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EX-32.1 - WHITE MOUNTAIN TITANIUM CORPv179400_ex32-1.htm
EX-23.6 - WHITE MOUNTAIN TITANIUM CORPv179400_ex23-6.htm
EX-31.1 - WHITE MOUNTAIN TITANIUM CORPv179400_ex31-2.htm
EX-31.1 - WHITE MOUNTAIN TITANIUM CORPv179400_ex31-1.htm
EX-32.2 - WHITE MOUNTAIN TITANIUM CORPv179400_ex32-2.htm

Washington, D.C.  20549

(Mark One) 

For the fiscal year ended December 31, 2009


For the transition period from __________ to __________

Commission File Number: 333-129347

White Mountain Titanium Corporation
(Exact name of Registrant as specified in its charter)

State or other jurisdiction of incorporation or organization
I.R.S. Employer Identification No.

Augusto Leguia 100, Oficina 812, Las Condes, Santiago Chile
(Address of principal executive offices)
(Zip Code)

Issuer’s telephone number, including area code:  (56 2) 657-1800

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  o   No  x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes  o    No  x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  (1)  Yes x    No o      (2)  Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files Yes o    No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.   (Check one):

Large Accelerated Filer  o
Accelerated Filer  o
Non-Accelerated Filer  o
Smaller reporting company  x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o    No x

As of June 30, 2009, the aggregate market value of the registrant’s common equity held by non-affiliates was approximately $25,394,438 computed by reference to the average bid and asked price of the Common Stock. For the purpose of the foregoing calculation only, all directors and executive officers of the registrant are assumed to be affiliates of the registrant.  Such determination should not be deemed an admission that such officers and directors are, in fact, affiliates of the registrant.

At March 22, 2010, there were 37,120,972 shares of the registrant’s Common Stock outstanding.



Table of Contents


Forward Looking Statements

The statements contained in this report that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information.  Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, need for financing, competitive position, potential growth opportunities, potential operating performance improvements, ability to retain and recruit personnel, the effects of competition and the effects of future legislation or regulations.  Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “will,” “should,” “anticipates,” “expects,” “could,” “plans,” or comparable terminology or by discussions of strategy or trends.  Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct.  Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such forward-looking statements.

Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed in this report.  While it is not possible to identify all factors, we continue to face many risks and uncertainties including, but not limited to, the cyclicality of the titanium dioxide industry, global economic and political conditions, global productive capacity, customer inventory levels, changes in product pricing, changes in product costing, changes in foreign currency exchange rates, competitive technology positions and operating interruptions (including, but not limited to, labor disputes, leaks, fires, explosions, unscheduled downtime, transportation interruptions, war and terrorist activities).  Mining operations are subject to a variety of existing laws and regulations relating to exploration and development, permitting procedures, safety precautions, property reclamation, employee health and safety, air and water quality standards, pollution and other environmental protection controls, all of which are subject to change and are becoming more stringent and costly to comply with.  Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those expected.  We disclaim any intention or obligation to update publicly or revise such statements whether as a result of new information, future events or otherwise.





White Mountain Titanium Corporation is an exploration stage company, which means we are engaged in the search for mineral deposits or reserves which could be economically and legally extracted or produced.  Although incorporated in the State of Nevada on April 24, 1998, our company was reorganized in February 2004 as a result of the reverse merger of GreatWall Minerals Ltd., an Idaho corporation, into Utah Networking Services, Inc., a Nevada corporation.  GreatWall had had an ongoing interest in the natural resources sector in Chile for several years prior to the merger and in 2003 had entered into an agreement with Phelps Dodge to acquire the Cerro Blanco rutile registered exploitation mining concessions.  The agreement was executed by GreatWall through its wholly owned subsidiary, Compañía Minera Rutile Resources Limitada.  Utah Networking Services, Inc. had been previously engaged in business of providing internet services but had refocused its business on the natural resources industry in March 2002.  The merger was approved by the shareholders of both companies on January 26, 2004, and was completed on February 10, 2004.  The newly reorganized company was subsequently renamed White Mountain Titanium Corporation.  Compañía Minera Rutile Resources Limitada was subsequently converted to a Chilean stock company and the name changed to Sociedad Contractual Minera White Mountain Titanium.  We also have another wholly owned Hong Kong company, White Mountain Titanium (Hong Kong), which is inactive.

On or about September 5, 2003, Sociedad Contractual Minera White Mountain Titanium (formerly known as Compania Minera Rutile Resources Limitada, and formally known as Minera Royal Silver Limitada), a subsidiary of GreatWall at the time, and Compania Contractual Minera Ojos del Salado, a Chilean operating subsidiary of Phelps Dodge Corporation, entered into a Transfer of Contract and Mortgage Credit agreement for the purchase by GreatWall’s subsidiary of the initial nine mining registered exploitation concessions located in Chile for which Compania Contractual Minera Ojos del Salado held a mortgage.  Pursuant to the transfer agreement, Compania Contractual Minera Ojos del Salado sold and transferred its mortgage right to the mining concessions to GreatWall’s subsidiary.  Subject to the terms of the transfer agreement, Compania Minera Rutile Resources Limitada was obligated to pay $650,000 to Compania Contractual Minera Ojos del Salado for its transfer of the mortgage to GreatWall’s subsidiary, payable $50,000 within thirty days of the transfer agreement, $50,000 on March 5, 2004, and $50,000 on September 5, 2004, and was obligated to pay $500,000 on September 4, 2005, which date was extended by mutual consent of the parties to September 9, 2005.  The original transfer agreement was negotiated between the management of GreatWall and Phelps Dodge, and as a result of the merger of GreatWall into our company, Compania Minera Rutile Resources Limitada became our wholly owned subsidiary.  The initial payment of $50,000 was paid by GreatWall prior to its merger into our company in February 2004.  The subsequent payments of $50,000 each on March 5, 2004, and September 5, 2004, were paid by us.  Prior to the final payment, Compania Contractual Minera Ojos del Salado transferred by dividend the right to receive the final payment from our Chilean subsidiary to its parent corporation, PD Ojos del Salado, Inc., a Delaware corporation, and PD Ojos del Salado, Inc. subsequently transferred by dividend the right to receive the final payment from to its parent corporation, Phelps Dodge.  In September 2005, we completed a debt conversion agreement with Phelps Dodge whereby we issued 625,000 shares of Series A Convertible Preferred Stock and warrants to purchase 625,000 shares of our common stock as consideration for the final payment of $500,000 owed under the property payment schedule.

We anticipate offering up to 1,869,159 units at $3.21 per unit for gross proceeds of $6,000,000.  Each unit is proposed to consist of three shares of common stock and one three-year warrant to purchase an additional share of common stock at $1.34 per share, or 125% of the price per share allocated to the common shares in the units.  We have entered into an agreement with Source Capital Group, Inc. to act as the placement agent for the units on a “best-efforts” basis.

Our sole business plan is to explore for titanium deposits or reserves on the Cerro Blanco mining concessions.  If this exploration program is unsuccessful, we will be unable to continue operations.


Titanium Industry and Market Overview


Titanium is the ninth most abundant element, making up about 0.6% of the earth’s crust.  Titanium occurs primarily in the minerals anatase, brookite, ilmenite, leucoxene, perovskite, rutile, and sphene.  Of these minerals, only rutile, ilmenite and leucoxene, an alternation product of ilmenite, have significant economic importance.  Both rutile and ilmenite are chemically processed to produce both titanium dioxide pigment and titanium metal.

Approximately 95% of titanium is consumed in the form of titanium dioxide concentrate, primarily as a white pigment in paints, paper, and plastics.  Titanium dioxide pigment is characterized by its purity, refractive index, particle size, and surface properties.  The superiority of titanium dioxide as a white pigment is due mainly to its high refractive index and resulting light-scattering ability, which impart excellent hiding power and brightness.

Titanium metal is well known for its corrosion resistance, high strength-to-weight ratio, and high melting point.  Accordingly, titanium metal is used in sectors, such as the aerospace and chemicals industries, where such considerations are extremely important.

Our business is currently focused on the mining concessions which constitute the Cerro Blanco property.  These concessions host a hard rock rutile deposit as opposed to ilmenite laden mineral sands deposits held by most of our competitors.  Rutile has a higher percentage of titanium oxide than mineral sands.

Industry Background

The bulk of the world’s titanium is used as the metal oxide, titanium dioxide (TiO2).  The chemically processed titanium ore, whether rutile or ilmenite based, is turned into pure titanium dioxide and used as a brilliant white pigment which imparts whiteness and opacity to paint, plastics, paper and other products.  The use of titanium dioxide as a color carrier has grown over the last 40 years, since the use of white lead based paints was banned throughout the world for health reasons.  Titanium dioxide is chemically inert, which gives it excellent color retention.  It is thermally stable, with a melting point at 1,668ºC, which makes it suitable for use in paints and products that are designed to withstand high temperatures.  About 5% of the world’s titanium is used as the metal, due to its exceptional properties.  It has the highest strength to weight ratio of any metal; is as strong as steel but 45% lighter.  The most noted chemical property of titanium is its excellent resistance to corrosion; it is almost as resistant as platinum, capable of withstanding attack by acids, moist chlorine gas, and by common salt solutions.

The table below gives a summary of distribution and end uses on an industry by industry basis for TiO2.

