On behalf of Corvus Gold Inc. (the “Company”), I am pleased
to be updating the progress that we are making in Nevada at the North Bullfrog Project and the newly acquired Mother Lode property.
Following the completion of the Preliminary Economic Assessment in 2015, the Company embarked on a staged exploration program to
identify additional resources at North Bullfrog. To date, approximately 20,000 metres of drilling have been completed since
January 2016 which will be used to calculate an updated resource estimate and preliminary economic assessment scheduled for completion
in the second half of calendar 2017.
In June of 2017, Corvus Gold acquired 100% of the Mother Lode property
in Nevada from Goldcorp Inc. The property covers approximately 250 acres and contains a historic (non-NI-43-101 compliant) resource
of 8.5Mt at a grade of 1.6 g/t gold totaling 430,000 ozs of gold. In addition, Corvus Gold staked two additional adjacent
claim blocks to Mother Lode project area host a multitude of exploration and development potential. The Mother Lode property approximately
10 kilometres from the nearby historic Bullfrog mine and has potential to become a large satellite operation.
In July of 2017 the Company completed a strategic CAD $4.65M financing
with Coeur Mining Inc. The financing will provide funding for exploration & development programs at North Bullfrog and
Mother Lode with the bulk of the proceeds dedicated towards the initial drill program at Mother Lode. The program will consist
of 3 dedicated drill rigs with the goal of bringing the resource at Mother Lode to modern NI-43-101 standards over the next 6 months.
Over the past four years the gold industry has faced a challenging period
of low metal prices. However, the steady increase in gold prices over the past 6 months has led to renewed interest in the
sector. This upward trend in commodity prices has allowed Corvus Gold to outperform the sector and the price of gold by continuing
to do what we do best: explore. The North Bullfrog and Mother Lode project areas hosts a multitude of high quality exploration
targets which could contain a number of higher grade structurally controlled deposits like the Company’s new YellowJacket
discovery and the nearby historic Bullfrog mine. Our recent Mother Lode acquisition will be the focus of our work over the
next 12 months as we assess how best to integrate it into the greater North Bullfrog mine plan.
Please join us at our 2017 Annual and Special Meeting (the “AGM)
of shareholders to be held on Thursday, October 12, 2017 at 8:30 am PDT, Vancouver time, at the Company’s office at Suite
1750, 700 West Pender, Vancouver, British Columbia, Canada. The Notice of Meeting and Information Circular/Proxy Statement
for the AGM have been sent or otherwise made available to you, as these documents contain important information, you are encouraged
to read them carefully. If you are unable to attend the 2017 AGM in person, please ensure that you take the opportunity to
vote online, by telephone or by mail.
The North Bullfrog project includes numerous prospective gold targets
at various stages of exploration with four having mineral resources (Sierra Blanca, Jolly Jane, Mayflower and YellowJacket) prepared
in accordance with the disclosure standards set out in NI 43-101. The project contains a measured mineral resource
of 3.86 Mt at an average grade of 2.55 g/t gold and 19.70 g/t silver, containing 316.5k ounces of gold and 2,445k ounces of silver,
an indicated mineral resource of 1.81 Mt at an average grade of 1.53 g/t gold, and 10.20 g/t silver, containing 89.1k ounces of
gold and 593.6k ounces of silver and an inferred resource of 1.48 Mt at an average grade of 0.83 g/t gold and 4.26 g/t silver,
containing 39.5k ounces of gold and 202.7k ounces of silver for oxide mill processing. The mineral resource for the mill
process was defined by Whittle
TM
optimization using all cost and recovery data and a breakeven cut-off grade of 0.52
g/t gold. In addition, the project contains a measured mineral resource of 0.3 Mt at an average grade of 0.25 g/t gold and 2.76
g/t silver, containing 2.4k ounces of gold and 26.6k ounces of silver, an indicated mineral resource of 22.86 Mt at an average
grade of 0.30 g/t gold and 0.43 g/t silver, containing 220.5k ounces of gold and 316.1k ounces of silver and an inferred mineral
resource of 176.3 Mt at an average grade of 0.19 g/t gold and 0.67 g/t silver, containing 1,077.4k ounces of gold and 3,799.2k
ounces of silver for oxide, heap leach processing. The mineral resource for heap leach processing was defined by Whittle
TM
optimization using all cost and recovery data and a breakeven cut-off grade of 0.15 g/t.
Jeffrey A. Pontius (CPG 11044), a qualified person as defined by NI
43-101, has supervised the preparation of the scientific and technical information that form the basis for this letter to shareholders
and has reviewed and approved the disclosure herein. Mr. Pontius is not independent of Corvus, as he is the President and CEO and
holds common shares and incentive stock options
CORVUS GOLD INC.
(Exact Name of Registrant as Specified
in its Charter)
British Columbia, Canada
|
|
|
98-0668473
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(State or other jurisdiction of incorporation
or
organization)
|
|
|
(I.R.S.
Employer Identification
No.)
|
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|
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1750 -700 West Pender Street
Vancouver, British Columbia, Canada,
(Address
of Principal Executive Offices)
|
V6C 1G8
(Zip
code)
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Registrant’s telephone number, including area code:
(604) 638-3246
|
Securities registered pursuant to Section 12(b)
of the Act:
None
Securities registered pursuant to Section 12(g)
of the Act:
Common Shares, no par value
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer ☐
|
Accelerated
Filer ☐
|
Non-Accelerated Filer ☐
(Do not check if a smaller reporting company)
|
Small Reporting Company ☒
Emerging Growth Company ☒
|
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒
State the aggregate market value of the voting
and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold,
or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed
second fiscal quarter: $40,168,119
As of June 29, 2017, the registrant had 93,369,582
Common Shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
To the extent specifically referenced in Part III,
portions of the registrant’s definitive Proxy Statement on Schedule 14A to be filed with the Securities and Exchange Commission
in connection with the registrant’s 2017 Annual Meeting of Shareholders are incorporated by reference into this report. See
Part III.
Table of Contents
CAUTIONARY NOTE TO U.S. INVESTORS REGARDING ESTIMATES
OF MEASURED, INDICATED AND INFERRED RESOURCES AND PROVEN AND PROBABLE RESERVES
The mineral estimates in this Annual Report on Form 10-K have been
prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of
United States securities laws. As used in this Annual Report on Form 10-K, the terms “mineral reserve”, “proven
mineral reserve” and “probable mineral reserve” are Canadian mining terms 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. These definitions differ from the definitions in the United States Securities
and Exchange Commission (“SEC”) Industry Guide 7 (“SEC Industry Guide 7”). 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.
In addition, the terms “mineral resource”, “measured
mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and
required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not
permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that all
or any part of a mineral deposit in these categories will ever be converted into reserves. “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 feasibility or pre-feasibility studies, except in rare
cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or
legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations;
however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC
Guide 7 standards as in place tonnage and grade without reference to unit measures.
Accordingly, information contained in this report and the 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.
The term “mineralized material” as used in this Annual
Report on Form 10-K, although permissible under SEC Industry Guide 7, does not indicate “reserves” by SEC Industry
Guide 7 standards. We cannot be certain that any part of the mineralized material will ever be confirmed or converted into SEC
Industry Guide 7 compliant “reserves”. Investors are cautioned not to assume that all or any part of the mineralized
material will ever be confirmed or converted into reserves or that mineralized material can be economically or legally extracted.
CAUTIONARY NOTE TO ALL INVESTORS CONCERNING ECONOMIC
ASSESSMENTS THAT INCLUDE INFERRED RESOURCES
The Company currently holds or has the right to acquire interests
in an advanced stage exploration project in Nye County, Nevada referred to as the North Bullfrog Project (the “NBP”).
Mineral resources that are not mineral reserves have no demonstrated economic viability. The preliminary assessments on the NBP
are preliminary in nature and include “inferred mineral resources” that have a great amount of uncertainty as to their
existence, and are considered too speculative geologically to have economic considerations applied to them that would enable them
to be categorized as mineral reserves. 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 feasibility
or pre-feasibility studies. There is no certainty that such inferred mineral resources at the NBP will ever be realized. Investors
are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K and the exhibits attached hereto
contain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act
of 1995, as amended, and “forward-looking information” within the meaning of applicable Canadian securities legislation,
collectively “forward-looking statements”. Such forward-looking statements concern our anticipated results and developments
in the operations of the Company in future periods, planned exploration activities, the adequacy of the Company’s financial
resources and other events or conditions that may occur in the future. Forward-looking statements are frequently, but not always,
identified by words such as “expects,” “anticipates,” “believes,” “intends,” “estimates,”
“potential,” “possible” and similar expressions, or statements that events, conditions or results “will,”
“may,” “could” or “should” (or the negative and grammatical variations of any of these terms)
occur or be achieved. These forward looking statements may include, but are not limited to, statements concerning:
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·
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the Company’s strategies and objectives, both generally and in respect of its specific mineral
properties;
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·
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the timing of decisions regarding the timing and costs of exploration programs with respect to,
and the issuance of the necessary permits and authorizations required for, the Company’s exploration programs, including
for the NBP;
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·
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the Company’s estimates of the quality and quantity of the mineral resources at its mineral
property;
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·
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the timing and cost of planned exploration programs of the Company and its joint venture partners
(as applicable), and the timing of the receipt of results therefrom;
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·
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the Company’s future cash requirements and use of proceeds of sales of none-core assets;
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general business and economic conditions;
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the Company’s ability to meet its financial obligations as they come due, and to be able
to raise the necessary funds to continue operations;
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·
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the Company’s expectation that it will be able to add additional mineral projects of merit
to its assets;
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·
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the potential for the existence or location of additional high-grade veins at the NBP, or high-grade
mineralization at the Mother Lode Property;
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·
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the potential to expand the high grade gold and silver at the YellowJacket target, the potential
to expand the higher grade bulk tonnage at the Sierra Blanca target, at the NBP, and at the Mother Lode Property;
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·
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the potential for any delineation of higher grade mineralization at the NBP or Mother Lode Property;
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the potential for there to be one or more additional vein zone(s) to the west and northeast of
the current YellowJacket high grade zone;
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the potential discovery and delineation of mineral deposits/resources/reserves and any expansion
thereof beyond the current estimate;
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the potential for the NBP or the Mother Lode mineralization systems to continue to grow and/or
to develop into a major new higher-grade, bulk tonnage, Nevada gold discovery; and
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·
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the Company’s expectation that it will be able to build itself into a non-operator gold producer
with significant carried interests and royalty exposure.
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Such forward-looking statements reflect the Company’s current
views with respect to future events and are subject to certain known and unknown risks, uncertainties and assumptions. Many factors
could cause actual results, performance or achievements to be materially different from any future results, performance or achievements
that may be expressed or implied by such forward-looking statements, including, among others, risks related to:
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our requirement of significant additional capital;
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our limited operating history;
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cost increases for our exploration and, if warranted, development projects;
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our Properties being in the exploration stage;
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mineral exploration and production activities;
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our lack of mineral production from our Properties;
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estimates of mineral resources;
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changes in mineral resource estimates;
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differences in United States and Canadian mineral reserve and mineral resource reporting;
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our exploration activities being unsuccessful;
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fluctuations in gold, silver and other metal prices;
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our ability to obtain permits and licenses for production;
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·
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government and environmental regulations that may increase our costs of doing business or restrict
our operations;
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proposed legislation that may significantly affect the mining industry;
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·
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land reclamation requirements;
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competition in the mining industry;
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equipment and supply shortages;
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current and future joint ventures and partnerships;
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our ability to attract qualified management;
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the ability to enforce judgment against certain of our Directors;
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claims on the title to our Properties;
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surface access on our Properties;
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potential future litigation;
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our lack of insurance covering all our operations;
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our status as a “passive foreign investment company” under US federal tax code; and
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Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. This list is
not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Forward-looking statements
are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or
conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties
and other factors, including without limitation those discussed in Part I, Item 1A, Risk Factors, of this Annual Report on Form
10-K, which are incorporated herein by reference, as well as other factors described elsewhere in this report and the Company’s
other reports filed with the SEC.
The Company’s forward-looking statements contained in this
Annual Report on Form 10-K are based on the beliefs, expectations and opinions of management as of the date of this Annual Report.
The Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs,
expectations or opinions should change, except as required by law. For the reasons set forth above, investors should not attribute
undue certainty to or place undue reliance on forward-looking statements.
GLOSSARY OF TERMS
“Ag”
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Silver
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“alteration”
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Changes in the chemical or mineralogical composition of a rock, generally produced by weathering or hydrothermal solutions
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“Arrangement”
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The corporate spin-out of Corvus from ITH by way of a plan of arrangement among ITH, the shareholders of ITH and Corvus under the BCBCA, effective August 26, 2010
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“Au”
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Gold
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“Board”
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The board of directors of Corvus
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“BCBCA
”
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Business Corporations Act
(British Columbia), Corvus’ governing statute
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“Corvus Nevada”
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Corvus Gold Nevada Inc., a wholly owned subsidiary of Corvus USA subsisting under the laws of Nevada
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“Corvus USA”
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Corvus Gold (USA) Inc., a wholly owned subsidiary of Corvus subsisting under the laws of Nevada
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“Common Shares”
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The Common Shares without par value in the capital stock of Corvus as the same are constituted on the date hereof
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“Corvus”
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Corvus Gold Inc., a company organized under the laws of British Columbia
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“cut-off grade”
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The lowest grade of mineralized material that qualifies as ore in a given deposit, that is, material of the lowest assay value that is included in a resource/reserve estimate
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“deposit”
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A mineralized body which has been physically delineated by sufficient drilling, trenching, and/or underground work, and found to contain a sufficient average grade of metal or metals to warrant further exploration and/or development expenditures. Such a deposit does not qualify as a commercially mineable ore body or as containing reserves or ore, unless final legal, technical and economic factors are resolved
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“Director”
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A member of the Board of Directors of Corvus
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“disseminated”
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Fine particles of mineral dispersed throughout the enclosing rock
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“epigenetic”
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Said of a mineral deposit of origin later than that of the enclosing rocks
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“executive officer”
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When used in relation to any issuer (including the Company) means
an individual who is:
(a)
a chair, vice chair or president;
(b) a vice-president in charge of a principal business unit, division or function, including sales, finance or production; or
(c) performing a policy-making function in respect of the issuer
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“g/t”
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Grams per metric tonne
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“grade”
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To contain a particular quantity of ore or mineral, relative to other constituents, in a specified quantity of rock
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“heap leaching”
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A method of recovering minerals from ore whereby crushed rock is stacked on a non-porous liner and an appropriate chemical solution is sprayed on the top of the pile (the “heap”) and allowed to percolate down through the crushed rock, dissolving the desired minerals(s) as it does so. The chemical solution is then collected from the base of the heap and is treated to remove the dissolved mineral(s)
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“host”
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A rock or mineral that is older than rocks or minerals introduced into it or formed within it
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“host rock”
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A body of rock serving as a host for other rocks or for mineral deposits, or any rock in which ore deposits occur
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“hydrothermal”
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A term pertaining to hot aqueous solutions of magmatic origin which may transport metals and minerals in solution
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“ITH
”
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International Tower Hill Mines Ltd., a company subsisting under the laws of British Columbia
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“massive”
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Said of a mineral deposit, especially of sulphides, characterized by a great concentration of ore in one place, as opposed to a disseminated or veinlike deposit
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“Moz”
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Million ounces
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“mineral reserve”
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The economically mineable part of a measured and/or indicated mineral resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at pre-feasibility or feasibility level as appropriate that include application of modifying factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which mineral reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. Under NI 43-101 standards, the public disclosure of a mineral reserve must be demonstrated by a pre-feasibility study or feasibility study.
