UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
TARA GOLD RESOURCES CORP.
(Exact name of registrant as specified in its charter)
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Nevada
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90-0316566
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.)
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incorporation or organization)
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375 N. Stephanie St.
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Bldg. 2, Ste. #211
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Henderson, NV
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89014
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (888) 901-4550
Securities to be registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which
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to be so registered
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each class is to be registered
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Securities to be registered pursuant to Section 12(g) of the Act:
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Common Stock
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Title of Class
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Title of Class
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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.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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Item 1. Business.
Tara Gold (the “Company” or “Tara Gold”), was incorporated in 1999 in Nevada as Westnet Communications Group, Inc. On April 1, 2001 the Company acquired MerchantPark Communications, Inc. for shares of its common stock. After this acquisition the Company’s operations involved the development of software which could be used by small businesses for web-site development and hosting.
In March 2002 the Company’s discontinued its software development operations and was inactive until early 2004. In November 2003 the Company changed its name to American Stellar Energy, Inc., and in early 2004 began acquiring oil and gas properties. In 2005 the Company sold its oil and gas properties after it determined that these properties were not economical.
In 2005 the Company became involved in the exploration of gold and silver mining properties. In February 2006, the Company changed its name to Tara Gold Resources.
In 2006 Tara Gold, then focused on gold and silver properties, formed Tara Minerals Corp. when it determined that some investors, prefer lead, zinc and silver projects, rather than gold and silver projects, and that capital may be easier to obtain by separating gold properties from industrial metal properties. Although this was Tara Gold’s intention when it formed Tara Minerals, as of May 31, 2012 Tara Minerals nevertheless had interests in properties which may be productive of gold or silver. Tara Minerals formed Adit Resources Corp. in 2009 to hold the Picacho property and to finance the exploration and development of this property solely from the sale of Adit’s securities.
In May 2005 Tara Gold, through its subsidiary Corporacion Amermin S.A. de C.V. (“Amermin”), began acquiring mining properties in Mexico. In May 2006, the Company formed Tara Minerals Corp. (“Tara Minerals”), which owns 99.9% of the common stock of American Metal Mining S.A. de C.V., a Mexican corporation. Tara Minerals also owns 85% of the common stock of Adit Resources Corp (“Adit”). Tara Gold’s operations in Mexico are conducted through Amermin and American Metal Mining since Mexican law provides that only Mexican corporations are allowed to own mining properties. All of Tara Gold’s operations in Mexico are conducted through its Mexican subsidiaries. As of May 31, 2012, Tara Gold owned approximately 53% of the outstanding common stock of Tara Minerals.
Tara Gold focuses primarily on gold mining concessions. Tara Minerals’ primary focus is also on gold and silver, as well as industrial minerals, copper, lead, zinc, iron, , and other associated metals.
On April 4, 2012 Adit Resources Corp. sold its subsidiary, American Copper Mining S.A. de C.V. (“American Copper”) to Yamana Mexico Holdings B.V. (“Yamana”). American Copper’s primary asset was the Picacho groupings.
Insofar as potential conflicts of interest between Tara Gold and Tara Minerals are concerned, Tara Minerals will have the first opportunity to acquire and develop properties which may be productive of gold and silver. With this process, Tara Gold, which owned approximately 53% of Tara Minerals as of May 31, 2012, will be able to share in any mining properties which Tara Minerals successfully develops.
Tara Gold began the distribution of its shares in Tara Minerals to its shareholders. On May 25, 2011 Tara Gold distributed one share of Tara Minerals for every 20 outstanding shares of Tara Gold. Additional distributions will be made until all Tara Minerals shares held by Tara Gold are distributed to Tara Gold’s shareholders.
Following the distribution of the shares of Tara Minerals, Tara Gold will not have any interest in the properties owned by Tara Minerals or Adit Resources.
Once the distribution of the Tara Minerals shares has been completed, both Tara Gold and Tara Minerals will continue their efforts to develop mining properties which are thought to contain commercial quantities of gold, silver and other minerals
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For the most part, the officers and directors of Tara Minerals, Tara Gold, and Adit Resources are the same, and will remain the same following the distribution of the shares of Tara Minerals. As discussed elsewhere in this registration statement, Adit has sold its only property and it is not expected that Adit will acquire any new mining properties.
In this filing references to "Company," "we," "our," and/or "us," refers to Tara Gold Resources and, unless the context indicates otherwise, its consolidated subsidiaries.
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Below is a chart which illustrates Tara Gold’s mining properties as of May 31, 2012.
No properties were in joint ventures as of May 31, 2012.
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The chart below illustrates Tara Gold’s mining properties after Tara Gold completes the distribution of its shares of Tara Mineral’s common stock.
After acquiring a property and selecting a possible exploration area through its own efforts or with others, Tara Gold will typically compile reports, past production records and geologic surveys concerning the area. Tara Gold will then undertake a field exploration program to determine whether the area merits work. Initial field exploration on a property normally consists of geologic mapping and geochemical and/or geophysical surveys, together with selected sampling to identify host environments that may contain specific mineral occurrences. If an area shows promise, geologic drilling programs may be undertaken to further define the existence of any economic mineralization. If such mineralization is delineated, further work may be undertaken to estimate ore reserves, evaluate the feasibility for the development of the mining project, obtain permits for commercial development, and, if the project appears to be economically viable, proceed to place the deposit into commercial production.
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The capital required for exploration and development of mining properties is substantial. Tara Gold plans to finance its future operations through joint venture arrangements with third parties (generally providing that the third party will obtain a specified percentage of Tara Gold’s interest in a certain property in exchange for the expenditure of a specified amount), the sale of Tara Gold properties, Tara Gold’s operations and by the sale of Tara Gold and its subsidiaries’, common stock. If the capital required to develop its properties is not available, Tara Gold may attempt to sell one or more of its properties.
The exploration and development of properties that are joint ventured with third parties are managed by one of the joint venture participants which is designated as the operator. The operator of a mining property generally provides all labor, equipment, supplies and management on a cost plus fee basis and generally must perform specific tasks over a specified time period. Separate fees may be charged to the joint venture by the operator and, once certain conditions are met, the joint venture is typically required to pay the costs in proportion to its interests in the property.
In connection with the acquisition of a property, Tara Gold may conduct limited reviews of title and related matters and obtains representations regarding ownership. Although Tara Gold plans to conduct reasonable investigations (in accordance with standard mining practice) of the validity of ownership, it may be unable to acquire good and marketable title to its properties.
Mines have limited lives, which is an inherent risk in the mining business. Although Tara Gold plans to acquire other mining properties, there is a limited supply of desirable mineral lands available in Mexico where Tara Gold would consider conducting exploration and/or production activities. In addition, Tara Gold faces strong competition for new properties from other mining companies, many of which have substantial financial resources, and Tara Gold may be unable to acquire attractive new mining properties on terms that are considered acceptable.
Tara Gold’s operations have not been affected by the escalating conflicts in Mexico involving drug cartels.
As of May 31, 2012 Tara Gold had interests in the mining properties listed below, all of which are located in Mexico. Tara Gold’s interests in the properties are generally in the form of mining concessions granted by the Mexican government. Although Mexican mining concessions are similar, in some respects to unpatented mining claims in the United States, there are differences. See “Mexican Mining Laws and Regulations” below for information concern Mexican mining concessions.
Although Tara Gold believes that each of these properties has deposits of gold, copper, lead, zinc, or iron the properties are in the exploratory state, do not have any known reserves, and may never produce any of these metals in commercial quantities.
Tara Gold’s significant mining properties are La Currita, Don Roman and Champion. The other prospects described below are not considered significant since Tara Gold did not, as of October 15, 2012, have any plans to develop those properties.
In Mexico, land size is denominated in hectares and weight is denominated in tonnes. One hectare is equal to approximately 2.47 acres and one tonne is equal to 2,200 pounds.
The proposed exploration program for Tara Gold’s properties will typically consist of rock-chip sampling, soil geochemistry, geological mapping, a geophysical survey, trenching, drilling, and resource calculation. The exploration program will take place in phases, with some phases occurring simultaneously. Rock chip and soil geochemistry may be initiated first to test and define the mineralization. This may be followed up with a CSAMT (Controlled-Source Audio-Frequency Magneto Telluric) (or other appropriate geophysical methods) to test the extent and depth of sulfide mineralization which could host copper, lead or zinc. The CSAMT is an industry standard geophysical technique that has been used successfully to identify carbonate deposits in Mexico and other locations.
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Upon completion of the exploration program, and if results are positive, a drilling program may begin. Split samples (i.e. samples cut in half) from logged cores will be sent for assay at Tara Mineral’s laboratory or at laboratories operated by third parties. Remaining cores will be saved for third party independent confirmation. Prospect samples will be assayed by Tara Minerals at its laboratory with occasional splits sent to third parties labs for verification. Samples for mine production will be taken according to the standard methodology generally accepted for either drill cuttings or channel sampling. Samples for mine production will be assayed internally at Tara Minerals’ laboratory, with duplicate assaying of every twentieth sample. Splits of every twentieth sample will be sent to an outside laboratory for confirmation. After drilling results have been evaluated, a mineral resource calculation will be made.
With the exception of the Don Roman Groupings, as of May 31, 2012 no plants or other facilities were located on any of the properties.
Tara Gold will use its own employees, or contract with qualified personnel, to conduct and supervise all aspects of its exploration program.
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Tara Gold plans to finance exploration through joint venture or options arrangements with third parties (generally providing that the third party will obtain a specified percentage of Tara Gold’s interest in a certain property in exchange for the expenditure of a specified amount), the sale by Tara Gold of interests in properties, Tara Gold’s operations and by the sale of Tara Gold and its subsidiaries common stock.
Unless otherwise noted below, all of the properties below were purchased from non-related third parties.
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La Currita Prospect
Tara Gold acquired the La Currita property in May 2005 for an effective purchase price of $1,253,439, plus $180,000 of value-added tax.
The La Currita property covers 65 hectares and is located in Chihuahua approximately 400 kilometers southwest of the city of Chihuahua, northern Mexico. The property is situated on the western edge of the Sierra Madre Occidental in the Temoris mining district and can be accessed by dirt road and a regular pick-up truck. The La Currita property includes four mines.
Geologically, La Currita is a low sulfide epithermal gold/silver tabular vein system that has a strike orientation of N30W and a dip of 60 degrees. It is part of the sequence of volcanic rocks that form the base of the Sierra Madre Occidental. This sequence of rocks is characterized by an up to 1,000 meter thick Lower Volcanic Sequence of andesitic flows, volcanic sediments and intrusive bodies that are unconformably overlain by a thick (up to 1,000 meters) Upper Volcanic Sequence of caldera-related rhyolitic flows, ignimbrites and domes. Precious metal mineralization in these units is hosted in low-sulfide quartz veins, breccias and stockwork zones that formed in the Lower Volcanic Sequence, principally along northwest trending, extensional normal faults.
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The justification for acquiring the La Currita concession is that the veins are located in the larger Sierra Madre Gold zone of Mexico. Locally the area is dominated by an abundance of quartz veins that are mineralized with gold. The La Currita veins are of the same type as others in the district and have been mined in the past to produce many tons of gold/silver concentrate. Recent geological sampling, as well as mine production sampling, has produced consistent analytical results, which show the presence of substantial gold. Geological mapping has shown the length and width of the veins to be adequate for mining. The depth of the veins is projected into the concession from drilling on other concessions covering the same veins and shows the depth to be more than adequate for mining.
The La Currita mines were in production between 1983 and 1998. Mining operations resumed in early January 2007 and were terminated by October 2008.
As of March 31, 2012, Tara Gold has spent approximately $729,000 on mapping, sampling, and trenching. Additional historical exploration was performed by other third parties prior to the acquisition of this property.
Currently no further exploration program is planned for La Currita. As of May 31, 2012, Tara Gold was looking for a joint venture partner which would be willing to fund the development of this prospect.
