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EXCEL - IDEA: XBRL DOCUMENT - WHITE MOUNTAIN TITANIUM CORP | Financial_Report.xls |
EX-32.2 - EXHIBIT 32.2 - WHITE MOUNTAIN TITANIUM CORP | exhibit32-2.htm |
EX-31.1 - EXHIBIT 31.1 - WHITE MOUNTAIN TITANIUM CORP | exhibit31-1.htm |
EX-31.2 - EXHIBIT 31.2 - WHITE MOUNTAIN TITANIUM CORP | exhibit31-2.htm |
EX-32.1 - EXHIBIT 32.1 - WHITE MOUNTAIN TITANIUM CORP | exhibit32-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from ______________________ to ______________________
Commission File Number 333-129347
WHITE MOUNTAIN TITANIUM CORPORATION
(Name of small business issuer in its charter)
NEVADA | 87-0577390 |
(State of incorporation or organization) | (IRS Identification No.) |
Augusto Leguia 100, Oficina 1401
Las
Condes, Santiago
Chile
(Address of
principal executive offices)
(56) 22 657-1800
(Issuers
telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed under Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, 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 for such
shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
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 the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer [ ] | Accelerated Filer [ ] |
Non-Accelerated Filer [ ] (Do not check if a smaller reporting company) | 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 [
] No [X]
85,835,392 shares of the issuers common stock, $.001 par value, were issued and outstanding at November 12, 2014.
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Condensed Consolidated Balance Sheets |
(Unaudited - Expressed in US dollars) |
As at | September 30, 2014 | December 31, 2013 | ||||
Assets | ||||||
Current | ||||||
Cash | $ | 2,319,385 | $ | 2,056,996 | ||
Prepaid expenses | 141,209 | 77,803 | ||||
Receivables | 41,073 | 33,519 | ||||
Total Current Assets | 2,501,667 | 2,168,318 | ||||
Property and Equipment (Note 3) | 242,346 | 194,594 | ||||
Mineral Properties (Note 4) | 651,950 | 651,950 | ||||
Technology Rights ( Note 5) | 1,555,552 | 1,788,886 | ||||
Total Assets | $ | 4,951,515 | $ | 4,803,748 | ||
Liabilities | ||||||
Current | ||||||
Accounts payable and accrued liabilities | 478,505 | 476,170 | ||||
Amount due to a related party (Note 6) | 40,405 | - | ||||
Total Liabilities | $ | 518,910 | $ | 476,170 | ||
Stockholders Equity | ||||||
Preferred Stock and Paid-in Capital in Excess of $0.001 Par Value (Note 7(a) & 7(b)) | ||||||
100,000,000 (December 31,
2013: 100,000,000) shares authorized Nil (December 31, 2013 Nil) shares issued and outstanding |
- | - | ||||
Common Stock and Paid-in Capital in Excess of $0.001 Par Value (Note 7(b) & 7(c)) | ||||||
500,000,000 (December 31,
2013: 500,000,000) shares authorized 85,835,392 (December 31, 2013 73,855,392) shares issued and outstanding |
56,725,671 | 52,110,387 | ||||
Deficit Accumulated During the Exploration Stage | (52,293,066 | ) | (47,782,809 | ) | ||
Total Stockholders Equity | 4,432,605 | 4,327,578 | ||||
Total Liabilities and Stockholders Equity | $ | 4,951,515 | $ | 4,803,748 |
See notes to the unaudited condensed consolidated financial statements.
3
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Condensed Consolidated Statements of Operations |
(Unaudited - Expressed in US dollars) |
Cumulative | |||||||||||||||
Period from | |||||||||||||||
Inception on | |||||||||||||||
November 13, | |||||||||||||||
Three months ended | Nine months ended | 2001 through | |||||||||||||
September 30, | September 30, | September 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | |||||||||||
Expenses | |||||||||||||||
Advertising and promotion | $ | 2,293 | $ | 6,824 | $ | 15,777 | $ | 23,998 | 549,955 | ||||||
Amortization | 92,171 | 91,902 | 277,180 | 276,515 | 1,632,774 | ||||||||||
Bank charges and interest | 6,149 | 2,881 | 13,859 | 13,147 | 130,783 | ||||||||||
Consulting fees (Note 7(e)) | 240,206 | 67,551 | 551,823 | 129,791 | 3,797,918 | ||||||||||
Consulting fees directors and officers (Note 7(e)) | 267,250 | 100,911 | 674,616 | 303,678 | 9,550,186 | ||||||||||
Engineering consulting | - | - | - | - | 711,084 | ||||||||||
Exploration (Note 4) | 884,455 | 375,880 | 1,849,002 | 1,324,008 | 15,033,801 | ||||||||||
Filing fees | 3,826 | 2,943 | 14,022 | 23,628 | 122,779 | ||||||||||
Insurance | 8,995 | 10,923 | 28,189 | 32,824 | 464,999 | ||||||||||
Investor relations | 11,391 | - | 31,554 | 7,500 | 929,718 | ||||||||||
Licenses, taxes and filing fees, net | 540 | - | (37,381 | ) | - | 342,566 | |||||||||
Management fees (Note 7(e)) | 97,228 | 101,228 | 309,684 | 303,684 | 4,897,185 | ||||||||||
Office (Note 7(e)) | 24,675 | 53,556 | 67,603 | 108,622 | 970,947 | ||||||||||
Professional fees | 110,574 | 69,081 | 251,056 | 189,125 | 2,907,122 | ||||||||||
Rent | 61,728 | 39,373 | 140,241 | 121,279 | 1,051,798 | ||||||||||
Research and development (Note 5) | - | (513 | ) | 8,197 | 251,188 | 1,094,521 | |||||||||
Staff salary and benefits | 21,448 | - | 45,277 | - | 45,277 | ||||||||||
Telephone | 8,644 | 7,997 | 25,700 | 22,514 | 229,886 | ||||||||||
Transfer agent fees | 413 | 4636 | 4,076 | 7,144 | 48,443 | ||||||||||
Travel and vehicle | 78,362 | 36,480 | 204,204 | 123,249 | 1,999,553 | ||||||||||
Loss Before Other Items | (1,920,348 | ) | (971,653 | ) | (4,474,679 | ) | (3,261,894 | ) | (46,511,295 | ) | |||||
Gain on Sale of Marketable Securities | - | - | - | - | 87,217 | ||||||||||
Loss on Sale of Assets | - | - | - | - | (19,176 | ) | |||||||||
Adjustment to Market for Marketable | - | - | - | - | (67,922 | ) | |||||||||
Foreign Exchange | (8,243 | ) | (20,518 | ) | (35,663 | ) | (62,759 | ) | (927,946 | ) | |||||
Interest Income | 45 | 7 | 85 | 46 | 363,567 | ||||||||||
Dividend Income | - | - | - | - | 4,597 | ||||||||||
Change in Fair Value of Warrants | - | - | - | - | (2,748,999 | ) | |||||||||
Change in Fair Value of Preferred Stock | - | - | - | - | (240,000 | ) | |||||||||
Financing Agreement Penalty | - | - | - | - | (330,000 | ) | |||||||||
Net Loss and Comprehensive Loss for Period | (1,928,546 | ) | (992,164 | ) | (4,510,257 | ) | (3,324,607 | ) | (50,389,957 | ) | |||||
Preferred stock dividends | - | - | - | - | (1,537,500 | ) | |||||||||
Net Loss Available for Distribution | $ | (1,928,546 | ) | $ | (992,164 | ) | $ | (4,510,257 | ) | $ | (3,324,607 | ) | (51,927,457 | ) | |
Basic and Diluted Loss Per Common Share (Note 8) | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.06 | ) | $ | (0.05 | ) | |||
Weighted
Average Number of Shares of Common Stock Outstanding |
82,359,196 | 68,141,107 | 78,282,865 | 67,096,653 |
See notes to the unaudited condensed consolidated financial statements.
