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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the fiscal year ended
Or
For the transaction period from ___________ to _________
Commission File No
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices, Zip Code)
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Securities registered pursuant to Section 12(b) of the Exchange Act:
None
(Title of each class)
Securities registered pursuant to Section 12(g) of the Exchange Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.002 par value | N/A | N/A |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
o Yes x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. xYes o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). xYes ¨
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | x | Smaller reporting company | |
| Emerging growth company | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter ($0.05 on December 31, 2021 was approximately $
The registrant had
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TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements
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| PART I |
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ITEM 1: | 6 | |
ITEM 1A: | 12 | |
ITEM 1B: | 24 | |
ITEM 2: | 24 | |
ITEM 3: | 38 | |
ITEM 4: | 39 | |
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| PART II |
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ITEM 5: | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES | 39 |
ITEM 6: | 41 | |
ITEM 7: | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION | 41 |
ITEM 7A: | 45 | |
ITEM 8: | 46 | |
ITEM 9: | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 71 |
ITEM 9A: | 71 | |
ITEM 9B: | 73 | |
| PART III |
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ITEM 10: | 73 | |
ITEM 11: | 74 | |
ITEM 12: | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 75 |
ITEM 13: | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 76 |
ITEM 14: | 76 | |
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| PART IV |
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ITEM 15: | 77 | |
ITEM 16: | 77 | |
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78 | ||
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EXPLANATORY NOTE
Santa Fe Gold Corporation. (the “Company”) filed its Annual Report on Form 10-K for the fiscal year ended June 30, 2022 (the “Original Form 10-K”), with the U.S. Securities and Exchange Commission (the “SEC”) on October 13, 2022. The Company is filing this Amendment No. 1 to the Original Form 10-K (this “Form 10-K/A”) solely for the purpose of inserting the revised audit report to the consolidated financial statements.
Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Form 10-K/A also contains new certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. Accordingly, this Form 10-K/A includes the currently dated certifications as exhibits.
No attempt has been made in this Form 10-K/A to modify or update the other disclosures presented in the Original Form 10-K. This Form 10-K/A does not reflect events occurring after the filing of the Original Form 10-K or modify or update the disclosures in the Original Form 10-K, except as set forth in this Form 10-K/A, and should be read in conjunction with the Original Form 10-K and the Company’s other filings with the SEC.
Unless the context requires otherwise, references to “Santa Fe Gold,” “Santa Fe,” “we,” “us,” “our” and the “Company” refer to Santa Fe Gold Corporation and its consolidated subsidiaries.
ADDITIONAL INFORMATION
Descriptions of agreements or other documents contained in this Annual Report filed on Form 10-K are intended as summaries and are not necessarily complete. Please refer to the agreements or other documents filed or incorporated herein and furnished herewith as exhibits for more complete descriptions of the terms and conditions set forth therein. Please see the exhibit index at the end of this report for a complete list of those exhibits.
Effective July 1, 2021, we are required to comply with the United States Securities and Exchange Commission Industry “(the SEC:) to Regulation S-K 1300 under the United States Securities Act of 1933, as amended (the “Securities Act”), with respect to disclosures related to our mineral properties. We cannot be certain that any part of mineral properties will ever be confirmed or converted into “reserves” as defined by Regulation S-K 1300. Investors are cautioned not to assume that all or any part of mineral property holdings will ever be confirmed as or converted into reserves; or that mineralized material can be economically or legally extracted.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This Annual Report may contain certain “forward-looking” statements as such term is defined by the Commission in its rules, regulations and releases, which represent the Company’s expectations or beliefs, including but not limited to, statements concerning the registrant’s operations, economic performance, financial condition, growth and acquisition strategies, investments, and future operational plans. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intent,” “could,” “estimate,” “might,” “plan,” “predict,” “strategy” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, many assuming that the Company secures adequate financing and is able to continue as a going concern, important factors that could prevent us from achieving objectives include but are not limited to those set forth in other “Risk Factors” section in this report and the following:
·our ability to continue as a going concern;
·our ability to acquire financing to allow us to remain in business and execute our business strategy;
·our anticipated cash requirements and the availability for current projects and financing thereof;
·projections regarding capital costs, expenditures, potential revenues, operating costs, production and economic returns may differ significantly from those that we have anticipated;
·our ability to secure permits or other regulatory approvals to operate or explore our mineral properties;
·exposure to all of the risks associated with mining operations, if any development of one or more of our projects is found to be economically feasible;
·title to some of our mineral properties may be uncertain or defective;
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·land reclamation and mine closure may be burdensome and costly;
·significant risk and hazards associated with mining operations;
·the requirements that we obtain, maintain and renew environmental, construction and mining permits, which is often a costly and time-consuming process and may be opposed by local environmental group;
·our future anticipated needs for working capital;
·claims, investigations, enforcement actions and other legal proceedings against us, and consequences therefrom;
·our lack of necessary financial resources to complete development of our projects and the uncertainty of our future best-efforts financing plans,
·our exposure to material costs, liabilities and obligations as a result of environmental laws and regulations (including changes thereto) and permits;
·changes in the price of silver and gold;
·extensive regulation by the U.S. government as well as state and local governments;
·any projected revenues;
·our growth strategies,
·anticipated trends in our industry;
·unfavorable weather conditions;
·the commercial and economic viability of any mines;
·availability of labor, materials and equipment;
·the volatility in the market price of our stock;
·our ability to acquire and retain key mining personnel to effectively operate and move forward the Company;
·failure of equipment to process or operate in accordance with specifications, including expected throughput, which could prevent the production of commercially viable output; and
·our ability to seek out and acquire high quality gold and silver properties.
Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described herein generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this report will in fact occur. We caution you not to place undue reliance on these forward-looking statements. Do not invest in our common stock based on forward-looking statements. We do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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PART I
Item 1. BUSINESS
Overview History
We are an exploration stage mining company, in the business of acquiring and developing metal and mineral properties that may contain recoverable gold and silver deposits. Our general business strategy is to acquire and develop mining properties positioned for low-cost production. We were originally incorporated in the State of Delaware on August 8, 1991 under the name Azco Mining, Inc. and on August 21, 2007, we changed our name to Santa Fe Gold Corporation by filing a Certificate of Amendment with the Delaware Secretary of State.
As an exploration mining company, we are engaged in the business of acquiring and developing mines and mining properties as well as securing production from existing and developed mining and mineral properties. Currently we own certain mining leases and other mineral rights, however none of them contain any proven or probable reserves, as defined in Regulation S-K 1300; and they are all currently considered “exploratory” in nature. Currently we have three projects, each of which management has determined is “material” based on the costs to secure the rights associated with them, as required by Regulation S-K 1304, these are: our Alhambra Property, the Jim Crow Imperial Mine and the Billali Mine, each of which are exploratory in nature and is described more fully in the properties section of this report.
Although management is optimistic about its plans for developing certain such properties, to date, minimal mining activities have commenced at the Jim Crow Imperial Mine and the Billali Mine sites and there can be no assurance that the Company’s mining activities will be profitable.
After the dismissal from bankruptcy in June 2016, we had no assets and approximately $20 million of indebtedness was reinstated. The properties we currently own were acquired subsequent to our dismissal from bankruptcy proceedings. We will be required to raise the capital that is required, in part, to continue to development of our current mining properties, construct a mill operation for processing our head ore and to help meet our continuing working capital requirements. There can be no assurances that we will be successful in raising the capital necessary to implement our business plan or if we are successful, that there may not be additional or superseding demands on our capital resources. Although the Company has been successful in meeting its capital requirements in the past, since emerging from Bankruptcy and management continues to be optimistic about being able to secure needed funding, any failure to do so or any unforeseen expenses or other demands on the Company’s capital could result in the need to curtail or cease operation, resulting in losses to investors.
Exploration Stage Company
We are considered an exploration stage company, as defined in S-K 1300. The Company has not demonstrated the existence of mineral reserves at any of our properties. Under Regulation S-K 1300, the SEC defines a “mineral reserve” as “an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of the qualified person, can be the basis of an economically viable project.” To have mineral resources, there must be reasonable prospects for economic extraction. Per the SEC, “probable mineral reserves” are the economically mineable part of an indicated and, in some cases, a measured mineral resource and “proven mineral reserves” can only result from measured mineral resources. Mineral reserves cannot be considered proven or probable unless and until they are supported by a preliminary feasibility study or feasibility study, indicating that the mineral reserves have had the requisite geologic, technical and economic work performed and are economically and legally extractable. We have not completed a preliminary feasibility study or feasibility study with regard to any of our properties to date. We do not anticipate leaving exploration stage company for the foreseeable future. Under S-K we will not exit the exploration stage until such time, if ever, that we demonstrate the existence of proven or probable mineral reserves that meet the guidelines under S-K 1300. When we begin extracting material from our properties, we will remain an exploration company under S-K 1300 guidelines.
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Company Organizational Chart
Overview of Current Events
Our Business
As a mining company in the exploration stage, we are engaged in the business of acquiring mineral properties that may contain recoverable mineral deposits, (we are currently targeting gold and/or silver deposits) with a view to develop them and, if there are mineral resources identified or mineral reserves, to actively mine them. Although management is optimistic about its prospects for favorable exploration results on the properties in which it has acquired interests, to date no mineral reserves have been determined. There are however minimal mining activities that have commenced and we have conducted limited extraction activity. Nevertheless, there can be no assurance it will continue or, that if it does, that any of the mining activities will be profitable, with or without mineral reserves.
Management’s continuing efforts were successfully rewarded as the Company secured, what management believes will ultimately be, promising mining leases and other mineral rights. The properties we now own are exploratory in nature and consist of certain mining leases and other mineral rights. As stated, they were acquired subsequent to our dismissal from bankruptcy proceedings and, although management is optimistic, none of them contain any proven and probable reserves. We are in the process of raising the capital required, in part (i) to begin further exploration activities of these current mining properties, and (ii) to help meet our working capital requirements. There can be no assurances that we will be successful in raising the capital necessary to implement our business plan or that, if we are successful in raising such capital, that there may not be additional or superseding demands on our capital resources. Although the Company has been successful in meeting its capital requirements in the past, and since emerging from Bankruptcy, management continues to be optimistic about its ability to continue securing the funding needed to execute on its business plan, any failure to do so or any unforeseen expenses or other demands on the Company’s capital could result in the need to curtail or cease some or all of the Company’s operations, resulting in losses to investors.
In October 2021, we exercised the purchase option for $164,335 on the mill property in Duncan, Arizona, and the transaction closed on November 9, 2021.
The Company is currently in the process of acquiring a mill operation for its head ore to be located on its property in Duncan, Arizona. The seller of the mill has disassembled the mill in Kellogg, Idaho and relocated the mill to the Duncan, Arizona site. Currently all associated costs of the mill and its relocation are being accumulated and finalized by the seller. At this time there are no agreements between the seller and the Company as to terms and sales price of the delivered disassembled mill and such price is anticipated to be negotiated and determined in late fall 2022, when the necessary funding will be raised by the Company for the acquisition of the mill equipment and its construction. At the time of filing this Form 10-K, negotiations for the purchase of the disassembled mill with the seller have not taken place and will be finalized upon the Company raising the adequate funding for the acquisition and determination if the seller or the Company will be responsible for its construction at the mill site.
Our Status as an Exchange Act Registrant and Trading in our Common Stock
The Company’s common stock has been quoted on OTC Markets (PINK) most recently under the trading symbol “SFEG.” However, in July 2020 it received notice that on June 25, 2020, the U.S. Securities and Exchange Commission (the “SEC” or “Commission”)
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issued an order suspending trading under Section 12(k) of the Securities Exchange Act of 1934, as amended (the “Exchange Act.”). Thereafter, the Commission commenced administrative proceedings to de-register the Company’s common stock under Section 12(j) of the Exchange Act. Issuers of securities registered pursuant to Section 12 of the Exchange Act are required under Section 13(a) of the Exchange Act and the rules promulgated thereunder to file current and accurate information in periodic reports with the Commission. Specifically, Exchange Act Rule 13a-1 requires issuers to file annual reports, and Exchange Act Rule 13a-13 requires domestic issuers to file quarterly reports. The Company’s inability to prepare and file the required quarterly and annual reports began with the misappropriation of funds by its former CEO; this had a direct impact on its financial statements as originally filed. This not only resulted in the need to amend and restate the 2017 annual report and related quarterly reports that had been filed with the Commission on Form 10-K and on Forms 10-Q, but since a restatement necessarily has a material effect on all future reports, the Company was not in a position to confidently restate its financial statements until it was able to fully and accurately define the scope of: (a) the issue created by Mr. Laws and (b) the subsequent actions taken against Mr. Laws by the Company and other unrelated parties. Compounding the issue, the Company’s auditor declined to continue auditing the Company’s financial statements, management believes, due to its potential liability and the conflicts that could result from any of the Law’s proceedings. Thereafter, the Company had difficulty engaging a qualified replacement audit firm, in part because of the perception of risk associated with the required restatements of its financial statements.
