LODE-STAR MINING INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes appearing elsewhere in this report. In addition to historical financial information, the following discussion includes a number of forward-looking statements that reflect our plans, estimates and our current views with respect to future events and financial performance. See "Cautionary Note Regarding Forward Looking Statements" above for a discussion of forward-looking statements and the significance of such statements in the context of this Report. It is important to note, while we have encountered several high-grade drill anomalies throughout the property, we have no proven and/or probable reserves at the present time.
Property - Previous Exploration Work, Mineralization and State of Exploration
The Property is wholly owned by LSG, our largest shareholder, and is clear titled. A 1% net smelter royalty exists in the favor of the original property owner. The property consists of 31 patented claims on approximately 460 acres. LSG, over the past 15 years and continuing, has spent over$7 million on underground rehab of approximately 1/4 mile of drift at the 300ft sub-surface level. LSG also executed 22 surface core drill holes for a total of 10,400ft and 152 underground core drill holes for a total of 23,000ft.
It is important to note the following sample preparation and quality controls used by LSG and by ICN, a previous operator of the Property:
All drill core samples were prepared and delivered to ALS Minerals inReno byTom Temkin , our COO. Individual sampled intervals varied from one to five-foot lengths, based on geologic parameters, and included 100% of core intervals. No core splitting was conducted. No duplicate samples or standards were introduced other than those inserted and utilized by ALS for their internal quality control. Lab preparation of individual samples included crushing and grinding to minus 200 mesh, followed by a 1-ton assay for gold. All samples that initially assayed over 1.0 opt Au were systematically re-assayed.
ICN drill hole core and Rotary RC sampling and analytical protocol
All drill core samples were prepared by ICN personnel and either delivered to the assay lab or were picked up on-site by lab personnel. Rotary RC chip drilling samples were collected on-site and transported toReno by the respective labs. The labs used includedALS Minerals and American Assay Lab . Core was sawn by ALS Minerals and/or ICN personnel. Individual core sampled intervals varied from one to five-foot lengths, based on geologic parameters, and included one-half of the original core material. Rotary RC samples were taken at five-foot intervals entirely. Quality control for all samples included a protocol of inserting duplicate samples, blanks, and known standards, at repeating intervals to maintain .08% check sampling. Lab preparation of Individual samples included crushing and grinding to minus 200 mesh, followed by a 1-ton assay for gold. All samples that initially assayed over 1.0 opt Au
were systematically re-assayed. Underground work has identified 2 high-grade gold-bearing zones (see the small yellow stars in Fig. 1. and see Fig. 2.) that can support mine development utilizing our current infrastructure. The property is now permitted for production and should be mine ready by the end of Q2, 2020. It is our intention to then start mining the property. Much of the property remains under-explored and it is our belief that the district's high-grade, million-ounce ore zones repeat themselves. Further surface and underground exploration work need to be executed. We plan to explore through production and chase our known, high-grade vein zones. Third Party Assay Data AuditMine Development Associates (MDA Reno), a highly regarded, third party NI 43-101 service provider, has audited our drill hole database and performed a comparative QA/QC check assay analysis on selected drilling and determined no inconsistencies to exist and assays were repeatable within both theRed Hills and Church Zones. NI 43-101 Update Status We filed an independent Technical Report written in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects (NI 43-101) on our property located inGoldfield, Nevada . Although not required for OTC listing, we had this report prepared under NI 43-101 guidelines to provide a summary of theGoldfield Bonanza Project . This NI 43-101 is required documentation for future possible business transactions and listings on Canadian exchanges. The Technical Report titled "Technical Report on theGoldfield Bonanza Project Esmeralda County Nevada U.S.A. " datedJanuary 15, 2020 has been prepared by Mr.Robert M. Hatch , SME Registered Geologist.
The report is available for review on EDGAR
(https://www.sec.gov/edgar/searchedgar/companysearch.html) and SEDAR
(https://www.sedar.com/) under
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
The red areas (See Figure 1a. below) show the historic vein zones where, at an average grade of 1oz Au/ton, roughly 4 million ounces were produced during the period 1904-1918: Last year of production by Goldfield Consolidated, (Source: Albers and Stewart, 1972). For historicGoldfield production see Figure 1b.
The large yellow stars indicate areas we need to explore to repeat the past high-grade production intercepts. The yellow lines are known geophysical interpreted structures. The small yellow stars are the immediate definition drilling and production zones.
Fig. 1a. - The red vein zones contained in the aerial photo below depict the
historic mined veins
[[Image Removed: (MAP)]]
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
HISTORIC PRODUCTION
Figure 1b. - Production from
Gold Grade Gold Silver Grade Silver
Year Ore (tons) (ounces) (avg. oz/ton) (ounces) (avg. oz/ton)
1903 3,419 287
1904 8,000 113,293 14.16 19,954 2.49
1905 11,700 91,088 7.79 8,589 0.73
1906 59,628 339,890 5.70 15,648 0.26
1907 101,136 406,756 4.02 71,710 0.71
1908 88,152 236,082 2.68 30,823 0.35
1909 297,199 453,915 1.53 33,164 0.11
1910 339,219 538,760 1.59 117,598 0.35
1911 390,431 497,637 1.27 126,406 0.32
1912 362,777 301,848 0.83 125,736 0.35
1913 364,785 242,815 0.67 153,984 0.42
1914 367,166 227,612 0.62 129,830 0.35
1915 418,935 212,337 0.51 165,305 0.39
1916 383,456 128,250 0.33 129,781 0.34
1917 339,488 91,917 0.27 78,184 0.23
1918* 264,237 58,685 0.22 90,560 0.34
1919 16,435 35,810 2.18 39,912 2.43
1920 6,571 7,536 1.15 6,081 0.93
1921 1,903 7,101 3.73 1,761 0.93
1922 5,619 12,773 2.27 5,755 1.02
1923 3,137 4,471 1.43 3,613 1.15
1924 7,352 4,336 0.59 3,982 0.541925 2,773 5,053 1.82 2,369 0.85 1925-1960 129,705 168,616 1.30 88,967 0.69
Total 3,958,104 4,190,000 1.06 1,450,000 0.37
* Last year of production by Goldfield Consolidated
SOURCE: Albers and Stewart, 1972
17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Geologic Structure
The geologic model, as seen in Fig. 1c. below, shows the modern interpretation
of expected structural intersections that created the Goldfield high-grade gold
zones. Current thinking, based on finding these repeated intersections, is that
more multi-million-ounce intercepts are possible.
