Unassociated Document
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
x |
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended June 30,
2007
|
o |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from __________ to __________
Idaho
General Mines, Inc.
(Name
of small business issuer in its
charter)
|
IDAHO
|
|
000-50539
|
|
91-0232000
|
(State
or other jurisdiction
|
|
Commission
File Number
|
|
(I.R.S.
Employer
|
of
incorporation or organization)
|
|
|
|
Identification
No.)
|
1726
Cole Blvd., Suite 115
Lakewood,
CO 80401
Telephone:
(303) 928-8599
(Address
and telephone number of principal executive offices)
10
North
Post St., Suite 610
Spokane,
WA 99201
(Former
name, former address and former fiscal year, if changed since last report)
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for at least the past 90 days. YES
x NO o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
YES o
NO
x
The
number of shares outstanding of registrant’s common stock as of August 3, 2007
was 56,334,005.
Transitional
Small Business Disclosure Format (check one): YES
o
NO x
PART
I
|
|
FINANCIAL
INFORMATION
|
|
ITEM
1. FINANCIAL
STATEMENTS
|
|
IDAHO
GENERAL MINES, INC.
|
(AN
EXPLORATION STAGE COMPANY)
|
CONDENSED
CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
|
ASSETS:
|
|
(Unaudited)
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
27,537,000
|
|
$
|
17,882,000
|
|
Deposits
|
|
|
238,000
|
|
|
147,000
|
|
Prepaid
expense and other assets
|
|
|
106,000
|
|
|
46,000
|
|
Total
Current Assets
|
|
|
27,881,000
|
|
|
18,075,000
|
|
Mining
properties, land and water rights
|
|
|
16,958,000
|
|
|
7,885,000
|
|
Property
and equipment, net
|
|
|
835,000
|
|
|
431,000
|
|
Restricted
cash held for reclamation bonds
|
|
|
575,000
|
|
|
—
|
|
TOTAL
ASSETS
|
|
$
|
46,249,000
|
|
$
|
26,391,000
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
2,751,000
|
|
$
|
951,000
|
|
Provision
for post closure reclamation and remediation costs
|
|
|
105,000
|
|
|
—
|
|
Current
portion of long term debt
|
|
|
39,000
|
|
|
19,000
|
|
Total
Current Liabilities
|
|
|
2,895,000
|
|
|
970,000
|
|
Provision
for post closure reclamation and remediation costs, net of
|
|
|
|
|
|
|
|
current
portion
|
|
|
324,000
|
|
|
—
|
|
Long
term debt, net of current portion
|
|
|
87,000
|
|
|
58,000
|
|
Total
Liabilities
|
|
|
3,306,000
|
|
|
1,028,000
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
Preferred
stock, Series A, $0.001 par value; 10,000,000 shares
|
|
|
|
|
|
|
|
authorized,
no shares issued and outstanding
|
|
|
—
|
|
|
—
|
|
Common
stock, $0.001 par value; 200,000,000 shares authorized,
|
|
|
|
|
|
|
|
54,959,000
and 43,398,000 shares issued and outstanding,
|
|
|
|
|
|
|
|
respectively
|
|
|
55,000
|
|
|
43,000
|
|
Additional
paid-in capital
|
|
|
81,268,000
|
|
|
45,223,000
|
|
Accumulated
deficit before exploration stage
|
|
|
(213,000
|
)
|
|
(213,000
|
)
|
Accumulated
deficit during exploration stage
|
|
|
(38,167,000
|
)
|
|
(19,690,000
|
)
|
Total
Stockholders’ Equity
|
|
|
42,943,000
|
|
|
25,363,000
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
46,249,000
|
|
$
|
26,391,000
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
|
IDAHO
GENERAL MINES, INC.
|
(AN
EXPLORATION STAGE COMPANY)
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(Unaudited)
|
|
|
|
Three
Months Ended
|
|
|
Six Months
Ended
|
|
|
January
1, 2002 (Inception
of Exploration
Stage)
to
|
|
|
|
|
June
30, 2007
|
|
|
June
30, 2006
|
|
|
June
30, 2007
|
|
|
June
30, 2006
|
|
|
June
30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
research, exploration and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
development
|
|
|
6,158,000
|
|
|
1,706,000
|
|
|
10,070,000
|
|
|
2,816,000
|
|
|
20,084,000
|
|
General
and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense
|
|
|
3,533,000
|
|
|
3,308,000
|
|
|
8,936,000
|
|
|
4,413,000
|
|
|
19,292,000
|
|
Realized
loss on marketable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
321,000
|
|
|
|
|
9,691,000
|
|
|
5,014,000
|
|
|
19,006,000
|
|
|
7,229,000
|
|
|
39,697,000
|
|
LOSS
FROM OPERATIONS
|
|
|
(9,691,000
|
)
|
|
(5,014,000
|
)
|
|
(19,006,000
|
)
|
|
(7,229,000
|
)
|
|
(39,697,000
|
)
|
OTHER
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and dividend income
|
|
|
361,000
|
|
|
186,000
|
|
|
529,000
|
|
|
330,000
|
|
|
1,465,000
|
|
Realized
gains
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65,000
|
|
TOTAL
OTHER INCOME
|
|
|
361,000
|
|
|
186,000
|
|
|
529,000
|
|
|
330,000
|
|
|
1,530,000
|
|
LOSS
BEFORE TAXES
|
|
|
(9,330,000
|
)
|
|
(4,828,000
|
)
|
|
(18,477,000
|
)
|
|
(6,899,000
|
)
|
|
(38,167,000
|
)
|
INCOME
TAXES
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
NET
LOSS
|
|
$
|
(9,330,000
|
)
|
$
|
(4,828,000
|
)
|
$
|
(18,477,000
|
)
|
$
|
(6,899,000
|
)
|
$
|
(38,167,000
|
)
|
BASIC
AND DILUTED NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
PER SHARE OF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON
STOCK
|
|
$
|
(0.17
|
)
|
$
|
(0.13
|
)
|
$
|
(0.38
|
)
|
$
|
(0.21
|
)
|
|
|
|
WEIGHTED
AVERAGE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NUMBER
OF COMMON
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
53,642,000
|
|
|
38,410,000
|
|
|
48,767,000
|
|
|
32,706,000
|
|
|
|
|
FULLY
DILUTED
|
|
|
61,409,000
|
|
|
46,191,000
|
|
|
55,421,000
|
|
|
41,791,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
|
IDAHO
GENERAL MINES, INC.
