Report On Mining Summer 2008

If you like what you’re reading, Subscribe Today!

FREE Digital Subscription: www.tiny.cc/ROM

Or receive the Hard Copy at a 35% discount, mail in the form above.

4

Volume 11 | Number 2 | Summer 2008Vancouver, British Columbia www.ReportOnMining.com

Planning for Profits - Report on Mining edition is published 4 times a year by Fusion Publishing Inc. All rights reserved.

Any reproduction or duplication without prior written consent of Fusion Publishing Inc. is strictly prohibited.

Published by Fusion Publishing Inc.

Canadian OfficeFusion Publishing Inc.#317 – 1489 Marine Dr.West Vancouver, BCCanada V7T 1B81.888.925.0313 (Toll Free)

USA OfficeFusion Publishing Inc.#1537 - 145 Tyee Dr.Pt. Roberts, WA USA 98281-9602 1.888.925.0313 (Toll Free)

PublisherTerry Tremaine

Associate Publisher & Editor Connie Ekelund

Editorial Assistant – Copy Editor & Proofreader Leslie Goodson

Production – Layout ArtistCindy Hughes

Contributing EditorGrant Campbell

Sales ManagerDoug Dulmage1.888.925.0313 x3001

Sales RepresentativesGarry FerrisMarie RichardsRichard WardRandy Chaster

Publication Mail Agreement #41124091

Circulation & DistributionCanada PostDistacor Inc.Newsstand

Non Deliverables please return to:Fusion Publishing Inc.Report On Mining Magazine#317 - 1489 Marine DriveWest Vancouver, BC Canada V7T 1B8

Subscriptions:1 year $14.95 in Canada (+$8.00 in USA) 2 years $28.00 in Canada (+$16.00 in USA)1.888.925.0313 [email protected]

The information in Planning for Profits - Report on Mining has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed.

www.ReportOnMining.com

Cover Story4 Bullish On Gold

By: James DiGeorgia

On The Move6 Scorpio Mining Corporation

Commodities: Uranium8 Aldershot Resources Ltd.

South America12 Network Exploration Ltd.

14 Polar Star Mining Corporation

16 Latin American Minerals Inc.

18 High Ridge Resources Inc.

Commodities: Molybdenum22 Mosquito Consolidated Gold Mines Limited

Supplier26 Geosoft Inc.

Review 28 Raising Capital

By: Kenneth G. Sam & Christopher Doerksen

4 Planning for Profits / Report on Mining | Summer 2008 www.reportonmining.comwww.reportonmining.com

The unprecedented bull market of 2008 is getting stronger all the time! But the ongoing bull is acting strangely. Normally, as prices go up, supply would

rise and demand would fall. But that’s not happening in the current market. Instead, supply is falling and demand is rising. The metal’s fundamentals are even stronger now than they were when this massive bull market began. My target is now $2,500. Of all the reasons why I expect gold to reach $2,500, all but one are bullish forces related to gold’s financial value. Gold is first and foremost a physical asset; therefore, before we discuss the metal’s financial aspects, we should first discuss the physical supply and demand fundamentals of gold.

Three Sources of Supply, Two Sources of Demand The above-ground supply of gold increases slightly every year. All the new metal comes from gold mining operations. The world’s gold mines can be divided into three categories:• Primary mines. These are mines with the principal pur-pose of extracting gold from the earth.• Secondary mines. These generate gold as a byproduct of mining other minerals.• Waste reclamation. These operations process waste from older mines, reclaiming gold that was formerly un-economical or impossible to obtain. Modern technology has made it possible to process material that was waste to previous miners, even extracting gold particles that are invisible to the naked eye.

In 2007, an estimated 119.3 million troy ounces of gold came onto the market. Of that, 82.8 million ounces came from mines, 27.5 million ounces from secondary supply, and 9 million ounces from official transactions (mostly sales from central banks). On the demand side, gold has two primary sources: fabrication demand and investors. Fabrication demand is a broad category–it includes anything made from gold: • Electronics (gold wire, electrical contacts, etc.)• Dental (gold fillings, inlays, crowns, and bridges)• Medical (gold-plated stents, gold-membrane drug de-livery microchips, gold-compound drugs, gold wires and circuitry in pacemakers, ventilators etc.)• Jewellery• Other industrial products (gold catalysts, nanoparticles etc.)

The second source of demand comes from investors. Again, this is a broad category. It includes the sale of government coins like Royal Canadian Mint coins, rounds and medallions from private mints, and bullion bars. It also includes shares in the various gold exchange-traded funds (GETFs) which have sprung up on the world’s stock exchanges.

Total demand in 2007 was 119.3 million troy ounces. Jewellery was the largest source of demand at 69.1 million ounces, next was investor demand at 39.7 million ounces, and fabrication demand was third at 10.5 million ounces.

I’ve listed central banks as a source of supply and investors as a source of demand. And you may ask, “Can’t central banks sometimes buy gold (thus becoming a source of demand instead of supply), and investors sometimes sell it (thus supplying instead of demanding)?”

Yes, they can. But both situations are rare. Official transactions have created net purchases of gold only once in the last 20 years (by 5.3 million ounces in 1988). Similarly, investors have been net sellers of gold only once during the last 30 years (by 700,000 ounces in 1995). So it makes sense to treat official transactions as supply, and investor activity as demand.

The Bullish Case for GoldConventional analysts are saying that gold’s recent sprint past the $1,000 mark is mainly due to inflation concerns, a weakening dollar, and increased demand by China and India. But they are missing the real reasons why it’s rising and will continue to rise.

Here are the real reasons to be bullish on gold:1. Supply is decreasingGlobal mining supply peaked in 2001 at 82.5 million ounces, and has declined slightly since then. Ironically, 2001 marked the beginning of the current bull. Mining supply has fallen even as the price has risen. Much of this is due to the plunge in South Africa’s gold production. Historically, the deep hardrock mines in South Africa have been a major source of gold for the world. In 1984, for example, it produced 46% of global supply. But the South African supply is drying up. Its deposits are nearing exhaustion in some cases.

Solid Gold: The real reasons to stay bullish on gold, even as it hits new highsBy James DiGeorgia

www.reportonmining.com Summer 2008Summer 2008 | Planning for Profits / Report on Mining 5

Also, the gold mines are huge, with some of them several miles deep. This makes mining not only difficult, but even more dangerous. Mining production has also fallen because of the savage bear market in gold from 1997 to 2001. More to the point, exploration for new deposits fell sharply. Ex-penditures on exploration fell by 60% from 1997 to 2002. Since it takes 5-10 years to go from discovery to production, the world’s gold supply will not fully recover from this lack of exploration until 2011-2012.

2. Secondary supply is decliningGold can often be recovered and recycled after its use. After melting and refining, the gold comes back onto the market for use again. This is known as secondary supply. There are multiple sources for this recovered gold. The two primary sources are industrial scrap and old jewellery. Tradition-ally, the largest sources of jewellery were nations in the Middle East where a common practice when buying new jewellery was to sell the old at the same time. However, this is changing. More and more, new jewellery buyers are keeping their old necklaces, bracelets, rings, and so on. Thus, the second-ary supply of gold has been declining. It peaked in 2003, but has fallen ever since. Will secondary supply increase again as gold pushes up to $2,500? Probably. Yet, since secondary supply is less than one-fourth of gold’s overall supply, it won’t exert as much influence on the price as the more important components of supply and demand.

