UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the transition period from____________ to____________

Commission File Number 000-55441

WHITE MOUNTAIN TITANIUM CORPORATION
(Name of small business issuer in its charter)

Augusto Leguia 100, Oficina 1401
Las Condes, Santiago Chile
(Address of principal executive offices)

(56) 22 657-1800
(Issuer’s 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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]     No [X]

96,114,442 shares of the issuer’s common stock, $.001 par value, were issued and outstanding at November 21, 2016.

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TABLE OF CONTENTS

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

See notes to the unaudited condensed consolidated interim financial statements.

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See notes to the unaudited condensed consolidated interim financial statements.

4

See notes to the unaudited condensed consolidated interim financial statements.

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See notes to the unaudited condensed consolidated interim financial statements.

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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 interim 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, 2016 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 (“US”) accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted. These unaudited condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s December 31, 2015, Annual Report on Form 10-K filed with the US Securities and Exchange Commission (“SEC”) on March 28, 2016. The organization and business of the Company, accounting policies followed by the Company, other than the recently adopted accounting pronouncements discussed below and other information are contained in the notes to the Company’s audited consolidated financial statements for the year ended December 31, 2015 filed as part of the Company’s December 31, 2015 Annual Report on Form 10-K. The results of operations for the period ended September 30, 2016 are not necessarily indicative of the operating results for the full year.

These condensed consolidated interim financial statements have been prepared by management on the basis of US 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 $61,792,864 at September 30, 2016 (December 31, 2015 - $59,653,661), 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. 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.

Convertible debentures

Convertible debentures and warrants are bifurcated between debt component and equity component based on the relative fair values of the debt and warrants. The conversion component of the debt component is then fair valued and accounted for as an additional discount to the debt component and is then treated as a derivative liability and fair valued every balance sheet date. The resulting discount to the debt component is amortized over the term of the debt using the effective interest rate method.

The following accounting pronouncements were adopted by the Company:

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During the period, the Company adopted update No. 2015-02 Consolidation (Topic 810) Amendments to the Consolidated Analysis. The amendments in this Update affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments:

The amendments in this Update are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015.

The adoption of this standard had no effects on the Company’s condensed consolidated interim financial statements.

During the current year, the Company adopted FASB Update No. 2014-12—Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force). The adoption of this standard had no effects on the Company’s condensed consolidated interim financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. Prior to the issuance of the standard, debt issuance costs were required to be presented in the balance sheet as an asset. ASU 2015-03 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The adoption of this standard had no effects on the Company’s condensed consolidated interim financial statements.

The following accounting pronouncements will become effective in future periods:

In August 2014, the FASB issued Update No. 2014-15—Presentation of Financial Statements— Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The amendments in the Update provide guidance on management’s responsibility to disclose conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern. The Update requires management also to discuss plans to mitigate the conditions or events and if the plans will alleviate the substantial doubt by considering the probability of implementation of the plans and mitigation effect of the plans. The new requirements are effective for annual periods ending after December 15, 2016. The adoption of this standard is not expected to have significant effects on the Company’s condensed consolidated interim financial statements.

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In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. The core principle of the standard is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in its statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The Company will be required to adopt the new standard in the first quarter of 2019. The Company is currently evaluating the impact this new standard will have on its financial statements.

Cash – as held-for-trading
Receivables – as refundable deposits and receivables
Accounts payable and accrued liabilities – as other financial liabilities
Convertible Note – as other financial liabilities
Derivative Liabilities – as held for trading

The carrying amounts of the Company’s cash, receivables and accounts payables and accrued liabilities approximate their respective fair values due to the short maturities of these instruments. The Company’s Convertible Note is classified as other financial liabilities and is carried at amortized cost. The fair value of the Convertible Note approximates its face value. The three levels of the fair value hierarchy are described below:

The following table summarizes the fair value by level at September 30, 2016 and December 31, 2015 for assets and liabilities measured at fair value on a recurring basis:

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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 US, Chilean and Chinese financial institutions.

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 Company’s cash at September 30, 2016 and December 31, 2015 totaled $677,985 and $396,878, respectively. At September 30, 2016 and December 31, 2015, the Company had accounts payable and accrued liabilities of $171,256, and $135,354, respectively, all of which fall due in the next fiscal quarter. The Company has a Convertible Note for principal amount of $2,000,000 which is due on March 16, 2018 (Note 6).

