GOLDEN EAGLE INTERNATIONAL INC - 10-K - 20040331 - NOTES_TO_FINANCIAL_STATEMENT
Notes to Consolidated
Financial Statements
Note A –
Organization and Business
Organization
and Nature of Business
Golden
Eagle International, Inc. (the “Company,” or “Golden Eagle”) was
incorporated in Colorado on July 21, 1988. Prior to fourth quarter 2003, we were a mining
enterprise in the exploration stage as set forth in Statement of Financial Accounting
Standards, “SFAS” No. 7, “Accounting and Reporting by Development Stage
Enterprises” and “Industry Guide 7” of the Securities and Exchange
Commission’s Guides for the Preparation of Registration Statements and with the
Society for Mining, Metallurgy and Exploration’s “Guide for Reporting
Exploration Information, Mineral Resources, and Mineral Reserves” dated March 1,
1999, promulgated by the U.S. Securities and Exchange Commission under the Securities Act
of 1933. Since our inception, we have been engaged in organizational activities,
acquiring, developing gold and other mineral properties, and starting in the fourth
quarter 2002, mining gold bearing ore and producing gold for market. We have had initial
production and have generated revenue through gold sales, but to date have not achieved
positive cash flow on a company-wide basis. Presently, substantially all of our current
operations are focused on two properties in the Republic of Bolivia, the combined Cangalli
(the “Cangalli properties”) and Tipuani Valley gold properties (the
“Tipuani Valley properties”) in western Bolivia and the Precambrian Shield area
of eastern Bolivia (the “Precambrian properties”). Effective in the fourth
quarter of 2003, we have established proven and probable reserves at our Cangalli and Buen
Futuro properties. Therefore, effective in the fourth quarter of 2003, we are no longer an
exploration stage company nor required to report as a development stage company under SFAS
No. 7.
Organization
of Subsidiaries and Bolivian Mining Activities
In
January 1996, we organized a Bolivian corporation, Golden Eagle Bolivia Mining, S.A.
(“GEBM”). Golden Eagle had a 93% ownership in GEBM. In October 1996, a sister
Bolivian corporation was formed, Eagle Mining of Bolivia, Ltd. (“EMB”), for the
purpose of assuming, together with GEBM, the responsibilities under contract with a
Bolivian gold mining cooperative, United Cangalli Gold Mining Cooperative, Ltd.
(“UCL”). We have an 84% ownership in EMB; however, EMB is currently inactive.
During 2001, Golden Eagle formed a wholly owned Bolivian corporation, Golden Eagle
International, Inc. Bolivia (“GEII Bolivia”), to conduct all continuing
operations in Bolivia. During 2002, we transferred substantially all agreements,
obligations, assets and rights in Bolivia to GEII Bolivia from GEBM.
In
1996, GEBM had entered an agreement, subsequently amended, with UCL for 25 years, with an
option for an additional 25 years, to explore and mine a group of mining concessions,
the Cangalli properties, consisting of 5,000 acres owned by UCL. Under the agreement, we
had to pay an 18% royalty and certain advanced royalty amounts. In 2001, all rights and
obligations pursuant to these agreements were transferred to GEII (Bolivia). On July 2,
2002, we signed a definitive purchase agreement with UCL to acquire the original Cangalli
mining concessions. The purchase price consisted of $300,000 cash, 3,944,500 shares of
Company common stock valued at $394,450 ($.10 per share), and the assumption of $175,000
of UCL obligations maturing over four years. The agreement canceled the 18% gross royalty
that was held by UCL. During 2003, an additional 133,000 shares of Golden Eagle stock
valued at $22,610 were issued to UCL members to satisfy additional claims.
We
own all right, title and interest in four mining claims, or concessions, in the Tipuani
Valley properties, acquired in November 1999 and October 2000. The property totals 69,000
acres, and the 5,000 acres previously held by UCL, for a total of 74,000 acres. We are not
required to pay any royalty on the Cangalli Properties or the Tipuani Valley properties,
and are only required to pay annual claim fees to the Bolivian government of $0.40 per
acre. Subsequent to the 2003 year-end, and, as a result of geological reconnaissance work
further identifying and mapping the gold bearing conglomerate material in the paleochannel
of the ancient Tipuani River basin, we reduced our landholdings in the Tipuani Gold
District from 74,000 total acres (116 square miles) to 49,000 total acres (77 square
miles). Concession fees were considerably reduced; however, we do not believe that any
decrease resulted in the value of mineralized materials on our properties.
Organization
of Subsidiaries and Bolivian Mining Activities(continued)
In
June 2001, we acquired all rights, title and interest in three mining concessions
consisting of 148,200 acres located 162 miles north of Santa Cruz, Bolivia, in eastern
Bolivia’s Precambrian Shield area, together with all proprietary exploration
information pertaining to the properties, including relevant reports, drill data, drill
cores, reverse circulation cuttings, samples and geological maps. The Superintendent of
Mines of the State of Santa Cruz later reduced the size of these concessions to 125,000
acres due to conflicts with neighboring claims. We are not required to pay a royalty on
these properties, and can maintain them in perpetuity by paying annual claims fees to the
Bolivian government of approximately $50,000.
In
June 2003, we acquired 100% of the Buen Futuro mining claim located in the center of
Golden Eagle’s 125,000-acre landholding in the Precambrian Shield geological
formation. The Buen Futuro claim consists of 2,500 acres and contains three
well-identified gold/copper ore bodies.
During
December 2003, we completed the acquisition of the Cobra claim, an additional 22,500 acres
of ground in the Ascension Gold-Copper Trend in eastern Bolivia’s Precambrian Shield.
The Cobra claim has proven positive for ore deposits containing gold and copper, as well
as, near-surface gold oxide deposits. We secured the Cobra claim through a Bolivian mining
petition and paid initial claims fees of $10,000 to acquire the property. To maintain the
property in perpetuity, we must pay annual claims fees to the Bolivian government of
$9,000. We have subsequently reduced some of our previously-held concessions in the
Ascension Gold-Copper Trend, and our total landholdings in the Precambrian Shield now
total 136,500 acres.