3. Supply from official transactions has declinedIn the past, sales from central banks have exerted a substan-tial effect on the price of gold. In fact, these official transac-tions tend to affect the gold market far out of proportion to their actual amounts. Governments have used official sell-offs to deliberately suppress the market. Whenever the price of gold became too lively, another round of sales would be announced. However, those days appear to be over. Official reserves have fallen sharply from these sales. Governments have sold some 170 million ounces of gold since 1992 when the Maastricht Accord, the treaty that created the European Union, was signed. Bankers and government officials rarely mention gold sales anymore. It appears they have sold all that they are willing to sell. Not only that, private investors (who histori-cally tend to be bullish) are now a more powerful force in the markets than central bankers. For the first time in almost a century, investors own more gold than govern-ments do. In the past, political considerations have played a large role in determining the price of gold. This influence was almost always negative; government officials usually resent gold’s ability to expose their financial misbehaviour, and that’s why they have acted so often to try to suppress the price of gold.

But those days are over. Now we can assume that market forces will be the primary driver in the price of gold. Since the metal’s fundamentals are all positive, we can now expect the price of gold to rise unhindered.

4. Investor demand is surgingIn general, investors are a reliable source of demand; they have only sold gold on a net basis once in the last 30 years. An important factor is the diversity of reasons that investors buy. We can easily identify at least six: a commodity, a currency hedge, an inflation hedge, a safe haven, a form of savings, and an alternative asset. Let’s look briefly at each:

• Gold as a commodity. As a physical asset, gold can rise in price as its underlying fundamentals change. Investors who follow the physical gold market closely can make handsome profits.• Gold as a currency hedge. There are always a few currencies in the world that are threatened by the stupidity of their own governments. Gold allows investors to protect themselves.• Gold as an inflation hedge. Even if the viability of a currency isn’t threatened, its long-term value is never sustain-able. Gold is an excellent way for investors to profit as their currencies depreciate.• Gold as a safe haven. Gold is immune to most troubles that can befall a market, and the recent credit crisis that is crippling the US markets is a great example of this. • Gold as savings. Many investors prefer to have at least some of their savings in gold; this isn’t limited to people in India or the Middle East who store their wealth in gold jewellery. • Gold as an alternative asset. Finally, many investors love gold because unlike other assets, it’s both tangible and beautiful. If you’ve ever held a one-ounce gold coin in your palm, you know what I mean. There’s a quiet satisfaction you get from gold; it’s something you just can’t get from numbers on a bank statement.

Despite gold’s record prices, all three sources of supply (primary mines, secondary mines and waste reclamation) are decreasing while overall demand is surging. There are excellent reasons to expect demand to soar in the years ahead. In fact, a new and growing source of investor demand–exchange-traded funds–is causing a massive shift in the markets. The real reasons to remain bullish on gold will extend the metal’s rapid rise for the foreseeable future. For more from James DiGeorgia, editor of the Gold and Energy Advisor and owner of finestknown.com, please visit www.goldandenergyadvisor.com.


Scorpio Mining Corporation is an aggressive Toronto-listed low-risk, low-cost near-production silver-zinc company that has started

the commissioning of its 2,000 tonnes per day mill facility. Initial startup commissioning is at 500 tonnes per day and reaching official commercial production of 1,000 tonnes per day in July of this year on its flagship Nuestra Senora project in Sinaloa State, Mexico.

The Scorpio team is extremely proud to have reached completion of the Nuestra Senora mill facilities, considering that the initial groundbreaking for the mill facility was on August 1, 2007. Having attained this milestone within a period of only eight months is an achievement that demonstrates the know-how and dedication of the Scorpio team. This extraordinary fast-track timeline is particularly impressive given the current mining industry shortages of supplies, components, and experienced professionals, including trades people.

In addition to this feat, the company also cleared and constructed a tailings dam impoundment area, a 34-kilometre power line, 4.8-kilometre water line, mine personnel living complexes and 4.3 kilometres of by-pass road, all while underground development and stockpiling of mineralized material continued to progress.

On

the

Mo

ve

A New Mine, New Deposits, A New Producer, A New Vision

At the same time, the geological team delineated some new discoveries and controls of high-grade mineral emplacement that is expected to significantly enhance the grade and tonnage of the mill throughput in the future, as well as offer more flexibility in mine planning.The mine and mill facility is close to the large town of Cosala, a railroad facility, and Mazatlan and Culiacan, two major seaports. The company currently holds 100% title to more than 16,000 contiguous hectares of exploitation mining concessions with no underlying royalties or payment.

In June 2007, the company released a pre-feasibility study, which showed that the cost of producing an ounce of silver is -$0.98 per ounce including net by-products, and mine operating costs are estimated to be only $40.30 per tonne using discounted metal prices of $11 per ounce silver, $1.25 per pound zinc, $0.50 per pound lead and $2.25 per pound copper.

To achieve the low operating costs, the company performs bulk mining as the deposit is amenable to such a cost-effective method of extraction. In addition, given the strong response in metal prices from those used for the base case, this increase in the price of metals can only enhance the economics of the project.


Scorpio Mining Corporation

At the initial start-up of commercial production of 1,000 tonnes per day, the annual recovered and payable output of the company is 1.1 million ounces of silver, 18 million pounds of zinc, 9 million pounds of lead and 1.8 million pounds of copper for 2008. In 2009, the company will continue to increase the through-put until the maximum is achieved.

Currently, the company has more than 75,000 tonnes stockpiled at the mill site, with an additional 15,000 tonnes underground.

Since commencing exploration on the Nuestra Senora property, the company has had success defining the Nuestra Señora, Candelaria, Santa Teresa, Santo Domingo, Hoag, Sept 9, Jewel Box and Footwall Zones, the last four of which are new discoveries and all accessible from the main ramp underground.

The company continues to aggressively move the project forwards with four underground drill delineating and exploring the deposits; underground development, which includes the transportation of more than 1,600 tonnes per day of ore and waste from underground to the mill site on one shift; and rapid construction of the mill through commissioning and supporting facilities with over 250 people working on site, 24 hours per day.

Scorpio is a strong supporter of the community, and the largest employer, with more than 475 people employed directly or indirectly, in the area. n

Scorpio Mining Corporation

#511-475 Howe St.

Vancouver, BC Canada V6C 2B3

Phone: 604.678.9639

[email protected]

www.scorpiomining.com

TSX.V: SPM

interview


Aldershot Resources Ltd.

The global movement recognizing climate change from greenhouse gas emissions

has many developed countries looking to the use of nuclear power as an

alternative to fossil fuel-generated power.

The World Nuclear Association (WNA) reports that there are some 435 commercial nuclear power reactors operating in 30 countries and

this number is expected to increase over the next decade or so. There are 35 reactors under construction, a further 91 planned to be in operation in the coming years, and 228 proposed for future development. The majority of the new construction is centred outside of North America: six in China, six in India, and seven in Russia.

The increase in nuclear capacity and uranium demand will have a positive long-term impact on the metal’s price, even though the price on the spot market has been quite volatile recently.

The spot price declined from a high of more than $100 in 2007 to between $70 and $80 per pound early in 2008, while the contract price has remained stable at $95 per pound since May 2007.