|
(AN
EXPLORATION STAGE COMPANY)
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
|
|
|
|
1-Jan-02
|
|
|
|
Six
Months
|
|
Six
Months
|
|
(Inception
of
|
|
|
|
Ended
June 30,
|
|
Ended
June 30,
|
|
Exploration
Stage
|
|
|
|
2007
|
|
2006
|
|
to
June 30, 2007
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(18,477,000
|
)
|
$
|
(6,899,000
|
)
|
$
|
(38,167,000
|
)
|
Adjustments
to reconcile net loss to net cash used by
|
|
|
|
|
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Services
and expenses paid with common stock
|
|
|
304,000
|
|
|
950,000
|
|
|
1,754,000
|
|
Depreciation
and amortization
|
|
|
76,000
|
|
|
14,000
|
|
|
149,000
|
|
Realized
loss on impairment of securities
|
|
|
—
|
|
|
—
|
|
|
321,000
|
|
Other
|
|
|
—
|
|
|
—
|
|
|
17,000
|
|
Equity
compensation for management and directors
|
|
|
4,663,000
|
|
|
745,000
|
|
|
7,584,000
|
|
Decrease
(increase) in restricted cash
|
|
|
(84,000
|
)
|
|
—
|
|
|
(84,000
|
)
|
Decrease
(increase) in deposits, prepaid expenses and
|
|
|
|
|
|
|
|
|
|
|
other
|
|
|
(151,000
|
)
|
|
(146,000
|
)
|
|
(373,000
|
)
|
(Decrease)
increase in accounts payable and accrued
|
|
|
|
|
|
|
|
|
|
|
liabilities
|
|
|
1,746,000
|
|
|
(522,000
|
)
|
|
2,697,000
|
|
(Decrease)
increase in post closure reclamation and
|
|
|
|
|
|
|
|
|
|
|
remediation
costs
|
|
|
220,000
|
|
|
—
|
|
|
220,000
|
|
Net
cash used by
operating activities
|
|
|
(11,703,000
|
)
|
|
(5,858,000
|
)
|
|
(25,882,000
|
)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Payments
for the purchase of equipment
|
|
|
(480,000
|
) |
|
(256,000
|
)
|
|
(858,000
|
)
|
Purchase
of securities
|
|
|
—
|
|
|
—
|
|
|
(458,000
|
)
|
Purchase
of mining property, claims, options
|
|
|
(8,475,000
|
)
|
|
(4,460,000
|
)
|
|
(15,941,000
|
)
|
Net
increase in debt
|
|
|
49,000
|
|
|
—
|
|
|
49,000
|
|
Cash
provided by sale of marketable securities
|
|
|
—
|
|
|
—
|
|
|
247,000
|
|
Net
cash used by investing activities
|
|
|
(8,906,000
|
)
|
|
(4,716,000
|
)
|
|
(16,961,000
|
)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of stock
|
|
|
30,264,000
|
|
|
32,719,000
|
|
|
70,334,000
|
|
Net
cash provided by financing activities
|
|
|
30,264,000
|
|
|
32,719,000
|
|
|
70,334,000
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
9,655,000
|
|
|
22,145,000
|
|
|
27,491,000
|
|
Cash
and cash equivalents, beginning of period
|
|
|
17,882,000
|
|
|
257,000
|
|
|
46,000
|
|
Cash
and cash equivalents, end of period
|
|
$
|
27,537,000
|
|
$
|
22,402,000
|
|
$
|
27,537,000
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW
|
|
|
|
|
|
|
|
|
|
|
INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Interest
paid
|
|
$
|
3,000
|
|
$
|
—
|
|
$
|
3,000
|
|
NON-CASH
INVESTING AND FINANCING
|
|
|
|
|
|
|
|
|
|
|
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for equipment
|
|
$
|
—
|
|
$
|
11,000
|
|
$
|
11,000
|
|
Common
stock and warrants issued for property
|
|
$
|
826,000
|
|
$
|
—
|
|
$
|
1,201,000
|
|
Restricted
cash held for reclamation bond acquired in a
|
|
|
|
|
|
|
|
|
|
|
business
combination
|
|
$
|
491,000
|
|
$
|
—
|
|
$
|
491,000
|
|
Post
closure reclamation and remediation costs assumed in a
|
|
|
|
|
|
|
|
|
|
|
business
combination
|
|
$
|
209,000
|
|
$
|
—
|
|
$
|
209,000
|
|
Accounts
payable and accrued expenses assumed in a
|
|
|
|
|
|
|
|
|
|
|
business
combination
|
|
$
|
54,000
|
|
$
|
—
|
|
$
|
54,000
|
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
|
IDAHO
GENERAL MINES, INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1—BASIS OF PRESENTATION
|
The
interim Condensed Consolidated Financial Statements of Idaho General Mines,
Inc.
and its subsidiaries (collectively, “IGMI” or the “Company”) are unaudited. In
the opinion of management, all adjustments and disclosures necessary for a
fair
presentation of these interim statements have been included. All such
adjustments are, in the opinion of management, of a normal recurring nature.
The
results reported in these interim Condensed Consolidated Financial Statements
are not necessarily indicative of the results that may be reported for the
entire year. These interim Condensed Consolidated Financial Statements should
be
read in conjunction with IGMI’s Consolidated Financial Statements included in
its Annual Report on Form 10-KSB for the year ended December 31, 2006.
On
January 30, 2007, the Company completed the acquisition of all of the issued
and
outstanding shares of a corporation that owned a royalty interest in our
Hall-Tonopah Property (see note 4). Upon its acquisition, the corporation was
consolidated as a wholly owned subsidiary of the Company.
Certain
amounts for the three and six months ended June 30, 2006 have been reclassified
to conform to the 2007 presentation.
NOTE
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies is presented to assist in
understanding the financial statements. The financial statements and notes
are
representations of the Company’s management, which is responsible for their
integrity and objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America and have been
consistently applied in the preparation of the financial statements.
Accounting
Pronouncements—Recent
|
There
are
no recently issued accounting pronouncements that when adopted in a future
period will have a material impact on the Company’s financial position or
results of operations.
Cash
and Cash Equivalents
|
For
the
purposes of the statement of cash flows, the Company considers all highly liquid
investments with original maturities of three months or less to be cash
equivalents.
The
process of preparing financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.
Exploration
Stage Activities
|
The
Company has been in the exploration stage since January 2002 and has not
realized any revenue from operations. It will be primarily engaged in minerals
exploration until it enters a development or operations stage.
The
Company’s financial instruments include cash, accounts payable and accrued
liabilities. All instruments are accounted for on a historical cost basis,
which, due to the short maturity of these financial instruments, approximates
fair value at June 30, 2007 and December 31, 2006.
Mining
Properties, Land and Water
Rights
|
Costs
of
acquiring and developing mining properties, land and water rights are
capitalized as appropriate by project area. Exploration and related costs and
costs to maintain mining properties, land and water rights are expensed as
incurred. When a property reaches the production stage, the related capitalized
costs are amortized using the units-of-production method on the basis of
periodic estimates of ore reserves. Mining properties, land and water rights
are
periodically assessed for impairment of value, and any subsequent losses are
charged to operations at the time of impairment. If a property is abandoned
or
sold, a gain or loss is recognized and included in operations.
Mineral
Exploration and Development
Costs
|
All
exploration expenditures are expensed as incurred. Significant property
acquisition payments for active exploration properties are capitalized. If
no
minable ore body is discovered, previously capitalized costs are expensed in
the
period the property is abandoned. Expenditures to develop new mines, to define
further mineralization in existing ore bodies, and to expand the capacity of
operating mines, are capitalized and amortized on a units-of-production basis
over proven and probable reserves.