Going Concern
Considerations
The accompanying financial statements have been presented assuming we will continue as a going
concern, which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. However, we had negative working capital of $(1,674,588)
as of December 31, 2003 and we have incurred substantial losses of $36,186,963 since our
inception. We presently have one producing mine and plant that is breaking even on an
operating basis but is not yet able to cover exploration, development and general and
administrative expenses on a company-wide basis. To further develop the mine and plant at
Cangalli, we will require additional financing to satisfy our outstanding obligations and
an increase in gold production levels. In addition our bank has indicated it intends not to
renew our loan for $995,800 on June 30, 2004. Unless we successfully obtain suitable
significant additional financing arrangements, there is substantial doubt about our
ability to continue as a going concern. Management’s plans to address these matters
include private placements of stock in reliance on exemptions to registration found in
Sections 4(2) and 4(6) of the Securities Act of 1933, a Regulation D offering, obtaining
short-term loans, seeking suitable joint venture relationships, and by increasing the
mineral production levels at our existing operation and commencing mining operations at
other claims owned by us or on properties to be acquired by us. The financial statements
do not include any adjustments to reflect the possible future effect on the recoverability
and classification of assets or the amounts and classification of liabilities that may
result from the outcome of this uncertainty.
Principles
of Consolidation
The financial statements include the accounts of Golden Eagle International, Inc. and its
subsidiaries Golden Eagle Bolivia Mining, S.A., Eagle Mining of Bolivia, Ltd., Golden
Eagle International, an unincorporated Bolivian entity, and Golden Eagle International,
Inc. (Bolivia). All inter-company transactions and balances have been eliminated. Minority
interests are not presented since they are not obligated to fund operating losses.
Use
of Estimates
Preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. Significant areas
requiring the use of management estimates include the determination of mineral ore
quantities and the depletion expense calculation, useful lives of property and equipment
for depreciation, impairment valuations and calculation of deferred taxes. Actual results
may differ from those estimates, and such differences may be material to the financial
statements.
Reclassifications
Certain
amounts in the prior years have been reclassified to conform to the 2003 presentation.
Foreign
Currency
The
functional currency for our foreign subsidiaries is U.S. dollars. The financial
transactions, records and statements of these foreign subsidiaries are all measured in
U.S. dollars using the daily exchange rate in effect. As a result, we have no material
currency translation gains or losses. Where the local currency is used to record
transactions, any material currency translation gains or losses would be included as an
element of comprehensive income in the statement of operations and in the equity section
of the balance sheet.
Concentration
of Credit Risk
Our
cash equivalents and receivables are exposed to concentrations of credit risk. We manage
and control risk by investing cash with a major financial institution. The amount on
deposit occasionally exceeds the $100,000 federally insured limit. However, management
believes that the financial institution is financially sound and the risk of loss is low.
Current risk over our receivables for minerals sold is minimized by the short periods for which these
receivables are outstanding.
Concentrations
and economic vulnerability
Concentrations
include: reliance on two areas containing our mining prospects in isolated regions of a
foreign country; limited financial capacity of related parties and/or others to continue
funding operations; and, reliance on the future stability of the local, regional and
national governments in Bolivia. If we are successful in commencing sustained, profitable
commercial levels of production in Bolivia, we will need significant quantities of mining
equipment and supplies that are presently in short supply or unavailable. Weather may
impact mining operations and transportation of heavy equipment in the region poses
practical difficulties and is weather dependent.
Fair
Value of Financial Instruments
Due
to their short-term nature, the carrying value of our current financial assets and
liabilities approximates their fair values. The fair value of our borrowings, if
recalculated based on current interest rates, would not significantly differ from the
recorded amounts.
Cash and Cash
Equivalents
All
highly liquid investments purchased with an initial maturity of three months or less are
considered to be cash equivalents.
Inventory
Inventories
consist of in-process and gold inventories.
In-process
inventories represent gold ore that is currently in the process of being converted to a
saleable product. The conversion process is mill in-circuit, which converts the gold ore
into gold concentrates and dore. In-process inventories are valued at the lower of average
production cost or net realizable value of the material fed into the process. As of
December 31, 2003 and 2002, there was no in-process inventory.
Gold
inventories represent mined and processed gold concentrates and dore. Gold inventories
that are received as in-kind payments of royalties are valued at fair value on the date
the gold is transferred to the Company. Gold inventory that results from our mining and
processing activities is valued at the lower of average production cost or net realizable
value. At December 31, 2003 and 2002, we held 45,596 grams, or 1,466 troy ounces, and
1,789 grams, or 58 troy ounces, of gold in inventory, respectively. As of December 31,
2003 and 2002, gold inventory was valued at $318,641 and $9,273, respectively.
Property, Equipment
and Mineral Development
Property
and equipment are recorded at cost. Maintenance and repair costs are charged to expense as
incurred, and renewals and improvements that extend the useful life of assets are
capitalized. Depreciation on property and equipment is computed using the straight-line
method over the assets’ estimated useful lives as follows:
Mining equipment
7-8 years
Vehicles
5 years
Office equipment
4-10 years
Depreciation
and depletion expense totaled $154,853, $101,166 and $66,724 for the years ended December
31, 2003, 2002 and 2001. There was no production for the year ended December 31, 2001.
Costs associated with the acquisition and development of mining prospects are capitalized
on a property-by property basis.
Mineral
exploration costs are expensed as incurred. Mine infrastructure development costs incurred
prior to establishing proven and probably reserves are expensed. In 2003, we expensed
$200,000 in pre-reserve mine infrastructure costs. When it has been determined that a
mineral property can be economically developed, the costs incurred to develop such
property, including costs to further delineate the ore body and remove overburden to
initially expose the ore body, are capitalized as incurred and are amortized using the
units-of-production (“UOP”) method over the estimated life of the ore body based
on estimated recoverable ounces mined from proven and probable reserves. If no mineable
ore body is discovered, such costs are expensed.
To
the extent that development costs benefit the entire ore body, they are amortized over the
estimated life of the ore body. Costs incurred to access specific ore blocks or areas that
only provide benefit over the life of that area are amortized over the estimated life of
that specific area. The capitalized cost bases subject to depletion expense are calculated
on a formula based on the number of tons of ore that are expected to be mined against the
total tons in proven and probable reserves and extrapolated to the number of tons in the
area of influence of the mine. Depletion expense for the years 2003, 2002 and 2001 was
$29,133, $5,515 and $-0-, respectively.
Mineral
Interests and Other Intangible Assets
Mineral interests and other intangible assets include acquired
mineral rights and royalty interests in production, development and exploration stage
properties. The amount capitalized related to a mineral or royalty interest represents its
fair value at the time it was acquired.