U.S. Distribution of TiO2 pigment shipments by industry: 2006
Paint and Coatings
Plastics and Rubber

Includes agricultural, building materials, ceramics, coated fabrics and textiles, cosmetics, food, paper and printing ink

The table below gives a broad picture of principal uses for titanium dioxide.

Uses of Titanium Dioxide
Paints & Pigments
Paints, coatings, lacquer, varnishes, to whiten and opacity polymer binder systems, to provide coating and hiding power, and to protect paints from UV radiation and yellowing of the color in sunlight.
To ensure high whiteness and color intensity, and increase plastic impact strength in such items as window sections, garden furniture, household objects, plastic components for the automotive industry.
Additive to whiten and increase opacity of paper.
Protection against UV radiation in high-factor sun creams; to give high brightness and opacity in toothpaste and soaps.
High brightness and opacity in foods and food packaging.
High chemical purity titanium dioxide is used as a carrier and to ensure brightness and opacity.
Printing Inks
Protection against fading and color deterioration.
Titanium dioxide is used in chemical catalysts, wood preservation, rubber, ceramics, glass, electroceramics, welding fluxes, and high temperature metallurgical processes.

Since 2004, an expanding world economy and industrial growth in China led to strong demand for titanium mineral concentrates, titanium metal and titanium dioxide (TiO2) pigment.  According to the U.S. Bureau of Mines, gross production of titanium mineral concentrates (ilmenite, rutile, and leucoxene) rose from 6.7 million tonnes in 2005 to an estimated 7.8 million tonnes in 2007.  During the same period, published prices for high grade rutile have held up at $500 - $750 per tonne, depending on grade.
The following table sets forth the estimated world reserves of titanium minerals based upon global resources of titanium minerals.

World Reserves of Ilmenite and Rutile (‘000t TiO2)
    130,000       19,000  
    31,000       -  
    200,000       -  
    85,000       7,400  
    37,000       -  
South Africa
    63,000       8,300  
    5,900       2,500  
    6,000       400  
    15,000       8,100  
Source:  U.S. Geological Survey, Mineral Commodity Summaries, January 2009, found online at


Titanium Pigment Production

Mining of titanium minerals is usually performed using surface methods like dredging and dry mining and gravity spirals.  Ilmenite is often processed to produce a synthetic rutile.

The most widely used processes available for the manufacture of titanium dioxide pigment are the sulphate and chloride processes.  Commercially manufactured titanium dioxide pigment is available as either anatase-type or rutile-type, categorized according to its crystalline form, regardless of whether it is made from the mineral rutile.  Anatase pigment is currently made by sulphate producers only, while rutile pigment is made by both the chloride and the sulphate processes.  The decision to use one process instead of the other is based on numerous factors, including raw material availability, freight, and waste disposal costs.

Anatase and rutile pigments, while both are white, have different properties and thus have different end-uses.  For example, rutile pigment is less reactive with the binders in paint when exposed to sunlight than is the anatase pigment and is preferred for use in outdoor paint.  Anatase pigment has a bluer tone than rutile, is somewhat softer, and is used mainly in indoor paints and in paper manufacturing.  Depending on the manner in which it is produced and subsequently finished, TiO2 pigment can exhibit a range of functional properties, including dispersion, durability, opacity, and tinting.

In the chloride process, rutile is converted to TiCl4 by chlorination in the presence of petroleum coke.  TiCl4 is oxidized with air or oxygen at about 900ºC, and the resulting TiO2 is calcined to remove residual chlorine and any hydrochloric acid that may have formed in the reaction.  Aluminum chloride is added to the TiCl4 to assure that virtually all the titanium is oxidized into the rutile crystal structure.  The process is conceptually simple but poses a number of significant chemical engineering problems because of the highly corrosive nature of chlorine, chlorine oxides and titanium tetrachloride at temperatures of 900°C or higher.

In the sulphate process, ilmenite or titanium slag is reacted with sulfuric acid.  Titanium hydroxide is then precipitated by hydrolysis, filtered and calcined.  This is a process involving approximately 20 separate processing steps.  Because sulphate technology is predominantly a batch process, it is possible to operate one part of a sulphate process plant while another part is shut down for maintenance.  To some extent, stocks of intermediate reaction products can be allowed to build up, awaiting further processing downstream at some later time.  It is also possible that a sulphate process plant can be run at 60-80% capacity utilization fairly easily if necessary, simply by switching off one or more of its calciners.

Synthetic rutile is formed by removing the iron content from ilmenite, thereby concentrating the titanium dioxide content to at least 90%.  In this way, ilmenites can be upgraded to chloride route feedstocks and used as a substitute for rutile.

For 2007, U.S. consumption of ilmenite and titaniferous slag was more than three times that of both natural and synthetic rutile.

Demand for Titanium Pigment

An assessment of U.S. Geological Survey historical data (Titanium Minerals Handbook, 1970-2007) shows that world demand for titanium dioxide pigments showed practically unbroken annual growth from 1.6 million tons (Mt) in 1970 to 3.9Mt in 2000.  It declined to 3.7Mt in 2001 but rebounded to around 4Mt in 2002, with sales increasing by around 6.6% and a further rise of 3.2% in 2003.  In 2007 world consumption rose to 4.9Mt.

Titanium Dioxide Prices

The 2007 year end published price range for bagged rutile mineral concentrates was US$570 to US$700 per metric ton, a moderate increase compared with that of 2005.  Year end prices of ilmenite concentrate ranged from US$75to US$85 per ton for 2007.


Once in production we will compete with a number of existing titanium dioxide concentrate producers, including Iluka Resources Inc., Richards Bay Iron and Titanium Pty. Ltd., QIT-Fer et Titane Inc., and Titania A/S as well as other projects proposed for development.  Each of the existing producers has an operating history as well as proven reserves and resources; however the majority of their collective production is in the form of ilmenite or synthetic rutile, not natural rutile.

Management believes that the location of the Cerro Blanco property may provide a significant advantage in competing with other producers of titanium.  In addition to good road transport links, power and water, a port facility capable of handling 70,000 ton ships is available at Huasco, 30 kilometers northwest of the Cerro Blanco property.  The property also lies close to a fully operational rail track, and if necessary, a spur line could be run into the property linking it directly to port facilities at Huasco.

In order to be competitive, we will be required to meet buyers’ specifications, including particle size, concentration levels, calcium and impurities.  Management believes metallurgical tests to date have demonstrated that the rutile mineralization at the Cerro Blanco concessions can be concentrated to an acceptable level to buyers.   Results received in November 2006 of metallurgical mapping studies of the Cerro Blanco rutile deposit, which were based on 15 different samples selected from a recent RC drilling campaign, indicate that a high grade rutile product with low levels of calcium and other impurities can be produced from a range of ore types.  Based on these earlier results, the Company has initiated work at the pilot plant level, to investigate critical engineering and commercial factors.  The Company’s technical team, working with consultants, aims to process some 500 tonnes of Cerro Blanco ore in Chile to produce a commercial grade concentrate.

Management does not currently have any customers for any rutile titanium which it may produce.  We anticipate that the concentrate would be transported by ship which makes the location of the mining concessions near a port advantageous.  Notwithstanding this, management will need to evaluate shipping rates and transit times when it obtains potential customers to determine whether existing prices for titanium would make sales to such customers economically viable.

Mining, particularly copper mining is a significant industry in Chile.  We will be competing with a number of existing mining companies, including the state-owned Codelco Copper Corporation, one of the world’s largest copper producers, for qualified workers, supplies, and equipment.  However, management believes Cerro Blanco has an attractive location and good infrastructure in an active mining region.  The property is located at a low elevation, near the coast, with two nearby towns from which it will be able to draw manpower and supplies.

Government Compliance

Our exploration activities are subject to extensive national, regional, and local regulations in Chile.  These statutes regulate the mining of and exploration for mineral properties, and also the possible effects of such activities upon the environment.  Future legislation and regulations could cause additional expense, capital expenditures, restrictions and delays in the development of the Cerro Blanco property, the extent of which cannot be predicted.  Also, permits from a variety of regulatory authorities are required for many aspects of mine operation and reclamation.  In the context of environmental permitting, including the approval of reclamation plans, we must comply with known standards, existing laws and regulations that may entail greater or lesser costs and delays, depending on the nature of the activity to be permitted and how stringently the regulations are implemented by the permitting authority.  We are not presently aware of any specific material environmental constraints affecting the Cerro Blanco property that would preclude its exploration, economic development, or operation.  Nevertheless, as a condition to placing the property into production, we are required to submit an environmental impact study for review and approval.

Chile enacted provisions in its 1980 Constitution to stimulate the development of mining, while at the same time guaranteeing the property rights of both local and foreign investors.  While the state owns all mineral resources, exploration and exploitation of these resources is allowed via mining concessions, which are granted by the courts.  A Constitutional Organic Law, enacted in 1982, sets out that certain rights and obligations may attach to concessions, such as the right to mortgage or transfer concessions and the entitlement of the holder to explore (pedimentos) as well as to exploit (mensuras).  A concession is obtained by filing a claim and includes all minerals that may occur within the area covered by the concession.  The holder of a concession also has the right to defend his interest against the state and third parties.


