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| SLGLF.OB > SEC Filings for SLGLF.OB > Form 10KSB/A on 23-Jan-2009 | All Recent SEC Filings |
23-Jan-2009
Annual Report
PLAN OF OPERATION
Our plan of operation for the next twelve months is as follows:
The Nolan Gold Project
We are continuing our exploration program on the Nolan Gold Project. The objective of this exploration program is to continue with tunneling into the Workman's Bench mineralized zone to intersect the 80 foot wide zone that contains gold bearing antimony-quartz veins. The company intends to collect a bulk sample from the mineralized zone for metallurgical test work. The underground exposure of the mineralized zone will play an important key role for the company in obtaining a better understanding of the nature of the structurally controlled gold and antimony mineralization in the Solomon Shear Zone. This will significantly support Silverado's exploration strategy. The underground work will continue until the end of January, 2008.
Reclamation work will be in progress throughout the summer and into fall. Our objective will be to reclaim 10 acres of disturbed surface area, while limiting 2008 surface disturbance to 5 acres or less. We work closely with the government agencies responsible for managing the lands that we work, and pride ourselves in being responsive and responsible stewards of the land.
Our drilling program will be aimed at lode gold and antimony exploration, and placer gold exploration. Lode drilling will focus on Pringle Bench, Workman's Bench and the Hillside along the Solomon's Shear trend, and is designed to provide a better three dimensional understanding of the mineralized sections of the structure and how it is related to the placer gold deposits of the Nolan Creek area. Further exploration drilling will be conducted in the Fortress area which is part of a gold bearing east-west trending deformation zone. Placer drilling will focus on a series of targets on the hillside benches. Our exploration work will provide a basis for the assessment of the feasibility of future additional exploration activities, including test mining activities, at the Nolan Gold Project.
Our exploration plans are to further define gold deposits in order to provide a basis for the assessment of the feasibility of future additional test mining activities at the Nolan project. We are currently undertaking an extensive geological exploration program on the Nolan Gold Project. The program includes drilling and trenching, as well as the review of geological and geophysical data. The overall objectives of our exploration program are as follows:
1. To identify surface or sub-surface placer deposits at our Nolan Gold Project that are prospective for test mining operations. In general, these deposits are located on benches that are ancient river beds and lakeshore deposits located above the present channel of Nolan Creek. These deposits include Mary's Bench, Jack London Bench, Wooll Bench, Workman's Bench, Swede Channel, Upper Nolan Creek (deep channel), Lower Nolan Bench and Mary's East including areas adjoining to the north, east and south. The objectives of our drilling program will include the determination of the nature and extent of areas of known bench deposits that are prospects for test mining operations and the identification of new bench deposits that may be prospects for test mining operations. Mary's Bench East and areas adjoining north, east and south as well as, the Swede Channel and the areas adjoining to the east and south, in that order, are our exploration priorities as they have showed the most positive results from earlier exploration that we have completed. Wooll Bench and Workman's Bench have been less extensively explored with only limited drilling. The Lower Nolan Bench has not been drilled. The newly discovered Jack London Bench may also be a priority target during fiscal 2008.
2. To determine whether there is a potential lode gold and antimony deposit which may be the source of the placer gold found on the Nolan Gold Project. A lode deposit of gold occurs when gold is present in its host rock as differentiated from placer gold which is gold that has been removed from its host rock by the process of erosion. Our reverse circulation and diamond core drilling, trenching, geologic and geophysical work will be part of our on-going
investigations to determine whether there exist one or more lode deposits on the Nolan Gold project that could be the source of our placer gold deposits.
3. To identify any placer deposits at Slisco Bench, which is located on our Hammond River property that are prospective for test mining operations. The Slisco Bench (deep channel) deposit is approximately 3 to 4 miles northeast of the Nolan Deep Channel.
We have been working on interpreting the geology of the Nolan area since 1979, when we first acquired the project. Our latest and most extensive exploration program began in early 2007 and was directed at improving our placer deposit definition and discovering potential lode sources of the placer gold. Our exploration geologists and mining engineers have worked to move this objective forward. Our exploration efforts have included the analysis of geophysical data, geochemical sampling results, company records and analysis provided by government mineral investigation efforts and publications as well as the trenching and exploration drilling of target areas.
