SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2002
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-13078
LEADVILLE MINING & MILLING CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA 13-3180530
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
76 Beaver Street, New York, NY 10005
(Address of principal executive offices)
Issuer's telephone number: (212) 344-2785
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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.
Yes [_] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.
Class Outstanding at March 11, 2001
Common Stock, par value $.001 per share 38,582,539
Transitional Small Business Format (check one); Yes [_] No [X]
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying financial statements are unaudited for the interim
periods, but include all adjustments (consisting only of normal recurring
accruals), which we consider necessary for the fair presentation of results for
the three and six months ended January 31, 2002.
Moreover, these financial statements do not purport to contain complete
disclosure in conformity with generally accepted accounting principles and
should be read in conjunction with our audited financial statements at, and for
the fiscal year ended July 31, 2001.
The results reflected for the three and six months ended January 31, 2002
are not necessarily indicative of the results for the entire fiscal year.
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
JANUARY 31, 2002
(Unaudited)
ASSETS
------
Current Assets:
Cash and Cash Equivalents $ 18,039
Loan Receivable 41,560
Other Current Assets 7,489
------------
Total Current Assets 67,088
------------
Property and Equipment (Net of
Accumulated Depreciation of $365,784) 1,389,322
------------
Other Assets:
Mining Reclamation Bonds 47,750
Security Deposit 3,667
------------
Total Other Assets 51,417
------------
Total Assets $ 1,507,827
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accrued Expenses $ 326,289
Note Payable - Current Portion 3,236
------------
Total Current Liabilities 329,525
------------
Commitments and Contingencies
Stockholders' Equity:
Common Stock, Par Value $.001 Per Share;
Authorized 150,000,000 shares; Issued and
Outstanding 37,509,638 Shares 37,510
Capital Paid In Excess of Par Value 20,907,013
Deficit Accumulated in the Development Stage (19,765,129)
Accumulated Other Comprehensive Income (Loss) (1,092)
------------
Total Stockholders' Equity 1,178,302
------------
Total Liabilities and Stockholders' Equity $ 1,507,827
============
The accompanying notes are an integral part of the financial statements.
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For The Period
September 17,1982
(Inception)
Three Months Ended Six Months Ended To
January 31, January 31, January 31, 2002
---------------------------- ---------------------------- ----------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Revenues:
Interest Income $ 393 $ 784 $ 1,033 $ 1,436 $ 715,507
Miscellaneous -- 192 -- 4,769 26,276
------------ ------------ ------------ ------------ ------------
Total Revenues 393 976 1,033 6,205 741,783
------------ ------------ ------------ ------------ ------------
Costs and Expenses:
Mine Expenses 122,156 284,960 274,731 608,629 4,675,355
Selling, General and Administrative
Expenses 146,767 456,967 260,658 253,541 6,991,972
Stock Based Compensation -- -- -- 723,363 8,332,009
Depreciation 582 956 1,163 1,912 365,784
Loss on Write-Off of Investment -- -- -- -- 10,000
Loss on Joint Venture -- -- -- -- 101,700
------------ ------------ ------------ ------------ ------------
Total Costs and Expenses 269,505 742,883 536,552 1,587,445 20,476,820
------------ ------------ ------------ ------------ ------------
Loss Before Provision For Income Taxes (269,112) (741,907) (535,519) (1,581,240) (19,735,037)
Provision For Income Taxes 1,100 170 1,480 340 30,092
------------ ------------ ------------ ------------ ------------
Net Loss $ (270,212) $ (742,077) $ (536,999) $ (1,581,580) $(19,765,129)
============ ============ ============ ============ ============
