Item
1. Business.
General
We
were incorporated under the laws of British Columbia, Canada in 1984. In 2004,
we changed our corporate jurisdiction from a British Columbia company to a
Canadian corporation. In December 2011, we amended our articles to change our
name from “i-minerals inc.” to “I-Minerals Inc.”
The
Company engaged in the development of our Helmer-Bovill industrial minerals
property (the “Helmer-Bovill Property”). The Helmer-Bovill Property, in which
we hold a 100% interest, is comprised of 11 mineral leases totaling 5,140.64
acres located approximately 6 miles southwest of Bovill, Latah County, Idaho.
We
acquired the Helmer-Bovill Property from Idaho Industrial Minerals (“IIM”)
pursuant to an Assignment Agreement with Contingent Right of Reverter (the “IIM
Agreement”) dated August 12, 2002, as amended August 10, 2005, August 10, 2008
and January 21, 2010, between I-Minerals USA (formerly Alchemy Kaolin
Corporation), our wholly owned subsidiary, and IIM. Under the terms of the IIM
Agreement, we issued a total of 1,800,000 common shares to IIM.
Our
principal executive office is located at Suite 880, 580 Hornby Street,
Vancouver, British Columbia, Canada and our telephone number is (877) 303-6573.
To
date, we
have
not
earned significant revenues from the operation of our Helmer-Bovill Property. Accordingly, we are dependent on debt
and equity financing as our primary source of operating working capital. Our capital resources are
largely determined by the strength of the junior resource markets and by the
status of our projects in relation
to these markets, and its ability to compete for investor support of its
projects.
Our
Principal Projects
Our
activities at the Helmer-Bovill Property are focused on developing the Bovill
Kaolin Project and the WBL Tailings Project.
The
Bovill Kaolin Project
Our
lead project, the Bovill Kaolin Project, is a strategically located long term
resource of high purity quartz, potassium feldspar (“K-spar”), halloysite and
kaolinite formed through weathering of a border phase of the Idaho Batholith
causing all minerals to be contained within a fine white clay-sand mixture
referred to as “primary clay.” The Bovill Kaolin Project
is located within 3 miles of state highways with electricity and natural gas
already at the property boundary.
Since
2010, our exploration work has focused diamond drilling on the Bovill Kaolin
Project. To date, a total of 258 diamond drill holes have been drilled
totaling 28,251 feet. As a result of these drill campaigns, four deposits have
been identified: Kelly’s Hump, Kelly’s Hump South, Middle Ridge and WBL.
In
June 2014, we completed an updated pre-feasibility study on the Bovill Kaolin
Project (the “2014 PFS”) and on March 8, 2016, we announced the economic
results of our full feasibility study (the “2016 FS”), which included the
following highlights:
-
Updated
Measured and Indicated Resource Estimate
-
Measured
Resources of 5.7 million tons containing 76.5% quartz/K-spar sand, 12.3%
Kaolinite and 4.0% Halloysite.
-
Indicated
Resources of 15.5 million tons containing 57.0% quartz/K-spar sand, 15.5%
Kaolinite and 2.8% Halloysite.
-
667,000 tons of contained halloysite, 3,119,000 tons of contained
kaolinite and 13,235,000 tons of contained quartz/K-spar.
5
-
Updated
Mineral Reserves. All figures are in thousands of tons.
Reserve
|
Proven
|
Probable
|
Total P&P
|
Tons (1000s)
|
4,155
|
4,548
|
8,702
|
Halloysite %
|
4.8
|
4.0
|
4.4
|
Halloysite Tons
(1000s)
|
200
|
182
|
382
|
Kaolinite %
|
11.1
|
12.5
|
11.8
|
Kaolinite Tons
(1000s)
|
460
|
568
|
1,028
|
Sand %
|
77.8
|
76.8
|
77.3
|
Sand Tons (1000s)
|
3,234
|
3,491
|
6,725
|
|
Note that values presented here have been rounded to reflect the level of accuracy.
Proven and Probable Mineral Reserves are presented using a $57.00 NSR cutoff grade.
|
-
Economic
Analysis
-
US$386
million Pre-Tax NPV; US$249.8 million After Tax NPV using a 6% discount rate.
-
31.6%
Pre-Tax IRR; 25.8% After Tax IRR.
-
Initial
Capital Cost of $108.3 million and Total Life of Mine capital costs $120.0
million.
-
Life
of Mine in excess of 25 years with a stripping ratio of 0.54:1 (waste:ore).
-
3
year estimated after tax payback.
The
full National Instrument (“NI”) 43-101 report
was filed on www.sedar.com on April 20, 2016
and is available on the Company’s website. Going forward our focus is to
complete the detailed engineering and commence efforts to raise the capital
necessary to build the mine.
In
May 2017, the Idaho Department of Lands (“IDL”) accepted our operation and
reclamation plan. Together with a water rights permit from the Idaho
Department of Water Resources, we are able to proceed with development and
construction of the mine, subject to obtaining sufficient financing.
See
“Properties – Helmer-Bovill Property – 2016 Feasibility Study”.
The
WBL Tailings Project
We
also plan to continue limited seasonal mining operations at the WBL Tailings
Project. The WBL Tailings Project is feldspathic sands deposited as tailings
from clay mining operations during the period from 1961 to 1974. In September
2012, we received approval of our Mine Plan of Operations (“MPO”) from the
Idaho Department of Lands. The MPO allows us to mine up to 50,000 tons per
annum of feldspathic sands from June to October for a period of 10 years. From
2013 through 2015 approximately 5,000 tons of tailings was extracted and sold
to a local cement company and a local contractor.
Three
Year History
During the last three fiscal years, our operations have focused on completing an extensive diamond drill program on the Bovill Kaolin Project, acquiring a 100% interest in the Helmer-Bovill Property, completion of the 2016 FS and receiving a mine permit from the State of Idaho.
Drill Programs at Bovill Kaolin
Project
We
have completed two extensive diamond drill programs on the Helmer-Bovill
Property for the Bovill Kaolin Project totaling over 25,000 feet, most recently
in 2013 where 167 diamond drill holes totaling 17,811 feet were completed at
the Middle Ridge, Kelly’s Hump and Kelly’s Hump South deposits. These programs
allowed us to better define our four key deposits at the Bovill Kaolin Project
and complete both our 2014 PFS and 2016 FS. See “Properties – Helmer-Bovill
Property”.
6
WBL Tailings Project
In
September 2012, we received approval of our MPO from the Idaho Department of
Lands. The MPO allows us to mine up to 50,000 tons per annum, or 500,000 tons
total production from feldspathic sands from June to October for a period of 10
years. Shortly thereafter, we completed our first production and inaugural
sales feldspathic sand from the WBL Tailings Project.
In
November 2013, we entered into an agreement with Pre-Mix, Inc. of Pullman
Washington (“Pre-Mix”) pursuant to which we sold 3,000 tons of sand tailings to
Pre-Mix.
On
April 28, 2014, we entered into a new contract with Pre-Mix for the sale of up
to 30,000 tons per annum of screened K-spar / quartz sand. Under the terms of
the contract, Pre-Mix is solely responsible for the operating costs to process
and remove the K-spar / quartz sand. The term of the contract is until
December 31, 2018 and may be extended for a further two years through the
mutual consent of the parties.
During
2014 and 2015 approximately 5,000 tons of sand tailings from our WBL Tailings
Project were sold generating limited revenues to date due to associated road
improvement costs.
Acquisition
of Helmer-Bovill Property
In
January 2013, we acquired a 100% interest in our Helmer-Bovill Property. In
order to acquire the Helmer-Bovill Property, we issued a total of 1,800,000
common shares, of which 1,300,000 common shares were issued as the final
payment to IIM.
On December 2, 2015, we settled all lawsuits relating to
the Helmer-Bovill Property pursuant to the terms of Global Settlement and
Absolute Release Agreement (the “Settlement Agreement”) dated October 29, 2015
among us, Idaho Industrial Minerals, LLC (“IIM”), Hoodoo Resources, LLC
(“Hoodoo”), the principal of Hoodoo, Robert Lemke (“Lemke”), Brent Thomson
(“Thomson”), The Thomson Family Trust (the “Thomson Trust”) (IIM, Hoodoo,
Lemke, Thomson and the Thomson Trust collectively referred to as the
“Plaintiffs”), the Estate of Philip Nisbet (the “Nisbet Estate”), Allen Ball
(“Ball”), the Allen Ball and Connie Ball Family Trust (the “Ball Trust”), Ball
Ventures, LLC (“BV”) and BVNR Natural Resources LLC (“BVNR”) (Ball, the Ball
Trust, BV and BVNR collectively referred to as the “Ball Entities”) and
Northwest Kaolin, Inc. (“NWK”). Under the terms of the Settlement Agreement,
we paid IIM the aggregate sum of $100,000 (the “I-Minerals Payment”) for the
release of any and all claims made against us under the lawsuits by the Ball
Entities and the Plaintiffs. In addition, IIM and NWK have expressly
acknowledged and agreed that, upon receipt of the I-Minerals Payment, we have
fulfilled all of our duties and obligations under the terms of the IIM
Agreement relating to our Helmer-Bovill Property, and that any and all rights
and claims of IIM and NWK to the mineral leases making up the Helmer-Bovill
Property will be released and extinguished.
Receipt of Permits of Bovill Kaolin Project
In May 2017, the
Idaho Department of Lands (the “IDL”) accepted our Operation and Reclamation
Plan (“ORP”). The approval of the ORP, together with the recently received
water rights permit from the Idaho Department of Water Resources (“IDWR”)
positions us to be able to begin construction, subject to financing and certain
bonding requirements.
The ORP was approved subject to standard
terms including:
1.
|
All refuse, chemical and petroleum products to be stored in designated location at least 100 feet from any surface water.
|
2.
|
State water quality standards to be maintained at all times during the life of the operation.
|
3.
|
Erosions and non-point source pollution shall be minimized by careful design and implementing Best Management practices.
|
4.
|
A reclamation bond of approximately $3,000,000 being submitted to, approved by and maintained by the IDL prior to conducting any mining activities;
|
5.
|
Obtaining all other necessary permits and approvals from state and federal authorities (e.g. Storm Water Pollution Prevention Plan; air quality, consultation with fisheries and US Army Corp of Engineers 404 Permit and Stream Channel Alteration Permits) as required for each production process.
|
7
Industrial
Minerals
In
carrying out our activities at the Bovill Kaolin Project, we are focused on the
development and, based upon the positive results of the 2016 FS, raising
sufficient capital to build the mine and commence the extraction of the
industrial minerals set forth below.
Kaolin
Kaolin is a raw material
used in the ceramic industry, especially in fine porcelains. Large quantities
of kaolin are used in paper coating, filler, paint, plastics, fiberglass,
catalysts, and other specialty applications. It is also used as a key
ingredient in natural pesticides that are suitable for organic farming
applications.
When kaolin is heated to about 850°, it is transformed into a
dehydrated phase called "metakaolin." Metakaolin is considered a
premium material as it adds strength and durability to cement based products.
When metakaolin is added to cement-based mortars, it causes an aggressive
reaction with calcium hydroxide (lime), turning the lime into a cementitious
material yielding cement with enhanced performance characteristics including
increased strength; reduced permeability; greater durability; effective control
of efflorescence; and control of degradation caused by Alkali-Silica Reaction.
A bridge deck in a northern climate where it is subject to the wear and tear
associated with plowing and salting is a prime metakaolin application. We are
continuing long term testing process of several metakaolin products produced
from the Bovill Kaolin
deposits and have received ASTM C-618
certification for two of our products indicating the Bovill Metakaolin is an
accredited pozzolan that meets all strength and water consumption
requirements. ASTM C-618 certification is a prerequisite for sales into the
cement industry. Additional testing is focused on optimizing the fineness of
the grind or particle size to create the metakaolin product that provides the
greatest strength while meeting the water requirement criteria.
Our target market for metakaolin is the North American
concrete and infrastructure industry. Premium white metakaolin is currently
priced at $500 per ton in the Pacific Northwest due to the transportation costs
to bring it from the southeastern USA. We are targeting applications where
color is not as important and pricing used in the 2016 FS is $231 per ton. The
2016 FS forecasts average annual production of about 40,000 tons of Bovill
Metakaolin and we have non-binding letters of interest from various cement and
construction companies for tonnage well in excess of this amount.