Mining claims in Chile are acquired in the following manner:

Pedimento: A pedimento is an exploration claim precisely defined by coordinates with north-south and east-west boundaries.  These may range in size from a minimum of 100 hectares to a maximum of 5000 hectares, with a maximum length-to-width ratio of 5:1.  A pedimento is valid for a maximum period of two years, following which the claim may be reduced in size by at least 50%, and renewed for an additional two years, provided that no overlying claim has been staked.  Claim taxes are due annually in the month of March; if the taxes on a pedimento are not paid by such time, the claim can be restored to good standing by paying double the annual claim tax by or before the beginning of the following year.  In Chile, new pedimentos are permitted to overlap pre-existing claims; however, the previously staked or underlying claim always takes precedence as long as the claim holder maintains his claim in good standing and converts the pedimento to a manifestacion within the initial two year period.
Manifestacion: During the two-year life of a pedimento, it may be converted at any time to a manifestacion.  Once an application to this effect has been filed, the claim holder has 220 days to file a “Solicitud de Mensura”, or “Request for Survey” with a court of competent jurisdiction, and notify surrounding claim holders of the application by publishing such request in the Official Mining Bulletin.  This notifies surrounding claim holders, who may contest the claim if they believe their pre-established rights are being encroached upon.  The option also exists to file a manifestacion directly on open ground, without going through the pedimento filing process.
Mensura: The claim must be surveyed by a government licensed surveyor within nine months of the approval of the “Request for Survey.”  During the survey any surrounding claim owners may be present, and once completed the survey documents are presented to the court and reviewed by SERNAGEOMIN, the National Mining Service.  Assuming that all steps have been carried out correctly and all other necessary items are in order, the court then adjudicates the application and grants a permanent property right (a mensura), the equivalent to a “patented claim.”

Each of the above stages of the acquisition of a mining claim in Chile requires the completion of several steps, including application, publication, inscription payments, notarization, tax payments, legal fees, “patente” payments, and extract publication, prior to the application being declared by the court as a new mineral property.  Details of the full requirements of the claim staking process are documented in Chile’s mining code.  Most companies carrying on operations in Chile retain a mining claim specialist to carry out and review the claim staking process and ensure that their land position is kept secure.

In 1994 Chile adopted legislation establishing general environmental norms which must be followed in activities such as mining.  This legislation requires us to prepare an environmental impact study which must include a description of the project and a plan for compliance with the applicable environmental legislation.  It must also include base line studies containing the information relative to the current components of the existing environment in the area influenced by the project.  Further, it must consider the construction, operation and closure/abandonment phases of the project.  It must also include a plan to mitigate, repair, and compensate, as well as risk prevention and accident control measures, to achieve a project compatible with the environment.  The study must be presented to the community for comment and to the regional arm of the National Environmental Commission for approval.

We have completed an environmental base line study on the property, which has not yet been submitted to the regional Chilean government authority for review and approval.  The work completed to date will form the basis of the environmental impact study to commence mining operations.  While the environmental monitoring and base line studies completed to date have not identified any endangered plant or animal species on the property, and while the property is located at distance from human habitation, these studies cited a risk of airborne dust being generated from rock blasting and crushing operations and from road haulage activities at open pit mining operations.  Without proper blasting, crushing and road maintenance practices in place, there is a risk that airborne dust generated from the planned mining activity at Cerro Blanco could be transported by winds to the village of Nicolasa, located approximately 14 kilometers to the northeast, or onto farmland located within the Huasco River valley to the north-northeast.  Nevertheless, prevailing winds at the mine site are east-west which should permit us to schedule blasting and other activities which create significant dust on days with prevailing or no winds.  Our principal rock crushing plant will be fitted with dust containment units which should also mitigate dust from these activities.  We also plan to use water trucks to dampen roadways and limit the amount of dust from trucks using these roads.


We maintain property and general liability insurance with coverage we believe is reasonably satisfactory to insure against potential covered events, subject to reasonable deductible amounts, through our exploration stage.


Aside from our President, Michael P. Kurtanjek, who works full time for our company, and our directors and executive officers that donate a portion of their time to our business, we currently have only one other full-time employee who works as an assistant to Mr. Kurtanjek.  With the funds from our proposed offering, we intend to hire an on-site full-time manager for the Cerro Blanco project.  We will also be dependent upon the services of outside geologists, metallurgists, engineers, and other independent contractors to conduct our drilling program, develop our pilot plant, and conduct the various studies required to complete exploration of our mining concessions.  In addition, we do not have any agreements or arrangements for the necessary managers and employees who will be necessary to operate the mine if commercial production commences.  We do not have any existing contracts for these services or employees.


As a smaller reporting company, we have elected not to provide the disclosure required by this item.


We have not received written comments from the staff of the Securities and Exchange Commission in regard to our periodic or current reports under the Exchange Act which comments remain unresolved.


Cerro Blanco Property

Glossary of Terms

Certain terms used in this section are defined in the following glossary:

ALKALIC DIORITE-GABBRO-PYROXENITE INTRUSIVE: a potassium and sodium rich, coarse grained and possibly dark colored igneous rock with associated magnesium and iron that consolidated from magma beneath the earth's surface.

DEVELOPMENT: work carried out for the purpose of opening up a mineral deposit and making the actual extraction possible.

DISSEMINATED: fine particles of mineral dispensed through the enclosing rock.

EXPLOITATION MINING CONCESSIONS: licensed claims where the holder has the right to permit, develop, and operate a mine.

EXPLORATION: work involved in searching for ore by geological mapping, geochemistry, geophysics, drilling and other methods.

GRADE: mineral or metal content per unit of rock or concentrate or expression of relative quality e.g. high or low grade.
INTRUSIVE: a volume of igneous rock that was injected, while still molten, and crystallized within the earth’s crust.

MINERALIZATION: the concentration of metals and their compounds in rocks, and the processes involved therein.

ORE: material that can be economically mined from an ore body and processed.

RECLAMATION: the restoration of a site after exploration activity or mining is completed.

RUTILE: a mineral, titanium dioxide (TiO2), trimorpheus with anatase and brookite.
TiO2:  Titanium dioxide.  The form of titanium found in the mineral rutile.

TITANIUM: a widely distributed dark grey metallic element, (Ti), found in small quantities in many minerals.  The mineral ilmenite, (FeTiO3), is currently the principal feedstock for the production of titanium dioxide (TiO2) powder and titanium metal.

Location and Access

The Cerro Blanco property is located approximately 39 kilometers, or approximately 24 miles, west of the city of Vallenar in the Atacama geographic region (Region III) of northern Chile and southwest of the Cerro Rodeo Mining District.  Access to the property is as follows:  The main Ruta 5, the PanAmerican Highway, runs north from Santiago for approximately 625 kilometers to Vallenar; from there a paved road runs west toward the Port of Huasco for a distance of 22 kilometers to the village of Nicolasa; at Nicolasa a municipally maintained dirt road runs approximately 14 kilometers southwest to the property.  Management believes access to the property is adequate to accommodate the type of vehicles and traffic during the exploration stage on the property.  Improvements to the dirt road will be required for the development and production stages.  These improvements will include widening of the road and topping it with gravel.  Management believes adequate supplies of bedrock and gravel are available for this purpose, although it currently has no arrangements or agreements to provide either the improvement services or supplies.   The area is served by a regional airport at Vallenar.

Cerro Blanco lies within an established mining district where management believes experienced mineworkers and support personnel are available.  Labor rates in the region are considerably less costly when compared with standard North American rates.  Mining is one of the main sectors of the Chilean economy and   Region III has a broad base of mining contractors and suppliers of both new and used mining and processing equipment.

The local climate is generally arid with little rainfall in normal years.  Vegetation is minimal, supporting only desert scrub and sparse cactus.  Topography consists of low hills with a mean elevation of 100 meters, which are incised periodically by active creeks.  The Huasco River, 15 kilometers, approximately 9 miles, to the north, is a source of water.  Additionally, high-tension power lines pass 15 kilometers, approximately 9 miles, to the north of the property along the Vallenar-Huasco highway.

In addition to road transport links, power and water access, a port facility with a capacity to handle 70,000 ton ships is accessible at Huasco, which is 30 kilometers, approximately 19 miles, northwest of the property.  The property also lies close to a fully operational rail track.  If necessary, a spur line could be run into the property linking it directly to the port.


Title Status and Exploration Rights

Under the Chilean mining code, surveyed mineral concessions can be held in perpetuity subject only to an annual tax based on the land held.  We have converted our existing exploration licenses into 33 exploitation licenses. The tax payment for March 2007 was approximately $50,000 based upon the status of the mining concessions and the currency exchange rate at that time.  The payment for March 2008 and 2009 was $55,000 at the prevailing exchange rate.  We estimate that the amount for 2010 will increase because of the increase in the number of our mining concessions.

The Chilean mining code does not convey surface rights to owners of the mining concessions.  However, the owners of mining concessions are entitled to the establishment of the necessary easements for mining exploration and exploitation.  The surface lands are subject to the burden of being occupied, to the extent required by mining operations, by ore yards and dumps, slag and tailings, ore extraction and benefaction plants, electric substations and communications lines, canals, reservoirs, piping, housing, construction and supplementary works, and to the encumbrance of transit and of being occupied by roads, railways, piping, tunnels, inclined planes, cableways, conveyor belts and all other means used to connect the operations of the concession with public roads, benefaction facilities, railroad stations, shipping ports, and consumer centers.  The establishment of these easements, the exercise thereof, and the compensation therefore, are to be agreed upon either between the concession owner and the surface owner, or are established by court decision under a special brief procedure contemplated by the law.

