MEXUS GOLD US Cautionary Statement Concerning Forward-Looking Statements
The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes included in this report. This report contains "forward-looking statements." The statements contained in this report that are not historic in nature, particularly those that utilize terminology such as "may," "will," "should," "expects," "anticipates," "estimates," "believes," or "plans" or comparable terminology are forward-looking statements based on current expectations and assumptions.
Various risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from expectations include, but are not limited to, those set forth under the section "Risk Factors" set forth in this report.
The forward-looking events discussed in this report, the documents to which we refer you and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. For these statements, we claim the protection of the "bespeaks caution" doctrine. All forward-looking statements in this document are based on information currently available to us as of the date of this report, and we assume no obligation to update any forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.
COVID-19
The recent outbreak of the coronavirus COVID-19 has spread across the globe and
is impacting worldwide economic activity. Conditions surrounding the coronavirus
continue to rapidly evolve and government authorities have implemented emergency
measures to mitigate the spread of the virus. The outbreak and the related
mitigation measures have had and will continue to have a material adverse impact
on global economic conditions as well as on the Company's business activities.
The extent to which COVID-19 may impact the Company's business activities will
depend on future developments, such as the ultimate geographic spread of the
disease, the duration of the outbreak, travel restrictions, business
disruptions, and the effectiveness of actions taken in
The Company
Our President and CEO,
Our executive offices are located at,
We were originally incorporated under the laws of the
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Description of the Business of
In addition, our management will look for opportunities to improve the value of the gold projects that we own or may acquire knowledge of or may acquire control through exploration drilling, introduction of technological innovations or acquisition with the goal of developing those properties into operating mines. We expect that emphasis on gold project acquisition and development will continue in the future.
Business Strategy
Our business plan was developed with the overriding goal of maximizing shareholder value through the exploration and development of our mineral properties, utilizing the extensive mining-related background and capabilities of our management consultants and advisors. To achieve this goal, our business plan focuses on the following prospective areas:
Mining Operations
We classify our mineral properties into three categories: "
Effective
Santa Elena Gold Project
The Company is managed by
Exploration at the Santa Elena project area has been systematically directed as
initial surface geologic mapping and sampling with some ground geophysical
surveys as electro magnetics and radiometric. Evaluation of results has led to
continued production sampling with percussion drilling and diamond core drilling
of portions of areas of interest. This resulted in 3 major geologic structures
which are open pit mined and are the main source of production. The producing
structures are all associated with mixed hydrothermal quartz vein fissure
filling and orogenic thrust fault conduits and are in the order of 0.5 to 9 g/t
gold. Additional structures are in the area and will soon be evaluated and
brought to production. The exploration resulted in the discovery of three major
targets on Mexus' three of nine concessions located on the Santa Elena gold
project. This resulted in the company opening 3 pits: Julio 1, Julio 2 and Mexus
3. Mineralized material was crushed to 1/2inch minus and transferred to the
existing heap leach pad via a conveyor system. All three pits show mineable
grade gold up to 1 oz. per ton. All 3 pits show a viable chemistry after running
four months and testing an estimated 25,000 tons. As of
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Preliminary reserve estimates at the Santa Elena project indicates a tonnage of approximately 1.5 to 5 million tons to a depth of 100 meters on the Julio structure. Geologic data further indicates the Julio structure is present at depths of 1,000 to 2,000 meters at a shallow incline. There are five additional structures that have been identified for further evaluation of the Santa Elena Projects lands.
Production was slowed due to COVID 19.
Return flow from the heap leach pad is running from .2 to .5 GPT of solution. At this stage of development, the company expects return from the heap leach pad flow and the activated carbon cell flow to match at 9 liters per second allowing a 24 hour a day, 7 day a week uninterrupted operation at an average of .35 per ton solution.
Three carbon cells are in use with 100% recovery in addition to the final
recovery being an electro winning plant to clean the gold from the activated
carbon. The electro winning plant takes approximately 30 hours to run 1 ton of
material carbon. The company has a complete and operable
Mabel Property
Mexus Gold MX, a fully owned subsidiary of
Mexus has decided to continue to validate a Technical Report on the advanced
Gold and Porphyry Copper property. Completion of an updated 43101 Technical
Report will include all exploration results since the last 43101 report which
was issued on
The 2013 exploration consisted of more than 700 drill holes, 4000 RC drills and surface samples which were analyzed in several independent laboratories.
Preliminary Resource Estimates from a 5% fraction of the project gave 1.3 million tons of 0.7 g/t Au and 23 g/t Ag including 20% with an average grade of 1.9 g/t Au equivalent. Potential resources at productive shallow depths are expected to be approximately 6,000,000 tons.