Halloysite
We plan to sell Halloysite on a worldwide basis. Halloysite
is chemically identical to kaolin. When water is added to the kaolin chemistry
its plate like structure takes on a tubular shape, identified as halloysite.
Much of the value of halloysite is generated by its tubular shape which can
only be seen through very powerful microscopes and are commonly referred to as halloysite nanotubes
and abbreviated as HNTs.
Historically, the primary use of halloysite has been in the
manufacture of porcelain, bone china, and fine china where the combination of
low iron and titanium content together with the hollow tubular shape of the
mineral grains yields ceramic bodies with exceptional whiteness and translucency.
However, the HNTs microscopic tubular shape is rapidly finding uses outside of
the ceramics industry. Applications in commercial production would include use
as a suspension agent in glaze preparations as well as in filters and inkjets,
and as an ingredient in special paints applied to ships to prevent barnacles
from growing on the ships’ hull. HNTs are also being increasingly used in
plastic and polymer applications where the addition of HNTs increases strength
while reducing the weight of these compounds. Perhaps the most exciting uses
for HNTs are in life science applications where the inside of the hollow tube
can be filled with active ingredients and as the clay tube erodes the active
ingredients are released. Used in this manner the HNTs are a delivery vector
made of natural materials.
The
largest supplier of commercial halloysite product available at present is
located in Maturi Bay, New Zealand. There is limited production in Poland,
Turkey and China, and a development stage project in Utah with negligible
commercial production. The largest halloysite supplier in the ceramics
industry sells halloysite at a price from $135 to $3,000 per ton. The majority
of imported halloysite in the United States for the ceramics industry is sold
at a price of approximately $700 per ton.
Our
halloysite is differentiated from those known halloysite deposits due to the
high aspect ratio (the ratio of the length of the tube to the diameter of the
tube) and by minimal levels of trace elements such as lead. We are not
targeting ceramic applications with our halloysite and instead focusing on the
life science and plastic and polymer applications. Third party research has
indicated we have arguably the best halloysite for life science applications as
the New Zealand deposit contains about 10% Cristobalite – a silica oxide that
has been categorized as a carcinogen and the other deposits capable of
meaningful commercial production have poorer aspect ratios and higher heavy
metal / trace element content.
8
We
are planning on producing two halloysite products. The first branded HalloPure® will be about 70% halloysite and 30%
kaolinite and will target the plastic and polymer and certain filtration
applications. The second is branded ULTRA Hallopure® and will be in excess of 90%
halloysite and less than 10% kaolinite. Both are considered high value
products. In the 2016 FS, halloysite production varied from about 10,000 tons
to 15,000 tons per year, split equally between the two halloysite products.
HalloPure® was priced at about
$700 per ton and ULTRA Hallopure®
at about $1,400 per ton.
To
date we have received interest in our HNTs from a number of companies in a wide
range of industries including: personal care products, nano-composites, fire retardants,
biocides, plastic fillers, animal feed, paint, and ceramics. Most of these
companies have received samples of our products produced at recent pilot plants
with some companies receiving up to 50 kg for bench scale product testing. We
have also provided samples free of charge to several universities to help with
the development of other new HNT applications. Currently we have non-binding
expressions of interest approximately equal to forecast production.
Quartz
Quartz (SiO
2
or silicon dioxide) is crystalline
silica, the second most common mineral in the crust of the earth. It is known
for its hardness and is well known for its use in glass. However, different
types of glass require different SiO
2
purity levels with some types
of glass requiring the SiO
2
content in quartz to have purity levels
in the 97-99% range to be suitable. Although silicon dioxide is abundant, not
all deposits are chemically identical, with the SiO
2
purity and the
levels of various trace element impurities varying across different deposits.
Contamination of quartz can be from mineral and fluid inclusions and non-silica
elements entering atomic sites usually occupied by silicon and oxygen. Our
quartz operations at the Bovill Kaolin Project will focus on two levels of purity
in excess of 99.8% SiO
2
and is prepared to introduce a third product
as market conditions warrant.
We have branded the quartz products TrueQ®. The least pure
product is TrueQ®-1 where the “1” indicates the material has been
processed once through flotation. The high purity product is TrueQ®-3
where the “3” indicates the material has been floated three times to remove the
maximum amount of impurities possible. Bench scale production at the recent
pilot plant indicates the TrueQ®-1 will grade 99.86% SiO
2
or higher and the
True®Q-3
99.97% SiO
2
or higher. The TrueQ®-1 will be offered in three different grinds or
particle size: 50 mesh, 200 mesh and 325 mesh. “Mesh” references the number of
openings in a 1 inch by 1 inch screen. As additional work and expense is
required to further grind the basic 50 mesh product into finer grained products
(200 or 325 mesh products), the finer grind products sell at higher prices than
the basic 50 mesh product.
The 2016 FS foresees total quartz production (TrueQ®-1 and
TrueQ®-3) of approximately 108,000 tons per year. The higher
value TrueQ®-3 markets will be harder to enter due to more
stringent testing and competition. Accordingly, the 2016 FS does not foresee
reaching full TrueQ®-3 production capacity until the third year of
production with a significant discount offered to gain business in the first
year. Pricing for the True Q1 ranges from $100 to $350 per ton depending on
the fineness of grind (particle size) together with the customer’s volume and
delivery method. Once markets for the TrueQ®-3 have
been established (2 year delay) the 2016 FS contemplates a price of
approximately $600 per ton. Currently we have non-binding expressions of
interest equal to two times production capacity from producers of paint, solar
glass, optical glass, art glass, glass bulbs, and liquid crystal display
(“LCD”) glass in North America and Asia.
Potassium-Feldspar
(“K-spar”)
K-spar
is primarily used in ceramic bodies and glazes. Our latest pilot plant test to
produce K-spar returned grades in excess of 14% K
2
O with low iron
and high alumina. A high quality K-spar product has high K
2
O, high
alumina and low iron. Iron tends to cause a darkening of the glaze when the
ceramics are heated to high temperatures in a kiln. The quality of the K-spar
produced in the pilot plant exceeds virtually all other commercially available
K-spar products. The North American market is currently in short supply and
the sole producer is offering a product of 9.5% - 10.0% K
2
O and
about twice the iron (Fe) content of our K-spar. The shortage is driven by the
largest producer in the United States shut down production at its Georgia
operations in December 2014 when it ran out of reserves after 57 years of
production. This company is attempting to service the North American market
with a more expensive European K-spar product. The ceramics industry has
extensively tested our K-spar product and it has been favorably written up in
trade publications. Interest in the K-spar product that will be marketed under
the brand name Fortispar® is very strong.
Similar
to quartz, we will offer our Fortispar®
in three grinds or particle sizes; a basic 30 mesh product as well as 200 and
325 mesh fine grind products. Fortispar®
will be sold primarily into K-spar North American ceramics and glass
industries. We also plan to focus on producers
of high clarity glass, ceramics, sanitary ware, tableware, and paint.
Industrial and marine paint manufacturers also use an ultra-fine grind variety
of feldspar. Pricing of our Fortispar® product in the 2016 FS ranged from $217 per ton for the
basic 30 mesh product up to $400 per ton for small quantiles of the fine ground
product. We currently have non-binding expressions of interest in our K-spar
product in excess of our production capacity.
9
Competition
We
compete with other mineral resource exploration and development companies for
financing. Many of the mineral resource exploration and development companies
with whom we compete have greater financial and technical resources than we
do. Accordingly, these competitors may be able to spend greater amounts on
acquisitions of mineral properties of merit, on exploration of their mineral
properties and on development of their mineral properties. In addition, they
may be able to afford greater geological expertise in the targeting and
exploration of mineral properties. This competition could result in
competitors having mineral properties of greater quality and interest to
prospective investors who may finance additional exploration and development.
This competition could adversely impact our ability to finance further
exploration and to achieve the financing necessary for us to develop our
mineral properties.
Government
Regulations
Mining
operations and exploration activities are subject to various national, state,
and local laws and regulations in the United States, which govern prospecting,
development, mining, production, exports, taxes, labor standards, occupational
health, waste disposal, protection of the environment, mine safety, hazardous
substances and other matters. We will obtain the licenses, permits or other
authorizations currently required to conduct our exploration program. We
believe that we are in compliance in all material respects with applicable mining,
health, safety and environmental statutes and the regulations passed thereunder
in Idaho and the United States.
In
Idaho, our exploration activities are regulated by the Idaho Department of
Lands (“IDL”) pursuant to the Idaho Rules Governing Exploration Surface Mining
and Closure of Cyanidation Facilities pursuant to the Idaho Administrative
Procedure Act. In order to carry out surface exploration and drilling
activities, a company is required to file a Notification of Exploration with
the IDL. In 2000, we filed our original Notification of Exploration with the
IDL, which has been subsequently amended, for our surface exploration and
drilling programs on the Helmer-Bovill Property.
In
order to carry out mining activities, we are required to obtain a Mine Plan for
Operations and Reclamation Plan (“ORP”). In May 2017, we received an ORP for
mining activities on the Bovill Kaolin Project. This ORP permits us to mine
Bovill Kaolin for a period of 26 years. In 2012, we received an ORP for the
extraction of sand tailings on the WBL Tailings Project. The ORP permits us to
mine the sand tailings between May to October for a period of 10 years (2012 –
2022).
All leases are subject to rental fees of
US$1.00 per acre each year and a production royalty of 5.0% based on gross
proceeds. The production royalty is prepaid at a rate of US$500 per lease for
the first five years and increases to US$1,000 per lease for the second five
years of the lease.
Mining
operations are also regulated by Mine and Safety Health Administration
(“MSHA”). MSHA inspectors will periodically visit projects to monitor health
and safety for the workers, and to inspect equipment and installations for code
requirements. Although we are not engaged in mining operations, we require all
of our workers to have completed safety training courses when working on our
project.
Other
regulatory requirements monitor the following:
(a)
|
Explosives and explosives handling.
|
(b)
|
Use and occupancy of site structures associated with mining.
|
(c)
|
Hazardous materials and waste disposal.
|
(d)
|
State Historic site preservation.
|
(e)
|
Archaeological and paleontological finds associated with mining.
|
We
believe that we are in compliance with all laws and plans to continue to comply
with the laws in the future. We believe that compliance with the laws will not
adversely affect its business operations. There is however no assurance that
any change in government regulation in the future will not adversely affect our
business operations.
Environmental Liability
We will have to sustain the cost of reclamation and environmental remediation for all exploration and development work undertaken. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the recommended work program.
10
In
the application for the MPO, costs are estimated for reclamation after 12
months of work, which would include construction, and for reclamation of the
entire project and the IDL must agree to those costs. Once the MPO is granted,
I-Minerals must submit a surety or cash bond for the first 12 months to begin
activities. After the first 12 months, the bond is increased to the full costs
estimated to clean up the entire project.
Permits
and regulations will control all aspects of the production program if the
project continues to that stage. Examples of regulatory requirements include:
|
(i)
|
Water discharge will have to meet drinking water standards;
|
|
(ii)
|
Dust generation will have to be minimal or otherwise re-mediated;
|
|
(iii)
|
Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation;
|
|
(iv)
|
An assessment of all material to be left on the surface will need to be environmentally benign;
|
|
(v)
|
Ground water will have to be monitored for any potential contaminants;
|
|
(vi)
|
The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and
|
|
(vii)
|
There will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species.
|
A
reclamation bond of US$7,600 has been posted to cover the current plan of
operations. The Storm Water Pollution Prevention Plan (SWPPP) has been publicly
noted without objection as of November 16, 2012. The Company does not view the
current environmental liability to be material as of April 30, 2017 as the
amount is estimated to be below $5,000. Under our ORP, we will be required to
pay a reclamation bond of approximately $3,000,000.
Employees
As
of the date of this annual report, we have five full time employees, four in
Idaho plus our Chief Executive Officer in Utah.
Research
and Development
We
have not incurred any research and development expenditures since our
inception.
Patents and Trademarks
As
of June 16, 2017, The United States Patent and Trademark Office issued the
company Certificates of Registration for the following marks: Fortispar® (K feldspar), TrueQ® (quartz), HalloPure® (standard halloysite), ULTRA
HalloPure® (high purity
halloysite) and I-Minerals®.
Item
1A. Risk Factors.
An investment in our common shares
involves a high degree of risk. You should carefully consider the risks
described below and the other information in this annual report before
investing in our common
shares
. If any of the following risks occur,
our business, operating results and financial condition could be seriously
harmed. The trading price of our common shares could decline due to any of
these risks, and you may lose all or part of your investment.
