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Item 1A. Risk Factors

2021-08-31 compared with 2020-09-25 · 49 added, 50 removed, 197 unchanged (33% of the section changed)

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While we have not seen a significant impact to our results from COVID-19 to date, if the virus continues to cause significant negative impacts to economic conditions or impacts the Joint Venture Company’s ability to continue exploration work, our results of operations, financial condition and liquidity could be adversely impacted.

Royal Gold will have discretion regarding the use and allocation of funds for further exploration of the Peak Gold Joint Venture Property.

Royal Gold is the Manager of the Joint Venture Company and has appointed two of the three designates to the Management Committee.

Kinross will have discretion regarding the use and allocation of funds for further exploration of the Manh Choh Joint Venture Property.

Kinross is the Manager of the Joint Venture Company and has appointed two of the three designates to the Management Committee.

The Company has appointed one designate to the Management Committee.

Royal Gold has earned a 40.0% membership interest in the Joint Venture Company by making the full $30.0 million investment, in accordance with the JV LLCA, and, therefore, will continue to have the right to appoint two designates to the Management Committee with the Company appointing one designate.

Kinross has a 70.0% membership interest in the Joint Venture Company, in accordance with the A&R JV LLCA, and, therefore, will continue to have the right to appoint two designates to the Management Committee with the Company appointing one designate.

The affirmative vote of a majority of designates will determine most decisions of the Management Committee, including the approval of programs and budgets and the expenditure of the Joint Venture Company ’s investments, which will include the level of expenditures.

As a result, Royal Gold has discretion regarding the use and allocation of funds for further exploration of the Peak Gold Joint Venture Property.

The Company has limited ability to influence the decision of Royal Gold in its capacity as Manager, or as the party controlling the majority of the Management Committee.

There can be no assurance that the Company will be capable of raising additional funding required to continue development of the Peak Gold Joint Venture Property and meet its funding obligations under the JV LLCA.

Pursuant to the JV LLCA, the Company and Royal Gold are required to jointly fund the joint venture operations in proportion to their interests in the Joint Venture Company.

If a member elects not to contribute to an approved program and budget or elects to contribute less than its proportionate interest, its percentage interest will be reduced.

The capital costs of developing a large gold mining facility could exceed $1 billion.

As a result, Kinross has discretion regarding the use and allocation of funds for further exploration of the Manh Choh Joint Venture Property.

The Company has limited ability to influence the decision of Kinross in its capacity as Manager, or as the party controlling the majority of the Management Committee.

There can be no assurance that the Company will be capable of raising additional funding required to continue development of the Manh Choh Joint Venture Property and meet its funding obligations under the A&R JV LLCA.

Pursuant to the terms of the A&R JV LLCA, the Company and KG Mining are required to jointly fund the operations of the Joint Venture Company in proportion to their respective membership interests in that company.

If a member elects not to contribute to an approved program and budget or contributes less than its proportionate membership interest, its percentage membership interest will be reduced.

The Company’s ability to contribute funds sufficient to retain its membership interests in the Joint Venture Company may be limited.

To date, neither the Company nor the Joint Venture Company has generated any revenue from mineral sales or operations.

In the future, the Joint Venture Company may generate revenue from a combination of mineral sales and other payments resulting from any commercially recoverable minerals from the Peak Gold Joint Venture Property.

The Company does not expect the Joint Venture Company to generate revenue from mineral sales in the foreseeable future.

Further, neither the Company nor the Joint Venture Company has any recurring source of revenue other than the Company and Royal Gold’s contributions in connection with the Transactions.

As a result, the Company’s ability to contribute funds to the Joint Venture Company and retain its interest will depend on its ability to raise capital.

The Company has limited financial resources and the ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions, the exploration results achieved at the Peak Gold Joint Venture Property, as well as the market price of metals.

The Joint Venture Company currently does not have any recurring source of revenue, and its only source of cash inflows are contributions received from KG Mining and the Company.

The Company currently does not have any recurring source of revenue.