Net Loss Per Share $ (0.01) $ (0.03) $ (0.02) $ (0.06)
============ ============ ============ ============
Average Common Shares Outstanding 36,467,592 29,715,732 35,434,479 27,932,873
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For The Period
Six Months Ended September 17, 1982
January 31, (Inception)
----------------------- To
2002 2001 January 31, 2002
--------- ----------- ----------------
Cash Flow From Operating Activities:
Net Loss $(536,999) $(1,581,580) $(19,765,129)
Adjustments to Reconcile Net Loss to
Net Cash Used By Operating Activities:
Depreciation 1,163 1,912 365,784
Loss on Write-Off of Investment -- -- 10,000
Loss From Joint Venture -- -- 101,700
Value of Common Stock Issued For Services -- 19,791 2,747,007
Stock Based Compensation -- 723,363 8,332,009
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Other Current Assets (1,173) 1,017 (7,489)
(Increase) in Prepaid Expenses -- (63,000) --
(Increase) in Security Deposit -- -- (3,667)
Increase in Accrued Expenses 255,653 8,600 326,289
Other 1,404 -- (11,323)
--------- ----------- ------------
Net Cash Used By Operating Activities (279,952) (889,897) (7,904,819)
--------- ----------- ------------
Cash Flow From Investing Activities:
Purchase of Property and Equipment -- -- (1,705,650)
Investment in Joint Venture -- -- (101,700)
Investment in Privately Held Company -- -- (10,000)
Net Assets of Business Acquired (Net of Cash) -- -- (42,130)
Increase in Option Payment Payable -- -- 50,000
Payment of Option Payment Payable (50,000) -- (50,000)
--------- ----------- ------------
Net Cash Used By Investing Activities (50,000) -- (1,859,480)
--------- ----------- ------------
The accompanying notes are an integral part of the financial statements.
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Continued)
For The Period
Six Months Ended September 17, 1982
January 31, (Inception)
------------------------ To
2002 2001 January 31, 2002
--------- ----------- ----------------
Cash Flow From Financing Activities:
Decrease in Loans Receivable - Related Portion $ 11,000 $ -- $ --
Increase in Loans Receivable 260 (16,730) (41,300)
Increase in Loans Payable - Officers -- -- 18,673
Repayment of Loans Payable - Officers -- -- (18,673)
Increase in Note Payable -- -- 11,218
Payments of Notes Payable (1,965) -- (9,161)
Decrease in Loan Payable -- (2,823) (3,641)
Proceeds From Sale of Common Stock 274,776 1,252,281 10,276,985
Commissions on Sale of Common Stock -- -- (5,250)
Expenses of Initial Public Offering -- -- (408,763)
Purchase of Certificate of Deposit-Restricted -- -- 5,000
Purchase of Mining Reclamation Bond -- (6,600) (42,750)
--------- ----------- ------------
Net Cash Provided By Financing Activities 284,071 1,226,128 9,782,338
--------- ----------- ------------
Increase (Decrease) In Cash and Cash Equivalents (45,881) 336,231 18,039
Cash and Cash Equivalents - Beginning 63,920 49,422 --
--------- ----------- ------------
Cash and Cash Equivalents - Ending $ 18,039 $ 385,653 $ 18,039
========= =========== ============
Supplemental Cash Flow Information:
Cash Paid For Interest $ -- $ -- $ --
========= =========== ============
Cash Paid For Income Taxes $ 1,440 $ 340 $ 29,160
========= =========== ============
Non-Cash Financing Activities:
Issuances of Common Stock as Commissions
on Sales of Common Stock $ 8,000 $ 58,530 $ 448,495
========= =========== ============
Issuance of Common Stock as Payment for Expenses $ -- $ -- $ 192,647
========= =========== ============
Issuance of Common Stock as Payment for Property
and Equipment $ -- $ -- $ 4,500
========= =========== ============
The accompanying notes are an integral part of the financial statements.
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2002
(Unaudited)
NOTE 1 - Basis of Presentation
The consolidated financial statements include the accounts of Leadville
Mining & Milling Corp. ("Leadville") and its subsidiaries, all of which are
wholly-owned. All significant inter-company accounts and transactions have been
eliminated in consolidation.
