GOLDRICH MINING COMPANY As used in herein, the terms "Goldrich," the "Company," "we," "us," and "our"
refer to
This discussion and analysis contains forward-looking statements that involve
known or unknown risks, uncertainties and other factors that may cause the
actual results, performance, or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. Except for historical information,
the matters set forth herein, which are forward-looking statements, involve
certain risks and uncertainties that could cause actual results to differ.
Potential risks and uncertainties include, but are not limited to, unexpected
changes in business and economic conditions; significant increases or decreases
in gold prices; changes in interest and currency exchange rates; unanticipated
grade changes; metallurgy, processing, access, availability of materials,
equipment, supplies and water; results of current and future exploration and
production activities; local and community impacts and issues; timing of receipt
and maintenance of government approvals; accidents and labor disputes;
environmental costs and risks; competitive factors, including competition for
property acquisitions; and availability of external financing at reasonable
rates or at all, and those set forth under the heading "Risk Factors" in our
Form 10-K filed with the
This discussion and analysis should be read in conjunction with the accompanying
unaudited condensed consolidated financial statements and related notes. The
discussion and analysis of the financial condition and results of operations are
based upon the unaudited condensed consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
General
Our Chandalar,
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We have defined drilling targets for a hard-rock (lode) gold deposit in an area
of interest approximately 1,800 feet wide and over five miles long, possibly
underlain by a series of mineralized magmatic intrusions (plutons). Exploration
therefore has taken on two directions; one toward defining a low-grade, large
tonnage body of mineralization running beneath the headwaters of
In
Although our main focus continues to be the exploration of these hard-rock
targets, we also endeavor to develop our placer properties as a source of
internal cash to protect us from future market fluctuations and to provide funds
for future exploration. In 2012, Goldrich and NyacAU formed
As shown below, the placer gold extracted by GNP increased each year from 2015 through 2018, trending toward production figures that were anticipated by a preliminary economic assessment authored by qualified geologists for us:
Ounces of Ounces of
Year Placer Gold Fine Gold
2015 4,400 3,900
2016 10,200 8,200
2017 15,000 12,300
2018 20,900 17,100
Although GNP's extraction increased over the years, ultimately the extraction
numbers attained over those years fell short of the Minimum Production
Requirements required in the GNP Operating Agreement. According to the terms of
the agreement, GNP was required to pay a Minimum Production Requirement of 1,100
ounces for 2016, 1,200 ounces for 2017, and 1,300 ounces for 2018 to both
Goldrich and NyacAU by
Subsequent to 2019, Goldrich commissioned an independent third-party mining
engineering firm to complete a mining plan and initial assessment for the
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Using a base case gold price of
Base Case Gold Price Sensitivity Analysis
Parameter $1,650 Gold $1,500 $2,000 $2,500 Undiscounted Pre-Tax Net Cash Flow:
$64 million $50 million $92 million $129 million After-tax IRR(1): 139% 112% 195% 275%
Undiscounted After-tax
1.3 1.44 1.19 1.1
All-in Sustaining Costs: $799 /Au oz.
All-in Costs: $1,064 /Au oz.
Total Operating Costs: $646 /Au oz.
The IA also estimated pit-constrained mineral resources for the Little Squaw Creek Placer deposit as follows:
Raw(1)
Resource Volume Gold Grade Raw(1) Gold Fine(2) Gold
Classification (1000s bcy) (troy oz./bcy) (troy oz) (troy oz)
Measured 2,609 0.0302 79,000 69,000
Indicated 2,188 0.0265 58,000 51,000
Measured & Indicated 4,797 0.0285 138,000 120,000
Inferred 771 0.0245 19,000 17,000
(1) Raw Gold - Gold as recovered from the placer deposit, historically 84%
gold and 16% other metals like silver and copper (referred to as 840
fine).
(2) Fine Gold - Gold that is 99.99% pure (referred to as 9999 fine).