Ultimately, while the underlying circumstances that gave rise to the Company’s delinquent filings were, in part, caused by an individual who was dismissed upon discovery of his misappropriation of funds, the difficulty in finding a replacement audit firm was an additional factor that was beyond the control of management that contributed substantially to delays in our filings. Although we have since filed the Annual Reports that were delinquent, one of which required restating our financials and all but three of the Quarterly Reports that were delinquent have since been filed, the Commission’s standard position has been that, once de-registration proceedings are commenced for failure to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, it will not then grant a right to cure or comply. Thus, when the Commission then commenced administrative proceedings under Section 12(j), the Registrant’s only options were to defend the matter in litigation or to settle it and agree with the Commission’s order for de-registration of securities registered under Section 12(j) of the Exchange Act. Therefore, given: (a) the protracted nature of litigation in general, and (b) the high expense associated with defending an adversary proceeding with the Commission and (c) the low probability of a successful outcome, compared with the fact that: (x) a settlement with the SEC would allow the Company to re-file a registration statement as soon as it was drafted, (y) the Company had already completed one of the required audits, was in a position to complete the other, and was in a position to file a Registration Statement on Form 10-12G, and (z) Form 10-12G Registration Statements are automatically effective 60 days from the date of filing (unless the Commission objects, which is rarely done, although it is now common to receive comments by the Commission that then must be addressed). After considering the forgoing, the Company determined that it was in the best interest of its shareholders to settle and consent to the de-registration of its common stock and to file a Registration Statement on Form 10-12G. On December 17, 2020, the SEC order suspending trading went into effect.
On May 14, 2022, the Company filed a Form 10-12G Registration statement with the SEC and was withdrawn by the Company on July 12, 2021 due to comments not completely cleared by the SEC. On July 20, 2021, we refiled a new Form 10-12G and on September 17, 2021 we withdrew the filing due to SEC comments requiring financial restatements. The Company made the required financial restatements and our auditors recertified the audited financial statements and we submitted a new Form 10-12G on June 14, 2022 and on August 4, 2022 the SEC declared our Form 10-12G Registration effective. Although the Company is not trading currently and we are a reporting Company under Section 12(g) of the Securities and Exchange Act of 1934, as amended and are required to timely file periodic and current reports with the SEC.
The Company is working on securing a broker dealer to prepare Form 211 for submittal to Financial Industry Regulatory Authority (“FINRA”) for review and approval. Upon receiving FINRA’s approval and issuance our trading symbol, the Company will request a review from the OTC for removal the Caveat Emptor designation associated with our prior trading symbol and submit our application to the OTC to trade on their QB tier.
Competition
The mining industry is highly competitive. We will be competing with numerous companies, substantially all of which have far greater resources available to them that we are likely to have when Swe commence operations. We therefore may be at a significant disadvantage in the course of obtaining materials, supplies, labor, and equipment from time to time. Additionally, we are and will continue to be an insignificant participant in the business of mining, exploration and development. Because there is presently no known mineral reserve at this time on our existing properties, we have not determined the impact of any capital expenditures on our earnings or competitive position in the event a potentially commercially mineable ore deposit is discovered.
Compliance with Government Regulations
Continuing to acquire and explore mineral properties in the State of New Mexico will require the Company to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in the State of New Mexico and the United States.
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The mining industry, (specifically the activities of exploration, drilling) operate in a legal environment that requires permits to conduct virtually all operations; and permits are required by local, state and federal government agencies. Local authorities, usually counties, also have control over mining activity. The various permits address such issues as prospecting, development, production, labor standards, taxes, occupational health and safety, toxic substances, air quality, water use, water discharge, water quality, noise, dust, wildlife impacts, as well as other environmental and socioeconomic issues.
Like all other mining companies doing business in the United States, we are subject to a variety of federal, state and local statutes, rules and regulations designed to protect the quality of the air and water, and to protect threatened or endangered species, in the vicinity of our mining operations. These include “permitting” or “pre-operating approval” requirements that are designed: (i) to ensure the environmental integrity of a proposed mining facility, (ii) to ensure operating plans are designed to mitigate the effects of discharges into the environment during exploration, mining operations, and reclamation and (iii) that post-operation plans are designed to remediate the lands affected by a mining facility once commercial mining operations have ceased.
United States
Mining in the State of New Mexico is subject to federal, state and local law. Three types of laws are of particular importance to the Company’s U.S. mineral properties: those affecting land ownership and mining rights; those regulating mining operations; and those dealing with the environment.
Land Ownership
On Federal Lands, mining rights are governed by the General Mining Law of 1872 (“General Mining Law”) as amended, 30 U.S.C. §§ 21-161 (various sections), which allows the location of mining claims on certain Federal Lands upon the discovery of a valuable mineral deposit and proper compliance with claim location requirements. A valid mining claim provides the holder with the right to conduct mining operations for the removal of locatable minerals, subject to compliance with the General Mining Law and New Mexico state law governing the staking and registration of mining claims, as well as compliance with various federal, state and local operating and environmental laws, regulations and ordinances. As the owner or lessee of the unpatented mining claims, the Company has the right to conduct mining operations on the lands subject to the prior procurement of required operating permits and approvals, compliance with the terms and conditions of any applicable mining lease, and compliance with applicable federal, state, and local laws, regulations and ordinances.
Mining Operations
The exploration of mining properties and development and operation of mines is governed by both federal and state laws. The State of New Mexico likewise requires various permits and approvals before mining operations can begin, although the state and federal regulatory agencies usually cooperate to minimize duplication of permitting efforts. The State of New Mexico Mining and Minerals Division requires mine permits for each mining location. The permit has an Annual Permit Fee that is due by April 30 of each year. The Annual Permit Fee for minimal impact mines is currently $250.
Prior to receiving the necessary permits to explore or mine, the operator must comply with all regulatory requirements imposed by all governmental authorities having jurisdiction over the project. Generally, in order to obtain the requisite permits, the operator must have its land reclamation, restoration or replacement plans pre-approved. Specifically, the operator must present its plan to restore or replace the affected area. Often these requirements result in delays and/or costly studies or changes in the proposed activities; which may extend the time to completion. Although this may be necessary in order to mitigate the negative impact of certain aspects of an initial plan, all of these factors make it more difficult and costly to operate; and have a negative, and sometimes fatal, impact on the economic viability of the exploration or planned mining operation. Finally, it is possible that future changes in laws or regulations could have a significant impact on our business, requiring the planned activities to be economically reevaluated at that time.
Effect of Existing or Potential Government Regulations
Mineral exploration, including mining operations is subject to governmental regulation. Our operations may be affected in varying degrees by government regulation such as restrictions on production, price controls, tax increases, expropriation of property, environmental and pollution controls or changes in conditions under which minerals may be marketed. An excess supply of certain minerals may exist from time to time due to lack of markets, restrictions on exports, and numerous factors beyond our control. These factors include market fluctuations and government regulations relating to prices, taxes, royalties, allowable production and importing and exporting minerals. The effect of these factors cannot be accurately determined, and we are not aware of any probable government regulations that would impact the Company at this time, although there can be no assurances that regulations may not arise in the future. To the extent that government regulations do arise in the future, they may have a negative effect on our operations, which may in turn, result in losses to investors. This section is intended as a brief overview of the laws and regulations described herein and is not intended to be a comprehensive treatment of the subject matter.
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Environmental Laws
Federal legislation in the United States and implementing regulations adopted and administered by the Environmental Protection Agency, the Forest Service, the Bureau of Land Management, the Fish and Wildlife Service, the Army Corps of Engineers and other agencies—in particular, legislation such as the federal Clean Water Act, the Clean Air Act, the National Environmental Policy Act, the Endangered Species Act, the National Forest Management Act, the Wilderness Act, and the Comprehensive Environmental Response, Compensation and Liability Act ‘have a direct bearing on domestic mining operations. These federal initiatives are often administered and enforced through state agencies operating under parallel state statutes and regulations.
The Clean Water Act
The Federal Clean Water Act is the principal Federal environmental protection law regulating mining operations in the United States as it pertains to water quality. At the state level, water quality is regulated by the New Mexico Environment Department. If our exploration or any future development activities could affect a ground water aquifer, we are required to apply for a ground water discharge permit in compliance with the groundwater regulations. If exploration affects surface water, then compliance with surface water regulations is required.
The Clean Air Act
The Federal Clean Air Act establishes ambient air quality standards, limits the discharges of new sources and hazardous air pollutants and establishes a federal air quality permitting program for such discharges. Hazardous materials are defined in the Federal Clean Air Act and enabling regulations adopted under the Federal Clean Air Act to include various metals. The Federal Clean Air Act also imposes limitations on the level of particulate matter generated from mining operations.
National Environmental Policy Act (“NEPA”)
NEPA requires all governmental agencies to consider the impact on the human environment of major federal actions as therein defined.
Endangered Species Act (“ESA”)
The ESA requires federal agencies to ensure that any action authorized, funded or carried out by such agency is not likely to jeopardize the continued existence of any endangered or threatened species or result in the destruction or adverse modification of their critical habitat. In order to facilitate the conservation of imperiled species, the ESA establishes an interagency consultation process. When a federal agency proposes an action that “may affect” a listed species, it must consult with the USFWS and must prepare a “biological assessment” of the effects of a major construction activity if the USFWS advises that a threatened species may be present in the area of the activity.
National Forest Management Act
The National Forest Management Act, as implemented through Title 36 of the Code of Federal Regulations, provides a planning framework for lands and resource management of the National Forests. The planning framework seeks to manage the National Forest System resources in a combination that best serves the public interest without impairment of the productivity of the land, consistent with the Multiple Use Sustained Yield Act of 1960.
Wilderness Act
The Wilderness Act of 1964 created a National Wilderness Preservation System composed of Federally owned areas designated by Congress as “wilderness areas” to be preserved for future use and enjoyment.
The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”)
CERCLA generally imposes joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of a “hazardous substance” into the environment. These persons include the current owner or operator of a contaminated facility, a former owner or operator of the facility at the time of contamination and those persons that disposed or arranged for the disposal of the hazardous substance. Under CERCLA and comparable state statutes, such persons may be subject to strict joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. Governmental agencies or third parties may seek to hold the Company responsible under CERCLA and comparable state statutes for all or part of the costs to clean up sites at which such “hazardous substances” have been released.
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The Resource Conservation and Recovery Act (“RCRA”)
RCRA was designed and implemented to regulate the disposal of solid and hazardous wastes. It restricts solid waste disposal practices and the management, reuse or recovery of solid wastes and imposes substantial additional requirements on the subcategory of solid wastes that are determined to be hazardous. Like the Clean Water Act, RCRA provides for citizens’ suits to enforce the provisions of the law.
National Historic Preservation Act
The National Historic Preservation Act was designed and implemented to protect historic and cultural properties. Compliance with the Act is necessary where federal properties or federal actions are undertaken, such as mineral exploration on federal land, which may impact historic or traditional cultural properties, including native or Indian cultural sites.
Reclamation
We generally will be required to mitigate long-term environmental impacts by stabilizing, contouring, re-sloping and revegetating various portions of a site after mining and mineral processing operations are completed. These reclamation efforts would be conducted in accordance with detailed plans, which must be reviewed and approved by the appropriate regulatory agencies. As soon as we have a mining operation, we will be required to arrange and pledge certificates of deposits for reclamation with the state regulatory agencies. At this time no reclamation cost is required to be calculated or carried forward.
Employees
We currently have three full time employees as of our current fiscal year end. In order to implement our business plan, we will be required to employ or retain qualified consultants with the technical expertise to evaluate and mine our mineral properties and for administrative duties as required. We currently employ no miners for our mines in in New Mexico as we are currently under a mine maintenance protocol until the processing mill is in operation in Duncan, AZ.
Employment Agreements
Effective July 7, 2020, the Company retained a new Chief Financial Officer and the prior Chief Financial Officer was reassigned to oversee all mining operations as they come on line in our fiscal 2022-23 year. Both parties signed a one-year employment agreement with the Company, with automatic successive one-year renewals provided that neither party has provided notice of termination prior to 30 days from the end of such applicable term.
Insurance
We normally maintain property, liability and workmen’s compensation insurance coverages to cover losses or risks incurred in the ordinary course of business. Upon resuming operations, the Company will reinstate our insurance coverages.
Exploration
The Company has spent only nominal amounts during each of the last two fiscal years on exploration and mine development due to the lack of availability to currently economically process mined head ore into concentrates that could be monetized for working capital funds.
Seasonality
We have no properties at this time that are subject to material restrictions on our operations due to seasonality.
Office Facilities
Our principal offices are located at 2325 San Pedro NE, Suite 225, Albuquerque, NM 87110. Our telephone number is (505) 255-4852 and our mailing address is P.O. BOX 25201, Albuquerque, NM 87125-0201.
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Dismissal of Bankruptcy Proceeding and Emergence from Voluntary Reorganization
In August 2015, the Company filed for Bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in Delaware in order to secure the existing assets from creditor actions, Case No. 15-11761 (MFW). Notwithstanding the Company’s Bankruptcy, the management continued to search for options that would allow it to continue as a going concern.