Risks Related To Our
Business
The following are some of the important
factors that could affect our financial performance or could cause actual
results to differ materially from estimates contained in our forward-looking
statements. We may encounter risks in addition to those described below.
Additional risks and uncertainties not currently known to us, or that we
currently deem to be immaterial, may also impair or adversely affect our
business, financial condition or results of operation.
11
We lack an operating history and have losses
which we expect to continue into the future. As a result, we may have to
suspend or cease exploration activities and if we do not obtain sufficient
financing, our business will fail.
To date, we have been involved primarily in
the acquisition, exploration and development of our mineral properties. We have
no operating history 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: (i) our ability to locate a profitable mineral
property, and (ii) our ability to generate revenues.
In order to carry out longer duration mine
building activities and our general continued operations, we will need to raise
additional financing. Obtaining financing would be subject to a number of
factors, including the market prices for industry minerals. These factors may
make the timing, amount, terms or conditions of additional financing
unavailable to us. Since our inception, we have relied on equity financings and
loans to fund our operations. We have not attained profitable operations and
are dependent upon obtaining financing to pursue our plan of operation.
Because we are an
exploration stage company, our business has a high risk of failure.
We
are an exploration stage company that has incurred net losses since inception,
we have not attained profitable operations and we are dependent upon obtaining
adequate financing to complete our exploration activities. The success of our
business operations will depend upon our ability to obtain further financing to
complete our development of the Bovill Kaolin Project and to attain profitable
operations. If we are not able to complete a successful exploration program and
attain sustainable profitable operations, then our business will fail.
We
have expressed substantial doubt about our ability to continue as a going
concern; as a result we could have difficulty finding additional financing.
Our
financial statements have been prepared assuming that we will continue as a
going concern. We have not generated significant revenues from our main
operations since inception and have accumulated losses. As a result, we have
expressed substantial doubt about our ability to continue as a going concern.
Our ability to continue our operations depends on our ability to complete
equity or debt financings or generate profitable operations. Such financings
may not be available or may not be available on reasonable terms. Our
financial statements do not include any adjustments that could result from the
outcome of this uncertainty.
Because
of the unique difficulties and uncertainties inherent in mineral exploration
ventures, we face a high risk of business failure.
You
should be aware of the difficulties normally encountered by mineral exploration
companies and the high rate of failure of such enterprises. The likelihood of
success must be considered in light of the problems, expenses, difficulties,
complications and delays encountered in connection with the development of our
property that we plan to undertake. These potential problems include, but are
not limited to, unanticipated problems relating to exploration, and additional
costs and expenses that may exceed current estimates.
Although
we have known mineral reserves, there are uncertainties related to mineral
reserve and mineralization estimates.
There
are numerous uncertainties inherent in estimating proven and probable reserves
and mineralization, including many factors beyond our control. The estimation
of reserves and mineralization is a subjective process and the accuracy of any
such estimates is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of drilling,
metallurgical testing and production and the evaluation of mine plans
subsequent to the date of any estimate may justify revision of such estimates.
No assurances can be given that the volume and grade of reserves recovered and
rates of production will not be less than anticipated. Assumptions about prices
are subject to greater uncertainty and industrial mineral prices have fluctuated
widely in the past. Declines in the market price of industrial minerals also
may render reserves or mineralization containing relatively lower grades of ore
uneconomic to exploit. Changes in operating and capital costs and other factors
including, but not limited to, short-term operating factors such as the need
for sequential development of ore bodies and the processing of new or different
ore grades, may materially and adversely affect reserves
Because
we have not earned significant revenues, we face a high risk of business
failure.
We
have not earned any significant revenues from business operations as of the
date of this annual report. Potential investors should be aware of the
difficulties normally encountered by new mineral exploration companies and the
high rate of failure of such enterprises. The likelihood of success must be
considered in light of the problems, expenses, difficulties, complications and
delays encountered in connection with the exploration of the mineral properties
that we plan to undertake. These potential problems include, but are not
limited to, unanticipated problems relating to exploration, and additional
costs and expenses that may exceed current estimates.
12
Because
of the inherent dangers involved in mineral exploration, there is a risk that
we may incur liability or damages as we conduct our business.
The
search for valuable minerals involves numerous hazards. As a result, we may
become subject to liability for such hazards, including pollution, cave-ins and
other hazards against which we cannot insure or against which we may elect not
to insure. At the present time we have no coverage to insure against these
hazards. The payment of such liabilities may result in our inability to
complete our planned development program and/or obtain additional financing to
fund our development program.
Because
the prices of minerals fluctuate, if the price of minerals for which we are
exploring decreases below a specified level, it may no longer be profitable to
explore for those minerals and we will cease operations.
The
profitability of mining operations is directly related to the market price of
the industrial minerals being mined. The market price of industrial minerals
may fluctuate widely and is affected by numerous factors beyond the control of
any mining company. These factors include expectations with respect to the rate
of inflation, the exchange rates of the dollar and other currencies, interest
rates, global or regional political, economic or banking crises, and a number
of other factors. If the market prices of the mineral commodities we plan to
explore decline, this will have a negative effect on the availability of
financing to us.
We may be required to defend title to
the leases that comprise our Helmer-Bovill Property.
Title
to mineral properties involves certain inherent risks due to the difficulties
of determining the validity of certain claims, as well as the potential for
problems arising from the frequently ambiguous conveyance history
characteristic of many mineral properties. Although we have taken steps to
verify title to mineral leases in which we have an interest, these procedures
do not guarantee our title. Such properties may be subject to prior agreements
or transfers and title may be affected by undetected defects.
There are environmental risks
associated with mineral exploration.
Environmental
risks are inherent with mining operations. The legal framework governing this
area is constantly developing, therefore we are unable to fully ascertain any future
liability that may arise from the implementation of any new laws or
regulations, although such laws and regulations are typically strict and may
impose severe penalties (financial or otherwise). Our proposed activities of,
as with any exploration, may have an environmental impact which may result in
unbudgeted delays, damage, loss and other costs and obligations including,
without limitation, rehabilitation and/or compensation. There is also a risk
that our operations and financial position may be adversely affected by the
actions of environmental groups or any other group or person opposed in general
to our activities and, in particular, the proposed exploration and mining by us
within the State of Idaho.
We
face significant competition in the mineral exploration industry.
We
compete with other mining and exploration companies possessing greater
financial resources and technical facilities than we do. Due to our weaker
competitive position, we may have greater difficulty in hiring and retaining qualified
personnel to conduct our planned exploration and development activities, which
could cause delays in our exploration programs.
There
may be barriers in entering the market as we will be a new supplier of
industrial mineral products.
We
will be a new supplier of industrial mineral products. Accordingly, we will be
competing with more established industrial mineral companies that currently
supply the ceramics and glass industries with industry mineral products.
Accordingly, the ceramics, glass and other industries may be reluctant to
terminate existing supply relationships and retain our company as a supplier of
industrial mineral products to them. In the event that we are unable to be
retained by these industries, our operations may be negatively impacted.
Demand
for our metakaolin products will be dependent on funding for infrastructure
projects.
Metakaolin
is significantly more expensive than other kaolin products, such as, fly ash.
In the United States, the funding for infrastructure projects is low. As a
result, fly ash is commonly used for infrastructure products due to its low
cost. Accordingly, our future customers may be unable or unwilling to purchase
our metakaolin products unless funding infrastructure projects is increased.
13
If we are unable to
hire and retain key personnel, we may not be able to implement our business
plan and our business will fail
Our success will
largely depend on our ability to hire highly qualified personnel with
experience in industrial mineral processing and sales. These individuals may be
in high demand and we may not be able to attract the staff we need. In
addition, we may not be able to afford the high salaries and fees demanded by
qualified personnel, or may lose such employees after they are hired.
Currently, we have not hired any key personnel. Our failure to hire key
personnel when needed could have a significant negative effect on our business.
Risks Related To The
Ownership of Our Shares
There has
been a very limited public trading market for our securities in the United
States, and the market for our securities in the United States
may continue to be limited and be sporadic and highly volatile. Trading
in our shares on the TSX Venture Exchange has sometimes been sporadic.
There is currently a limited
public market for our common shares. Our common shares trade in Canada on the
TSX Venture Exchange and over the counter in the United States on the OTCQB
market place. We cannot assure you that an active market for our shares will be
established or maintained in the future. The OTCQB is not a national securities
exchange, and many companies have experienced limited liquidity when traded
through this quotation system. Trading in our shares on the TSX Venture
Exchange has sometimes been sporadic. Holders of our common shares may,
therefore, have difficulty selling their shares, should they decide to do so.
In addition, there can be no assurances that such markets will continue or that
any shares, which may be purchased, may be sold without incurring a loss. The
market price of our shares, from time to time, may not necessarily bear any
relationship to our book value, assets, past operating results, financial
condition or any other established criteria of value, and may not be indicative
of the market price for the shares in the future.
In addition, the market price of
our common shares may be volatile, which could cause the value of our common
shares to decline. Securities markets experience significant price and volume
fluctuations. This market volatility, as well as general economic conditions,
could cause the market price of our common shares to fluctuate substantially.
Many factors that are beyond our control may significantly affect the market
price of our shares. These factors include:
|
(a)
|
price and volume fluctuations in stock markets;
|
|
(b)
|
changes in our operating results;
|
|
(c)
|
any increase in losses from levels expected by securities analysts;
|
|
(d)
|
changes in regulatory policies or law;
|
|
(e)
|
operating performance of companies comparable to us; and
|
|
(f)
|
general economic trends and other external factors.
|
Even if an active market for our
common shares is established, stockholders may have to sell their shares at
prices substantially lower than the price they paid for the shares or might
otherwise receive than if an active public market existed.
We
will likely conduct further offerings of our equity securities in the future,
in which case your proportionate interest may become diluted.
Since
our inception, we have relied on such sales of our common shares to fund our
operations. We will likely be required to conduct additional equity offerings
in the future to finance our current projects or to finance subsequent projects
that we decide to undertake. If common shares are issued in return for
additional funds, the price per share could be lower than that paid by our
current shareholders. We anticipate continuing to rely on equity sales of our
common shares in order to fund our business operations. If we issue additional
shares, your percentage interest in us could become diluted.
If we are, or were, a U.S. real
property holding corporation, non-U.S. holders of our common shares or other
security convertible into our common shares could be subject to U.S. federal
income tax on the gain from the sale, exchange or other disposition of such
security.
If we are or ever have been a
U.S. real property holding corporation (a “USRPHC”) under the Foreign
Investment Real Property Tax Act of 1980, as amended (“FIRPTA”) and applicable
United States Treasury regulations (collectively, the “FIRPTA Rules”), unless
an exception applies, certain non-U.S. investors in our common shares (or
options or warrants for our common shares) would be subject to U.S. federal
income tax on the gain from the sale, exchange or other disposition of our
common shares (or such options or warrants), and such non-U.S. investor would
be required to file a United States federal income tax return. In addition, the
purchaser of such common shares, option or warrant would be required to withhold
from the purchase price an amount equal to 10% of the purchase price and remit
such amount to the U.S. Internal Revenue Service.
14
We have not conducted a formal
analysis of whether we are or have ever been a USRPHC. However, we believe that
we may be a USRPHC. In general, under the FIRPTA Rules, a company is a USRPHC
if its interests in U.S. real property comprise at least 50% of the fair market
value of its assets. If we are or were a USRPHC, so long as our common shares
are “regularly traded on an established securities market” (as defined under
the FIRPTA Rules), a non-U.S. holder who, actually or constructively, holds or
held no more than 5% of our common shares not subject to U.S. federal income
tax on the gain from the sale, exchange or other disposition of our common
shares under FIRPTA. In addition, other interests in equity of a USRPHC may
qualify for this exception if, on the date such interest was acquired, such
interests had a fair market value no greater than the fair market value on that
date of 5% of our common shares. Any of our common shares (or owners of options
or warrants for our common shares) that are non-U.S. persons should consult
their tax advisors to determine the consequences of investing in our common
shares (or options or warrants).
The recently enacted
JOBS Act will allow us to postpone the date by which we must comply with
certain laws and regulations and to reduce the amount of information provided
in reports filed with the SEC. We cannot be certain if the reduced disclosure
requirements applicable to “emerging growth companies” will make our common
shares less attractive to investors.