Fig. 1c. Geologic Structural Model
[[Image Removed: (GRAPHIC)]]
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Mine Development :
Lode Star Gold has completed underground rehabilitation and is developing the
mine on two headings. Respectively, these are named the Red Hills Stope Zone and
Decline Vein Zone . Additional muck bays have been added for underground storage
of ore. Four bays are presently storing 0.15 - 0.25 oz/ton gold, 0.25 - 0.50
oz/ton gold, 0.50 - 1.00 oz/ton gold and 1.00 oz/ton or better gold,
respectively. Grade-control samples have been analyzed in Scorpio's Mineral
Ridge Gold laboratory and Paragon Geochemical's Reno, NV office. The variety of
grade-control samples include channel samples, blast-hole samples and muckpile samples. The majority of work has been done in theStope Zone which has been our most productive heading followed by theDecline Zone . A surprise addition to activities at the north end of theStope Zone found considerable veining becoming an additional area of development. The Company is awaiting assays from its efforts on this new heading. This is further explained below in Item 7. Red Hills Vein System - Priority 1. The Company has elected not to repurpose the Church shaft nor the January Whiterock shaft as mentioned in earlier reports. Instead, as noted in Fig. 2a below we have initiated the development of a raise that will accommodate a secondary escapeway and access to the Church ore zone. We are calling this theChurch Raise Zone . This raise to the surface will allow us to intersect and develop the high-grade ore zone identified byICN's Church Zone drilling of core holes ICN-003, 013, 014. This is further explained below in Item 7.Church Zone - Priority 2. Work on this began in late January of 2021. As of the drafting of this report, the Company has completed 25% of intended initial 100ft portion of the escapeway.
Step Out Drilling and Exploration:
Surface definition drilling is underway in the aforementionedChurch Vein Zone . This zone measures up to 40 feet in width and trends at least 600 feet north-northeasterly, immediately west of the Church shaft. Drilling by ICN in 2011 included 19 core holes with varying results. Some holes did not hit the intended target and will be re-drilled to better test the target. As drilling progressed into the vein area, marginal gold was identified. Three holes, ICN-003, ICN-013 and ICN-014 (results below) hit solid high- grade intercepts which need further drilling to define. (Grams per Metric Tonne = 34.2857). Hole ICN-003: included 9.5 ft (2.90 m) weighted averaged assays of 40.79 oz/ton (1398.6 g/t) gold. Hole ICN-013: included 4.5 ft (1.37 m) with 51.46 oz/ton (1764.2 g/t) gold. Hole ICN-014: included 3.5 ft (1.00 m) with 68.02 oz/ton (2332.0 g/t) gold. Hole ICN-001 included 3.0 ft (0.90 m) with averaged assays of 6.29 oz/ton (215.7 g/t) gold and ICN-023 included 4.0 ft (1.22 m) with averaged assays of 1.44 oz/ton (49.35 g/t) gold.
The Company is currently waiting for assays from six core drill holes which
commenced in Oct. of 2020 and completed to date. Due to extensive industry assay
work in calendar 2020 and ongoing,
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
The figure below indicates the relationship between the overall ICN core
drilling, high-grade gold intercepts, underground workings, the Church shaft,
January/Whiterock shaft, the Church Raise Zone and our planned area of
definition drilling. Geologic modeling to date has identified what may prove to
be a robust production area. Our drilling phase will determine the accuracy of
that modeling.
Fig. 2. ICN Drill Holes and Planned drilling
[[Image Removed: (MAP)]]
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Fig. 3. - Church and Red Hills Area Vein Zones are the two high-grade
gold-bearing
zones that we expect to yield high-grade gold concentrations.
[[Image Removed: (GRAPHIC)]]
Red Hills Vein System - Priority 1.
Two major vein zones exist in theRed Hills area, including the Stope veins and the Decline vein (see Fig. 3 above). The respective names refer to the nature of brief mining conducted previously in these areas. As further defined through LSG's drilling to date, the area referred to as the Stope Veins is comprised of two intersecting vein-filled faults, including the West vein zone and the East vein zone with a third vein delineation called theNew Vein Zone . The average width of each of these vein zones is approximately three feet. Drilling to date suggests the West vein zone to be essentially vertical and near parallel to the East vein zone. The Decline vein zone is also shown on Fig. 3, as a north-northwest trending zone. Drilling on the Decline vein zone indicates a generally westerly dipping feature with an average width of several feet. To date, drilling and mine development has yielded very encouraging gold values within each of the vein zones described above. As shown on Figures 4 and 5 on the following page, several high-grade drill intercepts have been encountered with values up to 75.0 oz/ton gold (East vein zone). Drilling indicates each of these vein zones to be open along strike and at depth. 21 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Fig. 4. - Red Hills Vein Zones Composite Cross Section [[Image Removed: (GRAPHIC)]] 22 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Two readily obvious targets where high-grade gold in excess of 1.0 ounce of gold
per ton has been intersected is shown on Figure 5 below with dashed outlines.
Some drill holes have been combined with their respective actual values for sake
of clarity. Additionally, each of these vein zones appear to be open to the
north, to the south, and to depth.
Fig. 5. - Red Hills Vein Zones Plan View
[[Image Removed: (GRAPHIC)]]
23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
A3-D depiction, (Fig. 6 below), of the three identified vein zones within theRed Hills shows the complex nature of their intersecting relationship. This complex intersection of the three vein components provides several locations where high-grade gold concentrations are identified. Fig. 6. - 3D Section of the Red Hills Vein Zones [[Image Removed: (GRAPHIC)]] Red Hills Zone Summary The drilling of this resource area was performed by LSG from 2000 to 2006 and assaying was performed byALS Chemex . All activity was performed prior to the company's need to have the drilling be resource NI 43-101 compliant.Mine Development Associates has audited LSG's drilling data base and concluded analyses of drill-sample pulps compared well with the original database gold analyses at grades relevant to the potential underground mining scenario at
Red Hills.