As a result, the Company’s ability to contribute funds to the Joint Venture Company and retain its membership interest will depend on its ability to raise capital.

The ability of the Company to arrange financing in the future will depend, in part, on the prevailing capital market conditions and the exploration results achieved at the Manh Choh Joint Venture Property, as well as the market price of metals.

The Company cannot be certain that financing will be available to the Company on acceptable terms, if at all.

If the Company is unable to fund its contributions to the approved programs and budgets for the Joint Venture Company, its interest in the Joint Venture Company will be diluted.

In addition, now that Royal Gold has earned a 40.0% interest in the Joint Venture Company, it has the option to require the Company to sell an additional 20.0% of the Company’s interest in the Joint Venture Company in a sale by Royal Gold of its entire percentage interest of 40.0% to a bona fide third-party purchaser.

If the Company were unable to fund its contributions to the approved programs and budgets for the Joint Venture Company, its membership interest in the Joint Venture Company would be diluted.

Further financing by the Company may include issuances of equity, instruments convertible into equity (such as warrants) or various forms of debt.

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Any additional issuances of common stock or securities convertible into, or exercisable or exchangeable for, common stock may ultimately result in dilution to the holders of common stock, dilution in any future earnings per share of the Company and may have a material adverse effect upon the market price of the common stock of the Company.

The Company must depend upon Royal Gold’s management of the Joint Venture Company following termination of the Company’s third-party consulting agreements.

The Company must depend upon Kinross' management of the Joint Venture Company following termination of the Company’s third-party consulting agreements.

On September 29, 2014, the Company terminated its advisory agreement with JEX.

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The Company has historically had part-time employees, none of whom are mineral geoscientists or have experience in the mining industry, and has previously depended upon third party consultants for the success of its exploration projects.

The Company must now depend upon Royal Gold for its expertise in planning work programs, conducting field work, evaluating drilling results and preparing development programs.

There can be no assurance that Royal Gold will continue to fund the Joint Venture Company to continue exploration work.

Pursuant to the JV LLCA, there is no requirement that Royal Gold contribute any future amounts to the Joint Venture Company to continue exploration work, and the Company will have limited funds to continue exploration of the Peak Gold Joint Venture Property, if Royal fails to contribute additional amounts to the Joint Venture Company.

The Company must now depend upon Kinross for its expertise in planning work programs, conducting field work, evaluating drilling results and preparing development programs.

There can be no assurance that Kinross will continue to fund the Joint Venture Company to continue exploration work.

Pursuant to the A&R JV LLCA, there is no requirement that Kinross contribute any future amounts to the Joint Venture Company to continue exploration work, and the Company will have limited funds to continue exploration of the Manh Choh Joint Venture Property, if Kinross fails to contribute additional amounts to the Joint Venture Company.

The Company’s interest in the Joint Venture Company may be reduced.

Pursuant to the JV LLCA, the members will contribute funds to approved programs and budgets in proportion to their respective percentage interests in the Joint Venture Company.

If a member elects not to contribute to an approved program and budget or contributes less than its proportionate interest, its percentage interest will be recalculated by dividing (i) the sum of (a) the value of its initial contribution plus (b) the total of all of its capital contributions plus (c) the amount of the capital contribution it elects to fund, by (ii) the sum of (a), (b) and (c) above for both members multiplied by 100.

Pursuant to the terms of the A&R JV LLCA, the Company and KG Mining are required to jointly fund the joint venture operations in proportion to their membership interests in the Joint Venture Company.

If a member elects not to contribute to an approved program and budget or contributes less than its proportionate membership interest, its percentage membership interest will be reduced.

Going forward, the Company’s ability to contribute funds sufficient to maintain the current level of its membership interests in the Joint Venture Company may be limited.

Due to the effects of COVID-19 and for the safety of the Joint Venture Company's field personnel and the surrounding community, the Management Committee approved a $2.7 million calendar year budget for 2020 that would serve to care for and maintain the Peak Gold Joint Venture Property, and postpone new exploration until conditions permit.