The surface rights are owned by Agrosuper, a large Chilean agricultural concern..  Upon completion of the final feasibility study, we intend to either negotiate surface rights with Agrospuper or to apply to local courts for these surface rights.  This is an ongoing progress.   Nevertheless, should this alternative fail, we will proceed to seek the easement through the court, which under Chilean mining law we have the right to obtain.  We do not anticipate any material difficulty with surface rights on the Cerro Blanco property.

Exploration History

In 1990-1991, the western half of the property, then referred to a as Barranca Negra, was held under option by Adonos Resources of Toronto, Canada, who conducted extensive rock sampling, geological mapping and 450 meters of trenching.  In 1992 the property was optioned by Phelps Dodge, to which they applied the name Freirina.  In late 1992 and early 1993, 1,200 meters of diamond and 6,000 meters of reverse circulation drilling were completed, principally in the most westerly Cerro Blanco anomaly.  In 1993 two 15 ton bulk samples were taken for metallurgical testing.  A gravity concentrate was produced from a 15 ton sample of this material by Lakefield Research in Santiago.  Fifty kilos of this concentrate were shipped to Carpco Inc. in Florida for further gravity circuit up-grading followed by dry-milling using magnetic and electrostatic separation techniques.

In 1999, Dorado Mineral Resources N.L. purchased the property and re-named the property Celtic.  In February 2000, a preliminary processing test carried out by RMG Services Pty. Ltd., Adelaide, Australia, on behalf of Dorado, used combined microwave leaching and flotation in the up-grading of Celtic (Freirina) gravity concentrate.  In June 2000 a review and summary of prior exploration programs and results was conducted by an independent geological consultant on behalf of Dorado Mineral Resources N.L.  A cross-sectional estimation of the resource potential of the Cerro Blanco deposit based on the prior drilling and surface sampling was completed as part of this study.  Later the same month a scoping study based on level plans produced for the area of highest density drilling was undertaken on behalf of Dorado Recursos Minerales Chile S.A. by Tecniterrae Limitada, a Santiago based group of consulting mining engineers.

In November and December 2000 a further study was commissioned by Dorado Recursos Minerales Chile S.A. to supervise the collection of a second bulk sample of 25 tons for metallurgical testing.  Also during this program the Cerro Blanco area was geologically re-mapped.  In August 2001, ownership of the property was transferred to Kinrade Resources Limited.  Subsequent to these events, Kinrade defaulted on its obligations and was unable to meet the payment schedules as required under contract.  In the fall of 2003 ownership of the property passed to Sociedad Contractual Minera White Mountain Titanium, formerly known as Compañía Minera Rutile Resources Limitada, the wholly owned subsidiary of White Mountain Titanium Corporation.  The purchase was completed in September 2005.

Geology and Mineralization

Management believes the Cerro Blanco property contains a large and possibly unique type of titanium mineralization.  Nevertheless, we are still in the exploration stage of development and there are no known reserves on the property.  The titaniferous mineral located on the property is clean red-brown and black rutile which occurs disseminated with the tonalitic suite of an alkalic diorite-gabbro-pyroxenite intrusive.  Its uniformly disseminated nature and associated alteration endow it with strong similarities to porphyry copper deposits.  Natural rutile concentrates such as found on this property would be the preferred feed stock for both titanium metal and pigment grade titanium dioxide production.

Exploration Plans

During 2006, we undertook two separate drilling campaigns.  The first was designed to test ore variability, and provided 15 different composites which were subjected to metallurgical testing.  The second campaign, which commenced in October 2006, centered on an exploration program consisting mainly of infill and step out drilling, grade variability studies and regional reconnaissance in search of possible extensions to the mineralization and geologic modelling.  On January 24, 2007, we announced that we had completed a 16-hole diamond drilling campaign, totaling over 2,900 meters at Cerro Blanco.  The principal objectives of this campaign were to increase resources in the central portion of the main zone as well as to test new target areas to the south and south-west.  Core recoveries in excess of 95% were achieved in the majority of holes drilled.  Split core samples were sent in for on-going metallurgical testing, and whole-core geotechnical testing has been carried out in respect of rock mechanics for mine planning purposes. 

Planning and execution of the drilling campaign was closely linked to previous metallurgical test work.  The principal focus was to target titanium resources which would yield a high grade TiO2 concentrate from conventional flotation.  After an extensive evaluation of historic data, our contract geologists devised and are now utilizing an ore ranking system, MR1 (“Mine Rank 1”) through to MR4, with ranks MR1 and MR2 producing the best, and most commercially acceptable chemical product specifications.  Data from the latest drilling campaign was input into a geological model and this model, together with ongoing technical work, will be integrated into a resource model.

Titanium mineralization starts at surface and extends over long intercepts with both attributes offering the potential for low mining costs.  We believe we have good results in the central portion of the main zone of Cerro Blanco, as well as significant potential for further resource development to the south and south-west areas of the property.

During 2007, the Company’s geological team undertook and extensive geochemical sampling program at the Eli prospect.  Working on a 25 by 25 meter grid, the team took nearly 700 samples of outcrop material over an area of 1100 meters by 900 meters.  These were sent for chemical assay.  Samples showed mineralization with TiO2 grades in the range 1.0% to 3.0%; two samples from high grade vein material reported results in excess of 21% TiO2 and 25% TiO2, respectively.

In early 2008 the Company built a 12 kilometer, 5 meter wide access road to and around Eli.  Drill pads were constructed on 50 meter centers adjacent to the road grid covering the prospect.  An initial drill program, which involved two diamond drill rigs, commenced in late April and ran through June. Approximately 4,000 meters of drilling was completed. The Company is awaiting final analyses and a compilation report on the program.

In January 2008 the Company retained Thomas A. Henricksen, PhD. and a qualified person under Canadian National Instrument 43-101 to prepare a NI 43-101 compliant technical report on the Cerro Blanco property (the “Technical Report”).  The Technical Report, which was dated February 25, 2008, was based on extensive geological mapping, surface sampling, 14,078 meters of drilling and a geological model developed by the Company.

Following completion of the Technical Report, the Company retained Dr. Henricksen to compile a NI 43-101 compliant preliminary assessment of the Cerro Blanco project (the “Assessment”). The Assessment, which was dated May 30, 2008, incorporated by reference the Technical Report as well as reports prepared for the Company by other independent experts in their fields.  The latter reports include preliminary process engineering and costing report prepared by AMEC-Cade dated March, 2008, a preliminary pit design report prepared by NCL Ingenieria y Construccion dated May 2008, various metallurgical reports prepared by SGS Lakefield, an environmental base line study prepared by Arcadis Geotecnica dated December 2004 and titanium marketing information provided by the Company’s marketing consultant.

For engineering design purposes, the Assessment adopted a base case set of assumptions, the major assumptions being the construction of an open pit mine, processing plant and ancillary facilities capable of producing 100,000 tonnes per year of high grade rutile concentrate grading plus 94.5% TiO2 at start up, scaling to 130,000 tonnes per year in production Year 4 at an assumed undiluted head grade to the plant of 2.3% TiO2.  Mining would commence on the Las Carolinas prospect and feed would be conveyed downhill to a processing plant located less than two kilometers to the northeast.  Within the plant, the process flow sheet consisted of a semi-autogenous grinding mill, gravity pre-concentration and column flotation circuits and high intensity magnetic separation with process water sourced from a desalination plant constructed at the port of Huasco. AMEC-Cade assumed that mining would be done under contract at a cost of US$1.20 per tonne mined and that the price of high grade rutile concentrates would be US$500 per tonne FOB port.

Based on these assumptions AMEC-Cade, our internationally recognized engineering contractor, designed a processing plant with an initial operating capacity of approximately 5.1 million tonnes per year, increasing to approximately 6.1 million tonnes per year by Year 4.  They estimated a cost to construct the plant and ancillary facilities of US$117 million in direct costs and US$42 million in indirect costs, for a total of US$159 million.  To this figure, and as this was a preliminary study, AMEC-Cade added a 20% contingency to arrive at a total estimated cost of US$190 million. With respect to processing plant operating costs, AMEC-Cade estimated site and transportation costs to port of US$3.60 per tonne processed (US$184 per tonne of rutile concentrate) in Year 1, dropping to US$3.50 per tonne processed (US$180 per tonne of rutile concentrate) in Year 4. The anticipated reduction in operating costs is attributed to increased volumes as well as increased efficiencies from the gravity pre-concentration circuit.  Electric power consumption was the highest single cost item, comprising approximately 31% of the total estimated unit operating costs. AMEC-Cade recommended that the Company proceed to the pilot stage and investigate two possibilities for reducing capital costs: the use of sea water rather than desalinated water in the processing plant and siting the plant elsewhere on the property to lower the installed cost of the conveyor. Two alternate sites were identified.

In December 2009 we announced completion of a detailed Stage 2 pilot plant test work program culminating in one 60 hour continuous test run.  The primary objective of the Stage 2 pilot plant test work was to produce a natural rutile, titanium dioxide concentrate meeting the chemical and particulate specifications of titanium pigment and sponge metal producers.  The test work was conducted on a 275 tonne bulk sample representative of currently identified, at and near surface natural rutile mineralization sourced from the Las Carolinas prospect at our Cerro Blanco project.  The bulk sample, which was taken from an area of the Las Carolinas prospect which could be chosen to provide initial mine feed to a full scale process plant, assayed 2.9% TiO2.

