DELAWARE
|
13-3180530
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
Class
|
Outstanding at December 2,
2010
|
|
Common
Stock, par value $.0001 per share
|
61,324,632
|
|
October 31,
2010
(unaudited)
|
July 31,
2010
|
||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
and Cash Equivalents
|
$ | 9,254 | $ | 12,125 | ||||
Accounts
Receivable
|
187 | - | ||||||
Stockpiles
and Ore on Leach Pads (Note 6)
|
36,933 | 32,896 | ||||||
Material
and Supply Inventories (Note 5)
|
2,306 | 1,953 | ||||||
Marketable
Securities (Note 4)
|
103 | 30 | ||||||
Prepaid
Expenses
|
330 | 431 | ||||||
Other
Current Assets (Note 7)
|
2,943 | 1,471 | ||||||
Total
Current Assets
|
52,056 | 48,906 | ||||||
Mining
Concessions (Note 11)
|
17,701 | 52 | ||||||
Property
& Equipment – net (Note 8)
|
68,913 | 21,390 | ||||||
Goodwill
(Note 9)
|
3,480 | - | ||||||
Intangible
Assets – net (Note 10)
|
734 | 730 | ||||||
Other
Assets:
|
||||||||
Deferred
Financing Costs
|
1,065 | 1,351 | ||||||
Security
Deposits
|
77 | 66 | ||||||
Total
Other Assets
|
1,142 | 1,417 | ||||||
Total
Assets
|
$ | 144,026 | $ | 72,495 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
Payable
|
$ | 1,607 | $ | 907 | ||||
Accrued
Expenses (Note 18)
|
5,960 | 5,040 | ||||||
Derivative
Contracts (Note 17)
|
17 | 40 | ||||||
Deferred
Tax Liability (Note 19)
|
7,666 | 7,462 | ||||||
Current
Portion of Long-term Debt (Note 16)
|
3,100 | 3,600 | ||||||
Total
Current Liabilities
|
18,350 | 17,049 | ||||||
Reclamation
and Remediation Liabilities (Note 12)
|
2,665 | 2,373 | ||||||
Other
Liabilities
|
308 | 373 | ||||||
Non-Current
Deferred Tax Liability (Note 19)
|
17,869 | 971 | ||||||
Long-Term
Debt (Note 16)
|
400 | 800 | ||||||
Total
Long-term Liabilities
|
21,242 | 4,517 | ||||||
Commitments
and Contingencies
|
- | - | ||||||
Stockholders’
Equity:
|
||||||||
Common
Stock, Par Value $.0001 Per Share; Authorized 75,000,000 shares; Issued
and Outstanding 61,290,287 and 48,768,665 shares,
respectively
|
6 | 5 | ||||||
Additional
Paid-In Capital
|
113,354 | 65,391 | ||||||
Accumulated
Deficit
|
(7,141 | ) | (10,095 | ) | ||||
Deferred
Compensation
|
(9 | ) | (80 | ) | ||||
Accumulated
Other Comprehensive Income (Note 14)
|
(1,776 | ) | (4,292 | ) | ||||
Total
Stockholders’ Equity
|
104,434 | 50,929 | ||||||
Total
Liabilities and Stockholders’ Equity
|
$ | 144,026 | $ | 72,495 | ||||
The
accompanying notes are an integral part of the financial
statements.
|
For
The Three Months Ended
|
||||||||
October 31,
|
||||||||
2010
|
2009
|
|||||||
Revenues
|
||||||||
Sales
– Gold, net
|
$ | 18,952 | $ | 11,727 | ||||
Costs
and Expenses:
|
||||||||
Costs
Applicable to Sales
|
7,210 | 4,110 | ||||||
Depreciation
and Amortization
|
960 | 601 | ||||||
General
and Administrative
|
3,534 | 1,630 | ||||||
Exploration
|
623 | 331 | ||||||
Total
Costs and Expenses
|
12,327 | 6,672 | ||||||
Income
from Operations
|
6,625 | 5,055 | ||||||
Other
Income (Expense):
|
||||||||
Interest
Income
|
3 | 3 | ||||||
Interest
Expense
|
(302 | ) | (376 | ) | ||||
Other
Income (Expense)
|
1 | (24 | ) | |||||
Total
Other Expense
|
(298 | ) | (397 | ) | ||||
Income
before Income Taxes
|
6,327 | 4,658 | ||||||
Income
Tax Expense
|
(3,373 | ) | (1,719 | ) | ||||
Net
Income
|
$ | 2,954 | $ | 2,939 | ||||
Income
Per Common Share
|
||||||||
Basic
|
$ | 0.05 | $ | 0.06 | ||||
Diluted
|
$ | 0.05 | $ | 0.06 | ||||
Basic
Weighted Average Common Shares Outstanding
|
60,970,736 | 48,482,400 | ||||||
Diluted
Weighted Average Common Shares Outstanding
|
61,158,138 | 48,669,802 |
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||||||||
Common
Stock
|
paid-in-
|
Accumulated
|
Comprehensive
|
Deferred
|
Stockholders’
|
|||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Income/(Loss)
|
Compensation
|