Las Minitas, Auriferos, Mariana and Mezquite, and Las Brisas Prospects
Las Minitas, Auriferos, Mariana and Mezquite, and Las Brisas properties are located in the southern part of the state of Sonora, Mexico in the Alamos district, which also resides on the western edge of Sierra Madre Occidental Gold belt. The properties in this area have returned results positive for gold and silver, although reserves have not been calculated. For management purposes we do not manage these as a group even though they are adjacent to each other. These prospects can be accessed from the paved highway from the town of Navojoa, Sonora going east towards Alamos, Sonora, 24 kilometers before arriving to Alamos take the caliche road north for 15 kilometers to the CFE Power Plant and Dam, from there take the left fork heading northwest following the 2 rut dirt road for 7 kilometers to the town of Minitas which sits amidst the concessions.
All of these properties are adjacent, but seem to form one deposit system, which is characterized as a silver-gold-bearing quartz vein and stockwork system. The district is underlain by older metasediments and granitic volcanic rocks. Within the deposit area itself, the bedrock consists of dacitic volcanic rocks that are mineralized and the bedrock is covered by younger, non-mineralized agglomerates of dacitic volcanic rocks and breccias.
Mineralization at the properties is confined to precious metals in the form of silver and gold-bearing epithermal quartz veins. The quartz veins commonly occur in swarms within the dacitic volcanics, which have an average trend of N60W and dip between vertical and 60 degrees northeast. The veins average between 1-2 meters in thickness. There is also a well-developed and prolific stockwork of smaller ½” or less quartz veins present in the central zones of the deposit.
Las Minitas Prospect
Tara Gold acquired the Las Minitas Prospect in March 2006 for an effective purchase price of $2,427,403, plus $340,000 in value-added tax.
The Las Minitas Prospect is 826.2575 hectares in size and is located in the state of Sonora, Mexico, approximately 40 kilometers northwest of the town of Alamos. The property lies at the western edge of the Sierra Madre Occidental gold-silver belt.
As of March 31, 2012 the Company has not spent any money on exploring this property. Historical exploration was performed by other third parties prior to the acquisition of this property.
As of May 31, 2012 Tara Gold was in negotiations to amend its agreements relating to the Las Minitas Prospect which may include the termination of this agreement and the return of the property. Per the contract, Tara Gold can only return the property in good standing, which requires all taxes must be paid and the property must be clear of any liabilities. As of May 31, 2012 Tara Gold had not paid the property taxes associated with these properties.
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Auriferos V Fraccion 1 and 2 Prospects
In 2007, Tara Gold signed an agreement with Pershimco Resources Ltd. (“Pershimco”) providing Pershimco the option to acquire a 75% interest in the Las Minitas Prospect. In March 2008 Tara Gold and Pershimco agreed to terminate their joint venture with respect to the Las Minitas prospect. The agreement with Pershimco contained a clause that any prospects purchased by Pershimco adjacent to the Las Minitas Prospect would revert to Tara Gold. This resulted in Tara Gold obtaining the Auriferos V Fraccion 1 and 2 Prospects (“Auriferos”), which the Company manages as part of the Las Minitas Prospect.
Should the Company return the Las Minitas Prospect the Company retains ownership of Auriferos.
As of March 31, 2012 the Company has not spent any money on exploring this property. Historical exploration was performed by other third parties prior to the acquisition of this property.
The Auriferos concessions are 400.7177 hectares in size and are located in the state of Sonora, Mexico, near the towns of Alamos and Quiriego.
Mariana and Mezquite Prospect
In March 2008, Pershimco transferred the mineral claims and obligations linked to the Mariana and Mezquite Prospect to Tara Gold. The obligations linked to Mariana and Mezquite are the remaining debt payments of $190,000, which includes value-added taxes of $25,907. The effective purchase price of this property is $171,451 plus value-added taxes.
The Mariana and Mezquite prospect is 276 hectares in size and is located in the state of Sonora, Mexico, near the towns of Alamos and Quiriego.
As of March 31, 2012 the Company has not spent any money on exploring this property. Historical exploration was performed by other third parties prior to the acquisition of this property.
As of May 31, 2012 Tara Gold was in negotiations to amend its agreements with all vendors relating to Mariana and Mesquite Prospect which may include the termination of this agreement and the return of the property. Per the contract, Tara Gold can only return the property in good standing, which requires all taxes must be paid and the property must be clear of any liabilities. As of May 31, 2012 Tara Gold had not paid the property taxes associated with these properties.
Las Brisas Prospect
Tara Gold acquired the Las Brisas Prospect in August 2007 for an effective purchase price of $3,134, plus $391of value-added tax.
The Las Brisas Prospect is 6,428.6896 hectares and is located in the state of Sonora, Mexico, approximately 40 kilometers northwest of the town of Alamos. The property lies at the western edge of the Sierra Madre Occidental gold-silver belt.
As of March 31, 2012 the Company has not spent any money on exploring this property. Historical exploration was performed by other third parties prior to the acquisition of this property.
Should the Company return the Las Minitas Prospect the Company retains ownership of Las Brisas.
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Properties owned by Tara Minerals Corp.
Don Roman Groupings
The Don Roman Groupings, comprised of 10,680.1213 hectares, were acquired in October 2006, November 2008, and March and April 2011 for an effective purchase price of approximately $2,126,000, plus value-added tax of approximately $327,500. The Don Roman Groupings consist of the Pilar, Don Roman, Las Nuvias, Centenario, La Verde and La Palma prospects.
The Don Roman plant is 18 kilometers north from Choix, state of Sinaloa, Mexico. The plant is accessed by 18 kilometers of paved road. From the plant site, the closest concessions are the Don Roman Groupings which can be accessed with a regular pick-up truck through a Company maintained road. The Don Roman Groupings are in the heart of La Reforma Mining District as well as the stated gold belt that stems from the state of Chihuahua.
The Don Roman Groupings, are located in the northern part of the La Reforma Mining District of north eastern Sinaloa State, Mexico. The predominant rocks in the area are Upper Jurassic-Lower Cretaceous carbonate (limestone) rocks and Tertiary granitic intrusives. The La Reforma Mining District has been mined for more than 300 years, with substantial amounts of precious and base metals produced from numerous mines. In the opinion of Tara Minerals, the district has never been properly explored using present day, industry standard, exploration methods, including geochemistry, geophysics, and geology. Tara Minerals feels that this area may potentially host base metals that were never discovered or exploited due in part to market conditions, lack of technology, and lack of funding.
The justification for acquiring the Don Roman concessions is the knowledge of the types and occurrence of deposits that form around a typical “Porphyry Copper Deposit System”. The many large and small, high-grade poly-metallic veins in the district, which surround the known low-grade porphyry copper center, are typical of this type of system. These types of veins have been mined successfully in many other districts in the U.S. and Mexico. The percentage of poly-metallics, meaning zinc, lead, copper and iron, is buoyed by the presence of substantial silver and gold as subordinate metals in these veins. One of the veins obtained has been mined for 20 years. Several others have been mined off and on for many years. One of the veins, El Refugio, was first mined over 400 years ago and has seen mining as recently as 5 years ago.
Preliminary and continuing evaluation of the Don Roman Groupings has identified numerous mineralized systems at various locations on the property, some of which include a series of parallel northwest trending lead, zinc, silver structures that can be traced for more than 300 meters; an abandoned lead, zinc, silver mine; and historic vein-type gold mineralization. A number of these mineralized structures lie within a complex suite of volcanic-granitic and sedimentary (carbonate) rocks. Preliminary evaluation of the property has indicated the potential for five separate mineral systems each having varying mineral characteristics. Initial sampling has indicated the potential for two lead, zinc, silver systems; two gold copper systems; and one iron ore, gold, copper system.
Temporary provisional permits have been acquired. Tara Minerals continues to work toward procuring definitive permits as production and financing allows. High voltage electrical service has been supplied to an electrical substation which is owned by Tara Minerals and supplies power to operate the plant.
Two circuits capable of producing a minimum of 200 tonnes per day are operational, with a third circuit that can be completed when production makes it necessary. An additional regrind circuit can also be implemented at the appropriate time. The plant, when all circuits are operational, is capable of processing approximately 400 tonnes per day.
In 2010 Tara Minerals began production at the Don Roman plant and extracted lead, zinc, and silver material from its mine and stockpiled it for future processing at the plant. During production in 2010,181 tons of concentrate were produced and sold. In the fourth quarter of 2010, the plant activity ceased.
As of May 31, 2012 $7,200,000 has been spent on the mapping, sampling, trenching, plant facilities, processing equipment, and related mining equipment.
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Exploration of the veins in the concessions will be multi-phased. The first phase will consist of drilling approximately 10 diamond core holes in the El Rosario vein system to accurately determine the total length, width and depth of the veins. This phase will further define the mineralized structure, which will then allow the concentration plant to be restarted. This cost will be approximately $150,000 and will be paid from cash received from the sale of the Picacho Prospect. The work will be completed under the direction of Steve Eady, Tara Mineral’s Chief Geologist.
Additional exploration phases will be conducted after the start of mining and will be paid with revenue generated by concentrate production from the Don Roman plant.
Pirita Prospect
Tara Minerals acquired the Pirita Prospect in June 2009 for an effective purchase price of $250,000, plus value-added tax of $30,000.
The Pirita Prospect is 6,656.1049 hectares in size and is located near the town of Bacoachi, state of Sonora, Mexico and the towns of Urieque and Morelos, state of Chihuahua, Mexico. The property can be accessed with a regular pick-up truck by driving 6 kilometers from Bacoachi along an unimproved dirt road.
The Pirita prospect is located within the gold orogenic belt of the Sierra Madre mountains in northern Mexico along the Sonora-Chihuahua border. Principally the area is underlain by Cretaceous or older meta-sediments and granodiorite. The prospect is overlain by various volcanic sequences of andesite, dacite and basalt. To date no detailed geology has been completed on the prospect.
As of March 31, 2012 the Company has not spent any money on exploring this property. Historical exploration was performed by other third parties prior to the acquisition of this property.
As of May 31, 2012 Tara Minerals was in negotiations to amend its agreements relating to the Pirita Prospect which may include the termination of this agreement and the return of the property. Per the contract, Tara Minerals can only return the property if it is in good standing, which requires that all taxes must be paid and the property must be clear of any liabilities. As of May 31, 2012 Tara Minerals had not paid the property taxes associated with this prospect.
Godinez Joint Venture
In July 2010, Tara Minerals entered into a joint venture agreement whereby third parties would contribute 100% of the mining rights to the concession “Mina Godinez” and Tara Minerals would have the exclusive rights to manage, operate, explore and exploit the concession. This joint venture was terminated on January 18, 2012.
Iron Ore Projects
Tara Minerals raised $750,000 through a royalty rights offering to fund these projects.
Tania Iron Ore Project
Tara Minerals leased the Tania Iron Ore Project in May 2011 for royalty payments based on production.
Tara Minerals has the right to remove 6 million tonnes of iron ore concentrate from the property, with renewal rights extending through the life of the property. Tara Minerals had agreed to pay $6 per tonne for the first 500,000 tonnes removed from the property and $7 per tonne thereafter. Tara Minerals has paid $100,000 against future royalty payments.
The property, comprised of 3,233.0147 hectares, is located approximately 33 kilometers southeast, via dirt road from the port of Manzanillo, in the city of Manzanillo, State of Colima, Mexico. The iron ore is contained within decomposed granite with little overburden. The property has not been subjected to modern exploration methods or concentrating processes prior to Tara Minerals.
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As of March 31, 2012 approximately $169,000 had been spent on road access construction, mapping, sampling, and trenching.
As of May 31, 2012 Tara minerals is in the process of terminating this contract.
Las Viboras Dos Iron Ore Project
Tara Minerals acquired the Las Viboras Dos Iron Ore Project in July 2011 for an effective purchase price of $188,094, plus value-added tax of $30,095.
This property, comprised of 147.9201 hectares, is located near the town of La Huerta, state of Jalisco, Mexico. It is accessible by a 50 kilometer paved highway from Manzanillo towards La Huerta.