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.

The Company’s cash consists of cash held in bank accounts. Due to the short-term nature of this financial instrument, fluctuations in market interest rates do not have a significant impact on estimated fair values and on cash flows associated with the interest income.

The convertible notes have a fixed rate of 7% (note 6). The Company is not exposed to interest cash-flow risk as fluctuations on market rates do not impact the Company’s cash-flows.

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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 Chilean pesos (“CLP”), Chinese yuan (“RMB”), and Hong Kong dollars (“HKD”)). As at September 30, 2016, the Company has net monetary liabilities of $9,454 (December 31, 2015 - net monetary liabilities of $44,693) denominated in CLP, net monetary assets of $1,100 (December 31, 2015 - $7,678) denominated in HKD, and net monetary assets of $77,204 (December 31, 2015 - $152,095) denominated in RMB. As at September 30, 2016, the Company’s sensitivity analysis suggests that a change in the absolute rate of exchange in CLP, RMB and HKD by 10% will not have a material effect on the Company’s business, financial condition and results of operations.

The Company has not entered into any foreign currency contracts to mitigate this 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.

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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 kilometers, 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 Dorado’s 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 southwest of the city of Vallenar and 17 kilometres southwest 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 frequently 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 (“AROs”).

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Exploration expenditures incurred by the Company during the nine months ended September 30, 2016 and 2015 were as follows:

On March 16, 2016, the Company and its wholly-owned subsidiary Sociedad Contractual Minera White Mountain Titanium Corporation entered into a loan agreement and issued a 7% Senior Convertible Promissory Note to the lender for a total of $2,000,000 (the “Convertible Note”).

The Convertible Note has a maturity date of March 16, 2018 and bears simple interest of 7% per annum on the unpaid principal amount until the principal amount is repaid in full.

The Convertible Note is convertible into shares of the Company’s Series A Preferred Stock (“Series A Shares”) at the rate of $0.12 per share, par value of $0.001 per share. Except for the right to elect one director, the Series A Shares have the same voting rights as Common Stockholders and are convertible into Common Stock at conversion price of $0.12 per share. The Convertible Note will automatically convert into Series A Preferred Stock if the Company successfully raises an additional $8,000,000, the proceeds of which are allocated for certain qualified milestones relating to the Cerro Blanco project, or if the Company secures a water off-take agreement for its proposed desalination plant with volume and price components that are mutually satisfactory to both the Company and the lender. In addition, the Company issued to the lender 100 shares of Series A Preferred Stock with a $0.001 par value and warrants to purchase 8,333,333 shares of Common Stock at price of $0.30 per share until March 16, 2019. An amount of $12 was recognized for the preferred share issuance which has been recognized as a derivative liability.

In the event of default, the interest rate increases to 25% per annum. Subject to certain exceptions, the Convertible Note is senior to any other indebtedness of the Company.

The fair value of the liability component was determined using present value of expected cash-flows. The conversion component of the Convertible Note was classified as a derivative liability. The estimated fair value of the derivative liability component was valued using the Black-Scholes option model using the following assumptions: volatility of 145.14%, expected term of 2 years, discount rate of 1.13% and dividend yield of 0%. The warrants were classified as equity and were recorded as additional paid in capital at their estimated fair value using the Black-Scholes option model using the following assumptions: volatility of 131.93%, expected term of 3 years, discount rate of 1.13% and dividend yield of 0%.

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Based on the valuation of the instruments, the proportionate allocation of fair values of the Convertible Note on initial recognition was allocated to the debt component as $748,591, the derivative liability component as $845,809 and the warrants component as $405,600.

The derivative component was further revalued at September 30, 2016 resulting in a gain on derivative liability of $169,558 and an ending balance of $676,251. The derivative liability component was revalued using the following assumptions: volatility of 161.54%, expected term of 1.46 years, discount rate of 1.13% and dividend yield of 0%.

$265,576 of accretion expense was recognized using the effective interest rate method during the nine months ended September 30, 2016. The debt component as at September 30, 2016 is $1,014,167.

