DESCRIPTION OF BUSINESS
The Mount McGuire limestone deposit is located at the eastern end of the Fraser
Valley approximately 17 km from the City of Chilliwack. We believe that athat a
potentially large occurrence of limestone situated favorably near an expanding
region could be a profitable business. We acquired the claims and commenced the
procedure to investigate the geology and grade of the deposit and to determine
the possible market for the limestone. The Fraser Valley businesses, communities
and residents currently use an unknown tonnage of limestone products. The
nearest major limestone quarry is located on Texada Island, a distance of 220 km
from the Mount McGuire deposit.
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We have reviewed a summary of the main producers and users of limestone
products. We will have to carry out significantly more exploration on the Mount
McGuire limestone occurrence and then carry out detailed and comprehensive
market analysis of the Fraser Valley limestone products demand in order to
determine the viability of placing the Mount McGuire limestone deposit into
commercial production. The British Columbia provincial economy is expected to
grow dramatically over the next few years and with the City of Vancouver hosting
the 2010 Winter Olympics the demand will be further stoked. We will not have a
clear picture of the limestone market for the Mount McGuire deposit until we
know the limestone quality and quantity. We have outlined a four step program
that is designed to determine if the Mount McGuire limestone occurrence can be
profitably developed to produce and sell limestone products. The first critical
task will be to determine the quality and quantity of limestone products that
can be potentially produced from the Mount McGuire limestone occurrence. The
second task will be to determine the markets for the limestone products
identified. The third task will to prepare a comprehensive business plan that
will outline the most profitable development scenarios.
If all the findings are positive the Company will seek the funding required to
place the Mount McGuire limestone deposit into production.
The Province of British Columbia population has experienced tremendous growth in
the last 50 years and development has spread from Vancouver into the Fraser
Valley. Sources of aggregates have been depleted or compromised by encroaching
residential development. The same scenario has been happening to major
metropolitan centers along the west coast of United States. Limestone materials
can be developed to supply raw fed for Portland cement kilns, to make
agriculture products, to be converted into lime and to be used in pulp and paper
mills. The waste limestone can be manufactured into aggregates that can be used
by construction companies in residential buildings, commercial developments and
in sub-bases for roadways.
REGIONAL MAP OF MOUNT MACGUIRE LIMESTONE MARKET
PLEASE SEE ATTACHED EXHIBIT 99
Industrial Minerals
Industrial Minerals are an increasingly significant component of international
trade. British Columbia is strategically located to take advantage of such
trade, by its location on the west coast of North America. It has a
well-developed transportation and industrial infrastructure, particularly in the
southern, populated third of the province. It has several deep-water ports, a
well-maintained all-weather highway system that permits efficient, long-distance
trucking. Rail lines link British Columbia's industrial centers to terminal
points across Canada and USA.
The province has attractive energy costs, a well-trained and experienced
workforce and untapped mineral resources. British Columbia's industrial mineral
production for 2002 was $56 million, and mineral exploration expenditures were
$2.6 million, which is about 8% of the province's exploration investment in
2002. Production is expected to increase in 2003, even though exploration
expenditures declined. Structural material production is estimated at $493
million
Trends
Over the last three years, the most significant industrial minerals trend in
British Columbia has been the increasing export of crushed stone and natural
aggregate to urban centers along the west coast of the United States. This
market, however, is becoming very competitive as industry identifies new
potential for development. Another important trend, which was not apparent
during the 1990s, is the increase in value-added processing of raw industrial
minerals.
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Limestone Production
The largest limestone production centre in the British Columbia is Texada
Island, where two quarries, Gillies Bay (Texada Quarrying Ltd.) and Blubber Bay
(Ash Grove Cement Corporation), ship 5 to 6 million tonnes annually to customers
in British Columbia, Washington, Oregon and California, for cement, chemical and
more recently agricultural use. In 2002, 5.1 and 3.8 million tonnes of rock were
quarried from Gillies Bay and Blubber Bay respectively, but not all was shipped.
Texada Quarrying Ltd. recently invested $10 million in an aggregate crushing
plant and shipped crushed rock as far as Los Angeles and San Diego, California.
