-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SzPxxQmkdhszTwrxSp3hzE6DOA0fbdEe/Yg1X2XJWpn2F00TMbglPjUIWTBu1hPn HdDirTomdZAlvg8Wv68QFg== 0001015402-01-000915.txt : 20010409 0001015402-01-000915.hdr.sgml : 20010409 ACCESSION NUMBER: 0001015402-01-000915 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AURORA GOLD CORP CENTRAL INDEX KEY: 0001037049 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 133945947 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-24393 FILM NUMBER: 1589182 BUSINESS ADDRESS: STREET 1: 1505 1060 ALBERNI ST CITY: VANCOUVER BC CAN V6E STATE: A1 MAIL ADDRESS: STREET 1: 1505-1060 ALBERNI STREET STREET 2: VANCOUVER BC CANADA V6E 4K2 10KSB 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal year ended December 31, 2000 Commission file number 0-24393 AURORA GOLD CORPORATION (Exact name of small business issuer as specified in its charter) Delaware 13-3945947 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 1505 - 1060 ALBERNI STREET, VANCOUVER B.C. CANADA V6E 4K2 (Address of principal executive offices) Registrant's telephone number, including area code 604-687-4432 Securities registered under Section 12(b) of the Securities Exchange Act of 1934: None Securities registered pursuant to Section 12 (g) of the Securities Exchange Act of 1934: Title of each class Name of each exchange on which registered - ----------------------- -------------------------- Common stock, par value $0.001 per share NASD OTC Bulletin Board - ---------------------------------------- -------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Security Exchange Act of 1934 during the preceding 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 the past 90 days. YES [ X ] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part 111 of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ] Revenue for the fiscal year ended December 31, 2000 was $Nil The aggregate market value of the Registrant's voting common Stock held by non-affiliates was $1,537,079 as of March 8, 2001. There were 12,873,943, shares of the registrant's Common Stock outstanding as of March 8, 2001. Documents incorporated by reference herein: None Transitional Small Business disclosure format (check one); YES [ ] NO [ X ] 1 AURORA GOLD CORPORATION This annual report contains statements that plan for or anticipate the future and are not historical facts. In this Report these forward looking statements are generally identified by words such as "anticipate", "plan", "believe", "expect", "estimate", and the like. Because forward-looking statements involve future risks and uncertainties, these are factors that could cause actual results to differ materially from the estimated results. These risks and uncertainties are detailed in Item 1. "Business", Item 2. "Properties", Item 6. "Management's Discussion and Analysis of Financial Condition and Results of Operations" Item 7 "Financial Statements", Item 12 "Certain Relationships and Related Transactions". The Private Securities Litigation Reform Act of 1995, which provides a "safe harbor" for such statements, may not apply to this Report. ITEM 1. BUSINESS (A) GENERAL Aurora Gold Corporation (the "Company" or "Aurora") was incorporated under the laws of the State of Delaware on October 10, 1995, under the name "Chefs Acquisition Corp." Initially formed for the purpose of engaging in the food preparation business, it redirected its business efforts in late 1995 following a change of control, which occurred on October 30, 1995, to the acquisition, exploration and, if warranted, the development of mineral resource properties. The Company changed its name to Aurora Gold Corporation on August 20, 1996 to more fully reflect its business activities. Since its redirection, the Company's activities have been limited primarily to the acquisition of rights to certain mineral properties and the implementation of preliminary exploration programs on these properties in which it has acquired an interest. See "Item 2. Description of Property." The Company is engaged in the location, acquisition, exploration and, if warranted, development of mineral resource properties. All of the mineral properties in which the Company has an interest or a right to acquire an interest in are currently in the exploration stage. None of the properties have a known body of Mineral Reserves. The Company's primary objective is to explore for gold, silver, base metals and industrial minerals and, if warranted, to develop those existing mineral properties. Its secondary objective is to locate, evaluate, and acquire other mineral properties, and to finance their exploration and development through equity financing, by way of joint venture or option agreements or through a combination of both. Currently, the Company's activities are centered in Canada, Guatemala, Tunisia and the United States of America. None of the Company's properties contain any known Mineral Reserves. The Company's common stock is traded on the NASD OTC Bulletin Board. The Company's offices are located at 1505 - 1060 Alberni Street, Vancouver, British Columbia, Canada, V6E 4K2. (B) SIGNIFICANT DEVELOPMENTS IN FISCAL 1999 AND SUBSEQUENT EVENTS In fiscal 2000 the Company issued 1,504,000 common shares for an aggregate consideration of $528,550 and cancelled 90,706 common shares with an aggregate consideration of $56,691. The following is a breakdown of the common shares issued in fiscal 2000. The Company issued 900,000 common shares during the first 2 quarter of fiscal 2000. The 900,000 common shares had been subscribed in fiscal 1999 for $425,000. The Company issued 405,0000 common shares for aggregate cash consideration of $4,050 on the exercise of 405,000 common share stock options. The Company settled $99,500 of debt with the issuance of 199,000 common shares at a price of $0.50 per common share. The Company cancelled 90,706 common shares, which had been issued in 1999 to settle $56,691 of debt. In February 2000 the Company decided not to proceed with further exploration work on the Totem Talc property during the year. The company has not complied with the expenditure requirements for 2000 and 1999 and did not make the required option payments on December 15, 2000 and 1999. On February 25, 2000 the Company signed a letter of intent with Billiton UK Resources B.V. ("Billiton") for funding of exploration on the Hammala property. In April 2000 the March letter of intent between the Company and Billiton UK Resources B.V., was revised and the area for exploration for zinc in the Kebbouch District in Tunisia, North Africa was extended to include Hammala and the ten (10) other contiguous exploration permits (Koudiat Sidi Amor, Koudiat Ed Diss, Koudiat Hamra, Sidi Nasseur, Henchir El Goussat, Aine Djonane Ed Dar, Oued El Hariga, El Gourine, Sidi Ahmed Bou Lahia and Griane) for which the Company filed applications in January 2000 and which were later accepted by the Directeur G n ral L'Office National des Mines. On May 18, 2000, the Board of Directors of the Company decided to transfer to Aurora Metals, 100% interest in (6) Exploration Permits in Tunisia, which it held under option from High Marsh Holdings Ltd., and 100% interest in the ten (10) Exploration Permits (Koudiat Sidi Amor, Koudiat Ed Diss, Koudiat Hamra, Sidi Nasseur, Henchir El Goussat, Aine Djonane Ed Dar, Oued El Hariga, El Gourine, Sidi Ahmed Bou Lahia and Griane) in Tunisia which were formally granted by publication in the Tunisian Government Gazette on May 26, 2000, (collectively, the "Tunisian Property"). The Company also assigned to Aurora Metals, the Company's interest in the Letter of Intent with Billiton UK Resources BV ("Billiton"), signed on February 25, 2000, for the funding of exploration for zinc on portion of the Tunisian Property. One of the requirements in the Letter of Intent was that a change of domicile be undertaken and this will be satisfied on acceptance of Aurora Metals' Registration Statement by the United States Securities and Exchange Commission. On May 19, 2000 the Board of Directors of the Company approved and authorized a stock dividend, on a one to one basis, of the 13,000,000 common shares of Aurora Metals then owned by the Company, payable to the stockholders of the Company. The 13,000,000 shares of common stock then represented the entire outstanding and issued common stock of Aurora Metals. The stock dividend would be payable to the Company's stockholders of record as of the close of business on June 15, 2000. On June 15, 2000 the Company had 12,873,943 shares issued and outstanding. Of the total outstanding 13,000,000 common shares of Aurora Metals held by the Company, 126,057 common shares will not be distributed to the stockholders of the company as a dividend. The Company will return those 126,057 common shares of Aurora Metals back to Aurora Metals to be cancelled. The Company proposed to effect the share distribution on the later to occur of: (i) the effective date of Aurora Metals Form 20-F Registration Statement which according to the U.S. Securities and Exchange Commission rules is sixty days after the June 19, 2000 filing of the Form 20-F Registration Statement (August 19, 2000); or (ii) the date on which the Company is notified by the staff of the U.S. Securities and Exchange Commission that there are no further comments on the Aurora Metals Form 20-F Registration Statement. On February 16, 2001 the Company was advised by the staff of the U.S. Securities and Exchange Commission that the Aurora Metals Form 20-F Registration Statement had gone to a "No Comment" position. The Company thus paid the stock dividend on March 9, 2001. The Company along with the distribution of Aurora Metals share certificates, included an explanatory cover letter and a copy of the Aurora Metals Form 20-F Registration Statement as part of its distribution in lieu of delivery of a Schedule 14A or 14C. The Company believes that the Aurora Metals Form 20-F Registration Statement, as amended, contains substantially all of the information required under Regulation 14A or 14C under the Exchange Act as described in the U.S Securities and Exchange Commission's Staff Bulletin No. 4. 3 On September 5, 2000 Aurora Metals, in accordance with the terms of the High Marsh Option Agreements, gave High Marsh 30 days' notice of termination on four of the Exploration Permits and similar notice on a further Exploration Permit on September 11, 2000. The Company kept the Hammala Exploration Permit, which it holds in accordance with the High Marsh Option Agreements. The Company's decision to terminate five (5) (Hamman Zriba, Koudiat Sidii, Ouled Moussa, El Mohguer, Jebel Oum Edeboua) of the six (6) High Marsh Option Agreements was based on the results of reconnaissance and technical investigations, which did not indicate potential for the existence of economically viable deposits of zinc-lead mineralization. On January 29, 2001 Aurora Metals signed a Subscription Agreement with Billiton E&D 3 B.V. and an Option Agreement with Billiton UK Resources B.V., both subsidiaries of Billiton plc ("Billiton"), for funding of exploration for zinc on the Hammala and Kebbouch District Exploration Permits in Northern Tunisia, North Africa. Closing occurred on February 8, 2001. Under the terms of the agreements: (i) Billiton, through its subsidiary, Billiton E&D 3 B.V., made a private placement in Aurora Metals of $600,000 by purchasing 857,143 newly issued Units at a price of $0.70 with each Unit comprising of a common share and a purchase warrant, exercisable for a period of one year at $0.85, which if exercised would result in further proceeds of $728,571; (ii) Aurora Metals undertook to spend $475,000 of the private placement on exploration on Hammala Exploration Permit and the ten other Exploration Permits in the Kebbouch District owned by Aurora Metals; (iii) after the proceeds of the initial private placement are expended, Billiton, through its subsidiary, can elect to exercise a First Option whereby it can earn a 51% interest in the Property by spending $1.0 million over the ensuing two years; (iv) following the exercise of the First Option and satisfaction of the earn-in, Aurora Metals and Billiton UK Resources B.V. will form a Joint Venture and will pro rata fund further expenditures on exploration of the Property; (v) prior to the expenditure under the Joint Venture Phase reaching $2.0 million, Billiton, through its subsidiary, can elect to exercise a Second Option to earn a further 19%, i.e. to reach a total of 70%, by providing financing for all further work including, but not limited to, Pre-feasibility and Feasibility studies, engineering, mine development and construction through to commercial production. Aurora Metal's pro rata share of these costs will be repaid from Aurora Metal's share of cash flow; and (vi) Aurora Metals will be the Operator from the outset and will also undertake regional geological investigations in the country. On March 9, 2001 the Company distributed 12,873,943 shares of Aurora Metals to the Company's June 30, 2000 shareholders of record, as a stock dividend. The Company returned 126,057 shares of Aurora Metals common stock back to Aurora Metals for cancellation. The 13,000,000 shares of common stock of Aurora Metals represented the entire outstanding and issued common stock of Aurora Metals. As a result of the distribution of Aurora Metals shares to the shareholders of the Company, Aurora Metals is no longer a subsidiary of the Company. On March 9, 2001 Aurora Metals had 13,731,086 common shares outstanding and 857,143 share purchase warrants outstanding as a result of the Company returning 126,057 common shares of Aurora Metals back to Aurora Metals for cancellation and the issuance of 857,143 common shares to Billiton E&D 3 B.V., as a result of the private placement that closed on February 8, 2001. (C) EXPLORATION AND DEVELOPMENT The Company conducts exploration activities from its headquarters in Vancouver, Canada. The Company owns or controls unpatented mining claims, and mineral exploration concessions, in British Columbia and Yukon Territories, Canada; Guatemala, Tunisia, and the United States of America. The Company's strategy is to concentrate its investigations into: (i) Existing operations where an infrastructure already exists; (ii) Properties presently being developed and/or in advanced stages of exploration which have potential for additional discoveries; and (iii) Grass-roots exploration opportunities. 4 The Company is currently concentrating its exploration activities in Canada, Guatemala and Tunisia. The Company is also examining other exploration properties in Mexico, North Africa and the United States of America. Exploration expenses on the British Columbia Kumealon limestone prospect totalled $910 during fiscal 2000 (1999 - $2,286). Exploration expenses in the Yukon Territories, Canada totalled $113,400 during fiscal 2000 (1999 - $408,319). During the year the Company filed for a Yukon Mineral Exploration Tax Credit with respect to it's 1999 Yukon mineral expenditures and received a refund from the Government of Canada in the amount of $59,854.The Company also recovered $16,077 for goods and services taxes charged on 1999 Yukon exploration expenditures for total refunds of $75,931. During the year the Company compiled geochemical, geophysical and Yukon Minifile information in a computer-based Graphical Information System ("GIS"). With this data, the Company identified a large number of gold targets within the Yukon's Tintina Gold belt and, subsequently, staked a total of 120 claims. The Company's exploration work program in 2001 will entail surface mapping of geology, sampling of soils on a grid basis to delineate geochemical anomalies, stream sediment sampling and geophysical surveying. The data assembled from this work will be used to determine whether: (i) further exploration and diamond core drilling is warranted and if so the sites for initial holes; or (ii) whether certain claim blocks should be surrendered. Exploration expenses in Guatemala totalled $6,793 during fiscal 2000 (1999 - - $53,597). Exploration expenditures on the San Diego Reconnaissance Concession by Aurora's joint venture partner totalled $1,135 during fiscal 2000 (1999 - $23,117). The work consisted of sampling of outcrops, soils and stream sediments and mapping. The aim of the exploration work was to identify a number of areas for which more comprehensive work programs can be planned. The Company's exploration work program in 2001 will entail surface mapping of geology, sampling of soils on a grid basis to delineate geochemical anomalies, stream sediment sampling and geophysical surveying. The data assembled from this work will be used to determine whether: (i) further exploration is warranted; or (ii) whether certain mineral exploration concession licenses and mineral reconnaissance license should be surrendered. Exploration expenses in Tunisia totalled $156,356 during fiscal 2000 (1999 - - $93,362). In February 2000 the Company filed applications for ten (10) additional exploration permits (Koudiat Sidi Amor, Koudiat Ed Diss, Koudiat Hamra, Sidi Nasseur, Henchir El Goussat, Aine Djonane Ed Dar, Oued El Hariga, El Gourine, Sidi Ahmed Bou Lahia and Griane) for zinc-lead mineralization in the Kebbouch district of northern Tunisia. The permits were filed with and accepted by the Directeur G n ral L'Office National des Mines. The new permit areas are contiguous with the existing Hammala property and increase the area under Aurora's control to 42 square kilometers. Exploration work programs carried out during 2000 consisted of surface mapping of geology, sampling of soils on a grid basis to delineate geochemical anomalies, stream sediment sampling and geophysical surveying. The results of the fieldwork will assist in designing the 2001 work program. As a result of reconnaissance and technical investigations the Company decided to terminate five (5) (Hamman Zriba, Koudiat Sidii, Ouled Moussa, El Mohguer, Jebel Oum Edeboua) of the six (6) High Marsh Option Agreements. Aurora Metals' exploration work during 2001 will be carried out on the remaining Hammala exploration permit held under the High Marsh Option Agreement and the ten (10) Kebbouch District exploration permits, at an estimated cost of $475,000. The work will comprise surface mapping of geology, sampling of soils on a grid basis to delineate geochemical anomalies, stream sediment sampling, geophysical surveying, and inspection of old workings. The data assembled from this work will be used to determine whether: (i) further exploration and diamond core drilling is warranted and if so the sites for initial holes; or (ii) certain Exploration Permits should be surrendered. In addition, preliminary regional exploration work will be carried out at an estimated cost of $70,000. 