We assume the zone contains 10,000 ounces of AU (This assumption is non-NI 43-101 compliant). Historic underground mining was executed by chasing veins that yielded pockets of high-grade gold production. LSM is following the same method and chasing its known high-grade gold-bearing veins. LSM's initial mining stage in theRed Hills area will extract mineralized material from the currently exposedStope Vein Zone , and theDecline Vein Zone on the 300-foot mine level. Mining dimensions in theStope Zone are expected to be an average up to 4 feet wide, approximately 80 feet upwards and 100 feet along strike. The mining in the Decline will achieve mineralized material extraction while developing access to lower levels. Eventually the gold mineralization below the 300-foot level in both the Stope and Decline Vein Zones will be removed through the development of a downward spiral ramping approach, ultimately accessing mining depths to approximately the 450-foot mine level. 24 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Based on the success and encouragement realized through drilling conducted by Trafalgar in 1982 and Westley in 1985, and further success through follow-up drilling by LSG and ICN to date, a vein zone measuring up to 40 feet in width and trending at least 600 feet north-northeasterly, exists immediately west of the Church shaft (fig. 6 below). Our interpretation of drilling to date indicates this vein zone, which is comprised of numerous individual veins up to several inches in width each, to be a steeply westerly-dipping feature, with several intercepts of high-grade gold exceeding 1.0 ounce of gold per ton. Areas highlighted in red on figures 7 and 8 display interpreted orientation of repeated vein sets based on drill intercepts. Figure 7 also shows the high priority drill targets we are currently drilling to yield additional high-grade gold concentrations in the Church Vein zone. The nearly 200-foot vertical interval between the 100-level gold mineralization and the 300-level gold mineralization is a high priority target, as are the extensions to the north and south, and down-dip from the 300-level workings.
As seen in red in Fig. 7. below, the Company has executed 6 core holes definition drilling of 6 core holes. Total drilling do date is approximately 1500 ft. We are awaiting assay results to plan our next series of drill holes.
Also shown on Fig. 7. is the approximate location of the
Fig. 7 - Church Vein Zones and Decline Vein Zone
[[Image Removed: (GRAPHIC)]]
25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Figure 8 - Cross Section of Church Vein Zone at Section 3555
[[Image Removed: (GRAPHIC)]]
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
ICN Resources Drilling
ICN Resources acquired control of the property in March 2011 . During that year
ICN drilled 26 core holes for a total of 5,795 ft (1,767 m) and an additional 63
RC holes for a total of 27,470 ft (8,375 m). The core holes (hole ID prefixed
with "ICN-" ) were drilled largely in the Church Zone and the RC holes (hole ID
prefixed with "ICR-") were utilized to test other exploration targets throughout
the property.
The third core hole, ICN-003, returned a weighted-average intercept of 9.5 ft (2.90 m) that assayed 40.8 oz/ton (1.4 kg/t) gold. Eleven holes were then drilled around the ICN-003 discovery hole within a 100 meter by 150-meter area. Additional extraordinary high-grade intercepts included 4.5 ft (1.37 m) in ICN-013 that assayed 51.46 oz/ton (1.76 kg) gold, and a weighted average of 9.5 ft (2.9 m) in ICN-014 that averaged 26.8 oz/ton (918.0 g/t) gold. The next highest-grade intervals are 4 ft (1.22 m) in ICN-023 that averaged 1.46 oz/ton (50 g/t) and 3 ft (.91 m) in ICN-024 that assayed .802 oz/ton (27.5 g/t). All of these high-grade intercepts lie along the same north-northeast structural trend, which also falls in the broader NE corridor of mineralization. See the table below for drill hole intercepts greater or equal to 0.5 oz/ton (17.14 g/t). ICN's core drilling showed that theChurch Zone is covered by as little as 55 ft (16.9 m) of post-mineral cover. The zone remains open along strike and down-dip and falls within the NE Corridor as defined by mineralization and geophysics. The RC drilling program was designed to test four areas. Most of the work was focused on the 600-foot (183 m) strike length of the NE Corridor between theChurch Zone and theCombination Pit . Six holes were drilled to test the January area, immediately west of theCombination Pit . An additional 19 holes were drilled to test mineralized zones noted by prior exploration programs in the northeastern portion of the claim block, including the Sheets-Ish Silver Pick and Phelan Shaft areas. Five holes were located in the Newmont Lode area to test extensions of known mineralization. Drilling in the NE Corridor (away from theChurch Zone ) showed that the structure and alteration persist throughout, and that attractive gold mineralization is present. Numerous lower grade intercepts were encountered, which contained shorter high-grade intervals. The degree of silicification, quartz veining and fracturing in these intercepts indicates that the lower grade intercepts may represent halos to higher grade mineralization. Additional drilling will be required to better delineate these mineralized zones.
ICN Resources Drill Intercepts Greater or Equal To 0.5 oz/ton (17.14 g/t)
Intervals greater than 1.0 oz/ton (34.29 g/t) are in bold.
Hole ID From m To m From ft To ft Length ft Au g/t Au oz/ton ICN-001 59.7 60.7 196.0 199.0 3.0 23.2 0.677 ICN-001 60.7 61.6 199.0 202.0 3.0 215.7 6.290 ICN-003 16.9 19.8 55.5 65.0 9.5 1398.6 40.793
Incl. 16.9 18.6 55.5 61.0 5.5 547.3 15.963
Incl. 18.6 19.8 61.0 65.0 4.0 2569.2 74.935 ICN-003 24.8 26.8 81.5 88.0 6.5 57.1 1.665 ICN-008 94.5 95.3 310.0 312.5 2.5 183.6 5.355 ICN-013 28.0 29.4 92.0 96.5 4.5 1,764.2 51.455 ICN-014 25.1 26.1 82.5 85.5 3.0 181.9 5.306 ICN-014 27.0 28.0 88.5 92.0 3.5 2,332.0 68.018 ICN-015 66.4 67.2 218.0 220.5 2.5 24.5 0.714 ICN-018 57.9 59.4 190.0 195.0 5.0 23.5 0.684 ICN-023 64.3 64.9 211.0 213.0 2.0 61.6 1.798 ICN-023 64.9 65.5 213.0 215.0 2.0 37.1 1.081 ICN-024 24.1 25.0 79.0 82.0 3.0 27.6 0.805
27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
ICN Resources Drill Intercepts Greater or Equal To 0.5 oz/ton (17.14 g/t) (Continued)
Intervals greater than 1.0 oz/ton (34.29 g/t) are in bold.