Ash Grove upgraded their crushing plant in 2002 and is expected to ship over 2
million tonnes of rock, while Texada Quarrying is expected to ship about 4.1
million tonnes. Both operations currently have excess capacity and are
aggressively marketing in Vancouver and the USA.
In addition to pulp mills, which normally produce their own lime, three cement
plants and two lime plants in British Columbia process limestone. Graymount
Western Canada Inc.'s Pavilion Lake limestone quarry and lime plant, near Cache
Creek, has a capacity of about 190,000 tonnes of lime annually. The Kamloops
cement plant of Lafarge Canada Inc. is forecast to mine about 187,000 tonnes of
limestone, and to produce about 122,000 tonnes of cement, from the Harper Ranch
quarry. Lafarge's plant located in Richmond and Lehigh Northwest Cement Ltd.
plants in Delta are state-of-the-art operations. Lafarge's plant has the
capacity to produce one million tonnes of cement. Pacific Lime Products Ltd. of
Giscome, near Prince George, sells small quantities of limestone to pulp mills
in the region.
Northrock Industries Ltd. provided a limited amount of limestone from its Dahl
Lake quarry for riprap and landscaping. I.G. Machine and Fibers Ltd. and
Homegold completed a 5,000-tonne, bulk sample in 2002 from its South Slesse
quarry near Chilliwack. Graymount Western Canada Inc. may submit its proposed
250,000-tonnes per year chemical limestone Var quarry, on Rupert Inlet near Port
Hardy.
Crushed Stone and Aggregate
Grassroots exploration for traditional construction materials is expanding along
the British Columbia coastline. It is expected that shipments of crushed stone
from Texada Island and other coastal sources will make significant inroads into
the Vancouver, Seattle, San Diego, San Francisco and Los Angeles markets. Texada
Island limestone producers have already started to exploit this market
opportunity. Texada Island producers are well established, and crushed rock is
the natural by-product of their limestone operations. Natural aggregate is the
focus of similar market demands. Tilbury Cement Ltd. shipped aggregate from its
facility at Sechelt to the San Francisco Bay area in 2001. Although Polaris
Minerals Corporation abandoned its efforts to develop aggregate and crushed rock
operations in Bella Coola, it is in the permitting process for a combined
crushed rock/aggregate operation at Port Alberni. Other companies, including
South Pacific Development Corp.'s project near Renfrew, Vancouver Island,
propose similar ventures.
Railroad ballast stockpiles, produced last year from Canadian Pacific Railway's
Giscome basalt quarry and from British Columbia's Ahbau basalt quarry,
diminished. No new production took place at either of these two quarries.
Canadian National Railways however, also operated at least six other railroad
ballast operations in British Columbia McAbee (near Ashcroft), Boulder (near
Clearwater), Taverne (near Tete-Jaune), Pacific (east of Terrace) and Kwinitsa
(Mile 40 on Skeena). Canadian Pacific Railway mined, crushed and shipped
railroad ballast at its Swansea Ridge gabbro quarry south of Cranbrook.
Fraser Valley Regional District
The Fraser Valley Regional District is located in the eastern Fraser Valley of
British Columbia approximately 100 kilometres east of the City of Vancouver.
Aggregate Potential Growth
The majority of the population of the Fraser Valley Regional District (FVRD)
live in the 60 kilometer long fertile agricultural valley of the Fraser River.
9
The current population of 250,000 is projected to almost double to over 450,000
in the next 20 years. The additional population growth would be concentrated in
the three urban areas - Abbotsford, Chilliwack and Mission, the present home to
89% of the region's population. It is projected that 93% of the new population
would settle in the three urban centers with over 50% settling in the largest
centre - Abbotsford. The following Table summarize the present populations and
employment and the projected population and employment for 2021.
