File No. 333-_______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
RISE GOLD CORP.
(Exact Name of Registrant as Specified in its Charter)
Nevada
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1000
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30-0692325
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(State or other jurisdiction of
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(Primary Standard Industrial
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(IRS Employer Identification No.)
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incorporation)
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Classification
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Code Number
)
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488 1090 West Georgia Street
Vancouver, British
Columbia V6E 3V7
Canada
(604) 260-4577
(Address, including zip code, and telephone number, including area code,
of registrants principal executive offices)
Nevada Business Center, LLC
701 South Carson
Street, Suite 200
Carson City, Nevada 89701
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
Dale A. Rondeau, Esq.
Thomas, Rondeau LLP
Suite 1780 - 400 Burrard Street
Vancouver, British
Columbia V6C 3A6
Canada
J. Brad Wiggins, Esq.
SecuritiesLawUSA, PC
1875 Century Park East, 6
th
Floor
Los Angeles, California 90067
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after this registration statement becomes
effective.
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box: [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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:
Large Accelerated Filer [ ]
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Accelerated Filer [ ]
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Non-Accelerated Filer [ ]
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Smaller Reporting
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(Do not check if a smaller
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Company
[X]
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reporting company)
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Emerging Growth
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Company
[X]
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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 pursuant to Section
(7)(a)(2)(B) of the Securities Act. [ ]
2
CALCULATION OF REGISTRATION FEE
*
Title of Each Class of
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Proposed
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Proposed
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Amount of
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Securities to be
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Amount to be
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Maximum
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Maximum
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Registration
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Registered
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Registered
(1)
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Offering Price
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Aggregate Offering
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Fee
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Per Share
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Price
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Common Stock offered by
selling stockholders
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4,630,088
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$
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0.1368
(2)
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$
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633,396
(2)
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$
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73.41
(2)
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Common Stock issuable upon
exercise of common stock purchase warrants held by selling stockholders
exercisable at CDN$0.40 per share
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5,480,088
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$
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0.32048
(3)
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$
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1,756,259
(3)
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$
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203.55
(3)
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Common Stock issuable upon exercise of common stock purchase
warrants held by selling stockholders exercisable at CDN$0.227 per share
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1,500,000
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$
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0.18187
(4)
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$
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272,805
(4)
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$
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31.62
(4)
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Total
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11,610,176
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$
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2,662,460
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$
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308.58
(5)
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(1)
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Pursuant to Rule 416 under the Securities Act, the shares
of Common Stock being registered hereunder include such indeterminate
number of shares as may be issuable with respect to the shares being
registered hereunder as a result of stock splits, stock dividends or
similar transactions.
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(2)
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Estimated solely for the purpose of calculating the
amount of registration fee pursuant to Rule 457(c) under the Securities
Act. The proposed maximum offering price per share and proposed maximum
aggregate offering price are based upon the average of the high and low
prices of the Common Stock as of August 28, 2017 as quoted on the OTC
Markets of $0.1368.
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(3)
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Estimated solely for the purpose of calculating the
amount of registration fee pursuant to Rule 457(g) based on the highest
exercise price of the warrants of CDN$0.40 per share converted into United
States dollars based on the exchange rate of one Canadian dollar to U.S.
dollars as reported by the Bank of Canada on August 28, 2017 of CDN$1.00
to US$0.8012.
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(4)
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Estimated solely for the purpose of calculating the
amount of registration fee pursuant to Rule 457(g) based on the highest
exercise price of the warrants of CDN$0.227 per share converted into
United States dollars based on the exchange rate of one Canadian dollar to
U.S. dollars as reported by the Bank of Canada on August 28, 2017 of
CDN$1.00 to US$0.8012.
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(5)
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The filing fee of $308.58 is being paid concurrently with
the filing of this registration statement on Form
S-1.
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*All dollar amounts in this table refer to U.S. Dollars unless
otherwise noted.
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
3
The information contained in this
prospectus is not complete and may be changed. The selling stockholders may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and the selling stockholders are not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
Subject To Completion, Dated September 5,
2017
11,610,176 Shares of Common Stock
This prospectus relates to the resale or other disposition from
time to time by certain selling stockholders, as further described in this
prospectus, of up to an aggregate of 11,610,176 shares of the Common Stock (the
Shares
) of Rise Gold Corp. (the
Company
,
Rise
,
we
,
us
or
our
). The Shares registered for sale are as
follows:
-
4,630,088 Shares held by selling stockholders;
-
1,500,000 Shares issuable upon exercise of common stock purchase warrants
held by selling stockholders issued on July 13, 2016 and exercisable at a
price per Share of CDN$0.227;
-
3,517,500 Shares issuable upon exercise of common stock purchase warrants
held by selling stockholders issued on December 23, 2016 and exercisable at a
price per Share of CDN$0.40;
-
125,000 Shares issuable upon exercise of common stock purchase warrants
held by selling stockholders issued on January 24, 2017 and exercisable at a
price per Share of CDN$0.40;
-
100,000 Shares issuable upon exercise of common stock purchase warrants
held by selling stockholders issued on February 6, 2017 and exercisable at a
price per Share of CDN$0.40;
-
1,737,588 Shares issuable upon exercise of common stock purchase warrants
held by selling stockholders issued on May 5, 2017 and exercisable at a price
per Share of CDN$0.40;
The Shares and warrants held by the selling stockholders were
issued to such selling stockholders pursuant to private transactions between our
company and the selling stockholders. The selling stockholders may sell or
otherwise dispose of the Shares covered by this prospectus or interests therein
on any stock exchange, market or trading facility on which the shares are traded
or in private transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at
negotiated prices. Additional information about the selling stockholders, and
the times and manner in which they may offer and sell Shares under this
prospectus, is provided in the sections entitled Selling Stockholders and
Plan of Distribution of this prospectus.
We will not receive any proceeds from the resale of the Shares
by the selling stockholders.
Our Common Stock is listed on the Canadian Securities Exchange
(the
CSE
) under the symbol RISE and quoted on the OTC Markets (Pink
Current) under the symbol RYES. On August 31, 2017, the closing sales price of
our Common Stock was CDN$0.185 per share on the CSE and US$0.15 per share on the
OTC Markets. You are urged to obtain current market quotations of the Common
Stock.
All dollar amounts reflected herein refer to Canadian dollars
unless otherwise noted.
4
We are an emerging growth company as defined under federal
securities laws and, as such, may elect to comply with certain reduced public
company requirements for future filings.
Investing in the Shares involves a high degree of risk. See
Risk Factors beginning on page 15 of this prospectus.
Neither the Securities and Exchange Commission (the SEC)
nor any state securities commission has approved or disapproved of the
securities offered hereby or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is September _____, 2017
5
TABLE OF CONTENTS
6
GLOSSARY OF TERMS
Common Stock
means the issued and unissued shares of
our common stock with a par value of US$0.001;
CSE
means the Canadian Securities Exchange;
December 2016 Warrants
means common stock purchase
warrants issued on December 23, 2016, exercisable at a price of CDN$0.40 per
share until December 23, 2018;
Exchange Act
means the Securities Exchange Act of
1934, as amended;
February 2017 Warrants
means common stock purchase
warrants issued on February 6, 2017, exercisable at a price of CDN$0.40 per
share until February 6, 2019;
I-M Mine Property
means the Idaho-Maryland Mine
Property comprising approximately 93 acres (38 hectares) surface land and
approximately 2,800 acres (1,133 hectares) mineral rights located near Grass
Valley of Nevada County in northern California, USA.
I-M Mine Project
means Rises gold project located on
the I-M Mine Property;
Indata Property
means certain mineral claims known as
the Indata Property, located in the Omineca Mining Division in British Columbia,
Canada in which the Company previously held an option to acquire up to a 75%
interest;
January 2017 Warrants
means common stock purchase
warrants issued on January 24, 2017, exercisable at a price of CDN$0.40 per
share until January 24, 2019;
Klondike Properties
means the portfolio of seven gold
and base metal properties in southeast British Columbia, Canada consisting of
150 mineral claims over 28,000 hectares;
Klondike Warrants
means common stock purchase warrants
issued on July 13, 2016 exercisable at a price of CDN$0.227 per share until July
13, 2018;
May 2017 Warrants
means common stock purchase warrants
issued on May 5, 2017, exercisable at a price of CDN$0.40 per share until May 5,
2019;
NI 43-101
means National Instrument 43-101 (Standards
of Disclosure for Mineral Projects);
Report
means the NI 43-101 compliant technical report
entitled Technical Report on the Idaho-Maryland Project, Grass Valley,
California, USA dated June 1, 2017 prepared by Greg Kulla, P.Geo. of Amec
Foster Wheeler Americas Limited;
Securities Act
means the United States Securities Act
of 1933, as amended;
7
SELECTIVE GLOSSARY OF TECHNICAL TERMS
accretion
Process by which material is added to a
tectonic plate or landmass. This material may be sediment, volcanic arcs,
seamounts or other igneous features.
albite
A kind of plagioclase mineral within the
feldspar group with formula NaAlSi
3
O
8
. Its colour is white
to grey.
amphibolite
A gneiss or schist largely made up of
amphibole and plagioclase minerals.
ankerite
A calcium, iron, magnesium, manganese
carbonate mineral of the group of rhombohedral carbonates.
arsenic
Chemical element with the symbol As and occurs
in many minerals, usually in combination with sulfur and metals, but also as a
pure elemental crystal.
carbonate
Class of sedimentary rocks composed
primarily of carbonate minerals; the two major types are limestone and dolomite.
chalcopyrite
A sulphide mineral of copper common in
the zone of secondary enrichment.
chlorite
Group name for about 10 related minerals and
a member of the mica group of minerals. Chlorite is very common, and is often an
uninteresting green mineral coating the surface of more important minerals.
en-echelon
Roughly parallel but staggered structures.
epizonal
Depth of formation of an orogenic deposit
(<6 km / <3.7mi) .
facies
The characteristics of a rock unit that reflect
its environment of deposition and allow it to be distinguished from rock
deposited in an adjacent environment.
foliation
Repetitive layering in metamorphic rocks;
the thickness of the layers can vary.
footwall
The rock on the underside of a vein or
mineralized structure.
free gold
Gold, uncombined with other minerals, found
in a pure state.
free milling
Mineralized material of gold from which
the precious metals can be recovered by concentrating methods without resorting
to pressure leaching or other chemical treatment.
gabbro
A dark, coarse-grained igneous rock.
galena
Lead sulphide, the most common form of lead.
gangue
The worthless minerals in an mineralized
deposit.
greenschist
Metamorphic rocks that formed under the
lowest temperatures and pressures usually produced by regional metamorphism,
typically 300450 °C (570840 °F) and 210 kilobars (14,50058,000 psi).
hangingwall
The rock on the upper side of a vein or
mineralized deposit.
hydrothermal
Relating to hot fluids circulating in the
earths crust.
hydrothermal gold deposit
During the reaction between
mineral-bearing hydrothermal fluids and wall-rocks, some elements are
concentrated in specific locations to form hydrothermal gold deposits. They are
usually controlled by faults or shear structures, occurring as veins and
stockworks, or by strata.
hypozonal
Depth of Formation of an orogenic deposit
(>12 km / >7.5mi) .
intrusive
A body of igneous rock formed by the
consolidation of magma intruded into other rocks, in contrast to lavas, which
are extruded upon the surface.
jura-triassic arc belt
One of the geologic packages of
the Sierra Nevada Foothills belt which consists of a Paleozoic basement of
disrupted ophiolite, serpentinite mélange, and ultra-mafic rocks overlain by
uppermost Triassic-Early Jurassic arc volcanics and coeval 200 Ma intrusive
rocks.
lithology
Description of its physical characteristics
of a rock unit at outcrop, in hard or core samples or with microscopy, such as
colour, texture, grain size, or composition.
8
low-sulphide au-quartz vein
Gold-bearing quartz veins
and veinlets with minor sulphides crosscutting a wide variety of host rocks and
are localized along major regional faults and related splays. The wallrock is
typically altered to silica, pyrite and muscovite within a broader carbonate
alteration halo.
mafic
Igneous rocks composed mostly of dark, iron- and
magnesium-rich minerals.
mariposite
A mineral which is a chromium-rich variety
of mica, which imparts an attractive green colour to the generally white
dolomitic marble in which it is commonly found.
mélange
A large-scale breccia, a mappable body of rock
characterized by a lack of continuous bedding and the inclusion of fragments of
rock of all sizes, contained in a fine-grained deformed matrix.
matrix
Finer-grained mass of material wherein larger
grains, crystals or clasts are embedded.
meta-volcanic rocks
A type of metamorphic rock that
was first produced by a volcano, either as lava or tephra and then buried
underneath subsequent rock and subjected to high pressure and temperatures,
causing the rock to recrystallize.
mesothermal quartz vein
Also known as and are
type-examples of low-sulfide Au-quartz vein deposits.
mesozonal
Depth of formation of an orogenic deposit
(612 km / 3.7 -7.5mi) .
metamorphosed
Rocks which have undergone a change in
texture or composition as the result of heat and/or pressure.
mill head grade
The grade of the mineralized material
which is fed into the processing plant to be concentrated into gold bullion. The
mill head grade includes mining dilution from un-mineralized rock adjacent to
the veins. The mill head grade does not account for metallurgical recovery of
gold during the processing of the mineralized material.
ophiolitic rock
An assemblage of the Earths oceanic
crust and the underlying upper mantle that has been uplifted and exposed above
sea level and often emplaced onto continental crustal rocks.
orogeny
An episode of intense deformation of the rocks
in a region, generally accompanied by metamorphism and plutonic activity.
orogenic gold deposit
Dominantly form in metamorphic
rocks in the mid- to shallow crust (5-15km depth), at or above the
brittle-ductile transition, in compressional settings that facilitate transfer
of hot gold=bearing fluids from deeper levels. The term orogenic is used
because these deposits likely form in accretionary and collisional orogens.
paleozoic
Geological era that followed the Precambrian
and during which began with the appearance of complex life, as indicated by
fossils (from 245 to 570 mil. of years ago).
pyrite
A yellow iron sulphide mineral, normally of
little value. It is sometimes referred to as fools gold.
quartz
Common rock-forming mineral consisting of
silicon and oxygen.
sedimentary rock
Secondary rocks formed from material
derived from other rocks and laid down under water. Examples are limestone,
shale, and sandstone.
serpentinite
Type of metamorphic rock composed mostly
of mineral serpentine. It is usually dark green to green-black in colour,
massive and macroscopically dense.
schistosity
Geological foliation (metamorphic
arrangement in layers) with medium to large grained flakes in a preferred
sheetlike orientation.
scheelite
A variously colored mineral, CaWO4, found in
igneous rocks and a common form of tungsten.
sericite
A fine grained mica and a common alteration
mineral of orthoclase or plagioclase feldspars in areas that have been subjected
to hydrothermal alteration typically associated with hydrothermal deposits.
splay
A series of branching faults near the
termination of a major fault which spread the displacement over a large area.
stope
An excavation in a mine from which mineralized
material is, or has been extracted.
9
tectonism
Geological term used to describe major
structural features and the processes that create them, including compressional
or tensional movements on a planetary surface that produce faults, mountains,
ridges, or scarps.
terrane
A crustal block or fragment that is typically
bounded by faults and that has a geologic genesis distinct from those of
surrounding areas.
tertiary
Former term for the geologic period from 65
million to 2.6 million years ago, a timespan that occurs between the superseded
Secondary period and the Quaternary.
thermal gradient
Rate of increasing temperature with
respect to increasing depth in the Earths interior.
ultra-mafic
Igneous and meta-igneous rocks with a very
low silica content, composed entirely or almost entirely of ferromagnesian
minerals, and are composed of usually greater than 90% mafic minerals.
ABBREVIATIONS
Imperial
|
Metric
|
|
|
|
|
AC
|
acres
|
m
|
meter
|
SF
|
square foot
|
km
|
kilometer
|
lb
|
pound
|
ha
|
hectare
|
oz
|
ounce
|
g
|
grams
|
|
|
kg
|
kilogram
|
|
|
gpt
|
grams
per tonne
|
|
|
|
|
CONVERSIONS
Imperial to Metric
|
|
Metric to Imperial
|
Imperial Measure
|
Metric Unit
|
|
Metric Measure
|
Imperial Unit
|
2.47 acres
|
1 hectare
|
|
0.4047 hectare
|
1 acre
|
3.28 feet
|
1 metre
|
|
0.3048 metre
|
1 foot
|
0.62 mile
|
1 kilometre
|
|
1.609 kilometres
|
1 mile
|
0.03215 troy ounce
|
1 gram
|
|
31.1035 grams
|
1 troy
ounce
|
0.02917 troy ounce per ton
|
1 gpt
|
|
34.2857 gpt
|
1 troy
ounce per ton
|
1.102 short ton
|
1 tonne
|
|
0.907 tonne
|
1 short
ton
|
2.2046 pounds
|
1
kilogram
|
|
0.4536
kilogram
|
1 pound
|
10
CURRENCY AND EXCHANGE RATES
All dollar amounts in this prospectus are expressed in Canadian
dollars unless otherwise indicated. Our financial accounts are maintained in
Canadian dollars and our financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America. Some
of our material agreements use Canadian dollars and our Common Stock is traded
on the CSE in Canadian dollars. As used herein CDN$ represents Canadian
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 daily mid-range
exchange rates reported by OANDA Corporation which approximates the Bank of
Canada rates for conversion of Canadian dollars into United States dollars:
|
Fiscal Year Ended July 31
|
Canadian Dollars to U.S. Dollars
|
2017($)
|
2016($)
|
2015($)
|
2014($)
|
|
|
|
|
|
Rate at end of period
|
0.8014
|
0.7668
|
0.7677
|
0.9171
|
|
|
|
|
|
Average rate for period
|
0.7555
|
0.7537
|
0.8423
|
0.9327
|
|
|
|
|
|
High for period
|
0.8042
|
0.7978
|
0.9213
|
0.9781
|
|
|
|
|
|
Low for period
|
0.7275
|
0.6848
|
0.7665
|
0.8889
|
11
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we
filed with the SEC.
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with information
different from that contained in this prospectus. This prospectus is offering to
sell, and is seeking offers to buy, the securities only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus
speaks only as of the date of this prospectus (unless the information
specifically indicates that another date applies), regardless of the time of
delivery of this prospectus or of any sale of the Shares.
We may provide a prospectus supplement containing specific
information about the terms of a particular offering by the selling
shareholders, or their transferees. The prospectus supplement may add, update or
change information in this prospectus. If information in a prospectus supplement
is inconsistent with the information in this prospectus, you should rely on the
information in that prospectus supplement. You should read both this prospectus
and, if applicable, any prospectus supplement hereto. See Where You Can Find
More Information for more information.
This prospectus includes industry and market data and other
information that we have obtained from, or which is based upon, market research,
independent industry publications or other publicly available information. Any
such data and other information is subject to change based on various factors,
including those described below under the heading Risk Factors and elsewhere
in this prospectus.
We have not, and the selling stockholders have not,
authorized anyone to provide you with information different from that contained
or incorporated by reference in this prospectus or in any supplement to this
prospectus or free writing prospectus, and neither we nor the selling
stockholders take any responsibility for any other information that others may
give you. This prospectus is not an offer to sell, nor is it a solicitation of
an offer to buy, the securities in any jurisdiction where the offer or sale is
not permitted. You should not assume that the information contained in this
prospectus or any prospectus supplement or free writing prospectus is accurate
as of any date other than the date on the front cover of those documents, or
that the information contained in any document incorporated by reference is
accurate as of any date other than the date of the document incorporated by
reference, regardless of the time of delivery of this prospectus or any sale of
a security. Our business, financial condition, results of operations and
prospects may have changed since those dates.
12
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus. It does not contain all of the information that you should
consider before investing in our Common Stock. You should read this entire
prospectus carefully, including the Risk Factors and the financial statements
and related notes included herein. This prospectus includes forward-looking
statements that involve risks and uncertainties. See Cautionary Note Regarding
Forward-Looking Statements. References to we, our, Rise, and the
Company refer to Rise Gold Corp.
About the Company
We are a mineral exploration stage company incorporated in the
state of Nevada, United States. Our current business operations are focused on
exploring the I-M Mine Property located near Grass Valley of Nevada County in
northern California. Our management team is headquartered in Vancouver, BC,
Canada.
We acquired our interest in the I-M Mine Project by exercising
an option granted pursuant to an option agreement dated August 30, 2016 (as
amended November 11, 2016 and December 23, 2016) with the owners of the
property. A more detailed discussion of the I-M Project and of the current
status of our business operations is provided under the sections entitled
Business and Properties. We have prepared a technical report outlining an
exploration plan which the Company is now preparing to commence. This report was
created through processing historic data on the Idaho-Maryland property obtained
from the vendors and from historic information in public databases in Nevada
County.
13
The Offering
Shares Offered By the Selling Stockholders
|
11,610,176 Shares of our Common Stock,
including:
|
|
|
4,630,088 Shares held by selling stockholders;
|
|
|
1,500,000 Shares issuable upon exercise of common stock
purchase warrants held by a selling stockholder issued on July13, 2016 and
exercisable at a price per Share of CDN$0.227.
|
|
|
3,517,500 Shares issuable upon exercise of common stock
purchase warrants held by selling stockholders issued on December 23, 2016
and exercisable at a price per Share of CDN$0.40;
|
|
|
125,000 Shares issuable upon exercise of common stock
purchase warrants held by selling stockholders issued on January 24, 2017
and exercisable at a price per Share of CDN$0.40;
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100,000 Shares issuable upon exercise of common stock
purchase warrants held by selling stockholders issued on February 6, 2017
and exercisable at a price per Share of CDN$0.40; and
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1,737,588 Shares issuable upon exercise of common stock
purchase warrants held by selling stockholders issued on May 5, 2017 and
exercisable at a price per Share of CDN$0.40.
|
Offering Price
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Determined at the time of sale by the selling
stockholders.
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Use of Proceeds
|
We will not receive any proceeds from the sale of the
Shares by selling stockholders covered by this prospectus.
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Common Stock Outstanding as of August 31, 2017
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67,124,839 shares of Common Stock
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Trading Symbols
|
Our Common Stock is listed on the CSE under the symbol
RISE and quoted on the OTC Markets (Pink Current) under the symbol
RYES
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Risk Factors
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Investing in our securities involves a high degree of
risk. See Risk Factors.
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14
RISK FACTORS
Investing in the Shares involves a high degree of risk. You
should consider carefully the risks and uncertainties described below, together
with all of the other information contained in this prospectus, before deciding
to invest in the Shares. If any of the following risks materialize, our
business, financial condition, results of operation, and future prospects will
likely be materially and adversely affected. In that event, the market price of
the Shares could decline and you could lose all or part of your investment.
Risks Related To Our Company
Our ability to operate as a going concern is in
doubt.
The audit opinion and notes that accompany our financial
statements for the year ended July 31, 2016, disclose a going concern
qualification to our ability to continue in business. The accompanying financial
statements have been prepared under the assumption that we will continue as a
going concern. We are an exploration stage company and we have incurred losses
since our inception.
We currently have no historical recurring source of revenue and
our ability to continue as a going concern is dependent on our ability to raise
capital to fund our future exploration and working capital requirements or our
ability to profitably execute our business plan. Our plans for the long-term
return to and continuation as a going concern include financing our future
operations through sales of our Common Stock and/or debt and the eventual
profitable exploitation of our I-M Mine Property. Additionally, the current
capital markets and general economic conditions in the United States are
significant obstacles to raising the required funds. These factors raise
substantial doubt about our ability to continue as a going concern.
These consolidated financial statements do not give effect to
any adjustments required to realize ours assets and discharge our liabilities in
other than the normal course of business and at amounts different from those
reflected in the accompanying financial statements.
We will require significant additional capital to fund
our business plan.
We will be required to expend significant funds to determine
whether proven and probable mineral reserves exist at our properties, to
continue exploration and, if warranted, to develop our existing properties, and
to identify and acquire additional properties to diversify our property
portfolio. We anticipate that we will be required to make substantial capital
expenditures for the continued exploration and, if warranted, development of our
I-M Mine Property. 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 at our I-M Mine Property. We may not benefit from some of these
investments if we are unable to identify commercially exploitable mineral
reserves.
As of April 30, 2017, we had cash of CDN$648,166 and a working
capital of CDN$350,465, compared to cash of CDN$139,021 and working capital
deficiency of CDN$58,602 on July 31, 2016. As of the date of this prospectus,
our current planned operational needs are approximately $3,800,000 until June
30, 2018. We currently have sufficient cash on hand to meet our planned
expenditures for approximately the next four months. We anticipate that we may
need to raise up to $3,500,000 to continue planned operations for the next
twelve months from the date of this prospectus. We are actively pursuing such
additional sources of debt and equity financing, and while we have been
successful in doing so in the past, there can be no assurance we will be able to
do so in the future.
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 metals. Capital markets worldwide have been
adversely affected by substantial losses by financial institutions, caused by
investments in asset-backed securities and remnants from those losses continue
to impact the ability for us to raise capital. 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.