See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated, and Inferred Resources and Proven and Probable Reserves above.
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“mineral resource”
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A mineral resource is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Material of economic interest refers to diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals. Mineral resources are sub-divided, in order of increasing geological confidence, into inferred, indicated and measured categories. The term mineral resource covers mineralization and natural material of intrinsic economic interest which has been identified and estimated through exploration and sampling and within which mineral reserves may subsequently be defined by the consideration and application of modifying factors.
See Cautionary Note to U.S. Investors Regarding Estimates of Measured, Indicated, and Inferred Resources and Proven and Probable Reserves above.
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“mineralization”
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The concentration of metals and their chemical compounds within a body of rock
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“modifying factors”
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Considerations used to convert mineral resources to mineral reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors
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“Mother Lode”
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The Mother Lode Property in Nevada held by Corvus Nevada, as more particularly described under “Properties”
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“National Instrument 43-101”/ “NI 43-101”
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National Instrument 43-101 of the Canadian Securities Administrators entitled “Standards of Disclosure for Mineral Projects”
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“NBP”
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The North Bullfrog Project in Nevada held by Corvus Nevada, as more particularly described under “Properties”
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“NSR”
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Net smelter return
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“Properties”
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The North Bullfrog Project in Nevada and the Mother Lode Property in Nevada
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“Raven Gold”
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Raven Gold Alaska Inc., a wholly owned subsidiary of Corvus USA subsisting under the laws of Alaska
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“
SEC
”
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United States Securities and Exchange Commission
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“SoN”
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SoN Land and Water, LLC, a limited liability company subsisting under the laws of Nevada, of which Corvus Nevada is the sole member
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“tabular”
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Said of a feature having two dimensions that are much larger or longer than the third, or of a geomorphic feature having a flat surface, such as a plateau
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“TSX”
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Toronto Stock Exchange
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“Exchange Act”
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The United States Securities Exchange Act of 1934, as amended
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“vein”
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An epigenetic mineral filling of a fault or other fracture, in tabular or sheetlike form, often with the associated replacement of the host rock; also, a mineral deposit of this form and origin
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SEC Industry Guide 7 Definitions:
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exploration stage
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An “exploration stage” prospect is one which is not in either the development or production stage
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development stage
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A “development stage” project is one which is undergoing preparation of an established commercially mineable deposit for its extraction but which is not yet in production. This stage occurs after completion of a feasibility study
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mineralized material
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The term “mineralized material” refers to material that is not included in the reserve as it does not meet all of the criteria for adequate demonstration for economic or legal extraction
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probable reserve
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The term “probable reserve” refers to reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation
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production stage
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A “production stage” project is actively engaged in the process of extraction and beneficiation of mineral reserves to produce a marketable metal or mineral product
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proven reserve
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The term “proven reserve” refers to reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established
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reserve
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The term “reserve” refers to that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Reserves must be supported by a feasibility study done to bankable standards that demonstrates the economic extraction. “Bankable standards” implies that the confidence attached to the costs and achievements developed in the study is sufficient for the project to be eligible for external debt financing. A reserve includes adjustments to the in-situ tonnes and grade to include diluting materials and allowances for losses that might occur when the material is mined
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1
For SEC Industry Guide 7 purposes this study
must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate,
at the time of reporting, that economic extraction is justified.
2
SEC Industry Guide 7 does not require designation
of a qualified person.
USE OF NAMES
In this Annual Report on Form 10-K, unless the context otherwise
requires, the terms "we", "us", "our", "Corvus", "Corvus Gold Inc.", the "Company"
or the "Corporation" refer to Corvus Gold Inc. and its subsidiaries.
CURRENCY AND EXCHANGE RATES
All dollar amounts in this Annual Report are expressed in Canadian
dollars unless otherwise indicated. The Company’s accounts are maintained in Canadian dollars and the Company’s financial
statements are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “U.S.
dollars”, “USD” or to “US$” are to United States dollars.
The following table sets forth the rate of exchange for the Canadian
dollar, expressed in United States dollars in effect at the end of the periods indicated, the average of exchange rates in effect
during such periods, and the high and low exchange rates during such periods based on the noon rate of exchange as reported by
the Bank of Canada for conversion of Canadian dollars into United States dollars.
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Year Ended May 31
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Canadian Dollars to U.S. Dollars
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2017
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2016
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2015
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Rate at end of period
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0.7407
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0.7634
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0.8022
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Average rate for period
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0.7559
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0.7567
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0.8617
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High for period
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0.7877
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0.8191
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0.9404
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Low for period
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0.7276
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|
0.6854
|
|
|
|
0.7811
|
|
Metric Equivalents
For ease of reference, the following factors for converting Imperial
measurements into metric equivalents are provided:
To convert from Imperial
|
To metric
|
Multiply by
|
Acres
|
Hectares
|
0.404686
|
Feet
|
Metres
|
0.30480
|
Miles
|
Kilometres
|
1.609344
|
Tons
|
Tonnes
|
0.907185
|
Ounces (troy)/ton
|
Grams/Tonne
|
34.2857
|
1 mile = 1.609 kilometres
1 acre = 0.405 hectares
2,204.62 pounds = 1 metric ton = 1 tonne
|
2000 pounds (1 short ton) = 0.907 tonnes
1 ounce (troy) = 31.103 grams
1 ounce (troy)/ton = 34.2857 grams/tonne
|
PART I
ITEM 1. BUSINESS
General Corporate Information
We were incorporated under the BCBCA with the name “Corvus
Gold Inc.” on April 13, 2010 as a wholly-owned subsidiary of ITH, with an authorized capital consisting of an unlimited number
of Common Shares. Pursuant to the corporate spin-out of Corvus from ITH by way of a plan of arrangement among ITH, the shareholders
of ITH and Corvus under the BCBCA, effective August 26, 2010, Corvus was spun out as a separate and independent public company,
and each shareholder of ITH received one-half of a Common Share.
We are a reporting issuer in the Canadian Provinces of British Columbia,
Alberta and Ontario and the Common Shares are listed for trading on the TSX under the trading symbol “KOR” and are
quoted for trading on the OTCQX under the symbol “CORVF”.
Our head office is located at Suite 1750 – 700 West Pender
Street, Vancouver, British Columbia, Canada V6C 1G8, and our registered and records office is located at Suite 2200, HSBC Building,
885 West Georgia Street, Vancouver, British Columbia V6C 3E8.
We are a mineral exploration company engaged in the acquisition,
exploration and development of mineral properties. We currently hold or have the right to acquire interests in the NBP and the
Mother Lode Property in Nevada. We are in the exploration stage as our Properties have not yet reached commercial production and
our Properties are not beyond the preliminary exploration stage. All work presently planned by us is directed at defining mineralization
and increasing understanding of the characteristics of, and economics of, that mineralization.
Emerging Growth Company Status
We qualify as an “emerging growth company” as defined
in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as we do not have more than $1,000,000,000 in
annual gross revenue and did not have such amount as of May 31, 2017, being the last day of our last fiscal year.
We may lose our status as an emerging growth company on the last
day of our fiscal year during which (i) our annual gross revenue exceeds $1,000,000,000 or (ii) we issue more than $1,000,000,000
in non-convertible debt in a three-year period. We will lose our status as an emerging growth company if at any time we are deemed
to be a large accelerated filer. We will lose our status as an emerging growth company on the last day of our fiscal year following
the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement
(August 28, 2019).
As an emerging growth company, we are exempt from Section 404(b)
of the Sarbanes-Oxley Act of 2002 and Section 14A (a) and (b) of the Exchange Act. Such sections are provided below:
|
·
|
Section 404(b) of the Sarbanes-Oxley Act of 2002 requires a public company’s auditor to attest
to, and report on, management's assessment of its internal controls.
|
|
·
|
Sections 14A(a) and (b) of the Exchange Act, implemented by Section 951 of the Dodd-Frank Act,
require companies to hold shareholder advisory votes on executive compensation and golden parachute compensation.
|
As long as we qualify as an emerging growth company, we will not
be required to comply with the requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the
Exchange Act, we may however determine to voluntarily comply with such requirements in our discretion.
Geographic and Segment Information
We have one reportable segment, consisting of evaluation, acquisition
and exploration activities which are focused principally in Nevada, U.S.A. We reported no material revenues during 2017 and 2016.
Intercorporate Relationships
We have five material subsidiaries:
|
(a)
|
Corvus Nevada, a corporation incorporated in Nevada on April 9, 2007,
which holds all of our properties in Nevada and is 100% owned by Corvus USA;
|
|
(b)
|
Raven Gold, a corporation incorporated in Alaska on July 2, 2009,
which held all of our properties in Alaska and will hold any future properties in Alaska and is 100% owned by Corvus USA;
|
|
(c)
|
SoN Land & Water, LLC, a limited liability company incorporated
in Nevada on July 25, 2013, of which Corvus Nevada is the sole member; and
|
|
(d)
|
Corvus USA, a corporation incorporated in Nevada on February 25,
2013, which holds all of the shares of Corvus Nevada and Raven Gold and is 100% owned by Corvus.
|
|
(e)
|
Mother Lode Mining Company, a limited liability company incorporated
in Nevada on March 14, 2014 of which Corvus Nevada is the sole member.
|
The following corporate chart sets forth all of our material subsidiaries:
Recent Corporate History
In May 2010, the board of directors of ITH approved a proposal to
undertake a spin-out transaction to segregate its then existing assets into two separate and highly focused companies.
The spin-out transaction pursuant to the Arrangement was approved
by the shareholders of ITH on August 12, 2010, and the final order of the Supreme Court of British Columbia approving the plan
of arrangement necessary to implement the transaction was received on August 20, 2010. The effective date of the Arrangement was
August 26, 2010 and the Common Shares commenced trading on the TSX on August 30, 2010. Under the terms of the Arrangement, ITH
retained all assets relating to the Livengood gold project in Alaska, together with approximately $33 million in working capital,
while Corvus received all of ITH’s other existing Alaska and Nevada assets (including the shares of Corvus Nevada), together
with approximately $3.3 million in working capital.
Following the completion of the Arrangement, Corvus held four advanced
to early stage exploration projects in Alaska (Chisna, Terra, LMS and West Pogo) and the advanced exploration stage NBP in Nevada.
Our primary focus is to leverage our exploration expertise to discover major new gold deposits. Furthermore, we intend to try and
build ourselves into a non-operator gold producer with significant carried interests and royalty exposure. To meet this objective,
all of the Alaskan projects received by us in the Arrangement have been sold.
We also received from ITH a 100% interest in the NBP, which is Corvus’
sole material mineral property and the primary focus of our exploration activities. Since the acquisition of the NBP from ITH,
we have expanded the NBP by entering into additional leases of patented lode mining claims and staking additional unpatented lode
mining claims.
In June 2017, Corvus acquired 100% of the Mother Lode Property from
Goldcorp USA, Inc. and staked two additional adjacent claim blocks to the Mother Lode Property. The Mother Lode Property is in
close proximity to Corvus Gold’s NBP with potential as a large satellite operation. The Company does not consider the Mother
Lode Property to be a material property to the Company.
Business Operations
Summary
We currently hold, or have rights to acquire, interests in two mineral
properties in Nevada, USA, the NBP and the Mother Lode Property. The Company’s objective with respect to such Properties
are to evaluate the potential of the Properties and to determine if spending additional funds is warranted (in which case, an appropriate
program to advance the Properties to the next decision point will be formulated and, depending upon available funds, implemented
by us) or not (in which case the Properties may be returned by us to the optionor/lessor or, in respect of properties in which
we are earning an interest, be returned to the optionor thereof). Our present focus is on the exploration and, if warranted, development
of the NBP, located 15 kilometres north of Beatty, Nevada, and the Mother Lode Property, located in the Bare Mountain District,
approximately 10 kilometres from the NBP. Corvus also staked two additional claim blocks, the MN claim group, to the northwest
of the Mother Lode claims, and the ME claim group, to the east of the Mother Lode claims. The progress on, and results of, the
work programs on our material mineral property is set out under Part I, Item 2, Properties in this Annual Report. We continue to
assess additional mineral property acquisitions but do not presently contemplate entering into any such agreements, other than
in connection with the NBP and the Mother Lode Property.
We are in the exploration stage and do not mine,
produce or sell any mineral products at this time. With respect to the NBP, our present preliminary studies indicate that any production
would be through a combination of heap leaching some of the mineralization (and treatment of the leaching solution to recover gold
and silver) and processing other portions of the mineralization through a gravity concentration-cyanide leach milling process.
We intend to initiate an exploration and, if warranted, a resource development program at the Mother Lode Property in the summer
of 2017.
Availability of Raw Materials
All of the raw materials we require to carry on
our business are readily available through normal supply or business contracting channels in Canada and the United States. Since
commencing current operations in August 2010, we have been able to secure the appropriate personnel, equipment and supplies required
to conduct our contemplated programs. As a result, we do not believe that we will experience any shortages of required personnel,
equipment or supplies in the foreseeable future.
Dependence on a Few Contracts
Our business is not substantially dependent on any contract such
as a contract to sell the major part of the Company’s products or services or to purchase the major part of its requirements
for goods, services or raw materials, or on any franchise or license or other agreement to use a patent, formula, trade secret,
process or trade name upon which its business depends. Rather, our ability to continue making the holding, assessment, lease and
option payments necessary to maintain our interest in our mineral projects is of primary concern. We do not presently anticipate
any difficulties in this regard in the current financial year.
Competitive Conditions
There is aggressive competition within the minerals industry to
discover and acquire mineral properties considered to have commercial potential. We compete for the opportunity to participate
in promising exploration projects with other entities. In addition, we compete with others in efforts to obtain financing to acquire
and explore mineral properties, acquire and utilize mineral exploration equipment and hire qualified mineral exploration personnel.
We may compete with other junior mining companies for mining claims in regions adjacent to our existing claims, or in other parts
of the world should we dedicate resources to doing so in the future. These companies may be better capitalized than us and we may
have difficulty in expanding our holdings through the staking or acquisition of additional mining claims or other mineral tenures.
