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 effective 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, or a
smaller reporting company.
RISK FACTORS
An investment in our common shares
involves a high degree of risk. You should carefully consider the risks
described below and the other information in this prospectus before investing
in our common
shares
. If any of the following risks occur, our
business, operating results and financial condition could be seriously harmed.
The trading price of our common shares could decline due to any of these risks,
and you may lose all or part of your investment.
Risks Related To Our
Business
The following are some of
the important factors that could affect our financial performance or could
cause actual results to differ materially from estimates contained in our
forward-looking statements. We may encounter risks in addition to those
described below. Additional risks and uncertainties not currently known to us,
or that we currently deem to be immaterial, may also impair or adversely affect
our business, financial condition or results of operation.
We lack an operating
history and have losses which we expect to continue into the future. As a
result, we may have to suspend or cease exploration activities and if we do not
obtain sufficient financing, our business will fail.
To date, we have been
involved primarily in the acquisition, exploration and development of our
mineral properties. We have no operating history upon which an evaluation of
our future success or failure can be made. Our ability to achieve and maintain
profitability and positive cash flow is dependent upon: (i) our ability to
locate a profitable mineral property, and (ii) our ability to generate
revenues.
In order to carry out
longer duration mine building activities and our general continued operations,
we will need to complete the Offering or raise additional financing. Obtaining
financing would be subject to a number of factors, including the market prices
for industry minerals. These factors may make the timing, amount, terms or
conditions of additional financing unavailable to us. Since our inception, we
have relied on equity financings and loans to fund our operations. We have not
attained profitable operations and are dependent upon obtaining financing to
pursue our plan of operation.
Because we are an
development stage company, our business has a high risk of failure.
We are an development stage company that has incurred
net losses since inception, we have not attained profitable operations and we
are dependent upon obtaining adequate financing to complete our development activities. The success of our business operations will depend upon our
ability to obtain further financing to complete our development of the Bovill
Kaolin Project and to attain profitable operations. If we are not able to
complete a successful development program and attain sustainable profitable
operations, then our business will fail.
We have expressed substantial doubt about our ability
to continue as a going concern; as a result we could have difficulty finding
additional financing.
Our financial statements have been prepared assuming
that we will continue as a going concern. We have not generated significant
revenues from our main operations since inception and have accumulated losses.
As a result, we have expressed substantial doubt about our ability to continue
as a going concern. Our ability to continue our operations depends on our
ability to complete equity or debt financings or generate profitable operations.
Such financings may not be available or may not be available on reasonable
terms. Our financial statements do not include any adjustments that could
result from the outcome of this uncertainty.
6
Because of the unique difficulties and uncertainties
inherent in mineral exploration and development ventures, we face a high risk of business
failure.
You should be aware of the difficulties normally
encountered by mineral exploration and development companies and the high rate of failure of
such enterprises. The likelihood of success must be considered in light of the
problems, expenses, difficulties, complications and delays encountered in
connection with the development of our property that we plan to undertake.
These potential problems include, but are not limited to, unanticipated problems
relating to exploration, and additional costs and expenses that may exceed
current estimates.
Although we have known mineral reserves, there are
uncertainties related to mineral reserve and mineralization estimates.
There are numerous uncertainties inherent in
estimating proven and probable reserves and mineralization, including many
factors beyond our control. The estimation of reserves and mineralization is a
subjective process and the accuracy of any such estimates is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, metallurgical testing and production and the
evaluation of mine plans subsequent to the date of any estimate may justify
revision of such estimates. No assurances can be given that the volume and
grade of reserves recovered and rates of production will not be less than
anticipated. Assumptions about prices are subject to greater uncertainty and
industrial mineral prices have fluctuated widely in the past. Declines in the
market price of industrial minerals also may render reserves or mineralization
containing relatively lower grades of ore uneconomic to exploit. Changes in
operating and capital costs and other factors including, but not limited to,
short-term operating factors such as the need for sequential development of ore
bodies and the processing of new or different ore grades, may materially and
adversely affect reserves
Because we have not earned significant revenues, we
face a high risk of business failure.
We have not earned any significant revenues from
business operations as of the date of this prospectus. Potential investors
should be aware of the difficulties normally encountered by new mineral
exploration companies and the high rate of failure of such enterprises. The
likelihood of success must be considered in light of the problems, expenses,
difficulties, complications and delays encountered in connection with the
exploration of the mineral properties that we plan to undertake. These potential
problems include, but are not limited to, unanticipated problems relating to
exploration, and additional costs and expenses that may exceed current
estimates.
Because of the inherent dangers involved in mineral
exploration, there is a risk that we may incur liability or damages as we
conduct our business.
The search for valuable minerals involves numerous
hazards. As a result, we may become subject to liability for such hazards,
including pollution, cave-ins and other hazards against which we cannot insure
or against which we may elect not to insure. At the present time we have no
coverage to insure against these hazards. The payment of such liabilities may
result in our inability to complete our planned development program and/or
obtain additional financing to fund our development program.
Because the prices of minerals fluctuate, if the price
of minerals for which we are exploring decreases below a specified level, it
may no longer be profitable to explore for those minerals and we will cease
operations.
The profitability of mining operations is directly
related to the market price of the industrial minerals being mined. The market
price of industrial minerals may fluctuate widely and is affected by numerous
factors beyond the control of any mining company. These factors include
expectations with respect to the rate of inflation, the exchange rates of the
dollar and other currencies, interest rates, global or regional political,
economic or banking crises, and a number of other factors. If the market prices
of the mineral commodities we plan to explore decline, this will have a
negative effect on the availability of financing to us.
We may be required to
defend title to the leases that comprise our Helmer-Bovill Property.
Title to mineral properties involves certain inherent
risks due to the difficulties of determining the validity of certain claims, as
well as the potential for problems arising from the frequently ambiguous
conveyance history characteristic of many mineral properties. Although we have
taken steps to verify title to mineral leases in which we have an interest,
these procedures do not guarantee our title. Such properties may be subject to
prior agreements or transfers and title may be affected by undetected defects.
7
There are environmental
risks associated with mineral exploration and development .
Environmental risks are inherent with mining
operations. The legal framework governing this area is constantly developing,
therefore we are unable to fully ascertain any future liability that may arise
from the implementation of any new laws or regulations, although such laws and
regulations are typically strict and may impose severe penalties (financial or
otherwise). Our proposed activities of, as with any exploration, may have an
environmental impact which may result in unbudgeted delays, damage, loss and
other costs and obligations including, without limitation, rehabilitation
and/or compensation. There is also a risk that our operations and financial
position may be adversely affected by the actions of environmental groups or
any other group or person opposed in general to our activities and, in
particular, the proposed exploration and mining by us within the State of
Idaho.
We face significant
competition in the mineral exploration and development industry.
We compete with other mining and exploration companies
possessing greater financial resources and technical facilities than we do.
Due to our weaker competitive position, we may have greater difficulty in
hiring and retaining qualified personnel to conduct our planned exploration and
development activities, which could cause delays in our exploration programs.
There may be barriers in entering the market as we
will be a new supplier of industrial mineral products.
We will be a new supplier of industrial mineral
products. Accordingly, we will be competing with more established industrial
mineral companies that currently supply the ceramics and glass industries with
industry mineral products. Accordingly, the ceramics, glass and other
industries may be reluctant to terminate existing supply relationships and
retain our company as a supplier of industrial mineral products to them. In
the event that we are unable to be retained by these industries, our operations
may be negatively impacted.
Demand for our metakaolin products will be dependent
on funding for infrastructure projects.
Metakaolin is significantly more expensive than other
kaolin products, such as, fly ash. In the United States, the funding for
infrastructure projects is low. As a result, fly ash is commonly used for
infrastructure products due to its low cost. Accordingly, our future customers
may be unable or unwilling to purchase our metakaolin products unless funding
infrastructure projects is increased.
If we are
unable to hire and retain key personnel, we may not be able to implement our
business plan and our business will fail
Our success will
largely depend on our ability to hire highly qualified personnel with
experience in industrial mineral processing and sales. These individuals may be
in high demand and we may not be able to attract the staff we need. In
addition, we may not be able to afford the high salaries and fees demanded by
qualified personnel, or may lose such employees after they are hired.
Currently, we have not hired any key personnel. Our failure to hire key
personnel when needed could have a significant negative effect on our business.
Risks Related To The Ownership of Our Shares
There
has been a very limited public trading market for our securities in the United
States, and the market for our securities in the United States
may continue to be limited and be sporadic and highly volatile. Trading
in our shares on the TSX Venture Exchange has sometimes been sporadic.
There is currently a limited
public market for our common shares. Our common shares trade in Canada on the
TSX Venture Exchange and over the counter in the United States on the OTCQB
market place. We cannot assure you that an active market for our shares will be
established or maintained in the future. The OTCQB is not a national securities
exchange, and many companies have experienced limited liquidity when traded
through this quotation system. Trading in our shares on the TSX Venture
Exchange has sometimes been sporadic. Holders of our common shares may,
therefore, have difficulty selling their shares, should they decide to do so.
In addition, there can be no assurances that such markets will continue or that
any shares, which may be purchased, may be sold without incurring a loss. The
market price of our shares, from time to time, may not necessarily bear any
relationship to our book value, assets, past operating results, financial
condition or any other established criteria of value, and may not be indicative
of the market price for the shares in the future.
8
In addition, the market price
of our common shares may be volatile, which could cause the value of our common
shares to decline. Securities markets experience significant price and volume
fluctuations. This market volatility, as well as general economic conditions,
could cause the market price of our common shares to fluctuate substantially.
Many factors that are beyond our control may significantly affect the market
price of our shares. These factors include:
|
(a)
|
price and volume fluctuations in stock markets;
|
|
(b)
|
changes in our operating results;
|
|
(c)
|
any increase in losses from levels expected by securities analysts;
|
|
(d)
|
changes in regulatory policies or law;
|
|
(e)
|
operating performance of companies comparable to us; and
|
|
(f)
|
general economic trends and other external factors.
|
Even if an active market for
our common shares is established, stockholders may have to sell their shares at
prices substantially lower than the price they paid for the shares or might
otherwise receive than if an active public market existed.
We will likely conduct further offerings of our equity
securities in the future, in which case your proportionate interest may become
diluted.
Since our inception, we have relied on such sales of
our common shares to fund our operations. We will likely be required to
conduct additional equity offerings in the future to finance our current
projects or to finance subsequent projects that we decide to undertake. If
common shares are issued in return for additional funds, the price per share
could be lower than that paid by our current shareholders. We anticipate
continuing to rely on equity sales of our common shares in order to fund our
business operations. If we issue additional shares, your percentage interest in
us could become diluted.
If we are, or were, a U.S. real
property holding corporation, non-U.S. holders of our common shares or other
security convertible into our common shares could be subject to U.S. federal
income tax on the gain from the sale, exchange or other disposition of such
security.
If we are or ever have been a
U.S. real property holding corporation (a “USRPHC”) under the Foreign
Investment Real Property Tax Act of 1980, as amended (“FIRPTA”) and applicable
United States Treasury regulations (collectively, the “FIRPTA Rules”), unless
an exception applies, certain non-U.S. investors in our common shares (or
options or warrants for our common shares) would be subject to U.S. federal
income tax on the gain from the sale, exchange or other disposition of our
common shares (or such options or warrants), and such non-U.S. investor would
be required to file a United States federal income tax return. In addition, the
purchaser of such common shares, option or warrant would be required to
withhold from the purchase price an amount equal to 10% of the purchase price
and remit such amount to the U.S. Internal Revenue Service.
We have not conducted a formal
analysis of whether we are or have ever been a USRPHC. However, we believe that
we may be a USRPHC. In general, under the FIRPTA Rules, a company is a USRPHC
if its interests in U.S. real property comprise at least 50% of the fair market
value of its assets. If we are or were a USRPHC, so long as our common shares are
“regularly traded on an established securities market” (as defined under the
FIRPTA Rules), a non-U.S. holder who, actually or constructively, holds or held
no more than 5% of our common shares not subject to U.S. federal income tax on
the gain from the sale, exchange or other disposition of our common shares
under FIRPTA. In addition, other interests in equity of a USRPHC may qualify
for this exception if, on the date such interest was acquired, such interests
had a fair market value no greater than the fair market value on that date of
5% of our common shares. Any of our common shares (or owners of options or
warrants for our common shares) that are non-U.S. persons should consult their
tax advisors to determine the consequences of investing in our common shares
(or options or warrants).
9
The recently
enacted JOBS Act will allow us to postpone the date by which we must comply
with certain laws and regulations and to reduce the amount of information
provided in reports filed with the SEC. We cannot be certain if the reduced
disclosure requirements applicable to “emerging growth companies” will make our
common shares less attractive to investors.
We are and we
will remain an "emerging growth company" until the earliest to occur
of (i) the last day of the fiscal year during which our total annual revenues
equal or exceed $1 billion (subject to adjustment for inflation), (ii) the last
day of the fiscal year following the fifth anniversary of our initial public
offering, (iii) the date on which we have, during the previous three-year
period, issued more than $1 billion in non-convertible debt securities, or (iv)
the date on which we are deemed a "large accelerated filer" (with at
least $700 million in public float) under the Securities Exchange Act of 1933,
as amended (the “Exchange Act”). For so long as we remain an "emerging
growth company" as defined in the JOBS Act, we may take advantage of
certain exemptions from various reporting requirements that are applicable to
other public companies that are not "emerging growth companies" as
described in further detail in the risk factors below. We cannot predict if
investors will find our common shares less attractive because we will rely on
some or all of these exemptions. If some investors find our common shares less
attractive as a result, there may be a less active trading market for our common
shares and our stock price may be more volatile. If we avail ourselves of
certain exemptions from various reporting requirements, as is currently our
plan, our reduced disclosure may make it more difficult for investors and
securities analysts to evaluate us and may result in less investor confidence.
As an “emerging growth
company” we are permitted to adopt accounting standards within the same
timeframes as private companies. This may make it more difficult to compare
our financial statements to the financial statements of other public companies.
Pursuant to the JOBS Act,
as an “emerging growth company”, we are permitted to adopt new or revised
accounting standards issued by the Public Company Accounting Oversight Board
(PCAOB) on the same date as private companies rather than other public
companies. The JOBS Act permits us to “opt out” of these extended transition
periods, however we have not elected to opt out of these rules. This may make
it more difficult to compare of our financial statements with other public
companies that are not “emerging growth companies”.
The JOBS Act
allows us to postpone the date by which we must comply with certain laws and
regulations intended to protect investors and to reduce the amount of
information provided in reports filed with the SEC.
We meet the
definition of an “emerging growth company” and so long as we continue to
qualify as an “emerging growth company,” we will, among other things:
-
be exempt from the
provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its
independent registered public accounting firm provide an attestation report on
the effectiveness of its internal control over financial reporting;
-
be exempt from the
"say on pay” provisions (requiring a non-binding shareholder vote to approve
compensation of certain executive officers) and the "say on golden
parachute” provisions (requiring a non-binding shareholder vote to approve
golden parachute arrangements for certain executive officers in connection with
mergers and certain other business combinations) of The Dodd–Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act) and certain disclosure
requirements of the Dodd-Frank Act relating to compensation of Chief Executive
Officers;
-
be permitted to omit
the detailed compensation discussion and analysis from proxy statements and
reports filed under the Exchange Act, as amended and instead provide a reduced
level of disclosure concerning executive compensation; and
-
be exempt from any
rules that may be adopted by the PCAOB requiring mandatory audit firm rotation
or a supplement to the auditor’s report on the financial statements.
We currently
intend to take advantage of all of the reduced regulatory and reporting
requirements that will be available to it so long as it qualifies as an
“emerging growth company”. We have elected not to opt out of the extension of
time to comply with new or revised financial accounting standards available
under Section 102(b)(1) of the JOBS Act. Among other things, this means that
our independent registered public accounting firm will not be required to
provide an attestation report on the effectiveness of our internal control over
financial reporting so long as we qualify as an “emerging growth company”,
which may increase the risk that weaknesses or deficiencies in the internal
control over financial reporting go undetected. Likewise, so long as we qualify
as an “emerging growth company”, we may elect not to provide certain
information, including certain financial information and certain information
regarding compensation of executive officers, which would otherwise have been
required to provide in filings with the SEC, which may make it more difficult
for investors and securities analysts to evaluate us. As a result, investor
confidence in our company and the market price of our common shares may be
adversely affected.
10
Notwithstanding
the above, we are also currently a “smaller reporting company”, meaning that we
are not an investment company, an asset-backed issuer, or a majority-owned
subsidiary of a parent company that is not a smaller reporting company and have
a public float of less than $75 million and annual revenues of less than $50
million during the most recently completed fiscal year. In the event that we
are still considered a “smaller reporting company”, at such time we cease being
an “emerging growth company”, the disclosure we will be required to provide in
our SEC filings will increase, but will still be less than it would be if we
were not considered either an “emerging growth company” or a “smaller reporting
company”. Specifically, similar to “emerging growth companies”, “smaller
reporting companies” are able to provide simplified executive compensation
disclosures in their filings; are exempt from the provisions of Section 404(b)
of the Sarbanes-Oxley Act requiring that independent registered public
accounting firms provide an attestation report on the effectiveness of internal
control over financial reporting; are not required to conduct say-on-pay and
frequency votes until annual meetings occurring on or after January 21, 2013;
and have certain other decreased disclosure obligations in their SEC filings,
including, among other things, only being required to provide two years of
audited financial statements in annual reports. Decreased disclosures in our
SEC filings due to our status as an “emerging growth company” or “smaller
reporting company” may make it harder for investors to analyze the Company’s
results of operations and financial prospects.
Our securities are considered a penny stock.
Because our securities are considered a penny stock,
shareholders will be more limited in their ability to sell their shares. The
SEC has adopted rules that regulate broker-dealer practices in connection with
transactions in penny stocks. Penny stocks are generally equity securities with
a price of less than $5.00, other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or quotation system. Because our
securities constitute “penny stocks” within the meaning of the rules, the rules
apply to us and to our securities. The rules may further affect the ability of
owners of shares to sell our securities in any market that might develop for
them. As long as the trading price of our common shares is less than $5.00 per
share, the common shares will be subject to Rule 15g-9 under the Exchange Act.
The penny stock rules require a broker-dealer, prior to a transaction in a
penny stock, to deliver a standardized risk disclosure document prepared by the
SEC, that:
-
contains a description of the nature and level of
risk in the market for penny stocks in both public offerings and secondary
trading;
-
contains a description of the broker’s or
dealer’s duties to the customer and of the rights and remedies available
to the customer with respect to a violation to such duties or other
requirements of securities laws;
-
contains a brief, clear, narrative description of
a dealer market, including bid and ask prices for penny stocks and the
significance of the spread between the bid and ask price;
-
contains a toll-free telephone number for
inquiries on disciplinary actions;
-
defines significant terms in the disclosure
document or in the conduct of trading in penny stocks; and
-
contains such other information and is in such
form, including language, type, size and format, as the SEC shall require
by rule or regulation.
