Related Party Disclosures

12 Months Ended

Sep. 30, 2011

Related Party Disclosures

Related Party Transactions Disclosure [Text Block]

NOTE 10 – RELATED PARTY TRANSACTIONS:

a.Juniper Resources, LLC

Information regarding related party notes payable is as follows at September 30, 2011 and 2010:

		2011		2010
Juniper Resources, LLC	$	5,000,000	$	5,000,000
Accrued interest on note payable to   Juniper Resources, LLC	$	41,667	$	41,667
Related party interest expense	$	527,272	$	556,625

On October 31, 2008, the Company entered into a series of agreements in connection with a $5 million loan from Small Mine Development, LLC (“SMD”), an entity controlled by Ron Guill, a director of the Company. The loan documents included: a convertible note (the “Convertible Term Note”), a credit agreement (the “Credit Agreement”), a collateral assignment and pledge of stock and security agreement (the “Pledge Agreement”), a security agreement (the “Security Agreement”) and a right of first refusal over the Company’s Butte Highlands property (the “Right of First Refusal”).

The Convertible Term Note has a principal amount of $5 million and is collateralized with all of the stock of Timberline Drilling, Inc., as well as a Deed of Trust covering the Company’s Butte Highlands property in Silver Bow County, Montana (the “Butte Highlands Property”).

The Convertible Term Note was scheduled to be repaid on or before October 31, 2010, including interest due at maturity.  In June 2010, SMD agreed to extend the maturity date of the Convertible Term Note to on or before April 30, 2012.  Accordingly, as of June 30, 2011 the note is classified as a current liability.  All interest accrued through June 30, 2010 was paid by the Company to SMD at that time.  The Company also paid a $50,000 extension fee to SMD in consideration for the extension of the Convertible Term Note.  The extension fee has been recorded as a deferred financing cost and is being amortized over the life of the loan.  The Convertible Term Note was also amended to require interest accrued subsequent to June 30, 2010 to be paid by the Company to SMD monthly, rather than accruing interest to maturity.  All other terms of the loan were unchanged.  The Company has accounted for the extension of the maturity date as a loan modification.

Effective December 31, 2010 SMD assigned the Convertible Term Note and all related agreements and rights to Juniper Resources, LLC (“Juniper”), an entity also controlled by Ron Guill.

The Company also assigned to Juniper the Right of First Refusal to purchase the Butte Highlands Property on the same terms as those of any bona fide offer from a third-party upon 60 days’ notice from the Company of any such offer. In addition, the Company granted Juniper a right to develop the Butte Highlands Property on the same terms as those of any bona fide offer to develop the property from a third-party upon 60 days’ notice from the Company of any such offer.

Pursuant to the terms of the Credit Agreement, the Convertible Term Note bears interest at 10% per annum, with interest payable monthly. The Convertible Term Note is convertible by Juniper at any time prior to payment of the note in full, at a conversion price of $1.50 per share. Should the Company issue any form of equity security other than the Company’s common stock, Juniper may also convert all or any portion of the outstanding amount under the Convertible Term Note into the new form of equity security at the issuance price of the new form of equity security. Management analyzed the conversion features contained in this note considering the guidance provided in the ASC for derivatives and hedging.  Management’s conclusion was that these convertible features are conventional convertible instruments and thus would qualify for equity classification. As conventional convertible instruments, the embedded conversion options qualify for the scope exception provided in the guidance for derivatives and hedging, and therefore would not be bifurcated from the host instrument.

Subsequent to September 30, 2011, in conjunction with the Company’s sale of Timberline Drilling, Inc., the Convertible Term Note and all accrued interest was repaid in full (see Note 17).

b.Butte Highlands Joint Venture Agreement

On July 22, 2009, the Company entered into an operating agreement (the “Operating Agreement”) with Highland, an entity controlled by Ron Guill, a director of the Company, to form a 50/50 joint venture for development and mining of the Company’s Butte Highlands Gold Project (see Note 5). Under the terms of the Operating Agreement, the Company contributed its Butte Highlands property to BHJV for a deemed value of $2 million, and Highland contributed certain property and will fund all future mine development costs.  Both the Company’s and Highland’s share of costs will be paid out of proceeds from future mine production.  

Ron Guill, a director of the Company and an owner of Highland, is the manager of BHJV until such time as income in an amount equal to all mine development costs less $2 million is distributed to Highland.  At that time, a management committee, with equal representation from Highland and the Company, will be the manager of BHJV.  Under the terms of the Operating Agreement, Highland will have preferential rights with respect to distributions until the investment by Highland is deemed equal to the investment by the Company.  

At September 30, 2011 and 2010, the Company has a receivable from BHJV for expenses incurred on behalf of BHJV in the amount of $97,626 and $30,571, respectively.  This amount is included in prepaid expenses and other current assets on the consolidated balance sheets at September 30, 2011 and 2010.

During the years ended September 30, 2011 and 2010, Timberline Drilling, our wholly owned subsidiary, provided $1,840,333 and $106,763, respectively, in core drilling services to BHJV at the Butte Highlands Gold Project.

c.Rae Wallace Mining Company

The Company is an affiliate of Rae Wallace Mining Company (“RWMC”), as it holds approximately 13% and 18% of the issued and outstanding stock of RWMC as of September 30, 2011 and 2010, respectively.

In May 2010, the Company entered into an agreement with RWMC to provide bridge loan financing.  An unsecured loan for $100,000 was made by the Company to RWMC, with an annual interest rate of 12%, due August 31, 2010.  In July 2010 the entire loan balance was repaid, along with $2,467 of interest accrued up to the date of repayment, and the loan agreement was cancelled.

d.Sale of Timberline Drilling, Inc.

In September 2011, the Company announced that it had entered into a non-binding letter of intent to sell its wholly owned subsidiary, Timberline Drilling, Inc., to a private company formed by a group of investors, including the senior management team of Timberline Drilling, Inc.  No management or directors of the Company are affiliated with the buyer.  Subsequent to September 30, 2011, the sale of Timberline Drilling, Inc. was completed (see Note 17).