Should
a
property be abandoned, its capitalized costs are charged to operations. The
Company charges to operations the allocable portion of capitalized costs
attributable to properties sold. Capitalized costs are allocated to properties
sold based on the proportion of claims sold to the claims remaining within
the
project area.
Reclamation
and Remediation
|
Expenditures
for ongoing compliance with environmental regulations that relate to current
exploration operations are expensed. Expenditures resulting from the remediation
of existing conditions caused by past operations that do not contribute to
future revenue generations are expensed. Liabilities are recognized when
environmental assessments indicate that remediation efforts are probable and
the
costs can be reasonably estimated.
Estimates
of such liabilities are based upon currently available facts, existing
technology and presently enacted laws and regulations taking into consideration
the likely effects of inflation and other societal and economic factors, and
include estimates of associated legal costs. These amounts also reflect prior
experience in remediating contaminated sites, other companies’ clean-up
experience and data released by The Environmental Protection Agency or other
organizations. Such estimates are by their nature imprecise and can be expected
to be revised over time because of changes in government regulations,
operations, technology and inflation. Recoveries are evaluated separately from
the liability and, when recovery is assured, the Company records and reports
an
asset separately from the associated liability.
Income
taxes are provided based upon the liability method of accounting pursuant to
Statement of Financial Accounting Standards No. 109, “Accounting for Income
Taxes” (hereinafter “SFAS No. 109”). Under this approach, deferred income taxes
are recorded to reflect the tax consequences in future years of differences
between the tax basis of assets and liabilities and their financial reporting
amounts at each year-end. A valuation allowance is recorded against the deferred
tax asset if management does not believe the Company has met the “more likely
than not” standard imposed by SFAS No. 109 to allow recognition of such an
asset.
Net
loss
per share was computed by dividing the net loss by the weighted average number
of shares outstanding during the period. The weighted average number of shares
was calculated by taking the number of shares outstanding and weighting them
by
the amount of time that they were outstanding. Diluted net loss per share for
IGMI is the same as basic net loss per share, as the inclusion of common stock
equivalents would be antidilutive.
The
Company accounts for its investments in debt and equity securities in accordance
with the provisions of Statement of Financial Accounting Standards No. 115,
“Accounting for Certain Investments in Debt and Equity Securities,” and reports
its investments in available for sale securities at their fair value, with
unrealized gains and losses excluded from income or loss and included in other
comprehensive income or loss.
NOTE
4—MINING PROPERTIES, LAND AND WATER RIGHTS
Mount
Hope. The
Company is currently in the process of evaluating the Mount Hope molybdenum
project and acquiring necessary rights, land and claims related to the
operations.
In
November 2004, IGMI entered into an option to lease all property and assets
of
the Mount Hope Molybdenum Property from Mt. Hope Mines, Inc. and in October
2005
exercised its rights under the option. The renewable lease allows IGMI to
proceed for the next 30 years with permitting, developing and mining the deposit
and for so long thereafter as IGMI maintains an active operation. In 2004,
the
Company paid $456,000 and issued 500,000 shares of common stock with warrants
to
purchase 500,000 shares of common stock for the Mount Hope option.
Pursuant
to the terms of the lease, the underlying total royalty on production payable
to
Mt. Hope Mines, Inc., less certain deductions, is three percent for a molybdenum
price up to $12 per pound, four percent for a molybdenum price up to $15
per pound, and five percent for a molybdenum price above $15 per pound (the
“Production Royalties”). IGMI is subject to certain periodic payments as set
forth in Note 11 “Commitments and Contingencies.” Additionally, IGMI is
obligated to pay Exxon Mineral Company a one percent net smelter royalty on
all
production.
In
July
2006, the Company purchased deeded land which includes certain BLM grazing
rights and certain water rights for $1,869,000. The primary purpose for the
purchase of this asset was to acquire the water rights for use by the Mount
Hope
operations.
In
November 2006, the Company purchased from Atlas Precious Metals, Inc. patented
millsite claims, water rights and fee land in Eureka, Nevada for $107,000.
As
part of the purchase the Company paid $321,000 for 150,000 shares of Atlas
Precious Metals, Inc. common stock. The investment in this common stock was
written off in the year ended December 31, 2006. The primary purpose of this
purchase was to acquire the water rights for the Mount Hope operation.
In
April
2007, the Company purchased land including all water rights and various personal
property for cash of $3,200,000 and 50,000 shares of common stock valued at
$308,000. The primary purpose of this purchase was to acquire the water rights
for the Mount Hope operation.
In
May
2007, the Company purchased water rights for cash of $1,375,000 and 17,000
shares of common stock valued at $98,000. The primary purpose of this purchase
was to acquire the water rights for the Mount Hope operation.
Hall-Tonopah.
The
Company is currently in the process of exploration and evaluation of the
Hall-Tonopah molybdenum project.
During
the year ended December 31, 2005, the Company
entered into an option agreement with High Desert Winds LLC (“High Desert”) for
High Desert’s approximately ten square mile property in Nye County,
Nevada, including
water rights, mineral and surface rights, buildings and certain equipment (the
“Hall-Tonopah Property”). On March 17, 2006, the Company entered into a purchase
agreement with High Desert whereby it purchased a substantial portion of the
Hall-Tonopah Property. At closing, the Company paid High Desert a cash payment
of $4,460,000 for the portion of the Hall-Tonopah Property that it purchased
and
made a deferred payment of $990,000 in November of 2006 for the purchase of
the
remaining portion of this property for the total purchase price of $5,450,000
including buildings and equipment at the Hall-Tonopah site. The primary purpose
of the Hall-Tonopah purchase was to further the Company’s strategy of exploring
and developing potential molybdenum properties.
At
December 31, 2006, the Hall-Tonopah Property was subject to a 12 percent royalty
payable with respect to the net revenues generated from molybdenum or copper
minerals removed from the properties purchased. In January 2007, the Company
completed the acquisition of all of the issued and outstanding shares of the
corporation that held the 12 percent net smelter royalty interest in the mineral
rights of the Hall-Tonopah Property and, as a result of this purchase, the
Company now owns the Hall Tonopah Property and all associated mineral rights
without future royalty obligations. As set forth in the Purchase Agreement,
the
Company paid approximately $3,691,000 in cash at closing, net of cash acquired
of $1,246,000. At first commercial production of the property, the Company
has
agreed to pay an additional $6,000,000. Because the Company cannot determine
beyond a reasonable doubt that the mine will attain commercial production,
the
Company has not recognized the $6,000,000 liability in its financial statements.
In connection with the acquisition, the Company also received restricted cash
totaling $491,000 and assumed reclamation and remediation costs, accounts
payable and accrued liabilities of $263,000.