Equity
|
||||||||||||||||||||||
Balance
at July 31, 2010
|
48,768,665 | $ | 5 | $ | 65,391 | $ | (10,095 | ) | $ | (4,292 | ) | $ | (80 | ) | $ | 50,929 | ||||||||||||
Nayarit
Acquisition
|
12,453,363 | 1 | 47,598 | - | - | - | 47,599 | |||||||||||||||||||||
Equity
based compensation, net of forfeitures
|
(20,833 | ) | - | 69 | - | - | 71 | 140 | ||||||||||||||||||||
Common
stock issued upon the exercising of options and warrants
|
89,092 | - | 296 | - | - | - | 296 | |||||||||||||||||||||
Net
income for the three months ended October 31, 2010
|
- | - | - | 2,954 | - | - | 2,954 | |||||||||||||||||||||
Change
in fair value on interest rate swaps
|
- | - | - | - | (23 | ) | - | (23 | ) | |||||||||||||||||||
Unrealized
gain on marketable securities
|
- | - | - | - | 71 | - | 71 | |||||||||||||||||||||
Equity
adjustment from foreign currency translation
|
- | - | - | - | 2,468 | - | 2,468 | |||||||||||||||||||||
Total
comprehensive income
|
- | - | - | - | - | - | 5,470 | |||||||||||||||||||||
Balance
at October 31, 2010
|
61,290,287 | $ | 6 | $ | 113,354 | $ | (7,141 | ) | $ | (1,776 | ) | $ | (9 | ) | $ | 104,434 |
For
The
|
||||||||
Three
Months Ended
|
||||||||
October
31,
|
||||||||
2010
|
2009
|
|||||||
Cash
Flow From Operating Activities:
|
||||||||
Net
Income
|
$ | 2,954 | $ | 2,939 | ||||
Adjustments
to Reconcile Net Income to Net Cash Provided by Operating
Activities:
|
||||||||
Depreciation
and Amortization
|
960 | 601 | ||||||
Amortization
of Deferred Financing Costs
|
249 | 242 | ||||||
Accretion
of Reclamation and Remediation
|
42 | 38 | ||||||
Gain
on sale of property and equipment
|
(2 | ) | - | |||||
Equity
Based Compensation
|
140 | 141 | ||||||
Changes
in Operating Assets and Liabilities, excluding business
combination
|
||||||||
Increase
in Accounts Receivable
|
(183 | ) | (16 | ) | ||||
Decrease
in Prepaid Expenses
|
115 | 20 | ||||||
Increase
in Inventory
|
(3,048 | ) | (3,239 | ) | ||||
Decrease
(increase) in Other Current Assets
|
(522 | ) | 53 | |||||
(Increase)
in Other Deposits
|
- | (6 | ) | |||||
Increase
(decrease) in Accounts Payable
|
(318 | ) | 958 | |||||
Increase
(decrease) in Other Liability
|
(72 | ) | 1 | |||||
Increase
in Reclamation and Remediation
|
181 | 20 | ||||||
Increase
in Deferred Tax Liability
|
- | 53 | ||||||
Increase
in Accrued Expenses
|
879 | 1,126 | ||||||
Net
Cash Provided By Operating Activities
|
1,375 | 2,931 | ||||||
Cash
Flow From Investing Activities:
|
||||||||
Purchase
of Mining, Milling and Other Property and Equipment
|
(3,602 | ) | (1,679 | ) | ||||
Purchase
of Intangibles
|
- | (269 | ) | |||||
Cash
Acquired in Nayarit Business Combination
|
50 | - | ||||||
Net
Cash Used in Investing Activities
|
(3,552 | ) | (1,948 | ) |
For
The
|
||||||||
Three
Months Ended
|
||||||||
October 31,
|
||||||||
2010
|
2009
|
|||||||
Cash
Flow From Financing Activities:
|
||||||||
Repayments
from Affiliate, net
|
2 | 1 | ||||||
Repayments
on Notes Payable
|
(900 | ) | (900 | ) | ||||
Proceeds
From Issuance of Common Stock
|
196 | 53 | ||||||
Net
Cash Used in Financing Activities
|
(702 | ) | (846 | ) | ||||
Effect
of Exchange Rate Changes on Cash and Cash Equivalents
|
8 | 188 | ||||||
(Decrease)
Increase In Cash and Cash Equivalents
|
(2,871 | ) | 325 | |||||
Cash
and Cash Equivalents - Beginning
|
12,125 | 6,448 | ||||||
Cash
and Cash Equivalents – Ending
|
$ | 9,254 | $ | 6,773 | ||||
Supplemental
Cash Flow Information:
|
||||||||
Cash
Paid For Interest
|
$ | 55 | $ | 138 | ||||
Cash
Paid For Income Taxes
|
$ | 2,008 | $ | 1,094 | ||||
Non-Cash
Financing Activities:
|
||||||||
Change
in Fair Value of Interest Rate Swaps
|
$ | (23 | ) | $ | 39 | |||
Non-Cash
Investing Activities:
|
||||||||
Fair
Value of Common Stock Issued Upon Acquisition of Nayarit Gold,
Inc.