5 Exploration expenses in the United States with respect to the Totem Talc property totalled $0 during fiscal 2000 (1999 - $39,783). In February 2000 the Company decided not to proceed with further exploration work on the property during the year. The Company has not complied with the expenditure requirements for 2000 or 1999 and did not make the required option payments on December 15, 2000 or 1999. All of the Company's properties are in the exploration stages only and are without a known body of Mineral Reserves. Development of the properties will follow only if satisfactory exploration results are obtained. Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. There is no assurance that the Company's mineral exploration and development activities will result in any discoveries of commercially viable bodies of mineralization. The long-term profitability of the Company's operations will be, in part, directly related to the cost and success of its exploration programs, which may be affected by a number of factors. (D) EMPLOYEES As of March 26, 2001 there were two full time employees and six part time employees. (E) REGULATION OF MINING ACTIVITY The Company's interests in its projects will be subject to various laws and regulations concerning exploration, production, taxes, labor standards, environmental protection, mine safety and other matters. In addition, new laws or regulations governing operations and activities could have a material adverse impact on the Company. (F) FOREIGN COUNTRIES AND REGULATORY REQUIREMENTS Mineral exploration, and mining activities on the Company's properties may be affected in varying degrees by political stability, and the policies of other nations. Any changes in regulations or shifts in political conditions are beyond the control of the Company and may adversely affect its business. Operations may be affected by government laws and regulations or the interpretations thereof, including those with respect to export controls, expropriation of property, employment, land use, water use, environmental legislation and mine safety. Operations may be also affected by political and economic instability, confiscatory taxation, restriction on currency conversions, imports and sources of supplies, the expropriation of private enterprises, economic or other sanctions imposed by other nations, terrorism, military repression, crime, and extreme fluctuations in currency exchange rates and high inflation and which may it more difficult for the Company to raise funds for the development of its mineral interests in some countries. (G) COMPETITION Many companies are engaged in the exploration of mineral properties. The Company encounters strong competition from other mining companies in connection with the acquisition of properties producing or capable of producing lead and zinc. Many of these companies have substantially greater technical and financial resources than the company and thus the Company may be at a disadvantage with respect to some of its competitors. 6 The marketing of minerals is affected by numerous factors, many of which are beyond the control of the Company. Such factors include the price of the mineral in the marketplace, imports of minerals from other nations, the availability of adequate refining and processing facilities, the price of fuel, electricity, labor, supplies and reagents and the market price of competitive minerals. In addition, sale prices for many commodities are determined by world market forces or are subject to rapid and significant fluctuations that may not necessarily be related to supply or demand or competitive conditions that in the past have affected such prices. Significant price movements in mineral prices over short periods of time may be affected by numerous factors beyond the control of the Company, including international economic and political trends, expectations of inflation, currency exchange fluctuations (specifically, the U.S. dollar relative to other currencies), interest rates and global or regional consumption patterns, speculative activities and increased production due to improved mining and production methods. The effect of these factors on the price of minerals and, therefore, the economic viability of any of the Company's projects cannot accurately be predicted. As the Company is in the exploration stage, the above factors have had no material impact on operations or income. (H) ENVIRONMENTAL REGULATIONS Environmental legislation in all countries is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. All phases of the Company's operations in Canada, Guatemala, Tunisia and the United States of America are subject to that country's environmental regulations. The regulations are comprehensive and cover water quality, discharge limits, hazardous wastes, agricultural land and vegetation. (I) MINING RISKS AND INSURANCE Mineral exploration involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Operations in which the Company has a direct or indirect interest will be subject to all type of hazards and risks or unexpected formations, cave-ins, pollution, all of which could result in work stoppages, damages to property, and possible environmental damages. The Company has general liability insurance covering its operations. Payment of any liabilities in excess of the Company's insurance coverage could have a materially adverse effect upon the Company's financial condition. ITEM 2. DESCRIPTION OF PROPERTY All of the Company's properties are in the preliminary exploration stage and do not contain any known body of ore. The Company's exploration activities are presently in Canada, Guatemala, Tunisia and the United States of America. (A) BRITISH COLUMBIA, CANADA -------------------------- In February 1999, the Company acquired, by staking, a high grade limestone property three (3) square kilometres (741 acres) located on the north shore of Kumealon Inlet, 54 kilometres south-southeast of Prince Rupert, B.C. Canada. This property is highlighted by consistence of purity and whiteness of the limestone zone outcropping along the southwest shore of Kumealon Lagoon. The zone is comprised mostly of white, recrystallized, fine to course grained limestone, striking 150 degrees and can be traced for at least 1200 meters. The zone is estimated to have an average stratigraphic thickness of 180 meters. Chip samples taken across the zone averaged 55.06% CaO, 2.11% insolubles and 43.51% ignition loss. The zone is estimated to contain 19 million tonnes of high-grade limestone over a strike length of 1200 meters, with an average width of 180 meters and an average height above water of 30 meters. The Company's plans for a complete geological investigation in connection with an extensive bedrock-sampling program have been deferred. 7 (B) YUKON TERRITORIES, CANADA --------------------------- During 2000, the Company acquired by staking, 100% interest in the following claims: Au 86-158 (a total of 73 new claims) which is an extension to the White River Project Area; and, Dan 125-144 (a total of 20 new claims), Dan 147-171 (a total of 25 new claims), Dan 172 Fraction Claims, and Dan 173 Fraction Claim which are an extension of the Independence Creek Project Area claims. These new claims were acquired to cover prospective areas and mineralized trends that extended beyond the previous claim block boundaries. Assessment filing for work carried out in 1999 was completed during 2000 and filed with the Yukon Mining recorder. Results of the fieldwork will provide the basis for future field programs at each of the project areas. No new fieldwork was carried out in 2000 on any of the claim blocks acquired in May and June 1999. CARLISLE CREEK PROPERTY: The property comprises 102 contiguous claims covering approximately 25 square kilometers, which were staked in June 1999. It is located in the Dawson Range, 200 kilometers northwest of the town of Carmacks and 125 kilometers south of Dawson City. The property was staked because of anomalous gold, arsenic, antimony and tungsten levels in stream sediment samples identified from the GIS and a similar geological setting to the Pogo deposit, owned by Sumitomo Metal Mining Arizona, Inc., SC Minerals Inc., and Teck Resources, Inc., located in east-central Alaska, approximately 145 kilometers southeast of Fairbanks. INDEPENDENCE CREEK PROPERTY: The property comprises 244 claims, in two blocks, covering approximately 60 square kilometers, which were staked in June 1999. It is located in close proximity to the east of the Carlisle Creek property. The property was selected because of anomalous gold, arsenic, antimony and tungsten levels in stream sediment samples identified from the GIS, and as with the Carlisle Creek property, similar geological setting to the Pogo deposit. LIVINGSTONE NORTH: The property comprises 479 claims, in two blocks, covering approximately 120 square kilometers, which were staked in July 1999. It is located in the Big Salmon Range, 100 kilometers north-northeast of the city of Whitehorse. The property was selected because of strongly anomalous gold, arsenic, antimony and tungsten levels in stream sediment samples identified from the GIS. Additional factors leading to selection of the property were the geological similarities to the area north of Fairbanks, Alaska, and occurrence of placer gold and bismuth minerals in quartz vein material at Livingstone Creek. SONORA WEST: The property comprises 116 contiguous claims, covering approximately 29 square kilometers, which were staked in June 1999. It is located in the Dawson Range, 115 kilometers northwest of the town of Carmacks. The property was selected to cover geophysical anomalies, suggestive of hydrothermal alteration, in an area drained by streams from which weakly anomalous values of gold, arsenic and antimony were detected in stream sediment samples identified from the GIS. WHITE RIVER: The property comprises 114 claims, in three blocks, covering approximately 29 square kilometers, which were staked in June 1999. It is located in the Dawson Range, 235 kilometers northwest of the town of Carmacks and 125 kilometers south of Dawson City. The property was selected because of anomalous values of gold, arsenic and antimony detected in stream sediment samples identified from the GIS. There are also similarities in the geological setting to that of the Pogo deposit. (C) GUATEMALA, CENTRAL AMERICA ---------------------------- In Guatemala, the Company's rights are working interests in mineral exploration concession licenses and a mineral reconnaissance license. The mineral exploration concession license confers on the titleholder the exclusive right to locate, study, analyze and evaluate the deposits that have been granted, within the licenses' territorial limits and to unlimited depth in the subsoil. The mineral reconnaissance license confers to the titleholder the exclusive rights to identify and locate possible areas for exploration, within the license's territorial limits and to unlimited depth in the subsoil. 8 All the Company's concessions are located within the South Volcanic Belt in Guatemala, which is considered to be the geological setting with the greatest mineral potential in the country. The Volcanic Province is represented by a Quaternary chain of active volcanoes to the south and Tertiary igneous rocks to the north. In the Tertiary area, ignimbrites and rhyolites crop out, as well as acidic tuffs and several intrusives. Gold-silver deposits are expected to be found in granites and in quartz veins within the tuffs. The epithermal type of precious and basic metallic deposits and the presence of lithofilic elements are associated with the geology of this area. In the eastern part of the volcanic province, the most common mineralogy is pyrite and arsenopyrite with chalcopyrite, covelite and native gold as associated minerals, and it is related to epithermal processes associated with intrusive igneous bodies. Important deposits of copper-lead-zinc-silver, gold-silver and lead-zinc mineralization occur in veins located in fractures within Tertiary volcanic rocks, typical features of epithermal deposits filling fissures that originated from tensional stresses. The mineralization consists mainly of zinc sulfides, lead-silver and copper with calcite and quartz as gangue minerals. Other deposits of economic importance are formed by a series of iron oxide bodies. It is important to note that most of this province has not yet been explored and evaluated, but it is one of the more important zones of interest due to its favorable geological environment for mineralization. The Company has a portfolio of five (5) mineral exploration concession licenses, namely: Aguas Calientes, Apantes, La Esperanza, El Jicaro and Valenton 1 and one (1) mineral reconnaissance license, San Diego which was granted in September 1999. In October 1999 the Company entered into a joint venture agreement with Patagonia Gold Corporation ("Patagonia") to carry out preliminary exploration within the San Diego license area. Under the terms of the joint venture Patagonia can earn a fifty percent (50%) interest in the San Diego mineral reconnaissance licence upon (a) payment of $9,250 (paid) Guatemala government fee for the acquisition of the San Diego mineral exploration reconnaissance licence and (b) the payment of $18,617 (paid) for a Phase 1 exploration program. AGUAS CALIENTES - MINERAL EXPLORATION CONCESSION LICENSE: The Aguas Calientes mineral exploration concession is located in the department of Sacatepequez in western Guatemala, some 30 kilometers southwest of Guatemala City. It covers an area of 99 square kilometers. Mining was carried out in the Spanish colonial period in a U-shaped, volcanic caldera in which the villages of San Antonio, Santa Catarina, Santiago and San Miguel are located. Investigation into old workings and a reconnaissance sampling program are planned during 2000. APANTES - MINERAL EXPLORATION CONCESSION LICENSE: The Apantes mineral exploration concession is located in the Jutiapa and Jalapa departments of eastern Guatemala 130 kilometers east of Guatemala City. It covers an area of 88 square kilometers. The area is located within tertiary volcanic rocks in contact with several pockets of redbeds. The reconnaissance program conducted in 1999 showed anomalous gold and silver values in quatz-sericite-pyrite alteration in basic volcanic rocks on the southeastern part of the concession. Further sampling and mapping of this area is required. The Company is considering an offer to sell the Apantes concession to reduce work commitments and concentrate on the other concessions. EL JICARO - MINERAL EXPLORATION CONCESSION LICENSE: The El Jicaro mineral exploration concession is located in the El Progreso department of eastern Guatemala, some 80 kilometers east of Guatemala City. It covers an area of 90 square kilometers. The geology of the region is characterized by the presence of several rock types, including intrusives, tertiary rhyolites and redbeds of the Cretaceous age and is marked by the presence of the Motagua Fault, the largest east-west structure in Guatemala. The reconnaissance program carried out in 1999 identified anomalous gold values in partly metamorphosed rocks (serpentinite) and stream sediments in the southern part of the concession. Further sampling and mapping of this area is planned during 2000. VALENTON 1 - MINERAL EXPLORATION CONCESSION LICENSE: The Valenton 1 mineral exploration concession is located in the Guatemala and Baja Verapaz departments in central Guatemala, 20 kilometers north of Guatemala City. It 9 covers an area of 25 square kilometers. The mineral exploration concession is located within metamorphic rocks (serpentinite) extremely close to the Montagua Fault system in a zone of great geological complexity, which may control mineralization. Alluvial gold has been retrieved from sand bars in the Motagua River since Spanish colonial times. The reconnaissance program conducted in 1999 concentrated on sampling of sediments of streams draining into the Motagua River. Anomalous values in gold were obtained and further fieldwork, including sampling and mapping is planned. LA ESPERANZA -MINERAL EXPLORATION CONCESSION LICENSE: The La Esperanza mineral exploration concession is located in the Zacapa department in eastern Guatemala some 115 kilometers east of Guatemala City. It covers an area of 40 square kilometers. The vein system within metamorphic rocks consists of a set of at least sixteen white-clear, quartz veins, varying from 0.3 to 9.0 meters in width, oriented between N60o W and N30o W, outcropping in some cases for up to 500 meters. The quartz veins contain sulfides in the form of galena, chalcopyrite, pyrite, native copper and some copper oxides. A program of trenching and chip sampling showed anomalous gold and silver values with defined spatial distribution in the central area of the vein system. Additional trenching and sampling is warranted, followed by drilling below the high-grade sections to determine whether, or not, grades increase and the veins are continuous, with depth. SAN DIEGO - MINERAL RECONNAISSANCE LICENSE: San Diego is a mineral reconnaissance concession located in the Zacapa and Chiquimula departments in eastern Guatemala, some 150 kilometers east of Guatemala City. As a mineral reconnaissance concession, it covers a larger area than a mineral exploration concession, specifically 