In competing for qualified mineral exploration personnel, we may
be required to pay compensation or benefits relatively higher than those paid in the past, and the availability of qualified personnel
may be limited in high-demand mining periods, such as was in past years when the price of gold was higher than it is now.
Government Regulation
The exploration and development of a mining prospect is subject
to regulation by a number of federal and state government authorities. These include the United States Environmental Protection
Agency (“EPA”) and the United States Bureau of Land Management (“BLM”) as well as the various state environmental
protection agencies. The regulations address many environmental issues relating to air, soil and water contamination and apply
to many mining related activities including exploration, mine construction, mineral extraction, ore milling, water use, waste disposal
and use of toxic substances. In addition, we are subject to regulations relating to labor standards, occupational health and safety,
mine safety, general land use, export of minerals and taxation. Many of the regulations require permits or licenses to be obtained
and the filing of Notices of Intent and Plans of Operations, the absence of which or inability to obtain will adversely affect
the ability for us to conduct our exploration, development and operation activities. The failure to comply with the regulations
and terms of permits and licenses may result in fines or other penalties or in revocation of a permit or license or loss of a prospect.
Federal
On lands owned by the United States, mining rights are governed
by the General Mining Law of 1872, as amended, which allows the location of mining claims on certain federal lands upon the discovery
of a valuable mineral deposit and compliance with location requirements. The exploration of mining properties and development and
operation of mines is governed by both federal and state laws. Federal laws that govern mining claim location and maintenance and
mining operations on federal lands are generally administered by the BLM. Additional federal laws, governing mine safety and health,
also apply. State laws also require various permits and approvals before exploration, development or production operations can
begin. Among other things, a reclamation plan must typically be prepared and approved, with bonding in the amount of projected
reclamation costs. The bond is used to ensure that proper reclamation takes place, and the bond will not be released until that
time. Local jurisdictions may also impose permitting requirements (such as conditional use permits or zoning approvals).
Nevada
In Nevada, initial stage surface exploration does not require any
permits. Notice-level exploration permits (less than 5 acres of disturbance) are required (through the BLM) for the NBP to allow
for drilling. More extensive disturbance required the application for a receipt of a “Plan of Operations” from the
BLM. In May 2013, Corvus obtained an amended Plan of Operations allowing 100 acres of surface disturbance in the public lands portion
of the NBP, which is considered sufficient by us for our currently proposed 2016-2017 drilling and characterization program. We
also applied for, and received in August 2013, a Notice of Intent for disturbance of an additional 1.3 acres outside the currently
defined NBP area in order to allow us to drill water monitor wells and geotechnical soil investigations outside the NBP area. This
Notice of Intent has been reviewed and extended until May 9, 2019 by BLM. In June of 2015, the Company applied for, and received
a Notice of Intent which allowed an additional 2.1 acres of disturbance for exploration of the Eastern Steam-heated Alteration
zone, outside of the NBP permit area. On December 7, 2015, a decision allowing the increase in disturbance area to 4.8 acres in
the Eastern Steam-heated Alteration zone was received from BLM. As of May 31, 2017, the Company had posted with the BLM, as security
for the reclamation obligations, a Surety Bond of US$362,597. In general, exploration activities in Nevada can be carried out on
a year-round basis. Mining is conducted in Nevada on a year round basis, both open pit and underground.
In Nevada, we are also required to post bonds with the State of
Nevada to secure our environmental and reclamation obligations on private land, with amount of such bonds reflecting the level
of rehabilitation anticipated by the then proposed activities. As at May 31, 2017, the Company had posted with Nevada Division
of Minerals in the State of Nevada, as security for these reclamation obligations, a Surety Bond of US$209,070.
In June 2013, formal meetings were held with officials of both the
Nevada Department of Environmental Protection (“NDEP”) and the BLM to discuss the design criteria for the environmental
baseline studies that will be required to support the development of a Plan of Operation and other permit applications necessary
to enable any mining at or production from the NBP. In January 2014, Corvus Nevada executed a Memorandum of Understanding (“MOU”)
with the Tonopah Office of the BLM for definition of baseline characterization requirements and development of a mining plan of
operations at the NBP. Characterization plans for hydro-geologic modeling studies, rock geochemical studies and biologic/wildlife
studies have been developed and have been reviewed by BLM specialists. We are in the process of responding to comments and additional
requirements received from the BLM with respect to such plans.
If we are successful in the future at discovering a commercially
viable mineral deposit on our property interests, then if and when we commence any mineral production, we will also need to comply
with laws that regulate or propose to regulate our mining activities, including the management and handling of raw materials, disposal,
storage and management of hazardous and solid waste, the safety of our employees and post-mining land reclamation.
We cannot predict the impact of new or changed laws, regulations
or permitting requirements, or changes in the ways that such laws, regulations or permitting requirements are enforced, interpreted
or administered. Health, safety and environmental laws and regulations are complex, are subject to change and have become more
stringent over time. It is possible that greater than anticipated health, safety and environmental capital expenditures or reclamation
and closure expenditures will be required in the future. We expect continued government and public emphasis on environmental issues
will result in increased future investments for environmental controls at our operations.
Environmental Regulation
Our mineral projects are subject to various federal, state and local
laws and regulations governing protection of the environment. These laws are continually changing and, in general, are becoming
more restrictive. The development, operation, closure, and reclamation of mining projects in the United States requires numerous
notifications, permits, authorizations, and public agency decisions. Compliance with environmental and related laws and regulations
requires us to obtain permits issued by regulatory agencies, and to file various reports and keep records of our operations. Certain
of these permits require periodic renewal or review of their conditions and may be subject to a public review process during which
opposition to our proposed operations may be encountered. We are currently operating under various permits for activities connected
to mineral exploration, reclamation, and environmental considerations. Our policy is to conduct business in a way that safeguards
public health and the environment. We believe that our operations are conducted in material compliance with applicable laws and
regulations.
Changes to current local, state or federal laws and regulations
in the jurisdictions where we operate could require additional capital expenditures and increased operating and/or reclamation
costs. Although we are unable to predict what additional legislation, if any, might be proposed or enacted, additional regulatory
requirements could impact the economics of our projects.
U.S.
Federal Laws
The Comprehensive Environmental, Response, Compensation, and Liability
Act (“CERCLA”), and comparable state statutes, impose strict, joint and several liability on current and former owners
and operators of sites and on persons who disposed of or arranged for the disposal of hazardous substances found at such sites.
It is not uncommon for the government to file claims requiring cleanup actions, demands for reimbursement for government-incurred
cleanup costs, or natural resource damages, or for neighboring landowners and other third parties to file claims for personal injury
and property damage allegedly caused by hazardous substances released into the environment. The Federal Resource Conservation and
Recovery Act (“RCRA”), and comparable state statutes, govern the disposal of solid waste and hazardous waste and authorize
the imposition of substantial fines and penalties for noncompliance, as well as requirements for corrective actions. CERCLA, RCRA
and comparable state statutes can impose liability for clean-up of sites and disposal of substances found on exploration, mining
and processing sites long after activities on such sites have been completed.
The Clean Air Act (“CAA”), as amended, restricts the
emission of air pollutants from many sources, including mining and processing activities. Any future mining operations by the Company
may produce air emissions, including fugitive dust and other air pollutants from stationary equipment, storage facilities and the
use of mobile sources such as trucks and heavy construction equipment, which are subject to review, monitoring and/or control requirements
under the CAA and state air quality laws. New facilities may be required to obtain permits before work can begin, and existing
facilities may be required to incur capital costs in order to remain in compliance. In addition, permitting rules may impose limitations
on our production levels or result in additional capital expenditures in order to comply with the rules.
The National Environmental Policy Act (“NEPA”) requires
federal agencies to integrate environmental considerations into their decision-making processes by evaluating the environmental
impacts of their proposed actions, including issuance of permits to mining facilities, and assessing alternatives to those actions.
If a proposed action could significantly affect the environment, the agency must prepare a detailed statement known as an Environmental
Impact Statement (“EIS”). The United States Environmental Protection Agency (“EPA”), other federal agencies,
and any interested third parties will review and comment on the scoping of the EIS and the adequacy of and findings set forth in
the draft and final EIS. This process can cause delays in issuance of required permits or result in changes to a project to mitigate
its potential environmental impacts, which can in turn impact the economic feasibility of a proposed project.
The Clean Water Act (“CWA”), and comparable state statutes,
impose restrictions and controls on the discharge of pollutants into waters of the United States. The discharge of pollutants into
regulated waters is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency.
The CWA regulates storm water mining facilities and requires a storm water discharge permit for certain activities. Such a permit
requires the regulated facility to monitor and sample storm water run-off from its operations. The CWA and regulations implemented
thereunder also prohibit discharges of dredged and fill material in wetlands and other waters of the United States unless authorized
by an appropriately issued permit. The CWA and comparable state statutes provide for civil, criminal and administrative penalties
for unauthorized discharges of pollutants and impose liability on parties responsible for those discharges for the costs of cleaning
up any environmental damage caused by the release and for natural resource damages resulting from the release.
The Safe Drinking Water Act (“SDWA”) and the Underground
Injection Control (“UIC”) program promulgated thereunder, regulate the drilling and operation of subsurface injection
wells. The EPA directly administers the UIC program in some states and in others the responsibility for the program has been delegated
to the state. The program requires that a permit be obtained before drilling a disposal or injection well. Violation of these regulations
and/or contamination of groundwater by mining related activities may result in fines, penalties, and remediation costs, among other
sanctions and liabilities under the SWDA and state laws. In addition, third party claims may be filed by landowners and other parties
claiming damages for alternative water supplies, property damages, and bodily injury.
Nevada
Other Nevada regulations govern operating and design standards for
the construction and operation of any source of air contamination and landfill operations. Any changes to these laws and regulations
could have an adverse impact on our financial performance and results of operations by, for example, requiring changes to operating
constraints, technical criteria, fees or surety requirements.
Key Personnel
As at June 29, 2017, we have 2 full time employees and a part-time
consultant. Our operations are managed by our officers with oversight by the Directors. We engage geological, metallurgical, and
engineering consultants from time to time as required to assist in evaluating our property interests and recommending and conducting
work programs.
Gold Price History
The price of gold is volatile and is affected by numerous factors
all of which are beyond our control, such as the sale or purchase of gold by various central banks and financial institutions,
inflation, recession, fluctuation in the relative values of the U.S. dollar and foreign currencies, changes in global and regional
gold demand and the political and economic conditions.
The following table presents the high, low and average afternoon
fixed prices in U.S. dollars for an ounce of gold on the London Bullion Market over the past five calendar years:
Year
|
|
High
|
|
Low
|
|
Average
|
|
|
US$
|
|
US$
|
|
US$
|
2012
|
|
|
1,792
|
|
|
|
1,540
|
|
|
|
1,669
|
|
2013
|
|
|
1,693
|
|
|
|
1,192
|
|
|
|
1,411
|
|
2014
|
|
|
1,385
|
|
|
|
1,142
|
|
|
|
1,267
|
|
2015
|
|
|
1,296
|
|
|
|
1,049
|
|
|
|
1,160
|
|
2016
|
|
|
1,366
|
|
|
|
1,077
|
|
|
|
1,251
|
|
Data Source: www.kitco.com
Seasonality
The NBP and the Mother Lode Property are not subject to material
restrictions on our operations due to seasonality.
Available Information
We make available, free of charge, on or through our Internet website,
at
www.corvusgold.com,
our Annual Report on Form 10-K, our quarterly reports on Form 10-Q and our current reports
on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. Our Internet
website and the information contained therein or connected thereto are not intended to be, and are not incorporated into this Annual
Report on Form 10-K.
ITEM 1A. RISK FACTORS
You should carefully consider the following risk factors in addition
to the other information included in this Annual Report on Form 10-K. Each of these risk factors could materially and adversely
affect our business, operating results and financial condition, as well as materially and adversely affect the value of an investment
in our Common Shares. The risks described below are not the only ones facing the Company. Additional risks that we are not presently
aware of, or that we currently believe are immaterial, may also adversely affect our business, operating results and financial
condition. We cannot assure you that we will successfully address these risks or that other unknown risks exist that may affect
our business.
Risks Related To Our Company
We will require significant additional capital to fund our
business plan.
We will be required to expend significant funds to determine if
proven and probable mineral reserves exist at our Properties, to continue exploration and if warranted, develop our existing Properties
and to identify and acquire additional properties to diversify our Properties portfolio. We have spent and will be required to
continue to expend significant amounts of capital for drilling, geological and geochemical analysis, assaying and feasibility studies
with regard to the results of our exploration. We may not benefit from some of these investments if we are unable to identify commercially
exploitable mineralized material.
Our ability to obtain necessary funding for these purposes, in turn,
depends upon a number of factors, including the status of the national and worldwide economy and the price of gold and silver.
Capital markets worldwide have been adversely affected by substantial losses by financial institutions, caused by investments in
asset-backed securities. We may not be successful in obtaining the required financing or, if we can obtain such financing, such
financing may not be on terms that are favorable to us. Failure to obtain such additional financing could result in delay or indefinite
postponement of further mining operations or exploration and development and the possible partial or total loss of our potential
interest in our Properties.
We have a limited operating history on which to base an evaluation
of our business and prospects.
Since our inception we have had no revenue from operations. We have
no history of producing metals from any of our properties. Our Properties are exploration stage Properties. Advancing properties
from exploration into the development stage requires significant capital and time, and successful commercial production from a
property, if any, will be subject to completing feasibility studies, permitting and construction of the mine, processing plants,
roads, and other related works and infrastructure. As a result, we are subject to all of the risks associated with developing and
establishing new mining operations and business enterprises including:
|
·
|
completion of feasibility studies to verify reserves and commercial viability, including the ability
to find sufficient gold/silver mineral reserves to support a commercial mining operation;
|
|
·
|
the timing and cost, which can be considerable, of further exploration, preparing feasibility studies,
permitting and construction of infrastructure, mining and processing facilities;
|
|
·
|
the availability and costs of drill equipment, exploration personnel, skilled labor and mining
and processing equipment, if required;
|
|
·
|
the availability and cost of appropriate smelting and/or refining arrangements, if required;
|
|
·
|
compliance with environmental and other governmental approval and permit requirements;
|
|
·
|
the availability of funds to finance exploration, development and construction activities, as warranted;
|
|
·
|
potential opposition from non-governmental organizations, environmental groups, local groups or
local inhabitants which may delay or prevent development activities;
|
|
·
|
potential increases in exploration, construction and operating costs due to changes in the cost
of fuel, power, materials and supplies; and
|
|
·
|
potential shortages of mineral processing, construction and other facilities related supplies.
|
The costs, timing and complexities of exploration, development and
construction activities may be increased by the location of our Properties and demand by other mineral exploration and mining companies.
It is common in exploration programs to experience unexpected problems and delays during drill programs and, if commenced, development,
construction and mine start-up. Accordingly, our activities may not result in profitable mining operations and we may not succeed
in establishing mining operations or profitably producing metals at any of our properties.