11
The broker-dealer also must provide, prior to
effecting any transaction in a penny stock, the customer with: (a) bid and
offer quotations for the penny stock; (b) the compensation of the broker-dealer
and its salesperson in the transaction; (c) the number of shares to which such
bid and ask prices apply, or other comparable information relating to the depth
and liquidity of the market for such shares; and (d) a monthly account
statements showing the market value of each penny stock held in the customer’s
account. In addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from those rules; the broker-dealer must
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser’s written acknowledgment
of the receipt of a risk disclosure statement, a written agreement to
transactions involving penny stocks, and a signed and dated copy of a written
suitably statement. These disclosure requirements may have the effect of
reducing the trading activity in the secondary market for our shares.
FOR ALL OF THE AFORESAID REASONS AND OTHERS SET-FORTH AND NOT SET-FORTH
HEREIN, AN INVESTMENT IN OUR SECURITIES INVOLVES A CERTAIN DEGREE OF RISK. ANY
PERSON CONSIDERING TO INVEST IN OUR SECURITIES SHOULD BE AWARE OF THESE AND
OTHER FACTORS SET-FORTH IN THIS REPORT AND IN THE OTHER REPORTS AND DOCUMENTS
THAT WE FILE FROM TIME TO TIME WITH THE SEC AND SHOULD CONSULT WITH HIS/HER
LEGAL, TAX AND FINANCIAL ADVISORS PRIOR TO MAKING AN INVESTMENT IN OUR SECURITIES.
AN INVESTMENT IN OUR SECURITIES SHOULD ONLY BE ACQUIRED BY PERSONS WHO CAN
AFFORD TO LOSE THEIR TOTAL INVESTMENT.
DESCRIPTION OF
SECURITIES
General
Our authorized share capital
consists of
an unlimited number of
common shares,
without par value, of which 89,484,792 are issued and outstanding.
Common
Shares
The following is a summary of the material rights and
restrictions associated with our common shares. This description does not
purport to be a complete description of all of the rights of our shareholders
and is subject to, and qualified in its entirety by, the provisions of our most
current Articles and Bylaws, which are included as exhibits to the Registration
Statement of which this prospectus is a part.
The holders of our common shares are
entitled to receive notice of and to attend and vote at all meetings of the
shareholders and each common share shall confer the right to one vote in person
or by proxy at all meetings of the shareholders. One shareholder, whether
present in person or by proxy, constitute a quorum for all meetings of the
shareholders. Except as otherwise provided by the Canada Business
Corporations Act, our Articles or our Bylaws, all action taken by the holders
of a majority of the votes cast, excluding abstentions, at any meeting at which
a quorum is present shall be valid and binding. In the case of certain
fundamental changes such as liquidation, amalgamation or changes to our
Articles, a “special resolution”, being a vote approved by two-thirds of the
votes cast at a shareholders’ meeting, is required. Where a separate vote
of a class, classes or series is required, a vote of a majority, for ordinary
matters, or special majority, for fundamental changes, is required.
Currently, our common shares are the only authorized class of shares in our
capital stock. Our Articles do not provide for cumulative voting in the
election of directors.
Holders of our common
shares are, subject to the prior rights, if any, of any other class of shares,
are entitled to receive such dividends in any financial year as the board of
directors may determine by resolution, provided that dividends may not be
declared or paid if there would be reasonable grounds for believe that (i) we
would be unable to pay or liabilities as they become due after payment of the
dividend, or (ii) if the realizable value of our assets would be less than the
total of all of our liabilities and the stated capital of all classes of our
shares. In the event of our liquidation, dissolution or winding-up, whether
voluntary or involuntary, the holders of our common shares are entitled to receive,
subject to the prior rights, if any, of the holders of any other class of
shares, our remaining property and assets. The common shares do not carry
any pre-emptive, subscription, redemption or conversion rights, nor do they
contain any sinking fund provisions.
Share Purchase Warrants
The following is
a brief summary of certain terms and conditions of the Warrants to be issued in
connection with this offering and are subject in all respects to the provisions
contained in the Warrants.
Form.
The Warrants will be issued in certified form
to the investors. You should review a copy of the form of warrant, which is
filed as an exhibit to the registration statement of which this prospectus
forms a part, for a complete description of the terms and conditions applicable
to the Warrants.
Exercisability.
The Warrants are
exercisable at any time after their original issuance and at any time up to the
date that is two years after their original issuance. The Warrants will be
exercisable, at the option of each holder, in whole or in part by delivering to
us a duly executed exercise notice and, at any time a registration statement
registering the issuance of the common shares (the “Warrant Shares”) underlying
the Warrants under the Securities Act is effective and available for the
issuance of such shares, or an exemption from registration under the Securities
Act is available for the issuance of such shares, by payment in full in
immediately available funds for the number of Warrant Shares purchased upon
such exercise. We will
have the right to accelerate the expiry date of the Warrants if, at any time,
the volume weighted average price exceeds $♦ over any 10 day trading period. In the event of acceleration, the
expiry date will be accelerated to a date that is 30 days after we issue a news
release announcing that it has elected to exercise this acceleration right. If a registration statement registering the
issuance of the Warrant Shares underlying the Warrants under the Securities Act
is not effective or available and an exemption from registration under the
Securities Act is not available for the issuance of such Warrant Shares, the
holder may, in its sole discretion, elect to exercise the Warrant through a
cashless exercise, in which case the holder would receive upon such exercise
the net number of Warrant Shares determined according to the formula set forth
in the Warrant. No fractional Warrant Shares will be issued in connection with
the exercise of a Warrant. In lieu of fractional shares, we will pay the holder
an amount in cash equal to the fractional amount multiplied by the exercise price
or round up to the next whole share.
16
Exercise Price.
The exercise price per Warrant
upon is expected to be $♦ per share, which is equal to ♦%
of public offering price of our common shares. The exercise price is subject to
appropriate adjustment in the event of certain stock dividends and distributions,
stock splits, stock combinations, reclassifications or similar events affecting
our common shares and also upon any distributions of assets, including cash,
stock or other property to our shareholders.
Transferability.
Subject to applicable
laws, the Warrants may be offered for sale, sold, transferred or assigned without
our consent.
Fundamental
Transactions.
In the event
of a fundamental transaction, as described in the Warrants and generally including
any reorganization, recapitalization or reclassification of our common stock,
the sale, transfer or other disposition of all or substantially all of our
properties or assets, our consolidation or merger with or into another person,
the acquisition of more than 50% of our outstanding common shares, or any
person or group becoming the beneficial owner of 50% of the voting power
represented by our outstanding common shares, the holders of the Warrants will
be entitled to receive upon exercise of the Warrants the kind and amount of
securities, cash or other property that the holders would have received had
they exercised the Warrants immediately prior to such fundamental transaction.
No exchange
listing
. There is no
established public trading market for the Warrants nor do we intend to apply to
list the Warrants on any securities exchange.
Rights as a
Shareholder.
Except as
otherwise provided in the warrants or by virtue of such holder’s ownership of
our common shares, the holder of a Warrant does not have the rights or
privileges of a holder of our common shares, including any voting rights, until
the holder exercises the Warrant.
17
OUR BUSINESS
General
We were incorporated under the laws of British
Columbia, Canada in 1984. In 2004, we changed our corporate jurisdiction from a
British Columbia company to a Canadian corporation. In December 2011, we
amended our articles to change our name from “i-minerals inc.” to “I-Minerals
Inc.”
We are engaged in the development of our Helmer-Bovill
industrial minerals property (the “Helmer-Bovill Property”). The Helmer-Bovill
Property, in which we hold a 100% interest, is comprised of 11 mineral leases
totaling 5,140.64 acres located approximately 6 miles northwest of Bovill,
Latah County, Idaho.
We acquired the Helmer-Bovill Property from Idaho
Industrial Minerals (“IIM”) pursuant to an Assignment Agreement with Contingent
Right of Reverter (the “IIM Agreement”) dated August 12, 2002, as amended
August 10, 2005, August 10, 2008 and January 21, 2010, between I-Minerals USA
(formerly Alchemy Kaolin Corporation), our wholly owned subsidiary, and IIM.
Under the terms of the IIM Agreement, we issued a total of 1,800,000 common
shares to IIM.
Our principal executive office is located at Suite
880, 580 Hornby Street, Vancouver, British Columbia, Canada and our telephone
number is (877) 303-6573.
To date, we have not earned significant revenues from the
operation of our mineral properties.
Accordingly, we are dependent on debt and equity financing as its primary
source of operating working capital. Our capital resources are largely
determined by the strength of the junior resource markets and by the status of our
projects in relation to these markets, and its ability to compete for investor
support of its projects.
Our Principal Projects
Our activities at the Helmer-Bovill Property are
focused on developing the Bovill Kaolin Project and the WBL Tailings Project.
The Bovill Kaolin Project
Our lead project, the Bovill Kaolin Project, is a
strategically located long term resource of high purity quartz, potassium
feldspar (“K-spar”), halloysite and kaolinite formed through weathering of a
border phase of the Idaho Batholith causing all minerals to be contained within
a fine white clay-sand mixture referred to as “primary clay.” The Bovill Kaolin Project is located within 3 miles of state
highways with electricity and natural gas already at the property boundary.
Since 2010, our exploration work has focused diamond
drilling on the Bovill Kaolin Project. To date, a total of 258 diamond drill
holes have been drilled totaling 28,251 feet. As a result of these drill
campaigns, four deposits have been identified: Kelly’s Hump, Kelly’s Hump
South, Middle Ridge and WBL.
In June 2014, we completed an updated pre-feasibility
study on the Bovill Kaolin Project (the “2014 PFS”) and on March 8, 2016, we
announced the economic results of our full feasibility study (the “2016 FS”),
which included the following highlights:
-
Updated Measured and Indicated
Resource Estimate
-
Measured Resources of 5.7 million
tons containing 76.5% quartz/K-spar sand, 12.3% Kaolinite and 4.0% Halloysite.
-
Indicated Resources of 15.5
million tons containing 57.0% quartz/K-spar sand, 15.5% Kaolinite and 2.8%
Halloysite.
-
667,000
tons of contained halloysite, 3,119,000 tons of contained kaolinite and
13,235,000 tons of contained quartz/K-spar.
18
-
Updated Mineral Reserves. All
figures are in thousands of tons.
Reserve
|
Proven
|
Probable
|
Total P&P
|
Tons (1000s)
|
4,155
|
4,548
|
8,702
|
Halloysite %
|
4.8
|
4.0
|
4.4
|
Halloysite Tons (1000s)
|
200
|
182
|
382
|
Kaolinite %
|
11.1
|
12.5
|
11.8
|
Kaolinite Tons (1000s)
|
460
|
568
|
1,028
|
Sand %
|
77.8
|
76.8
|
77.3
|
Sand Tons (1000s)
|
3,234
|
3,491
|
6,725
|
|
Note that values presented here have been rounded to reflect the level of accuracy.
Proven and Probable Mineral Reserves are presented using a $57.00 NSR cutoff grade.
|
-
Economic Analysis
-
US$386 million Pre-Tax NPV; US$249.8
million After Tax NPV using a 6% discount rate.
-
31.6% Pre-Tax IRR; 25.8% After Tax
IRR.
-
Initial Capital Cost of $108.3
million and Total Life of Mine capital costs $120.0 million.
-
Life of Mine in excess of 25 years
with a stripping ratio of 0.54:1 (waste:ore).
-
3 year estimated after tax
payback.
The full National Instrument
(“NI”) 43-101 report was filed on www.sedar.com
on April 20, 2016 and is available on the Company’s website. Going forward our
focus is to complete the detailed engineering and commence efforts to raise the
capital necessary to build the mine.
In May 2017, the Idaho Department of Lands (“IDL”)
accepted our operation and reclamation plan. Together with a water rights permit
from the Idaho Department of Water Resources, we are able to proceed with
development and construction of the mine, subject to obtaining sufficient
financing.
See “Properties – Helmer-Bovill Property – 2016
Feasibility Study”.
The WBL Tailings Project
We also plan to continue limited seasonal mining
operations at the WBL Tailings Project. The WBL Tailings Project is
feldspathic sands deposited as tailings from clay mining operations during the
period from 1961 to 1974. In September 2012, we received approval of our Mine
Plan of Operations (“MPO”) from the Idaho Department of Lands. The MPO allows
us to mine up to 50,000 tons per annum of feldspathic sands from June to
October for a period of 10 years. From 2013 through 2015 approximately 5,000
tons of tailings was extracted and sold to a local cement company and a local
contractor.
Three Year History
During the last three fiscal years, our operations
have focused on completing an extensive diamond drill program on the Bovill
Kaolin Project, acquiring a 100% interest in the Helmer-Bovill Property,
completion of the 2016 FS and initial submittal of the mine permit application
to the State of Idaho.
Drill Programs at
Bovill Kaolin Project
We have completed two extensive diamond drill programs
on the Helmer-Bovill Property for the Bovill Kaolin Project totaling over
25,000 feet, most recently in 2013 where 167 diamond drill holes totaling 17,811
feet were completed at the Middle Ridge, Kelly’s Hump and Kelly’s Hump South
deposits. These programs allowed us to better define our four key deposits at
the Bovill Kaolin Project and complete both our 2014 PFS and 2016 FS. See
“Properties – Helmer-Bovill Property”.
19
WBL Tailings Project
In September 2012, we received approval of our MPO
from the Idaho Department of Lands. The MPO allows us to mine up to 50,000
tons per annum, or 500,000 tons total production from feldspathic sands from
June to October for a period of 10 years. Shortly thereafter, we completed our
first production and inaugural sales feldspathic sand from the WBL Tailings
Project.
In November 2013, we entered into an agreement with
Pre-Mix, Inc. of Pullman Washington (“Pre-Mix”) pursuant to which we sold 3,000
tons of sand tailings to Pre-Mix.
On April 28, 2014, we entered into a new contract with
Pre-Mix for the sale of up to 30,000 tons per annum of screened K-spar / quartz
sand. Under the terms of the contract, Pre-Mix is solely responsible for the
operating costs to process and remove the K-spar / quartz sand. The term of
the contract is until December 31, 2018 and may be extended for a further two
years through the mutual consent of the parties.
During 2014 and 2015 approximately 5,000 tons of sand
tailings from our WBL Tailings Project were sold generating limited revenues to
date due to associated road improvement costs.
Acquisition of Helmer-Bovill Property
In January 2013, we acquired a 100% interest in our
Helmer-Bovill Property. In order to acquire the Helmer-Bovill Property, we
issued a total of 1,800,000 common shares, of which 1,300,000 common shares
were issued as the final payment to IIM.
On December 2, 2015,
we settled all lawsuits relating to the Helmer-Bovill Property pursuant to the
terms of Global Settlement and Absolute Release Agreement (the “Settlement
Agreement”) dated October 29, 2015 among us, Idaho Industrial Minerals, LLC
(“IIM”), Hoodoo Resources, LLC (“Hoodoo”), the principal of Hoodoo, Robert
Lemke (“Lemke”), Brent Thomson (“Thomson”), The Thomson Family Trust (the
“Thomson Trust”) (IIM, Hoodoo, Lemke, Thomson and the Thomson Trust
collectively referred to as the “Plaintiffs”), the Estate of Philip Nisbet (the
“Nisbet Estate”), Allen Ball (“Ball”), the Allen Ball and Connie Ball Family
Trust (the “Ball Trust”), Ball Ventures, LLC (“BV”) and BVNR Natural Resources
LLC (“BVNR”) (Ball, the Ball Trust, BV and BVNR collectively referred to as the
“Ball Entities”) and Northwest Kaolin, Inc. (“NWK”). Under the terms of the
Settlement Agreement, we paid IIM the aggregate sum of $100,000 (the
“I-Minerals Payment”) for the release of any and all claims made against us
under the lawsuits by the Ball Entities and the Plaintiffs. In addition, IIM
and NWK have expressly acknowledged and agreed that, upon receipt of the
I-Minerals Payment, we have fulfilled all of our duties and obligations under
the terms of the IIM Agreement relating to our Helmer-Bovill Property, and that
any and all rights and claims of IIM and NWK to the mineral leases making up
the Helmer-Bovill Property will be released and extinguished.
Receipt of Permits of
Bovill Kaolin Project
In May 2017, the
Idaho Department of Lands (the “IDL”) accepted our Operation and Reclamation
Plan (“ORP”). The approval of the ORP, together with the recently received
water rights permit from the Idaho Department of Water Resources (“IDWR”)
positions us to be able to begin construction, subject to financing and certain
bonding requirements.
The ORP was approved subject to standard terms
including:
1.
|
All refuse, chemical and petroleum products to be stored in designated location at least 100 feet from any surface water.
|
2.
|
State water quality standards to be maintained at all times during the life of the operation.
|
3.
|
Erosions and non-point source pollution shall be minimized by careful design and implementing Best Management practices.
|
4.
|
A reclamation bond of approximately $3,000,000 being submitted to, approved by and maintained by the IDL prior to conducting any mining activities;
|
20
5.
|
Obtaining all other necessary permits and approvals from state and federal authorities (e.g. Storm Water Pollution Prevention Plan; air quality, consultation with fisheries and US Army Corp of Engineers 404 Permit and Stream Channel Alteration Permits) as required for each production process.
|
Industrial Minerals
In carrying out our activities at the Bovill Kaolin
Project, we are focused on the development and, based upon the positive results
of the 2016 FS, raising sufficient capital to build the mine and commence the
extraction of the industrial minerals set forth below.
Kaolin
Kaolin
is a raw material used in the ceramic industry, especially in fine porcelains.
Large quantities of kaolin are used in paper coating, filler, paint, plastics,
fiberglass, catalysts, and other specialty applications. It is also used as a
key ingredient in natural pesticides that are suitable for organic farming
applications.
When kaolin is heated to about 850°,
it is transformed into a dehydrated phase called "metakaolin."
Metakaolin is considered a premium material as it adds strength and durability
to cement based products. When metakaolin is added to cement-based mortars, it
causes an aggressive reaction with calcium hydroxide (lime), turning the lime
into a cementitious material yielding cement with enhanced performance
characteristics including increased strength; reduced permeability; greater
durability; effective control of efflorescence; and control of degradation
caused by Alkali-Silica Reaction. A bridge deck in a northern climate where it
is subject to the wear and tear associated with plowing and salting is a prime
metakaolin application. We are continuing long term testing process of several
metakaolin products produced from the Bovill Kaolin deposits and have received ASTM
C-618 certification for two of our products indicating the Bovill Metakaolin is
an accredited pozzolan that meets all strength and water consumption
requirements. ASTM C-618 certification is a prerequisite for sales into the
cement industry. Additional testing is focused on optimizing the fineness of
the grind or particle size to create the metakaolin product that provides the
greatest strength while meeting the water requirement criteria.