Intangible
assets related to mineral interests represent mineral rights for parcels of land not owned
fee simple by us. Intangible assets represent mineral rights related to production,
development or exploration stage properties, and the value of such intangible assets is
primarily driven by the nature and amount of mineralized material believed to be
contained, or potentially contained, in such properties. Production stage mineral
interests represent interests in operating properties that contain proven and probable
reserves. Development stage mineral interests represent interests in properties under
development that contain proven and probable reserves. Exploration stage mineral interests
represent interests in properties that are believed to potentially contain mineralized
material consisting of (i) other mineralized material such as inferred material within
pits; measured, indicated and inferred material with insufficient drill spacing to qualify
as proven and probable reserves; and inferred material in close proximity to proven and
probable reserves; (ii) around-mine exploration potential such as inferred material not
immediately adjacent to existing reserves and mineralization but located within the
immediate mine infrastructure; (iii) other mine-related exploration potential that is not
part of measured, indicated or inferred material and is comprised mainly of material
outside of the immediate mine area; or (iv) greenfields exploration potential that is not
associated with any other production, development or exploration stage property, as
described above.
Our
royalty interest consists of a 10% gross royalty on gold production from a single shaft
mine operation, which was leased back to UCL during the purchase of the Cangalli
properties from UCL.
Intangible
assets associated with production stage mineral and royalty interests are amortized over
the life of the mine using the UOP method in order to match the amortization with the
expected underlying future cash flows. As a result, intangible assets associated with
development stage mineral interests are not amortized until such time as the underlying
property is converted to the production stage. With respect to intangible assets
associated with exploration stage mineral interests, (i) the excess of the carrying value
over the residual value of intangible assets related to other mineralized material,
around-mine exploration potential and other mine-related exploration potential is
amortized on a straight-line basis over the period that the we expect to convert, develop
or further explore the underlying properties (which period is generally equal to the
applicable life of the mine); and (ii) the excess of the carrying value over underlying
the residual value of intangible assets related to greenfields exploration potential is
amortized on a straight-line basis over the period in which we expect to complete the
exploration process.
Residual
values for exploration stage mineral interests represent the expected fair value of the
interests at the time we plan to convert, develop, further explore or dispose of the
interests. The residual values can range from zero to 100% of the gross carrying value of
the respective exploration stage mineral interests. Residual values are determined for
each individual property based on the fair value of the exploration stage mineral
interest, and the nature of, and the Company’s relative confidence in, the
mineralized material believed to be contained, or potentially contained, in the underlying
property. Such values are based on (i) discounted cash flow analyses for those properties
characterized as other mineralized material and around-mine exploration potential, and
(ii) recent transactions involving similar properties for those properties characterized
as other mine-related exploration potential and greenfields exploration potential. Based
on its knowledge
Amortization
of
the secondary market that exists for the purchase and sale of mineral properties, the
Company believes that both methods result in a residual value that is representative of
the amount that the Company could expect to receive if the property were sold to a third
party. When an exploration stage mineral interest is converted to a development or
production stage mineral interest, the residual value is reduced to zero for purposes of
calculating UOP amortization.
Long-Lived Assets
We
have adopted SFAS No. 144, “Accounting for the Impairment and Disposal of Long-Lived
Assets,” which requires that long-lived assets to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. We review for the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable. An impairment loss would be recognized when the estimated future
cash flows are less than the carrying amount of the asset and would be calculated based on
discounted cash flows. In 2002, we recorded an impairment of $88,010 on mining equipment
in Bolivia. There were no such impairments for the years ended December 31, 2003 and 2001.
Revenue Recognition
and Production Costs
Revenue
is recognized when the price is determinable, upon delivery and transfer of title of gold
to the customer and when the collectibility of sales proceeds is assured. Production costs
of gold sold include labor and related direct and indirect costs of mine and plant
operations. Production costs are charged to operations as incurred. In September 2002, we
began mining operations at our Cangalli gold mine. During the fourth quarter 2002, a total
of 92,700 tons of gold bearing ore were mined and processed and during 2003, 458,767 tons
of gold bearing ore was mined and processed. Through December 31, 2003, we had
cumulatively produced 217,086 grams, or 6,964 troy ounces of gold, with gold sales of
$1,744,600.
Reclamation and
Remediation Costs (Asset Retirement Obligations)
On
January 1, 2003, we adopted SFAS No. 143, “Accounting for Asset Retirement
Obligations”. SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. In our current Bolivian operations, we do not
have a legal or contractual obligation for reclamation or remediation of our mines after
mining has ceased. As a result, the adoption of SFAS No. 143 did not have a material
impact on our financial position, results of operations or cash flows. However, once
development of our Precambrian Shield properties begins, we expect to incur asset
retirement obligations.
Stock Based
Compensation
We
account for stock-based compensation using Accounting Principles Board Opinion No. 25
(“APB No. 25”) for employee and directors. Under APB No. 25, compensation
expense is recognized for stock options with an exercise price that is less than the
market price on the grant date of the option. In 2002, we recognized expense for stock
options issued to the current and former presidents of the Company because the exercise
price was less than market and due to variable accounting requirements associated with
cashless exercise stock options. For stock options with exercise prices at or above the
market value of the stock on the grant date, we adopted the disclosure-only provisions of
Accounting for Stock Based Compensation, SFAS 123 as amended by SFAS No. 148,
“Accounting for Stock-Based Compensation — Transition and Disclosure — an
amendment of FASB Statement No. 123". Had additional compensation expense for the
options granted been determined based on the fair value at the grant date for the options,
consistent with the provisions of SFAS No. 123, our net loss and net loss per share for
the years ended December 31, 2003, 2002 and 2001 would have been increased to the pro
forma amounts indicated below:
Stock Based
Compensation (continued)
2003
2002
2001
Net (loss):
As reported
$(6,519,054)
$(12,272,389)
$(2,617,066)
Officer compensation expense
-
(1,725,000)
-
Pro forma
$(6,519,054)
$(13,997,389)
$(2,617,066)
Net income (loss) per share
of common stock:
As reported
$(.02)
$(.05)
$(.01)
Pro Forma
$(.02)
$(.06)
$(.01)
In
2001 and 2003, no options were issued. For purposes of pro forma disclosures, the
estimated fair value of the options is amortized to expense over the options’ vesting
period, if any.
Pro
forma information regarding the fair value of stock options is determined at the date of
grant using the Black-Scholes option pricing model with the following weighted-average
assumptions for the year ended December 31, 2002: risk free interest rates of 5%; no
dividend yield, volatility factor of the expected market price of our common stock of
354%; and a weighted-average expected life of the options of 12 months.