In
March
2007, the Company purchased a patented lode mining claim adjacent to the
Hall-Tonopah Property for $175,000 cash. Additionally, in March 2007, the
Company completed the purchase of certain patented lode mining claims referred
to as the Liberty Claims on property adjacent to the Hall-Tonopah Property
for
cash of $75,000 and 150,000 shares of common stock valued at $420,000. These
two
acquisitions of mining claims were completed to control additional mineral
rights needed for the development of the Hall-Tonopah Property. The Company
currently believes that it has all the mineral, water and surface rights
necessary to develop the Hall-Tonopah Property.
Other
Properties. The
Company’s mining claims and land purchased prior to 2006 consist in part of (a)
approximately 107 acres of fee simple land in the Little Pine Creek area of
Shoshone County, Idaho, (b) six patented mining claims known as Chicago-London
group, located near the town of Murray in Shoshone County, Idaho, (c) 265 acres
of private land with three unpatented claims in Josephine County, Oregon, known
as the Turner Gold project.
The
following is a summary of mining properties, land and water rights at June
30,
2007 and December 31, 2006:
|
|
At
June 30,
|
|
At
Dec. 31,
|
|
|
|
2007
|
|
2006
|
|
Mount
Hope:
|
|
|
|
|
|
Real
estate and water rights
|
|
$
|
6,804,000
|
|
$
|
1,971,000
|
|
Total
Mount Hope
|
|
|
6,804,000
|
|
|
1,971,000
|
|
Hall-Tonopah:
|
|
|
|
|
|
|
|
Hall-Tonopah
Property
|
|
|
9,162,000
|
|
|
5,417,000
|
|
Liberty
claims
|
|
|
495,000
|
|
|
—
|
|
Total
Hall-Tonopah
|
|
|
9,657,000
|
|
|
5,417,000
|
|
Other
Properties:
|
|
|
|
|
|
|
|
Little
Pine Creek land
|
|
|
1,000
|
|
|
1,000
|
|
Chicago-London
group
|
|
|
80,000
|
|
|
80,000
|
|
Turner
Gold land
|
|
|
416,000
|
|
|
416,000
|
|
Total
Other Properties
|
|
|
497,000
|
|
|
497,000
|
|
Total
|
|
$
|
16,958,000
|
|
$
|
7,885,000
|
|
During
the six months ended June 30, 2007, the Company purchased depreciable assets
such as vehicles, equipment and computers in the amount of $481,000. The
vehicles, equipment and computers will be depreciated over useful lives of
three
to seven years using straight line depreciation. Depreciation expense for the
six months ended June 30, 2007 was $76,000.
Capital
assets are recorded at cost. Depreciation is calculated using the straight-line
method over three to twenty years. The following is a summary of property,
equipment, and accumulated depreciation at June 30, 2007 and December 31, 2006:
|
|
|
Cost
|
|
|
|
|
|
Net
Book Value at June 30,
2007
|
|
|
Net
Book Value at Dec. 31,
2006
|
|
Field
Equipment and Vehicles
|
|
$
|
391,000
|
|
$
|
67,000
|
|
$
|
324,000
|
|
$
|
167,000
|
|
Office
Furniture and Computers
|
|
|
326,000
|
|
|
67,000
|
|
|
259,000
|
|
|
209,000
|
|
Buildings
and Improvements
|
|
|
267,000
|
|
|
15,000
|
|
|
252,000
|
|
|
55,000
|
|
Total
|
|
$
|
984,000
|
|
$
|
149,000
|
|
$
|
835,000
|
|
$
|
431,000
|
|
NOTE
6—RELATED PARTY
TRANSACTIONS
|
In
January 2007, the Company entered into an employment agreement with a son of
the
Company’s Chairman for services as Director of Projects and Operations. Under
this agreement, the Company granted a stock option to purchase 140,000 shares
at
$2.78 per share, the closing price of the Company’s stock on January 30, 2007.
Also under this agreement the Company issued an additional 90,000 shares of
nonvested common stock at $2.78 that will vest based on certain performance
based milestones. The Company has recorded the expense associated with these
shares this period as per the accounting guidelines of SFAS No. 123(R),
Share-Based
Payment.
Additional
related party transactions are included as part of Note 9.
NOTE
7—COMMON STOCK AND COMMON STOCK WARRANTS
In
April
2007, the Company completed the private placement of units for gross proceeds
of
$25,000,000 less placement agent and finder’s fees of $1,500,000. In the
aggregate, the Company issued 7,353,000 units at a price of $3.40 per unit.
Each
unit consisted of one share of common stock and a warrant to purchase one half
of one share of common stock. Each warrant will be exercisable at a price of
$5.20 per whole share for a period of one year from the date of closing. The
Units were offered and sold pursuant to exemptions from registration under
Regulation S of the Securities Act of 1933, as amended (the “Securities Act”),
for offers and sales occurring outside the United States, and Rule 506 of
Regulation D and Section 4(2) of the Securities Act, as a transaction not
involving any public offering.
During
the six months ending June 30, 2007, the Company had the following issuances
of
common stock. The Company issued 303,000 shares of common stock upon the
cashless exercise of warrants and 255,000 shares of common stock upon the
cashless exercise of stock options. Warrants and options in the amount of
2,779,000 and 326,000 were exercised for cash in the amount of $6,387,000 and
$379,000 respectively. The Company issued 150,000 shares of common stock in
the
completion of the Liberty Claims purchase valued at $420,000, issued 17,000
shares of common stock in the completion of a water rights purchase associated
with Mount Hope valued at $98,000, issued 50,000 shares of common stock as
part
of the consideration paid for property in the Mount Hope vicinity valued at
$308,000, and issued 75,000 shares of common stock in exchange for services
valued at $304,000. The Company issued 620,000 shares of nonvested stock to
officers and management of the Company. During the first six months of 2007,
shareholders returned to the Company 39,000 shares of common stock due to a
stock option exercise pricing error in 2006.
|
|
|
Number
of
|
|
|
|
|
|
|
|
Shares
Under
|
|
|
|
|
|
|
|
Warrants
|
|
|
Exercise
Price
|
|
Balance
at December 31, 2006
|
|
|
12,268,000
|
|
|
$0.80
to $3.75
|
|
Issued
in connection with a private placement
|
|
|
3,676,000
|
|
|
$5.20
|
|
Exercised
for cash
|
|
|
(2,779,000
|
)
|
|
$0.80
to $3.75
|
|
Exercised
in cashless exchange
|
|
|
(400,000
|
)
|
|
$1.00
|
|
Expired
|
|
|
(60,000
|
)
|
|
$1.00
|
|
Balance
at June 30, 2007
|
|
|
12,705,000
|
|
|
$0.80
to $5.20
|
|
Weighted
average exercise price
|
|
|
$3.82
|
|
|
|
|
Of
the
warrants outstanding at June 30, 2007, 7,050,000 are exercisable at $3.75 per
warrant and expire February 2011; 3,676,000 are exercisable at $5.20 per share
and expire April 2008; and the remaining 1,979,000 are exercisable at prices
ranging from $.80 to $2.10 and expire through November 2010.