15
Our inability to access sufficient capital for our operations
could have a material adverse effect on our financial condition, results of
operations, or prospects. Sales of substantial amounts of securities may have a
highly dilutive effect on our ownership or share structure. Sales of a large
number of shares of our Common Stock in the public markets, or the potential for
such sales, could decrease the trading price of the shares and could impair our
ability to raise capital through future sales of Common Stock. We have not yet
commenced commercial production at any of our properties and, therefore, have
not generated positive cash flows to date and have no reasonable prospects of
doing so unless successful commercial production can be achieved at our I-M Mine
Property. We expect to continue to incur negative investing and operating cash
flows until such time as we enter into successful commercial production. This
will require us to deploy our working capital to fund such negative cash flow
and to seek additional sources of financing. There is no assurance that any such
financing sources will be available or sufficient to meet our requirements.
There is no assurance that we will be able to continue to raise equity capital
or to secure additional debt financing, or that we will not continue to incur
losses.
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 products from any of our properties. Our I-M Mine
Project is a historic, past-producing mine with very little recent exploration
work. Advancing our I-M Mine Property into the development stage will require
significant capital and time, and successful commercial production from the I-M
Mine Property will be subject to completing feasibility studies, permitting and
re-commissioning of the mine, constructing processing plants, 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 ore 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, local groups or
local inhabitants that 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 current or future properties,
including our I-M Mine Property.
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:
-
$633,466 for the year ended July 31, 2016;
-
$250,235 for the year ended July 31, 2015;
-
$3,285,186 for the nine months ended April 30, 2017; and
-
$489,132 for the nine months ended April 30, 2016.
16
We expect to continue to incur losses unless and until such
time as one of our properties enters into commercial production and generates
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.
Risks Related to Mining and Exploration
The I-M Mine Property is in the exploration stage. There
is no assurance that we can establish the existence of any mineral reserve on
the I-M Mine Property or any other properties we may acquire in commercially
exploitable quantities. Unless and until we do so, we cannot earn any revenues
from these 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 reserve in a
commercially exploitable quantity, the exploration component of our business
could fail.
We have not established that any of our mineral properties
contain 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 that could be economically and legally
extracted or produced at the time of the reserve determination. In general, the
probability of any individual prospect having a reserve that meets the
requirements of the SECs Industry Guide 7 is small, and our mineral properties
may 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 one or more of
our properties, there can be no assurance that they can be developed into
producing mines and that we can extract those minerals. Both mineral exploration
and development involve a high degree of risk, and few mineral properties that
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 processing facilities, roads, rail, power, 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.
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:
-
economically insufficient mineralized material;
-
fluctuation in production costs that make mining uneconomical;
-
labor disputes;
-
unanticipated variations in grade and other geologic problems;
-
environmental hazards;
-
water conditions;
-
difficult surface or underground conditions;
-
industrial accidents;
-
metallurgic and other processing problems;
-
mechanical and equipment performance problems;
17
-
failure of dams, stockpiles, wastewater transportation systems, or
impoundments;
-
unusual or unexpected rock formations; and
-
personal injury, fire, flooding, cave-ins and landslides.
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. 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 that are not recoverable, or that result in additional expenses.
We have no history of producing commercial products from
our current mineral properties and there can be no assurance that we will
successfully establish mining operations or profitably produce minerals.
We have no history of producing commercial products from our
current mineral properties. We do not produce commercial products and do not
currently generate operating earnings. While we intend to seek to move our I-M
Mine Property into development and production, if warranted, such efforts will
be subject to all of the risks associated with establishing new mining
operations and business enterprises, including:
-
the timing and cost, which are considerable, of the construction and/or
re-commissioning of mining and processing facilities;
-
the availability and costs of skilled labor and mining equipment;
-
compliance with stringent environmental and other governmental approval
and permit requirements;
-
the availability of funds to finance construction and development
activities;
-
potential opposition from non-governmental organizations, local groups or
local inhabitants that may delay or prevent development activities; and
-
potential increases in construction and operating costs due to changes in
the cost of labor, fuel, power, materials and supplies.
It is common in new mining operations to experience unexpected
problems and delays during construction, development and mine start-up. In
addition, our management and workforce will need to be expanded, and sufficient
housing and other support systems for our workforce will have to be established.
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 at all.
Commodity price volatility could have dramatic effects on
the results of operations and our ability to execute our business plan.
The price of commodities varies on a daily basis. Our future
revenues, if any, will likely be derived from the extraction and sale of base
and precious metals. The price of those commodities has fluctuated widely,
particularly in recent years, and is affected by numerous factors beyond our
control including economic and political trends, expectations of inflation,
currency exchange fluctuations, interest rates, global and regional consumptive
patterns, speculative activities and increased production due to new extraction
developments and improved extraction and production methods. The effect of these
factors on the price of base and precious metals, and therefore the economic
viability of our business, could negatively affect our ability to secure
financing or our results of operations.
Estimates of mineralized material and 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 mineralized material and resources/reserves within the
earth using statistical sampling techniques. Estimates of any mineralized
material or resource/reserve on any of our properties would be made using
samples obtained from appropriately placed trenches, test pits, 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 mineralized material and 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.
18
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 propertys return on capital.
As we have not completed feasibility studies on our I-M Mine
Property and have not commenced actual production, mineralization resource
estimates may require adjustments or downward revisions. In addition, the grade
of ore ultimately mined, if any, may differ from that indicated by future
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.
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 I-M Mine Property 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 commodity exploration is determined in part
by the following factors:
-
the identification of potential mineralization based on surficial
analysis;
-
availability of government-granted exploration permits;
-
the quality of our management and our geological and technical expertise;
and
-
the capital available for exploration and development work.
Substantial expenditures are required to establish proven and
probable 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 that include, without
limitation, the particular attributes of the deposit, such as size, grade, and
proximity to infrastructure; commodity prices, which can 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 may 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.
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, on the I-M Mine
Property, 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, as well as 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 that 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.
19
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
that affect our operations and costs of conducting our business.
Our current and future operations, including exploration and,
if warranted, development of the I-M Mine Property, are and will be governed by
laws and regulations, including:
-
laws and regulations governing mineral concession acquisition,
prospecting, development, mining, and production;
-
laws and regulations related to exports, taxes, and fees;
-
labor standards and regulations related to occupational health and mine
safety; and
-
environmental standards and regulations related to waste disposal, toxic
substances, land use reclamation, and environmental protection.
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 or our mining activities, if any, 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 I-M Mine Property is located in California and has numerous
clearly defined regulations with respect to permitting mines, which could
potentially impact the total time to market for the project.
Although we are currently focused on mineral exploration at the
I-M Mine Project and are not contemplating the permitting or the re-opening of
the I-M Mine at this time, Nevada County, based on our preliminary review of the
regulatory framework, would likely be the lead agency for permitting of an
underground mine. Both parcels fall within the City of Grass Valleys Sphere of
Influence. As such, the County may consult with the City before authorizing uses
within the Sphere of Influence. During the previous Emgold permitting
applications, which were focussed on the Idaho land adjacent to the City of
Grass Valley, the City of Grass Valley became the lead agency and proposed to
annex the project into the City.
Subsurface mining is allowed in the Nevada County M1 Zoning
District with approval of a Use Permit. Approval of a Use Permit for mining
operations requires a public hearing before the County Planning Commission,
whose decision may be appealed to the County Board of Supervisors. Use Permit
approvals include conditions of approval, which are designed to minimize the
impact of conditional uses on neighboring properties.
In 1975, the California Legislature enacted the Surface Mining
and Reclamation Act (
SMARA
), which required that all surface mining
operations in California have approved reclamation plans and financial
assurances. SMARA was adopted to ensure that land used for mining operations in
California would be reclaimed post-mining to a useable condition. Pursuant to
SMARA, we would be required to obtain approval of a Reclamation Plan and
financial assurances from the County for any surface component of the
underground mining operation before mining operations could commence. Approval
of a Reclamation Plan will require a public hearing before the County Planning
Commission.
20
To approve a Reclamation Plan and Use Permit, the County would
need to satisfy the requirements of California Environmental Quality Act
(
CEQA
). CEQA requires that public agency decision makers study the
environmental impacts of any discretionary action, disclose the impacts to the
public, and minimize unavoidable impacts to the extent feasible. CEQA is
triggered whenever a California governmental agency is asked to approve a
discretionary project. The approval of a Reclamation Plan is a discretionary
project under CEQA. Other necessary ancillary permits like the California
Department of Fish and Wildlife (
CDFW
) Streambed Alteration Agreement
(if applicable) also triggers CEQA compliance.
In this situation, the lead agency for the purposes of CEQA
would be the County. Other public agencies (in charge of administering specific
legislation) will also need to approve aspects of the Project, such as the CDFW
(the California Endangered Species Act), the Air Pollution Control District
(Authority to Construct and Permit to Operate), and the Regional Water Quality
Control Board (National Pollutant Discharge Elimination System (authorized to
state governments by the US Environmental Protection Agency) and Report of Waste
Discharge). However, CEQAs Guidelines provide that if more than one agency must
act on a project, the agency that acts first is generally considered the lead
agency under CEQA . All other agencies are considered responsible agencies.
Responsible agencies do need to consider the environmental document approved by
the lead agency, but will usually accept the lead agencys document and use it
as the basis for issuing their own permits.
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 that may 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.
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 legislative and/or regulatory changes in response to
concerns about the potential impact of climate change. Legislation and increased
regulation regarding climate change could impose significant costs on us, on our
future venture partners, if any, and on our suppliers, including costs related
to increased energy requirements, capital equipment, environmental monitoring
and reporting, and other costs necessary 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 emotional and political significance and uncertainty
surrounding the impact of climate change and how it should be dealt with, we
cannot predict how legislation and regulation will ultimately 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 could be
particular to the geographic circumstances in areas in which we operate and 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.
21
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:
-
control dispersion of potentially deleterious effluents;
-
treat ground and surface water to drinking water standards; and
-
reasonably re-establish pre-disturbance land forms and vegetation.
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
properties, if any, 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 companies that produce our
planned commercial products 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 mining 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. Any shortage
of such supplies, equipment, and parts could have a material adverse effect on
our ability to carry out our operations and could therefore limit, or increase
the cost of, production.
Joint ventures and other partnerships, including offtake
arrangements, may expose us to risks.
We may enter into joint ventures, partnership arrangements, or
offtake agreements, with other parties in relation to the exploration,
development, and production of the properties in which we have an interest. 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 us, the development and
production at our properties, including the I-M Mine Property, and on future
joint ventures, if any, or their properties, and therefore could have a material
adverse effect on our results of operations, financial performance, cash flows
and the price of our Common Stock.
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 Chief Executive Officer and Chief Financial 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.
22
Our results of operations could be affected by currency
fluctuations.
Our properties are all located in the United States and most
costs associated with these properties are paid in U.S. dollars. There can be
significant swings in the exchange rate between the U.S. dollar and the 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
that could affect our property rights and claims.
There are risks that title to our properties may be challenged
or impugned. Our current I-M Mine Property is located in California and may be
subject to prior unrecorded agreements or transfers and title may be affected by
undetected defects.
We may be unable to secure surface access or purchase
required surface rights.
Although we obtain the rights to some or all of the minerals in
the ground subject to the mineral tenures that we acquire, or have the right to
acquire, in some cases we may not 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 that may result in litigation or other legal claims. We may be
required to take countermeasures 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, 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.
23
Risks Related to the Shares
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 Shares:
-
Disappointing results from our exploration efforts;
-
Decline in demand for our Common Stock;
-
Downward revisions in securities analysts estimates or changes in general
market conditions;
-
Technological innovations by competitors or in competing technologies;
-
Investor perception of our industry or our prospects; and
-
General economic trends.
In the last 12 months, the price of our stock on the CSE has
ranged from a low of CDN$0.135 to a high of CDN$0.36. 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 Shares. As a result, you may be unable to sell any Shares you
acquire at a desired price.
We have never paid dividends on our Common Stock.
We have not paid dividends on our Common Stock to date, and we
do not expect to pay dividends for the foreseeable future. We intend to retain
our initial earnings, if any, to finance our operations. Any future dividends on
Common Stock 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 share of Common Stock
if we issue additional employee/director/consultant options or if we sell
additional Common Stock and/or warrants to finance our operations.
In order to further expand our 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
Stock, including, but not limited to, raising funds to explore the I-M Mine
Property. Furthermore, to finance any acquisition activity, should that activity
be properly approved, and depending on the outcome of our exploration programs,
we likely will also need to issue additional Common Stock to finance future
acquisitions, growth, and/or additional exploration programs of any or all of
our projects 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 Stock as non-cash incentives. The
issuance of any equity securities could, and the issuance of any additional
Common Stock will, cause our existing stockholders to experience dilution of
their ownership interests.
If we issue additional Common Stock or decide to enter into
joint ventures with other parties in order to raise financing through the sale
of equity securities, investors interests in our company will be diluted and
investors may suffer dilution in their net book value per share of Common Stock
depending on the price at which such securities are sold.
We are subject to the continued listing criteria of the
CSE, and our failure to satisfy these criteria may result in delisting of our
Common Stock from the CSE and could also jeopardize our status as having Pink
Current information needed to facilitate trading of our Common Stock on the OTC
Markets.
Our Common Stock is currently listed for trading on the CSE. In
order to maintain the listing on the CSE or any other securities exchange we may
trade on, we must maintain certain financial and share distribution targets,
including maintaining a minimum number of public shareholders. In addition to
objective standards, these exchanges may delist the securities of any issuer if,
in the exchanges opinion, our 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 inadvisable; if we sell or dispose of our principal operating
assets or cease to be an operating company; if we fail to comply with the
listing requirements; or if any other event occurs or any condition exists
which, in their opinion, makes continued listing on the exchange inadvisable.
24
If the CSE or any other exchange were to delist the Common
Stock, investors may face material adverse consequences, including, but not
limited to, a lack of trading market for the Common Stock, reduced liquidity,
decreased analyst coverage, and/or an inability for us to obtain additional
financing to fund our operations.
In addition, our inability to maintain our CSE listing and
remain current in our Canadian public disclosure requirements could result in
our loss of OTC Markets Pink Current status needed to facilitate trading in
the U.S. over-the-counter market.
The issuance of additional share of Common Stock may
negatively impact the trading price of our securities.
We have issued Common Stock in the past and will continue to
issue Common Stock to finance our activities in the future. In addition, newly
issued or outstanding options, warrants, and broker warrants to purchase Common
Stock may be exercised, resulting in the issuance of additional Common Stock.
Any such issuance of additional Common Stock would result in dilution to our
stockholders, and even the perception that such an issuance may occur could have
a negative impact on the trading price of the Common Stock.
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 Stock 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 stockholder
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 Stock held by non-affiliates exceeds $700 million as of any July 31
before that time, in which case we would no longer be an emerging growth company
as of the following January 31. We cannot predict if investors will find our
Common Stock less attractive because we may rely on these exemptions. If some
investors find our Common Stock less attractive as a result, there may be a less
active trading market for our Common Stock 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 elected to avail ourselves of this exemption from new
or revised accounting standards and, therefore, will not 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 our Common Stock because it is considered a penny stock and is
subject to the penny stock rules.
Our Common Stock is currently considered 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 $5.00 per share,
subject to certain exceptions. The Common Stock is 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 $5,000,000 or individuals with a net worth in excess of $1,000,000 or
annual income exceeding $200,000 or $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 customers 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
purchasers 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 Stock. Consequently, these penny stock rules may affect
the ability of broker-dealers to trade in the Common Stock.
25
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information discussed in this prospectus includes
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. All statements, other than statements
of historical facts, included herein concerning, among other things, planned
capital expenditures, future cash flows and borrowings, pursuit of potential
acquisition opportunities, our financial position, business strategy and other
plans and objectives for future operations, future exploration activities,
future mineral resource estimates, and future joint venture arrangements are
forward-looking statements. These forward-looking statements are identified by
their use of terms and phrases such as may, expect, estimate, project,
plan, believe, intend, achievable, anticipate, will, continue,
potential, should, could, and similar terms and phrases.
Any statements that express or involve discussions with respect
to predictions, expectations, beliefs, plans, projections, objectives,
assumptions, or future events or performance (often, but not always, using words
or phrases such as expects or does not expect, is expected, anticipates
or does not anticipate, plans, estimates or intends, or stating that
certain actions, events or results may, could, would, might or will be
taken, occur or be achieved) are not statements of historical fact and may be
forward-looking statements. Forward-looking statements are subject to a variety
of known and unknown risks, uncertainties, and other factors that could cause
actual events or results to differ from those expressed or implied by the
forward-looking statements, including, without limitation:
-
risks related to our requirement of significant additional capital;
-
risks related to our limited operating history;
-
risks related to our history of losses;
-
risks related to our properties that are in the exploration stage;
-
risks related to mineral exploration and production activities;
-
risks related to our lack of mineral production from our properties;
-
risks related to our exploration activities being unsuccessful;
-
risks related to our ability to obtain permits and licenses for
production;
-
risks related to government and environmental regulations that may
increase our costs of doing business or restrict our operations;
-
risks related to proposed legislation that may significantly affect the
mining industry;
-
risks related to land reclamation requirements;
-
risks related to competition in the mining industry;
-
risks related to equipment and supply shortages;
-
risks related to current and future joint ventures and partnerships;
-
risks related to our ability to attract qualified management;
-
risks related to currency fluctuations;
-
risks related to claims on the title to our properties;
-
risks related to surface access on our properties;
-
risks related to potential future litigation;
-
risks related to our lack of insurance covering all our operations; and
-
risks related to our Common Stock, including price volatility, lack of
dividend payments, dilution and penny stock rules.
This list is not exhaustive of the factors that may affect our
forward-looking statements. Some of the important risks and uncertainties that
could affect forward-looking statements are described further under Risk
Factors in this prospectus. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, believed, estimated, or expected. We
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. We disclaim any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events, except as required by law.
26
USE OF PROCEEDS
This prospectus relates to the sale or other disposition of
Shares of our Common Stock by the selling stockholders listed in the Selling
Stockholders section below, and their transferees. We will not receive any
proceeds from any sale of the Shares by the selling stockholders.
SELLING STOCKHOLDERS
This prospectus covers the offering of up to 11,610,176 Shares
by selling stockholders - this includes Shares acquirable upon exercise of our
outstanding warrants.
Selling stockholders are persons or entities that, directly or
indirectly, have acquired shares, or will acquire shares from us from time to
time upon exercise of certain warrants and options. This prospectus and any
prospectus supplement will only permit the selling stockholders to sell the
Shares identified in the column Number of Shares Offered Hereby.
The selling stockholders may from time to time offer and sell
the Shares pursuant to this prospectus and any applicable prospectus supplement.
The selling stockholders may offer all or some portion of the Shares they hold
or acquire, but only Shares that are currently outstanding or are acquired upon
the exercise of certain warrants that are currently outstanding, and in either
case included in the Number of Shares Offered Hereby column, may be sold
pursuant to this prospectus or any applicable prospectus supplement.
The Shares issued to the selling stockholders are restricted
securities under applicable federal and state securities laws and are being
registered to give the selling stockholders the opportunity to sell their
Shares. The registration of such Shares does not necessarily mean, however, that
any of these Shares will be offered or sold by the selling stockholders. The
selling stockholders may from time to time offer and sell all or a portion of
their Shares in the over-the-counter market, in negotiated transactions, or
otherwise, at market prices prevailing at the time of sale or at negotiated
prices.
The registered Shares may be sold directly or through brokers
or dealers, or in a distribution by one or more underwriters on a firm
commitment or best efforts basis. To the extent required, the names of any agent
or broker-dealer and applicable commissions or discounts and any other required
information with respect to any particular offer will be set forth in an
accompanying prospectus supplement. See Plan of Distribution.
Each of the selling stockholders reserves the sole right to
accept or reject, in whole or in part, any proposed purchase of the registered
Shares to be made directly or through agents. To the extent that any of the
selling stockholders are brokers or dealers, they may be deemed to be
underwriters within the meaning of the Securities Act and any commissions
received by them and any profit on the resale of the registered shares may be
deemed to be underwriting commissions or discounts under the Securities Act. As
of the date of this prospectus, and based on the representations we have
received from the selling stockholders, two of the selling stockholders are
brokers or dealers or affiliated with brokers or dealers.
The following table sets forth the name of persons who are
offering the resale of Shares by this prospectus, the number of shares of Common
Stock beneficially owned by each person, the number of Shares that may be sold
in this offering and the number of shares of Common Stock each person will own
after the offering, assuming they sell all of the Shares offered. The
information appearing in the table below is based on information provided by or
on behalf of the named selling stockholders. We will not receive any proceeds
from the resale of the Shares by the selling stockholders.
27
|
Number of
|
|
|
|
|
Shares of
|
|
|
|
|
Common Stock
|
|
|
|
|
Beneficially Owned
|
|
Shares of Common Stock
|
|
|
Prior to this
|
Number of Shares
|
Owned After the Offering
|
|
Name
|
Offering
(1)
|
Offered Hereby
(1)
|
Number
|
Percent
(1
)
|
|
|
|
|
|
321 Gold Ltd.
|
500,000
|
500,000
(2
)
|
0
|
-
|
Alan Stier
|
1,435,715
|
500,000
(3
)
|
935,715
|
1.39
|
Andrew Cumming
|
1,700,000
|
1,500,000
(4
)
|
200,000
|
*
|
Arcon Holdings Ltd.
|
713,042
|
713,042
(5
)
|
0
|
-
|
Brian Buckley
|
295,000
|
250,000
(6
)
|
45,000
|
*
|
Bull Markets Media GMBH
|
600,000
|
600,000
(7
)
|
0
|
-
|
Caesar Holdings BVBA
|
135,000
|
135,000
(8
)
|
0
|
-
|
Chad MacDonald
|
60,000
|
60,000
(9
)
|
0
|
-
|
Craig Angus
|
500,000
|
500,000
(10
)
|
0
|
-
|
David Parry
|
500,000
|
500,000
(11
)
|
0
|
-
|
David Talbot
|
65,218
|
65,218
(12
)
|
0
|
-
|
Douglas Witzel
|
200,000
|
200,000
(13
)
|
0
|
-
|
Elizabeth Shepherd
|
50,000
|
50,000
(14
)
|
0
|
-
|
Glenn Shepherd
|
70,000
|
70,000
(15
)
|
0
|
-
|
Gordon Jang
|
500,000
|
500,000
(16
)
|
0
|
-
|
Howard Bruce Latimer
|
217,390
|
217,390
(17
)
|
0
|
-
|
Jeb A Handwerger
|
250,000
|
250,000
(18
)
|
0
|
-
|
Klondike Gold Corp.
|
1,500,000
|
1,500,000
(19
)
|
0
|
-
|
Loria Capital Corporation
|
869,566
|
869,566
(20
)
|
0
|
-
|
Marshall Arlin
|
80,000
|
50,000
(21
)
|
30,000
|
*
|
Martin Wood
|
180,000
|
180,000
(22
)
|
0
|
-
|
Michael Stier
|
363,143
|
200,000
(23
)
|
163,143
|
*
|
NMC Resource Corporation
|
100,000
|
100,000
(24
)
|
0
|
-
|
Paul L. Kilfoy
|
86,960
|
86,960
(25
)
|
0
|
-
|
Peter Adamek
|
100,000
|
100,000
(26
)
|
0
|
-
|
Peter Van Seggelen
|
400,000
|
400,000
(27
)
|
0
|
-
|
Philip Wilhelmsen
|
130,000
|
100,000
(28
)
|
30,000
|
*
|
Robert Cicci
|
200,000
|
200,000
(29
)
|
0
|
-
|
Ron Wolff
|
50,000
|
50,000
(30
)
|
0
|
-
|
Ronald E. Cloud
|
100,000
|
100,000
(31
)
|
0
|
-
|
28
|
Number of
|
|
|
|
|
Shares of
|
|
|
|
|
Common Stock
|
|
|
|
|
Beneficially Owned
|
|
Shares of Common Stock
|
|
|
Prior to this
|
Number of Shares
|
Owned After the Offering
|
|
Name
|
Offering
(1)
|
Offered Hereby
(1)
|
Number
|
Percent
(1
)
|
|
|
|
|
|
Sandra Sveinson
|
300,000
|
250,000
(32
)
|
50,000
|
*
|
Terry Sklavenitis
|
200,000
|
200,000
(33
)
|
0
|
-
|
Thomas Hull Jr.
|
13,000
|
13,000
(34
)
|
0
|
-
|
William Fox
|
500,000
|
500,000
(35
)
|
0
|
-
|
William R. Zalla
|
100,000
|
100,000
(36
)
|
0
|
-
|
Total
|
13,064,034
|
11,610,176
|
1,453,858
|
2.17
|
* less than 1%
(1)
|
This table is based upon information supplied by the
selling stockholders, which information may not be accurate as of the date
hereof. We have determined beneficial ownership in accordance with the
rules of the SEC. In computing the number of shares beneficially owned by
a selling stockholder, shares issuable upon the exercise of warrants are
included with respect to that stockholder. Except as indicated by the
footnotes below, we believe, based on the information furnished to us,
that the selling stockholders named in the table above have sole voting
and investment power with respect to all shares of Common Stock that they
beneficially own, subject to applicable community property laws.