We plan to spend up to $5,000,000 in the next twelve months in carrying out our exploration activities for the Nolan Gold Project. Of this amount, we anticipate approximately $3,000,000 will be spent on test mining activities, with the balance being spent on maintaining our properties, and other exploration activities, including placer drilling, and lode drilling and trenching on the Solomons Shear. The actual amount that we spend on exploration will depend on the actual amount of funds that we have available for exploration. We are presently seeking sufficient financing to enable us to proceed with these plans and will require additional financing if we are able to proceed with our exploration plans, including our ongoing underground test mining activities. Further, while the amount of exploration expenditures may be off-set by any recoveries from sales of gold that we may achieve from test mining activities, we anticipate that these recoveries will not exceed our costs of exploration. However, at this time we are achieving recoveries from sales of gold.
Our plan of operations at the Nolan Gold Project will be continually evaluated and modified as exploration and gold recovery results become available. Modifications to our plans will be based on many factors, including: results of exploration, assessment of data, weather conditions, exploration costs, the price of gold and available capital. Further, the extent of our exploration programs that we undertake will be dependent upon the amount of financing available to us.
We do not have any commercially viable reserves on any of our properties that comprise the Nolan Gold Project or any of our other properties. We plan to carry out exploration activities on the Nolan Gold Project that are referred to as "test mining activities". The objective of the test mining activities on the Nolan Gold Project is to expand our knowledge of the placer deposits and lode gold occurrences on the Nolan Gold Project and to develop a cost effective method for working the deposits. While the irregular high grade nature of these deposits may preclude attainment of "reserve" categories; management does believe that we may be attaining profitability presently or soon, depending on the considerable increase of recovered gold this year anticipated over last. Profitability is the objective, while at the minimum we endeavor to pay for a portion of the expense associated with exploration of the Nolan Gold Project. As we have not established commercially viable reserves on the Nolan Gold Project, we anticipate that recoveries of gold from test mining activities may not be sufficient to pay for the full cost of exploration. There is no assurance that our test mining activities will result in a final evaluation that a commercially viable lode or placer mineral deposit exists on any of our mineral properties that comprise the Nolan Gold Project.
Ester Dome Property
During 2008, we plan to complete the closure of the Grant Mill Tailings Pond. This pond is filled to capacity, and will be capped and decommissioned after a final approval of the tailings pond closure plan is received from State of Alaska regulatory agencies. A meaningful exploration program may be completed during the summer months to explore for and identify small high-grade gold anomalies as well as larger low-grade gold anomalies.
Completing the 2008 exploration work plan will be contingent on available funding.
Hammond Property
The encouraging drill results to date, the potential of extending the Slisco Channel to the southeast plus the possibility of discovering gold bearing tributary channels, make this a prospect for additional discoveries. During the summer of 2008, a series of drill holes may be completed to explore for the extension of the Slisco Channel to the south. Presently, it has been traced for 1,800 feet. The drill program will also seek to define any gold bearing tributaries to the Slisco Channel.
This project will require additional funding for the company. Even if funding is acquired, there is no assurance that a commercial gold bearing placer deposit will be developed. Even if a gold bearing deposit is developed, additional funding will be required to mine the deposit, and until a feasibility study is completed, there is no assurance that the deposit will be profitable to mine.
During 2008, annual assessment work will be completed on the Eagle Creek property to keep the mining claims in good standing. Assessment work will be focused on the northwest part of the claim block, where drilling and trenching has defined an intrusive host rock, thought to be a sill, containing low grade gold, silver and antimony mineralization. If funding permits, the company will design a drilling program to further investigate the gold and by-product mineral distribution of the intrusive. Additional work which includes trenching and drilling will also be completed on the Number One. The Number One Vein was the lode quartz structure which has been mined commercially for antimony.
A commercially viable economic mineral deposit has not been defined on the property, and there is no assurance that a commercially viable economic mineral deposit exists on the property.
Completing the 2008 work plan will be contingent on available funding. Even if funding becomes available, there is no assurance that a commercial gold-silver-antimony deposit will
Low-Rank Coal-Water Fuel Project
On December 18, 2006, Silverado Green Fuel Inc. announced the signing of a Memorandum of Understanding ("MOU") between Choctaw County, the Choctaw County Economic Development District, the Mississippi Development Authority ("MDA") and Silverado Green Fuel Inc. The MOU is an agreement to build the country's first Low-Rank Coal-Water fuel commercial demonstration plant at the Red Hills Ecoplex just outside of Ackerman, MS. The anticipated $26 million Silverado Green Fuel Demonstration Project will be located on a 14-acre site, and is being designed to utilize the state's vast supply of low-rank coal reserves by converting them into green fuel, a new form of coal-based, environmentally friendly, low-cost, alternative fuel.