Goldrich will decide if a preliminary feasibility study should also be prepared
for the
Looking forward, our ability to develop either hard-rock (lode) targets or placer deposits is subject to financing. Although we are seeking investors to provide funding to reinstate the placer mining operation, we believe there are investors motivated to provide funding for exploration programs to locate and exploit the hard rock deposits from which the placer mineralization is coming from. This strategy can be pursued independent of any mining activities.
Joint Venture Agreement
On
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On
Arbitration
In 2017, we, our subsidiary and the joint venture, as claimants, filed an
arbitration statement of claim before a three-member
During the years ended
On
The Partial Final Award
A summary of the various matters addressed in the Partial Final Award is as follows:
Capital vs. Operating Leases.
In response to a claim made by Goldrich, the Panel ruled that certain leases were capital leases, rather than operating leases, which increased the basis upon which distributions are made to the JV partners. In addition, the Panel modified the interest rates applicable to the leases, which decreased the profitability of the JV for the change in interest on all leases but only decreased the basis upon which distributions are made to Goldrich for leases that were deemed to be operating leases. The net change had no effect on the Company's financial statements. The ruling did, however, affect the amount of interim distributions made from GNP to Goldrich for 2016 and 2017 as noted below.
Ownership by GNP of Leased Equipment.
The Panel ruled that certain continuing lease payments made by GNP for equipment
treated as operating leases, which were subsequently ruled capital leases,
represented buy-out payments at the conclusion of the capital lease. Therefore,
ownership of the subject equipment was transferred to GNP. As a result of the
ruling, certain leased equipment became the property of GNP, but was
subsequently transferred to
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Lease Charges and Ownership of Arctic
The Panel ruled that lease payments made by GNP to
Interim Distributions to Goldrich for 2016 and 2017.
As a result of the awards noted above, the Panel determined that the Company is
entitled to an additional
Payment of Interest Earned by LOC1.
The Partial Final Award also addressed our claim for payment of interest earned
by LOC1. The Panel determined that NyacAU should pay the Company 50% of the
interest earned on LOC1 actually received by NyacAU, or
2012 Reclamation Work
The Panel ruled Goldrich is responsible to pay the full amount charged by NyacAU for the 2012 reclamation work and NyacAU is also entitled to 5% pre-judgement interest on the award from the date the first invoice was sent to Goldrich. Goldrich has accrued a liability for this ruling, however Goldrich has contested the party to whom payment should be made and whether additional amounts not invoiced by GNP should be included in the award.
Allocation of Tax Losses
From 2012 through 2018, NyacAU, as managers of GNP, had allocated net tax losses
from GNP totaling
Prior to Goldrich receiving the award, the
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In
Other
? The arbitration awarded NyacAU's request that an entry be made on GNP's books
for unpaid and unbilled interest expense of
Lease, incurred during the period of construction of the wash plant. In the
liquidation process, NyacAU (through
third-party creditor with respect to the recovery of this amount from GNP.
? The Panel awarded
personal expenses incurred relating to 2012 Goldrich reclamation costs. The
matter is further discussed below in the summary for Judgements issued by
Superior Court .
? The Partial Final Award found the Company liable for an act of negligent
misrepresentation regarding the concealment of certain technical information
from NyacAU. We have vigorously disputed the concealment and the finding of
negligence. Nevertheless, as a result of the Panel's determination, the Panel
awarded Dr.
stock investment in the Company or
The matter is further discussed below in the summary for Judgements issued by
Superior Court .
? As requested by Goldrich and NyacAU, the Panel will retain jurisdiction and
oversight over the dissolution/liquidation process to its completion. The Panel
stated, "there is likely more information the parties will have to provide on
certain issues--including, among others, changes in the balance of LOC1 and the
issue of transfer of the permit to Goldrich--before a Final Award on
dissolution/liquidation can be made." As of the date of this report, the
balance of LOC1 continues to change as a result of on-going rulings by the
Panel. Additionally, the Panel has stated it lacks jurisdiction on the transfer
of the mining permit, which the Panel has ruled is a matter to be negotiated
between the parties.