We have a history of losses and expect to continue to incur
losses in the future.
We have incurred losses since inception, have negative cash flow
from operating activities and expect to continue to incur losses in the future. We incurred the following losses from operations
during each of the following periods:
|
·
|
$(6,730,817)
for the year ended May 31, 2017; and
|
|
·
|
$(7,004,710)
for the year ended May 31, 2016.
|
We expect to continue to incur losses unless and until such time
as one of our Properties enters into commercial production and generate sufficient revenues to fund continuing operations. We
recognize that if we are unable to generate significant revenues from mining operations and dispositions of our properties, we
will not be able to earn profits or continue operations. At this early stage of our operation, we also expect to face the risks,
uncertainties, expenses and difficulties frequently encountered by companies at the start up stage of their business development.
We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a
materially adverse effect on our financial condition.
Increased costs could affect our financial condition.
We anticipate that costs at our projects and Properties that we
may explore or develop, will frequently be subject to variation from one year to the next due to a number of factors, such as changing
grade, metallurgy and revisions to mine plans, if any, in response to the physical shape and location of the body. In addition,
costs are affected by the price of commodities such as fuel, steel, rubber, and electricity. Such commodities are at times subject
to volatile price movements, including increases that could make production at certain operations less profitable. A material increase
in costs at any significant location could have a significant effect on our profitability.
Risks Related to Mining and Exploration
Our NBP and the Mother Lode Property are in the exploration
stage.
The NBP has estimated mineral resources identified, but there has
not been a mineral reserve estimation in accordance with NI 43-101 or SEC Industry Guide 7. Estimates of gold mineralization at
the Mother Lode Property are available in historical data obtained during the property purchase, but verification those data still
needs to be performed, before it can then provide the basis of a resources estimate. There is no assurance that we can establish
the existence of any mineral reserves on the NBP or the Mother Lode Property in commercially exploitable quantities. Until we can
do so, we cannot earn any revenues from the properties and if we do not do so we will lose all of the funds that we expend on exploration.
If we do not discover any mineral reserves in a commercially exploitable quantity, the exploration component of our business could
fail.
We have not established that our NBP or Mother Lode Property contains
any mineral reserve according to recognized reserve guidelines, nor can there be any assurance that we will be able to do so. A
mineral reserve is defined by the SEC in its Industry Guide 7 as that part of a mineral deposit, which could be economically and
legally extracted or produced at the time of the reserve determination. The probability of an individual prospect ever having a
“reserve” that meets the requirements of the SEC’s Industry Guide 7 is extremely remote; in all probability our
mineral Properties do not contain any “reserves” and any funds that we spend on exploration could be lost. Even if
we do eventually discover a mineral reserve on our Properties, there can be no assurance that they can be developed into producing
mines and extract those minerals. Both mineral exploration and development involve a high degree of risk and few mineral properties
which are explored are ultimately developed into producing mines.
The commercial viability of an established mineral deposit will
depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity
of the mineral deposit to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices.
Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral
deposit unprofitable.
The nature of mineral exploration and production activities
involves a high degree of risk and the possibility of uninsured losses
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Exploration for and the production of minerals is highly speculative
and involves much greater risk than many other businesses. Most exploration programs do not result in the discovery of mineralization,
and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. Our operations are, and
any future development or mining operations we may conduct will be, subject to all of the operating hazards and risks normally
incident to exploring for and development of mineral properties, such as, but not limited to:
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economically
insufficient mineralized material;
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fluctuation
in production costs that make mining uneconomical;
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unanticipated
variations in grade and other geologic problems;
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difficult
surface or underground conditions;
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metallurgic
and other processing problems;
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mechanical
and equipment performance problems;
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failure
of pit walls or dams;
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unusual
or unexpected rock formations;
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personal
injury, fire, flooding, cave-ins and landslides; and
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decrease
in the value of mineralized material due to lower gold and/or silver prices.
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Any of these risks can materially and adversely affect, among other
things, the development of properties, production quantities and rates, costs and expenditures, potential revenues and production
dates. We currently have very limited insurance to guard against some of these risks. If we determine that capitalized costs associated
with any of our mineral interests are not likely to be recovered, we would incur a write-down of our investment in these interests.
All of these factors may result in losses in relation to amounts spent which are not recoverable, or result in additional expenses.
We have no history of producing metals from our current mineral
properties and there can be no assurance that we will successfully establish mining operations or profitably produce precious metals.
We have no history of producing metals from our current mineral
Properties. We do not produce gold or silver and do not currently generate operating earnings. While we seek to move our project
and Properties into production, such efforts will be subject to all of the risks associated with establishing new mining operations
and business enterprises, including:
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the timing and cost, which are considerable, of the construction of mining and processing facilities;
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the ability to find sufficient gold/silver reserves to support a profitable mining operation;
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the availability and costs of skilled labor and mining equipment;
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compliance with environmental and other governmental approval and permit requirements;
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the availability of funds to finance construction and development activities;
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potential opposition from non-governmental organizations, environmental groups, local groups or
local inhabitants that may delay or prevent development activities; and
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potential increases in construction and operating costs due to changes in the cost of labor, fuel,
power, materials and supplies.
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It is common in new mining operations to experience unexpected problems
and delays during construction, development and mine start-up. In addition, our management will need to be expanded. This could
result in delays in the commencement of mineral production and increased costs of production. Accordingly, we cannot assure you
that our activities will result in profitable mining operations or that we will successfully establish mining operations.
Estimates of mineral resources are subject to evaluation uncertainties
that could result in project failure.
Our exploration and future mining operations, if any, are and would
be faced with risks associated with being able to accurately predict the quantity and quality of mineral resources/reserves within
the earth using statistical sampling techniques. Estimates of mineral resource/reserve on our Properties would be made using samples
obtained from appropriately placed trenches, test pits and underground workings and intelligently designed drilling. There is an
inherent variability of assays between check and duplicate samples taken adjacent to each other and between sampling points that
cannot be reasonably eliminated. Additionally, there also may be unknown geologic details that have not been identified or correctly
appreciated at the current level of accumulated knowledge about our Properties. This could result in uncertainties that cannot
be reasonably eliminated from the process of estimating mineral resources/reserves. If these estimates were to prove to be unreliable,
we could implement an exploitation plan that may not lead to commercially viable operations in the future.
Any material changes in mineral resource/reserve estimates
and grades of mineralization will affect the economic viability of placing a property into production and a property’s return
on capital.
As we have not completed feasibility studies on our NBP or Mother
Lode Property and have not commenced actual production, mineral resource estimates may require adjustments or downward revisions.
In addition, the grade ultimately mined, if any, may differ from that indicated by our feasibility studies and drill results. Minerals
recovered in small scale tests may not be duplicated in large scale tests under on-site conditions or in production scale.
The mineral resource estimates contained in this Annual Report have
been determined based on assumed future prices, cut-off grades and operating costs that may prove to be inaccurate. Extended declines
in market prices for gold or silver may render portions of our mineralization and resource estimates uneconomic and result in reduced
reported mineralization or adversely affect any commercial viability determinations we may reach. Any material reductions in estimates
of mineralization, or of our ability to extract this mineralization, could have a material adverse effect on our share price and
the value of our Properties
There are differences in U.S. and Canadian practices for reporting
reserves and resources.
Our mineral resource estimates are not directly comparable to those
made in filings subject to SEC reporting and disclosure requirements, as we generally report mineral reserves and mineral resources
in accordance with Canadian requirements. These requirements are different from the practices used to report mineral reserve and
mineral resource estimates in reports and other materials filed with the SEC. It is Canadian practice to report measured, indicated
and inferred mineral resources, which are generally not permitted in disclosure filed with the SEC by United States issuers. In
the United States, mineralization may not be classified as a “reserve” unless the determination has been made that
the mineralization could be economically and legally produced or extracted at the time the reserve determination is made.
United
States investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be converted
into reserves.
Further, “inferred mineral resources” have a great amount
of uncertainty as to their existence and as to whether they can be mined legally or economically. Disclosure of “contained
ounces” is permitted disclosure under Canadian regulations; however, the SEC only permits issuers to report “resources”
as in place, tonnage and grade without reference to unit measures.
Accordingly, information concerning descriptions of mineralization,
mineral reserves and mineral resources contained in this Annual Report, or in the documents incorporated herein by reference, may
not be comparable to information made public by other United States companies subject to the reporting and disclosure requirements
of the SEC.
Our exploration activities on our properties may not be commercially
successful, which could lead us to abandon our plans to develop our properties and our investments in exploration.
Our long-term success depends on our ability to identify mineral
deposits on our existing Properties and other properties we may acquire, if any, that we can then develop into commercially viable
mining operations. Mineral exploration is highly speculative in nature, involves many risks and is frequently non-productive. These
risks include unusual or unexpected geologic formations, and the inability to obtain suitable or adequate machinery, equipment
or labor. The success of gold, silver and other commodity exploration is determined in part by the following factors
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the
identification of potential mineralization based on surficial analysis;
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availability
of government-granted exploration permits;
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the
quality of our management and our geological and technical expertise; and
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the
capital available for exploration and development work.
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Substantial expenditures are required to establish proven and probable
mineral reserves through drilling and analysis, to develop metallurgical processes to extract metal, and to develop the mining
and processing facilities and infrastructure at any site chosen for mining. Whether a mineral deposit will be commercially viable
depends on a number of factors, which include, without limitation, the particular attributes of the deposit, such as size, grade
and proximity to infrastructure; metal prices, which fluctuate widely; and government regulations, including, without limitation,
regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental
protection. We may invest significant capital and resources in exploration activities and abandon such investments if we are unable
to identify commercially exploitable mineral reserves. The decision to abandon a project may have an adverse effect on the market
value of our securities and the ability to raise future financing.
The volatility of the price of gold could adversely affect
our future operations and, if warranted, our ability to develop our properties
.
The potential for profitability of our operations, the value of
our Properties, the market price of the Common Shares and our ability to raise funding to conduct continued exploration and development,
if warranted, are directly related to the market price of gold and silver. Our decision to put a mine into production and to commit
the funds necessary for that purpose must be made long before the first revenue from production would be received. A decrease in
the price of gold and/or silver may prevent our Properties from being economically mined or result in the write-off of assets whose
value is impaired as a result of lower gold and silver prices. The prices of gold and silver are affected by numerous factors beyond
our control, including inflation, fluctuation of the U.S. dollar and foreign currencies, global and regional demand, the sale of
gold by central banks, and the political and economic conditions of major gold and silver producing countries throughout the world.
The volatility in gold prices is illustrated in the table presented
under the heading “Business – Business Operations – Gold Price History” below.
The volatility of mineral prices represents a substantial risk which
no amount of planning or technical expertise can fully eliminate. In the event gold and/or silver prices decline or remain low
for prolonged periods of time, we might be unable to develop our Properties, which may adversely affect our results of operations,
financial performance and cash flows.
We may not be able to obtain all required permits and licenses
to place any of our properties into production.
Our current and future operations, including development activities
and commencement of production, if warranted, require permits from governmental authorities and such operations are and will be
governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational
health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged
in mineral property exploration and the development or operation of mines and related facilities generally experience increased
costs, and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits.
We cannot predict if all permits which we may require for continued exploration, development or construction of mining facilities
and conduct of mining operations will be obtainable on reasonable terms, if at all. Costs related to applying for and obtaining
permits and licenses may be prohibitive and could delay our planned exploration and development activities. Failure to comply with
applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory
or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment, or remedial actions.
Parties engaged in mining operations may be required to compensate
those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for
violations of applicable laws or regulations. Amendments to current laws, regulations and permits governing operations and activities
of mining companies, or more stringent implementation thereof, could have a material adverse impact on our operations and cause
increases in capital expenditures or production costs or reduction in levels of production at producing properties or require abandonment
or delays in development of new mining properties.
We are subject to significant governmental regulations, which
affect our operations and costs of conducting our business.
Our current and future operations are and will be governed by laws
and regulations, including:
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laws
and regulations governing mineral concession acquisition, prospecting, development, mining and production;
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laws
and regulations related to exports, taxes and fees;
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labor
standards and regulations related to occupational health and mine safety; and
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environmental
standards and regulations related to waste disposal, toxic substances, land use and environmental protection.
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Companies engaged in exploration activities often experience increased
costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits.
Failure to comply with applicable laws, regulations and permits may result in enforcement actions, including the forfeiture of
mineral claims or other mineral tenures, orders issued by regulatory or judicial authorities requiring operations to cease or be
curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or costly remedial
actions. We may be required to compensate those suffering loss or damage by reason of our mineral exploration activities and may
have civil or criminal fines or penalties imposed for violations of such laws, regulations and permits.
Existing and possible future laws, regulations and permits governing
operations and activities of exploration companies, or more stringent implementation, could have a material adverse impact on our
business and cause increases in capital expenditures or require abandonment or delays in exploration.
Our activities are subject to environmental laws and regulations
that may increase our costs of doing business and restrict our operations.
All phases of our operations are subject to environmental regulation
in the jurisdictions in which we operate. Environmental legislation is evolving in a manner which will require stricter standards
and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects
and a heightened degree of responsibility for companies and their officers, directors and employees. These laws address emissions
into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources,
antiquities and endangered species and reclamation of lands disturbed by mining operations. Compliance with environmental laws
and regulations and future changes in these laws and regulations may require significant capital outlays and may cause material
changes or delays in our operations and future activities. It is possible that future changes in these laws or regulations could
have a significant adverse impact on our Properties or some portion of our business, causing us to re-evaluate those activities
at that time.
Legislation has been proposed that would significantly affect
the mining industry.
Members of the United States Congress have repeatedly introduced
bills which would supplant or alter the provisions of the United States General Mining Law of 1872. If enacted, such legislation
could change the cost of holding unpatented mining claims and could significantly impact our ability to develop mineralized material
on unpatented mining claims. Such bills have proposed, among other things, to either eliminate or greatly limit the right to a
mineral patent and to impose a federal royalty on production from unpatented mining claims. Although we cannot predict what legislated
royalties might be, the enactment of these proposed bills could adversely affect the potential for development of unpatented mining
claims and the economics of existing operating mines on federal unpatented mining claims. Passage of such legislation could adversely
affect our financial performance.
Regulations and pending legislation governing issues involving
climate change could result in increased operating costs, which could have a material adverse effect on our business.
A number of governments or governmental bodies have introduced or
are contemplating regulatory changes in response to various climate change interest groups and the potential impact of climate
change. Legislation and increased regulation regarding climate change could impose significant costs on us, our venture partners
and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting
and other costs to comply with such regulations. Any adopted future climate change regulations could also negatively impact our
ability to compete with companies situated in areas not subject to such limitations. Given the emotion, political significance
and uncertainty around the impact of climate change and how it should be dealt with, we cannot predict how legislation and regulation
will affect our financial condition, operating performance and ability to compete. Furthermore, even without such regulation, increased
awareness and any adverse publicity in the global marketplace about potential impacts on climate change by us or other companies
in our industry could harm our reputation. The potential physical impacts of climate change on our operations are highly uncertain,
and would be particular to the geographic circumstances in areas in which we operate. These may include changes in rainfall and
storm patterns and intensities, water shortages, changing sea levels and changing temperatures. These impacts may adversely impact
the cost, production and financial performance of our operations.