800 square kilometers. The main feature of the mineral reconnaissance concession is the fact that it completely surrounds the El Pato gold and silver mineral reserve, an exploration project funded by the United Nations which identified a Mineral Resource estimated to contain some 200,000 ounces of gold. Geologically, because of its size this mineral reconnaissance concession contains several geological settings. Most important is the presence of the Motagua Fault to the North and the Chiguimula Pluton (intrusive) on the eastern half of the concession. During the first quarter of 2000 the Company completed the sampling of outcrops, soils and stream sediments and mapping, commenced in November of 1999. The aim of the preliminary exploration work was to identify a number of highly prospective areas for which applications for mineral exploration licenses will be made, and subsequently undertake more comprehensive work. Exploration work on the Guatemala properties during 2001 will include geological mapping and extension of soil and rock sampling. (D) TUNISIA, NORTH AFRICA ----------------------- Hammala and Kebbouch District Exploration Permits The Company's Hammala Exploration Permit, which is held under an Option Agreement with High Marsh Holdings Limited, and ten Exploration Permits (Koudiat Sidi Amor, Koudiat Ed Diss, Koudiat Hamra, Sidi Nasseur, Henchir El Goussat, Aine Djonane Ed Dar, Oued El Hariga, El Gourine, Sidi Ahmed Bou Lahia and Griane), which are held directly from the Government, located in the Kebbouch District are located in the "Zone des Domes", a southwest - northeast striking belt of Triassic salt domes and diapirs intruded into Cretaceous carbonates. The zone is the central part of the Atlas fold belt in Tunisia, and is approximately 250 kilometers long by 80 kilometers wide. Most of the past zinc producers and the three currently producing mines are located in the Zone des Domes. The Exploration Permits, in general, are square with sides of two (2) kilometers and oriented north-south/east west in accordance with the Tunisian Mining Law. Those held by the Company in the Kebbouch District are: HAMMALA: The Exploration Permit comprises four (4) square kilometers in the western Kebbouch District located between the town of Le Krib and the city of Le Kef, approximately 150 kilometers by road, southwest of Tunis. The Exploration Permit covers a portion of the western side of a crescent-shaped Triassic diapir, known as Jebel Kebbouch, where Cenomanian-Turonian rocks, including the Bahloul Formation, are common. The Hammala Exploration Permit was previously explored by the Office National des Mine ("ONM"), the Tunisian government entity responsible, until recently, for exploration and evaluation of minerals within the country. Overall, the target is stratiform mineralization within the Bahloul 10 Formation and associated stockwork mineralization. KOUDIAT SIDI AMOR: The Exploration Permit comprises four (4) square kilometers, adjoins Hammala to the south and covers the extreme southwestern portion of the Jebel Kebbouch Diapir. It contains two historical lead-zinc mining prospects, Hammala and Majembia Nord. Both deposits were explored in the early 1900s and, up to 1946 about 4,000 tonnes of zinc and 1,000 tonnes of galena had been produced from Majembia, but are considered to be of greater current significance because some of this mineralization has characteristics of synsedimentary origin. Further, the permit covers the area in which extensions of the known mineralization might reasonably be found. KOUDIAT ED DISS: The Exploration Permit adjoins the eastern boundary of Koudiat Sidi Amor and is an L-shaped area of 2.14 square kilometers, around the northern and western boundaries of the Kebbouch Sud Exploration Permit held by Breakwater Tunisia, S.A. It covers a portion of the southern end of the Jebel Kebbouch Diapir and contains the Majembia Sud lead-zinc showing and possible extension to the Majembia Sud occurrence. KOUDIAT HAMRA: Koudiat Hamra is four (4) square kilometers in area and abuts the eastern boundary of Hammala. The Jebel Kebbouch Diapir extends over approximately the northern 60% of the Exploration Permit, largely underlain by Triassic-aged diapiric sediments but also includes the central portion of the eastern contact of the diapir. It is reasonable to expect that mineralization may be found here similar to that found within the adjacent Hammala Exploration Permit which covers the western contact of the diapir. SIDI NASSEUR: Sidi Nasseur is four (4) square kilometers in area, adjoining the eastern boundary of Koudiat Hamra. This Exploration Permit contains a portion of the northeastern margin of the Jebel Kebbouch Diapir. The exploration target is a zinc prospect, which may be related to the Kebbouch Nord occurrences on strike to the northeast, or to crosscutting structures that appear on the southeast as well as the southwest sides of the diapir. HENCHIR EL GOUSSAT: The Exploration Permit adjoins the northern boundary of Hammala and is four (4) square kilometers in area. Down-dip extensions of mineralization on the Hammala Exploration Permit may extend across the boundary. AINE DJONANE ED DAR: Aine Djonane Ed Dar abuts the eastern boundary of Henchir El Goussat and the northern boundary of Koudiat Hamra, and is four (2) kilometers in area. The Jebel Kebbouch Diapir exists in the southeastern quadrant with Bahloul Formation on the northern flank. The Exploration Permit is underlain in part by discontinuous exposures of the Cenomanian-Turonian stratigraphy that is host to synsedimentary mineralization in this area. These rocks can also be presumed to be present along this trend within the permit in the areas in which they are not exposed. This belt of rocks is on strike with the Ain el Morra lead-zinc zone in the Hammala Exploration Permit to the southwest, and this mineralization may extend into this permit. OUED EL HARIGA: The Exploration Permit is of four (4) square kilometers in area, and adjoins the eastern boundary of Aine Djonane Ed Dar and the northern boundary of Sidi Nasseur. The Jebel Kebbouch Diapir cuts diagonally across to the northeast with the Bahloul Formation on the northern flank. Mineralization was discovered here in 1900 and minor intermittent exploration and production was carried out until 1944. These showings occur over a strike length of about two kilometers along the northeast side of the diapir in rocks that overlie the Cenomanian-Turonian, which may be indicative of bedded mineralization at depth. EL GOURINE: El Gourine is of four (4) square kilometers and adjoins the eastern boundary of Oued el Hariga and covers the northeastern extremity of the Jebel Kebbouch Diapir. It was acquired to cover any potential mineralization that may exist down-dip from the Kebbouch Nord occurrences. SIDI AHMED BOU LAHIA: The Exploration Permit adjoins the northern boundary of Oued el Hariga and is four (4) square kilometers in area. While covered by surficial materials it was acquired to cover the probable extension of the favorable Cenomanian-Turonian stratigraphy that exists to the southwest in the Oued el Hariga Permit. In addition, mineralization present in the Kebbouch Nord zone may extend into the southwestern corner. GRIANE: Griane is four (4) square kilometers in area, and abuts the eastern boundary of Sidi Ahmed Bou Lahia and the northern boundary of El Gourine. It was acquired for the same reasons as the Sidi Ahmed Bou Lahia Permit: that both the stratigraphy and contained mineralization of the Kebbouch Nord zone may extend into the southwestern corner. 11 Aurora Metals intends to file applications for additional exploration permits for zinc-lead mineralization in Tunisia with the Directeur G n ral L' Office National des Mines during 2001. Aurora Metals commenced exploration work on the properties in March 2001 with geological mapping, and extension of soil and rock sampling to better define the extent of anomalous zinc geochemistry, thus enabling selection of initial drilling targets. It is intended to commence diamond drilling within the next two to three months. (E) UNITED STATES OF AMERICA: The Totem Talc property is located near Metalline Falls, Pend Oreille County, Washington, approximately 100 miles north of Spokane. The Totem Talc property consists of ten unpatented lode claims, covering approximately 206 acres, and is held under option by the Company in an Agreement with the joint venture owners, United Catalysts Inc. and Getchell Gold Corporation. The Company engaged an international firm of consultants to re-estimate the Mineral Resources (not "Reserves") of the talc deposit and provide an overview for further development of the project. The total Mineral Resources, categorized as Combined Indicated and Inferred, were re-estimated as 2.22 million tons at a grade of 45.9% talc above a cut-off grade of 20% talc. Included in the total are Mineral Resources for two high-grade areas, the Southwestern and Northeastern Areas, which are estimated to contain 861,000 tons at a grade of 60.2% talc above a cutoff grade of 50% talc. The mineralization in the Southwestern and Northeastern Areas is in the three most prominent and adjacent zones, and is amenable to extraction by open pit mining with low stripping ratios. The revised estimate of Mineral Resources represent increases of 71% in tonnage, and 2.27% in talc grade, above those previously reported by the Company as provided by the Joint Venture owners. The increases are mainly attributable to modifications in the geological interpretations with extensions both vertically and horizontally, and the fact that the previously reported Mineral Resources were confined by a preliminary open pit design. The Company decided not to proceed with further exploration work on the Totem Talc property during the year. The company has not complied with the expenditure requirements for 2000 and 1999 and did not make the required option payments on December 15, 2000 and 1999. ITEM 3. LEGAL PROCEEDINGS The company is not party to any litigation, and has no knowledge of any pending or threatened litigation against it. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None PART 11 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. (a) The Common Stock of the Company has been quoted on the NASD OTC Bulletin Board since December 5, 1996. The following table sets forth the high and low bid prices for the Common Stock for the calendar quarters indicated as reported by the NASD OTC Bulletin Board for the last two years. These prices represent quotations between dealers without adjustment for retail markup, markdown or commission and may not represent actual transactions. 12
First Quarter Second Quarter Third Quarter Fourth Quarter -------------- --------------- -------------- --------------- 2000 - High $ 0.750 $ 0.750 $ 0.500 $ 0.375 - ----------- -------------- --------------- -------------- --------------- 2000 - Low $ 0.250 $ 0.141 $ 0.250 $ 0.094 - ----------- -------------- --------------- -------------- --------------- 1999 - High $ 0.843 $ 0.875 $ 0.875 $ 0.700 - ----------- -------------- --------------- -------------- --------------- 1999 - Low 0.625 0.593 0.593 0.437 - ----------- -------------- --------------- -------------- ---------------
(b) As of March 8, 2001, there were 761 holders of record of the Common Stock. (c) On May 19, 2000 the Board of Directors of the Company approved and authorized a stock dividend, on a one to one basis, of the 13,000,000 common shares of Aurora Metals then owned by the Company, payable to the stockholders of the Company. The 13,000,000 shares of common stock then represented the entire outstanding and issued common stock of Aurora Metals. The stock dividend would be payable to the Company's stockholders of record as of the close of business on June 15, 2000. On June 15, 2000 the Company had 12,873,943 shares issued and outstanding. Of the total outstanding 13,000,000 common shares of Aurora Metals held by the Company, 126,057 common shares will not be distributed to the stockholders of the Company as a dividend. The Company will return those 126,057 common shares of Aurora Metals back to Aurora Metals to be cancelled. The stock dividend was paid on March 9, 2001. There were no Common Stock cash dividends paid in 2000, 1999, 1998 or 1997. The amount and frequency of cash dividends are significantly influenced by metal prices, operating results and the Company's cash requirements. The Registrant has issued securities in the manner set forth below without registration under the Securities Act of 1933, as amended (the "Act") Between January 1 and December 31, 2000. In February 2000 amounts owing to a director of $35,000 were settled with the issuance of 70,000 common shares. In March 2000 350,000 common shares were issued. The common shares were subscribed for at a price of $0.50 per common share in September 1999 for aggregate consideration of $175,000. In March 2000 550,000 common shares were issued. The common shares were subscribed for at a price of $0.455 per common share in December 1999 for aggregate consideration of $250,000. In April 2000 a finder's fee of $20,000 was settled with the issuance of 40,000 common shares. In April 2000 a finder's fee of $40,000 was settled with the issuance of 80,000 common shares. In April 2000 90,706 common shares were cancelled. The shares were issued in August of 1999 to settle $56,691 in accounts payable. The accounts payable of $56,691 were reaccrued. In May 2000 accounts payable of $4,500 were settled with the issuance of 9,000 common shares. In June 2000 405,0000 common shares were issued for aggregate cash consideration of $4,050 upon the exercise of 405,000 common share stock options. 13 All the above shares are "restricted securities," as that term is defined in the rules and regulations promulgated under the Securities Act of 1933, as amended, subject to certain restrictions regarding resale. Certificates evidencing all of the above-referenced securities have been stamped with a restrictive legend and will be subject to stop transfer orders. The Registrant believes that each of the above-referenced transaction was exempt from registration under the Act, pursuant to Section 4(2) of the Act and the rules and regulations promulgated thereunder as a transaction by an issuer not involving any public offering. ITEM 6. MANAGEMENT'S' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (A) GENERAL The Company is a mineral exploration company based in Vancouver, Canada engaged in the exploration of base, precious metals and industrial minerals worldwide. The Company was incorporated under the laws of the State of Delaware on October 10, 1995, under the name "Chefs Acquisition Corp.". The Company conducts exploration activities from it headquarters in Vancouver, Canada. The Company owns or controls unpatented mining claims, and mineral exploration concessions, in British Columbia and Yukon Territories, Canada; Guatemala; Tunisia and the United States of America. The Company's strategy is to concentrate its investigations into: (i) Existing operations where an infrastructure already exists; (ii) Properties presently being developed and/or in advanced stages of exploration which have potential for additional discoveries; and (iii) Grass-roots exploration opportunities. The Company is currently concentrating its exploration activities in Canada, Guatemala, Morocco, Tunisia and the United States of America. The Company is also examining other exploration properties in Mexico and North Africa. All of the Company's properties are in the preliminary exploration stage without any presently known Mineral Reserves. The Company had no revenues during fiscal 2000, 1999 and 1998. Income during fiscal 2000, 1999 and 1998 was the result of interest earned on funds raised, as the Company has no mineral properties in production. Funds raised in fiscal 2000, 1999 and 1998 were used for exploration of the Company's properties and general administration. During the next 12 months the Company needs to raise additional funds through equity offerings and/or debt borrowing to meet its administrative/general operating expenses, to conduct work on its exploration properties, to meet its obligations under the Tunisian and the Totem Talc agreements. The Company intends to move forward in the current low gold price environment by selectively developing its existing assets and to further develop the Company through the possible acquisition or joint venturing of additional mineral properties either in the exploration or development stage. Additional employees will be hired on a consulting basis as required by the exploration projects. (B) FINANCING In fiscal 2000 the Company issued 1,504,000 common shares for an aggregate consideration of $528,550 and cancelled 90,706 common shares with an aggregate consideration of $56,691. The following is a breakdown of the common shares issued in fiscal 2000. The Company issued 900,000 common shares during the first quarter of fiscal 2000. The 900,000 common shares had been subscribed in fiscal 1999 for $425,000. The Company issued 405,0000 common shares for aggregate cash consideration of $4,050 upon the exercise of 405,000 common share stock options. The Company settled $99,500 of debt with the issuance of 199,000 common shares at a price of $0.50 per common share. The Company cancelled 90,706 common shares with an aggregate consideration of $56,691. 