ICN Resources rotary-reverse circulation ICR-003 18.3 19.8 60.0 65.0 5.0 39.0 1.138 ICR-003 19.8 21.3 65.0 70.0 5.0 21.7 0.633 ICR-003 39.6 41.1 130.0 135.0 5.0 17.2 0.502 ICR-003 59.4 61.0 195.0 200.0 5.0 19.0 0.554 ICR-031 105.2 106.7 345.0 350.0 5.0 17.3 0.505 ICR-032 64.0 65.5 210.0 215.0 5.0 18.2 0.530 ICR-044 12.2 13.7 40.0 45.0 5.0 28.3 0.826
GOLD MINERALIZATION and ALTERATION
Goldfield is one of the most prominent North American examples of the epithermal subclass classification known as high-sulfidation (or alunite-gold) deposits. This type of deposit is characterized by intense pyritization and low-pH, acid-sulfate hydrothermal alteration of the volcanic host rocks. Gold mineralization occurs in brecciated, quartz-alunite vein-filled faults and fractures. Individual veined zones are typically one to three feet in total width and are characterized by a clustering of several smaller veins up to three inches in width each. Gold deposition has been dated (using isotopes) as occurring 22 to 18 million years ago (Silberman, 1985). Fluid inclusion and oxygen isotope data from several locations within the district indicate an ore deposition temperature ranging from 200 to 2900 degrees C. Host rocks surrounding the brecciated quartz-alunite-filled faults and fractures typically display a near-symmetrical pattern of three successive hydrothermal alteration zones. The gold-bearing veined zones containing predominantly quartz, alunite and pyrite, invariably are surrounded by strongly developed silicification (silica replacement of host rock). An advanced argillic zone enveloping the silicification is characterized by the presence of alunite, kaolinite, pyrite, quartz and montmorillonite, which further grades into a more regional propylitic alteration zone containing calcite, chlorite, and pyrite. Widespread intense hydrothermal alteration often makes it difficult to trace individual volcanic units. HIGH-GRADE GOLD OCCURRENCES TheGoldfield mining district has recorded production of more than 4.2 million ounces of gold and 1.5 million ounces of silver. Production in the district generally has been limited to an area about one mile (east-west) by about one and one-half mile (north-south). High-grade gold ores (>1.0 oz/ton) typically occur as breccia-matrix and open-space vug fillings within a series of banded quartz-alunite veins, surrounded by pervasively silicified zones that often contain lower-grade gold (>0.05 oz/ton). From 1903 to 1925, about fifteen individual high-grade ore bodies averaging 100,000 tons and yielding 100,000 to 500,000 ounces of gold each were mined from the veins in the immediate vicinity of the Apex of the Main Vein at the Combination pit. Typical dimensions of these ore bodies are approximately 200 feet along strike, 300 feet on dip, and up to 20 feet in width. Of the total tonnage, high-grade ores accounted for 51% mined. The average grade of total gold produced during this period was 1.13 ounces per ton; 96% of total gold produced had an average grade greater than 1 ounce per ton, while 39% of total gold produced had an average grade of 2.9 ounces per ton. The cutoff grade in the district was 0.25 ounces of gold per ton. The majority (75% to 80%) of the district's gold production occurred from depths of 600 feet or less. The deepest ores mined atGoldfield were 1,900 feet below the surface and approximately 2,500 feet downdip from the apex of the lode.
Unoxidized ore, formed as cavity fillings in brecciated veins, consists of varying proportions of native gold and gold tellurides including calaverite and goldfieldite, as well as sulfosalt minerals including bismuthinite and famatinite, each of which are associated with high-grade gold.
28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Geophysics
CSAMT
In 2008, Lode-Star Gold contracted Zonge Geophysics to carry out an orientation
CSAMT (controlled source, audio-frequency magneto-telluric) survey. The
objective was to determine the effectiveness of this technique in detecting
resistivity variations that correlate with known gold-bearing quartz vein zones.
Five east-west lines were run across the Church-Red Hills-Newmont Zone area for
a total of 1.7 line miles (2.7km) of coverage. The results clearly defined
several pronounced resistivity gradients with patterns associated with
aforementioned areas of known gold mineralization.
In February 2012 , ICN contracted Zonge Geophysics to carry out a similar CSAMT
survey which covered nearly all of the Goldfield Bonanza property. It included
32 lines for a total of 10.6 line-miles (17 line-kilometers). The survey data
was acquired using 30-meter (100 ft) receiver dipoles in spreads of six
down-line electric field dipoles with two magnetic field measurements taken per
spread in the broadside mode of operation. The signal source was a Zonge GGT-30
constant current transmitter. Survey control was maintained using a Trimble
PRO-XRS GPS receiver.
Figure 9 below displays the results of the property-wide survey. Overlain on the
CSAMT is drilling in the Northeast Corridor with drill hole assays presented as
calculated grade X thickness (GxT) values. There is a clear association of CSAMT
resistivity highs with high gold assays from these drill holes, occurring in
highly silicified areas. Also shown on figure 8, the biogeochemical survey
anomalies are overlain on the CSAMT results, indicating close correlation with
high resistivity values. The biogeochemistry patterns are discussed further in
the Biogeochemistry section below.
The main NE Corridor is defined by a major break in the CSAMT data. This break
is directly indicative of significant northwest and northeast oriented
structures at depth, some of which have been observed in underground exposures
and interpreted through drilling. The potential significance of the CSAMT break
is demonstrated by the drill holes in and around the Newmont Lode in the
southern portion of the grid.
Holes in this area are weakly to strongly gold mineralized, suggesting that further drill testing southwest along this break is warranted.
In addition, the mineralization trending northwesterly in the Sheets-Ish,Silver Pick , Phelan area is shown to hug the sharp Northwest break in the CSAMT response. Thus, the better gold grades seem to follow the margins of the CSAMT highs. The principal conclusion was that the general exploration model was verified - "Main District style" high-grade gold mineralization is, in fact, localized beneath the post-mineral cover below theLode-Star Gold claim block. 29 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Figure 9 - Geophysics & Biochemistry Anomalies w/ GxT Drill Assays [[Image Removed: (GRAPHIC)]] 30 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Biogeochemistry Figure 10 Biogeochemical Interpretive
Map
Conventional surface sampling of [[Image Removed:
(GRAPHIC)]]
outcrops and soils on theLode-Star claims is not useful due to poor exposures and contamination by waste dumps and tailings. However, biogeochemical sampling has been shown to be effective in indicating areas of anomalous gold and other gold-related trace metal values below the Seibert gravels. InAugust 2011 , ICN personnel sampled rabbit brush in an area measuring approximately 4000 feet (1200 m) by 2000 feet (600 m) in the northern and central portions of the property, including in the Silver Pick shaft area and in the NE Corridor target area. The program was designed, and the data interpreted byShea Clark Smith of Minerals Exploration & Environmental Geochemistry (Smith, 2012). Large areas that are defined by gold concentrations from 2 - 60 ppb are significant and attest to the volume (and possibly grade) of mineralized rock in contact with groundwater in these areas. Smith states that metal uptake in rabbit brush is not overwhelmed by mineralized dust that might have masked the metal concentrations in plant tissues of less well endowed (by gold) areas. The Figure to the right displays the gold-mineralized areas indicated by the biogeochemical data. The anomalies cluster in areas of historically mined mineralization near the Phelan, Sheets-Ish andSilver Pick shafts. Most importantly multiple clusters occur in the Northeast Corridor area, which includes the Newmont Lode and especially theChurch Zone . Of particular note is the cluster of anomalies that exist to the northwest of the NE Corridor, correlating closely with interpreted northwest-trending structures. Thus, the biogeochemical data confirms the conclusions from drilling and underground geologic work as shown on Figure 8 above. Overall the biogeochemical anomalies were found in four areas of the property that have had no drilling, as follows:
1. the area immediately east of the
2. several grouped anomalies immediately northwest of the Newmont Lode and the
January-Whiterock shaft;
3. a northwest trending series of anomalies extending 400 meters to the northwest
of the Church discovery zone; and,
4. three separate anomalies located to the west of the Silver Pick shaft and to
the east of the Phelan shaft in the northern portion of the claim group. In
general, all of the drill holes with anomalous gold values fall within
biogeochemical anomalies and all those holes with no significant gold
intercepts are outside the biogeochemical anomalies.
