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SAGD > SEC Filings for SAGD > Form 10-Q on 19-Nov-2013All Recent SEC Filings

Show all filings for SOUTH AMERICAN GOLD CORP.

Form 10-Q for SOUTH AMERICAN GOLD CORP.


19-Nov-2013

Quarterly Report


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

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words "believe," "expect," "anticipate," "intend," "estimate," "may," "should," "could," "will," "plan," "future," "continue," and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate.

Important factors that may cause the actual results to differ from the forward-looking statements, projections or other expectations include, but are not limited to, the following:

? risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our contemplated acquisition and exploration and development projects;

? risk that Federal and State permissions required for exploration on our properties are not available, or conflicting property interests preclude exploration and production on unpatented mining claims:

? risk that we cannot attract, retain and motivate qualified personnel, particularly employees, consultants and contractors for our operations;

? Risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits;

? results f initial feasibility, pre-feasibility and feasibility studies, and the possibility that future exploration, development or mining results will not be consistent with our expectations;

? mining and development risks, including risks related to accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in production;

? the potential for delays in exploration or development activities or the completion of feasibility studies;

? risks related to the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses;

? risks related to commodity price fluctuations;

? the uncertainty of profitability based upon our history of losses;

? risks related to environmental regulation and liability;

? risks that the amounts reserved or allocated for environmental compliance, reclamation, post-closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;

? risks related to tax assessments;

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? political and regulatory risks associated with mining development and exploration; and other risks and uncertainties related to our prospects, properties and business strategy;

? risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our contemplated acquisition and exploration and development projects;

? risk that Federal and State permissions required for exploration on our properties are not available, or conflicting property interests preclude exploration and production on unpatented mining claims;

? risk that we cannot attract, retain and motivate qualified personnel, particularly employees, consultants and contractors for our operations ;

? risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits;

? results of initial feasibility, pre-feasibility and feasibility studies, and the possibility that future exploration, development or mining results will not be consistent with our expectations;

? mining and development risks, including risks related to accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in production;

? the potential for delays in exploration or development activities or the completion of feasibility studies;

? risks related to the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses;

? risks related to commodity price fluctuations;

? the uncertainty of profitability based upon our history of losses;

? risks related to environmental regulation and liability;

? risks that the amounts reserved or allocated for environmental compliance, reclamation, post-closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;

? risks related to tax assessments; and

? political and regulatory risks associated with mining development and exploration; and other risks and uncertainties related to our prospects, properties and business strategy.

The forgoing list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.

As used in this Quarterly Report, the terms "we," "us," "our," and "Company" mean South American Gold Corp., unless otherwise indicated.

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Overview

The Company's current focus is on the acquisition, exploration, and potential development of mining properties in in the United States, though we are also seeking mineral property interests in Colombia, Mexico, and southeastern Europe. Though no such interests for acquisition have been identified at this time. Our common stock is currently quoted over-the-counter (the "OTC QB") under the trading symbol "SAGD".

As a part of our business plan, we intend to seek out and acquire interests in other mineral exploration properties which, in the opinion of our management, offer attractive mineral exploration opportunities. During the fiscal years ending June 30, 2013 and a 2102 acquired mineral property interests in Arizona, Nevada and Montana; we have also begun due diligence activities with the objective of additional properties in the United States and Southeastern Europe. In the fiscal year ending June 30, 2013, we continued exploration of properties including sampling, geologic mapping and beginning to review bonding requirements for forecast exploration activities. We actively reviewed several projects presented to us. We also signed a Memorandum of Understanding in regards to a Montana property interest which as of the end of the quarter ended September 30, 2013 had not been finalized.

We are an exploration stage mining company and while our objective is to develop profitable mining operations, currently we produce no cash flow from operations. Junior exploration stage mining companies generally seek to acquire mineral properties and mineral property interests, to explore, develop or joint-venture. Value is added through exploration and discovery of the potential for commercial mineralization on properties, and by joint venturing, selling or leasing properties. Companies at our stage generally use equity or equity-type financing, with pure debt financing generally only available from producing operations or upon completion of a bankable feasibility study. We have relied in the last year on convertible debt financing, which can be highly dilutive to shareholders, in absence of other funding availability.

Our business plan is highly contingent on our ability to secure financing under acceptable terms which is not assured.