After the dismissal from Bankruptcy, the Company had limited assets, yet remained liable for all commitments and debts that then were outstanding. Santa Fe Gold Barbados, The Lordsburg Mining Company and AZCO are subsidiaries of the Company with no assets and all of their commitments and debts remain. The bankruptcy court set up a trust fund funded by the activities of the Summit mine (main asset sold in bankruptcy proceedings) for five years from the inception of mine production at the Summit mine, with the funds held in trust distributed by an independent trustee to certain unsecured creditors. Following prior management’s failure to provide a plan of reorganization, the resulting significant transactions that occurred upon emergence from bankruptcy were as follows:
·The approximately $20 million of indebtedness outstanding on account of the Company’s finance facilities and unsecured claims were reinstated; and
·The Court established a trust in April 2016 for the benefit of certain creditors. A profit interest was attached to the Summit mine for the benefit of certain creditors holding unsecured claims filed by each creditor.
The Company received Bankruptcy Court confirmation of the dismissal in June 2016, and subsequently emerged from bankruptcy. The only funds available for the future administrative costs were prepaid insurance funds of approximately $49,000. The Company subsequently began selling, on a best-efforts basis, equity for the cash needed for working capital purposes. Currently we have no continuing commitment from any party to provide working capital, and there is no certainty that the Company will be able to continue its current business plan. However, the mining claims / assets that it has managed to secure appear to present a significant opportunity for the Company to continue in the mining business.
Available Information
We make available, free of charge, on or through our Internet website, at www.santafegoldcorp.com, our annual report on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934. Our Internet website and the information contained therein or connected thereto are not intended to be, and are not, incorporated into this report on Form 10-K.
You can read our SEC filings, including this annual report as well as our other periodic and current reports, on the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.
ITEM 1A. RISK FACTORS
The Company operates in a rapidly changing environment that involves numerous risks and uncertainties involving precious metal prices, explorations costs and government oversight. Investors should carefully consider the risks described below before purchasing the Company’s common shares. The occurrence of any of the following events could negatively affect our business operations and our results of operations. If these events occur, the trading price of the Company’s common shares could decline, and shareholders may lose part or even all of their investment.
Risk Associated with Our Business
Our business involves a number of very significant risks, including but not limited to various areas of the mining exploration industry. The Company operates in a rapidly changing environment that involves numerous risks and uncertainties involving precious metal prices, explorations costs and government oversight. Our business, operating results and financial condition could be seriously harmed as a result of the occurrence of any of the following risks.
You should invest in our common stock only if you can afford to lose your entire investment. Your decision to invest in our common stock should only be made after you have knowingly accepted the possibilities of such a loss and the associated risks.
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Risks Related to Our Business
All of our properties are in the exploration stage. There can be no assurance that we will establish the existence of any mineral resource or reserves on any of our properties. Until we can do so, there is a possibility we may not be likely to generate substantial revenues from these properties on an economically feasible basis, and our business could fail.
We have not established that any of our mining properties contain any mineral reserves; and as such, under Regulation S-K 1300 et. seq. (“Reg S-K 1300”), we are considered an “exploration stage company.” Under the new rules set forth in Reg S-K 1300, an individual property is defined as being: 1.) An exploration stage property if it has no mineral reserves disclosed; 2.) A development stage property if it has mineral reserves disclosed, but has no material extraction; and 3.) A production stage property if it has material extraction of mineral reserves. Our ability to conclude that an individual prospect has any viable mineral reserves requires further efforts and any funds that we spend on exploration may be lost. Even if we do eventually discover mineral reserves on one or more of our properties and they are considered “development stage” because we have not engaged in any material extraction, there can be no assurances that they will become production stage properties. Both mineral exploration and development involve a high degree of risk and few properties, which are explored become development properties; and even if they become eligible to be considered development stage properties, as defined in Reg. S-K 1300, there are no assurances that they will ultimately become production stage properties with commercially viable producing mines.
The commercial viability of an established mineral deposit will depend on a large number of factors; including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any previously identified mineral resource unprofitable. Because of this, we will most likely be required to conduct a “feasibility study” by a qualified person or company in order to secure any financing for development, extraction and processing. Feasibility studies, themselves, are very time consuming and costly. There are no assurances that we will be able to fund a feasibility study or to find an investor or partner that will be willing to fund feasibility studies needed to progress to extraction. If we are unable to fund a feasibility study when needed, or if the results of a feasibility study do not suggest that a property will be commercially viable, any funds used on the property will have been lost.
Even if commercial viability of a mineral or metal deposit is established, we may be required to expend significant resources until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to both establish proven and probable reserves as well as those required to implement permitting and drilling operations. Because of these uncertainties, investors have no assurances that our drilling programs will result in commercially viable operations nor that we will be successful in the establishment or expansion of any resources or reserves. Any failure in our ability to successfully execute on the forgoing will adversely impact our business results of operations, in turn leading to losses for investors.
As the Company has adopted the required disclosure prescribed in Regulation S-K 1300 et. seq., the concept of a feasibility study is the same; and although, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” were not defined terms under SEC Industry Guide 7 and were not permitted to be used in reports and registration statements filed with the SEC. Under Reg. S-K 1300 each of those terms is specifically defined and must be used as defined therein in describing mineral deposits in the required reports. Investors are cautioned not to assume that any part or all of potential mineral deposits will ever be converted into “mineral resources,” as the term under Reg. S-K 1300 means not only that there are mineral deposits present but that they have been determined to be economically viable for extraction. The mineral deposits on our properties have a great amount of uncertainty as to their existence, and great uncertainty as to their economic feasibility. Our properties currently do not contain any known proven or probable ore reserves under Reg. S-K 1300 reporting standards. Investors are cautioned not to assume that any identified mineral deposits will be determined to be mineral reserves or ever be converted into mineral resources as defined in Reg. S-K 1300 et. seq.
If we establish the existence of commercially viable mineral resources on any of our properties, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the resource, and our business could suffer.
If we do discover mineral resources on any of our properties, as defined under Reg. S-K 1300 meaning that such mineral deposit(s) is/are commercially viable, we will be required to expend substantial sums of money to establish the extent of the resource, engage in drilling operations and develop extraction and processing facilities (or effect acceptable shipping arrangements therefor) and infrastructure. We do not have adequate capital to develop necessary facilities and infrastructure and will need to raise additional funds. Although we may derive substantial benefits from the discovery of commercially exploitable deposits, there can be no assurance that such a mineral resource will be large enough to justify conventional commercial operations or that we will be able to raise the funds required for development and/or processing on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities, infrastructure, development, processing or related activities, our business may fail and we may be forced to curtail or cease operations.
Our exploration and extraction activities may not be commercially successful.
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While we believe there are positive indicators that our properties contain commercially exploitable minerals and metals, such belief has been based solely on preliminary tests that we have conducted and data provided by third parties. There can be no assurance that the tests and data upon which we have relied are correct or accurate. Moreover, mineral exploration is highly speculative in nature, involves many risks and is frequently non-productive. Unusual or unexpected geologic formations and the inability to obtain suitable or adequate machinery, equipment or labor are risks involved in the conduct of most exploration programs. The success of mineral exploration and development is determined in part by the following factors:
·the identification of potential mineralization based on analysis;
·the availability of permits;
·compliance with environmental requirements;
·increases in operating mining related costs;
·the quality of our management and our geological and technical expertise; and
·the capital available for mining operations.
Substantial expenditures and time are required to establish existing proven and probable reserves through drilling and analysis, and to develop the mines and facilities and infrastructure at any site chosen for mining. Whether a mineral or metal deposit will be commercially viable and meet Reg. S-K 1300’s definition of “mineral resource”, depends on a number of factors, which include, without limitation: the particular attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices, which fluctuate widely; and government regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection; and general economic factors, which include, without limitation, market prices for certain minerals or metals, labor costs, the impact of technological innovations on the supply and demand for the commodities we mine. If our exploration and extraction activities are not successful, our business will likely fail.
There may be challenges to the title of our mineral properties.
The Company has acquired certain rights to its properties by unpatented claims, ownership of land or by lease from those owning the property and its patented claims are limited. The validity of title to many types of natural resource property depends upon numerous circumstances and factual matters (many of which are not discoverable of record or by other readily available means) and is subject to many uncertainties of existing law and its application. There can be no assurance that the validity of our titles to our properties will be upheld or that third parties will not otherwise seek to invalidate those rights. In the event the validity of our title to any of these properties are not upheld, such events would have a material adverse effect on us.
Mineral operations are subject to applicable law and government regulations. Even if we discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of them. If we cannot exploit any mineral resources that we discover on our properties, our business may fail.
Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters.
Companies, such as ours that plan to engage in exploration and extraction activities, often experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. Issuance of permits for our activities is subject to the discretion of government authorities, and we may be unable to obtain or maintain such permits. Permits required for future exploration or development may not be obtainable on reasonable terms, on a timely basis or at all. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration or development of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs. If we cannot accomplish these objectives, our business could face difficulty and/or fail.
We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to do so. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.
Environmental hazards unknown to us, which have been caused by previous or existing owners or operators of the properties, may exist on the properties in which we hold an interest. It is possible that our properties could be located on or near the site of a Federal Superfund cleanup project. Although we endeavor to avoid such sites, it is possible that environmental cleanup or other environmental restoration procedures could remain to be completed or mandated by law, causing unpredictable and unexpected liabilities to arise. We are not currently aware of any environmental issues or litigation relating to any of our current or former properties but if they were to arise, we could face significant liability that would negatively impact our operations that would cause our business to fail.
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Competition in the mining industry is intense, and we have limited financial and personnel resources with which to compete.
Competition in the mining industry for desirable properties, investment capital, equipment and personnel are intense. Numerous companies headquartered in the United States, Canada and elsewhere throughout the world compete for properties on a global basis, including areas where we intend to operate. We are currently an insignificant participant in the mining industry due, in part, to our limited financial and personnel resources. We may be unable to: i) attract the necessary investment capital or a joint venture partner to fully develop our mineral properties, ii) acquire other desirable properties, iii) attract and hire necessary personnel, or iv) purchase necessary equipment.
The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses.
The business of exploring for and extracting minerals and metals involves a high degree of risk. Few properties are ultimately developed into producing mines. Whether a mineral deposit can be commercially viable depends upon a number of factors, including the particular attributes of the deposit, including size, grade and proximity to infrastructure, metal prices, which can be highly variable, and government regulation, including environmental and reclamation obligations. These factors are not within our control. Uncertainties as to the metallurgical amenability of any minerals discovered may not warrant the mining of these metals or minerals on the basis of available technology. Our operations are subject to all of the operating hazards and risks normally incident to exploring for and developing mineral or metal properties, such as, but not limited to:
·encountering unusual or unexpected formations;
·environmental pollution;
·personal injury, flooding and landslides;
·variations in grades of minerals or metals;
·political and economic related conditions;
·labor disputes; and
·a decline in the price of gold or silver.
We currently have no insurance or hedges to guard against any of these risks. If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a write-down on our investment in such property interests. All of these factors may result in losses in relation to amounts spent which are not recoverable. The payment of any liabilities that arise from any such occurrence would have a material, adverse impact on our Company.
Our exploration and development activities are subject to environmental risks, which could expose us to significant liability and delay, suspension or termination of our operations.
The exploration, possible future development and production phases of our business will be subject to federal, state and local environmental regulation. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set out limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments, and a heightened degree of responsibility for companies and their officers, directors and employees. Future changes in environmental regulations, if any, may adversely affect our operations. If we fail to comply with any of the applicable environmental laws, regulations or permit requirements, we could face regulatory or judicial sanctions. Penalties imposed by either the courts or administrative bodies could delay or stop our operations or require a considerable capital expenditure. Although we intend to comply with all environmental laws and permitting obligations in conducting our business, there is always a possibility that those opposed to exploration and mining may attempt to interfere with our operations, whether by legal process, regulatory process or otherwise.
We could be subject to environmental lawsuits.
Neighboring landowners, other third parties and governmental entities could file claims based on environmental statutes and common law for personal injury and property damage allegedly caused by the release of hazardous substances or other waste material into the environment on or around our properties. There can be no assurance that our defense of such claims will be successful. A successful claim against us could have an adverse effect on our business prospects, financial condition and results of operation.
The Company’s industry is highly competitive and we have less capital and resources than many of our competitors which may give them an advantage in developing and securing mining claims and marketing products similar to ours or make our products obsolete.
We are involved in a highly competitive industry where we may compete with numerous other companies who offer alternative methods or approaches. These competitors may have far greater resources, more experience, and personnel perhaps more qualified than we do.
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Such resources may give our competitors an advantage in developing and marketing products similar to ours or products that make our products obsolete. There can be no assurance that we will be able to successfully compete against these other entities.
The Company’s failure to continue to attract, train, or retain highly qualified personnel could harm the Company’s business:
The Company’s success also depends on the Company’s ability to attract, train, and retain qualified personnel, specifically those with management and product development skills. In particular, the Company must hire additional skilled personnel to further the Company’s research and development efforts. Competition for such personnel is intense. If the Company does not succeed in attracting new personnel or retaining and motivating the Company’s current personnel, the Company’s business could be harmed.