As of March 31, 2012 the Company has not spent any money on exploring this property. Historical exploration was performed by other third parties prior to the acquisition of this property.
As of May 31, 2012 Tara minerals is in the process of terminating this contract.
Mina El Champinon Iron Ore Project
In September 2011, Tara Minerals leased the Mina El Champinon Iron Ore Project (“Champinon”) for royalty payments based on production which gives Tara Minerals the right to mine the project for a period of 10 years with an automatic renewal clause. In May 2012, the lease agreement and the royalty payments were rescinded. Tara Minerals acquired Champinon for an effective purchase price of $2,175,000, plus value-added tax of $348,000.
This property, comprised of 150 hectares, is located approximately 12 kilometers from the Don Roman plant, in Choix, state of Sinaloa, Mexico. The property can be accessed with a regular pick-up truck by driving along a 4 kilometer paved road followed by an 8 kilometer dirt road. Tara's operational team has succeeded in identifying high, medium, and low grade mineralized iron zones. Drilling, mineralogy and design work, with a dual focus of tonnage expansion and production is in progress.
The Champinon deposit host rock is meta-andesite, which has been intruded by granodiorite/monzonite. Along contacts there are skarn mineralized zones formed. In the area of the deposit, there are numerous northwest/southeast trending steeply dipping fault/breccia zones. The dip is to the northeast. The zone at the Champinon deposit appears to be at least 100 meters wide consisting of andradite garnet up to 5 meters wide, vertically inter-layered with zones of high-grade magnetite up to 12 meters wide. The garnet varies from weakly to heavily mineralized with magnetite.
The justification for acquiring the Champinon concession is the extensive massive iron ore (magnetite) outcrop that is present on the vein. Geological mapping showed what appears to be adequate iron grades present across the outcrop. There is what appears to be adequate length, width and depth of the veins to be favorable for mining.
As of March 31, 2012 approximately $889,000 had been spent on road access construction, mapping, sampling, and trenching. Mapping and sampling of this property is ongoing.
Exploration will be a one -phase project that will consist of drilling 5 or 6 diamond core holes to determine the true thickness and depth of the iron veins. The cost for six holes, each drilled to a depth of 100 meters, is estimated to be $90,000. This cost will be paid from cash received from the sale of the Picacho Prospect. Work will be under the direction of Steve Eady, Tara Minerals’ Chief Geologist.
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Property owned by Adit Resources
Picacho Groupings
The Picacho Groupings, comprised of 7,059.5691 hectares, were acquired in July 2009 and May 2011 for an effective purchase price of approximately $1,457,000, plus value-added tax of approximately $226,000. The Picacho Groupings consist of the Picacho and Picacho Fractions I, II and III properties.
The Picacho Groupings are located approximately 100 kilometers south of the U.S. – Mexico border within the Northern Sierra Madre gold belt, in close proximity to town of Bacoachi, state of Sonora, Mexico. From Bacoachi the concessions can be accessed through a Company maintained road with a regular pick-up truck. The area has a high level of exploration activity and is close to a national paved highway and power grid.
The Picacho Groupings are underlain by Tertiary and Cretaceous andesitic, rhyolitic flows and tuffs with ignimbritic and less abundant intrusive porphyritic rocks. Past activity on the Picacho Groupings by various parties has resulted in the construction of at least nine adits, several shafts and raises, numerous workings and diamond drills, remnants of tailings from operations in the 1930´s have been found but most of this material was removed and further beneficiated by prior owners.
In July 2009, Tara Minerals acquired the Picacho property from Mr. Emilio Acuña.
In July 2009 Tara Minerals transferred the Picacho prospect to Adit. In connection with the transfer of the prospect, Adit issued Tara Minerals a promissory note in the principal amount of $650,000 to compensate Tara Minerals for its down payment toward the purchase price of the property and to reimburse Tara Minerals for other amounts advanced on behalf of Adit. The note (as amended) is unsecured, bears interest at prime rate plus 3.25% per year, and is due and payable on December 31, 2011. Adit has since repaid $600,000 towards this note.
On March 31, 2010 Adit and Mr. Acuna amended their agreement. Under the revised agreement, Adit paid Mr. Acuna $500,000 in cash (plus $80,000 in value-added tax) and in consideration for the transfer of all technical data relating to the prospect, issued Mr. Acuna 320,000 shares of Adit’s common stock, which was valued at $2.50 per share, and 437,500 shares of Tara Minerals’ common stock, which was valued at $4.00 per share.
Adit paid for the Tara Minerals shares by a note in the principal amount of $1,750,000. The note bears interest at 6% per year and is be due and payable on March 31, 2012. At any time after July 1, 2010 Tara Minerals may convert the outstanding principal, plus accrued interest, into shares of Adit’s common stock. Tara Minerals will receive one share of Adit’s common stock for each $0.75 of principal and interest converted.
In May 2011, Tara Minerals sold the Picacho Fractions I, II and III to Adit for $163,793 plus value-added tax of $26,207.
On January 28, 2011, Adit sold 500,000 units at a price of $1.00 per unit to Yamana Gold Inc. Each unit consisted of one share of Adit’s common stock and one half warrant. Each full warrant entitles Yamana to purchase one share of Adit’s common stock at a price of $1.50 per share at any time on or before January 28, 2014.
On April 4, 2012 Adit Resources Corp. sold its subsidiary, American Copper Mining S.A. de C.V. (“American Copper”) to Yamana Mexico Holdings B.V. (“Yamana”). American Copper’s primary asset is the Picacho groupings.
As consideration for the sale of American Copper, Yamana paid or agreed to pay Adit the following, in U.S. dollars:
|
|
·
|
$7.5 million, minus approximately $780,000 (the amount required to pay the Mexican government to release its tax lien on the Property), was deposited into an escrow account and released May 25, 2013;
|
15
|
|
·
|
$9.8 million on May 25, 2013;
|
|
|
·
|
During the period ending on May 25, 2017, Yamana will pay $1.0 million for every 100,000 ounces of gold, (whether proved, measured or inferred) (as defined by Canadian Securities Administrators National Instrument 43-101) discovered on the Picacho Groupings. If no gold is discovered on the Picacho Groupings by May 25, 2015, Yamana will make an advance payment of $3 million. Pursuant to this provision of the Agreement, Yamana will pay a maximum of $14 million; and,
|
|
|
·
|
$4.3 million on May 25, 2018.
|
Yamana Gold Inc. will also surrender 500,000 common shares, and warrants to purchase an additional 250,000 common shares, that it holds in the capital of Adit for cancellation by Adit.
Yamana has the option to terminate the agreement within ten business days prior to May 25, 2013 for any reason. If the Agreement is terminated, Yamana will be required to return the capital stock of American Copper and the underlying Property to Company in good standing.
United States Mining Laws and Regulations
In the United States, unpatented mining claims on inappropriate federal land may be acquired pursuant to procedures established by the Mining Law of 1872 and other federal and state laws. These acts generally provide that a citizen of the United States (including corporations) may acquire a possessory right to develop and mine valuable mineral deposits discovered upon inappropriate federal lands, provided that such lands have not been withdrawn from mineral location, e.g., national parks, military reservations and lands designated as part of the National Wilderness Preservation System. The validity of all unpatented mining claims is dependent upon inherent uncertainties and conditions. These uncertainties relate to such non-record facts as the sufficiency of the discovery of minerals, proper posting and marking of boundaries, and possible conflicts with other claims not determinable from descriptions of record. Prior to discovery of a locatable mineral thereon, a mining claim may be open to location by others unless the owner is in possession of the claim.
The domestic exploration programs conducted by Tara Gold will be subject to federal, state and local environmental regulations. The United States Forest Service and the Bureau of Land Management extensively regulate mining operations conducted on public lands. Most operations involving the exploration for minerals are subject to existing laws and regulations relating to exploration procedures, safety precautions, employee health and safety, air quality standards, pollution of stream and fresh water sources, odor, noise, dust, and other environmental protection controls adopted by federal, state, and local governmental authorities as well as the rights of adjoining property owners. Tara Gold may be required to prepare and present to federal, state, or local authorities data pertaining to the effect or impact that any proposed exploration or production of minerals may have upon the environment. All requirements imposed by any such authorities may be costly and time-consuming, and may delay commencement or continuation of exploration or production operations.
Future legislation and regulations are expected to continue to emphasize the protection of the environment, and, as a consequence, the activities of Tara Gold may be more closely regulated to further the cause of environmental protection. Such legislation and regulations, as well as future interpretation of existing laws, may require substantial increases in capital and operating costs to Tara Gold and may result in delays, interruptions, or a termination of operations, the extent of which cannot be predicted.
Mining operations in the United States are subject to inspection and regulation by the Mine Safety and Health Administration of the Department of Labor (MSHA) under provisions of the Federal Mine Safety and Health Act of 1977.
Tara Gold’s operations will also be subject to regulations under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA or Superfund), which regulates and establishes liability for the release of hazardous substances, and the Endangered Species Act (ESA), which identifies endangered species of plants and animals and regulates activities to protect these species and their habitats. Tara Gold may incur expenditures for land reclamation pursuant to federal and state land restoration laws and regulations. Under certain circumstances, Tara Gold may be required to close an operation until a particular problem is remedied or to undertake other remedial actions.
16
Mexican Mining Laws and Regulations
In Mexico, Article 27 of the Mexican Constitution grants the ownership of essentially all minerals to the Mexican nation. The right to exploit those minerals is given to private parties through concessions issued by the Mexican government. The current Mining Law of Mexico was enacted in 1992. Concessions are granted on mining lots, the sides of which measure 100 meters, or a multiple of 100, except when adjoining lots (granted when there were no size requirements) require a smaller size.
An exploration concession is granted to the first applicant that meets the requirements of the Mining Law, the most important of which is that the claimed area is deemed to be “free land”. Under the Mining Law, areas that are already covered by mining concessions or applications for mining concessions are not free, as well as reserved areas such as the coast and the seabed.
Exploration mining concession applications are filed at government offices. Exploration concessions are valid for fifty years and give their holders the right to carry out exploration work and, if warranted, put into produce any ore discovered on the concession.
Mining concessions do not grant the holder the right to enter or use the surface land of the mining lots. It is therefore necessary to obtain the permission of the surface owner for that purpose. Typically, a verbal authorization with no consideration is granted for prospecting and sample gathering. A simple letter agreement or contract is normally used for drilling, trenching, or basic road building. For more advanced exploration activities, a small monetary consideration is normally required. In some cases the concessionaire is also required to make minor improvements which benefit the local community such as fixing a road or fence or building an earthen dam. Building and operating a mine requires a more formal agreement. If an agreement cannot be reached with the surface owner, the Mining Law gives the concessionaire the right to request a temporary occupation of the land or an expropriation (or an easement for the construction of roads, power lines, water pipes, etc.). Compensation is set through an appraisal made by the federal government.
A concessionaire’s most important obligation is the performance of assessment work on the mining lots. A minimum amount of assessment work measured in monetary terms must be performed each year, depending on the size of the mining lot and, for an exploration mining concession, the number of years elapsed since its issue, pursuant to minimum investment tables established by the Mexican government. Assessment work may be done either through expenditures or the sale of minerals. A report must be filed in May of every year regarding the work for the previous calendar year. Lack of performance of the minimum work will result in the cancellation of the concession; payment to the government in lieu of required assessment of work is not allowed.
Concessionaires must comply with federal environmental regulations which generally require that mining activities be subject to an environmental impact statement authorization. Normally an environmental impact statement authorization can be obtained in six to twelve months from the date of its filing. However, mining operations which do not exceed levels established by the Mexican government are not required to file an environmental impact statement.
The Mining Law forbids concessionaires from removing mine timbering and supports and requires compliance with all safety rules promulgated by the Mexican government.
Mexican and foreign individuals, as well as Mexican corporations, are allowed to hold mining concessions. Although foreign corporations may not hold mining concessions, foreign corporations may, however, own Mexican corporations.