Substantially, all of our assets will be put into commercializing mining rights and mineral claims located within a limited geographical area. Accordingly, any adverse circumstances that affect these areas would affect us financially. If any adverse circumstances were to arise, we would need to consider alternatives, both in terms of our prospective operations and for the financing of our activities. Management cannot provide assurance that we will ultimately achieve profitable operations or become cash-flow positive, or raise additional debt and/or equity capital. If we are unable to raise additional capital, we will continue to experience liquidity problems and management expects that we will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures including ceasing operations. We may also consider entering into a joint venture arrangement to provide the required funding to acquire and explore any mineral property interests. We have not undertaken any efforts to locate a joint venture participant. Even if we determine to pursue a joint venture participant, there is no assurance that any third party would enter into a joint venture agreement with us in order to fund the acquisition and exploration of mineral property interests. If we enter into a joint venture arrangement, we would likely have to assign a percentage of any mineral property interest we may hold to the joint venture participant.

North American Exploration and Acquisition Activities

We have commenced regular activities to locate and evaluate potential projects in North America. Initial projects under review have been in Mexico (Zactaecas region) and the United States (principally projects in Nevada, Arizona and Montana). These activities included site visits to the lease mining claims in Arizona and the Lucky Boy Silver project in Nevada, and the Baltimore Silver Mine project in Montana, which are discussed below. These efforts include reviewing historical literature, contacting property owners, compiling and reviewing information on properties, and where merited site visits and negotiations with property owners, and in addition exploration preparation for our GB Claims in Arizona. The lucky boy Silver project the company has elected tonot pursue, and the relevant mining claims were dropped.

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GB Claims - Arizona

GB 2 Gold

Leased Claims

The nine unpatented mining claims underlying the GB2 Lease cover approximately
180 acres and are located in the Black Rock Mining District of Yavapai County,
Arizona. Set forth below are the claim reference numbers.

                            Claim Reference Numbers

                BLM Recording Number        County Recording Number

                GB 1     AMC   393641         8 4608         P 313
                GB 3           393643         8 4608         P 315
                GB 4           393644         8 4608         P 316
                GB 5           393645         8 4608         P 317
                GB 6           393646         8 4608         P 318
                GB 7           393647         8 4608         P 319
                GB 8           393648         8 4608         P 320
                GB 23          393931         8 4608         P 983
                GB 25          393930         8 4608         P 984

Owned Claims

The single Claim acquired by the Company has a BLM recording number of AMC 3993932 and county recording number of 84608P-982.

Location

The Black Rock Mining District is located in the southeast part of Yavapai County between the east foothills of the Bradshaw Mountains and the Agua Fria River. The following map shows the general location of the leased and owned unpatented mining claims we acquired in Yavapai County, Arizona:

[[Image Removed: graphic1]]

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Access

The Property is readily accessed from Wickenberg, Arizona (approximately sixty five miles northwest of Phoenix, Arizona), which lies on Federal Highway 93. Wickenberg is the nearest large town that has services necessary for mineral exploration and mining. From Wickenberg, paved Constellation Highway is followed about two miles, thence sixteen miles of dirt road lead to the Property. Unimproved tracks provide access to the claim group. Road access to the east side of the Property is limited.

History

The Yavapai County area of Arizona is an area of historic gold prospecting and production activities. However, the Company is not aware of any recorded history of production from the Property underlying the Lease or the Claim.

Climate, Local resources, Infrastructure, Physiography

Climate

The climate is semi-arid with roughly 12.2 inches/year precipitation, mostly in late winter. The Property can be accessed year-round because of the mild climate, good road access, and low elevation of about 1200 meters above mean sea level.

Water Rights, Power, and Mining Personnel

The status of water rights at the Property is uncertain. The amount of water in the vicinity of the Property is adequate for exploratory drilling in the winter, but may not be adequate for mineral processing. The nearest power lines are about 16 miles distant. Mining personnel are not available locally.

The most important natural feature on the Property is tertiary sandstones on the north end of the property.

Tailings Storage Areas, Waste Disposal Areas, and Plant Sites

The Company has not identified private land adjacent to the Property or within close proximity that could be used for potential storage areas, waste disposal or processing sites. There is public land in the vicinity, but it is unknown whether permits would be granted for such uses. There is evidence of old tailings on the project which have not been sampled.

Permitting

Preliminary geological mapping, sampling, and geophysical surveys can be conducted without any permits. A Plan of Operations ("POO") will have to be filed and approved by the Bureau of Land Management before mechanized work such as access work or drilling can be undertaken on the Property. There is no cost to file a POO with the Bureau of Land Management. Water for drilling would need to be hauled into the property according to initial site visits. Permits are often granted in a short period of time as long as they do not significantly impact existing water rights or unduly degrade riparian areas.