Land reclamation requirements for our properties may be burdensome
and expensive.
Although variable depending on location and the governing authority,
land reclamation requirements are generally imposed on mineral exploration companies (as well as companies with mining operations)
in order to minimize long term effects of land disturbance.
Reclamation may include requirements to:
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control
dispersion of potentially deleterious effluents;
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treat
ground and surface water to drinking water standards; and
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reasonably
re-establish pre-disturbance land forms and vegetation.
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In order to carry out reclamation obligations imposed on us in connection
with our potential development activities, we must allocate financial resources that might otherwise be spent on further exploration
and development programs. We plan to set up a provision for our reclamation obligations on our Properties, as appropriate, but
this provision may not be adequate. If we are required to carry out unanticipated reclamation work, our financial position could
be adversely affected.
We face intense competition in the mining industry.
The mining industry is intensely competitive in all of its phases.
As a result of this competition, some of which is with large established mining companies with substantial capabilities and with
greater financial and technical resources than ours, we may be unable to acquire additional attractive mining claims or financing
on terms we consider acceptable. We also compete with other mining companies in the recruitment and retention of qualified managerial
and technical employees. If we are unable to successfully compete for qualified employees, our exploration and development programs
may be slowed down or suspended. We compete with other precious metal companies for capital. If we are unable to raise sufficient
capital, our exploration and development programs may be jeopardized or we may not be able to acquire, develop or operate additional
precious metal projects.
A shortage of equipment and supplies could adversely affect
our ability to operate our business.
We are dependent on various supplies and equipment to carry out
our mining exploration and, if warranted, development operations. The shortage of such supplies, equipment and parts could have
a material adverse effect on our ability to carry out our operations and therefore limit, or increase the cost of, production.
Joint ventures and other partnerships may expose us to risks.
We may enter into joint ventures or partnership arrangements with
other parties in relation to the exploration, development and production of a certain portion of the NBP and the Mother Lode Property
in which we have an interest. Joint ventures can often require unanimous approval of the parties to the joint venture or their
representatives for certain fundamental decisions such as an increase or reduction of registered capital, merger, division, dissolution,
amendments of constating documents, and the pledge of joint venture assets, which means that each joint venture party may have
a veto right with respect to such decisions which could lead to a deadlock in the operations of the joint venture. Further, we
may be unable to exert control over strategic decisions made in respect of such properties. Any failure of such other companies
to meet their obligations to us or to third parties, or any disputes with respect to the parties’ respective rights and obligations,
could have a material adverse effect on the joint ventures or their properties and therefore could have a material adverse effect
on our results of operations, financial performance, cash flows and the price of the Common Shares.
We may experience difficulty attracting and retaining qualified
management to meet the needs of our anticipated growth, and the failure to manage our growth effectively could have a material
adverse effect on our business and financial condition.
We are dependent on a relatively small number of key employees,
including our President and Chief Executive Officer and our Chief Operating Officer. The loss of any officer could have an adverse
effect on us. We have no life insurance on any individual, and we may be unable to hire a suitable replacement for them on favorable
terms, should that become necessary.
It may be difficult to enforce judgments or bring actions
outside the United States against us and certain of our directors.
We are a Canadian corporation and certain of our Directors are neither
citizens nor residents of the United States. A substantial part of the assets of several of these persons, are located outside
the United States. As a result, it may be difficult or impossible for an investor:
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to
enforce in courts outside the United States judgments obtained in United States courts based upon the civil liability provisions
of United States federal securities laws against these persons and the Company; or
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to
bring in courts outside the United States an original action to enforce liabilities based upon United States federal securities
laws against these persons and the Company.
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Our results of operations could be affected by currency fluctuations.
Our Properties are located in the United States and most costs associated
with this property are paid in U.S. dollars. There can be significant swings in the exchange rate between the U.S. and Canadian
dollar. There are no plans at this time to hedge against any exchange rate fluctuations in currencies.
Title to our properties may be subject to other claims, which
could affect our Properties rights and claims.
There are risks that title to our property may be challenged or
impugned. Our current Properties are located in Nevada and may be subject to prior unrecorded agreements or transfers or native
land claims and title may be affected by undetected defects. There may be valid challenges to the title of our Properties which,
if successful, could impair development and/or operations. This is particularly the case in respect of those portions of the our
Properties in which we hold our interest solely through a lease with the claim holders, as such interest is substantially based
on contract and has been subject to a number of assignments (as opposed to a direct interest in the property).
Several of the mineral rights to our Properties consist of “unpatented”
lode mining claims created and maintained in accordance with the United States General Mining Law of 1872. Unpatented mining claims
are unique property interests, and are generally considered to be subject to greater title risk than other real property interests
because the validity of unpatented mining claims is often uncertain. This uncertainty arises, in part, out of the complex federal
and state laws and regulations under the United States General Mining Law of 1872. Also, unpatented mining claims are always subject
to possible challenges by third parties or validity contests by the federal government. The validity of an unpatented lode mining
or mill site claim, in terms of both its location and its maintenance, is dependent on strict compliance with a complex body of
U.S. federal and state statutory and decisional law. In addition, there are few public records that definitively determine the
issues of validity and ownership of unpatented mining claims. Should the federal government impose a royalty or additional tax
burdens on the portion of the property that lie within public lands, the resulting mining operations could be seriously impacted,
depending upon the type and amount of the burden.
We may be unable to secure surface access or purchase required
surface rights.
Although the Company acquires the rights to some or all of the minerals
in the ground subject to the mineral tenures that it acquires, or has a right to acquire, in most cases it does not thereby acquire
any rights to, or ownership of, the surface to the areas covered by such mineral tenures. In such cases, applicable mining laws
usually provide for rights of access to the surface for the purpose of carrying on mining activities, however, the enforcement
of such rights through the courts can be costly and time consuming. It is necessary to negotiate surface access or to purchase
the surface rights if long-term access is required. There can be no guarantee that, despite having the right at law to access the
surface and carry on mining activities, we will be able to negotiate satisfactory agreements with any such existing landowners/occupiers
for such access or purchase of such surface rights, and therefore we may be unable to carry out planned mining activities. In addition,
in circumstances where such access is denied, or no agreement can be reached, we may need to rely on the assistance of local officials
or the courts in such jurisdiction the outcomes of which cannot be predicted with any certainty. Our inability to secure surface
access or purchase required surface rights could materially and adversely affect our timing, cost or overall ability to develop
any mineral deposits we may locate.
Our properties and operations may be subject to litigation
or other claims.
From time to time our Properties or operations may be subject to
disputes which may result in litigation or other legal claims. We may be required to assert or defend against these claims which
will divert resources and management time from operations. The costs of these claims or adverse filings may have a material effect
on our business and results of operations.
We do not currently insure against all the risks and hazards
of mineral exploration, development and mining operations.
Exploration, development and mining operations involve various hazards,
including environmental hazards, industrial accidents, metallurgical and other processing problems, unusual or unexpected rock
formations, structural cave-ins or slides, flooding, fires, metal losses and periodic interruptions due to inclement or hazardous
weather conditions. These risks could result in damage to or destruction of mineral properties, facilities or other property, personal
injury, environmental damage, delays in operations, increased cost of operations, monetary losses and possible legal liability.
We may not be able to obtain insurance to cover these risks at economically feasible premiums or at all. We may elect not to insure
where premium costs are disproportionate to our perception of the relevant risks. The payment of such insurance premiums and of
such liabilities would reduce the funds available for exploration and production activities.
Risks Related to the Common Shares
We believe that we may be a “passive foreign investment
company” for the current taxable year which may result in materially adverse United States federal income tax consequences
for United States investors.
We generally will be designated as a “passive foreign investment
company” under the meaning of Section 1297 of the United States Internal Revenue Code of 1986, as amended (a “PFIC”)
if, for a tax year, (a) 75% or more of our gross income for such year is “passive income” (generally, dividends, interest,
rents, royalties, and gains from the disposition of assets producing passive income) or (b) if at least 50% or more of the value
of our assets produce, or are held for the production of, passive income, based on the quarterly average of the fair market value
of such assets. United States shareholders should be aware that we believe we were classified as a PFIC during our tax year ended
May 31, 2017, and based on current business plans and financial expectations, believe that we may be a PFIC for the current and
future taxable years. If we are a PFIC for any year during a U.S. shareholder’s holding period, then such U.S. shareholder
generally will be required to treat any gain realized upon a disposition of Common Shares, or any “excess distribution”
received on its Common Shares, as ordinary income, and to pay an interest charge on a portion of such gain or distribution, unless
the shareholder makes a timely and effective "qualified electing fund" election (“QEF Election”) or a "mark-to-market"
election with respect to the Common Shares. A U.S. shareholder who makes a QEF Election generally must report on a current basis
its share of our net capital gain and ordinary earnings for any year in which we are a PFIC, whether or not we distribute any amount
to our shareholders. A U.S. shareholder who makes a mark-to-market election generally must include as ordinary income each year
the excess of the fair market value of the Common Shares over the taxpayer’s basis therein. This paragraph is qualified in
its entirety by the discussion below under the heading “Certain United States Federal Income Tax Considerations.” Each
U.S. shareholder should consult its own tax advisors regarding the PFIC rules and the U.S. federal income tax consequences of the
acquisition, ownership, and disposition of Common Shares.
If we fail to establish and maintain an effective system of
internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and
file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our Common
Shares.
Effective internal control is necessary for us to provide reliable
financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage
our business as effectively as we would if an effective control environment existed, and our business and reputation with investors
may be harmed. As a result of our small size, any current internal control deficiencies may adversely affect our financial condition,
results of operation and access to capital. Although as of May 31, 2017, management has concluded that our internal control over
financial reporting is effective, there can be no assurance that our internal control over financial reporting will remain effective.
Our share price may be volatile and as a result you could
lose all or part of your investment
.
In addition to volatility associated with equity securities in general,
the value of your investment could decline due to the impact of any of the following factors upon the market price of the Common
Shares:
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changes
in the worldwide price for gold and/or silver;
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disappointing
results from our exploration efforts;
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decline
in demand for Common Shares;
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downward
revisions in securities analysts’ estimates or changes in general market conditions;
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technological
innovations by competitors or in competing technologies;
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investor
perception of our industry or our prospects; and
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general
economic trends.
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In the last 12 months, the price of our stock on the TSX has ranged
from a low of $0.50 to a high of $1.38. In addition, stock markets in general have experienced extreme price and volume fluctuations
and the market prices of securities have been highly volatile. These fluctuations are often unrelated to operating performance
and may adversely affect the market price of the Common Shares. As a result, you may be unable to resell any Common Shares you
acquire at a desired price.
We have never paid dividends on the Common Shares.
We have not paid dividends on the Common Shares to date, and we
may not be in a position to pay dividends for the foreseeable future. Our ability to pay dividends with respect to the Common Shares
will depend on our ability to successfully develop our NBP and Mother Lode Property and generate earnings from operations. Further,
our initial earnings, if any, will likely be retained to finance our operations. Any future dividends on Common Shares will depend
upon our earnings, our then-existing financial requirements and other factors, and will be at the discretion of the Board.
Investors’ interests in our Company will be diluted
and investors may suffer dilution in their net book value per Common Share if we issue additional employee/Director/consultant
options or if we sell additional Common Shares to finance our operations
.
In order to further expand the Company’s operations and meet
our objectives, any additional growth and/or expanded exploration activity will likely need to be financed through sale of and
issuance of additional Common Shares, including, but not limited to, raising funds to explore the NBP and the Mother Lode Property.
Furthermore, to finance any acquisition activity, should that activity be properly approved, and depending on the outcome of our
exploration programs, we will likely also need to issue additional Common Shares to finance future acquisitions, growth and/or
additional exploration programs of our NBP and Mother Lode Property or to acquire additional properties. We will also in the future
grant to some or all of our Directors, officers, and key employees and/or consultants options to purchase Common Shares as non-cash
incentives. The issuance of any equity securities could, and the issuance of any additional Common Shares will, cause our existing
shareholders to experience dilution of their ownership interests.
If we issue additional Common Shares or decide to enter into joint
ventures with other parties in order to raise financing through the sale of equity securities, investors’ interests in the
Company will be diluted and investors may suffer dilution in their net book value per Common Share depending on the price at which
such securities are sold.
We are subject to the continued listing criteria of the TSX
and our failure to satisfy these criteria may result in delisting of the Common Shares
.
The Common Shares are currently listed on the TSX. In order to maintain
the listing, we must maintain certain financial and share distribution targets, including maintaining a minimum number of public
shareholders. In addition to objective standards, the TSX may delist the securities of any issuer if, in its opinion, the issuer’s
financial condition and/or operating results appear unsatisfactory; if it appears that the extent of public distribution or the
aggregate market value of the security has become so reduced as to make continued listing on the TSX inadvisable; if the issuer
sells or disposes of principal operating assets or ceases to be an operating company; if an issuer fails to comply with the listing
requirements of TSX; or if any other event occurs or any condition exists which makes continued listing on the TSX, in the opinion
of the TSX, inadvisable.
If the TSX delists the Common Shares, investors may face material
adverse consequences, including, but not limited to, a lack of trading market for the Common Shares, reduced liquidity, decreased
analyst coverage of the Company, and an inability for us to obtain additional financing to fund our operations.
The issuance of additional Common Shares may negatively impact
the trading price of our securities.
We have issued Common Shares in the past and will continue to issue
Common Shares to finance our activities in the future. In addition, outstanding options, warrants and broker warrants to purchase
Common Shares may be exercised, resulting in the issuance of additional Common Shares. The issuance by us of additional Common
Shares would result in dilution to our shareholders, and even the perception that such an issuance may occur could have a negative
impact on the trading price of the Common Shares.
We are an “emerging growth company,” and we cannot
be certain if the reduced reporting requirements applicable to emerging growth companies will make our Common Shares less attractive
to investors.
We are an “emerging growth company,” as defined in the
Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take
advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging
growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions
from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause
us to lose that status earlier, including if the market value of our Common Shares held by non-affiliates exceeds $700 million
as of any November 30 before that time, in which case we would no longer be an emerging growth company as of the following May
31. We cannot predict if investors will find our Common Shares less attractive because we may rely on 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. Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting
standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of
this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards
as other public companies that are not emerging growth companies.
Broker-dealers may be discouraged from effecting transactions
in Common Shares because they are considered a penny stock and are subject to the penny stock rules.