17
General
Tara Gold’s offices are located at 375 N. Stephanie St., Bldg. 2 Ste. #211, Henderson, NV 89014 of office space supplied free of charge by Lynda R. Keeton-Cardno, Chief Financial Officer of Tara Gold and Tara Minerals.
As of May 31, 2012 Tara Gold had 7 employees; Tara Minerals had 6 employees; and American Metal Mining, Tara Mineral’s subsidiary, had 2 employees. All personnel for Amermin and American Copper Mining are subcontract labor.
Tara Gold’s website is www.taragoldresources.com
Item 1A. Risk Factors.
There is no assurance that any of Tara Gold’s remaining properties will be capable of producing precious or industrial metals in commercial quantities.
There is no assurance that Tara Gold will remain current or file its periodic Exchange Act filings.
Item 2. Financial Information.
Tara Gold was incorporated in October 1999. During the period from its incorporation through June 30, 2011 Tara Gold generated revenue of approximately $725,000 and incurred expenses of approximately $759,000 in cost of sales; $9,172,000 in exploration expenses and $37,245,000 in operating and general administration expenses. Included in operating and general and administrative expenses are non-cash charges of approximately $8,464,000 pertaining to the issuance of stock options of Tara Minerals.
Material changes of certain items in Tara Gold’s Statement of Operations for the year ended December 31, 2010, as compared to the same period in 2009, are discussed below.
|
Twelve Months Ended
|
December 31, 2010
|
December 31, 2009
|
||||||
|
(In thousands of U.S. Dollars)
|
||||||||
|
Revenue
|
$ | 160 | $ | - | ||||
|
Cost of revenue
|
658 | - | ||||||
|
Exploration expenses
|
2,033 | 280 | ||||||
|
Operating, general and administrative expenses
|
17,471 | 4,156 | ||||||
|
Net operating loss
|
$ | (20,002 | ) | $ | (4,436 | ) | ||
In 2010 Tara Minerals the Don Roman plant was in operation for several months. In the fourth quarter of 2010, the plant activity ceased. During 2009 the Don Roman mine was not producing ore. These are the primary reasons to the increase in revenue and cost of revenue for December 31, 2010 when compared to December 31, 2009. Exploration expenses for the Don Roman Groupings increased $400,000 for mine and smelting operations and other various mine expenses relating to the operation of this mine.
In addition to production at the Don Roman plant, $1,359,000 of exploration expenses in 2010 were related to Adit, consisting $1,224,000 for the purchase of technical data for the Picacho Groupings and $125,000 for geological consulting, assaying, and field supplies for the Picacho Groupings. Exploration expenses for the Picacho Groupings were a negligible $8,000 as of December 31, 2009.
18
Material changes of certain items in Tara Gold’s operating, general and administrative expenses for the year ended December 31, 2010, as compared to the same period in 2009, are discussed below.
|
Year Ended
|
December 31, 2010
|
December 31, 2009
|
||||||
|
(In thousands of U.S. Dollars)
|
||||||||
|
Advertising
|
$ | 54 | $ | - | ||||
|
Bad debt expense
|
1,610 | 17 | ||||||
|
Depreciation expense
|
250 | 40 | ||||||
|
Insurance
|
58 | 30 | ||||||
|
Investment banking, investor relations and consulting
|
7,546 | 1,571 | ||||||
|
Marketing, promotions and other expenses
|
264 | 87 | ||||||
|
Compensation, officer employment contracts and bonuses
|
4,671 | 905 | ||||||
|
Other taxes and penalties
|
390 | 2 | ||||||
|
Professional fees, other
|
1,433 | 703 | ||||||
|
Repairs and maintenance
|
59 | 118 | ||||||
|
Travel
|
148 | 26 | ||||||
Advertising increased during the year ended December 31, 2010 due to mine and gold shows to expose the Company in the market compared to no advertising expenses in 2009.
Bad debt expense increased in the year ended December 31, 2010 due to an increase in the allowance for IVA receivables to 90% for all Mexican subsidiaries for IVA taxes to be received back from the Mexican government. As of November 2009, the local taxing authority in Mexico changed its policies on the reimbursement of value added tax, and requested more data and documentation, which had not been required in the past, be submitted before they will reach a verdict to return funds in cash. This however, does not mean that these credits cannot be applied for future use but it does mean that eminent cash flow is not assured. As such, the valuation of the receivable of cash from the Mexican taxing authorities was not readily assured and the Company increased its allowance for this receivable to 90% to more appropriate represent the amount realizable based on facts and circumstances at each period end. Though the Company may not receive cash flow from these receivables in the same manner as past experience, the Company has continued to use this receivable position to offset any payable position that incurred as allowed by Mexico tax laws.
Depreciation expense increased as more plant and equipment was in service in the year ended December 31, 2010 than 2009. Insurance expense increased due to life insurance being paid for key executives and key subcontract labor in the Mexican subsidiaries during the year ended December 31, 2010, the life insurance was cancelled at the end of the same year.
Investment banking ($5,400,000), investor relations ($939,000) and consulting expense ($1,207,000) increased due to common stock, options and warrants issued or granted for services provided to Tara Minerals. During 2010 Tara Minerals expected to start production at the Don Roman plant and enter the Amex Stock Exchange. During 2010, expenses related to entering the Amex Stock Exchange were approximately $5,400,000 and consisted of cash payments of $28,051, the issuance of common stock valued at $2,687,500 and the grant of options and warrants valued at $2,684,028. The expense associated with the issuance of the stock, options and warrants did not require the use of cash. Investor relations ($939,000) and consulting services ($1,207,000) unrelated to the Amex Stock Exchange application primarily involved introduction to brokerage firms, high net worth potential investors, investor communication, trade shows, introduction to foreign investment markets. This expense consisted of $149,570 in cash, the issuance of common stock valued at $1,602,054 and the grant of options and warrants valued at $394,537. More additional information on the issuance of options and warrants for Tara Minerals for this period can be found in the Option and Warrants and Non-controlling Interest footnotes in the financial statements which are part of this registration statement.
19
Marketing and promotions increased due to common stock valued at approximately $134,000 issued for services provided to Tara Minerals and $131,000 in cash for services provided to Tara Gold and its subsidiaries. Compensation, officer employment contracts and bonuses increased due to options and common stock granted or issued to officers of the Company for services rendered and performance criteria achieved. Other taxes increased due to accrued payroll taxes and accrued taxes related to the Tara Gold U.S. Federal IRS Audit. Professional fees, other increased as Tara Gold resumed filing its 10-K and 10-Q reports. Travel expenses increased due to projects at the Don Roman mine site and visits to other prospects.
Material changes of certain items in Tara Gold’ Statement of Operation for the three months ended June 30, 2011, as compared to the same period in 2010, are discussed below.
|
Three Months Ended
|
June 30, 2011
|
June 30, 2010
|
||||||
|
(In thousands of U.S. Dollars)
|
||||||||
|
Revenue
|
$ | - | $ | 38 | ||||
|
Cost of revenue
|
- | 147 | ||||||
|
Exploration expenses
|
891 | 146 | ||||||
|
Operating, general and administrative expenses
|
1,198 | 2,750 | ||||||
|
Net operating loss
|
$ | (2,089 | ) | $ | (3,005 | ) | ||
During the three months ended June 30, 2011, exploration expenses increased from the prior period in 2010 due to the beginning of exploration activities at the Tania Iron Ore project and the Company’s purchase of technical data for La Verde. For the three months ended June 30, 2011, exploration expenses consisted of $740,000 for the purchase of technical data for the La Verde property part of the Don Roman Groupings, $1,000 for geological consulting, assaying, and field supplies for the Picacho Groupings, and $150,000 for mine and smelting operations and other various mine expenses for the Don Roman Groupings and Tania Iron Ore Project. As of June 30, 2010, exploration expenses consisted of $39,000 for geological consulting, assaying, and field supplies for the Picacho Groupings, $107,000 for mine and smelting operations and other various mine expenses for the Don Roman Groupings.
Material changes of certain items in Tara Gold’s operating, general and administrative expenses for the three months ended June 30, 2011, as compared to the same period in 2010, are discussed below.
|
Three Months Ended
|
June 30, 2011
|
June 30, 2010
|
||||||
|
(In thousands of U.S. Dollars)
|
||||||||
|
Bad debt expense
|
$ | 160 | $ | 422 | ||||
|
Depreciation expense
|
72 | 45 | ||||||
|
Investor relations expense
|
36 | 1,394 | ||||||
|
Compensation, officer employment contracts and bonuses
|
502 | 194 | ||||||
|
Professional fees, other
|
359 | 334 | ||||||
Bad debt expense decreased for the three months ended June 30, 2011 compared to 2011 due to lower transaction volumes. Depreciation expense increased as more plant and equipment was in service during the three months ended June 30, 2011 than 2010.
The decrease in investor relations expense is due to fewer consultants needed during the three months ended June 30, 2011. During 2010 the Company, through Tara Minerals, expected to start production at the Don Roman site and enter the Amex Stock Exchange. For the three months ended June 30, 2011, investor relations expenses consisted of the issuance of common stock valued at $16,500 and approximately $19,000 in cash to consultants. For the three months ended June 30, 2010, investor relations expenses consisted of the issuance of common stock valued at $1,193,550 and approximately $201,000 in cash for investor relations at the Tara Minerals level.
For the three months ended June 30, 2011, compensation, officer employment contracts and bonuses consisted of options with a value of $311,000, and officers’ compensation of approximately $191,000. As of June 30, 2010, compensation, officer employment contracts and bonuses consisted of approximately $194,000.
20
Material changes of certain items in Tara Gold’ Statement of Operation for the six months ended June 30, 2011, as compared to the same period in 2010, are discussed below.
|
Six Months Ended
|
June 30, 2011
|
June 30, 2010
|
||||||
|
(In thousands of U.S. Dollars)
|
||||||||
|
Revenue
|
$ | - | $ | 38 | ||||
|
Cost of revenue
|
- | 147 | ||||||
|
Exploration expenses
|
2,821 | 1,749 | ||||||
|
Operating, general and administrative expenses
|
2,975 | 10,037 | ||||||
|
Net operating loss
|
$ | (5,796 | ) | $ | (11,895 | ) | ||
In 2011, Tara Minerals sought to expand and advance the Don Roman Groupings project by acquiring additional mineral claims and by finding a joint venture partner that would provide the capital and expertise to restart the operations. The Company also ventured into the iron ore industry segment, exploring the Tania, Las Viboras Dos and Champinon properties.
During the six months ended June 30, 2011, Tara Gold did not have any revenue. For the six months June 30, 2011, exploration expenses consisted of $2,592,000 for the purchase of technical data for both the Centenario (part of the Don Roman Groupings) and La Verde and La Palma properties (part of the Don Roman Groupings), $16,000 for geological consulting, assaying, and field supplies for the Picacho Groupings, and $213,000 for mine and smelting operations and other various mine expenses for the Don Roman Groupings and Tania Iron Ore Project.
During the six months ended June 30, 2010, exploration expenses consisted of $1,224,000 for the purchase of technical data for the Picacho Groupings, $80,000 for geological consulting, assaying, and field supplies for the Picacho Groupings, $584,000 for mine and smelting operations and other various mine expenses for the Don Roman Groupings.
Material changes of certain items in Tara Minerals’ operating, general and administrative expenses for the six months ended June 30, 2011, as compared to the same period in 2010, are discussed below.
|
Six Months Ended
|
June 30, 2011
|
June 30, 2010
|
||||||
|
(In thousands of U.S. Dollars)
|
||||||||
|
Bad debt expense
|
$ | 803 | $ | 443 | ||||
|
Depreciation expense
|
148 | 95 | ||||||
|
Investor relations expense
|
98 | 4,417 | ||||||
|
Compensation, officer employment contracts and bonuses
|
921 | 3,943 | ||||||
|
Professional fees, other
|
593 | 552 | ||||||
|
Repairs and maintenance
|
11 | 35 | ||||||
|
Rent and rental of equipment
|
53 | 92 | ||||||
Bad debt expense increased for the six months ended June 30, 2011 due to an adjustment in the allowance at Amermin and the renegotiation of an agreement which included IVA. Depreciation expense increased as more plant and equipment was in service during the six months ended June 30, 2011 than 2010.