Further mining exploration and exploitation activities are subject to federal, state and local laws, regulations and policies, including laws regulating surface disturbance, water discharge, and the removal of natural resources from the ground and the discharge of materials into the environment. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Exploration and exploitation activities are also subject to federal, state and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of exploration methods and equipment. The Company is unable to quantify at this time the potential cost of such regulations and permitting. (see also "Risk Factors).

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Infrastructure

There is no ascertainable infrastructure on the Property at present.

No adits or trenches have been identified on the property.

Regional Geology

The Property lies on the southern margin of Arizona's Transition Zone physiographic province. The majority of the area is underlain by Precambrian gneiss, and at the north end of district Tertiary sandstone predominate. Historical information refers to complex igneous and metamorphic host rocks in the general area.

Geology and Mineralization

The Property is characterized by the Precambrian gneiss, with the westerly part exposed hornblende diorite porphyry-type mineralization identified form initial examination of the breccias pipes #4, #5 and #6. The host rock is mostly composed of Proterozoic formations intruded by younger igneous rocks.

[[Image Removed: graphic2]] Metallurgical

No metallurgical testing has been conducted.

Reserves

There are no established probable or proven reserves on the Property. Our due diligence activities have been limited, and to a great extent, have relied upon information provided to us by third parties. We have not established and cannot provide any assurance that any of the properties underlying the Lease or the Claim contain adequate, if any, amounts of gold or other mineral reserves to make mining economically feasible to recover that gold or other mineral reserves, or to make a profit in doing so.

Project Exploration Plan

The project area is an early stage prospect with potential identified to date from reconnaissance exploration. The initial objective is to identify the presence of and extent of breccia pipes on the Property. This will require an initial work plan of geologic mapping, surface sampling and soil analysis, after which a more comprehensive plan would be developed with an objective of identifying drill targets and developing a Plan of Operation to be filed with the BLM for permission to conduct such an exploration program.

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During 2013, exploration efforts have focused on the area adjacent to the identified breccias pipes, evaluating nearby properties for acquisition or lease, and considering potential bonding requirements for a drilling plan. Initial summary maps were prepared, and some surface sampling was conducted on a limited basis. Surface sampling was conducted and results considered positive to merit further exploration. However bonding requirements may preclude the Company drilling until additional financing is put in place.

We estimate the initial work plan described above to require an estimated five thousand dollars ($5,000) for geological consulting, travel expenses, and sampling analysis costs. The Company is reviewing the cost of providing necessary bonding for the project, and due to limited finances will consider in the upcoming fiscal year seeking a joint venture partner or selling the project while retaining a net smelter return. The Company is actively considering joint-ventures or a sale of the project while retaining a Net Smelter Return and looking upon effecting such a transaction while looking for additional land position in the area.

Lucky Boy Silver Project - Nevada

In December 2011, we staked five unpatented mining claims in the Walker Lane Mineral Belt in western Nevada which we are referring to as the "Lucky Boy Silver Project".

In connection with our consideration of whether to stake these unpatented mining claims, we conducted a diligence review of the Lucky Boy Silver Project. The description of the Lucky Boy Silver Project contained herein is the product of our due diligence from an initial site visits conducted in December 2011 and certain historical information publicly available which we have not been able to independently verify. Further description of the project may be found in our Annual Report on Form 10-K for the year ended June 30, 2013.

Land Status

We staked the following five unpatented mining claims in December 2011 covering approximately 100 acres of the Lucky Boy Silver Project:

Claim BLM Recording No.

LB#1 NMC 1062491
LB#2 NMC 1062492
LB#3 NMC 1062493
LB#4 NMC1062494
LB#5 NMC 1062495

The Company was unsuccessful at acquiring mineral property rights to adjacent patented land in the fiscal year ending June 30, 2013. The Company forfeited these claims in the quarter ended September 30, 2013.

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Baltimore Silver Mine

On August 6, 2012, the Company entered into a binding Memorandum of Understanding (the "Agreement") with Western Continental, Inc. ("Western") to lease with option to purchase three patented mining claims ( the "Baltimore Silver Mine") subject to a definitive agreement to be signed within ninety days, with an effective lease date of August 3, 2012. Our Current Report on Form 8-K filed August 9, 2012 provided property information and is incorporated herein by reference, as is our recently filed 10k report for the period ending June 30, 2013.