Our target market for metakaolin is
the North American concrete and infrastructure industry. Premium white
metakaolin is currently priced at $500 per ton in the Pacific Northwest due to
the transportation costs to bring it from the southeastern USA. We are
targeting applications where color is not as important and pricing used in the 2016
FS is $231 per ton. The 2016 FS forecasts average annual production of about
40,000 tons of Bovill Metakaolin and we have non-binding letters of interest
from various cement and construction companies for tonnage well in excess of
this amount.
Halloysite
We plan to sell Halloysite on a worldwide
basis. Halloysite is chemically identical to kaolin. When water is added to
the kaolin chemistry its plate like structure takes on a tubular shape,
identified as halloysite. Much of the value of halloysite is generated by its
tubular shape which can only be seen through very powerful microscopes and are
commonly referred to as halloysite
nanotubes and abbreviated as HNTs.
Historically, the primary use of
halloysite has been in the manufacture of porcelain, bone china, and fine china
where the combination of low iron and titanium content together with the hollow
tubular shape of the mineral grains yields ceramic bodies with exceptional
whiteness and translucency. However, the HNTs microscopic tubular shape is
rapidly finding uses outside of the ceramics industry. Applications in
commercial production would include use as a suspension agent in glaze
preparations as well as in filters and inkjets, and as an ingredient in special
paints applied to ships to prevent barnacles from growing on the ships’ hull. HNTs
are also being increasingly used in plastic and polymer applications where the
addition of HNTs increases strength while reducing the weight of these
compounds. Perhaps the most exciting uses for HNTs are in life science
applications where the inside of the hollow tube can be filled with active
ingredients and as the clay tube erodes the active ingredients are released.
Used in this manner the HNTs are a delivery vector made of natural materials.
The largest supplier of commercial halloysite product
available at present is located in Maturi Bay, New Zealand. There is limited
production in Poland, Turkey and China, and a development stage project in Utah
with negligible commercial production. The largest halloysite supplier in the
ceramics industry sells halloysite at a price from $135 to $3,000 per ton. The
majority of imported halloysite in the United States for the ceramics industry
is sold at a price of approximately $700 per ton.
21
Our halloysite is differentiated from those known halloysite
deposits due to the high aspect ratio (the ratio of the length of the tube to
the diameter of the tube) and by minimal levels of trace elements such as lead.
We are not targeting ceramic applications with our halloysite and instead
focusing on the life science and plastic and polymer applications. Third party
research has indicated we have arguably the best halloysite for life science
applications as the New Zealand deposit contains about 10% Cristobalite – a
silica oxide that has been categorized as a carcinogen and the other deposits
capable of meaningful commercial production have poorer aspect ratios and
higher heavy metal / trace element content.
We are planning on producing two halloysite products.
The first branded HalloPure® will be about 70% halloysite
and 30% kaolinite and will target the plastic and polymer and certain
filtration applications. The second is branded ULTRA Hallopure® and will be in excess of 90% halloysite and less than 10% kaolinite.
Both are considered high value products. In the 2016 FS, halloysite production
varied from about 10,000 tons to 15,000 tons per year, split equally between
the two halloysite products. HalloPure® was priced at about
$700 per ton and ULTRA Hallopure® at about $1,400 per
ton.
To date we have received interest in our HNTs from a
number of companies in a wide range of industries including: personal care
products, nano-composites, fire retardants, biocides, plastic fillers, animal
feed, paint, and ceramics. Most of these companies have received samples of
our products produced at recent pilot plants with some companies receiving up
to 50 kg for bench scale product testing. We have also provided samples free
of charge to several universities to help with the development of other new HNT
applications. Currently we have non-binding expressions of interest
approximately equal to forecast production.
Quartz
Quartz (SiO
2
or silicon
dioxide) is crystalline silica, the second most common mineral in the crust of
the earth. It is known for its hardness and is well known for its use in glass.
However, different types of glass require different SiO
2
purity levels with some types of glass
requiring the SiO
2
content
in quartz to have purity levels in the 97-99% range to be suitable. Although
silicon dioxide is abundant, not all deposits are chemically identical, with
the SiO
2
purity and the levels of various trace element impurities
varying across different deposits. Contamination of quartz can be from mineral
and fluid inclusions and non-silica elements entering atomic sites usually
occupied by silicon and oxygen. Our quartz operations at the Bovill Kaolin
Project will focus on two levels of purity in excess of 99.8% SiO
2
and
is prepared to introduce a third product as market conditions warrant.
We have branded the quartz products
TrueQ®. The least pure product is TrueQ®-1 where the “1” indicates the material
has been processed once through flotation. The high purity product is TrueQ®-3 where the “3” indicates the material
has been floated three times to remove the maximum amount of impurities
possible. Bench scale production at the recent pilot plant indicates the TrueQ®-1 will grade 99.86% SiO
2
or
higher and the True®Q-3 99.97% SiO
2
or higher. The TrueQ®-1 will be offered in
three different grinds or particle size: 50 mesh, 200 mesh and 325 mesh.
“Mesh” references the number of openings in a 1 inch by 1 inch screen. As
additional work and expense is required to further grind the basic 50 mesh
product into finer grained products (200 or 325 mesh products), the finer grind
products sell at higher prices than the basic 50 mesh product.
The 2016 FS foresees total quartz
production (TrueQ®-1 and TrueQ®-3) of approximately 108,000 tons per
year. The higher value TrueQ®-3 markets will be harder to enter due to more
stringent testing and competition. Accordingly, the 2016 FS does not foresee
reaching full TrueQ®-3
production capacity until the third year of production with a significant
discount offered to gain business in the first year. Pricing for the True Q1
ranges from $100 to $350 per ton depending on the fineness of grind (particle
size) together with the customer’s volume and delivery method. Once markets
for the TrueQ®-3 have been
established (2 year delay) the 2016 FS contemplates a price of approximately
$600 per ton. Currently we have non-binding expressions of interest equal to
two times production capacity from producers of paint, solar glass, optical
glass, art glass, glass bulbs, and liquid crystal display (“LCD”) glass in North
American and Asia.
22
Potassium-Feldspar (“K-spar”)
K-spar is primarily used in ceramic bodies and
glazes. Our latest pilot plant test to produce K-spar returned grades in
excess of 14% K
2
O with low iron and high alumina. A high quality
K-spar product has high K
2
O, high alumina and low iron. Iron tends
to cause a darkening of the glaze when the ceramics are heated to high
temperatures in a kiln. The quality of the K-spar produced in the pilot plant
exceeds virtually all other commercially available K-spar products. The North
American market is currently in short supply and the sole producer is offering
a product of 9.5% - 10.0% K
2
O and about twice the iron (Fe) content
of our K-spar. The shortage is driven by the largest producer in the United
States shut down production at its Georgia operations in December 2014 when it
ran out of reserves after 57 years of production. This company is attempting
to service the North American market with a more expensive European K-spar
product. The ceramics industry has extensively tested our K-spar product and
it has been favorably written up in trade publications. Interest in the K-spar
product that will be marketed under the brand name Fortispar® is very strong.
Similar to quartz, we will offer our Fortispar® in three grinds or particle sizes; a basic 30 mesh product as well as
200 and 325 mesh fine grind products. Fortispar® will be sold
primarily into K-spar North American ceramics and glass industries. We also
plan to focus on producers of high clarity glass,
ceramics, sanitary ware, tableware, and paint. Industrial and marine paint
manufacturers also use an ultra-fine grind variety of feldspar. Pricing
of our Fortispar® product in the 2016 FS ranged from $217 per ton for
the basic 30 mesh product up to $400 per ton for small quantiles of the fine
ground product. We currently have non-binding expressions of interest in our
K-spar product in excess of our production capacity.
Competition
We compete with other mineral resource exploration and
development companies for financing. Many of the mineral resource exploration
and development companies with whom we compete have greater financial and
technical resources than we do. Accordingly, these competitors may be able to
spend greater amounts on acquisitions of mineral properties of merit, on
exploration of their mineral properties and on development of their mineral
properties. In addition, they may be able to afford greater geological
expertise in the targeting and exploration of mineral properties. This
competition could result in competitors having mineral properties of greater
quality and interest to prospective investors who may finance additional
exploration and development. This competition could adversely impact our
ability to finance further exploration and to achieve the financing necessary
for us to develop our mineral properties.
Government Regulations
Mining operations and exploration activities are
subject to various national, state, and local laws and regulations in the
United States, which govern prospecting, development, mining, production,
exports, taxes, labor standards, occupational health, waste disposal,
protection of the environment, mine safety, hazardous substances and other
matters. We will obtain the licenses, permits or other authorizations currently
required to conduct our exploration program. We believe that we are in
compliance in all material respects with applicable mining, health, safety and
environmental statutes and the regulations passed thereunder in Idaho and the
United States.
In Idaho, our exploration activities are regulated by
the Idaho Department of Lands (“IDL”) pursuant to the Idaho Rules Governing
Exploration Surface Mining and Closure of Cyanidation Facilities pursuant to
the Idaho Administrative Procedure Act. In order to carry out surface
exploration and drilling activities, a company is required to file a
Notification of Exploration with the IDL. In 2000, we filed our original
Notification of Exploration with the IDL, which has been subsequently amended, for
our surface exploration and drilling programs on the Helmer-Bovill Property.
In order to carry out mining activities, we are
required to obtain a Mine Plan for Operations and Reclamation Plan (“ORP”). In
May 2017, we received an ORP for mining activities on the Bovill Kaolin
Project. This ORP permits us to mine Bovill Kaolin for a period of 26 years. In
2012, we received an ORP for the extraction of sand tailings on the WBL
Tailings Project. The ORP permits us to mine the sand tailings between May to
October for a period of 10 years (2012 – 2022).
All leases are subject to rental fees of
US$1.00 per acre each year and a production royalty of 5.0% based on gross
proceeds. The production royalty is prepaid at a rate of US$500 per lease for
the first five years and increases to US$1,000 per lease for the second five
years of the lease.
23
Mining operations are also regulated by Mine and
Safety Health Administration (“MSHA”). MSHA inspectors will periodically visit
projects to monitor health and safety for the workers, and to inspect equipment
and installations for code requirements. Although we are not engaged in mining
operations, we require all of our workers to have completed safety training
courses when working on our project.
Other regulatory requirements monitor the following:
(a)
|
Explosives and explosives handling.
|
(b)
|
Use and occupancy of site structures associated with mining.
|
(c)
|
Hazardous materials and waste disposal.
|
(d)
|
State Historic site preservation.
|
(e)
|
Archaeological and paleontological finds associated with mining.
|
We believe that we are in compliance with all laws and
plans to continue to comply with the laws in the future. We believe that
compliance with the laws will not adversely affect its business operations.
There is however no assurance that any change in government regulation in the
future will not adversely affect our business operations.
Environmental
Liability
We will have to sustain the cost of reclamation and
environmental remediation for all exploration and development work undertaken.
Both reclamation and environmental remediation refer to putting disturbed
ground back as close to its original state as possible. Other potential
pollution or damage must be cleaned up and renewed along standard guidelines
outlined in the usual permits. Reclamation is the process of bringing the land
back to its natural state after completion of exploration activities.
Environmental remediation refers to the physical activity of taking steps to
remediate, or remedy, any environmental damage caused. The amount of these
costs is not known at this time as we do not know the extent of the exploration
program that will be undertaken beyond completion of the recommended work
program. Because there is presently no information on the size, tenor, or quality
of any resource or reserve at this time, it is impossible to assess the impact
of any capital expenditures on earnings, our competitive position or us in the
event that a potentially economic deposit is discovered.
In the application for the MPO, costs are estimated
for reclamation after 12 months of work, which would include construction, and
for reclamation of the entire project and the IDL must agree to those costs.
Once the MPO is granted, I-Minerals must submit a surety or cash bond for the first
12 months to begin activities. After the first 12 months, the bond is increased
to the full costs estimated to clean up the entire project.
Permits and regulations will control all aspects of
the production program if the project continues to that stage. Examples of
regulatory requirements include:
|
(i)
|
Water discharge will have to meet drinking water standards;
|
|
(ii)
|
Dust generation will have to be minimal or otherwise re-mediated;
|
|
(iii)
|
Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation;
|
|
(iv)
|
An assessment of all material to be left on the surface will need to be environmentally benign;
|
|
(v)
|
Ground water will have to be monitored for any potential contaminants;
|
|
(vi)
|
The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and
|
|
(vii)
|
There will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species.
|
A reclamation bond of US$7,600 has been posted to
cover the current plan of operations. The Storm Water Pollution Prevention Plan
(SWPPP) has been publicly noted without objection as of November 16, 2012. The
Company does not view the current environmental liability to be material as of
April 30, 2017 as the amount is estimated to be below $5,000. Under our ORP,
we will be required to pay a reclamation bond of approximately $3,000,000.
24
Employees
As of the date of this registration statement, we have
five full time employees, four in Idaho plus our Chief Executive Officer in
Utah.
Research and Development
We have not incurred any research and development
expenditures since our inception.
Patents and Trademarks
As of June 16, 2017, The United States Patent and
Trademark Office issued the company Certificates of Registration for the
following marks: Fortispar® (K feldspar), TrueQ® (quartz), HalloPure® (standard halloysite), ULTRA
HalloPure® (high purity halloysite) and I-Minerals®.
PROPERTIES
We currently do not own
any real property. We currently sub lease on a month to month basis an office
space located at Suite 880,
580 Hornby Street, Vancouver, BC Canada V6C 3B6, consisting of approximately 256 square feet at a cost of CAD $1,500 per
month.
HELMER-BOVILL
PROPERTY
We own a 100% interest
in our lead mineral project called the Helmer-Bovill Property. Our activities
at the Helmer-Bovill Property are focused on developing the Bovill Kaolin
Project.
We acquired the Helmer-Bovill Property from Idaho
Industrial Minerals (“IIM”) pursuant to an Assignment Agreement with Contingent
Right of Reverter dated August 12, 2002, as amended August 10, 2005, August 10,
2008 and January 21, 2010 (as amended, the “IIM Agreement”), between I-Minerals
USA (formerly Alchemy Kaolin Corporation), our wholly owned subsidiary, and
IIM. Under the terms of the IIM Agreement, IIM retained a contingent right of
reverter with respect to the mineral lease applications (or the mineral leases
acquired thereby) underlying the Helmer-Bovill Property if we failed meet our
obligation to issue to IIM a total of 1,800,000 shares of our common stock, in
tranches, based upon the completion of certain deliverables, and subject to
such conditions as imposed by the TSX Venture Exchange. On January 22, 2013,
we delivered the final tranche of the shares issuable to IIM. As such, we
believe that the contingent right of reverter set out in the IIM Agreement has been
extinguished, and that we have fulfilled all of our obligations under the IIM
Agreement.
However, shortly after our delivery of the final
tranche of shares to IIM, two minority members of IIM attempted to derivatively
(and on behalf of IIM) reject our tender of shares. These minority members of
IIM claimed that the deliverables were not completed and the right of reverter
could be exercised. The majority member of IIM brought suit against the two
minority members claiming that no such derivative right exists, that the
minority members had no right or authority to reject the shares on behalf of
IIM, and that we had fully complied with the terms of the IIM. We were
brought into that lawsuit. Court-ordered mediation was held on May 28, 2015,
in the lawsuit filed against the Company by Hoodoo Resources, LLC, and the
Brent Thomson Family Trust (collectively, "the Plaintiffs"). The
mediation sought to resolve the Plaintiffs’ claims against the Company, as well
as the Company’s claims against the Plaintiffs.
Mediation was successful and the Plaintiffs and the
Company entered into an agreement in principle to settle the parties’ claims
against one another that was documented in a Binding Settlement Term Sheet. Thereafter, on December 2, 2015, we settled all lawsuits
relating to the Helmer-Bovill Property pursuant to the terms of the Settlement
Agreement. Under the terms of the Settlement Agreement, we paid IIM the
aggregate sum of $100,000 (the “I-Minerals Payment”) for the release of any and
all claims made against us under the lawsuits by the Ball Entities and the
Plaintiffs. In addition, IIM and NWK have expressly acknowledged and agreed
that, upon receipt of the I-Minerals Payment, we have fulfilled all of our
duties and obligations under the terms of the IIM Agreement relating to our
Helmer-Bovill Property, and that any and all rights and claims of IIM and NWK
to the mineral leases making up the Helmer-Bovill Property will be released and
extinguished. Refer to
“Legal
Proceedings”
below for further information.
25
The technical information appearing below concerning
the Helmer-Bovill Property is derived from the technical report titled Bovill Kaolin Project, Latah County, Idaho, USA, NI 43-101
Technical Report - Feasibility Study, Prepared For I-Minerals USA, Inc. with
contributing consultants GBM Engineers LLC, Mine Development Associates, HDR
Engineering Inc., SRK Consulting (U.S.), Inc. and Tetra Tech, Compiled By GBM
Project Number: 0530.
Description of Property
The Helmer-Bovill Property is a development stage open
pit mining operation which will produce quartz sand, K- feldspar sand,
kaolinite clay and halloysite clay. The area has been mined historically for
similar products.
The Helmer-Bovill Property is located at geographical coordinates 46° 52' 43.5"
N. latitude and 116° 25' 47.2" W longitude (State Plane, NAD 83, Zone
1103, Idaho West: 1 900 717 N, 2 454 671 E) in Latah County, Idaho, USA. The
property currently totals 5,140.6 acres. The mineral leases are not adjoining,
but are situated within three surveyed townships near the town of Bovill, Idaho.
Figure 1. Location of the Helmer-Bovill Property
26
Figure 2. Location of Mineral Leases
The
Helmer-Bovill Property area is located on endowment lands owned and
administered by the IDL. These and other IDL holdings across the state of Idaho
were granted to the state in 1890 by the federal government on the condition
they produce maximum long-term financial returns for public schools and other
beneficiaries. Therefore, IDL has a mandate for these lands to produce revenue
to support the state’s public school system and other state institutions. To
achieve this, IDL manages these properties primarily for profit through the
production of timber, livestock grazing, and the extraction of mineable
materials.
The State of
Idaho endowments lands fall in two categories referred to as Fee Simple (FS) and
Minerals Only (MO). The FS lands are where the State owns both mineral and
surface rights. The MO lands are where the State owns mineral rights but
someone else owns surface rights. The majority of the lands held by us are FS.
All mineral resources and mineral reserves described in this report are located
on FS lands. By way of our mineral leases, we have surface rights and legal
access to the Helmer-Bovill Property provided it meets all permitting and
bonding requirements administered by IDL. In the State of Idaho, mineral leases
are not required to be physically located in the field. The mineral leases are
currently described only on paper by the U.S. Public Land Survey Grid.