In
October 2004, shareholders of the Company authorized 10,000,000 shares of no
par
value preferred stock. The authorized but unissued shares of preferred stock
may
be issued in designated series from time to time by one or more resolutions
adopted by the board of directors. The directors have the power to determine
the
preferences, limitations and relative rights of each series of preferred stock.
In
November 2004, the board of directors unanimously consented to amend the
articles of incorporation of the Company. The amendment reclassified 10,000,000
shares of the Company’s no par value preferred stock into 10,000,000 shares of
$0.001 par value Series A preferred stock. At June 30, 2007 and December 31,
2006, no shares of $0.001 par value Series A preferred stock were issued or
outstanding.
NOTE
9—STOCK BASED COMPENSATION
Stock
Based Compensation Plans
|
During
2006, the board of directors and shareholders adopted the Idaho General Mines,
Inc. 2006 Equity Incentive Plan (the “2006 Plan”). During 2004, the board of
directors and shareholders adopted the Idaho General Mines, Inc. 2003 Stock
Option Plan (the “2003 Plan” and together with the 2006 Plan, the “Plans”). The
purpose of the Plans is to give the Company greater ability to attract, retain,
and motivate its officers and key employees. The Plans are intended to provide
the Company with the ability to provide incentives more directly linked to
the
success of the Company’s business and increases in shareholder value.
Under
the
2006 Plan, the board of directors is authorized to grant incentive stock options
(“ISOs”) to employees (pursuant to Internal Revenue Code 422), non-statutory
stock options, restricted stock awards, restricted stock units and stock
appreciation rights. The aggregate number of shares of common stock that may
be
issued pursuant to awards granted under the 2006 Plan will not exceed 3,500,000
plus the number of shares that are ungranted and those that are subject to
reversion under the 2003 Plan. As of June 30, 2007, the maximum number of shares
available for issuance under the 2003 Plan was 360,000 shares. Shares under
the
2003 Plan that become eligible for awards under the 2006 Plan may not be granted
again under the 2003 Plan.
During
the six months ending June 30, 2007, the Company issued 1,865,000 options under
the 2006 Plan with an exercise price ranging from $2.41 to $6.40 with vesting
at
various dates through 2009. These options were granted to members of the board
of directors, officers, employees and consultants of the Company. The fair
value
of each option is estimated on the issue date using the Black-Scholes Option
Price Calculation. The following assumptions
were made in estimating the fair value: risk free interest of 4.94% to 5.05%;
volatility of 88% to 91%; dividend rate of 0%; and expected life of 2.0 years.
The total value of options awarded during the first six months of 2007 was
calculated at $3,858,000. Expense was recorded of $2,947,000 for the options
which were earned in the first six months ended June 30, 2007.
During
the year ended December 31, 2006, the Company granted 1,665,000 non-qualified
stock options outside of the Plans with an exercise price ranging from $2.25
to
$3.68 with vesting at various dates through 2008. These options were granted
to
members of the board of directors, officers, and employees of the Company.
The
Company issued 60,000 of ISOs within the 2003 Plan with an exercise price of
$2.10 with vesting at various dates through 2008. The fair value of each option
is estimated on the issue date using the Black-Scholes Option Price Calculation.
The following assumptions were made in estimating the fair value: risk free
interest of 5%; volatility of 101%; dividend rate of 0% and expected life of
2.4
years. The total value of options awarded during 2006 was calculated at
$3,347,000. Expense was recorded of $2,326,000 for the options which were earned
in 2006.
The
following is a summary of the Company’s stock option plans as of June 30, 2007:
|
|
|
Number
of
|
|
|
|
|
|
Number
of securities
|
|
|
|
|
|
securities
|
|
|
|
|
|
remaining
available
|
|
|
|
|
|
to
be issued upon
|
|
|
Weighted
average
|
|
|
for
future issuance
|
|
|
|
|
|
exercise
of
|
|
|
exercise
price of
|
|
|
under
equity
|
|
|
|
|
|
outstanding
options
|
|
|
outstanding
options
|
|
|
compensation
plans
|
|
|
Equity
compensation plans not
|
|
|
|
|
|
|
|
|
|
|
|
approved
by security holders
|
|
|
2,057,000
|
|
$
|
1.20
|
|
|
n/a
|
|
|
Equity
compensation plans
|
|
|
|
|
|
|
|
|
|
|
|
approved
by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
2006
Plan
|
|
|
1,845,000
|
|
|
3.98
|
|
|
1,015,000
|
(1) |
|
2003
Plan
|
|
|
540,000
|
|
|
0.59
|
|
|
360,000
|
|
|
Total
|
|
|
4,442,000
|
|
$
|
2.28
|
|
|
1,375,000
|
|
|
(1)
The
aggregate number of shares of common stock that may be issued pursuant to awards
granted under the 2006 Equity Incentive Plan will not exceed 3,500,000 plus
the
number of shares that are ungranted and those that are subject to reversion
under the 2003 Stock Plan. Shares under the 2003 Plan that become eligible
for
awards under the 2006 Plan may not be granted again under the 2003 Plan.
The
following is a summary of stock option activity in 2006 and
2007:
|
|
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
|
|
Shares
Under
|
|
|
|
|
|
|
|
Warrants
|
|
|
Exercise
Price
|
|
Outstanding
January 1, 2006
|
|
|
4,020,000
|
|
$
|
0.43
|
|
Granted
|
|
|
1,725,000
|
|
|
3.01
|
|
Exercised
|
|
|
(1,615,000
|
) |
|
0.49
|
|
Forfeited
|
|
|
(480,000
|
) |
|
1.57
|
|
Expired
|
|
|
—
|
|
|
—
|
|
Outstanding
at December 31, 2006
|
|
|
3,650,000
|
|
$
|
1.48
|
|
Options
exercisable at December 31, 2006
|
|
|
2,705,000
|
|
|
|
|
Weighted
average fair value of options granted during 2006
|
|
$
|
3.10
|
|
|
|
|
Outstanding
January 1, 2007
|
|
|
3,650,000
|
|
$
|
1.48
|
|
Granted
|
|
|
1,865,000
|
|
|
3.97
|
|
Exercised
|
|
|
(956,000
|
) |
|
2.48
|
|
Forfeited
|
|
|
(117,000
|
) |
|
2.71
|
|
Expired
|
|
|
—
|
|
|
—
|
|
Outstanding
June 30, 2007
|
|
|
4,442,000
|
|
$
|
2.28
|
|
Exercisable
at June 30, 2007
|
|
|
3,402,000
|
|
|
|
|
|
Weighted
Average Fair Value Granted During 2007
|
|
$
|
2.07
|
|
|
|
|
|
Nonvested
Shares of Common Stock
During
the six months ending June 30, 2007, the Company issued 620,000 shares of
nonvested common stock to officers and employees of the Company that will vest
based on certain performance based milestones established for each
person.
The
total
value of restricted stock awarded and expensed during the first six months
of
2007 was calculated at $1,716,000.