The decrease in investor relations expense is due to fewer consultants needed. During 2010 the Company, through Tara Minerals, expected to start production at the Don Roman site and enter the Amex Stock Exchange. During the six months ended June 30, 2011, investor relations expenses consisted of $36,000 in options, $16,500 paid with common stock and $46,000 in cash to consultants. During the six months ended June 30, 2010, investor relations expenses consisted of the issuance of common stock valued at $4,108,610 for investor relations at the Tara Minerals level and the issuance of common stock valued at $21,083 for investor relations at the Adit level, the remainder was paid in cash.
21
During the six months ended June 30, 2011, compensation, officer employment contracts and bonuses consisted of options with a value of $493,000, and officers’ compensation of approximately $428,000. During the six months ended June 30, 2010, compensation, officer employment contracts and bonuses consisted of options valued at $3,406,000, $157,000 for stock bonuses and officers’ compensation of $380,000.
Repairs and maintenance decreased for the six months ended June 30, 2011, because the Don Roman plant stopped operating; therefore the Company spent less on repairs and maintenance of machinery and other plant and mining equipment.
During the six months ended June 30, 2010, the Company was working on a program to track inventory and parts that is not being used in 2011; the Don Roman plant was operating and more repairs and maintenance expenses were incurred. Rent and rental equipment increased for the six months ended June 30, 2011, due to rental of apartments in Manzanillo, Colima, where the Tania Iron Ore Project is located, for personnel and officers, and rent of the offices in Chihuahua; the Company defaulted on an equipment capital lease entered into on July 21, 2010, the equipment was capitalized as an asset and the asset and related debt were removed and payments were reclassified as treating payments similar to an operating lease during the first quarter of 2011.
The following is an explanation of Tara Gold’s material sources and (uses) of cash (in thousands of U.S. dollars) during the years ended December 31, 2010 and 2009 and the three months ended June 30, 2011 and 2010:
|
December 31,
|
June 30,
|
|||||||||||||||
|
2010
|
2009
|
2011
|
2010
|
|||||||||||||
|
(In thousands of U.S. Dollars)
|
||||||||||||||||
|
Net cash (used) provided in operating activities
|
$ | (3,109 | ) | $ | (3,438 | ) | $ | (2,505 | ) | $ | (2,479 | ) | ||||
|
Acquisition of property, plant and equipment
|
(268 | ) | (109 | ) | - | (230 | ) | |||||||||
|
Construction of the Don Roman Mine
|
- | (1,498 | ) | - | - | |||||||||||
|
Sale of marketable securities
|
- | 4,547 | - | - | ||||||||||||
|
Purchase of mining properties
|
(25 | ) | (643 | ) | (30 | ) | (25 | ) | ||||||||
|
Sale of assets
|
- | - | 29 | - | ||||||||||||
|
Loans from third and related parties
|
630 | - | - | 430 | ||||||||||||
|
Repayment of loans and related party payables
|
(780 | ) | (956 | ) | (102 | ) | (712 | ) | ||||||||
|
Sale of common stock of subsidiaries
|
2,372 | 2,668 | 1,865 | 1,240 | ||||||||||||
|
Proceeds from Iron Ore financial instrument
|
- | - | 750 | - | ||||||||||||
|
Changes in exchange rate
|
(78 | ) | 618 | (51 | ) | (65 | ) | |||||||||
|
Cash on hand at beginning of period
|
1,451 | 264 | 193 | 1,451 | ||||||||||||
Tara Gold does not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on its sales, revenues or income from continuing operations, or liquidity and capital resources.
22
Tara Gold anticipates that its capital requirements during the twelve months ending March 31, 2013 will be:
|
Tara Minerals
|
||||
|
Exploration and development – Don Roman Groupings
|
$ | 750,000 | ||
|
Exploration and development - Champinon
|
750,000 | |||
|
Property taxes
|
150,000 | |||
|
General and administrative expenses
|
750,000 | |||
|
Tara Gold
|
||||
|
Property taxes
|
150,000 | |||
|
General and administrative expenses
|
500,000 | |||
|
Total
|
$ | 5,379,000 | ||
The capital requirements shown above include capital required by Tara Gold and its subsidiaries.
Tara Gold will need to obtain additional capital if it is unable to generate sufficient cash from its operations or find joint venture partners to fund all or part of its exploration and development costs.
In August, an Agreement was signed that included an option for a joint venture partner to earn a 50% interest in the Don Roman Groupings and an additional option to earn an interest in all Iron Ore Properties located in Mexico, which Tara Gold controls or may control. As of December 31, 2011 this joint venture expired. See Item 8 of this Registration Statement for information concerning litigation involving this joint venture.
As of May 31, 2012, the Company was reviewing the Las Minitas, Mariana & Mezquite, Pirita, Tania and Las Viboras Dos properties for continued inclusion as part of the Company’s mining property portfolio. No payments toward Las Minitas, Mariana and Mezquite or Pirita were made in 2011. The Company may decide to terminate the purchase/lease agreements and return the properties. Tara Gold is critically reviewing all properties for joint venture, option or sale opportunities.
Tara Gold’s future plans will be dependent upon the amount of capital available to Tara Gold, the amount of cash provided by its and its subsidiaries’ operations, and the extent to which Tara Gold is able to have joint venture partners pay the costs of exploring and developing its mining properties.
Tara Gold does not have any commitments or arrangements from any person to provide Tara Gold with any additional capital. If additional financing is not available when needed, Tara Gold may continue to operate in its present mode or Tara Gold may need to cease operations. Tara Gold does not have any plans, arrangements or agreements to sell its assets or to merge with another entity.
See Note 1 to the financial statements included as part of this report for a description of Tara Gold’s accounting policies and recent accounting pronouncements.
Item 3. Properties.
See Item 1.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table lists, as of May 31, 2012, those persons owning beneficially 5% or more of Tara Minerals’ common stock, the number and percentage of outstanding shares owned by each director and officer of Tara Minerals and by all officers and directors as a group. Unless otherwise indicated, each owner has sole voting and investment powers over his shares of common stock.
23
|
Name and Address
|
Number of Shares (1)
|
Percent of Class
|
||||||
|
Francis R. Biscan, Jr. (2)
|
11,994,729 | 11.7 | % | |||||
|
2162 Acorn Court
|
||||||||
|
Wheaton, IL 60189
|
||||||||
|
Name and Address
|
Number of Shares (1)
|
Percent of Class
|
||||||
|
David Barefoot (2)
|
- | 0 | % | |||||
|
240 Columbus Circle
|
||||||||
|
Longwood, FL 32750
|
||||||||
|
Lynda R. Keeton-Cardno (2)
|
10,000 | 0 | % | |||||
|
185 Bethany St.
|
||||||||
|
Henderson, NV 89074
|
||||||||
|
Clifford A. Brown (2)
|
3,402,371 | 3.3 | % | |||||
|
313 Arbor Avenue
|
||||||||
|
West Chicago, IL 60185
|
||||||||
|
All officers and directors as a group (4 persons)
|
15,407,100 | 15.0 | % | |||||
Item 5. Directors and Executive Officers.
|
Name
|
Age
|
Position
|
||
|
Francis R. Biscan, Jr.
|
51
|
President, Chief Executive Officer and Director
|
||
|
David Barefoot
|
47
|
Chief Operating Officer
|
||
|
Lynda R. Keeton-Cardno
|
40
|
Chief Financial Officer and Treasurer
|
||
|
Clifford A. Brown
|
60
|
Director, U.S. Corporate Controller
|
The directors of Tara Gold serve in such capacity until the first annual meeting of Tara Gold shareholders and until their successors have been duly elected and qualified. The officers of Tara Gold serve at the discretion of Tara Gold directors.
The principal occupations of Tara Gold’ officers and directors are as follows:
Francis R. Biscan, Jr. has been an officer and director of Tara Gold since May 2003. Between 1997 and August 2003 Mr. Biscan was an independent financial consultant, providing advice to public and private companies in the areas of capital formation and mergers and acquisitions. Mr. Biscan has also been an officer and director of Tara Mineral’s since May 2006 and an officer and direct of Adit Resources since June 2009.
David Barefoot has been an officer of Tara Gold and Tara Minerals since August 2011. On August 9, 2011 David Barefoot was appointed as the Company’s Chief Operating Officer. Over the last year and a half, Mr. Barefoot has been an integral part of streamlining the Company and overall strategy development with regards to advancing the Company's portfolio of properties. Working closely with the CEO, he will continue to build and manage the strengths of the Company's team in the U.S. and Mexico. For the past 26 years, Mr. Barefoot has been a consultant (as a sole proprietor) to various public and private businesses focusing on business development, expanding market share presence and building leadership teams; including 16 years of hiring, training and developing leadership in the financial services industry throughout the Southeast and Chicago areas. The immediate past 5 years Mr. Barefoot has continued consulting (as a sole proprietor) and sits as the President and Board Member of Vision Sky, a company that focuses on software for the home health care industry. Mr. Barefoot has been a director of Adit Resources since May 2011.
24
Lynda R. Keeton-Cardno, CPA, has been an officer of Tara Gold and Tara Minerals since January 2011. Since 2004, Ms. Keeton-Cardno has been the CEO/Managing Member of Lynda R. Keeton CPA, LLC, a PCAOB registered firm which provides audit and consulting services to public and private companies. Between 1996 and 2002, Ms. Keeton-Cardno worked for Arthur Andersen LLP in Phoenix, AZ and Las Vegas, NV in both the Audit and Advisory group and Technology Risk Consulting group. Ms. Keeton-Cardno is a licensed Certified Public Accountant in Nevada, a member of the American Institute of Certified Public Accountants, a graduate of Arizona State University’s School of Business and Honors College, and has held the Certified Information Systems Auditor designation. Ms. Keeton-Cardno is also the treasurer for Tara Gold, Tara Minerals, and Adit Resources.
Clifford A. Brown, CPA, has been an officer and director of Tara Gold since November 2004. Since 1989 Mr. Brown has been the President of Clifford A. Brown and Co., a firm which provides accounting and consulting services and sells accounting software. Since 1993 Mr. Brown has served as the treasurer and Board member of Restoration Ministries, Inc., a non-profit corporation with 33 different ministries in Chicago. Mr. Brown has also been an officer and director of Tara Mineral’s since May 2006 and a director of Adit Resources since June 2009. Mr. Brown has been a Certified Public Accountant since 1981.
Key Employees
Ramiro Trevizo. Mr. Trevizo has been a director of Tara Minerals since May 2008 and President/Sole administrator for American Metal Mining, S.A. de C.V, its Mexican subsidiary since 2007. Mr. Trevizo has also been the President of Corporacion Amermin, S.A. de C.V., the Mexican subsidiary of Tara Minerals Resources Corp., since 2005. Between 2003 and 2005 Mr. Trevizo was the President of Grupo Constructor del Desierto, S.A., an engineering company based in Chihuahua, Mexico. Between 2002 and 2004 Mr. Trevizo was a regional manager for D&B Engineering of Phoenix, Arizona. Mr. Trevizo was a project manager for Concord, California based OSP Consultants from 1999 to 2002.
Steve Eady. Mr. Eady was appointed Chief Geologist for Tara Minerals in December 2011 and is an accomplished geologist and has been working in mining since 1973. His past experience includes mineralogy, geology, ore reserve development, leach testing, feasibility studies and geological related development research. He has worked in the past for Inspiration Consolidated Copper Company, and on numerous exploration and development projects at Phelps Dodge Mining / Freeport-McMoRan Copper & Gold Inc.