Following crushing to minus ½ inch, mill underflow was fed to a gravity pre-concentration circuit which consisted of a fine fraction recovery cyclone as well as middlings and coarse fraction mechanical vibrating tables.  The mechanical vibrating tables concentrated the higher specific gravity, natural rutile while rejecting some 50% by volume of the lower specific gravity feed material.  The result of gravity pre-concentration was to upgrade the natural rutile being processed from an initial grade of 2.9% TiO2 to a grade of approximately 5.0% TiO2.  Upgraded material from the gravity pre-concentration circuit was fed to a conditioning tank for pH adjustment and from there to a conventional flotation circuit for further recovery, concentration and cleaning.  Flotation feed from the conditioning tank was passed to rougher, scavenger and 5 cleaning flotation stages, where the majority of the natural rutile was recovered and concentrated.  An acid pH in the flotation circuit between 3.5 and 4.75 was maintained in the flotation circuit.  Tailings from the flotation circuit could form the feed source for a feldspar recovery circuit.

Following the final flotation cleaning stage, the natural rutile, titanium dioxide concentrate was fed to a high intensity magnetic separator to remove magnetic and para-magnetic minerals.  Magnetic separation resulted in two concentrate products: a high grade natural rutile, titanium dioxide concentrate and a magnetic and para-magnetic minerals by-product concentrate.

The following table provides a chemical analysis of the final product from the 60 hour test run for both + and -75 micron fractions after magnetic separation:
Table 17.  Magnetic Separation Results from the Concentrate
produced during Continuous Operation – Non-magnetics
-75 Micron Fraction 
-75 Micron Fraction 
  TiO2 %     96.8       97.3  
  Fe2O3     0.70       0.86  
  SiO2     0.95       0.80  
  Al2O3     0.11       0.08  
  CaO     0.06       0.17  
  Na2O     0.07       0.03  
  K2O %     0.02       0.02  
  P2O5 %  
  Cr2O3     0.39       0.42  
  V2O5 %     0.23       0.26  
        0.17       0.18  

We are now preparing samples of the coarser, +75 micron product for testing by potential buyers of the natural rutile, titanium dioxide concentrate for paint and pigment applications.

Following completion of the Stage 2 pilot plant test work, we conducted further optimization test work on the rutile process flow sheet, specifically the use of spirals and Knelson concentrators in the gravity pre-concentration circuit and the use of sea water as the aqueous medium in the flotation circuit.  In January 2010 we released results from this optimization test work which stated that spirals were a viable alternative to mechanical vibrating tables in the pre-concentration circuit and that comparable concentrate grades and recoveries were obtained using sea water versus fresh water as the aqueous medium in the flotation circuit.

Also in January 2010 we reported that we had successfully completed a locked cycle, flotation test work program to recover feldspar from natural rutile (titanium dioxide) flotation tailings.

All test work was carried out in an acidic environment (pH 3.5 to 5.5)—very similar to pH conditions previously used in the flotation of rutile.  Management believes this is an important achievement as it obviates the need to undertake major pH adjustment from the rutile to the feldspar flotation circuit.  A sodium feldspar concentrate assaying 9.07% Na2O and 0.37% Fe2O3 was produced using fresh water as the aqueous medium and minimal addition of flotation reagents.  As with the natural rutile, titanium dioxide concentrate results achieved in the optimization test work, comparable sodium feldspar concentrate grades were obtained using sea water versus fresh water as the aqueous medium.

With respect to mining, mining costs would be in addition to the processing plant operating costs estimates set out above.  A preliminary mine plan will be prepared once further drilling has been completed.  At present NCL have modeled preliminary optimized pits for only the Central Zone of the Las Carolinas prospect on the assumption that this could be the initial pit area.  The pits were modeled using 10 x 10 x 10 meter blocks and base case pit wall angles of 45 degrees, with sensitivities run at 50 degrees.  Whilst the objective of our mapping, surface sampling and drilling programs is to both increase the quantity and classification of TiO2 resources on the Cerro Blanco property, the project is at an exploration stage and there is no guarantee of future exploration success or of economic viability. For these reasons, project cash flow estimates are not included in the Assessment.

Arcadis Geotecnica conducted an environmental base line study in 2005 -2006 over the Las Carolinas and La Cantera prospects. Based on field information gathered, vegetation in the area was comprised mostly of bushes, cactus and plants characteristically found in desert regions and areas of sandy and stony soils.  Whilst no native animals were observed, animals potentially living in the area would include foxes, rodents, pumas, guanacos, rabbits and reptiles. The study stated that a mining operation as contemplated would have no significant impact on land vertebrates but care would need to be exercised on the northern slopes favored by reptiles.  Six underground springs were identified, several with only seasonal flow.  As well six houses were observed extending from the project north towards Vallenar, three of which are occupied on a permanent basis.  Conversations with the inhabitants suggested that they would have a positive view of the project due to the economic and social benefits it would bring.  Arcadis Geotecnica recommended an intensive follow up survey of one ravine for possible archaeological relics and indentified two areas for the possible stockpiling of waste rock.  We retained Arcadis Geotechnica to complete the recommended follow up survey and no archaeological relics were found.

The Assessment concluded that results from the considerable body of work completed on the project to date support the our recommended, phased work programs and that the estimated costs for the work programs were reasonable and adequate to the present stage of the project.  The overall objective of our work programs is to complete an independent final feasibility study which supports the construction of a natural rutile, TiO2 mining operation on the property.

 We now have a considerable body of engineering design and process engineering work completed, both by us and previous owners, for the development of a large open pit mine and milling operation.  The extent to which this engineering work could be incorporated into a feasibility study will depend on factors such as optimal plant sizing and configuration based on product volumes and specifications set out in off-take contracts and process design, the latter to be determined by refinements coming out of the metallurgical test work and pilot scale testing completed last year.  With a portion of the funds from our proposed offering, and contemporaneous with commencement of our marketing plan to seek suitable off-take contracts, we intend to undertake a program of drilling to provide data for mine planning and design, for an environmental impact assessment and permitting program, and to commission a feasibility study.  As some of these activities would be undertaken in tandem, we believe a feasibility study could be completed by fourth quarter 2010 or first quarter 2011, subject to the availability of funds, personnel and equipment.  We estimate the cost to take the project to the point of completing a final engineering feasibility study at approximately $3,810,000, including general and administrative and marketing expenses.  As of January 31, 2010, our cash position was approximately $1,091,000.  We currently do not have sufficient capital to complete this plan and estimate that we will require additional financing to do so.

Also, as an exploration stage company, our work is highly speculative and involves unique and greater risks than are generally associated with other businesses.  We cannot know if our mining concessions contain commercially viable ore bodies or reserves until additional exploration work is done and an evaluation based on such work concludes that development of and production from the ore body is technically, economically, and legally feasible.

If we proceed to development of a mining operation, our mining activities could be subject to substantial operating risks and hazards, including environmental hazards, industrial accidents, labor disputes, encountering unusual or unexpected geologic formations or other geological or grade problems, encountering unanticipated ground or water conditions, pit-wall failures, flooding, rock falls, periodic interruptions due to inclement weather conditions or other unfavorable operating conditions and other acts of God.  Some of these risks and hazards are not insurable or may be subject to exclusion or limitation in any coverage which we obtain or may not be insured due to economic considerations.
Metric Conversion Table
For ease of reference, the following conversion factors are provided:

Metric Share
U.S. Measure
U.S. Measure
Metric Share
1 hectare
2.471 acres
1 acre
0.4047 hectares
1 meter
3.2881 feet
1 foot
0.3048 meters
1 kilometer
0.621 miles
1 mile
1.609 kilometers
1 tonne
1.102 short tons
1 short ton
0.907 tonnes



From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.  However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.  We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results.



ITEM 5. 

Market Information

Our common stock is quoted on the OTC Bulletin Board and on the Pink Sheets under the symbol “WMTM.”  The table below sets forth for the periods indicated the range of the high and low bid information as reported by a brokerage firm and/or as reported on the Internet.  These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.

DECEMBER 31, 2008
  $ 1.13     $ 1.06  
  $ 1.02     $ 0.97  
  $ 0.97     $ 0.86  
  $ 0.56     $ 0.49  
  $ 1.37     $ 0.83  
DECEMBER 31, 2009
  $ 1.06     $ 0.35  
  $ 0.95     $ 0.75  
  $ 0.93     $ 0.90  

At March 22, 2010, we had approximately 120 record holders of our common stock.  The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.  We have appointed Interwest Transfer Company, Inc., 1981 East 4800 South, Suite 100, Salt Lake City, UT 84117, to act as the transfer agent of our common stock.


We have never declared or paid any cash dividends on our common stock.  We do not anticipate paying any cash dividends to stockholders in the foreseeable future.  In addition, any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant

We currently have outstanding a class of preferred stock designated as Series A Convertible Preferred Stock.  The holders of these preferred shares are entitled to any dividends paid and distributions made to the holders of our common stock to the same extent as if these holders of preferred shares had converted the preferred shares into common stock and had held such shares of common stock on the record date for the particular dividends and distributions.

Securities Authorized for Issuance under Equity Compensation Plans

See “Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” regarding information about our equity compensation plans.

Purchases of Equity Securities

We have no equity securities registered pursuant to Section 12 of the Exchange Act.