Applicable percentages are based on 67,124,839 shares of Common Stock
outstanding on August 31, 2017, adjusted as required by rules promulgated
by the SEC.
|
(2)
|
Includes 250,000 shares issuable upon exercise of
December 2016 Warrants.
|
(3)
|
Includes 200,000 shares issuable upon exercise of
December 2016 Warrants and 50,000 shares issuable upon exercise of May
2017 Warrants.
|
(4)
|
Includes 500,000 shares issuable upon exercise of
December 2016 Warrants and 250,000 shares issuable upon exercise of May
2017 Warrants.
|
(5)
|
Includes 250,000 shares issuable upon exercise of
December 2016 Warrants.
|
(6)
|
Consists of 250,000 shares issuable upon exercise of
December 2016 Warrants.
|
(7)
|
Includes 300,000 shares issuable upon exercise of
December 2016 Warrants.
|
(8)
|
Includes 67,500 shares issuable upon exercise of December
2016 Warrants.
|
(9)
|
Includes 30,000 shares issuable upon exercise of May 2017
Warrants.
|
(10)
|
Consists of 500,000 shares issuable upon exercise of
December 2016 Warrants.
|
(11)
|
Includes 250,000 shares issuable upon exercise of
December 2016 Warrants.
|
(12)
|
Includes 32,609 shares issuable upon exercise of May 2017
Warrants.
|
(13)
|
Includes 100,000 shares issuable upon exercise of
December 2016 Warrants.
|
(14)
|
Includes 25,000 shares issuable upon exercise of December
2016 Warrants.
|
(15)
|
Includes 35,000 shares issuable upon exercise of December
2016 Warrants.
|
(16)
|
Includes 100,000 shares issuable upon exercise of
February 2017 Warrants and 150,000 shares issuable upon exercise of May
2017 Warrants.
|
(17)
|
Includes 108,695 shares issuable upon exercise of May
2017 Warrants.
|
(18)
|
Includes 125,000 shares issuable upon exercise of January
2017 Warrants.
|
(19)
|
Consists of 1,500,000 shares issuable upon exercise of
Klondike Warrants.
|
(20)
|
Includes 434,783 shares issuable upon exercise of May
2017 Warrants.
|
(21)
|
Includes 25,000 shares issuable upon exercise of December
2016 Warrants.
|
(22)
|
Includes 90,000 shares issuable upon exercise of December
2016 Warrants.
|
(23)
|
Includes 100,000 shares issuable upon exercise of
December 2016 Warrants.
|
(24)
|
Includes 50,000 shares issuable upon exercise of December
2016 Warrants.
|
(25)
|
Includes 43,480 shares issuable upon exercise of May 2017
Warrants.
|
(26)
|
Includes 50,000 shares issuable upon exercise of May 2017
Warrants.
|
(27)
|
Includes 250,000 shares issuable upon exercise of
December 2016 Warrants.
|
(28)
|
Includes 50,000 shares issuable upon exercise of December
2016 Warrants.
|
(29)
|
Includes 50,000 shares issuable upon exercise of December
2016 Warrants and 50,000 shares issuable upon exercise of May 2017
Warrants.
|
29
(30)
|
Includes 25,000 shares issuable upon exercise of December
2016 Warrants.
|
(31)
|
Includes 50,000 shares issuable upon exercise of December
2016 Warrants.
|
(32)
|
Includes 125,000 shares issuable upon exercise of May
2017 Warrants.
|
(33)
|
Includes 50,000 shares issuable upon exercise of December
2016 Warrants and 50,000 shares issuable upon exercise of May 2017
Warrants.
|
(34)
|
Includes 6,500 shares issuable upon exercise of May 2017
Warrants.
|
(35)
|
Includes 250,000 shares issuable upon exercise of
December 2016 Warrants.
|
(36)
|
Includes 50,000 shares issuable upon exercise of December
2016 Warrants.
|
PLAN OF DISTRIBUTION
We are registering the Shares to permit the resale of those
Shares from time to time after the date of this prospectus at the discretion of
the holders of such Shares. We will not receive any of the proceeds from the
sale by the selling stockholders of the Shares. We will bear all fees and
expenses incident to our obligation to register the Shares.
Each selling stockholder and any of their pledgees, assignees
and successors-in-interest may, from time to time, sell any or all of their
Shares on the CSE, the OTC Markets, or any other stock exchange, market,
quotation service or trading facility on which the shares are traded or in
private transactions, provided that all applicable Canadian laws and other
applicable local laws are satisfied. The selling stockholders may also sell
their Shares directly or through one or more underwriters, broker-dealers, or
agents. If the Shares are sold through underwriters or broker-dealers, the
selling stockholders will be responsible for underwriting discounts or
commissions or agent's commissions. The Shares may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
A selling stockholder may use any one or more of the following methods when
selling shares:
-
ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
-
block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
-
purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
-
an exchange distribution in accordance with the rules of the applicable
exchange;
-
privately negotiated transactions;
-
settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;
-
broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
-
through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
-
a combination of any such methods of sale; and
-
any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares pursuant to Rule
144 under the Securities Act, if available, rather than under this prospectus.
If the selling stockholders effect such transactions by selling
Shares to or through underwriters, broker-dealers, or agents, such underwriters,
broker-dealers, or agents may receive commissions in the form of discounts,
concessions, or commissions from the selling stockholders or commissions from
purchasers of the Shares for whom they may act as agent or to whom they may sell
as principal (which discounts, concessions, or commissions as to particular
underwriters, broker-dealers, or agents may be in excess of those customary in
the types of transactions involved). Broker-dealers engaged by any selling
stockholder may arrange for other brokers-dealers to participate in sales.
Broker-dealers may receive commissions or discounts from the selling stockholder
(or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement
to this prospectus, in the case of an agency transaction not in excess of a
customary brokerage commission in compliance with FINRA Rule 2440; and in the
case of a principal transaction a markup or markdown in compliance with FINRA
IM-2440.
30
In connection with sales of Shares or interests therein, the
selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
Shares in the course of hedging in positions they assume. The selling
stockholders may also sell shares of Common Stock short and deliver Shares
covered by this prospectus to close out their short positions and to return
borrowed shares in connection with such short sales. The selling stockholders
may also loan or pledge Shares to broker-dealers that in turn may sell such
Shares. The selling stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions or the creation
of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of Shares offered by this
prospectus, which Shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The selling stockholders and any broker-dealers or agents that
are involved in selling the Shares may be deemed to be underwriters within the
meaning of the Securities Act, in connection with such sales. In such event, any
commissions received by, or any discounts or concessions allowed to, any such
broker-dealer or agent and any profit on the resale of any Shares purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act. At the time a particular offering of the Shares is made, a
prospectus supplement, if required, will be distributed that will set forth the
aggregate amount of Shares being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts,
commissions, and other terms constituting compensation from the selling
stockholders and any discounts, commissions, or concessions allowed or
re-allowed or paid to broker-dealers.
Each selling stockholder has informed us that it does not have
any written or oral agreement or understanding, directly or indirectly, with any
person to distribute the Shares.
Because the selling stockholders may be deemed to be
underwriters within the meaning of the Securities Act, they will be subject to
the prospectus delivery requirements of the Securities Act, including Rule 172
thereunder. We will make copies of this prospectus available to the selling
stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including by
compliance with Rule 172 under the Securities Act).
There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the selling
stockholders.
Under the securities laws of some states, the Shares may be
sold in such states only through registered or licensed brokers or dealers. In
addition, in some states the Shares may not be sold unless such shares have been
registered or qualified for sale in such state, or an exemption from
registration or qualification is available and is complied with.
There can be no assurance that any selling stockholder will
sell any or all of the Shares registered pursuant to the registration statement
of which this prospectus forms a part.
Under applicable rules and regulations under the Securities
Exchange Act of 1934, as amended, any person engaged in the distribution of the
Shares may not simultaneously engage in market making activities with respect to
the Common Stock for the applicable restricted period, as defined in Regulation
M, prior to the commencement of the distribution. In addition, the selling
stockholders will be subject to applicable provisions of the Exchange Act, and
the rules and regulations thereunder, including Regulation M, which may limit
the timing of purchases and sales of shares of Common Stock by the selling
stockholders or any other person. All of the foregoing provisions may affect the
marketability of the Shares and the ability of any person or entity to engage in
market-making activities with respect to the Shares.
We will pay all expenses of the registration of the Shares,
estimated to be approximately $66,300 in total, including, without limitation,
Securities and Exchange Commission filing fees, expenses of compliance with
state securities or blue sky laws, and legal and accounting fees; provided,
however, that a selling stockholder will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling stockholders against
liabilities, including some liabilities under the Securities Act, in accordance
with applicable registration rights agreements, if any, or the selling
stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling stockholder specifically for use in
this prospectus, in accordance with the related registration rights agreement,
or we may be entitled to contribution.
31
We agreed to keep this prospectus effective until the earlier
of (i) the date on which the Shares may be resold by the selling stockholders
without registration and without the requirement to be in compliance with Rule
144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144
or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144
under the Securities Act or any other rule of similar effect.
Once sold under the registration statement of which this
prospectus forms a part, the Shares will be freely tradable in the hands of
persons other than our affiliates.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital consists of 400,000,000 shares of Common
Stock with a par value of $0.001.
Common Stock
As of August 31, 2017, there are 67,124,839 shares of our
Common Stock issued and outstanding.
Holders of our Common Stock have no preemptive rights to
purchase additional shares of Common Stock or other subscription rights. The
Common Stock carries no conversion rights and is not subject to redemption or to
any sinking fund provisions. All of our issued Common Stock is entitled to share
equally in dividends from sources legally available, when, as and if declared by
our Board of Directors, and upon our liquidation or dissolution, whether
voluntary or involuntary, to share equally in our assets available for
distribution to security holders.
Our Board of Directors is authorized to issue additional shares
of Common Stock not to exceed the amount authorized by our Articles of
Incorporation, on such terms and conditions and for such consideration as the
Board may deem appropriate without further security holder action.
Voting Rights
Each holder of our Common Stock is entitled to one vote per
share on all matters on which such stockholders are entitled to vote. Since the
Common Stock does not have cumulative voting rights, the holders of more than
50% of the shares voting for the election of directors can elect all the
directors if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any person to the Board of Directors.
Dividend Policy
Holders of our Common Stock are entitled to dividends if
declared by the Board of Directors out of funds legally available for the
payment of dividends. Since our inception as a company on February 9, 2007, we
have not declared any dividends, nor do we intend to issue any cash dividends in
the future. Our foreseeable plans include retaining earnings, if any, to finance
the development and expansion of our business.
Warrants
As of August 31, 2017, an aggregate of 36,456,556 warrants,
with each warrant convertible into one (1) share of Common Stock, were issued
and outstanding as follows:
Number
|
Exercise Price
|
Expiry Date
|
9,863,486
|
CDN$0.40
|
May 5, 2019
|
192,670
|
CDN$0.10
|
January 29, 2018
|
1,500,000
|
CDN$0.227
|
July 13, 2018
|
32
Number
|
Exercise Price
|
Expiry Date
|
22,148,800
|
CDN$0.40
|
December 23, 2018
|
2,286,100
|
CDN$0.40
|
January 24, 2019
|
465,500
|
CDN$0.40
|
February 6, 2019
|
36,456,556
|
|
|
Each of the foregoing warrants provides that in the event there
is a subdivision, consolidation, reclassification, or other change to our Common
Stock resulting in a greater or lesser number of shares of Common Stock or our
other securities, the terms of the Common Stock issuable on conversion of such
warrants and the exercise price of such warrants will be adjusted accordingly.
Incentive Stock Options
As of July 31, 2017, an aggregate of 5,729,142 incentive stock
options are issued and outstanding, with each option exercisable into one (1)
share of Common Stock, as follows:
Option Grant Date
|
Option Exercise Price
|
Option Expiry Date
|
Number of Options
|
|
|
|
Currently Outstanding
|
March 23, 2016
|
CDN$0.15
|
March 22, 2021
|
1,100,000
|
August 9, 2016
|
CDN$0.20
|
August 8, 2021
|
586,600
|
December 27, 2016
|
CDN$0.24
|
December 27, 2021
|
2,142,542
|
February 7, 2017
|
CDN$0.33
|
February 7, 2020
|
500,000
|
April 3, 2017
|
CDN$0.27
|
April 3, 2022
|
500,000
|
April 20, 2017
|
CDN$0.28
|
April 20, 2020
|
900,000
|
|
|
|
5,729,142
|
Each agreement in respect of incentive stock options provides
that in the event there is a subdivision, consolidation, reclassification, or
other change to our Common Stock resulting in a greater or lesser number of
shares of Common Stock, the terms of the Common Stock issuable on exercise of
such options and the exercise price of such options will be adjusted
accordingly. Furthermore, the expiry period of each of the foregoing options
will be accelerated in the event the holder ceases to hold their applicable
position as director, officer, consultant, or employee of Rise.
BUSINESS
General Corporate Information
Our company was incorporated on February 9, 2007 as Atlantic
Resources Inc. in the state of Nevada pursuant to the Nevada Revised Statutes.
On April 11, 2012, we changed our name to Patriot Minefinders Inc. On January
14, 2015, we changed our name to Rise Resources Inc.. On March 29, 2017, we
changed our name to Rise Gold Corp..
On January 14, 2015, we completed a merger with our wholly
owned subsidiary, Rise Resources Inc., and formally assumed the subsidiarys
name by filing Articles of Merger with the Nevada Secretary of State. The
subsidiary was incorporated entirely for the purpose of effecting the name
change and the merger did not affect our Articles of Incorporation or corporate
structure in any other way.
On January 22, 2015, we completed a 1 for 80 reverse split of
our Common Stock and effected a corresponding decrease in our authorized capital
by filing a Certificate of Change with the Nevada Secretary of State (the
Reverse Split
). As a result of the Reverse Split, our authorized
capital decreased from 1,680,000,000 shares to 21,000,000 and our issued and outstanding Common Stock decreased from
63,400,000 shares to 792,518, with each fractional share being rounded up to the
nearest whole share.
33
Both the name change and Reverse Split became effective in the
market at the open of business on February 9, 2015. On April 9, 2015, we
increased our authorized capital from 21,000,000 to 400,000,000 shares of Common
Stock.
On March 29, 2017, we completed another merger with our wholly
owned subsidiary, Rise Gold Corp., and formally assumed the subsidiarys name by
filing Articles of Merger with the Nevada Secretary of State. The subsidiary was
incorporated entirely for the purpose of effecting the name change and the
merger did not affect our Articles of Incorporation or corporate structure in
any other way.
We have one wholly owned subsidiary, Rise Grass Valley, Inc.,
which holds our interests and assets located in the United States, and in
particular, our interest in the I-M Mine Property. Rise Grass Valley, Inc. was
incorporated in the state of Nevada pursuant to the Nevada Revised Statutes.
Our Common Stock is currently listed on the CSE under the
symbol RISE. We are a reporting issuer in British Columbia, Alberta, and
Ontario in Canada. Our Common Stock is also currently quoted on the OTC Markets
(Pink Current) under the symbol RYES. We are an SEC reporting company by
virtue of our class of Common Stock being registered under Section 12(g) of the
Exchange Act.
Description of Business
We are a mineral exploration company and our primary asset is a
major past producing high grade property near Grass Valley, California, United
States, which we own outright. We have held, until recently, several other
potential mineral properties in British Columbia, Canada, which have been
written off based on the strength of the Grass Valley asset.
On February 11, 2015, we entered into debt conversion
agreements with five of our investors pursuant to which such investors agreed to
convert an aggregate of $400,000 in debt into 20,000,000 shares of Common Stock
at a price of CDN$0.02 per share. On October 28, 2015, the investors agreed to
cancel an aggregate of 8,571,428 of those shares on a pro rata basis to increase
the effective conversion price to CDN$0.035 per share.
On February 16, 2015, the holders of a majority of our Common
Stock approved an increase in our authorized capital from 21,000,000 to
400,000,000 shares of Common Stock (the
Authorized Capital Increase
).
The purpose of the Authorized Capital Increase was to reorganize our capital
structure in connection with the Reverse Split, which management believed would
better position our company to attract financing. On April 9, 2015, we formally
effected the Authorized Capital Increase by filing a Certificate of Amendment
with the Nevada Secretary of State.
On March 31, 2015, we entered into debt conversion agreements
with 13 investors pursuant to which such investors agreed to convert an
aggregate of approximately CDN$206,675 in debt into 10,333,771 shares of Common
Stock at a price of CDN$0.02 per share. On April 9, 2015, following the
completion of the Authorized Capital Increase, we formally issued these shares.
On October 28, 2015, the investors agreed to cancel an aggregate of 4,428,758 of
those shares on a pro rata basis to increase the effective conversion price to
CDN$0.035 per share.
On April 23, 2015, we entered into debt conversion agreements
with two investors pursuant to which such investors agreed to convert an
aggregate of approximately CDN$40,982 in debt into 1,170,906 shares of Common
Stock at a price of CDN$0.035 per share. On the same day, we also issued an
aggregate of 6,000,002 shares of Common Stock to six investors at a price of
CDN$0.035 per share in exchange for gross proceeds of CDN$210,000.
On May 18, 2015, we entered into an option agreement (the
Eastfield Option
) with Eastfield Resources Ltd., a British Columbia
company with its common shares listed for trading on the TSX Venture Exchange
under the symbol ETF (
Eastfield
), pursuant to which Eastfield granted
us the exclusive and irrevocable option to acquire up to a 75% undivided
interest in and to certain mineral claims known as the Indata property located
in the Omineca Mining Division in British Columbia, Canada (the
Indata
Property
), by paying Eastfield an aggregate of CDN$450,000 in cash,
incurring a minimum of CDN$2,500,000 in aggregate exploration expenditures on
the Indata Property, and completing a feasibility study on the property.
On May 5, 2017, we terminated the Option Agreement and wrote off CDN$50,000 in
acquisition costs relating to Indata during the period ended April 30, 2017.
34
Prior to entering into the Eastfield Option, we were a
development stage company engaged in exploring and evaluating potential
strategic transactions in multiple industries, including but not limited to
mineral properties and technology.
On August 1, 2015, we changed our functional currency from the
United States dollar to the Canadian dollar.
On October 28, 2015, we cancelled 13,000,186 shares of Common
Stock that were originally issued by us through debt conversion agreements on
February 11, 2015 and March 31, 2015 pursuant to a share surrender and
cancellation agreement.
On January 29, 2016, we completed the issuance and sale of an
aggregate of 6,050,000 shares of Common Stock at a price of $0.10 per share in a
Canadian public offering in exchange for gross proceeds of $605,000. The shares
were qualified for distribution in the provinces of British Columbia and Alberta
pursuant to a final long form prospectus we prepared dated November 10, 2015.
Pursuant to an agency agreement dated September 22, 2015 between us and one
Canadian selling agent, we paid the agent a cash commission equal to 8% of the
gross proceeds ($48,400) and issued the agent and one sub-agent an aggregate of
484,000 warrants valued at $42,248 (discount rate 0.43%, volatility 215.3%,
expected life 2 years, dividend yield 0%), each of which is exercisable into
one share of Common Stock at a price of $0.10 per share for a period of 24
months. We also paid the Canadian selling agent a corporate finance fee of
$25,000 and incurred other share issuance costs of $51,004.
On February 1, 2016, our Common Stock commenced trading on the
CSE.
On May 31, 2016, we entered into a property purchase agreement
(the
Klondike Purchase
) with Klondike Gold Corp., a British Columbia
company with its common shares listed for trading on the TSX Venture Exchange
under the symbol KG (
Klondike
), regarding the purchase of a portfolio
of seven gold and base metal properties in southeast British Columbia consisting
of 150 mining claims with a total area of 28,000 hectares (collectively, the
Klondike Properties
). Under the Purchase Agreement, on July 13, 2016
(the
First Closing
), we paid Klondike $50,000 in cash, issued 1,500,000
shares of Common Stock, and issued 1,500,000 warrants exercisable at a price of
$0.227 per share until July 13, 2018. On the one year anniversary of the First
Closing, we were required to pay Klondike $150,000 in cash, issue 2,000,000
shares of Common Stock, and issue 1,000,000 warrants. In June 2017, we decided
to terminate the Purchase Agreement and wrote off $513,031 in acquisition costs
relating to the Klondike Properties during the period ended April 30, 2017.
Under the terms of settlement agreement dated July 17, 2017 with Klondike, we
agreed to pay $100,000 and return any interests we had in the Klondike
Properties in exchange for a release from any future obligations and commitments
to Klondike.
On August 1, 2016, Fred Tejada resigned as our Chief Executive
Officer and the Board of Directors appointed Benjamin W. Mossman as a director
and Chief Executive Officer to the fill the vacancy resulting from Mr. Tejadas
resignation.
On August 31, 2016, Michael Evans resigned as a director and
the Board of Directors appointed John D. Anderson to fill the director vacancy
and the audit committee vacancy resulting from Mr. Evans resignation.
On August 30, 2016, we entered into an option agreement with
three parties to purchase a 100% interest in and to the Idaho-Maryland Gold Mine
property (the
I-M Mine Property
) located near Grass Valley, California,
United States. In order to exercise the option, we agreed to pay the vendors
US$2,000,000 by November 30, 2016. Upon execution of the option agreement, we
paid the vendors a non-refundable cash deposit in the amount of $32,758
(US$25,000), which was to be credited against the purchase price of US$2,000,000
upon exercise of the option. On November 30, 2016, we negotiated an extension of
the closing date of the option agreement to December 26, 2016, in return for a
cash payment of $32,758 (US$25,000), which also was credited against the
purchase price of US$2,000,000 upon exercise of the option. On December 28,
2016, we negotiated a further no-cost extension of the closing date of the
option agreement to January 31, 2017. On January 25, 2017, we exercised the
option by paying $2,588,625 (US$1,950,000), and acquired a 100% interest in the
I-M Mine Property. In connection with the option agreement, we agreed to pay a
cash commission of $184,000 (US$140,000) equal to 7 per cent of the purchase
price of US$2,000,000; the commission was settled on January 25, 2017 through
the issuance of 920,000 units valued at $0.20 per unit, each unit consisting of one share of Common
Stock and one transferable share purchase warrant exercisable into one share of
Common Stock at a price of $0.40 for a period of two years from the date of
issuance.
35
We have prepared a technical report outlining an exploration
plan which we are now preparing to commence. This report was created through
processing historic data on the I-M Mine Property obtained from the vendors.
On December 23, 2016, we completed a non-brokered private
placement, issuing an aggregate of 21,044,500 units at a price of $0.20 per unit
for gross proceeds of $4,208,900. Each unit consists of one share of Common
Stock and one transferable share purchase warrant exercisable into one share of
Common Stock at a price of $0.40 for a period of two years from the date of
issuance. In connection with the private placement, we paid finders fees of
$218,410 and issued a total of 1,104,300 agent warrants exercisable into Common
Stock at a price of $0.40 for a period of two years from the date of
issuance.
On January 6, 2017, we entered into an option agreement with
Sierra Pacific Industries Inc. of Anderson, California to purchase a 100%
interest in and to certain surface rights totalling approximately 82 acres
located, contiguous to the I-M Mine Property acquired on January 25, 2017.
Pursuant to the option agreement, we were required to pay US$1,900,000 by March
31, 2017 in order to exercise the option. Upon execution of the option
agreement, we paid the vendors a non-refundable cash deposit in the amount of
$132,732 (US$100,000), which was credited against the purchase price of
US$1,900,000 upon exercise of the option. On April 3, 2017, we negotiated an
extension of the closing date of the option agreement to June 30, 2017, in
return for a cash payment of $268,000 (US$200,000) to extend the option
agreement to June 30, 2017, at which time a payment of US$1,600,000 was due in
order to exercise the option. On June 7, 2017, we negotiated a further extension
of the closing date of the option agreement to September 30, 2017 in return for
a cash payment of $406,590 (US$300,000), which will be credited against the
remaining purchase price. As a result, the remaining amount required to exercise
the option and complete the purchase is US$1,300,000.
On January 24, 2017, we completed a non-brokered private
placement, issuing an aggregate of 1,340,000 units at a price of $0.20 per unit
for gross proceeds of $268,000. Each unit consists of one share of Common Stock
and one transferable share purchase warrant exercisable into one share of Common
Stock at a price of $0.40 for a period of two years from the date of issuance.
In connection with the private placement, we paid finders fees of $5,220 and
issued a total of 26,100 agent warrants, each exercisable into one share of
Common Stock at a price of $0.40 for a period of two years from the date of
issuance.
On February 6, 2017, we completed a non-brokered private
placement, issuing an aggregate of 455,000 units at a price of $0.25 per unit
for gross proceeds of $113,750. Each unit consists of one share of Common Stock
and one transferable share purchase warrant exercisable into one share of Common
Stock at a price of $0.40 for a period of two years from the date of issuance.
In connection with the private placement, we paid finders fees of $2,625 and
issued a total of 10,500 agent warrants exercisable into one share of Common
Stock at a price of $0.40 for a period of two years from the date of issuance.
On April 20, 2017, Fred Tejada resigned as a director, the
President and Secretary and Bradley Scharfe resigned as a director from our
Board of Directors. On the same date, our Board of Directors appointed Alan R.