Seismic Survey
In 1980 Trafalgar Mines contracted Cooksley Geophysics to conduct a refraction
seismic survey over a small area in the Church zone. This survey delineated
several shallow silica ledges which were confirmed by drilling to be gold
bearing. Westley Mines leased the property during 1985. They contracted Dr.
McWilliams , a professor at Stanford , to conduct a more extensive refraction
seismic survey. Thirteen east-west lines were run at approximately a 400-foot
(122m) spacing covering an area from about 600 feet (183m) south of the Silver
Pick shaft to 2000 feet (610m) south of the January-Whiterock shaft. This work
delineated silicified zones and ledges which are interpreted to have horizontal
thicknesses of up to 200 feet (61 m) and varying lengths. See Fig. 10 below.
31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Figure 11 - Seismic Survey Anomalies
[[Image Removed: (GRAPHIC)]]
32
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
The Company's immediate drill program is to define its existing and mineable Gold mineralization within the northeast corridor. See Fig. 13. Specifically, the Church,Red Hills /Decline and Newmont Zones, referred to as the CRN Area. Current drill budget isUS$1,800,000 plus$200,000 in analytical fees. Combined total cost:US$2,000,000 . To date the Company has commenced definition drilling in theChurch Zone . Approximately 1500 ft of core drilling has been executed at a price of roughly$100,000 . All the costs for drilling have been paid by the Company's largest shareholderLode Star Gold, INC Fig. 12 Immediate Drill Program Area [[Image Removed: (GRAPHIC)]]Red Hills ,Decline Zone : The Company is planning for 6,000 combined feet of deep core drilling for theRed Hills andDecline Zone . Anticipated Cost$400,000 . See Table 11a.Church Zone : The Company has commenced its 6,400 combined feet of drilling for theChurch Zone with approximate 1500 feet drilled to date Anticipated Cost$400,000 See Table 11b.Newmont Zone : Future planning for an initial 22,200 combined feet of surface drilling in theNewmont Zone . Anticipated Cost (Surface)$1,000,000 See Table 11c. Phase 1
Table 12a. -
Red Hills Surface Hole Depth $/ft Cost/Hole # of Holes Cost TTl ft Drilled Core Drilling 1000 avg. 60.00$ 60,000 6$ 360,000 6,000 Contingency$ 40,000 Total Budget 6$ 400,000 6,000
Table 12b. - Church Zone Drilling Budget
Church Zone Surface Hole Depth $/ft Cost/Hole # of Holes Price TTl ft Drilled Core Drilling 300 50.00$ 15,000 8$ 120,000 2,400 Core Drilling 1000 60.00$ 60,000 4$ 240,000 4,000 Contingency$ 40,000 Total Budget 12$ 400,000 6,400
33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Phase 2
Table 12c. - Newmont Zone Surface Drilling Budget (Planned)
Newmont Zone Surface Hole Depth $/ft Cost/Hole # of Holes Price TTl ft Drilled RC Drilling 1000 38.00$ 38,000 10$ 380,000 10,000 RC Drilling 500 38.00$ 19,500 10$ 190,000 5,000 Core Drilling 1000 60.00$ 60,000 4$ 240,000 4,000 Core Drilling 400 50.00$ 20,000 8$ 160,000 3,200 Contingency$ 30,000 Surface Budget 32$ 1,000,000 22,200
Underground Budget Newmont Underground - Yet to be Determined Unplanned
Total for Phase 1 planned step-out drilling -
Combined 12a & 12b Drilling$800,000 Analytical Fees$200,000 Total$1,000,000
Underground mining in theRed Hills area will extract ore on the 300-level and raise to higher levels. The Company has continued its mine development and we plan to initially mine 10,000 tons of material at a rate of approximately 50 tons per day. On-going development has identified several additional areas
where tonnage will be added. We have a$5.0 million exploration and mine development program that will be focused on defining and mining of the Property's gold mineralization; advance the geologic modeling for continued mining; and bulk sampling of the Project's current underground workings as well as for working capital purposes. Funding
Details of the development program are as follows:
Item Major Categories Cost 1. Equipment & Mining Materials$275,000 2. Secondary Escape & Second Production Shaft$1 million 3.Red Hills /Stope & Decline Vein Zones Mining$860,000 4. Drilling the Northeast Corridor$2 million 5. Corporate & General Admin.$865,000 Total$5 million
Line items 1, 2, 3 and 5 above, totaling
Line item 4 accounts for the Development Drilling totaling
The estimates above are for planning purposes only. No information contained
herein should be considered an official corporate offering. The application of
funds shown above is an estimate and may not exactly match the actual future
costs.
34
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Future Exploration Targets Figure 13 - Seismic Survey
Target Area 1. [[Image Removed: (GRAPHIC)]]
North-south oriented CSAMT gradient that
indicates extension of the known
high-grade gold in the Red Hills Vein
Zone .
Target Area 2.
Several Refractive Seismic responses along a north-northwest oriented alignment, suggesting the existence of one (or more) siliceous zones, likely below the 1,700 meter search horizon. The pronounced south-pointing protruding gradient at the south end of this linear, which is similar to the northeast pointing gradient in theRed Hills . This is indicative of the existence of a siliceous zone.
Target Area 3.
A major northwest oriented CSAMT gradient trending similar to numerous historic ore zones in the main district (note the repeated spacing of the prominent NW historic ore zones). Intersection of this northwest oriented gradient with the southern projection of the NE Corridor, that correlates with the existence of biogeochemical anomalies.
Target Area 4.
A north-northeast oriented CSAMT gradient adjacent to the NE Corridor with coincident Refractive Seismic responses and biogeochemical anomalies. A sharp embayment and protruding CSAMT gradient with coincident RS responses and biogeochemical anomaly.
Target Area 5.
Several Refractive Seismic responses along a north-northwest oriented alignment, suggesting the existence of one (or more) siliceous zones, likely below the 1,700 meter search horizon. The intersection of RS responses with CSAMT gradient.