Beneficial
Conversion Feature of Debentures
In
accordance with Emerging Issues Task Force No. 98-5,
Accounting for Convertible
Securities with
Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios
, and No. 00-27,
Application of Issue No. 98-5 to Certain
Convertible Instruments
, we recognize the advantageous value of conversion rights
attached to convertible debt. Such rights give the debt holder the ability to convert his
debt into common stock at a price per share that is less than the trading price to the
public on the day the loan is made to us. The beneficial value is calculated as the
intrinsic value (the market price of the stock at the commitment date in excess of the
conversion rate) of the beneficial conversion feature of debentures and related accruing
interest is recorded as a discount to the related debt and addition to additional paid in
capital. The discount is amortized over the remaining outstanding period of related debt
using the interest method. By December 31, 2003, all debenture holders had exercised the
conversion provision of their securities and converted outstanding principal and interest
in the amount of $4,302,957 into 136,828,182 restricted common shares of Golden Eagle
stock. As of December 31, 2003, there were no debentures or accrued interest on debentures
outstanding.
Earnings
(Loss) Per Share
Basic
net income (loss) per share is computed by dividing net income (loss) attributable to the
common shareholders by the weighted average number of common shares outstanding during the
reporting period. Diluted net income per common share includes the potential dilution that
could occur upon exercise of the options to acquire common stock computed using the
treasury stock method. The treasury stock method assumes that the increase in the number
of diluting shares is reduced by the shares, which could have been repurchased by us with
the proceeds from the exercise of the options (which were assumed to have been made at the
average market price of the common shares during the reporting period). Options have not
been included in the computation of diluted income (loss) per share during all periods
because their inclusion would have been anti-dilutive.
Income
Taxes
We
use the liability method of accounting for income taxes under which deferred tax assets
and liabilities are recognized for the future tax consequences of temporary differences
between the accounting basis and the tax basis of our assets and liabilities. The deferred
tax assets and liabilities are computed using enacted tax rates in effect for the year in
which the temporary differences are expected to reverse.
Statement of Cash Flows Information and Supplemental Non-Cash Financing Activities
Cash and cash equivalents include cash and short-term investments with
original maturities of three months or less. During 2003, 2002 and 2001, we paid cash for
interest of $58,331, $53,137 and $55,534, respectively. Non-cash investing and financing
transactions during the periods consist of the following:
2003
Shares
Amount
Beneficial conversion interest added to equity
N/A
$
337,186
Accrued interest converted to stock
11,346,956
902,925
Principal amount of debentures and notes converted to stock
131,188,355
4,465,387
Stock issued for mining prospect
589,204
97,610
Cashless exercise of stock options
12,264,456
2,281,189
2002
Beneficial conversion interest added to equity
N/A
$
1,777,336
Accrued interest converted to debt
N/A
232,830
Liabilities assumed on acquisition of mining property
N/A
175,000
Common stock issued to acquire mining property
3,944,450
394,450
2001
Contribution of accrued officer salaries to equity
N/A
$
905,886
Common stock issued for mining prospect
10,000,000
300,000
Beneficial conversion interest added to equity
N/A
1,815,059
Conversion of accrued interest on debentures into stock
5,000,000
150,000
Other Comprehensive
Income
We
do not have any items of other comprehensive income for the years ended December 31, 2003,
2002 and 2001.
Certain
Equity Instruments
In
June 2003, the FASB approved SFAS No. 150, “Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity”. SFAS No. 150
establishes standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. We have adopted SFAS No.
150. As a result, stock to be issued in the purchase of Buen Futuro mineral interest has
been included in liabilities.
Effect
of New Accounting Pronouncements
In
April 2003, the FASB issued SFAS No. 149, “Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities”. SFAS No. 149 amends certain portions
of SFAS No. 133 and is effective for all contracts entered into or modified after June 30,
2003 on a prospective basis. SFAS No. 149 is not expected to have a material effect on our
results of operations or financial position since we currently have no derivatives or
hedging contracts.
Note C – Mining
properties
Our mining properties consist of the following:
2003
2002
Mine development costs
$
386,178
$
415,295
Mineral interests and other intangible assets
1,700,397
1,239,450
2,086,575
1,654,745
Less: accumulated depreciation and depletion
(34,648
)
(5,515
)
Total
$
2,051,927
$
1,649,230
Mine development costs
Our mine development costs consist of the following:
2003
2002
Mine development costs
$
320,064
$
380,778
Processing plant and land
66,114
34,517
$
386,178
$
415,295
Mine
development costs consist primarily of the block caving and mine infrastructure costs.
These costs are being amortized as depletion expense based on the ratio of tons of ore
mined divided by estimated tons of ore accessible by currently developed mine
infrastructure. Capitalized costs do not exceed fair value.
Mineral
interests and other intangible assets
Our mineral and other intangible assets consist of the following:
2003
2002
Precambrian mineral interests
$
725,000
$
300,000
Cangalli mineral interests
975,397
939,450
Total
$
1,700,397
$
1,239,450
Our mineral interests are in the following stages:
2003
2002
Mineral interest:
Production stage
$
4,877
$
-
Development stage
76,500
-
Exploration stage
1,619,020
1,239,450
Total
$
1,700,397
$
1,239,450
Our
mineral interests are subject to amortization. The amounts of residual values and the
weighted-average amortization periods were as follows at December 31, 2003:
Residual Value
Weighted-average
Amortization Period
(years)
Mineral interest:
Production stage
$
-
2
Development stage
-
10
(1)
Exploration stage
725,000
35
(1)
Our development stage properties will be amortized using the units of production
method once production has commenced. The life is estimated.
Note C – Mining
properties (continued)
Based
on the carrying value of our intangible assets at December 31, 2003, the estimated
aggregate amortization expense for each of the next five years is as follows:
Years ended December 31,
2004
$ 42,590
2005
42,590
2006
42,590
2007
42,590
2008
42,590
Concurrent
with the acquisition of UCL properties, we wrote off $100,000 of advanced royalties that
had been paid to UCL in 2000 and 2001.