TABLE
Forecasts of Employment by Sub region in the FVRD by 2021
1996 (actual 1) 2021 (forecast)
----------------- -------------------------------------------- ----------------------------------------------
Subregions2 Employment Share of Jobs to Employment Share of Jobs to
Lower Population Lower Population
Mainland Ratios Mainland Ratios4
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Abbotsford 36,465 3.6% 0.34 73,000 to 4.6% to 4.9% 0.35 to 0.40
84,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Chilliwack 24,060 2.4% 0.34 49,000 to 3.1% to 3.2% 0.34 to 0.38
54,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Hope 2,655 0.3% 0.34 3,000 0.2% n/a
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Mission 8,170 0.8% 0.24 13,000 to 0.8% to 0.9% 0.19 to 0.22
15,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
No fixed 12,530 1.2% n/a 25,000 to 1.6% to 1.9% n/a
workplace 32,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
FVRD TOTAL3 84,345 8.3% 0.38 163,000 to 10.2% to 11.0% 0.36 to 0.42
188,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Lower Mainland 1,014,065 100.0% 0.49 1,600,000 to 100.0% 0.48 to 0.51
1,700,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Note 1: 1996 employment is from Statistics Canada. The sum of the communities
does not exactly match the FVRD total due to rounding by Statistics Canada. Note
that "No fixed workplace" includes Reserves.
Note 2: Sub regions are defined as follows:
Abbotsford: Abbotsford, Subdivision D
Chilliwack: Chilliwack, Kent, Harrison Hot Springs, Subdivision B
Mission: Mission, Subdivisions C and E
Hope: Hope, Subdivision A
Note 3: FVRD total does not exactly match sum of the sub regions due to
rounding.
The population expansion will require a significant aggregate supply in the
region over the next seventeen years. The aggregate market will need increasing
sources of aggregate for roads and buildings in the eastern Fraser Valley. The
final projection will be developed when the McGuire limestone material is
quantified to type of products and grade of the products.
Agriculture Project Growth
The FVRD has the highest farm gate receipts of any regional district in the
province. The diverse output includes dairy products; greenhouse cultivation,
sod, vegetables, berries, nursery stock and specialty crops. Innovative products
include nutraceuticals and component extractions.
The agriculture community currently uses a yet to be determined number of tonnes
of limestone products for agriculture purposes.
The current supply of agriculture products is imported into the region from one
main supplier located in Langley. The final projection of agricultural limestone
products that would be marketed to the local agriculture industry will be
developed when the McGuire limestone material has sufficient technical
information to formulate a product package.
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The Mount McGuire Limestone material will be assessed by a four-phase review and
exploration process. Each subsequent phase is contingent on the results in the
previous stage. In all phases the marketing program will be refined as the
physical information on the material is developed. The key physical issues of
the Mount McGuire Limestone material are the quantity of mineable limestone, the
quality of that mineable limestone and the costs to extract and deliver the
limestone products to market. Limestone material of this size and location might
be able to profitably produce lime, construction aggregates, agricultural
limestone, feed for cement plants, ballast for railway beds, and quarried stone
for the building industry.
Transportation costs are a major element in the delivery of most limestone
products to market. All things equal, the closest supplier to a market can
usually deliver the products at a lower unit price than a more distant supplier.
As shown on the Regional Map of the Mount McGuire Limestone Market, the nearest
supplier is located 220 km air distance on Texada Island up the coast of British
Columbia. The Mount McGuire limestone occurrence is located 17 km from the
eastern end of the Fraser Valley. . We envisage that the evaluation process will
take at least four phases and we have completed the first phase.
Exploration and Marketing Evaluation
Mount McGuire has a substantial resource of limestone material and tests
indicate that certain beds of the limestone material are high grade. The Fraser
Valley's population is predicted to grow over the next 17 years. Our company
will seek to develop the limestone material by advancing the geological
information, developing a quarrying plan, determining what limestone products
can be manufactured and at what cost and carrying out marketing studies for
those products in the Fraser Valley.
Phase I
Laurence Stephenson, P. Eng., the independent engineer who has carried out the
first report on the project has confirmed management's initial assessment that
the Mount McGuire Limestone material is potentially large and any products
produced from the limestone materials are easily transportable to local markets
and maybe to existing transportation systems that connect to regional and
international markets.