Risks Related to the Company
Litigation with respect to Mr. Laws may not result in additional funds being obtained to reduce his indebtedness owed to the Company.
The Company has determined by its records that Mr. Laws initially owed us $1,197,198 (“The Missing Funds”), excluding related professional fees, forensic accounting costs and interest and penalties associated with the indebtedness. As of the filing of this Form 10-K, after deducting cash collections of $990,632 from Laws and related litigation and properties held for sale of $25,800, Laws owes the Company $180,766 plus penalties, professional fees and accrued interest. The Company has been awarded from litigation and collection efforts, the foreclosure on pledged assets and received these assets free and clear of any liens.
There were also expenses associated with engaging the special committee to conduct a forensic review of the Company’s books and records in connection with the transactions giving rise to the Missing Funds. The Company has incurred costs associated with engaging counsel to represent the Company in this matter and in the investigations as well as the court proceedings. The Missing Funds together with the additional expenses that have arisen as a result of Mr. Laws’ actions in the aggregate are substantial and have been expensed in the periods incurred.
There can be no assurance the Company will successfully implement its plans.
We have historically incurred net losses from operations and we expect losses in the future periods. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the formation of a new business which seeks to obtain funds to finance its operations in a highly competitive environment. There can be no assurance that we will successfully implement any of our plans (including without limitation production of any mine, shipping ore to a smelter or otherwise commercially exploit our properties) in a timely or effective manner or that we will ever be profitable. In addition, there can be no assurances that we will choose to continue to develop any of our current properties because we intend to consider and, as appropriate, to divest ourselves of properties that may no longer be a strategic fit to our business strategy or that we lack the necessary capital to develop. If we lack the capital to implement our plans, we will be forced to curtail or cease operations.
Mineral exploration and development inherently involve significant and irreducible financial risks. We may suffer from the failure to find and develop profitable mineral deposits.
The exploration for and development of mineral deposits involves significant financial risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. Unprofitable efforts may result from the failure to discover mineral deposits. Even if mineral deposits are found, such deposits may be insufficient in quantity and quality to return a profit from production, or it may take a number of years until production is possible, during which time the economic viability of the project may change. Few properties which are explored are ultimately developed into producing mines. Mining companies rely on consultants and others for exploration, development, construction and operating expertise.
Substantial expenditures are required to establish ore reserves, extract metals from ores and, in the case of new properties, to construct mining and processing facilities. The economic feasibility of any development project is based upon, among other things, estimates of the size and grade of ore reserves, proximity to infrastructures and other resources (such as water and power), metallurgical recoveries, production rates and capital and operating costs of such development projects, and metals prices. Development projects are also subject to the completion of favorable feasibility studies, issuance and maintenance of necessary permits and receipt of adequate financing.
Once a mineral deposit is developed, whether it will be commercially viable depends on a number of factors, including: the particular attributes of the deposit, such as size, grade and proximity to infrastructure; government regulations including taxes, royalties and land tenure; land use, importing and exporting of minerals and environmental protection; and mineral prices. Factors that affect adequacy of infrastructure include: reliability of roads, bridges, power sources and water supply; unusual or infrequent weather phenomena; sabotage; and government or other interference in the maintenance or provision of such infrastructure. All of these factors are highly cyclical. The exact effect of these factors cannot be accurately predicted, but the combination may result in not receiving an adequate return on invested capital.
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Significant investment risks and operational costs are associated with our exploration activities. These risks and costs may result in lower economic returns and may adversely affect our business.
Mineral exploration, particularly for gold, involves many risks and is frequently unproductive. If mineralization is discovered, it may take a number of years until production is possible, during which time the economic viability of the project may change. Development projects may have no operating history upon which to base estimates of future operating costs and capital requirements. Development project items such as estimates of reserves, metal recoveries and cash operating costs are to a large extent based upon the interpretation of geologic data, obtained from a limited number of drill holes and other sampling techniques, and feasibility studies. Estimates of cash operating costs are then derived based upon anticipated tonnage and grades of ore to be mined and processed, the configuration of the ore body, expected recovery rates of metals from the ore, comparable facility and equipment costs, anticipated climate conditions and other factors. As a result, actual cash operating costs and economic returns of any and all development projects may materially differ from the costs and returns estimated, and accordingly, our financial condition and results of operations may be negatively affected.
Any of our future acquisitions may result in significant risks, which may adversely affect our business.
An important element of our business strategy is the opportunistic acquisition of operating mines, properties and businesses or interests therein within our geographical area of interest. While it is our practice to engage independent mining consultants to assist in evaluating and making acquisitions, any mining properties or interests therein we may acquire may not be developed profitably or, if profitable when acquired, that profitability might not be sustained. In connection with any future acquisitions, we may incur indebtedness or issue equity securities, resulting in increased interest expense, or dilution of the percentage ownership of existing shareholders. We cannot predict the impact of future acquisitions on the price of our business or our common stock. Unprofitable acquisitions, or additional indebtedness or issuances of securities in connection with such acquisitions, may impact the price of our common stock and negatively affect our results of operations.
Our ability to find and acquire new mineral properties is uncertain. Accordingly, our prospects are uncertain for the future growth of our business.
Because mines have limited lives based on proven and probable ore reserves, we may seek to replace and expand our future ore reserves, if any. Identifying promising mining properties is difficult and speculative. Furthermore, we encounter strong competition from other mining companies in connection with the acquisition of properties producing or capable of producing gold. Many of these companies have greater financial resources than we do. Consequently, we may be unable to replace and expand future ore reserves through the acquisition of new mining properties or interests therein on terms we consider acceptable. As a result, our future revenues from the sale of gold or other precious metals, if any, may decline, resulting in lower income and reduced growth.
Delaware law and our by-laws protect our directors from certain types of lawsuits.
Delaware law provides that our directors will not be liable to us or our stockholders for monetary damages except for certain types of conduct as directors. Our by-laws require us to indemnify our directors and officers against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our directors caused by their negligence, poor judgment, or other circumstances. The indemnification provisions may require us to use our assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment, or other circumstances.
Even if the Ore Contains a Substantial amount of Gold or Silver it May Not be Profitable Because of Other Factors.
The Company is in the preliminary stages of mining operations in the Jim Crow and Billali Mines. There can be no assurances of continued mining operations at the Jim Crow and Billali Mines or that continued operations will be profitable. The Company currently does not have a long-term smelting contract and there can be no assurances that shipping to a smelter will occur in the immediate or near future. Transportation of head ore is expensive and the smelter the Company previously used is no longer accepting ore from outside sources. This has forced the Company to advance its plans to construct a mill on our site in Duncan, Arizona. This will enable us to process our ore into concentrate, which is more efficient to transport cost wise to the smelter. Without the ability to process the head ore into concentrate, the transportation of the head ore is cost prohibitive. Thus, it is imperative that the Company construct a mill to process its ore on a site that is in close proximity to our mine sites. Any delays in securing the financing necessary to construct the required mill and/or any delays in constructing it will negatively impact the Company’s mining operations and results of operations. The Company is currently seeking financing to construct the mill but there can be no assurances that it will be successful in securing the necessary financing or that if it is able to secure financing that it will be on terms that are favorable to the Company. Any delays or problems in raising the funds required for a mill will adversely impact the Company and its operations which ultimately adversely impacts investors.
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Dismissal of Bankruptcy Proceedings and Emergence from Voluntary Reorganization did not result in the elimination of Company liabilities.
After the dismissal of the bankruptcy petition in June 2016 and the sale of the Company’s significant assets, the Company emerged with limited assets while it remained liable for all commitments and debts that then were outstanding. Santa Fe Gold Barbados, The Lordsburg Mining Company and AZCO are subsidiaries of the Company with no assets and all of their commitments and debts remain outstanding. The bankruptcy court set up a trust fund, funded by the activities of the Summit mine (main asset sold in bankruptcy proceedings) for five years from the inception of mine production at the Summit mine and the trust funds will be distributed to certain unsecured creditors by an independent trustee. The Company failed to provide a plan of reorganization with the filing for protection under the Bankruptcy Code and as such, its debts were not discharged. The significant transactions that occurred upon emergence from bankruptcy were as follows:
·The approximately $20 million of indebtedness outstanding on account of the Company’s senior notes and unsecured claims were reinstated; and
·The courts established a trust in April 2016 for the benefit of certain creditors. A profit interest was attached to the Summit mine with the benefit for certain creditors holding unsecured claims filed by each creditor.
Accordingly, there can be no assurance that the Company’s remaining liabilities, after the emergence from bankruptcy, will not materially impact the Company. The Company has no continuing commitment from any party to provide working capital, and there is no certainty that the Company will be able to raise sufficient capital to fund any or all existing liabilities as well as to fund its current business plan. The failure to raise needed capital may result in the curtailment or cessation of our business.
We have a history of operating losses and expect to incur substantial operating losses and negative operating cash flows for the foreseeable future, and we may never achieve or maintain profitability.
We have had no revenues since emerging from bankruptcy, and we may not generate revenues this current fiscal year, depending on the completion of our mill project. We do not currently have sufficient capital to fund operations through June 30, 2023 and will need to raise additional funding to implement our business strategy. Even if we succeed in developing any of our properties and the mill site, we may incur operating losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future. As the Company has no commitment for debt or equity financing, the Company will be reliant upon best-efforts fund-raising activities to provide sufficient working capital to fund current and future needs. There can be no assurance that the Company will be successful in its best-efforts capital raising efforts, and the failure to raise needed capital will result in the curtailment or cessation of our business.
We may never be able to write-down certain liabilities and this may have a negative impact on our ability to raise capital and on the market price of our common stock, when we resume trading.
At the end of the Company’s fiscal year ending June 30, 2019, the Company wrote off debt and related accrued interest aggregating $12,507,540. The write off of debt was related to two finance facilities governed by and enforceable under British Columbia statutes. The Company retained legal services in British Columbia to research the British Columbia statutes of limitations on the collectability of the finance facilities. Legal counsel reviewed all related documents, records of proceedings and all records and documents deemed relevant to the two finance facilities. The finance facilities were subject to the laws of the Providence of British Columbia and the National laws of Canada and as a result, the Company secured a written legal opinion from Canadian counsel that any liability under the two finance facilities, because of the Limitations Act (British Columbia) and the relevant case law in British Columbia, were no longer enforceable. That is, because the statute of limitations had run for the two liabilities, pursuant to the Limitations Act (British Columbia), no future claims could be commenced in the Province of British Columbia and therefore, the Company had no outstanding legal obligations on the two finance facilities. With this, the Company wrote down $12,507,540 in liabilities and this has been the Company’s position; however, upon review of earlier Registration Statements that were subsequently withdrawn, the SEC Staff expressed its concern with the Company taking this write-down because FASB ASC 405-20-40-1(b) states that “a liability has been extinguished if the debtor is legally released from being the primary obligor under the liability, either judicially or by the creditor.” Since management knew that one of the creditors had been dissolved and was no longer in existence and the other creditor had written-off the amounts that had been owed to it by the Company in one of its annual reports, it knew that it would be difficult if not impossible to get both creditors to release it from liability and that obtaining a court order would be time consuming and expensive at best. The Commission Staff was willing to allow an opinion of counsel, however the opinions we provided did not meet the standard that the Commission requires. The standard that the Commission Staff requires is what is sometimes referred to as a “would” or “will” opinion. In requiring a “will” or “would” opinion, the Commission is looking for greater assurance that the Company “would” or “will” be successful in the event that one of the creditors sought to collect on the liabilities. Although this standard may seem subjective, “will opinions” are regularly used in the context of tax law where a tax opinion is needed. In that context the term “will” means that the drafter of the opinion believes and is effectively stating that there is a 90%-95% probability that a given result “will” come to pass based on the facts present. Absent the availability of one of these three routes to write-off the liabilities, he Commission Staff’s position is that
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the correct treatment of the aforementioned liabilities is to continue carrying them on the Company’s balance sheets. The Company was not able to procure a judicial order in a timely manner, specific written agreement of the creditors nor an opinion of counsel meeting the “would” or “will” standard, therefore it determined the most expeditious course of action was to restate the consolidated financial statements so that the liabilities that were written-off are now included in the liabilities of the Company once again; in effect, restating the consolidated financial statements as of June 30, 2019 and 2020. Although, in a future period, while the Company plans to either seek a judicial determination or an opinion of counsel that meets the “would” or “will” standard with respect to the liabilities, there can be no assurance that the Company will be successful in meeting the requirements necessary to write-off the aforementioned liabilities or that the Commission will agree that the judicial determination or opinion of counsel satisfies the requirements and spirit of FASB ASC 405-20-40-1(b). To meet the requirements of the Commission, the Company reinstated the debt and restated our financial statements in question in our Registration Statement on Form 10-12G filed on June 14, 2022 and became effective on August 4, 2022. As a result of these restated financial statements and the forward impact on future financial statements, our stock prices as well as our ability to secure necessary financial funding could be harmed as a result.