There are also surface geological and geophysical anomalies identified which, upon further evaluation and sampling, may present a strong potential for the existence of a porphyry copper target.
Ures Property
In the past year, Mexus has completed leach VAT testing and trenching including assaying with promising results. Historical assaying of the Ocho Hermanos concession has produced assays up to 1 Kg Ag per ton with 10 Gpt Au, 4% lead and 1% copper. One ton of mineralized materials holds 40 metals which is a complex ore. The Company is evaluating production procedures to economically process this ore.
Mexus has done limited drill hole testing of the
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In March, 2014, we sold our 50% interest in the Joint Venture to
Effective
Other Operations Cable Salvage Operation
The Company completed the first phase of its
At
Mergers and Acquisitions
We will routinely review merger and acquisition opportunities. An appropriate
merger and acquisition opportunity must be accretive to the overall value of
Description of Mining Projects
The following properties are located in
Santa Elena Prospects (formerly known as the
The Company executed a revised Mineral Mining and Purchase Agreement, dated
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Santa Elena Concessions
AREA
No CONCESSION NAME TITLE NO HECTARE DATE ISSUED END DATE
1 MARTHA ELENA 221447 339.3811 10/2/2004 9/2/2054
2 JULIO II 221448 59.0401 10/2/2004 9/2/2054
3 JULIO III 231609 99.6381 3/25/2008 3/24/2058
4 JULIO IV 231610 99.9687 3/25/2008 3/24/2058
5 JULIO V 231611 100 3/25/2008 3/24/2058
6 JULIO VI 231612 100 3/25/2008 3/24/2058
7 JULIO VII 231613 100 3/25/2008 3/24/2058
Total Hectares 898.028
Total Acres 2,219.0755
The Company has conducted geological evaluation of the Santa Elena Prospects comprised of expanding the existing placer facility for the purpose of mineral evaluation, physical geological evaluations including the drilling of reverse circulation and core holes. Situated on the prospect area are caterpillars, haul trucks, maintenance trucks, power generators, pumps, tractor blade, truck mounted winch, water handling supplies and maintenance trailer with supplies. The prospect area is accessed from a state highway on existing roads. There is access to well water which is available for the current and future operations.
On
We have been unable to locate geologic maps of the area from the
There are multiple exploration targets on the Santa Elena Prospect. The two most important are the quartz stockwork zone and the Julio vein system. The first target will be the quartz stockwork zone area. A limited drilling program has been conducted and completed. Production testing has been completed resulting in the construction of the surface production and recovery facilities.
Access to the Santa Elena prospect is via dirt road approximately two miles west
of paved highway
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FIGURE 1 - SANTA ELENA PROJECT LOCATION MAP
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[Please see Exhibit 99.1]
Exhibit 99.1 - PRELIMINARY REPORT AND FIRST STAGE MAPPING
Ures Property Prospects, being comprised of the following projects:
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FIGURE 2 - GUADALUPE DE URES PROJECT LOCATION MAP
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The initial term of the agreement was 5 years. During the term Mexus must pay
40% of the net revenue received for minerals produced to the seller. At the
conclusion of the 5 years, the lease could be purchased for
[[Image Removed: Picture]]
FIGURE 3 - OCHO HERMANOS
PROJECT AREA CLAIM MAP
We did not perform any systematic sampling or any systematic drilling and
because of this did not set up a formal QA/QC program. All of the samples were
submitted to
We located a previously mined area with interesting values - Ocho Hermanos. Mexus began to submit characterization samples to the above noted assay laboratories, in order to determine the range of Au - Ag values
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present. Mexus then began an investigation into recovery options by using material taken from the areas with the better values.
The above work was completed before any systematic exploration was done because if no recovery method could be found relatively quickly, the project would move more slowly because of the lead time involved. Mexus began work on an Environmental Impact Statement for the likely operational area (a total of 4 hectares to begin). In order to complete the EIS, figures for estimated tonnages for volume were submitted. To date, no suitable recovery method has been identified due primarily to the partial oxidation of the principally sulfide deposit.
The Environmental Permits run for 35 years so there is time for further investigation.
The main geologic feature of this project area is an apparent "manto" sulfide zone composed primarily of galena with some pyrite, arsenopyrite and possibly pyrrhotite. Above this zone there is an oxide zone composed of iron and lead oxides. The sulfides themselves are partially oxidized. Reconnaissance and characterization samples taken indicated sporadically high gold and silver values. The deposit occurs in shallow water sediments (principally quartzites, with some limestone and shales) and can be best characterized as a skarn type deposit due to the presence of intrusive rocks within 1 kilometer.