In the opinion of the Company's management, the accompanying consolidated
financial statements reflect all adjustments ( which include only normal
recurring adjustments) necessary to present fairly the consolidated financial
position and results of operations and cash flows for the periods presented.
These financial statements are unaudited and have not been reported on by
independent public accountants.
Results of operations for interim periods are not necessarily indicative of
the results of operations for a full year.
Effective December 15, 2000, Leadville obtained an option from AngloGold
North America Inc. to purchase from AngloGold North America Inc., and AngloGold
(Jerritt Canyon) Corp. 100% of the issued and outstanding stock of Minera
Chanate, S.A. de C.V., ("Minera") a subsidiary of those two companies. Minera's
assets consist of certain exploitation and exploration concessions of the States
of Sonora, Chihuahua and Guerrero, Mexico.
Pursuant to the option, during fiscal 2001, Leadville provided AngloGold
funds needed of approximately $145,000 to cover all rental and maintenance
payments required to hold Minera's concessions.
On June 29, 2001 Leadville exercised its option to purchase all of the
stock of Minera. In addition, although it exercised such option, Leadville must
make a payment of $50,000 to AngloGold pursuant to the option agreement. If such
$50,000 payment is not made by December 15, 2001, Leadville must sell back to
AngloGold the Minera shares for nominal consideration. During December 2001
Leadville made the required option payment.
Under the terms of the option, Leadville has granted AngloGold the right to
designate one of its wholly-owned Mexican subsidiaries to receive a one-time
option to purchase 51% of Minera Chanate. That option is exercisable over a 180
day period commencing at such time as Leadville notifies AngloGold that we have
made a good faith determination that we have gold-bearing ore deposits on any
one of the identified group of Minera Chanate properties, when aggregated with
any ore that Leadville has mined, produced and sold from such properties, of in
excess of 2,000,000 troy ounces of contained gold. The exercise price would
equal twice Leadville's project costs on the properties during the period
commencing on December 15, 2000 and ending on the date of such notice.
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2002
(Unaudited)
NOTE 2 - Subsequent Events
On February 23, 2002, Minera Santa Rita S. de R.L. de C.V., one of our
wholly-owned Mexican subsidiaries, entered into a joint venture agreement with
Grupo Minero FG S.A. de C.V. to explore, evaluate and develop certain mining
exploitation concessions currently owned by Minera Chanate S.A. de C.V., another
of our wholly-owned Mexican subsidiaries. The concessions are located in the
Municipality of Altar in the State of Sonora, Mexico. Grupo Minero FG S.A. de
C.V., referred to as FG, is a private Mexican company that owns and operates the
La Colorada open-pit gold mine outside of Hermosillo in Sonora, Mexico. FG also
is involved in road construction and maintenance for the federal and Sonoran
government.
Pursuant to the agreement, the venture will be conducted in five phases.
The first two phases will entail continued exploration and evaluation of the
mining potential of lots in the concessions. Phase two will culminate with a
feasibility study. The parties anticipate that phase one will cost approximately
$330,000 and be completed by November 1, 2002 and that phase two will cost
approximately $350,000 and be completed by March 1, 2003. Phase three consists
of FG's contribution to the venture of mining equipment sufficient to develop
the lots pursuant to the feasibility study. Phase three will occur only if the
parties determine to continue and they are able to obtain outside funding for
phase four. The Company is unable to estimate phase four costs at this time.
Phase four involves the building of an access road, the acquisition of water
extraction rights and the drilling and equipping of water wells. Phase five
entails exploitation, processing and sale of minerals on a commercial scale.
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2002
(Unaudited)
NOTE 2 - Subsequent Events (Continued)
Pursuant to the agreement, FG has paid the Company $75,000 to participate
in the venture. It will contribute an additional $75,000 towards the first phase
of the venture for which it will receive a 30% interest in the venture. The
balance of the costs for phase one and the costs for phase two will be split
equally between the parties. As mentioned above, phase four will be funded from
outside sources. Phase five funding will be provided by the parties in
proportion to their respective interests in the venture.