4
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Condensed Consolidated Statements of Stockholders Equity (Deficit) |
(Unaudited - Expressed in US dollars) |
Common Stock | Preferred Stock | |||||||||||||||||
and Paid-In | and Paid-in | Total | ||||||||||||||||
Shares of | Capital in | Shares of | Capital in | Stockholders | ||||||||||||||
Common | Excess of | Preferred | Excess of | Accumulated | Equity | |||||||||||||
Stock | Par Value | Stock | Par Value | Deficit | (Deficit) | |||||||||||||
Balance, December 31, 2012 | 63,836,689 | $ | 47,194,724 | - | $ | - | $ | (43,288,992 | ) | $ | 3,905,732 | |||||||
Stock-based compensation | - | 164,912 | - | - | - | 164,912 | ||||||||||||
Shares issued for cash | ||||||||||||||||||
Private placement, March 2013 | 4,304,418 | 2,762,751 | - | - | - | 2,762,751 | ||||||||||||
Private placement, December 2013 | 5,714,285 | 1,988,000 | - | - | - | 1,988,000 | ||||||||||||
Net loss for the year | - | - | - | - | (4,493,817 | ) | (4,493,817 | ) | ||||||||||
Balance, December 31, 2013 | 73,855,392 | 52,110,387 | - | - | (47,782,809 | ) | 4,327,578 | |||||||||||
Stock-based compensation (Note 7(e)) | - | 123,684 | - | - | - | 123,684 | ||||||||||||
Shares issued for services (Note 7(e)) | 730,000 | 306,600 | - | - | - | 306,600 | ||||||||||||
Shares issued for cash | ||||||||||||||||||
Private placement, April 2014 (Note 7 ( e)) | 5,000,000 | 1,860,000 | - | - | - | 1,860,000 | ||||||||||||
Shares issued for cash | ||||||||||||||||||
Private placement, August 2014 (Note 7 ( e)) | 6,250,000 | 2,325,000 | - | - | - | 2,325,000 | ||||||||||||
Net loss for the period | - | - | - | - | (4,510,257 | ) | (4,510,257 | ) | ||||||||||
Balance, September 30, 2014 | 85,835,392 | $ | 56,725,671 | - | $ | - | $ | (52,293,066 | ) | $ | 4,432,605 |
See notes to the unaudited condensed consolidated financial statements.
5
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Condensed Consolidated Statements of Cash Flows |
(Unaudited - Expressed in US dollars) |
Cumulative Period | |||||||||
from Inception on | |||||||||
November 13, | |||||||||
2001 through | |||||||||
Nine months ended September 30, | September 30, | ||||||||
2014 | 2013 | 2014 | |||||||
Operating Activities | |||||||||
Net loss for period | $ | (4,510,257 | ) | $ | (3,324,607 | ) | $ | (50,389,957 | ) |
Items not involving cash | |||||||||
Amortization | 277,180 | 276,515 | 1,632,774 | ||||||
Stock-based compensation | 123,684 | 123,684 | 4,046,525 | ||||||
Loss on sale of assets | - | - | 19,176 | ||||||
Common stock issued for services | 306,600 | - | 8,227,935 | ||||||
Change in fair value of warrants | - | - | 2,748,999 | ||||||
Change in fair value of preferred stock | - | - | 240,000 | ||||||
Financing agreement penalty | - | - | 330,000 | ||||||
Adjustment to market for marketable securities | - | - | 67,922 | ||||||
Gain on sale of marketable securities | - | - | (87,217 | ) | |||||
Non-cash exploration expenditures | - | - | 600,000 | ||||||
Changes in non-cash working capital | |||||||||
Prepaid expenses | (63,406 | ) | 27,662 | (150,510 | ) | ||||
Receivables | (7,554 | ) | 30,825 | (33,791 | ) | ||||
Marketable securities | - | - | 19,295 | ||||||
Due to a related party | 40,405 | - | 40,405 | ||||||
Accounts payable and accrued liabilities | 2,335 | (45,517 | ) | 412,659 | |||||
Cash Used in Operating Activities | (3,831,013 | ) | (2,911,438 | ) | (32,275,785 | ) | |||
Investing Activities | |||||||||
Additions to property and equipment | (91,598 | ) | (1,489 | ) | (636,068 | ) | |||
Additions to mineral properties | - | - | (651,950 | ) | |||||
Cash Used in Investing Activities | (91,598 | ) | (1,489 | ) | (1,288,018 | ) | |||
Financing Activities | |||||||||
Repayment of long-term debt | - | - | (100,000 | ) | |||||
Issuance of preferred stock for cash | - | - | 5,000,000 | ||||||
Issuance of common stock for cash | 4,185,000 | 2,762,751 | 30,729,352 | ||||||
Stock subscriptions received | - | - | 263,500 | ||||||
Working capital acquired on acquisition | - | - | 171 | ||||||
Cash Provided by Financing Activities | 4,185,000 | 2,762,751 | 35,893,023 | ||||||
Foreign Exchange Effect on Cash | - | - | (9,835 | ) | |||||
Inflow (Outflow) of Cash | 262,389 | (150,176 | ) | 2,319,385 | |||||
Cash, Beginning of Period | 2,056,996 | 1,126,720 | - | ||||||
Cash, End of Period | $ | 2,319,385 | $ | 976,544 | $ | 2,319,385 | |||
Supplemental Cash Flow Information | |||||||||
Common shares issued for settlement of debt | $ | - | $ | - | $ | 830,000 | |||
Common shares issued to acquire technology | $ | - | $ | - | $ | 2,800,000 | |||
Common shares issued for preferred stock | $ | - | $ | - | $ | 740,000 |
See notes to the unaudited condensed consolidated financial statements.