Western and the Company agreed to a Definitive Agreement ("the Agreement") to Lease with Option to Purchase the Baltimore Silver Mine. The Company effected the Agreement September 5, 2012. The lease will be for a term of ten years beginning August 2, 2012, and may be extended for an additional 15 years with a payment of $100,000 at any time. During the term of this lease, the Company will be responsible for the payment of any property taxes, indemnify Western for any and all activities the Company conducts on the property, and secure all required permits and operating licenses for the Company activities on the property. The lease payment will be $10,000 per year in cash payments, which may be paid in restricted stock as the Company's option provided such restricted stock has a market bid price in excess of $20,000 for the 20 days average bid price for the stock prior to payment, and a quarterly cash payment of $500 per quarter. Payment will be on July 31st of each year beginning in 2013.

The Company will pay a production royalty of all minerals mined from the property in the form of a Net Smelter Return to Western of 3%. The Company will have for the term of this agreement an option to purchase the property free and clear of any lien or encumbrance in the amount of $500,000 at which time the lease would terminate and no royalty would be due afterwards from the property. Should the Company cause to be issued a property report meeting standard industry guidelines indicating probable or proven reserves in excess of two million ounces of silver on the property, Western shall receive an additional $30,000 in cash or restricted shares valued as described above, within 30 days of publication of such report. The Company has issued 10,000,000 shares of its restricted common stock to Western. The Company will also pay $25,000 in cash or restricted stock, valued at the ten day average bid price for the stock, between January 1, 2013 and July 1, 2013. The Company is currently negotiating and amendment and has not received notification of default as a result of these discussions.

Description of Property

Land Status

The property consists of three patented mining claims covering approximately 60
acres.

                         Name of Claim Mineral Survey #

                         Last Hope           9689
                         Baltimore           1540
                         Mona                9689

The Company has also staked two unpatented claims as part of the project, thus the project as a whole contains approximately 100 acres.

Location

The Baltimore Mine property is located in Jefferson County Montana, approximately twenty two miles northeast of Butte, MT and four miles northwest of Boulder, MT. Coordinates are Section 7, Township 6 N, Range 4W, Jefferson County, Montana. The Company is collating information and preparing general maps on the project.

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Access

Access is generally from Boulder by four miles of unimproved county road thence along the Boomerang Creek Road.

Climate and Physiography

The climate is relatively temperate allowing work generally all year around. The mine is on the eastern slope area of Sugarloaf Mountain, with ridges one thousand foot above the main valley. Elevations on the property range from 6,250 feet on ridge top to 5,800 feet above sea level near the Baltimore Mine. Vegetation consists of mostly sage but stands of conifers are common on the north slopes.

Local Resources

There are sufficient local resources for general material and supplies, and general labor. Electric power lines are within a mile of the property and water supply appears adequate for the property, though an assessment will be required for water supply for expanded drilling programs and future potential milling requirements.

Geology

The geology of the area is dominated by the monzonites of the Butte Batholith intruding into the older Elkhorn volcanics, consisting of green-gray welded tuffs and sites. East-westerly striking pyrite-galena bearing quartz veins have been deposited along or near to fault or shear zones with some Scricitic alteration. The Baltimore shear or alteration zone can be traced can be traced over five thousand feet on the surface.

Metallurgy

The Company has no metallurgical tests relating to the property, or historical information as to recoveries of metal from ore formerly produced.

Reserves and Mineralized Material

There are no established reserves or mineralized material on the property according to available information on the project.

History and Historical Information on the Property

The following information has been provided by independent sources not been independently verified by the Company but provided for general informational purposes, and it should not be assumed that prior production results are an indication of potential future results.

The mine apparently was discovered in the nineteenth century with regular shipments ore reported in 1903 by lessees, and two thousand feet of workings. In 1907, it was reported the mine had six adits and a 140 foot shaft. In 1912, 60 men were employed at the mine, and it was extended an additional six hundred feet. By 1935 the underground workings were estimated at three thousand feet of crosscuts and drifts, and with tunnels. In 1960 it was reported that the mine had produced 18,148 tons of ore which yielded 1,734 ounces of gold, 275,489 ounces of silver, and 271,266 pounds of copper, 1,273,965 pounds of lead and 280,750 pounds of zinc. Past production is no indicator of future production potential which can only be determined through additional information on the property.

Limited sampling was conducted on the property in 1966, 1979, and in 1989, a . . .

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