FG's percentage of the venture can increase to 45%. It will increase to 31%
upon completion of phase one; 33% upon completion of phase two; 37% upon it
contribution of equipment in phase three; 40% upon completion of phase four; and
45% upon attaining optimal levels of production in phase five. Optimal levels of
production will be determined by agreement of the parties.
The venture is terminable, among other things, if:
o its purpose is concluded or can no longer be obtained;
o it experiences continued non-profitability;
o the parties elect to terminate it at a meeting of the
parties;
o it loses 2/3 of its assets; or
o the parties fail to obtain the requisite financing to fund
phase four by September 1, 2003.
If FG determined that it does not want to continue to participate in the
venture after the parties agree to commence phase two, or it cannot provide its
share of the funding for Phase two, Santa Rita has a 45 day option to purchase
FG's interest in the venture for $127,500. If Santa Rita does not exercise this
option within the 45 day period and pay the purchase price within 15 days
thereafter, FG may sell its interest to another party.
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2002
(Unaudited)
NOTE 2 - Subsequent Events (Continued)
If additional contributions are needed as determined by a meeting of the
parties, the parties have 30 days to elect whether they will make these
contributions and an additional 15 days to make their contribution. To the
extent that a party, referred to as the waiving party, does not want to pay its
share or does not pay its share, the other party can make the payment and the
waiving party's percentage interest in the venture will be diluted
proportionately plus 10%. The waiving party can reacquire its lost interest by
repaying the amount previously not paid plus a 25% penalty. These dilution
provisions do not apply to Santa Rita unless and until FG has contributed
$600,000 to the venture. FG can be diluted any time on or after the date it
acquires its initial 30% interest.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Cautionary Statement on Forward-Looking Statements
Some information contained in or incorporated by reference into this report on
Form 10-QSB may contain "forward-looking statements," as defined in Section 21E
of the Securities and Exchange Act of 1934. These statements include comments
regarding exploration and mine development and construction plans, costs, grade,
production and recovery rates, permitting, financing needs, the availability of
financing on acceptable terms or other sources of funding, and the timing of
additional tests, feasibility studies and environmental permitting. The use of
any of the words "anticipate," "continue," "estimate," "expect," "may," "will,"
"project," "should," "believe" and similar expressions are intended to identify
uncertainties. We believe the expectations reflected in those forward-looking
statements are reasonable. However, we cannot assure you that these expectations
will prove to be correct. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of the risk factors
set forth below and other factors set forth in, or incorporated by reference
into, this report:
o worldwide economic and political events affecting the supply of and
demand for gold;
o volatility in market prices for gold and other metals;
o financial market conditions, and the availability of debt or equity
financing on terms acceptable to our company;
o uncertainties as to whether additional drilling, testing and
feasibility studies will establish reserves at any of our properties;
o uncertainties associated with developing a new mine, including
potential cost overruns and the unreliability of estimates in early
states of mine development;
o uncertainties as to title to our properties and the availability of
sufficient properties to allow for planned activities in Mexico or the
Leadville District;
o variations in ore grade and other characteristics affecting mining,
crushing, milling and smelting operations and mineral recoveries;
o geological, metallurgical, technical, permitting, mining and
processing problems;
o the availability and timing of acceptable arrangements for power,
transportation, mine construction, contract mining, water and
smelting; the availability, terms conditions and timing of required
government approvals;
o uncertainties regarding future changes in tax and foreign-investment
legislation or implementation of existing tax and foreign-investment
legislation;
o the availability of experienced employees; and
o political instability, violence and other risks associated with
operating in a country like Mexico with a developing economy.