Edwards and Thomas I. Vehrs to fill the director vacancies and audit committee
vacancies. The Board also appointed Benjamin W. Mossman as our President and
Cale Thomas as our corporate secretary to fill the office vacancies resulting
from Mr. Tejadas resignation.
On May 5, 2017, we completed a non-brokered private placement,
issuing an aggregate of 9,009,814 units at a price of $0.23 per unit for gross
proceeds of $2,072,257. Each unit consists of one share of Common Stock and one
transferable share purchase warrant exercisable into one share of Common Stock
at a price of $0.40 for a period of two years from the date of issuance. In
connection with the private placement, we paid or accrued finders fees of
$100,392 and issued a total of 436,488 agent warrants exercisable into one share
of Common Stock at a price of $0.40 for a period of two years from the date of
issuance.
On August 8, 2017, we entered into a shares for debt settlement
transaction with one of our creditors, providing for the settlement of
approximately $95,952 of indebtedness through the issuance of an aggregate of
417,184 units of our securities at a deemed issue price of $0.23 per unit. Each
unit was comprised of one share of Common Stock and one common stock purchase warrant. Each warrant entitles
the holder to acquire one additional share of Common Stock at an exercise price
of $0.40 until May 5, 2019.
36
Plan of Operations
As at April 30, 2017, we had a cash balance of $648,166,
compared to a cash balance of $139,021 as of July 31, 2016.
Our plan of operations for the next 12 months is to commence
exploration diamond drilling at the I-M Mine Property. We plan to complete the
recommended work program outlined in a technical report that was prepared on the
I-M Mine Property and which was issued on June 1, 2017.
The I-M Mine Property hosts numerous exploration targets that
warrant drilling. While a significant drill program is required to test these
targets, our initial plans are to complete the limited exploratory work program
described in the Report. Contingent upon available financing, we plan to drill
additional targets.
An initial single 6,000 ft (1,830 m) surface diamond drill hole
is recommended to provide geological samples from most of the major lithological
units on the I-M Mine Property geology. The single hole has been designed to
pierce the #1 Vein projection approximately 400 ft (122 m) below the elevation
of the I2400 Level and then carry on through the potential western extensions of
the Idaho 3 Vein System. The objectives of this drill hole are as follows:
|
1)
|
Provide a long drill intercept of the Brunswick Block
from surface to the Serpentinite contact.
|
|
|
|
|
2)
|
Test the up-dip area and below the 52 Vein (60 Winze)
mineralized area in the Brunswick Block.
|
|
|
|
|
3)
|
Test the #1 Vein below the I2400 Level.
|
|
|
|
|
4)
|
Test the serpentinite footwall for potential 3 Vein/Rose
Garden analogies.
|
|
|
|
|
5)
|
Test and obtain samples of ankerite alteration in the
serpentinite unit.
|
|
|
|
|
6)
|
Test for the location of the major Idaho
faults.
|
|
|
|
|
7)
|
Drill through the serpentinite unit to provide further
insight on the thickness and geometry of this unit at depth.
|
|
|
|
|
8)
|
Determine drill hole deviation, drilling productivity,
and drilling costs to allow refinement of the design of a major drill
program at the Idaho-Maryland property.
|
In addition, Amec Foster Wheeler recommends that the digital
geological model be expanded to include model channel samples, the lithological
contacts and structures such as the diabase dikes, ankerite alteration
envelopes, minor quartz veins, and all faults mapped by the historic mine
operators. This work may provide additional insight into the mineralization
controls at the I-M Mine Property.
The cost of the work program is estimated at CDN$595,000 as
shown in the following table:
Estimated Cost of Recommended Work Program
|
|
|
|
|
|
Hole Length (m)
|
1829
|
|
m
|
|
|
|
|
Duration
|
38
|
|
days
|
|
|
|
|
Drilling Cost
|
$390,000
|
|
|
|
|
|
|
Mobilization
|
$7,000
|
|
|
|
|
|
|
Standby charges
|
$40,000
|
|
|
|
|
|
|
Centrifuge System
|
$36,000
|
|
|
37
Living Allowance
|
$29,000
|
|
|
|
|
|
|
Geology & Assaying
|
$38,000
|
|
|
|
|
|
|
Supplies
|
$15,000
|
|
|
|
|
|
|
Total Drilling Cost
|
$555,000
|
|
= $303/m
|
|
|
|
|
Geological Modelling
|
$40,000
|
|
|
|
|
|
|
Total Work Program
|
$595,000
|
|
CDN
|
|
|
|
|
We have not attained profitable operations and are dependent
upon obtaining financing to pursue our proposed exploration activities. For
these reasons, our auditors believe that there is substantial doubt that we will
be able to continue as a going concern.
PROPERTIES
I-M Mine Property, California
Our principal mineral property is the I-M Mine Property.
I-M Mine Project
The information in this prospectus with respect to the I-M Mine
Property is derived from a technical report prepared in compliance with National
Instrument 43-101 (
Standards of Disclosure for Mineral Projects
) (
NI
43-101
) mandated by Canadian Securities Regulatory authorities. Entitled
Technical Report on the Idaho-Maryland Project, Grass Valley, California, USA
(the
Report
) and dated June 1, 2017, the Report was prepared by Greg
Kulla, P.Geo. (the
Author
) of Amec Foster Wheeler Americas Limited. The
Author is an independent Qualified Person for purposes of NI 43-101. The full
text of the Report is available for review at our corporate offices located at
Suite 488 1090 West Georgia Street, Vancouver, BC V63 3V7, and may also be
accessed online, under our companys profile, on the SEDAR website:
www.sedar.com. Readers are encouraged to review the Report in its entirety.
Project Location, Description and Access
Property Location
The I-M Mine Property comprises approximately 93 acres (38
hectares) surface land and approximately 2,800 acres (1,133 hectares) mineral
rights located near Grass Valley of Nevada County in northern California, USA.
The I-M Mine Property is situated in the Grass Valley-Nevada City District along
the western slope of the Sierra Nevada, as shown on the overview map and
regional map in Figure 1 and Figure 2, respectively and is located approximately
60 miles northeast of Sacramento, CA and 90 miles west of Reno, NV.
38
39
40
Property Description
The recorded owner of the surface land and mineral rights
associated with the I-M Mine Property, as documented by a Quitclaim Deed
recorded by the Nevada County Recorder on the 26
th
of January 2017
(Document #: 20170001985), is Rise Grass Valley Inc., a Nevada Corporation and
subsidiary of Rise Gold Corp. Rise Grass Valley Inc. purchased the I-M Mine
Property, inclusive of its mineral rights from the Grantors of the BET Group
Estate, as described in the Quitclaim Deed (Document #: 20170001985), on the
25
th
of January 2017.
Surface Rights
The IM Mine Property surface rights include two parts of fee
simple land, (1) Idaho land representing 56 acres (23 hectares) and (2)
Brunswick land representing 37 acres (15 hectares) as displayed in Figure 3.
The I-M Mine Property consists of parcels of surface land
located in portions of Section 26 and 36, Township 16 North Range 8 East Mount
Diablo Base and Meridian (MDM) and Section 31, Township 16 North Range 9 East
MDM as detailed in Table 1 and displayed in Figure 3.
Table 1: Idaho-Maryland Mine Property Surface Land Legal
Description
Parcel
Number
|
Description
|
Lot Size
|
09-550- 32
|
SEC 26, TWN 16N,
RNG 8E, MDM, PTN N 1/2 26-16-8
|
20,908 SF
(0.48 AC)
|
09-550- 37
|
SEC 26, TWN 16N,
RNG 8E, MDM, PTN NE 1/4 26-16-8
|
4.47 AC
|
09-550- 38
|
SEC 26, TWN 16N,
RNG 8E, MDM, PTN NE 1/4 26-16-8
|
40.1 AC
|
09-550- 39
|
SEC 26, TWN 16N,
RNG 8E, MDM, PTN NE 1/4 26-16-8 344 CENTENNIAL DRIVE GRASS VALLEY, CA
95945
|
42,668 SF
(0.98 AC)
|
09-550- 40
|
SEC 26, TWN 16N,
RNG 8E, MDM, PTN NE 1/4 26-16-8
|
5,662 SF
(0.13 AC)
|
09-560- 36
|
SEC 26, TWN 16N,
RNG 8E, MDM, PTN N 1/2 SE 1/4 26-16-8
|
10.25 AC
|
09-630- 37
|
SEC 36, TWN 16N,
RNG 8E, MDM, LOT 6 BET ACRES
|
21.8 AC
|
09-630- 39
|
SEC
36, TWN 16N, RNG 8E, MDM & SEC 31, TWN 16N, RNG 9E, MDM, LOT 7 BET
ACRES
|
15.07 AC
|
41
- 42 -
Surface Land Obligations
Fee simple ownership entitles the owner to all rights of a
property, which are only restricted by law or private restrictions, such as zone
ordinances or covenants. Fee simple owners retain possession of their property
permanently, assuming all obligations to the land are met.
The surface land is subject to a tax lien imposed by and
payable to Nevada County. The parcels comprising the Idaho land and Brunswick
land have a combined annual property tax of $16,126.78 for the fiscal year
ending June 30
th
, 2017. The total amount includes County taxes and
Agency taxes. The I-M Mine Property remains in good standing with property taxes
paid in full through June 30
th
, 2017.
The Nevada Irrigation District supplies treated water to the
I-M Mine Property. Water to the Brunswick land is delivered from the Loma Rica
System, while water to the Idaho land is delivered from the E. George System. A
nominal service fee is charged.
There are no further interests registered against the title of
the surface rights.
Land Designation
The Brunswick land is located approximately 1 to 2 miles
southeast of the city limits of the City of Grass Valley in Nevada County. The
Idaho land is located on Idaho-Maryland Rd adjacent to the city limits of the
City of Grass Valley in Nevada County. The I-M Mine Property in relation to city
limits is shown on Figure 3. Due to its proximity, the I-M Mine Property is
located within the City of Grass Valleys planning area boundary, with Brunswick
land located in the Long-term Annexation and Idaho land located in the
Near-term Annexation Sphere of Influence. Based on the City of Grass Valley
2020 General Plan, the planned land use designation for the Brunswick land
remains M-1 Manufacturing/Industrial, while the planned land use designation
for the Idaho land is BP Business Park (CoGV-CDD, 2009).
Each of the parcels of Brunswick land and Idaho land are
positioned within the Countys M1 Light Industrial Zone. Within the M1
District, surface access to subsurface mining (e.g., vent and escape shafts) is
allowed with a Use Permit (Nevada County Code § L-II 3.21. ). Mineral
exploration, however, is distinct from the definitions of subsurface mining
and surface mining. Exploration involves the search for economic minerals
through the use of geological surveys, geophysical or geochemical prospecting,
bore holes and trial pits, and surface or underground headings, drifts, or
tunnels (NCC § L-II 3.22(B)(5) .). Exploration diamond drilling on M1-Industrial
Land is an allowed use and does not require a discretionary permit provided that
no water is discharged offsite and disturbance per site is less than 1 acre and
1,000 yd
3
material (NCC, 2017).
The Project area is private land and no permits or
consultations with the US Bureau of Land Management (BLM) or the US Forest
Service (USFS) are required.
Mineral Rights
The I-M Mine Property consists of mineral rights on 10 parcels,
including 55 subparcels, totaling 2,800 acres (1,133 hectares), of full or
partial interest, as detailed in Table 2 and displayed in Figure 4. The mineral
rights encompass the past producing I-M Mine Property which includes the Idaho
and Brunswick underground gold mines.
The original mineral rights were granted at various times since
1851. Through various patents and agreements since the original grants, there
has been a succession of ownership of the mineral rights.
- 43 -
The Quitclaim Deed describes the mineral rights as follows:
The I-M Mine Property consists of all rights to minerals
within, on, and under the land shown upon the Subdivision Map of BET ACRES, No.
85-7, filed in the Office of the County Records, Nevada County, California, on
February 24, 1987, in Book 7 of Subdivisions, at Page 75 et seq.
The I-M Mine Property consists of all rights to minerals
within, on, and under the land located in portions of Sections 23, 24, 25, 26,
35, and 36 in Township 16 North Range 8 East MDM, Sections 19, 29, 30, and 31
in Township 16 North Range 9 East MDM, and Section 6 in Township 15 North
Range 9 East MDM and all other mineral rights associated with the Idaho-Maryland
Mine.
The mineral rights are defined as parcels and subparcels in
a Quitclaim Deed (Document #: 20170001985). All property is described in that
Quitclaim Deed by Idaho Maryland Industries Inc. in favor of William Ghidotti
and Marian Ghidotti, his wife as tenants in common, dated June 10, 1963. The
Quitclaim deed is located at vol. 337, pp. 175-196 in the official records of
Nevada County, as recorded on June 12, 1963
.
Mineral rights pertain to all minerals, gas, oil and mineral
deposits of every kind and nature beneath the surface of all such real property,
together with all necessary and convenient rights to explore for, develop,
produce, extract and take the same, subject to the express limitation that the
fore-going exception and reservation shall not include any right of entry upon
the surface of said land without the consent of the owner of such surface of
said land, as excepted in the Quitclaim Deed recorded the 26
th
of
January 2017 (Document #: 20170001985). Mineral rights are severed from surface
rights at a depth of 200 ft (61 m) below surface, with all mineral rights being
contiguous below 200 ft (61 m) of surface.
There are no interests registered against or obligations
required of the mineral rights of the I-M Mine Property.
- 44 -
- 45 -
Property Access
The I-M Mine Property is situated east of the City of Grass
Valley and south of Nevada City, in western Nevada County. State Route 49, State
Route 20, and State Route 174 (state highways) connect the Grass Valley area
regionally. The Brunswick land and the adjacent Mill Site are situated on the
south western quadrant of the intersection of the East Bennett Road, a two-lane
artery, and Brunswick Road, a major two-lane artery connecting Grass Valley with
State Highway 174. Access to the Brunswick land is on Millsite Road via the East
Bennet Road, approximately 2.8 miles east of Grass Valley Center. The Idaho land
is situated along the Idaho Maryland Road to the south, centered between
Railroad Avenue and Brunswick Road. The Idaho land can be accessed by Idaho
Maryland Road or Centennial Drive and multiple trails are present across the
property.
Agreements
Rise owns a 100% interest in the I-M Mine Property and there
are no known royalties on future gold production. There are no other known
agreements or encumbrances to which the I-M Mine Property is subject. See Item
5 Description of Business Three Years History Property Acquisition.
Environmental Liabilities
Environmental studies have been completed on all the surface
holdings owned by Rise. The environmental studies were completed prior to Rise
purchasing the Idaho land and Brunswick land.
Idaho Land
In 2016, a Draft Preliminary Endangerment Report on the Idaho
Land was prepared for the City of Grass Valley by Geocon Consultants Inc. This
report provided conclusions and recommendations to support redevelopment of this
site for commercial and industrial use. Geocon noted the metal of greatest
concern with respect to potential health risks for future site occupants is
arsenic which is present is mine tailings and waste berms located on the site.
Geocon noted that the presence of arsenic in mine waste on the site does not
currently appear to pose a significant risk to public health or the environment
in its current state and that an expedited response action does not appear
warranted at this time (Geocon, 2016).
Brunswick Land
In 2007, a Phase I Environmental Site Assessment for the
Round-Hole and New Brunswick Mine Sites was prepared by Engineering/Remediation
Resources Group, Inc. (
ERRG
) for Idaho-Maryland Mining Corporation. The
report concluded that there were no current recognized environmental conditions
on the I-M Mine Property at the time, although there are suspect environmental
concerns regarding spills of hydrocarbons from vandalism at the New Brunswick
Shaft, roofing asphalt on the property, debris from illegal dumping on the
property boundaries, and the potential for naturally occurring asbestos in
serpentinite rocks on the property. ERRG did not complete an analysis to
determine if contamination from historic mining and mineral processing was
present, although ERRG has recommended further sampling and studies to determine
this (ERRG, 2007).
Permits
All parcels included in the I-M Mine Property are within the
M1 Light Industrial Zoning District of Nevada County. Mineral exploration is
allowed in M1 Districts subject to zoning compliance and building permit
issuance, if required. A Use Permit is only required for mineral exploration if
one of the following conditions are triggered, as per NCC § L-II 3.22(D)(2):
|
(a)
|
Overburden or mineral deposits in excess of 1,000 cubic
yards are disturbed, or
|
|
|
|
|
(b)
|
The operation in any one location exceeds one acre in
size, or
|
46
|
(c)
|
Dewatering will occur or water will be discharged from
the site as a result of the operation.
|
Additionally, all exploratory operations shall require a
reclamation plan and secure adequate financial assurances to ensure site
reclamation unless:
|
(a)
|
Less than 1,000 cubic yards of overburden are disturbed,
and
|
|
|
|
|
(b)
|
The size of the operation in any one location is one acre
or less.
|
In those instances where a reclamation plan is not required, an
erosion control plan as per NCC § L-V 13.14. , approved by the Nevada County
Planning Department, and a grading permit shall be required for those operations
in which 50 cubic yards or more of overburden are disturbed as per NCC § L-II
3.22(D)(2) (NCC, 2017).
A building permit, issued by the County, may be required for
construction or installation of drilling facilities. A building permit is a
ministerial approval. Ministerial approval is a non-discretionary approval.
Surface exploration drilling will be subject to Nevada County
Noise Regulations. The Noise Element of the Nevada County General Plan (2014)
establishes maximum allowable exterior noise levels for various land use
categories (NC-BOS, 2014).
Other significant risks
No significant factors or risks are currently known to exist
which would affect access, title, or the right or ability to perform exploration
work on the I-M Mine Property.
History
The Idaho-Maryland Mine (the
I-M Mine
), located in the
Grass Valley mining district of northern California was one of the most
productive and best known gold mines in the Unites States, with gold production
from the I-M Mine Property dating back to 1863.
The I-M Mine, as it now exists, represents a consolidation of a
number of important early day producing mines including Eureka, Idaho, Maryland,
Brunswick, and Union Hill Mines. Based on historic production records, the I-M
Mine produced a total of 2.4 Moz gold at an average mill head grade of
approximately 0.5 oz/ton (17.1 gpt). The I-M Mine was reportedly the second
largest gold mine in the United States in 1941 (Clark, 2005), producing up to
129,000 oz gold per year before being forced to shut down by the US government
in 1942 (Shore, 1943). Due to lack of development, a decline in gold production
was experienced and recovery from war-time shutdown never occurred.
Historic Exploration & Mine Development
The I-M Mine has a rich history of mining work completed
between 1863 and 1956 by various operators. Extensive exploration and
underground mine development was completed during that time on the I-M Mine
Property. The I-M Mine Property and its comprehensive collection of original
documents was rediscovered in 1990 by Consolidated Del Norte Ventures Inc., the
predecessor company of Emgold Mining Corporation (
Emgold
), and efforts
were made to reopen the historic mine.
Exploration & Mine Development 1851-1956
Exploration by historic operators from 1851 through to 1956 was
mainly completed by lateral exploration (drift development) and raise or winze
development. Levels were driven along the strike of the veins to determine their
extent. Raises were developed upwards following the dip of the vein and winzes
were sunk down along the dip of the vein. Chip samples were assayed for
mineralization of the quartz vein. In 1923, the first prospect drill was
purchased. Following that, exploration holes were completed ahead of mine
development to confirm vein locations and to locate vein extensions.
47
The I-M Mine encompasses a system of underground tunnels, many
raises, numerous winzes, four inclined shafts, and two vertical shafts. An
estimated equivalent of 72.8 miles (117 km) of underground tunnel occur at the
I-M Mine, assuming typical drift dimensions of 7.5 ft x 8.5 ft (W x H).
Based on available historic records, 883 exploratory holes
totalling approximately 234,100 ft (71,354 m) were diamond drilled at a diameter
of 7/8 (EX-size). Historic drill logs were not available for review and no
historic drill core was preserved from past mining operations at the I-M Mine.
Exploration & Mine Development 2003-2004
Emgold and its former entities leased the I-M Mine Property
from 1990 to 2013. Development work during this period included completion of a
preliminary investigation of the mine records, publishing various technical
reports on the I-M Mine Property, leasing or purchasing adjacent properties,
various permit applications and associated environmental studies, development of
a ceramics technology process, and completion of an exploration program. Emgold
was unsuccessful in reopening the historic mine due to inability to raise
necessary funding in the midst of unfavourable market conditions.
Emgold completed an exploration program on the I-M Mine
Property in 2003 and 2004. Gold exploration consisted of 31 diamond drill holes
totalling 21,335 ft (6,502 m) and 7 drill holes totalling 3,537 ft (1,078 m)
were completed for geotechnical and ceramics feedstock work.
The surface exploration drill program focused on the
westernmost portion of what Emgold termed the Idaho Deformation Corridor, along
the Idaho Fault Zone. Exploration drilling was mainly conducted from two sites;
1) west of the Eureka shaft and 2) west of the Idaho shaft, both targeting near
surface mineralization around historic workings.
The Emgold diamond drill hole database was acquired by Rise in
the purchase of the I-M Mine Property. As per the purchase agreement with the
BET Group, ownership transfer of the I-M Mine Property included all historical
documents to which the BET Group held rights, inclusive of Emgold data.
48
Production History
Rise has completed a compilation of the mine production data of
the I-M Mine during historic operation from 1866 through 1955, the final year of
production from the mine. Rise estimates that the I-M Mine produced a total of
2,414,000 oz of gold from 5,298,000 tons of mill feed and that the life of mine
average mill head-grade averaged approximately 0.50 oz/ton (17.1 gpt). Total
production for the I-M Mine is detailed in Table 3.
Table 3: Total Idaho-Maryland Mine Production from
1866-1955*
|
Mined & Milled
|
Mill Head Grade
|
Metallurgical Recovery
|
Yield
|
Gold Produced
|
|
tons
|
tonnes
|
oz/ton
|
gpt
|
%
|
oz/ton
|
oz
|
Idaho Mine
|
|
|
|
|
|
|
|
#1 Vein
|
978,000
|
887,000
|
1.12
|
38.6
|
85%
|
0.96
|
935,000
|
3 Vein system
|
1,215,000
|
1,102,000
|
0.60
|
20.4
|
95%
|
0.56
|
686,000
|
Total
|
2,193,000
|
1,989,000
|
0.83
|
28.4
|
89%
|
0.74
|
1,621,000
|
Brunswick Mine
|
|
|
|
|
|
|
|
Old Brunswick
|
41,000
|
37,000
|
0.56
|
19.3
|
85%
|
0.49
|
20,000
|
Union Hill
|
35,000
|
32,000
|
1.21
|
41.5
|
85%
|
1.03
|
36,000
|
New Brunswick
|
3,029,000
|
2,748,000
|
0.26
|
8.8
|
95%
|
0.24
|
737,000
|
Total
|
3,105,000
|
2,817,000
|
0.27
|
9.3
|
94%
|
0.26
|
793,000
|
Total I-M Mine
|
5,298,000
|
4,806,000
|
0.50
|
17.1
|
91%
|
0.46
|
2,414,000
|
*Details regarding data verification are presented under the
heading Data Verification below.
In 1926, Errol MacBoyle took over management of the I-M Mine
and, as President and General Manager, led the mine into its most successful
period of production. A graph of production from the Idaho and Brunswick Mines
from 1926 to 1955 is displayed in Figure 5. The historic mine workings of the
I-M Mine are displayed in Figure 6.
49
*Details regarding data verification are presented on page 31
of the Application.
50
51
Mill Head Grade
The mill head grade is the grade of the mineralized material
which is fed into the processing plant to be concentrated into gold bullion. The
mill head grade includes mining dilution from un-mineralized rock adjacent to
the veins. The mill head grade does not account for metallurgical recovery of
gold during the processing of the mineralized material.
Data Verification
Detailed production information from the internal records of
the I-M Mine is available for the period from 1926 through 1955. Whenever
possible, mill reports were reconciled against financial statements and
submissions by Rise to the US Bureau of Mines. Where reconciliation between
documents was possible, only minor variations in production reporting were
noted. The entire library of documents is no longer fully complete but there is
sufficient material to make an accurate estimate of historic production during
this period. The following materials were used to prepare an estimate during the
period from 1926-1955:
|
|
Idaho Maryland Mines Co.
Financial Statements (1926-1932, 1934-1942).
|
|
|
|
|
|
Idaho Maryland Mines Co. Mill
Reports (1933-1942, 1946-1950).
|
|
|
|
|
|
Idaho Maryland Mines Co. Final
Distributions Sheets (1944, 1945).
|
|
|
|
|
|
Idaho Maryland Mines Co.
Breakdown of Income and Expenses (1946-1949).
|
|
|
|
|
|
Idaho Maryland Mines Co. Cost
Data & Cost Sheets from (1946-1949).
|
|
|
|
|
|
Idaho Maryland Mines Corp. Lode Mine Production Report to
US Bureau of Mines (1944-1945, 1947-1948, 1950, 1952, 1953, 1955).
|
For the period prior to 1926 there are no internal corporate
records regarding historic production. The Author believes this information is
reliable but the source documents used by the authors of these documents are not
available for reconciliation. The following documents were used to prepare an
estimate during the period from 1866-1925:
|
|
Lindgren, Waldemar. The Gold
Quartz Veins of Nevada City and Grass Valley Districts, California (1896).
|
|
|
|
|
|
Hamilton, Fletcher. Mines and
Mineral Resources of Nevada County (1918).
|
|
|
|
|
|
Clark, Jack. Gold in Quartz: The
Legendary Idaho Maryland Mine (2005).
|
Detailed records of metallurgical recoveries from the I-M Mine
prior to 1924 are also not available. From 1924-1930 gold recoveries ranged from
72% to 89% using a similar process to that used in the years prior to 1924.