During late May of 2007 Silverado environmental staff met in a "pre-permitting" meeting with representatives of the Mississippi Department of Environmental Quality ("MDEQ"). At that meeting all the various sections of MDEQ that would be involved in the permitting of the Green Fuel industrial process were present, representatives of these sections were assigned to our project, and the lead MDEQ regulator that will serve as our point-of-contact was designated.
As we await full funding of the project, preliminary work on aspects of the various permits involved will continue during fiscal 2008. The development of an Environmental Management System ("EMS") that was initiated in 2007 upon the signing of the MOU will also continue during fiscal 2008. Silverado has also agreed to fund a study by the University of Alaska Fairbanks of the chemical and physical characteristics of Mississippi lignite coal, and it is anticipated that that study will commence during fiscal 2008.
There is no assurance that any financing will be obtained from either government or private sources to fund this project. It is the case, however, that two divisions of the state of Mississippi government have agreed to begin funding the start-up of our demonstration facility subject to certain terms and conditions as outlined in the MOU.
We expect to spend approximately $171,500 to fund the research into lignite coal conversion in conjunction with the University of Fairbanks, Alaska, referred to above, and the preparation of a Phase I feasibility study and cost estimate for the Mississippi Commercial Low Rank Coal Water Fuel plant. In addition we expect to incur administration costs of approximately $150,000 relating to the Green Fuel project.
Cash Requirements and Additional Financings
At November 30, 2007, we had working capital of $1,759,774. During the first quarter of 2008 we raised $3,860,388 in additional share capital. Our plan of mining operations in Alaska anticipates that we will expend $6,550,000 during fiscal year 2008. In addition, we expect to spend $321,500 on research and development for the Green Fuel project and approximately $2,000,000 on administrative costs in the Company's Vancouver office.
Our management is confident that they will be able to raise additional capital during the second, third and fourth quarters of Fiscal 2008 to cover the resulting anticipated shortfall of approximately $3,250,000. However, there is no assurance that we will be able to raise the financing necessary to enable us to implement our business plan.
Planned operations as described above could be curtailed if funding were not available. In addition, as of the date of this filing gold is trading above the spot price used to value the Company's inventory at November 30, 2007. Furthermore, historically, the Company has sold its gold inventory at a premium to the spot price. These benefits, although presently determinable, would serve to further reduce the anticipated shortfall.
Exploration Stage Company
The Securities and Exchange Commission's Exchange Act Guide 7 "Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations" requires that mining companies in the exploration stage should not refer to themselves as development stage companies in their financial statements, even though such companies should comply with Financial Accounting Board Statement No. 7, if applicable. We are an exploration stage company under the SEC's Guide 7 and accordingly, we have not been referred to as a development stage company in our financial statements. Accumulated results of operations are presented from December 1, 2001, the date we re-entered the exploration stage.
Mineral rights payments and exploration costs
Pursuant to EITF 04-02, "Whether Mineral Rights are Tangible or Intangible
Assets and Related Issues", the Company has modified its accounting policy with
respect to mineral claim payments, retroactively effective to June 1, 2004, to
capitalize the direct costs to acquire or lease mineral properties and mineral
rights as tangible assets. The direct costs include the costs of signature
(lease) bonuses, options to purchase or lease properties, and brokers' and legal
fees. If the acquired mineral rights relate to unproven properties, the Company
does not amortize the capitalized mineral costs, but evaluates the capitalized
mineral costs periodically for impairment. The Company expenses all costs
related to the exploration of mineral claims in which it had secured exploration
rights prior to establishment of proven and probable reserves.
Asset retirement obligation
Effective December 1, 2002, we adopted SFAS 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and normal use of the asset.
SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, we will recognize a gain or loss on settlement.
Stock Based Compensation
Effective December 1, 2006, the Company adopted the provisions of SFAS 123(R) (Share-based Compensation) requiring equity awards granted under its stock option plan to be accounted for under the fair value method. Accordingly, share-based compensation is measured at grant date, based on the fair value of the award. Prior to December 1, 2006, the Company accounted for awards granted under its stock option plans utilizing the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related interpretations, and provided the required pro forma disclosures prescribed by SFAS 123, "Accounting for Stock-Based Compensation" (SFAS 123), as amended. Under the existing stock option plans, all options vest entirely on the grant date. Therefore, there were no partially vested options outstanding as of the SFAS 123(R) adoption date.
OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources, and that would be considered material to investors.
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