14 In fiscal 1999 the Company issued 279,157 common shares and received advances on 900,000 common shares for an aggregate consideration of $620,694. The following is a breakdown of the common shares issued and subscribed. The Company issued 22,871 common shares for aggregate cash consideration of $15,000 and received $425,000 on the subscription of 900,000 shares. The 900,000 common shares were issued during the first quarter of 2000. The Company settled $160,382 of debt with the issuance of 231,286 common shares at prices ranging from $0.62 to $0.84 per common share. The Company also issued 25,000 common shares at a price of $0.81 per common share for aggregate consideration of $20,312 in payment of a finder's fee. In Fiscal 1998, the Company raised $411,250 through the issuance of 415,000 common shares at prices ranging $0.75 to $1.25 per share. (C) FINANCIAL INFORMATION (a) Twelve Months Ended December 31, 2000 (Fiscal 2000) versus Twelve Months Ended December 31, 1999 (Fiscal 1999) For the year ended December 31, 2000 the Company recorded a loss of $677,705, or $0.06 per share, compared to a loss of $855,391 ($0.08 per share) in 1999 and a loss of $1,151,604 ($0.11 per share) in 1998. General and administrative expenses - For the year ended December 31, 2000 the Company recorded general and administrative expenses of $217,838, compared to $169,093 in 1999. The 2000 amount of $217,838 includes travel expense and project research and development of $129,000 (1999 - $64,000), professional fees - accounting $14,964 (1999 - $19,171) and legal $-3,272 (1999 - $13,713). Exploration expenditures - For the year ended December 31, 2000 the Company recorded exploration expenses of $265,410, compared to $686,968 in 1999. The following is a breakdown of the exploration expenses by property: - Canada, Kumealon property $910 (December 31, 1999 - $2,286); Canada - Yukon properties $35,799 (December 31, 1999 - $408,319); Guatemala $6,793 (December 31, 1999 - $53,597); Tunisia $156,356 (December 31, 1999 - $93,362); United States, Totem Talc property $0 (December 31, 1999 - $39,783); and Project assessment and exploration expenditures of $65,552 (December 31, 1999 - $90,621). Amortization expenditures - For the year ended December 31, 2000 the Company recorded depreciation and amortization costs of $4,592, compared to $4,607 in 1999. The Company initially capitalized all costs directly incurred in its formation. To comply with the American Institute of Certified Public Accounts Statement of Position 98-5 "Reporting on Costs of Start-Up Activities", the remaining balance was written off to depreciation expense during 1999. (b) Twelve Months Ended December 31, 1999 (Fiscal 1999) versus Twelve Months Ended December 31, 1998 (Fiscal 1998) For the year ended December 31, 1999 the Company recorded a loss of $855,391, or $0.08 per share, compared to a loss of $1,151,604 ($0.11 per share) in 1998. General and administrative expenses - For the year ended December 31, 1999 the Company recorded general and administrative expenses of $169,092, compared to $764,266 in 1998. The 1998 amount of $764,266 includes stock option compensation expense of $508,273 (1999 - $0). Administrative cost savings in 1999 reflect the increased sharing of costs with six other junior resource companies. 15 Exploration expenditures - For the year ended December 31, 1999 the Company recorded exploration expenses of $686,968, compared to $390,203 in 1998. The following is a breakdown of the exploration expenses by property: - Canada, Kumealon property $2,286 (December 31, 1998 - $0); Canada - Yukon properties $407,319 (December 31, 1998 - $0); Guatemala $53,597 (December 31, 1998 - $148,744); Tunisia $93,362 (December 31, 1998 - $0); United States, Totem Talc property $39,783 (December 31, 1998 - $11,418); and Project assessment and exploration expenditures of $90,621, which amount includes stock option compensation expense of $29,500 (December 31, 1998 - $230,041, which amount includes stock option compensation expense of $182,727). Amortization expenditures - For the year ended December 31, 1999 the Company recorded depreciation and amortization costs of $4,607, compared to $6,515 in 1998. The Company initially capitalized all costs directly incurred in its formation. To comply with the American Institute of Certified Public Accounts Statement of Position 98-5 "Reporting on Costs of Start-Up Activities", the remaining balance was written off to depreciation expense during 1999. (D) FINANCIAL CONDITION AND LIQUIDITY At December 31, 2000, the Company had cash of $1,686 (1999 - $2,109) and working capital deficiency of $403,742 (1999 working capital - $211,974) respectively. Total liabilities as of December 31, 2000 were $632,505 as compared to $214,083 on December 31, 1999, an increase of $418,422. During 2000 financing activities consisted of the following, net proceeds from the issuance and subscription of common stock of $4,050 (December 31, 1999 - $440,000). In Fiscal 2000 investing activities consisted of additions to mineral properties $0 (1999 - $59,130) and additions to fixed assets $30,583 (1999 - $0). For the year ended December 31, 2000 the Company recorded a loss of $677,705, or $0.06 per share, compared to a loss of $855,391 ($0.08 per share) in 1999 and a loss of $1,151,604 ($0.11 per share) in 1998. The Company does not have sufficient working capital to (i) pay its administrative and general operating expenses through December 31, 2000 and (ii) to conduct its preliminary exploration programs. Without cash flow from operations, it may need to obtain additional funds (presumably through equity offerings and/or debt borrowing) in order, if warranted, to implement additional exploration programs on its properties. Failure to obtain such additional financing may result in a reduction of the Company's interest in certain properties or an actual foreclosure of its interest. The Company has no agreements or understandings with any person as to such additional financing. None of the Company's properties has commenced commercial production and the Company has no history of earnings or cash flow from its operations. While the Company may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of its properties, there is no assurance that any such activity will generate funds that will be available for operations. There were no Common Stock cash dividends paid in 2000, 1999, 1998 or 1997. The amount and frequency of cash dividends are significantly influenced by metal prices, operating results and the Company's cash requirements (See Plans For Year 2001 for description of stock dividend paid on March 9, 2001). 16 PLANS FOR YEAR 2001 General On May 19, 2000 the Board of Directors of the Company approved and authorized a stock dividend, on a one to one basis, of the 13,000,000 common shares of Aurora Metals then owned by the Company, payable to the stockholders of the Company. The 13,000,000 shares of common stock of Aurora Metals then represented the entire outstanding and issued common stock of Aurora Metals. The stock dividend would be payable to the Company's stockholders of record as of the close of business on June 15, 2000. On June 15, 2000 the Company had 12,873,943 shares issued and outstanding. Of the total outstanding 13,000,000 common shares of Aurora Metals held by the Company, 126,057 common shares will not be distributed to the stockholders of the Company as a dividend. The Company will return those 126,057 common shares of Aurora Metals back to Aurora Metals to be cancelled. The stock dividend was paid on March 9, 2001. (E) YEAR 2000 ISSUES. The "Year 2000 problem", passed without incident at any of the Company's properties. The Year 2000 (YK2) issue is the result of computerized systems using two digits rather than four digits to identify an applicable year. Date-sensitive systems may recognize a date using "00" as the year 1900 rather that the year 2000. This could result in a system failure or miscalculation causing disruption to business operations. In 1999, the Company completed a review of its computer-based information systems and, where needed, Y2K compliant upgrades for the Company's core financial systems were installed and tested. To date, no Y2K problems have been encountered by the Company or the Company's vendors or others with whom it transacts business and none are expected. The Company's management and operations staff again monitored critical operations during the December 31, 2000 - January 1, 2001 Y2K rollover dates and no Y2K problems were encountered. (F) NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 133 requires companies to recognize all derivative contracts as either assets or liabilities on the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition (i) the changes in the fair value of the hedged asset or the liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Historically, the Company has not entered into derivatives contracts either to hedge existing risks or for speculative purposes. Accordingly, the Company does not expect adoption of the new standards on January 1, 2001 to affect its financial statements. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-up Activities", ("SOP 98-5") which provides guidance on the financial reporting of start-up costs and organization costs. It requires costs of start-activities and organization costs to be expensed as incurred. SOP 98-5 is effective for fiscal years beginning after December 15, 1998 with initial adoption reported as the cumulative effect of a change in accounting principle. The Company initially capitalized all costs directly incurred in its formation. To comply with the American Institute of Certified Public Accountants Statement of Position 98-5 "Reporting on Costs of Start-Up Activities", the remaining balance was written off to depreciation expense during 1999. 17 ITEM 7. FINANCIAL STATEMENTS See ITEM 13 of this Report for information with respect to the financial statements filed as a part hereof, including financial statements filed pursuant to the requirements of this ITEM 7. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS None PART 111. ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: The following table lists the names and positions of the executive officers and directors of the Company as of December 31, 2000 and March 31, 2001. All executive officers and directors have been elected and appointed to serve until their successors are elected and qualified. Additional information regarding the business experience, length of time served in each capacity and other matters relevant to each individual are set forth below the table.
Name Position - ---------------------- ----------------------------------------------------------- David E. Jenkins Age 47, Founder, President and Director since October 1995. Director of Aurora Metals (BVI) Limited since May 2000. President and Director of Patagonia Gold Corporation since 1997. Director of Eurasia Gold Fields, Inc. since 1997. John A. A. James Age 62, Vice President and Director since October 1996. President and Director of Aurora Metals (BVI) Limited since May 2000. President of JAMine Inc. (formerly James Askew Associates, Inc.) since 1988. President and Director of Mirage Resource Corporation from 1994 to 1997. Antonino G. Cacace Age 55, Director since October 1995. Director of Patagonia Gold Corporation since June 1997. Engineer, Founder and current Managing Director of Stelax Industries in the United Kingdom. Between 1984 and 1995 he was manaing director/chief executive officer of several Companies involved in development and operation of steel/bar rolling mills. Scott Broughton P.Eng. Age 40, Engineer, Vice President since May 1999. Vice President of Aurora Metals (BVI) Limited since May 2000. Engineering consultant with BGC Engineering Inc., which is a private company. President of Barramundi Gold Ltd. 1995 to 1999. A. Cameron Richardson Age 48, Controller since October 1997, & Secretary since April 1998. 1981 to 1997 held accounting positions with Various Canadian resource companies. - ---------------------- -----------------------------------------------------------
There are no family relationships between any of the executive officers. 18 COMPLIANCE WITH SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE, OF THE EXCHANGE ACT OF 1934 Section 16 (a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange commission (the "SEC"). Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16 (a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, the Company believes that during the fiscal year ended December 31, 1999 all filings requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with. ITEM 10. EXECUTIVE COMPENSATION (A) General The following table sets forth information concerning the compensation of the named executive officers for each of the registrant's last three completed fiscal year:
Annual Compensation Long-Term Compensation --------------------------------- -------------------------------------------- Awards Payments ------------------------ ------------------ Securities Under- All Other Annual Restricted Lying other Name And Compen Stock Options/ LTIP Compen- Principal Position Year Salary Bonuses Sation Award(s) SARs Payouts sation ($) ($) ($) ($) (=) ($) ($) (a) (b) (c) (d) (e) (f) (g) (h) (i) - ------------------- ----- -------- -------- ------------- ----------- ----------- -------- -------- David Jenkins 2000 60,000 -0- -0- None None None -0- President and 1999 60,000 -0- -0- None None None -0- Director 1998 60,000 -0- -0- None None None -0- - ------------------- ----- -------- -------- ------------- ----------- ----------- -------- -------- John A. A. James 2000 154,950 -0- -0- None None None -0- Vice President and 1999 111,890 -0- -0- None None None -0- Director 1998 -0- -0- -0- None None None -0- - ------------------- ----- -------- -------- ------------- ----------- ----------- -------- -------- Scott Broughton 2000 -0- -0- -0- None None None -0- Vice President 1999 26,972 -0- -0- None None None -0- 1998 -0- -0- -0- None None None -0- - ------------------- ----- -------- -------- ------------- ----------- ----------- -------- -------- Cameron Richardson 2000 6,744 -0- -0- None None None -0- Controller and 1999 7,059 -0- -0- None None None -0- Secretary 1998 9,946 -0- -0- None None None -0- - ------------------- ----- -------- -------- ------------- ----------- ----------- -------- --------
Effective January 1, 1998, none of the Company's officers or directors were party to an employment agreement with the Company. Prior to January 1, 1998 Mr. Jenkins had been party to a written agreement. Mr. Jenkins, in his capacity as president of the Company, receives a monthly salary of $5,000. Directors and/or officers receive expense reimbursement for expenses reasonably incurred on behalf of the Company. During the fiscal year ending December 31, 2000 the entire board of directors acted as the Company's compensation committee. 19 (B) Options/SAR Grants Table The following table sets forth information concerning individual grants of stock options (whether or not in tandem with stock appreciation rights ("SARs") and freestanding SARs made during the last completed fiscal year to each of the named executive officers;
OPTION/SAR GRANTS IN 1997, 1998, 1999 and 2000 FISCAL YEAR (Individual Grants) ============================================================================================= Percent Of Number of Total Options/ Securities SARs Granted Underlying To Employees Exercise Or Option/SARs In Fiscal Base Price Expiration Date Name Granted (#) Year ($/Sh) (M/D/Y) (a) (b) (c) (d) (e) - ----------------------------- ------------ --------------- ------------- ---------------- David Jenkins (1) (2) (3) (4) None 0% $0 John James (1) (2) (3) (4) None 0% $0 Scott Broughton (1) (5) None 0% $0 Cameron Richardson (1) (3) None 0% $0 (1) No options were awarded in 2000. (2) Options granted to David Jenkins (200,000) and John James (100,000) on June 26, 1998 at $0.01 per share, expiring June 26, 2003, were exercised during the year. (3) Options granted to David Jenkins (200,000), John James (50,000) and Cameron Richardson (25,000) on September 9, 1998 at $0.75 per share, expiring September 9, 2003 were cancelled in June 2000. (4) Options granted to David Jenkins (100,000), John James (50,000) on December 11, 1998 at $0.75 per share, expiring December 11, 2003 were cancelled in June 2000. (5) Options granted to Scott Broughton (150,000) on August 5, 1999 at $0.69 per share, expiring August 5, 2004 were cancelled in June 2000.
(C) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table The following table sets forth information concerning each exercise of stock options (or tandem SARs) and freestanding SARs during the last completed fiscal year by each of the named executive officers and the fiscal year-end value of unexercised options and SARs, on an aggregated basis: 20
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES ================================================================================ Number of Securities Value Of Underlying Unexercised Unexercised In-The-Money Shares Options/SARs Options/SARs Acquired Value At FY-End ($) At FY-End ($0.218) On Exercise Realized Exercisable/ Exercisable/ Name (#) ($) Unexercisable Unexercisable (a) (b) (c) (d) (e) - ------------------- ------------ --------- -------------- ------------------- David Jenkins 200,000 39,000 None $ 0 - ------------------- ------------ --------- -------------- ------------------- John James 100,000 78,000 None $ 0 - ------------------- ------------ --------- -------------- ------------------- Scott Broughton None None None $ 0 - ------------------- ------------ --------- -------------- ------------------- Cameron Richardson None None None $ 0 - ------------------- ------------ --------- -------------- -------------------
(D) Long-Term Incentive Plans ("LTIP") Awards Table The Company does not have a Long-term Incentive Plan. (E) Compensation of Directors The Company does not pay a fee to its outside, non-officer directors. The Company reimburses its directors for reasonable expenses incurred by them in attending meetings of the Board of Directors. During fiscal 2000 non-officers directors received a total of $0 in consulting fees. ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership of the Company's Common Stock as of March 8, 2001 by (i) each person who is known by the Company to own beneficially more than five percent (5%) of the Company's outstanding Common Stock; (ii) each of the Company's directors and officers; and (iii) all directors and officers of the Company as a group. As at March 8, 2001 there were 12,873,943 shares of Common Stock issued and outstanding.