Lindgren (1896) estimated that gold mills in the Grass Valley mines averaged 75%
metallurgical gold recovery but noted that the I-M Mine was unique in that it
treated the tailings from its concentrates by secondary processes. Rise has
assumed a metallurgical recovery of 85% for the pre-1924 processing at the I-M
Mine which it believes is the best estimate possible given the information
available.
Geological Setting, Mineralization and Deposit Types
Geology
The I-M Mine Property is located in the Grass Valley area of
the Western Sierra Nevada Foothills of Northern California. This belt of rocks
consists of late Paleozoic marine sedimentary and ophiolitic rocks, and early
and late Mesozoic submarine volcanic-arc and basinal terranes.
52
The Jura-Triassic arc belt has yielded the majority of gold
production in the Western Sierra Nevada Foothills. Gold deposits in
Jura-Triassic arc belt are associated with second, third, and fourthorder
faults related to the regionally significant Wolf Creek/Bear Mountain and
Melones faults.
The Grass Valley area is dominated by blocks of variably
metamorphosed volcanic, mafic plutonic, and minor sedimentary rocks hosted in a
serpentinite matrix. The whole package of rocks exhibits a region foliation and
is interpreted as a serpentinite-matrix tectonic mélange. These rocks were
variably metamorphosed from lower greenschist to amphibolite facies during and
after accretion to the continental margin. Two distinct gold vein groups exist
within the Grass Valley district: steeply dipping E-W-trending veins in the
northern and generally N-S trending veins with gentler dips averaging 35° in the
southern part of the district. The most important E-W veins are associated with
the I-M Mine Property. Both vein sets have extraordinary vertical and lateral
persistence; individual veins extend for kilometers.
Mineralization
All of the significant gold production from the I-M Mine was
localized within and around the Brunswick Block, which consists of variably
metamorphosed volcanic and intrusive, and minor sedimentary rocks. The Brunswick
Block is surrounded to the west, north, and east by gabbro and serpentinite
rocks. Overlying Tertiary volcanic rocks mask rock units along the southern
boundary of the Brunswick Block. The contacts between the Brunswick Block and
surrounding gabbro and serpentinite are dominated by the 6-3, the Idaho, and the
Morehouse Fault domains. Mineralization is closely associated with these
significant second or third order structures close to the contact between the
Brunswick block and serpentinite contact. Gold in the quartz veins occurs as
native gold, ranging from very fine grains to large nuggets within the quartz.
Sulfide minerals, primarily pyrite with lesser galena, chalcopyrite, from 1% to
4% are commonly associated with gold mineralization. Scheelite is common in the
Union Hill area near the Brunswick mine. Gangue minerals include quartz,
carbonate, sericite, chlorite, mariposite, and albite. Ankerite is a common
alteration mineral and may occur in the mafic and ultra-mafic rocks and the
meta-volcanic rocks. The mineralized wallrock is strongly carbonate altered.
Gold mineralization on the I-M Mine Property can be divided
into three significant vein systems: the Idaho, the Brunswick, and the Morehouse
systems.
Idaho System
The #1 Vein, #2 Vein, and 3 Vein System comprise the Idaho Vein
System.
The Eureka discovery showing outcropped at the western end of
the #1 Vein system but had only minor gold concentration and could not be traced
on surface east or west. High grade mineralization plunging to the south east
was intersected starting at approximately 100 ft (30 m) below surface at this
showing. Follow-up exploration and mining led to the development of the prolific
Eureka-Idaho ore shoot which plunges at approximately 30° to the south east and
has a pitch length of almost 1 mile (1.6km) and a breadth of 500 ft to 1,000 ft
(152 m to 305 m). The width of the vein within the ore shoot averaged
approximately 3 ft (~1 m) and in places ranged up to 8 ft (~2.4 m). The average
insitu grade of the #1 Vein would likely have been slightly higher than the
estimated mill head grade of 1.12 oz/ton (39 gpt). The trend of the shoot is
approximately parallel to an expected trend of the intersection of the Idaho and
Morehouse faults suggesting the interaction of the Idaho and Morehouse faults
may have played a role on the formation of the rich mineralization encountered
in the Eureka-Idaho stope. Alternatively, the shape of the Brunswick Block may
have influenced this trend.
The Idaho #1 Vein occurs coincident with a diabase dike hosted
in serpentinite, in close proximity to the serpentinite-Brunswick Block contact.
Just west of the Idaho shaft, at the western end of the Idaho #1 Vein, the
diabase dike bends in an arc to the south mimicking a fold around the nose of
the Brunswick Block. The Eureka-Idaho ore shoot pinches out at the I1500 Level
but significant gold grades coincident with a diabase dike hosted in
serpentinite in close proximity to the serpentinite-Brunswick contact were
exposed in workings on the I2400 Level suggesting the vein may open up again or
a second vein is present. To the east, the Eureka-Idaho ore shoot pinches out
near the #2 Vein. All rocks are highly altered and contain much ankerite. The
cross section in Figure 7 shows the general form and relationship of the #1 Vein
with the serpentinite and diabase dike.
53
The #2 Vein is a disrupted zone of quartz veins trending
northeast and dipping steeply to the south east. This vein system is hosted in
the serpentinite approximately coincident with where the serpentinite-Brunswick
Block contact bends abruptly to the north before turning east again. #2 Vein
trends northeast into the 3 Vein System.
The 3 Vein System, like the #1 Vein system, hosts a prolific
ore shoot. The 3 Vein System comprises an Idaho fault split into four main
branches. Connecting diagonal structures between the four fault branches were
also mineralized. As with the #1 Vein, gold mineralization is associated with a
diabase dike sub parallel to the serpentine-Brunswick Block contact. The main 3
Vein was mined continuously over a vertical distance of approximately 1,500 ft
(457 m) and an average horizontal strike length of approximately 700 ft (213 m).
There were several important veins which splayed from the main 3 Vein, forming
the larger 3 Vein System. The most important of which were named the 5 Vein, 13
Vein, and 22 Vein. Minor splays from the main 3 Vein included 19 Vein, 4 Vein,
and 6 Vein. The 3 Vein ranged in dip from 45° to 70°, with an average dip of
approximately 55°. An average vein width of approximately 5 ft (1.5 m) was
typical but in places reached widths of over 20 ft (6 m).
In the 3 Vein System, the best mineralization was typically
found in quartz veins where the Idaho structures intersected areas where diabase
dikes or Brunswick Block rocks are in contact with the serpentinite unit. Veins
hosted solely in serpentinite were rarely of economic importance due to the
yielding nature of the serpentinite which typically does not allow wide or
continuous open structures to form from faulting. The 23 Vein is an exception.
Also known as the Rose Garden, it was intersected by exploration drifting 2,000
ft (610 m) east of the main 3 Vein System on I2000 Level. The mine operator was
following the Idaho #5 Vein towards the 6-3 Fault and located the 23 Vein by
diamond drilling. The 23 Vein dips to the northwest as opposed to the southwest
and is hosted entirely in serpentinite. It is quite narrow but was noted to
contain abundant visible gold. The 23 Vein was followed along strike to the
south east directly to its intersection with the 6-3 Fault.
Brunswick System
The Brunswick vein system constitutes a distinct vein system
within meta-volcanic rocks of the Brunswick Block. The veins strike
northwesterly and have a southwesterly dip. These parallel, vertically dipping
mineralized veins were mined above 1600L along continuous strike lengths ranging
from 430 ft (131 m) to 1,000 ft (305 m) with continuous vertical heights
reaching up to 1,000 ft (305 m). These veins generally range from several inches
up to 8 ft (2.4 m) in width. A few veins with opposite strike and dip occur. The
veins are most numerous and have the highest grades near the 6-3 Fault. The
veins nearest to the fault turn to the north on the footwall side, suggesting a
northward component of movement of the hanging wall. A quartz-carbonate
stockwork develops near the fault.
54
The quartz stringers dip from the veins toward the fault and
many have connecting diagonals extending from an upper to a lower stringer
toward the fault. The Brunswick veins generally pinch out before rarely coming
in contact with the fault footwall. No significant mineralization is present in
the fault. Only a few unimportant veins are known beyond its hanging wall.
In the area of the Brunswick veins there are layers of
meta-sedimentary rocks within the meta-volcanic rocks that exhibit the regional
N-W schistosity dipping very steeply to the north. Where the Brunswick veins
cross these meta-sedimentary rocks vein splitting and en-echelon crossings occur
forming what is known in the historical records as Zebra Rock. The Zebra
Rock produced fair to good grades of large tonnage and the presence of free
gold was reported. A large Zebra Rock zone was intersected and mined along the
western extents of 16 Vein from levels 1300L to 1000L. Mining in this zone
occurred over strike lengths from 360 ft to 525 ft (110 m to 160 m) and reached
widths of up to 110 ft (34 m) on 1100 level.
Morehouse System
The Morehouse vein system is not as well understood as the
Idaho #1, #2, 3 Vein System, and Brunswick vein systems. It is defined by fault
and quartz-vein and quartz stockwork intersections in workings and drill holes
in only a few areas such as the Morehouse, 16 Vein, 52 Vein, and 60 Winze. There
is little historic production from the Morehouse Vein system.
The Morehouse vein is associated with the serpentinite-hosted
diabase dike wrapping around the western end of the Brunswick Block. Underground
working show the Morehouse connects directly to the Idaho #1 Vein. The extension
of the Idaho shaft in 1923 to I1500 Level intersected the Morehouse splay and
the shaft station on I1500 Level is right above the #1 Vein.
The best Morehouse mineralization intersected to date, and the
only significant production, occurs within the Brunswick Block at the 52 Vein
and 60 Winze areas. There is very little other exploration of this vein in the
Brunswick Block.
Mineral Deposit Type
The Author describes the Idaho System deposits on the I-M Mine
Property as an orogenic gold deposit. Orogenic gold deposits encompass a broad
range of depth of formation and different host lithologies; however, common to
orogenic gold deposits is a spatial association with compressional to
transpressional deformation processes at convergent plate margins in
accretionary and collisional orogens. Most ores are post-orogenic with respect
to tectonism of their immediate host rocks but are simultaneously syn-orogenic
with respect to ongoing deep-crustal, subduction-related thermal gradient. Depth
of formation of orogenic deposits are best subdivided into epizonal (<6 km /
<3.7 mi), mesozonal (612 km / 3.7 -7.5 mi), and hypozonal (>12 km /
>7.5 mi).
The gold deposits on the I-M Mine Property have been classified
as Mesothermal Quartz Veins (Lindgren, 1894), are also known as and are
type-examples of low-sulfide Au-quartz vein deposits (Berger, 1986), and gold
quartz vein deposits (Ash, 2001). These classifications are sub-groups of
orogenic gold deposit type.
Exploration
Rise has not completed an exploration work program on the I-M
Mine Property to date, although it has completed a comprehensive exploration
desktop study. Rise compiled the extensive historical dataset into digital
format and used this data to identify several promising exploration targets.
Data compilation and processing completed by Rise is summarized as follows:
|
|
Scanned historical documents into
a digital library
|
|
|
|
|
|
Reviewed available historical
exploration and development data of the I-M Mine
|
55
|
|
Reviewed reports on the I-M Property and local geology,
written by geologists and engineers employed at the Mine, hired as
Consultants, or external professionals
|
|
|
|
|
|
Prepared a detailed 3D mine model
of the mine workings (drifts, raises, and winzes) and stopes
|
|
|
|
|
|
Prepared a 3D geological model of
vein locations, faults, rock types, and contact locations
|
|
|
|
|
|
Developed a historical diamond
drill hole database
|
|
|
|
|
|
Tabulated historical production
at the I-M Mine
|
Compilation of the historic data led to the identification of
several significant unexplored exploration targets below the current workings
within the I-M Mine Property which include:
#1 Vein Target
|
|
This is a possible down-plunge extension of the prolific
Eureka-Idaho stope. The #1 Vein target covers an area 2,150 ft (655 m)
between the I2400 Level west and east drifts and 500 ft to 1,000 ft (152 m
to 305 m) down-dip from the I2400 level. Within this area gold
mineralization may occur within a quartz vein adjacent to the diabase dike
similar to that encountered in the prolific Eureka- Idaho stope above or
may be hosted within the adjacent diabase dike. The projected down-dip
extension of the #1 Vein target is defined in relation to the deepest
mineralization encountered at the nearby Empire Mine. This does not
preclude deeper mineralization.
|
Crackle Zone Target
|
|
This is a wedge-shaped area 2,000 ft (610 m) wide and 500
ft to 1,000 ft (152 m to 305 m) thick at the I2700 Level, plunging as much
as 5,000 ft (1,524 m) to the south east where it pinches out against the
intersection of the Idaho, Morehouse, and 6-3 Faults. Within this zone,
gold mineralization may occur in shallow dipping quartz veins and
irregular quartz stockworks in metavolcanic rocks that may be highly
fractured due to the interaction of the Idaho, Morehouse, and 6-3 Faults.
|
Brunswick Target
|
|
The Brunswick area offers many areas with potential for
discovery of mineralization, particularly the area below the existing
stoping and in the untested area in the immediate footwall of the 6-3
Fault south east of the Brunswick shaft. In Brunswick Mine, the richest
mineralization was typically found near the 6-3 Fault. Below 1600 Level,
development in the southern region of the Brunswick Mine deviated to the
west, away from the 6-3 Fault leaving a region of unexplored ground in the
footwall adjacent to the fault approximately 500 ft to 1,000 ft (152 m to
305 m) thick, 1,000 ft to 2,000 ft (305 m to 610 m) wide, and 1,000 ft to
3,000 ft (305 m to 914 m) deep.
|
3 Vein Rose Garden Target
|
|
Rose Garden-style mineralization is hosted solely in
serpentinite with no apparent association with the brittle rocks common in
all other mine and target areas of the Idaho-Maryland Project.
Serpentinite within the Idaho fault zone, east towards the 6-3 Fault and
west of the 3 Vein area may host mineralization similar to the Rose
Garden.
|
All exploration targets are below current extents of drilling
and development and warrant exploration through drilling. Through its life, the
I-M Mine faced several shut downs related to fires and war measures that
resulted in loss of access to some promising areas due to collapsed workings or
early termination of planned developments. Exploration potential may remain in
some of these areas.
56
Drilling
Rise has not completed an exploration drilling program on the
I-M Mine Property to date.
Rise has prepared a drill hole database derived from
information contained in the collection of historic documents and records
acquired through the purchase of the I-M Mine Property. The drill hole database
is divided into I-M Mine drilling completed before the mine shut down in 1956
and Emgold drilling completed in 2004.
Sampling, Analysis and Data Verification
Sample Preparation and Analysis
Sample preparation methods, quality control measures, security
measures, assaying and analytical procedures, and quality control measures
presented apply to historical operators. No present sampling or assaying has
been conducted.
There is no detailed information describing sample preparation,
analysis and security procedures applied by mine operators prior to 2002. The
historical samples are reportedly fire-assayed at former mine site laboratories.
No records exist of any QA/QC program.
Emgold sample preparation, analysis and security procedures for
core collected by Emgold are described in a 2009 Technical Report prepared by
Robert Pease, P.G., for Emgold titled Idaho-Maryland Mine Project, Grass Valley
CA. Three-foot core samples were cut in half by a wet saw. The half core
samples were put in a sample bag, tagged, and shipped to a laboratory. All
samples were crushed to 80% passing -10 mesh, rotary split to a 500 g subsample
which was pulverized to 95% passing -150 mesh. All samples were analyzed using
screened metallics fire assay methods. The QAQC program used Standard Reference
Materials, blank samples, coarse reject and pulp duplicate samples, and third
party laboratory check assays. Insertion rate of SRMs and duplicates was
approximately 1 in 20 samples. Blanks were only inserted immediately following
mineralized intervals. The control samples were reportedly used to successfully
control the assay quality process.
Historical Data Verification
The Author inspected Rises 3D model on screen, reviewed
several historical reports, and reviewed many historical documents including
cross sections and level plans used to prepare the model. The drill hole
database developed by Rise was not verified; however, drilling is not used
extensively to support the reported exploration targets.
The Author did not assess previous I-M Mine operators or Emgold
drilling sampling and assay quality. The Emgold drilling focused on shallow
mineralization not considered part of the exploration targets described in the
Report.
Although Rise has carefully digitized and checked the locations
and values of drill hole results from level plans and other documents, the
absence of drill hole related documentation, such as drill logs, drill hole
deviation, core recovery and density measurements, assay certificates, and
possible channel sample grade biases, could materially impact the accuracy and
reliability of the reported results. The database that has been created,
however, is suitable for exploration targeting.
Mineral Processing and Metallurgical Testing
Rise has conducted no mineral processing or metallurgical
testing analyses on the I-M Mine Property.
A significant amount of production has occurred on the I-M Mine
Property which confirms that gold can be recovered, mainly by gravity and
flotation methods. Nearly all gold at the I-M Mine is free milling, as
demonstrated by cyanide leaching of concentrates and tailings by the I-M Mine
during past production.
57
Mineral Resource and Mineral Reserve Estimates
The present Report does not include an estimate of mineral
resources for the I-M Mine Property. Rise is not treating the historical mineral
resource estimate as a current mineral resource estimate. In addition, there are
no mineral reserves estimates for the I-M Mine Project.
Recommendations
A single 6,000 ft (1,830 m) surface diamond drill hole is
recommended to provide geological samples from most of the major lithological
units on the I-M Mine geology. The single hole has been designed to pierce the
#1 Vein projection approximately 400 ft (122 m) below the elevation of the I2400
Level and then carry on through the potential western extensions of the Idaho 3
Vein System. The objectives of this drill hole are as follows:
|
1)
|
Provide a long drill intercept of the Brunswick Block
from surface to the serpentinite contact.
|
|
|
|
|
2)
|
Test the up-dip area and below the 52 Vein (60 Winze)
mineralized area in the Brunswick Block.
|
|
|
|
|
3)
|
Test the #1 Vein below the I2400 Level.
|
|
|
|
|
4)
|
Test the serpentinite footwall for potential 3 Vein/Rose
Garden analogies.
|
|
|
|
|
5)
|
Test and obtain samples of ankerite alteration in the
serpentinite unit.
|
|
|
|
|
6)
|
Test for the location of the major Idaho
faults.
|
|
|
|
|
7)
|
Drill through the serpentinite unit to provide further
insight on the thickness and geometry of this unit at depth.
|
|
|
|
|
8)
|
Determine drill hole deviation, drilling productivity,
and drilling costs to allow refinement of the design of a major drill
program on the I-M Mine Property.
|
In addition, Amec Foster Wheeler recommends that the digital
geological model be expanded to include model channel samples, the lithological
contacts and structures such as the diabase dikes, ankerite alteration
envelopes, minor quartz veins, and all faults mapped by the historic mine
operators. This work may provide additional insight into the mineralization
controls at the I-M Mine.
The cost of the work program is estimated at a cost of $595,000
as shown in Table 4.
58
Table 4: Estimated Cost of Recommended Work Program
|
|
|
|
|
|
|
|
Hole Length (m)
|
1829
|
|
m
|
|
|
|
|
Duration
|
38
|
|
days
|
|
|
|
|
Drilling Cost
|
$390,000
|
|
|
|
|
|
|
Mobilization
|
$7,000
|
|
|
|
|
|
|
Standby charges
|
$40,000
|
|
|
|
|
|
|
Centrifuge System
|
$36,000
|
|
|
|
|
|
|
Living Allowance
|
$29,000
|
|
|
|
|
|
|
Geology & Assaying
|
$38,000
|
|
|
|
|
|
|
Supplies
|
$15,000
|
|
|
|
|
|
|
Total Drilling Cost
|
$555,000
|
|
= $303/m
|
|
|
|
|
Geological
Modelling
|
$40,000
|
|
|
|
|
|
|
Total
Work
Program
|
$595,000
|
|
CDN
|
59
References
American Society for Testing Materials (ASTM). (2013). ASTM
E1527-13, Standard Practice for Environmental Site Assessments: Phase 1
Environmental Site Assessment Process. ASTM International, West Conshohocken,
PA. Retrieved at http://www.astm.org/cgi-bin/resolver.cgi?E1527-13
Ash, Chris. (June 2001). Bulletin 108: Relationship Between
Ophiolites and Gold-Quartz Veins in the North American Cordillera. Chapter 8.
Geological Survey Branch. Victoria, BC. Retrieved at
http://www.empr.gov.bc.ca/Mining/Geoscience/PublicationsCatalogue/BulletinInformation/BulletinsAfter1940/Pa
ges/Bulletin108.aspx
California Department of Conservation (CDC). (April 2017).
SMARA Mines AB 3098 List, Listing as of April 7, 2017). Retrieved at
http://www.conservation.ca.gov/dmr/SMARA%20Mines/ab_3098_list/Pages/Index.aspx
Cal. Pub. Res. Code (CPRC). California Public Resources Code.
Chapter 9 Surface Mining and Reclamation Act of 1975
. 1975.
Cal. Pub. Res. Code (CPRC). California Public Resources Code.
Division 13 Environmental Quality
. 1979.
California Environmental Quality Act (CEQA). (February 1992).
City of Sacramento v. State Water Resources Control Board. Retrieved at
http://resources.ca.gov/ceqa/cases/1992/sac_swrcb.html
City of Grass Valley Community Development Dept. (CoGV-CDD).
City of Grass Valley 2020 General Plan Map. Grass Valley, CA. November 2009.
Clark, Jack. Gold In Quartz The Legendary Idaho Maryland
Mine. Grass Valley, CA. 2005.
Engineering/Remediation Resources Group, Inc. (ERRG). Phase 1
Environmental Site Assessment Round-Hole and New Brunswick Mine Sites. Concord,
CA. March 2007.
Geocon Consultants, Inc. (Geocon). Draft Preliminary
Endangerment Assessment Report. Rancho Cordova, CA. August 2016.
Geomatrix Consultants Inc. (Geomatrix). Summary Phase II
Investigation: Data Collection and Analysis, Brunswick Lumber Mill Site Nevada
County, CA. September 2006.
Groves, D.I., Goldfarb, R.J., Gebre-Mariam, M., Hagemann, S.G.,
Robert, F. Orogenic gold deposits: A proposed classification in the context of
their crustal distribution and relationship to other gold deposit types. Ore
Geol. Rev. Special Issue, 13, 7-27. 1998.
Kleinschmidt. City of Grass Valley Sphere of Influence Plan.
Prepared for Nevada Local Agency Formation Commission (LAFCo). April 2011.
Lindgren, W. US Geological Survey Grass Valley Special Map.
1894.
Lindgren, Waldemar. The Gold Quartz Veins of Nevada City and
Grass Valley Districts, California (1896).
Nevada County Code (NCC). (March 2017). Article 3 Specific Land
Uses. Retrieved from
http://qcode.us/codes/nevadacounty/?view=desktop&topic=3-ii-2-l__2
Pease, Robert C. Idaho-Maryland Mine Project, Grass Valley CA
Technical Report. December 2009.
Shore, F.M for United States Bureau of Mines. Mineral Yearbook
1941. Pg. 252. Washington, D.C. 1943. Retrieved at
http://digital.library.wisc.edu/1711.dl/EcoNatRes.MinYB1941
60
LEGAL PROCEEDINGS
On September 17, 2014, we learned that our company, along with
a number of additional defendants, were the subject of a notice of civil claim
(the
Wundr Claim
) filed in the Supreme Court of British Columbia by
Wundr Software Inc. (
Wundr
), an eBook software developer. Wundr and our
company were formerly parties to a binding letter of intent that was announced
on November 12, 2013 (the
Wundr LOI
), pursuant to which we proposed to
acquire 100% of the outstanding shares of Wundr. On January 10, 2014, we
reported that the Wundr LOI had expired.
Among other things, the Claim alleges that we committed the
tort of intentional interference with economic or contractual relations by
virtue of our role in an alleged scheme to establish a competing business to
Wundr, and that we, through our agents, breached the terms of the Wundr LOI by
appropriating certain confidential information and intellectual property of
Wundr for the purpose of establishing a competing business. The Claim also
alleges that we are vicariously liable for the actions of our agents.
Wundr is seeking general damages from our company as well as
damages for conspiracy to cause economic harm. None of the allegations contained
in the Claim have been proven in court, which we believe are without merit, and
we therefore intend to vigorously defend our position against Wundr.
On May 5, 2017 we gave notice to Klondike that we were
terminating the Klondike Agreement on the basis that certain of the Klondike
Properties, contrary to representations made in the Klondike Agreement, could
not be transferred to us free and clear of all encumbrances. On June 7, 2017, we
filed a Civil Claim in B.C. Supreme Court claiming that the Klondike Agreement
had been rescinded and seeking, among other things, the return of consideration
paid to Klondike at the First Closing. On July 17, 2017, we entered into a
material Settlement Agreement with Klondike and agreed to pay $100,000 and
return any interests we had in the Klondike Properties in exchange for a full
release from any future obligation and commitments to Klondike.