We have a limited operating history on which to base an evaluation of our business and properties.
Any investment in the Company’s securities should be considered a high-risk investment because investors will be placing funds at risk in an early-stage business with unforeseen costs, expenses, competition, a history of operating losses and other problems, to which start-up ventures are often subject. Investors should not invest in the Company’s securities unless they can afford to lose their entire investment. Your investment must be considered in light of the risks, expenses, and difficulties encountered in establishing a new business in a highly competitive and mature industry. Our operating history does not provide a meaningful basis for an evaluation of our current prospects. Other than through conventional and typical exploration methods and procedures, we have no additional way to evaluate the likelihood of whether other properties contain commercial quantities of mineral or metal reserves or, if they do, if they will be operated successfully.
Management of growth may be necessary for us to be competitive.
Successful expansion of our business will depend on our ability to effectively attract and manage staff, strategic business relationships, and shareholders. Specifically, we will need to hire skilled management and technical personnel as well as manage partnerships and joint ventures to navigate shifts in the general economic environment. Expansion has the potential to place significant strains on financial, management, and operational resources, yet failure to expand will inhibit our profitability goals.
If we cannot secure additional funding, we will be unable to implement our business plan.
Since we do not generate any revenues, we may not have sufficient financial resources ourselves, to undertake all planned development activities relating to our business plan. As stated, the smelter the Company previously used is no longer accepting ore from outside sources and this has forced the Company to advance its plans to construct a mill on site so that the ore can be processed into concentrate. Without the ability to process the head ore into concentrate, the transportation of the head ore is cost prohibitive. Thus, unless the smelter we had used previously begins accepting outside ore for processing, it is imperative that the Company construct a mill to process its ore. The Company had planned on constructing a mill in the future but this development with our previous smelter has forced the Company to plan and start construction immediately in order for it to realize any revenue from the ore it mines. The Company currently does not have the financial resources to construct the mill, therefore until it is able to secure the necessary financing, its prospects for generating revenue from the Jim Crow and Billali Mines is non-existent. Nevertheless, there can be no assurances that additional financing will be available to us or that if available, that it would be on terms acceptable to us. We do not have any commitments for debt or equity financing at this time, nor do we have credit facilities available with financial institutions or other third parties, and investors may lose their all of their investment if we are unable to secure such financing in a timely manner. As the Company has no commitment for debt or equity financing, the Company will be reliant upon its own best-efforts fund-raising activities to provide sufficient working capital to fund its current and future needs, as well as on the potential cash flow from operations. There can be no assurances that the Company will be successful in its best-efforts capital raising or receive significant cash flow from operations; and the failure to generate needed working capital may result in the curtailment or cessation of its business, and losses for investors.
Our resources may not be sufficient to manage our expected growth; failure to properly manage our potential growth would be detrimental to our business.
Even if we obtain funding for operations, we may fail to adequately manage our anticipated future growth. Any growth in our operations will place a significant strain on our administrative, financial and operational resources, and increase demands on our management, as well as our operational and administrative systems, controls and other resources. There can be no assurances that our existing personnel, systems, procedures or controls will be adequate to support our operations in the future; or that we will be able to successfully implement appropriate measures consistent with our growth strategy. As part of this growth, we may have to implement new operational and financial systems, procedures and controls to expand, train and manage our employee base, and maintain close coordination among our staff. There can be no guarantee that we will be able to do so, or that if we are able to do so, we will be able to effectively integrate them into our existing staff and systems.
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If we are unable to manage growth effectively, our business, operating results and financial condition could be materially adversely affected. As with all expanding businesses, the potential exists that growth will occur rapidly. If we are unable to effectively manage this growth, our business and operating results could suffer. Anticipated growth in future operations may place a significant strain on management systems and resources. In addition, the integration of new personnel will continue to result in some disruption to ongoing operations. The ability to effectively manage growth in a rapidly evolving market requires effective planning and management processes. We will need to continue to improve operational, financial and managerial controls, reporting systems and procedures, and will need to continue to expand, train and manage our work force.
The loss of key personnel could adversely impact the Company.
The nature of our business, including our ability to continue our current activities depends, in large part, on the efforts of our key personnel, the loss of any of which could have a material adverse effect on our business.
We may be unable to continue as a going concern.
As a result of our financial condition, our auditors have expressed doubt as to our ability to continue as a going concern which may have an adverse impact on our relationship with third parties with whom we do business, and could make it challenging and difficult for us to raise additional debt or equity financing, all of which could have a material adverse impact on our business, results of operations, financial condition and future prospects. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.
A substantial or extended decline in gold and silver prices would have a material adverse effect on the value of our assets, on our ability to raise capital and could result in lower than estimated economic returns.
The value of our assets, our ability to raise capital and any future economic returns are substantially dependent on the prices of gold and silver. Gold and silver prices fluctuate daily and are affected by numerous factors beyond our control. Factors tending to influence gold prices, for example, include:
·gold sales or leasing by governments and central banks or changes in their monetary policy, including gold inventory management and reallocation of reserves;
·speculative short positions taken by significant investors or traders in gold;
·the relative strength of the U.S. dollar;
·expectations of the future rate of inflation;
·interest rates;
·changes to economic activity in the United States, China, India and other industrialized or developing countries;
·geopolitical conflicts;
·changes in industrial, jewelry or investment demand;
·changes in supply from production, disinvestment and scrap; and
·forward sales by producers in hedging or similar transactions.
Risks Related to our Common Stock
The Company’s Common Stock was Deregistered and Trading was Halted.
In July of 2020, the Company received notice from the SEC that it was seeking to deregister the Company’s common stock pursuant to Section 12(j), based on the Company’s failure to file periodic reports with the Commission and otherwise provide current information to the market. This failure was based in large part from the need to restate its financial statements and the need to find and engage a PCAOB auditor who was willing to conduct and provide the required audits amid the SEC and DOJ’s investigations. Although we were able to secure a qualified auditor, we were not able to make our filings quickly enough and by the time they were completed, the Commission had already sent a notice under Section 12(k). The Commission takes a hardline position in these situations such that once they have instituted deregistration proceedings, the only options available to the Company were to litigate or settle and consent to the deregistration of the Company’s common stock. Historically, registrants have not been successful in litigating with the Commission over Section 12(j) matters and therefore the Company determined that the best course of action was to consent to deregistration of its common stock and then file a new registration statement on Form 10-12G. The Company has signed a settlement agreement with the SEC with respect to the registration of its common stock in response to the Commission’s institution of deregistration proceedings under Section 12(j), and has re-registered the same under Section 12(g) by way of filing our Form 10-12G and the filing has been ordered effective by the SEC on August 4, 2022. Currently the Company is preparing the application to the Over-the-Counter Markets Group (“the OTC”) to trade on their QB tier. Upon the OTC completing their due diligence on the application their and approval of the
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application, it will submit a Form 211 to the Financial Industry Regulatory Authority (“FINRA”) for their final review and acceptance of the OTC due diligence process. The Company filed a complete and current Form 10-12G and it meets the informational requirements of the SEC Rule 15c2-11. Upon the FINRA approval, they will issue our trading symbol and the Company will begin trading. Any delay or failure in securing FINRA’s final approval and issuance of our trading symbol would result in our shareholders not having a public market to sell their shares. Further, it would make it more difficult for the Company to obtain the financing it requires.
Our common stock is not currently traded, and there is no guarantee that our stock will be tradable or that if it is as to the prices at which the shares may trade.
Trading of our common stock recently was most recently quoted by OTC Markets Group, Inc., under the ticker symbol “SFEG.” Since the Company was not current in its filings with the U.S. Securities and Exchange Commission (the “SEC” or “Commission”), the Company it had a “skull and cross bones” associated with its trading symbol (the symbol used by OTC Markets meaning “Caveat Emptor” or buyer beware) but trading was suspended indefinitely when the SEC approved the Company’s settlement agreement which culminated in the deregistration of its common stock following the proceedings instituted by the Commission under Section 12j. In July 2020 we received notice that on June 25, 2020, the Commission had issued an order suspending trading under Section 12(k) of the Securities Exchange Act of 1934, as amended (the “Exchange Act.”). Thereafter, the Commission commenced administrative proceedings to de-register the Company’s common stock under Section 12(j) of the Exchange Act. On December 17, 2020, the SEC order suspending trading went into effect.
Currently the Company is preparing the application to the OTC to trade on their QB tier. Upon the OTC completing their due diligence on the application and their approval of the application, it will submit a Form 211 to the Financial Industry Regulatory Authority (“FINRA”) for their final review and acceptance of the OTC due diligence process. The Company filed a complete and current Form 10-12G and it meets the informational requirements of the SEC Rule 15c-211. Upon the FINRA approval, they will issue our trading symbol and the Company will begin trading. Any delay or failure in securing FINRA’s final approval and issuance of our trading symbol would result in our shareholders not having a public market to sell their shares. This in turn would negatively affect the Company’s ability to secure the funding required for it to execute on its business plan, which would negatively affect its operations and could result in a complete loss to investors.
Although our Form 10-12G became effective, with all comments cleared, we still face challenges in receiving FINRA approval and even if we are successful and resume trading, trading may still be limited or suffer because we are not listed on an established securities exchange.
Although management is optimistic that we will receive approval to resume trading and views any delays as a short-term issue as of the date of filing of this Form 10-K, there can be no assurances that we will in fact receive timely approval to resume trading or that we will ever be successful in our efforts to resume trading. Additionally, even if we are able to resume trading through the quotations on OTC Markets, not being listed for trading on an established securities exchange has an adverse effect on the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions, number of market makers and lack of security analysts’ research coverage of the Company. This may result in systemically lower prices for your common stock than might otherwise be obtained if the Company had been listed on the NYSE or NASDAQ exchanges and could also result in a larger spread between the bid and ask prices that are quoted for our common stock. Historically, our common stock has been thinly traded, and there is no guarantee of the prices at which the shares will trade, or that there will be sufficient volume to allow stockholders to sell their shares without having an adverse effect on market prices.
Because our common stock is currently a “penny stock,” it may be difficult to sell shares at times and prices that are acceptable.
Assuming we are successful in having our stock resume trading on OTC Markets, our common stock will likely be considered a “penny stock.” Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. Assuming a market maker are allowed to provide bid and offer quotations because we have been successful in securing through our OTC application process and we are able to satisfy FINRA’s requirements, we will continue to be considered a “penny stock.” The penny stock rules may make it difficult for you to sell your shares of our common stock. Because of these rules, many brokers choose not to participate in penny stock transactions and there is less trading in penny stocks overall as a result. Accordingly, you may not always be able to resell shares of our common stock in ordinary transactions at times and prices that you feel are appropriate.
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If we are successful, it our efforts to have our stock resume trading, the sale of it by existing stockholders may depress its price due to the limited trading market that would likely exist.
Any sales of a significant amount of common stock by existing shareholders may depress the price otherwise causing the price of our common stock may decline.
A small number of existing shareholders own a significant portion of our common stock, which could limit your ability to influence the outcome of any shareholder vote.
A relatively small number of shareholders hold large concentrations of shares and under our certificate of incorporation and Delaware law, the vote of a majority of the shares outstanding is generally required to approve most shareholder actions. As a result, these individuals and entities will be able to influence the outcome of shareholder votes for the foreseeable future, including votes concerning the election of directors, amendments to our certificate of incorporation or proposed mergers or other significant corporate transactions.
If the Company is successful in its efforts to have its common stock resume trading, the Company’s stock price and volume is likely to be highly volatile, limited and sporadic.
The market price of our common stock fluctuated historically and if the Company is successful in its efforts to have it resume trading is likely to continue to fluctuate in the future. These fluctuations may be exaggerated since the trading volume would likely be volatile, limited, and sporadic. These fluctuations may or may not be based upon any business or operating results. Our common stock may experience similar or even more dramatic price and volume fluctuations in the future, if our efforts are successful and its trading resumes.
The Company will not pay dividends on its common stock.
We have never paid any cash dividends on any shares of our capital stock, and we do not anticipate that we will pay any dividends in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion of our business. Any future determination to pay cash dividends will be at the discretion of our Board of Directors, and will be dependent upon our financial condition, results of operations, capital requirements and other factors as our board of directors may deem relevant at that time. If we do not pay cash dividends, our stock may be less valuable because a return on your investment will only occur if our stock price appreciates. This may never happen and investors may lose all of their investment in our company.
If trading in our common stock is allowed to resume, any outstanding shares that are eligible for future sale could adversely impact a public trading market for our common stock.
We have offered and sold and will continue to offer and sell shares without registration under the Securities Act, through exemptions available under the Securities Act. All such shares are "restricted securities" as defined by Rule 144 ("Rule 144") when issued under available exemptions from registration under the Securities Act, and cannot be resold without registration except in reliance on Rule 144 or another applicable exemption from registration. In general, under Rule 144, our non-affiliates (who have not been affiliates within the past 90 days) can sell restricted shares held for at least six months, subject only to the requirement that we make current information available publicly as required by Rule 144. However, since being deregistered, some broker-dealers may require a one year holding period out of an abundance of caution if they take the position that the Company could have been a shell at some point. Shareholders including our affiliates could sell restricted securities after they have been held for six months if broker-dealers are willing to accept that the Company has never been a shell, subject to compliance with manner of sale, volume restrictions, Form 144 filing and current public information requirements.