6
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
1. |
NATURE OF BUSINESS AND BASIS OF PRESENTATION AND GOING CONCERN |
White Mountain Titanium Corporation, through its subsidiaries, (collectively the Company) is in the business of exploring for titanium deposits or reserves on its Cerro Blanco mining concessions. The Company is an exploration stage company and 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 accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2014, and for the period then ended, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States (U.S.) generally accepted accounting principles (U.S. GAAP) have been condensed or omitted. It is suggested that these unaudited consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Companys December 31, 2013, annual report on Form 10-K filed with the United States Securities and Exchange Commission (SEC) on March 14, 2014. The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the Companys audited consolidated financial statements for the year ended December 31, 2013 filed as part of the Companys December 31, 2013 Annual Report on Form 10-K. The results of operations for the period ended September 30, 2014 are not necessarily indicative of the operating results for the full year. | |
These condensed consolidated financial statements have been prepared by management on the basis of U.S. GAAP 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 $52,293,066 at September 30, 2014 (December 31, 2013 - $47,782,809), 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 and its Chinuka process technology. Management intends to raise additional capital through stock issuance to finance operations. However, there is no assurance that management will be successful in its future financing activities. | |
2. |
FINANCIAL INSTRUMENTS AND RISKS |
The Company has classified its financial instruments as follows: |
Cash as held-for-trading
Receivables as loans and receivables
Accounts payable and accrued
liabilities as other financial liabilities
Amount due to related party
as other financial liabilities.
(a) |
Fair value | |
The carrying amounts of the Companys financial instruments approximate their respective fair values due to the short maturities of these instruments. The three levels of the fair value hierarchy are described below: |
7
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
2. |
FINANCIAL INSTRUMENTS AND RISKS (Continued) |
(a) |
Fair value (continued) |
|
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; | |
|
Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and | |
|
Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
(b) |
Credit risk | |
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge its contractual obligations. | ||
The Company mitigates credit risk by maintaining its cash with high credit quality Canadian and Chilean financial institutions, and in respect of cash, by purchasing highly liquid, short-term guaranteed investment certificates (GIC) held at high credit quality Canadian financial institutions when there is excess cash to be invested. The receivables consist of Goods and Services Tax due from the Government of Canada. | ||
(c) |
Liquidity risk | |
Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due. The Company manages its liquidity risk by forecasting cash flows required for operations and anticipated investing and financing activities. The Companys cash at September 30, 2014 and December 31, 2013 totaled $2,319,385 and $2,056,996, respectively. At September 30, 2014 and December 31, 2013, the Company had accounts payable and accrued liabilities of $478,505, and $476,170, respectively, and amounts due to related party of $40,405 (December 31, 2013 - $nil) all of which fall due in the next fiscal quarter. | ||
(d) |
Market risk | |
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk. |
8
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
2. |
FINANCIAL INSTRUMENTS AND RISKS (Continued) |
(d) |
Market risk (Continued) |
(i) |
Interest rate risk | ||
Interest rate risk consists of two components: | |||
(a) |
To the extent that payments made or received on the Companys monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Company is exposed to interest rate cash flow risk. | ||
(b) |
To the extent that changes in prevailing market interest rates differ from the interest rate in the Companys monetary assets and liabilities, the Company is exposed to interest rate price risk. |
The Companys cash consists of cash held in bank accounts. | ||
(ii) |
Foreign currency risk | |
The Company is exposed to foreign currency risk to the extent expenditures incurred or funds received and balances maintained by the Company are denominated in currencies other than the US dollar (primarily Canadian dollars (CAD), Chilean pesos (CLP) and Chinese Yuan (RMB)). As at September 30, 2014, the Company has net monetary assets of $22,169 (December 31, 2013 net monetary liabilities of $5,996) denominated in CAD, net monetary liabilities of $191,587 (December 31, 2013 $95,181) in CLP, and net monetary assets of $9,464 (December 31, 2013 - $nil) denominated in RMB. | ||
As at September 30, 2014, the Companys sensitivity analysis suggests that a change in the absolute rate of exchange in CAD by 6% will not have a material effect on the Companys business, financial condition and results of operations and a change in the absolute rate of exchange in CLP by 9% will also not have a material impact. | ||
The Company has not entered into any foreign currency contracts to mitigate this risk. | ||
(iii) |
Other price risk | |
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk. The Company is not exposed to other price risk. |
9
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
3. |
PROPERTY AND EQUIPMENT |
September 30, 2014 | ||||||||||
Accumulated | ||||||||||
Cost | Amortization | Net | ||||||||
Land | $ | 76,770 | $ | - | $ | 76,770 | ||||
Vehicle | 129,439 | 102,716 | 26,723 | |||||||
Office furniture & fixtures | 143,048 | 37,807 | 105,241 | |||||||
Office equipment | 32,516 | 17,756 | 14,760 | |||||||
Computer equipment | 10,735 | 8,821 | 1,914 | |||||||
Computer software | 68,994 | 66,893 | 2,101 | |||||||
Field equipment | 122,754 | 107,917 | 14,837 | |||||||
$ | 584,256 | $ | 341,910 | $ | 242,346 |
December 31, 2013 | ||||||||||
Accumulated | ||||||||||
Cost | Amortization | Net | ||||||||
Land | $ | 76,770 | $ | - | $ | 76,770 | ||||
Vehicle | 129,439 | 94,287 | 35,152 | |||||||
Office furniture | 54,137 | 31,765 | 22,372 | |||||||
Office equipment | 32,007 | 14,283 | 17,724 | |||||||
Computer equipment | 9,390 | 8,385 | 1,005 | |||||||
Computer software | 68,556 | 52,295 | 16,261 | |||||||
Field equipment | 122,360 | 97,050 | 25,310 | |||||||
$ | 492,659 | $ | 298,065 | $ | 194,594 |
10
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
4. |
MINERAL PROPERTIES |
Cerro Blanco | |
On September 5, 2003, the Company, through its wholly-owned Chilean subsidiary, White Mountain Chile, entered into a purchase agreement with Compañía Contractual Mineral Ojos del Salado (Ojos del Salado), a wholly- owned Chilean subsidiary of Phelps Dodge Corporation, to acquire a 100% interest in nine exploration mining concessions, collectively known as Cerro Blanco. Cerro Blanco is located in Region III of northern Chile, approximately 39 kilometres, or 24 miles, west of the city of Vallenar. Consideration for the purchase, including legal fees, was $651,950. | |
The purchase agreement covering Cerro Blanco was originally entered into between Ojos del Salado and Dorado Mineral Resources NL (Dorado) on March 17, 2000. Under that agreement, Dorado purchased the mining exploitation concessions from Ojos del Salado for $1,000,000, of which $350,000 was paid. A first mortgage and prohibitions against entering into other contracts regarding mining concessions without the prior written consent of Ojos del Salado had also been established in favor of Ojos del Salado. On September 5, 2003, White Mountain Chile assumed Dorados obligations under the purchase agreement, including the mortgage and prohibitions, with payment terms as described above. | |
La Martina | |