|
$ | 47,599 | - |
Three
months ended October 31,
|
||||||||
2010
|
2009
|
|||||||
Expected
volatility
|
58.66%
- 66.28%
|
- | ||||||
Risk-free
interest rate
|
1.46%
- 1.76%
|
- | ||||||
Expected
dividend yield
|
-
|
- | ||||||
Expected
life
|
5
years
|
- | ||||||
Forfeiture
rate
|
-
|
- |
Number of
Options
|
Weighted
average
exercise
price
|
Weighted
average
remaining
contracted
term (years)
|
Aggregate
intrinsic
value
|
|||||||||||||
Outstanding
at July 31, 2008
|
887,500 | $ | 2.20 | 4.00 | $ | 334 | ||||||||||
Options
granted1
|
250,000 | 1.96 | - | - | ||||||||||||
Options
exercised
|
(176,432 | ) | 1.48 | - | - | |||||||||||
Options
expired
|
(86,068 | ) | 1.40 | - | - | |||||||||||
Outstanding
at July 31, 2009
|
875,000 | 2.36 | 5.18 | 70 | ||||||||||||
Options
granted1
|
500,000 | 3.60 | - | - | ||||||||||||
Options
exercised
|
(128,638 | ) | 2.39 | - | - | |||||||||||
Options
expired
|
(1,015,112 | ) | 2.93 | - | - | |||||||||||
Options
outstanding at July 31, 2010
|
231,250 | 2.52 | 4.37 | 280 | ||||||||||||
Options
granted2
|
237,466 | 4.61 | - | - | ||||||||||||
Options
exercised
|
- | - | - | - | ||||||||||||
Options
expired
|
- | - | - | - | ||||||||||||
Options
outstanding at October 31, 2010
|
468,716 | $ | 3.58 | 3.28 | $ | 380 | ||||||||||
Options
exercisable at October 31, 2010
|
363,716 | $ | 3.84 | 3.02 | $ | 198 |
Number
of Options
|
Weighted
average
exercise
price
|
Weighted
average
remaining
contracted
term
(years)
|
Aggregate
Intrinsic
value
|
|||||||||||||
Unvested
Options Outstanding at July 31, 2008
|
437,500 | $ | 2.52 | 4.49 | $ | 8 | ||||||||||
Options
granted
|
250,000 | 1.96 | - | - | ||||||||||||
Options
vested
|
(250,000 | ) | 2.24 | - | - | |||||||||||
Unvested
Options outstanding at July 31, 2009
|
437,500 | $ | 2.36 | 5.18 | $ | 35 | ||||||||||
Options
granted
|
500,000 | 3.60 | - | - | ||||||||||||
Options
vested
|
(237,500 | ) | 3.23 | - | - | |||||||||||
Options
expired
|
(607,500 | ) | 3.02 | - | - | |||||||||||
Unvested
Options outstanding at July 31, 2010
|
92,500 | $ | 2.52 | 4.37 | $ | 112 | ||||||||||
Options
granted
|
25,000 | 3.73 | - | - | ||||||||||||
Options
vested
|
(12,500 | ) | 3.73 | - | - | |||||||||||
Options
expired
|
- | - | - | - | ||||||||||||
Unvested
Options outstanding at October 31, 2010
|
105,000 | $ | 2.66 | 4.20 | $ | 181 |
Number
of options
|
Weighted
average
exercise
price
|
Weighted
average
remaining
contracted
term
(years)
|
Aggregate
Intrinsic
value
|
|||||||||||||
Warrants
and options outstanding at July 31, 2008
|
503,750 | $ | 2.48 | 3.54 | $ | 54 | ||||||||||
Options
granted1
|
350,000 | 2.00 | - | - | ||||||||||||
Options
exercised
|
(37,500 | ) | 1.56 | - | - | |||||||||||
Options
expired
|
(37,500 | ) | 1.56 | - | - | |||||||||||
Warrants
and options outstanding at July 31, 2009
|
778,750 | $ | 2.36 | 3.36 | $ | 73 | ||||||||||
Options
granted1
|
237,500 | 3.63 | - | - | ||||||||||||
Warrants
and options exercised
|
(239,954 | ) | 2.83 | - | - | |||||||||||
Options
expired
|
(388,796 | ) | 2.16 | - | - | |||||||||||
Warrants
and options outstanding at July 31, 2010
|
387,500 | $ | 3.02 | 3.97 | $ | 250 | ||||||||||
Options
granted2
|
2,644,162 | 4.64 | - | - | ||||||||||||
Options
exercised
|
(60,518 | ) | 3.49 | - | - | |||||||||||
Options
expired
|
(45,782 | ) | 3.60 | - | - | |||||||||||
Warrants
and options outstanding at October 31, 2010
|
2,925,362 | $ | 4.47 | 1.42 | $ | - | ||||||||||
Warrants
and options exercisable at October 31, 2010
|
2,358,715 | $ | 4.73 | .44 | $ | - |
Number
of
Options
|
Weighted
Average
Exercise
price
|
Weighted
average
remaining
contracted
term
(years)
|
Aggregate
Intrinsic
value
|
|||||||||||||
Outstanding
at July 31, 2008
|
113,750 | $ | 2.52 | 4.49 | $ | 3 | ||||||||||
Options
granted
|
318,750 | 1.96 | - | - | ||||||||||||
Options
vested
|
(191,875 | ) | 2.04 | - | - | |||||||||||
Outstanding
at July 31, 2009
|
240,625 | $ | 2.16 | 4.88 | $ | 70 | ||||||||||
Options
granted
|
237,500 | 3.63 | - | - | ||||||||||||
Options
vested
|
(154,166 | ) | 3.18 | - | - | |||||||||||
Options
expired
|
(157,292 | ) | 2.25 | - | - | |||||||||||
Outstanding
at July 31, 2010
|
166,667 | $ | 3.21 | 4.32 | $ | 77 | ||||||||||
Options
granted
|
425,000 | 3.47 | - | - | ||||||||||||
Options
vested
|
- | - | - | - | ||||||||||||
Options
expired
|
(25,000 | ) | 3.60 | - | - | |||||||||||