As a smaller reporting company, we have elected not to provide the disclosure required by this item.

ITEM 7. 

The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto as filed with this report.


We are a mineral exploration company.  We hold mining concessions composed of 33 registered mining exploitation concessions, and 5 exploration concessions, over approximately 8,225 hectares located approximately 39 kilometers west of the City of Vallenar in the Atacama, or Region III, geographic region of northern Chile (“Cerro Blanco”).  We are in the exploration stage, which means we are engaged in the search for mineral deposits or reserves which could be economically and legally extracted or recovered.  Our primary expenditures at this stage consist of acquisition and exploration costs and general and administration expenses.  We have produced no revenues, have achieved losses since inception, have no operations, and currently rely upon the sale of our securities to fund our operations.

Our common stock is quoted on the OTC Bulletin Board under the symbol “WMTM.”  The last reported sales price per share of our common stock as reported by the OTC Bulletin Board on March 19, 2010, was $1.05.

 We recorded a loss for the year ended December 31, 2009 of $5,860,005 ($0.17 per weighted average common share outstanding) compared to a loss of $3,175,908 ($0.10 per weighted average common share outstanding) for 2008.  This was a direct result of a loss recorded due to the adoption of an accounting policy in 2009, which required us to remeasure our warrant liability at its fair market value.  As a result in 2009 we recognized loss of $2,071,350 (2008: $nil).  Excluding this change in this accounting policy, our loss for the year was a more comparable $3,788,655.

A significant difference in 2009 compared to 2008 was the reduced level of exploration expenditures as the activities of the Company were focused on the pilot plant program and not field exploration.  Exploration expense was $377,891 (2008: $1,525,060), while engineering consulting expense was $639,185 (2008: $55,651).

Consulting fees – directors and officers was $1,182,776 (2008: $354,139) as a result of stock-based compensation recognized for previously issued options which vested during the year and shares issuances to management for attaining goals specified by the compensation committee during the year.

Investor relations expense of $696,191(2008: $4,809) reflects the stock-based compensation expense recorded with respect to the revaluation of the warrants in second quarter.

Interest revenue at $1,768 was down significantly from $38,057 in 2008 due to continued lower US dollar denominated deposit interest rates.


Generally most other expenses were comparable or lower this year due to changes in operations and cost constraints applied earlier in the year.

We anticipate offering up to 1,869,159 units at $3.21 per unit for gross proceeds of $6,000,000.  Each unit is proposed to consist of three shares of common stock and one three-year warrant to purchase an additional share of common stock at $1.34 per share, or 125% of the price per share allocated to the common shares in the units.  We have entered into an agreement with Source Capital Group, Inc. to act as the placement agent for the units on a “best-efforts” basis.

Liquidity and Cash Flow

As of December 31, 2009 we had working capital of $1,263,449 (2008 - $1,509,859) including $1,343,994 (2008 -$1,475,460) of cash and cash equivalents.  As of March 15, 2009, our cash position was approximately $875,000.

During the year ended December 31, 2009, the Company completed an offering of 1,496,930 shares at a price of $0.65 per unit for total gross proceeds of $973,005.  Share issuance costs for the private placement consisted of cash payments of $72,314 and issuance of 104,785 warrants at an exercise price of $0.90, to give net proceeds of $900,691

During the year ended December 31, 2008, the Company completed an offering of 2,814,909 shares at a price of $0.75 per share for gross proceeds of $2,111,180.  Share issuance costs for the private placement consist of cash payments of $144,094 to give net proceeds of $1,967,086.

We have prepared a 2010 combined operating budget which incorporates general corporate and administrative expenses as well as a base case of Chilean operations plus engineering studies.  We anticipate that expenditures, net of interest income will be such that we have sufficient funds for up to two years of operations, excluding 2009 drilling expenditures.   The diversion of funds from general purposes to engineering and marketing will, however, reduce the period during which we can cover expenditures.

We anticipate 2010 expenditures on the engineering and marketing plans to be as follows:

Step out and infill drilling
  $ 1,200,000     $ 1,500,000  
Claim holding costs
    50,000       60,000  
Environmental impact study
    200,000       300,000  
Final feasibility study
    600,000       900,000  
  $ 2,050,000     $ 2,760,000  

We continue to actively source additional funds to meet or exceed the anticipated expenditures above.  We believe that the prospects are such that we will be able to raise sufficient funds; however there are a number of risk factors which will influence our ability to do so, including the state of the capital markets generally, and the market price of our common stock. With the exception of funds on deposit, we have no other sources of committed funds, except for outstanding warrants for which there are no commitment to exercise.  The most likely source of new funds would be an equity placement of common shares.  We believe that a failure to raise funds in a timely manner would likely delay the achievement of some of the milestones in the engineering and marketing plans, and would delay any decision regarding the viability of operations while likely increasing future costs.

The July 2005 funding agreement with Rubicon contained certain anti-dilution provisions, such that any subsequent funds raised below $1.25 per share may trigger provisions which require the issuance of additional shares or re-pricing of warrants held by Rubicon.  This may influence our decision as to the suitability of any future financing.  In 2007 we commenced an offering of securities at $0.50 which triggered a reduction in the warrant exercise price to $0.50 per share and increased the number of shares issuable upon exercise of the outstanding preferred shares by a factor of 1.6.


Off-Balance Sheet Arrangements

During the year ended December 31, 2009, the Company did not have any off-balance sheet arrangements.

Critical Accounting Estimates

Effective January 1, 2009, the Company adopted the provisions of Emerging Issues Task Force (“EITF”) EITF 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock, (EITF 07-05), which was primarily codified into Topic 815 - Derivatives and Hedging.  ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.  As a result of adopting ASC 815, warrants to purchase 6,875,000 shares of our common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment. The warrants had an exercise price of $0.50 and expire in July and September 2009, of which 4,250,000 warrants were extended to April 2011.  As such, effective January 1, 2009, the Company reclassified the fair value of these warrants to purchase common stock, which had exercise price reset features, from equity to liability status as if these warrants were treated as a derivative liability since their date of issue.   On January 1, 2009, the Company reclassified $1,084,375 to beginning accumulated deficit and $1,084,375 to other liabilities - warrants to recognize the fair value of such warrants on such date.  As of December 31, 2009, the remaining 4,250,000 warrants were fair valued using the Black-Scholes pricing model with the following weighted average assumptions:  risk-free interest rate of 1.08%, expected life of 1.25 years, an expected volatility factor of 84.10% and a dividend yield of 0.0%. The fair value of these warrants to purchase common stock increased to $2,956,725 as of December 31, 2009. As such, the Company recognized a $2,071,350 non-cash charge from the change in fair value of these warrants for the year ended December 31, 2009.

The Company accounts for stock-based compensation expenses associated with stock options and other forms of equity compensation in accordance with ASC 718-10, Share-Based Payment, as interpreted by SEC Staff Accounting Bulletin No. 107.  ASC 718-10 requires the Company to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model.  The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s statement of operations.  The Company uses the straight-line single-option method to recognize the value of stock-based compensation expense for all share-based payment awards.  Stock-based compensation expense recognized in the statement of operations is reduced for estimated forfeitures, as it is based on awards ultimately expected to vest.  ASC 718-10 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

(An Exploration Stage Company)

Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(US Funds)

Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity (Deficit)
Notes to Consolidated Financial Statements

(An Exploration Stage Company)

We have audited the accompanying consolidated balance sheets of White Mountain Titanium Corporation (An Exploration Stage Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, cash flows and stockholders' equity (deficit) for each of the years in the three-year period ended December 31, 2009, and the cumulative period from inception (November 13, 2001) through December 31, 2009.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2009, and the cumulative period from inception (November 13, 2001) through December 31, 2009 in conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the financial statements, the Company has no revenues and limited capital, which together raise substantial doubt about its ability to continue as a going concern.  Management plans in regard to these matters are also described in Note 2.  These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 12 to the consolidated financial statements, effective January 1, 2009, the Company retrospectively adopted the presentation and disclosure requirements of ASC 815.