As a result of regional exploration carried out in January 2013, a new rutile prospect named La Martina has been discovered and staked in the Atacama, or Region III, geographic region of northern Chile. La Martina, which is located approximately 45 kilometres south-west of the city of Vallenar and 17 kilometres south-west of the Cerro Blanco project, consists of six registered exploration concessions. Concession fees and other costs incurred in staking the property have been expensed. | |
Ownership in mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequent, ambiguous conveyance history characteristic of mineral properties. The Company has investigated ownership of its mineral properties, and to the best of its knowledge, ownership of its interests is in good standing. At present, the Company has determined that it has no material asset retirement obligations. | |
Exploration expenditures incurred by the Company during the three and nine months ended September 30, 2014 and 2013 were as follows: |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||
Assaying | $ | 61,690 | $ | 2610 | $ | 63,775 | $ | 3420 | |||||
Concession fees | (1,274 | ) | 1,743 | 100,501 | 95,248 | ||||||||
Environmental | 376,939 | 177,267 | 733,725 | 476,518 | |||||||||
Equipment rental | 26,903 | 1,821 | 34,637 | 48,646 | |||||||||
Geological consulting fees | 253,468 | 52,328 | 443,310 | 99,027 | |||||||||
Site costs | 159,709 | 136,507 | 456,952 | 586,050 | |||||||||
Transportation | 7,020 | 3,604 | 16,102 | 15,099 | |||||||||
Exploration expenditures for | $ | 884,455 | $ | 375,880 | $ | 1,849,002 | $ | 1,324,008 |
11
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
5. |
TECHNOLOGY RIGHTS |
On October 1, 2010, the Company issued 4,000,000 shares of common stock pursuant to the terms of the non- exclusive, sublicensing agreement of the titanium metal technology developed by Chinuka Limited plc (Chinuka or the Chinuka Process), giving the Company access to the Chinuka Process for the Cerro Blanco project. La Serena Technologies Ltd. (La Serena) executed the sublicensing agreement as holder of the Chinuka Process master license. Four million restricted shares of common stock were issued to Chinuka and La Serena (800,000 to Chinuka and 3,200,000 to La Serena); 1,000,000 of the total were delivered at the time of signing of the agreement (500,000 shares released each to Chinuka and La Serena). The balance of common stock was to be released from escrow over 24 months at the end of each subsequent fiscal quarter on the basis of 37,500 to Chinuka and 337,500 to La Serena. As of December 31, 2013, all shares had been released. The Company may terminate the sublicense agreement under certain circumstances as stipulated in the agreement. La Serena may terminate the agreement if any of the following conditions are not met: |
|
Cumulative expenditures of $5,000,000 by the Company within five years of the effective date to advance development of the Chinuka Process towards commercialization (cumulative expenditures to September 30, 2014: $1,094,521); | |
|
2% gross royalty payments to La Serena on any revenue generated by the Cerro Blanco project, which is attributable to the Chinuka Process. The gross royalty payments following five years from the effective date of the agreement are subject to a minimum payment of $200,000 per year; and | |
|
Commercial production of titanium metal using the Chinuka Process and feed stock derived from the Cerro Blanco project within nine years after closing. |
The Company has valued the consideration for the technology rights on the basis of the market value of the common shares issued for technology rights on the date of issuance of $2,800,000 and is amortizing over nine years.
For the nine months ended September 30, 2014, amortization of technology rights included in amortization expense is $233,334 (nine months ended September 30, 2013 - $233,334).
September 30, 2014 | ||||||||||
Accumulated | ||||||||||
Cost | Amortization | Net | ||||||||
Technology rights | $ | 2,800,000 | 1,244,448 | $ | 1,555,552 |
December 31, 2013 | ||||||||||
Accumulated | ||||||||||
Cost | Amortization | Net | ||||||||
Technology rights | $ | 2,800,000 | 1,011,114 | $ | 1,788,886 |
12
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
6. |
AMOUNT DUE TO A RELATED PARTY |
Amount due to a related party represents expenses incurred and paid on behalf of the Company by a director and officer of the Company in relation to setting up an office in the Peoples Republic of China (PRC). This amount is without interest of stated terms for repayment. | |
7. |
CAPITAL STOCK |
(a) |
Authorized stock | |
On July 2, 2013, the Board of Directors, through unanimous written consent, adopted a proposal to amend the Articles of Incorporation to increase the number of authorized shares of Common Stock to 500,000,000 shares and the number of authorized shares of Preferred Stock to 100,000,000 shares. The proposal was approved by the stockholders at the Annual General Meeting held on September 5, 2013. | ||
(b) |
Preferred stock | |
During the year ended December 31, 2005, the Company designated shares of Series A preferred stock with a par value of $0.001 per share. Each share of preferred stock was convertible into one common share at any time at the holders option, subject to the adjustments to the conversion ratio. The adjustment to the conversion price of these preferred shares was based on the lowest of the share price of any common shares issued, the exercise price of any options granted or reprised, or any preferred shares issued after the issuance of these preferred shares. The preferred stock was unlisted, non-retractable and non-redeemable. The preferred stockholders were entitled to the number of votes equal to the number of whole shares of common stock into which the preferred stock are convertible. The preferred stockholders were further entitled to the same dividends and distributions as the common stockholders. | ||
On February 4, 2013, the Company filed with the Nevada Secretary of State a Certificate of Withdrawal of Certificate of Designations, Preferences and Rights of the Series A convertible preferred stock. The Company has no shares of Series A convertible preferred stock outstanding or authorized to be issued. | ||
On January 18, 2011, the Companys Board of Directors adopted a stockholders rights plan and pursuant to this plan, the Company entered into a rights agreement (the Rights Agreement) with its transfer agent, as rights agent of the shareholders. In connection with the adoption of the Rights Agreement, effective January 18, 2011, the Board of Directors declared a dividend distribution of one right (Right) for each outstanding share of the Companys common stock, payable to stockholders of record on January 28, 2011. Each Right, when exercisable, entitles the registered holder to purchase from the Company one one- thousandth of one share of Series B Junior Participating Preferred Stock (Series B Preferred Stock) at a price of $4.00 per one one-thousandth share, subject to adjustment. | ||
Pursuant to the rights plan, a total of 500,000 shares of preferred stock are reserved for issuance upon exercise of the rights. At September 30, 2014, there were no shares of Series B Preferred Stock issued and outstanding. |
(c) |
Common stock | |
During the nine months ended September 30, 2014, the Company: |
13
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
7. |
CAPITAL STOCK (Continued) |
(c) |
Common stock (continued) |
|
Issued 730,000 shares of common stock at a fair value of $306,600 to management, employees and consultants, under the Management Compensation Pool. Share certificates for 175,000 shares issued to our staff in Chile have been distributed, while the remaining share certificates for 555,000 shares issued to consultants and directors and officers have been withheld from distribution. The Board of Directors of the Company elected to place these shares under a voluntary escrow until the Company completes its Environmental Impact Statement. | |
|
Closed the sale of 5,000,000 Second Tranche Units (the Second Tranche Units) in April 2014 with Million Cheer Investment Limited (MCIL), a company formed in Hong Kong. The sale of the units was pursuant to a Binding Memorandum of Understanding (the MOU) dated April 10, 2014, entered into with Grand Agriculture Investment Limited (the Investor), whereby the Investor agreed to purchase a total of 20,000,000 Second Tranche Units. The purchase price for the 5,000,000 Second Tranche Units was $0.40 per unit for gross proceeds of $2,000,000. Each Second Tranche Unit consists of one share of Common Stock and 90% of one warrant to purchase one share of Common Stock at $0.55 per share exercisable immediately upon issuance through December 31, 2017 (the Second Tranche Warrants). The Company paid $140,000 in commissions. | |
|
Closed an additional sale of 6,250,000 Second Tranche Units with an accredited investor in August 2014, pursuant to MOU. The sale price for the 6,250,000 Second Tranche Units was $0.40 per unit for gross proceeds of $2,500,000. Each Second Tranche Unit consists of one share of Common Stock and 0.9 share of Common Stock purchase warrant at $0.55 per share exercise price with expiration date of December 31, 2017. The Company paid $175,000 in commissions. |
During the year ended December 31, 2013, the Company:
|
Issued 4,304,418 units for gross proceeds of $3,013,100 by way of a private placement priced at $0.70 per unit. Each unit consisted of one share of common stock and one-half warrant, each whole warrant exercisable at $0.90 per share until July 25, 2014. The Company paid commissions, finders and legal fees of $250,349. In addition, 215,221 compensation warrants were issued to agents. The terms and conditions of the agent warrants are essentially identical to the terms and conditions of the warrants sold to investors as part of the units, except that the agent warrants had an original expiration date of March 12, 2015. | |
|
Entered into a $10,000,000 financing by means of a MOU dated December 3, 2013, with the Investor, a company formed in Hong Kong and controlled by Kin Wong, a shareholder of the Company at the time. Pursuant to the MOU, the Investor agreed to purchase 5,714,285 First Tranche Units and an additional 20,000,000 Second Tranche Units. The purchase price per unit for the First Tranche Units is $0.35 per unit for gross proceeds of $2,000,000. Each First Tranche Unit consists of one share of the Companys common stock and one warrant to purchase one share of common stock at $0.45 per share exercisable immediately upon issuance through December 31, 2016. Each Second |
14
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
7. |
CAPITAL STOCK (Continued) |
(c) |
Common stock (continued) | |
Tranche Unit. The MOU allows the Investor to syndicate the purchase of the First or Second Tranche Units through one or more additional investors. | ||
In December 2013, the Company closed the sale of the 5,714,285 First Tranche Units at a price of $0.40 per unit for gross proceeds of $2,000,000. The Company paid $12,000 in commissions. | ||
(d) |
Stock options | |
The Company has a stock option plan, adopted in 2005, and a Stock Option/Stock Issuance Plan, adopted in 2010, (individually the 2005 Plan and the 2010 Plan, respectively, and, collectively, the Plans). Under the Plans, the Company is authorized to grant options to executive officers and directors, employees and consultants of the Company. The 2005 Plan was originally authorized to grant 3,140,000 shares; and the 2010 Plan was originally authorized to issue 4,901,740 shares, which amount is increased at the end of each year to represent 10% of the total outstanding shares at year-end, up to a maximum of 3,800,000. The terms of any stock options granted under the 2005 Plan may not exceed five years and the exercise price of any stock option granted may not be discounted below the maximum discount permitted under the policies of the Toronto Stock Exchange. The terms of any stock options granted under the 2010 Plan may not exceed ten years and the exercise price of any stock option plan is fixed by the plan administrator. | ||
The Company has also adopted a Management Compensation Pool for the benefit of officers, directors and employees of the Company. The pool will consist of 1% of the outstanding shares at the end of each year. | ||
The Company did not grant any stock options during either the nine months ended September 30, 2014 or the year ended December 31, 2013. | ||
The following table represents service-based stock option activity during the nine months ended September 30, 2014 and the year ended December 31, 2013: |
15
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
7. |
CAPITAL STOCK (Continued) |
(d) |
Stock Options (continued) |
September 30, 2014 | December 31, 2013 | ||||||||||||
Weighted | Weighted | ||||||||||||
Number of | Number of | ||||||||||||
Average | Average | ||||||||||||
Shares | Exercise | Shares | Exercise | ||||||||||
Price | Price | ||||||||||||
Outstanding - beginning of period | 150,000 | $ | 1.30 | 315,000 | $ | 1.14 | |||||||
Granted | - | - | - | - | |||||||||
Expired | - | - | (165,000 | ) | 1.00 | ||||||||
Exercised | - | - | - | - | |||||||||
Outstanding end of period | 150,000 | $ | 1.30 | 150,000 | $ | 1.30 | |||||||
Exercisable end of period | 150,000 | $ | 1.30 | 150,000 | $ | 1.30 |
As at September 30, 2014 and December 31, 2013, the following stock options were outstanding:
Exercise | September 30, | December 31, | |||||||||
Expiry Date | Price | 2014 | 2013 | ||||||||
October 1, 2017 | $ | 1.30 | 150,000 | 150,000 |
The shares under option at September 30, 2014 had an exercise price of $1.30 (December 31, 2013: $1.30), an intrinsic value of $nil (December 31, 2013: $nil) and a weighted average remaining contractual life of three years (December 31, 2013: 3.75 years).
16
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
7. |
CAPITAL STOCK (Continued) | |
(e) |
Stock-based compensation | |
During the nine months ended September 30, 2014, $123,684 (2013 - $123,684) was recognized as stock- based compensation for the 2,000,000 management warrants issued to directors and officers in 2010 (Note 7(f)). The maximum stock-based compensation to be recognized is $944,959. The remaining unamortized balance of $182,945 (December 31, 2013 - $306,629) will be amortized through December 2015. These warrants were fair valued using a trinomial barrier pricing model with the following weighted average assumptions: exercise price of $1.50, risk-free interest rate of 1.89%, expected life of 3.4 years, an expected volatility factor of 75.90%, a dividend yield of 0.00% and a probability exercisability of 11%. The Company estimated the exercisability of these warrants using a Monte Carlo probability calculator. | ||
During the nine months ended September 30, 2014, in recognition of past services, the Company issued 730,000 shares of common stock at a fair value of $306,600 to management, employees and consultants, under the Management Compensation Pool. No such issuance was made during the nine months ended September 30, 2013. | ||
The total stock-based compensation recognized for shares issued and warrants granted for services for the three and nine months ended September 30, 2014 and 2013 was as follows: |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||
Consulting fees | $ | - | $ | - | $ | 96,600 | $ | - | |||||
Consulting fees directors and officers | - | - | 155,400 | - | |||||||||
Management fees | 41,228 | 41,228 | 165,684 | 123,684 | |||||||||
Office | - | - | 12,600 | - | |||||||||
$ | 41,228 | $ | 41,228 | $ | 430,284 | $ | 123,684 |
(f) | Warrants |
|
During the year ended December 31, 2010, the Company issued 2,000,000 warrants to two officers and directors of the Company as compensation, as approved by the Board in January 2010. These warrants were exercisable at $1.50 per share expiring December 31, 2015. Effective October 29, 2014, the Company amended these warrants with term changes as follows: |
i) |
The number of warrants is reduced to 600,000; |
(ii) |
The expiration date of the warrants is extended to December 31, 2017; |
(iii) |
The exercise price is reset to $0.65 per share. | |
These amended warrants are fully vested. |
17
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
7. |
CAPITAL STOCK (Continued) |
(f) |
Warrants (Continued) |
These prices are subject to reasonable adjustment upon occurrence of certain conditions, as defined in the warrant indenture.