Many of those factors are beyond our ability to control or predict. You should
not unduly rely on these forward-looking statements. These statements speak only
as of the date of this report on Form 10-QSB. Except as required by law, we are
not obligated to publicly release any revisions to these forward-looking
statements to reflect future events or developments. All subsequent written and
oral forward-looking statements attributable to our Company and persons acting
on our behalf are qualified in their entirety by the cautionary statements
contained in this section and elsewhere in this report on Form 10-QSB.
Results of Operation
During the fiscal quarter ended January 31, 2002, we focused attention on the
mining exploitation concessions that we acquired from AngloGold in Sonora,
Mexico. We continued geological evaluation of these concessions and negotiated a
joint venture arrangement with Grupo Minero FG S.A. de C.V. in Hermosillo to
explore, evaluate and develop certain of these concessions. As a result of these
negotiations, we entered into a joint venture agreement with Grupo Minero on
February 23, 2002. For more information on this agreement, see Part II. Item 5.
"Other Information" below.
During the period, we released back to the Mexican government all the properties
not deemed adequately mineralized to justify holding. We believe that we will
greatly reduce our bi-annual taxes by turning back these properties.
We continued exploration of the properties in Mexico during the quarter. Mine
Reserve Associates, Inc. of Wheat Ridge, Colorado together with our geologists
and engineers continue the evaluation of the Chanate deposit and preparing a
preliminary mine plan. Metallurgical studies by cyanide leach are underway by
R.D.I. of Denver, Colorado to determine processing technology and gold recovery
system. Our Mexican counsel and accounting firm are continuing their efforts
with respect to financial and corporate matters. In January 2001, our field
crews examined a number of oxide mineral prospects in Sonora, Mexico on the
Minera Chanate property. Geological evaluation of the field data did not
indicate the existence of commercial grades of gold and properties were dropped.
Activities in Leadville, Colorado remain temporarily suspended. The properties
are in a state of care and maintenance. Further drilling is planned to offset
drill hole #34 during the summer 2002, funds permitting.
Revenues.
We generated no revenues from operations during the three months ended January
31, 2002 and 2001. There were de minimis non-operating revenues during the six
months ended January 31, 2002 and 2001 of $1,033 and $6,205, respectively.
Costs and Expenses.
Over all, costs and expense during the three months ended January 31, 2002
($269,505) decreased by $473,328 (approximately 63.7 %) from the three months
ended January 31, 2001 ($742,883). Over all, costs and expense during the six
months ended January 31, 2002 ($536,552) decreased by $1,050,893 (approximately
66.2%) from the six months ended January 31, 2001 ($1,587,445).
Mine expenses during the three months ended January 31, 2002 ($122,156)
decreased by $162,804 (approximately 57.1%) from the three months ended January
31, 2001 ($284,960). We believe that the decrease in mine expenses resulted
primarily from lack of available capital. Mine expenses during the six months
ended January 31, 2002 ($274,731) decreased by $333,898 (approximately 54.9%)
from the six months ended January 31, 2001 ($ 608,629). We believe that the
decrease in mine expenses also resulted primarily from lack of available
capital.
Selling, general and administrative expenses during the three months ended
January 31, 2002 ($146,767) decreased by $310,200 (approximately 67.9%) from the
three months ended January 31, 2001 ($456,967). We believe that the decreased
was due to lack of available capital. Selling, general and administrative
expenses during the six months ended January 31, 2002 ($260,658) increased by
$7,117 (approximately 2.8%) from the six months ended January 31, 2001
($253,541). We believe that the increased was de minimums.
There was no stock based compensation during the three month ended January 31,
2002 and period ended January 31, 2001. Stock based compensation decreased
$723,363 approximately (100%) during the six month period ended January 31, 2002
($ 0) from the six month period ended January 31, 2001 ($723,363).
Net Loss.