In 2002, we
acquired from IIM, through our wholly owned subsidiary Alchemy Kaolin
Corporation, 16 State of Idaho mineral lease applications in Latah County,
Idaho, to cover deposits of feldspar, kaolin, and quartz located near Bovill,
Idaho. In 2003, we converted these applications to ten mineral leases and
subsequently obtained two more mineral leases. Renewal applications for all 12
leases were filed on April 27, 2012 with a US$3,000 application fee. As part of
the renewal process, Idaho converted the 12 mineral leases into 10 revised
mineral leases which were issued on February 28, 2013. Subsequently, during
2013 the State of Idaho granted one additional mineral lease to us. At this
time, we hold 11 mineral leases totaling 5,140.64 acres. All current leases are valid until 2023. Due to recent
changes in the law, we are exploring various options for renewal. All leases
are subject to rental fees of US$1.00/acre/y and a production royalty of 5
percent of gross proceeds.
27
The production royalty is
prepaid at a rate of US$500 per lease for the first five years, and increases
to US$1,000 per lease for the second five years of the lease. The surface
rights of the 11 mineral leases are owned by both the State of Idaho and some
private landowners. However, the surface right of the mineral leases specific
to the resource estimation contained in this report are all owned and
administered by the State of Idaho. The U.S. Army Corps of Engineers (“USACE”)
owns the surface rights of all waterways located within the mineral lease
boundaries.
The details of the mineral leases that comprise the
Helmer-Bovill Property are summarized below:
Mineral Lease No.
|
FS / MO
|
Acres
|
E410005
|
FS
|
172.00
|
E410006
|
FS
|
377.75
|
E410007
|
FS
|
140.00
|
E410007
|
FS
|
260.00
|
E410008
|
FS
|
370.80
|
E410008
|
FS
|
160.00
|
E410008
|
FS
|
53.17
|
E410009
|
MO
|
80.00
|
E410009
|
MO
|
280.00
|
E410009
|
MO
|
269.50
|
E410010
|
FS
|
242.44
|
E410010
|
FS
|
242.52
|
E410010
|
FS
|
40.00
|
E410010
|
FS
|
80.00
|
E410011
|
FS
|
117.19
|
E410011
|
FS
|
438.73
|
E410012
|
MO
|
41.41
|
E410012
|
MO
|
80.00
|
E410013
|
FS
|
240.00
|
E410013
|
FS
|
400.00
|
E410014
|
FS
|
413.78
|
E410014
|
FS
|
161.35
|
E410015
|
FS
|
480.00
|
Location, Access and
Infrastructure
The Helmer-Bovill Property is accessed by road from
the town of Lewiston by following U.S Highway #12 to State Highway ID-3 N to
Deary and then State Highway ID-8 E for 4 mi, then turning left on Moose Creek
Road/National Forest Road 381 and following for 5.5 miles. ID-3 S/ID-8 W is an
improved two lane road, while Moose Creek Road/National Forest Development Road
381 is a dirt/gravel road that provides access to State and Federal lands. In
addition, access to specific areas to be mined will require either upgrades to
former logging roads or construction of new access roads.
The nearest, large communities are Moscow, Idaho,
which lies about 28 miles west-southwest of the Property, and Lewiston, Idaho,
which lies about 33 miles to the southwest. Transport to the Helmer-Bovill
Property would utilize standard over-highway vehicles.
Electric power would be provided by Avista Corp. We
would be required to share in the costs in the construction of four miles of
power lines, including a 2 mile 115 kv line to a substation, and a 2 mile 24 kv
line from the substation to the plant site.
Natural gas is available to the Helmer-Bovill Property
from a natural gas pipeline that extends from Moscow to Bovill and is available
to be utilized for this processing facility. Approximately two miles of
pipeline would need to be constructed.
Groundwater from drilled wells is typically used to
serve domestic needs within the vicinity of the Property. Additional water is
also available in a small reservoir north of the Helmer-Bovill Property.
28
The region has a long history of clay production,
forestry and farming. A labor force skilled in heavy equipment operation,
trucking, and general labor exists within the surrounding communities and rural
areas.
There are several suitable locations for potential
tailings storage, mining waste disposal, and potential processing plants.
Climate and Physiography
The climate at the Helmer-Bovill Property is
characterized by an estimated average annual precipitation of 38.82 inches,
with the highest values recorded between October and March (71% of the annual
precipitation). The average annual minimum and maximum temperatures are 30.1°F
and 55.7°F, respectively; with average monthly minimum and maximum temperatures
ranging from 18.5°F to 41.7°F and 41.1°F to 83.3°F, respectively.
The average total snowfall ranges from 0.1 inches in
October to 37.3 inches in January, with an annual average of 100.9 inches.
Average snow depth ranges from 1.0 inches in November to 23.0 inches in
February, with an annual average snow depth of 6.0 inches.
The average elevation is about 3,000 ft. above mean
sea level, with a topographic relief of about 200 ft. The area is largely
covered with soil, but old workings (pits and trenches) and road cuts provide
exposure to the underlying bedrock geology. The Helmer-Bovill Property is
located on the west side of the Potlatch River drainage area.
The Helmer-Bovill Property area consists of low
foothills and ridges alternating with relatively wide, flat basins. Forested
areas occupy the slopes and ridge tops which are managed primarily for timber
production. Conifer forest makes up approximately 50% of the overall
Helmer-Bovill Property area. Forest stands were observed to be early seral, highly
fragmented, and lacking in the ecological functions and values of older, more
contiguous forests. Grasslands occur in the basins alongside sinuous
intermittent and perennial stream channels. The Helmer-Bovill Property area is
currently permitted for livestock grazing. Most of the Helmer-Bovill Property
area has been disturbed by previous mining, forestry and grazing activities
and, as such, contain predominantly disturbance oriented plant communities.
Non-forested meadows or pasture areas are intensively grazed resulting in a
proliferation of non-native vegetation and soil compaction and erosion.
Surface waters primarily consist of small, meandering,
intermittent stream channels that flow toward the Potlatch River. These
channels are typically located in the level “flats” between low hills or
ridgelines and dry up by mid or late summer. Most streams are hydrologically
altered by high- density road construction, historic mining, and cattle
grazing. Grazing has also eliminated much of the woody growth along most stream
channels resulting in eroded channels and sedimentation. Other surface waters
include several old clay mining pits and small dams that have developed into
water catchment basins as well as emergent wetlands flanking the stream
channels. Groundwater appears in scattered locations as either springs or
seepage discharge along streams or edges of wetlands. Native soils predominate
in the area.
History
U.S. Bureau of Mines
(“USBM”) and United States Geological Survey (“USGS”) (1942-1947)
During World War II, the clays in eastern Washington
and northern Idaho were examined as a possible source of alumina and a
substitute for foreign bauxite ores. Domestic bauxite reserves were being
depleted, and the importation of foreign bauxites was handicapped by
transportation difficulties. Both the USGS and USBM conducted extensive field
studies that were followed by the drilling of 650 holes that totaled about
20,252 ft.
USBM (1953-1963)
In 1953 the USBM continued their search for viable
clay deposits. They also investigated the potential of the contained silica
sand for the glass industry. The USBM tested the Benson and Olsen clay deposits
between Troy and Deary, and then moved on to the Bovill deposits. Ninety-seven
samples were collected from 1,325 ft. of drilling over an area covering 750 ft.
x 350 ft. that is located 1.5 miles southwest of Bovill near State Highway 8.
29
A.P. Green Refractories Company (1956-1993)
In 1956, A.P. Green Refractories Company purchased all
the remaining assets of Troy Brick and Clay and acquired a lease, being located
north of Helmer, from which they produced refractory clay. They processed the
clay by air flotation to produce two grades of refractory clay. Production
continued until the early 1990’s when Hammond Engineering purchased one pit
from A.P. Green. This pit produced transported clay for ceramic applications.
Total production from the area during this period is estimated to be 250,000
tons.
J.R. Simplot Company (1956-1974)
In 1956, the J.R. Simplot Company (“Simplot”) of
Boise, Idaho, acquired leases covering the Bovill deposits. In a cooperative
program, Simplot and USBM drilled 240 holes (99 of which were on 50 ft.
centers) and conducted washing, pyrometric, mineralogical, and beneficiation
tests. By 1962, Simplot had built a clay plant, the Miclasil facility, for the
production of paper fillers and specialty ceramics. Production initially came
from pits in the Bovill deposit, which are in transported clay of the Latah
formation directly south of the plant. Simplot shifted production to residual
clay deposits in the granodiorite, as this source proved more satisfactory for
paper filler. The pits exploited by Simplot for residual clays were the WBL
north and south pits and the Moose Creek Clay Mine, and the Stanford pit.
Simplot operated their plant until 1974, when it was sub-leased to Clayburn
Industries of British Columbia. Clayburn operated the property only a few
years, calcining clay that was shipped to Canada and processed into super-duty
and 70% alumina bricks. In 1994 the plant was dismantled and the property
partially reclaimed.
Several Companies (1983-1986)
During the mid-1980’s, a number of companies began
exploration work in the Helmer-Bovill area to identify clays suitable for use
as paper fillers and coaters. The University of Indiana, Nord Resources, Miles
Industrial Mineral Research, and Cominco American conducted work on the
Helmer-Bovill area deposits. In 1985-1986, the Erikson- Nisbet Partnership
formed a consortium of companies to develop new processes for beneficiation of
the clays, but the introduction of precipitated calcium carbonate fillers for
paper reduced the demand for kaolin fillers.
Regional Geology
The regional geology is dominated by Precambrian
sedimentary rocks of the Belt Supergroup (“Belt”), which have been strongly
deformed and intruded with granitic phases of the Idaho Batholith during the
Cretaceous age Sevier Orogeny.
During the Middle Proterozoic, the area was dominated
by a large intra-cratonic basin that was subsiding along syn-sedimentary
faults. The basin sediments comprise the Belt which range in age from about
1,470 to 1,400 Ma. The oldest units consist of the Lower Belt sequence, these
are overlain by the Middle Belt Carbonates and the youngest are the Missoula
Group.
The Belt sediments are believed to have remained
relatively stable until approximately 1,350 Ma when portions of the basin were
affected by compressional tectonics of the East Kootenay Orogeny. This orogeny
was followed by rifting of the basin during the late Proterozoic-early
Paleozoic when large portions of the sediments were transported away and the
western margin of North America was developed.
The next major tectonic event occurred during the
Cretaceous Sevier Orogeny. Early compressional tectonics dominated the area
forming large-scale folds, reverse and thrust faults. During the late
Cretaceous, the Bitterroot Lobe of the Idaho Batholith was emplaced in the
region. The intrusive rocks described below were formed during this event.
The most recent, significant, geologic event was the
deposition of the Columbia River Basalts (“CRB”). The CRB consist of a large
plateau flow sequence of Miocene age (6 to 17 Ma). The lavas are distributed
over an extensive area covering portions of Idaho, Oregon, and Washington.
Minor extensional block faulting has resulted in much of the present landscape.
30
Local Geology
Belt Series
The Precambrian metasediments of the Belt series are
the oldest rocks in the Bovill-Moscow area and form the basement for the entire
area. The Belt series rocks crop out primarily in the northern and eastern
sections of the Helmer-Bovill Property. They form a high-grade metamorphic
facies assemblage that includes gneiss, schist, and minor meta-quartzite,
meta-argillite, and meta-siltite.
Thatuna Granodiorite
Granitoid intrusive rocks of Cretaceous age underlie a
large portion of the Helmer-Bovill area and form part of the Thatuna batholith.
Thatuna lithologies consist predominantly of granodiorite with subordinate
adamellite, tonalite, and granite. The principal mineral constituents are
quartz, plagioclase feldspar, K-spar, and biotite with trace to minor amounts
of muscovite, garnet, and epidote. The batholith is medium- to coarse-grained
granular, and porphyritic textures are common. Erosion of the Thatuna batholith
developed a mature topography where it is exposed in Latah County.
Recent geological mapping identified a previously
undescribed phase of the Thatuna batholith, referred to as the Kmcp. The Kmcp
is interpreted to be a border zone of the intrusion that occurs along the
interface between the main-stage, coarse-grained, and porphyritic Thatuna
batholith and the Precambrian Belt series roof rocks. Intrusion into cooler
roof rocks resulted in a distinctive and texturally diverse unit characterized
by dominant granular medium-grained and subordinate coarse-grained and
pegmatoid textures, the lack of well-developed porphyritic textures and the
presence of Precambrian xenolithic paragneiss, paraschist and metasiltite
blocks inherited from the roof rocks. Where unaltered, the Kmcp intrusive rocks
contain a primary assemblage of plagioclase, K-spar, quartz, biotite, and
muscovite, and are predominantly of granodioritic to granitic composition. The
porphyritic main body of the Thatuna batholith does not appear to crop out
within the mapped part of the Helmer-Bovill area.
The Kmcp derives its distinctive character from
high-level interaction with the Precambrian metasedimentary roof rocks. More
rapid cooling in the contact zone produced a dominant medium-grained,
non-porphyritic, granodioritic unit in contrast to the coarser-grained,
porphyritic granodiorite lithology that characterizes the deeper main stage of
the batholith. In the roof zone, hydrous mineral-bearing xenolithic blocks of
the Precambrian Belt series metasediments were entrained by the intruding magma
and outgassed of their volatile component. The outgassing contributes to the
creation of pockets of hydrous granitic liquid proximal to the Precambrian
blocks. These pockets crystallized subsequently into coarse-grained to
pegmatoid granite pods that are distributed within the larger body of
medium-grained granodiorite. Owing to the physicochemical conditions of
crystallization within the hydrous pods of granitic liquid, the resultant
solidified rocks show a stronger tendency toward higher proportions of
K-feldspar relative to plagioclase and higher K2O/Na2O ratios than does the
dominant medium-grained granodiorite.
Weathered Thatuna Granitoid
The exposed Thatuna batholith was subjected to intense
weathering in a tropical or near-tropical climate during the Miocene epoch,
while the Columbia River basalts were erupted and the Latah formation sediments
were deposited. In response to the strong weathering, much of the feldspar and
at least some of the mica in the igneous body were altered to one or more
varieties of clay minerals. The depth limit of weathering may initially have
been fairly consistent; however, subsequent erosion has left a variable
weathering profile with thickness roughly dependent on topography. At present,
the depth of weathering may exceed 100 ft. along ridges and be less than 3 ft.
in some valleys.
Of particular importance is the weathering of the
feldspar in the granitoids to halloysitic to kaolinitic clays. It was the
presence of kaolinitic clay deposits that provided the initial impetus for
economic mineral development in north Idaho. Plagioclase feldspar is the least
stable phase in the weathering environment, and it alters to form clay well
before K-spar and muscovite. K-spar and the micas are relatively resistant to
alteration during all but the most intense weathering. Quartz is impervious to
alteration throughout the weathering cycle. In the Helmer-Bovill area, pits
that were mined for kaolin in residual deposits contained mostly quartz,
halloysite, kaolinite, and K-spar. The waste material is primarily quartz and
K-feldspar, with plagioclase accounting for only a minor proportion of the
total feldspar.
31
Potato Hill Volcanics
The Potato Hill volcanic rocks contain silicic to
intermediate volcanic rocks and include lava flow and pyroclastic flow units,
as well as hypabyssal intrusive rocks. They form much of the rock along the
western edge of the Helmer embayment at Potato Hill, and along the southern
edge of the Thatuna. Many of the pyroclastic flows contain abundant xenolithic
clasts of older granodiorite and Belt metasediments.
The individual flows are 3 to 50 ft. thick and the
complete sequence exceeds 900 ft. in thickness. The flow units generally contain
3% to 10% phenocrysts of feldspar and quartz distributed in an aphanitic matrix
of devitrified volcanic glass. Accessory minerals include magnetite,
hornblende, apatite, and zircon. Some lithic-rich pyroclastic flow units carry
up to 20% fragments. The saprolitic weathering that is well-developed in the
older rocks has not appreciably affected the Potato Hill volcanics.
Columbia River Basalts
The First Normal member of the Grande Ronde formation,
the Priest Rapids member of the Wanapum formation, and the Onaway member of the
Saddle Mountain formation (oldest to youngest, respectively) are all Columbia
River basalt flows mapped in the Helmer-Bovill area. The Grande Ronde formation
flow occurs in the southern portion of the Helmer-Bovill area and consists of
fine-grained to very fine-grained aphyric basalt. The Priest Rapids flow is a
medium to course-grained basalt with microphenocrysts of plagioclase and
olivine in a groundmass of intergranular pyroxene, ilmenite, and devitrified
glass. It crops out in increasing abundance to the southwest toward Deary.
Saddle Mountain basalts are found much further to the west. The importance of
the Columbia River basalts to the genesis of the Latah formation is that the
episodic basaltic extrusion dammed streams and formed lakes into which
kaolin-rich sediments eroded from weathered granitoid and Precambrian
metasediments were deposited.
Latah Formation
The Latah formation can be described as lake bed
sediments that, although local in origin and distributed in disconnected
basins, occur over an area 175 miles long and 75 miles wide in eastern
Washington and northern Idaho. Episodic flows of the Columbia River basalts
blocked streams and formed lakes that collected sediments eroded from
surrounding rocks. In the Helmer-Bovill area, a major basin termed the Helmer
embayment occurs over an area of approximately 25 to 30 square miles. Latah
formation sediments are described as clay, silt, sand and minor gravel deposits
that are laterally equivalent with and overlie flows of Columbia River basalts.
The clays are white, yellow, red and brown in color, kaolinite-rich, and range
from a few feet to several tens of feet in thickness.
Palouse Formation
The Palouse Formation comprises mixed loess and flood
plain sediments of Pleistocene age. It ranges in thickness from 3 to 35 ft. in
thickness and averages 10 ft. thick in the Helmer embayment. The unconsolidated
layers also include volcanic ash from the eruption of various Cascade Range
volcanoes.
Mineralization
The Helmer-Bovill Property hosts four different
deposit types. These include primary Na-feldspar deposits, residual
K-spar-quartz-kaolinite-halloysite deposits, transported clay deposits and
K-spar-quartz tailings deposits (which are located at the WBL Tailings
Project).
The
primary Na-feldspar deposits are hosted within granitic border phases of the
Thatuna granodiorite. The transported clay deposits are hosted primarily within
the Latah formation. This formation was deposited primarily in shallow lakes
dammed by Columbia River Basalts. Extensive weathering of feldspathic source
terrains constitutes the provenance of these clays. The residual deposits are
derived from saprolitic weathering of the Thatuna granodiorite-granitic phases.
In general, Na-feldspar alters to kaolinite and halloysite. These clays are
accompanied by residual K-spar and quartz and are the subject of this report.
The WBL Tailings Project hosts K-spar and quartz. The
tailings were deposited on a gently east-northeast sloping hillside and also
with an impoundment structure located at the base of the slope. Exploration
trenches indicate the tailings are in excess of 17 ft. deep in most places. In
general, the sloping portions of the tailings are composed of coarser material
and the flat lying portions at the base of the slope are composed of relatively
finder materials. The tailings appear to be continuous based on observations
from test pits.