Target Area 6.
A major northwest oriented CSAMT
gradient trending similar to numerous
historic ore zones in the main district
coincident with biogeochemical
anomalies.
35
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Developments
On November 20, 2018 we were issued Water Pollution Control Permit NEV2017109
from the Nevada Department of Environmental Protection (NDEP) regarding
production at the property. This Permit authorizes the construction, operation,
and closure of approved mining facilities in Esmeralda County, Nevada . The
Permit is effective for 5 years until November 20, 2023 and authorizes the
processing of 10,000 tons of ore per year from Lode-Star's underground
operations. 100% of the permitting cost has been borne by our largest
shareholder, Lode-Star Gold INC. Unique to our production permit, the
We have received our blasting permit from the
Company is actively engaged in underground mine development and surface definition core drilling.
The Covid-19 pandemic has had minimal effect on the execution of our milestones.
Metallurgy Reports To date we have had three metallurgy reports prepared. In order they are:Kappes Cassady & Associates located inReno, NV datedJuly 10,2006 , Newmont Mining located inCarlin, NV datedMay 27, 2010 , andMcClelland Laboratories, Inc. located inReno, NV datedJanuary 26, 2016 . Indications are that the Company can expect at a minimum, an 85% AU recovery from floatation milling. Better recovery is achieved by Agitated Leach processing, which show results closer to +90%. The best recovery results, +95%, due to the high sulphide content of the ore, is achieved through roasting. An additional lab report has been generated byKappes Cassady & Associates to determine ore compatibility for processing at Scorpio Gold's milling circuit. Milling OnFebruary 17, 2017 , we executed an agreement with Scorpio Gold Corporation (Scorpio) for a pilot toll milling test. We completed the first test inMay 2017 and both companies have determined that further testing needs to be completed to determine a definitive cost analysis and other operational details. The sample processed was historic material stockpiled on the property surface and therefore of limited metallurgical value, but indicative of material that will be run through the mill. Milling throughput did identify specific equipment configuration details that need to be considered for future runs. Both parties agree that additional milling circuitry is needed for the most optimum gold yield. OnJanuary 22, 2020 we executed a toll milling agreement (the "Agreement") with Scorpio Gold Corporation's affiliate,Goldwedge LLC . The Agreement allows for the processing of ore delivered from our Property to the 400 ton per day Goldwedge milling facility located inManhattan, Nevada . Based on previous metallurgical testing, our ore requires gravity combined with flotation for optimal recoveries of contained precious metals. The Goldwedge milling circuit is currently configured with a gravity recovery circuit. Under the terms of the Agreement, we wouldl advance funds required for the design, engineering, permitting and modifications to the Goldwedge facility to include the addition of a flotation circuit, supporting reagent tanks/silos, secondary lining of process containment ponds, leak detection and monitoring wells associated with fluid containments. The Agreement provides for us to recoup the advanced funds through a reduction in toll milling rates until all advanced funds have been repaid. Following repayment, the toll charges would revert
to standard rates.
Subsequent to a change in ownership of Scorpio, the Company re-assessed the agreement, concluding that it is unlikely to be completed and that the Company has no commitment to continue with it. Based on that, the total of$54,318 incurred in connection with the agreement and included in Prepaid fees has been written off and charged to Impairment expense atDecember 31, 2020 .
Mine Design and Utilization of Equipment
The mine will be designed through the interpretation of detailed drilling data in cross sections and the use of conventional software. Currently there are two areas, theRed Hills and the Church, containing high-grade gold mineralization identified that are to be incorporated into the mine plan. Currently the mine is equipped with a 1-yard scoop-tram loader. Mining activity will be conducted with the utilization of this loader, pneumatic equipment and by an existing conveyor system providing for the transfer of ore to the surface. 36 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) ProductionMining Method We intend to maximize profitability through a disciplined approach involving the separation of high-grade gold ore from waste rock during the mining stage, thus avoiding the additional cost of pre-shipment concentration. In order to maintain the highest grade of ore production the blast holes will be sampled during drilling, then assayed to determine ore boundaries prior to blasting. The current plan is to ship ore directly from the mine to an offsite mill employing a toll-milling arrangement. A summary of the mining methodology is as follows: ? Timbered raises
? Cut & Fill/Resuing Narrow Vein Stoping (described below)
? Mechanized internal decline
Figure M1. - A typical blast pattern to extract the ore from waste using two
detonations.
[[Image Removed: (IMAGE)]]
37
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Timbered Raise Summary
The design accommodates the ease of installation of the timber using pre-cut
timbers. Caps, and Gerts are jointed on each end so that each fits on another,
with a place for each corner post. The timbers are designed to be carried by a
pneumatic tugger hoist and set by a crew of two men. A man-way is provided with
landings every 4 sets vertically. A utility compartment is provided with
accommodation for air and water lines as well as ventilation tubing. The raise
timbering is designed to accommodate chute lagging on each end of the raise,
with a timber slide along the footwall. Each set is to be blocked to the sides
and ends of the raise using similar size timber and wedges. The timbering in
this design is intended for temporary vertical access for mining operations and
is not intended for permanent long-term ground support. (Fig. M2 below).
Cut & Fill/Resuing Stope Summary
Access is provided by first constructing an internal ramp system, or by timbered
raise. RESUING (Shrink Stoping): A method that reduces dilution when the vein is
narrower than the heading. Historically a drift round was taken in two passes.
First pass was to extract the gold vein, and the second pass was to extract the
waste. CUT & FILL: Access is provided by first taking a sill cut, then taking
down the back in successive slices. After mucking, the stope is backfilled, but
enough space is left to mine the next slice.
Fig. M2 - A typical timber raise and a spiral ramp. The arrow indicates where
the raise will be constructed.
[[Image Removed: (IMAGE)]]
38
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Plan of Operations
Drilling and
The Company's underground workings are 100% rehabbed and ready to mine.
The capital requirement to achieve our next phase of project development is
estimated at
- Line items 1, 2, 3 and 5 below, totaling
- Line item 4 accounts for the Development Drilling required to fully assess the property's resource. Application of Funds Item Major Categories Cost 1. Equipment & Mining Materials$275,000
2. Secondary Escape & Second Production Shaft
$2,000,000 5. Corporate & General Admin.$865,000 Total$5,000,000 The estimates above are for discussion purposes only. No information contained herein should be considered an official corporate offering. All costing of the application of funds is an estimate and may not exactly match the actual future costs.