No prediction can be made as to the effect, if any, that future sales of restricted shares of common stock, or the availability of such common stock for sale, would have on the market price of the common stock prevailing from time to time, assuming the resumption of trading. Sales of substantial amounts of such common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of the common stock.
Risk Factors Related to the COVID-19 Pandemic.
An occurrence of an uncontrollable event such as the COVID-19 pandemic may negatively affect our operations. A pandemic typically results in social distancing, travel bans and quarantine, and this may limit access to our facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact our operations, financial condition and demand for our product but our overall ability to react timely to mitigate the impact of this event. Our mine manager and two employee miners contracted COVID-19 and our operations were negatively affected in the form of delays in the execution of our business plan. Although, it appears that the Company will not continue to experience issues due to COVID-19, assuming that the vaccines on the market prove successful, of which there can be no assurance. It is possible that new variants of the COVID virus may develop and that they may have the same or worse impact on our future operations and in our markets as was experienced with COVID-19.
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Because we may issue additional shares of our common stock, investment in our company could be subject to substantial dilution.
Investors’ interests in our Company will be diluted and investors may suffer dilution in their net book value per share when we issue additional shares. We are authorized to issue 550,000,000 shares of common stock, $0.002 par value per share. As of June 30, 2022 and 2021 there were 441,308,551 and 433,018,551, shares of our common stock issued and outstanding, respectively. We anticipate that all or at least some of our future funding, if any, will be in the form of equity financing from the sale of our common stock. If we do sell more common stock, investors’ investment in our company will likely be diluted. Dilution is the difference between what investors pay for their stock and the net tangible book value per share immediately after the additional shares are sold by us. If dilution occurs, any investment in our Company’s common stock could seriously decline in value.
Our prior trading in our common stock on the OTC Pink Exchange has been subject to wide fluctuations.
Our common stock was quoted for public trading on OTC Markets prior to Commission order suspending trading that went into effect on December 17, 2020. Historically, the trading price of our common stock has been subject to wide fluctuations. Assuming trading resumes, of which there can be no assurance, the trading prices of our common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with limited business operations. There can be no assurance that trading prices and price earnings ratios previously experienced by our common stock will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management’s attention and resources.
Delaware law our Certificate of Incorporation and our by-laws provide for the indemnification of our officers and directors at our expense, and correspondingly limits their liability, which may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers and/or directors.
Our Certificate of Incorporation and By-Laws include provisions that eliminate the personal liability of our directors for monetary damages to the fullest extent possible under the laws of the State of Delaware or other applicable law. These provisions eliminate the liability of our directors and our shareholders for monetary damages arising out of any violation of a director of his fiduciary duty of due care. Under Delaware law, however, such provisions do not eliminate the personal liability of a director for (i) breach of the director's duty of loyalty, (ii) acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends or repurchases of stock other than from lawfully available funds, or (iv) any transaction from which the director derived an improper benefit. These provisions do not affect a director's liabilities under the federal securities laws or the recovery of damages by third parties.
FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (known as “FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common shares, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Trading was suspended on our common stock following the deregistration of our common stock in accordance with our settlement with the SEC.
Trading in our common stock was suspended after the SEC commenced Administrative Proceedings under 12k of the Exchange Act. The Commission then commenced proceedings under 12j of the Exchange Act to deregister our common stock because we had not posted current information by filing the required Periodic Reports on Forms 10-K and 10-Q. We had not made these filings because of the need to restate our financial statements following the misappropriation of funds by our former CEO, Thomas Laws. However, notwithstanding these mitigating circumstances, the failure to file the required reports is a matter of strict liability and has resulted in the deregistration of our common stock, which became effective on December 17, 2020 following execution of our settlement agreement with the Commission. We may not be able unable to satisfy FINRA’s requirements in a timely manner or at all, market makers will not post bids or offers for our common stock.
On September 28, 2021, the SEC compliance date of their amended Rule 15c2-11and the amended FINRA rule 6432 went into effect. The amended Rule 15c2-11 allows a qualified IDOS (i.e., the OTC Markets) to comply with the information review requirements, to
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publish an affirmative determination that it has conducted such review, and for the broker-dealer to rely on the OTC markets determination without conducting an independent review. As long as the OTC Markets makes it known to the public that it has completed a review, a broker-dealer can quote or resume quoting the securities and be in compliance with Rule 15c2-11. The amended Rule 6432 requires that (i) a qualified inter-dealer quotation system (Qualified IDOS) (i.e. OTC Markets) submit a modified Form 211 filing to FINRA in connection with each initial information review that it conducts; (ii) a Qualified IDOS ( OTC Markets) that makes a certain publicly available determination under Rule 15c2-11 submit a daily security file to FINRA containing applicable summary information for all securities quoted on its system, and (iii) other changes to the FINRA Rule 6432 and the form 211 to further clarify the operation of the rule and conform it to the amended Rule 15c2-11.
The Company has registered its common stock with the SEC on Form 10-12G and the filing has been declared effective by the SEC on August 4, 2022, resulting in the Company becoming an Exchange Act reporting company at that time. The information contained in its Form 10-12G filing was complete and current information, and as a result, the effective filing contains the current information that meets the requirements of Rule 15c2-11.
Until we are able to have our Form 211 approved by FINRA and a trading symbol issued by FINRA, of which there can be no assurance, it may be difficult for the Company to secure the financing it requires to implement its current business plan.
The filing of our Registration Statement on Form 10-12G should allow us to receive FINRA approval more quickly than we would have if we had not been an Exchange Act reporting company, there is no way to determine the length of time it may take to receive final approval or if we will receive approval at all. Any delays in our ability to secure approval for the filing of our Form 211 t by FINRA and by the OTC will delay market makers from posting bids and offers for our common stock and this in turn, may make it more difficult for the Company to find investors and the capital required for it to implement its business plan. The lack of an active market or even posted bids and offers severely limits our shareholders and prospective shareholders from availing themselves of an exit in the event that they need or want to sell their shares. As a result, many prospective investors may be reluctant to invest in our common stock unless we are able to have market makers resume posting bids and offers. Until the listing is complete, with FINRA’s approval, the Company may have difficulty in finding investors that are willing to purchase shares. Even if investors are willing to purchase shares, they may not be willing to purchase unless shares are offered at substantially lower prices. Any of the forgoing impediments to our ability to sell shares at what we believe are reasonable prices or at all, would have a negative impact on the Company and its operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS |
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There are no unresolved SEC Staff comments.
ITEM 2. PROPERTIES
Mining Claims
Patented Mining Claims
We hold seven (7) patented claims related to the Jim Crow Imperial Mine and the one (1) for the Billali Mine, all of which are held by our wholly owned subsidiary, Minerals Acquisitions, LLC, together with thirteen (13) for the Alhambra Mine held by our wholly owned subsidiary, Bullard’s Peak Corporation. Patented mining claims, such as the ones located in our Jim Crow Imperial Mine, our Billali Mine and our Alhambra Mine, are mining claims on federal lands that are held in fee simple by the owner. No maintenance fees or royalties are payable to the BLM; however, payments and royalties with third parties are applicable on some of these claims.
Unpatented Mining Claims: The Mining Law of 1872
Thus, our mining rights consist of agreements covering “patented” and "unpatented" mining claims created and maintained in accordance with the U.S. General Mining Law of 1872, or the “General Mining Law.” Unpatented mining claims are unique U.S. property interests and are generally considered to be subject to greater title risk than other real property interests because the validity of unpatented mining claims is often uncertain. The validity of an unpatented mining claim, in terms of both its location and its maintenance, is dependent on strict compliance with a complex body of federal and state statutory and decisional law that supplement the General Mining Law. Also, unpatented mining claims and related rights, including rights to use the surface, are subject to possible challenges by third parties or contests by the federal government. In addition, there are few public records that definitively control the issues of validity and ownership of unpatented mining claims. We have not filed a patent application for any of our unpatented mining claims that are located on federal public lands in the United States and, under possible future legislation to change the General Mining Law, patents may be difficult to obtain.
Our exploration, development and mining rights relate to patented and unpatented mining claims covering federal and State lands in the State of New Mexico. Location of mining claims under the General Mining Law, is a self-initiation system under which a person physically stakes an unpatented mining claim on public land that is open to location, posts a location notice and monuments the
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boundaries of the claim in compliance with federal laws and regulations and with state location laws, and files notice of that location in the county records and with the Bureau of Land Management (“BLM”). Mining claims can be located on land as to which the surface was patented into private ownership under the Stock Raising Homestead Act of 1916, 43 U.S.C. §299, but the mining claimant cannot injure, damage or destroy the surface owner's permanent improvements and must pay for damage to crops caused by prospecting. Discovery of a valuable mineral deposit, as defined under federal law, is essential to the validity of an unpatented mining claim and is required on each mining claim individually. The location is made as a lode claim for mineral deposits found as veins or rock in place, or as a placer claim for other deposits. While the maximum size and shape of lode claims and placer claims are established by statute, there are no limits on the number of claims one person may locate or own. The General Mining Law also contains a provision for acquiring five-acre claims of non-mineral land for mill site purposes. A mining operation typically is comprised of many mining claims.
The holder of a valid unpatented mining claim has possessory title to the land covered thereby, which gives the claimant exclusive possession of the surface for mining purposes and the right to mine and remove minerals from the claim. Legal title to land encompassed by an unpatented mining claim remains in the United States, and the government can contest the validity of a mining claim. The General Mining Law requires the performance of annual assessment work for each claim, and subsequent to enactment of the Federal Land Policy and Management Act of 1976, 43 U.S.C. §1201 et seq., mining claims are invalidated if evidence of assessment work is not timely filed with the BLM. However, in 1993 Congress enacted a provision requiring payment of a small claim maintenance fee in lieu of performing assessment work, subject to an exception for small miners having less than 10 claims. No royalty is paid to the United States with respect to minerals mined and sold from a mining claim. The General Mining Law provides a procedure for a qualified claimant to obtain a mineral patent (i.e., fee simple title to the mining claim) under certain conditions. It has become much more difficult in recent years to obtain a patent. Beginning in 1994, Congress imposed a funding moratorium on the processing of mineral patent applications which had not reached a designated stage in the patent process at the time the moratorium went into effect. Additionally, Congress has considered several bills in recent years to repeal the General Mining Law or to amend it to provide for the payment of royalties to the United States and to eliminate or substantially limit the patent provisions of the law. Any such changes to the law and increases to our costs would have a negative impact on our results of operations.
Mining claims are conveyed by deed or leased by the claimant to the party seeking to develop the property. Such a deed or lease (or memorandum of it needs to be recorded in the real property records of the county where the property is located, and evidence of such transfer needs to be filed with the BLM in order to secure “title” to such claims. It is not unusual for the grantor or lessor to reserve a royalty, which as to precious metals often is expressed as a percentage of net smelter returns.
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Mining Properties General Locations
Steeple Rock District, Grant County New Mexico – Project Description
Properties - The Jim Crow, Imperial and Billali Mines
Santa Fe’s properties consist of the Jim Crow group of patented and unpatented claims in the southern part of the district and the Billali patented claim in the northern part of the district. The Jim Crow group is made up of seven patented mining claims and the Billali consists of one (1) patented mining claim.
Patented Lode Claims
| Name | MS No. |
1 | Imperial Lode | MS 1012 A |
2 | Jim Crow Lode | MS 1012 B |
3 | Gold King Lode | MS 1012 C |
4 | Portal Lode | MS 1012 D |
5 | Gold Bug Lode | MS 1012 E |
6 | Red Prince Lode | MS 1012 F |
7 | Three Brothers Lode | MS 1012 G |
8 | Contention Lode | MS 1012 H |
The Jim Crow group also consists of two unpatented mining claims and Mineral Acquisitions, LLC controls nine unpatented mining claims.
Unpatented Lode Claims
| Name | BLM Serial Number |
1 | Papoose No 1 Lode | Leslie Billingsley – claimant |
2 | Papoose No 2 Lode | Leslie Billingsley - claimant |
3 | Telephone Ridge No 1 | NMMC193685 |
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4 | Telephone Ridge No 2 | NMMC193686 |
5 | Telephone Ridge No 3 | NMMC193687 |
6 | Telephone Ridge No 4 | NMMC196049 |
7 | Telephone Ridge No 5 | NMMC196050 |
8 | Telephone Ridge No 6 | NMMC196051 |
9 | Telephone Ridge No 7 | NMMC196052 |
10 | Telephone Ridge No 8 | NMMC196053 |
11 | Telephone Ridge No 9 | NMMC196054 |
All the combined mining claims for this project encompass approximately 343 acres.