Tom Claridge. Mr. Claridge was appointed Senior Mining and Plant Engineer for Tara Minerals in December 2011 and is an accomplished project manager with over 20 years of experience in mine operations, plant design, and water treatment all over the world. His experience includes mineral resource evaluations, conceptual and feasibility reports, metallurgical test programs, economic evaluations and mine and process development of engineering projects for major and junior mining companies. His past employers include Hanlon Engineering & Architecture Inc. and Phelps Dodge Mining / Freeport-McMoRan Copper & Gold Inc.
Tara Gold does not have a compensation committee. Tara Gold’s Board of Directors serves as its Audit Committee. Lynda R. Keeton-Cardno is Tara Gold’s financial expert. Since Ms. Keeton-Cardno is an officer of Tara Gold, Ms. Keeton-Cardno is not independent as that term is defined in section 803 of the listing standards of the NYSE Amex. None of Tara Gold’s Directors are a financial expert as that term is defined by the Securities and Exchange Commission.
None of Tara Gold’ directors are independent as that term is defined in section 803 of listing standards of the NYSE Amex.
25
Tara Gold believes all of its directors are qualified to act as such due to their longstanding relationship with Tara Gold.
Tara Gold has adopted a Code of Ethics applicable to its principal executive, financial, and accounting officers and persons performing similar functions.
Item 6. Executive Compensation.
The following table shows the compensation paid or accrued during the two years ended December 31, 2010 to the executive officers of Tara Gold.
|
All Other
|
|||||||
|
Stock
|
Option
|
Annual
|
|||||
|
Name and
|
Fiscal
|
Salary
|
Bonus
|
Awards
|
Awards
|
Compensation
|
Total
|
|
Principal Position
|
Year
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(7)
|
|
Francis R. Biscan
|
2010
|
$276,000
|
-
|
$ 78,500
|
$2,954,000
|
-
|
$3,308,500
|
|
President and
|
2009
|
$256,000
|
-
|
$ 15,000
|
-
|
-
|
$ 271,000
|
|
Chief Executive Officer
|
|||||||
|
Lynda R. Keeton-Cardno,
|
2010
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Chief Financial Officer
|
2009
|
-
|
-
|
-
|
-
|
-
|
-
|
|
and Treasurer (6)
|
|||||||
|
David Bizzaro,
|
2010
|
$100,000
|
-
|
-
|
-
|
-
|
$ 100,000
|
|
Chief Financial Officer
|
2009
|
-
|
-
|
-
|
-
|
-
|
-
|
|
and Treasurer (6)
|
|||||||
|
Clifford A. Brown
|
2010
|
$ 30,000
|
-
|
$ 39,250
|
$ 977,000
|
-
|
$ 1,046,250
|
|
Controller, Director
|
2009
|
$ 20,000
|
-
|
$ 7,500
|
-
|
-
|
$ 27,500
|
|
(1)
|
The dollar value of base salary (cash and non-cash) earned.
|
|
(2)
|
The dollar value of bonus (cash and non-cash) earned.
|
|
(3)
|
During the periods covered by the table, the value of Tara Mineral’s shares issued as compensation for services to the persons listed in the table.
|
|
(4)
|
The value of all stock options granted during the periods covered by the table. The options awards relate to the grant of options to purchase shares of Tara Minerals. See Note 9 to the financial statements included as part of this report for details concerning the assumptions used in determining the value of these options. See the “Stock Option and Bonus Plans - Summary” section below for other information concerning these stock options.
|
|
(5)
|
All other compensation received that Tara Gold could not properly report in any other column of the table.
|
|
(6)
|
Ms. Keeton-Cardno was appointed Chief Financial Officer and Treasurer in 2011. Mr. Bizzaro served as Chief Financial Officer and Treasurer between May 2010 and January 2011.
|
|
(7)
|
The total represents all compensation on a consolidated basis of Tara Gold and its subsidiaries as defined in Item 1 above.
|
In January 2011 Tara Gold and Tara Minerals entered into employment agreements with Mr. Biscan for three years. The employment agreements provided that Tara Gold and Tara Minerals will collectively pay Mr. Biscan a base salary of $276,000 per year (as amended) and requires Tara Gold to pay for Mr. Biscan’s medical, dental, optical, life and disability insurance. In the event there is a material reduction in Mr. Biscan’s authority, duties or activities, in the event Mr. Biscan’s offices are moved to a location which is not conducive to operating in North America, or in the event there is a change in the control of Tara Gold, then Mr. Biscan may resign from his position at Tara Gold and receive the remainder of his salary. For purposes of the employment agreement, a change in control includes the acquisition of more than 50% of the outstanding shares of Tara Gold’s common stock by a third party or a change in a majority of Tara Gold’s directors.
26
Mr. Biscan’s employment agreement will also terminate upon the death or physical or mental disability of Mr. Biscan, in which case Mr. Biscan, or his legal representative, as the case may be, will be paid the salary provided by the employment agreement for a period of one year following Mr. Biscan’s death or disability.
In January 2011, Tara Gold entered into an employment agreement with Ms. Lynda R. Keeton-Cardno for one year. The employment agreement provides that Tara Gold will pay Ms. Keeton-Cardno a base salary of $48,000.
In January 2011 Tara Gold entered into an employment agreement with Clifford A. Brown for one year. The employment agreement provides that Tara Gold will pay Mr. Brown a base salary of $96,000 during the term of the agreement and requires Tara Gold to pay for Mr. Brown’s medical insurance.
The following shows the amounts that Tara Gold expects to pay to its officers during the twelve month period ending December 31, 2011, and the time these persons plan to devote to Tara Gold’s business. Amounts include payments to be made by, and time to be spent on, the affairs of Tara Minerals.
|
Proposed
|
Time to be Devoted to
|
||||
|
Name
|
Compensation
|
Tara Gold and Subsidiaries Business
|
|||
|
Francis Richard Biscan, Jr.
|
$ | 276,000 |
40 hours / week
|
||
|
Lynda R. Keeton-Cardno
|
$ | 48,000 |
20 hours / week
|
||
|
Clifford A. Brown
|
$ | 96,000 |
30 hours / week
|
||
Long-Term Incentive Plans. Tara Gold does not provide its officers or employees with pension, stock appreciation rights, long-term incentive or other plans and has no intention of implementing any of these plans for the foreseeable future.
Employee Pension, Profit Sharing or other Retirement Plans. Tara Gold does not have a defined benefit, pension plan, profit sharing or other retirement plan, although it may adopt one or more of such plans in the future.
Compensation of Directors. Tara Gold’s directors did not receive any compensation for their services as directors during the fiscal year ended December 31, 2010.
Stock Option and Bonus Plans
Tara Gold’s subsidiary Tara Minerals, has adopted stock option and stock bonus plans. A summary description of these plans follows. In some cases these Plans are collectively referred to as the “Plans”.
Incentive Stock Option Plan. Tara Minerals’ Incentive Stock Option Plan authorizes the issuance of shares of Tara Minerals’ common stock to persons that exercise options granted pursuant to the Plan. Only Tara Minerals employees may be granted options pursuant to the Incentive Stock Option Plan. The option exercise price is determined by Tara Minerals’ directors but cannot be less than the market price of Tara Minerals’ common stock on the date the option is granted.
Non-Qualified Stock Option Plan. Tara Minerals’ Non-Qualified Stock Option Plan authorizes the issuance of shares of Tara Minerals’ common stock to persons that exercise options granted pursuant to the Plan. Tara Minerals’ employees, directors, officers, consultants and advisors are eligible to be granted options pursuant to the Plan, provided however that bona fide services must be rendered by such consultants or advisors and such services must not be in connection with the offer or sale of securities in a capital-raising transaction or promoting the price of Tara Mineral’s common stock.
27
Stock Bonus Plan. Tara Minerals’ Stock Bonus Plan allows for the issuance of shares of common stock to its employees, directors, officers, consultants and advisors. However bona fide services must be rendered by the consultants or advisors and such services must not be in connection with the offer or sale of securities in a capital-raising transaction or promoting the price of Tara Mineral’s common stock.
Summary. The following lists, as of July 31, 2011, the options granted and the bonus shares issued pursuant to the Plans. Each option represents the right to purchase one share of Tara Minerals’ common stock.
|
Name of Plan
|
Total Shares
Reserved Under Plans
|
Shares Reserved
for Outstanding Options |
Shares Issued as
Stock Bonus |
Remaining
Options/Shares Under Plans |
|
Incentive Stock Option Plan
|
1,000,000
|
750,000
|
N/A
|
250,000
|
|
Non-Qualified Stock Option Plan
|
3,000,000
|
2,500,000
|
N/A
|
500,000
|
|
Stock Bonus Plan
|
750,000
|
N/A
|
750,000
|
-
|
Tara Minerals’ stock option and bonus plans have not been approved by its shareholders.
The following table shows the weighted average exercise price of the outstanding options granted pursuant to Tara Minerals’ Stock Option Plans as of December 31, 2010.
|
Plan category
|
Number
of Securities
to be Issued
Upon Exercise
of Outstanding
Options
|
Weighted-
Average
Exercise
Price of
Outstanding
Options
|
Number of Securities
Remaining
Available For Future
Issuance Under Equity
Compensation
Plans (Excluding Securities
Reflected in the First Column
of This Table
|
|
Incentive Stock Option Plan
|
750,000
|
$1.57
|
250,000
|
|
Non-Qualified Stock Option Plan
|
2,500,000
|
$0.05
|
500,000
|
The following lists the unexercised options which were outstanding as of July 31, 2011, and held by the Tara Minerals’ officers and directors.
|
Shares underlying unexercised
options which are
|
|||||
|
Name
|
Date of
Grant |
Exercisable
|
Unexercisable
|
Exercise
Price |
Expiration
Date |
|
Francis R. Biscan, Jr.
|
1/5/10
|
125,000
|
375,000
|
$1.57
|
2015-2020
|
|
Francis R. Biscan, Jr.
|
1/5/10
|
750,000
|
$0.05
|
1/5/15
|
|
|
Clifford A. Brown
|
2/1/07
|
150,000
|
$0.05
|
2/01/12
|
|
|
Clifford A. Brown
|
1/5/10
|
125,000
|
125,000
|
$1.57
|
2015-2018
|
|
Clifford A. Brown
|
1/5/10
|
250,000
|
$0.05
|
1/5/15
|
|
|
Ramiro Trevizo
|
1/5/10
|
250,000
|
$0.05
|
1/5/15
|
|
28
The following lists the shares issued pursuant to Tara Minerals’ Stock Bonus Plan:
|
Name
|
Date
|
Shares Issued
|
||
|
Francis R. Biscan, Jr.
|
4/23/09
|
250,000
|
||
|
Francis R. Biscan, Jr.
|
1/05/10
|
50,000
|
||
|
Clifford A. Brown
|
4/23/09
|
200,000
|
||
|
Clifford A. Brown
|
1/05/10
|
25,000
|
||
|
Ramiro Trevizo
|
4/23/09
|
200,000
|
||
|
Ramiro Trevizo
|
1/05/10
|
25,000
|
Tara Gold may adopt stock option and bonus plans in the future. However, as of October 15, 2012, Tara Gold did not have any intensions in this regard.
Item 7. Certain Relationships and Related Transactions, and Director Independence.
During the year ended December 31, 2010 and the six months ended June 30, 2011, there have been no issuances of Tara Gold’s stock to officers, directors or affiliates.
See Item 1 and Item 13, footnote 5, of the December 31, 2010 and June 30, 2011 financial statements included in this registration statement for information concerning transactions between Tara Minerals, Tara Gold and Adit Resources.
Item 8. Legal Proceedings.
On September 13, 2010, Tara Gold announced that it had entered into a tentative agreement with Tara Minerals which provided Tara Minerals would acquire all of the outstanding shares of Tara Gold by exchanging one share of Tara Mineral’s common stock for two Tara Gold shares.
On September 20, 2010 Chris Columbo filed a lawsuit in the District Court for Carson City Nevada, against Tara Gold, Tara Gold’s officers and directors and Tara Minerals. The essence of the lawsuit was to obtain the fairest price for Tara Gold, whether from Tara Minerals or a third party. On October 25, 2010 Mr. Columbo voluntarily dismissed his lawsuit against Tara Gold and other defendants.