We are and we will
remain an "emerging growth company" until the earliest to occur of
(i) the last day of the fiscal year during which our total annual revenues
equal or exceed $1 billion (subject to adjustment for inflation), (ii) the last
day of the fiscal year following the fifth anniversary of our initial public
offering, (iii) the date on which we have, during the previous three-year period,
issued more than $1 billion in non-convertible debt securities, or (iv) the
date on which we are deemed a "large accelerated filer" (with at
least $700 million in public float) under the Securities Exchange Act of 1933,
as amended (the “Exchange Act”). For so long as we remain an "emerging
growth company" as defined in the JOBS Act, we may take advantage of
certain exemptions from various reporting requirements that are applicable to
other public companies that are not "emerging growth companies" as described
in further detail in the risk factors below. We cannot predict if investors
will find our common shares less attractive because we will rely on some or all
of these exemptions. If some investors find our common shares less attractive
as a result, there may be a less active trading market for our common shares
and our stock price may be more volatile. If we avail ourselves of certain
exemptions from various reporting requirements, as is currently our plan, our
reduced disclosure may make it more difficult for investors and securities
analysts to evaluate us and may result in less investor confidence.
As an “emerging growth company” we are
permitted to adopt accounting standards within the same timeframes as private
companies. This may make it more difficult to compare our financial statements
to the financial statements of other public companies.
Pursuant to the JOBS Act, as an “emerging
growth company”, we are permitted to adopt new or revised accounting standards
issued by the Financial Accounting Standards Board (“FASB”) and the Securities
and Exchange Commission (“SEC”) on the same date as private companies rather
than other public companies. The JOBS Act permits us to “opt out” of these
extended transition periods, however we have not elected to opt out of these
rules. This may make it more difficult to compare of our financial statements
with other public companies that are not “emerging growth companies”.
The JOBS Act allows
us to postpone the date by which we must comply with certain laws and
regulations intended to protect investors and to reduce the amount of
information provided in reports filed with the SEC.
We meet the
definition of an “emerging growth company” and so long as we continue to
qualify as an “emerging growth company,” we will, among other things:
-
be
exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring
that its independent registered public accounting firm provide an attestation
report on the effectiveness of its internal control over financial reporting;
-
be
exempt from the "say on pay” provisions (requiring a non-binding
shareholder vote to approve compensation of certain executive officers) and the
"say on golden parachute” provisions (requiring a non-binding shareholder
vote to approve golden parachute arrangements for certain executive officers in
connection with mergers and certain other business combinations) of The
Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and
certain disclosure requirements of the Dodd-Frank Act relating to compensation
of Chief Executive Officers;
-
be
permitted to omit the detailed compensation discussion and analysis from proxy
statements and reports filed under the Exchange Act, as amended and instead
provide a reduced level of disclosure concerning executive compensation; and
15
-
be
exempt from any rules that may be adopted by the Public Company Accounting Oversight
Board (“PCAOB”) requiring mandatory audit firm rotation or a supplement to
the auditor’s report on the financial statements.
We currently intend
to take advantage of all of the reduced regulatory and reporting requirements that
will be available to it so long as it qualifies as an “emerging growth
company”. We have elected not to opt out of the extension of time to comply
with new or revised financial accounting standards available under Section
102(b)(1) of the JOBS Act. Among other things, this means that our independent
registered public accounting firm will not be required to provide an
attestation report on the effectiveness of our internal control over financial
reporting so long as we qualify as an “emerging growth company”, which may
increase the risk that weaknesses or deficiencies in the internal control over
financial reporting go undetected. Likewise, so long as we qualify as an
“emerging growth company”, we may elect not to provide certain information,
including certain financial information and certain information regarding
compensation of executive officers, which would otherwise have been required to
provide in filings with the SEC, which may make it more difficult for investors
and securities analysts to evaluate us. As a result, investor confidence in our
company and the market price of our common shares may be adversely affected.
Notwithstanding the
above, we are also currently a “smaller reporting company”, meaning that we are
not an investment company, an asset-backed issuer, or a majority-owned
subsidiary of a parent company that is not a smaller reporting company and have
a public float of less than $75 million and annual revenues of less than $50
million during the most recently completed fiscal year. In the event that we
are still considered a “smaller reporting company”, at such time we cease being
an “emerging growth company”, the disclosure we will be required to provide in
our SEC filings will increase, but will still be less than it would be if we were
not considered either an “emerging growth company” or a “smaller reporting
company”. Specifically, similar to “emerging growth companies”, “smaller
reporting companies” are able to provide simplified executive compensation
disclosures in their filings; are exempt from the provisions of Section 404(b)
of the Sarbanes-Oxley Act requiring that independent registered public
accounting firms provide an attestation report on the effectiveness of internal
control over financial reporting; are not required to conduct say-on-pay and
frequency votes until annual meetings occurring on or after January 21, 2013;
and have certain other decreased disclosure obligations in their SEC filings,
including, among other things, only being required to provide two years of audited
financial statements in annual reports. Decreased disclosures in our SEC
filings due to our status as an “emerging growth company” or “smaller reporting
company” may make it harder for investors to analyze the Company’s results of
operations and financial prospects.
Our
securities are considered a penny stock.
Because
our securities are considered a penny stock, shareholders will be more limited
in their ability to sell their shares. The SEC has adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. Penny
stocks are generally equity securities with a price of less than $5.00, other
than securities registered on certain national securities exchanges or quoted
on the NASDAQ system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
quotation system. Because our securities constitute “penny stocks” within the
meaning of the rules, the rules apply to us and to our securities. The rules
may further affect the ability of owners of shares to sell our securities in
any market that might develop for them. As long as the trading price of our
common shares is less than $5.00 per share, the common shares will be subject
to Rule 15g-9 under the Exchange Act. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure document prepared by the SEC, that:
-
contains a description of the nature and level of
risk in the market for penny stocks in both public offerings and secondary
trading;
-
contains a description of the broker’s or dealer’s
duties to the customer and of the rights and remedies available to the
customer with respect to a violation to such duties or other requirements
of securities laws;
-
contains a brief, clear, narrative description of a
dealer market, including bid and ask prices for penny stocks and the
significance of the spread between the bid and ask price;
-
contains a toll-free telephone number for inquiries
on disciplinary actions;
-
defines significant terms in the disclosure document
or in the conduct of trading in penny stocks; and
-
contains such other information and is in such form,
including language, type, size and format, as the SEC shall require by rule
or regulation.
The
broker-dealer also must provide, prior to effecting any transaction in a penny
stock, the customer with: (a) bid and offer quotations for the penny stock; (b)
the compensation of the broker-dealer and its salesperson in the transaction;
(c) the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the market for
such shares; and (d) a monthly account statements showing the market value of
each penny stock held in the customer’s account. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from those rules; the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser’s written acknowledgment of the receipt of a risk disclosure
statement, a written agreement to transactions involving penny stocks, and a
signed and dated copy of a written suitably statement. These disclosure requirements
may have the effect of reducing the trading activity in the secondary market
for our shares.
16
FOR
ALL OF THE AFORESAID REASONS AND OTHERS SET-FORTH AND NOT SET-FORTH HEREIN, AN
INVESTMENT IN OUR SECURITIES INVOLVES A CERTAIN DEGREE OF RISK. ANY PERSON
CONSIDERING TO INVEST IN OUR SECURITIES SHOULD BE AWARE OF THESE AND OTHER
FACTORS SET-FORTH IN THIS REPORT AND IN THE OTHER REPORTS AND DOCUMENTS THAT WE
FILE FROM TIME TO TIME WITH THE SEC AND SHOULD CONSULT WITH HIS/HER LEGAL, TAX
AND FINANCIAL ADVISORS PRIOR TO MAKING AN INVESTMENT IN OUR SECURITIES. AN
INVESTMENT IN OUR SECURITIES SHOULD ONLY BE ACQUIRED BY PERSONS WHO CAN AFFORD
TO LOSE THEIR TOTAL INVESTMENT.
Item
2. Properties.
We currently do not own any real property.
We currently sub lease on a month to month basis an office space located at Suite 880,
580 Hornby Street, Vancouver, BC Canada V6C 3B6, consisting of approximately 256
square feet at a cost of $1,500 per month.
HELMER-BOVILL PROPERTY
We own a 100% interest in our lead mineral
project called the Helmer-Bovill Property. Our activities at the Helmer-Bovill
Property are focused on developing the Bovill Kaolin Project and the WBL
Tailings Project, which are located within the Helmer-Bovill Property.
The technical information appearing
below concerning the Helmer-Bovill Property is derived from the March 2016
feasibility study report titled “NI 43-101 Technical
Report – Feasibility Study – Bovill Kaolin Project – Latah County, Idaho, USA”
prepared by GBM Engineers LLC, Mine Development Associates, HDR Engineering
Inc., SRK Consulting (U.S.), Inc. and Tetra Tech, Compiled by GBM Project
Number: 0530, Michael Short CEng, FIMMM (the “Qualified Person”).
Description
of Property
The
Helmer-Bovill Property is a development stage open pit mining operation which
will produce quartz sand, K- feldspar sand, kaolinite clay and halloysite
clay. The area has been mined historically for similar products.
The
Helmer-Bovill Property is located at geographical coordinates 46° 52' 43.5" N.
latitude and 116° 25' 47.2" W longitude (State Plane, NAD 83, Zone 1103,
Idaho West: 1 900 717 N, 2 454 671 E) in Latah County, Idaho, USA. The
property currently totals 5,140.6 acres. The mineral leases are not adjoining,
but are situated within three surveyed townships near the town of Bovill, Idaho.
17
Figure 1. Location
of the Helmer-Bovill Property
Figure 2. Location
of Mineral Leases
The Helmer-Bovill
Property area is located on endowment lands owned and administered by the IDL.
These and other IDL holdings across the state of Idaho were granted to the
state in 1890 by the federal government on the condition they produce maximum
long-term financial returns for public schools and other beneficiaries.
Therefore, IDL has a mandate for these lands to produce revenue to support the
state’s public school system and other state institutions. To achieve this, IDL
manages these properties primarily for profit through the production of timber,
livestock grazing, and the extraction of mineable materials.
18
The State of Idaho
endowments lands fall in two categories referred to as Fee Simple (FS) and
Minerals Only (MO). The FS lands are where the State owns both mineral and
surface rights. The MO lands are where the State owns mineral rights but
someone else owns surface rights. The majority of the lands held by us are FS.
All mineral resources and mineral reserves described in this report are located
on FS lands. By way of our mineral leases, we have surface rights and legal
access to the Helmer-Bovill Property provided it meets all permitting and
bonding requirements administered by IDL. In the State of Idaho, mineral leases
are not required to be physically located in the field. The mineral leases are
currently described only on paper by the U.S. Public Land Survey Grid.
In 2002, we acquired
from IIM, through our wholly owned subsidiary Alchemy Kaolin Corporation, 16
State of Idaho mineral lease applications in Latah County, Idaho, to cover
deposits of feldspar, kaolin, and quartz located near Bovill, Idaho. In 2003,
we converted these applications to ten mineral leases and subsequently obtained
two more mineral leases. Renewal applications for all 12 leases were filed on
April 27, 2012 with a US$3,000 application fee. As part of the renewal process,
Idaho converted the 12 mineral leases into 10 revised mineral leases which were
issued on February 28, 2013. Subsequently, during 2013 the State of Idaho granted
one additional mineral lease to us. At this time, we hold 11 mineral leases
totaling 5,140.64 acres. All
current leases are valid until 2023. Due to recent changes in the law, we are
exploring various options for renewal. All leases are subject to rental fees
of US$1.00/acre/y and a production royalty of 5 percent of gross proceeds.
The production royalty is prepaid at a rate
of US$500 per lease for the first five years, and increases to US$1,000 per
lease for the second five years of the lease. The surface rights of the 11
mineral leases are owned by both the State of Idaho and some private
landowners. However, the surface right of the mineral leases specific to the
resource estimation contained in this report are all owned and administered by
the State of Idaho. The U.S. Army Corps of Engineers (“USACE”) owns the
surface rights of all waterways located within the mineral lease boundaries.