As a result, our net loss for the three months ended January 31, 2002 was
$270,212, which was $471,805 (approximately 63.4%) less than our $742,077 loss
for the three months ended January 31, 2001. Our net loss for the six months
ended January 31, 2002 was $536,999, which was $1,044,581 (approximately 66%)
less than our $1,581,580 loss for the six months ended January 31, 2001.
Liquidity and Capital Resources
As of January 31, 2002, we had a working capital deficit of ($262,437). We
anticipate that we will need approximately $300,000 in order to carry out our
plans for the next 12 months. Our plans include the costs of administration, and
exploration related activities in both Colorado and Mexico. As was explained in
our annual report on form 10-KSB, we are in a precarious financial condition. No
assurance whatsoever can be given that we will be able to continue as a going
concern or that any of our plans with respect to our gold properties will, to a
material degree, come to fruition. In order to continue our program, we must
obtain substantial financing. While we are seeking such financing through bank
bridge financing, private placement of our shares, joint venture partners and
other arrangements, there is no assurance that we will be successful.
In this regard, as discussed in Item 5 of Part II below, in February 23, 2001,
we entered into a joint venture agreement with Grupo Minero FG S.A. de C.V. in
Hermosillo to explore, evaluate and develop certain of our Mexican properties.
Pursuant to this agreement, Grupo Minero paid us $75,000 to enter the venture,
will contribute an additional $75,000 towards the first phase of the venture
and, if the venture proceeds, will contribute mining equipment and pay its
proportionate share of the expenses.
In addition, during the three months ended January 31, 2001, we raised
approximately $102,100 through the sale of common stock.
Environmental Issues
We do not expect that environmental issues will have an adverse material effect
on our liquidity or earnings. Before any mining development or mining
exploration or construction of milling facilities could begin at our Leadville
properties, it was necessary to meet all environmental requirements and to
satisfy the regulatory agencies in Colorado that our proposed procedures fell
within the boundaries of sound environmental practice. We are bonded to insure
procedures and reclamation of any areas disturbed by our activities. In 1997,
the Colorado Mined Land Reclamation Board reviewed our permit and bond and
determined that an increase in the bond was necessary. At that time, we placed
an additional $6,000 in escrow against any future indemnity. We again increased
the bond by an additional $24,550 and $6,600, respectively on March 14, 2000 and
July 25, 2000. The current amount of this bond is $37,150.
In Mexico, we are not aware of any significant environmental concerns or
existing reclamation requirements at the Minera Chanate properties. However, we
will be required to obtain various environmental and related permits in order to
engage in our planned activities at El Chanate. The costs and any delays
associated with obtaining these required permits could have an impact on our
ability to timely complete our planned activities at El Chanate and ultimately
on the feasibility of opening a mine.
Part of the Leadville Mining District was declared a Superfund site. Several
mining companies and one individual were declared defendants in a possible
lawsuit. We were not named a defendant or Possible Responsible Party. We did
respond in full detail to a lengthy questionnaire prepared by the Environmental
Protection Agency ("EPA") regarding our proposed procedures and past activities
in November 1990. To our knowledge, the EPA has initiated no further comments or
questions.
We do include in all our internal revenue and cost projections a certain amount
for environmental and reclamation costs on an ongoing basis. This amount is
determined at a fixed amount of $1.50 per ton of material to be milled on a
continual, ongoing basis to provide for further tailing disposal sites and to
reclaim the tailings disposal sites in use. At this time, there does not appear
to be any environmental costs to be incurred by us beyond those already
addressed above. No assurance can be given that environmental regulations will
not be changed in a manner that would adversely affect our planned operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
During the quarter ended January 31, 2002, we issued the following shares of our
common stock pursuant to the exemption from registration provided by Section
4(2) of the Securities Act of 1933: In November 2001, we sold an aggregate of
195,455 shares to four individuals for an aggregate of $23,000. In December
2001, we sold an aggregate of 1,713,638 shares to 11 individuals for an
aggregate of $50,300. In January 2002, we sold an aggregate of 625,000 shares to
three individuals for an aggregate of $28,800.