? The Panel ruled that "there has been no prevailing party in the arbitration to
this point, although it reserves judgment as to whether a prevailing party will
emerge from the Final Award with regard to issues which are now part of the
Revised [Second] Interim Award. Accordingly, as to all issues covered by this
Partial Final Award, the parties shall bear their own costs, expenses, and
attorneys' fees." The Second Interim Award
The Second Interim Award was necessitated by the fact that the dissolution/liquidation of the joint venture had not yet run its course. A summary of the various matters addressed in the Second Interim Award is as follows:
Transfer of Mining Permits The Panel ordered that:
a) No later than
establish, by agreement, a market value for the GNP permit in connection with
a transfer of the Permit to Goldrich or a third party, taking into
consideration the obligation of GNP, or any transferee of the permit, to
complete reclamation in accordance with NyacAU's government-approved
reclamation plan.
b) Reasonably prior to
provision … for reclamation by (1) adding all reclamation expenses actually
incurred by NyacAU to LOC1; (2) from GNP's assets, to the extent possible
after payment of GNP's debts and liabilities and liquidation expenses".
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Neither order was successfully executed by the parties on the dates specified by the Panel. The Second Interim Award confirmed the dissolution of GNP and noted that "no provision of the Claims Lease or the Operating Agreement speaks directly to the rights or obligations of GNP to transfer its mining permit, which is held in the name of the manager, NyacAU. Although GNP no longer has the right to mine, GNP and specifically NyacAU have the liability of reclamation. Absent a transfer of the Permit, GNP (through NyacAU) would be obligated to complete reclamation, and obtain final approval from appropriate government authorities, as required by the Claims Lease-a process estimated to take several years."
If NyacAU does not transfer the mining permit to Goldrich as part of the dissolution, they will retain the requirement to reclaim the mine, and Goldrich will be prevented from mining the property, since two mining permits cannot be issued for the same claims. The actual cost of the reclamation will be subject to many variables, not the least of which will be whether the remedial activity is undertaken while the mine is inactive or conversely, when the mine is actively producing gold. If the mining permit were to be transferred to Goldrich or another entity with the reclamation obligation intact, the reclamation activity could be undertaken as a key piece of a mining plan in order to mitigate reclamation costs. If an agreement cannot be reached to transfer the mining permit and the associated reclamation of prior mining activities, Goldrich will be prevented from mining its claims until a new mining permit is acquired after the current mining permit expires in 2027, and will be limited to exploration activities on the hard rock deposits of the Chandalar property.
NyacAU has indicated they will not transfer the permit without also transferring
the reclamation obligation, of which they believe to be
Balance and payment of LOC1
The Panel calculated a tentative balance of LOC1 at
As allowed by the Operating Agreement and a separate Security Agreement between GNP and NyacAU, NyacAU has recorded a security interest in future placer gold production from all current placer claims owned by Goldrich as collateral for repayment of fifty percent (50%) of GNP's LOC1 to NyacAU. The agreements between GNP and NyacAU are silent concerning what happens if GNP is dissolved and is no longer producing gold, the basis of calculation, timing of remittance and other key factors related to repayment if mining activities were to be undertaken again. If there is no further placer production from these claims, Goldrich does not have a liability to pay LOC1.
The Panel ruled in the
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If an agreement cannot be reached for the transfer of the mining permit and
reclamation liability to Goldrich or an operating company that will harvest the
placer gold in the deposit, mining will likely not continue at the mine.
Further, in order to operate the mine, Goldrich will be required to raise money
to fund replacement equipment, wash plant, infrastructure and initial operating
costs to restart the mine, due to the mining assets which have been removed as
part of the liquidation of GNP. Goldrich has prepared a new mine plan and an
initial assessment to show the mine's potential, as announced in Goldrich's news
release dated
Goldrich may not have a reasonable avenue to pursue in restarting the mine and may be limited to raising investment funds for the sole purpose of exploration of the hard rock deposits.