The
details of the mineral leases that comprise the Helmer-Bovill Property are
summarized below:
Mineral Lease No.
|
FS / MO
|
Acres
|
E410005
|
FS
|
172.00
|
E410006
|
FS
|
377.75
|
E410007
|
FS
|
140.00
|
E410007
|
FS
|
260.00
|
E410008
|
FS
|
370.80
|
E410008
|
FS
|
160.00
|
E410008
|
FS
|
53.17
|
E410009
|
MO
|
80.00
|
E410009
|
MO
|
280.00
|
E410009
|
MO
|
269.50
|
E410010
|
FS
|
242.44
|
E410010
|
FS
|
242.52
|
E410010
|
FS
|
40.00
|
E410010
|
FS
|
80.00
|
E410011
|
FS
|
117.19
|
E410011
|
FS
|
438.73
|
E410012
|
MO
|
41.41
|
E410012
|
MO
|
80.00
|
E410013
|
FS
|
240.00
|
E410013
|
FS
|
400.00
|
E410014
|
FS
|
413.78
|
E410014
|
FS
|
161.35
|
E410015
|
FS
|
480.00
|
Location, Access and Infrastructure
The
Helmer-Bovill Property is accessed by road from the town of Lewiston by
following U.S Highway #12 to State Highway ID-3 N to Deary and then State
Highway ID-8 E for 4 mi, then turning left on Moose Creek Road/National Forest
Road 381 and following for 5.5 miles. ID-3 S/ID-8 W is an improved two lane
road, while Moose Creek Road/National Forest Development Road 381 is a
dirt/gravel road that provides access to State and Federal lands. In addition,
access to specific areas to be mined will require either upgrades to former
logging roads or construction of new access roads.
19
The
nearest, large communities are Moscow, Idaho, which lies about 28 miles
west-southwest of the Property, and Lewiston, Idaho, which lies about 33 miles
to the southwest. Transport to the Helmer-Bovill Property would utilize
standard over-highway vehicles.
Electric
power would be provided by Avista Corp. We would be required to share in the
costs in the construction of four miles of power lines, including a 2 mile 115
kv line to a substation, and a 2 mile 24 kv line from the substation to the
plant site.
Natural
gas is available to the Helmer-Bovill Property from a natural gas pipeline that
extends from Moscow to Bovill and is available to be utilized for this
processing facility. Approximately two miles of pipeline would need to be
constructed.
Groundwater
from drilled wells is typically used to serve domestic needs within the
vicinity of the Property. Additional water is also available in a small
reservoir north of the Helmer-Bovill Property.
The
region has a long history of clay production, forestry and farming. A labor
force skilled in heavy equipment operation, trucking, and general labor exists
within the surrounding communities and rural areas.
There
are several suitable locations for potential tailings storage, mining waste
disposal, and potential processing plants.
Climate
and Physiography
The
climate at the Helmer-Bovill Property is characterized by an estimated average
annual precipitation of 38.82 inches, with the highest values recorded between
October and March (71% of the annual precipitation). The average annual minimum
and maximum temperatures are 30.1°F and 55.7°F, respectively; with average
monthly minimum and maximum temperatures ranging from 18.5°F to 41.7°F and
41.1°F to 83.3°F, respectively.
The
average total snowfall ranges from 0.1 inches in October to 37.3 inches in
January, with an annual average of 100.9 inches. Average snow depth ranges from
1.0 inches in November to 23.0 inches in February, with an annual average snow
depth of 6.0 inches.
The
average elevation is about 3,000 ft. above mean sea level, with a topographic
relief of about 200 ft. The area is largely covered with soil, but old workings
(pits and trenches) and road cuts provide exposure to the underlying bedrock
geology. The Helmer-Bovill Property is located on the west side of the Potlatch
River drainage area.
The
Helmer-Bovill Property area consists of low foothills and ridges alternating
with relatively wide, flat basins. Forested areas occupy the slopes and ridge
tops which are managed primarily for timber production. Conifer forest makes up
approximately 50% of the overall Helmer-Bovill Property area. Forest stands
were observed to be early seral, highly fragmented, and lacking in the
ecological functions and values of older, more contiguous forests. Grasslands
occur in the basins alongside sinuous intermittent and perennial stream
channels. The Helmer-Bovill Property area is currently permitted for livestock
grazing. Most of the Helmer-Bovill Property area has been disturbed by previous
mining, forestry and grazing activities and, as such, contain predominantly
disturbance oriented plant communities. Non-forested meadows or pasture areas
are intensively grazed resulting in a proliferation of non-native vegetation
and soil compaction and erosion.
Surface
waters primarily consist of small, meandering, intermittent stream channels
that flow toward the Potlatch River. These channels are typically located in
the level “flats” between low hills or ridgelines and dry up by mid or late
summer. Most streams are hydrologically altered by high- density road
construction, historic mining, and cattle grazing. Grazing has also eliminated
much of the woody growth along most stream channels resulting in eroded
channels and sedimentation. Other surface waters include several old clay
mining pits and small dams that have developed into water catchment basins as
well as emergent wetlands flanking the stream channels. Groundwater appears in
scattered locations as either springs or seepage discharge along streams or
edges of wetlands. Native soils predominate in the area.
History
U.S. Bureau of Mines (“USBM”) and
United States Geological Survey (“USGS”) (1942-1947)
During
World War II, the clays in eastern Washington and northern Idaho were examined
as a possible source of alumina and a substitute for foreign bauxite ores.
Domestic bauxite reserves were being depleted, and the importation of foreign
bauxites was handicapped by transportation difficulties. Both the USGS and USBM
conducted extensive field studies that were followed by the drilling of 650
holes that totaled about 20,252 ft.
20
USBM (1953-1963)
In
1953 the USBM continued their search for viable clay deposits. They also
investigated the potential of the contained silica sand for the glass industry.
The USBM tested the Benson and Olsen clay deposits between Troy and Deary, and
then moved on to the Bovill deposits. Ninety-seven samples were collected from
1,325 ft. of drilling over an area covering 750 ft. x 350 ft. that is located
1.5 miles southwest of Bovill near State Highway 8.
A.P.
Green Refractories Company (1956-1993)
In
1956, A.P. Green Refractories Company purchased all the remaining assets of
Troy Brick and Clay and acquired a lease, being located north of Helmer, from
which they produced refractory clay. They processed the clay by air flotation
to produce two grades of refractory clay. Production continued until the early
1990’s when Hammond Engineering purchased one pit from A.P. Green. This pit
produced transported clay for ceramic applications. Total production from the
area during this period is estimated to be 250,000 tons.
J.R.
Simplot Company (1956-1974)
In
1956, the J.R. Simplot Company (“Simplot”) of Boise, Idaho, acquired leases
covering the Bovill deposits. In a cooperative program, Simplot and USBM
drilled 240 holes (99 of which were on 50 ft. centers) and conducted washing,
pyrometric, mineralogical, and beneficiation tests. By 1962, Simplot had built
a clay plant, the Miclasil facility, for the production of paper fillers and
specialty ceramics. Production initially came from pits in the Bovill deposit,
which are in transported clay of the Latah formation directly south of the
plant. Simplot shifted production to residual clay deposits in the
granodiorite, as this source proved more satisfactory for paper filler. The
pits exploited by Simplot for residual clays were the WBL north and south pits
and the Moose Creek Clay Mine, and the Stanford pit. Simplot operated their
plant until 1974, when it was sub-leased to Clayburn Industries of British
Columbia. Clayburn operated the property only a few years, calcining clay that
was shipped to Canada and processed into super-duty and 70% alumina bricks. In
1994 the plant was dismantled and the property partially reclaimed.
Several
Companies (1983-1986)
During
the mid-1980’s, a number of companies began exploration work in the
Helmer-Bovill area to identify clays suitable for use as paper fillers and
coaters. The University of Indiana, Nord Resources, Miles Industrial Mineral
Research, and Cominco American conducted work on the Helmer-Bovill area
deposits. In 1985-1986, the Erikson- Nisbet Partnership formed a consortium of
companies to develop new processes for beneficiation of the clays, but the
introduction of precipitated calcium carbonate fillers for paper reduced the
demand for kaolin fillers.
Regional Geology
The
regional geology is dominated by Precambrian sedimentary rocks of the Belt
Supergroup (“Belt”), which have been strongly deformed and intruded with
granitic phases of the Idaho Batholith during the Cretaceous age Sevier
Orogeny.
During
the Middle Proterozoic, the area was dominated by a large intra-cratonic basin
that was subsiding along syn-sedimentary faults. The basin sediments comprise
the Belt which range in age from about 1,470 to 1,400 Ma. The oldest units
consist of the Lower Belt sequence, these are overlain by the Middle Belt
Carbonates and the youngest are the Missoula Group.
The
Belt sediments are believed to have remained relatively stable until
approximately 1,350 Ma when portions of the basin were affected by
compressional tectonics of the East Kootenay Orogeny. This orogeny was followed
by rifting of the basin during the late Proterozoic-early Paleozoic when large
portions of the sediments were transported away and the western margin of North
America was developed.
The
next major tectonic event occurred during the Cretaceous Sevier Orogeny. Early
compressional tectonics dominated the area forming large-scale folds, reverse
and thrust faults. During the late Cretaceous, the Bitterroot Lobe of the Idaho
Batholith was emplaced in the region. The intrusive rocks described below were
formed during this event.
The
most recent, significant, geologic event was the deposition of the Columbia
River Basalts (“CRB”). The CRB consist of a large plateau flow sequence of
Miocene age (6 to 17 Ma). The lavas are distributed over an extensive area
covering portions of Idaho, Oregon, and Washington. Minor extensional block
faulting has resulted in much of the present landscape.
21
Local
Geology
Belt
Series
The
Precambrian metasediments of the Belt series are the oldest rocks in the
Bovill-Moscow area and form the basement for the entire area. The Belt series
rocks crop out primarily in the northern and eastern sections of the
Helmer-Bovill Property. They form a high-grade metamorphic facies assemblage
that includes gneiss, schist, and minor meta-quartzite, meta-argillite, and
meta-siltite.
Thatuna
Granodiorite
Granitoid
intrusive rocks of Cretaceous age underlie a large portion of the Helmer-Bovill
area and form part of the Thatuna batholith. Thatuna lithologies consist
predominantly of granodiorite with subordinate adamellite, tonalite, and
granite. The principal mineral constituents are quartz, plagioclase feldspar,
K-spar, and biotite with trace to minor amounts of muscovite, garnet, and
epidote. The batholith is medium- to coarse-grained granular, and porphyritic
textures are common. Erosion of the Thatuna batholith developed a mature
topography where it is exposed in Latah County.
Recent
geological mapping identified a previously undescribed phase of the Thatuna
batholith, referred to as the Kmcp. The Kmcp is interpreted to be a border zone
of the intrusion that occurs along the interface between the main-stage,
coarse-grained, and porphyritic Thatuna batholith and the Precambrian Belt
series roof rocks. Intrusion into cooler roof rocks resulted in a distinctive
and texturally diverse unit characterized by dominant granular medium-grained
and subordinate coarse-grained and pegmatoid textures, the lack of
well-developed porphyritic textures and the presence of Precambrian xenolithic
paragneiss, paraschist and metasiltite blocks inherited from the roof rocks.
Where unaltered, the Kmcp intrusive rocks contain a primary assemblage of
plagioclase, K-spar, quartz, biotite, and muscovite, and are predominantly of
granodioritic to granitic composition. The porphyritic main body of the Thatuna
batholith does not appear to crop out within the mapped part of the
Helmer-Bovill area.
The
Kmcp derives its distinctive character from high-level interaction with the
Precambrian metasedimentary roof rocks. More rapid cooling in the contact zone
produced a dominant medium-grained, non-porphyritic, granodioritic unit in
contrast to the coarser-grained, porphyritic granodiorite lithology that
characterizes the deeper main stage of the batholith. In the roof zone, hydrous
mineral-bearing xenolithic blocks of the Precambrian Belt series metasediments
were entrained by the intruding magma and outgassed of their volatile
component. The outgassing contributes to the creation of pockets of hydrous
granitic liquid proximal to the Precambrian blocks. These pockets crystallized
subsequently into coarse-grained to pegmatoid granite pods that are distributed
within the larger body of medium-grained granodiorite. Owing to the
physicochemical conditions of crystallization within the hydrous pods of
granitic liquid, the resultant solidified rocks show a stronger tendency toward
higher proportions of K-feldspar relative to plagioclase and higher K2O/Na2O
ratios than does the dominant medium-grained granodiorite.