The following tables shows the estimated, detailed application of the
1. Equipment & Mining Materials
Description Cost Quantity Total
a. Blasting Materials and Storage
$5,000 4$20,000
c. Pneumatic Slusher/w bucket used
$5,000 1 Purchased e. Stopers/Buzzies$2,000 2 Purchased f. 1-yard used Scoop$200,000 1$200,000 g. Compressor$130,000 1 Leased
h. Hoist Rehab and Retrofitting
$30,000 1$30,000 Total Equipment Items and Cost$275,000 39 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
2. Secondary Escape and Second, Higher Volume Production Shaft
Location Description Costs Comments
300 ft Level Labor + Equipment
300 ft Level Total$1,000,000 Budgeted
3. Phase 1. Mining the
Location Description Costs Comments
RH/St/Dec Labor Related
Ore Grade Control
Timber $35,000 Timber Prep , crib, man-way & service raise timbers
Equipment Maintenance $30,000 0.5-man hours. $2,000 =Tire wear, service & diesel consumption
Ground Support $20,000 4' Split Set w/plate& monster mat. Estimated 1000 bolts
Explosives $100,000 Ongoing Blasting Materials
Fuel $75,000 15 months @ $5,000 /month
Backfill Material $40,000 Limestone
Consumables $5,000 Small hand tools (Fin hoes, drillsteel, bits, drivers, axes, nails, etc.
Utilities $5,000 24" vent bag, 2" water & 2" air pipe
Contingency $50,000
RH Total $860,000 Budgeted
4.
Description Cost
Newmont Zone $1,000,000 Analytical Fees$200,000 Total$2,000,000
5. General Corporate and Administration Fees
Public Company Administrative Costs Description Cost
Personnel $365,000
Regulatory $200,000
General $300,000
Total $865,000
40
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Funding
All of our ongoing operations, since the inception of our Mineral Option
Agreement on October 4, 2014 , have been funded by monies advanced to us by
Lode-Star Gold INC. (LSG) our largest shareholder. We do not currently have
enough funds to carry out our entire plan of operations, so we intend to meet
the balance of our cash requirements for the next 12 months through a
combination of debt financing and equity financing through private placements.
There is no assurance that we will be successful in completing any such
financings.
If we are unsuccessful in obtaining sufficient funds through our capital raising
efforts, we may review other financing options, although we cannot provide any
assurance that any such options will be available to us or on terms reasonably
acceptable to us. Further, if we are unable to secure any additional financing
then we plan to reduce the amount that we spend on our operations, including our
management-related consulting fees and other general expenses, so as not to
exceed the capital resources available to us. Regardless, our current cash
reserves and working capital will not be sufficient for us to sustain our
business for the next 12 months, even if we decide to scale back our operations.
Going Concern
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our expenses. This is because we have not generated any revenues to date, and we cannot currently estimate the timing of any possible future revenues. Our only source for cash currently is loans or investments by others in our common stock. Intellectual Property
We do not own any intellectual property and we have not filed for any protection of our trademark.
Personnel We have no employees. Our president and CEO, our COO and our Corporate Secretary received no compensation in the years endedDecember 31, 2020 and 2019 for their services, other than the value charged to those years for stock options issued in 2017, as detailed in Item 11 and$100,000 in consulting fees incurred to another company controlled by our CEO in 2020 (2019:$12,000 ). We expect to continue to use outside consultants, advisors, attorneys and accountants as necessary. See Item 10 for information regarding our officers and directors.
We now have a crew of 4 miners and 1 grade-control geologist working underground. The manpower component allows for mine development to advance in multiple headings.
Government Regulations We plan to engage in mineral exploration and are accordingly exposed to environmental risks associated with mineral exploration activity. LSG is currently in the exploration stage on the Property and, pursuant to the Option Agreement, once formal work plans are mutually agreed between us and LSG, we will be the operator.
In general, inNevada , no government permits are required on mining claims for exploration activities which do not involve the use of powered equipment. Any disturbance of existing land and vegetation by powered means will generally require a permit which will specify that after work is completed land be re-contoured to the original surface and be seeded with native plant species. On unpatented claims with federally owned surface, a "Notice of Intent" must be filed with the BLM for all activities involving the disturbance of five acres (two hectares) or less of the surface. A Notice of Intent will include details on the company submitting the notice, maps of the proposed disturbance, equipment to be utilized, the general schedule of operations, a calculation of the total disturbance anticipated, and a detailed reclamation plan and budget. A bond will be required to ensure reclamation and the amount will be determined by the calculated acreage being disturbed. The notice does not have an approval process associated with it but the bond calculation does have to be approved with a letter from the BLM before work can proceed. It is not necessary to file a Notice of Intent prior to work on land with privately owned surface. Measurement of land disturbance is cumulative, and once five acres total has been disturbed on one project, a "Plan of Operations" must be filed and approved by the BLM before additional work can take place. This too requires a cash bond along with a reclamation plan. LSG is not required to file a Notice of Intent for the Property with the BLM; instead, it is required to file one with theDepartment of Environmental Protection of the State of Nevada (NDEP), since the only portion of the Property that has publicly owned surface rights is that which overlaps theGoldfield town limits. This form of notice includes the same information as the BLM Notice of Intent except that a detailed reclamation plan, budget and bond are not required. The notice also has a very informal approval process associated with it. 41 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LSG is currently operating under a Notice of Intent filed with the NDEP and datedJanuary 2011 . This is an open-ended permit that does not require bonding for reclamation and allows for a total of five acres of disturbance. We do not have any additional pending Notices of Intent.
To the best of our knowledge, there are no existing environmental liabilities on the Property. A detailed environmental investigation has not been conducted.
Results of Operations The following summary of our results of operations should be read in conjunction with our audited financial statements for the year endedDecember 31, 2020 which are included with this Report. See the "Cautionary Note Regarding Forward Looking Statements" above for a discussion of forward-looking statements and the significance of such statements in the context of this Report.