Unvested
options outstanding at October 31, 2010
|
566,667 | $ | 3.39 | 4.60 | $ | 568 |
(in
thousands)
|
||||||||
October 31,
2010
|
July
31,
2010
|
|||||||
Marketable
equity securities, at cost
|
$ | 52 | $ | 50 | ||||
Marketable
equity securities, at fair value
|
$ | 103 | $ | 30 |
(in
thousands)
|
||||||||
October
31,
2010
|
July
31,
2010
|
|||||||
Materials,
supplies and other
|
$ | 2,306 | $ | 1,953 | ||||
Total
|
$ | 2,306 | $ | 1,953 |
(in
thousands)
|
||||||||
October
31,
2010
|
July
31,
2010
|
|||||||
Ore
on leach pads
|
$ | 36,933 | $ | 32,896 | ||||
Total
|
$ | 36,933 | $ | 32,896 |
(in
thousands)
|
||||||||
October
31,
2010
|
July
31,
2010
|
|||||||
Value
added tax to be refunded
|
$ | 2,385 | $ | 891 | ||||
Note
receivable – Nayarit
|
- | 350 | ||||||
MRS
receivable
|
80 | 210 | ||||||
Loans
receivable – affiliate
|
13 | 15 | ||||||
Deposit
|
443 | 5 | ||||||
Other
|
22 | - | ||||||
Total
Other Current Assets
|
$ | 2,943 | $ | 1,471 |
(in
thousands)
|
||||||||
October
31,
2010
|
July
31,
2010
|
|||||||
Process
equipment and facilities
|
$ | 30,725 | $ | 29,038 | ||||
Mining
equipment
|
2,240 | 2,180 | ||||||
Mineral properties
|
45,010 | 152 | ||||||
Construction
in progress
|
2,627 | 165 | ||||||
Computer
and office equipment
|
546 | 366 | ||||||
Improvements
|
48 | 13 | ||||||
Furniture
|
67 | 43 | ||||||
Total
|
81,263 | 31,957 | ||||||
Less:
accumulated depreciation
|
(12,350 | ) | (10,567 | ) | ||||
Property
and equipment, net
|
$ | 68,913 | $ | 21,390 |
(in
thousands)
|
||||||||
October
31,
2010
|
July
31,
2010
|
|||||||
Water
Rights
|
$ | 519 | $ | 510 | ||||
Reforestation
fee
|
290 | 271 | ||||||
Mobilization
Payment to Mineral Contractor
|
62 | 70 | ||||||
Investment
in Right of Way
|
9 | 18 | ||||||
Total
|
880 | 869 | ||||||
Accumulated
Amortization
|
(146 | ) | (139 | ) | ||||
Intangible
assets, net
|
$ | 734 | $ | 730 |
(in
thousands)
|
||||||||
October
31,
2010
|
July
31,
2010
|
|||||||
Sonora
concessions
|
$ | 35 | $ | 52 | ||||
Nayarit
concessions
|
17,666 | - | ||||||
Total
|
$ | 17,701 | $ | 52 |
(in
thousands)
|
||||
Balance
as of July 31, 2010
|
$ | 2,373 | ||
Additions,
changes in estimates and other
|
250 | |||
Accretion
expense
|
42 | |||
Balance
as of October 31, 2010
|
$ | 2,665 |
Foreign
currency items
|
Unrealized
gain
(loss) on securities
|
Change
in fair
value
on interest
rate swaps
|
Accumulated
other
comprehensive
income
|
|||||||||||||
Balance
as of July 31, 2010
|
$ | (4,512 | ) | $ | (20 | ) | $ | 240 | $ | (4,292 | ) | |||||
Income
(loss)
|
2,468 | 71 | (23 | ) | 2,516 | |||||||||||
Balance
as of October 31, 2010
|
$ | (2,044 | ) | $ | 51 | $ | 217 | $ | (1,776 | ) |
Long
term debt consists of the following:
|
(in
thousands)
|
|||||||
October
31,
2010
|
July
31,
2010
|
|||||||
Total
long-term debt
|
$ | 3,500 | $ | 4,400 | ||||
Less
current portion
|
(3,100 | ) | (3,600 | ) | ||||
Long-term
debt
|
$ | 400 | $ | 800 |
Fiscal
Years Ending July 31,
|
||||
2011
|
$ | 3,100 | ||
2012
|
400 | |||
$ | 3,500 |
(in
thousands)
|
||||
Liability
balance as of July 31, 2010
|
$ | 40 | ||
Change
in fair value of swap agreement
|
1 | |||
Net
cash settlements
|
(24 | ) | ||
Liability
balance as of October 31, 2010
|
$ | 17 |
Quarter
Ended
|
Derivatives
in Cash
Flow
Hedging
Relationships
|
Effective
Results
Recognized
in
OCI
|
Location
of Results
Reclassified from
AOCI
to
Earnings
|
Amount
Reclassified
from
AOCI
to
Income
|
Ineffective
Results
Recognized
in
Earnings
|
Location
of
Ineffective
Results
|
|||||||||||||
7/31/09
|
Interest
Rate contracts
|
$ | (19 | ) |
Interest
Income (Expense)
|
(55 | ) | - | N/A | ||||||||||
10/31/09
|
Interest
Rate contracts
|
$ | (16 | ) |
Interest
Income (Expense)
|
(53 | ) | - | N/A | ||||||||||
1/31/10
|
Interest
Rate contracts
|
$ | (8 | ) |
Interest
Income (Expense)
|
(48 | ) | - | N/A | ||||||||||
4/30/10
|
Interest
Rate contracts
|
$ | (1 | ) |
Interest
Income (Expense)
|
(38 | ) | - | N/A | ||||||||||
7/31/10
|
Interest
Rate contracts
|
$ | (2 | ) |
Interest
Income (Expense)
|
(30 | ) | - | N/A | ||||||||||
10/31/10
|
Interest
Rate contracts
|
$ | (1 | ) |
Interest
Income (Expense)
|
(22 | ) | - | N/A |
Liability
Derivatives
|
||||||
July 31, 2009
|
Balance Sheet Location
|
Fair Values
|
||||
Derivatives
designated as hedging instruments
|
||||||
Interest
rate derivatives
|
Current
Liabilities