Aldershot Resources Ltd. is a Canadian exploration and development company based in Vancouver, BC, and focused on discovering uranium in Australia, Zambia and Canada. Of known recoverable resources of uranium, Australia accounts for 24%, and Canada accounts for 9%.

Companies exploring for uranium and developing uranium deposits are operating in the best market environment in decades.

According to the WNA there was very little uranium exploration between 1985 and 2005, so the noteworthy increase in exploration efforts now underway may likely double the known economic resources.

Aldershot’s primary focus is the continued exploration of its projects in Australia’s Northern Territory. The most promising is the George Project, which is located approximately 90 kilometres southwest of Darwin.

The property covers an area of 84 square kilometres and contains two old workings, the Adelaide River Mine and the George Creek Mine.

Initial mapping and drilling, completed in 2007, identified a 500-metre surface expression of the mineralization that was intersected just below the old workings. Geologists have also taken a wider view of the results and identified a polymetalic component that includes nickel, cobalt and copper, along with the uranium present in the samples.

Ura

nium


Assuming the 500-metre shear zone contains mineralization to about the 50-metre depth and has a true width of 4 metres, this equates to approximately half a million tons of mineralized ore. Aldershot plans to complete drilling along strike to allow calculation of an NI 43-101-compliant resource estimate.

The Ngalia Project, also in the Northern Territory, covers 211 square kilometres and is located approximately 365 kilometres northwest of Alice Springs. The project is 40 kilometres southwest along strike and in a similar geological horizon to the Biyli uranium project deposits, which recently (March 2008) reported 7.56 million tonnes grading 0.14% uranium or 23.4 million pounds uranium.

Uranium anomalies have been selected from the airborne survey for ground checking. The targets identified so far are very shallow, with most of the target horizon overlain by thin desert sands that subdue or mask the surface expressions. Drilling will commence next year.

In Western Australia, the company has two uranium projects, the Yuinmery Project and the Turee Creek Project. The Yuinmery Project is located approximately 480 kilometres northeast of Perth and covers 100 square kilometres. This project has a known historical resource of 1.5 million tonnes grading 379 parts per million uranium (this resource calculation was completed prior to the implementation of NI 43-101).

The company has completed approximately one third of the drilling required to bring this resource calculation into NI 43-101 compliance.

Aldershot plans to continue drilling to confirm and expand the resource estimate. This young deposit is very shallow with calcrete-type mineralization from surface to five metres, running parallel to an ancient lakeshore. The company expects that this will be a high-volume low-grade deposit and that ongoing improvement in heap leach technology will enhance the deposit’s economic feasibility.

The Turee Creek Project, which covers approximately 100 square kilometres in the Pilbara region, has a historical non-NI 43-101-compliant resource estimate of 1.05 million tonnes grading 350 parts per million uranium. Aldershot has completed an aerial radiometric-magnetic survey and an EM survey. Only provisional results are available from the EM survey. Aldershot will use the survey data to target conductors for drill testing as initial indications suggest the historic resource could be the surface expression of a large Athabasca basin-type deposit. Drill testing is planned for 2008.

In Zambia, Aldershot has its Kariba Project, which is in the early exploration stage where 20 grab samples have been collected. Initial results showed 15 of the 20 contain uranium with four assaying above 1000 parts per million uranium (maximum 0.16% uranium).

interview


The company plans to follow up on these encouraging results and undertake an airborne survey over the property to identify new targets.

In Canada, Aldershot has properties in Quebec and British Columbia. The seven projects in Quebec, all of which have recorded uranium prospects, are Fort Colougne, Kert; Saguenay, Latour; Sept Iles, Otish Mountains; and the Labrador, Trough. In BC, the company has projects over existing uranium prospects or reported resources at Atlin, Rexspar, Okanagan West, Kelowna Beaverdell, and Grand Forks.

Aldershot has a very experienced management team led by President and CEO Jeremy Caddy, who has more than 30 years of experience as a mining engineer, as well as extensive experience in corporate finance. He spent his early years in Australia and Asia.

Chief Financial Officer Frank De Marte has more than 22 years of mining industry experience in Western Australia. Brian Richardson, Director, has more than 21 years of mining industry experience, including the role of chief geologist for Aldershot, where he picked up the projects in the Northern Territory. Vice President of Exploration Ian Faris has 30 years of mining experience, which include 15 years in uranium exploration and mining in various regions of Australia.

Ura

nium


Aldershot Resources Ltd.

#900-555 Burrard St.

Vancouver, BC Canada V7X 1M8

Phone: 604.682.6718

[email protected]

www.aldershotresources.com

TSX.V: ALZ

Aldershot Resources Ltd. has a knowledgeable and qualified management team that is focused on uranium exploration in Australia’s Northern Territory. The company has assembled a diversified portfolio of uranium properties (a number of which lend themselves to joint venture arrangements) that will free it to concentrate on the prospective George Uranium Project to increase shareholder value by taking advantage of the strong uranium market fundamentals. n


The highly prospective Andean mountain region in South America hosts an abundance of recognized base and precious metal

properties. Chile, in particular, is home to the world’s largest copper mines and continues to dominate world production and exportation. With an expected production of 38% of the world’s total copper in 2010, Chile remains an extremely attractive region for successful mineral exploration and development.

TSX-V: NET

ETWORKNE PLORATION LTD

Network Exploration Ltd. Equipped and determined to uncover Latin America’s next great discovery

Over the past year, Vancouver-based Network Exploration Ltd. has transformed from an inactive shell to a drilling junior with properties in Latin America’s hottest areas. Led by dedicated management and a world-renowned geological team, Network Exploration is focused on the discovery of economically mineable copper and gold deposits in Chile and Peru.

Network’s initial acquisition and current focus is its Caldera property. Well-situated in the mineral rich Huasco region of Chile, Caldera exhibits the characteristics of a porphyry system with copper, gold, and molybdenum mineralization. The Caldera project is located approximately 150 kilometres northeast of La Serena and covers 24 square kilometres at elevations between 2500 to 2800 metres.

Initial chip samples taken from the property in August 2006, confirmed the presence of anomalous copper and gold values with results as high as 4% copper and 6.6 grams per ton of gold. These encouraging results, and the abundance of historical placer and artesian mining on the property, drew Network’s geologists to Caldera. Network’s Chilean-based Senior Geologist Marco Fernandez-Concha led a trenching and sampling program at the site in 2007 that revealed widespread copper and numerous targets for the company’s 2008 Phase I Drill Program.

Drilling proceeded from January through March 2008, with the first set of results confirming the company’s theory of Caldera hosting a porphyry system. Highlights from the first four holes (nine total) revealed 0.52% copper over 36 metres and 171 metres of 0.23% copper with a 3-metre section assaying 1.50%.

Sout

h A

mer

ica


Network Exploration Ltd.

#1160-1100 Melville St.

Vancouver, BC Canada V6E 4A6

Phone: 604.638.7363

Toll Free: 1.866.637.5138

[email protected]

www.networkexploration.com

TSX.V: NET

Network’s second property, Pistala, is a 16-square kilometre Peruvian prospect located east of the major NW-SE trending Incapquio fault system of Southern Peru. Pistala was acquired in 2007 and is in the preliminary exploration stages at this time.

Company President Alexander Helmel leads Network’s well-respected geological team, whose members have more than 100 years of combined geological exploration, development, and production experience.