At
June
30, 2007 and December 31, 2006, the Company had deferred tax assets principally
arising from the net operating loss carry forwards for income tax purposes
multiplied by an expected rate of 34%. As management of the Company cannot
determine that it is more likely than not that the Company will realize the
benefit of the deferred tax assets, a valuation allowance equal to the deferred
tax asset has been established at June 30, 2007 and December 31, 2006. The
significant components of the deferred tax asset at June 30, 2007 and December
31, 2006 were as follows:
|
|
June
30,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Net
operating loss carry forward
|
|
$
|
12,202,000
|
|
$
|
8,425,000
|
|
Deferred
tax asset
|
|
$
|
4,149,000
|
|
$
|
2,865,000
|
|
Deferred
tax asset valuation allowance
|
|
$
|
(4,149,000
|
)
|
$
|
(2,865,000
|
)
|
Net
deferred tax asset
|
|
|
—
|
|
|
—
|
|
At
June
30, 2007 and December 31, 2006, the Company had a net operating loss carry
forward of approximately $12,202,000 and $8,425,000 respectively, which expire
in the years 2022 through 2027. The change in the allowance amount from December
31, 2006 to June 30, 2007 was $1,284,000.
NOTE
11—COMMITMENTS AND CONTINGENCIES
The
Mount
Hope Lease Agreement requires a royalty advance (the “Construction Royalty
Advance”) of the greater of $2,500,000 or 3% of the construction capital cost
estimate upon the earliest of the Company’s securing project financing in
sufficient amounts to develop and put into operation the Mount Hope property
at
a production level of at least 10 million pounds of annual production or October
19, 2008.
The
Company has the right to defer the Construction Royalty Advance for one or
two
years by payment of a deferral fee (the “Deferral Fee”) in the amount of
$350,000 on or before October 19, 2008 and October 19, 2009 in the event project
financing for the project has not been secured by each of the dates. By October
19, 2010, the Company must pay at a minimum $2,500,000 of the Construction
Royalty Advance with the remainder due upon securing project financing or 50%
of
the remainder on October 19, 2011 and the other 50% due on October 19, 2012.
Based
on
the Company’s current estimate of developing and operating the mine, we believe
our contractual obligations under the Mount Hope Lease Agreement will be as
shown in the following table. This estimate is based on our current estimates
of
the timing of securing project financing and construction capital costs. The
Company is currently in the process of developing a new bankable feasibility
study and our estimates of both the amount and the timing may change upon
completion of the bankable feasibility study.
Year
|
|
Deferral
Fees
|
|
Advance
Royalties
|
|
Total
|
|
2007
|
|
$
|
350,000
|
|
$
|
—
|
|
$
|
350,000
|
|
2008
|
|
|
350,000
|
|
|
—
|
|
|
350,000
|
|
2009
|
|
|
—
|
|
|
21,000,000
|
|
|
21,000,000
|
|
2010
|
|
|
—
|
|
|
500,000
|
|
|
500,000
|
|
2011
|
|
|
—
|
|
|
500,000
|
|
|
500,000
|
|
Thereafter
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
700,000
|
|
$
|
22,000,000
|
|
$
|
22,700,000
|
|
(1)
After
the first full year of production the Company estimates that the Production
Royalties will fully recover the Advance Royalties for the life of the project
and, further, the Advance Royalties will be fully recovered (credited against
Production Royalties) by the end of 2012.
Environmental
Considerations
|
The
Company owns and has owned mineral property interests on certain public and
private lands in Shoshone County, Idaho. The Company’s mineral property holdings
known as the Little Pine Creek and the Chicago-London properties include lands
contained in mining districts that have been designated as “Superfund” sites
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act. The Company and its properties have been and are subject to
a
variety of federal and state regulations governing land use and environmental
matters. The Company believes it has been in substantial compliance with all
such regulations, and is unaware of any pending action or proceeding relating
to
regulatory matters that would affect the financial position of the Company.
The
Company’s management acknowledges, however, that the possibility exists that the
Company may be subject to further environmental liabilities associated with
its
properties in the future, and that the amount and nature of any liabilities
the
Company may be held responsible for is impossible to estimate.
Other
Commitments and Contingencies
The
Company has entered into miscellaneous notes for vehicles and leases for office
equipment at various interest rates and terms totaling $140,000. The table
below
shows these obligations over the next five years.
Year
|
|
Lease
Payment
|
|
Interest
on Leases
|
|
Note
Payment
|
|
Note
Interest
|
|
2007
(Remaining portion)
|
|
$
|
5,000
|
|
$
|
1,000
|
|
$
|
17,000
|
|
$
|
2,000
|
|
2008
|
|
|
10,000
|
|
|
2,000
|
|
|
35,000
|
|
|
3,000
|
|
2009
|
|
|
10,000
|
|
|
1,000
|
|
|
35,000
|
|
|
2,000
|
|
2010
|
|
|
10,000
|
|
|
1,000
|
|
|
6,000
|
|
|
—
|
|
2011
|
|
|
10,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
45,000
|
|
$
|
5,000
|
|
$
|
93,000
|
|
$
|
7,000
|
|
The
following discussion of our financial condition and plan of operations
constitutes management’s review of the factors that affected our financial and
operating performance for the six months ended June 30, 2007 and 2006. This
discussion should be read in conjunction with the financial statements and
notes
thereto contained elsewhere in this report and in our Form 10-KSB, for the
year
ended December 31, 2006.
We
are in
the business of the exploration, development and, if warranted, the mining
of
properties containing molybdenum, as well as silver, gold, base metals and
other
specialty metals. We currently have a 30-year renewable lease for the lands,
surface rights, patented and unpatented claims related to the Mount Hope
Project, a primary molybdenum property, located in Eureka County, Nevada. In
2006, we acquired a second significant molybdenum project, the Hall-Tonopah
project, located in Nye County, Nevada. We also own other properties and mineral
rights on which we intend to conduct mineral exploration and evaluation for
determining economic viability for further development. We continue to identify,
investigate, and acquire other potential properties for future development.
Mount
Hope.
In
November 2004, we entered into an option agreement with Mt. Hope Mines, Inc.,
or
MHMI, pursuant to which we were granted an exclusive one-year option to enter
into a lease agreement for Mount Hope’s previously drilled molybdenum deposit
consisting of 13 patented claims and 109 unpatented claims in Eureka County,
Nevada, for a lease period of 30 years. In April 2005, we completed a Phase
1
Mine Feasibility Study with respect to Mount Hope and began the permitting
process for placing into production an open pit molybdenum mine, concentrator
and processing facility capable of producing 44,000 short tons (40,000 metric
tons) of ore per day. In October 2005, we exercised the option and our lease
agreement with MHMI became effective.
In
December 2005, we completed a Technical Report that evaluated the potential
to
profitably extract the deeper portion of the Mount Hope deposit and augmented
the mine plan contained in the 2005 Phase I Mine Feasibility Study. The
augmented mine plan allowed for the mining and processing of 1.0 billion short
tons (920 million tons) of molybdenum bearing rock over a mine production life
of 50 or more years.