On October 22, 2010 Patricia J. Root filed a lawsuit in the Circuit Court for Dupage County, Illinois, against, Tara Gold, Tara Gold’s directors and Tara Minerals. The essence of the lawsuit was to prevent Tara Mineral’s proposed acquisition of Tara Gold.
Tara Gold believes the lawsuit filed by Ms. Root was premature since, as noted in the September 13, 2010 press release, the transaction is tentative and is subject to the approval of the shareholders of Tara Gold who are not officers or directors of Tara Gold. No binding agreement between Tara Gold and Tara Minerals was ever signed. In April 2011 Ms. Root subsequently dismissed her lawsuit against Tara Gold and other defendants.
Tara Minerals subsequently decided that it would not acquire Tara Gold.
On May 6, 2010, the Securities and Exchange Commission temporarily suspended trading in Tara Gold’s securities due to the failure of Tara Gold to file its 10-Q and 10-K reports pursuant to Section 13 of the Securities and Exchange Act of 1934.
On the same day the Commission issued an Order Instituting Proceedings whereby the Commission sought to revoke Tara Gold’s registration of its common stock pursuant to Section 12(g) of the Exchange Act.
On September 7, 2010 an administrative law judge issued an Initial Decision revoking Tara Gold’s registration of its common stock. On September 24, 2010 Tara Gold filed a Petition to Review the decision of the administrative law judge. On September 30, 2010 the Commission granted Tara Gold’s Petition for Review. On November 1, 2010 Tara Gold filed a brief in support of its petition with the Commission. On July 18, 2011, the Commission revoked the registration of Tara Gold’s securities pursuant to Section 12(j) of the Securities Act of 1934. Tara Gold has appealed the Commission’s decision to the U.S, 7th Circuit Court of Appeals. In May 2012 the 7th Circuit Court of Appeals dismissed Tara Gold’s appeal on the basis that:
29
|
|
·
|
Tara Gold filed this Registration Statement on August 4, 2011,
|
|
|
·
|
The Registration Statement automatically became effective on October 3, 2011,
|
|
|
·
|
Upon the effectiveness of the Registration Statement, Tara Gold’s common stock was registered pursuant to Section 12(g) of the 1934 Act,
|
|
|
·
|
Since Tara Gold’s stock had become registered under the 1934 Act, there was no point in reversing the Commission decision, and therefore the issue was moot.
|
There is no assurance that Tara Gold will be able to continue to file reports required by the Securities and Exchange Commission in a timely manner.
In August 2011 Tara Minerals entered into an agreement with Carnegie Mining and Exploration, Inc. which provided Carnegie with the option to earn up to a 50% interest in Tara Minerals’ Don Roman and iron ore projects.
In order to earn an interest in the Don Roman project, Carnegie was required to spend certain amounts on the Don Roman property such that the Don Roman plant reached minimum production levels. Carnegie could earn a 50% interest in Tara Minerals’ iron ore projects by spending $1,000,000 toward the projects by November 6, 2011.
Carnegie did not spend the required amounts on either project and Tara Minerals terminated the option.
On November 10, 2011, Tara Minerals filed a complaint against Carnegie seeking a declaration that Carnegie failed to properly exercise its option to acquire an interest in the iron ore properties. Carnegie is required to respond to the complaint on or before March 21, 2012.
On December 9, 2011, Carnegie and a purported affiliate, Carnegie Operations, LLC filed a complaint in Texas state court against former employees of Carnegie. Although Tara Minerals was not initially named as a defendant, the substance of the state court complaint made it clear that the core issues were substantially similar to those raised in the Nevada litigation. The individual defendants removed the case to federal court in Dallas, Texas on December 22, 2011. Carnegie responded with a First Amended Complaint on January 31, 2012, which formally named Tara Minerals as a defendant. In its amended complaint, Carnegie seeks an injunction against Tara Minerals in connection with its option on the iron ore properties, as well as damages for alleged fraud, trade secret theft, civil conspiracy, and tortuous interference with Carnegie’s employment contracts with the individual defendants.
On February 14, 2012, Tara Minerals moved the Texas court for a transfer of venue to Nevada so that the cases could be consolidated. The motion is premised upon the facts that: 1) the option agreement includes an express consent to jurisdiction and venue in Nevada; 2) Tara Minerals filed its lawsuit first in Nevada; 3) the cases involve common issues of fact and law; and 4) transfer is cost-efficient and more convenient for the key witnesses in both matters. In July 2012, the Texas Court granted Tara Minerals motion and transferred the case to Nevada.
Other than the foregoing, Tara Gold is not involved in any legal proceedings and Tara Gold does not know of any legal proceedings which are threatened or contemplated
Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.
Prior to May 2010 the common stock of Tara Gold traded in the over-the-counter market, which is sometimes referred to as the “pink sheets”, under the symbol: TRGD. In May 2010 the Securities and Exchange Commission stopped the trading in Tara Gold’s common stock due to the fact that Tara Gold was delinquent in filing its 10-K and 10-Q reports. As a result of the SEC’s stop trading order, Tara Gold’s common stock was removed from the Pink Sheets and until July 18, 2011 traded only on an unsolicited basis.
30
As a result of the Commission’s ruling on July 18, 2011 (see Item 8 above), all trading in Tara Gold’s stock ceased.
Shown below are the ranges of high and low closing prices for Tara Gold’ common stock for the periods indicated as reported by FINRA and as reported on www.stockwatch.com. The market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.
|
Quarter Ended
|
High
|
Low
|
|
March 31, 2009
|
$0.10
|
$0.10
|
|
June 30, 2009
|
$0.16
|
$0.16
|
|
September 30, 2009
|
$0.32
|
$0.30
|
|
December 31, 2009
|
$0.39
|
$0.36
|
|
March 31, 2010
|
$0.71
|
$0.41
|
As of May 31, 2012 Tara Gold had 102,795,119 outstanding shares of common stock and 76 shareholders of record. As of that same date Tara Gold did not have any outstanding options, warrants or securities which were convertible into shares of Tara Gold’s common stock.
During the years ended December 31, 2010 and 2009 neither Tara Gold, nor any of Tara Gold’s officers or directors, purchased any shares of Tara Gold’s common stock in the open market.
Item 10. Recent Sales of Unregistered Securities and Use of Proceeds
During the year ended December 31, 2008, Tara Gold issued:
|
|
·
|
5,654,167 shares of common stock in payment of liabilities in the amount of $190,000;
|
|
|
·
|
175,000 shares for services rendered valued at $67,004;
|
|
|
·
|
300,000 shares of common stock for services rendered valued at $126,000 from 2007; and
|
|
|
·
|
850,000 shares of common stock in payment of liabilities in the amount of $315,000 and in payment of a note in the amount of $27,200 from 2007.
|
During the year ended December 31, 2009, Tara Gold issued 800,000 shares for services rendered valued at $1,041,000
Item 11. Description of Registrant’s Securities to be Registered.
Tara Gold’s authorized capital consists of 150,000,000 shares of common stock. As of May 31, 2012, Tara Gold had 102,795,119 outstanding shares of common stock.
Common Stock
All shares of common stock have equal voting rights and, when validly issued and outstanding, are entitled to one vote per share in all matters to be voted upon by shareholders. The shares of common stock have no preemptive, subscription, conversion or redemption rights and may be issued only as fully-paid and non-assessable shares. Cumulative voting in the election of directors is not permitted; which means that the holders of a majority of the issued and outstanding shares of common stock represented at any meeting at which a quorum is present will be able to select the entire Board of Directors if they so choose. In that event, the holders of the remaining shares of common stock will not be able to elect any directors. In the event of Tara Gold’s liquidation, each shareholder is entitled to receive a proportionate share of the assets available for distribution to shareholders after the payment of liabilities. All shares of Tara Gold’s common stock issued and outstanding are fully-paid and non-assessable.
31
Holders of shares of common stock are entitled to share pro rata in dividends and distributions with respect to the common stock when as and if declared by the Board of Directors out of funds legally available for dividends. Tara Gold has not paid any dividends on the Company’s common stock and intends to retain earnings, if any, to finance the development and expansion of its business. Future dividend policy is subject to the discretion of the Board of Directors and will depend upon a number of factors, including future earnings, capital requirements and its financial condition.
Item 12. Indemnification of Directors and Officers.
Section 78.751 of the Nevada Revised Statutes and Article XVI of Tara Gold’s bylaws provide that Tara Gold may indemnify any and all of its officers, directors, employees or agents, or former officers, directors, employees or agents, against expenses actually and necessarily incurred by them in connection with the defense of any legal proceeding or threatened legal proceeding, except as to matters in which such persons shall be determined to not have acted in good faith and in Tara Gold’s best interest.
32
Item 13. Financial Statements and Supplementary Data.
TARA GOLD RESOURCES CORP. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED DECEMBER 31, 2010 AND DECEMBER 31, 2009
AND
THE PERIOD FROM INCEPTION (OCTOBER 14, 1999) THROUGH DECEMBER 31, 2010
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-1
|
|
FINANCIAL STATEMENTS:
|
|
|
Consolidated Balance Sheets
|
F-2
|
|
Consolidated Statements of Operations and Comprehensive Loss
|
F-3
|
|
Consolidated Statements of Stockholders’ (Deficit) Equity
|
F-4
|
|
Consolidated Statements of Cash Flows
|
F-12
|
|
Notes to the Consolidated Financial Statements
|
F-15
|
33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of Tara Gold Resources Corp., Inc. and Subsidiaries,
We have audited the accompanying consolidated balance sheets of Tara Gold Resources Corp., Inc. (an exploration stage company) (a Nevada corporation) and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations and comprehensive loss, stockholders' equity (deficit), and cash flows for each of the years then ended and the period from inception (October 14, 1999) through December 31, 2010. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tara Gold Resources Corp, Inc. and subsidiaries as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years then ended and for the period from inception (October 14, 1999) through December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
/s/ Mendoza Berger & Company, LLP
Mendoza Berger & Company, LLP
Irvine, CA
April 18, 2011, except for notes 2 and 13 which are dated June 28, 2012
F-1
TARA GOLD RESOURCES CORP. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. Dollars)
|
December 31,
2010
|
December
31, 2009
|
|||||||
|
Assets
|
||||||||
|
Current assets
|
||||||||
|
Cash
|
$ | 193 | $ | 1,451 | ||||
|
Other receivables, net of $2,010 and $374 of allowance as of
December 31, 2010 and December 31, 2009, respectively
|
1,212 | 3,262 | ||||||
|
Due from related parties, net of due to related parties of $292
December 31, 2009
|
- | 354 | ||||||
|
Marketable securities
|
450 | 450 | ||||||
|
Other current assets
|
1 | 3 | ||||||
|
Total current assets
|
1,856 | 5,520 | ||||||
|
Property, plant, equipment, mine development, construction in
progress and land, net of accumulated depreciation of $361 and
$111 as of December 31, 2010 and December 31, 2009,
respectively
|
12,359 | 15,304 | ||||||
|
Mining deposits
|
53 | 25 | ||||||
|
Deferred tax, non-current portion
|
2,931 | 1,748 | ||||||
|
Goodwill
|
12 | 12 | ||||||
|
Other assets
|
160 | 19 | ||||||
|
Total assets
|
$ | 17,371 | $ | 22,628 | ||||
|
Liabilities and Stockholders’ Equity
|
||||||||
|
Current liabilities
|
||||||||
|
Accounts payable and accrued expenses
|
$ | 2,675 | $ | 1,143 | ||||
|
Notes payable, current portion
|
994 | 1,106 | ||||||
|
Notes payable related party, current portion
|
100 | - | ||||||
|
Due to related parties, net of due from of $36 December 31,
2010
|
259 | - | ||||||
|
Total current liabilities
|
4,028 | 2,249 | ||||||
|
Long-term accrued liabilities
|
418 | 989 | ||||||
|
Notes payable, non-current portion
|
2,603 | 6,168 | ||||||
|
Total liabilities
|
7,049 | 9,406 | ||||||
|
Commitments and contingencies
|
- | - | ||||||
|
Stockholders’ equity
|
||||||||
|
Common stock; $0.001 par value 150,000,000 shares
authorized – 102,795,119 issued and outstanding at
December 31, 2010 and December 31, 2009, respectively
|
103 | 103 | ||||||
|
Additional paid-in capital
|
12,175 | 12,175 | ||||||
|
Accumulated deficit during exploration stage
|
(17,060 | ) | (3,293 | ) | ||||
|
Other comprehensive loss
|
(514 | ) | (436 | ) | ||||
|
Total Tara Gold stockholders’ (deficit) equity
|
(5,296 | ) | 8,549 | |||||
|
Non-controlling interest
|
15,618 | 4,673 | ||||||
|
Total equity
|
10,322 | 13,222 | ||||||
|
Total liabilities and equity
|
$ | 17,371 | $ | 22,628 | ||||
See accompanying notes to these consolidated financial statements.