Right to Offset Damages or Distributions
The Panel granted the request that any damages awarded to one party can be an offset to distributions (or damages) due to the other party.
Judgements issued by
On
Final Post Award Orders
On
Reclamation
The Company had previously filed a motion to compel NyacAU to correct accruals for certain expenses including reclamation, demobilization, equipment rental and utilities. Most notably, the Company contended that an accrual for reclamation liability was short of a larger estimate prepared by independent professionals as engaged by Goldrich. The Panel denied the Company's motion and ruled that Goldrich does not have the authority to compel the establishment of any reserves on the GNP financial records.
The Company had previously filed a motion to compel NyacAU to reclaim the disturbed acres as required under the Operating Agreement and the mining permit issued to NyacAU in 2013, and to require NyacAU to fund the reclamation reserve from cash that had been distributed to NyacAU. The Panel denied the Company's motion and ruled that while there was express provision in the Operating Agreement to establish reserves necessary for contingent or unforeseen liabilities or obligations, which could conceivably include reclamation reserves, the agreement does not impose an express obligation to reclaim the project site.
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Mining Claims
All of the Company's mining claims remain the property of the Company; however, NyacAU staked several claims contiguous to the claims owned by the Company. The Company had previously filed a motion to compel the transfer NyacAU's claims from NyacAU to the Company. The motion was granted in part in that the claims held in NyacAU's name were ruled to be owned by the Company, but would not be transferred immediately. They would remain in the possession of NyacAU as manager of the liquidation until the property covered by the claims was not being used for liquidation activities and could be transferred without disruption to the liquidation activity.
Supplemental Orders 5-8
On
2018 Profitability and 2018 Interim Distributions
Under the GNP Operating Agreement, Goldrich was entitled to receive certain
interim distributions based on GNP's profitability. Goldrich received such
distributions for 2016 and 2017. Goldrich challenged the Panel's understanding
of facts related to GNP's profitability for 2018 as presented in the arbitration
proceedings and made a motion for GNP to distribute interim distributions for
2018 after applying the arbitration rulings made to date. Goldrich submitted a
claim to the arbitration Panel for approximately
The Panel ruled that GNP was dissolved at the end of the 2018 mining season
(
Goldrich's Portion of Interest Paid on LOC1
Under the GNP Operating Agreement, Goldrich is to receive 50% of any interest on
LOC1 paid by GNP to NyacAU. Goldrich made a claim to the Panel that GNP had paid
interest to NyacAU and that Goldrich was entitled to 50% of the amount paid. The
Panel ruled that NyacAU is obligated to pay Goldrich 50% of
Clarification of Award
In the Partial Final Award given in 2019, the arbitration Panel made an award to
NyacAU of
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On
- Order on Respondents' Motion to Preserve Confidentiality of Arbitration
Proceedings, wherein the Panel ruled that the Company did not violate
confidentiality when it filed the arbitration rulings as exhibits to its public
reporting with the
- Order on Respondents' Motion to Confirm Judgement, to correct, clarify or
modify an award made in the Partial Final Award. This order confirmed a GNP
claim against the Company for
including interest of
the 2012 reclamation costs. This event constitutes a 'Type 1' event, which
required adjustment and recognition in the financial statements for the year
ended
and included in accounts and interest payable on the condensed consolidated
balance sheet. Additional interest of
three and nine months ended
total to
condensed consolidated balance sheet
On
Finally, if the
Estimates of Arbitration
It is possible that there could be either adverse or favorable developments in the arbitration pending with the Company and its JV partner. An unfavorable outcome or settlement of pending arbitration could encourage the commencement of additional legal action by the affected party.