In
June
2007, the Company completed a five hole drill program that produced an aggregate
of over 5,100 feet of core and 1,400 feet of RC drilling. The holes targeted
mineralization expected to be mined within the first five years of the mine
plan. The core material intersected long runs of mineralization with average
molybdenum grades ranging between 0.145% and 0.118% ranging between 635 and
905
feet in thickness.
The
Company intends to conduct another drilling program prior to the end of 2007,
which will consist of approximately 14 holes (over 21,000 feet of core) that
target mineralization within the first ten years of planned production.
In
July
2007, the Company announced plans to increase mill throughput capacity at Mount
Hope from 44,000 short tons per day (40,000 metric tons) to an average of
approximately 60,000 short tons per day (54,000 metric tons), with actual annual
throughput dependant on ore characteristics and other factors. The increased
throughput capacity is expected to expand average annual molybdenum production
during the first ten years of production to 37 million pounds from the Company’s
prior estimates of approximately 31 million pounds.
The
Company is currently in the process of developing a bankable feasibility study
with respect to the Mount Hope Project, which, due to the additional engineering
required to accommodate the higher throughput capacity, is now scheduled to
be
completed in late August of 2007. The bankable feasibility study will include
optimized mine and waste rock placement plans as well as revised estimates
for
capital and operating costs. As we are currently focused primarily on the
development of the Mount Hope Project, we do not expect to generate revenues
from operations before production of molybdenum begins at the Mount Hope
Project.
In
January 2007, we purchased 100% of the corporation which owned a 12% net smelter
returns royalty on the Hall-Tonopah Property, effectively eliminating the
royalty on the property.
From
January 2007 through April 2007, we completed a drilling program at Hall-Tonopah
on the molybdenum mineralization of the existing molybdenum pit developed by
Cyprus and an east extension mineralized area near the top of the east side
of
the existing pit. This program included 13 reverse circulation drill holes
and
six diamond drill holes.
The
drilling program was designed to validate and confirm the continuity of
mineralization indicated in the previous results of drilling by Anaconda and
Cyprus. The new drilling confirmed previous drill results for the upper ore
body, and has indicated near surface high grade mineralization greater than
0.10% on the east side of the existing molybdenum pit.
The
Company is conducting a pre-feasibility study on the Hall-Tonopah Property,
which it expects to complete before year-end 2007.
Other
Properties.
We also
currently own several other properties located in the western United States.
These properties include additional molybdenum deposits as well as copper and
gold deposits.
Results
of Operations for the Six Months Ended June 30, 2007
Compared
to Six Months Ended June 30, 2006
We
are
classified as an exploration stage company with no producing mines and,
accordingly, we do not produce income. Our net loss for the six months ended
June 30, 2007 was $(18,477,000) as compared to a net loss of $(6,899,000) for
the six months ended June 30, 2006. The increase of $11,578,000 is attributable
primarily to increased level of expenditures in exploration and research studies
required to complete our Environmental Impact Statement and our bankable
feasibility study at Mount Hope as well as continuing research and exploration
at Hall-Tonopah as we continue to evaluate our molybdenum resources there.
General and administrative costs are also increasing as we continue to expand
our support personnel for the higher levels of activity in our exploration
efforts.
Exploration
and development expenditures of $10,070,000 were incurred at the Mount Hope
Project and the Hall-Tonopah Project during the six months ended June 30, 2007,
as we continued to drill and evaluate our properties. This is consistent
with our stated objective to complete our Mount Hope Project plans and to focus
on the permitting required to bring the project to commercial production and
to
confirm existing mineralization as well as identify additional molybdenum
resources at Hall-Tonopah. The expenditures during the six months ended June
30,
2007 were related to this objective, including associated costs involved in
properly evaluating and developing our feasibility study for the Mount Hope
Project.
We
also
incurred corporate and administrative costs of $8,936,000 for the six months
ended June 30, 2007 compared with $4,413,000 for the six months ended June
30,
2006 consistent with our increased activity levels. These costs include employee
compensation expenses, increase in staffing levels of corporate personnel and
associated costs, marketing and investor relations expenses, general legal
expenses, and accounting and compliance issues reflecting the greater complexity
of our operations.
During
the six months ended June 30, 2007, we added key Officers, Directors and
employees as a continuation of our previously announced reorganization of the
executive team to keep up with our significant growth. In connection with our
compensation programs we granted stock options and unvested common shares to
attract, retain and motivate our Officers, Directors and key employees. As
a
result, we incurred non-cash equity compensation costs
of
$4,663,000 in the six months ended June 30, 2007 compared with $745,000 in
the
six months ended June 30, 2006. Approximately one half of the amount for the
six
months ended June 30, 2007 was as a result of the initial retention of Officers,
Directors and employees and, accordingly, will not be of a recurring nature.
Liquidity
and Capital Resources
|
We
have
limited capital resources and thus have to rely upon the sale of equity and
debt
securities for the cash required for exploration and development purposes,
for
acquisitions and to fund our administration. Since we do not expect to generate
any revenues in the near future, we must continue to rely upon the sale of
our
equity and debt securities to raise capital. There can be no assurance that
financing, whether debt or equity, will always be available to us in the amount
required at any particular time or for any period or, if available, that it
can
be obtained on terms satisfactory to us.
Our
cash
balance at June 30, 2007 was $27,537,000 compared to $22,501,000 at June 30,
2006. Total assets at June 30, 2007 were $46,249,000 compared to $27,943,000
at
June 30, 2006. The change in these balances reflects the purchase of property
and water rights for our Mount Hope Project and the purchase of a corporation
to
secure the royalty at our Hall-Tonopah project offset by proceeds received
in
March 2007, from a private placement of equity. Current liabilities at June
30,
2007 were $2,895,000 compared to $293,000 at June 30, 2006. This increase in
current liabilities reflects our increased accounts payable due to increased
drilling expenses and expenses related to the preparation of our bankable
feasibility study, and due to the increase in our required provision for post
closure reclamation and remediation costs.
On
January 10, 2006, we concluded a private placement of 3,442,000 units at a
price
of $1.10 per unit. Each unit consisted of one share of our common stock and
one-half of one warrant to purchase one share of our common stock. Each whole
warrant is exercisable for 24 months from the date of issuance and carries an
exercise price of $1.75 per whole share. The gross proceeds of this offering
were $3,786,000 and, after payment of sales commissions and finder’s fees, we
received net proceeds of $3,621,000.
On
February 15, 2006, we concluded a private placement of 15,000,000 units at
a
price of $2.00 per unit. Each unit consisted of one share of our common stock
and a warrant to purchase one-half of a share of our common stock. Each whole
warrant is exercisable for five years from the date of issuance and carries
an
exercise price of $3.75 per whole share. The gross proceeds of this offering
were $30,000,000 and, after payment of sales commissions and finder’s fees, we
received net proceeds of $27,875,000. In the aggregate, we issued 15 million
shares of common stock and warrants to purchase an additional 8.3 million
shares, including warrants issued as compensation to the placement agent.