On
July 2, 2002, we acquired the Cangalli mining property from UCL, a mining cooperative. The
purchase price, capitalized as mineral interests, includes the following components:
Cash
$
300,000
Obligations assumed and payable over approximately
four years
175,000
Prior contract payments
70,000
Common stock issued
417,047
Total
$
425,000
In
June 2003, we acquired 100% of the Buen Futuro mining property located between and
adjacent to Golden Eagle’s landholdings in the Precambrian Shield. The following
purchase price was capitalized as mineral interests and includes the following components:
Cash paid
$
25,000
Cash payable
225,000
Common stock issued
75,000
Common stock payable
100,000
Total
$
425,000
The
Buen Futuro property consists of 2,500 acres and contains proven and probable reserves of
gold and copper. We have paid cash of $25,000 and stock valued at $75,000 in 2003. We
additionally paid cash of $25,000 in 2004. In 2005, we must pay $200,000 in cash and
$100,000 in common stock. The contractual obligation of cash and stock, in accordance with
SFAS No. 150, has been presented as current liabilities of $25,000 and long-term
liabilities of $300,000 as of December 31, 2003.
The
cash and common stock amounts due on Cangalli and Buen Futuro as of December 31, 2003 are
as follows:
2004
$ 25,000
2005
300,000
2006
-
2007
93.871
Total
$ 418,871
Note D – Loans and
Notes Payable
We
have debt obligations out standing at December 31, 2003 and 2002 as follows:
2003
2002
Bank note payable, interest at prime plus 3%. Interest
due monthly until June 29, 2004 when principal and unpaid
interest are due. Secured by s certain assets of
relatives of a former officer, and 13.5 million shares of
Company stock of the former officer.
$ 995,800
$ 995,800
Note payable, interest at 18% per year issued January 16,
2002, unsecured
-
25,000
Convertible debentures payable, interest at 10% to 12%
due annually, principal and interest due dates were
extended by two years on each of the debentures, the
first coming due in January 2004, and all other
debentures at varying dates during 2004 through 2006.
These debentures all have the same terms and are
convertible at the lesser of $.03 to $.12 per share or
50% of the average of the closing bid price of common
stock for three days prior to conversion.
-
3,836,325
Less: unamortized beneficial interest discount
-
(1,914,901)
Total unrelated party
995,800
2,942,224
Borrowings
from Related Parties:
2003
2002
Note payable, interest at 10.5%,issued in 1996 to a
relative of a former officer, unsecured, due June 30,
2003, personally guaranteed by the former officer and her
former husband. Classified as
current due to the related
party aspect of the notes.
450,000
450,000
Notes payable, interest at 12%, issued from November 1996
through
December 1998 to relatives of a former officer,
unsecured, due June 30, 2003. Classified as current due
to the related party
aspect of the notes.
-
629,062
Loan from a former employee and director, interest at 8%,
unsecured,
due on demand.
23,204
41,204
Total related party
473,204
1,120,266
Total Loans and Notes
1,494,004
4,062,490
Less: Current maturities
(1,494,004)
(2,141,066)
Non-current maturities
$-
$1,921,424
The
bank that has loaned us $995,800 has indicated it expects it will not renew or extend the
loan beyond June 30, 2004.
The note payable of $450,000 was due June 30, 2003. We are currently negotiating either to
convert the note to common stock or extend the due date of the loan.
The
beneficial conversion interest related to the convertible debentures was recorded
initially as an addition to additional paid in capital and as a discount to the related
debentures. The discount has been amortized to interest expense over the life of the
related debentures using the interest method.
Effective
in third and fourth quarters of 2003, all of the holders of convertible debt converted
their debentures and accrued interest into common stock. As a result, all of the
unamortized discount was charged to interest expense.
The
components of the unamortized discount at December 31, 2003 and 2002 is as follows:
December 31
2003
2002
Total discount
$
3,592,395
$
3,592,395
Less: accumulated amortization
3,592,395
1,677,494
Total unamortized
$
-
$
1,914,901
Note E – Income
Taxes
We have not recorded an income tax
provision for 2003, 2002 or 2001 due to continued net operating losses.
The
following is a reconciliation of the provision for income taxes to income before income
taxes computed at the federal statutory rate of 34%:
2003
2002
2001
Income taxes at the federal statutory rate
$
(2,200,000
)
$
(4,173,000
)
$
(889,803
)
State income taxes, net of federal benefits
(261,000
)
(48,000
)
65,750
(Deductible) Nondeductible expenses
(709,000
)
3,540,000
145,904
Non-U.S. taxes
239,000
134,000
111,583
Effect of net operating loss
2,931,000
547,000
566,566
Net
$
-
$
-
$
-
Deferred
tax liabilities and deferred tax assets are as follows:
2003
2002
2001
Deferred tax asset:
Net operating loss
$
4,821,000
$
2,129,000
$
1,630,000
Valuation allowance
(4,821,000
)
(2,129,000
)
(1,630,000
)
Net
$
-
$
-
$
-
Change
in valuation allowance as of December 31, is as follows:
Valuation allowance:
2003
2002
2001
Beginning valuation allowance
$
(2,129,000
)
$
(1,630,000
)
$
(1,418,400
)
Change
(2,692,000
)
(499,000
)
(211,600
)
Ending valuation allowance
$
(4,821,000
)
$
(2,129,000
)
$
(1,630,000
)
The
valuation allowance has been established due to the uncertainty of future taxable income,
which is necessary to realize the benefits of the deferred tax assets. We had net
operating losses (“NOL”) of approximately $14.2 million $6.3 million and $4.8
million at December 31, 2003, 2002 and 2001 respectfully, which expire in 2006
through 2023. These NOL’s are subject to annual utilization limitations due to prior
ownership changes. The approximate tax benefit of $4,821,000 of the net operating losses
has been offset by a valuation allowance.
Note F –
Stockholders’ Equity
Common
Stock Issued
During
2001, 11,424,662 shares of common stock were sold to various individuals in a private
placement at prices ranging from $.03 to $.05 per share for total proceeds of $363,534. On
June 28, 2001, we acquired from three individuals mining concession interests for 10
million shares of common stock valued at $300,000 ($.03 per share). During 2001, 5,341,051
shares of common stock were granted to various individuals for services valued at the
publicly traded stock prices on the day of grant ranging from $.03 to $.06 for total value
of $344,578. On December 31, 2001, accrued interest payable of $150,000 on convertible
debentures was converted to 5,000,000 shares of common stock at $.03 per share. On
December 31, 2001, our president forgave accrued salary in the amount of $905,886. This
amount has been recorded as contributed capital. On February 13, 2001 and July 9, 2001, we
issued 300,000 shares of common stock at a rate of $.073 (trading price on the date of
issue) per share to an individual in exchange for accrued interest of $44,044. On March
22, 2002, 1,000,000 shares of common stock were issued to a former officer to settle a
lawsuit at $.07 per share for a total value of $70,000. However, this settlement was
accrued into 2001 since the dispute related to earlier periods. During 2001, we recorded
the aggregate intrinsic value of the beneficial conversion feature, including the
conversion of interest, in the amount of $1,815,059.