Name of Shares of Common Approximate Beneficial Stock Beneficially Percentage Owner Owned Owned - ---------------------------------- ------------------- ------------ Moristan Limited 800,000(1) 6.2% Trident Chambers Wickhams Cay PO Box 146 Road Town, Tortola British Virgin Islands New Odessy Limited 700,000(1) 5.4% Kings Court Bay Street, PO Box N3944 Nassau Bahamas Viabilite Et Ablissement a.r.l. 656,205(1) 5.1% Broadcasting House Rouge Bouillon St Helier, Jersey Channel Islands 21 Officers and Directors - ---------------------------------- David E. Jenkins 296,105 2.3% 1505-1060 Alberni Street Vancouver, B.C. Canada V6E 4K2 John A.A. James 272,870 2.1% 2055 South Ingalls Way, Lakewood, Colorado U.S.A. 80227-2515 Antonino G. Cacace 8,333 * Crud-y-Gloyat Carswell Bay Swansea Wales, U.K. Officers and Directors (3 persons) 577,308 4.4% (1) None of the officers and directors of the Company are affiliated with either Moristan Limited, New Odessy Limited or Viabilite et Ablissement a.r.l. * Less than 1%.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The proposed business of the Company raises potential conflicts of interests between the Company and certain of its officers and directors. Certain of the directors of the Company are directors of other mineral resource companies and, to the extent that such other companies may participate in ventures in which the Company may participate, the directors of the Company may have a conflict of interest in negotiating and concluding terms regarding the extent of such participation. In the event that such a conflict of interest arises at a meeting of the directors of the Company, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In appropriate cases, the Company will establish a special committee of independent directors to review a matter in which several directors, or Management, may have a conflict. From time to time, several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing for their participation in larger programs, involvement in a greater number of programs and reduction of the financial exposure with respect to any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment. In determining whether the Company will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the potential benefits to the Company, the degree of risk to which the Company may be exposed and its financial position at that time. Other than as indicated, the Company has no other procedures or mechanisms to deal with conflicts of interest. The Company is not aware of the existence of any conflict of interest as described herein. 22 Directors and/or officers will receive expense reimbursement for expenses reasonably incurred on behalf of the Company. Included in accounts payable at December 31, 2000 is $234,261 (1999 - $43,504) due to directors and a corporation controlled by a director in respect of salaries, consulting fees and reimbursement for operating expenses. Indebtedness to directors totaling $35,000 (1999 - $78,190) was settled with the issuance of 70,000 (1999 - 102,870) shares of common stock. The conversion rates were based on the quoted market prices at the date of conversion. The Company does not pay a fee to its outside, non-officer directors. The Company believes that consulting fees and reimbursement for operating expenses paid to corporations owned by directors are comparable to amounts that would have been paid to at arms length third party providers of such services. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (1) FINANCIAL STATEMENTS - Reference is made to the Financial Statements appearing on pages F-1, through F-37 (2) EXHIBITS - AURORA GOLD CORPORATION 3.1 Certificate of Incorporation* 3.2 Certificate of Amendment to the Certificate of Incorporation* 3.3 Certificate of Restoration and Renewal of Certificate of Incorporation* 3.4 Amended and Restated By-laws* 10.1 Agreement dated July 18, 1997 between The Company and Minera Motagua, S.A.* 10.2 Agreement dated August 16, 1997 between the Company and Minera Motagua, S.A.* 10.3 Agreement dated November 3, 1997 between the Company and Minera Motagua, S.A.* 10.4 Agreement dated July 28, 1998 between the Company and Minera Motagua, S.A.* 10.5 Agreement dated August 24, 1998 with Jorge Mario Rios Munoz. * 10.6 Agreement dated November 18, 1998 between the Company and United Catalyst, Inc. and Getchell Gold Corporation. * 10.7 Agreement dated February 23, 1999 between the Company and Gregory G. Crowe. * 10.8 Option Agreements dated as shown between the Company and High Marsh Holdings Ltd.* 10.8.1 Hamman Zriba/Jebel Guebli October 15, 1999 10.8.2 Koudiat Sidii October 15, 1999 10.8.3 Ouled Moussa (bou Jabeur Est) October 15, 1999 10.8.4 Hammala January 20, 2000 10.8.5 El Mohguer (Garn Halfaya) January 20, 2000 10.8.6 Jebel Oum Edeboua (Garn Halfaya) January 20, 2000 10.9 Joint Venture Agreement between the Company and Patagonia Gold Corporation * 10.10 Letter of Intent between the Company and Billiton UK Resources B.V. * 10.11 January 29, 2001 Subscription Agreement between Aurora Metals (BVI) Limited and Billiton E&D 3 B.V. 10.12 January 29, 2001 Option Agreement between Aurora Metals (BVI) Limited and Billiton UK Resources B.V. 21.1 List of subsidiaries of the Registrant. 27.1 Financial Data Schedule - -------- * Previously Filed 23 (3) INDEX TO EXHIBITS - AURORA METALS (BVI) LIMITED 3.1 Certificate of Incorporation. *1 3.3 Memorandum of Association and Articles of Association. *1 3.3 Amendment to the Memorandum and Articles of Association. *1 3.4 Amended Certificate of Incorporation. *1 3.5 Amended Memorandum and Articles of Association. * 1 3.6 Certificate of Incumbency of Aurora Metals (BVI) Ltd. *1 10.1 Letter of Intent between Aurora Gold Corporation and High Marsh Holdings Ltd., dated March 15, 1999. *1 10.2 Option Agreements dated as shown between Aurora Gold Corporation and High Marsh Holdings Ltd. *1 10.2.1 Hamman Zriba/Jebel Guebli October 15, 1999 *1 10.2.2 Koudiat Sidii October 15, 1999 *1 10.2.3 Ouled Moussa October 15, 1999 *1 10.2.4 Hammala January 20, 2000 *1 10.2.5 El Mohguer January 20, 2000 *1 10.2.6 Jebel Oum Edeboua January 20, 2000 *1 10.3 Letter of Intent between Aurora Gold Corporation and Billiton UK Resources B.V., dated February 25, 2000. *1 10.4 Letter of Intent between Aurora Gold Corporation and Billiton UK Resources B.V., dated April 12, 2000, amending the Letter of Intent of February 25, 2000. *1 10.5 Amendments to Letter of Intent between Aurora Gold Corporation and Billiton UK Resources B.V *1 10.5.1 Letter of Intent between Aurora Gold Corporation and Billiton UK Resources B.V., dated May 30, 2000, amending the Letter of Intent of February 25, 2000. *1 10.5.2 Letter of Intent between Aurora Gold Corporation and Billiton UK Resources B.V., dated June 22, 2000, amending the Letter of Intent of February 25, 2000. *1 10.5.3 Letter of Intent between Aurora Gold Corporation and Billiton UK Resources B.V., dated July 27, 2000, amending the Letter of Intent of February 25, 2000. *1 10.5.4 Letter of Intent between Aurora Gold Corporation and Billiton UK Resources B.V., dated August 30, 2000, amending the Letter of Intent of February 25, 2000. *1 10.5.5 Letter of Intent between Aurora Gold Corporation and Billiton UK Resources B.V., dated September 28, 2000, amending the Letter of Intent of February 25, 2000. *1 10.5.6 Letter of Intent between Aurora Gold Corporation and Billiton UK Resources B.V., dated November 10, 2000, amending the Letter of Intent of February 25, 2000. *1 10.5.7 Letter of Intent between Aurora Gold Corporation and Billiton UK Resources B.V., dated December 8, 2000, amending the Letter of Intent of February 25, 2000. *1 10.5.8 Letter of Intent between Aurora Gold Corporation and Billiton UK Resources B.V., dated January 12, 2001, amending the Letter of Intent of February 25, 2000. *1 10.6 Notifications of granting of ten (10) Exploration Permits, extracts from the Tunisian Government Gazette, May 26, 2000. *1 10.7 Directors Consent Resolutions of Aurora Gold Corporation, dated May 18, 2000, transferring 100% interest in six (6) Exploration Permits held under option, and the ten (10) Exploration Permits formally granted on May 26, 2000, to its wholly owned subsidiary, Aurora Metals (BVI) Ltd. *1 24 10.8 Directors Consent Resolutions of Aurora Gold Corporation, dated May 18, 2000, transferring 100% interest in the Letter of Intent and proposed private placement with Billiton UK Resources B.V. to its wholly owned subsidiary, Aurora Metals (BVI) Ltd. *1 10.9 Letters of Termination on Option Agreements between Aurora Metals (BVI) Ltd. and High Marsh Holdings Ltd., under Exhibits 10.2.1 (10.9.1), 10.2.3 (10.9.2), 10.2.5 (10.9.3) and 10.2.6 (10.9.4), dated September 5, 2000. *1 10.10 Letter of Termination between Aurora Metals (BVI) Ltd. and High Marsh Holdings Ltd., under Exhibit 10.2.2, dated September 11, 2000. *1 - ------------ *1 Previously filed with Aurora Metals (BVI) Limited Form 20-F Registration Statement SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized. Date: March 29, 2001 BY: /s/ David Jenkins ---------------- ------------------- David Jenkins Director and President Date: March 29, 2001 BY: /s/ John A.A. James ---------------- ---------------------- John A.A. James Director and Vice-President 25 EXHIBIT (1) THE FOLLOWING FINANCIAL STATEMENTS REQUIRED TO BE INCLUDED IN ITEM 8 ARE LISTED BELOW (1.a) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS - December 31, 2000
Financial Statements Page - -------------------------------------------------------------------- ------------ Report of Independent Accountants F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Changes in Stockholders' Equity (Deficit) F-4 Consolidated Statements of Operations F-5 Consolidated Statements of Cash Flows F-6 Summary of Significant Accounting Policies F-7 to F-10 Notes to the Consolidated Financial Statements F-10 to F-17
(1.b) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS - December 31, 1999
Financial Statements Page - -------------------------------------------------------------------- ------------ Report of Independent Accountants F-20 Consolidated Balance Sheets F-21 Consolidated Statements of Changes in Stockholders' Equity (Deficit) F-22 Consolidated Statements of Operations F-23 Consolidated Statements of Cash Flows F-24 Summary of Significant Accounting Policies F-25 to F-28 Notes to the Consolidated Financial Statements F-29 to F-37
Financial Statement Schedules * *Financial Statement Schedules have been omitted as not applicable 26 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Consolidated Financial Statements (EXPRESSED IN U.S. DOLLARS) December 31, 2000 and 1999 INDEX ----- Report of Independent Accountants Consolidated Balance Sheets Consolidated Statements of Stockholders' Deficiency Consolidated Statements of Operations Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements F1 MOORE STEPHENS ELLIS FOSTER LTD. CHARTERED ACCOUNTANTS 1650 West 1st Avenue Vancouver, BC Canada V6J 1G1 Telephone: (604) 734-1112 Facsimile: (604) 714-5916 E-Mail: generaldelivery@ellisfoster.bc.ca --------------------------------- - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS AND STOCKHOLDERS AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) We have audited the consolidated balance sheet of AURORA GOLD CORPORATION & ITS SUBSIDIARIES ("the Company") as at December 31, 2000 and the consolidated statements of stockholders' deficiency, operations and cash flows and cumulative data for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the cumulative data from October 10, 1995 to December 31, 1999 in the Statements of stockholders' deficiency, operations and cash flows, which were audited by other auditors whose report, dated February 10, 2000 which expressed an unqualified opinion, has been furnished to us. Our opinion, insofar as it relates to the amounts included for cumulative data from October 10, 1995 to December 31, 1999 is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2000 and the results of its operations and cash flows and cumulative data for the year then in conformity with generally accepted accounting principles in the United States. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Vancouver, Canada "MOORE STEPHENS ELLIS FOSTER LTD." March 9, 2001 Chartered Accountants F2 - -------------------------------------------------------------------------------- MSAn independently owned and operated member of Moore Stephens North America, Inc. Members in principal cities throughout North America. Moore Stephens North America, Inc. is a member of Moore Stephens International Limited, members in principal cities throughout the world.
AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Consolidated Balance Sheets December 31, 2000 (EXPRESSED IN U.S. DOLLARS) =================================================================================== 2000 - ----------------------------------------------------------------------------------- ASSETS CURRENT Cash $ 1,685 Receivables 300 Loan receivables (Note 6) 226,778 - ----------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 228,763 FIXED ASSETS (Note 3) 25,991 MINERAL PROPERTY COSTS (Note 4) - - ----------------------------------------------------------------------------------- TOTAL ASSETS $ 254,754 =================================================================================== LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) LIABILITIES CURRENT Accounts payable and accrued liabilities $ 632,505 - ----------------------------------------------------------------------------------- TOTAL LIABILITIES 632,505 - ----------------------------------------------------------------------------------- STOCKHOLDERS' (DEFICIENCY) SHARE CAPITAL (Note 5) Authorized: 50,000,000 common shares, with par value of $0.001 each Issued: 12,873,943 common shares (1999 - 11,460,649) 12,874 ADDITIONAL PAID-IN CAPITAL 3,271,163 ADVANCES FOR STOCK SUBSCRIPTION - ACCUMULATED (DEFICIT) (3,661,788) - ----------------------------------------------------------------------------------- STOCKHOLDERS' (DEFICIENCY) (377,751) - ----------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) $ 254,754 ===================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. F3
AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Consolidated Statements of Stockholders' Deficiency January 1, 2000 to December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ====================================================================================================================== Advances Total stock- Common stock Additional for stock holders' --------------------- paid-in sub- Accumulated equity Shares Amount capital scriptions deficit (deficiency) - ---------------------------------------------------------------------------------------------------------------------- BALANCE, January 1, 2000 11,460,649 $11,461 $2,484,219 $ 425,000 $(2,984,083) $ (63,403) Issuance of common stock: For cash in March 2000 at $5.00 per share 350,000 350 174,650 (175,000) - - For cash in March 2000 at $4.55 per share 550,000 550 249,450 (250,000) - - For settlement of indebtedness (Note 8) 199,000 199 99,301 - - 99,500 Cancellation of shares in April 2000 (90,706) (91) (56,600) - - (56,691) Exercise of options in June 2000 405,000 405 3,645 - - 4,050 Spin-off of AML (Note 6) 316,498 Net (loss) for the year - - - - (677,705) (677,705) - ---------------------------------------------------------------------------------------------------------------------- BALANCE, December 31, 2000 12,873,943 $12,874 $3,271,163 $ - $(3,661,788) $ (377,751) ======================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. F4
AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Consolidated Statement of Operations (EXPRESSED IN U.S. DOLLARS) - ------------------------------------------------------------------------------------------------------ Cumulative October 10 Year 1995 (inception) Ended to December 31 December 31 2000 2000 - ------------------------------------------------------------------------------------------------------ GENERAL AND ADMINISTRATIVE EXPENSES Depreciation and amortization $ 26,454 $ 4,592 Interest, bank charges and foreign exchange 39,161 2,768 Administrative and general 594,569 129,840 Professional fees - accounting and legal 330,910 11,692 Salaries and consulting fees 801,130 68,946 - ------------------------------------------------------------------------------------------------------ 1,792,224 217,838 EXPLORATION EXPENSES (Note 4) 1,402,129 109,054 WRITEOFF OF MINERAL PROPERTY COSTS 172,981 133,571 - ------------------------------------------------------------------------------------------------------ 3,367,334 460,463 LESS: OTHER INCOME (LOSS) INTEREST INCOME 22,144 614 OPERATING LOSS OF SPUN-OFF OPERATIONS (Note 6) (316,598) (217,856) - ------------------------------------------------------------------------------------------------------ NET (LOSS) FOR THE PERIOD $ (3,661,788) $ (677,705) ====================================================================================================== (LOSS) PER SHARE, basic and diluted (0.06) ====================================================================================================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - basic and diluted 12,014,298 =====================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. F5
AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Consolidated Statement of Cash Flows (EXPRESSED IN U.S. DOLLARS) ====================================================================================================== Cumulative October 10 Year 1995 (inception) Ended to December 31 December 31 2000 2000 - ------------------------------------------------------------------------------------------------------ CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES Net (loss) for the period $ (3,661,788) $(677,705) Add: loss from discountinued operations (Note 6) 316,598 217,856 - ------------------------------------------------------------------------------------------------------ Income from continued operations (3,345,190) (459,849) Adjustments to reconcile net loss to net cash used in operating activities: - depreciation and amortization 26,454 4,592 - compensation on stock options 720,500 - - expenses satisfied with common stocks 292,200 42,809 - writeoff of mineral property costs 172,981 133,571 - adjustment for spin-off of AML (Note 6) 14,900 113,642 - ------------------------------------------------------------------------------------------------------ Changes in assets and liabilities: - decrease (increase) in receivables (227,078) (227,078) - increase in accounts payable 632,505 418,422 - ------------------------------------------------------------------------------------------------------ (1,712,728) 26,109 - ------------------------------------------------------------------------------------------------------ CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Purchase of fixed assets (55,383) (30,583) Proceeds on disposal of fixed assets 14,449 - Mineral property costs (187,981) - Incorporation cost (11,511) - - ------------------------------------------------------------------------------------------------------ (240,426) (30,583) - ------------------------------------------------------------------------------------------------------ CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES Proceeds from issuance of common stocks and stock subscription receipts 1,954,839 4,050 - ------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN CASH FOR THE PERIOD 1,685 (424) CASH AND CASH EQUIVALENTS, beginning of period - 2,109 - ------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS, end of period $ 1,685 $ 1,685 ======================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. F6 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Notes to Financial Statements December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ================================================================================ 1. NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS The Company was formed on October 10, 1995 under the laws of the State of Delaware and is in the business of location, acquisition, exploration and, if warranted, development of mineral properties. The Company has not yet determined whether its properties contain mineral reserves that may be economically recoverable. These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The general business strategy of the Company is to acquire mineral properties either directly or through the acquisition of operating entities. The continued operations of the Company and the recoverability of mineral property costs is dependent upon the existence of economically recoverable mineral reserves, confirmation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete the development and upon future profitable production. The Company has incurred recurring operating losses and requires additional funds to meet its obligations and maintain its operations. Management's plans in this regard are to raise equity financing as required. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might result from this uncertainty. The Company has not generated any operating revenues to date. 2. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Consolidation These consolidated financial statements are stated in US dollars and have been prepared in accordance with accounting principles generally accepted in the United States and include the accounts of the Company and its wholly-owned subsidiaries Aurora Gold, S.A., and Deltango Gold Limited. All intercompany transactions and balances have been eliminated. (b) Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. F7 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Notes to Financial Statements December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ================================================================================ 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (c) Cash Equivalents Cash equivalents comprise certain highly liquid instruments with a maturity of three months or less when purchased. There were no cash equivalents as of December 31, 2000. (d) Fixed Assets Depreciation is based on the estimated useful lives of the assets and is computed using the straight-line method. Fixed assets are recorded at cost. Depreciation is provided over the following useful lives: Computer equipment 2 years Telecommunication equipment 5 years Office equipment 5 years (e) Mineral Properties and Exploration Expenses Exploration costs are charged to operations as incurred until such time that proven reserves are discovered. From that time forward, the Company will capitalize all costs to the extent that future cash flow from mineral reserves equals or exceeds the costs deferred. The deferred costs will be amortized over the recoverable reserves when a property reaches commercial production. As at December 31, 2000, the Company did not have proven reserves. Exploration activities conducted jointly with others are reflected at the Company's proportionate interest in such activities Costs related to site restoration programs are accrued over the life of the project. (f) Stock-Based Compensation The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-based Compensation". SFAS No. 123 encourages, but does not require, companies to adopt a fair value based method for determining expense related to stock-based compensation. The Company accounts for stock-based compensation issued to employees and directors using the intrinsic value method as prescribed under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. (g) Advertising Expenses The Company expenses advertising costs as incurred. There were no advertising expenses incurred by the Company for the periods ended December 31, 2000. F8 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Notes to Financial Statements December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ================================================================================ 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (h) Foreign Currency Transactions Foreign currency accounts are translated into U.S. Dollars. At the transaction date, each asset, liability, revenue and expense is translated into U.S. dollars by the use of the exchange rate in effect at that date. At the period end, monetary assets and liabilities are translated into U.S. dollars by using the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in operations. (i) Concentration of Credit Risk The Company places its cash and cash equivalents with high credit quality financial institutions. The Company routinely maintains balances in a financial institution beyond the insured amount. As of December 31, 2000 the Company has no deposit in a bank beyond insured limits. (j) Long-Lived Assets Impairment Certain long-term assets of the Company are reviewed when changes in circumstances require as to whether their carrying value has become impaired, pursuant to guidance established in Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets will be written down to fair value. (k) Accounting for Derivative Instruments and Hedging Activities In June 1998, the Financial Accounting Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 requires companies to recognize all derivative contracts as either assets or liabilities in the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the designated as a hedging instrument, the gain or loss is recognized in income in the period of change. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Historically, the Company has not entered into derivative contracts either to hedge existing risks or for speculative purposes. The Company does not anticipate that the adoption of the statement will have a significant impact on its financial statements. F9 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Notes to Financial Statements December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ================================================================================ 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (l) Income Taxes The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for income Taxes", which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carry amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. (m) Loss Per Share Loss per share is computed using the weighted average number of shares outstanding during the year. Effective for the year ended December 31, 1997, the Company adopted SFAS No. 128, "Earnings Per Share". Diluted loss per share is equivalent to basic loss per share. 3. FIXED ASSETS -------------------------------------------------------------------------- 2000 -------------------------------------------------------------------------- Computer equipment $ 15,125 Telecommunication equipment 1,875 Office equipment 13,583 30,583 -------------------------------------------------------------------------- Accumulated depreciation and amortization (4,592) -------------------------------------------------------------------------- $ 25,991 ========================================================================== F10 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Notes to Financial Statements December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ================================================================================ 4. MINERAL PROPERTIES AND EXPLORATION EXPENSES (a) Guatemala, Central America In 1997, the Company entered into agency agreements with a Guatemalan company to apply for mineral exploration licenses on certain Guatemalan mineral concessions. The agreements provided for the payment of $10,000 and the issuance of 1,500 shares of common stock for each mineral exploration/reconnaissance concession granted by the Guatemalan government. In November 1997, the Company advanced $20,000 to the principals of the agent against the issuance of future shares. Subsequently, the agency agreement was terminated with the Company agreeing to forfeit its claims against the $20,000 advance in exchange for releasing the Company from any future stock issuance obligation stemming from this agreement. During 1998, the Company made application to the Guatemalan government for fifteen mineral exploration licenses and one mineral reconnaissance license, of which ten mineral exploration licenses were granted during 1998. At December 31, 1998, applications for five mineral exploration licenses and one mineral reconnaissance license were awaiting government approval. As a consequence of the results of the geological reconnaissance, sampling of rock outcrops and stream sediment sampling which was carried out in 1998 and the first quarter of 1999, the Company decided to surrender six exploration licenses (January, 1999) and withdraw four applications (February, 1999). At December 31, 1999, the Company retains five mineral exploration licenses and one mineral reconnaissance license. Each distinct mineral deposit per mineral concession acquired by the Company will be subject to a Net Smelter Return ("NSR") royalty equal to 1% of the NSR royalty payable to the Government of Guatemala. F11 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Notes to Financial Statements December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ================================================================================ 4. MINERAL PROPERTIES AND EXPLORATION EXPENSES (continued) (b) Totem Talc Property, Washington, U.S.A An Option Agreement, dated November 18, 1998, was established between the Company and joint venture owners of the Totem Talc property. The Totem Talc property consists of 10 unpatented lode claims covering approximately 206 acres and is located near Metalline Falls in Pend Oreille County, Washington, approximately 100 miles north of Spokane. The agreement calls for the Company to pay the Joint Venture $5,000 on or before May 18, 1999 in addition to the initial payment of $1,000 already made. The Company committed to expenditures of $10,000 by July 18, 1999 and an additional $50,000 by November 18, 1999 on further development of the project through market studies, geological and engineering work, claims maintenance and the like. The Company is committed to pay the Joint Venture a further total of $400,000 commencing with $100,000 on December 15, 1999 and subsequent payments of $100,000 on December 15, 2000 and $200,000 on December 15, 2001. The Company has not complied with the expenditure requirements for 1999 and has not made the required option payments on December 15, 1999. The Company is seeking modification to the exploration commitments and the schedule of option payments. During the year ended December 31, 2000, the Company failed to make the option payments and exploration commitments, and has forfeited the joint ownership of Totem Talc property. The Company wrote off capitalized acquisition cost of $6,000 to operations. (c) British Columbia, Canada - Kumealon Property In February 1999, the Company acquired, by staking, a 741 acre limestone property located on the north shore of Kumealon Inlet, southeast of Prince Rupert, British Columbia, Canada. A finder's fee of 25,000 shares of common stock was paid in connection with these claims. (d) Yukon Territory, Canada In May and June 1999, the Company acquired, by staking, 100% interest in five gold exploration properties covering approximately 240 square kilometres in the Yukon's Tintina Gold Belt. The properties are known as Carlisle Creek, Independence Creek, Livingstone Creek North, Sonora West and White River. Permits on the properties expire between April 2001 and June 2003, but are subject to renewal. During the year, the Company received tax refunds from Mineral ExplorationTax Credit and Goods and Service Tax, totalling $77,601 from Canadian tax authorities for the exploration activities carried out in Yukon, Canada. The Company treats those tax refunds from property exploration expenditures as cost recovery. F12 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Notes to Financial Statements December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ================================================================================ 4. MINERAL PROPERTIES AND EXPLORATION EXPENSES (continued) A summary of property acquisition costs is as follows:
- ------------------------------------------------------------------------------------------------------ Accumulated Accumulated Balance Balance December 31 December 31 1999 Additions Write Off Cost Recovery Spin off 2000 - ------------------------------------------------------------------------------------------------------ Property acquisition expenditures: Canada - Kumealon $ 23,630 $ - $ (23,630) $ - $ - $ - Guatemala 103,941 - (103,941) - - - Tunisia, owned by 15,000 - - - (15,000) - AML, Spin-off United States - Totem Talc 6,000 - (6,000) - - - - ------------------------------------------------------------------------------------------------------ Total $ 148,571 $ - $ (133,571) $ - $ (15,000) $ - - ------------------------------------------------------------------------------------------------------ A summary of cumulative exploration expenditures is as follows: Property exploration Expenditures: Canada - Cape Breton 96,186 - - - - 96,186 Canada - Kumealon 2,286 910 - - - 3,196 Canada - Yukon 408,319 113,400 - (77,601) - 443,118 Guatemala 248,241 6,793 - - - 255,034 Tunisia, owned by 93,362 156,356 - - (249,718) - AML, Spin-off United States - Totem Talc 51,201 - - - - 51,201 Project assessment and exploration expenditures 487,842 65,552 - - - 553,394 - ------------------------------------------------------------------------------------------------------ Total $ 1,387,437 $ 343,011 $ - $ (77,601) $(249,718) $ 1,402,129 ======================================================================================================