Location and Access
The Steeple Rock mining district is in the western part of Grant County, New Mexico. The district lies approximately 45 miles east of the town of Safford, Arizona and approximately 10 miles northeast of Duncan, Arizona. The district is reached by well-maintained county roads from Duncan.
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District, Historical and Prior Operations
The Steeple Rock district was discovered in the 1860’s and was in production until the so-called “silver panic” of 1893. Since 1893, there has been little activity. We believe that the Steeple Rock district was reopened at different times in the 1950’s, 1960’s and the 1970’s, but no sustained development or production is believed to have occurred. There has been some trenching and surface Geochem work done at various times. During the time of elevated precious metal prices after 1980 there was considerable activity, including a project at the Imperial-Jim Crow Mine by Queenstake Resources in the early 1980’s and work by ASARCO also in the 1980’s. The Billali was explored by Biron Bay Resources in 1990-1993 and again in 2013-2014 by Shooting Star Mining Co. In 2010 the Summit mine was successfully developed and operated but closed in 2013.
Title and Ownership of the Billali, Jim Crow and Imperial Mine Projects
The Company determined the Agreement with the sellers of the properties is Right of Use (“ROU”) asset lease at its inception and provides for grant of use. The Company has the right to cancel the Agreement at any time. The Company currently considers the properties to be exploration properties. The Agreement gives the Company surface, mining, and access rights. These are subject only to any limitations imposed by federal, state and local regulations, the free, unrestricted and uninterrupted right of access, for ingress and egress to the Billali, Jim Crow and Imperial Mines over existing roads or alternate routes approved by Seller and the right to enter upon and occupy the Billali, Jim Crow and Imperial Mines for all purposes reasonably incident to: exploring for, developing, mining (by underground mining, surface mining, strip mining or any other surface or subsurface method, including any method later developed), extracting, milling, smelting, refining, stockpiling, storing, processing, removing and marketing there from, all ores, metals, minerals, mineral products (including intermediate products) and materials of every nature or sort, and the right to place, construct, maintain, use and thereafter remove such structures, facilities, equipment, roadways, haulage ways, utility lines, reservoirs and water courses, and other improvements as may be necessary, useful or convenient for the full enjoyment of all of the rights granted, are the rights granted by the seller under our agreement. We have sole and exclusive custody, possession, ownership and control of all ore, rock, drill core and other mineral substances extracted or removed from the Billali, and Jim Crow and Imperial Mines and may sell or otherwise dispose any of the forgoing. We have also been granted the right to use any of the seller’s water rights, which were assigned to the Company, on, about, under or appurtenant to the Billali and Jim Crow Mines to facilitate the exploration, mining and processing rights we were granted under our agreement with the seller. Until the total price under the agreement is paid in full, title on all of the properties and all unpatented property will remain in the name of the seller.
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Mineralization and Geology
The Steeple Rock district is classified as a high level, epithermal gold and silver bearing, quartz vein system hosted principally in andesite lava flow rock which comprises the lower part of the tertiary volcanic section in the region. Other rocks exposed within the district are Precambrian igneous and metamorphic rocks, Paleozoic sedimentary rocks, and Mesozoic igneous and sedimentary rocks. The veins trend northwesterly and northerly. Most of the historic production has been from the northwest trending set of veins. Veins within the district are numerous and only a few of them have undergone systematic development to date. The ore in the Steeple Rock district appears to be controlled by rock lithology, with the host rock being a coarse-grained quartz diorite. Vein boundaries are sharp and the vein filings are generally recognizable visually. Mineralization in the Steeple Rock mining district consists of numerous narrow carbonate veins containing varying amounts of cobalt and nickel, silver, uranium, and arsenic. This is a geologic type of mineral deposit generally referred to as “five element veins.”
Description of the Jim Crow and Imperial Mines
The Jim Crow group covers approximately 4,000 feet strike length on the north trending Imperial vein and approximately 2,600 feet strike length of the northwest trending Jim Crow vein system. The Imperial mine occupies the southernmost 1,000 feet of the Imperial vein at which point the Jim Crow system branches to the northwest. The north trending Imperial continues another 3,050 to the property end line. The Jim Crow trend consists of three, possibly more, sub-parallel veins converging in the northwest.
The Jim Crow mine is well equipped and in good working order. It is served by a 320-foot-deep inclined shaft with a well-designed steel headframe. The hoist is equipped with up-to-date safety devices. The shaft is capable of lifting 30 tons per hour and can handle both ore and waste at the same time. The mine has three levels, 50 feet, 200 feet and 300 feet, all with air, water and ventilation services installed. Broken muck is moved to the shaft by scrapers on the 50- and 200-foot levels and by a 2-foot gauge rail on the 300-foot level.
The location of the Jim Crow mine is highly advantageous in that the unexplored and undeveloped segments of the Imperial and Jim Crow veins can be easily accessed from the mine. The lower 300-foot level can be extended to the south to explore and develop the Imperial vein below it and the lowermost 200-foot level in the area intercepted by the encouraging drill holes. It can also be extended to the northwest to explore the northwest extension of the Jim Crow vein and its parallel “wall” veins and the area where these veins “intersect.” The unexplored north trending segment of the Imperial vein could also be readily accessed from the Jim Crow Mine.
Description of the Billali Mine
The Billali property consists of one patented mining claim. It covers 1,200 feet of vein length and is situated approximately 3,000 feet northwest of the Summit mine.
The principal working on the Billali is a 12’ x12’ decline driven at grade of -20% for approximately 1120 feet. The decline was started on the northeast flank of the vein zone, driven across it for approximately 260 feet and then turned southeast and continued straight along the zone for another, approximately 580 feet. The present water level is at approximately 800 feet. From that point it extends in an irregular manner for another 650 feet to its present head which is approximately 260 feet vertically below the portal. A lateral level was driven 300 feet northeast across the vein zone from the bottom of the decline. The first 856 feet of the decline is set up for rail haulage using a winch stationed on the surface.
The Billali Mine occupies the northwest extension of the Summit vein. In the 1990-1992 time period Byron Bay Resources, a Canadian mining company, conducted an extensive exploration program on the Summit vein including the Billali mine. Data in the mine owner’s archives are poorly documented and drill hole collars are not definitely located. Diamond drilling was done on the Billali claim in 1990, 1991 and 1992. Partial data is available for twenty of these drill holes. Byron Bay Resources company reports dated 1990 and 1991 describe a vein zone approximately 350 feet wide with a discontinuously mineralized footwall and hanging wall quartz veins, ranging from 3 to 15 feet true width.
In 2013 and 2014 Shooting Star Mining Co. optioned the property and continued development. Their intention was to expand on the previous work of Biron Bay Resources and to “in fill” the drill intercepts of that 1990-90 project. They drove the decline to explore the drill intercepts of Biron Bay. The company completed 21 underground diamond drill holes. The Shooting Star drilling failed to establish horizontal continuity for the earlier drilling but did establish that high grade mineralization over economically viable widths was present. They concluded that the prospect would not support a conventional mine-mill operation.
The work by these two companies has demonstrated that, although the vein is not consistently mineralized enough to support a large-scale operation, there are numerous lenses and pockets of high-grade rock that could be profitably extracted by careful development and mining and the Company will be engaging a specialist in connection with the construction of its mill in order to maximize the yield.
Exploration Status
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Exploration and development work done in the 1990’s and in the 2011-14 time period suggest there are potentially high-grade zones with indications of vertical continuity distributed throughout the length of the property. These can be in any of the three or more veins that are presently identified within the approximately 350-foot-wide structural zone that makes up Billali vein zone.
Santa Fe is currently mining one of these gold-silver bearing pipe-like bodies that has recently been discovered approximately 180 feet from the portal. Certain long hole drilling in the overlying Hoover Tunnel some 70 feet above suggests that this zone is continuous for at least that far, although we have not conducted any exploration in this area to date. The mined high silica vein rock is being stockpiled and will be tested by the specialists we intend to engage for our mill design. Initially we had planned to send a trial shipment to a nearby smelter pending the aggregation of 500 tons and assuming it was accepted and we were able to execute an acceptable contract with the smelter. Since that smelter is no longer accepting outside ore and it currently is not cost effective to send our ore to another smelter for initial processing, we have determined that we will need to construct a mill to process our ore into concentrate in order for shipping to become cost effective. Whether we are able to sell to our smelter as initially planned or we construct a mill, the Company intends to mine on three levels approximately 100 vertical feet apart. These levels will crosscut the entire vein zone and the veins will be developed by a series of lateral workings from these crosscuts.
We have not established that our Billali Mine and Jim Crow Mine rights contain proven or probable reserves, as defined under Reg. S-K 1300. The Company has conducted a limited amount of exploration work on the Jim Crow mine to date. The Company commenced work at the Jim Crow mine in late 2019. Work to date has consisted of upgrading the surface facilities, rehabilitating the shaft, expanding the hoisting capability and underground excavation on three levels and a crushing plant site was purchased on January 1, 2020, in Duncan, Arizona. We have extracted approximately 2,000 tons of ore that is sitting on our property awaiting further processing and analysis.
The Company will need to conduct further work on the mine properties for sustained production. Such work will consist of exploration drilling from the surface and underground. The Company will continue to be considered an exploration stage property until it has disclosed reserves and once it has disclosed reserves it will be considered a development stage. Further work to be done includes drifting, raising and slope development, as well as further improvement of the surface facilities.
Power and Water
The Company will be required to use water from the mine, to be stored in a water tank to be placed on the property, for its water source. It is believed that this water will be sufficient for any development purposes. The Company will be required to place a generator on the property for electricity.
Development Plans
Santa Fe Gold believes that a profitable operation can be established and sustained in the Steeple Rock district by careful development and mining the high silica, gold and silver bearing vein rock thought to be present in both the Jim Crow and Billali mines, although we have not conducted any analytical work to demonstrate this. The district has a long record of producing high quality smelter flux ores that were previously directly shipped to a nearby copper smelter. Both the Jim Crow and Billali mines have well developed infrastructure with services in place. Both can be commissioned with relatively little development cost and continued maintenance. We have extracted ore from the Jim Crow mine recently and have been upgrading the Billali mine with the enhancements to make it ready for development and if successful, production. With the prior COVID-19 situation and other unstated factors, the copper smelter the Company previously utilized is not accepting any outside material from any source. Coupled with some of our mine personnel contacting the COVID-19 virus, we ceased extracting ore until we can develop our alternative business plan and finance its implementation.
With that current situation, we were required to advance our business plan by approximately a year referencing the design and construction of a mine-mill complex in Duncan, Arizona. This site will service both the Company’s property sites in the Steeple Rock mining district and the Black Hawk mining district. The Company will need to raise or finance the construction of the mill complex. The Company’s future revenue is contingent on the construction of a mill complex. The mill complex will require us to raise financing in order for it to be constructed and ramp-up operations at the mill complex and for mining operations. The Company’s plan for operations is reliant on our ability to secure the financing required to construct and operate the mill-complex and continue mining operations. No assurances can be made that the Company will be successful in securing this needed financing or that if it is able to, that it will be on terms acceptable to the Company.
The Company currently has its crushing equipment on this site and retained a specialist firm in Colorado which has completed the analysis our ore and prepared a process and mill site plan with the optimal equipment, methods, chemical reagents that will allow us to realize the maximum yield from our ore. We received the report in late September 2021. This is the first step needed for the construction of our mill and we have the detailed plan of what will be required. The Company anticipates that the total cost to construct the mill site will approximate around $1,200,000. We will need to secure these funds in order to begin construction and to purchase the equipment and materials necessary and to have the mill operational, of which there can be no assurance.
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As of filing this Form 10-K, the Company is currently in process of acquiring a mill operation for its head ore to be located on its property in Duncan, Arizona. The seller of the mill has disassembled the mill in Kellogg, Idaho and relocated the mill to the Duncan, Arizona site. Currently all associated costs of the mill and its relocation are being accumulated and finalized by the seller. At this time there are no agreements between the seller and the Company as to terms and sales price of the delivered disassembled mill and such price is anticipated to be negotiated and determined in late fall 2022, when the necessary funding will be raised by the Company for the acquisition of the mill equipment and its construction. At the time of filing this Form 10-K, negotiations for the purchase of the disassembled mill with the seller have not taken place and will be finalized upon the Company raising the adequate funding for the acquisition and determination if the seller or the Company will be responsible for its construction at the mill site.
Description of Black Hawk Project
Property Location and Access
The Black Hawk district, also called the Bullard’s Peak district in some references, is located approximately 15 miles west-southwest of Silver City New Mexico. Santa Fe Gold Corp. owns 13 patented and 82 unpatented mining claims covering approximately 72% of the known extent of the district. This property includes four of the five mines with recorded production among which are the two largest, the Black Hawk and the Alhambra. The property is reached by truck on a private dirt road that turns left off a paved highway, which access road is approximately 15 miles west-southwest of Silver City. The claims are all located within approximately 1,900 acres.