The Common Shares are a penny stock. The SEC has adopted Rule 15g-9
which generally defines “penny stock” to be any equity security that has a market price (as defined) less than USD
5.00 per share or an exercise price of less than USD 5.00 per share, subject to certain exceptions. The Common Shares are covered
by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than
established customers and “accredited investors”. The term “accredited investor” refers generally to institutions
with assets in excess of USD 5,000,000 or individuals with a net worth in excess of USD 1,000,000 or annual income exceeding USD
200,000 or USD 300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which
provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account.
The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally
or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these 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 agreement to the transaction. These disclosure requirements may have the effect of reducing
the level of trading activity in the secondary market for the Common Shares. Consequently, these penny stock rules may affect the
ability of broker-dealers to trade in the Common Shares.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
North Bullfrog Project, Nevada
Our principal mineral property is the NBP (Figure 1), a gold exploration
project located in northwestern Nye County, Nevada, in the Northern Bullfrog Hills about 15 km north of the town of Beatty. The
NBP does not have any known proven or probable reserves under SEC Industry Guide 7 and the project is exploratory in nature. A
NI 43-101 technical report entitled “Technical Report and Preliminary Economic Assessment for Combined Mill and Heap Leach
Processing at the North Bullfrog Project Bullfrog Mining District, Nye County, Nevada” with an effective date of June 16,
2015, as amended and restated on May 18, 2016 (the “Technical Report”) is available on SEDAR. The Technical Report
is referred to herein for informational purposes only and is not incorporated herein by reference. The Technical Report contains
disclosure regarding mineral resources that are not Guide 7 compliant proven or probable reserves, see “Cautionary Note to
U.S. Investors Regarding Estimates of Measured, Indicated and Inferred Resources and Proven and Probable Reserves” above.
Property Description and Location
North
Bullfrog Project
The NBP is located in the Bullfrog Hills of northwestern Nye County,
Nevada (Figure 2). The NBP covers about 7,223 hectares of patented and unpatented mining claims in Sections 20, 21, 25, 26, 27,
28, 29, 32, 33, 34, 35, and 36 of T10S, R46E; sections 1, 2, 11, 12, 13, and 14 of T11S, R46E; section 31 of T10S, R47E; and sections
6, 9, 15, 16, and 17 T11S, R47E, MDBM. We have a total of nine option/lease agreements in place that give us control of an aggregate
of 51 patented lode mining claims (Figure 2). Corvus Nevada owns an additional 5 patented claims (the Millman claims) and a 430
acre property with 1600 acre-feet of water rights located north of NBP in the Sarcobatus hydrographic basin.
Figure 1: Property Map showing the Location of the North Bullfrog
Project and Mother Lode Property, blue outline shows the North Bullfrog Project and the green outline shows the Mother Lode Property
Figure 2: Property Map of the North Bullfrog Project, Blue
outline shows the NBP Federal claims boundary
and red outlines are the Leased Private Land
Title and Ownership
Redstar
Gold Joint Venture and ITH Land Purchase
Redstar Gold Corp. (“Redstar”) originally staked 213
unpatented lode mining claims and optioned 21 patented lode mining claims from six private parties in 2006. ITH optioned the original
NBP land package from Redstar in 2006, creating the NBPJV. ITH added 11 patented lode mining claims (the Mayflower property) to
the NBPJV in 2007 under the Greenspun lease agreement. Redstar added 12 patented lode mining claims (the Connection and adjacent
properties) to the NBPJV in 2008 under the lease agreement with Lunar Landing LLC. In August 2009 ITH purchased 100% interest in
the NBPJV from Redstar by paying Redstar CAD$250,000 and issuing 200,000 ITH common shares. These holdings were then transferred
to Corvus during the spin out. Corvus completed an additional option lease agreement on two patented lode mining claims in the
Jolly Jane area in March 2011. In May 2014, Corvus amended its existing lease agreement with Kolo Corp. to add the Yellow Rose
and Yellow Rose No. 1 claims. In March 2015 Corvus added a second option lease agreement with Lunar Landing LLC, to lease the Sunflower,
Sunflower No. 1 and Sunflower No. 2 claims for a total of nine option agreements on private land. Table 1 summarizes the obligations
of the nine leases which are part of Corvus’ responsibilities on the Project.
Table 1: Summary of Lease Obligations that are part of the
North Bullfrog Project
Party
|
Area
|
Claims/Acres
|
Next Payment
|
Property Taxes
|
NSR
|
Signing Date
|
Gregory
|
North Pioneer
|
1/8.2
|
$3,600
|
none
|
2%
|
6/16/2006
|
Wylie
1
|
Savage
|
3/45.7
|
$8,600
|
none
|
2%
|
5/22/2006
|
Kolo Corp
|
Jolly Jane & Yellow Rose
|
4/81.7
|
$6,000
|
$258
|
3%
|
5/8/2006
|
Milliken
|
Pioneer
|
3/24.5
|
$5,400
|
none
|
2%
|
5/8/2006
|
Pritchard
|
Pioneer
|
12/203.0
|
$20,000
|
none
|
4%
|
5/16/2006
|
Lunar Landing LLC
|
Connection
|
12/195.0
|
$16,200
|
$207
|
4%
|
10/27/2008
|
Lunar Landing LLC
|
Sunflower
|
3/59.2
|
$5,000
|
$180
|
4%
|
3/30/2015
|
Greenspun
(2)
|
Mayflower
|
11/183.1
|
$10,000
1
|
$214
|
4%
|
12/1/2007
|
Sussman
|
Jolly Jane
|
2/37.4
|
$30,000
|
$113
|
2%
|
3/1/2011
|
Total
|
-
|
51/748.7
|
$104,800
|
$972
|
-
|
-
|
(1)
|
|
Original title transferred from Hall to Wylie due to death in the family
|
(2)
|
|
Plus 50,000 shares of ITH and 25,000 Common Shares
|
Corvus has added an additional 808 federal unpatented lode mining
claims which were staked in 2012, and added an additional 57 federal unpatented lode mining claims which were staked in late 2014.
The Gregory, Hall, Kolo Corp., Milliken and Pritchard leases contain
provisions for extension of the lease beyond the initial term, as long as active exploration or mining activities are maintained
by the Company. The leases are now extended annually under this provision.
Gregory
Property (North Pioneer Area) Notification of Extension Term
Pursuant to a mining lease made and entered into as of June 16,
2006 between Redstar and an arm’s length individual, Redstar has leased one patented mineral claims which form part of the
North Bullfrog project holdings. The lease is for an initial term of 10 years, and for so long thereafter as mining activities
continue on the claims or contiguous claims held by the lessee. The lessee is required to pay advance minimum royalty payments
(recoupable from production royalties) of USD 2,000 on execution, USD 2,000 on each of June 16, 2007, 2008 and 2009, USD 3,000
on June 16, 2010 and each anniversary thereafter, adjusted for inflation. The lessor is entitled to receive a 2% NSR royalty on
all production, which may be purchased by the lessee for USD 1,000,000 per 1% (USD 2,000,000 for the entire royalty).
Hall
Property (Savage Valley Area)
Pursuant to a mining lease made and entered into as of May 22, 2006
between Redstar and two arm’s length individuals, Redstar has leased 3 patented mineral claims. The lease is for an initial
term of 10 years, and for so long thereafter as mining activities continue on the claims or contiguous claims held by the lessee.
The lessee is required to pay advance minimum royalty payments (recoupable from production royalties) of USD 8,000 on execution,
USD 4,800 on each of May 22, 2007, 2008 and 2009, USD 7,200 on May 22, 2010 and each anniversary thereafter, adjusted for inflation.
The lessor is entitled to receive a 2% NSR royalty on all production, which may be purchased by the lessee for USD 1,000,000 per
1% (USD 2,000,000 for the entire royalty).
Kolo
Property (Jolly Jane Area)
Pursuant to a mining lease made and entered into as of May 8, 2006
between Redstar and an arm’s length private Nevada corporation, Redstar has leased 2 patented mining claims (Jolly Jane and
ZuZu). The lease is for an initial term of 10 years, and for so long thereafter as mining activities continue on the claims or
contiguous claims held by the lessee. The lessee is required to pay advance minimum royalty payments (recoupable from production
royalties) of USD 2,000 on execution, USD 2,000 on each of May 8, 2007, 2008 and 2009, USD 3,000 on May 8, 2010 and each anniversary
thereafter, adjusted for inflation. The lessor is entitled to receive a 3% NSR royalty on all production from the Jolly Jane and
ZuZu claims, which may be purchased by the lessee for USD 850,000 per 1% (USD 2,550,000 for the entire royalty).
The Kolo lease agreement was amended on May 29, 2014 to add the
Yellow Rose and Yellow Rose No. 1 patented claims to the agreement. The term remained the same, but the amended lease includes
additional Advance Minimum Royalty payments of USD 2,400 per year for years 1 and 2, increasing to USD 3,600 per year thereafter
(adjusted for inflation) for the Yellow Rose claims. The Lessor is entitled to receive a 3% NSR royalty on all production from
the Yellow Rose claims, which may be purchased by the lessee for USD 770,000 per 1% (USD 2,310,000 for the entire royalty).
Milliken
Property (Pioneer Area)
Pursuant to a mining lease made and entered into as of May 8, 2006
between Redstar and two arm’s length individuals, Redstar has leased 3 patented mining claims. The lease is for an initial
term of 10 years, and for so long thereafter as mining activities continue on the claims or contiguous claims held by the lessee.
The lessee is required to pay advance minimum royalty payments (recoupable from production royalties) of USD 4,000 on execution,
USD 3,500 on each of May 8, 2007, 2008 and 2009, USD 4,500 on May 8, 2010 and each anniversary thereafter, adjusted for inflation.
The lessor is entitled to receive a 2% NSR royalty on all production, which may be purchased by the lessee for USD 1,000,000 per
1% (USD 2,000,000 for the entire royalty).
Prichard
Property (Pioneer Area)
Pursuant to a mining lease made and entered into as of May 16, 2006
between Redstar and an arm’s length individual, Redstar has leased 12 patented mineral claims. The lease is for an initial
term of 10 years, and for so long thereafter as mining activities continue on the claims or contiguous claims held by the lessee.
The lessee is required to pay advance minimum royalty payments (recoupable from production royalties) of USD 20,500 on execution
and USD 20,000 on each anniversary thereafter. The lessor is entitled to receive a 4% NSR royalty on all production, which may
be purchased by the lessee for USD 1,000,000 per 1% (USD 4,000,000 for the entire royalty).
Lunar
Property (Connection Area)
Pursuant to a mining lease and option to purchase agreement made
effective October 27, 2008 between Redstar and an arm’s length limited liability company, Redstar has leased (and has the
option to purchase) 12 patented mining claims. The ten-year, renewable mining lease requires advance minimum royalty payments (recoupable
from production royalties, but not applicable to the purchase price if the option to purchase is exercised) of USD 10,800 on signing
and annual payments for the first three anniversaries of USD 10,800 and USD 16,200 for every year thereafter. Redstar has an option
to purchase the property (subject to the NSR royalty below) for USD 1,000,000 at any time during the life of the lease. Production
is subject to a 4% NSR royalty, which may be purchased by the lessee for USD 1,250,000 per 1% (USD 5,000,000 for the entire royalty).
Lunar
Property (Sunflower Area)
Pursuant to a mining lease and option to purchase agreement made
effective March 30, 2015 between Corvus Nevada and an arm’s length limited liability company, Corvus Nevada has leased (and
has the option to purchase) 3 patented mining claims. The 3 ½ year, renewable mining lease requires advance minimum royalty
payments (recoupable from production royalties, but not applicable to the purchase price if the option to purchase is exercised)
of USD 5,000 on signing and annual payments for the three anniversaries of USD 5,000. Corvus Nevada has an option to purchase the
property (subject to the NSR royalty below) for USD 300,000 at any time during the life of the lease. Production is subject to
a 4% NSR royalty, which may be purchased by the lessee for USD 500,000 per 1% (USD 2,000,000 for the entire royalty).
Sussman
Property (Jolly Jane Area)
Pursuant to a mining lease and option to purchase made effective
March 1, 2011 between Corvus Nevada and an arm’s length individual, Corvus Nevada has leased, and has the option to purchase,
2 patented mineral claims. The lease is for an initial term of 10 years, subject to extension for an additional 10 years (provided
advance minimum royalties are timely paid), and for so long thereafter as mining activities continue on the claims. The lessee
is required to pay advance minimum royalty payments (recoupable from production royalties, but not applicable to the purchase price
if the option to purchase is exercised) of USD 20,000 on execution, USD 25,000 on each of March 1, 2012, 2013 and 2014, USD 30,000
on March 1, 2015 and each anniversary thereafter, adjusted for inflation. The lessor is entitled to receive a 2% NSR royalty on
all production. The lessee may purchase the royalty for USD 1,000,000 per 1%. If the lessee purchases the entire royalty (USD 2,000,000)
the lessee will also acquire all interest of the lessor in the subject property
Greenspun
Property (Mayflower Area)
ITH, through what is now Corvus Nevada, entered into a mining lease
with option to purchase with the Greenspun Group for 183 acres of patented lode mining claims that cover much of the Mayflower
prospect. The Mayflower lease requires Corvus to make payments and complete work programs as outlined in Table 2. During the term
of the lease any production from the Mayflower property is subject to a sliding scale royalty, also outlined in Table 2. Corvus
has the right to purchase a 100% interest in the Mayflower property for $7.5 million plus a 0.5% NSR (if gold is less than $500)
or 1.0% (if gold is above $500) at any time during the term of the lease (subject to escalation for inflation if the option is
exercised after the 10th year of the lease). The annual property taxes to be paid by Corvus for the Mayflower property are $214.
On February 11, 2015, the Mayflower mining lease with option to purchase was amended with the addition of an anti-dilution clause
applying to the ITH shares and with an increase in the annual payment to include 25,000 Common Shares.