Mr. Stephenson estimates from preliminary whole rock testing, air photo
interpretation and government topographic maps that the Mount McGuire material
could contain a potentially large amount of limestone. According to a joint
Federal and Provincial study ("Limestone and Dolomite Occurrences of British
Columbia" map prepared by Province of British Columbia Ministry of Energy Mines
and Petroleum
Resources Geological Survey Branch 1985-1990) Mount McGuire is the largest
undeveloped limestone occurrence in the Lower Mainland region of British
Columbia. Hence we are seeking to hold the property while developing the
potential of this property and paying for the future development work from the
proceeds of a more modest production program. Our initial goal is to locate an
Initial Quqrry of high grade limestone that can be profitability developed to
annually produce limestone products.
Mr. Stephenson reports that some layers of limestone contain 96% calcium
carbonate and have a very low iron content (<0.2% Fe2O3). We will determine if
high grade limestone products could be marketed in the local Fraser Valley. We
therefore are moving forward to identify an Initial Quarry of high grade
mineable limestone within the very large limestone occurrence on Mount McGuire.
We will continue our market research in the limestone products presently
required in the local Fraser Valley to determine how many annual tonnes of high
grade limestone products could be successfully marketed.
Phase II
The key objective is to identify and map the higher grade limestone beds. Mr.
Stephenson recommends that a helicopter be used to photograph the South Ridge
and to take samples from those areas that are not easily accessible by foot.
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The site information collected would be drawn on a 1:1000 scale map. Mr.
Stephenson would prepare a geological model that would identify all the visually
known layers of limestone and determine if a mineable high grade bed of
limestone could be the Initial Quarry. If the engineer is successful in
identifying the above resources and potential grade of the limestone products,
management would approach end user groups and present suppliers to ascertain the
limestone products market at that time.
The following $7,635 budget which was prepared Mr. Stephenson P. Eng., outlines
an exploration program to map the project and to physically measure the location
of the high grade limestone beds.
BUDGET
Personnel
---------
(1) Geologist 3 days @ $500/day $ 1,500.00
(1) Geological Assistant 3 days @ $200/day 600.00
Equipment
---------
(1) 4x4 Truck 3 days @ $85/day $ 255.00
(1) 4-Trax 3 days @ $60/day 180.00
Expenses
--------
(1) hour helicopter 1 hour @ $1,100/hour all in $ 1,100.00
Room and board and travel 500.00
Analytical work 2,000.00
Report 1,500.00
===================
TOTAL $ 7,635.00
Based on acceptable results from the above site exploration program and a
preliminary market analysis, a diamond drilling program would be developed.
Phase III
Based on a successful program in Phase II, the consulting engineer would prepare
a drilling program that would be designed to intersect the higher grade
limestone beds. The drill pattern selected would supply sufficient information
for the engineer to compute the high grade mineable tonnage and to design a
preliminary quarry plan to extract the limestone. Once the tonnage, grade and
characteristic of the high grade limestone have been quantified, a preliminary
marketing plan can be developed. The tonnage and physical specification of the
following potential products would be assessed:
- agriculture products
- building aggregate
- lime manufacturing
- quarry stone
- raw material for cement kilns
Management would approach the local limestone suppliers and end users once a
better idea of the Mount McGuire quantity, quality and production costs have
been estimated. If the property exploration results and marketing feedback are
positive, a decision would be made to prepare a limestone quarry scoping study.
Phase IV
An infill drilling program would be carried out to substantiate and confirm the
tonnage and grade estimates prepared previously. The drilling program would be
designed to produce proven reserves of a higher grade mineable limestone bed.
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We will then prepare a project Limestone Quarry Scoping Study that will cost out
the following steps.
a) Quarry pit preparation
b) Infrastructure
o Roads
o Electrical power
o Building facilities
o Water supply
o Site working area
c) Equipment
o Earth movers
o Crushers
o Storage bins
o Conveyors
o Fuel storage
d) Permitting and licenses
e) Environmental considerations
f) The limestone products that can be produced
g) The market for limestone products in the Fraser Valley
If the scoping study is positive then management would prepare a business plan.