On December 10, 2020, the Management Committee approved a total budget of $18.0 million for the calendar year 2021 to undertake in-fill drilling, engineering and environmental studies necessary to complete a feasibility-level study, additional exploration, community relations, and to prepare the project for formal permitting.

On June 22, 2021 the Management Committee voted to increase the exploration budget by $0.2 million for interpretation of archive drilling, adopting oriented core and geological consulting.

The Company would need to fund its share of the budget, approximately $5.5 million, to maintain its current level of interest in the Joint Venture Company.

If the Company elects not to, or is unable to contribute its proportionate share of the approved exploration budget, its interest in the Joint Venture Company will be reduced.

In addition, now that Royal Gold has earned a percentage interest of 40.0% in the Joint Venture Company, the Company’s interest in the Joint Venture Company may also be reduced if Royal Gold exercises its right to require the Company to sell up to 20.0% of the interest in the Joint Venture Company in a sale by Royal Gold of its entire percentage interest in the Joint Venture Company.

Royal Gold has far greater technical and financial resources than the Company.

Royal Gold is an international precious metals royalty and streaming company with interests in approximately 193 properties on six continents and a market capitalization of approximately $9 billion.

Because of its vastly superior technical and financial resources, Royal Gold may adopt budgets and work programs for the Joint Venture Company that the Company will be unable to fund in the time frame required, and its interest in the Joint Venture Company may be substantially diluted.

The JV LLCA restricts the Company ’s right to transfer or encumber its interests in the Joint Venture Company.

The JV LLCA contains certain limitations on transferring or encumbering interests in the Joint Venture Company including any transfer that would cause termination of the Joint Venture Company as a partnership for Federal income tax purposes except none of the restrictions limit the transfer of any capital stock of the Company.

The formation of the Joint Venture Company and appointment of Royal Gold as Manager do not provide assurance that further exploration efforts will be successful.

The formation of the Joint Venture Company and appointment of Royal Gold as Manager do not provide assurance that further exploration of the Peak Gold Joint Venture Property will be successful, any additional resource will be discovered or a commercial deposit of gold ore and associated minerals will be located.

Kinross has far greater technical and financial resources than the Company.

Kinross is a large gold producer with a diverse global portfolio and extensive operating experience in Alaska.

Kinross has a market capitalization of approximately $7 billion.

Because of its vastly superior technical and financial resources, Kinross may adopt budgets and work programs for the Joint Venture Company that the Company will be unable to fund in the time frame required, and its interest in the Joint Venture Company may be substantially diluted.

The A&R JV LLCA restricts the Company ’s right to transfer or encumber its interests in the Joint Venture Company.

The A&R JV LLCA contains certain limitations on transferring or encumbering interests in the Joint Venture Company including any transfer that would cause termination of the Joint Venture Company as a partnership for Federal income tax purposes except none of the restrictions limit the transfer of any capital stock of the Company.

The appointment of Kinross as Manager of the Joint Venture Company does not provide assurance that further exploration efforts will be successful.

The appointment of Kinross as Manager of the Joint Venture Company does not provide assurance that further exploration of the Manh Choh Joint Venture Property will be successful, any additional resource will be discovered or a commercial deposit of gold ore and associated minerals will be located.

The results of any further exploration work will be assayed and analyzed to determine if additional work should be performed and additional funds expended.

The probability that an individual prospect will contain commercial grade reserves is extremely remote.

The probability of finding economic mineral reserves on the Peak Gold Joint Venture Property is extremely small.

The probability of finding economic mineral reserves on the Manh Choh Joint Venture Property is extremely small.

It is common to spend millions of dollars on an exploration prospect and complete many phases of exploration and still not obtain mineral reserves that can be economically exploited.

Therefore, the possibility that the Peak Gold Joint Venture Property will contain commercial mineral reserves and that the Company will recover funds spent on exploration is extremely remote.

Therefore, the possibility that the Manh Choh Joint Venture Property will contain commercial mineral reserves and that the Company will recover funds spent on exploration is extremely remote.