5. ADVANCE FOR STOCK SUBSCRIPTIONS In September 1999, the Company received $175,000 on a subscription for 350,000 shares of common stock. In December 1999, the Company further received 250,000 on a subscription for 550,000 shares of common stock. The advances were unsecured and non-interest bearing. The stock was issued on March 10, 2000. F13 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Notes to Financial Statements December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ================================================================================ 6. SPIN-OFF OF AURORA METALS (BVI) LIMITED (THE"AML") Subsequent to year ended December 31, 2000, the Company completed the spin-off of a wholly-owned subsidiary Aurora Metals (BVI) Limited (the "AML") in a stock dividend distribution to the Company's stockholders. Each stockholder of the Company received one share of AML (totalling of 13,000,000 stocks issued and outstanding) common stock for each share of the Company's stock (totalling of 12,873,943 issued and outstanding) held on the record date of June 15, 2000. Upon the completion of spin-off, the Company will return the remaining 126,057 (13,000,000 - 12,873,943) stocks of AML back to AML to be cancelled. The Consolidated Financial Statements for the year ended at December 31, 2000 of the Company have been prepared to reflect the spin-off of AML at book value. Accordingly, expenses and cash flows of AML spun off have been segregated in the Consolidated Statements of Operations and Cash flows for the year then ended as at December 31, 2000. The historical carrying amount of the net deficiency transferred to AML on the spin-off date (net of initial investment of $100) has been recorded as additional paid-in capital of $316,498. Included in the net deficiency transferred at June 15, 2000 was a $226,778 loan owed to the Company by AML. The effect of the transfer are reflected in the Consolidated Balance Sheet. Following is the summarized financial information for the Spun-off operations:
-------------------------------------------------------------------------- Cumulative from From January 1 June 17, 1997 2000 (inception of AML) to June 15 to June 15, 2000 2000 -------------------------------------------------------------------------- General and administrative expenses $ 51,880 $ 46,500 Exploration expenses 264,718 171,356 -------------------------------------------------------------------------- Operating Loss $ 316,598 $ 217,856 -------------------------------------------------------------------------- June 15 2000 -------------------------------------------------------------------------- Total assets $ 500 Total liabilities (317,098) -------------------------------------------------------------------------- Net deficiency of AML $ (316,598) --------------------------------------------------------------------------
AML raised $600,000 through a private placement subsequent to December 31, 2000. F14 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Notes to Financial Statements December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ================================================================================ 7. STOCK OPTIONS In 1997, the Company's Board of Director approved a stock options plan ("the Plan") to offer an inducement to obtain services of key employees, directors and consultants of the Company. The maximum number of shares issuable under the Plan in any calendar year shall be an amount equal to 15% of the issued and outstanding common stock on January 1 of each year. Under the Plan, the exercise price of an incentive stock option must be at least equal to 100% of the fair market value of the common stock on the date of grant (110% of fair market value in the case of options granted to employees who hold more than 10% of the company's capital stock on the date of grant). The exercise price of a non-qualified stock option must not be less than the par value of a share of the common stock on the date of the grant. The term of an incentive or non-qualified stock option is not to exceed five years. A summary of the status of the Company's stock options as of December 31, 2000 and the changes during the years then ended is as follows:
-------------------------------------------------------------------------------- Weighted Weighted Average Average Number Exercise Fair of Options Price Value -------------------------------------------------------------------------------- Outstanding and exercisable, December 31, 1999 1,405,000 $ 0.48 Exercised 405,000 $ 0.48 Cancelled 1,000,000 $ 0.48 -------------------------------------------------------------------------------- Outstanding and exercisable, December 31, 2000 - $ - --------------------------------------------------------------------------------
The Company accounts for its stock-based compensation plan in accordance with APB Opinion No. 25, under which no compensation is recognized in connection with options granted to employees except if options are granted with a strike price below fair value of the underlying stock. The Company adopted the disclosure requirements SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly, the Company is required to calculate and present the pro forma effect of all awards granted. There were no stock options granted during the year and a summarized pro-forma effect as follows:
---------------------------------------------- 2000 ---------------------------------------------- Net (loss) for the period: - as reported $ (771,067) - pro-forma $ (771,067) ---------------------------------------------- Basic and diluted loss per share: - as reported $ (0.06) - pro-forma $ (0.06) ----------------------------------------------
F15 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Notes to Financial Statements December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ================================================================================ 8. RELATED PARTY TRANSACTIONS Related party transactions not disclosed elsewhere in these financial statements: (a) Included in accounts payable is $69,934 due to directors and a company controlled by a director in respect of salaries, consulting fees and reimbursement for expenses. (b) During the year, salaries and consulting fees of $174,492 were paid or are payable to directors or companies controlled by directors. (c) In January 2000, fixed assets of $14,449 sold to a director at their book value were purchased back by the Company at their sold book value. Except as otherwise noted, these transactions are recorded at the exchange amount, being the value established and agreed to by the related parties. 9. NON-CASH INVESTING AND FINANCING ACTIVITIES In 2000, the Company settled various debts with the issuance of shares of common stock as follows: ------------------------------------------------------- FISCAL YEAR 2000 Conversion Month of Settlement Indebtedness Price Shares ------------------------------------------------------- February $ 35,000 $ 0.50 70,000 April 20,000 0.50 40,000 April 40,000 0.50 80,000 May 4,500 0.50 9,000 ------------- ------- $ 99,500 199,000 ============= ======= The carrying value of the indebtedness approximated the fair value of the common shares issued. Indebtedness of directors totalling $35,000 was settled with the issuance of 70,000 shares of common stock. F16 AURORA GOLD CORPORATION & SUBSIDIARIES (An exploration stage enterprise) Notes to Financial Statements December 31, 2000 (EXPRESSED IN U.S. DOLLARS) ================================================================================ 10. INCOME TAXES (a) The Company has net losses for tax purposes totaling approximately which maybe applied against future taxable income. Accordingly, there is no tax expense for the years ended December 31, 2000. The potential tax benefits arising from these losses have not been recorded in the financial statements. The Company evaluates its valuation allowance requirements on an annual basis based on projected future operations. When circumstances change and this causes a change in management's judgement about the realizability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current operations. The right to claim these losses expires as follows: ------------------------- 2011 $ 360,000 2012 564,000 2018 331,000 2019 795,000 2020 550,000 ------------------------- $ 2,600,000 ========================= (b) The tax effects of temporary difference that give rise to the Company's deferred tax asset are as follows: ------------------------------------------- 2000 ------------------------------------------- Tax loss carryforwards $ 884,000 Mineral exploration expenses 39,000 Valuation allowance (923,000) ------------------------------------------- $ - =========================================== 11. SUBSEQUENT EVENTS On March 8, 2001, the Company announced that March 9, 2001 is the Dividend Payable Date for spin-off of Aurora Metals (BVI) Limited (see Note 6). 12. COMPARATIVE FIGURES Certain cumulative figures have been reclassified to conform with the financial statement presentation adopted for 2000. F17 AURORA GOLD CORPORATION CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 (EXPRESSED IN U.S. DOLLARS) F - 18 ================================================================================ AURORA GOLD CORPORATION - -------------------------------------------------------------------------------- Table of Contents REPORT OF INDEPENDENT ACCOUNTANTS CONSOLIDATED FINANCIAL STATEMENTS Balance Sheets Statements of Changes in Stockholders' Equity (Deficit) Statements of Operations Statements of Cash Flows Summary of Significant Accounting Policies Notes to the Financial Statements F - 19 ================================================================================ REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To The Board of Directors and Stockholders Aurora Gold Corporation We have audited the Consolidated Balance Sheets of Aurora Gold Corporation as at December 31, 1999 and 1998, the Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 1999 and 1998 and the Consolidated Statements of Operations and Cash Flows for the period from October 10, 1995 (inception) to December 31, 1999 and for the years ended December 31, 1999 and 1998. These 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1999 and 1998 and the results of its operations and its cash flows for the period from October 10, 1995 (inception) to December 31, 1999 and for the years ended December 31, 1999 and 1998 in conformity with generally accepted accounting principles in the United States. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. As discussed in Note 1 to the financial statements, the Company has incurred a loss from operations and lacks liquidity which raises substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Vancouver, Canada "BDO DUNWOODY LLP" February 10, 2000 CHARTERED ACCOUNTANTS F - 20
========================================================================================= AURORA GOLD CORPORATION Consolidated Balance Sheets (Expressed in U.S. Dollars) - ----------------------------------------------------------------------------------------- DECEMBER 31 1999 1998 - ----------------------------------------------------------------------------------------- ASSETS CURRENT Cash $ 2,109 $ 68,326 MINERAL PROPERTY COSTS (Note 2) 148,571 89,441 ORGANIZATION COSTS (Note 3) - 4,607 ------------------------------ $ 150,680 $ 162,374 ========================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) LIABILITIES CURRENT Accounts payable and accrued liabilities $ 160,855 $ 20,580 Loans payable (Note 4) 53,228 - ------------------------------ 214,083 20,580 ------------------------------ STOCKHOLDERS' EQUITY (DEFICIT) Share capital Authorized 50,000,000 common shares, par value $0.001 per share Issued 11,460,651 (1998 - 11,181,494) common shares 11,461 11,182 Additional paid-in capital 2,484,219 2,259,304 Advances for stock subscriptions (Note 5) 425,000 - Accumulated deficit (2,984,083) (2,128,692) ------------------------------ (63,403) 141,794 ------------------------------ $ 150,680 $ 162,374 =========================================================================================
The accompanying summary of significant accounting policies and notes form an integral part of these financial statements. Approved by the Board: - --------------------------------------- -------------------------------------- Director Director F - 21
==================================================================================================================== AURORA GOLD CORPORATION Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Expressed in U.S. Dollars) FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------------------------------------------- Total Common Stock Additional Advances for Stockholders' ---------------------- Paid-In Stock Accumulated Equity Shares Amount Capital Subscriptions Deficit (Deficit) --------------------------------------------------------------------------------- BALANCE, January 1, 1998 10,670,389 $ 10,670 $ 1,088,869 $ - $ (977,088) $ 122,451 Issuance of common stock For cash in May 1998 at $1.25 per share 200,000 200 249,800 - - 250,000 For cash in November 1998 at $0.75 per share 71,667 72 53,678 - - 53,750 For cash in December 1998 at $0.75 per share 143,333 143 107,357 - - 107,500 For settlement of indebtedness (Note 8) 96,105 96 68,601 - - 68,697 Grant of options to employees and directors (Note 6) - - 518,900 - - 518,900 Grant of options to consultants (Note 6) - - 172,100 - - 172,100 Net loss for the year - - - - (1,151,604) (1,151,604) --------------------------------------------------------------------------------- BALANCE, December 31, 1998 11,181,494 11,182 2,259,304 - (2,128,692) 141,794 Issuance of common stock For cash in March 1999 at $0.656 per share 22,871 23 14,977 - - 15,000 For settlement of indebtedness (Note 8) 231,286 231 160,151 - - 160,382 For finder's fee in February 25,000 25 20,287 - - 20,312 1999 at $0.81 per share (Note 2) Grant of options to consultants (Note 6) - - 29,500 - - 29,500 Cash advanced on stock - - - 425,000 - 425,000 subscriptions (Note 5) Net loss for the year - - - - (855,391) (855,391) --------------------------------------------------------------------------------- BALANCE, December 31, 1999 11,460,651 $ 11,461 $ 2,484,219 $ 425,000 $(2,984,083) $ (63,403) ====================================================================================================================
The accompanying summary of significant accounting policies and notes form an integral part of these financial statements. F - 22
==================================================================================================== AURORA GOLD CORPORATION Consolidated Statements of Operations (Expressed in U.S. Dollars) OCTOBER 10 1995 (INCEPTION) TO Twelve-months ended DECEMBER 31 December 31 1999 --------------------------------- (CUMULATIVE) 1999 1998 - ---------------------------------------------------------------------------------------------------- GENERAL AND ADMINISTRATIVE EXPENSES Depreciation and amortization $ 21,862 $ 4,607 $ 6,515 Interest, bank charges and foreign exchange 36,393 16,470 16,112 Administrative and general, net of recoveries 470,109 44,844 117,468 Professional fees - accounting and legal (Note 6) 319,218 34,396 161,112 Salaries and consulting fees (Note 6) 732,184 68,776 463,059 --------------------------------------------------- 1,579,766 169,093 764,266 Less interest income 21,530 670 2,865 --------------------------------------------------- 1,558,236 168,423 761,401 EXPLORATION EXPENSES (Notes 2 and 6) 1,386,437 686,968 390,203 WRITE OFF OF MINERAL PROPERTIES 39,410 - - --------------------------------------------------- NET LOSS FOR THE PERIOD $ 2,984,083 $ 855,391 $ 1,151,604 ==================================================================================================== LOSS PER SHARE Basic and diluted $ 0.08 $ 0.11 ================================= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic and diluted 11,284,435 10,800,784 =================================
The accompanying summary of significant accounting policies and notes form an integral part of these financial statements. F - 23
============================================================================================================ AURORA GOLD CORPORATION Consolidated Statements of Cash Flows (Expressed in U.S. Dollars) OCTOBER 10 1995 (INCEPTION) TO Twelve-months ended DECEMBER 31 December 31 1999 ----------------------------------- (CUMULATIVE) 1999 1998 - ------------------------------------------------------------------------------------------------------------ CASH PROVIDED (USED) BY: OPERATING ACTIVITIES Net loss for the period $ (2,984,083) $ (855,391) $(1,151,604) Adjustment to reconcile net loss to net cash used in operating activities Depreciation and amortization 21,862 4,607 6,515 Write off of mineral properties 39,410 - - Compensation on stock options 720,500 29,500 691,000 Expenses satisfied with common stock 249,391 180,694 42,522 Changes in assets and liabilities Decrease in accounts receivable - - 12,326 Increase (decrease) in accounts payable 160,855 140,275 (22,111) ----------------------------------------------------- (1,792,065) (500,315) (421,352) ----------------------------------------------------- INVESTING ACTIVITIES Purchase of fixed assets (24,800) - - Mineral property costs (187,981) (59,130) (58,942) Proceeds on disposal of fixed assets 14,449 - 14,449 Incorporation costs (11,511) - - ----------------------------------------------------- (209,843) (59,130) (44,493) ----------------------------------------------------- FINANCING ACTIVITIES Proceeds from the issuance of common stock 1,950,789 and stock subscription receipts 440,000 411,250 Repayment of notes payable (300,000) (250,000) - Proceeds from notes and advances payable 353,228 303,228 - ----------------------------------------------------- 2,004,017 493,228 411,250 ----------------------------------------------------- INCREASE (DECREASE) IN CASH FOR THE PERIOD 2,109 (66,217) (54,595) CASH, beginning of period - 68,326 122,921 ----------------------------------------------------- CASH, end of period $ 2,109 $ 2,109 $ 68,326 ============================================================================================================