We recorded a net loss of
Revenues and Net Loss
Years Ended December 31 Increase/(Decrease)
2020 2019 Amount Percentage
Revenue $ - $ - $ - -
Operating Expenses 355,732 231,811 123,921 53%
Operating Loss (355,732 ) (231,811 ) (123,921 ) 53%
Other Expenses (137,908 ) (65,076 ) (72,832 ) 112%
Net Loss $ (493,640 ) $ (296,887 ) $ (196,753 ) 66%
Expenses
Our expenses for the years ended December 31, 2020 and 2019 are shown below:
Years Ended December 31 Increase/(Decrease)
2020 2019 Amount Percentage
Consulting services $ 160,892 $ 46,274 $ 114,618 248%
Corporate support services 1,869 1,835 34 2%
Exploration and evaluation 18,043 - 18,043 -
Impairment expense 54,318 - 54,318 -Interest, bank and finance charges 83,590 65,076 18,514 28% Mineral option fees 100,000 100,000 - - Office, foreign exchange and sundry 10,425 15,567
(5,142 ) (33% ) Professional fees 40,574 45,342 (4,768 ) (11% ) Transfer and filing fees 23,929 22,793 1,136 5%
Total Operating and Other Expenses
66%
Consulting services
In 2020, we incurred $100,000 in consulting fees payable to a company controlled
by our CEO, compared to $12,000 in 2019, an increase of $88,000 . We granted
stock options to key outside consultants in 2018. The related Consulting
services expense for the year ended December 31, 2020 based on a Black-Scholes
calculation, was $3,535 , compared to $10,562 in 2019, a decrease of
approximately $7,000 . 2020 Consulting services included approximately $34,000
paid to an advisory firm for assistance in exploring fund raising opportunities,
with no equivalent expense in 2019. The net of those changes accounted for the
total year over year increase.
Exploration and evaluation
Exploration and evaluation expense in 2020 was for assay costs. No such costs were incurred in 2019.
42
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Impairment expense
Management concluded that the mill modification agreement with Goldwedge LLC is
unlikely to be completed and that we have no commitment to continue with it.
Based on that, the total of $54,318 incurred in connection with the agreement
and included in Prepaid fees was written off and charged to Impairment expense
at December 31, 2020 . There was no equivalent expense in 2019.
Interest, bank and finance charges
The increase in interest expense in 2020 was mainly due to a net increase of approximately$241,000 in interest-bearing loans and approximately$131,000 in interest-bearing amounts due to LSG for mineral option fees and accrued interest.
Office, foreign exchange and sundry
The decrease of approximately
Professional fees
Professional fees were lower in 2020 primarily due to costs in 2019 of
approximately
Assets and Liabilities
Balance Sheet items with notable year over year differences are as follows:
December 31 Change
2020 2019 Amount Percentage
Prepaid fees $ 3,940 $ 2,078 $ 1,862 90%
Accounts payable and accrued
liabilities 84,181 8,014 76,167 950%
Due to related parties and accrued
interest $ 2,021,878 $ 1,598,114 $ 423,764 27%
Loans payable and accrued interest $ - $ 5,819 $ (5,819 ) (100% )
Additional Paid-In Capital 1,632,181 1,628,646 3,535 -
Prepaid fees increased primarily due to prepayment in 2020 of approximately
Accounts payable and accrued liabilities increased in 2020 primarily due to the
accrual of
Due to related parties and accrued interest increased due to the following:
° the accrual of mineral option fees and related interest due to LSG totaling
approximately$131,000 ;
° net cash loan advances from related parties of
° accrued loan interest due to related parties of approximately
° expenses paid by related parties on our behalf of approximately
Loans payable and accrued interest decreased due to the repayment of
Additional Paid-In Capital increased as a result of the current year expense of a portion of the value assigned to 500,000 stock options issuedNovember 20, 2018 , calculated using the Black-Scholes option pricing model. The expense was charged to Consulting services. 43
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Liquidity and Capital Resources
Our financial condition at
Working Capital
December 31 Increase/(Decrease)
2020 2019 Amount PercentageCurrent Assets$ 16,584 $ 12,577 $ 4,007 32% Current Liabilities 2,106,059 1,611,947 494,112 31% Working Capital (Deficiency)$ (2,089,475 ) $ (1,599,370 ) $
(490,105 ) 31%
Our working capital decreased, as expected, from
o ongoing funding in 2020 from LSG and its controlling shareholder, together with
related interest (increase of approximately
accrual of mineral option fees and related interest due to LSG (increase of
approximately
o the accrual of
change of approximately
approximately
approximately$6,000 of accrued loan interest. Cash Flows Year Ended December 31 Increase/(Decrease) 2020 2019 Amount Percentage Cash Flows Provided By (Used In): Operating Activities$ (127,036 ) $ (100,009 ) $ (27,027 ) 27% Financing Activities 129,181 104,000 25,181 24%
Net increase (decrease) in cash
As of the date of this report, we have yet to generate any revenues from our business operations. Our principal sources of working capital have been related party loans and funds received as subscriptions for our common stock. For the foreseeable future, we will continue to rely on those sources for funding. We have no assurance that we can successfully engage in any private sales of our securities or that we can obtain any additional loans.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Commitments
We do not have any commitments as of
Critical Accounting Policies Our critical accounting policies are mainly those subject to significant judgments and uncertainties which could potentially result in materially different results under different conditions and assumptions. We believe the following critical accounting policies reflect our most significant estimates, judgments and assumptions used in the preparation of our financial statements:
Use of Estimates and Assumptions
The preparation of financial statements, in conformity with US GAAP, requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying disclosures. By their nature, these
estimates are subject to measurement uncertainty and the effect on the financial
statements of changes in such estimates in future periods could be significant.
Management bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources.
Significant areas requiring management's estimates and assumptions are
determining the fair value of transactions involving related parties and common
stock. Actual results may differ from the estimates.
44
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Foreign Currency Accounting
Our functional currency is the
? monetary items at the exchange rate prevailing at the balance sheet date;
? non-monetary items at the historical exchange rate; and
? revenue and expense items at the rate in effect of the date of transactions.
Gains and losses arising on the settlement of foreign currency denominated transactions or balances are recorded in the statements of operations.
Income Taxes We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, Income Taxes. This standard requires the use of an asset and liability approach for financial accounting and reporting on income taxes. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. In addition, and as a result of completing the Acquisition, we anticipate that the following critical accounting policies of LSG will also become our critical accounting policies: Mineral Property Mineral property interests are capitalized and recorded at cost. The property interests are periodically assessed for impairment of value when facts and circumstances suggest that the carrying amount of the property interest may exceed its recoverable amount. Costs of exploration, evaluation and retaining mineral property interests are expensed as incurred. Once we have identified proven and probable reserves in our investigation of our property interests and upon development of a plan for operating a mine, we would enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capital costs will be amortized, using the units-of-production method over proven and probable reserves.
Reclamation Liabilities and Asset Retirement Obligations
Minimum standards for site reclamation and closure have been established by various government agencies that affect our operations. We calculate estimates of reclamation liabilities based on current laws and regulations. US GAAP requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. It further requires the recording of a liability for the present value of estimated environmental remediation costs and the related asset when a recoverable asset (long-lived asset) can be realized. To date, no asset retirement obligation exists due to the early stage of exploration. Accordingly, no liability has been recorded.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by theFinancial Accounting Standards Board , ("FASB") or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial statements upon adoption.
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