|
$ | 193 | |||
Liability
Derivatives
|
||||||
October
31, 2009
|
Balance
Sheet Location
|
Fair
Values
|
||||
Derivatives
designated as hedging instruments
|
||||||
Interest
rate derivatives
|
Current
Liabilities
|
$ | 154 | |||
Derivatives
designated as hedging instruments
|
||||||
Liability
Derivatives
|
||||||
January
31, 2010
|
Balance
Sheet Location
|
Fair
Values
|
||||
Derivatives
designated as hedging instruments
|
||||||
Interest
rate derivatives
|
Current
Liabilities
|
$ | 112 | |||
Derivatives
designated as hedging instruments
|
||||||
Liability
Derivatives
|
||||||
April
30, 2010
|
Balance
Sheet Location
|
Fair
Values
|
||||
Derivatives
designated as hedging instruments
|
||||||
Interest
rate derivatives
|
Current
Liabilities
|
$ | 72 | |||
Liability
Derivatives
|
||||||
July
31, 2010
|
Balance
Sheet Location
|
Fair
Values
|
||||
Derivatives
designated as hedging instruments
|
||||||
Interest
rate derivatives
|
Current
Liabilities
|
$ | 40 | |||
Liability
Derivatives
|
||||||
October
31, 2010
|
Balance
Sheet Location
|
Fair
Values
|
||||
Derivatives
designated as hedging instruments
|
||||||
Interest
rate derivatives
|
Current
Liabilities
|
$ | 17 |
October 31,
2010
|
July 31,
2010
|
|||||||
Net
smelter return
|
$ | 380 | $ | 388 | ||||
Mining
contract
|
546 | 497 | ||||||
Income
tax payable
|
3,264 | 1,900 | ||||||
Utilities
|
136 | 126 | ||||||
Interest
|
8 | 11 | ||||||
Legal
and professional
|
175 | 70 | ||||||
Salaries,
wages and related benefits
|
792 | 662 | ||||||
Severance
|
492 | 1,279 | ||||||
Other
liabilities
|
167 | 107 | ||||||
$ | 5,960 | $ | 5,040 |
(in thousands)
|
||||||||
October 31,
2010
|
October 31,
2009
|
|||||||
United
States
|
$ | (3,649 | ) | $ | (1,908 | ) | ||
Foreign
|
9,976 | 6,566 | ||||||
Total
|
$ | 6,327 | $ | 4,658 |
Level 1
|
Unadjusted
quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or
liabilities;
|
Level 2
|
Quoted
prices in markets that are not active, or inputs that are observable,
either directly or indirectly, for substantially the full term of the
asset or liability; and
|
Level 3
|
Prices
or valuation techniques that require inputs that are both significant to
the fair value measurement and unobservable (supported by little or no
market activity).
|
Fair Value at October 31, 2010
(in thousands)
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Cash
equivalents
|
$ | 2,801 | $ | 2,801 | $ | - | $ | - | ||||||||
Marketable
securities
|
103 | 103 | - | - | ||||||||||||
$ | 2,904 | $ | 2,904 | $ | - | $ | - | |||||||||
Liabilities:
|
||||||||||||||||
Interest
rate swap
|
17 | - | 17 | - | ||||||||||||
$ | 17 | $ | - | $ | 17 | $ | - |
Conversion
Calculation
|
Estimated
Fair Value
|
Form of
Consideration
|
|||||||
(In thousands, except per share amounts)
|
|||||||||
Number
of Nayarit shares outstanding as of the Amalgamation date
|
92,910 | ||||||||
Exchange
ratio(1)
|
0.134048 | ||||||||
Number
of shares issued to Nayarit shareholders
|
12,454 | ||||||||
Value
of Capital Gold common shares issued(1)
|
$ | 3.71 | $ | 46,206 |
Capital
Gold
Common
stock
|
||||
Value
of Nayarit’s options and warrants to be exchanged for Capital Gold options
and warrants (2)
|
1,393 |
Capital
Gold
Options
and
Warrants
|
|||||||
Total
consideration transferred
|
$ | 47,599 |
Stock
price
|
$3.71
|
|
Post
conversion strike price
|
$3.28
- $9.92
|
|
Average
expected volatility
|
70%
|
|
Dividend
yield
|
None
|
|
Average
risk-free interest rate
|
0.29%
|
|
Average
contractual term
|
.79
years
|
|
Black-Scholes
average value per warrant and option
|
$0.57
|
Fair Value (in
thousands)
|
||||
Cash
and cash equivalents
|
$ | 50 | ||
Short-term
investments
|
2 | |||
Prepaid
expenses and sundry receivables
|
1,238 | |||
Property,
plant and equipment
|
196 | |||
Mineral
interests – indicated and inferred
|
43,780 | |||
Exploration
interests
|
16,730 | |||
Goodwill
|
3,394 | |||
Accounts
payable and liabilities assumed
|
(1,336 | ) | ||
Deferred
tax liability
|
(16,455 | ) | ||
Net
assets acquired
|
$ | 47,599 |
(in thousands) | ||||||||
Three Months
Ended
October 31,
2010
|
Three Months
Ended October
31,
2009
|
|||||||
Revenues
|
$ | 18,952 | $ | 11,727 | ||||
Net
income
|
$ | 2,954 | $ | 2,037 | ||||
Income
per common share:
|
||||||||
Basic – net
income
|
$ | 0.05 | $ | 0.03 | ||||
Diluted – net
income
|
$ | 0.05 | $ | 0.03 |
Metric
|
U.S.