Weathered
Thatuna Granitoid
The
exposed Thatuna batholith was subjected to intense weathering in a tropical or
near-tropical climate during the Miocene epoch, while the Columbia River
basalts were erupted and the Latah formation sediments were deposited. In
response to the strong weathering, much of the feldspar and at least some of
the mica in the igneous body were altered to one or more varieties of clay
minerals. The depth limit of weathering may initially have been fairly
consistent; however, subsequent erosion has left a variable weathering profile
with thickness roughly dependent on topography. At present, the depth of
weathering may exceed 100 ft. along ridges and be less than 3 ft. in some
valleys.
Of
particular importance is the weathering of the feldspar in the granitoids to
halloysitic to kaolinitic clays. It was the presence of kaolinitic clay
deposits that provided the initial impetus for economic mineral development in
north Idaho. Plagioclase feldspar is the least stable phase in the weathering
environment, and it alters to form clay well before K-spar and muscovite.
K-spar and the micas are relatively resistant to alteration during all but the
most intense weathering. Quartz is impervious to alteration throughout the
weathering cycle. In the Helmer-Bovill area, pits that were mined for kaolin in
residual deposits contained mostly quartz, halloysite, kaolinite, and K-spar.
The waste material is primarily quartz and K-feldspar, with plagioclase
accounting for only a minor proportion of the total feldspar.
Potato
Hill Volcanics
The
Potato Hill volcanic rocks contain silicic to intermediate volcanic rocks and
include lava flow and pyroclastic flow units, as well as hypabyssal intrusive
rocks. They form much of the rock along the western edge of the Helmer
embayment at Potato Hill, and along the southern edge of the Thatuna. Many of
the pyroclastic flows contain abundant xenolithic clasts of older granodiorite
and Belt metasediments.
The
individual flows are 3 to 50 ft. thick and the complete sequence exceeds 900
ft. in thickness. The flow units generally contain 3% to 10% phenocrysts of feldspar
and quartz distributed in an aphanitic matrix of devitrified volcanic glass.
Accessory minerals include magnetite, hornblende, apatite, and zircon. Some
lithic-rich pyroclastic flow units carry up to 20% fragments. The saprolitic
weathering that is well-developed in the older rocks has not appreciably
affected the Potato Hill volcanics.
22
Columbia
River Basalts
The
First Normal member of the Grande Ronde formation, the Priest Rapids member of
the Wanapum formation, and the Onaway member of the Saddle Mountain formation
(oldest to youngest, respectively) are all Columbia River basalt flows mapped
in the Helmer-Bovill area. The Grande Ronde formation flow occurs in the
southern portion of the Helmer-Bovill area and consists of fine-grained to very
fine-grained aphyric basalt. The Priest Rapids flow is a medium to
course-grained basalt with microphenocrysts of plagioclase and olivine in a
groundmass of intergranular pyroxene, ilmenite, and devitrified glass. It crops
out in increasing abundance to the southwest toward Deary. Saddle Mountain
basalts are found much further to the west. The importance of the Columbia
River basalts to the genesis of the Latah formation is that the episodic
basaltic extrusion dammed streams and formed lakes into which kaolin-rich
sediments eroded from weathered granitoid and Precambrian metasediments were
deposited.
Latah
Formation
The
Latah formation can be described as lake bed sediments that, although local in
origin and distributed in disconnected basins, occur over an area 175 miles
long and 75 miles wide in eastern Washington and northern Idaho. Episodic flows
of the Columbia River basalts blocked streams and formed lakes that collected
sediments eroded from surrounding rocks. In the Helmer-Bovill area, a major
basin termed the Helmer embayment occurs over an area of approximately 25 to 30
square miles. Latah formation sediments are described as clay, silt, sand and
minor gravel deposits that are laterally equivalent with and overlie flows of
Columbia River basalts. The clays are white, yellow, red and brown in color,
kaolinite-rich, and range from a few feet to several tens of feet in thickness.
Palouse
Formation
The
Palouse Formation comprises mixed loess and flood plain sediments of
Pleistocene age. It ranges in thickness from 3 to 35 ft. in thickness and
averages 10 ft. thick in the Helmer embayment. The unconsolidated layers also
include volcanic ash from the eruption of various Cascade Range volcanoes.
Mineralization
The
Helmer-Bovill Property hosts four different deposit types. These include
primary Na-feldspar deposits, residual
K-spar-quartz-kaolinite-halloysite deposits, transported clay deposits and
K-spar-quartz tailings deposits (which are located at the WBL Tailings
Project).
The primary Na-feldspar deposits are hosted
within granitic border phases of the Thatuna granodiorite. The transported clay
deposits are hosted primarily within the Latah formation. This formation was
deposited primarily in shallow lakes dammed by Columbia River Basalts.
Extensive weathering of feldspathic source terrains constitutes the provenance
of these clays. The residual deposits are derived from saprolitic weathering of
the Thatuna granodiorite-granitic phases. In general, Na-feldspar alters to kaolinite
and halloysite. These clays are accompanied by residual K-spar and quartz and are the subject
of the 2016 FS.
The
WBL Tailings Project hosts K-spar and quartz. The tailings were deposited on a
gently east-northeast sloping hillside and also with an impoundment structure
located at the base of the slope. Exploration trenches indicate the tailings
are in excess of 17 ff. deep in most places. In general, the sloping portions
of the tailings are composed of coarser material and the flat lying portions at
the base of the slope are composed of relatively finder materials. The
tailings appear to be continuous based on observations from test pits.
Feldspars
The
unweathered Thatuna Batholith represents a source carrying a high total feldspar
abundance, of which a significant proportion is Na-feldspar. In the strongly
weathered Thatuna Batholith rocks plagioclase (Na-feldspar) shows nearly
complete alteration to a kaolin mineral, but much of the K-spar survives
alteration.
Quartz
Exploration
and drilling results indicate that the quartz in the Thatuna batholithic rocks
is relatively free of Fe-bearing mica or oxide inclusions. The analytical values
for the trace elements in the quartz are very near or below detection limits
for the electron microprobe and indicate that quartz from the Moose Meadows
area is essentially free of impurities. This data suggests that the area has
excellent potential to produce a glass-grade product that might be processed
further into feed stocks for the high purity quartz market.
23
Clay
Minerals
The
kaolinite group of clay minerals includes four minerals that are similar
chemically, but differ with regard to crystal structure. Two of these
kaolinite group minerals, kaolinite and halloysite are the major clay minerals in
the Helmer-Bovill area clay deposits. Crystal structure differences are
important and control properties relevant to their commercial applications.
Kaolinite occurs as distinct platelets, whereas halloysite forms tubes and
spheroids. Although halloysite also has a plate-like crystal form,
imperfections in its crystal lattice cause the crystal to “roll up” into the
tubular forms. There are two varieties of halloysite, the four-water variety
and the two-water variety. The two-water variety is a dehydrated version of the
four-water halloysite and is almost impossible to distinguish from poorly
crystallized kaolinite. Both varieties of tubular halloysite and poorly
crystallized kaolinite exhibit poor viscosity.
Residual
clays developed on weathered granitoid in the Helmer-Bovill area are a mixture
of halloysite and kaolinite, with the concentration of total clay dependent
upon the degree of weathering. Drilling shows that halloysite content decreases
with depth as the effects of weathering diminish. In tests on two
samples from the WBL north pit, GMT (2005) demonstrated that there is a
significant halloysite fraction in the residual clay. The work done by GMT
indicates that the quality of the residual clay from the WBL pit is high enough
to be used in some high-end specialty paper, paint, and ceramic markets. Work
done by I-Minerals and further continued by GMT show that a wet process using
proven gravity separation equipment can produce a high-quality halloysite
product that will gain attention of halloysite markets.
Deposit
Type
The
mineral deposit consists of residual deposits containing primarily K-spar,
quartz and clays. The mineral deposit is underlain by the Thatuna Batholith,
composed mainly of plagioclase feldspar, K-spar and quartz. Weathering has
created a residual saprolite horizon which directly overlies the bedrock from
which it was derived. During the natural processes of weathering, the original
plagioclase feldspars have preferentially broken down to produce the clays
kaolinite and halloysite. The K-spars have resisted weathering to a degree and
much of the original component remains as free grains. Similarly, the quartz
component of the host rock remains as free grains in the weathered material.
Exploration
, Drilling and Bulk Sampling/Pilot
Testing
Exploration Programs
During the period
from 1999 through the end of 2001, the exploration work included the
acquisition of over 6,000 acres of mineral lease applications, the compilation
of an extensive file on the results of previous operations, and new drilling
programs.
During 2002 and 2003,
geologic mapping and petrographic studies were performed. An electron
microprobe analytical study was conducted on field samples, quartz products and
feldspar products from earlier work. Following petrographic and microprobe
studies, select intervals of residual deposits from the 2000-2001 drilling
program were sent to Mineral Resource Laboratory (MRL) for process testing.
Since 2003, all exploration work completed on
the property has involved diamond core drilling. The Mineral Resource estimate
included in the 2016 FS is based on data and information gathered during these
diamond drilling programs.
The
exploration work we conducted was used to target generalized rock types and
their weathering by-products. The work was successful in defining four target
areas which were subsequently tested by diamond drilling. SRK Consulting (SRK)
reviewed the exploration procedures and sampling methods as part of the
pre-feasibility study completed in 2014 and found that the work was conducted
by trained professionals to industry standards for a deposit of this type. SRK
also stated that the exploration methods were successful in defining their
intended targets and that similar techniques would be appropriate to expand the
resource base if necessary.
Drilling Programs
During 2000-2001, a
41-hole diamond drill program was completed at the Property, focused on both
bedrock feldspar deposits and residual deposits. Approximately 50% of the drill
holes penetrated residual deposits at or very near the surface. A total of
4,063 ft. were drilled during this program. All holes were surveyed by Rim Rock
Surveying.
In 2003, a 12-hole,
diamond drill program was completed at the Project, testing for residual deposits
over a broad area. A total of 1,333 ft. were drilled in this program. The core was split,
sampled, and described in detail within a previous Technical Report and in
petrographic reports prepared for I-Minerals All holes were
surveyed with a hand held GPS with an accuracy of several meters.
24
In 2007, a 28-hole,
diamond drill program was conducted to further evaluate the residual deposits.
Six holes were located in the WBL Pit area on 200 to 600 ft spacing. The
remaining holes were spread over the entire property to test those areas
believed to be underlain by the weathered Thatuna granodiorite, establishing
several new prospective areas. A total of 3,529 ft were drilled during this
program. The six holes located at WBL Pit were surveyed by Jamar and Associates
and all remaining holes were surveyed by handheld GPS with an accuracy of
several meters.
In 2010, a 10-hole,
diamond drilling program was completed in the WBL Pit and Middle Ridge areas.
Five holes were completed in each area, on 400 to 900 ft spacing. A total of
1,195 ft were drilled in this program. All holes were surveyed by Taylor
Engineering with a differential GPS with centimetre accuracy.
In 2011, a 66-hole,
diamond drilling program was conducted in the WBL Pit and Middle Ridge areas.
At Middle Ridge, 45 holes were drilled and at WBL, 21 holes were drilled. These
holes were mostly located on 200 ft spacing with a few on 400 ft. A total of
7,747 ft were drilled during this program. All holes were surveyed by Taylor
Engineering with a differential GPS with centimetre accuracy.
In 2013, a 167-hole,
diamond drilling program was conducted in the Middle Ridge deposit and in two
new areas referred to as Kelly’s Hump North and South. At Middle Ridge, 21
additional holes were completed to provide a drill pattern on 100 ft spacing in
the area hosting higher halloysite grades. In the Kelly’s Hump area, a phase
one program was completed with 17 holes spread though out the elevated area of
the north south trending ridge. These were generally spaced at approximately
400-800 ft with all but one, located in the northern area. A Phase 2 program was
completed with 113 additional holes on 100 ft spacing in the Kelly’s Hump North
area, and 16 holes on 200 ft spacing in the Kelly’s Hump South area. A total
of 17,811 ft. were drilled during this program. The drill hole locations were
first laid out by Taylor Engineering with a differential GPS and then once the
drill rig was set up any offsets were measured with a tape measure.
The drillhole
database supporting the resource estimation of this report consists of 322
diamond core drillholes totaling 35,909 ft. The shallowest hole is 20 ft, the
deepest is 260 ft, and the average is 112 ft. All drillholes are oriented
vertically and none of the holes have down hole deviation surveys. Since all of
the drilling is relatively shallow the lack of down hole deviation survey has
no material impact on the sample location. Since many of the older drillholes
are located with a hand held GPS their elevations do not match the current,
high resolution topographic surface. For this reason, all drillhole supporting
the resource estimation of this report, are draped onto the high resolution
topography to provide a uniform basis of elevation control. Typically, the
sample recovery was very good ranging from 60 to 100%. The average core
recovery is 87%.