During
2002, 32,066,314 shares of common stock were sold to various individuals in a private
placement at prices ranging from $.03 to $.12 per share for total proceeds of $1,337,211.
During 2002, 6,400,870 shares of common stock were granted to various individuals for
services valued at the publicly traded stock prices on the day of grant ranging from $.03
to $.275 for total value of $1,033,745. During 2002, we issued 4,600,000 shares of common
stock at prices from $.05 to $.135 (trading price on the date of issue) per share to an
individual in exchange for accrued interest of $475,500. On July 2, 2002, 3,944,500 shares
of common stock was issued to the owners of the UCL cooperative as a portion of the
payment to acquire mining interests at $.10 per share for a total value of $394,450. On
March 20, 2002, our Board of Directors granted options to our President and CEO to
purchase 25,000,000 common shares of our stock at $0.075 per share, for a one-year period.
In addition, on that same date the Board granted options to a former Executive Officer of
us to purchase 20,000,000 common shares of our stock also at $0.075 per share, for a
one-year period. The transaction was valued at $2,098,000 using the intrinsic method for
the president’s options and Black-Scholes fair valuation method for the former
employee’s options. During 2002, we recorded the aggregate intrinsic value of the
beneficial conversion feature, including the conversion of interest, in the amount of
$1,777,336.
Note F –
Stockholders’ Equity (continued)
During
2003, 23,697,207 shares of common stock were sold to various individuals in a private
placement at prices ranging from $.08 to $.15 per share for total proceeds of $2,149,888.
During 2003, 8,297,073 shares of common stock were granted to various individuals for
services valued at the publicly traded stock prices on the day of grant ranging from $.12
to $.255 for total value of $1,394,114. During 2003, 4,362,562 shares of common stock were
granted to various individuals and companies for mineral exploration and development
services valued at the publicly traded stock prices on the day of grant ranging from $.14
to $.217 for total value of $691,809. During 2003, we issued 11,346,956 shares of common
stock at prices from $.03 to $.19 per share to individuals in exchange for accrued
interest of $926,425 and issued 131,188,355 shares ranging from $.03 and $.19 to
individuals for the conversion of debentures and notes payable to common stock valued at
$4,465,387. During, 2003, an additional 133,000 shares of common stock was issued to the
various owners of the UCL cooperative to satisfy additional claims related to the
acquisition of the Cangalli mining interest at $.17 per share in the amount of $22,610. We
also issued 456,204 shares at a price of $.164 per share for the acquisition of the Buen
Futuro mining claim valued at $75,000. During 2003, 12,264,456 shares were issued to our
CEO and President and a former officer of Golden Eagle at $.186 per share for the cashless
exercising of options valued at $2,281,188; however, this amount was expensed during 2002
under variable accounting rules applicable to certain stock compensation transactions.
Stock
Compensation Plan
On
June 1, 2000, our Board of Directors adopted the “Golden Eagle International, Inc.
2000 Employee and Consultant Stock Compensation Plan, (the “Plan”) which
provides for compensation payable to employees and consultants (not including officers,
directors or others deemed to be insiders) by issuing shares of common stock or options to
purchase common stock. The Plan reserves the right to issue up to 20 million shares in the
discretion of the Board of Directors.
On
November 1, 2000, the Board of Directors granted a retention bonus to certain employees of
its Bolivian subsidiary, GEII Bolivia, consisting of a total of 1,020,000 shares, one
third of which vest each year for three years beginning November 1, 2001. The estimated
fair value of the stock on the grant date was approximately $.275 per share and was
recorded as deferred compensation. Deferred compensation is amortized over the vesting
period. As of December 31, 2003, all deferred compensation for stock previously
distributed under this Plan has been fully amortized.
Officer
Retention Bonus
On
November 3, 2000, the Board of Directors granted a retention bonus to an officer of its
Bolivian subsidiary, consisting of a total of 900,000 shares, 300,000 shares of which vest
each year for three years beginning November 1, 2001. The estimated fair value of the
stock on the grant date was approximately $.08 per share and is recorded as deferred
compensation. Deferred compensation is amortized over the vesting period. As of December
31, 2003, all stock previously distributed under this plan has been fully amortized.
Non-qualified
stock options
On
March 22, 2002, we adopted a non-qualified stock option plan for our president and former
president in which we granted options to purchase 25,000,000 and 20,000,000 shares of
common stock, respectively. A total of $2,098,000 in compensation was recorded at the time
of the granting of the options. The options were exercisable for $.075 per share for a
period of one year. The Plan provided that the recipients could elect to pay for the
shares in cash or from proceeds of the sale of a portion of the shares acquired from the
exercise of options (cashless exercise). On December 30, 2002, the recipients exercised
their options to purchase an aggregate of 24,456,523 shares of our common stock. To pay
for the shares, the individuals exchanged, in a like-kind, share-for-share exchange, a
total of 6,456,523 shares at a price of $0.284 per share for a total of $1,833,653. The
net effect was the issuance of 18,000,000 shares of common stock at the strike price of
$0.075 per share; however, the benefit to the individuals was the 18,000,000 net shares
issued and compensation of $5,112,000. On March 20, 2003, the recipients exercised their
options to purchase an aggregate of 20,543,477 shares of our common stock. To pay for the
shares, the individuals exchanged, in a like-kind, share-for-share exchange, a total of
8,279,021 shares at a price of $0.284 per share for a total of $2,351,242. The net effect
was the issuance of 12,264,456 shares of common stock at the strike price of $0.075 per
share; however, the benefit to the individuals was the 12,264,456 net shares issued and
compensation of $2,281,183. This additional compensation was recorded in 2002 and the
shares were issued in 2003.
A
summary of the options granted to purchase common stock and the changes therein during the
years ended December 31, 2003, 2002 and 2001 is presented below.