|
|||
Materials
|
||||
Reserves
|
||||
Proven
|
22.4
Million Tonnes @ 0.70 g/t (1)
|
24.7
Million Tons @ 0.0204 opt (1)
|
||
Probable
|
48.2 Million Tonnes @ 0.65
g/t (
1)
|
53.0 Million Tons @ 0.0189 opt
(1)
|
||
Total
Reserves (2)
|
70.6
Million Tonnes @ 0.66 g/t (1)
|
77.7
Million Tons @ 0.0193 opt (1)
|
||
Waste
|
203.5 Million Tonnes
|
224.3 Million Tons
|
||
Total
Ore/Waste
|
274.1
Million Tonnes
|
302.0
Million tons
|
||
Contained
Gold
|
46.78
Million grams
|
1,504,000
Oz
|
||
Production
|
||||
Ore
Crushed
|
5.4
Million Tonnes /Year
|
6.0
Million Tons/Year
|
||
14,868
Mt/d (1)
|
16,390
t/d (1)
|
|||
Operating
Days/Year
|
365
Days per year
|
365
Days per year
|
||
Gold
Plant Average Recovery
|
58.25%
|
58.25%
|
||
Average
Annual Production
|
2.1
Million grams
|
67,391
Oz
|
||
Total
Gold Produced
|
|
27.25
Million grams
|
|
876,080
Oz
|
(1)
|
“g/t”
means grams per metric tonne, “opt” means ounces per ton, “Mt/d” means
metric tonnes per day and “t/d” means tons per
day.
|
(2)
|
The
reserve estimates are mainly based on a gold cutoff grade of 0.15 g/t for
sandstone and 0.19 grams for siltstone and latite within the pit
design.
|
Cutoff
Grade Calculation Basic Parameters
|
Internal
Cutoff Grade
|
Break
Even Cutoff Grade
|
||
Gold
Price
|
US$800/oz
|
US$800/oz
|
||
Gold
Selling Cost (4% Royalty, Refining, Transport, Silver Credit,
etc)
|
$25.258/oz
|
$25.258/oz
|
||
Gold
Recovery*
|
58.25%
|
58.25%
|
||
Operating
Costs per Tonne of Ore
|
||||
Mining
|
$1.08/tonne
|
|||
Processing
– Heap leach
|
$2.357/tonne
|
$2.357/tonne
|
||
Total
|
$2.357/tonne
|
$3.44/tonne
|
||
Cutoff
Grade
|
Grams
per Tonne
|
Grams
per Tonne
|
||
Head
Grade Cutoff (58.25% average recovery)
|
0.15
g/t gold
|
0.24
g/t gold
|
||
Recovered
Gold Grade Cutoff
|
|
0.09
g/t gold
|
|
0.14
g/t gold
|
Proven and probable mineral reserve (Ktonnes of ore)
|
October 31,
2010
|
July 31,
2010
|
July 31,
2009
|
|||||||||
Ore
|
-
|
-
|
-
|
|||||||||
Beginning
balance (Ktonnes)
|
66,712
|
40,911
|
35,417
|
|||||||||
Additions
|
-
|
30,388
|
9,342
|
|||||||||
Reductions
|
(1,221
|
)
|
(4,587
|
)
|
(3,848
|
)
|
||||||
Ending
Balance
|
65,491
|
66,712
|
40,911
|
|||||||||
Contained
gold
|
||||||||||||
Beginning
balance (thousand of ounces)
|
1,411
|
859
|
719
|
|||||||||
Additions
|
-
|
662
|
239
|
|||||||||
Reductions
|
(27
|
)
|
(110
|
)
|
(99
|
)
|
||||||
Ending
Balance
|
1,384
|
1,411
|
859
|
|
(i)
|
$100
plus applicable Value Added Tax, in December 8,
2010;
|
|
(ii)
|
$100
plus applicable Value Added Tax, in June 8,
2011;
|
|
(iii)
|
$175
plus applicable Value Added Tax, in December 8;
2011
|
|
(iv)
|
$175
plus applicable Value Added Tax, in June 8, 2012;
and
|
|
(v)
|
$350
plus applicable Value Added Tax, in December 8,
2012.
|
CLAIM
|
TITLE NUMBER
|
|||
“San
Juan Fracc. I”
|
205392
|
|||
“San
Juan Fracc. II”
|
205393
|
|||
“San
Francisco Tres”
|
203136
|
|||
“San
Juan I”
|
221365
|
|||
“Isis”
|
214395
|
|||
“San
Miguel”
|
224392
|
Concession Name
|
Title
|
File No.