25
Figure
3. Drill Hole Locations
Mineral
Processing and Historical Testing
Various
investigators have undertaken mineralogical, beneficiation, and product
characterization testing programs on material taken from our Helmer-Bovill
property. This testing includes primary material from the Bovill deposit, as
well as secondary material—referred to as WBL Tailings—that was generated from
a previous kaolin clay mining operation at the site during the 1960s and 1970s.
Much
of the process developed to recover the minerals was conducted by two principal
investigators: Ginn Mineral Technology (GMT) and the Mineral Research
Laboratory (MRL) of North Carolina State University. GMT completed the
developmental work on the clay (halloysite and kaolinite) circuit, using
bench-scale (pounds of material) and pilot plant (hundreds of pounds) process
demonstrations. Similarly, MRL carried out the development work on the sand
circuit (k-spar and quartz), also employing bench-scale and pilot plant process
demonstrations. Both service providers produced products of a suitable grade
and quality for detailed characterization, and suitable for commercial
production.
The
bench-scale testwork conducted by GMT demonstrated the responsiveness of the
clay to conventional physical and chemical beneficiation methods. The
bench-scale testing results were further reinforced with five pilot plant
demonstrations. The first two were conducted in July 2008 and July 2010, and
were modest in scale. Subsequently, three additional small-scale pilot tests
were conducted to explore alternative process flowsheet arrangements. The data
generated from these tests confirmed the results of the previous tests, both
quantitatively and qualitatively, including definition of the circuit for the
recovery of halloysite.
26
Additional
testing and development was conducted in 2011 and 2012 on bulk samples and
composites to confirm previous work and generate material for product
development. Process development work focused on assessing alternative physical
separation technologies for the kaolinite/halloysite separation preparation.
The results from this more recent testing confirmed the previous work, which
improves the confidence in the viability of the process to generate saleable
products.
Historical
kaolinite mining activities on the property generated a feldspathic sand
tailings material, which is referred to as WBL Tailings. These tailings are
considered representative of the sand fraction of the material derived from the
Bovill resource. Primary material from the historical WBL pit was also used in
testing. The sand material was prepared from the sand separated from the clay
as part of the clay testwork programs undertaken by GMT.
Initial
testing on the WBL Tailings focused on recovery of K-feldspar from quartz
including unit operations, operating conditions, and general equipment
arrangement. A basic set of parameters for conventional beneficiation methods
was established at the bench test level. Later, a comprehensive pilot plant
campaign was undertaken based on the findings of the bench-scale testing. The
objective was to determine engineering and operating data that would facilitate
the design of a commercial process plant. A 35-ton bulk sample of WBL Tailings
was processed on a continuous basis, facilitating the preparation of a sizable
quantity of product concentrates as well as the optimization of unit
operations. The process employed conventional unit operations and was
successful in achieving the stated objectives.
MRL
was also retained to provide design the quartz purification process. Mirroring
previous development work on the K-feldspar flowsheet, MRL performed
bench-scale testing to provide preliminary data to design and plan a more
comprehensive pilot plant campaign. Pilot campaigns were conducted in late 2011
and again mid-2012, which demonstrated the ability to produce suitable quartz
products from both WBL Tailings and primary material. Due to constraints on
material, budget, and time, the processing regime was not optimized during
these campaigns.
Initial
Clay Testing
GMT
reported on a clay processing pilot plant trial that used material sourced from
the Kelly’s Hump location (Drill Hole RC13-5263). The sample was extracted from
a depth of 10 ft to 15 ft and totaled about 12,000 lbs.
The
primary purpose of the testwork was to optimize the separation of halloysite
from kaolinite. Other stated objectives of the work were to optimize the
brightness of the halloysite by employing physical and chemical beneficiation
methods, and to produce a metakaolin product and assess its pozzolanic
properties. The testing undertaken by GMT was conducted using American Society
for Testing and Materials (ASTM) and Technical Association of the Pulp and
Paper Industry (TAPPI) standards in line with previous testing campaigns and
industry practice.
The
bulk sample was processed to remove the sand component (+325 mesh).
Reconciliation and mass balancing determined that approximately 78% of the feed
mass reports to the +325 mesh sand fraction, with the other 22% reporting
to the fine clay fraction. The sand fraction was then shipped to MRL for
further feldspathic sand testing.
A
two-stage beneficiation process employing both centrifugation and differential
flotation yielded the brightest product. Differential flotation also produced
the highest grade halloysite, exceeding 90%. Final product processing then
explored cleaning the concentrates with either acid leaching or magnetic
separation, or cleaning them with a combined magnetic separation with acid
leaching step. A single-stage processing route with magnetic separation alone
was the most effective in improving the brightness of the finished products by
removing mica gangue from the concentrate. Further improvements were realized
with the inclusion of an acid leaching stage for the non-magnetic product.
Finally, a coarse kaolinite product was prepared from the 3” hydrocyclone
underflow for conversion into metakaolin. The sample was prepared by calcining
the kaolinite at 850°C for appraisal as a pozzolanic material.
The
clay testwork demonstrated the ability to produce varying grades of halloysite
and kaolinite concentrates. The extent of the process to be deployed in the
commercial plant will largely be determined by the size and value of the
halloysite product markets. Market research indicates that there is a market
for both standard-grade and high-purity halloysite, and therefore, differential
flotation is incorporated in the process flowsheet. Market research also shows
that while there is a limited market for the type of kaolin produced from
Bovill ores, there is a robust market for metakaolin. Therefore, all of the
Bovill kaolin will be converted to metakaolin.
Current Testing
The
current testwork is mainly focused on the development of both sand and clay
circuits, further product definition and characterization, and initial OEM
equipment testing in preparation for detailed engineering. Previous testwork on
the feldspathic sands provided engineering definition sufficient for the
completion of engineering and feasibility assessment. However, additional
testing in 2015 confirmed earlier results, optimized the processing scheme, and
added some refinements regarding purification of the products.
27
Representative
Sample Collection
In
mid-2014, bulk metallurgical samples were collected from 9 trenches using an
excavator. The trench locations were selected based on the local geology and
results from adjacent drill holes.
The
mineral composition of the deposit is relatively homogeneous with the exception
of halloysite content. The selected sample locations are in the expected mining
areas, and either rich in halloysite (6 locations in the Kelly’s Hump area and
two locations in the Middle Ridge area) or void of halloysite (one location in
the Kelly’s Hump South area).
Depth
of the ore-bearing layer, and depth of the overburden were also considered when
selecting the sample locations. The depth to the ore layer (weathered
granodiorite) was determined for each hole, and an excavator dug through the
overburden to the top of the mineralized layer to approximately 5 feet below.
The samples were collected, placed in large bulk bags, and shipped to GMT for
clay and sand separation. The samples were not blended in the field, but were
sent to GMT in three discrete samples; Kelly’s Hump (halloysite rich), Kelly’s
Hump South (halloysite void), and Middle Ridge (halloysite rich). GMT processed
the clay fraction and shipped the sand to MRL for additional bench and pilot
scale testing.
While
these samples cannot be considered statistically representative of the entire
ore body, they are characteristic of the ore that is expected to be encountered
during the mining and processing of the Bovill Project. The sampling techniques,
and the metallurgical samples collected are considered suitable for bench and
pilot plant metallurgical testing to define and confirm the process recovery
scheme and final product quality.
Clay
Processing
Clay
samples were shipped to GMT in Sandersville, Georgia, USA. GMT received 26.3
tons of Kelly’s Hump (halloysite-rich) material, 4.4 tons of Kelly’s Hump (void
of halloysite) material, and 6.3 tons of Middle Ridge (halloysite-rich)
material for production scale trials. Results of the trials were reported in
January 2015.
Each
of the three samples was treated individually. The halloysite-rich samples from
Kelly’s Hump and Middle Ridge were treated in a similar manner, whereas the
Kelly’s Hump South sample was treated using an abbreviated program due to its
lack of contained halloysite.
The
most significant difference in the products is the brightness values. At
greater than 70% brightness, the Middle Ridge products were much higher than
the other two resource products. Product from Kelly’s Hump South had the
lowest brightness, at 47%.
Recovery
of Clay Products
Combined
clay products (halloysite together with kaolinite) in the ore account for
16-18% of the total feed. The clays are separated from the other constituents
in the ore based on particle size and apparent density. Virtually 100% of the
clay is recovered as standard purity halloysite, high purity halloysite or
kaolinite (metakaolin).
The
split of recovery between standard grade halloysite and high purity halloysite
is dictated more by market conditions than any inherent differences in the
products. The market for high purity halloysite will be satisfied first with
the market for standard grade being satisfied on a secondary basis. If
necessary, any remaining halloysite can be blended with kaolinite and calcined
to create metakaolin.
Kaolinite
recovery is 100% of this constituent in the ore with the only loss being in the
calcining step, where the kaolinite is heated to about 850
o
Celsius.
The conversion of kaolinite to metakaolin by calcining removes most of the
water of hydration and results in approximately 10% loss of mass. As a result,
the recovery of kaolinite is effectively 90% of the amount of kaolinite in the
feed.
Sand
Recovery
Feldspathic
sand (k-feldspar together with quartz) makes up approximately 75% of the
material in the ore. Processing of the sand involves separation of the quartz
from the potassium feldspar and purification of the resulting separate streams.
In this process there is removal and rejection of iron bearing minerals
(muscovite and biotite) and losses of fines to the tailings stream. Testwork
results show that the recovery of quartz and potassium feldspar from the ore
feed is approximately 58.5% each which is equivalent to approximately 78%
recovery from the sand component in the feed.
28
Overall
Product Recovery
The
sum of all products recovered from the feed ore is approximately 61%. The
remaining 39% is lost to tailings as sand fines or impurities removed in the
upgrading of the sand product
The
sand portion (+325 mesh), makes up 76-77% of the sample. This portion reports
to the sand processing area of the plant. In the case of the 2014 bulk sample,
the sand portion was shipped to MRL for further testing.
The
clay fraction of the ore (-325 mesh) contains the kaolinite and halloysite
clays in addition to grit, which is rejected in the 3” cyclone operation. The
cyclone underflow, which contains the grit, reports to tailings and makes up
approximately 4% of the ore (in the case of the 2014 bulk samples). This
material is categorized as waste in the mineral resource and mineral reserve
estimates. The 3” cyclone overflow contains the clays (18-20% of the total
feed) which are further processed using a centrifuge to separate standard-grade
(70%) halloysite (50% classification of overflow) and kaolinite (50%
classification of underflow). The halloysite is further concentrated using
differential flotation to high-purity halloysite (+90%). Recent tests by First
Test Minerals showed 6% halloysite contained in a sample of high purity
halloysite. Because essentially all of the material in the 3” cyclone overflow
is recovered into one of the three final clay products, the process recovery of
the clays from this point is 100%.
2016 Feasibility Study
In
March 2016, we announced the completion of our feasibility study on the Bovill
Kaolin Project in accordance with NI 43-101. The
2016 FS was filed on SEDAR on April 20, 2016, and is titled “NI 43-101
Technical Report – Feasibility Study – Bovill Kaolin Project – Latah County,
Idaho, USA” dated March 17, 2016 and prepared by GBM Engineers LLC, Mine
Development Associates, HDR Engineering Inc., SRK Consulting (U.S.), Inc. and
Tetra Tech, Compiled By GBM Project Number: 0530.
A
summary of the project economics contained in the 2016 FS is set forth below.
Economic
Analysis
The
economic analysis results of the Bovill Kaolin Project indicate an NPV 6% of
US$385.8 million and an IRR of 31.6% on a pre-tax basis. An after-tax basis
analysis indicates an NPV 6% of US$249.8 million with an IRR of 25.8%. Our
analysis estimates that payback will be 3 years from the start of production.
The economic analysis is based on the following assumptions and estimates:
-
a
mine life of 26 years.
-
Average
Annual Plant Production Rate of 346,000 tons
-
Waste
: Ore stripping ratio of 0.54
-
an
average operating cost of US$91.84/t of product.
-
capital
costs (which includes reclamation and closure costs) of US$120 million over
life of mine, which consist of US$108.3 million initial capital cost and
US$11.8 million sustaining capital cost.