32
Feldspars
The unweathered Thatuna Batholith represents a source
carrying a high total feldspar abundance, of which a significant proportion is
Na-feldspar. In the strongly weathered Thatuna Batholith rocks plagioclase
(Na-feldspar) shows nearly complete alteration to a kaolin mineral, but much of
the K-spar survives alteration.
Quartz
Exploration and drilling results indicate that the
quartz in the Thatuna batholithic rocks is relatively free of Fe-bearing mica
or oxide inclusions. The analytical values for the trace elements in the
quartz are very near or below detection limits for the electron microprobe and
indicate that quartz from the Moose Meadows area is essentially free of
impurities. This data suggests that the area has excellent potential to produce
a glass-grade product that might be processed further into feed stocks for the
high purity quartz market.
Clay Minerals
The kaolinite group of clay minerals includes four
minerals that are similar chemically, but differ with regard to crystal
structure. Two of these kaolinite group minerals, kaolinite and halloysite are
the major clay minerals in the Helmer-Bovill area clay deposits. Crystal
structure differences are important and control properties relevant to their
commercial applications. Kaolinite occurs as distinct platelets, whereas
halloysite forms tubes and spheroids. Although halloysite also has a plate-like
crystal form, imperfections in its crystal lattice cause the crystal to “roll
up” into the tubular forms. There are two varieties of halloysite, the
four-water variety and the two-water variety. The two-water variety is a
dehydrated version of the four-water halloysite and is almost impossible to
distinguish from poorly crystallized kaolinite. Both varieties of tubular
halloysite and poorly crystallized kaolinite exhibit poor viscosity.
Residual clays developed on weathered granitoid in the
Helmer-Bovill area are a mixture of halloysite and kaolinite, with the
concentration of total clay dependent upon the degree of weathering. Drilling
shows that halloysite content decreases with depth as the effects of weathering
diminish. In tests on two samples from the WBL north pit, GMT (2005)
demonstrated that there is a significant halloysite fraction in the residual
clay. The work done by GMT indicates that the quality of the residual clay
from the WBL pit is high enough to be used in some high-end specialty paper,
paint, and ceramic markets. Work done by I-Minerals and further continued by
GMT show that a wet process using proven gravity separation equipment can
produce a high-quality halloysite product that will gain attention of
halloysite markets.
Deposit Type
The mineral deposit consists of residual deposits
containing primarily K-spar, quartz and clays. The mineral deposit is underlain
by the Thatuna Batholith, composed mainly of plagioclase feldspar, K-spar and
quartz. Weathering has created a residual saprolite horizon which directly
overlies the bedrock from which it was derived. During the natural processes of
weathering, the original plagioclase feldspars have preferentially broken down
to produce the clays kaolinite and halloysite. The K-spars have resisted
weathering to a degree and much of the original component remains as free
grains. Similarly, the quartz component of the host rock remains as free grains
in the weathered material.
Exploration
, Drilling and Bulk Sampling/Pilot Testing
Exploration Programs
During the
period from 1999 through the end of 2001, the exploration work included the
acquisition of over 6,000 acres of mineral lease applications, the compilation
of an extensive file on the results of previous operations, and new drilling programs.
During 2002 and
2003, geologic mapping and petrographic studies were performed. An electron
microprobe analytical study was conducted on field samples, quartz products and
feldspar products from earlier work. Following petrographic and microprobe
studies, select intervals of residual deposits from the 2000-2001 drilling
program were sent to Mineral Resource Laboratory (MRL) for process testing.
33
Since 2003, all exploration
work completed on the property has involved diamond core drilling. The Mineral
Resource estimate in this study report is based on data and information
gathered during these diamond drilling programs.
The
exploration work we conducted was used to target generalized rock types and
their weathering by-products. The work was successful in defining four target
areas which were subsequently tested by diamond drilling. SRK Consulting (SRK)
reviewed the exploration procedures and sampling methods as part of the
pre-feasibility study completed in 2014 and found that the work was conducted
by trained professionals to industry standards for a deposit of this type. SRK also
stated that the exploration methods were successful in defining their intended
targets and that similar techniques would be appropriate to expand the resource
base if necessary.
Drilling
Programs
During
2000-2001, a 41-hole diamond drill program was completed at the Property,
focused on both bedrock feldspar deposits and residual deposits. Approximately
50% of the drill holes penetrated residual deposits at or very near the
surface. A total of 4,063 ft. were drilled during this program. All holes were
surveyed by Rim Rock Surveying.
In 2003, a
12-hole, diamond drill program was completed at the Project, testing for
residual deposits over a broad area. A total of 1,333 ft. were drilled in this
program. The core was split, sampled, and
described in detail within a previous Technical Report and in petrographic
reports prepared for I-Minerals All holes were surveyed with a hand held GPS with an accuracy of
several meters.
In 2007, a
28-hole, diamond drill program was conducted to further evaluate the residual
deposits. Six holes were located in the WBL Pit area on 200 to 600 ft spacing.
The remaining holes were spread over the entire property to test those areas believed
to be underlain by the weathered Thatuna granodiorite, establishing several new
prospective areas. A total of 3,529 ft were drilled during this program. The
six holes located at WBL Pit were surveyed by Jamar and Associates and all
remaining holes were surveyed by handheld GPS with an accuracy of several
meters.
In 2010, a
10-hole, diamond drilling program was completed in the WBL Pit and Middle Ridge
areas. Five holes were completed in each area, on 400 to 900 ft spacing. A
total of 1,195 ft were drilled in this program. All holes were surveyed by
Taylor Engineering with a differential GPS with
centimetre accuracy.
In 2011, a
66-hole, diamond drilling program was conducted in the WBL Pit and Middle Ridge
areas. At Middle Ridge, 45 holes were drilled and at WBL, 21 holes were
drilled. These holes were mostly located on 200 ft spacing with a few on 400
ft. A total of 7,747 ft were drilled during this program. All holes were
surveyed by Taylor Engineering with a differential GPS with centimetre accuracy.
In 2013, a
167-hole, diamond drilling program was conducted in the Middle Ridge deposit
and in two new areas referred to as Kelly’s Hump North and South. At Middle
Ridge, 21 additional holes were completed to provide a drill pattern on 100 ft
spacing in the area hosting higher halloysite grades. In the Kelly’s Hump area,
a phase one program was completed with 17 holes spread though out the elevated
area of the north south trending ridge. These were generally spaced at
approximately 400-800 ft with all but one, located in the northern area. A Phase 2 program was completed with 113 additional
holes on 100 ft spacing in the Kelly’s Hump North area, and 16 holes on 200 ft
spacing in the Kelly’s Hump South area. A total of 17,811 ft. were drilled during this program.
The drill hole locations were first laid out by Taylor Engineering with a
differential GPS and then once the drill rig was set up any offsets were
measured with a tape measure.
The drillhole
database supporting the resource estimation of this report consists of 322
diamond core drillholes totaling 35,909 ft. The shallowest hole is 20 ft, the
deepest is 260 ft, and the average is 112 ft. All drillholes are oriented
vertically and none of the holes have down hole deviation surveys. Since all of
the drilling is relatively shallow the lack of down hole deviation survey has
no material impact on the sample location. Since many of the older drillholes
are located with a hand held GPS their elevations do not match the current,
high resolution topographic surface. For this reason, all drillhole supporting
the resource estimation of this report, are draped onto the high resolution
topography to provide a uniform basis of elevation control. Typically, the
sample recovery was very good ranging from 60 to 100%. The average core
recovery is 87%.
34
Figure 3.
Drill Hole Locations
Mineral Processing and
Historical Testing
Various investigators have undertaken mineralogical,
beneficiation, and product characterization testing programs on material taken
from our Helmer-Bovill property. This testing includes primary material from
the Bovill deposit, as well as secondary material—referred to as WBL
Tailings—that was generated from a previous kaolin clay mining operation at the
site during the 1960s and 1970s.
Much of the process developed to recover the minerals
was conducted by two principal investigators: Ginn Mineral Technology (GMT) and
the Mineral Research Laboratory (MRL) of North Carolina State University. GMT
completed the developmental work on the clay (halloysite and kaolinite)
circuit, using bench-scale (pounds of material) and pilot plant (hundreds of
pounds) process demonstrations. Similarly, MRL carried out the development work
on the sand circuit (k-spar and quartz), also employing bench-scale and pilot
plant process demonstrations. Both service providers produced products of a
suitable grade and quality for detailed characterization, and suitable for
commercial production.
The bench-scale testwork conducted by GMT demonstrated
the responsiveness of the clay to conventional physical and chemical
beneficiation methods. The bench-scale testing results were further reinforced
with five pilot plant demonstrations. The first two were conducted in July 2008
and July 2010, and were modest in scale. Subsequently, three additional
small-scale pilot tests were conducted to explore alternative process flowsheet
arrangements. The data generated from these tests confirmed the results of the
previous tests, both quantitatively and qualitatively, including definition of
the circuit for the recovery of halloysite.
35
Additional testing and development was conducted in
2011 and 2012 on bulk samples and composites to confirm previous work and
generate material for product development. Process development work focused on
assessing alternative physical separation technologies for the
kaolinite/halloysite separation preparation. The results from this more recent
testing confirmed the previous work, which improves the confidence in the
viability of the process to generate saleable products.
Historical kaolinite mining activities on the property
generated a feldspathic sand tailings material, which is referred to as WBL
Tailings. These tailings are considered representative of the sand fraction of
the material derived from the Bovill resource. Primary material from the
historical WBL pit was also used in testing. The sand material was prepared
from the sand separated from the clay as part of the clay testwork programs
undertaken by GMT.
Initial testing on the WBL Tailings focused on
recovery of K-feldspar from quartz including unit operations, operating
conditions, and general equipment arrangement. A basic set of parameters for
conventional beneficiation methods was established at the bench test level.
Later, a comprehensive pilot plant campaign was undertaken based on the
findings of the bench-scale testing. The objective was to determine engineering
and operating data that would facilitate the design of a commercial process
plant. A 35-ton bulk sample of WBL Tailings was processed on a continuous
basis, facilitating the preparation of a sizable quantity of product
concentrates as well as the optimization of unit operations. The process
employed conventional unit operations and was successful in achieving the
stated objectives.
MRL was also retained to provide design the quartz
purification process. Mirroring previous development work on the K-feldspar
flowsheet, MRL performed bench-scale testing to provide preliminary data to
design and plan a more comprehensive pilot plant campaign. Pilot campaigns were
conducted in late 2011 and again mid-2012, which demonstrated the ability to
produce suitable quartz products from both WBL Tailings and primary material.
Due to constraints on material, budget, and time, the processing regime was not
optimized during these campaigns.
Initial Clay Testing
GMT reported on a clay processing pilot plant trial
that used material sourced from the Kelly’s Hump location (Drill Hole
RC13-5263). The sample was extracted from a depth of 10 ft to 15 ft and totaled
about 12,000 lbs.
The primary purpose of the testwork was to optimize
the separation of halloysite from kaolinite. Other stated objectives of the
work were to optimize the brightness of the halloysite by employing physical
and chemical beneficiation methods, and to produce a metakaolin product and
assess its pozzolanic properties. The testing undertaken by GMT was conducted
using American Society for Testing and Materials (ASTM) and Technical
Association of the Pulp and Paper Industry (TAPPI) standards in line with
previous testing campaigns and industry practice.
The bulk sample was processed to remove the sand
component (+325 mesh). Reconciliation and mass balancing determined that
approximately 78% of the feed mass reports to the +325 mesh sand fraction,
with the other 22% reporting to the fine clay fraction. The sand fraction was
then shipped to MRL for further feldspathic sand testing.
A two-stage beneficiation process employing both
centrifugation and differential flotation yielded the brightest product.
Differential flotation also produced the highest grade halloysite, exceeding
90%. Final product processing then explored cleaning the concentrates with
either acid leaching or magnetic separation, or cleaning them with a combined
magnetic separation with acid leaching step. A single-stage processing route
with magnetic separation alone was the most effective in improving the
brightness of the finished products by removing mica gangue from the
concentrate. Further improvements were realized with the inclusion of an acid
leaching stage for the non-magnetic product. Finally, a coarse kaolinite
product was prepared from the 3” hydrocyclone underflow for conversion into
metakaolin. The sample was prepared by calcining the kaolinite at 850°C for appraisal
as a pozzolanic material.
36
The clay testwork demonstrated the ability to produce
varying grades of halloysite and kaolinite concentrates. The extent of the
process to be deployed in the commercial plant will largely be determined by
the size and value of the halloysite product markets. Market research indicates
that there is a market for both standard-grade and high-purity halloysite, and
therefore, differential flotation is incorporated in the process flowsheet.
Market research also shows that while there is a limited market for the type of
kaolin produced from Bovill ores, there is a robust market for metakaolin.
Therefore, all of the Bovill kaolin will be converted to metakaolin.
Current Testing
The current testwork is mainly focused on the development
of both sand and clay circuits, further product definition and
characterization, and initial OEM equipment testing in preparation for detailed
engineering. Previous testwork on the feldspathic sands provided engineering
definition sufficient for the completion of engineering and feasibility
assessment. However, additional testing in 2015 confirmed earlier results,
optimized the processing scheme, and added some refinements regarding
purification of the products.
Representative Sample
Collection
In mid-2014, bulk metallurgical samples were collected
from 9 trenches using an excavator. The trench locations were selected based on
the local geology and results from adjacent drill holes.
The mineral composition of the deposit is relatively
homogeneous with the exception of halloysite content. The selected sample
locations are in the expected mining areas, and either rich in halloysite (6
locations in the Kelly’s Hump area and two locations in the Middle Ridge area)
or void of halloysite (one location in the Kelly’s Hump South area).
Depth of the ore-bearing layer, and depth of the
overburden were also considered when selecting the sample locations. The depth
to the ore layer (weathered granodiorite) was determined for each hole, and an
excavator dug through the overburden to the top of the mineralized layer to
approximately 5 feet below. The samples were collected, placed in large bulk
bags, and shipped to GMT for clay and sand separation. The samples were not
blended in the field, but were sent to GMT in three discrete samples; Kelly’s
Hump (halloysite rich), Kelly’s Hump South (halloysite void), and Middle Ridge
(halloysite rich). GMT processed the clay fraction and shipped the sand to MRL
for additional bench and pilot scale testing.
While these samples cannot be considered statistically
representative of the entire ore body, they are characteristic of the ore that
is expected to be encountered during the mining and processing of the Bovill
Project. The sampling techniques, and the metallurgical samples collected are
considered suitable for bench and pilot plant metallurgical testing to define
and confirm the process recovery scheme and final product quality.
Clay Processing
Clay samples were shipped to GMT in Sandersville,
Georgia, USA. GMT received 26.3 tons of Kelly’s Hump (halloysite-rich)
material, 4.4 tons of Kelly’s Hump (void of halloysite) material, and 6.3 tons
of Middle Ridge (halloysite-rich) material for production scale trials. Results
of the trials were reported in January 2015.
Each of the three samples was treated individually.
The halloysite-rich samples from Kelly’s Hump and Middle Ridge were treated in
a similar manner, whereas the Kelly’s Hump South sample was treated using an
abbreviated program due to its lack of contained halloysite.
The most significant difference in the products is the
brightness values. At greater than 70% brightness, the Middle Ridge products
were much higher than the other two resource products. Product from Kelly’s
Hump South had the lowest brightness, at 47%.
Recovery of Clay Products
Combined clay products (halloysite together with
kaolinite) in the ore account for 16-18% of the total feed. The clays are
separated from the other constituents in the ore based on particle size and
apparent density. Virtually 100% of the clay is recovered as standard purity
halloysite, high purity halloysite or kaolinite (metakaolin).
37
The split of recovery between standard grade
halloysite and high purity halloysite is dictated more by market conditions
than any inherent differences in the products. The market for high purity
halloysite will be satisfied first with the market for standard grade being
satisfied on a secondary basis. If necessary, any remaining halloysite can be
blended with kaolinite and calcined to create metakaolin.
Kaolinite recovery is 100% of this constituent in the
ore with the only loss being in the calcining step, where the kaolinite is
heated to about 850
o
Celsius. The conversion of kaolinite to
metakaolin by calcining removes most of the water of hydration and results in
approximately 10% loss of mass. As a result, the recovery of kaolinite is
effectively 90% of the amount of kaolinite in the feed.
Sand Recovery
Feldspathic sand (k-feldspar together with quartz)
makes up approximately 75% of the material in the ore. Processing of the sand
involves separation of the quartz from the potassium feldspar and purification
of the resulting separate streams. In this process there is removal and
rejection of iron bearing minerals (muscovite and biotite) and losses of fines
to the tailings stream. Testwork results show that the recovery of quartz and
potassium feldspar from the ore feed is approximately 58.5% each which is
equivalent to approximately 78% recovery from the sand component in the feed.
Overall Product Recovery
The sum of all products recovered from the feed ore is
approximately 61%. The remaining 39% is lost to tailings as sand fines or
impurities removed in the upgrading of the sand product
The sand portion (+325 mesh), makes up 76-77% of the
sample. This portion reports to the sand processing area of the plant. In the
case of the 2014 bulk sample, the sand portion was shipped to MRL for further
testing.
The clay fraction of the ore (-325 mesh) contains the
kaolinite and halloysite clays in addition to grit, which is rejected in the 3”
cyclone operation. The cyclone underflow, which contains the grit, reports to
tailings and makes up approximately 4% of the ore (in the case of the 2014 bulk
samples). This material is categorized as waste in the mineral resource and
mineral reserve estimates. The 3” cyclone overflow contains the clays (18-20%
of the total feed) which are further processed using a centrifuge to separate
standard-grade (70%) halloysite (50% classification of overflow) and kaolinite
(50% classification of underflow). The halloysite is further concentrated using
differential flotation to high-purity halloysite (+90%). Recent tests by First
Test Minerals showed 6% halloysite contained in a sample of high purity
halloysite. Because essentially all of the material in the 3” cyclone overflow
is recovered into one of the three final clay products, the process recovery of
the clays from this point is 100%.
2016 Feasibility
Study
In March 2016, we announced the completion of our feasibility
study on the Bovill Kaolin Project in accordance with NI 43-101. The 2016 FS was filed on SEDAR on April 20, 2016, and is
titled “NI 43-101 Technical Report – Feasibility Study – Bovill Kaolin Project
– Latah County, Idaho, USA” dated March 17, 2016 and prepared by GBM Engineers
LLC, Mine Development Associates, HDR Engineering Inc., SRK Consulting (U.S.),
Inc. and Tetra Tech, Compiled By GBM Project Number: 0530.
A summary of the project economics contained in the
2016 FS is set forth below.
Economic Analysis
The economic analysis results of the Bovill Kaolin
Project indicate an NPV 6% of US$385.8 million and an IRR of 31.6% on a pre-tax
basis. An after-tax basis analysis indicates an NPV 6% of US$249.8 million
with an IRR of 25.8%. Our analysis estimates that payback will be 3 years from
the start of production. The economic analysis is based on the following
assumptions and estimates:
-
a
mine life of 26 years.