Table 2: Summary of the Material Terms of the Mayflower/Greenspun
Group Lease
Term: Five Years Beginning December 1, 2007
|
Five additional years with an additional five year period, plus an additional 3 year period or so long thereafter as commercial production continues
|
Lease Payments: Due on Each Anniversary Date of the Lease
|
On regulatory acceptance - US$5,000 and 25,000 ITH shares
Each of first – fourth anniversaries, US$5,000 and 20,000 ITH
shares
Each of fifth – ninth anniversaries, US$10,000, 50,000 ITH
shares and 25,000 Common Shares
|
Work Commitments: Excess Expenditures in Any Year Can Be Carried Forward, or if under Spent the Unspent Portion Paid to Greenspun Group
|
Years 1-3 US$100,000 each year the lease is in effect
Years 4-6 US$200,000 each year the lease is in effect
Years 7-10 US$300,000 each year the lease is in effect
|
Retained Royalty: Production Sliding Scale Net Smelter Return Based on Price of Gold Each Quarter
|
2% if gold is less than US$400 per ounce
3% if gold is between US$401 and US$500 per ounce
4% if gold is more than US$500 per ounce
|
Advance Minimum Royalty Payments (if not in commercial production by the tenth anniversary, in order to extend lease for an additional three years)
|
Years 11-13 US$100,000 each year the lease is in effect and commercial production has not been achieved
|
Purchase
Option
:
|
During first 10 years, the property can be purchased for US$7.5 million
plus an 0.5% NSR (if gold is less than US$500) or 1.0% (if gold is above US$500)
After the tenth anniversary the US$7.5 million purchase price escalates
by the Consumer Price Index, using the CPI immediately prior to the tenth anniversary as a base
|
Millman
Property
On February 21, 2013 Corvus Nevada signed a purchase agreement,
which was subsequently closed on March 28, 2013, for the purchase of the surface rights only to five patented lode mining claims
owned by Mr. and Mrs. Gordon Millman and located east of the Mayflower Property. This ground could be used for potential overburden
storage from the Mayflower deposit as well as improving access to the Mayflower Property in general. Corvus Nevada purchased the
surface rights for US $160,000. Additionally, Corvus Nevada agreed to pay the Millmans a fee of US $0.02 per ton of any potential
overburden storage subject to a minimum storage of 12 million short tons of material. The note for the storage fee of $240,000
was paid on December 17, 2015.
Sarcobatus
Property
In December 2013, SoN Land and Water LLC, wholly owned by Corvus
Nevada, completed the purchase of an 160 hectare fee simple parcel of land approximately 30 km north of the NBP which carries with
it 1,600 acre feet of irrigation water rights within the Sarcobatus Flats water basin. The cost of the land and associated water
rights was US $1,034,626. The Company has registered the purchase of water rights with the Nevada State Engineer (“NSE”)
and will make application to the NSE to temporarily move the production point to the NBP, and change the application to mining.
The water right requires annual renewal and has currently been extended through June 11, 2017.
Other
property considerations
All of the unpatented lode mining claims are on U.S. public land
administered by the BLM. These claims give Corvus the right to explore for and mine minerals which include the metals gold and
silver, subject to the necessary permits. The current exploration permits from BLM and NDEP allow Corvus surface access, maintenance
of roads, drilling and sampling, and a defined amount of accompanying surface disturbance. The unpatented lode mining claims require
payment of yearly maintenance fees to the BLM and Nye County (recording fees) of an aggregate of $144,459 (estimated for 2017).
Annual property taxes to be paid by Corvus for some of the properties under the original six Redstar leases and subsequent leases
are tabulated in Table 1.
The unpatented lode claims at the Mother Lode Property required
payment of yearly maintenance fees to BLM and Nye County (recording fees) of an aggregate $16,323 (estimated for 2017).
Current exploration activities are covered
by a Plan of Operations (NVN-83002) with the BLM. Two exploration Plans of Operation are in place with the Nevada Department of
Environmental Protection (“NDEP”) (NDEP#0280 and #0290) that fulfill the State of Nevada permitting obligations on
private and public lands, respectively. Additional exploration activities are covered by two Notices of Intent (NOI) with the BLM.
Those NOIs (N-92210 and N-93906) have temporary terms renewable every 2 years, and currently extend to 2019. Reclamation bonds,
related to environmental liabilities to which the NBP is subject, are in place to cover activities on the property. Corvus’
reclamation liabilities are covered by surety bonds issued by Lexon Insurance Company in the amount of $362,597 for 84.4 acres
of disturbance on public land with the BLM and $209,070 for 25.4 acres of disturbance on private land with NDEP.
Accessibility, Physiography, Climate and Infrastructure
at NBP
The NBP is accessible by a two and one
half hour (209 km, 130 mile) drive north of Las Vegas, Nevada along US Highway 95. US 95 is the major transportation route between
Las Vegas, Reno Nevada and Boise Idaho. Las Vegas is serviced by a major international airport. The property lies immediately to
the west and to the east of the highway. Beatty, Nevada is the closest town to the property with a population of about 1,100 and
contains most basic services. The nearest major supply point that would support a major mining related activity is Las Vegas, Nevada
about 160 km to the southeast. There are several accessible old mine workings. Access around both Properties is by a series of
reasonably good gravel and dirt roads that extend to most of the important exploration areas.
The property is in Western Nevada’s high desert, which receives
about 15 cm of precipitation per year, mostly as modest snow fall in the winter and thunderstorms in the summer. The average daily
temperature (°F) varies from a low of 40 in January to a high of 80 in July. The hills at the NBP are covered with sparse low
brush including creosote, four-wing saltbush, rabbit brush and Nevada ephedra. The property is in the Basin and Range province,
but the local topographic relief is only a few hundred feet. Most of the areas at the property are characterized by low hills separated
by modest width valleys.
There are currently no other structures or infrastructure on the
NBP. Major mining and construction equipment sales and service are readily available throughout Nevada; however, most major mining
operations are located in the northern part of the state and are serviced from the cities of Reno and Elko. Human resources are
readily available within the community of Beatty and historically provided a substantial portion of the workforce for the Bullfrog
Mine, which operated between 1989 and 1998 as both an open pit and underground gold mining operation. Pahrump, approximately 110
km to the southeast of Beatty, is a larger community with a population of 36,000. Pahrump is a local regional center, with a hospital
and emergency medical services, a college campus with technical training for industrial support and expanded service sectors.
Electrical power is provided to the immediate area of the NBP by
the Valley Electric Association, Inc. (“VEA”), which is headquartered in Pahrump. A 25 kV line runs north from Beatty,
NV along Highway 95. VEA began upgrading its existing electrical facilities, on the eastern portion of the NBP, in mid-2013. The
upgrade has a separate circuit of 15 Mw capacity and will accommodate the presently anticipated future demand from the property.
We anticipate that adequate power will be available for all proposed future mining operations at the property. The Company contributed
US $28,500 for the line upgrade. Two electrical feeder lines run west from the main line, one to the perimeter of the NBP to power
an aggregate crushing plant operating in the southern portion of NBP and a second that traverses the NBP to power a centrally located
microwave station and the Company’s weather station which has been installed on Corvus controlled patented mining claims
near Mayflower.
Water resources for a mining project at NBP must be obtained from
the ground water. There appears to be sufficient resources in the ground water basins at the NBP, and the Company has registered
the water rights purchased in Sarcobatus with the NSE. The Company will make application to convert the water rights to a temporary
mining use, and to transfer the point of extraction to the NBP. Water wells, booster stations, and pipelines would be developed
to provide water to the mine, process facilities, and ancillary structures. The current plan would be to drill several wells northwest
of the heap leach pad and install a fresh water line from the well fields to the process plant. The first phase of the hydrologic
characterization program was completed during the 2013 drill program, which successfully identified a potential water production
well site in the Sarcobatus Flats (Nevada State Water Basin 146) within the northwest portion of the NBP.
Geology and Mineralization
Geology
The NBP is within the Walker Lane structural province and the Southwestern
Nevada Volcanic Field (“SWNVF”). The Project lies approximately ten kilometres west of the western margin of the middle
Miocene Timber Mountain caldera complex of the SWNVF and many of the volcanic units exposed on the NBP originated from the caldera
complex. However, it appears that many of the most important host rocks to the mineralization are locally derived from what is
now known as the North Bullfrog Hills Volcanic Complex (“NBVC”) and are slightly older than the main ash flows erupted
from the Timber Mountain Caldera. The region is underlain by Paleozoic sedimentary rocks which are the basement for the mid-Miocene
tuffs and related rocks that are the hosts for most of the mineralization in the Bullfrog mining district. The region was subjected
to extensional faulting which was contemporaneous with volcanism and localized sedimentary basins filled with reworked volcanic
and basement debris developed as a result. Multiple episodes of extension have been documented. Most of the major fault zones have
northerly strikes with normal displacement to the west. However, hanging wall antithetic faults are also present. Some of the major
faults are interpreted to have listric shapes, similar to the MP fault at the Bullfrog mine, and likely sole into a district-scale
detachment fault at depth. During younger periods of extension many of the older faults in the hanging walls of these listric structures
have experienced significant rotation. Figure 3 is a geologic map of NBP showing target exploration and resource areas;
Figure 3 Geologic Map of NBP Showing Target and Resource Areas
and Legend of Geologic Symbols
The Northern Bullfrog Hills (“NBH”) is underlain by
pre-Tertiary basement rocks consisting of Precambrian to Cambrian sedimentary rocks of the Wood Canyon, Zabriskie and Carrara Formations.
The basement rocks are exposed on the property in two prominent erosional windows. The pre-Tertiary windows are remnants of a basement
structural high of significant relief upon which the Tertiary rocks were deposited. The basement rocks are overlain by a sequence
of Miocene volcanic and lesser sedimentary rocks of the SWNVF.
The lowermost Tertiary rocks are known as the Jolly Jane Formation
and consist of a basal conglomerate overlain by a sequence of heterogeneous sedimentary rocks including mudstone, siltstone and
sandstone. The basal conglomerate is a time transgressive surface lag deposit which generally contains abundant clasts of pre-Tertiary
basement rocks. The type locality for this unit is known from drilling in the Jolly Jane area and consists of up to 50 metres of
heterogeneous sediments which appear to have been accumulated in a structural basin prior to and during the onset of volcanism.
Sandstone, silt, shale and calcareous sediments are present with both black organic-rich and hematitic intervals also present.
It is common to see tuffaceous sediments in the upper portions of the sand and shale sequences. The thickness and composition of
the Jolly Jane Formation is highly variable, and is interpreted to have been deposited on a Tertiary erosional unconformity of
significant relief.
The Jolly Jane Formation is overlain by the Savage Formation which
consists of locally-sourced lava domes, flows and associated intrusive rocks of dacitic to rhyolitic composition. The Savage Formation
also includes intercalated volcaniclastic intervals (re-worked dacite) and locally carbonaceous sediments. It is rather heterogeneous
in terms of the thickness and the areal distribution of individual domes, flows and epiclastic intervals. The Savage Formation
is only locally mineralized.
The Pioneer Formation rhyolitic pyroclastics overlie the Savage
Formation dacites. The Pioneer Formation ranges from 10 to more than 200 metres in thickness and consists of monotonous lithic
lapilli tuffs. In the northern parts of the NBP these tuffs are mixed with rhyolite domes of uncertain origin, however, dating
shows that the tuffs and rhyolites are essentially the same age. Epiclastic sediments found at the top of the Pioneer Formation
suggest that an angular unconformity is developed between this sequence and the overlying Sierra Blanca Tuff. The Pioneer Formation
is extensively altered and hosts a large portion of the disseminated gold mineralization.
The Sierra Blanca Tuff is a large rhyolitic ash flow tuff that blankets
the NBP. Unlike the preceding units, which appear to have been locally derived, the Sierra Blanca Tuff probably represents a regional
ash flow eruption that came from outside the NBP. The Sierra Blanca Tuff varies in thickness from <70 metres at Jolly Jane to
>160 metres at North Sierra Blanca. The tuff consists of a single cooling unit and is densely welded. The densely welded nature
makes the rock brittle and, as a consequence, it is the most important host for both disseminated and vein style mineralization
at the NBP.
Following the deposition of the Sierra Blanca Tuff, local volcanism
continued with the deposition of the Savage Dacite, another locally-sourced sequence of lava domes, flows, pyroclastics and epiclastics
of primarily dacitic composition. The Savage Dacite varies greatly in both thickness and composition, characterized by alternating
eruptive cycles of geochemically different dacitic magmas. The Savage Dacite is only mineralized where it is in contact with significant
fault structures.
Zircon dating shows that the entire sequence
from Pioneer Formation through the Savage Dacite was deposited between 16.1Ma and 14.4Ma, making it among the oldest volcanic in
the region.
The 13.5Ma Crater Flat Tuff, which consists of two regionally extensive
ash flow cooling units, appears to overlie the Savage Dacite at both Savage Valley and Jolly Jane but the contact is not exposed
at the surface. The Crater Flat Tuffs are extensively altered at both YellowJacket and Jolly Jane but no significant mineralization
has yet been identified in these units.
The Rainbow Mountain Sequence is the most heterogeneous unit of
the NBH. It consists of intercalated sequences of heterolithic and monolithic sedimentary debris flow breccias, large slide bocks
derived from local volcanic and sedimentary units, as well as rhyolitic ash flows and rhyolite domes. The debris flow breccias
are bedded but poorly sorted, consisting of sand- to large boulder-size clasts of predominantly volcanic rocks. Both gravity sliding
and fluvial processes appear to have played a role in deposition. The volcanic debris is derived from many of the SWNVF units that
are preserved as tabular ash flow tuff sheets elsewhere in the Bullfrog Hills. These include the Crater Flat Group, the Paintbrush
Group and the Timber Mountain Group tuffs. The debris flow breccia deposits are largely the result of the re-working of the SWNVF
units via gravity sliding and alluvial fan development around fault-bounded basement structural highs. The Debris Flow Breccia
sequence represents a period of dynamic extensional faulting, scarp development and mass wasting. Massive, relatively intact blocks
of monolithic breccias are interpreted as landslide megabreccia deposits that were shed off local fault scarps. Gold mineralization
at Mayflower and Connection is hosted in the Rainbow Mountain Sequence. The thickness of this unit exceeds 300 metres in the Mayflower
area.
Mineralization
All of the mineralization at NBP can be classified as low–sulphidation
epithermal mineralization. There are at least two and possibly three distinct periods of mineralization present. Older mineralization,
before 11.2 Ma, is observed at the Sierra Blanca and Jolly Jane Mineral Resource areas. A younger mineralization, 10 Ma, occurs
at the Mayflower Mineral Resource area.
In both mineralization periods, there are two styles of low suphidation
gold/silver mineralization; (1) high grade, fault controlled fissure veins, vein breccias and stockworks (Mayflower, Liberator,
YellowJacket, Liberty and others), and (2) low grade disseminated replacement deposits (Sierra Blanca, Jolly Jane and Mayflower).
The low grade, disseminated mineralization is currently the more abundant type at NBP.
|
1)
|
Sierra Blanca Mineralization
|
Mineralization at Sierra Blanca can be classified into six different
styles:
|
·
|
Disseminated gold mineralization associated with pervasive silica adularia and sulphidation of
iron (ubiquitous at Sierra Blanca );
|
|
·
|
Gold associated with fault controlled suphidation (NE30, NE50, NE60 Faults);
|
|
·
|
Gold associated with quartz veining;
|
|
·
|
Continuous quartz vein and associated stockworks (Josh vein at YellowJacket);
|
|
·
|
Localized quartz veins and stockworks (numerous zones);
|
|
·
|
Sulphide veining with gold and tellurium mineralization (Air Track Hill).
|
Pervasive disseminated mineralization occurs
in the Pioneer Formation and Sierra Blanca Tuff over virtually the entire area at Sierra Blanca at 0.2-0.3 g/t gold grade. Oxidation
of this mineralization extends locally to 200m and is associated with good cyanide leach metallurgical recovery. Fault hosted mineralization
has been encountered in numerous locations (NS10, E30, NE40, NE50, NE60 and Savage Faults) with consistently higher gold grade
(1-17 g/t) than the disseminated mineralization. Where oxidized, the fault zones respond well to cyanide leaching.