Other than as described above, we are not aware of any material
pending legal proceedings to which we are a party or of which the I-M Mine
Property is the subject. We know of no proceedings to which any of our
directors, officers or affiliates, or any registered or beneficial holders of
more than 5% of any class of our securities, or any associate of any such
director, officer, affiliate or security holder are an adverse party or have a
material interest adverse to our company.
61
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Market Information
Our common stock is listed on the CSE under the symbol RISE,
and the following table reflects the high and low sales price information for
our Common Stock on that exchange since it began trading on February 1, 2016:
|
CSE
|
|
Quarter
Ended
|
High (CDN$)
|
Low (CDN$)
|
July 31, 2017
|
0.315
|
0.135
|
April 30, 2017
|
0.36
|
0.20
|
January 31, 2017
|
0.35
|
0.17
|
October 31, 2016
|
0.29
|
0.15
|
July 31, 2016
|
0.23
|
0.11
|
April 30, 2016 (from Feb 1, 2016)
|
0.20
|
0.11
|
Our Common Stock is also quoted under the symbol RYES on the
OTC Pink Current Information tier of the over-the-counter market operated by OTC
Markets Group Inc.
The following table reflects the high and low bid information
for our Common Stock based on inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
|
OTC Pink
|
|
Quarter
Ended
|
High (US$)
|
Low (US$)
|
July 31, 2017
|
0.25
|
0.1001
|
April 30, 2017
|
0.29
|
0.145
|
January 31, 2017
|
0.34
|
0.1087
|
October 31, 2016
|
0.40
|
0.12
|
July 31, 2016
|
0.16
|
0.11
|
April 30, 2016
|
1.15
|
0.08
|
January 31, 2016
|
0.25
|
0.08
|
October 31, 2015
|
0.21
|
0.20
|
Holders
As of the date of this prospectus, there are approximately 150
registered holders of our Common Stock and approximately 430 beneficial holders
of our Common Stock who hold through intermediaries.
Dividends
We have not paid dividends since our inception. While there are
no restrictions in our Articles of Incorporation or Bylaws or pursuant to any
agreement or understanding which could prevent us from paying dividends or
distributions, we have limited cash flow and anticipate using all available cash
resources to fund working capital and explore the I-M Mine Property. As such,
there are no plans to pay dividends for the foreseeable future. Any decisions to
pay dividends in cash or otherwise in the future will be made by the Board of
Directors on the basis of our earnings, financial requirements and other
conditions existing at the time a determination is made.
62
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion provides information regarding the
results of operations for the years ended July 31, 2016 and 2015 and the three
and nine months ended April 30, 2017 and 2016, and our financial condition,
liquidity and capital resources as of April 30, 2017 and July 31, 2016 and 2015.
The financial statements and the notes thereto contain detailed information that
should be referred to in conjunction with this discussion.
The following discussion and analysis should be read in
conjunction with and our historical consolidated financial statements and the
accompanying notes included elsewhere in this prospectus, as well as the Risk
Factors and the
Cautionary Note Regarding Forward-Looking Statements
included above.
Results of Operations
For the Years Ended July 31, 2016 and 2015
Our operating results for the years ended July 31, 2016 and
2015 are summarized as follows:
|
|
|
For the year ended
|
|
|
For the year ended
|
|
|
|
|
July
31, 2016
|
|
|
July
31, 2015
|
|
|
|
|
|
|
|
|
|
|
Bad debt expenses
|
$
|
7,126
|
|
$
|
6,748
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
102,420
|
|
|
77,476
|
|
|
|
|
|
|
|
|
|
|
Filing and regulatory
|
|
30,927
|
|
|
26,722
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
|
|
1,959
|
|
|
(90,810)
|
|
|
|
|
|
|
|
|
|
|
Gain on settlement of payables
|
|
(41,982)
|
|
|
(9,259)
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
20,839
|
|
|
41,049
|
|
|
|
|
|
|
|
|
|
|
Mineral exploration
|
|
-
|
|
|
4,801
|
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
107,197
|
|
|
73,036
|
|
|
|
|
|
|
|
|
|
|
Promotion and shareholder communication
|
|
20,201
|
|
|
2,970
|
|
|
|
|
|
|
|
|
|
|
Property investigation costs
|
|
10,408
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Salaries
|
|
5,365
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
369,006
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
633,466
|
|
|
132,733
|
|
Our operating expenses increased during the year ended July 31,
2016 compared to the prior year primarily as a result of increased activity
preparing for and completing our listing on the CSE, acquiring the Klondike
Properties and researching and compiling exploration plans for the Indata
property and the Klondike Properties. Increases in costs for consulting, filing
and regulatory, professional fees and promotion and shareholder communications
were all driven by the new listing and increases in consulting and mineral
exploration expenses related to planning and researching our mineral
properties.
The largest difference between the years ended July 31, 2016
and 2015 was $369,006 for share based payments through the grant of options
pursuant to our recently adopted option plan to incentivize management and
certain consultants. Other notable items were gains we realized for the
write-off of certain amounts payable on the settlement of certain older debts in the year ended July 31,
2016, and a large gain on foreign exchange due to the movement in the Canadian
dollar / US dollar exchange rate and realized foreign exchange on
Canadian-denominated debt settled through the issuance of Common Shares in the
year ended July 31, 2015 that was not repeated in 2016. Our other operating
expenses were generally consistent from period-to period.
63
For the Periods Ended April 30, 2017 and 2016
Our operating results for the periods ended April 30, 2017 and
2016 are summarized as follows:
|
|
|
For the nine
|
|
|
For the nine
|
|
|
|
|
month period
|
|
|
month period
|
|
|
|
|
ended April 30,
|
|
|
ended April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
$
|
430,342
|
|
$
|
69,233
|
|
|
|
|
|
|
|
|
|
|
Filing and regulatory
|
|
28,000
|
|
|
24,102
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
|
|
174
|
|
|
(753)
|
|
|
|
|
|
|
|
|
|
|
Gain on settlement of
payables
|
|
(11,415)
|
|
|
(41,982)
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
116,127
|
|
|
16,245
|
|
|
|
|
|
|
|
|
|
|
Geological mineral property
costs
|
|
171,146
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
261,559
|
|
|
45,157
|
|
|
|
|
|
|
|
|
|
|
Promotion and shareholder
communication
|
|
579,553
|
|
|
8,124
|
|
|
|
|
|
|
|
|
|
|
Property investigation costs
|
|
55,253
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Salaries
|
|
81,352
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
1,010,064
|
|
|
369,006
|
|
|
|
|
|
|
|
|
|
|
Write-off mineral property
costs
|
|
563,031
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loss for the period
|
|
(3,285,186)
|
|
|
(489,132)
|
|
Our operating expenses increased during the period ended April
30, 2017 compared to the prior period primarily as a result of increased costs
for consulting, filing and regulatory, professional fees and promotion and
shareholder communications, driven by increases in consulting and expenses
related to planning and researching our mineral properties, and promotional
activity involved in raising funds in the recent private placements.
Liquidity and Capital Resources
For the Years Ended July 31, 2016 and 2015
As of July 31, 2016, we had $139,021 in cash, $168,608 in
current assets, $731,639 in total assets, $227,210 in current and total
liabilities, a working capital deficit of $58,602 and an accumulated deficit of
$1,836,969.
During the year ended July 31, 2016, we used $276,299 in net
cash on operating activities, whereas we used $9,705 in net cash on operating
activities during the prior year. The difference in net cash used in operating
activities during the two years was largely due to the increase in our net loss
for the most recent year, as adjusted for the accrual of a smaller accounts
payable, accrued liabilities and due to related parties balance.
64
During the year ended July 31, 2016, we used net cash of
$80,000 on investing activities, whereas we used net cash of $26,748 on
investing activities during the prior year. In the current year, we paid $80,000
in acquisition costs on mineral properties (2015 - $20,000).
We received net cash of $477,320 from financing activities
during the year ended July 31, 2016, whereas we received $171,876 in net cash
from financing activities during the prior year. Other than $46,500 (2015 -
$Nil) in loan payments made during the year, all of the net cash we received
from financing activities during the current year was attributable to proceeds
from the issuance of Common Shares.
For the Periods Ended April 30, 2017 and 2016
Working Capital
|
|
At April 30,
|
|
|
At July 31,
|
|
|
Change between July 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2016
and April 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
$
|
1,020,156
|
|
$
|
168,608
|
|
$
|
851,548
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
669,691
|
|
|
227,210
|
|
|
(442,481)
|
|
|
|
|
|
|
|
|
|
|
|
Working Capital/(Deficit)
|
|
350,465
|
|
|
(58,602)
|
|
|
409,067
|
|
|
Cash Flows
|
|
|
|
|
|
|
|
|
|
For the nine
|
|
|
For the nine
|
|
|
|
|
month period
|
|
|
month period
|
|
|
|
|
ended April 30,
|
|
|
ended April 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash used in
Operating Activities
|
$
|
(1,770,549)
|
|
$
|
(202,436)
|
|
|
|
|
|
|
|
|
|
|
Net Cash used in
Investing Activities
|
|
(3,054,872)
|
|
|
(71,500)
|
|
|
|
|
|
|
|
|
|
|
Net Cash provided by in
Financing Activities
|
|
5,334,566
|
|
|
523,699
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease)
in Cash During Period
|
|
509,145
|
|
|
249,763
|
|
As of April 30, 2017, we had $648,166 in cash, $1,020,156 in
current assets, $4,259,028 in total assets, $669,691 in current and total
liabilities, a working capital of $350,465 and an accumulated deficit of
$5,122,155.
During the period ended April 30, 2017, we used $1,770,549
(2016 - $202,436) in net cash on operating activities. The difference in net
cash used in operating activities during the two periods was largely due to the
increase in our net loss for the most recent year, as adjusted for an increase
in prepaid expenses, and the accrual of a larger accounts payable, accrued
liabilities and due to related parties balance, all based on our increased
overall business and acquisition activity.
During the period ended April 30, 2017, we used net cash of
$3,054,872 (US$2,300,000) (2016 - $71,500) in investing activities for the
acquisition of the I-M Mine Property and the recent option agreement with Sierra
Pacific Industries, Inc. to increase the holdings of the I-M Mine Property. In
the prior period, we repaid a loan of $41,500 to a related party and paid
$30,000 pursuant to the Indata option agreement.
We received net cash of $5,334,566 (2016 - $523,699) from
financing activities during the period ended April 30, 2017. In the same period,
we received gross proceeds of $4,590,650 (2016 - $605,000) from private
placements, $27,208 (2016 - $Nil) from the exercise of warrants, $60,000
(2016 - $Nil) from the exercise of options, $220,000 (2016 - $Nil) from the
issuance of promissory notes and $678,650 (2016 - $Nil) from subscriptions
received in advance, offset by $241,942 (2016 - $81,301) in share issuance
costs.
65
We expect to continue operating at a loss for at least the next
12 months. We currently have no agreements for additional financing and cannot
provide any assurance that additional funding will be available to finance our
operations on acceptable terms in order to enable us to carry out our business
plan. There are no assurances that we will be able to complete further sales of
shares of our Common Stock or any other form of additional financing. If we are
unable to achieve the financing necessary to continue our plan of operations,
then we will not be able to carry out any exploration work on the I-M Mine
Property or the other properties in which we own an interest and our business
may fail.
Off-Balance Sheet Arrangements
For the Years Ended July 31, 2016 and 2015 and For the Nine
Month Periods Ended April 30, 2017 and 2016
We have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
investors.
DIRECTORS AND EXECUTIVE OFFICERS
As of September 1, 2017, the names, titles, and ages of the
members of our Board of Directors and our executive officers are as set forth in
the table below.
Name
|
Age
|
Position
|
Date of Appointment
|
|
|
|
|
Benjamin W. Mossman
|
40
|
Chief Executive
Officer, President, Director
|
August 1, 2016
|
|
|
|
|
Cale Thomas
|
48
|
Chief Financial
Officer, Treasurer, Secretary, Director
|
April 2, 2015
|
|
|
|
|
John D Anderson
(1)
|
53
|
Director
|
August 30, 2016
|
|
|
|
|
Thomas I. Vehrs
(1)
|
70
|
Director
|
April 20, 2017
|
|
|
|
|
Alan R. Edwards
(1)
|
59
|
Chairman,
Director
|
April 20, 2017
|
(1)
|
Member of the audit committee.
|
The following sets forth a brief description of the business
experience of each of our directors and executive officers:
Benjamin W. Mossman; Chief Executive Officer, President,
Director
Benjamin W. Mossman, P.Eng was appointed as our Chief Executive
Officer and a director on August 1, 2016 and our President on April 20, 2017.
Mr. Mossman is a mining engineer with over 15 years of experience in the mining
industry including experience in capital markets, project evaluation,
acquisitions, and mine operations and development. He was formerly the
President, Chief Executive Officer and a director of Banks Island Gold Ltd., a
junior mining issuer with its common shares listed for trading on the TSX
Venture Exchange under the symbol BOZ.
66
Cale Thomas; Chief Financial Officer, Treasurer, Secretary,
Director
Cale Thomas was appointed as our Chief Financial Officer,
Treasurer and a director on April 2, 2015 and our Secretary on April 20, 2017.
He is a Vancouver businessman and financial consultant who helps companies, both
public and private, to develop their operations and provides access to private
capital and public markets where appropriate. Mr. Thomas was previously the
Chief Financial Officer and a director of Carl Data Solutions Inc. (CSE:CRL) and
has held positions with several other Canadian reporting issuers in the past. He
was the Chief Financial Officer of Eagle Hill Exploration Corporation from May
2008 to August 2013 and a director of the same company from September 2008 to
September 2013; the Chief Financial Officer of Yankee Hat Minerals Ltd. from
July 2007 to October 2012; the Chief Financial Officer of Worldwide Promotional
Management Inc. from April 2008 to January 2009; and the Chief Financial Officer
of Supreme Resources Inc. from April 2006 to December 2006. Mr. Thomas holds a
Master of Business Administration degree from the DeGroote School of Business at
McMaster University in Hamilton, Ontario and a Bachelor of Arts degree with a
major in Economics from the University of Western Ontario in London,
Ontario.
John D. Anderson; Director
John D. Anderson was appointed to our Board of Directors on
August 31, 2016. He was the co-founder of Aquastone Capital Advisors LP, a
U.S.-based gold investment fund. With over 20 years of experience in the capital
markets, Mr. Andersons specialty is identifying undervalued opportunities in
the resource industry and investing capital into these situations. He has been
involved in a number of small-cap companies, providing financing, investor
relations and corporate development services. Throughout his career, Mr.
Anderson has raised in excess of US$500-million in equity for a number of public
and private companies in the United States, Canada and Europe. Mr. Anderson
holds a Bachelor of Arts degree from the University of Western Ontario.
Thomas I. Vehrs; Director
Thomas I. Vehrs was appointed to our Board of Directors on
April 20, 2017. Dr. Vehrs is a highly regarded and experienced exploration
geologist with over 40 years of experience in the Americas. During his career,
Dr. Vehrs has conducted and managed numerous exploration programs resulting in
the discovery and delineation of major copper, gold and silver deposits,
including the Los Pelambres porphyry copper deposit in Chile, the Northumberland
sediment-hosted gold deposit in central Nevada, the Rio Blanco porphyry copper
deposit in northern Peru and orogenic gold deposits in Central Guatemala. For
the past ten years, Dr. Vehrs held the position of Vice President of Exploration
for Fortuna Silver Mines and was responsible for the development and execution
of exploration programs at the Caylloma Mine in Peru and the San Jose Mine in
southern Mexico. During this period, Fortuna Silver Mines was successful in
expanding the resources, reserves and production rate at the San Jose Mine
resulting in a market capitalization in excess of $1 billion. Dr. Vehrs holds a
Ph.D. in geology from Syracuse University and served as an officer in the U.S.
Army Corps of Engineers.
Alan R. Edwards; Chairman, Director
Alan R. Edwards was appointed to our Board of Directors on
April 20, 2017. Mr. Edwards is an experienced executive and engineer with over
35 years of experience in the mining industry. Mr. Edwards was the General
Manager for three major mining operations in the United States and the Senior
Vice President of Operations for Freeport Indonesia where he was responsible for
the leadership of a workforce of over 6,000 employees. Mr. Edwards served as the
Vice President Operations for Kinross Gold Corporation and as the Chief
Operating Officer for Apex Silver Mines where he directed the successful
construction of the $675 million San Cristobal Mine in the difficult political
climate of Bolivia. Mr. Edwards has served on numerous boards of public
companies including as Chairman of AuRico Gold Corporation during a period of
extensive growth which culminated into a successful US$1.5 billion merger with
Alamos Gold. Mr. Edwards holds an MBA and a Mining Engineering degree from the
University of Arizona.
Family Relationships
There are no family relationships among any of our directors or
executive officers.
67
Involvement in Certain Legal Proceedings
Except as disclosed below, during the past ten years none of
the persons serving as our executive officers and/or directors have been the
subject of any of the following legal proceedings that are required to be
disclosed pursuant to Item 401(f) of Regulation S-K, including: (a) any
bankruptcy petition filed by or against any business of which such person was a
general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time; (b) any criminal convictions (excluding
traffic violations and other minor offenses); (c) any order, judgment, or decree
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; (d)
any finding by a court, the SEC or the CFTC to have violated a federal or state
securities or commodities law, any law or regulation respecting financial
institutions or insurance companies, or any law or regulation prohibiting mail
or wire fraud; or (e) any sanction or order of any self-regulatory organization
or registered entity or equivalent exchange, association, entity or other
organization that has disciplinary authority over its members or persons
associated with a member. Further, no such legal proceedings are believed to be
contemplated by governmental authorities against any director or executive
officer.
Benjamin W. Mossman was a director and officer of Banks Island
Gold Ltd. (
Banks
) during the time it assigned itself into bankruptcy on
January 7, 2016. Banks appointed D. Manning & Associates as trustee in the
bankruptcy proceedings. Subsequent to the bankruptcy, a Receiver, FTI
Consulting, was appointed as receiver by a major secured creditor. To the best
of Mr. Mossmans knowledge, the secured creditor has not taken possession of the
property as of this date. To date, Banks remains undischarged.
Benjamin W. Mossman along with 2 other former employees of
Banks and Banks itself are subject to summary conviction proceedings commenced
in August 2016 for alleged violations of the provincial Environmental Management
Act, the Provincial Water Act, and the federal Fisheries Act. Banks was a
company listed on the TSX Venture Exchange at the time of the alleged
infractions and traded under the symbol BOZ. The charges are related to the
active mining operations conducted by Banks at and on Banks Island, BC during
the period from 2014 to 2016. Benjamin W. Mossman intends to enter a not-guilty
plea to all counts and intends to defend himself vigorously against all charges.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the
compensation awarded or paid to Benjamin W. Mossman, our Chief Executive
Officer, President and director and Cale Thomas, our Chief Financial Officer,
Treasurer, Secretary and director and Fred Tejada, our former Chief Executive
Officer and former President, Secretary and director (the named executive
officers), for all services rendered in all capacities to our company during
the past two fiscal years. As of July 31, 2017, we did not have any other
executive officers and no other individual who received total compensation in
excess of US$100,000 during those years. Pursuant to Item 402(a)(5) of
Regulation S-K, we have omitted certain columns from the table since there was
no compensation awarded to, earned by or paid to these individuals required to
be reported in such columns in either year.
Name and Principal Position
|
|
Year Ended
|
|
|
Salary
|
|
|
Option Awards
|
|
|
Total
|
|
|
|
July 31
|
|
|
($)
|
|
|
($)
(1)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benjamin W. Mossman, Chief
Executive
Officer
(2)
|
|
2017
|
|
|
135,000
(3)
|
|
|
570,255
(4)
|
|
|
705,255
|
|
|
|
2016
|
|
|
5,000
(3)
|
|
|
Nil
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cale Thomas, Chief Financial
Officer
|
|
2017
|
|
|
63,904
(3) (5)
|
|
|
Nil
|
|
|
63,904
|
|
|
|
2016
|
|
|
22,946
(3) (6)
|
|
|
95,668
(7)
|
|
|
118,614
|
|
68
Name and Principal Position
|
|
Year Ended
|
|
|
Salary
|
|
|
Option Awards
|
|
|
Total
|
|
|
|
July 31
|
|
|
($)
|
|
|
($)
(1)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fred Tejada, our former Chief
Financial
Officer
(8)
|
|
2017
|
|
|
32,619
(9)
|
|
|
Nil
|
|
|
32,619
|
|
|
|
2016
|
|
|
30,000
(9)
|
|
|
123,002
(10)
|
|
|
153,002
|
|
(1)
|
See Note 8 of the notes to our audited financial
statements included in this Report for a description of the assumptions
made in the valuation of option awards.
|
(2)
|
Mr. Mossman was appointed our Chief Executive Officer on
August 1, 2016.
|
(3)
|
Represents payments made pursuant to an executive
employment agreement.
|
(4)
|
Represents share-based payments related to options
vesting during the year ended July 31, 2017. Options for the purchase of
586,600 shares of Common Stock were granted on August 9, 2016, exercisable
at $0.20 per share until August 8, 2021, and options for the purchase of
2,142,542 shares of Common Stock were granted on December 27, 2016,
exercisable at $0.24 per share until December 27, 2021.
|
(5)
|
Represents $52,428 paid to Mr. Thomas personally and
$11,476 representing Mr. Thomas share of consulting payments made to
Scharfe Investment Group of Companies Inc., a company in which Mr. Thomas
holds a 50% interest.
|
(6)
|
Represents $18,000 paid to Mr. Thomas personally and
$4,946 representing Mr. Thomas share of consulting payments made to
Scharfe Investment Group of Companies Inc., a company in which Mr. Thomas
holds a 50% interest.
|
(7)
|
Represents share-based payments related to options
vesting during the year ended July 31, 2016. Options for the purchase of
700,000 shares of Common Stock were granted on March 22, 2016, exercisable
at $0.15 per share until March 22, 2021.
|
(8)
|
Fred Tejada resigned as our Chief Executive Officer on
August 1, 2016. Mr. Tejada resigned as our President, Secretary and a
director on April 20, 2017.
|
(9)
|
Represents consulting fees paid to the applicable
individuals.
|
(10)
|
Represents share-based payments related to options
vesting during the year ended July 31, 2016. Options for the purchase of
900,000 shares of Common Stock were granted on March 22, 2016, exercisable
at $0.15 per share until March 22, 2021.
|
Executive Compensation
During the fiscal year ended July 31, 2017, we paid $135,000 in
salaries (2016 - $5,000) to our Chief Executive Officer, Benjamin W. Mossman,
$63,904 in consulting fees (2016 - $22,946) to our Chief Financial Officer, Cale
Thomas, and $32,619 in consulting fees (2016 - $30,000) to our former President and
former Chief Executive Officer, Fred Tejada.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information relating to the
options granted to the named executive officers that are outstanding as of July
31, 2017:
Outstanding Equity Awards at Fiscal
Year-End
|
|
|
|
|
|
|
|
Name
|
Number of Securities
|
Option Exercise Price
|
Option Expiration Date
|
|
Underlying Unexercised
|
($)
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Benjamin W. Mossman
|
586,600
2,142,542
|
0.20
0.24
|
August 8, 2021
December 27,
2021
|
|
|
|
|
Cale Thomas
|
700,000
|
0.15
|
March 22, 2021
|
|
|
|
|
Fred Tejada
(1)
|
400,000
(1)
|
0.15
|
March 22, 2021
|
(1)
|
On April 20, 2017 Mr. Tejada surrendered 500,000 of the
900,000 stock options we had previously granted to him. He remains a part
of our team as a consultant and retains 400,000 options in such
capacity.
|
69
Employment Agreements
On July 7, 2016, we entered into an executive employment
agreement with Benjamin W. Mossman, our Chief Executive Officer, pursuant to
which we engaged Mr. Mossmans services on an ongoing basis beginning on August
1, 2016. Pursuant to the agreement, we issued 400,000 shares of Common Stock to
Mr. Mossman as a signing bonus on August 1, 2016, granted options to purchase
586,600 shares of Common Stock to Mr. Mossman at a price of $0.20 per share for
a period of five years on the same date, and we are required to pay Mr. Mossman
an annual salary of $120,000. On April 19, 2017, we entered into a new executive
employment agreement with Mr. Mossman (the
Executive Employment
Agreement
) to replace the prior agreement. The Executive Employment
Agreement commenced on May 1, 2017. The Executive Employment Agreement provides
for an annual salary of $180,000 per year. The Executive Employment Agreement
provides that Mr. Mossman will, subject to the terms of the stock option plan
and exchange policies, be granted options from time to time to maintain his
right to purchase 5% of our issued and outstanding Common Stock. To date, Mr.
Mossman has been granted options to acquire 2,729,142 shares of Common Stock
pursuant to the terms of the Executive Employment Agreement.