Marco Fernandez-Concha, Network’s Senior Geologist, has 25 years of exploration and geological leadership in South America. He has worked for several multinational mining corporations including Noranda, as South American Exploration Manager, and Teck Exploration, as General Manager responsible for Latin America.

Ken Thorsen, Senior Geological Advisor and Director, has more than 38 years of experience in the exploration industry, leading several distinguished companies to their success.

Company President Alexander Helmel

leads Network’s well respected

geological team, whose members

have more than 100 years of combined

geological exploration, development, and

production experience.

During his 21 years with Teck Exploration, where was responsible for carrying out Teck’s exploration projects around the world, Mr. Thorsen rose from regional exploration manager to president.

Robert Friesen, Senior Mining Advisor and Director, has more than 40 years of experience in underground and open pit mining operations, mine area exploration, and the development of projects from pre-feasibility through production.

His experience with several major and junior corporations includes a 17-year career with Noranda, and a five-year term with Teck Exploration.

While work at Caldera and Pistala continues, Network Exploration actively explores other acquisition opportunities in Latin America. “Our focus has been on assembling a dedicated, elite team of individuals to pursue promising exploration projects in South America,” Mr. Helmel says. “With these elements in place, we look forward to an exciting year as we continue to develop our current projects and search for new and exciting opportunities.” n


In 2008, Polar Star expects that it will be most active on each of the following three properties: Los Azules, Region III: Uranium/CopperIn January 2008, Polar Star commenced a 3,000 metre drill program at Los Azules, where it is targeting a breccia pipe measuring 1,100 metres along strike, 100 metres in average width and oxidized to approximately 100 metres in depth.

The mineralization consists of copper and uranium, ranging from 0.7% to 1% and 0.5 to 1.2 pounds uranium equivalent, respectively. Since acquiring the nearly 7,471 hectares of land that represents Los Azules, the company has identified five new breccia pipes ranging from 200 to 400 metres in diameter. SRK Consulting of Santiago, Chile, has been retained to prepare an NI 43-101 report on the property.

Montezuma, Calama, Region II: CopperPolar Star’s 25,000 hectare Montezuma property is directly south of Codelco’s Chuquicamata open pit mine, covering 20 kilometres of strike along the famous West Fissure, which has spawned many of Chile’s mega copper porphyry deposits; that is, those over 500 million tonnes.

Polar Star Mining Corporation is an exploration and development company, based in Toronto, Canada, focused on mineral opportunities in

Chile. Since January 2007, when company representatives first visited the country, Polar Star has assembled a portfolio of 17 properties covering approximately 136,000 hectares in Chile’s most prominent mining districts. Polar Star is among the very first to pursue uranium properties in Chile and is believed to be the only junior with properties in the vicinity of Chuquicamata, the world’s second largest open pit mine, which produces copper and uranium.

Management in Chile is led by Terry Walker, M.Sc., P.Geo., who has more than 15 years of experience in that country. His familiarity with the geology, land system and people has enabled Polar Star to rapidly emerge as a leading explorer there. A number of the targets pursued were generated by Mr. Walker through a combination of private research and/or recognition in the field of promising geological targets. The Polar Star team in Chile consists of approximately 20 people active in Calama, Region II; Copiapó, Region III; La Serena, Region IV; and Talca, Region VII.

Photo of Yoanca

Sout

h A

mer

ica


Polar Star Mining Corporation

#1700, 8 King St. East

Toronto, ON, Canada M5C 1B5

Phone: 416.368.3496

Fax: 416.368.5146

[email protected]

www.polarstarmining.com

TSX-V: POS

The 4,800 hectare Tulipan property abuts Montezuma to the east and is believed to cover an adjacent splay fault. Mina Yoanca, the company’s newest acquisition, covers 30 hectares and is approximately 60 kilometres north of Chuquicamata. It covers a classic copper porphyry leach cap that has been selectively mined by artisan miners for copper with grades ranging from 3% to 5% per tonne. With nearly 31,330 hectares in the Chuquicamata/Calama area, Polar Star is probably the most significant junior active in this camp. Current work programs are focused on drilling Yoanca in April 2008, and developing targets on Montezuma and Tuilpan for drilling in the second half of 2008.

Nancagua, Region VI: Gold and Silver Nancagua is approximately 180 kilometres south of Santiago and hosts epithermal gold/silver veins. Previously drilled during 1995-1996 by another junior, eight drill holes returned results ranging from 31 metres of 1.6 g/t Au plus 6.6 g/t of Ag to more than 11 metres of 9.2 g/t Au plus 65 g/t Ag. The property encompasses 4,800 hectares and is at 300 metres mean elevation. Drilling is expected to commence in the next six months.

Since Polar Star’s arrival in Chile, the company has been driven to find advance-staged projects that can be put into production, and is committed to pursuing projects with characteristics that can add to its value portfolio.

Corporately, Polar Star is structured into three subsidiaries: one each for uranium, copper and precious metals. This was done so that value can be realized for its portfolio at the appropriate time. Polar Star is attractive to investors for a number of reasons: Chile has one of the most favourable political risk ratings for mining companies; the quality and size of the mega porphyry targets of Polar Star in the Calama region are among the best in the world; and, as demonstrated by the company’s track record, management delivers value and executes focused business plans. Finally, since nearly a third of Polar Star’s ownership is held by management and directors, the company is a very shareholder-friendly enterprise. n

Los Azules rock sample

Los Azules rock breccia

Polar Star claim locations near Chuquicamata


Latin American’s management holds a proven and consistent history of significant discovery across South America. This experience that

has led to three new discoveries in the last 18 months: a massive sulphide deposit in Argentina, a new gold camp in Paraguay, and an emerging gold porphyry camp in Colombia.

The Rio Tendal massive sulphide project is a new discovery located in the La Rioja Province in northwestern Argentina. The company has 100% ownership over a 36,488 hectare mining concession, including four mining claims covering 36 hectares. Within Latin American’s mining concession are five small mining claims covering 114 hectares held by Teck Cominco.

This massive sulphide body is exposed on surface and, in one area, the Verdiona trend is up to 80 metres wide and can be traced intermittently on surface for approximately 2 kilometres. A new discovery on the property - the Yegua Pircada trend - is 20 metres wide and runs for 400 metres.

During the past six months, Latin American has been busy with the exploration and analysis of Rio Tendal’s exciting possibilities and is preparing to expand involvement on this site.

As of March 2008, the company has built, and now maintains, a 22-kilometre access road to the project, as well as an on-site camp with the capacity to house 30 people.

More than 1,000 trench samples have been collected, and a 5,000 metre diamond drill program has commenced to further understand this property’s potential. Significant trench results from the Verdiona zone returned 4.4% zinc, 2.75% lead, 0.10% copper and 12.7 grams of silver per tonne over 29 metres.

The Paso Yobai project is located in southwestern Paraguay and lies approximately 150 kilometres from Asuncion, the country’s capital.

Paso Yobai is an emerging gold field discovered by local miners in 1996. Latin American has contracted the rights to earn a 70% interest in the project covering 22,266

hectares. Paso Yobai has several impressive features: visible

gold at surface level that has been mined by local

artisan miners using panning methods, visible gold at depth as intersected in core sampling, and a defining regional gold soil

geochemistry.Latin American

Minerals has received analyses on 2,000 metres

of the 5,000-metre diamond drill program that has been

completed at Paso Yobai.