Given the complex nature of the sulfide deposit and the partial oxidization of
the material (indicated by the presence of yellow colored lead oxides), a
satisfactory recovery method has not yet been found. Consequently, at this time,
no further systematic work beyond the initial reconnaissance and
characterization sampling has been completed. The entire project was essentially
put on hold until a suitable recovery method is found, which is a continuing
effort and at this time is being pursued by a member of the faculty at the
The Environmental Permits detail all of the affected flora and fauna. The land
is presently used for cattle grazing and the surface rights are owned by the
community of Guadalupe de Ures. An agreement is in place with
No known contamination from past mining activities was found or is known to locals. The historic workings consisted of a few shallow adits and pits. In the course of obtaining the Environmental Permission the permit stipulated that properly lined ponds etc. must be used to prevent any potential surface or ground water contamination from any proposed activities.
Only separation is proposed to be conducted on site if found to be possible, while final metal recovery will be conducted at a properly licensed and certified metal refining facility. Current efforts to find suitable recovery methods are being conducted off site in a University laboratory. Up sizing the process, if found, will be completed by a licensed, certified metallurgical laboratory.
Figures of the proposed permitted sites are attached. These were extracted from the environmental permit
Application.
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FIGURE 4- MICROLOCALIZACION PROYECTO "URES MINING DISTRICT"
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FIGURE 5 - LOCALIZACION DE AREAS DE EXTRACCION
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FIGURE 6 - PLANTA DE BENEFICIO
AREA DE EXTRACCION
370 Area Project This zone is composed of a sedimentary sequence (limestone, quartzite, shale) intruded by dacite and diorite as well as rhyolite. The dacite exhibits argillic alterations as well as silicification (quartz veins). The entire area is well oxidized on the surface. This is an area of classic disseminated low grade gold and silver mineralization. Surface grab sample assays show 0.14 grams per ton to as high as 29.490 grams per ton gold. This area is an important area for potentially defining an open pit heap leach project.
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--------------------------------------------------------------------------------El Scorpion Project Area
This area has several shear zones and veins which show copper and gold
mineralization. Recent assays of an 84' drill hole shows 1.750% per ton to .750%
per ton of copper and 3.971 grams per ton to 0.072 grams per ton of gold.
Another assay of rock sample from the area shows greater than 4.690% per ton
copper. This land form distribution appears to be synonymous to the ideal
porphyry deposit at Baja La Alumbrera,
Los Laureles
As of the date of this Report, we have opened up old workings at the
The San Felix Mine Project
The San Felix mining site contains seven (7) concessions over an area of
approximately 26,000 acres located in the
Employees
We have one employee,
Competition
We compete with other mining companies in connection with the acquisition of
gold properties. There is competition for the limited number of gold acquisition
opportunities, some of which is with companies having substantially greater
financial resources than
Management of
Legal Proceedings
There are no legal proceedings to which
Property Interests, Mining Claims and Risk
Property Interests and Mining Claims
Our exploration activities and operations in
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property acquisition agreement is necessary in order for us to explore or develop such property. Generally, these agreements take the form of long term mineral leases under which we acquire the right to explore and develop the property in exchange for periodic cash payments during the exploration and development phase and a royalty, usually expressed as a percentage of gross production or net profits derived from the leased properties if and when mines on the properties are brought into production. Other forms of acquisition agreements are exploration agreements coupled with options to purchase and joint venture agreements.
Reclamation
We may be required to mitigate long-term environmental impacts by stabilizing, contouring, re-sloping and re-vegetating various portions of a site after mining and mineral processing operations are completed. These reclamation efforts will be conducted in accordance with detailed plans, which must be reviewed and approved by the appropriate regulatory agencies.
While the Company, as of
Risk
Our success depends on our ability to recover precious metals, process them, and successfully sell them for more than the cost of production. The success of this process depends on the market prices of metals in relation to our costs of production. We may not always be able to generate a profit on the sale of gold or other minerals because we can only maintain a level of control over our costs and have no ability to control the market prices. The total cash costs of production at any location are frequently subject to great variation from year to year as a result of a number of factors, such as the changing composition of ore grade or mineralized material production, and metallurgy and exploration activities in response to the physical shape and location of the ore body or deposit. In addition costs are affected by the price of commodities, such as fuel and electricity. Such commodities are at times subject to volatile price movements, including increases that could make production at certain operations less profitable. A material increase in production costs or a decrease in the price of gold or other minerals could adversely affect our ability to earn a profit on the sale of gold or other minerals. Our success depends on our ability to produce sufficient quantities of precious metals to recover our investment and operating costs.