-
Average
Annual Plant Production Rate of 346,000 tons
-
Waste
: Ore stripping ratio of 0.54
38
-
an
average operating cost of US$91.84/t of product.
-
capital
costs (which includes reclamation and closure costs) of US$120 million over
life of mine, which consist of US$108.3 million initial capital cost and US$11.8
million sustaining capital cost.
The results of our economic analysis are set forth in
the table below:
|
Description
|
Value
Pre-Tax
(US$Millions)
|
Value
After-Tax
(US$Millions)
|
Unit Cost
(US$/t)
|
|
Gross Revenue
|
1,683.1
|
1,683.1
|
316.43
|
|
Royalties
|
(84.2)
|
(84.2)
|
(15.82)
|
|
Gross Income
|
1,598.9
|
1,598.9
|
300.60
|
|
Operating Costs
|
(493.4)
|
(493.4)
|
(91.84)
|
|
Total Capital (LOM)
|
(120.0)
|
(120.0)
|
-
|
|
Income Tax
|
0
|
(342.8)
|
-
|
|
Cash Flow
|
990.4
|
658.1
|
-
|
|
NPV
|
385.8
|
249.8
|
-
|
|
IRR
|
31.6%
|
25.8%
|
-
|
Mining Methods
The Bovill Kaolin Project is planned as an open-pit,
truck and excavator operation. The truck and excavator method provides
reasonable cost benefits and selectivity for this type of deposit. Only
open-pit mining methods are considered for mining at the Bovill Kaolin Project.
The material to be mined consists of clays and soils,
and as such, no drilling or blasting is anticipated. Most sampling will be done
from mining faces, however some auger drilling will be done where additional
ore control data is required.
Industrial Mineral
Pricing
Composite prices
utilized for our mineral reserve and resource estimates is summarized in the
table below:
|
Products
|
Weighted Average Price
($/t)
|
|
Halloysite (Standard Grade)
|
716
|
|
Halloysite (High Purity)
|
1,392
|
|
K-spar (30 mesh)
|
217
|
|
K-spar (200 mesh)
|
270
|
|
K-spar (325 mesh)
|
346
|
|
Quartz Q3 (50 mesh)
|
400 - 620
|
|
Quartz Q1 (325 mesh)
|
350
|
|
Quartz Q1 (200 mesh)
|
280
|
|
Quartz Q1 (50 mesh)
|
126
|
|
Metakaolin
|
231
|
Industrial mineral pricing is based on thirteen years
of data derived from the USGS, books, journals, trade journals, Internet
searches, and market reports in the public domain. Additional data is from
personal visits and conversations with contacts within the glass, concrete,
ceramics, tile, sanitary, paint, tableware, polymers, insulators, plastics,
animal feed, toothpaste and cosmetic industries. Due to the highly competitive
nature of the industrial sand and clay industry, contract prices are
confidential and generally not available in the public domain.
39
Capital Costs
Capital cost estimates
are summarized in the table below:
|
Total Capital Investment
|
Initial Capital
(US$ 000s)
|
Sustaining Capital (US$000s)
|
Total LoM Capital
(US$ 000s)
|
|
Total Capital Investment
|
108,258
|
11,775
|
120,033
|
|
FIXED CAPITAL TOTAL
|
97,773
|
11,230
|
109,548
|
|
DIRECT TOTAL
|
65,054
|
11,230
|
76,284
|
|
General
|
4,059
|
6,001
|
10,059
|
|
Mining
|
1,334
|
84
|
1,418
|
|
Process
|
50,764
|
0
|
50,764
|
|
Waste Management
|
3,167
|
5,145
|
8,312
|
|
Infrastructure and Utilities
|
5,731
|
0
|
5,731
|
|
INDIRECT TOTAL
|
32,718
|
546
|
33,264
|
|
Engineering & Procurement
|
10,200
|
0
|
10,200
|
|
Construction Management
|
5,204
|
0
|
5,204
|
|
Field Indirect
|
5,314
|
0
|
5,314
|
|
Contingency
|
12,000
|
546
|
12,546
|
|
WORKING CAPITAL TOTAL
|
10,485
|
0
|
10,485
|
|
Cash Reserve
|
9,687
|
0
|
9,687
|
|
Inventory
|
798
|
0
|
798
|
Operating Costs
Operating cost estimates are summarized in the table
below:
|
Description
|
Avg. US$/yr
(000s)
|
Avg. US$/t ROM
|
Avg. US$/t Product
|
%
|
|
General – Subtotal
|
3,888
|
11.62
|
19.01
|
20.69
|
|
General and Administration
|
2,615
|
7.81
|
12.78
|
13.92
|
|
General - Utilities - Gas
|
3
|
0.01
|
0.02
|
0.02
|
|
General - Utilities - Power
|
124
|
0.37
|
0.61
|
0.66
|
|
General - Mobile Equipment lease
|
168
|
0.50
|
0.82
|
0.89
|
|
General - Consumables - Raw Water Pumping
|
3
|
0.01
|
0.02
|
0.02
|
|
General - Consumables - Diesel
|
161
|
0.09
|
0.15
|
0.17
|
|
General - Mobile Equip. Maintenance.
|
161
|
0.48
|
0.79
|
0.86
|
|
General - Labor
|
782
|
2.34
|
3.82
|
4.16
|
|
Mining – Subtotal
|
2,960
|
8.84
|
14.47
|
15.75
|
|
Contract Mining Cost
|
2,616
|
7.82
|
12.79
|
13.92
|
|
Owners Mining Cost
|
344
|
1.03
|
1.68
|
1.83
|
|
Processing Plant – Subtotal
|
10,652
|
31.83
|
52.07
|
56.70
|
|
Processing - Reagents
|
1,165
|
3.48
|
5.69
|
6.20
|
|
Processing - Maint. & Operating spares
|
798
|
2.39
|
3.90
|
4.25
|
|
Processing - Utilities
|
3,869
|
11.56
|
18.91
|
20.59
|
|
Processing - Consumables
|
1,071
|
3.20
|
5.24
|
5.70
|
|
Processing - Labor
|
3,749
|
11.20
|
18.33
|
19.95
|
|
Waste Management - Tailings
|
449
|
1.34
|
2.19
|
2.39
|
|
Product Handling – Bulk Bags
|
840
|
2.51
|
4.11
|
4.47
|
|
TOTAL OPERATING COST
|
18,789
|
56.14
|
91.84
|
100.00
|
40
CIM Mineral Resource Estimate
We have prepared a CIM measured and indicated resource
estimate on the Bovill Kaolin Project as set out in the table below. The
resource estimate does not utilize a cut-off grade as all recovered material in
the resource estimation contains sufficient sand, kaolinite or halloysite that
can be mined for profit.
-
Measured Resources of 5.7 million
tons containing 76.5% quartz/K-spar sand, 12.3% Kaolinite and 4.0% Halloysite.
-
Indicated Resources of 15.5
million tons containing 57.0% quartz/K-spar sand, 15.5% Kaolinite and 2.8%
Halloysite.
-
667,000
tons of contained halloysite, 3,119,000 tons of contained kaolinite and 13,235,000
tons of contained quartz/K-spar.
CIM Mineral Reserve Estimate
A mineral reserves estimate on the Bovill Kaolin
Project has been prepared in accordance with CIM guidelines. Cut-off grades
were not applied since all weathered Thatuna material in the resource
estimation contains sufficient sand, kaolinite or halloysite to be mined for
profit. The proven and probable mineral reserves are set forth below:
Reserve
|
Proven
|
Probable
|
Total P&P
|
Tons (1000s)
|
4,155
|
4,548
|
8,702
|
Halloysite %
|
4.8
|
4.0
|
4.4
|
Halloysite Tons (1000s)
|
200
|
182
|
382
|
Kaolinite %
|
11.1
|
12.5
|
11.8
|
Kaolinite Tons (1000s)
|
460
|
568
|
1,028
|
Sand %
|
77.8
|
76.8
|
77.3
|
Sand Tons (1000s)
|
3,234
|
3,491
|
6,725
|
Note that values presented here
have been rounded to reflect the level of accuracy.
Proven and Probable Mineral
Reserves are presented using a $57.00 NSR cutoff grade.
Cautionary Note to U.S.
Investors
:
This section and other
sections of this prospectus contain the terms “measured mineral resources,”
“indicated mineral resources,” “inferred mineral resources,” “proven mineral
reserves,” and “probable mineral reserves” as defined in accordance with NI
43-101. Please note the following regarding these terms:
-
“Measured
mineral resources” and “indicated mineral resources”
. We advise U.S. investors that although these terms are
recognized and required by Canadian regulations, these terms are not defined in
SEC Industry Guide 7 and the SEC does not normally permit such terms to be used
in reports and registration statements filed with the SEC. U.S. investors are
cautioned not to assume that any part or all of the mineral deposits in these
categories will ever be converted into reserves.
-
“Inferred
mineral resources”
. We advise U.S. investors that although this
term is recognized by Canadian regulations, the SEC does not recognize it. “Inferred mineral resources”
have a great amount of uncertainty as to their existence, and great uncertainty
as to their economic and legal feasibility. It cannot be assumed that all or
any part of an inferred mineral resource will ever be upgraded to a higher
category. Under Canadian rules, estimates of inferred mineral resources may not
form the basis of a feasibility study or pre-feasibility study, except in rare cases. The SEC
normally only permits an issuer to report mineralization
that does not constitute “reserves” as in-place tonnage and grade without
reference to unit measures. U.S. investors
are cautioned not to assume that any part or all of an inferred mineral
resource exists or is economically or legally minable.
-
“Proven mineral reserves” and “probable mineral reserves”
. The definitions of proven and probable mineral reserves used in NI
43-101 differ from the definitions for “proven reserves” and “probable
reserves” as found in SEC Industry Guide 7. Accordingly, our disclosures of mineral reserves herein may not be
comparable to information from U.S. companies subject to reporting and
disclosure requirements of the SEC.
41
Please
see “Cautionary Note to U.S. Investors
Regarding Estimates of Measured, Indicated and Inferred Resources and Proven
and Probable Reserves” for further discussion on the differences between terms
under NI 43-101 and SEC Industry Guide 7.
Cautionary Note To All Investors Concerning Economic Assessments
That Include Mineral Resources:
Mineral resources that are not mineral reserves have no
demonstrated economic viability.
Current Activities
Bovill Kaolin Project
Based on the results of the
2016 FS, which demonstrate that the Project is both technically and
economically feasible, it is recommended that I-Minerals pursue a program of
further investment and development to complete the engineering, procurement and
construction of the Project. The following activities are recommended to be
undertaken as early as possible in the next phase of development, as both have
schedule and completion impacts:
-
Confirmation testwork needs to be
completed for final equipment selection, as well as to finalize the process
plant water balance and utilities consumptions. The confirmation testwork is
expected to cost about US$100,000 and take approximately 4 months to complete.
-
Activities required to bring
electricity and gas to the site should be expedited, as this currently impacts
the overall project completion.
Pilot plant work is ongoing at MRL in North Carolina
to confirm product quality characteristics and generate additional samples for
our continued product marketing efforts. We have also initiated preliminary
contact with institutional investors that may have an interest in participating
in the debt or equity components of the Capital Costs. The detailed
engineering and construction time is forecast to be a minimum of 18 months and
a maximum of 30 months from the completion of the production financing to raise
the capital costs as set out in the 2016 FS. The estimated cost for the
completion of longer lead time engineering work, utilities surveys, marketing
work and financing activities (general and admin) set forth below:
Study Items
|
Project Costs
|
Project Management
|
$340,000
|
Marketing
|
540,000
|
Conceptual Engineering
|
100,000
|
Environmental and Permitting
|
120,000
|
Electrical and Gas Studies
|
100,000
|
Hydrogeological Work
|
60,000
|
Metallurgical Testwork
|
260,000
|
General & Admin
|
920,000
|
Total Cost
|
$2,440,000
|
In addition to the above expenditures, we
are reviewing the potential of undertaking a land swap with the IDL wherein we
would buy a property within Latah County of equal value to our Helmer Bovill
property and trade this property for the surface rights at Helmer Bovill.
Owning the surface rights at Helmer Bovill may reduce the bonding requirements
and strengthen our land tenure. The estimated cost of such land swap would be
$3 to $4 million of which about 25% would need to be paid as earnest money in
the next 12 months.
LEGAL PROCEEDINGS
On December 2, 2016, I-Minerals and Unimin Corporation
(“Unimin”), Joseph C. Shapiro (“Shapiro”), and Richard C. Zielke (“Zielke”)
(Unimin, Shapiro and Zielke collectively the “Unimin Defendants”) entered into
a settlement agreement (“Settlement Agreement”) relating to the subject matter
of the lawsuit filed in March 2015. Under the terms of the Settlement
Agreement, the Unimin Defendants and I-Minerals agreed to grant each other full
release of all claims, and the Unimin Defendants paid the Company an
agreed-upon amount in exchange for the Company causing the lawsuit to be
dismissed with prejudice.
42
MARKET FOR COMMON SHARES AND RELATED SHAREHOLDER MATTERS
Holders of Our Shares
As of the date of prospectus, there were 139 registered
shareholders.
Market
Information
Our common shares trade in
Canada on the TSX Venture Exchange under the symbol “IMA” and over-the-counter
in the United States on the OTCQB marketplace under the symbol “IMAHF.” The
following is the high and low close information for our common shares during
each fiscal quarter of our last two fiscal years on the TSX Venture Exchange
and the OTCQB.
|
TSXV
|
OTCQB*
|
|
High
|
Low
|
High
|
Low
|
|
CAD
|
CAD
|
USD
|
USD
|
Q1 ended Jul. 31, 2015
|
$
|
0.31
|
$
|
0.16
|
$
|
0.25
|
$
|
0.193
|
Q2 ended Oct. 31, 2015
|
$
|
0.28
|
$
|
0.16
|
$
|
0.215
|
$
|
0.1375
|
Q3 ending Jan. 31 2016
|
$
|
0.37
|
$
|
0.215
|
$
|
0.2849
|
$
|
0.1511
|
Q4 ended Apr. 30, 2016
|
$
|
0.295
|
$
|
0.195
|
$
|
0.22
|
$
|
0.15
|
Q1 ended Jul. 31, 2016
|
$
|
0.34
|
$
|
0.22
|
$
|
0.251
|
$
|
0.174
|
Q2 ended Oct. 31, 2016
|
$
|
0.34
|
$
|
0.27
|
$
|
0.26
|
$
|
0.2069
|
Q3 ending Jan. 31 2017
|
$
|
0.415
|
$
|
0.27
|
$
|
0.3207
|
$
|
0.1965
|
Q4 ending Apr. 30, 2017
|
$
|
0.48
|
$
|
0.38
|
$
|
0.3622
|
$
|
0.2872
|
Q1 ending Jul 31, 2017***
|
$
|
0.60
|
$
|
0.36
|
$
|
0.443
|
$
|
0.2657
|
Q2 ending Oct. 31, 2017**
|
$
|
0.43
|
$
|
0.32
|
$
|
0.3549
|
$
|
0.2573
|
*
|
High and low bid information for the OTCQB was not available for the above periods. For the periods presented, prices represent high and low closing prices during the period.
|
**
|
Through October 3 , 2017.
|
Bid quotations entered on the OTCQB
reflect inter-dealer prices, without retail mark-up, markdown or commission and
may not represent actual transactions.
Dividend Rights
We have never declared, nor paid, any dividend since
our incorporation and we do not foresee paying any dividend in the near future
since all available funds will be used to conduct exploration activities. Any
future payment of dividends will depend on our financing requirements and
financial condition and other factors which the board of directors, in its sole
discretion, may consider appropriate.
Under the Canada Business Corporations Act, we are
prohibited from declaring or paying dividends if there are reasonable grounds
for believing that:
(a)
|
We are, or after the payment of the dividend, we would be, unable to pay our liabilities as they become due; or
|
(b)
|
The realizable value of our assets would, after giving effect to the dividend, be less than the aggregate of our liabilities and the stated capital of all classes.
|
43
Securities
Authorized for Issuance Under Equity Compensation Plans
The following table sets forth details of all our equity compensation plans as of April 30, 2017 . As at April 30, 2017 , our equity compensation plans consisted solely of our Stock Option Plan, defined below, which was approved by our shareholders on December 7, 2016.
Plan Category
|
Number of securities to be issued upon exercise of
outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding
options, warrants and rights
|
Number of securities remaining available for future
issuance under equity compensation plans (excluding securities reflected in
column (a))
|
Equity compensation plans approved by security
holders
|
6,555,000
|
CAD$0.22
|
2,382,236
|
Equity compensation plans not approved by security
holders
|
-
|
-
|
-
|
Total
|
6,555,000
|
CAD$0.22
|
2,382,236
|
Stock Option Plan
We received shareholder approval, on December 7, 2016,
of our “rolling” stock option plan (the “Stock Option Plan”) whereby 10% of the
number of our issued and outstanding shares at any given time may be reserved
for issuance pursuant to the exercise of options. The TSX Venture Exchange
requires that listed companies that have “rolling” stock option plans in place
receive shareholder approval of such plans on a yearly basis at the Company’s
annual general meeting.
The Stock Option Plan was established to provide
incentive to directors, officers, employees, management company employees and
consultants who are eligible to participate in the Stock Option Plan.
Terms of the Stock
Option Plan
Options may be granted under the Stock Option Plan to
such service providers of us and our affiliates, if any, as the Board of
Directors may from time to time designate. The exercise price of option grants
will be determined by the Board of Directors, but cannot be lower than the
price permitted by the TSX Venture Exchange. The Stock Option Plan provides
that the number of common shares that may be reserved for issuance to any one
individual upon exercise of all stock options held by such individual may not
exceed 5% of the issued common shares, if the individual is a director or
officer, or 2% of the issued common shares, if the individual is a consultant
or engaged in providing investor relations services, on a yearly basis. Subject
to earlier termination, all options granted under the Stock Option Plan will
expire not later than the date that is five years from the date that such
options are granted. In the event that an optionee ceases to be a director,
officer, employee or consultant, the option will terminate within ninety days.
In the event of the death of an optionee, the options will only be exercisable
within 12 months of such death. Options granted under the Stock Option Plan are
not transferable or assignable other than by will or other testamentary
instrument or pursuant to the laws of succession.
MANAGEMENT’S DISCUSSION OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
You should read the following discussion
and analysis of our financial condition and results of operations together with
our financial statements and related notes appearing elsewhere in this report.
This discussion and analysis contains forward-looking statements that involve
risks, uncertainties and assumptions. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including, but not limited to, those set forth under “Risk Factors”
and elsewhere in this document. See
“Cautionary Note Regarding Forward-Looking Statements” above. Our fiscal year
is the 12 months ending April 30.