Latin American Minerals, a dynamic new exploration corporation based in Toronto, Canada, has become one of the best positioned junior exploration companies in South America.

Sout

h A

mer

ica


Latin American Minerals Inc.

#602-357 Bay St.

Toronto, ON Canada M5H 2T7

Phone: 416.363.0841

FAX: 416.363.0585

[email protected]

www.latinamericanminerals.com

TSX.V: LAT

Mendoza, Argentina

Phone (00.54.261) 439.9268

Asuncion, Paraguay

Phone (595-21) 212930

President and CEO David Wahl, a mining engineer and professional geoscientist with 40 years of experience, leads the management team. Dr. Waldo Perez, a professional geoscientist with extensive experience, directs the exploration team. Prior to joining Latin American, Dr. Perez was the senior geologist running project generation for Barrick Gold Corporation in South America. n

Noteworthy drill results include DDH 11 with 6.5 metres with 26.64 grams of gold per tonne, and DDH 3 with six metres averaging 12.52 grams of gold per tonne. Visible gold was observed in several of the drill holes analyzed to date.

The company has collected 8,000 soil samples and completed a 3,500-line kilometre electromagnetic and magnetometer helicopter survey. The soil sample results outline a large anomaly measuring 200 metres wide by 6,400 metres in length.

Values returned from the samples range from 0.05 to 1 gram of gold per tonne. The electromagnetic and magnetometer surveys show a strike length of 10 kilometres with the large soil anomaly lying over top.

In addition to these two exciting projects, Latin American is actively exploring its Esmeralda gold porphyry property in Southern Colombia. Reconnaissance rock chip samples from the property returned results of up to 130 grams of gold per tonne. Regional stream sediment sampling defines a five kilometre by two kilometre mineralized camp with consistent gold anomalies related to porphyry in contact with sediments.

Mineral exploration is one of the most technically challenging activities in the mining business, and it is also the activity with the highest potential rewards. Latin American provides the multi-commodity base to take advantage of the current metal cycle, a multi-country base to reduce country risk, and one of the most talented technical teams to discover the next “Company Maker” deposit in South America.

Left: Rio Tendal Camp. Note the massive sulphide outcropping on surface in the top right of picture

The Rio Tendal massive

sulphide project is a new

discovery located in the

La Rioja Province in

northwestern Argentina.

interview

18 Planning for Profits / Report on Mining | Spring 2008 www.reportonmining.comwww.reportonmining.com

High Ridge Resources Inc.

The price of gold has reached new all time highs recently and the forces behind its rise are expected to push the price even higher. Inflation is up and

as the prices of food and energy products rise–historically a powerful inflationary force–gold, traditionally used as a hedge against inflation, is expected to be in even greater demand. The ongoing credit crisis is also adding to economic uncertainty, another reason for investors to move to gold. Accordingly, the price of gold has the potential to continue to climb as global inflation concerns increase.

Companies involved in the exploration and development of gold deposits now find they are operating in the most attractive environment in more than 20 years. The potential to develop an economically viable deposit is dramatically enhanced when the price of gold reaches over $1,000 per ounce.

British Columbia-based High Ridge Resources Inc., a Canadian exploration and development company with gold and polymetallic properties in Peru and British Columbia, is focused on large-scale exploration projects with significant resource potential.

Sout

h A

mer

ica

www.reportonmining.com Spring 2008Spring 2008 | Planning for Profits / Report on Mining 19

High Ridge geologists collect samples on the Chanape project near San Mateo, Peru

Peru has a long history of successful mineral exploration and is one of the world’s leading countries in the production of copper, lead, zinc, gold and silver. In the San Mateo area, located approximately 90 kilometres east of Lima, Peru’s capital, High Ridge has three projects: Chanape, Rosicler-El Domo, and Pacococha-Germania concessions. The total area of staked land and properties under option agreements covers nearly 10,000 hectares.

Access to the project is via 94 kilometres on a paved road to the town of San Mateo and then along a further 26-42 kilometres of dirt roads. The company is focused on building solid relationships with the neighboring communities by fostering social development and greater awareness of environmentally-responsible mining. The company’s high standards are currently being implemented in the development of the Chanape project.

This property, the most advanced of the four in the San Mateo project, contains a historic resource estimate of 2.16 million tons grading 7.42 grams per ton gold, 16.82 grams per ton silver, 7.55% lead, 1.10% zinc, and 5.16% copper in the known veins, and 22.349 million tons grading 2.5 grams per ton gold, 1.32 ounces per ton silver, 0.56% lead, and 0.82% zinc in the intrusive and volcanic breccias.

These estimates are considered historic and not produced in accordance with the requirements of NI 43-101; further work will be required to bring these estimates into compliance. High Ridge Resources has just completed geophysical surveys and is currently concluding geochemical sampling and mapping on the Chanape property to identify drill targets. Early results of these surveys indicate that the deposit may be broader and deeper than the historical data suggests.

Survey results also indicate that additional targets have been found. Permitting is also underway, and a contractor has been selected for an initial +3,000-metre drill program planned to begin in upcoming weeks. The area has not had any drilling or exploration using modern techniques, as previous work was traditionally done by following a vein into the mountain side.

The objective of the drilling program is to delineate and expand the previously identified resource on the property and, as part of the proposed program, to identify the additional geophysical targets on the property. The current program is aimed at moving the project towards a feasibility stage as soon as possible. The company sees similarly excellent potential for other San Mateo projects.

The work being performed on the Rosicler vein and El

Domo alteration zone, the other High Ridge project in the San Mateo area, includes the recently completed 3D IP survey, geological mapping and sampling.

An IP survey was performed on the veins in the former Germania mine area and covered, among others, two previously unmined structures. Detailed mapping and sampling of the Germania area is ongoing.

In addition to its San Mateo projects in Peru, High Ridge has three projects in British Columbia: the Chuchi copper-gold porphyry property 90 kilometres north of Fort St. James near the Mount Milligan deposit 36 kilometres to the southeast; the Newton Mountain property 105 kilometres southwest of Williams Lake; and the Silver Bay property near Nelson on the eastern shore of Kootenay Lake.

The Chuchi property covers 10,000 hectares and it is along the same general trend as the Mount Milligan discovery.

interview

20 Planning for Profits / Report on Mining | Spring 2008 www.reportonmining.comwww.reportonmining.com

IP geophysical survey on Chanape

Previous work on the property indicates that the mineralization is contained within an extensive intrusive complex that trends northwest in a series of halos 10 kilometres by 2 kilometres.

Previous drill holes started and ended in mineralization at a depth of 175 metres, indicating that Chuchi remains open at depth.

The 4,100 hectare Newton Mountain property is located in an area with a long history of mineral exploration. High Ridge’s initial work on the property has been encouraging, with the best recorded intercept of 49 metres grading 2.3 grams per ton of gold, including 2 metres of 16 grams per ton of gold as part of a 187-metre drill hole.

The Newton Mountain property has never been tested to the 200-metre level and remains open at depth.

At the 1,900 hectare Silver Bay property, the company has collected numerous boulder and outcrop samples that have shown grades as high as 27% zinc, 37% lead, and 338 grams per ton silver.

The boulders are located along the mineralized outcrops trend and differ in chemistry from the nearby Blue Bell deposit, indicating the potential for a separate mineral deposit at Silver Bay.

