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3. South Mountain Project

12 Months Ended

Dec. 31, 2019

3. South Mountain Project

BeMetals Option Agreement:

On February 27, 2019, the Company entered into an Option Agreement, (the “BeMetals Option Agreement”) with BeMetals Corp., a British Columbia corporation (“BeMetals”), and BeMetals USA Corp., a Delaware corporation (“BMET USA”), a wholly owned subsidiary of BeMetals. Under the terms of the BeMetals Option Agreement, BMET USA will be entitled to purchase 100% of the issued and outstanding shares of SMMI from TMRI, both wholly owned subsidiaries of the Company. SMMI is the Company’s subsidiary that holds the Company’s investment in the South Mountain project mineral interest. The term of the agreement is for two years with BeMetals completing a preliminary economic assessment ("PEA") completed by a mutually agreed third-party engineering firm.

Pursuant to the BeMetals Option Agreement, BMET USA will be entitled to purchase 100% of the outstanding shares of SMMI from TMRI if the following obligations are satisfied:

·Tranche 1: cash payment of $100,000 to TMRI within 1 business day of delivery of voting support agreements from shareholders of THMG who hold or control shares carrying more than 50% of the voting rights attached to all outstanding THMG Shares. Payment was received on March 5, 2019 and is nonrefundable.

·Tranche 2: within 3 business days following satisfaction of the Tranche 2 conditions (as defined and described below - the "Tranche 2 Completion Date"):

·issuance of 10 million common shares in the capital of BMET USA to TMRI; and

·BMET USA purchase of 2.5 million shares of THMG common stock at a price of $0.10 per share, for an aggregate purchase price of $250,000, on a private placement basis.

·Tranche 3: cash payment of $250,000 on or before the 6-month anniversary of the Tranche 2. Payment was received on December 10, 2019 and is nonrefundable.

·Tranche 4: cash payment of $250,000 on or before the 12-month anniversary of the Tranche 2.

·Tranche 5: cash payment of $250,000 on or before the 18-month anniversary of the Tranche 2.

·Tranche 6: cash payment of $250,000 plus an additional payment paid in in cash, BMET USA common shares or a combination of both. The calculation of the additional payment is an amount equal to the lesser of 50% of the market capitalization of BeMetals at the time, and the greater of either $10 million; or 20% the net present value of the South Mountain Project as calculated in a PEA.

The “Tranche 2 Completion Date” as defined by the Option Agreement was subject to several conditions, including, among other things:

·all requisite consents and regulatory approvals, including exchange approval;

·approval of the shareholders of THMG which was received from 53.24% of shareholders holding or controlling the issued and outstanding shares of the Company as of February 28, 2019;

·delivery by THMG of a title opinion in respect of the South Mountain Project (including opinions relating to OGT, SMMI's ownership interest in OGT and TMRI ownership of SMMI Shares) (the "Title Opinion"), and related corporate legal opinions (met as of May 1, 2019);

·delivery by THMG of an updated technical report in respect of the South Mountain Project, re-addressed to SMMI and BMET USA and with such amendments as required to satisfy Exchange requirements (met as of May 6, 2019); and

·entry into the management contracts as defined by the Option Agreement (met as of May 13, 2019).

Tranche 2 was completed on June 10, 2019. As per the agreement, BeMetals purchased 2,500,000 shares of the Company’s common stock for $250,000 in cash. In addition, as per the agreement, the Company received 10,000,000 shares of BeMetals common stock that had a fair value of $1,883,875 on the Tranche 2 Completion Date.

To date, the Company has received consideration of $350,000 in cash and shares of BeMetals common stock with a fair value of $1,883,875 when received. Prior to the agreement, the carrying value of the Company’s investment in the South Mountain mineral interest was $479,477. The Company recognized a gain on mineral interest of $1,754,398 during the year ended on December 31, 2019.

Concurrent with the BeMetals Option Agreement, BMET USA and SMMI entered into a management contract whereby BeMetals will pay $25,000 monthly to SMMI for management services to enable BMET to perform exploration and development work with respect to the South Mountain Project. Management service income of $200,000 was recognized for the year ended December 31, 2019.

BeMetals provides funding to SMMI for ongoing project expenses, including office lease payments. Under the terms of the Option Agreement, SMMI’s management provides BeMetals a request for funding monthly to cover the upcoming month’s expenses. At December 31, 2019, advances received from BeMetals that have not yet been spent total $73,343.

SMMI Joint Venture – OGT, LLC

The Company’s wholly owned subsidiary SMMI is the sole manager of the South Mountain Project in its entirety through a separate Mining Lease with Option to Purchase (“Lease Option”) with the Company’s majority-owned subsidiary OGT. The Lease Option includes a capped $5 million less net returns royalties paid through the date of exercise. The Lease Option expires in November 2026. If SMMI exercises the option, the option payment of $5 million less advance royalties will be distributed 100% by OGT to OGT’s minority member. Under the Lease Option, SMMI pays an advance $5,000 net returns royalty to OGT annually on November 4 which is distributed to OGT’s minority member. OGT’s financial information is included 100% in the Company’s consolidated financial statements and reflects its minority member’s non-controlling interest. Changes in the non-controlling interest equity balance is as follows:

		Years Ended December 31,
		2019		2018
Balance at beginning of period	$	`173,702`	$	`174,111`
Distribution to non-controlling interest		`(5,000)`		`(5,409)`
Net income attributable to noncontrolling interest		`5,000`		`5,000`
Balance at end of period	$	`173,702`	$	`173,702`