Quartz vein and stockwork mineralization
occurs primarily in the YellowJacket deposit, a generally NW striking structural corridor along the eastern side of Sierra Blanca.
The gold–bearing quartz vein and stockwork zones are generally gray translucent quartz with native gold and electrum, and
varying amounts of acanthite or other silver sulphosalts. Metallurgical testing indicates high gold and silver recovery with cyanide
leaching, both above and below the oxidation horizon.
The pervasive disseminated mineralization at Sierra Blanca and the
Josh vein and stockwork mineralization at YellowJacket comprise approximately 84% of the gold resource at NBP.
|
2)
|
Jolly Jane Mineralization
|
Jolly Jane is located in the middle of
NBP and virtually all of the geological elements common to NBP are found there. Disseminated mineralization occurs within the Sierra
Blanc Tuff, which is thinner, approximately 70 m as compared to a thickness of >160 m at Sierra Blanca. The mineralized Sierra
Blanca Tuff is preserved a horst between the West Jolly Jane Fault and the East Jolly Jane Fault. Gold grade is similar to Sierra
Blanca disseminated mineralization with slightly lower cyanide leach recovery.
|
3)
|
Mayflower Mineralization
|
Younger, fracture controlled deposits at
Mayflower and Pioneer were historically mined. The Mayflower Mine developed on a calcite vein and stockwork zone along a NW striking,
steeply SW-dipping fault zone in silica-adularia-altered heterolithioc debris flow breccia in the Rainbow Mountain Sequence. Multiple
high-grade gold areas have been identified, surrounded by low grade mineralization. Mayflower mineralization is typically 0. 4-0.5
g/t and is well oxidized with good cyanide leach recovery.
Historical Exploration Work
The NBP is in the Bullfrog Mining District. Gold was discovered
at what was to become the original Bullfrog mine by Frank “Shorty” Harris and Ernest Cross on August 9, 1904. Two periods
of mining activity account for the majority of production from the District. It is reported that 111,805 ounces of gold and 868,749
ounces of silver were produced between 1905 and 1921, after which there was little production until the 1980s. In early 1982 geologists
from St. Joe Minerals Corporation became interested in the District. They conducted extensive exploration in the area of the Montgomery-Shoshone
and Senator Stewart mines, resulting in the discovery of the Bullfrog deposit in mid-1986. Several company acquisitions resulted
in Barrick Gold Corporation (“Barrick”) being the final owner of the mine. The Bullfrog mine produced gold and silver
from three separate deposits including: 1) main Bullfrog (open pit and underground); 2) Montgomery-Shoshone (open pit); and 3)
Bonanza Mountain (open pit). Between 1989 and 1999, it is reported that the Bullfrog mine produced 2.31 Moz of gold and 3.0 Moz
of silver.
The early history of the NBP is comingled with the greater Bullfrog
Mining District. The Pioneer and Mayflower were the principal mines in the northern part of the district. The Pioneer mine was
most active between 1909 and 1926 with about 15,000 feet of underground workings, all being developed within 330 feet of the surface.
There are no accurate production figures, but limited records suggest that head grades were about one quarter ounce of gold per
ton. The Mayflower mine was probably active during the same time, but again there are no reliable production records. Underground
development at Sierra Blanca, Jolly Jane, Savage Valley, and YellowJacket also attest to historic mining and production, probably
during the same period.
Modern exploration started in the early 1970s and consisted of a
number of companies with focuses on different parts of the property. These programs consisted of a variety of activities including
surface mapping and sampling, underground mapping and sampling, and drilling.
Between the early 1970’s and the end of the Barrick exploration
in the mid-1990’s, approximately 249 rotary and reverse-circulation drill holes were drilled on the NBP.
With the downturn in gold price at the start of the 21
st
Century, interest in the NBP was essentially nonexistent. Redstar became attracted to the North Bullfrog area in late 2005, and
started staking claims and acquiring leases on patented mining claims. In March 2007, Redstar granted ITH the right to earn an
interest in the NBP and thereafter form the NBPJV. In December 2007 ITH completed a lease of the Mayflower property, which was
included in the NBPJV. Following the execution of the NBPJV agreement, ITH commenced active exploration on the NBP. In October
2008, Redstar completed a lease of the Connection property, which was also included in the NBPJV. On August 4, 2009, ITH purchased
Redstar’s interests in the NBP and continued the exploration program as sole owner/lessor. On August 26, 2010, ITH spun out
Corvus as a separate public company in a transaction which resulted in Corvus owning Corvus Nevada, through which all interest
in the NBP was held, thus resulting in Corvus indirectly acquiring all of the interest in and responsibilities for the NBP.
Corvus Exploration Work
Recent NBP Exploration Work
2016-2017
The Company performed District wide exploration to assess the potential
for further high-grade vein systems similar to the YellowJacket discovery, to extend the mineralization around the Sierra Blanca
and YellowJacket resources and to assess the potential of other structural targets throughout the property. Drilling exploration
was performed in two phases, with the first phase in April – July 2016 completing 20 RC drill holes for 6,257 m of drilling.
The second phase of drilling was performed from September 2016 – April 2017 and completed 44 holes with 11,279 m of drilling.
The drilling tested mineralization in the new Western Zone (Figure
4) which is comprised of the previously named NW Sierra Blanca and Swale targets, and the Liberator Zone. These two zones border
the Sierra Blanca and YellowJacket resources to the northwest (Western Zone) and northeast (Liberator Zone). Additional scout drilling
and surface sampling investigated structural targets at North Jolly Jane, Savage Deep, East Savage Vein, Jim Dandy, West Connection
and Cat Hill, which comprised a Phase I District “New Discovery” Program.
Figure 4: Map of 2016-2017 exploration targets, North Bullfrog
project, Nevada
Target
Reviews
Western Zone
The new Western Zone, which is a combination of the previously described
NW Sierra Blanca and Swale targets, lies immediately west of the Company’s Sierra Blanca-YellowJacket resource (Figure 4).
The mineralization intersected in the Western Zone is controlled by a large northeast trending structural zone which can be tracked
for a strike length of nearly 1.5 kilometres. This zone hosts disseminated and stockwork related higher grade gold mineralization
along its length. Mineralization at the Western Zone is associated with distinct highly altered dikes intruding the Sierra Blanca
Tuff.
Liberator
The Liberator Zone is parallel to the YellowJacket deposit and has
about the same strike length at nearly one kilometre. Although the Liberator and YellowJacket structural zones are parallel they
dip in opposite directions with the YellowJacket dipping to the west and the Liberator dipping to the east, which led to the Liberator
not being effectively tested in the past during the east directed YellowJacket drilling programs. The new Liberator discovery like
the YellowJacket has returned drill intersections of shallow, higher grade gold mineralization. In addition, the Liberator also
hosts broad zones of lower grade mineralization highlighting the extensive fluid flow of gold and silver rich solutions in a large
structural
North Jolly Jane
The higher-grade zones in the North Jolly
Jane target area are related to stockwork quartz veining along the West Jolly Jane fault zone and appear to be increasing as the
drill program steps out to the north. The large District scale, West Jolly Jane Fault intersects another northeast trending District
scale structural zone. In addition to structurally controlled higher grade mineralization, the North Jolly Jane target area has
potential to develop a large new deposit of higher grade (twice the current grade) heap leach material that could enhance the project
economics and production plan.
Cat Hill
The Cat Hill target hosts a large deeply oxidized low-grade gold
system. Results to date have intersected widths and grades above cutoff for run of mine oxide material over a broad area but have
yet to intersect mill grade material. The size of the mineralized system at Cat Hill is encouraging and further work is needed
to identify the feeder structures for this system.
Savage Deep, East Savage Vein and Jim Dandy
Structural targets have been identified at the Savage Deep, East
Savage Vein and Jim Dandy areas of NBP. Two to three holes were allocated to each of the targets to confirm geologic interpretations
and to test for the presence of gold mineralization along the structures. Results indicate wide spread low-grade mineralization
which is favorable for the presents of higher grade vein type systems.
Western Zone
The mineralization intersected in the Western
Zone is controlled by a large northeast trending structural zone which can be tracked for a strike length of nearly 1.5 kilometres.
Drilling to date has tested about ½ the length of the Western Zone structural extent. The zone contains two discreet fault
zones that host higher grade mineralization and display good continuity along strike. These zones have been intersected from near
surface down to a vertical depth of about 150 metres which is the depth of the currently designed pit to the east. The holes drilled
in the 2016-2017 program are plotted in Figure 5, which also shows the surface projection of the Western Zone and the Liberator
with respect to the YellowJacket Zone.
Additional potential exists for one or more zones to develop to
the west of the current drill area as illustrated in prior hole NB-17-329 (NR17-2, February 23, 2017) with 38.1m @ 0.97 g/t gold
from a new zone. In addition, exploration in 2014 tested a structural target some 300 metres west of the Western Zone and outlined
a small higher grade resource whose expansion potential has yet to be followed up.
At the north end of the NE trending Western Zone at the intersection
with the YellowJacket and Liberator systems, a large rhyolite intrusive body occurs covering an area of one kilometre by half a
kilometre. This rhyolite body hosts broad zones of low-grade gold mineralization, as well as structurally controlled higher grade
mineralization near the margins. This rhyolite body may have an important genetic relationship to the larger North Bullfrog gold
system and important implication for deep targets below the current gold deposit. There is strongly elevated molybdenum (100-2800
ppm), uranium and zinc associated with gold mineralization within and adjacent to the rhyolite dome feature (Figure 6). The alteration
and mineralization of the rhyolite body is characteristic of a high-level porphyry environment with potential at depth. Phase I
and II drilling results are tabulated for all holes in the Western Zone in Table 3.
Figure 5: Map showing location of the Western Zone-Liberator
Zone and YellowJacket-Sierra Blanca Pit outline.
Figure 6: Map of elevated Molybdenum
and Rhyolite intrusive at the north end of Sierra Blanca-YellowJacket Deposit, North Bullfrog Project
Table 3: Drill Results from the Western Zone
(Reported drill intercepts are not true widths. At this time,
there is insufficient data with respect to the shape of the true orientation in space.)
|
From (m)
|
To (m)
|
Length (m)*
|
Gold (g/t)
|
Silver (g/t)
|
NB-16-293
|
97.54
|
103.63
|
6.09
|
0.19
|
0.42
|
AZ 130 dip -50
|
143.26
|
208.79
|
65.53
|
0.21
|
0.79
|
|
|
|
|
hole
ended in mineralization
|
|
From (m)
|
To (m)
|
Length (m)*
|
Gold (g/t)
|
Silver (g/t)
|
NB-16-294
|
64.01
|
68.58
|
4.57
|
0.20
|
1.20
|
AZ 130 dip -60
|
102.11
|
213.36
|
111.25
|
0.23
|
1.31
|
inc
|
121.92
|
132.59
|
10.67
|
0.63
|
3.13
|
|
From (m)
|
To (m)
|
Length (m)*
|
Gold (g/t)
|
Silver (g/t)
|
NB-16-295
|
74.68
|
161.54
|
86.86
|
0.53
|
1.21
|
AZ 090 dip -50
|
inc
|
74.68
|
99.06
|
24.38
|
0.80
|
1.50
|
inc
|
103.63
|
106.68
|
3.05
|
0.58
|
0.97
|
inc
|
121.92
|
146.3
|
24.38
|
0.60
|
1.31
|
|
166.12
|
169.16
|
3.04
|
0.17
|
0.33
|
|
201.17
|
204.22
|
3.05
|
0.42
|
0.42
|
The Liberator Zone is parallel to the YellowJacket deposit and has
about the same strike length at nearly one kilometre. Although the Liberator and YellowJacket structural zones are parallel they
dip in opposite directions with the YellowJacket dipping to the west and the Liberator dipping to the east, which led to the Liberator
not being effectively tested in the past during the east directed YellowJacket drilling programs. The new Liberator discovery like
the YellowJacket has returned drill intersections of shallow, higher grade gold mineralization (NB-15-267,
11m @ 3.5 g/t Au,
NR15-14, Oct. 15, 2015; NB-13-350,
6m @ 2.4 g/t Au, NR13-25, Oct. 10, 2013
; NB-12-126,
5.7m @ 6 g/t Au,
NR12-10,
Mar. 22, 2012; NB-10-63,
14m @ 6 g/t Au,
NR11-03, Feb. 1, 2011). In addition, the Liberator also hosts broad zones of lower
grade mineralization highlighting the extensive fluid flow of gold and silver rich solutions in this large structural zone (NB-16-320,
108m @ 0.57 g/t Au
; NB-16-303,
154m @ 0.54 g/t Au,
NR16-11, Aug. 2, 2016; NB-15-267,
210m @ 0.47 g/t Au
, NR15-14,
Oct. 15, 2016;
low grade halo around high-grade zone
).
Infill holes drilled in the 2016-2017 program (shown in Figure 5)
have added continuity to the overall Liberator mineralized zone and importantly have now defined its northern extension (NB-16-315
6.1m @ 1.06 g/t Au
and
6.1m @ 1.14 g/t Au
) below the intercept in hole NB-16-300 with
18m @ 1.8 g/t Au
. Results
from the northern portion of the Western Zone now show a direct connection to the main east dipping Liberator zone to the south.
This work also highlighted a 250 metre section of the structure that is essentially untested, which hosts high-grade gold and silver
mineralization. The higher-grade parts of the Liberator system are related to quartz stockwork and sulfidized zones at intersections
with northeast structures, forming shoots within the very broad and extensive structurally controlled low-grade system. Follow-up
drilling on the zone is being planned. Drill results for the holes drilled in the Liberator Zone are listed in Table 4.
Higher-grade zones in the North Jolly Jane
target area (Figure 7) are related to stockwork quartz veining along the West Jolly Jane fault zone and grades appear to be increasing
as the drill program steps out to the north (NB-17-432 with 10.7m @ .0.80 g/t Au and 12.2m @ 0.76 g/t Au). The large District scale,
West Jolly Jane Fault intersects another northeast trending District scale structural zone about 100 metres to the north of hole
NB-17-432. In addition to structurally controlled higher grade zones the North Jolly Jane target area has potential to develop
a large new deposit of higher grade (twice the current grade) heap leach material that could enhance the project economics and
production plan. Drill holes from the North Jolly Jane target have returned broad zones of low-grade mineralization with several,
plus ten-metre-thick zones of +0.5 g/t gold (Table 1). Results to date suggest grades are improving to the north where follow-up
drilling is scheduled to begin shortly. Drill hole results for North Jolly Jane and a single hole drilled in main Jolly Jane are
listed in Table 5.