44
Plan of Operation
During the next twelve months, our plan of
operation is to complete the longer lead time engineering tasks such as the
electricity and gas planning. In May 2017, the IDL accepted our Operation and
Reclamation Plan on the Bovill Kaolin Project. Avista, the local utility, has
started the initial scoping studies to bring electricity and gas the last five
miles from its current terminus to the proposed mill site. In the interim we
will continue to strengthen our customer list and continue discussions to raise
the capital to fund the mine construction
Engineering work on the Bovill Kaolin
Project
As recommended in the 2016 FS, we are about to begin
the contemplated utility surveys and are undertaking additional pilot plant
work to produce customer samples for marketing purposes and the related
testwork for final equipment selection. Two pilot plants are currently ongoing
with the first producing metakaolin and halloysite and the second producing
quartz and K-spar. Additional work is also ongoing to finalize the process
plant water balance and utilities consumptions. This work together with the
General and Administrative expenses related in part to our continuing financing
efforts are estimated to cost about USD$ 2,440,000 before taking into
consideration any possible land swap with the IDL.
Outlook
Our focus continues to be the detailed assessment of all our mineral assets and advancing the Bovill Kaolin Project towards production. The process of producing minerals through pilot plant work includes shipping the unprocessed primary clay to Ginn Mineral Technologies (“GMT”) who undertakes the separation of the sand fraction (quartz and K-spar) from the clay fraction (kaolin and halloysite). GMT then sends the sand fraction on to Minerals Research Laboratory at North Carolina State University (“MRL”) where MRL separates the K-spar and quartz through flotation. GMT separates the halloysite and kaolinite into marketable products.
Three bulk samples are currently completed or being processed at both GMT and MRL. Processing of the first of the three bulk samples is complete. Processing of the second bulk sample has been completed at GMT and the K-spar float was completed at MRL. The third bulk sample has been separated at GMT. The clay fraction was separated into halloysite and metakaolin products. The halloysite products have been returned to our warehouse in Coeur d’Alene, Idaho. A small spilt of the kaolin was sent out to test flash calcination, an alternate calcining technique. Preliminary results are very favorable with indications of the highest quality metakaolin product to date. On September 18, 2017, the Company announced it had received results of ASTM C618-15 testing from CTL Thomson in Denver, CO of the various metakaolin products produced using the flash calcination technologies of FLSmidth in Allentown, PA. The key test is the water requirement measured as a percentage of the control samples with 115% of control the acceptable maximum. Four samples representative of calcining temperatures of 700, 750, 800 and 850oC were sent for testing and all fell in the range of 108-110% of control and hence handily met the ASTM C618-15 water demand specifications. With respect to the 28-day Strength Activity Index (%) number, the minimum threshold to achieve to meet the ASTM C618-15 standard is 75. The four samples sent for testing resulted in values from 86.4-94.3% and are expected to increase with additional time. All remaining kaolin currently at GMT will be sent for flash calcination once the final results from the test work are received.
At present we have, or will have shortly, inventory of all minerals for distribution to customers. Fine grinding of quartz and K-spar still needs to be completed. With material from the third bulk sample, we are testing a different fine grinding technique from what has previously been used and will also test flash calcination - a technique which in other instances has produced a superior metakaolin product.
Management is very pleased with the product development to date. Processing of the second bulk sample at MRL has generated the highest K
2
O grades to date with results consistently in excess of 14% K
2
O. Sample requests for halloysite have come from North America, Europe, the Middle East, South America and Asia showing both the scarcity of halloysite in general and the quality of I-Minerals halloysite in particular. While we currently have inventory of ULTRA Hallopure® and HalloPure® several companies have advanced their halloysite consuming products to near commercialization and have indicated a need for multiple tons of halloysite to complete the commercialization process. We are currently assessing the logistics and cost of completing an additional large pilot plant to make multiple tons of ULTRA Hallopure® and HalloPure® available to customers in life science, clean tech and plastic / polymer industries.
Based upon opportunities identified in the Charles Rivers report, internal marketing efforts and customer leads generated through the website, strong interest has been generated in all our mineral products with ever increasing interest in the K-spar. Samples continue to be sent to customers for testing and the response has been very favorable.
Results of Operation
Year ended April 30,
2017
We recorded a loss of $5,259,749 ($0.06) for the year ended April 30, 2017 as compared to a loss of $4,601,846 ($0.06 per share) for the year ended April 30, 2016. The increase in the loss recorded for the year ended April 30, 2017 as compared to the year ended April 30, 2016 is the net result of changes to a number of expenses. Of note are the following items.
-
Management and consulting fees of $319,443 (2016 - $245,755) are comprised of fees to manage our Company and stock-based compensation. The stock-based compensation recognized in the current period was $202,886 (2016 - $105,606). Approximately half of the fees to manage our Company are charged to management and consulting fees and the other half is charged to mineral property expenditures.
45
-
Mineral property expenditures of $1,539,709 (2016 - $2,881,230) are costs incurred on our Helmer-Bovill Property. The main expenses incurred during the current period included engineering and consulting ($256,922), mineral analysis and processing ($301,299) and environmental ($219,678). We were working on completing permitting work and final pilot plant processing during the current period. In the prior period, the Company incurred $1,734,460 of engineering and consulting expenditures and mineral analysis and processing of $541,223 as part of updating the feasibility study.
-
General and miscellaneous expenses of $730,885 (2016 - $580,862) are comprised of office and telephone expenses, payroll taxes, medical benefits, insurance premiums, travel expenses, promotional expenses, shareholder communication fees, transfer agent fees and filing fees. The increase during the current period was due primarily to an increase in mineral marketing activities as well as investor relations activities.
-
Professional fees recovery of $92,083 (2016 – expense of $338,644) include legal fees, audit fees and financial consulting fees. The fees in the current period are negative as the Company recovered legal fees after settlement of a legal action.
-
Accretion expense of $490,531 (2016 - $372,266) is the amortization of the fair value of bonus shares and bonus warrants issued to the lender of the promissory notes. The bonus shares and bonus warrants are amortized over the life of the promissory notes.
-
Interest expense of $1,578,631 (2016 - $1,161,339) is from promissory notes that bear interest at a rate of 12% per year. Interest increased as additional funds were advanced.
-
We recorded a loss on change in fair value of derivative liabilities of $687,979 (2016 – gain of $1,019,786). The change in fair value of derivative liabilities is based on the change in remaining term of derivative instruments and our stock price. The derivatives include warrants as well as stock options granted to non-employees. The derivative liabilities do not represent cash liabilities.
Three months ended July 31, 2017
We recorded a loss of $563,999 ($0.01 per share) for the three months ended July 31, 2017 as compared to a loss of $1,394,994 ($0.02 per share) for the three months ended July 31, 2016. The decrease in the loss recorded for the three months ended July 31, 2017 as compared to the three months ended July 31, 2016 is the net result of changes to a number of expenses. Of note are the following items:
-
Management and consulting fees of $34,731 (2016 - $113,653) are comprised of fees to manage our Company and stock-based compensation. The stock-based compensation recognized in the current period was $9,829 (2016 - $72,169). Approximately 25% of the fees to manage our Company are charged to management and consulting fees and the other 75% is charged to mineral property expenditures and/or capitalized to mineral property interest.
-
Mineral property expenditures of $118,212 (2016 - $291,509) are costs incurred on our Helmer-Bovill Property. The expenditures in the current period are pre-development costs that have been expensed during the period. The Company also capitalized $179,963 of development costs to the balance sheet during the period. The main components of capitalized costs during the current period included engineering and consulting ($90,028) and metallurgy ($74,226). In May 2017, the Company completed permitting work. During the current period, the Company continues to optimize the metallurgical processes and detailed engineering.
46
-
General and miscellaneous expenses of $136,924 (2016 - $235,879) are comprised of office and telephone expenses, payroll taxes, medical benefits, insurance premiums, travel expenses, promotional expenses, shareholder communication fees, transfer agent fees and filing fees. The decrease during the current period was due primarily to a decrease in mineral marketing activities as well as investor relations activities.
-
Professional fees of $95,615 (2016 - $99,236) include legal fees, audit fees and financial consulting fees.
-
Accretion expense of $150,925 (2016 - $125,117) is the amortization of the fair value of bonus shares and bonus warrants issued to the lender of the promissory notes. The bonus shares and bonus warrants are amortized over the life of the promissory notes.
-
Interest expense of $463,296 (2016 - $354,752) is from promissory notes that bear interest at a rate of 12% per year. Interest increased as additional funds were advanced.
-
We recorded a gain on change in fair value of derivative liabilities of $455,144 (2016 – loss of $173,334). The change in fair value of derivative liabilities is based on the change in remaining term of derivative instruments and our stock price. The derivatives include warrants as well as stock options granted to non-employees. The derivative liabilities do not represent cash liabilities.
Liquidity
and Capital Resources
Year ended April 30, 2017
Our aggregate operating, investing and financing activities during the year ended April 30, 2017 resulted in a net cash inflow of $158,929 (2016 – outflow of $143,687). As at April 30, 2017, we had a working capital deficiency of $16,145,797, including cash of $287,282.
During the year ended April 30, 2017, $3,879,851 was used in operations before changes in non-cash operating working capital items (2016 - $5,105,601). The decrease in these cash flows was due primarily to a decrease in mineral property expenditures. During the year ended April 30, 2017, we spent $3,303 on investing activities (2016 - $nil) and we received $2,502,420 from financing activities (2016 - $3,644,449).
Currently, we are being financed by advances pursuant to promissory notes advanced by BV Lending LLC, an entity controlled by Allen L. Ball, a member of our Board of Directors and our largest shareholder (the “Lender”). During the year ended April 30, 2016, the Company was receiving advances pursuant to the First Promissory Notes and the Second Promissory Notes. As at April 30, 2016, the balance of the promissory notes was $11,044,280. The final tranche pursuant to the Second Promissory Notes was received in May 2016. Effective August 31, 2016, the Company entered into an agreement with the Lender pursuant to which up to an additional $2,965,000 will be advanced to the Company in tranches (the “Third Promissory Notes”), of which we have received $2,065,000 as at July 27, 2017. The August 31, 2016 agreement also amended the maturity date of the First Promissory Notes and the Second Promissory Notes. The promissory notes have a modified maturity date of December 2, 2017. Certain conditions may result in early repayment. An additional CAD$250,000 promissory note was issued in March 2017 to an arm’s-length lender with a maturity date of December 31, 2018.
Three Months Ended July 31, 2017
Our aggregate operating, investing and financing activities during the three months ended July 31, 2017 resulted in a net cash outflow of $242,089 (2016 – inflow of $275,312). As at July 31, 2017, we had a working capital deficiency of $16,875,502, including cash of $45,193.
During the three months ended July 31, 2017, $840,636 was used in operations before changes in non-cash operating working capital items (2016 - $1,023,775). The decrease in these cash flows was due primarily to a decrease in mineral property expenditures. During the three months ended July 31, 2017, we spent $181,895 on investing activities (2016 - $nil) and we received $250,000 from financing activities (2016 - $967,736).
Currently, we are being financed by advances pursuant to promissory notes advanced by BV Lending LLC, an entity controlled by Allen L. Ball, a member of our Board of Directors and our largest shareholder (the “Lender”). During the three months ended July 31, 2017, the Company was receiving advances pursuant to the Third Promissory Notes. As at July 31, 2017, the balance of the Third Promissory Notes was $15,559,324. Subsequent to July 31, 2017, the Company received $300,000 in advances. Pursuant to the terms of the agreement, the Lender has agreed to advance up to an additional $600,000. The Third Promissory Notes have a maturity date of December 2, 2017. Certain conditions may result in early repayment.
An additional CAD$250,000 promissory note was issued in March 2017 to an arm’s-length lender with a maturity date of December 31, 2018.
47
We have not as yet put into commercial production any mineral properties and as such have no operating revenues. Accordingly, we are dependent on debt and equity financing as its primary source of operating working capital. Our capital resources are largely determined by the strength of the junior resource markets and by the status of our projects in relation to these markets, and our ability to compete for investor support of our projects.
We remain dependent on additional financing to fund development requirements on the Helmer-Bovill property and for general corporate costs. With respect to funds required for capital cost items, State-sponsored debt financing instruments may be available on attractive terms, and we intend to pursue such financial instruments to cover portions of the capital costs associated with placing the Bovill Kaolin deposits into production. We have commenced efforts to raise the capital necessary to build the mine.
We do not have the ability to internally generate sufficient cash flows to support our operations for the next twelve months. We are currently receiving funds from a company controlled by a director of the Company through promissory notes. We have no formal plan in place to address this going concern issue but consider that we will be able to obtain additional funds by equity financing and/or debt financing; however, there is no assurance of additional funding being available. As a result, our auditors included an emphasis of matter note in their report on the financial statements for the year ended April 30, 2017 about our ability to continue as a going concern.
Off-Balance
Sheet Arrangements
We have no significant
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 is material to shareholders.
Critical Accounting
Policies
Measurement
Uncertainty
The preparation of these consolidated financial
statements in conformity with US GAAP requires us 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. We regularly evaluate estimates and assumptions related
to the useful life and recoverability of long lived assets, stock-based
compensation, valuation of convertible debentures and derivative liabilities,
and deferred income tax asset valuation allowances. We base our estimates and
assumptions on current facts, historical experience and various other factors
that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities and the accrual of costs and expenses that are not readily apparent
from other sources. The actual results experienced by us may differ materially
and adversely from our estimates. To the extent there are material differences
between the estimates and the actual results, future results of operations will
be affected. The most significant estimates with regard to our condensed consolidated
financial statements relate to the determination of fair values of derivative
liabilities and stock-based transactions.
48
Stock-based Compensation
We account for all
stock-based payments and awards under the fair value based method. Stock-based
payments to non-employees are 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 measurable.
The fair value of
stock-based payments to non-employees is periodically re-measured until the
counterparty performance is complete, and any change therein is recognized over
the vesting period of the award and in the same manner as if we had paid cash
instead of paying with or using equity based instruments. The cost of the
stock-based payments to non-employees that are fully vested and non-forfeitable
as at the grant date is measured and recognized at that date, unless there is a
contractual term for services in which case such compensation would be
amortized over the contractual term.
We account for the
granting of stock options to employees using the fair value method whereby all
awards to employees will be recorded at fair value on the date of the grant.
The fair value of all stock options is expensed over their vesting period with
a corresponding increase to additional paid-in capital.
Compensation costs
for stock-based payments that do not include performance conditions are
recognized on a straight-line basis. Compensation cost associated with a share
based award having a performance condition is recognized on the probable
outcome of that performance condition during the requisite service period.
Share based awards with a performance condition are accrued on an award by
award basis.
We use the
Black-Scholes option valuation model to calculate the fair value of stock
options at the date of the grant. Option pricing models require the input of
highly subjective assumptions, including the expected price volatility. Changes
in these assumptions can materially affect the fair value estimates.
Derivative
Liabilities
We evaluate our
financial instruments and other contracts to determine if those contracts or
embedded components of those contracts qualify as derivatives to be separately
accounted for in accordance with ASC 815. The result of this accounting
treatment is that the fair value of the embedded derivative is marked-to-market
at each balance sheet date and recorded as a liability and the change in fair
value is recorded in the consolidated statement of loss. Upon conversion or
exercise of a derivative instrument, the instrument is marked to fair value at
the conversion date and then that fair value is reclassified to equity.
The classification of
derivative instruments, including whether such instruments should be recorded
as liabilities or as equity, is re-assessed at the end of each reporting
period. Derivative instruments that become subject to reclassification are
reclassified at the fair value of the instrument on the reclassification date.
Derivative instrument liabilities will be classified in the balance sheet as
current or non-current based on whether or not settlement of the derivative
instrument is expected within 12 months of the balance sheet date.
We use the
Black-Scholes option valuation model to value derivative liabilities. This
model uses Level 3 inputs in the fair value hierarchy established by ASC 820
Fair Value Measurement.
Mineral Property and Exploration Costs
Costs related to the development of our mineral reserves are capitalized when it has been determined an ore body can be economically developed. The development stage begins when an ore body is determined to be economically recoverable based on proven and probable reserves and appropriate permits are in place, and ends when the production stage or exploitation of reserves begins. Major mine development expenditures are capitalized, including primary development costs such as costs of building access ways, tailings impoundment, development of water supply and infrastructure developments.
49
Exploration costs include those relating to activities carried out (a) in search of previously unidentified mineral deposits, or (b) at undeveloped concessions. Pre-development activities involve costs incurred in the exploration stage that may ultimately benefit production that are expensed due to the lack of evidence of economic development, which is necessary to demonstrate future recoverability of these expenses. Secondary development costs are incurred for preparation of an ore body for production in a specific ore block or work area, providing a relatively short-lived benefit only to the mine area they relate to, and not to the ore body as a whole.
Drilling and related costs are either classified as exploration or secondary development, as defined above, and charged to operations as incurred, or capitalized, based on the following criteria:
-
Whether the costs are incurred to further define mineralization at and adjacent to existing reserve areas or intended to assist with mine planning within a reserve area;
-
Whether the drilling costs relate to an ore body that has been determined to be commercially mineable, and a decision has been made to put the ore body into commercial production; and
-
Whether, at the time that the cost is incurred, the expenditure: (a) embodies a probable future benefit that involves a capacity, singly or in combination, with other assets to contribute directly or indirectly to future net cash inflows, (b) we can obtain the benefit and control others’ access to it, and (c) the transaction or event giving rise to our right to or control of the benefit has already occurred.
If all of these criteria are met, drilling and related costs are capitalized. Drilling costs not meeting all of these criteria are expensed as incurred. The following factors are considered in determining whether or not the criteria listed above have been met, and capitalization of drilling costs is appropriate:
-
Completion of a favourable economic study and mine plan for the ore body targeted;
-
Authorization of development of the ore body by management and/or the Board of Directors; and
-
All permitting and/or contractual requirements necessary for us to have the right to or control of the future benefit from the targeted ore body have been met.
Once production has commenced, capitalized costs will be depleted using the units-of-production method over the estimated life of the proven and probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to the Consolidated Statements of Loss in that period.
We assess the carrying cost of our mineral properties for impairment whenever information or circumstances indicate the potential for impairment. Such evaluations compare estimated future net cash flows with our carrying costs and future obligations on an undiscounted basis. If it is determined that the future undiscounted cash flows are less than the carrying value of the property, a write down to the estimated fair value is charged to the Consolidated Statements of Loss for the period. Where estimates of future net cash flows are not available and where other conditions suggest impairment, management assesses if the carrying value can be recovered.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth
the name and positions of our executive officers and directors as of the date
hereof.