The
results of our economic analysis are set forth in the table below:
Description
|
Value
Pre-Tax
(US$Millions)
|
Value
After-Tax
(US$Millions)
|
Unit Cost
(US$/t)
|
Gross Revenue
|
1,683.1
|
1,683.1
|
316.43
|
Royalties
|
(84.2)
|
(84.2)
|
(15.82)
|
Gross Income
|
1,598.9
|
1,598.9
|
300.60
|
Operating Costs
|
(493.4)
|
(493.4)
|
(91.84)
|
Total Capital (LOM)
|
(120.0)
|
(120.0)
|
-
|
Income
Tax
|
0
|
(342.8)
|
-
|
Cash Flow
|
990.4
|
658.1
|
-
|
NPV
|
385.8
|
249.8
|
-
|
IRR
|
31.6%
|
25.8%
|
-
|
29
Mining
Methods
The
Bovill Kaolin Project is planned as an open-pit, truck and excavator operation.
The truck and excavator method provides reasonable cost benefits and
selectivity for this type of deposit. Only open-pit mining methods are
considered for mining at the Bovill Kaolin Project.
The
material to be mined consists of clays and soils, and as such, no drilling or
blasting is anticipated. Most sampling will be done from mining faces, however
some auger drilling will be done where additional ore control data is required.
Industrial Mineral Pricing
Composite prices utilized for our mineral
reserve and resource estimates is summarized in the table below:
Products
|
Weighted Average
Price
($/t)
|
Halloysite
(Standard Grade)
|
716
|
Halloysite
(High Purity)
|
1,392
|
K-spar
(30 mesh)
|
217
|
K-spar
(200 mesh)
|
270
|
K-spar
(325 mesh)
|
346
|
Quartz
Q3 (50 mesh)
|
400
- 620
|
Quartz
Q1 (325 mesh)
|
350
|
Quartz
Q1 (200 mesh)
|
280
|
Quartz
Q1 (50 mesh)
|
126
|
Metakaolin
|
231
|
Industrial
mineral pricing is based on thirteen years of data derived from the USGS,
books, journals, trade journals, Internet searches, and market reports in the
public domain. Additional data is from personal visits and conversations with
contacts within the glass, concrete, ceramics, tile, sanitary, paint,
tableware, polymers, insulators, plastics, animal feed, toothpaste and cosmetic
industries. Due to the highly competitive nature of the industrial sand and
clay industry, contract prices are confidential and generally not available in
the public domain.
Capital Costs
Capital cost estimates are summarized in the
table below:
Total Capital Investment
|
Initial Capital
(US$ 000s)
|
Sustaining Capital (US$000s)
|
Total LoM Capital
(US$ 000s)
|
Total
Capital Investment
|
108,257
|
11,776
|
120,033
|
FIXED
CAPITAL TOTAL
|
97,772
|
11,776
|
109,548
|
DIRECT
TOTAL
|
65,054
|
11,230
|
76,284
|
General
|
4,058
|
6,001
|
10,059
|
Mining
|
1,334
|
84
|
1,418
|
Process
|
50,764
|
0
|
50,764
|
Waste Management
|
3,167
|
5,145
|
8,312
|
Infrastructure and Utilities
|
5,731
|
0
|
5,731
|
INDIRECT
TOTAL
|
32,718
|
546
|
33,264
|
Engineering & Procurement
|
10,200
|
0
|
10,200
|
Construction Management
|
5,204
|
0
|
5,204
|
Field Indirect
|
5,314
|
0
|
5,314
|
Contingency
|
12,000
|
546
|
12,546
|
WORKING CAPITAL TOTAL
|
10,485
|
0
|
10,485
|
Cash Reserve
|
9,687
|
0
|
9,687
|
Inventory
|
798
|
0
|
798
|
30
Operating
Costs
Operating
cost estimates are summarized in the table below:
Description
|
Avg. US$/yr
(000s)
|
Avg. US$/t ROM
|
Avg. US$/t Product
|
%
|
General
– Subtotal
|
3,888
|
11.62
|
19.01
|
20.69
|
General
and Administration
|
2,615
|
7.81
|
12.78
|
13.92
|
General
- Utilities - Gas
|
3
|
0.01
|
0.02
|
0.02
|
General
- Utilities - Power
|
124
|
0.37
|
0.61
|
0.66
|
General
- Mobile Equipment lease
|
168
|
0.50
|
0.82
|
0.89
|
General
- Consumables - Raw Water Pumping
|
3
|
0.01
|
0.02
|
0.02
|
General
- Consumables - Diesel
|
161
|
0.09
|
0.15
|
0.17
|
General
- Mobile Equip. Maintenance.
|
161
|
0.48
|
0.79
|
0.86
|
General
- Labor
|
782
|
2.34
|
3.82
|
4.16
|
Mining
– Subtotal
|
2,960
|
8.84
|
14.47
|
15.75
|
Contract
Mining Cost
|
2,616
|
7.82
|
12.79
|
13.92
|
Owners
Mining Cost
|
344
|
1.03
|
1.68
|
1.83
|
Processing
Plant – Subtotal
|
10,652
|
31.83
|
52.07
|
56.70
|
Processing
- Reagents
|
1,165
|
3.48
|
5.69
|
6.20
|
Processing
- Maint. & Operating spares
|
798
|
2.39
|
3.90
|
4.25
|
Processing
- Utilities
|
3,869
|
11.56
|
18.91
|
20.59
|
Processing
- Consumables
|
1,071
|
3.20
|
5.24
|
5.70
|
Processing
- Labor
|
3,749
|
11.20
|
18.33
|
19.95
|
Waste
Management - Tailings
|
449
|
1.34
|
2.19
|
2.39
|
Product
Handling – Bulk Bags
|
840
|
2.51
|
4.11
|
4.47
|
TOTAL
OPERATING COST
|
18,789
|
56.14
|
91.84
|
100.00
|
CIM
Mineral Resource Estimate
We
have prepared a CIM measured and indicated resource estimate on the Bovill
Kaolin Project as set out in the table below. The resource estimate does not
utilize a cut-off grade as all recovered material in the resource estimation
contains sufficient sand, kaolinite or halloysite that can be mined for profit.
|
-
Measured
Resources of 5.7 million tons containing 76.5% quartz/K-spar sand, 12.3%
Kaolinite and 4.0% Halloysite.
-
Indicated
Resources of 15.5 million tons containing 57.0% quartz/K-spar sand, 15.5% Kaolinite
and 2.8% Halloysite.
-
667,000 tons of contained halloysite, 3,119,000 tons of contained
kaolinite and 13,235,000 tons of contained quartz/K-spar.
|
CIM
Mineral Reserve Estimate
A
mineral reserves estimate on the Bovill Kaolin Project has been prepared in
accordance with CIM guidelines. Cut-off grades were not applied since all
weathered Thatuna material in the resource estimation contains sufficient sand,
kaolinite or halloysite to be mined for profit. The proven and probable
mineral reserves are set forth below:
Reserve
|
Proven
|
Probable
|
Total P&P
|
Tons (1000s)
|
4,155
|
4,548
|
8,702
|
Halloysite %
|
4.8
|
4.0
|
4.4
|
Halloysite Tons
(1000s)
|
200
|
182
|
382
|
Kaolinite %
|
11.1
|
12.5
|
11.8
|
Kaolinite Tons
(1000s)
|
460
|
568
|
1,028
|
Sand %
|
77.8
|
76.8
|
77.3
|
Sand Tons (1000s)
|
3,234
|
3,491
|
6,725
|
|
Note that values
presented here have been rounded to reflect the level of accuracy.
Proven and Probable
Mineral Reserves are presented using a $57.00 NSR cutoff grade.
|
31
Cautionary
Note to U.S. Investors
:
This section and other sections of this document contain the terms “measured
mineral resources,” “indicated mineral resources,” “inferred mineral
resources,” “proven mineral reserves,” and “probable mineral reserves” as
defined in accordance with Canadian National Instrument 43-101 – Standards of
Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of
Mining, Metallurgy and Petroleum (the “CIM”) – CIM Definition Standards on
Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended
(the “CIM Definition Standards”). These definitions differ from the definitions
in the United States Securities and Exchange Commission (“SEC”) Industry
Guide 7 (“SEC Industry Guide 7”) under the United States Securities Act of 1933,
as amended (the “Securities Act”). Under SEC Industry Guide 7 standards, a
“final” or “bankable” feasibility study is required to report reserves, the
three-year historical average price is used in any reserve or cash flow
analysis to designate reserves, and the primary environmental analysis or
report must be filed with the appropriate governmental authority. Please note
the following regarding these terms:
-
“Mineral resource”,
“Measured mineral
resources” and “indicated mineral resources”
. We advise
U.S. investors that although these terms are recognized and required by
Canadian regulations, these terms are not defined in SEC Industry Guide 7 and
the SEC does not normally permit such terms to be used in reports and
registration statements filed with the SEC. U.S. investors are cautioned not to
assume that any part or all of the mineral deposits in these categories will
ever be converted into reserves.
-
“Inferred mineral resources”
. We advise
U.S. investors that although this term is recognized by Canadian regulations,
the SEC does not recognize it. “Inferred mineral resources” have a
great amount of uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility. It cannot be assumed that all or any part
of an inferred mineral resource will ever be upgraded to a higher category.
Under Canadian rules, estimates of inferred mineral resources may not form the
basis of a feasibility study or pre-feasibility study, except in rare cases. The SEC
normally only permits an issuer to report mineralization
that does not constitute “reserves” as in-place tonnage and grade without
reference to unit measures. U.S. investors
are cautioned not to assume that any part or all of an inferred mineral
resource exists or is economically or legally minable.
-
“Proven mineral reserves” and “probable
mineral reserves”
. The definitions of proven and probable mineral reserves used in NI
43-101 differ from the definitions for “proven reserves” and “probable
reserves” as found in SEC Industry Guide 7. Accordingly, our disclosures of mineral reserves herein may not be
comparable to information from U.S. companies subject to reporting and
disclosure requirements of the SEC.
Accordingly, information contained in this annual
report and any documents incorporated by reference herein contain descriptions
of our mineral deposits that may not be comparable to similar information made
public by U.S. companies subject to the reporting and disclosure requirements
under the United States federal securities laws and the rules and
regulations thereunder.
Cautionary
Note To All Investors Concerning Economic Assessments That Include Mineral
Resources:
Mineral resources that are not mineral
reserves have no demonstrated economic viability.
Current Activities
Bovill Kaolin Project
Based on the results of the 2016 FS, which
demonstrate that the Project is both technically and economically feasible, it
is recommended that I-Minerals pursue a program of further investment and
development to complete the engineering, procurement and construction of the
Project. The following activities are recommended to be undertaken as early as
possible in the next phase of development, as both have schedule and completion
impacts:
-
Confirmation testwork needs to be
completed for final equipment selection, as well as to finalize the process
plant water balance and utilities consumptions. The confirmation testwork is
expected to cost about US$100,000 and take approximately 4 months to complete.
-
Activities required to bring
electricity and gas to the site should be expedited, as this currently impacts
the overall project completion.
Pilot
plant work is ongoing at MRL in North Carolina to confirm product quality
characteristics and generate additional samples for our continued product
marketing efforts. We have also initiated preliminary contact with
institutional investors that may have an interest in participating in the debt
or equity components of the Capital Costs. The detailed engineering and
construction time is forecast to be a minimum of 18 months and a maximum of 30
months from the completion of the production financing to raise the capital
costs as set out in the 2016 FS. The estimated cost for the completion of
longer lead time engineering work, utilities surveys, marketing work and
financing activities (general and admin) set forth below:
32
Study Items
|
Project Costs
|
Project
Management
|
$340,000
|
Marketing
|
540,000
|
Conceptual
Engineering
|
100,000
|
Environmental
and Permitting
|
120,000
|
Electrical
and Gas Studies
|
100,000
|
Hydrogeological
Work
|
60,000
|
Metallurgical
Testwork
|
260,000
|
General
& Admin
|
920,000
|
Total Cost
|
$2,440,000
|
In
addition to the above expenditures, we are reviewing the potential of
undertaking a land swap with the IDL wherein we would buy a property within
Latah County of equal value to our Helmer Bovill property and trade this
property for the surface rights at Helmer Bovill. Owning the surface rights at
Helmer Bovill may reduce the bonding requirements and strengthen our land tenure.
The estimated cost of such land swap would be $3 to $4 million of which about
25% would need to be paid as earnest money in the next 12 months.