|
Owner
|
Surface (ha)
|
|||||||||
BONANZA
I
|
227603 | 6923 |
NAYARIT
GOLD DE MÉXICO SA de CV
|
200.00 | |||||||||
EL
DORADO
|
228887 | 7013 |
NAYARIT
GOLD DE MÉXICO SA de CV
|
23,001.85 | |||||||||
EL
MAGNIFICO
|
221592 | 6758 |
NAYARIT
GOLD DE MÉXICO SA de CV
|
7,595.74 | |||||||||
EL
MAGNIFICO F-I
|
221588 | 6758 |
NAYARIT
GOLD DE MÉXICO SA de CV
|
6.90 | |||||||||
EL
MAGNIFICO F-II
|
221589 | 6758 |
NAYARIT
GOLD DE MÉXICO SA de CV
|
32.00 | |||||||||
EL
MAGNIFICO F-III
|
221590 | 6758 |
NAYARIT
GOLD DE MÉXICO SA de CV
|
6.96 | |||||||||
EL
MAGNIFICO F-IV
|
221591 | 6758 |
NAYARIT
GOLD DE MÉXICO SA de CV
|
8.84 | |||||||||
GROSS
F I
|
228826 | 7002 |
NAYARIT
GOLD DE MÉXICO SA de CV
|
67,148.77 | |||||||||
GROSS
F- II
|
228827 | 7002 |
NAYARIT
GOLD DE MÉXICO SA de CV
|
16.00 | |||||||||
ORION
|
205616 | 6253 |
NAYARIT
GOLD DE MÉXICO SA de CV
|
527.50 | |||||||||
REESE
|
227775 | 6980 |
NAYARIT
GOLD DE MÉXICO SA de CV
|
3,104.29 | |||||||||
SAN
JUAN I
|
221365 |
3/1/639
|
COMPAÑIA
MINERA HUAJICARI SA de CV
|
45.63 | |||||||||
SAN
FRANCISCO 3
|
203136 |
3/1.3/243
|
COMPAÑIA
MINERA HUAJICARI SA de CV
|
32.75 | |||||||||
SAN
JUAN F - II
|
205393 | 6250 |
COMPAÑIA
MINERA HUAJICARI SA de CV
|
0.81 | |||||||||
ISIS
|
214395 | 6617 |
COMPAÑIA
MINERA HUAJICARI SA de CV
|
101.34 | |||||||||
SAN
JUAN F-I
|
205392 | 6250 |
COMPAÑIA
MINERA HUAJICARI SA de CV
|
1,339.01 | |||||||||
SAN
MIGUEL
|
224392 |
3/1/723
|
COMPAÑIA
MINERA HUAJICARI SA de CV
|
1,177.38 | |||||||||
LA ESTRELLA
|
196009 |
3/1.3/232
|
ADRIAN EVODIO PRADO GÓMEZ
|
146.35 |
|
·
|
An
increase in mining costs of approximately $1,886 or 72% over the prior
period. This was primarily due to higher mining contractor costs of
approximately $1,142 or 77% compared to the prior period primarily due to
an increase in tonnage mined of 1,287,143 tonnes or 55%, higher diesel
fuel consumption of $464 due to an increase in tonnage mined and longer
haul distance as the pit deepens, and higher explosive costs of $177 due
to the increase in tonnage mined;
|
|
·
|
Higher
crushing costs of approximately of $323, an increase of 42% over the prior
period, mainly due to: 1) an increase in tonnage going through the
crushing circuit of 104,000 tonnes or 9% over the prior period; 2)
an increase in electricity consumption and maintenance costs as well as an
increase in the usage of crusher parts and supplies with the corresponding
increase in tonnage; and 3) an increase in labor costs associated with the
hiring of additional crusher
operators;
|
|
·
|
An
increase in leaching and ADR plant costs of approximately $378 or 22%
mainly due to a general increase in consumption of gold leaching chemicals
and reagents as well as electricity usage in the processing of ore.
The increased consumption can be mainly attributed to the increased
tonnage processed during the current period as compared to the prior
period as well as an the result of increasing the gold leaching chemicals
and solution flow to the leach pad as we increased the level of lifts or
height of the leach pad as well as the increased surface area under
leach;
|
|
·
|
Higher
heavy equipment maintenance costs of approximately $131 or 46% over the
same period in the prior year. This was primarily due to an increase
in repair and maintenance costs experienced with our mining fleet.
The higher repair and maintenance costs incurred during the current
quarter were mainly the result of our fleet mining additional tonnage as
compared to the prior period. In addition, our mining fleet is
comprised of used equipment which required a higher level of maintenance
than the previous period.
|
For the three
|
For the three
|
|||||||
months ended
|
months ended
|
|||||||
October 31,
2010
|
October 31,
2009
|
|||||||
Revenues
|
18,952 | 11,727 | ||||||
Net
Income
|
2,954 | 2,939 | ||||||
Basic
net income per share
|
0.05 | 0.06 | ||||||
Diluted
net income per share
|
0.05 | 0.06 | ||||||
Gold
ounces sold
|
14,837 | 11,733 | ||||||
Average
price received
|
$ | 1,277 | $ | 999 | ||||
Cash
cost per ounce sold(1)
|
$ | 476 | $ | 338 | ||||
Total
cost per ounce sold(1)
|
$ | 539 | $ | 389 |
(1)
|
"Cash
costs per ounce sold" is a Non-GAAP measure which includes all direct
mining costs, refining and transportation costs and by-product credits as
well as royalties as reported in the Company's financial statements.
“Total cost per ounce sold” is a Non-GAAP measure which includes
“cash costs per ounce sold” as well as depreciation and amortization as
reported in the Company's financial
statements.
|
For the Three
|
For the Three
|
|||||||
Months Ended
|
Months Ended
|
|||||||
Reconciliation from non-GAAP measure to US GAAP
|
October 31,
2010
|
October 31,
2009
|
||||||
Cash
cost per ounce sold
|
$ | 476 | $ | 338 | ||||
Intercompany
management fee
|
13 | 14 | ||||||
Other
|
(3 | ) | (2 | ) | ||||
Costs
applicable to sales per ounce sold*
|
$ | 486 | $ | 350 |
For the three
|
For the three
|
|||||||
months ended
|
months ended
|
|||||||
October 31,
2010
|
October 31,
2009
|
|||||||
Tonnes
of ore mined
|
1,221,240 | 1,135,892 | ||||||
Tonnes
of waste removed
|
2,394,621 | 1,192,826 | ||||||
Ratio
of waste to ore
|
1.96 | 1.05 | ||||||
Tonnes
of ore processed
|
1,226,137 | 1,122,183 | ||||||
Grade
(grams/tonne)
|
0.64 | 0.70 | ||||||
Gold
(ounces)
|
||||||||
-
Produced(1)
|
14,804 | 11,908 | ||||||
-
Sold
|
14,837 | 11,733 |
(1)
|
Gold
produced each year does not necessarily correspond to gold sold during the
year, as there is a time delay in the actual sale of the
gold.