During the nine months ended September 30, 2016, no common stock was issued.

During the period ended September 30, 2016, the Company designated 19,000,100 shares of Series A preferred stock with a par value of $0.001 per share. Each share of preferred stock is convertible into one common share at any time at the holder’s option, at a conversion of $0.12 per share subject to the adjustments to the conversion ratio. The adjustment to the conversion price of these preferred shares is based on the lowest of the share price of any common shares issued, the exercise price of any options granted or repriced, or any common shares issued after the issuance of these preferred shares.

The preferred stock is unlisted, non-retractable and non-redeemable. The preferred stockholders are entitled to the number of votes equal to the number of whole shares of common stock into which the preferred stock is convertible. The preferred stockholders are further entitled to the same dividends and distributions as the common stockholders.

In connection with the issuance of the Convertible Note (Note 6), 100 shares of Series A Preferred Stock, $0.001 par value, were issued to the note holder.

The Company has a stock option plan, adopted in 2005, and a stock option/stock issuance plan, adopted in 2010, which has been replaced by a stock incentive plan adopted in June 2015 (individually, the “2005 Plan”, the “2010 Plan”, and the “2015 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 2015 Plan was originally authorized to grant 4,641,040 shares, which amount is increased at the end of each year to represent 10% of the total number of shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year, less 3,949,500 shares. Effective January 1, 2016, the 2015 Plan authorized shares automatically increased to 5,661,944 shares. 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 2015 Plan may not exceed ten years and the exercise price of any stock option plan is fixed by the plan administrator.

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The Company originally also adopted a management compensation pool for the benefit of officers, directors and employees of the Company. The pool consists of 1% of the outstanding shares at the end of each year. The shares granted under the compensation pool program are issued under the 2015 Plan.

The following table represents service-based stock option activity during the nine months ended September 30, 2016 and the year ended December 31, 2015:

As at September 30, 2016 and December 31, 2015, the following stock options were outstanding:

The shares under option at September 30, 2016 had an intrinsic value of $nil (December 31, 2015 - $nil) and a weighted average remaining contractual life of 1.12 (December 31, 2015 – 1.94) years.

During the nine months ended September 30, 2016, $129,007 (2015 - $451,369) was recognized as stock-based compensation for shares of common stock issuable upon the market performance of the Company’s stock.

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On March 16, 2016, the Company issued warrants to purchase 8,333,333 shares of Common Stock, in connection with the issuance of Convertible Promissory Note (Note 6). Each whole warrant is exercisable at $0.30 per share until March 16, 2019.

Stock purchase warrant activity for the period ended September 30, 2016 and the year ended December 31, 2015 is as follows:

As at September 30, 2016 and December 31, 2015, the following warrants were outstanding:

Potentially dilutive securities not included in diluted weighted average shares outstanding include shares underlying 675,000 in outstanding options and 38,647,619 in outstanding warrants.

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The Company entered into a lease agreement for office premises in China that commenced July 1, 2014 with an expiration date of June 30, 2021. The total lease payment pursuant to the agreement is $584,018, of which the remaining balance at September 30, 2016 is $375,440. In June 2016, the Company reached an agreement with the landlord and terminated the lease on August 2, 2016 with a loss of a deposit of $14,000.

The Company entered into a lease agreement for office premises in China that commenced September 1, 2016 and expires August 31, 2018. The total lease payment pursuant to the agreement is $54,710, of which the remaining balance at September 30, 2016 is $52,430.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s 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, 2015, and our unaudited interim consolidated condensed financial statements for the nine months ended September 30, 2016 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 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,” “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, the cyclicality of the titanium dioxide industry, global economic and political conditions, global productive capacity, 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 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, an inactive Chilean stock company; 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; White Mountain Titanium (Hong Kong), a Hong Kong corporation and parent of our Chinese corporation; and Cerro Blanco Titanium Corporation Limited (Shenzhen), a Chinese corporation.