We record provisions in the condensed consolidated financial statements for pending arbitration results when it determines that an outcome is probable, and the amount of the gain or loss can be reasonably estimated. At the present time, except as stated otherwise, while it is reasonably possible that a favorable or unfavorable outcome in the arbitration may occur, after assessing the information available, management is unable to estimate the possible gain or loss, or range of gains or losses, for the pending arbitration; and accordingly, no estimated gains or losses have been accrued in the condensed consolidated financial statements for favorable or unfavorable outcomes. Legal defense costs are expensed as incurred.
Liquidity and Capital Resources
We are an exploration stage company and have incurred losses since our
inception. We currently do not have sufficient cash to support the Company
through 2022 and beyond. We anticipate that we will incur approximately
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We have filed an arbitration claim against our joint venture operating partner
to challenge certain accounting treatment of capital leases, allocations of tax
losses, charges to the JV for funding costs related to the JV manager's
financing, related-party transactions, and other items of dispute. For recent
developments in the arbitration proceedings, see the sections titled Joint
Venture Agreement and Arbitration above. The arbitration is proceeding on the
basis that GNP has been dissolved. As noted above, NyacAU has recorded a secured
interest in all placer gold production from certain claims owned by Goldrich as
collateral for repayment of fifty percent (50%) of LOC1. Arbitration proceedings
may significantly affect the balance of LOC1, the magnitude of which cannot be
estimated at the date of this report. The arbitration Panel calculated a
tentative balance of LOC1 at
The audit opinion and notes that accompany our consolidated financial statements
for the year ended
We currently have only a brief recent history of a recurring source of revenue
and in 2016 received our first cash distribution from the joint venture. If we
profitably execute a production business plan, our ability to continue as a
going concern may improve and become less dependent on our ability to raise
capital to fund our future exploration and working capital requirements. Our
plans for the long-term include the profitable exploitation of our mining
properties and financing our future operations through sales of our common stock
and/or debt. Additionally, the current capital markets and general economic
conditions in
During the nine months ended
If we are unable to timely satisfy our obligations under these secured senior
notes payable, the notes payable in gold, originally due
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We believe we will be able to secure sufficient financing for further operations
and exploration activities of our Company but we cannot give assurance we will
be successful in attracting financing on terms acceptable to us, if at all.
Additionally, anticipating continued placer production after dissolution of GNP,
we look forward to internal cash flow and additional options for financing. A
successful mining operation may provide the long-term financial strength for the
Company to remove the going concern condition in future years. To increase its
access to financial markets, Goldrich intends to also seek a listing of its
shares on a recognized stock exchange in
The condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.
Results of Operations
On
On
During the three and nine months ended
During the nine months ended
During the nine months ended
During the nine months ended
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Private Placement Offerings
During the nine months ended
Notes Payable in Gold, Notes Payable & Notes Payable -
At
During September of 2020 and
Inter-Creditor Agreement
As a result of an Amended and Restated Loan, Security, and Intercreditor
Agreement (the "Amended Agreement") dated
1. The borrower and holder entered into a Deed of Trust whereunder the notes are
secured by a security interest in all real property, claims, contracts,
agreements, leases, permits and the like.
2. The Company entered into a written Guaranty ("Guaranty") whereunder, among
other conditions, the Company unconditionally guarantees and promises to pay
to the order of each holder the principal sum and all interest payable on each
note payable held by such holder when and as the same becomes due, whether at
the stated maturity thereof, by acceleration, call for redemption, tender, or
otherwise. The Company is not in default as no demand has been made for
payment or delivery.
3.
and future interest on his note into shares of the Company's common stock at
$0.015 per share.
4. All loans by
designated as Senior Notes and accounted for as Notes payable - related party
and all loans by the other holders made prior to August 25, 2021 were
designated as Junior Notes. Additionally, notes arising in the future to
certain unrelated parties are also designated as Senior notes. Senior Notes,
which include principal and interest are entitled to be repaid in full before
any of the Junior Notes are repaid.