December 31,
2002
Number of Options
Weighted Average
Exercise price
Outstanding at beginning of year
20,543,477
.075
Granted
-
-
Cancelled
-
-
Exercised
20,543,477
.075
Oustanding at year end
-
-
Weighted avg. value of options granted
20,543,477
.075
Weighted average remaining contractual life of options outstanding as of year end
N/A
N/A
December 31,
2002
Number of Options
Weighted Average
Exercise price
Outstanding at beginning of year
-
-
Granted
45,000,000
.075
Cancelled
-
-
Exercised
24,456,523
.075
Oustanding at year end
20,543,477
.075
Weighted avg. value of options granted
20,543,477
.075
Weighted average remaining contractual life of options outstanding as of year end
N/A
79 days
December 31,
2002
Number of Options
Weighted Average
Exercise price
Outstanding at beginning of year
-
-
Granted
-
-
Cancelled
-
-
Exercised
-
-
Oustanding at year end
-
-
Weighted avg. value of options granted
N/A
N/A
Weighted average remaining contractual life of options outstanding as of year end
N/A
N/A
Assumptions used in valuing the stock options is:
For the year ended December
2003
2002
2001
31,
Expected
dividend yield
-
-
-
Expected
volatility
-
354%
-
Risk-free
interest rate
-
5.0%
-
Expected
volatility life of options
-
12 months
-
Amounts expensed
to compensation were $-0-, $7,393,189 and $-0- for the years ended December 31, 2003, 2002
and 2001, respectively.
Note G – Related
Party Transactions
From
1994 through 1999, a former officer and current major stockholder advanced funds to us on
an unsecured basis at 8%. During 2000, $16,784 was repaid, leaving a balance of $41,204
plus accrued interest of $3,776 at December 31, 2002. Due its related party nature, the
loan is included in current liabilities. The principal amount of this note was reduced
during 2003 to a principal balance on December 31, 2003 of $23,204 and accrued interest of
$1,406.
During
1996, notes payable totaling $450,000 at an interest rate of 10½%, were issued to a
relative of the former officer discussed above. The notes are unsecured but personally
guaranteed by the former officer and her former husband. As of December 31, 2003, the
$450,000 of loan principal and accrued interest of $510,730 was outstanding. Due to their
related party nature, the notes are included in current liabilities.
From
1995 through 1999, relatives of the former officer advanced funds to us on an unsecured
basis at 12%. As of December 1, 2003, $629,062 in principal plus accrued interest of
$436,292 was outstanding. On December 1, 2003, this individual agreed to convert all
outstanding principal and accrued interest to common stock at $.19 per share that was the
closing market price on the day the stock was purchased in the form of a private placement
for 5,607,129 shares.
From
1997 through July 31, 2002, we made cumulative unsecured net advances to our president. As
of December 31, 2003, the outstanding balance of these advances totaled $516,783. However,
as of December 31, 2003, we also owed the president $516,783 of unpaid salary. The amount
due to the president, includes a voluntary cancellation of accrued salary totaling $36,457
and $443,772 in 2003 and 2001, respectively
During
1999, we contracted the services of a consulting metallurgical firm, an employee of which
became an officer and director of Golden Eagle, to carry out metallurgical and feasibility
studies, as well as perform laboratory and bench testing and analysis, on our Cangalli
prospect. On March 16, 2000, we satisfied the accrued fees payable to this in their
entirety by issuing the consulting firm 2,005,800 restricted shares of common stock ($.03
per share). In 2000, we advanced the firm $66,885. As of December 31, 2003, all advances
had been repaid by the firm. During 2003, the consulting firm was paid $93,046 in cash and
the firm and individual were paid 3,000,000 shares of common stock for engineering
services at prices between $.145 and $.215, totaling $475,000
.
On January 5, 2004,
the officer and director here referenced resigned as an officer and director of Golden
Eagle for health reasons. The consulting firm continues to provide services to us.
In
2003, we purchased the Buen Futuro property from the mother of the wife of our consultant
and reserve estimation geologist, Dr. Biste.
Note H –
Commitments and Contingencies
Contingencies
Resulting from Litigation
Litigation in Bolivia
Litigation
in Bolivia against a former employee was resolved in 2002 in our favor. We had accrued a
liability of $275,804 and recaptured the prior contingency amounts as other income during
2002.
Subsequent
to the 2003 year-end, a lawsuit was initiated against Golden Eagle relating to stock
transactions occurring in 1996 between a former officer and a stockbroker. The matter was
filed in the District Court for the City and County of Denver, Colorado, and is entitled:
Geiger v. Golden
Eagle International, Inc. and Ronald A. Knittle
, Civ. No.
03CV9390. On March 2, 2004, we filed a Motion to Dismiss plaintiff’s complaint in
which we state that plaintiff’s claims are barred by the statute of limitations, or
are barred based on the doctrine of issue preclusion because those issues were previously
decided against the plaintiff by an administrative law judge and the SEC in the case:
In Re Kirby
, Release No. 8174 Admin. Proc. File No. 3-9602 (2003) Golden Eagle does
not believe that plaintiff’s complaint has merit and further believes that the matter
as to Golden Eagle will be dismissed.
Office
Leases
October
30, 2002, we entered a one-year lease of an office in Draper, Utah for $1,920 per month.
Since November 2003 we have leased the offices on month-to-month basis and no new lease
has been executed. Rent paid for the office during 2003, 2002 and 2001 was approximately
$22,574, $14,000 and $12,000 respectively. We are also responsible for the cost of
utilities, insurance, taxes, and common area expenses.
During
June 2003, the Golden Eagle entered into a two- year office lease in La Paz, Bolivia at
$1,700 per month. Rental expense paid for the office was approximately $20,000 per year in
2003, 2002 and 2001. Lease payments for 2004 are expected to remain at approximately
$20,000.
Other
Commitments
Under
our agreement with the seller of Buen Futuro, Golden Eagle has agreed to maintain an
exploration program to replace mineral reserves as they are depleted through mining for as
long as the potential for feasible mineral reserves continues on the ore deposits found
within the Buen Futuro concession. Golden Eagle has also agreed to invest $1 million in
exploration of Buen Futuro by the end of June 2006. Golden Eagle has expended
approximately $75,000. Also in the agreement, Golden Eagle has committed to commence
mineral production on the Buen Futuro concession by May 23, 2005, and to expend a minimum
of $2,000,000 to initiate that production. To date, Golden Eagle has not spent any amounts
towards this commitment.
Note I – Subsequent
Events
Private
Placements Subsequent to Year-End
We
have also continued to make private placements during the first quarter of 2004 with 14
accredited investors. As of March 30, 2004 we had received $600,690 in private placement
proceeds in exchange for 5,997,182 shares of restricted common stock with prices ranging
from $.09 to $.11 .