Our principal business is to explore for and develop natural rutile deposits on our mining concessions. With the receipt of the RCA for our water desalination plant, we now have the ability to add the production and sale of desalinated industrial water to our principal business interests. Our current principal objectives are to advance the Cerro Blanco project through the development of the seawater desalination plant, continued efforts to increase the verified grade and size of the Cerro Blanco deposit, securing off-take agreements for the planned rutile concentrate output, and securing strategic financial and development partnerships. We intend to sell industrial grade desalinated water to local credit-worthy off-takers. We also intend to sell the rutile concentrate to titanium metal and pigment producers. In addition, we continue to research into the recovery of feldspar, which, if successful, would provide another potential income stream from the sale of feldspar to the glass and ceramics industries.

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During the current year, we will look to advance our Cerro Blanco Project on several related fronts. We will solicit bids for additional drilling to be carried out at Cerro Blanco with the goal of increasing the overall resource base, and identifying areas of high grade rutile mineralization which would provide quality process plant feed in the early years of production. Also, working with Nexo WMTM Holdings, LLC (“Nexo”), we will seek to obtain off-take agreements for industrial water, which can be made available for sale, from our desalination plant. To that end, discussions have already taken place with a number of interested parties whose water requirements could be met by our water project. Whilst the production of industrial water is an integral part of the mining project, sales of surplus water to parties in the Huasco Valley could represent another potential income stream for the project.

Our common stock is currently traded in the over-the-counter market and is quoted on the OTCQB Markets. 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, Hororio’s Creek, Hippo Ear, Quartz Creek, Algodon and Bono prospects. The last five of these have only recently been located. We presently hold 58 registered mining exploration concessions and three exploration concessions over an area of approximately 14,791 hectares.

La Martina

La Martina consists of six 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:

These two contracts were still in force at September 30, 2016.

Major Developments

Since December 31, 2015, we had the following major developments:

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Results of Operations

We recorded a net loss of $686,131 and $2,139,203 for the three months and nine months ended September 30, 2016 ($0.01 and $0.02 per weighted average common share outstanding) compared to a net loss of $821,222 and $3,411,936 ($0.01 and $0.04 per share) for the comparative interim periods in 2015.

Compared to the nine months ended September 30, 2015, our operation expenses for the current comparative period decreased from $3.4 million to $2.1 million due to the changes in the following items:

Gain on derivative liability of $169,558 comprises of a change in value during the period of the conversion component of the convertible notes issued in the first quarter of 2016.

Exploration expense is still the largest single expense item in our operation. It decreased by 17% from $786,604 to $643,817 reflecting reduced geological work after we received the approval of the EIS.

Due to cash constraints, there was no spending on research and development during the nine months ended September 30, 2016.

Loss before other items for the current nine-month period was $2,244,359, compared to $3,370,736 for the comparative period in 2015.

In our China operation we lost $64,858 on disposal of office fixtures and furniture due to the move to a smaller shared office.

Liquidity and Cash Flows

As of September 30, 2016, we had working capital of $664,383 (December 31, 2015: $460,651), including $677,985 of cash (December 31, 2015: $396,878).

Cash used in operating activities was $1,717,937 for the nine months ended September 30, 2016, compared to $2,982,702 for the comparative interim period in 2015. Investing activities for the nine months ended September 30, 2016 were $956 (2015: $1,025).

We raised $2,000,000 from financing activities during the current nine-month period by issuing a Convertible Note. During the nine months ended September 30, 2015, we raised $3,255,000 from issuing Common Stock. The proceeds received will be used to support our operating activities during the year.

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We anticipate that we will need to raise additional funds of $1,500,000 to $4,500,000 to fulfill our commitments stipulated in the EIS as well as finance the necessary corporate general and administrative expenses in 2016. Alternatively, we are currently analyzing the potential for revenue generation through strategic partnership buy-in with EPC/development entities on both the mining and seawater desalination projects. Such an arrangement may provide funds for further development of the project while eliminating the need for future highly-dilutive fundraising endeavors. We are seeking such partnerships only with well-capitalized and capable industry specific entities. For 2016, we prepared a flexible annual operating budget open to adjustment depending on our ability to raise capital and the overall Titanium Dioxide market conditions. The 2017 budget has been reduced to reflect the current cash position of the Company and to provide the best case for the uninterrupted operation of the company in the absence of further fundraising.

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 13(a)-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 Commission’s rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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 28, 2016, for broader discussion on risk factors.

Item 6. Exhibits

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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.

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