The business plan would incorporate a detailed analysis of the project to
determine the optimal method to extract limestone and to produce limestone
products that can be profitable marketed in the Fraser Valley. . The business
plan will address and describe in detail the following key corporate areas:
1. Company Description
2. Limestone Market Analysis
3. Target Market
4. Competition
5. Strategic Position and Risk Assessment
6. Marketing Plan and Sales Strategy
7. Quarry and Sales Operations
8. Management and Organization
9. Development, Milestones and Exit Plan
10. Financial Data and Projections
The annual production rate finally selected would depend on the markets for
products that would be produced from the Mount McGuire Limestone occurrence, the
selling price and contract terms that could be negotiated with end users and
suppliers. The business plan would be used to finance the project and place the
property into production. Any commercially viable industrial mineral operations
will dependent on our ability to obtain contracts to supply various customers.
Without these contracts we may be successful in our plan to develop the property
but we will not be profitable without contracts in place to sell the materials.
DESCRIPTION OF PROPERTY
We currently use approximately 200 square feet of leased office space in the
8400 East Crescent Pkwy #600, Greenwood Village, Colorado 90111. We lease such
space from Peter Banysch, our sole officer and principal shareholder for $200
month which covers the use of the telephone, office equipment and furniture.
Western Exploration's Mount McGuire mineral claims situated 17 km south east of
the City of Chilliwack in South-western British Columbia.
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Mineral Property Agreement
We purchased the property containing mineral claims from Brock McMichael on
January 30, 2004. The property consists of 2 unpatented two post mineral claims
representing 36 units that have been staked and recorded and occur in the New
Westminster mining division. The claims are contiguous. In March 2004, the
"Mount McGuire Claims" was transferred in Trust to Peter Banysch, President of
our company. The total purchase price of the claims will be $32,000, of which
$12,000 was paid in February 2004. The final payment of $20,000 is due on or
before August 15, 2005. Pursuant to the terms of the contract, advance royalties
of $25,000 are to be paid annually commencing 36 months from the date of
signature of the agreement. Such advanced royalties are due in a timely manner
regardless of whether we find or removed high grade limestone material from the
property. Failure to pay the advance royalties will cause a reversion of the
property within ten days of such failure. Mr. McMichael is required to keep the
claims in good standing for at least 24 months from the date of the agreement.
In addition, Mr. McMichael is required to provide geological consulting services
for the claims and maintain the claims in good standing for a period of 24
months.
These claims are subject to a 2.5% Net Smelter Royalty and a 7.5% Gross Rock
Royalty. Brock McMichael is the beneficiary of such royalties. 1 1/2% of the Net
Smelter Royalty can be acquired for $1.0 million within 12 months from the
commencement of commercial production. Even if we acquire this 1 1/2% of the Net
Smelter Royalty, Mr. McMichael will still be owed the 1% of the Net Smelter
Royalty and the 7.5% Gross Rock Royalty. A summary of payments and obligations
to Brock McMichael are as follows:
O Payment of $12,000 by February 15th 2004 (paid).
O Payment of $20,000 by August 15, 2005.
O Minimum payment of $25,000 commencing 36 months from the signing of
the Purchase Agreement (January 30, 2007) and then annually
thereafter.
O Provide funds to complete assessment work in order to maintain the
property in good standing. Assessment work will be a minimum of
$3,600Cdn per year for the first three years and $7,200Cdn per year
thereafter.
Location and Land Status
The Mount McGuire group consists of two contiguous mineral claims, LST 1 and LST
2. The claims cover a 9 sq. km. area, representing 900 hectares. The claims are
located in the New Westminster Mining Division of British Columbia at
coordinates: Latitude 49(0)02' 41" and longitude 121(0)41' 00" and on map sheet
BCGS: 92H/002. The pertinent property information is as follows:
Claim Name Tenure No. No. of Units Staking Date
------------------------------ --------------------------- ---------------------------- ----------------------------
LST 1 407199 18 December 7, 2004
LST 2 407200 18 December 7, 2004
------------------------------ --------------------------- ---------------------------- ----------------------------
In British Columbia, for assessment purposes in the first three years, $100 of
work or cash in lieu per unit plus 10% filing fees are due to maintain the
claims in good standing. Thereafter it rises to $200 per unit plus 10% filing
fees. The claims have not been legally surveyed.