/s/“Smythe Ratcliffe LLP” (signed)

Chartered Accountants
Vancouver, Canada
March 22, 2010

(An Exploration Stage Company)
Consolidated Balance Sheets
(US Funds)
December 31,
  Cash and cash equivalents
  $ 1,343,994     $ 1,475,460  
  Prepaid expenses
    57,546       54,530  
    50,443       15,646  
Total Current Assets
    1,451,983       1,545,636  
Property and Equipment (Note 5)
    73,927       86,019  
Mineral Properties (Note 6)
    651,950       651,950  
Total Assets
  $ 2,177,860     $ 2,283,605  
  Accounts payable and accrued liabilities
  $ 188,534     $ 35,777  
Total Current Liabilities
    188,534       35,777  
Other Liabilities – warrants (Notes 3 and 11)
    2,956,725       -  
Total Liabilities
    3,145,259       35,777  
Subsequent Events (Note 13)
Stockholders’ Equity (Deficit)
Preferred Stock and Paid-in Capital in Excess of $0.001 Par Value (Note 7(a)) 20,000,000  Shares authorized 625,000  (2008 – 625,000) shares issued and outstanding
    500,000        500,000   
Common Stock and Paid-in Capital in Excess of $0.001 Par Value (Note 7(b)) 100,000,000  Shares authorized 36,400,972  (2008 – 32,004,042) shares issued and outstanding
    21,660,100        17,930,947   
Deficit Accumulated During the Exploration Stage
    (23,127,499 )     (16,183,119 )
Total Stockholders’ Equity (Deficit)
    (967,399 )     2,247,828  
Total Liabilities and Stockholders’ Equity (Deficit)
  $ 2,177,860     $ 2,283,605  

(An Exploration Stage Company)
Consolidated Statements of Operations
(US Funds)
Years Ended December 31,
Cumulative Period From Inception (November 13, 2001) through
December 31,
Advertising and promotion
  $ 45,702     $ 38,168     $ 65,757     $ 226,664  
    45,525       39,766       22,824       141,105  
Bank charges and interest
    4,765       5,697       5,754       27,568  
Consulting fees (Note 7(d))
    106,814       119,194       928,532       1,981,785  
Consulting fees – directors and officers (Notes 7(b)(ii) and (d))
    1,182,776       354,139       1,231,327       4,059,819  
Engineering consulting
    639,185       55,651       -       694,836  
Exploration (Note 6)
    377,891       1,525,060       571,090       4,520,524  
Filing fees
    5,010       2,570       250       52,877  
    53,757       64,452       44,711       246,222  
Investor relations, net (Note 7(d))
    696,191       4,809       (7,708 )     769,989  
Licenses, taxes and filing fees
    18,595       81,987       37,797       379,947  
Management fees (Note 7(d))
    139,200       139,200       595,350       1,535,590  
    37,047       40,861       30,086       186,535  
Professional fees
    173,685       246,212       191,331       1,544,914  
    73,091       102,258       86,827       391,097  
    15,707       22,573       28,266       89,806  
Transfer agent fees
    3,295       2,354       950       14,518  
Travel and vehicle
    138,596       181,544       189,182       1,003,629  
Loss Before Other Items
    (3,756,832 )     (3,026,495 )     (4,022,326 )     (17,867,425 )
Gain on Sale of Marketable Securities
    -       -       -       87,217  
Loss on Sale of Assets
    (7,465 )     (11,711 )     -       (19,176 )
Adjustment to Market for Marketable Securities
    -       -       -       (67,922 )
Foreign Exchange
    (26,126 )     (175,759 )     9,418       (223,100 )
Interest Income
    1,768       38,057       88,485       347,143  
Dividend Income
    -       -       2,606       4,597  
Change in Fair Value of Warrants (Note 11)
    (2,071,350 )     -       -       (3,155,724 )
Financing Agreement Penalty
    -       -       -       (330,000 )
Net Loss and Comprehensive Loss for Year
    (5,860,005 )     (3,175,908 )     (3,921,817 )     (21,224,390 )
  Preferred stock dividends (Note 7(a))
    -       -       -       (1,537,500 )
Net Loss Available for Distribution
  $ (5,860,005 )   $ (3,175,908 )   $ (3,921,817 )   $ (22,761,890 )
Basic and Diluted Loss Per Common Share (Note 8)   $
 )   $
Weighted Average Number of Shares of Common Stock Outstanding    

(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(US Funds)
Years Ended December 31,
Cumulative Period From Inception (November 13, 2001) through December 31,
Operating Activities
  Net loss for year
  $ (5,860,005 )   $ (3,175,908 )   $ (3,921,817 )   $ (21,224,390 )
  Items not involving cash
    45,525       39,766       22,824       129,394  
Stock-based compensation
    1,024,122       45,339       718,184       3,188,211  
Loss on sale of assets
    7,465       11,711       -       19,176  
Common stock issued for services
    560,000       -       1,565,000       2,517,630  
Change in value of warrants
    2,071,350       -       -       3,155,724  
Financing agreement penalty
    -       -       -       330,000  
Adjustment to market on marketable securities
    -       -       -       67,922  
Gain on sale of marketable securities
    -       -       -       (87,217 )
Non-cash resource property expenditures
    -       -       -       600,000  
  Changes in non-cash working capital
    (34,797 )     24,307       (11,166 )     (50,443 )
Marketable securities
    -       -       -       19,295  
Accounts payable and accrued liabilities
    152,757       (33,620 )     (40,174 )     188,534  
Prepaid expenses
    (3,016 )     (2,843 )     (17,629 )     (57,546 )
Cash Used in Operating Activities
    (2,036,599 )     (3,091,248 )     (1,684,778 )     (11,203,710 )
Investing Activities
  Addition to property and equipment
    (40,898 )     (79,030 )     (24,619 )     (222,497 )
  Addition to mineral property
    -       -       (1,950 )     (651,950 )
Cash Used in Investing Activities
    (40,898 )     (79,030 )     (26,569 )     (874,447 )
Financing Activities
  Repayment of long-term debt
    -       -       -       (100,000 )
  Issuance of preferred stock for cash
    -       -       -       5,000,000  
  Issuance of common stock for cash
    1,946,031       1,967,086       2,340,684       8,290,980  
  Stock subscriptions received
    -       -       -       120,000  
  Stock subscriptions receivable
    -       -       -       111,000  
  Working capital acquired on acquisition
    -       -       -       171  
Cash Provided by Financing Activities
    1,946,031       1,967,086       2,340,684       13,422,151  
Inflow (Outflow) of Cash and CashEquivalents
    (131,466 )     (1,203,192 )     629,337       1,343,994  
Cash and Cash Equivalents, Beginning of Year
    1,475,460       2,678,652       2,049,315       -  
Cash and Cash Equivalents, End of Year
  $ 1,343,994     $ 1,475,460     $ 2,678,652     $ 1,343,994  
Supplemental Cash Flow Information
Income tax paid
  $ -     $ -     $ -     $ -  
Interest paid
  $ -     $ -     $ -     $ -  
Shares Issued for
  Settlement of debt
  $ -     $ -     $ -     $ 830,000  
  $ 560,000     $ -     $ 1,565,000     $ 1,957,630  

(An Exploration Stage Company)
Consolidated Statements of Stockholders’ Equity (Deficit)
(US Funds)

Shares of
Common Stock
Common Stock
and Paid-In
Capital in
Excess of
Par Value
Shares of
Preferred Stock
Preferred Stock
and Paid-in
Capital in
Excess of
Par Value
Balance, December  31, 2002 and inception (November 13, 2001)
    -     $ -       -     $ -     $ -     $ -     $ -     $ -  
Shares issued for cash Private placements
    4,040,000       404,000       -       -       (111,000 )     -       -       293,000  
Shares issued for services
    7,211,000       72,110       -       -       -       -       -       72,110  
Balance, prior to acquisition
    11,251,000       476,110       -       -       (111,000 )     -       -       365,110  
Shares of accounting subsidiary acquired on reverse takeover
    1,550,000       28,368       -       -       -       -       -       28,368  
Adjustment to eliminate capital of accounting subsidiary on reverse takeover
    -       (28,368 )     -       -       -       -       -       (28,368 )
Adjustment to increase capital of accounting parent on reverse takeover
    -       365,779       -       -       -       -       -       365,779  
Excess of purchase price overnet assets acquired on recapitalization
    -       -       -       -       -       -       (365,607 )     (365,607 )
Net loss for year
    -       -       -       -       -       -       (830,981 )     (830,981 )
Balance, December 31, 2003
    12,801,000       841,889       -       -       (111,000 )     -       (1,196,588 )     (465,699 )
Shares issued for cash Private placement
    2,358,633       1,405,180       -       -       -       -       -       1,405,180  
Share subscriptions received
    -       -       -       -       -       120,000       -       120,000  
Shares issued for services
    128,500       205,320       -       -       -       -       -       205,320  
Receipt of subscriptions receivable
    -       -       -       -       111,000       -       -       111,000  
Stock-based compensation
    -       651,750       -       -       -       -       -       651,750  
Net loss for year
    -       -       -       -       -       -       (1,523,509 )     (1,523,509 )
Balance, December 31, 2004
    15,288,133     $ 3,104,139       0     $ 0     $ 0     $ 120,000     $ (2,720,097 )   $ 504,042  

(An Exploration Stage Company)
Consolidated Statements of Stockholders’ Equity (Deficit)
(US Funds)
Shares of
Common Stock
Common Stock
and Paid-In
Capital in
Excess of
Par Value
Shares of
Preferred Stock
Preferred Stock
and Paid-in
Capital in
Excess of
Par Value
Balance, December 31, 2004
    15,288,133     $ 3,104,139       -     $ -     $ -     $ 120,000     $ (2,720,097 )   $ 504,042  
Preferred stock issued for cash Private placement
    -       -       6,250,000       5,000,000       -       -       -       5,000,000  
Preferred stock issued for debt
    -       -       625,000       500,000       -       -       -       500,000  
Shares issued for cash Private placement
    459,000       459,000       -       -       -       (120,000 )     -       339,000  
Shares issued for services
    82,000       115,200       -       -       -       -       -       115,200  
Stock-based compensation
    -       688,920       -       -       -       -       -       688,920  
Beneficial conversion feature
    -       1,537,500       -       -       -       -       (1,537,500 )     -  
Net loss for year
    -       -       -       -       -       -       (2,642,954 )     (2,642,954 )
Balance, December 31, 2005
    15,829,133       5,904,759       6,875,000       5,500,000       -       -       (6,900,551 )     4,504,208  
Shares issued for financial agreement penalty to be settled
    440,000       330,000       -       -       -       -       -       330,000  
Stock-based compensation
    -       59,896       -       -       -       -       -       59,896  
Net loss for year
    -       -       -       -       -       -       (2,184,843 )     (2,184,843 )
Balance, December 31, 2006
    16,269,133       6,294,655       6,875,000       5,500,000       -       -       (9,085,394 )     2,709,261  
Stock-based compensation
    -       718,184       -       -       -       -       -       718,184  
Shares issued for cash Private placement
    5,070,000       2,340,683       -       -       -       -       -       2,340,683  
Shares issued for services
    1,600,000       1,565,000       -       -       -       -       -       1,565,000  
Shares issued for conversion of preferred stock
    6,250,000       5,000,000       (6,250,000 )     (5,000,000 )     -       -       -       -  
Net loss for the year
    -       -       -       -       -       -       (3,921,817 )     (3,921,817 )
Balance, December 31, 2007
    29,189,133     $ 15,918,522       625,000     $ 500,000     $ -     $ -     $ (13,007,211 )   $ 3,411,311  