5. The Company confirmed that the written Guaranty extends to the repayment of
additional loans made by the holders.
6. The Company confirmed that repayment of additional loans will be and remain
secured by the Deed of Trust.
Subsequent Events
Subsequent to
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Mining Permit and Future Mining Activities
The recent upward movements in the price of gold to a range of
If we can attract the type of investor who is comfortable with reinstating the placer mining operation, we may have a viable and productive path forward toward obtaining financing in the short-term to achieve long-term profitability. To effectively pursue this strategy, (1) the mining permit for the Chandalar mine must be transferred to us from NyacAU, our former JV partner and the current holder of the permit, (2) financial concessions must be made relative to LOC1, which is currently to be satisfied from gold produced from the claims at the Chandalar mine, and (3) reclamation costs for the Chandalar mine that currently are the responsibility of NyacAU must be mitigated by a mining plan that accomplishes much of the reclamation costs as part of the ongoing mining activity. We do not believe an investor or group of investors will be willing to step forward to fund the placer mining activity without these three factors aligning themselves as described.
Additionally, without a profitable mining operation, the ability to pay back the Notes may not be available to us. If that is the case, the payback would require us to raise money from placements of equity instruments to raise the cash to satisfy the obligations. Such a use of funds may present a funding effort that receives tepid or little response in the equity markets.
However, we do believe there are investors motivated to provide funding for exploration programs to locate and exploit the hard rock deposits from which the placer mineralization is coming from. This strategy can be pursued independent of any mining activities.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Inflation
We do not believe that inflation has had a significant impact on our condensed consolidated results of operations or financial condition.
Contractual Obligations See Subsequent Events above. Critical Accounting Policies
We have identified our critical accounting policies, the application of which may materially affect the financial statements, either because of the significance of the financials statement item to which they relate, or because they require management's judgment in making estimates and assumptions in measuring, at a specific point in time, events which will be settled in the future. The critical accounting policies, judgments and estimates which management believes have the most significant effect on the financial statements are set forth below:
? Estimates of the recoverability of the carrying value of our mining and mineral
property assets. We use publicly available pricing or valuation estimates of
comparable property and equipment to assess the carrying value of our mining
and mineral property assets. However, if future results vary materially from
the assumptions and estimates used by us, we may be required to recognize an
impairment in the assets' carrying value.
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? Estimates of our environmental liabilities. Our potential obligations in
environmental remediation, asset retirement obligations or reclamation
activities are considered critical due to the assumptions and estimates
inherent in accruals of such liabilities, including uncertainties relating to
specific reclamation and remediation methods and costs, the application and
changing of environmental laws, regulations and interpretations by regulatory
authorities.
? Accounting for Investments in Joint Ventures. For joint ventures in which we do
not have joint control or significant influence, the cost method is used. Under
the cost method, these investments are carried at the lower of cost or fair
value. For those joint ventures in which there is joint control between the
parties and in which we have significant influence, the equity method is
utilized whereby our share of the ventures' earnings and losses is included in
the statement of operations as earnings in joint ventures and our investments
therein are adjusted by a similar amount. We have no significant influence over
our joint venture described in Note 3 Joint Ventures to the financial
statements, and therefore account for our investment using the cost method. For
joint ventures where we hold more than 50% of the voting interest and has
significant influence, the joint venture is consolidated with the presentation
of a non-controlling interest. In determining whether significant influence
exists, we consider our participation in policy-making decisions and our
representation on the venture's management committee. We currently have no
joint venture of this nature.
? Estimates of contingent uncertainties. The arbitration rulings and awards have
resulted in potential obligations and partially-offsetting potential
receivables to and from GNP, some of which must be recognized and recorded,
while others cannot be recognized or recorded until the actual realization of
the cash benefit. If future results vary materially from the assumptions and
estimates used by us, we may be required to recognize material differences from
those we have recognized in the financial statements, and those disclosed in
Commitments and Contingencies.
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