On
January 30, 2007, the Company completed its previously announced acquisition
of
all of the issued and outstanding shares of a corporation that held a 12 percent
net smelter royalty interest in the mineral rights of the Company’s Hall-Tonopah
molybdenum-copper property in Nye County, Nevada. The Company now owns the
Hall-Tonopah Property and all associated mineral rights without future royalty
obligations. As set forth in the Purchase Agreement, the Company paid
approximately $4,937,000 in cash at closing. At first commercial production
of
the property, the Company has agreed to pay an additional
$6,000,000.
In
April
2007, we concluded a private placement of 7,353,000 units for gross proceeds
of
$25,000,000, with net proceeds to the Company of approximately $23,500,000
after
legal and other related expenses. In the aggregate, the Company issued the
units
at a price of $3.40 per unit. Each unit consisted of one share of common stock
and a warrant to purchase one half of one share of common stock. Each warrant
will be exercisable at a price of $5.20 per whole share for a period of one
year
from the date of closing.
See
note
11 to the condensed consolidated notes to the financial statements for a
discussion of commitments and contingencies.
Changes
in Accounting Policies
|
We
did
not change our accounting policies during the six months ended June 30,
2007.
Certain
statements in this report may constitute forward-looking statements, which
involve known and unknown risks, uncertainties and other factors, which may
cause actual results, performance or achievements of our company, the Mount
Hope
Project, Hall-Tonopah project and our other projects, or industry results,
to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. We use the words “may”,
“will”, “believe”, “expect”, “anticipate”, “intend”, “future”, “plan”,
“estimate”, “potential” and other similar expressions to identify
forward-looking statements. Forward-looking statements may include, but are
not
limited to, statements with respect to the following:
· |
the
timing
and possible outcome of pending regulatory and permitting
matters;
|
· |
the
parameters and design of our planned initial mining facilities at
the
Mount Hope Project;
|
· |
future
financial or operating performances of our company and our
projects;
|
· |
the
estimation and realization of mineral reserves, if
any;
|
· |
the
timing of
exploration, development and production activities and estimated
future
production, if any;
|
· |
estimates
related to costs of production, capital, operating and exploration
expenditures;
|
· |
requirements
for additional capital;
|
· |
government
regulation of mining operations, environmental conditions and risks,
reclamation and rehabilitation
expenses;
|
· |
title
disputes or claims;
|
· |
limitations
of insurance coverage; and
|
· |
the
future
price of molybdenum, gold, silver or other
metals.
|
You
should not place undue reliance on these forward-looking statements, which
speak
only as of the date of this report. These forward-looking statements are based
on our current expectations and are subject to a number of risks and
uncertainties, including those set forth above. Although we believe that the
expectations reflected in these forward-looking statements are reasonable,
our
actual results could differ materially from those expressed in these
forward-looking statements, and any events anticipated in the forward-looking
statements may not actually occur. Except as required by law, we undertake
no
duty to update any forward-looking statements after the date of this report
to
conform those statements to actual results or to reflect the occurrence of
unanticipated events. We qualify all forward-looking statements contained in
this report by the foregoing cautionary statements.
ITEM
3. CONTROLS
AND
PROCEDURES
|
An
evaluation was performed under the supervision and with the participation of
our
management, including our principal executive officer and principal financial
officer, of the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of
1934) as of the end of the period covered by this Quarterly Report on Form
10-QSB. Based on the foregoing, our management concluded that our disclosure
controls and procedures are effective to ensure that information required to
be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission rules and forms and such information
is accumulated and communicated to our management, including our principal
executive officer and principal financial officer, to allow timely decisions
regarding required disclosure.
There
was
no change in our internal control over financial reporting that occurred during
the quarter ended June 30, 2007 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
Additionally,
the Company has engaged an outside Sarbanes-Oxley consultant to assist the
Company in assessing the effectiveness of the internal controls over its
financial reporting processes. The consultant will assist management in
establishing the framework for compliance with Section 404(a) of the
Sarbanes-Oxley Act of 2002.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During
the period covered by this quarterly report, the Company issued 7,353,000 units
for gross proceeds of $25,000,000, with net proceeds to the Company of
approximately $23,500,000 after legal and other related expenses. In the
aggregate, the Company issued the units at a price of $3.40 per unit. Each
unit
consisted of one share of common stock and a warrant to purchase one half of
one
share of common stock. Each warrant will be exercisable at a price of $5.20
per
whole share for a period of one year from the date of closing. The Units were
offered and sold pursuant to exemptions from registration under Regulation
S of
the Securities Act of 1933, as amended (the “Securities Act”), for offers and
sales occurring outside the United States, and Rule 506 of Regulation D and
Section 4(2) of the Securities Act, as a transaction not involving any public
offering. In addition, the Company also issued the following securities during
the second quarter: (i) 150,000 shares of common stock valued at $420,000 in
connection with the purchase of certain patented lode mining claims referred
to
as the Liberty Claims on property adjacent to the Hall-Tonopah Property, (ii)
75,000 shares of common stock to John Mears, a consulting geologist, in exchange
for services valued at $304,000, (iii) 17,000 shares of common stock valued
at
$98,000 in the completion of a water rights purchase associated with Mount
Hope,
and (iv) 50,000 shares of common stock valued at $308,000 as part of the
consideration paid for property in the Mount Hope vicinity. The foregoing
issuances were exempt from the registration requirements of the Securities
Act
of 1933, as amended, pursuant to Section 4(2) thereof.
ITEM
5. OTHER
INFORMATION
|
On
July
24, 2007, the Board of Directors adopted Corporate Governance Guidelines that,
among other things, include the following requirements that relate to the
procedures by which security holders may recommend nominees to the Board of
Directors:
The
Governance and Nominating Committee will consider candidates submitted for
nomination by shareholders that satisfy the procedural requirements promulgated
by the SEC and the American Stock Exchange, including Rule 14a-8(b)(1). Any
shareholder with a nomination should submit such candidate’s name, along with a
curriculum vitae or other summary of qualifications, experience and skills,
a
document signed by the candidate indicating the candidate’s willingness to serve
if elected, and evidence of the shareholder’s ownership of Company stock to the
Corporate Secretary, Idaho General Mines, Inc., at the corporate offices in
Lakewood, Colorado. A shareholder wanting to formally nominate a candidate
must
do so by following the procedures described in the Company’s bylaws and proxy
statement for the prior year.
ITEM
6. EXHIBITS
Exhibit |
|
|
Number |
|
Description
of Exhibit
|
31.1
|
|
Certification
of CEO pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange
Act
|
31.2
|
|
Certification
of CFO pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange
Act
|
32.1
|
|
Certification
of CEO pursuant to 18 U.S.C. Section 1350
|
32.2
|
|
Certification
of CFO pursuant to 18 U.S.C. Section 1350
|
|
In
accordance with the requirements of the Exchange Act, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly
authorized.
|
|
|
|
IDAHO
GENERAL
MINES, INC. |
|
|
|
Dated: August
7, 2007 |
By: |
/s/
Bruce
D.
Hansen |
|
Bruce D. Hansen
Chief Executive Officer
|