The price of gold and the gold mining industry are volatile and beyond the Company’s control.

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dollar strength or weakness, speculation, global currency values, the price of products that incorporate gold, global and regional demand and production, political and economic conditions and other factors.

A significant decline in the price of gold may result in the Company having to reassess the feasibility of its projects and could negatively affect the value of the Peak Gold Joint Venture Property and the Company’s securities.

A significant decline in the price of gold may result in the Company having to reassess the feasibility of its projects and could negatively affect the value of the Manh Choh Joint Venture Property and the Company’s securities.

The Company’s ability to successfully execute its business plan is dependent on its ability to obtain adequate financing.

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In the event additional capital resources are unavailable, the Company may be unable to fund expenditures by the Joint Venture Company for exploration and development activities or be forced to sell all or some portion of its interest in the Joint Venture Company in an untimely fashion or on less than favorable terms.

The Company has no revenue to date from the Peak Gold Joint Venture Property, which may negatively impact the Company’s ability to achieve its business objectives.

Since the acquisition of the Peak Gold Joint Venture Property, the Company and the Joint Venture Company have conducted only exploration activities and to date none of the Joint Venture Company ’s properties have any proven or probable reserves as defined by SEC Industry Guide 7 .

The Company has no revenue to date from the Manh Choh Joint Venture Property, which may negatively impact the Company’s ability to achieve its business objectives.

Since the acquisition of the Manh Choh Joint Venture Property, the Company and the Joint Venture Company have conducted only exploration activities and to date none of the Joint Venture Company ’s properties have any proven or probable reserves as defined by SEC Industry Guide 7 .

The Company’s ability to become profitable will be dependent on the receipt of revenues from the extraction of minerals greater than operational expenses.

The Company and the Joint Venture Company have carried on their business of exploring the Peak Gold Joint Venture Property at a loss since inception and expect that the Company and the Joint Venture Company will continue to incur losses unless and until such time as one of the properties enters into commercial production and generates sufficient revenues to fund its continuing operations.

The Company and the Joint Venture Company have carried on their business of exploring the Manh Choh Joint Venture Property at a loss since inception and expect that the Company and the Joint Venture Company will continue to incur losses unless and until such time as one of the properties enters into commercial production and generates sufficient revenues to fund its continuing operations.

The amounts and timing of expenditures will depend on the progress of ongoing exploration, the results of consultants ’ analysis and recommendations, the rate at which operating losses are incurred, and other factors, many of which are beyond the Company’s control.

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If the Joint Venture Company cannot discover commercially viable deposits or commence actual mining operations, the Company and the Joint Venture Company may never generate revenues and may never become profitable.

The Company’s continued viability depends on the exploration, permitting, development and operation of the Peak Gold Joint Venture Property, which is the only material property of the Joint Venture Company.

The Joint Venture Company’s only material project at this time is the Peak Gold Joint Venture Property, which is in the exploration stage.

The Company’s continued viability depends on the exploration, permitting, development and operation of the Manh Choh Joint Venture Property, which is the only material property of the Joint Venture Company.

The Joint Venture Company’s only material project at this time is the Manh Choh Joint Venture Property, which is in the exploration stage.

The Company’s continued viability is based on successfully implementing its strategy, which will require the Joint Venture Company to perform appropriate exploratory and engineering work and evaluate such work, and the permitting and construction of a mine and processing facilities in a reasonable time frame.

The Peak Gold Joint Venture Property does not have any proven or probable reserves and the Joint Venture Company may never identify any commercially exploitable mineralization.

The Manh Choh Joint Venture Property does not have any proven or probable reserves and the Joint Venture Company may never identify any commercially exploitable mineralization.

None of the Joint Venture Company ’s properties have any proven or probable reserves as defined by SEC Industry Guide 7.

To date, the Company and the Joint Venture Company have only engaged in exploration activities on the Peak Gold Joint Venture Property.

To date, the Company and the Joint Venture Company have only engaged in exploration activities on the Manh Choh Joint Venture Property.