High Ridge Resources management has extensive experience in exploration and development of precious metal deposits.

Checking the Sin Cpmplemento vein Germania vein

Sout

h A

mer

ica

www.reportonmining.com Spring 2008Spring 2008 | Planning for Profits / Report on Mining 21

High Ridge Resources Inc.#902 - 409 Granville St.Vancouver, BC, Canada V6C [email protected]: 604.689.9195 x223Toll Free: 1.888.689.9195 x223FAX: 604.681.4340TSX.V: HRR

Drill rig on Newton Mountain, BC

President and CEO Gary Anderson has 20 years of experience in the investment banking sector. Vice President of Exploration Adam Szybinski, PhD, has 30 years of experience in the exploration of mining properties in Canada, Peru, the US, Poland and Mongolia.

High Ridge’s highly-qualified board of directors includes, in addition to Mr. Anderson and Dr. Szybinski, CFO Dave McElhanney, P.Eng., independent consultant and past senior manager with a large private surveying and engineering consulting company, Crichy Clarke, president of TTM Resources Inc, Dr. Jordan Ponce Gambirazio, Peruvian lawyer, and Executive Director and co-owner of the Sindicato Minero Pacococha S.A., and Andreas Hees, managing partner of Independent German bank.

The company has also established an experienced advisory board that consists of C.M. (Mark) Rebagliati, P.Eng. and Alexander (Al) Korelin, MBA. Mr. Rebagliati has more than 35 years of experience in mineral exploration. In 2007, the Prospectors and Developers Association of Canada recognized Mr. Rebagliati for the Pebble East Copper Gold Molybdenum discovery; in 1997 he was named prospector of the year. Mr. Korelin is President of A.B. Korelin and Associates, and co-host of The Korelin Economics Report (which airs in the US and is available online at www.kereport.com).

High Ridge’s experienced management team has the expertise to realize the full potential of its highly prospective portfolio of exploration projects. The company is very well-positioned with its near-feasibility on the Chanape property in the San Mateo project in Peru, and the opportunity for expansion into the other properties there as well.

Furthermore, there is excellent potential at all three of its British Columbia properties for continued exploration success over the medium term. n


Mo

lybd

enum

Mosquito Consolidated Gold Mines Limited is well positioned to capitalize on molybdenum, a base metal that is becoming

increasingly important in steel manufacturing and environmental protection, and is currently at record high prices. Global demand for molybdenum is expected to increase between 5-7% annually during the next decade with demand forecasted to outstrip supply for several years to come.

Mosquito Consolidated, based in Vancouver, BC, has four molybdenum projects in the US, of which one of them, the CUMO project in south central Idaho, is the largest un-mined, open-pit, accessible molybdenum deposit in the world.

“CUMO is a company-maker,” says Brian McClay, Mosquito President and CEO. “We have 10 precious and base metal properties in Canada, Australia and the US, but CUMO is our number one focus right now.”

Mosquito’s other three molybdenum projects include the potential +500 million ton Pine Tree copper-molybdenum-silver deposit located in Nevada, the Spruce Mountain molybdenum-silver-gold property, also in Nevada, and the Spring Creek molybdenum-silver copper high-grade deposit located in east Idaho.

Mosquito was founded in 1971 and had early success bringing the Mosquito Creek and Cariboo gold mines into play. The Mosquito-molybdenum connection began when the company took advantage of low metal prices between 1991 and 2004 to diversify its portfolio at favourable prices.

The recently released NI 43-101 report on Mosquito’s CUMO project details an inferred resource of 2.01 billion tons of ore containing 2.89 billion pounds of molybdenum, 3.41 billion pounds of copper, 149.8 million ounces of silver, and 185.3 million pounds of tungsten. To date, the company has only drilled approximately 20% of the mineralized system covered by the property.

Drilling will resume in early May 2008 to delineate the edges of the mineralized zone and expand the CUMO resource, while moving the resource estimate from the inferred category to the indicated and measured categories. Mosquito also expects, by the end of May 2008, completion of a metallurgical study on a one-ton sample of CUMO ore. Simultaneous engineering studies on the project’s mill, waste and tailings sites are ongoing in anticipation of the completion of an open-pit mine analysis.

Production at CUMO will help meet the growing global molybdenum (moly) supply gap driven by expanded use of the metal and increasing demand. Known for its steel-strengthening and anticorrosive properties, moly is used extensively in the production of both carbon and stainless steel, which, in turn, are used in many and varied industries, including oil and gas pipelines, nuclear power plants, and infrastructure construction.

Drilling Hole 30 at CUMO

“CUMO is a company-maker. It is the

largest un-mined, open-pit, accessible

molybdenum deposit in the world.”


CUMO

Demands for increasingly higher strength steel and higher grades of stainless to withstand tough environments are upping the moly content.

Moly is also used as a catalyst for applications such as extracting oil from tar sands and lowering the sulphur content of diesel to meet environmental standards for ultra-low sulphur diesel (ULSD).

While demand is increasing, substantial amounts of new moly production are not anticipated to come on stream before 2010, and some will be delayed due to permitting, construction and processing delays; consequently, this could keep the price of molybdenum elevated over the long term.

Molybdenum is already considered a strategic resource in Korea, Japan and China. “It is a 21st century metal whose time has come,” says Mr. McClay.

Mosquito’s management has extensive global experience in the mining industry. Company President and CEO for the past 15 years, Brian McClay has more than 40 years of experience in mine exploration and development. He is part of a dedicated and long-serving management team and Board of Directors, whose members all have extensive backgrounds in the required management and technical aspects of mine development and operation.

Management strength and the strategic acquisition of highly prospective properties under favourable terms give Mosquito enviable upside potential to increase shareholder value. The Company’s enormous CUMO molybdenum project and an extremely favorable outlook for high moly prices for the foreseeable future increase that potential. Its diversified portfolio with multi-element resources buffers the company in the commodity market environment. Bottom line: Mosquito appears to represent excellent value. n

Mosquito Consolidated Gold Mines Limited

#100, 1616 West 3rd Ave.

Vancouver BC Canada V6J 1K2

Phone: 604.689.7902

FAX: 604.689.7816

[email protected]

www.mosquitogold.com

TSX-V: MSQ


Q: WHEN DOES A WINE BECOME A REVELATION?

A: “ ”

www.tinhorn.com

The Oldfield’s Collection Merlot is a limited vintage that embodies our passion for excellence and sublime taste. We let our estate vineyards express themselves in every bottle of wine we make. The Oldfield’s Collection Merlot is the result of that journey. Only 1,280 cases of this wine to be enjoyed by a select few. Rich, rare, exquisite... and soon to be gone.

New Perspective accelerates exploration at

Eaglecrest’s San Simon project President Hans Rasmussen explains how having the right team and

technology is contributing to higher success rates for Eaglecrest

Sometimes, simply viewing exploration results from a different perspective can

highlight hidden details and change the whole direction of a project. That’s what

happened when Hans Rasmussen, a former senior geophysicist for Newmont and

Rio Tinto, took the helm at Eaglecrest Explorations Ltd. and brought his apprecia-

tion for having the right team, approach and technology to explore projects to

the fullest.

Rasmussen’s first priority as President of Eaglecrest was to assemble a first-class

team, both on the executive and on the ground, to lead and develop the

company’s advanced gold exploration projects. And his first observation on the

ground was that the company needed to update the archaic software being used

on drill projects, and bring in technology that enabled deeper, three dimensional

insight.