Note J – Unaudited
Gold and Copper Reserves
Cangalli
Effective
December 31, 2003, we estimated proven and probable gold reserves on our Cangalli mining
concessions located in the Tipuani Gold District of western Bolivia. Those reserves were
estimated in a report (the “reserve report”) dated February 2004, by Carlos
Thompson, Reg. Eng., an independent economic geologist and consultant, as well as Giovanni
Viscarra, Reg. Eng., a geologist and Golden Eagle’s Cangalli mine superintendent. The
report states that the reserves were estimated in accordance with Industry Guide 7 of the
Securities and Exchange Commission. In preparing the reserve report and estimated mineral
reserves, Mr. Thompson was acting as a consultant to us, and Mr. Viscarra was acting as an
employee of Golden Eagle International, Inc. Bolivia. Messrs. Thompson and Viscarra have
consented to the public release of the information contained in the accompanying
consolidated financial statements.
There
are many uncertainties in estimating reserve quantities and in projecting future
production rates and the timing of development expenditures. Accordingly these estimates
may change as further information becomes available.
Proven and
Probable in
Open Pit
Total
Ore in
tonnes
g/t
Gold
Troy Ounces
of Gold
(proven and
probable)
Proven
Reserve
only Ore in
Open Pit in tonnes
g/t
Gold
Troy Ounces
of Gold
Probable Reserve only Ore in Open Pit in tonnes
g/t Gold
Troy Ounces of Gold
Total
613,000
0.47
9,226
299,000
0.47
4,500
314,000
0.47
4,726
G/t=grams per tonne
Proven and
Probable in
Underground
Total
Ore in
tonnes
g/t
Gold
Troy Ounces
of Gold
(proven and
probable)
Proven
Reserve
only Ore in
Underground in tonnes
g/t
Gold
Troy Ounces
of Gold
Probable Reserve only Ore in Underground in tonnes
g/t Gold
Troy Ounces of Gold
Total
38,000
3.73
4,574
19,000
3.73
2,287
19,000
3.73
2,287
The
in-place proven and probable gold reserves total an in situ metal quantity of 13,800 troy
ounces. As stated in the reserve report, mining losses are estimated to be approximately
5%, and metallurgical losses are also estimated to be 5%, qualifying the in-place reserves
pursuant to Industry Guide 7, and decreasing the quantity of metal to 12,420 troy ounces
recoverable.
Note J – Unaudited
Gold and Copper Reserves (continued)
Buen
Futuro
Effective
December 31, 2003, we estimated proven and probable gold reserves, and proven and probable
copper reserves, on our Buen Futuro mining concession located in the Precambrian Shield of
eastern Bolivia. Those reserves were estimated by Michael H. Biste, Ph.D, an independent
economic geologist and consultant in a report dated February 2004. The report states that
the reserves were estimated in accordance with Industry Guide 7 In preparing the report
and estimated mineral reserves, Dr. Biste was acting as our consultant to when we acquired
the Buen Futuro property and related information from an unrelated Bolivian national in
June 2003. At the time, Golden Eagle entered into a consulting agreement with Dr. Biste by
which we pay him $3,000 per month and Golden Eagle common stock with a value of $2,000 per
month. Dr. Biste has consented to the public release of the information in the
accompanying consolidated financial statements.
There
are many uncertainties in estimating reserve quantities and in projecting future
production rates and the timing of development expenditures. Accordingly these estimates
may change as further information becomes available.
Proven and
Probable
Total
Ore in
000's of
tonnes
g/t
Gold
Troy Ounces
of Gold
(proven and
probable)
Proven
Reserve
only Ore in
000's of tonnes
g/t
Gold
Troy Ounces
of Gold
Probable Reserve only Ore in
000's of tonnes
g/t Gold
Troy Ounces of Gold
Total
2,528
1.03
83,175
1,577
1.12
56,585
951
0.89
27,328
G/t=grams per tonne
Copper Reserves
Proven and
Probable
Total
Ore in
000's of
tonnes
%
Copper
Fine Tonnes
of Copper
(proven and
probable)
Proven
Reserve
only Ore in
000's of tonnes
%
Copper
Fine tonnes
of Copper
Probable Reserve only Ore in
000's of tonnes
% Copper
Fine tonnes of Copper
Total
2,162
1.72
37,205
(82 million pounds)
1,137
1.85
21,025
(46.4 million pounds)
1,025
1.58
16,153
(35 million pounds)
The
in-place proven and probable oxide gold reserves total 2,528,000 tonnes @ 1.03 g/t gold,
giving an in situ metal quantity of 83,715 troy ounces. As stated in the report by Dr.
Biste, mining method losses are estimated to be negligible, however, metallurgical testing
indicates a 4% recovery loss should be expected, which in any event is extremely low,
qualifying the in-place reserves pursuant to Industry Guide 7, and decreasing the number
to 80,366 troy ounces recoverable.
Note J – Unaudited
Gold and Copper Reserves (continued)
Buen
Futuro (continued)
The
in-place proven and probable supergene copper reserves total 2,162,000 tonnes @ 1.72%
copper giving an in situ metal quantity of 37,186 tonnes (82 million pounds) of copper.
Again, the mining method losses are estimated to be low compared to actual block ore
estimates, however, the metallurgical losses are estimated to be in the range of 13%,
qualifying the in-place reserves pursuant to Industry Guide 7, and decreasing the number
to 32,352 tonnes (71 million pounds) recoverable.
The
Buen Futuro mining concession is located 280 kilometers north of Santa Cruz, Bolivia, and
18 kilometers east of the township of Ascension de Guarayos. It consists of a single claim
of 1,000 hectares (2,471 acres) in size. Golden Eagle also owns six contiguous claims in
the area consisting of 55,420 hectares (136,500 acres).
As
used in the preceding tables, proven (or measured) reserves are reserves for which: (a)
quantity is computed from dimensions revealed in outcrops, trenches, workings or drill
holes; grade and/or quality are computed from the results of detailed sampling; and (b)
the sites for inspection, sampling and measurement are spaced so closely and the geologic
character is so well defined that size, shape, depth and mineral content of the reserves
are well-established; and probable (or indicated) reserves are reserves for which quantity
and grade and/or quality are computed from information similar to that used for proven
(measured) reserves, but the sites for inspection, sampling and measurement are farther
apart or are otherwise less adequately spaced. The degree of assurance, although lower
than that for proven (measured) reserves, is high enough to assume continuity between
points of observation. Tonnes are the metric equivalent of U.S. tons.
Note K – Quarterly
Data (Unaudited)
The
following is a summary of selected quarterly financial information.
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