(An Exploration Stage Company)
Consolidated Statements of Stockholders’ Equity (Deficit)
(US Funds)

Shares of
Common Stock
Common Stock
and Paid-In
Capital in
Excess of
Par Value
Shares of
Preferred Stock
Preferred Stock
and Paid-in
Capital in
Excess of
Par Value
Balance, December 31, 2007
    29,189,133     $ 15,918,522       625,000     $ 500,000     $ (13,007,211 )   $ 3,411,311  
Stock-based compensation
    -       45,339       -       -       -       45,339  
Shares issued for cash
Private placement
    2,814,909       1,967,086       -       -       -       1,967,086  
Net loss for the year
    -       -       -       -       (3,175,908 )     (3,175,908 )
Balance, December 31, 2008
    32,004,042       17,930,947       625,000       500,000       (16,183,119 )     2,247,828  
Stock-based compensation (Note 7(d))
    -       1,024,122       -       -       -       1,024,122  
Warrants exercised (Note 7(e))
    2,100,000       1,045,340       -       -       -       1,045,340  
Shares issued for cash
Private placement (Note 7(b))
    1,496,930       900,691       -       -       -       900,691  
Reduction in warrant liability on exercise of 2,000,000 warrants
    -       199,000       -       -       -       199,000  
Common stock issued for services (Note 7(d))
    800,000       560,000       -       -       -       560,000  
Cumulative effect of change in accounting principle (Note 11)
    -       -       -       -       (1,084,375 )     (1,084,375 )
Net loss for the year
    -       -       -       -       (5,860,005 )     (5,860,005 )
Balance, December 31, 2009
    36,400,972     $ 21,660,100       625,000     $ 500,000     $ (23,127,499 )   $ (967,399 )

(An Exploration Stage Company)
Notes to Consolidated Financial Statements
Years Ended December 31, 2009, 2008 and 2007
(US Funds)

White Mountain Titanium Corporation (the “Company”) currently has no ongoing operations.  Its principal business is to advance exploration and development activities on the Cerro Blanco rutile (titanium dioxide) property (“Cerro Blanco”) located in Region III of northern Chile.  The Company is considered an exploration stage company and its financial statements are presented in a manner similar to a development stage company as defined in Statement of Financial Accounting Standards (“SFAS”) No. 7.

These consolidated financial statements are prepared in accordance with United States (“US”) generally accepted accounting principles (“GAAP”).


These consolidated financial statements have been prepared by management on the basis of generally accepted accounting principles applicable to a going concern, which assumes the Company will continue to operate for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.

The Company has an accumulated deficit of $23,127,499 (2008 - $16,183,119), has not yet commenced revenue-producing operations, and has significant expenditure requirements to continue to advance its exploration and development activities on the Cerro Blanco property.

These consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate because management believes that the actions already taken or planned will mitigate the adverse conditions and events that raise doubts about the validity of the going concern assumption used in preparing these consolidated financial statements. Management intends to raise additional capital through stock issuances to finance operations and invest in other business opportunities.

If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.


Principles of consolidation

These financial statements include the accounts of the Company and its wholly-owned subsidiaries Sociedad Contractual Minera White Mountain Titanium (formerly Compañía Minera Rutile Resources Limitada) (“White Mountain Chile”), a Chilean corporation; White Mountain Titanium Corporation, a Canadian corporation; and White Mountain Titanium (Hong Kong) Limited, an inactive Hong Kong corporation.  All significant intercompany balances and transactions have been eliminated.

Cash equivalents

The Company considers all highly liquid debt instruments that are readily convertible to known amounts of cash and purchased with a maturity of three months or less from the date acquired to be cash equivalents.


(An Exploration Stage Company)
Notes to Consolidated Financial Statements
Years Ended December 31, 2009, 2008 and 2007
(US Funds)


Amortization is provided using a straight-line method based on the following estimated useful lives:

- 5 years
Office furniture
- 5 years
Office equipment
- 5 years
Computer equipment and software
- 5 years
Field equipment
- 5 years
Exploration expenditures

The Company is in the exploration stage of developing its mineral properties and has not yet determined whether these properties contain ore reserves that are economically recoverable.

Exploration costs incurred in locating areas of potential mineralization are expensed as incurred.  Mineral property acquisition costs are capitalized.  Commercial feasibility is established in compliance with Securities and Exchange Commission (“SEC”) Industry Guide 7, which consists of identifying that part of a mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination.  After an area of interest has been assessed as commercially feasible, expenditures specific to the area of interest for further development are capitalized.  In deciding when an area of interest is likely to be commercially feasible, management may consider, among other factors, the results of prefeasibility studies, detailed analysis of drilling results, the supply and cost of required labor and equipment, and whether necessary mining and environmental permits can be obtained.

Mining projects and properties are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.  If the estimated future cash flows expected to result from the use of the mining project or property and its eventual disposition are less than the carrying amount of the mining project or property, an impairment is recognized based upon the estimated fair value of the mining project or property.  Fair value is generally based on the present value of the estimated future net cash flows for each mining project or property, calculated using estimated mineable reserves and mineral resources based on engineering reports, projected rates of production over the estimated life of the mine, recovery rates, capital requirements, remediation costs and future prices considering the Company’s hedging and marketing plans.

Asset retirement obligations (“ARO”)

The Company recognizes a legal liability for obligations related to the retirement of property, plant and equipment, and obligations arising from the acquisition, construction, development or normal operations of those assets.  Such asset retirement costs must be recognized at fair value when a reasonable estimate of fair value can be estimated in the period in which the liability is incurred.  A corresponding increase to the carrying amount of the related asset, where one is identifiable, is recorded and amortized over the life of the asset.  Where a related future value is not easily identifiable with a liability, the change in fair value over the course of the year is expensed.  The amount of the liability is subject to re-measurement at each reporting period.  The estimates are based principally on legal and regulatory requirements.


(An Exploration Stage Company)
Notes to Consolidated Financial Statements
Years Ended December 31, 2009, 2008 and 2007
(US Funds)

Asset retirement obligations (“ARO”) (Continued)

It is possible that the Company’s estimates of its ultimate reclamation and closure liabilities could change as a result of changes in regulations, changes in the extent of environmental remediation required, changes in the means of reclamation or changes in cost estimates.  Changes in estimates are accounted for prospectively commencing in the period the estimate is revised.

At present, the Company has determined that it has no material AROs.

Income taxes

The Company uses the asset and liability approach in its method of accounting for income taxes that requires the recognition of deferred tax liabilities and assets for expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities.  A valuation allowance against deferred tax assets is recorded if based upon weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Stock-based compensation

The Company accounts for stock-based compensation expenses associated with stock options and other forms of equity compensation in accordance with ASC 718-10, Share-Based Payment, as interpreted by SEC Staff Accounting Bulletin No. 107.  ASC 718-10 requires the Company to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model.  The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s statement of operations.  The Company uses the straight-line single-option method to recognize the value of stock-based compensation expense for all share-based payment awards.  Stock-based compensation expense recognized in the statement of operations is reduced for estimated forfeitures, as it is based on awards ultimately expected to vest.  ASC 718-10 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Loss per share

The Company accounts for loss per share in accordance with ASC 260-10, Earnings Per Share, which requires the Company to present basic and diluted earnings per share.  The computation of loss per share is based on the weighted average number of shares of common stock outstanding during the year presented (see Note 8).  The Company uses the two-class method to calculate loss per share for common stock as well as preferred stock at their conversion equivalent to common stock.

The calculation of diluted loss per share excludes the effects of all common share equivalents that would be anti-dilutive.

(An Exploration Stage Company)
Notes to Consolidated Financial Statements
Years Ended December 31, 2009, 2008 and 2007
(US Funds)

Financial instruments

All financial instruments are classified as one of the following: held-to-maturity, loans and receivables, held-for-trading, available-for-sale or other financial liabilities. Financial assets and liabilities held-for-trading are measured at fair value with gains and losses recognized in net income. Financial assets held-to-maturity, loans and receivables, and other financial liabilities are measured at amortized cost using the effective interest method. Available-for-sale instruments are measured at fair value with unrealized gains and losses recognized in other comprehensive income (loss) and reported in shareholders’ equity. Any financial instrument may be designated as held-for-trading upon initial recognition.

Transaction costs that are directly attributable to the acquisition or issue of financial instruments that are classified as other than held-for-trading, which are expensed as incurred, are included in the initial carrying value of such instruments.