Although Eaglecrest had been exploring the San Simon gold project in

northeastern Bolivia for more than a decade, it wasn’t until last year, when

Rasmussen’s team used the Geosoft exploration platform, and specifically their

Target exploration geology application, to produce a 3-D model of previous drill

sections, that Eaglecrest noticed something it hadn’t seen before: the gold was

concentrated in vertically-oriented high-grade gold shoots.

Rasmussen immediately revised the drill program to reflect this new understand-

ing of gold distribution and since then, at least a third of the holes on the main ore

shoot have hit grades of better than 10 grams gold per tonne. As the company

progresses towards establishing an underground resource for San Simon, the

original Target model is continuously being updated and used to illustrate drill

results to shareholders.

“From a business perspective, this kind of technology is helping tremendously,”

says Rasmussen, president and COO of Eaglecrest. “There is no question of the

impact a three dimensional presentation makes on the average investor.”

And no question that during this period of accelerated worldwide

exploration, explorers that can manage different data sets

quickly and effectively, then convey the results to investors

in a manner that is easy to visualize and understand, will

have a competitive advantage over those who can’t.

The record of the past two decades shows that mineral

discovery rates have fallen even as the level of investment

in exploration has risen to an all-time high. Companies

are spending more than ever, but discovering less. To

improve their hit rates, they need a means to manage

their bourgeoning data.

Having one platform for working with exploration data and GIS data in three

dimensions is where Rasmussen sees greatest advantage. “We can incorpo-

rate GIS data and exploration data - from technical information to

topographic data - and view it all in three dimensions within our Geosoft

platform,” says Rasmussen. “That’s a core strength for our advanced explora-

tion.”

In the earlier phases of exploration, when acquiring prospective ground and

selecting targets is important, software like Geosoft Target is able to

maximize the value of all available data and enable focused perspective to

support drill decisions.

Later, as the company grows and takes on more exploration projects or

moves into advanced exploration, their Geosoft platform can grow with

them, adapting to larger and more complex datasets as a project or

company develops.

As Eaglecrest gathers the information required to produce a resource

estimate for San Simon, Target continues to unlock the mysteries of the

subsurface to ensure that the drilling is focused and effective. As

testament to the value of the 3-D model, Eaglecrest has recently

been intersecting some of the highest grades the San Simon

property has ever produced.

There is also the opportunity to gather insight beyond their

immediate drilling area. “Target is very good for cross-sections

and it’s good for planned view maps, so we’ve also been able to

incorporate satellite images with surface geochemistry as a

means of exploring our project outside of where we’re drilling,”

says Rasmussen. “That’s another capability that Target provides.”

“Exploration technology has made huge leaps in how you

incorporate data, grid it, and then present it,” says Rasmussen.

“The Geosoft platform and Target have worked out really well

for us, meeting our technical requirements as well as our

business need to effectively present our results to investors.”

300-1055 West Hastings St.Vancouver, BC, Canada V6E 2E9Phone: 604-687-7272Fax: 604-684-7162E-Mail: [email protected]

Three Dimensional Model of High Grade Gold Shoots.

www.reportonmining.com www.reportonmining.com New Perspective Accelrate Exploration at Eaglecrest’s San Simon Project

For more information on Geosoft software & solutions referenced in this article, go to

www.geosoft.com/start-exploring or email your inquiry to [email protected].


The Securities and Exchange Commission (SEC) recently adopted significant amendments to Rule 144 under the Securities Act of 1933

(Securities Act), which shortens hold periods and eases the requirements for reselling restricted securities. These amendments should assist companies that raise capital in the United States by making it easier for investors to resell securities purchased in US private placements.

It’s important for Canadian companies looking to raise capital in the United States to understand several key aspects of the amendments to assist them in negotiating with agents, underwriters and US investors.

The amendments to Rule 144 effectively reduce the resale burdens associated with restricted securities and are expected to increase liquidity in securities purchased in US private placements. It is expected that the amendments will increase interest in investing in US Reporting Issuers, especially those dual listed in Canada, where the traditional Canadian hold period is four months. Generally, securities are deemed to be restricted securities when issued without registration in US private transactions (such as private placements under Section 4(2) of the Securities Act or pursuant to Rule 506 of Regulation D) and all securities issued by US domestic issuers (even in offshore transactions under Regulation S). Restricted securities should bear a US restrictive Securities Act legend and will not constitute good delivery on Canadian exchanges.

PRACTICAL IMPLICATIONS TO CONSIDERSubscription Agreements . For Canadian companies that are Foreign Issuers, subscrip-tion agreements will see few changes. Regulation S will con-tinue to be available for the removal of 1933 Act legends for resales through the facilities of the Toronto Stock Exchange (TSX) and TSX Venture Exchange and most US private placements will continue to be structured as they have in the past. Sometimes referred to as foreign private issuers, a foreign issuer is any corporation incorporated outside the United States unless the following conditions apply:

Raising Capital Raising Capital in the United States Just Got Easier, or Did It?By Kenneth G. Sam and Christopher Doerksen

(i) more than 50% of the outstanding voting securities of the issuer are held of record, directly or indirectly by residents of the United States; and (ii) any of the fol-lowing are true: (a) the majority of the executive offi-cers or directors are United States citizens or residents; (b) more than 50% of the assets of the issuer are located in the United States; or (c) the business of the issuer is administered principally in the United States. For Canadian companies that are US reporting issuers in the United States, the shortened hold period of six months is more closely aligned to the Canadian four-month hold period. Investors may require additional representations and warranties related to SEC reporting for US report-ing issuers. A US reporting issuer is a company that files reports with the SEC (i.e., Form 10-K, Form 10-Q, Form 20-F, Form 40-F, etc.) under Sections 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act).

Registration RightsIn the past, many investors insisted on registration rights in connection with investments in US domestic issuers be-cause of the restrictions placed on the securities. With the shortened hold period of six months and elimination of the burdensome restrictions for non-affiliates, US reporting is-suers are in a better position to negotiate away from grant-ing registration rights or limit their application in financings. A US domestic issuer is a company that is not a foreign issuer, and includes companies incorporated in the United States (Delaware, Nevada, Florida, etc.), and even Canadian corporations that do not meet the test for foreign issuer. Note that the restriction on warrant shares begins to run only after the warrants are exercised, so it is likely that investors in unit placements involving warrants will continue to require registration rights where the issuer is a US domestic issuer.

Shell CompaniesAmended Rule 144 provides specific requirements and limita-tions on the availability of Rule 144 for any company that is or has ever been a Shell Company.


A shell company is any company that has no or nominal operations and no or nominal assets other than cash and cash equivalents.

Unless the shell company becomes a reporting issuer and files Form 10 prospectus-type information with the SEC (and a one-year seasoning period has passed), the US restrictive legend may not be removed from restricted securities and an Affiliate may not be able to resell securities (restricted or not) under Rule 144.

An affiliate is a person who directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such company, and generally includes any director, an executive officer, or 10% shareholder. Structuring transactions with a shell company will require additional consideration if Rule 144 is expected to be relied upon for resale transactions.

Generally, Regulation S provides an exemption from the US registration requirements for Canadian companies that are foreign issuers and do not have a substantial US market interest (i.e., the primary market for the company’s securities is not in the United States) to issue securities outside the United States. Securities issued in these transactions are considered unrestricted and free trading for US securities law purposes.