The Executive Employment Agreement includes compensation
provisions for Mr. Mossman if there is a change of control, he is terminated
without just cause, he resigns under circumstances contemplated in the
Employment Agreement or he dies while in our employment. If Mr. Mossman is
terminated within one (1) year of the date of a change of control, or otherwise
terminated without just cause, or if Mr. Mossman terminates his employment with
us upon the occurrence of certain events, including a material adverse and
fundamental change in his overall authority and responsibilities, Mr. Mossman
will be entitled to a lump sum amount equal to three (3) years of Mr. Mossmans
then applicable annual salary. In addition, Mr. Mossman will be entitled to
maintain in effect, until the earliest of the expiration of three years and the
death of Mr. Mossman, participation in certain of our benefit plans and stock
option plans. If Mr. Mossman dies while employed with us, Mr. Mossmans estate,
subject to compliance with stock exchange requirements, our stock option plan,
and the terms of the Executive Employment Agreement, will be entitled to
continue Mr. Mossmans participation in our stock option plan.
We entered into an executive employment agreement (the
Employment Agreement
) with Cale Thomas as of October 1, 2016. Mr.
Thomas is our Chief Financial Officer and a strategic advisor. The Employment
Agreement is for a term commencing on October 1, 2016 until March 22, 2021. As
compensation we have granted 700,000 stock options to Mr. Thomas exercisable at
$0.15 per share of Common Stock until March 22, 2021. The Employment Agreement
provides that we will pay Mr. Thomas a monthly fee to be determined by our Board
of Directors. Currently the monthly fee is $4,000. Mr. Thomas may resign and
terminate the Employment Agreement by giving us at least two weeks prior notice
which we may waive, in whole or in part in our sole discretion, in which case we
will pay to Mr. Thomas his base salary for the notice period remaining.
When Fred Tejada resigned as our President, Secretary and a
director, we entered into a consulting services agreement (the
Consulting
Agreement
) with him pursuant to which Mr. Tejada continues to perform
geological consulting services for our company. The Consulting Agreement is for
a term that commenced on April 20, 2017 and ends on December 31, 2020, unless
earlier terminated in accordance with its terms. Under the Consulting Agreement,
Mr. Tejada will invoice us for any work he performed at our request. In
addition, by virtue of his retention as a consultant to the Company under the
Consulting Agreement, Mr. Tejada was permitted pursuant to the Consulting
Agreement to retain 400,000 stock options previously granted to him under our
Stock Option Plan when he was serving as a director and officer.
We expect that our executive officers will allocate
approximately 40% of their working time to our business.
Benefit Plans
We do not currently have any pension plan, profit sharing plan
or similar plan for the benefit of our officers, directors or employees;
however, we may establish such plans in the future.
70
Director Compensation
As at July 31, 2017, two of our directors were compensated for
serving on the Board of Directors. Management directors were not paid fees for
services as a director; however they may have received compensation for their
services as employees or consultants. The following table sets out compensation
of the directors for the year ended July 31, 2017.
Name
|
Fees Earned or Paid in
|
Option Awards ($)
(1)
|
Total
|
|
Cash ($)
|
|
($)
|
John D. Anderson
|
Nil
|
125,861
(5)
|
125,861
|
|
|
|
|
Thomas I. Vehrs
(2)
|
6,915
(3)
|
84,115
(5)
|
91,030
|
|
|
|
|
Alan R. Edwards
(2)
|
10,373
(3)
|
105,142
(5)
|
115,515
|
|
|
|
|
Bradley Scharfe
(4)
Former
Director
|
160,809
(6)
|
-
|
160,809
|
(1)
|
See Note 8 of the notes to our audited financial
statements included in this Report for a description of the assumptions
made in the valuation of option awards.
|
(2)
|
Dr. Vehrs and Mr. Edwards were appointed directors on
April 20, 2017.
|
(3)
|
Represents directors fees. Dr. Vehrs and Mr. Edwards are
paid directors fees of US$20,000 and US$30,000 per year,
respectively.
|
(4)
|
Bradley Scharfe resigned as a director on April 20,
2017.
|
(5)
|
Represents share-based payments related to options
vesting during the year ended July 31, 2017.
|
(6)
|
Consulting fees of $149,333 paid to Scharfe Holdings
Inc., a company wholly owned by Mr. Scharfe, and $11,476 representing Mr.
Scharfe share of consulting fees made to Scharfe Investment Group of
Companies Inc., a company in which Mr. Scharfe holds a 50%
interest.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of August 31, 2017 we had 67,124,839 shares of Common Stock
issued and outstanding. The following table sets forth the beneficial ownership
of our Common Stock as of August 31, 2017 by (a) each person who serves as a
director and/or is a named executive officer of Rise in the Executive
Compensation section above, and by all of our directors and executive officers
as a group, and (b) each person known by us to beneficially own more than 5.0%
of any class of our voting securities.
A person is considered to beneficially own any shares over
which such person, directly or indirectly, exercises sole or shared voting or
investment power, or over which such person has the right to acquire beneficial
ownership at any time within 60 days through an exercise of stock options or
warrants or otherwise. Unless otherwise indicated, voting and investment power
relating to the shares shown in the table for our officers and directors is
exercised solely by the beneficial owner thereof.
For the purposes of this table, a person or group of persons is
deemed to have beneficial ownership of any shares of our Common Stock that
such person or group of persons has the right to acquire within 60 days. For the
purposes of computing the percentage of outstanding Common Stock held by each
person or group of persons named below, any shares that such person or group of
persons has the right to acquire within 60 days of August 31, 2017 is deemed to
be outstanding, but is not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person. The inclusion herein of any shares
listed as beneficially owned does not constitute an admission of beneficial
ownership.
71
|
Amount and
|
|
|
Nature of
|
|
Name and Address of
|
Beneficial
|
Percent of
|
Beneficial Owner
|
Ownership
|
Class
(1)
|
|
|
|
Named Executive
Officers and Directors
|
|
|
|
|
|
Benjamin W.
Mossman
(2)
488 1090 West Georgia Street
Vancouver,
British Columbia V6E 3V7
|
3,129,142
(2)
|
4.48%
|
|
|
|
Cale Thomas
488 1090
West Georgia Street
Vancouver, British Columbia V6E 3V7
|
1,664,597
(3)
|
2.45%
|
|
|
|
John D. Anderson
488
1090 West Georgia Street
Vancouver, British Columbia V6E 3V7
|
500,000
(4)
|
*
|
|
|
|
Thomas I. Vehrs
853
Windflower Drive
Longmont, Colorado 80504
|
400,000
(5)
|
*
|
|
|
|
Alan R. Edwards
8121 N.
Fairway View Dr.
Tucson, Arizona 85742
|
500,000
(6)
|
*
|
|
|
|
Fred Tejada
488 1090
West Georgia Street
Vancouver, British Columbia V6E 3V7
|
1,103,505
(7)
|
1.63%
|
|
|
|
Executive Officers and
Directors as a Group (6 persons)
|
7,297,244
|
10.06%
|
|
|
|
5% Owners
|
|
|
|
|
|
Bradley Scharfe
488
1090 West Georgia Street
Vancouver, British Columbia V6E 3V7
|
6,289,836
(8)
|
9.25%
|
(1)
|
Based on 67,124,839 shares of Common Stock issued and
outstanding as of August 31, 2017.
|
(2)
|
Benjamin W. Mossman, our Chief Executive Officer,
President and a director, holds 400,000 shares of Common Stock and
2,729,142 stock options, 586,600 of which are exercisable into Common
Stock at a price of $0.20 per share until August 8, 2021 and 2,142,542 of
which are exercisable into Common Stock at a price of $0.24 per share
until December 27, 2021.
|
(3)
|
Cale Thomas, our Chief Financial Officer, treasurer,
secretary and a director, holds 895,031 shares of Common Stock, 700,000
stock options, each of which is exercisable into Common Stock at a price
of $0.15 per share until March 22, 2021, and warrants to purchase 52,174
shares of Common Stock, and also owns 8,696 shares of Common Stock and
warrants to purchase 8,696 shares of Common Stock through his 50% owned
company, Scharfe Investment Group of Companies Inc.
|
(4)
|
John D. Anderson, a director, holds 500,000 stock
options, each of which is exercisable into Common Shares at a price of
$0.27 per share until April 3, 2022.
|
(5)
|
Thomas I. Vehrs, a director, holds 400,000 stock options,
each of which is exercisable into Common Shares at a price of $0.28 per
share until April 20, 2020.
|
(6)
|
Alan R. Edwards, a director, holds 500,000 stock options,
each of which is exercisable into Common Shares at a price of $0.28 per
share until April 20, 2020.
|
72
(7)
|
Fred Tejada, our former Chief Executive Officer, holds
573,505 shares of Common Stock, warrants to purchase 130,000 shares of
Common Stock at a price of $0.40 per share until January 24, 2019 and
400,000 stock options which are exercisable into Common Stock at a price
of $0.15 per share until March 22, 2021.
|
(8)
|
5,398,009 shares of Common Stock and warrants to purchase
874,435 shares of Common Stock are held by Scharfe Holdings Inc., a
corporation over which Mr. Scharfe has sole voting and investment power
and 8,696 shares of Common Stock and warrants to purchase 8,696 shares of
Common Stock represent Mr. Scharfes share of securities held by Scharfe
Investment Group of Companies Inc., a company 50% owned by Mr. Scharfe.
Mr. Scharfe previously served as a director of Rise. He resigned as a
director on April 20, 2017.
|
* Less than 1%.
Changes in Control
We are not aware of any arrangements, including any pledge by
any person of its securities, the operation of which may at a subsequent date
result in a change in control of our company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Promoters
During the past five fiscal years, the following persons have
been or are considered to be promoters of our company: Benjamin W. Mossman, Cale
Thomas, Bradley Scharfe and Fred Tejada. The amounts of anything of value
(including money, property, contracts, options or rights of any kind) received
or to be received by each promoter from our company, directly or indirectly, and
the nature and amount of any services, assets or other consideration received or
to be received by our company for the value given by each promoter during such
period up to and until July 31, 2017 are set out below.
Benjamin Mossman
Mr. Mossman began working with us on July 15, 2016 and was
appointed as a director and our Chief Executive Officer on August 1, 2016. He
has been instrumental in sourcing the I-M Mine Property and in the negotiations
for its purchase along with negotiations to purchase further contiguous land for
the I-M Mine Project. Mr. Mossman secured the historical records of the I-M Mine
along with other publically available information to compile the current
Technical Report.
Pursuant to his management contract, Mr. Mossman has received a
total of $140,000 in cash, 400,000 shares of Common Stock and options for the
purchase of a total of 2,729,142 shares of Common Stock pursuant to our stock
option plan comprised of 586,600 options exercisable at $0.20 per share until
August 8, 2021 and 2,142,542 options exercisable at $0.24 per share until
December 27, 2021. See Employment Agreements under the heading Executive
Compensation.
Cale Thomas
Mr. Thomas was appointed as our Chief Financial Officer,
Treasurer and a director on April 2, 2015, and as our Corporate Secretary on
April 20, 2017. He helped us bring our company from shell status to an
operating entity in good standing, and trading on the US OTC Markets, and the
Canadian Securities Exchange. He has led our management team in negotiating the
payment of debts and the acquisition of mineral exploration projects suitable
for investment and exploration.
Mr. Thomas has received a total of $86,850 in cash, which
includes $16,422 as Mr. Thomas share of fees paid to a company of which Mr.
Thomas holds 50% ownership. He has also received options for the purchase up to
700,000 shares of our Common Stock pursuant to our stock option plan at a price
of $0.15 per share until March 22, 2021. In addition, we issued Mr. Thomas
2,000,000 shares at a price of $0.02 per share pursuant to the conversion of
$40,000 in debt. On October 28, 2015, Mr. Thomas agreed to cancel 857,143 of
those shares in order to increase the effective conversion price to $0.035 per
share. See Employment Agreements under the heading Executive
Compensation.
73
Bradley Scharfe
Mr. Scharfe became a member of our board of directors on April
2, 2015 and ceased to be a director on April 20, 2017. He helped bring our
company from shell status to an operating entity in good standing, and trading
on the US OTC Markets, and the Canadian Securities Exchange through negotiating
the payment of debts and the acquisition of mineral exploration projects
suitable for investment and exploration. Mr. Scharfe was also instrumental in
attracting capital to finance our operations and allow us to make property
acquisitions.
Mr. Scharfe has received a total of $165,755, which includes
$16,422 as Mr. Scharfes share of consulting fees paid to a company of which Mr.
Scharfe holds 50% ownership, and $149,333 paid to Scharfe Holdings Inc., a
company controlled by Mr. Scharfe. In addition, we issued Scharfe Holdings Inc.
13,548,241 shares at a price of $0.02 per share in exchange for the conversion
of $270,964.83 in debt. On October 28, 2015, Scharfe Holdings Inc. agreed to
cancel 5,806,389 of those shares in order to increase the effective conversion
price to $0.035 per share.
Fred Tejada
Mr. Tejada became a member of our board of directors on June 1,
2012, our President and our Corporate Secretary on November 19, 2013 and our
Chief Executive Officer on April 2, 2015. He resigned as our Chief Executive
Officer on August 1, 2016 and as our President, Secretary and as one of our
directors on April 20, 2017.
Mr. Tejada has helped our company through its development by
negotiating the purchase of various mineral exploration rights including the
purchase of our British Columbia properties that were initially the focus of our
exploration activities. Mr. Tejada has also provided geological consulting and
assistance with due diligence, on any mining opportunities that we review.
Mr. Tejada has received $72,119 in cash and, pursuant to our
stock option plan, options for the purchase of 900,000 shares of our Common
Stock at a price of $0.15 per share until March 22, 2021. Mr. Tejada agreed to
surrender 500,000 of these options when he resigned his executive positions, so
he currently retains 400,000 options. In addition, we issued Mr. Tejada 451,759
shares at a price of $0.02 per share pursuant to the conversion of $9,035.17 in
debt; and on April 9, 2015, we issued an additional 250,000 shares to him at a
price of $0.02 per share pursuant to the conversion of $5,000 in debt. On
October 28, 2015, Mr. Tejada agreed to cancel an aggregate of 300,754 of those
shares in order to increase the effective conversion price to $0.035 per share.
When Fred Tejada resigned as our President, Secretary and a
director, we entered into a consulting services agreement with him pursuant to
which Mr. Tejada continues to perform geological consulting services for our
company. See Employment Agreements under the heading Executive
Compensation.
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby will
be passed upon for us by SecuritiesLawUSA, PC, Los Angeles, California.
INTERESTS OF EXPERTS
The financial statements as of July 31, 2016 and 2015 and for
the years ended July 31, 2016 and 2015 included in this prospectus and in the
registration statement have been so included in reliance on the report of
Davidson & Company LLP, an independent registered public accounting firm,
appearing elsewhere herein, given on the authority of said firm as experts in
auditing and accounting.
Certain portions of the description of the I-M Mine Property
were summarized or extracted from a technical report prepared in accordance with
NI 43-101 dated June 1, 2017 and entitled Technical Report on the
Idaho-Maryland Project, Grass Valley, California, USA. Those extracts were
reviewed and approved by Greg Kulla, P.Geo., the Author of the report.
74
None of the above experts has received, or is to receive, in
connection with the offering, a substantial interest, direct or indirect, in our
company or any of our subsidiaries nor were they connected with our company or
any of our subsidiaries as a promoter, managing or principal underwriter, voting
trustee, director, officer, or employee.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form
S-1, including exhibits and schedules, under the Securities Act with respect to
the Shares of Common Stock to be sold in this offering. This prospectus and any
prospectus supplement which form a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules filed therewith. For further information about us and the
securities covered by this prospectus, please see the registration statement and
the exhibits filed with the registration statement. Any statements made in this
prospectus or any prospectus supplement concerning legal documents are not
necessarily complete and you should read the documents that are filed as
exhibits to the registration statement or otherwise filed with the SEC for a
more complete understanding of the document or matter.
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read, without charge, and copy, at
prescribed rates, all or any portion of the registration statement or any
reports, statements or other information in the files at the public reference
room at the SECs principal office at 100 F Street NE, Washington, D.C., 20549.
You may request copies of these documents, for a copying fee, by writing to the
SEC. You may call the SEC at 1-800-SEC-0330 for further information on the
operation of its public reference room. Our filings, including the registration
statement, are also available to you on the Internet website maintained by the
SEC at
http://www.sec.gov.
75
INDEX TO FINANCIAL STATEMENTS
The following audited financial statements of the Company as at
and for the years ended July 31, 2016 and 2015 are attached as pages F-1 through
F-16 and are included herein by reference:
The following unaudited condensed consolidated interim
financial statements of the Company as at and for the three and nine months
ended April 30, 2017 and 2016 are attached as pages F-17 through F-30 and are
include herein by reference:
76
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of
Rise Resources Inc.
We have audited the accompanying financial statements of Rise
Resources Inc. (formerly Patriot Minefinders Inc.) (the Company), which
comprise the balance sheets as of July 31, 2016 and 2015, and the related
statements of operations and comprehensive loss, cash flows, and stockholders
deficit for the years then ended. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Rise
Resources Inc. (formerly Patriot Minefinders Inc.) as of July 31, 2016 and 2015,
and the results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared
assuming that Rise Resources Inc. (formerly Patriot Minefinders Inc.) will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has suffered recurring losses from operations and has a net capital
deficiency. These matters, along with the other matters set forth in Note 1,
indicate the existence of material uncertainties that raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
|
DAVIDSON & COMPANY LLP
|
|
|
Vancouver, Canada
|
Chartered Professional Accountants
|
|
|
October 27, 2016
|
|
F-1
RISE RESOURCES INC.
|
(formerly Patriot Minefinders Inc.)
|
(An Exploration Stage Company)
|
BALANCE SHEETS
|
(Expressed in Canadian Dollars)
|
AS AT
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash
|
$
|
139,021
|
|
$
|
18,000
|
|
Receivables
|
|
20,021
|
|
|
4,941
|
|
Prepaid expenses
|
|
9,566
|
|
|
-
|
|
Deferred financing costs (Note 8)
|
|
-
|
|
|
51,948
|
|
|
|
|
|
|
|
|
|
|
168,608
|
|
|
74,889
|
|
|
|
|
|
|
|
|
Mineral properties (Note 4)
|
|
563,031
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
$
|
731,639
|
|
$
|
94,889
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
183,996
|
|
$
|
181,784
|
|
Loan from related parties (Note 7)
|
|
43,214
|
|
|
87,105
|
|
|
|
|
|
|
|
|
|
|
227,210
|
|
|
268,889
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit)
|
|
|
|
|
|
|
Capital stock, $0.001
par value, 400,000,000 shares authorized;
32,866,261 shares issued and
outstanding (Note 8)
|
|
32,867
|
|
|
38,298
|
|
Additional
paid-in-capital (Note 8)
|
|
2,475,194
|
|
|
1,157,868
|
|
Cumulative translation adjustment
|
|
(166,663
|
)
|
|
(166,663
|
)
|
Deficit
|
|
(1,836,969
|
)
|
|
(1,203,503
|
)
|
|
|
|
|
|
|
|
|
|
504,429
|
|
|
(174,000
|
)
|
|
|
|
|
|
|
|
|
$
|
731,639
|
|
$
|
94,889
|
|
Nature and continuance of operations
(Note 1)
Long-term receivable and contingency
(Note 5)
Subsequent
events
(Note 12)
Approved and authorized by the Board on October 27, 2016.
Benjamin
Mossman
|
Director
|
Cale Thomas
|
Director
|
Benjamin Mossman
|
|
Cale Thomas
|
|
The accompanying notes are an integral part of these financial
statements.
F-2
RISE RESOURCES INC.
|
(formerly Patriot Minefinders Inc.)
|
(An Exploration Stage Company)
|
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
|
(Expressed in Canadian Dollars)
|
FOR THE YEAR
ENDED JULY 31,
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
Bad debt expense (Note 6)
|
$
|
7,126
|
|
$
|
6,748
|
|
Consulting
|
|
102,420
|
|
|
77,476
|
|
Filing and regulatory
|
|
30,927
|
|
|
26,722
|
|
Foreign exchange
|
|
1,959
|
|
|
(90,810
|
)
|
Gain on settlement of payables
|
|
(41,982
|
)
|
|
(9,259
|
)
|
General and
administrative
|
|
20,839
|
|
|
41,049
|
|
Geological, mineral, and prospect costs
(Note 4)
|
|
-
|
|
|
4,801
|
|
Professional fees
|
|
107,197
|
|
|
73,036
|
|
Property investigation costs
|
|
10,408
|
|
|
-
|
|
Promotion and
shareholder communication
|
|
20,201
|
|
|
2,970
|
|
Salaries
|
|
5,365
|
|
|
-
|
|
Share-based payments
(Note 8)
|
|
369,006
|
|
|
-
|
|
|
|
|
|
|
|
|
Loss for the year
|
|
(633,466
|
)
|
|
(132,733
|
)
|
|
|
|
|
|
|
|
Cumulative impact of
foreign exchange
|
|
-
|
|
|
(117,502
|
)
|
|
|
|
|
|
|
|
Comprehensive loss for the year
|
$
|
(633,466
|
)
|
$
|
(250,235
|
)
|
|
|
|
|
|
|
|
Basic and diluted loss per common share
|
$
|
(0.02
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding
|
|
31,556,200
|
|
|
15,506,582
|
|
The accompanying notes are an integral part of these financial
statements.
F-3
RISE RESOURCES INC.
|
(formerly Patriot Minefinders Inc.)
|
(An Exploration Stage Company)
|
STATEMENT OF CASH FLOWS
|
(Expressed in Canadian Dollars)
|
FOR THE YEAR
ENDED JULY 31,
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Loss for the year
|
$
|
(633,466
|
)
|
$
|
(132,733
|
)
|
Items not involving
cash
|
|
|
|
|
|
|
Bad debt
expense
|
|
7,126
|
|
|
6,748
|
|
Gain on settlement of payables
|
|
(41,982
|
)
|
|
(9,259
|
)
|
Share-based
payments
|
|
369,006
|
|
|
-
|
|
Unrealized foreign exchange
|
|
2,644
|
|
|
6,525
|
|
Non-cash working capital item changes:
|
|
|
|
|
|
|
Receivables
|
|
(22,206
|
)
|
|
(4,081
|
)
|
Prepaid
expenses
|
|
(9,566
|
)
|
|
8,836
|
|
Accounts payables and accrued liabilities and due to related parties
|
|
52,145
|
|
|
114,259
|
|
|
|
|
|
|
|
|
Net cash used in
operating activities
|
|
(276,299
|
)
|
|
(9,705
|
)
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITY
|
|
|
|
|
|
|
Loan receivable
|
|
-
|
|
|
(6,748
|
)
|
Mineral property
|
|
(80,000
|
)
|
|
(20,000
|
)
|
|
|
|
|
|
|
|
Net cash used in
investing activity
|
|
(80,000
|
)
|
|
(26,748
|
)
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITY
|
|
|
|
|
|
|
Private placement
|
|
605,000
|
|
|
210,000
|
|
Warrants exercised
|
|
1,925
|
|
|
-
|
|
Share issuance costs
|
|
(83,105
|
)
|
|
-
|
|
Loan repayments
|
|
(46,500
|
)
|
|
-
|
|
Deferred financing costs
|
|
-
|
|
|
(38,124
|
)
|
|
|
|
|
|
|
|
Net cash provided by financing activity
|
|
477,320
|
|
|
171,876
|
|
|
|
|
|
|
|
|
Effect of foreign exchange on cash
|
|
-
|
|
|
(117,502
|
)
|
|
|
|
|
|
|
|
Change in cash for the year
|
|
121,021
|
|
|
17,921
|
|
|
|
|
|
|
|
|
Cash, beginning of year
|
|
18,000
|
|
|
79
|
|
|
|
|
|
|
|
|
Cash, end of
year
|
$
|
139,021
|
|
$
|
18,000
|
|
|
|
|
|
|
|
|
Interest
|
$
|
-
|
|
$
|
-
|
|
Income taxes
|
|
-
|
|
|
-
|
|
Supplemental disclosure with respect to cash flows (Note 10)
The accompanying notes are an integral part of these financial
statements.
F-4
RISE
RESOURCES
INC.
(formerly Patriot
Minefinders Inc.)