Item 3. Defaults Upon Senior Securities
None.
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On February 23, 2002, Minera Santa Rita S. de R.L. de C.V., one of our
wholly-owned Mexican affiliates, entered into a joint venture agreement with
Grupo Minero FG S.A. de C.V. to explore, evaluate and develop certain mining
exploitation concessions currently owned by Minera Chanate S.A. de C.V., another
of our wholly-owned Mexican affiliates. The concessions are located in the
Municipality of Altar in the State of Sonora, Mexico. Grupo Minero FG S.A. de
C.V., referred to as FG, is a private Mexican company that owns and operates the
La Colorada open-pit gold mine outside of Hermosillo in Sonora, Mexico. FG also
is involved in road construction and maintenance for the Sonoran government.
Pursuant to the agreement, the venture will be conducted in five phases. The
first two phases will entail continued exploration and evaluation of the mining
potential of lots in the concessions. Phase two will culminate with a
feasibility study. The parties anticipate that phase one will cost approximately
$330,000 and be completed by November 1, 2002 and that phase two will cost
approximately $350,000 and be completed by March 1, 2003. Phase three consists
of FG's contribution to the venture of mining equipment sufficient to develop
the lots pursuant to the feasibility study. Phase three will occur only if the
parties determine to continue and they are able to obtain outside funding for
phase four. We are unable to estimate phase four costs at this time Phase four
involves the building of an access road, the acquisition of water extraction
rights and the drilling and equipping of water wells. Phase five entails
exploitation, processing and sale of minerals on a commercial scale.
Pursuant to the agreement, FG has paid us $75,000 to participate in the venture.
It will contribute an additional $75,000 towards the first phase of the venture
for which it will receive a 30% interest in the venture. The balance of the
costs for phase one and the costs for phases two will be split equally between
the parties. As mentioned above, phase four will be funded
from outside sources. Phase five funding will be provided by the parties in
proportion to their respective interests in the venture.
FG's percentage of the venture can increase to 45%. It will increase to 31% upon
completion of phase one; 33% upon completion of phase two; 37% upon its
contribution of equipment in phase three; 40% upon completion of phase four; and
45% upon attaining optimal levels of production in phase five. Optimal levels of
productions will be determined by agreement of the parties.
The venture is terminable, among other things, if:
o its purpose is concluded or can no longer be obtained;
o it experiences continued non-profitability;
o the parties elect to terminate it at a meeting of the parties;
o it loses 2/3 of its assets; or
o the parties fail to obtain the requisite financing to fund phase four
by September 1, 2003.
If FG determined that it does not want to continue to participate in the venture
after the parties agree to commence phase two, or it cannot provide its share of
the funding for Phase two, Santa Rita has a 45 day option to purchase FG's
interest in the venture for $127,500. If Santa Rita does not exercise this
option within the 45 day period and pay the purchase price within 15 days
thereafter, FG may sell its interest to another party.
If additional contributions are needed as determined by a meeting of the
parties, the parties have 30 days to elect whether they will make these
contributions and an additional 15 days to make their contribution. To the
extent that a party, referred to as the waiving party, does not want to pay its
share or does not pay its share, the other party can make the payment and the
waiving party's percentage interest in the venture will be diluted
proportionately plus 10%. The waiving party can reacquire its lost interest by
repaying the amount previously not paid plus a 25% penalty. These dilution
provisions do not apply to Santa Rita unless and until FG has contributed
$600,000 to the venture. FG can be diluted any time on or after the date it
acquires its initial 30% interest.
Item 6. Exhibits and Reports on Form 8-K
10.a Agreement between Santa Rita and Grupo Minero FG.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
LEADVILLE MINING & MILLING CORPORATION
Registrant
By: /s/ Gifford A. Dieterle
--------------------------
Gifford A Dieterle
President/Treasurer
Date: March 22, 2002