However, securities issued in the United States or to persons in the United States are almost always restricted securities, regardless of whether the company is a foreign issuer. All securities issued by US domestic issuers are generally restricted securities unless the securities have been registered under the Securities Act. Restricted securities should be issued with a US restrictive legend or a 1933 Act legend and will not constitute good delivery on Canadian exchanges.

Investors who receive restricted securities must remove the 1933 Act legend in order to sell the securities. Removal of legends under Rule 144 generally requires an opinion letter of US legal counsel and Rule 144 is not generally available for securities of a company that is, or has ever been, a shell company unless the shell rules are complied with (see below). A 1933 Act legend may be legally removed in one of several ways:

Offshore Sales (TSX and TSX Venture)Most Canadian companies are familiar with the 1933 Act legend removal requirements for sales through the facilities of the TSX or TSX Venture Exchange. Regulation S provides an exemption and permits the removal of 1933 Act legends for sales through these facilities if certain conditions are met. These include: (a) the company being a foreign issuer; (b) the seller not being a 10% shareholder affiliate; and (c) the sale not knowingly being made to a person in the United States.

The documents required for removal of legend generally require the delivery of a seller’s declaration for removal of legend, a broker’s representation or acknowledgement letter, and authorization by the company. This process is still available and will continue to be the most frequently used process for removing 1933 Act legends for securities of foreign issuers.

One-Year Hold Rule 144 Removals for Non-Affiliates A non-affiliate of a company can have the Securities Act legend removed from certificates if the shareholder has held the se-curities for more than one year. Removal under the one-year hold rule will generally require the opinion of US counsel.

Rule 144 For US Reporting Issuers (Six-Month Hold) Amended Rule 144 has effectively reduced the standard one- to two-year hold period to six months for securities of US reporting issuers that have been reporting in the US for at least 90 days prior to the resale. After a six-month hold period: • Non-affiliates of a company can resell under Rule 144 if the company is current in its SEC filings;• Affiliates may resell under Rule 144 if (a) the company is current in its SEC filings; (b) the holder files a Form 144 with the SEC, (c) sales are limited to 1% of the issued and outstanding; or 1% of the average four-week trading vol-ume in any three-month period for national market listed securities; and (d) manner of sale restrictions are complied with. The SEC increased the Form 144 filing thresholds to $50,000 or 10,000 shares.

Rule 144 Affiliate Sales For Non-US Reporting IssuersAffiliates may resell securities of non-US reporting issuers after holding for one year if (a) current public information is available on the company; (b) the holder files a Form 144 with the SEC; (c) sales are limited to 1% of the issued and outstanding; and (d) manner of sale restrictions are complied with.

SEC RegistrationCompanies can still file registration statements with the SEC under the Securities Act to register restricted securities for resale. The obligation to file registration statements, some-times referred to as registration rights, is often negotiated by investors in the United States. In light of the reduced hold periods under amended Rule 144 and the continued availability of Regulation S for securities of foreign issuers, the need for registration rights is mitigated, except in certain circumstances where warrants are issued. The hold period for warrant shares issued on the exercise of warrants does not begin to run until the warrants are exercised and the consideration for the exercise is paid.


This restriction differs from the rules in Canada. However, the hold period can tack to the date of warrant issuance if the warrants are exercisable and exercised on a cashless basis.

In summary, the amendments to Rule 144 will facilitate the removal of legends after one year for non-affiliates and reduce the hold period to six months for US reporting issuers. For foreign issuers, the familiar declaration for removal of legend for sales through the TSX and TSX Venture Exchange remains the same.

ADDITIONAL BURDENS FOR SHELL COMPANIES Shell Companies, on the other hand, face additional burdens under the amended rules. The SEC has expressed concerns about the use of shell companies for fraudulent and manipulative purposes. The SEC has adopted a number of rules and positions to deter fraud and abuse in the market for highly speculative securities, especially securities that trade at low share prices and through “pump-and-dump” schemes. The SEC has previously stated that Rule 144 is not available for the resale of securities initially issued by companies that are, or previously were, blank cheque companies.

The SEC adopted rules to define a shell company and placed specific restrictions and reporting requirements on a shell company. These include: (i) identifying the company’s status as a shell company in SEC reports filed under the Exchange Act on Forms 10-K, 10-Q and 20-F; and (ii) reporting an event that causes a company to cease being a shell company on Forms 8-K or 20-F to disclose the same type of information that it would be required to provide in registering a class of securities under the Exchange Act, including target pro forma financial statements (Form 10 Information). Post-Shell Form 8-K and 20-F filings, as with all SEC filings, are subject to full review by SEC staff.

Impact of Amendments to Rule 144 on Shell Companies The amendments to Rule 144 are perhaps the SEC’s most direct action to restrict the sale of securities of Shell Companies. Under the amended rules, Rule 144 will not be available for the resale of securities initially issued by either a reporting or non-reporting shell company (other than a business combination related shell company) or an issuer that has been at any time previously a reporting or non-reporting shell company, unless the company is a former shell company that meets all of the conditions of the amended rule.

Under the amended Rule 144, the resale of restricted or unrestricted securities that were initially issued by a reporting or non-reporting shell company or an issuer that has been at any time previously a reporting or non-reporting shell company, can be made under Rule 144 only if the following conditions are met:

(i) The company has ceased to be a shell company;(ii) The company becomes a US reporting issuer;(iii) The company filed all SEC reports and material required to be filed under the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; (iv) At least one year has passed from the time the company filed a Form 8-K (Super 8-K), or equivalent, with the SEC containing current Form 10 prospectus-type information.

These changes are designed to deter back-door listing in the US and to ensure that shell companies file adequate public information with the SEC.

How this applies to companies with no US market: many foreign issuers can fall into the category of a shell company as a result of historical transactions and changes to a company’s business. Specifically, many Canadian public companies were initially formed as capital pool companies (CPCs) and became operating public companies through qualifying transactions with private operating companies. Regulation S will continue to be available for the removal of 1933 Act legends for resales through the facilities of the TSX and TSX Venture Exchange for securities of a foreign issuer.

Amended Rule 144 may create special challenges for US domestic issuers because under it, the resale of restricted or unrestricted securities that were initially issued by a reporting or non-reporting shell company, or an issuer that has been at any time previously a reporting or non-reporting shell company, can be made under Rule 144 only if the issuer of the securities is or becomes a US reporting issuer and at least one year has elapsed from the time that the issuer filed a Super 8-K with the SEC.

In many cases, these issuers never become US reporting issuers in the United States and never file a Super 8-K with the SEC. Under Rule 905 of Regulation S, restricted securities of a US domestic issuer continue to be restricted securities even after resale transactions made pursuant to Regulation S, which means that the 1933 Act legend cannot technically be removed absent registration under the Securities Act or the availability of Rule 144.

This article provides a very general overview of US resale restrictions applicable to resales of securities under Rule 144, and it is not a definitive statement on the subject. You should consult your legal advisor with specific questions. Kenneth G. Sam and Christopher Doerksen are partners at the international law firm of Dorsey & Whitney LLP. Their practices focus on representing Canadian companies on cross-border matters.

Report On Mining Summer 2008

Documents

Transcript of Report On Mining Summer 2008