Property Description
The Black Hawk district, sometimes referred to as the Bullard Peak district, is located in Grant County, New Mexico, approximately 15 miles by road west of Silver City, New Mexico, the terminus of a branch line of the Atchison, Topeka and Santa Fe Railway. The district is in the northeastern foothills of the Big Burro Mountains at an altitude of approximately 5,450 to 6,150 feet. Scattered junipers, scrub oak, small pines, and brush cover the hillsides. Most of the district is drained by way of Black Hawk Canyon which bisects the area and flows northward to Mangas Creek, but the eastern part is drained by tributaries of Silver Dale Creek, which flows northeastward to Mangas Creek. Mangas Creek flows into the Gila River about 9 miles northwest of the mouth of Black Hawk Canyon. The ore in the Black Hawk district appears to be controlled by rock lithology, with the host rock being a coarse-grained quartz diorite. Vein boundaries are sharp and the vein filings are generally recognizable visually. Mineral property claims are as follows:
Patented Lode Claims
| Name | MS No. |
1 | Alhambra Lode | MS 869 |
2 | Kent County Lode | MS 778 |
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3 | Blackhawk Lode | MS 364A |
4 | Butternut Lode | MS 546 |
5 | Little Rody Lode | MS 365A |
6 | Extension Lode | MS 772 |
7 | Pumpkin Lode | MS 548 |
8 | Silver Glance Lode | MS 366A |
9 | Good Hope Lode | MS 480 |
10 | Chicago Lode | MS 771 |
11 | Surprise Lode | MS 367A |
12 | Cornicopia Lode | MS 770 |
13 | Stonewall Lode | MS 547 |
Unpatented Lode Claims
| Name | BLM Serial Number |
1 | Alhambra Extension – Lode | NMMC 50356 |
2 | Easy Days – Lode | NMMC 50357 |
3 | Old Hobson – Lode | NMMC 50358 |
4 | Argentine No. 5 – Lode | NMMC 85992 |
5 | Argentine No. 6 – Lode | NMMC 85993 |
6 | Argentine No. 7 – Lode | NMMC 85994 |
7 | Argentine No. 8 – Lode | NMMC 85995 |
8 | Argentine No. 9 – Lode | NMMC 85996 |
9 | Argentine No. 17 – Lode | NMMC 86004 |
10 | Argentite #1 – Lode | NMMC 64721 |
11 | Argentite #2 – Lode | NMMC 64722 |
12 | Argentite #3 – Lode | NMMC 64723 |
13 | Argentite #4 – Lode | NMMC 64724 |
14 | Argentite #10 – Lode | NMMC 64725 |
15 | Argentite #11 – Lode | NMMC 64726 |
16 | Argentite #12 – Lode | NMMC 64727 |
17 | Argentite #13 – Lode | NMMC 64728 |
18 | Argentite #14 – Lode | NMMC 64729 |
19 | Argentite #15 – Lode | NMMC 64730 |
20 | Argentite #16 – Lode | NMMC 64731 |
21 | Argentite #18 – Lode | NMMC 64732 |
22 | Argentite #19 – Lode | NMMC 64733 |
23 | Argentite #20 – Lode | NMMC 64734 |
24 | Argentite #21 – Lode | NMMC 64735 |
25 | Argentite #22 – Lode | NMMC 64736 |
26 | Contention #1 – Lode | NMMC 64719 |
27 | Contention #2 – Lode | NMMC 64720 |
28 | No Show #1 – Lode | NMMC 106382 |
29 | No Show #2 – Lode | NMMC 106383 |
30 | No Show #3 – Lode | NMMC 106384 |
31 | No Show #4 – Lode | NMMC 106385 |
32 | No Show #5 – Lode | NMMC 106386 |
33 | No Show #6 – Lode | NMMC 106387 |
34 | No Show #7 – Lode | NMMC 106388 |
35 | No Show #8 – Lode | NMMC 106389 |
36 | No Show #9 – Lode | NMMC 106390 |
37 | No Show #10 – Lode | NMMC 106391 |
38 | No Show #11– Lode | NMMC 106392 |
39 | No Show #12 – Lode | NMMC 106393 |
40 | No Show #13 – Lode | NMMC 106394 |
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41 | No Show #14 – Lode | NMMC 106395 |
42 | No Show #15 – Lode | NMMC 106396 |
43 | No Show #16 – Lode | NMMC 106397 |
44 | No Show #17 – Lode | NMMC 106398 |
45 | No Show #18 – Lode | NMMC 106399 |
46 | No Show #19 – Lode | NMMC 106400 |
47 | No Show #20 – Lode | NMMC 106401 |
48 | Rhonda #1 – Lode | NMMC 106402 |
49 | Rhonda #2 – Lode | NMMC 106403 |
50 | Rhonda #3 – Lode | NMMC 106404 |
51 | Rhonda #4 – Lode | NMMC 106405 |
52 | Rhonda #5 – Lode | NMMC 106406 |
53 | Rhonda #6 – Lode | NMMC 106407 |
54 | Rhonda #7 – Lode | NMMC 106408 |
55 | Rhonda #8 – Lode | NMMC 106409 |
56 | Rhonda #9 – Lode | NMMC 106410 |
57 | Rhonda #10 – Lode | NMMC 106411 |
58 | Rhonda #11 – Lode | NMMC 106412 |
59 | Rhonda #12 – Lode | NMMC 106413 |
60 | Rhonda #13 – Lode | NMMC 106414 |
61 | Rhonda #14 – Lode | NMMC 106415 |
62 | Rhonda #15 – Lode | NMMC 106416 |
63 | Rhonda #16 – Lode | NMMC 106417 |
64 | Rhonda #17 – Lode | NMMC 106418 |
65 | Rhonda #18 – Lode | NMMC 106419 |
66 | Pec-II #1 – Lode | NMMC 106420 |
67 | Barite – Lode | NMMC 109082 |
68 | Barite No. 2 – Lode | NMMC 109083 |
69 | Barite No. 3 – Lode | NMMC 109084 |
70 | Jody #1 – Lode | NMMC 115276 |
71 | Jody #2 – Lode | NMMC 115277 |
72 | Jody #3 – Lode | NMMC 115278 |
73 | Jody #4 – Lode | NMMC 115279 |
74 | Jody #5 – Lode | NMMC 115280 |
75 | Jody #7 – Lode | NMMC 115281 |
76 | Jody #8 – Lode | NMMC 115282 |
77 | Jody #9 – Lode | NMMC 115283 |
78 | Jody #10 – Lode | NMMC 115284 |
79 | Stonewall Surprise – Lode | NMMC 193678 |
80 | Alhambra Extension 2 – Lode | NMMC 193679 |
81 | No Show No. 21 – Lode | NMMC 193680 |
82 | No Show No. 23 - Lode | NMMC 193681 |
History and Prior Operations
The Black Hawk district was discovered in 1881 and was in production until the so called “silver panic” of 1893. Since its main productive period, ending in its closure in late 1893 or early 1894, there has been little activity in the Black Hawk district. One of the mines, the Black Hawk was reopened in 1917 and some development done in the upper levels. Both the Black Hawk and the Alhambra were reopened at different times in the 1950’s, 1960’s, and the 1970’s but no sustained development or production was achieved. There has been some trenching and surface Geochem work done at various times.
Project Status and Exploration Activities
We have not established that our Black Hawk and Bullard Peak rights contain proven or probable reserves, as defined under Reg S-K 1300. No exploration activities have commenced to date and no exploration costs have been incurred or paid. To date, the Company
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has not (i) commenced or adopted plans to conduct any exploration, (ii) prepared drilling plans, proposals, timetables or budgets for exploration work, or (iii) identified engineers and other personnel that will conduct or assist in any exploration work. The Company will need to raise funds to conduct exploration work and it currently lacks firm commitment financing for any exploration activities.
The Company will need to prepare the property for exploration and drilling activities, including building infrastructure, installing facilities, and purchasing equipment. Future exploration drilling on any of our properties that consist of BLM land will require us to either file a Notice of Intent (NOI) or a Plan of Operations with the BLM, depending upon the amount of new surface disturbance that is planned. A Notice of Intent is required for planned surface activities that anticipate less than 5.0 acres of surface disturbance, and usually can be obtained within a 30 to 60-day time period. The Company currently lacks sufficient capital to fund these expenditures and is currently allocating working capital to the Jim Crow and Billali project.
On December 1, 2020, the Company made a joint announcement with Texas Mineral Resources Corp. (“TMRC”), of the execution of a letter agreement to pursue, negotiate and thereafter enter into a definitive joint venture agreement with TMRC to jointly explore and develop a targeted silver property to be selected by TMRC among patented and unpatented mining claims held by Santa Fe Gold within the Black Hawk Mining District in Grant County, New Mexico. Completion of a joint venture agreement is subject to the successful outcome of a multi-phase exploration plan to be undertaken in the near future by TMRC. Under terms of the letter agreement TMRC plans to conduct a district-wide evaluation among the patented and unpatented claims held by Santa Fe Gold consisting of geologic mapping, sampling, trenching, radiometric surveying, geophysics, drilling and/or other methods as warranted. The purpose of the letter agreement was to allow TMRC the ability to enter onto the Company’s property, begin incurring the costs associated with the work necessary to secure a bankable feasible study. The parties may then secure the funding needed to develop and mine the 80 acres that TMRC identifies. TMRC will be responsible for mining operations and will receive 51% of the profits as defined in the definitive agreement, when executed. The Company will receive 49% of the profits.
On July 28, 2022, TMRC issued a press release that updated the successful completion of their geophysical work in the Blackhawk mining district in New Mexico. The related project details that were provided to TMRC by the advanced technology deployed were cost effective and will assist TMRC in developing their next phase in their exploration program on project site.
Mineralization and Geology
Mineralization in the Black Hawk mining district consists of numerous narrow carbonate veins containing varying amounts of cobalt, nickel, silver, uranium, and arsenic. It is one of a well-known, but poorly understood, geologic type of mineral deposit generally called “five element veins”. They are also rich in uranium, nickel and, of interest today, cobalt. In the Black Hawk district, the host is a coarse-grained quartz diorite. Mining conditions within the veins are good. The lack of strong alteration results in stable walls requiring minimum support, only occasional faults or gouge zones require timber. Vein boundaries are sharp and the vein fillings are easily recognizable visually.
The Silver City quadrangle covers approximately 20,650 square kilometers chiefly in the southern basin and range province of Southwestern New Mexico and Southeastern Arizona. Bedrock of the ranges includes Precambrian igneous and metamorphic rocks, Paleozoic sedimentary rocks, Mesozoic igneous and sedimentary rocks, and Cenozoic igneous rocks. The intervening basins, which constitute about 65% of the quadrangle’s surface area, are filled with Late Cenozoic (Pliocene-Pleistocene) sedimentary deposits in places to depths of more than 1,000 meters. The geology of each range is generally different, and most rock units and pre-basin and range structures cannot be correlated across the basin areas. The principal hydrothermal ore-forming processes in the quadrangle are believed to be attributable to subduction-related events including complex eruptive systems during two distinct periods in the development of the western orogenic continental margin: (i) a medium-potassium calcium/alkaline volcanic arc system in late Cretaceous/early Tertiary time (the Laramide orogeny 80/50 million years ago); and (ii) a high-potassium calcium/alkaline volcano-plutonic arc system in middle Tertiary time (30/15 million years ago). The hydrothermal-magmatic vein and pegmatite type deposits are probably Precambrian in age and the syngenetic sedimentary and volcanic deposits range in age from Cambrian to late Tertiary (or younger).
Although there is some local variation in some of the districts, the five metal types of deposits in the Black Hawk district are fissure veins where the carbonate and the ore minerals fill open space caused by the fracturing. The ore generally occurs in small high-grade pods or shoots randomly distributed within the fracture zone. The location of these open spaces is the sole recognized control of ore distribution. The favorability of the host seems to be governed by its fracturing characteristics rather than any chemical factor. Generally, in these deposits there is one favored rock type that accounts for most of the production. At the Black Hawk district, the preferred host rock is the coarse-grained quartz diorite.
The project requires further evaluation of its mineralogical makeup and economic modeling to determine the appropriate course for any potential future development and production. The Company has not conducted a preliminary feasibility study for the project at the time of filing this Registration Statement. Upon completion of the preliminary feasibility study for the project, the Company will prepare an impairment analysis of the project to determine if an impairment is required at that time.
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Power and Water
The Company will be required to use water from the mine. Water will be pumped from a mine using one or more electric pumps powered by one or more on-site generators placed on site. Water will be stored in an on-site water tank placed on site for use in processing. We believe that the water we collect from will be sufficient for exploration, development and production purposes. The Company will be required to place a generator(s) on the property for electricity required to run the water pumps and for other operational purposes.
REGULATION S-K 1300 DEFINITIONS
The following definitions are taken from Regulation S-K 1300 which goes into effect in the First Fiscal Quarter of Operations for the Company’s Fiscal year 2022. Previously the Company made disclosures in compliance with Industry Guide 7 for the mining industry entitled “Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations” contained in the Securities Act Industry Guides published by the United States Securities and Exchange Commission, as amended. There are a number of definitional changes. The following terms have the definitions set opposite them under Regulation S-K 1300: