suite 1801
1 Yonge Street
Toronto, Ontario
M5E 1W7
Attention: Mr. Joseph I. Gutnick, President
Dear Sir or Madam:
Re: Bay Resources Ltd. (the "Company")
Engagement Letter - Sponsorship
We understand that Bay Resources Ltd. ("the Company") will be undertaking a TSX
Venture Exchange Listing Application (the "Transaction") and wishes Canaccord
Capital Corporation ("Canaccord") to act as the Company's sponsor pursuant to
the sponsorship policies of the TSX Venture Exchange (the "Exchange"). Canaccord
hereby agrees to act as the Company's sponsor subject to completing our due
diligence and on the terms and conditions set forth below.
The following terms represent the basis under which Canaccord and the Company
have agreed to proceed with the Sponsorship and they will be superseded and
replaced by a more formal sponsorship agreement in our standard form (the
"Formal Agreement"):
1. In order for Canaccord and Canaccord's legal counsel to commence their
due diligence, the Company agrees to provide to Canaccord the following
documents (the "Documents") forthwith:
(a) all available audited, unaudited and pro-forma financial
statements of the Company;
(b) all available technical reports (draft or otherwise), title
reports, valuations, patents, trademarks and copyrights
respecting the operations and assets of the Company;
(c) a current copy of the Company's business plan, together with
financial projections and details of all underlying assumptions
made by management;
(d) a copy of the draft information circular or other disclosure
document appropriate to the Transaction;
(e) copies of all material contract; and
(f) personal information forms (in Form 2A of the Exchange) and
resumes for each of the directors, officers and insiders of the
Company.
Canaccord may request further documents from the Company apart from those
noted above. The Company represents, warrants and covenants that the
Documents provided to Canaccord or its counsel and any other written or
oral representations made by the Company to Canaccord or its counsel are
accurate and complete and fairly represent the business of the Company.
Where there is any material change to any information provided to Canaccord
by the Company, the Company agrees to immediately advise Canaccord and its
counsel of the change.
2. Canaccord shall conduct such other investigations as it deems appropriate.
This may involve Canaccord engaging independent consultants to assess the
Company, at the Company's expense. The Company acknowledges that Canaccord
is entitled to decide at any time during its investigations not to act as
sponsor or to terminate its sponsorship. If Canaccord is prepared to act as
sponsor, it shall notify the Exchange of that fact and in doing so shall
prepare and deliver a sponsorship report (the "Sponsorship Report") in
accordance with the rules and policies of the Exchange.
3. In order to prepare the Sponsorship Report and fulfill its sponsorship
duties as required by the rules and policies of the Exchange, Canaccord
will undertake:
(a) a review of the experience and expertise of the Company's board of
directors and management;
(b) a review of the business of the Company;
(c) a review of the Company's compliance with all applicable regulations
whether securities related or industry related;
(d) site visits as Canaccord considers is required; and
(e) a review of such other documentation and matters as Canaccord
considers is required.
4. The Company agrees to advise Canaccord promptly of any material event or
material change in business, affairs, condition (financial or otherwise) or
prospects of the Company that occur during the term of Canaccord's
engagement hereunder.
5. The Company agrees to pay Canaccord a sponsorship fee of $ 50,000 plus GST;
50% of which will be non-refundable and paid upon execution of this
agreement and the balance to be paid upon Canaccord delivering the
preliminary Sponsorship Report to the Exchange. In the event the Company
terminates this agreement prior to entering into the Formal Agreement, the
Company agrees to pay all reasonable costs and expenses as outlined in "6"
below.
6. In addition to the Sponsorship Fee, the Company agrees to reimburse all
reasonable costs and expenses of Canaccord, whether or not the Transaction
contemplated herein is completed and whether or not the Formal Agreement is
entered into. Without limiting the generality of the foregoing, reasonable
expenses include the costs of any consultant's report, the fees and
disbursements of Canaccord's counsel, the costs of any searches into the
background of directors and officers, and Canaccord's expenses related to
informational meetings and travel, if any. Any other unusual expenses will
normally be reviewed with the Company prior to being incurred. A $10,000
retainer will be payable in this regard upon signing of this engagement
letter.
7. Fiscal advisory services provided by Canaccord Capital will be included in
the fees described in item 5. Canaccord Capital's fiscal advisory services
shall include:
* Assistance in identifying and evaluating the strategic direction and
business plan of the Company;
* Assistance in developing the Company's capital markets strategy;
* Assistance in developing a capitalization plan for the Company;
8. Subject to market conditions, Canaccord may offer to act as Agent on a
commercially reasonable basis to raise Bay Resources up to $3,000,000 in
Flow-Through financing. A separate engagement will outline more definitive
terms and will be subject to successful listing on the TSX-V and a mutually
agreeable valuation.
9. The Company covenants and agrees to indemnify Canaccord as provided for in
Schedule A attached hereto. The provisions of the indemnity as provided for
in Schedule A shall survive the termination of this Agreement.
10. The Company agrees that Canaccord shall have the right of first refusal for
all future financings of the Company (the "Right of First Refusal") for a
period of 12 months from the date of acceptance of the Transaction by the
Exchange. The Right of First Refusal must be exercised by Canaccord within
10 business days of Canaccord receiving notice in writing from the Company
that the Company intends to proceed with a financing. Such notice must
contain the specific terms and conditions of such financing evidenced by a
bona fide third party offer.
11. This Agreement shall terminate on the earlier of: (i) the date upon which
either party gives written notice of the other party of termination of this
Agreement, or (ii) the entering into of the Formal Agreement.
Notwithstanding the termination of this Agreement, the Company will
promptly pay all expenses and fees provided for in this Agreement. In
addition, the Right of First Refusal will continue in full force upon
termination of this Agreement.
12. Time is of the essence of this Agreement.
13. This Agreement constitutes the entire agreement between the parties with
respect to its subject matter, and supercedes any prior agreements with
respect to that subject matter between the Company and Canaccord.
14. This Agreement and its application and interpretation will be governed
exclusively by the laws prevailing in British Columbia. The parties to this
Agreement consent to the jurisdiction of the courts of British Columbia,
which courts shall have exclusive jurisdiction over any dispute of any kind
arising out of or in connection with this Agreement.
15. This Agreement may be executed in as many counterparts as may be necessary
and by facsimile, each of such counterparts so executed will be deemed to
be an original, and such counterparts together will constitute one and the
same instrument.
If this letter accurately reflects your understanding of the terms of our
agreement and you agree to be legally bound thereby, please execute this letter
agreement, in duplicate, where indicated below and return a signed copy thereof
(by facsimile and by courier) to Canaccord Capital Corporation (attention: Frank
G. Sullivan). Should you have any questions or comments on the above, please
contact Frank G. Sullivan at (604) 643-7648 or direct fax (604) 643-7040.
Yours truly,
CANACCORD CAPITAL CORPORATION
/s/ DAVID J. HORTON
------------------------------------
David J. Horton
Senior Vice President and Director
The foregoing accurately reflects the terms of the transaction which we hereby
agree to enter into and the undersigned agrees to be legally bound hereby.
Agreed and accepted this 22nd day of September, 2004.
BAY RESOURCES LTD.
/s/ JOSEPH I. GUTNICK
----------------------------------------
Joseph I. Gutnick
SCHEDULE A
Bay Resources Ltd. (the "Indemnitor") hereby agrees to indemnify and hold
Canaccord Capital Corporation and/or any its subsidiary companies and/or
divisions (hereinafter referred to as the "Sponsor") and each and every one of
the directors, officers, employees and shareholders of the Sponsor (hereinafter
referred to as the "Personnel") harmless from and against any and all expenses,
losses, claims, actions, damages or liabilities, whether joint or several
(including the aggregate amount paid in reasonable settlement of any actions,
suits, proceedings or claims), and the reasonable fees and expenses of its
counsel that may be incurred in advising with respect to and/or defending any
claim that may be made against the Sponsor to which the Sponsor and/or its
Personnel may become subject or otherwise involved in any capacity under any
statute or common law or otherwise insofar as such expenses, losses, claims,
damages, liabilities or actions arise out of or are based directly or
indirectly, upon the performance of professional services rendered to the
Indemnitor by the Sponsor and its Personnel hereunder or otherwise in connection
with the matters referred to in the attached letter agreement, provided however,
that this indemnity shall not apply to the extent that a court of competent
jurisdiction in a final judgement that has become non-appealable shall determine
that:
i. the Sponsor or its Personnel have been negligent or dishonest or have
committed any fraudulent act in the course of such performance; and
ii. the expenses, losses, claims, damages or liabilities, as to which
indemnification is claimed, were directly caused by negligence, dishonesty
or fraud referred to in (i).
If for any reason (other than the occurrence of any events itemized in (i) and
(ii) above, the foregoing indemnification is unavailable to the Sponsor or
insufficient to hold it harmless, then the Indemnitor shall contribute to the
amount paid or payable by the Sponsor as a result of such expense, loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the Indemnitor on the one hand and the Sponsor on
the other hand but also the relative fault of the Indemnitor and the Sponsor, as
well as any relevant equitable considerations provided that the Indemnitor shall
in any event contribute to the amount paid or payable by the Sponsor as a result
of such expense, loss, claim, damage or liability any excess of such amount over
the amount of the fees received by the Sponsor hereunder.
The Indemnitor agrees that in case any legal proceeding shall be brought against
the Indemnitor and/or the Sponsor by any governmental commission or regulatory
authority or any stock exchange or other entity having regulatory authority,
either domestic or foreign, shall investigate the Indemnitor and/or the Sponsor
and Personnel of the Sponsor shall be required to testify in connection
therewith or shall be require to respond to procedures designed to discover
information regarding, in connection with, or by reason of the performance of
professional services rendered to the Indemnitor by the Sponsor, the Sponsor
shall have the right to employ its own counsel in connection therewith, and the
reasonable costs and out-of-pocket expenses incurred by the Sponsor and its
Personnel in connection therewith shall be paid by the Indemnitor as they occur.
Promptly after receipt of notice of the commencement of any legal proceeding
against the Sponsor or any of its Personnel or after receipt of notice of the
commencement of any investigation, which is based, directly or indirectly, upon
any matter in respect of which indemnification may be sought from the
Indemnitor, the Sponsor will notify the Indemnitor in writing of the
commencement thereof and, throughout the course thereof, will provide copies of
all relevant documentation to the Indemnitor, will keep the Indemnitor advised
of the progress thereof and will discuss with the Indemnitor all significant
actions proposed.
The indemnity and contribution obligations of the Indemnitor shall be in
addition to any liability which the Indemnitor may otherwise have, shall extend
upon the same terms and conditions to the Personnel of the Sponsor and shall be
binding upon and ensure to the benefit of any successors, assigns, heirs and
personal representatives of the Indemnitor, the Sponsor and any of the Personnel
of the Sponsor. The foregoing provisions shall survive the completion of
professional services rendered under the attached letter of agreement or any
terminations of the authorization given by the attached Engagement Letter.
/s/ DAVID J. HORTON
-------------------- for CANACCORD CAPITAL CORPORATION
/s/ JOSEPH I. GUTNICK
---------------------- for BAY RESOURCES LTD.