|
Type of Derivative
|
Notional Size
|
Fixed Price or
Strike Price
|
Underlying Price
|
Termination or
Expiration
|
Fair Value
|
||||||||||
Interest
Rate Swaps
|
$ | 1,313 | (1) | 5.30 | % |
3
Mo. USD LIBOR
|
12/31/2010
|
$ | (17 | ) |
Item
1.
|
Legal
Proceedings.
|
Item
1A.
|
Risk
Factors
|
·
|
industrial
and commercial demand for gold,
|
|
·
|
the
level of interest rates,
|
|
·
|
the
rate of inflation,
|
|
·
|
central
bank sales,
|
|
·
|
world
supply of gold and
|
|
·
|
stability
of exchange
rates.
|
·
|
labor
disputes,
|
|
·
|
invalidity
of governmental orders,
|
|
·
|
uncertain
or unpredictable political, legal and economic
environments,
|
|
·
|
war
and civil disturbances,
|
|
·
|
changes
in laws or policies,
|
|
·
|
taxation,
|
|
·
|
delays
in obtaining or the inability to obtain necessary governmental
permits,
|
|
·
|
governmental
seizure of land or mining claims,
|
|
·
|
limitations
on ownership,
|
|
·
|
limitations
on the repatriation of earnings,
|
|
·
|
increased
financial costs,
|
|
·
|
import
and export regulations, including restrictions on the export of gold,
and
|
|
·
|
foreign
exchange
controls.
|
·
|
ownership
of assets,
|
|
·
|
land
tenure,
|
|
·
|
mining
policies,
|
|
·
|
monetary
policies,
|
|
·
|
taxation,
|
|
·
|
rates
of exchange,
|
|
·
|
environmental
regulations,
|
|
·
|
labor
relations,
|
|
·
|
repatriation
of income and/or
|
|
·
|
return
of
capital.
|
·
|
stricter
standards and
enforcement,
|
·
|
increased
fines and penalties for non-compliance,
|
|
·
|
more
stringent environmental assessments of proposed projects
and
|
|
·
|
a
heightened degree of responsibility for companies and their officers,
directors and employees.
|
·
|
environmental
hazards,
|
|
·
|
industrial
accidents,
|
|
·
|
metallurgical
and other processing,
|
|
·
|
acts
of God, and/or
|
|
·
|
mechanical
equipment and facility performance
problems.
|
·
|
damage
to, or destruction of, mineral properties or production
facilities,
|
|
·
|
personal
injury or death,
|
|
·
|
environmental
damage,
|
|
·
|
delays
in mining,
|
|
·
|
monetary
losses, and/or
|
|
·
|
possible
legal
liability.
|
·
|
the
location of economic ore bodies,
|
|
·
|
development
of appropriate metallurgical processes,
|
|
·
|
receipt
of necessary governmental approvals, and
|
|
·
|
construction
of mining and processing facilities at any site chosen for
mining.
|
|
·
|
the
price of gold,
|
|
·
|
the
particular attributes of the deposit, such as
its
|
|
o
|
size
|
|
o
|
grade,
and
|
|
o
|
proximity
to infrastructure,
|
|
·
|
financing
costs,
|
|
·
|
taxation,
|
|
·
|
royalties,
|
|
·
|
land
use,
|
|
·
|
water
use,
|
|
·
|
power
use,
|
|
·
|
importing
and exporting gold, and
|
|
·
|
environmental
protection.
|
|
·
|
a
limited availability for market quotations for Capital Gold’s common
stock;
|
|
·
|
reduced
liquidity with respect to Capital Gold’s common
stock;
|
|
·
|
a
determination that Capital Gold’s common stock is a “penny stock,” which
will require brokers trading in the common stock to adhere to more
stringent rules and possibly result in a reduced level of trading activity
in the secondary trading market for Capital Gold’s common
stock;
|
|
·
|
limited
amount of news and analyst coverage for Capital Gold’s common stock;
and
|
|
·
|
a
decreased ability to issue additional securities or obtain additional
financing in the future.
|
|
·
|
the
Company does not achieve the perceived benefits of the Nayarit Business
Combination as rapidly, or to the extent anticipated by, financial or
industry analysts; or
|
|
·
|
the
effect of the Nayarit Business Combination on Capital Gold’s financial
results is not consistent with the expectations of financial or industry
analysts.
|
|
·
|
our
employees may experience uncertainty about their future roles with the
combined company, which might adversely affect our ability to retain and
hire key personnel and other
employees;
|
|
·
|
the attention of our management
may be directed toward the completion of the merger and
transaction-related considerations and may be diverted from the day-to-day
operations and pursuit of other opportunities that could have been
beneficial to our business;
and
|
|
·
|
distributors
or other vendors or suppliers may seek to modify or terminate their
business relationships with us.
|
Item
2.
|
Unregistered Sales of
Equity Securities and Use of
Proceeds.
|
Item
3.
|
Defaults Upon Senior
Securities.
|
Item
4
|
Submission of Matters
to a Vote of Security
Holders.
|
Item
5.
|
Other
Information.
|
Item
6.
|
Exhibits.
|
|
31.1
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 from the
Company's Chief Executive Officer.
|
|
31.2
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 from the
Company's Chief Financial Officer.
|
|
32.1
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from the
Company's Chief Executive Officer.
|
|
32.2
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from the
Company's Chief Financial Officer.
|
CAPITAL GOLD CORPORATION
|
|||
Date:
December 10, 2010
|
By:
|
/s/ Colin Sutherland
|
|
Colin
Sutherland
|
|||
President
and Director
|
|||
(Principal
Executive Officer)
|
|||
Date:
December 10, 2010
|
By:
|
/s/ Christopher M. Chipman
|
|
Christopher
M. Chipman
|
|||
Chief
Financial Officer
|
|||
(Principal
Financial
Officer)
|