Distribution Methods of the Products
The end product of our operations will usually be doré bars. Doré is an alloy consisting of gold, silver and other precious metals. Doré is sent to refiners to produce bullion that meets the required market standard of 99.95% pure gold. Under the terms of refining agreements, the doré bars are refined for a fee and our share of the refined product is delivered to a buyer for immediate sale or held by the Company for investment purposes.
General Market
The general market for gold has two principal categories, being fabrication and investment. Fabricated gold has a variety of end uses, including jewelry, electronics, dentistry, industrial and decorative uses, medals, medallions and official coins. Gold investors buy gold bullion, official coins and jewelry. The supply of gold consists of a combination of current production from mining and the draw-down of existing stocks of gold held by governments, financial institutions, industrial organizations and private individuals.
Patents, trademarks, licenses, franchises, concessions, royalty agreements, or labor contracts, including duration;
We do not have any designs or equipment which is copyrighted, trademarked or patented.
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--------------------------------------------------------------------------------Effect of existing or probable governmental regulations on the business
Government Regulation
Mining operations and exploration activities in
Environmental Regulation
Our gold projects are subject to various Mexican federal laws and regulations
governing protection of the environment. These laws are continually changing
and, in general, are becoming more restrictive. It is our policy to conduct
business in a way that safeguards public health and the environment. We believe
that the actions and operations of
Research and Development
We do not foresee any immediate future research and development costs.
Costs and effects of compliance with environmental laws
Our gold projects are subject to various federal and state laws and regulations governing protection of the environment. These laws are continually changing and, in general, are becoming more restrictive. It is our policy to conduct business in a way that safeguards public health and the environment. We believe that our operations are and will be conducted in material compliance with applicable laws and regulations. The economics of our current projects consider the costs and expenses associated with our compliance policy.
Changes to current state or federal laws and regulations in
Results of Operations
The following management's discussion and analysis of operating results and
financial condition of
Three months ended
We had a net loss during the three months ended
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--------------------------------------------------------------------------------Operating Expenses
Total operating expenses decreased to
For the three months ended
Other Income (Expense)
We reported
The change in other income (expense) is mainly attributable to a decrease in the gain on the change in the fair value of and settlement of convertible promissory notes and derivative liabilities and a decrease in interest expense.
Liquidity and Capital Resources
On
Our property and equipment increased to
Our mineral properties remained unchanged at
Total assets increased to
Our total liabilities increased to
Our working capital deficit on
Our net cash used in operating activities for the three months ended
Our net cash (used in) provided by investing activities for the three months
ended
Our net cash provided by financing activities for the three months ended
The Company is dependent upon outside financing to continue operations. It is management's plans to raise necessary funds through a private placement of its common stock to satisfy the capital requirements of the Company's business plan. There is no assurance that the Company will be able to raise the necessary funds, or that if it is successful in raising the necessary funds, that the Company will successfully execute its business plan. The Company is unable to predict the effect, if any, that the coronavirus COVID-19 global pandemic may have on its access to the financing markets.
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Going concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
During the three months ended
The Company is dependent upon outside financing to continue operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is management's plans to raise necessary funds through a private placement of its common stock to satisfy the capital requirements of the Company's business plan. There is no assurance that the Company will be able to raise the necessary funds, or that if it is successful in raising the necessary funds, that the Company will successfully execute its business plan. The Company is unable to predict the effect, if any, that the coronavirus COVID-19 global pandemic may have on its access to the financing markets.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and/or liabilities that might be necessary should the Company be unable to continue as a going concern. The continuation as a going concern is dependent upon the ability of the Company to meet our obligations on a timely basis, and, ultimately to attain profitability.
Future goals
The Santa Elena Prospect (formerly known as
Therefore, our goal for the current year is to increase the cash flow of the Company's operations through (a) place the current facilities into full commercial production, (b) increase the mineralization of the ore pad from 1 gram per ton gold and 3 grams per ton silver and (c) increase the capacity of the leach pad.
The Company has now scheduled the installation of a crushing/milling recovery plant for the high grade Julio quartz deposit as a result of the values of the assay analysis from the deposit which range from .250 to 5.5 ounces of gold per ton.
Therefore, our goal for the current year is to increase the cash flow of the placer mining operation, continue the drilling program which began during 2011, initialize mining operations on the Julio quartz deposit while we conduct a thorough geological study by an independent geological firm of the future potential of other vein deposits located near the Julio deposit.
Foreign Currency Transactions
The majority of our operations are located in
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--------------------------------------------------------------------------------Off-balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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