F-2
TARA GOLD RESOURCES CORP. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands of U.S. Dollars)
|
For the Year Ended
December 31,
|
From inception
October 14, 1999 to
December 31,
|
|||||||||||
|
2010
|
2009
|
2010
|
||||||||||
|
Revenues
|
||||||||||||
|
Revenue from website development and software
|
$ | - | $ | - | $ | 168 | ||||||
|
Mining revenues
|
160 | - | 557 | |||||||||
|
Total revenues
|
160 | - | 725 | |||||||||
|
Cost of revenue
|
658 | - | 759 | |||||||||
|
Gross margin
|
(498 | ) | - | (34 | ) | |||||||
|
Exploration expenses
|
2,033 | 280 | 6,351 | |||||||||
|
Operating, general, and administrative expenses
|
17,471 | 4,156 | 34,271 | |||||||||
|
Net operating loss
|
(20,002 | ) | (4,436 | ) | (40,656 | ) | ||||||
|
Non-operating (income) expense
|
||||||||||||
|
Interest (income)
|
(26 | ) | (95 | ) | (308 | ) | ||||||
|
Interest expense
|
450 | 67 | 1,210 | |||||||||
|
Settlement expense
|
- | - | (134 | ) | ||||||||
|
Loss on extinguishment of debt
|
- | 1,097 | 766 | |||||||||
|
(Gain) on deconsolidation of joint venture
|
- | - | (8,661 | ) | ||||||||
|
(Gain) on sale of joint venture interest
|
- | - | (3,112 | ) | ||||||||
|
(Gain) on dissolution of joint venture
|
- | (250 | ) | (9,163 | ) | |||||||
|
Loss on disposal of assets
|
- | - | 399 | |||||||||
|
(Gain) on acquisition of mining concession
|
- | - | (100 | ) | ||||||||
|
Loss on conversion of note payable
|
783 | - | 783 | |||||||||
|
Realized loss on the sale of marketable securities
|
- | 2,266 | 4,604 | |||||||||
|
(Gain) on sale of net cash flow interest
|
- | (197 | ) | (197 | ) | |||||||
|
Other (income)
|
(757 | ) | (261 | ) | (1,223 | ) | ||||||
| 450 | 2,627 | (15,136 | ) | |||||||||
|
Loss before income taxes
|
(20,452 | ) | (7,063 | ) | (25,520 | ) | ||||||
|
Income tax benefit, net of $169 and $0 provision as of
December 31, 2010 and 2009
|
(1,015 | ) | (1,822 | ) | (2,317 | ) | ||||||
|
Loss from continuing operations
|
(19,437 | ) | (5,241 | ) | (23,203 | ) | ||||||
|
Discontinued operations
|
||||||||||||
|
Income from operations of discontinued oil properties
(including loss on disposal of $7)
|
- | - | 17 | |||||||||
|
Loss from operations of La Escuadra
|
- | - | (1,038 | ) | ||||||||
|
Net loss
|
(19,437 | ) | (5,241 | ) | (24,224 | ) | ||||||
|
Add: Net loss attributable to non-controlling interest
|
5,670 | 801 | 7,164 | |||||||||
|
Net loss attributable to Tara Gold shareholders’
|
(13,767 | ) | (4,440 | ) | (17,060 | ) | ||||||
|
Other comprehensive income (loss):
|
||||||||||||
|
Foreign currency translation
|
(78 | ) | 214 | (514 | ) | |||||||
|
Unrealized gain, net on marketable securities
|
- | 618 | - | |||||||||
|
Comprehensive loss
|
$ | (13,845 | ) | $ | (3,608 | ) | $ | (17,574 | ) | |||
|
Net loss per share, basic and diluted
|
$ | (0.19 | ) | $ | (0.05 | ) | ||||||
|
Weighted average number of shares, basic and diluted
|
102,795,119 | 102,137,585 | ||||||||||
See accompanying notes to these consolidated financial statements.
F-3
TARA GOLD RESOURCES CORP. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT)
From inception (October 14, 1999) to December 31, 2010
(In thousands of U.S. dollars, except share amounts)
|
Common Stock
|
Additional
Paid In
|
Accumulated
Deficit During
|
Share
Subscriptions
|
Other
Comprehensive
|
Total
Stockholders’
|
|||||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Exploration Stage
|
Received
|
(Loss) Income
|
(Deficit) Equity
|
||||||||||||||||||||||
|
Balance at inception
|
- | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
|
Issuance of common stock to Founders for cash
|
4,000,000 | 4 | - | - | - | - | 4 | |||||||||||||||||||||
|
Net loss
|
- | - | - | (9 | ) | - | - | (9 | ) | |||||||||||||||||||
|
Balance at December 31, 2000
|
4,000,000 | 4 | - | (9 | ) | - | - | (5 | ) | |||||||||||||||||||
|
Issuance of common stock in exchange for 100%
of common stock of MerchantPark
|
1,500,000 | 2 | (2 | ) | - | - | - | - | ||||||||||||||||||||
|
Issuance of Common stock for cash
|
2,491,583 | 2 | 152 | - | - | - | 154 | |||||||||||||||||||||
|
Issuance of common stock for services
|
4,645,261 | 5 | 77 | - | - | - | 82 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Issuance of common stock for 100% of shares of
Caged Iron Technologies
|
2,000,000 | 2 | 101 | - | - | - | 103 | |||||||||||||||||||||
|
Issuance of common stock issued for debt
|
459,000 | - | 46 | - | - | - | 46 | |||||||||||||||||||||
|
Issuance of common stock issued for assets
|
3,064,556 | 3 | 301 | - | - | - | 304 | |||||||||||||||||||||
|
Stock offering costs
|
- | - | (13 | ) | - | - | - | (13 | ) | |||||||||||||||||||
|
Currency translation adjustment
|
- | - | - | - | - | 1 | 1 | |||||||||||||||||||||
|
Net loss
|
- | - | - | (418 | ) | - | - | (418 | ) | |||||||||||||||||||
|
Balance at December 31, 2001
|
18,160,400 | $ | 18 | $ | 662 | $ | (427 | ) | $ | - | $ | 1 | $ | 254 | ||||||||||||||
See accompanying notes to these consolidated financial statements.
F-4
TARA GOLD RESOURCES CORP. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT)
From inception (October 14, 1999) to December 31, 2010
(In thousands of U.S. Dollars, except share amounts)
(Continued)
|
Common Stock
|
Additional
Paid In
|
Accumulated
Deficit During
|
Share
Subscriptions
|
Other
Comprehensive
|
Total
Stockholders’
|
|||||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Exploration Stage
|
Received
|
(Loss) Income
|
(Deficit) Equity
|
||||||||||||||||||||||
|
Balance at December 31, 2001
|
18,160,400 | $ | 18 | $ | 662 | $ | (427 | ) | $ | - | $ | 1 | $ | 254 | ||||||||||||||
|
Issuance of common stock for services
|
2,336,500 | 2 | 22 | - | - | - | 24 | |||||||||||||||||||||
|
Issuance of common stock for debt
|
5,844,976 | 6 | 272 | - | - | - | 278 | |||||||||||||||||||||
|
Issuance of Common stock for cash
|
6,000,000 | 6 | 23 | - | - | - | 29 | |||||||||||||||||||||
|
Currency Translation adjustment
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Net Loss
|
- | - | - | (677 | ) | - | - | (677 | ) | |||||||||||||||||||
|
Balance at December 31, 2002
|
32,341,876 | 32 | 979 | (1,104 | ) | - | 1 | (92 | ) | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Issuance of Common stock for cash
|
3,754,848 | 4 | 53 | - | - | - | 57 | |||||||||||||||||||||
|
Issuance of common stock for debt
|
9,019,445 | 9 | 189 | - | - | - | 198 | |||||||||||||||||||||
|
Net loss
|
- | - | - | (156 | ) | - | - | (156 | ) | |||||||||||||||||||
|
Balance at December 31, 2003
|
45,116,169 | $ | 45 | $ | 1,221 | $ | (1,260 | ) | $ | - | $ | 1 | $ | 7 | ||||||||||||||
See accompanying notes to these consolidated financial statements.
F-5
TARA GOLD RESOURCES CORP. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT)
From inception (October 14, 1999) to December 31, 2010
(In thousands of U.S. Dollars, except share amounts)
|
Common Stock
|
Additional
Paid In
|
Accumulated
Deficit During
|
Share
Subscriptions
|
Other
Comprehensive
|
Total
Stockholders’
|
|||||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Exploration Stage
|
Received
|
(Loss) Income
|
(Deficit) Equity
|
||||||||||||||||||||||
|
Balance at December 31, 2003
|
45,116,169 | $ | 45 | $ | 1,221 | $ | (1,260 | ) | $ | - | $ | 1 | $ | 7 | ||||||||||||||
|
Issuance of common stock for cash
|
2,807,000 | 3 | 161 | - | - | - | 164 | |||||||||||||||||||||
|
Issuance of common stock for services
|
3,010,000 | 3 | 147 | - | - | - | 150 | |||||||||||||||||||||
|
Stock cancelled
|
(1,200,000 | ) | (1 | ) | 1 | - | - | - | - | |||||||||||||||||||
|
Share subscriptions received
|
- | - | - | - | 148 | - | 148 | |||||||||||||||||||||
|
Foreign currency translation income
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Net loss
|
- | - | - | (373 | ) | - | - | (373 | ) | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance at December 31, 2004
|
49,733,169 | $ | 50 | $ | 1,530 | $ | (1,633 | ) | $ | 148 | $ | 1 | $ | 96 | ||||||||||||||
See accompanying notes to these consolidated financial statements.
F-6
TARA GOLD RESOURCES CORP. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT)
From inception (October 14, 1999) to December 31, 2010
(In thousands of U.S. Dollars, except share amounts)
(Continued)
|
Common Stock
|
Additional
Paid In
|
Accumulated
Deficit During
|
Share
Subscriptions
|
Other
Comprehensive
|
Total
Stockholders’
|
|||||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Exploration Stage
|
Received
|
(Loss) Income
|
(Deficit) Equity
|
||||||||||||||||||||||
|
Balance at December 31, 2004
|
49,733,169 | $ | 50 | $ | 1,530 | $ | (1,633 | ) | $ | 148 | $ | 1 | $ | 96 | ||||||||||||||
|
Issuance of common stock for services
|
6,472,984 | 6 | 273 | - | - | - | 279 | |||||||||||||||||||||
|
Issuance of common stock for cash
|
13,506,001 | 14 | 431 | - | - | - | 445 | |||||||||||||||||||||
|
Share subscriptions delivered
|
- | - | - | - | (113 | ) | - | (113 | ) | |||||||||||||||||||
|
Common stock for mining concession
finders’ fees
|
200,000 | - | 8 | - | - | - | 8 | |||||||||||||||||||||
|
Warrants for mining concession finders’ fees
|
- | - | 4 | - | - | - | 4 | |||||||||||||||||||||
|
Beneficial conversion feature
|
- | - | 207 | - | - | - | 207 | |||||||||||||||||||||