Accordingly, the Company does not have sufficient information upon which to assess the ultimate success of their exploration efforts.

There is no assurance that the Joint Venture Company may ever locate any mineral reserves on the Peak Gold Joint Venture Property.

There is no assurance that the Joint Venture Company may ever locate any mineral reserves on the Manh Choh Joint Venture Property.

Additionally, even if the Joint Venture Company finds minerals in sufficient quantities to warrant recovery, such recovery may not be economically profitable.

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If the Joint Venture Company does not establish reserves, it might be required to curtail or suspend operations, in which case the market value of the Company’s common stock will decline, and you might lose all of your investment.

The Peak Gold Joint Venture Property is located in the remote regions of Alaska and exploration activities may be limited by weather and limited access and existing infrastructure.

The Manh Choh Joint Venture Property is located in the remote regions of Alaska and exploration activities may be limited by weather and limited access and existing infrastructure.

The Joint Venture Company is focused on the exploration of its properties in the State of Alaska.

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In addition, the remote location of the properties may limit access and increase exploration expense.

Higher costs associated with exploration activities and limitation on the annual periods in which the Joint Venture Company can carry on exploration activities might increase the costs and time associated with our planned exploration activities and could negatively affect the value of the Peak Gold Joint Venture Property and the Company’s securities.

Concentrating capital investment in the Peak Gold Joint Venture Property in the State of Alaska increases exposure to risk.

The Company and the Joint Venture Company have focused their capital investments in exploring for gold and associated mineral prospects on the Peak Gold Joint Venture Property in the State of Alaska.

Higher costs associated with exploration activities and limitation on the annual periods in which the Joint Venture Company can carry on exploration activities might increase the costs and time associated with our planned exploration activities and could negatively affect the value of the Manh Choh Joint Venture Property and the Company’s securities.

Concentrating capital investment in the Manh Choh Joint Venture Property in the State of Alaska increases exposure to risk.

The Company and the Joint Venture Company have focused their capital investments in exploring for gold and associated mineral prospects on the Manh Choh Joint Venture Property in the State of Alaska.

However, the exploration prospects in Alaska may not lead to any revenue s or the Joint Venture Company may not be able to drill for mineral deposits at anticipated costs due to financing, environmental or operating uncertainties.

Should the Joint Venture Company be able to make an economic discovery on the Peak Gold Joint Venture Property, it would then be solely dependent upon a single mining operation for its revenue and profits.

Should the Joint Venture Company be able to make an economic discovery on the Manh Choh Joint Venture Property, it would then be solely dependent upon a single mining operation for its revenue and profits.

Because of this concentration in a limited geographic area, the success and profitability of our operations may be disproportionately exposed to regional factors relative to competitors that have more geographically dispersed operations.

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The Joint Venture Company has no assurance of title to its properties.

The Joint Venture Company holds approximately 183,000 acres in the form of State of Alaska unpatented mining claims for gold ore exploration.

The Company and the Joint Venture Company collectively hold approximately 220,000 acres in the form of State of Alaska unpatented mining claims for gold ore exploration.

Unpatented mining claims are unique property interests in that they are subject to the paramount title of the State of Alaska and rights of third parties to uses of the surface within their boundaries, and are generally considered to be subject to greater title risk than other real property interests.

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The Company’s common stock is thinly traded.

As of June 30, 2020, there were approximately 6.6 million shares of the Company’s common stock outstanding, with directors and officers beneficially owning approximately 19.2% of our common stock, The Marital Trust of Mr.

Peak, the Company’s former Chairman, beneficially owning approximately 12.0% of our common stock, and Royal Gold owning approximately 12.7% of our common stock.

As of June 30, 2021, there were approximately 6.7 million shares of the Company’s common stock outstanding, with directors and officers beneficially owning approximately 23.5% of our common stock, and The Marital Trust of Mr.

Peak, the Company’s former Chairman, beneficially owning approximately 11.8% of our common stock.

Our common stock is quoted on the OTCQB tier of the OTC Markets Group Inc.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors