Attached files
| file | filename |
|---|---|
| 10-K - 10-K - Contango ORE, Inc. | ctgo-20160630x10k.htm |
| EX-32.2 - EXHIBIT 32.2 - Contango ORE, Inc. | ctgo-20160630x10kxex322.htm |
| EX-32.1 - EXHIBIT 32.1 - Contango ORE, Inc. | ctgo-20160630x10kxex321.htm |
| EX-31.2 - EXHIBIT 31.2 - Contango ORE, Inc. | ctgo-20160630x10kxex312.htm |
| EX-31.1 - EXHIBIT 31.1 - Contango ORE, Inc. | ctgo-20160630x10kxex311.htm |
| EX-23.2 - EXHIBIT 23.2 - Contango ORE, Inc. | ex232-heinconsent.htm |
| EX-23.1 - EXHIBIT 23.1 BDO 2015 CONSENT - Contango ORE, Inc. | ex231bdo2015opinionconsent.htm |
Peak Gold, LLC
Financial Statements
As of June 30, 2016 and 2015 and for the Year Ended June 30, 2016 and for the Period from Inception (January 8, 2015) through June 30, 2015
INDEX
PAGE
Independent Auditor’s Report 3
Financial Statements
Balance Sheets 4
Statements of Operations 5
Statements of Members’ Equity 6
Statements of Cash Flows 7
Notes to Financial Statements 8-11
2
PEAK GOLD, LLC
Balance Sheets
June 30, | June 30, | |||||||
2016 | 2015 | |||||||
Assets | ||||||||
Cash and equivalents | $ | 990,698 | 4,757,194 | |||||
Mineral properties | 1,433,886 | 1,433,886 | ||||||
Total assets | $ | 2,424,584 | $ | 6,191,080 | ||||
Liabilities and Members' Equity | ||||||||
Accounts payable | $ | 1,536,097 | 1,950,796 | |||||
Amounts due Royal Alaska | 123,314 | 109,680 | ||||||
Amounts due Royal Gold | 15,545 | — | ||||||
Total liabilities | 1,674,956 | 2,060,476 | ||||||
Commitments and Contingencies | ||||||||
Members' equity | 749,628 | 4,130,604 | ||||||
Total liabilities and members' equity | 2,424,584 | 6,191,080 | ||||||
See accompanying notes to financial statements.
3
PEAK GOLD, LLC
Statements of Operations
For the period from | ||||||||
For the year ended | inception (January 8, 2015 | |||||||
June 30, 2016 | through June 30, 2015 | |||||||
Operating Expenses | ||||||||
Drilling | $ | 3,180,692 | $ | 481,584 | ||||
Labor | 1,896,271 | 507,503 | ||||||
Fuel, rents and field supplies | 1,324,476 | 368,260 | ||||||
General and administrative | 1,002,865 | 395,851 | ||||||
Contracted rental services | 534,955 | 339,383 | ||||||
Geochemistry | 392,641 | 80,500 | ||||||
Community relations | 314,570 | 89,113 | ||||||
Land | 138,427 | 11,626 | ||||||
Technical studies | 132,305 | — | ||||||
Geophysics | 91,123 | 22,500 | ||||||
Communications | 22,651 | 6,962 | ||||||
Total operating expenses | 9,030,976 | 2,303,282 | ||||||
Net loss | $ | (9,030,976 | ) | $ | (2,303,282 | ) | ||
See accompanying notes to financial statements.
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PEAK GOLD, LLC
Statements of Members’ Equity
Capital Contributions | ||||||||||||||||
CORE | Royal Alaska | Accumulated Losses | Total Member Equity | |||||||||||||
Balance at January 8, 2015 | $ | — | $ | — | $ | — | $ | — | ||||||||
(inception date) | ||||||||||||||||
Equity contributions: | ||||||||||||||||
Tetlin mineral property | 1,433,886 | — | — | $ | 1,433,886 | |||||||||||
Royal Alaska (option) | 5,000,000 | — | — | $ | 5,000,000 | |||||||||||
Net loss | — | — | (2,303,282 | ) | $ | (2,303,282 | ) | |||||||||
Balance at June 30, 2015 | $ | 6,433,886 | $ | — | $ | (2,303,282 | ) | $ | 4,130,604 | |||||||
Equity contributions: | ||||||||||||||||
Royal Alaska (11.0% Interest) | — | 5,650,000 | — | $ | 5,650,000 | |||||||||||
Net loss | — | — | (9,030,976 | ) | $ | (9,030,976 | ) | |||||||||
Balance at June 30, 2016 | $ | 6,433,886 | $ | 5,650,000 | $ | (11,334,258 | ) | $ | 749,628 | |||||||
See accompanying notes to financial statements.
5
PEAK GOLD, LLC
Statements of Cash Flows
For the year ended June 30, 2016 | For the period from inception (January 8, 2015) through June 30, 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (9,030,976 | ) | $ | (2,303,282 | ) | ||
Changes in assets and liabilities: | ||||||||
Accounts payable | (414,699 | ) | 1,950,796 | |||||
Amounts due Royal Alaska | 13,634 | 109,680 | ||||||
Amounts due Royal Gold | 15,545 | — | ||||||
Net cash used in operating activities | $ | (9,416,496 | ) | $ | (242,806 | ) | ||
Cash flows from financing activities: | ||||||||
Royal Alaska earn in contribution | 5,650,000 | 5,000,000 | ||||||
Net cash provided by financing activities | 5,650,000 | 5,000,000 | ||||||
Net (decrease) increase in cash and equivalents | (3,766,496 | ) | 4,757,194 | |||||
Cash and equivalents at beginning of period | $ | 4,757,194 | $ | — | ||||
Cash and equivalents at end of period | $ | 990,698 | $ | 4,757,194 | ||||
Non-Cash Financing Activities: | ||||||||
Mineral property contribution by member | $ | — | $ | 1,433,886 | ||||
See accompanying notes to financial statements.
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PEAK GOLD, LLC
Notes to Financial Statements
1. Organization and Nature of the Business
Peak Gold, LLC (“Peak Gold”, the “Company”, “we”, “us”, or “our), is a Delaware limited liability company formed on January 8, 2015 between Royal Gold, through its wholly-owned subsidiary, Royal Alaska, LLC (“Royal Alaska”), and Contango ORE, Inc., through its wholly-owned subsidiary CORE Alaska, LLC (together, “Contango”). Royal Alaska and Core entered a limited liability company agreement for Peak Gold, a joint venture for exploration and advancement of the Tetlin gold project located near Tok, Alaska (the “Tetlin Project”). Contango contributed all of its assets relating to the Tetlin Project to Peak Gold, including a mining lease and certain state of Alaska mining claims. Royal Alaska contributed $5.0 million in cash to Peak Gold. Contango will initially hold a 100% membership interest in Peak Gold. Royal Alaska has the right to obtain up to 40% of the membership interest in Peak Gold by making contributions, detailed in Note 3 below, of up to $30.0 million (including Royal Alaska’s initial $5.0 million contribution) in cash to Peak Gold by October 31, 2018. As of June 30, 2016, Royal Alaska has contributed $5,650,000 and has obtained an 11% membership interest in Peak Gold.
2. Liquidity and Going Concern
The financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations in the normal course of business. The ability of the Company to continue as a going concern is dependent upon, among other things, future contributions from Royal Alaska.
3. | Summary of Significant Accounting Policies |
Use of Estimates
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses during the reporting periods. Actual results could differ significantly from those estimates.
Cash and Equivalents
Cash and equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Cash and equivalents were held in cash deposit accounts as of June 30, 2016.
Mineral Properties
Mineral properties include the Tetlin lease and unpatented State of Alaska mining claims which make up the Tetlin Project. At such time as the associated exploration stage mineral property is converted to proven and probable reserves, the cost basis is amortized over the remaining life of the mineral property, using proven and probable reserves.
Asset Impairment
We evaluate our mineral property for impairment whenever events or changes in circumstances indicate that the related carrying amount of the asset may not be recoverable. Specifically, we evaluate the recoverability of the carrying value of exploration stage mineral property in the event of significant decreases in commodity prices, and whenever new information regarding the mineral property is obtained indicating that production or further exploration will not likely occur or may be reduced in the future, thus affecting the future recoverability of the mineral property. Impairments in the carrying value of the mineral property is measured
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PEAK GOLD, LLC
Notes to Financial Statements
and recorded to the extent that the carrying value in the mineral property exceeds its estimated fair value, which is generally calculated using estimated future discounted cash flows.
Costs and Expenses
Costs and expenses are those costs specific to the exploration and advancement of the Tetlin Project. These costs are expensed when incurred.
Income taxes
As a limited liability company, the Company’s taxable income or loss is allocated to members in accordance with their respective percentage ownership. Therefore, no provision or liability for income taxes has been included in the financial statements.
Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the Company and recognize a tax liability if the Company has taken an uncertain position that more likely than not would not be sustained upon examination by taxing authorities. Management evaluated the Company’s tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance.
4. Member Contributions
Initial Contributions
Contango contributed $1,433,886 of mineral properties that was credited to Contango’s capital account. Contango holds an initial 100% membership interest in Peak Gold. Royal Alaska made an initial cash contribution of $5,000,000 for an option to earn membership interest, which was credited to Contango’s capital account. Should Royal Alaska elect to make additional contributions to the Company during the earn-in period, only then will Royal Alaska begin to earn a membership interest, and get credit for the initial $5,000,000, as described below. Royal Alaska did not make additional contributions during the period ended June 30, 2015.
Phase I Earn-In
Royal Alaska may make further contributions in an amount up to an additional $5,000,000 for an aggregate percentage interest of up to 10%. If Royal Alaska makes Phase I Earn-In contributions of less than $5,000,000, then, for each $1,000,000 in Phase I Earn-In contributions, Royal Alaska will earn an incremental 2.0% percentage interest.
As of June 30, 2016, Royal Alaska has made $5,000,000 of Phase I Earn-In contributions for a membership interest of 10%.
Phase II Earn-In
If Royal Alaska funds the entire Phase I Earn-In contribution, then Royal Alaska may make further contributions in an amount up to an additional $10,000,000 for an additional percentage interest of up to 15% and a total percentage interest of up to25%. If Royal Alaska makes Phase II Earn-In contributions of less than $10,000,000, then, for each additional $1,000,000 in Phase II Earn-In contributions, Royal Alaska will earn an incremental 1.5% percentage interest.
8
PEAK GOLD, LLC
Notes to Financial Statements
As of June 30, 2016, Royal Alaska has made $650,000 of Phase II Earn-In contributions for a membership interest of 1% and a total membership interest of 11%. On July 14, 2016 Royal Alaska made $2,700,000 of Phase II Earn-In contributions for a membership interest of 4.1% and a total membership interest of 15.1%.
Phase III Earn-In
If Royal Alaska funds the entire Phase II Earn-In contribution, then Royal Alaska may make further contributions in an amount up to an additional $10,000,000 for an additional percentage interest of up to 15% and a total percentage interest of up to 40%. If Royal Alaska makes Phase III Earn-In contributions of less than $10,000,000, then, for each additional $1,000,000 in Phase III Earn-In contributions, Royal Alaska will earn an incremental 1.5% percentage interest.
5. Mineral Properties
As of June 30, 2016 | Cost | Accumulated Depletion | Net | |||||||||
Exploration stage | ||||||||||||
Tetlin Project | $ | 1,433,886 | $ | — | $ | 1,433,886 | ||||||
As of June 30, 2015 | ||||||||||||
Exploration stage | ||||||||||||
Tetlin Project | $ | 1,433,886 | $ | — | $ | 1,433,886 | ||||||
6. Accounts Payable
Accounts payable of $1,536,097 and $1,950,796 as of June 30, 2016 and June 30, 2015, respectively, consisted primarily of fees due consultants as a result of exploration activities on the Tetlin Project.
7. Related Party Transactions
The Company is responsible for reimbursement of certain overhead and general and administrative expenses of Royal Alaska in lieu of a management fee and is to be calculated as 5% of allowable costs, as defined, up to $500,000 per year until the Management Committee has made a construction decision in respect of commercial facilities for the Tetlin Project. Upon and after the time the Management Committee has made a construction decision for the Tetlin Project, the reimbursable expenses are to be calculated as 3% of allowable costs, up to $5,000,000 per year.
The Company incurred reimbursable costs due to Royal Alaska of $430,046 and $109,680 for the fiscal year ended June 30, 2016 and from inception through June 30, 2015, respectively. The reimbursable costs were determined using the 5% rate as described above as the Management Committee has not made a construction decision.
8. Commitments and Contingencies
9
PEAK GOLD, LLC
Notes to Financial Statements
The Company is required to make payments of $110,000 per year, payable in quarterly advance increments of $25,000 on each March 31, September 1, and December 1, to the Native Village of Tetlin under the Community Support Agreement dated April 28, 2016.
9. Subsequent Events
The Company has evaluated subsequent events through August 23, 2016, the date these financial statements were available to be issued.
10