In March 2013, the Company issued warrants to purchase 2,152,216 shares of common stock, as part of a private placement offering. Each whole warrant is exercisable at $0.90 per share until July 25, 2014. In addition, 215,221 compensation warrants were issued to agents. The terms and conditions of the selling agent warrants are identical to the terms and conditions of the warrants sold to investors as part of the Units, except that the agent warrants had an original expiration date of March 12, 2015.
On September 5, 2013, the Board of Directors amended all outstanding warrants (except those held by a members of management) to extend the expiration date of the warrants to December 31, 2015. On October 7, 2013, the Board of Directors approved the re-pricing of the exercise price of all outstanding warrants, excluding any warrants held by management, to $0.65.
In December 2013, the Company issued warrants to purchase 5,714,285 shares of common stock, as part of a private placement offering (Note 7(c)). Each whole warrant is exercisable at $0.45 per share until December 31, 2016.
In April and August 2014, the Company issued investors warrants to purchase 4,500,000 and 5,625,000 shares of common stock, respectively, as part of a private placement offering (Note 7(c)). Each whole warrant is exercisable at $0.55 per share until December 31, 2017.
Details of stock purchase warrant activity for the year ended December 31, 2013 and the period ended September 30, 2014 are as follows:
September 30, 2014 | December 31, 2013 | ||||||||||||
Weighted | Weighted | ||||||||||||
Average | Average | ||||||||||||
Number | Exercise | Number | Exercise | ||||||||||
of Warrants | Price | of Warrants | Price | ||||||||||
Outstanding - beginning of period | 12,762,585 | $ | 0.69 | 4,716,862 | $ | 1.01 | |||||||
Issued | 10,125,000 | 0.55 | 8,081,723 | 0.51 | |||||||||
Expired | - | - | (36,000 | ) | (1.18 | ) | |||||||
Outstanding - end of period | 22,887,585 | $ | 0.55 | 12,762,585 | $ | 0.69 |
18
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
7. |
CAPITAL STOCK (Continued) |
(f) |
Warrants (Continued) |
As at September 30, 2014 and December 31, 2013, the following warrants were outstanding:
Expiry Date | Exercise Price | September 30, | December 31, | ||||||||
2014 | 2013 | ||||||||||
31-Dec-15 | $ 0.65 | 1,770,328 | 1,770,328 | ||||||||
31-Dec-15 | $ 0.65 | 910,534 | 910,534 | ||||||||
31-Dec-15 | $ 0.65 | 2,367,437 | 2,367,437 | ||||||||
31-Dec-15 | $ 1.50 | 2,000,000 | 2,000,000 | ||||||||
31-Dec-16 | $ 0.45 | 5,714,285 | 5,714,285 | ||||||||
31-Dec-17 | $ 0.55 | 10,125,000 | - | ||||||||
22,887,585 | 12,762,585 |
8. |
LOSS PER SHARE |
Potentially dilutive securities not included in diluted weighted average shares outstanding include shares underlying 150,000 in outstanding options and 22,887,585 in outstanding warrants. | |
9. |
COMMITMENTS |
|
Pursuant to the Binding MOU entered into on December 3, 2013 with the Investor (Note 7 (c)), the Company has closed the sales of 5,714,285 First Tranche Units and 11,250,000 Second Tranche Units, for total gross proceeds of $6,500,000. | |
The closing for the sale of the balance of 15,000,000 Second Tranche Units is scheduled to occur within 30 days after the date upon which the Environmental Impact Statement for the Companys Cerro Blanco project is completed, or such other date as the Company and the Investor may agree. The MOU provides for 7% selling commission in connection with the sale of the Second Tranche Units to non-U.S. purchasers. | ||
In connection with the completion of the closing of the sale of the Second Tranche Units, the Company has agreed to grant to the Investor at no additional cost warrants to purchase up to 6,000,000 shares of common stock at $0.50 per share exercisable immediately upon issuance and through December 31, 2017 (the Bonus Warrants). The Bonus Warrants will be in form substantially identical to the Second Tranche Warrants. | ||
|
On August 12, 2014, the Company signed a service termination agreement with Lan Shangguan, former Chief Financial Officer, that on termination date the Company will issue to Ms. Shangguan 70,000 shares of common stock at no cash consideration for her assistance to the new Chief Financial Officer during the transition. |
19
WHITE MOUNTAIN TITANIUM CORPORATION |
(An Exploration Stage Company) |
Notes to Condensed Consolidated Financial Statements |
Nine months ended September 30, 2014 |
(Unaudited - Expressed in US dollars) |
9. |
COMMITMENTS (Continued) |
|
On March 17, 2014, the Company entered into a financial advisory services agreement with RBC Capital Markets (the Advisory Agreement). Pursuant to the Advisory Agreement, the Company will pay to RBC the following fees: |
|
a work fee of $30,000 per month for a maximum of six months, of which $150,000 has been paid; | |
|
a success fee of 2.0% of the Transaction Proceeds as defined in the Advisory Agreement, subject to a minimum of $2,000,000; and | |
|
out-of-pocket expenses up to a maximum of $100,000. |
10. |
SUBSEQUENT EVENTS |
Management has evaluated subsequent events through November 10, 2014, which represents the date the consolidated financial statements were issued. The following subsequent events have occurred: |
|
On October 2, 2014, the Company granted 1,075,000 shares of stock options to directors at an exercise price of $0.45 with expiration date of December 31, 2017. |
20
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Managements Discussion and Analysis of Financial Condition and Results of Operations analyze the major elements of our balance sheets and statements of operations. This section should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2013, and our unaudited interim consolidated condensed financial statements for the nine months ended September 30, 2014 and accompanying notes to these financial statements (financial statements).
Forward Looking Statements
The statements contained in this report that are not historical facts are forward-looking statements that represent managements 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, 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, continued access to financing prior to completion of the EIS, 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.
There may also be other risks and uncertainties that we are unable to predict at this time or that we do not now expect to have a material adverse impact on our business.
Overview
We are a mineral exploration company engaged in the search for mineral deposits or reserves which could be economically and legally extracted or recovered. We hold mining concessions covering two rutile properties located in the Atacama region (Region III) of northern Chile, namely Cerro Blanco and the newly discovered La Martina.
We were incorporated in the State of Nevada on April 24, 1998. We have six wholly owned subsidiaries: SCM White Mountain Titanium, a Chilean stock company which holds our Chilean mining concessions for our Cerro Blanco project and conducts our principal exploration operations on that property; White Mountain Metals SpA, a Chilean stock company which currently has no active operations; White Mountain Titanium Corporation, a Canadian stock company which provides management and administrative services on behalf of the U.S. parent; White Mountain Minerals SpA, which holds our Chilean mining concessions for our La Martina project and conducts our principal exploration operations on that property; White Mountain Energy Ltda., an inactive Chilean company; and White Mountain Titanium (Hong Kong), a Hong Kong company which has been recently re-activated and is intended to be the holding company for our operations in PRC.
Our principal business is to explore for and develop natural rutile deposits on our mining concessions. Our principal objective is to complete the Companys EIS application and secure the Second Tranche funding and, if achieved, then to advance the Cerro Blanco project towards a final engineering feasibility, to secure off-take agreements for the planned rutile concentrate output, and to secure funding or other arrangements to place the project into production, if warranted. It would be the intention to sell the rutile concentrate to titanium metal and pigment producers. In addition, we continue to fund research and development on the Chinuka Process, which is conducting research into the recovery of feldspar and the production of refined titanium metal from materials sourced from these mining concessions. We also plan to expand our exploration activities on the La Martina concessions which we discovered in 2013.
21
Our common stock is currently traded in the over-the-counter market and is quoted on the OTCQB marketplace. Upon meeting listing requirements, it is our intention to graduate to a more senior exchange in due course.
We have produced no revenues, have experienced losses since inception, have no revenue producing operations, and currently rely upon the sale of our securities to fund our exploration activities on our mining properties.
Cerro Blanco
We are progressing in various stages of development on our Cerro Blanco project, which is our principal project. We have identified nine natural rutile prospects designated as the Las Carolinas, La Cantera, Eli, Chascones, Hororios Creek, Hippo Ear, Quartz Creek, Algodon and Bono prospects. The last five of these have only recently been located. We presently hold 44 registered mining exploitation concessions and 36 exploration concessions over an area of approximately 17,041 hectares.
La Martina
La Martina consists of 6 registered exploration concessions, covering an area of 1,288 hectares, comparable in size to the area covering the current nine known prospects at Cerro Blanco. Alteration and mineralization at La Martina is similar to that observed on the Cerro Blanco property.
Off-Take Agreements
We currently have two definitive off-take agreements in place:
-
During 2011, we entered into our first off-take agreement with a major international pigment producer where that producer will purchase 25,000 tonnes per annum of our standard grade, natural rutile concentrate at US$1,200 per tonne FOB port. Deliveries must commence no later than September, 2014 and would run to December, 2016. The term of the agreement may then be extended by mutual agreement. If we are unable to provide product to the buyer before September 30, 2014, they will have the right to terminate this off-take agreement.
-
On September 27, 2012, we entered into a second off-take agreement with a major international pigment producer for the supply of natural rutile concentrate from the Cerro Blanco project. Under the agreement, the pigment producer has agreed to purchase 10,000 tonnes per annum of our standard grade rutile concentrate at $1,250 per tonne FOB port. The three year term, which commences upon the production of 5,000 tons of product from the Cerro Blanco project, may be extended by mutual agreement. If we are unable to provide product to the buyer before December 31, 2014, they will have the right to terminate this off-take agreement.
These two contracts are still in force at September 30, 2014.
The Chinuka Process
The Chinuka Process is a patented titanium metal technology developed by Chinuka Ltd. (Chinuka). We hold a sub-license to use Chinukas patented electro-refining process to produce titanium metal directly from a variety of titanium oxide concentrates. To-date, Company-funded research on the Chinuka Process has focused principally on the production of titanium metal using natural rutile concentrate from the Cerro Blanco project as the process feedstock. The contract with Chinuka is currently under review for potential adjustments that better reflect changing priorities of both parties.
Major Developments
Since December 31, 2013, we had the following major developments:
22
- We issued 730,000 shares of common stock at a fair value of $306,600 to
management, employees and consultants, under the Management Compensation Pool.
Share certificates for 175,000 shares issued to our staff in Chile have been
distributed, while the remaining share certificates for 555,000 shares issued
to consultants and directors and officers have been withheld from
distribution. The Board of Directors of the Company elected to place these
shares under a voluntary escrow until the Company completes its Environmental
Impact Statement.
- We entered into a financial advisory services agreement with RBC Capital
Markets. The mandate will see both parties looking to enhance our presence in
Asia and the PRC, as well as seeking to attract support for the Cerro Blanco
Project from a strategic partner.
- We closed the sale of 5,000,000 Second Tranche Units (the Second Tranche
Units) in April 2014 with Million Cheer Investment Limited (MCIL), a
company formed in Hong Kong. We closed additional sale of 6,250,000 Second
Tranche Units with an accredited investor in August 2014. See note 7 (c) to
the Financial Statements for transaction details.
- In April 2014, we completed and filed with the Chilean environmental
authority, Servicio de Evaluación Ambiental (SEA), a written response to a
first round of questions and comments posed during a public review of the
Companys EIS application. Subsequent to filing our written response, Company
management and its environmental personnel met with national and local
government representatives from the Third Region to discuss outstanding issues
related to the Cerro Blanco project (the Project). During the meeting,
attendees from the national government and councilors representing local
communities expressed strong support for the Project.
On July 1, 2014, SEA replied to us with a second round of questions and comments, 70% fewer than were raised in the first round. As importantly, by the second round almost half of the government ministries had no further questions or comments, and of those raised, most sought further clarification centered on three issues: water, disaster contingencies, resettlement and community issues.
Following official receipt of the second round of questions and comments, the Company was given 90 working days to prepare and file a written response with SEA. Technical work to address the second round of questions has been completed and the report was filed at October 30, 2014. Whilst the Company is not in a position to forecast when full EIS approval will be issued, ensuring a continuing dialogue with and maintaining strong support from government and local communities remains a primary objective of our project personnel.
- On July 2, 2014, the Board of Directors of the Company appointed Kin Wong
as the Chief Executive Officer to serve as the Companys principal executive
officer. Mr. Wong has served as a director and Chairman of the Company since
January 2014. Further to the above, the Board of Directors of the Company
appointed Michael Kurtanjek as Chief Operating Officer. Mr. Kurtanjek now
serves as both President and Chief Operating Officer.