(An Exploration Stage Company)
STATEMENT OF
STOCKHOLDERS EQUITY (DEFICIT)
(Expressed in Canadian Dollars)
|
|
Capital Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
|
Translation
|
|
|
Equity
|
|
|
|
|
|
|
Number
|
|
|
Amount
|
|
|
Capital
|
|
|
Adjustment
|
|
|
(Deficit)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at July 31, 2014
|
|
792,518
|
|
$
|
793
|
|
$
|
337,716
|
|
|
(49,161
|
)
|
$
|
(1,070,770
|
)
|
$
|
(781,422
|
)
|
Shares issued for cash
|
|
6,000,002
|
|
|
6,000
|
|
|
204,000
|
|
|
-
|
|
|
-
|
|
|
210,000
|
|
Shares issued for debt
|
|
31,504,677
|
|
|
31,505
|
|
|
616,152
|
|
|
-
|
|
|
-
|
|
|
647,657
|
|
Cumulative translation adjustments
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(117,502
|
)
|
|
-
|
|
|
(117,502
|
)
|
Loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(132,733
|
)
|
|
(132,733
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at July 31, 2015
|
|
38,297,197
|
|
|
38,298
|
|
|
1,157,868
|
|
|
(166,663
|
)
|
|
(1,203,503
|
)
|
|
(174,000
|
)
|
Shares surrender and cancellation (Note
7)
|
|
(13,000,186
|
)
|
|
(13,000
|
)
|
|
13,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Shares issued for cash
|
|
6,069,250
|
|
|
6,069
|
|
|
600,856
|
|
|
-
|
|
|
-
|
|
|
606,925
|
|
Shares issued for mineral property
|
|
1,500,000
|
|
|
1,500
|
|
|
238,500
|
|
|
-
|
|
|
-
|
|
|
240,000
|
|
Warrants issued for
mineral property
|
|
-
|
|
|
-
|
|
|
223,031
|
|
|
-
|
|
|
-
|
|
|
223,031
|
|
Share issuance costs
|
|
-
|
|
|
-
|
|
|
(127,067
|
)
|
|
-
|
|
|
-
|
|
|
(127,067
|
)
|
Share-based payments
|
|
-
|
|
|
-
|
|
|
369,006
|
|
|
-
|
|
|
-
|
|
|
369,006
|
|
Loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(633,466
|
)
|
|
(633,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at
July 31, 2016
|
|
32,866,261
|
|
$
|
32,867
|
|
$
|
2,475,194
|
|
|
(166,663
|
)
|
$
|
(1,836,969
|
)
|
$
|
504,429
|
|
The accompanying notes are an integral part of these financial
statements.
F-5
RISE RESOURCES INC.
|
(formerly Patriot Minefinders Inc.)
|
(An Exploration Stage Company)
|
NOTES TO THE FINANCIAL STATEMENTS
|
FOR THE YEAR ENDED JULY 31, 2016
|
|
1.
|
NATURE AND CONTINUANCE OF OPERATIONS
|
|
|
|
Atlantic Resources Inc. (the Company) was incorporated
in the State of Nevada on February 9, 2007 and is in the exploration
stage. On January 14, 2015, the Company merged its wholly-owned
subsidiary, Rise Resources Inc., a Nevada corporation, in and to the
Company to effect a name change from Patriot Minefinders Inc. to Rise
Resources Inc. Rise Resources Inc. was formed solely for the purpose of
effecting the change of name.
|
|
|
|
On February 16, 2015, the Company increased its
authorized capital from 21,000,000 shares to 400,000,000 shares.
|
|
|
|
On January 29, 2016, the Company completed an initial
public offering in Canada and began trading on the Canadian Securities
Exchange (CSE) on February 1, 2016.
|
|
|
|
The Company is in the early stages of exploration and as
is common with any exploration company, it raises financing for its
acquisition activities. The accompanying financial statements have been
prepared on the going concern basis, which presumes that the Company will
continue operations for the foreseeable future and will be able to realize
assets and discharge liabilities in the normal course of business. The
Company has incurred a loss of $633,466 for the year ended July 31, 2016
and has accumulated a deficit of $1,836,969. This raises substantial doubt
about the Companys ability to continue as a going concern. The ability of
the Company to continue as a going concern is dependent on the Companys
ability to raise additional capital and implement its business plan, which
is typical for a start-up company. The financial statements do not include
any adjustments that might be necessary if the Company is unable to
continue as a going concern.
|
|
|
|
Management of the Company (management) is of the
opinion that sufficient financing will be required from external financing
and further share issuances to meet the Companys obligations. At July 31,
2016, the Company had working capital deficiency of $58,602.
|
|
|
2.
|
BASIS OF PREPARATION
|
|
|
|
Generally accepted accounting principles
|
|
|
|
These financial statements have been prepared in
conformity with generally accepted accounting principles of the United
States of America (US GAAP) for financial information with the
instructions to Form 10-K and Regulation S-K. Results are not necessarily
indicative of results which may be achieved in the future.
|
|
|
|
Change in Functional and Presentation
Currency
|
|
|
|
The Companys expenses and overheads are now primarily
being incurred in Canadian Dollars (CAD) and it is anticipated that cash
flows will continue to be primarily in CAD. Accordingly, the Company
determined that effective August 1, 2015, the functional currency of the
Company would change from the United States Dollar (USD) to
CAD.
|
|
|
|
Effective August 1, 2015, the Company also changed its
presentation currency from USD to CAD. As a result of changing the
presentation currency, all the comparative assets and liabilities were
translated using the closing rate at the balance sheet date, comparative
equity were translated at the exchange rates at the dates of transaction
and the statements of loss were translated at the average exchange rate
for the period covered. All resulting change differences are recognized in
the accumulated deficit in the balance sheets shareholders equity
(deficiency) section. A change in presentation currency is accounted for
as a change in accounting policy and is applied retrospectively, as if the
new presentation currency had always been the presentation currency.
Consequently, the comparatives for the year ended July 31, 2015 and as at
July 31, 2015 have been restated to be presented in CAD. The exchange
rates applied for translation purposes were as
follows:
|
F-6
RISE RESOURCES INC.
|
(formerly Patriot Minefinders Inc.)
|
(An Exploration Stage Company)
|
NOTES TO THE FINANCIAL STATEMENTS
|
FOR THE YEAR ENDED JULY 31, 2016
|
|
2.
|
BASIS OF PREPARATION
|
|
|
|
Change in Functional and Presentation Currency
(contd
)
|
Date or period
|
Exchange
rate
|
As at July 31, 2015
|
1 CAD = 0.7703 USD
|
For the year ended July 31, 2015
|
1 CAD = 0.8403
USD
|
|
Use of Estimates
|
|
|
|
The preparation of these financial statements in
conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates. Significant areas requiring the use of estimates include the
carrying value and recoverability of mineral properties and the
recognition of deferred tax assets based on the change in unrecognized
deductible temporary tax differences. Actual results could differ from
those estimates, and would impact future results of operations and cash
flows.
|
|
|
|
Restatement
|
|
|
|
Certain prior year balances within equity have been
restated to comply with the Companys accounting policies.
|
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
|
|
Receivables
|
|
|
|
The Company reviews all receivables that exceed terms and
establishes an allowance for doubtful accounts based on management's
assessment of the collectability of trade and other receivables.
|
|
|
|
Mineral property
|
|
|
|
The costs of acquiring mineral rights are capitalized at
the date of acquisition. After acquisition, various factors can affect the
recoverability of the capitalized costs. If, after review, management
concludes that the carrying amount of a mineral property is impaired, it
will be written down to estimated fair value. Exploration costs incurred
on mineral properties are expensed as incurred. Development costs incurred
on proven and probable reserves will be capitalized. Upon commencement of
production, capitalized costs will be amortized using the
unit-of-production method over the estimated life of the ore body based on
proven and probable reserves (which exclude non-recoverable reserves and
anticipated processing losses). When the Company receives an option
payment related to a property, the proceeds of the payment are applied to
reduce the carrying value of the exploration asset.
|
|
|
|
Long-lived assets
|
|
|
|
Long-lived assets held and used by the Company are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. For
purposes of evaluating the recoverability of long-lived assets, the
recoverability test is performed using undiscounted net cash flows related
to the long-lived assets. If such assets are considered to be impaired,
the impairment recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value
less costs to sell.
|
F-7
RISE RESOURCES INC.
|
(formerly Patriot Minefinders Inc.)
|
(An Exploration Stage Company)
|
NOTES TO THE FINANCIAL STATEMENTS
|
FOR THE YEAR ENDED JULY 31, 2016
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
(contd
)
|
|
|
|
Asset retirement obligations
|
|
|
|
The Company records the fair value of an asset retirement
obligation as a liability in the period in which it incurs a legal
obligation associated with the retirement of tangible long-lived assets
that result from the acquisition, construction, development, and/or normal
use of the long-lived assets. The Company also records a corresponding
asset which is amortized over the life of the asset. Subsequent to the
initial measurement of the asset retirement obligation, the obligation is
adjusted at the end of each period to reflect the passage of time
(accretion expense) and changes in the estimated future cash flows
underlying the obligation (asset retirement cost).
|
|
|
|
Loss per share
|
|
|
|
Basic loss per common share is computed using the
weighted average number of common shares outstanding during the year. To
calculate diluted loss per share, the Company uses the treasury stock
method and the
if converted
method.
|
|
|
|
Financial instruments
|
|
|
|
The Companys financial instruments consist of cash,
receivables, accounts payable and accrued liabilities, and due to related
parties. It is managements opinion that the Company is not exposed to
significant interest, currency or credit risks arising from its financial
instruments. The fair values of these financial instruments approximate
their carrying values unless otherwise noted.
|
|
|
|
Fair value of financial assets and
liabilities
|
|
|
|
The Company measures the fair value of financial assets
and liabilities based on US GAAP guidance which defines fair value,
establishes a framework for measuring fair value, and expands disclosures
about fair value measurements.
|
|
|
|
The Company classifies financial assets and liabilities
as held-for-trading, available-for-sale, held-to- maturity, loans and
receivables or other financial liabilities depending on their nature.
Financial assets and financial liabilities are recognized at fair value on
their initial recognition, except for those arising from certain related
party transactions which are accounted for at the transferors carrying
amount or exchange amount.
|
|
|
|
Financial assets and liabilities classified as
held-for-trading are measured at fair value, with gains and losses
recognized in net income. Financial assets classified as held-to-maturity,
loans and receivables, and financial liabilities other than those
classified as held-for-trading are measured at amortized cost, using the
effective interest rate method of amortization. Financial assets
classified as available-for-sale are measured at fair value, with
unrealized gains and losses being recognized as other comprehensive income
until realized, or if an unrealized loss is considered other than
temporary, the unrealized loss is recorded in income.
|
|
|
|
The following indicates the fair value hierarchy of the
valuation techniques the Company utilizes to determine the fair value of
financial assets that are measured at fair value on a recurring
basis.
|
F-8
RISE RESOURCES INC.
|
(formerly Patriot Minefinders Inc.)
|
(An Exploration Stage Company)
|
NOTES TO THE FINANCIAL STATEMENTS
|
FOR THE YEAR ENDED JULY 31, 2016
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
(contd
)
|
|
|
|
Level 1 Unadjusted quoted prices in active markets for
identical assets and liabilities;
|
|
Level 2 Inputs other than quoted prices that are
observable for the asset or liability either directly or indirectly; and
Level 3 Inputs that are not based on observable market
data.
|
|
|
|
Financial instruments, including loan from related
parties, and accounts payable and accrued liabilities are classified as
other financial liabilities and are carried at cost, which management
believes approximates fair value due to the short term nature of these
instruments.
|
|
|
|
Concentration of credit risk
|
|
|
|
The financial instrument which potentially subjects the
Company to concentration of credit risk is cash. The Company maintains
cash in bank accounts that, at times, may exceed federally insured limits.
As of July 31, 2016 and 2015, the Company has not exceeded the federally
insured limit. The Company has not experienced any losses in such accounts
and believes it is not exposed to any significant risks on its cash in
bank accounts.
|
|
|
|
Stock-based compensation
|
|
|
|
The Company accounts for share-based compensation under
the provisions of ASC 718, Compensation- Stock Compensation. Under the
fair value recognition provisions, stock-based compensation expense is
measured at the fair value of the consideration received, or the fair
value of the equity instruments issued, or liabilities incurred, whichever
is more reliably measured. Grant date for all stock-based awards to
employees and directors and is recognized as an expense over the requisite
service period, which is generally the vesting period. The Black-Scholes
option valuation model is used to calculate fair value.
|
|
|
|
The Company accounts for stock compensation arrangements
with non-employees in accordance with ASC 718 which requires that such
equity instruments are recorded at their fair value on the measurement
date. The measurement of stock-based compensation is subject to periodic
adjustment as the underlying equity instruments vest. Non-employee
stock-based compensation charges are amortized over the vesting period on
a straight-line basis. For stock options granted to employees, directors,
and non-employees, the fair value of the stock options is estimated using
a Black-Scholes valuation model.
|
|
|
|
Income taxes
|
|
|
|
The Company accounts for income taxes under the asset and
liability method, whereby deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under the asset and liability method
the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date. A
valuation allowance is recognized if it is more likely than not that some
portion or all of the deferred tax asset will not be recognized.
|
|
|
|
Foreign exchange
|
|
|
|
The Companys functional currency is the Canadian dollar.
Any monetary assets and liabilities that are in a currency other than the
Canadian dollar are translated at the rate prevailing at year end. Revenue
and expenses in a foreign currency are translated at rates that
approximate those in effect at the time of translation. Gains and losses
from translation of foreign currency transactions into Canadian dollars
are included in current results of operations.
|
F-9
RISE RESOURCES INC.
|
(formerly Patriot Minefinders Inc.)
|
(An Exploration Stage Company)
|
NOTES TO THE FINANCIAL STATEMENTS
|
FOR THE YEAR ENDED JULY 31, 2016
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
(contd
)
|
|
|
|
Recently adopted and recently issued accounting
standards
|
|
|
|
In August 2014, the FASB issued ASU No. 2014-15,
Presentation of Financial Statements Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entitys Ability to Continue as a
Going Concern. This ASU provides guidance on determining when and how to
disclose going concern uncertainties in the financial statements. The new
standard requires management to perform interim and annual assessments of
an entitys ability to continue as a going concern within one year of the
date the financial statements are issued. An entity must provide certain
disclosures if conditions or events raise substantial doubt about the
entitys ability to continue as a going concern. The ASU applies to all
entities and is effective for annual periods ending after December 15,
2016, and interim periods thereafter, with early adoption permitted. The
Company is currently evaluating the impact of adoption of this
standard.
|
|
|
|
In November 2015, the FASB issued ASU No. 2015-17,
Income Taxes (Topic 740): Balance Sheet Classification of Deferred
Taxes. This ASU eliminates the current requirement to present deferred
tax assets and liabilities as current and noncurrent amounts in a
classified balance sheet and replaces it with a noncurrent classification
of deferred tax assets and liabilities. The ASU applies to all entities
and is effective for annual periods beginning after December 15, 2017, and
interim periods thereafter, with early adoption permitted. The Company is
currently evaluating the impact of adoption of this standard.
|
|
|
|
In January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Liabilities. This ASU amendment
addresses aspects of recognition, measurement, presentation and disclosure
of financial instruments. It affects investments in equity securities and
the presentation of certain fair value changes for financial liabilities
measured at fair value, and simplifies the impairment assessment of equity
investments without a readily determinable fair value by requiring a
qualitative assessment. The ASU applies to all entities and is effective
for annual periods beginning after December 15, 2017, and interim periods
thereafter, with early adoption permitted. The Company is currently
evaluating the impact of adoption of this standard.
|
|
|
|
Other than the above, the Company has determined that
other significant newly issued accounting pronouncements and are either
not applicable to the Companys business or that no material effect is
expected on the financial statements as a result of future
adoption.
|
|
|
4.
|
MINERAL PROPERTY OPTION
|
|
|
|
Title to mineral properties
|
|
|
|
Title to mineral properties involves certain inherent
risks due to the difficulties of determining the validity of certain
mineral titles as well as the potential for problems arising from the
frequently ambiguous conveying history characteristic of many mineral
properties. As at July 31, 2016, the Company does not hold titles to any
mineral properties.
|
|
|
|
Indata, British Columbia
|
|
|
|
On May 18, 2015, the Company entered into an option
agreement with Eastfield Resources Ltd., (Eastfield), pursuant to which
Eastfield granted the Company the exclusive and irrevocable right to
acquire up to a 75% interest in and to certain claims in the Indata
property located in the Omineca Mining Division in British Columbia,
Canada. In order to earn the initial 60% interest, the Company is required
to pay Eastfield an aggregate of $350,000 ($50,000 paid to date; $30,000
paid in the current year) in cash and incur a minimum of $2,000,000 in
aggregate exploration expenditures on the property by April 3, 2019. In
order to earn the additional 15% interest, the Company is required to pay
Eastfield $100,000 cash within 90 days of earning the 60% interest and
incur a further $500,000 in aggregate annual exploration expenditures on
the property until such time as the Company is able to complete a
feasibility study on the property. As at July 31, 2016, the Company has
incurred cumulative exploration expenditures of $4,035 on the Indata
property.
|
F-10
RISE RESOURCES INC.
|
(formerly Patriot Minefinders Inc.)
|
(An Exploration Stage Company)
|
NOTES TO THE FINANCIAL STATEMENTS
|
FOR THE YEAR ENDED JULY 31, 2016
|
|
4.
|
MINERAL PROPERTY OPTION
(contd
)
|
|
|
|
Klondike, British Columbia
|
|
|
|
On May 26, 2016, the Company entered into an agreement
with Klondike Gold Corp. (Klondike) regarding the purchase of a
portfolio of seven gold and base metal properties in southeast British
Columbia. Under the agreement, within 60 days of signing, the Company paid
Klondike $50,000 in cash, issued 1,500,000 shares of the Companys common
stock valued at $240,000, and issued 1,500,000 warrants valued at $223,031
(discount rate 0.49%, volatility 200.64%, expected life 2 years,
dividend yield 0%), exercisable at $0.227 per share until July 13, 2018.
On the one year anniversary of the first closing, the Company will pay
Klondike $150,000 in cash, issue 2,000,000 shares of the Companys common
stock, and issue 1,000,000 warrants. Klondike will retain a 2% net smelter
return royalty (NSR) and the Company will have the right to purchase 50%
of the NSR for $1,000,000 at any time after the first closing. Each of the
warrants is exercisable for a period of two years into one share of the
Companys common stock at a price that is a 20% premium to the 10-day
volume-weighted average price of the stock on the CSE immediately prior to
the date of issuance. As at July 31, 2016, the Company has incurred
cumulative exploration expenditures of $10,408 on the Klondike
properties.
|
|
|
5.
|
CONTINGENCY
|
|
|
|
During the year ended July 31, 2014, the Company entered
into a binding letter of intent (LOI) with Wundr Software Inc.
(Wundr). Under the terms of the LOI, the Company would acquire 100% of
the issued and outstanding common shares of Wundr. Due to unforeseen
circumstances, the Company did not complete the transactions contemplated
in the LOI, which the Company announced had expired on January 10,
2014.
|
|
|
|
On September 17, 2014, the Company learned that it was
the subject, along with a number of additional defendants, of a notice of
civil claim (the Claim) filed in the Supreme Court of British Columbia
by Wundr, under which Wundr is seeking general damages from the Company as
well as damages for conspiracy to cause economic harm. None of the
allegations contained in the Claim have been proven in court. Management
has determined that the probability of the Claim resulting in an
unfavourable outcome and financial loss to the Company is
unlikely.
|
|
|
6.
|
BAD DEBT EXPENSE
|
|
|
|
During the year ended July 31, 2016, the Company advanced
to Skanderbeg Capital Partners Inc. a total of $7,126, which had been
recorded in prepaid expenses to be applied to future rent expense (Note
7). As the Company moved its premises during the year ended July 31, 2016,
management has assessed the recoverability of the amount and recorded an
allowance for doubtful accounts of $7,126 for the year ended July 31,
2016.
|
|
|
|
During the year ended July 31, 2015, the Company advanced
$6,748 (US$6,106) to Juliet Press Inc. (Juliet) as a loan, due on demand
without interest. In fiscal 2014, the Company had entered into a share
exchange agreement with Juliet to acquire 100% of the issued and
outstanding common stock of Juliet in exchange for 175,000 common shares
of the Company. On September 25, 2014, the Company, Juliet and Juliet
stockholders mutually agreed in writing to terminate the Share Exchange
Agreement. Management has assessed the collectability of the loan and
recorded an allowance for doubtful accounts of $6,748 for the year ended
July 31, 2015.
|
|
|
7.
|
RELATED PARTY TRANSACTIONS
|
|
|
|
Key management personnel consist of the Chief Executive
Officer, Chief Financial Officer, and the directors of the Company. The
remuneration of the key management personnel is as
follows:
|
|
a)
|
Salaries of $5,000 (2015 - $Nil) to the CEO of the
Company.
|
F-11
RISE RESOURCES INC.
|
(formerly Patriot Minefinders Inc.)
|
(An Exploration Stage Company)
|
NOTES TO THE FINANCIAL STATEMENTS
|
FOR THE YEAR ENDED JULY 31, 2016
|
|
7.
|
RELATED PARTY TRANSACTIONS
(contd
)
|
|
|
|
|
b)
|
Consulting fees of $30,000 (2015 - $19,203) to the former
CEO of the Company.
|
|
|
|
|
c)
|
Consulting fees of $18,000 (2015 - $Nil) to the CFO of
the Company.
|
|
|
|
|
d)
|
Share-based payments of $246,004 (2015 - $Nil) to the
former CEO, CFO, and a director of the
Company.
|
|
As at July 31, 2016, the Company has recorded loans from
related parties of $43,214 (US$33,099) (2015 - $87,105 or US$67,100)
representing advances made by a director and a former director and
officer. The advances are due on demand without interest. During the year
ended July 31, 2016, $51,132 (US$36,600) of these loans were assigned to a
company controlled by a director of the Company and $46,500 (US$34,001)
was repaid.
|
|
|
|
As at July 31, 2016, included in due to related parties
is $25,494 (2015 - $11,313) in accounts and advances payable and accrued
liabilities to current and former officers and companies controlled by
directors and officers of the Company. Of this amount, $nil (2015 - $604)
represents advances made by Skanderbeg Capital Partners Inc.
(Skanderbeg), a company that advises the Companys management and does
promotional work for the Company. Skanderbeg made payments on behalf of
the Company until such time as the Company was able to complete a
financing.
|
|
|
|
Included in general and administration expenses for the
period ended July 31, 2016 is rent of $7,128 (2015 - $5,042) paid to
Skanderbeg. A total of $7,126 advanced to Skanderbeg for future rent
expense was assessed as non-recoverable during the year ended July 31,
2016 (Note 6).
|
|
|
8.
|
CAPITAL STOCK AND ADDITIONAL
PAID-IN-CAPITAL
|
|
|
|
Issued Capital Stock
|
|
|
|
On February 11, 2015, the Company entered into debt
conversion agreements with five investors pursuant to which such investors
agreed to convert an aggregate of $400,000 in debt into 20,000,000 shares
of the Companys common stock at a price of $0.02 per share.
|
|
|
|
On March 31, 2015, the Company entered into debt
conversion agreements with 13 investors pursuant to which such investors
agreed to convert an aggregate of $206,675 in debt into 10,333,771 shares
of the Companys common stock at a price of $0.02 per share. These shares
were formally issued on April 9, 2015.
|
|
|
|
On April 23, 2015, the Company entered into debt
conversion agreements with two investors pursuant to which such investors
agreed to convert an aggregate of $40,982 in debt into 1,170,906 shares of
the Companys common stock at a price of $0.035 per share.
|
|
|
|
On April 23, 2015, the Company completed a non-brokered
private placement, issuing an aggregate of 6,000,002 shares of common
stock to six investors at a price of $0.035 per share for gross proceeds
of $210,000.
|
|
|
|
On October 28, 2015, pursuant to a share surrender and
cancellation agreement, the Company cancelled 13,000,186 shares of common
stock surrendered to the Company, originally issued through the debt
conversion agreements on February 11, 2015 and March 31,
2015.
|
F-12
RISE RESOURCES INC.
|
(formerly Patriot Minefinders Inc.)
|
(An Exploration Stage Company)
|
NOTES TO THE FINANCIAL STATEMENTS
|
FOR THE YEAR ENDED JULY 31, 2016
|
|
8.
|
CAPITAL STOCK AND ADDITIONAL PAID-IN-CAPITAL
(contd
)
|
|
|
|
Issued Capital Stock
(contd
)
|
|
|
|
On January 29, 2016, the Company completed an initial
public offering in Canada, issuing an aggregate of 6,050,000 shares of
common stock at a price of $0.10 per share for gross proceeds of $605,000.
In connection with the offering, the Company paid a cash commission of
$48,400 and issued 484,000 agent warrants valued at $42,248 (discount rate
0.43%, volatility 215.3%, expected life 2 years, dividend yield
0%), exercisable at $0.10 per share for period of 24 months. The Company
also paid the agent a corporate finance fee of $25,000 and incurred other
share issuance costs of $53,667.
|
|
|
|
On June 3, 2016, the Company issued 19,250 shares of
common stock upon the exercise of agent warrants at a price of $0.10 per
share.
|
|
|
|
On July 18, 2016, the Company issued 1,500,000 shares of
common stock at a price of $0.16 per share to Klondike pursuant to the
Klondike properties purchase agreement (Note 4).
|
|
|
|
Stock Options
|
|
|
|
During the year ended July 31, 2016, the Company granted
2,700,000 stock options, exercisable at a price of $0.15 per share for a
period of five years, to directors and consultants.
|
|
|
|
The following incentive stock options were outstanding at
July 31, 2016:
|
Number
|
|
|
|
Exercise
|
|
|
of Shares
|
|
|
|
Price
|
|
Expiry
Date
|
|
|
|
|
|
|
|
2,700,000
|
|
|
$
|
0.15
|
|
January 31, 2021
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.