Geology of the Mount McGuire Claims
The geological setting is comprised of a complicated structure of folded and
thrust faulted sedimentary rocks. The rock units underlying the Chilliwack River
valley consist of the Cultus Lake formation and the Chilliwack Group. The Cultus
Lake formation is made up of mainly siltstone, shale and sandstone of Triassic
to Jurassic age. The Chilliwack Group consists of Permian sandstone, shale and
conglomerate and Pennsylvanian limestone and basic to intermediate volcanics.
Limestone of Pennsylvanian age has been documented by the G.S.C, along Borden
Creek and on the summit of Mount McGuire, along which the Borden Creek claims
are located.
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The Chilliwack River valley is a glacial U-shaped valley. The valley floor along
the south side of the river is covered by Pleistocene and recent glacial,
glaclofluvial and fluvial gravels. A small gravel quarry operation owned by the
BC Ministry of Highways occurs on one of the large gravel benches. Rising above
the valley floor are prominent ridges. The ridges are mainly composed of low
angle thrust faulted, shallow to steeply dipping shale, sandstone and limestone.
The author has previously examined limestone outcrops along a 4 kilometer
section on the north side of the river. The limestone beds that are exposed
along this section are interpreted as being a series of repetitive low angle
thrusts. Samples collected by previous operators from sections of the limestone
analyzed between 80% to 95% calcium carbonate with corresponding silica.
The majority of rocks exposed along the banks of Borden Creek consist
predominately of dark grey to black shale, calcareous shale and minor limestone.
However, on the west side of the creek along which the claims occur, is an
extensive exposure of bedded limestone. Found near the centre of the claims is a
small east flowing stream, a branch of Borden Creek, which divides the limestone
material into 2 ridges, the north and south ridges. The south ridge (south
limestone material) is covered by the LST 1 claim and the north ridge (north
limestone material) is covered by the LST 2 claim. Both ridges expose a thick
sequence of shallow to steeply dipping beds of limestone. The limestone can be
traced from just west of the creek, which forms the eastern boundary of the
claims at an elevation of approximately 1,160 m, to the summit of Mount McGuire,
at elevation of 2,019 m, forming the western boundary of the claims.
The north and south limestone materials are believed to be essentially part of
one large continuous occurance. Based on the limestone material exposed on the
south ridge, preliminary volume calculations can roughly be determined. By
measuring the ridge from a topographical map the dimensions were estimated as
length (2000 m), average width (750 m), and height (400 m). Specific gravity for
the limestone of 2.6 was used. Mr. Stephenson P.Eng. believes Mount McGuire
limestone occurrence is very large. An initial assessment is that a 500,000 to
1,000,000 tonne high grade minable limestone material could be proven to lie
within the Mount McGuire limestone occurence.
Conclusions and Recommendations of the Geology Report
Based on the preliminary positive results of the 1999 work, it is recommended
that proper mapping and sampling surveys be conducted on the LST 1 & 2 claims. A
majority of the surveys should be concentrated on the South ridge limestone
material.
When the snow is gone off the claims, a helicopter aerial survey should be
conducted and photos taken of the material. As well, samples should be collected
where possible by helicopter, especially areas that are not accessible by foot
and where higher grade limestone sections may be defined.
A mapping and sampling survey should be carried out over the South Ridge
material at reasonable scale (e.g. 1:1000) in order to properly identify the
areas of limestone that are of higher quality and grade. As well, various beds
of limestone should be identified and approximate thickness and grades
determined.
If results warrant, a limited drilling program would be conducted in Phase II.
The objective would be to analyze the drill core samples to determine the
location and grade of the higher grade limestone beds and their continuity.
WEBSITE
We currently own our own domain name www.western-exploration.com. We are
currently in the process of constructing a website to provide our shareholders
and investors with information relating to the exploration of the Mount McGuire
claims. We anticipate that our website will be operational by the end of August
2004.
OFFICES
Our corporate offices are located at 8400 East Crescent Pkwy #600, Greenwood
Village, Colorado 90111. Our telephone number is (720) 528-4326.
15
EMPLOYEES
We currently have no employees. We have one person in management as well as one
other part-time director. We plan to employ additional people as we deem
necessary as we continue to implement our plan of operation and exploration of
the Mount McGuire property.
LEGAL PROCEEDINGS
To the best of our knowledge, there are no known or pending litigation
proceedings against us.