Name
|
Age
|
Positions
|
Thomas M. Conway
|
60
|
Chief Executive Officer,
President, and Director
|
Matthew Anderson
|
34
|
Chief Financial Officer
|
Allen L. Ball
|
72
|
Director
|
W. Barry Girling
|
57
|
VP Corporate Development
and Director
|
Gary Childress
|
69
|
Director
|
Wayne Moorhouse
|
53
|
Director
|
John Theobald
|
60
|
Director
|
Set forth below is a brief description of the
background and business experience of our executive officers and directors:
Thomas M. Conway
has been our Chief Executive Officer and President since January 2011,
and a director since October 2010. Mr. Conway holds a B.S.- Mining Engineering
(University of Minnesota) and later attended Harvard Business School's
Executive MBA program. He has significant expertise in permitting, feasibility
and mining. A results-oriented executive, Mr. Conway has 20 years of diverse
experience largely with Newmont Mining Corporation ("Newmont") in
operations, general management, environmental affairs and risk management. His
experience covers domestic and international assignments in open pit and
underground operations where he has a record of successfully implementing plans
to enhance operations through improved cost control and productivity
innovations. His roles at Newmont included Vice President Risk Management, Vice
President / General Manager Carlin Operations, Vice President / General Manager
Minera Yanacocha.
50
Matthew Anderson
has been our Chief Financial Officer since July 2011.
Mr.
Anderson holds a Bachelor of Commerce degree from McGill University and
obtained his Chartered Accountant designation in 2008 while articling at a
large accounting firm. Matt is a Senior Consultant with Malaspina Consultants
Inc., a private company that provides accounting and administrative
infrastructure to junior public companies. He has worked with Malaspina
Consultants Inc. since July 2009. He serves or has served as CFO of several
junior public companies including VirtualArmour International Inc., Claren
Energy Ltd., EFLO Energy, Inc., Wolfpack Gold Corp., Search Minerals Inc.,
Tigris Uranium Corp. and Explorator Resources Inc.
Allen L. Ball
has been a director since March 2002. Mr. Ball is a successful Idaho business
man and has been involved in many business ventures including farming, farm
implement sales, vending machines, cosmetics industry, mining, timber,
construction and related materials, high tech venture capital, commercial car
washes, A/R factoring, septic system sales / installation / servicing, lending,
real estate development, hospitality, assisted living, pharmaceutical, firearms
manufacturing, fishing lodge/outfitting, and motorsports sales, but he is
probably most known for his involvement in forming Melaleuca, Inc, which is a
manufacturer of wellness products and based in Idaho.
W. Barry Girling
has been a director since March 2002. Mr. Girling has been active in
various aspects of mineral exploration since 1977. He couples his geological
understanding with a B.Com. (Finance) degree to provide consulting services to
a number of TSX Venture Exchange companies. He has strong capital markets
experience gained as a founder and director of Foundation Resources Inc. and
Search Minerals Inc and was a director of Roxgold Inc. from August 2006 through
September 2102 completed the re-organization of Roxgold Inc. and the
acquisition of its Burkina Faso gold properties. Aside from I-Minerals Inc.,
Mr. Girling was from November 2012 President and CEO of Birch Hill Gold
Corporation until it amalgamated with Canoe Mining Ventures in June of 2014,
Kiska Metals Inc. until March 2017 and continues to serve as a director of Zinc
One Resources Inc., Silver One Resources Inc. and Broome Capital Inc.
Gary Childress
has
been a director since November 2013. Mr. Childress has a BS in Ceramic
Engineering from Clemson University and has spent much of the last 40 years in
industrial minerals or related industries. He has served as General Manager of
Edward Orton Ceramic Foundation since September 2001, the primary focus of
which is providing products to assist and enhance high temperature processing
of ceramics and other materials. Mr. Childress also served as Vice President of
Hecla Mining Company from 1994 to 2001 where he was responsible for Heclas's
industrial mineral division including acquisitions and project development.
Wayne Moorhouse
has been a director since January 6, 2014. Mr. Moorhouse has extensive
experience with public companies and has acted as the CFO, corporate secretary
or president of a number of TSX and TSX Venture listed resource companies and
their subsidiaries. In particular, Mr. Moorehouse served as CFO and corporate
secretary of Genco Resources Ltd., a former TSX company that had a producing
silver-gold property in Mexico, from June 2003 to October 2010, and as a special
advisor to Silvermex Resources Ltd., a company listed on the TSX that was in
process of developing advanced stage silver projects, from November 2010 to
December 2011. Between January 2012 and September 2013, Mr. Moorhouse served
as CFO of Roxgold Inc, a company listed on the TSX Venture Exchange engaged in
the exploration of a gold property in Burkina Faso. Currently, Mr. Moorhouse
is CFO of Midnight Sun Mining Corp., a company listed on the TSX Venture
Exchange engaged in the exploration of properties in Africa and CFO of WPC
Resources Inc., a TSX Venture Exchange listed company focused on advancing a
portfolio of Canadian gold properties.
John Theobald
has been a director since July 21, 2016. Mr. Theobald has over thirty-five
years in the international mining industry and has been involved with
exploration, business development, operations, investments and capital
markets. Most recently he was a director of ASX listed High Peak Royalties
Ltd, director, CEO & COO of London and TSX listed royalty company Anglo
Pacific Group plc, and served as Chairman of First Coal Corporation which was
successfully sold to Xstrata plc for C$147 million. From 1999 to 2008 he held a
number of senior positions with Sibelco, a major industrial minerals group,
where he gained significant experience of kaolin, feldspar, clay and quartz
markets and operations. Mr. Theobald has a B.Sc. with Honours in Geology from
the University of Nottingham, is a Chartered Engineer with the UK Engineering
Council, Fellow of the Institute of Materials Minerals and Mining (UK) and
Member of the Institute of Directors (UK).
51
Term of Office
Our directors are elected to hold office until the
next annual meeting of the shareholders and until their respective successors
have been elected and qualified. Our executive officers are appointed by our
board of directors and hold office until removed by our board of directors or
until their successors are appointed.
Family
Relationships
There are no family
relationships between our executive officers and directors.
Other Significant
Employees
We have three
significant employees as follows:
A. Lamar Long
has
been our
Project Manager since January 26, 2011. Mr. Long coordinated
the Kelly's Basin feasibility study with our principal geological consultant
and overseas all geological developments, including the design of the Primary
Clay deposits prefeasibility study. Prior to being promoted to Project Manager
in January 2011, Mr. Long served as Exploration Manager beginning August 2002.
Prior to joining us, Mr. Long spent 13 years as the Exploration Manager,
Industrial Minerals for Hecla Mining Corporation where he developed, planned
and managed all exploration programs for industrial minerals. Earlier in his
career Lamar was a Project Geologist for J.M. Huber Corporation for 7 years
where he managed industrial minerals projects including a regional exploration
program for kaolin in Georgia and South Carolina.
Gary L. Nelson
(B.S. Metallurgical Engineering)
has been our
Manager,
Metallurgical Operations since September 2007. Mr. Nelson oversees all
metallurgical work from both the Kelly's Basin and Primary Clay deposits. He
works closely with the engineering consultants in the all economic assessments
with a focus on material balances and process facility design. Mr. Nelson has
over thirty years of diverse expertise with an emphasis on industrial minerals
including economic modeling, project / process development, operations
start-up, marketing and market development and environmental reporting. Mr. Nelson
is charged with the task of overseeing the completion of the ongoing
feasibility study on the Helmer-Bovill property and ultimately the design and
procurement of the production facility.
Linda A. Koep
has
been our Market Development Manager since September 2003. Ms Koep oversees the
marketing and sales of all mineral products from both deposits. She has
eighteen years’ experience in the mining industry including mineral markets and
mergers and acquisitions. Ms. Koep develops mineral markets and potential
sales, analyzes transportation opportunities, and plans strategy for
implementing the company's entry as a producer of industrial minerals. In
addition, Ms. Koep is a member of Gonzaga University faculty in Spokane,
Washington.
Related Transactions
Except as disclosed
below, none of the following parties has, during our last two fiscal years, had
any material interest, direct or indirect, in any transaction with us or in any
presently proposed transaction that has or will materially affect us, in which
the Company is a participant and the amount involved exceeds the lesser of
$120,000 or 1% of the average of the Company’s total assets for the last two
completed fiscal years:
|
(i)
|
Any of our directors or officers;
|
|
(ii)
|
Any person proposed as a nominee for election as a director;
|
|
(iii)
|
Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding common shares;
|
|
(iv)
|
Any of our promoters; and
|
|
(v)
|
Any relative or spouse of any of the foregoing persons who has the same house as such person.
|
Compensation Arrangements
During the year ended April 30, 2017, management and consulting fees of $96,000 (2016 - $96,002) were charged by RJG Capital Corporation, a wholly-owned company of W. Barry Girling, Director. Wayne Moorhouse, Director, charged $2,911 (2016 - $3,093) in management and consulting fees. A further $150,000 (2016 - $150,000) in salary was earned by Thomas M. Conway, CEO, and is included with mineral property exploration costs. $23,759 (2016 - $23,557) was charged by Malaspina Consultants Inc. for the services of Matt Anderson, CFO, and are included in professional fees. John Theobald, Director, charged $54,124 (2016 - $nil) in mineral property expenditures. See “Executive Compensation – Summary Compensation Table” and “Executive Compensation – Director Compensation”.
Indebtedness
As at April 30, 2017, we recorded accounts payable and accrued liabilities of $197,954 (2016 - $189,501) in connection with amounts owed to our directors, an officer and a former director. At April 30, 2017, we owed Wayne Moorhouse, Director, $1,465, Tom Conway, CEO and Director, $1,668, Erimus Management Ltd, a company controlled by John Theobald, Director, $19,821 and Ball Ventures, LLC, a company controlled by Allen L. Ball, $175,000. At April 30, 2016, we owed Wayne Moorhouse, Director, $3,923, Tom Conway, CEO and Director, $2,178, RJG Capital Corporation, a company controlled by Barry Girling, $8,400 and Ball Ventures, LLC, a company controlled by Allen L. Ball, $175,000. All amounts are non- interest bearing, unsecured, and due on demand.
56
Loan Agreements with Directors
On September 13, 2013, January 27, 2014 and December 4, 2014, the Company entered into agreements with BV Lending LLC, a company controlled by Allen L. Ball, a director of our Company (the “Lender”) pursuant to which $5,787,280 was advanced to the Company in tranches (the “First Promissory Notes”). The First Promissory Notes were to mature as to $3,000,000 on December 2, 2016 and the balance due on December 31, 2016.
On February 18, 2015 and December 1, 2015, the Company entered into agreements with the Lender pursuant to which $5,457,000 was advanced to the Company in tranches (the “Second Promissory Notes”). The Second Promissory Notes mature were to mature as to $1,000,000 on December 2, 2016, $2,000,000 on June 2, 2017 and the balance due on December 2, 2017.
Effective August 31, 2016, the Company entered into an agreement (dated June 1, 2016) with the Lender pursuant to which up to an additional $2,965,000 will be advanced to the Company in tranches (the “Third Promissory Notes”). In addition, the First Promissory Notes and the Second Promissory Notes were amended and combined with the Third Promissory Notes with a modified maturity date of December 2, 2017. All other terms of the First Promissory Notes and the Second Promissory Notes remained unchanged.
In accordance with the guidance of ASC 470-50 and ASC 470-60, the Company determined that the June 1, 2016 agreement resulted in a debt modification, not a debt extinguishment or a troubled debt restructuring. The aggregate finance fees relating to the promissory notes are now being amortized to the Statement of Loss over the revised life of the promissory notes using the effective interest method.
During the year ended April 30, 2017, the Company received $1,815,000 in advances pursuant to the Third Promissory Notes and the final $200,000 in advances pursuant to the Second Promissory Notes.
Certain conditions may result in early repayment including immediate repayment in the event a person currently not related to the Company acquires more than 40% of the outstanding common shares of the Company. Debt issuance costs will be amortized over the estimated maturity life of the promissory notes.
The promissory notes bear interest at the rate of 12% per annum and during the year ended April 30, 2017, the Company recorded interest of $1,576,365 (2016 - $1,161,339). Interest is payable semi-annually as calculated on May 31st and November 30th of each year. Interest is to be paid either in cash, in common shares or deemed an advance of principal at the option of the Lender. As part of the Third Promissory Notes agreement dated June 1, 2016, interest payable of $640,130 was transferred to the promissory notes balance as a deemed advance. This balance transferred was not subject to bonus shares or bonus warrants. The $640,130 of interest was for the period from December 1, 2015 to May 31, 2016. The lender elected to have interest payable from June 1, 2016 to November 30, 2016 of $759,247 deemed an advance (not subject to bonus shares or bonus warrants).
In July 2015, the Company settled $395,665 of interest payable on the promissory notes by the issuance of 2,267,685 common shares at the fair value of $427,177 based on their quoted market price at the date of issuance. Accordingly, the Company recorded a loss on settlement of liabilities of $31,512. The interest settled was for the period from December 1, 2014 to May 31, 2015. In December 2015, the Company settled $556,433 of interest payable by the issuance of 2,948,431 common shares at the fair value of $536,541. The Company recorded an increase in additional paid-in capital on extinguishment of debt of $19,892. The interest settled was for the period from June 1, 2015 to November 30, 2015.
57
The Company and the Lender agreed that the Lender is to receive bonus shares equal to 7.5% of each loan tranche advanced under the Second Promissory Notes and Third Promissory Notes divided by the Company’s common share market price. In addition, the Company will issue the Lender an equal number of share purchase warrants for each loan tranche advanced. Each bonus share purchase warrant will entitle the Lender to purchase one common share of the Company at a price equal to the greater of (a) the market price of the Company’s common shares on the date of the advance and (b) the volume weighted average price of the Company’s common shares over the twenty trading days immediately prior to the date of the advance. The bonus share purchase warrants expire on the earlier of (a) December 31, 2018 and (b) the date the advance has been repaid in full, including interest. Advances received under the First Promissory Notes had the same terms other than the number of bonus shares and bonus share purchase warrants being based on 6% of each loan tranche advanced and the bonus share purchase warrants were to expire on December 1, 2016.
During the year ended April 30, 2017, the Company issued 852,562 bonus shares to the Lender at the fair value of $200,756, based on their quoted market price at the date the advances were received, including 349,325 shares having a fair value of $81,112 that the Company had committed to issue as at April 30, 2016. At April 30, 2017, the Company was committed to issuing an additional 88,089 bonus shares to the Lender at the fair value of $29,625. The fair value of the bonus shares was determined by reference to the trading price of the Company’s common shares on the date the advances were received.
During the year ended April 30, 2016, the Company issued 1,832,108 bonus shares to the Lender at the fair value of $409,031, based on their quoted market price at the date the advances were received, including 693,573 shares having a fair value of $136,735 that the Company had committed to issue as at April 30, 2015.
The fair value of 622,569 bonus share purchase warrants committed to be issued (based on advances received during the period) during the year ended April 30, 2017 of $65,711 was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: stock price – CAD$0.315; exercise price – CAD$0.320; expected risk-free interest rate – 1.15%; expected life – 2.32 years; expected volatility – 78% and expected dividend rate – 0%.
The aggregate finance fees (bonus shares and bonus warrants) are recorded against the promissory notes balance and are being amortized to the Statement of Loss over the life of the promissory notes using the effective interest method. The accretion expense in respect of the debt discount recorded on the issuance of bonus shares and warrants totalled $489,646 for the year ended April 30, 2017 (2016 - $372,266). The unamortized debt discount as at April 30, 2017 is $310,693 (2016 – $585,359).
The promissory notes are collateralized by the Company’s Helmer-Bovill Property.
Subsequent to April 30, 2017, the Company received $550,000 in advances pursuant to the Third Promissory Notes.
IIM Agreement
Allen L. Ball, a member of our board of director, owns a 25% interest in Idaho Industrial Minerals LLC, which is the property vendor in respect of IIM Agreement whereby we acquired a 100% interest in the Helmer-Bovill property.
DIRECTOR INDEPENDENCE
Our common shares trade in Canada on the
TSX Venture Exchange and in the over-the-counter in the United States on the OTCQB
market place. Our securities are not listed in the United States on a national
securities exchange or an interdealer quotation system.
When assessing the independence of our
Board for corporate governance purposes, we apply the rules of the TSX Venture
Exchange. Under the rules of the TSX Venture Exchange, we are required to have
a minimum of two independent directors. For purposes of the TSX Venture
Exchange rules, a director is considered to be “independent” if he or she has
no direct or indirect relationship that could, in the view of our Board of
Directors, reasonably interfere with the exercise of his or her independent
judgment. Under these rules, any person meeting the following criteria would
be deemed to have a “material relationship” to us, and to not be independent:
(a)
|
Anyone that has been an employee or executive officer within the last 3 years;
|
(b)
|
Any immediate family member of a person that has been an executive officer within the last 3 years;
|
58
(c)
|
Any person that is a partner or employee of our internal or external auditors, or was a partner or employee of our internal or external auditors within the last 3 years and personally worked on our audit during that time;
|
(d)
|
Any person that has a spouse or a child that shares the person’s home that is a partner of our internal or external auditor;
|
(e)
|
Any person that is or has been, within the last 3 years, or has an immediate family member that is or has been, within the last 3 years, an executive officer of another entity, if any of our current executive officers serve or served at the same time with that person on the other entity’s compensation committee; and
|
(f)
|
Any person that received more than $75,000 in direct compensation from us during any 12 month period within the last three years.
|
However, when assessing the independence
of our directors for purposes of this section, we have applied the definition
of independence set out in NASDAQ Rule 5605(a)(2). Generally, NASDAQ Rule
5605(a)(2) provides that a director is independent if he or she is not an
executive officer or employee, and does not otherwise have a relationship
which, in the opinion of our Board of Directors, would interfere with the
exercise of independent judgment in carrying out his or her responsibilities as
a director. The following persons are deemed, for purposes of Rule 5605(a)(2)
to not be independent:
|
(i)
|
Any person that was employed by us within the last 3 years;
|
|
(ii)
|
Any person that accepted, or has an immediate family member that accepted, compensation from us in excess of $120,000 during any 12 month period within the last 3 years;
|
|
(iii)
|
Any person that is an immediate family member of another person that is, or was, at any time during the last 3 years, employed as an executive officer of our Company;
|
|
(iv)
|
Any person that is, or has an immediate family member that is, a partner, controlling shareholder or executive officer of any organization to which we have made, or from which we have received, payments in excess of the lesser of (A) 5% of the recipients total gross revenues for that year, or (B) $200,000, within the last 3 years;
|
|
(v)
|
Any person that is, or has an immediate family member that is, an executive officer of another entity where, at any time during the last 3 years, one of our executive officers served on the compensation committee of that other entity; and
|
|
(vi)
|
Any person that is, or has an immediate family member that is, a current partner of our outside auditors or was a partner or employee of our outside auditors during the last 3 years, and personally worked on our audit during that time.
|
We have determined that Gary Childress,
Wayne Moorhouse and John Theobald are “independent” when applying both the
definition of independence required under the rules of the TSX Venture
Exchange, and the definition set out in NASDAQ Rule 5605(a)(2). Thomas Conway
is not an independent director because of his position as our Chief Executive
Officer and President, W. Barry Girling is not independent because of his
position as VP Corporate Development, and Allen L. Ball is not independent due
to his being our controlling stockholder.