Since expanding the Board to seven and announcing the appointment of Mr. Wong as Chairman at the outset of the year, directors and management have been working jointly to advance the Cerro Blanco project to final engineering feasibility, secure long term financing, restore shareholder value through share price appreciation and seek strategic alliances in Asia and the PRC. To that end, the Company opened an office in the PRC which will be used to provide corporate and project information to interested companies and individual investors in mainland China and Hong Kong. The new PRC office, located in Shenzhen, has been put in use. On September 30, 2014, our Vancouver, Canada office was shut down as we no longer have employees in that location. Our Canadian subsidiary will continue to meet Canadian regulatory reporting requirements for two years.
- On July 30, 2014 the Board of Directors approved an amendment to the
Binding MOU increasing the amount of Second Tranche Units by up to $5,000,000.
- On July 30, 2014, the Board of Directors approved the appointment of Eric
Gan as our Chief Financial Officer effective August 15, 2014.
- On September 30, 2014, Brian Flower, our Executive Vice President, retired from his management position. Mr. Flower has served the Company for over nine years.
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- On September 11, 2014, the Board of Directors appointed Ron Vance to replace Terese Gieselman as our Corporate Secretary, effective October 1, 2014.
Results of Operations
We recorded a net loss of $1,928,546 and $4,510,257 for the three and nine months ended September 30, 2014, respectively, ($0.05 and $0.06 per weighted average common share outstanding) compared to a net loss of $992,164 and $3,324,607 ($0.01 and $0.05 per share) for the comparative interim periods in 2013.
A number of expenses in the nine months ended September 30, 2014 were materially affected by the issuance of 730,000 shares of common stock during that period. These shares were issued to directors, officers, management, employees and consultants. As a result, a total of $306,600 was recognized as stock based compensation expense and allocated to Consulting fees, Consulting fees directors and officers, and Management fees. No such issuance was made in the prior year interim period. The fluctuations of these expenses are as follows:
- Consulting fees of $551,823 for 2014 as compared to $129,791 for 2013. In addition to the stock-based compensation expense discussed above, consulting fees for the current period also included $180,000 paid to RBC, representing the monthly work fees pursuant to a financial advisory services agreement entered in March 2014.
- Consulting fees directors and officers: $674,616 for 2014 as compared to $303,678 for 2013. The stock-based compensation as discussed above, as well as a retroactive payment to new management, contributed most of the increase. In addition, monthly consulting fees to directors and officers also increased as a result of an increase in the level of services provided by officers during the current year.
- Management fees of $309,684 for 2014 as compared to $303,684 for 2013. The increase as a result of the stock- based compensation expense was largely offset by a decrease in the monthly management fees following a reduction in the level of the related management services.
Exploration expenditures increased with a total of $1,849,002 for the current nine-month period as compared to $1,324,008 for 2013. The increase reflects increased activities in the Companys EIS related technical work.
Research and development costs represent the amount of funding the Company has provided to further the Chinuka process. There was no amount committed and payable pertaining to the current period as a result of the expiration of the last annual funding agreement in December 2013. The renewal of the funding agreement is subject to further negotiation process. The $8,197 expense for the current period represented the difference between the amount accrued at December 31, 2013 and that actually paid subsequent to the year end.
Foreign exchange loss was $35,663 for the current period, as compared to $62,759 for the comparative period, due to the volatility of U.S. dollar compared to the Chilean Peso and Canadian dollar during the comparable period.
Liquidity and Cash Flows
As of September 30, 2014, we had a working capital of $2,004,574 (December 31, 2013: $1,692,148), including $2,319,385 (December 31, 2013: $2,056,996) of cash.
Cash used in operating activities was $3,871,418 for the nine months ended September 30, 2014, compared to $2,911,438 for the comparable prior year period. For the current period, more cash was used due to increased exploration and technical work in our Chilean operation. Cash used in investing activities was $91,598 for the nine months ended September 30, 2014 (2013: $1,489). Cash used in investing activities was primarily for new office renovation spending in Shenzhen, China. Cash raised from financing activities was $4,225,405 for the nine months ended September 30, 2014, compared to $2,762,751 for the comparable prior year period. We sold 10,125,000 units for gross proceeds of $4,500,000 less $315,000 in commissions.
We anticipate that we will need to raise additional funds to meet or exceed the needs of our operations, and we continue to do so actively. 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 general capital markets conditions, overall global economy, and the market price of our common stock. With the exception of funds on deposit and the expected remaining $3,200,000 from the sale of Second Tranche Units, we have no other sources of committed funds, except for outstanding warrants for which there are no commitments to exercise. The most likely source of new funds would be an equity placement of common shares or some form of strategic alliance. We believe that a failure to raise funds in a timely manner would likely delay the achievement of some of our project milestones, and would delay any decision regarding the viability of operations while likely increasing future costs.
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Recent Accounting Pronouncements
In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). US GAAP does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendments in this ASU state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets.
This ASU applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements or results of operations.
In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities. The amendments in this Update remove the definition of a development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows, and shareholder's equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations. The amendments also remove paragraph 810-10-15-16, which states that a development stage entity does not meet the condition in paragraph 810-10-15-14(a) to be a variable interest entity (VIE) if (1) the entity can demonstrate that the equity invested in the legal entity is sufficient to permit it to finance the activities it is currently engaged in and (2) the entity’s governing documents and contractual arrangements allow additional equity investments. These amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The Company elects not to take early adoption.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we have elected not to provide the disclosure required by this item.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 15(d)-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and (ii) is accumulated and communicated to the Companys management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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Changes in internal control over financial reporting
There has been no change in our internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during our most recent fiscal quarter ended September 30, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1A. Risk Factors
See Item 1A Risk Factors as disclosed in Form 10-K as filed with the Securities and Exchange Commission on March 14, 2014.
Item 4. Mine Safety Disclosures
There are no reportable events required pursuant to this item.
Item 6. Exhibits
The following exhibits are furnished with this report:
Exhibit No. | Description | |
31.1 | Rule 15d-14(a) Certification by Chief Executive Officer | |
31.2 | Rule 15d-14(a) Certification by Chief Financial Officer | |
32.1* | Section 1350 Certification of Chief Executive Officer | |
32.2* | Section 1350 Certification of Chief Financial Officer | |
101.INS** | XBRL Instance Document | |
101.SCH** | XBRL Taxonomy Extension Schema Document | |
101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB** | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
* |
This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (Securities Act), or the Exchange Act. | |
** |
Pursuant to applicable securities laws and regulations, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 of the Securities Act, are deemed not filed for purposes of Section 18 of the Exchange Act and otherwise are not subject to liability under these sections. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
White Mountain Titanium Corporation
Date: November 12, 2014 | By | /s/ Kin Wong |
Kin Wong, Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: November 12, 2014 | By | /s/ Eric Gan |
Eric Gan, Chief Financial Officer | ||
(Principal Financial Officer) |
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