The accompanying summary of significant accounting policies and notes form an integral part of these financial statements. F - 24 ================================================================================ AURORA GOLD CORPORATION Summary of Significant Accounting Policies (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- BASIS OF CONSOLIDATION These consolidated financial statements are stated in US dollars and have been prepared in accordance with accounting principles generally accepted in the United States and include the accounts of the Company and its wholly-owned subsidiaries Aurora Gold, S.A., Aurora Gold (BVI) Ltd. and Deltango Gold Limited. All intercompany transactions and balances have been eliminated. During the year, the Company incorporated Deltango Gold Limited to hold the Company's Yukon mineral properties. MINERAL PROPERTIES AND Exploration costs are charged to operations as EXPLORATION EXPENSES incurred as are normal development costs until such time that proven reserves are discovered. At such time that proven reserves are established, the Company will capitalize all costs to the extent that future cash flow from mineral reserves equals or exceeds the costs deferred. At December 31, 1999 and 1998, the Company did not have proven mineral reserves. Costs of initial acquisition of mineral rights and concessions are capitalized until the properties are abandoned or the right expires. Exploration activities conducted jointly with others are reflected at the Company's proportionate interest in such activities. FOREIGN CURRENCY TRANSACTIONS Foreign currency accounts are translated into U.S. dollars as follows: At the transaction date, each asset, liability, revenue and expense is translated into U.S. dollars by the use of the exchange rate in effect at that date. At the year end, monetary assets and liabilities are translated into U.S. dollars by using the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in operations. F - 25 ================================================================================ AURORA GOLD CORPORATION Summary of Significant Accounting Policies - Continued (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- ORGANIZATION COSTS The Company initially capitalized all costs directly incurred in its formation. To comply with the American Institute of Certified Public Accountants Statement of Position 98-5 "Reporting on Costs of Start-Up Activities", the remaining balance was written off to depreciation expense during the year. ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. FAIR VALUE OF FINANCIAL The respective carrying value of certain INSTRUMENTS on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable and accrued liabilities. Fair values were assumed to approximate carrying values for these financial instruments, except where noted, since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. Management is of the opinion that the Company is not exposed to significant interest, credit, or currency risks arising from these financial instruments. INCOME TAXES The Company follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted rates in effect in the years in which the differences are expected to reverse. F - 26 ================================================================================ AURORA GOLD CORPORATION Summary of Significant Accounting Policies - Continued (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- LOSS PER SHARE Loss per share is computed in accordance with SFAS No. 128, "Earnings Per Share". Basic loss per share is calculated by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in earnings of an entity. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. Basic and diluted earnings per share are the same for the periods presented. For the year ended December 31, 1999, total stock options of 1,405,000 (1998 - 1,155,000) and advances for a private placement of 900,000 shares were not included in the computation of diluted earnings per share because the effect was anti-dilutive. STOCK BASED The Company applies Accounting Principles Board COMPENSATION ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations in accounting for stock option plans. Under APB No. 25, compensation cost is recognized for stock options granted at prices below the market price of the underlying common stock on the date of grant. SFAS No. 123, "Accounting for Stock-Based Compensation", requires the Company to provide pro-forma information regarding net income as if compensation cost for the Company's stock option plan had been determined in accordance with the fair value based method prescribed in SFAS No. 123. F - 27 ================================================================================ AURORA GOLD CORPORATION Summary of Significant Accounting Policies - Continued (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- NEW ACCOUNTING In June 1998, the Financial Accounting Standards PRONOUNCEMENTS Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies to recognize all derivatives contracts as either assets or liabilities on the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Historically, the Company has not entered into derivatives contracts either to hedge existing risks or for speculative purposes. Accordingly, the Company does not expect adoption of the new standards on January 1, 2001 to affect its financial statements. RECLASSIFICATIONS Certain comparative amounts have been restated to conform with the current period's financial statement presentation. F - 28 ================================================================================ AURORA GOLD CORPORATION Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- 1. NATURE OF BUSINESS AND GOING CONCERN The Company was formed on October 10, 1995 under the laws of the State of Delaware and is in the business of location, acquisition, exploration and, if warranted, development of mineral properties. The Company has not yet determined whether its properties contain mineral reserves that may be economically recoverable. These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The general business strategy of the Company is to acquire mineral properties either directly or through the acquisition of operating entities. The continued operations of the Company and the recoverability of mineral property costs is dependent upon the existence of economically recoverable mineral reserves, confirmation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete the development and upon future profitable production. The Company has incurred recurring operating losses and requires additional funds to meet its obligations and maintain its operations. Management's plans in this regard are to raise equity financing as required. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might result from this uncertainty. - -------------------------------------------------------------------------------- 2. MINERAL PROPERTIES AND EXPLORATION EXPENSES a) Guatemala, Central America In 1997, the Company entered into agency agreements with a Guatemalan company to apply for mineral exploration licenses on certain Guatemalan mineral concessions. The agreements provided for the payment of $10,000 and the issuance of 1,500 shares of common stock for each mineral exploration/reconnaissance concession granted by the Guatemalan government. In November 1997, the Company advanced $20,000 to the principals of the agent against the issuance of future shares. Subsequently, the agency agreement was terminated with the Company agreeing to forfeit its claims against the $20,000 advance in exchange for releasing the Company from any future stock issuance obligation stemming from this agreement. F - 29 ================================================================================ AURORA GOLD CORPORATION Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- 2. MINERAL PROPERTIES AND EXPLORATION EXPENSES - CONTINUED a) Guatemala, Central America - Continued During 1998, the Company made application to the Guatemalan government for fifteen mineral exploration licenses and one mineral reconnaissance license, of which ten mineral exploration licenses were granted during 1998. At December 31, 1998, applications for five mineral exploration licenses and one mineral reconnaissance license were awaiting government approval. As a consequence of the results of the geological reconnaissance, sampling of rock outcrops and stream sediment sampling which was carried out in 1998 and the first quarter of 1999, the Company decided to surrender six exploration licenses (January, 1999) and withdraw four applications (February, 1999). At December 31, 1999, the Company retains five mineral exploration licenses and one mineral reconnaissance license. Each distinct mineral deposit per mineral concession acquired by the Company will be subject to a Net Smelter Return ("NSR") royalty equal to 1% of the NSR royalty payable to the Government of Guatemala. b) Totem Talc Property An Option Agreement, dated November 18, 1998, was established between the Company and joint venture owners of the Totem Talc property. The Totem Talc property consists of 10 unpatented lode claims covering approximately 206 acres and is located near Metalline Falls in Pend Oreille County, Washington, approximately 100 miles north of Spokane. The agreement calls for the Company to pay the Joint Venture $5,000 on or before May 18, 1999 in addition to the initial payment of $1,000 already made. The Company committed to expenditures of $10,000 by July 18, 1999 and an additional $50,000 by November 18, 1999 on further development of the project through market studies, geological and engineering work, claims maintenance and the like. The Company is committed to pay the Joint Venture a further total of $400,000 commencing with $100,000 on December 15, 1999 and subsequent payments of $100,000 on December 15, 2000 and $200,000 on December 15, 2001. The Company has not complied with the expenditure requirements for 1999 and has not made the required option payment on December 15, 1999. The Company is seeking modification to the exploration commitments and the schedule of option payments. c) British Columbia, Canada - Kumealon Property In February 1999, the Company acquired, by staking, a 741 acre limestone property located on the north shore of Kumealon Inlet, southeast of Prince Rupert, British Columbia. A finder's fee of 25,000 shares of common stock was paid in connection with these claims. F - 30 ================================================================================ AURORA GOLD CORPORATION Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- 2. MINERAL PROPERTIES AND EXPLORATION EXPENSES - CONTINUED d) Tunisia, North Africa In October 1999 and January 2000, the Company entered into option agreements (subject to regulatory approval by authorities in Tunisia) with a company incorporated in the British Virgin Islands, to acquire 100% interest in six Tunisian zinc properties. The Republic of Tunisia has granted exploration permits on the properties expiring on various dates between December 2000 and July 2002. The properties are known as Hamman Zriba (Jebel Guebli), Ouled Moussa (Bou Jabeur Est), Koudiat Sidii, Jebel Oum Edeboua (Garn Halfaya), El Mohguer (Garn Halfaya) and Hammala (Kebbouch Ouest). Option payments and work commitments for the properties are as follows:
Initial 1st 2nd 3rd 4th 5th Payment Anniversary Anniversary Anniversary Anniversary Anniversary Total ------------------------------------------------------------------------------------------ Property Option Payments Hamman Zriba - Jebel Guebli $ 5,000 $ 10,000 $ 15,000 $ 20,000 $ 25,000 $ - $ 75,000 Koudiat Sidii 5,000 10,000 15,000 20,000 25,000 - 75,000 Ouled Moussa 5,000 10,000 15,000 20,000 25,000 - 75,000 Jebel Oum Edeboua 2,500 5,000 7,500 10,000 12,500 - 37,500 El Mohguer 2,500 5,000 7,500 10,000 12,500 - 37,500 Hammala 5,000 10,000 15,000 20,000 25,000 - 75,000 ------------------------------------------------------------------------------------------ 25,000 50,000 75,000 100,000 125,000 - 375,000 ------------------------------------------------------------------------------------------ Property Work Commitments Hamman Zriba - Jebel Guebli - 50,000 50,000 75,000 150,000 175,000 500,000 Koudiat Sidii - 25,000 50,000 100,000 150,000 175,000 500,000 Ouled Moussa - 50,000 50,000 75,000 150,000 175,000 500,000 Jebel Oum Edeboua - 25,000 25,000 37,500 75,000 87,500 250,000 El Mohguer - 25,000 25,000 37,500 75,000 87,500 250,000 Hammala - 50,000 50,000 75,000 150,000 175,000 500,000 ------------------------------------------------------------------------------------------ - 225,000 250,000 400,000 750,000 875,000 2,500,000 ------------------------------------------------------------------------------------------ $ 25,000 $ 275,000 $ 325,000 $ 500,000 $ 875,000 $ 875,000 $2,875,000 ==========================================================================================
The Option Agreements provide for royalties of 2% Net Smelter Return ("NSR") on commencement of commercial production. The NSR can be reduced to 1% by cash payment of $1.0 million per property. Advance royalties of $25,000 per annum are payable for each property, after vesting of the properties through compliance with cash payments and work commitments, until commercial production is established. F - 31 ================================================================================ AURORA GOLD CORPORATION Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- 2. MINERAL PROPERTIES AND EXPLORATION EXPENSES - CONTINUED e) Yukon Territory, Canada In May and June 1999, the Company acquired, by staking, 100% interest in five gold exploration properties covering approximately 240 square kilometres in the Yukon's Tintina Gold Belt. The properties are known as Carlisle Creek, Independence Creek, Livingstone Creek North, Sonora West and White River. Permits on the properties expire in June and July 2000, but are subject to renewal.
Accumulated Accumulated Accumulated Balance Balance Balance January 1 December 31 December 31 1998 Additions 1998 Additions 1999 ---------------------------------------------------------------- PROPERTY ACQUISITION EXPENDITURES Canada - Kumealon $ - $ - $ - $ 23,630 $ 23,630 Guatemala 30,499 57,942 88,441 15,500 103,941 Tunisia - - - 15,000 15,000 United States - Totem Talc - 1,000 1,000 5,000 6,000 ---------------------------------------------------------------- 30,499 58,942 89,441 59,130 148,571 ---------------------------------------------------------------- PROPERTY EXPLORATION EXPENDITURES Canada - Cape Breton 96,186 - 96,186 - 96,186 Canada - Kumealon - - - 2,286 2,286 Canada - Yukon - - - 407,319 407,319 Guatemala 45,900 148,744 194,644 53,597 248,241 Tunisia - - - 93,362 93,362 United States - Totem Talc - 11,418 11,418 39,783 51,201 Project assessment and exploration expenditures (Note 6) 167,180 230,041 397,221 90,621 487,842 ---------------------------------------------------------------- 309,266 390,203 699,469 686,968 1,386,437 ---------------------------------------------------------------- $ 339,765 $ 449,145 $ 788,910 $ 746,098 $ 1,535,008 ================================================================
F - 32 ================================================================================ AURORA GOLD CORPORATION Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- 3. ORGANIZATION COSTS 1999 1998 ------------------- Cost $ 11,511 $11,511 Less accumulated amortization (11,511) (6,904) ------------------- $ - $ 4,607 =================== The cumulative effect of the adoption of SOP 98-5 in 1999 resulted in a write off of $4,607. This amount is included in depreciation and amortization on the Statement of Operations due to its insignificance. - -------------------------------------------------------------------------------- 4. LOANS PAYABLE Loans payable are unsecured, non-interest bearing and due on demand. - -------------------------------------------------------------------------------- 5. ADVANCES FOR STOCK SUBSCRIPTIONS In September 1999, the Company received $175,000 on a subscription for 350,000 shares of common stock. In December 1999, the Company further received $250,000 on a subscription for 550,000 shares of common stock. The advances are unsecured and non-interest bearing. The stock was issued subsequent to December 31, 1999. - -------------------------------------------------------------------------------- 6. STOCK OPTIONS In 1997, the Company's Board of Directors approved a stock option plan ("the Plan") to offer an inducement to obtain services of key employees, directors and consultants of the Company. The maximum number of shares issuable under the Plan in any calendar year shall be an amount equal to 15% of the issued and outstanding common stock on January 1 of each year. Under the Plan, the exercise price of an incentive stock option must be at least equal to 100% of the fair market value of the common stock on the date of grant (110% of fair market value in the case of options granted to employees who hold more than 10% of the Company's capital stock on the date of grant). The exercise price of a non-qualified stock option must not be less than the par value of a share of the common stock on the date of the grant. The term of an incentive or non-qualified stock option is not to exceed five years. F - 33 ================================================================================ AURORA GOLD CORPORATION Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- 6. STOCK OPTIONS - CONTINUED Pro-forma information regarding Net Loss and Loss per Share is required under SFAS No. 123, and has been determined as if the Company had accounted for its stock options under the fair value method of SFAS No. 123. The weighted average fair value of options granted in 1999 was $0.60 (1998 - $0.79). The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: no dividends, a risk-free interest rate of 5.39% (1998 - 5.45%), volatility factor of the expected market price of the Company's common stock of 180% (1998 - 91%) and a weighted average expected life of the option of 30 (1998 - 30) months. Under the accounting provisions of SFAS No. 123, the Company's 1999 and 1998 Net Loss and Loss per Share would have been increased to the pro-forma amounts indicated below: As Reported Pro-forma ------------------------ 1999 Net loss for the year $ 855,391 $ 974,764 Loss per share - basic and diluted $ 0.08 $ 0.09 1998 Net loss for the year $ 1,151,604 $1,161,604 Loss per share - basic and diluted $ 0.11 $ 0.11 A summary of the status of the Company's stock options as of December 31, 1999 and 1998 and the changes during the years then ended is as follows:
Weighted Weighted Number of Average Average Options Exercise Price Fair Value ------------------------------------------- Outstanding, January 1, 1998 - - Granted 1,155,000 $ 0.43 $ 0.79 ------------------------------------------- Outstanding and exercisable, December 31, 1998 1,155,000 $ 0.43 Granted 250,000 $ 0.70 $ 0.60 ------------------------------------------- Outstanding and exercisable, December 31, 1999 1,405,000 $ 0.48 ============================
F - 34 ================================================================================ AURORA GOLD CORPORATION Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- 6. STOCK OPTIONS - CONTINUED Expense for the options granted in 1999 and 1998 were allocated as follows: 1999 1998 ----------------- Professional fees - legal $ - $117,922 Salaries and consulting fees - 390,351 Exploration expenses 29,500 182,727 ----------------- $29,500 $691,000 ================= The expense related to the grant of options to employees and directors in 1998 consists of the difference between the exercise price and the market value of the Company's common stock at the grant date. Compensation expense for options granted to consultants in 1999 and 1998 is determined using the Black Scholes option pricing model. Stock options outstanding and exercisable at December 31, 1999 are as follows: Number Exercise Price Expiry ------------------------------------------ 505,000 $ 0.01 June 2003 450,000 $ 0.75 September 2003 200,000 $ 0.75 December 2003 50,000 $ 0.72 March 2004 200,000 $ 0.69 August 2004 --------- 1,405,000 ========= - -------------------------------------------------------------------------------- 7. RELATED PARTY TRANSACTIONS Related party transactions not disclosed elsewhere in these financial statements include: a) Included in accounts payable is $43,505 (1998 - $3,475) due to directors and a company controlled by a director in respect of salaries, consulting fees and reimbursement for expenses. b) During the year, salaries and consulting fees of $193,313 (1998 - $70,681) were paid or are payable to directors or companies controlled by directors. F - 35 ================================================================================ AURORA GOLD CORPORATION Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- 7. RELATED PARTY TRANSACTIONS - CONTINUED c) In September 1998, fixed assets of $14,449 were sold for their book value to a director. The Company is renting these assets back on a month-to-month basis. Except as otherwise noted, these transactions are recorded at the exchange amount, being the value established and agreed to by the related parties. - -------------------------------------------------------------------------------- 8. NON CASH INVESTING AND FINANCING ACTIVITIES In 1999 and 1998, the Company settled various debts with the issuance of shares of common stock as follows: 1999 Conversion Month of Settlement Indebtedness Price Shares -------------------------------------------------------- January $ 42,190 $ 0.84 50,000 February 7,000 $ 0.81 8,615 March 22,650 $ 0.72 31,510 August 15,000 $ 0.62 24,000 August 70,042 $ 0.62 112,066 August 3,500 $ 0.69 5,095 ------------- ------- $ 160,382 231,286 =================================== 1998 Conversion Month of Settlement Indebtedness Price Shares -------------------------------------------------------- September $ 37,194 $ 0.69 54,100 December 31,503 $ 0.75 42,005 ------------- ------- $ 68,697 96,105 =================================== F - 36 ================================================================================ AURORA GOLD CORPORATION Notes to the Consolidated Financial Statements (Expressed in U.S. Dollars) DECEMBER 31, 1999 AND 1998 - -------------------------------------------------------------------------------- 8. NON CASH INVESTING AND FINANCING ACTIVITIES - CONTINUED The carrying value of the indebtedness approximated the fair value of the common shares issued. Indebtedness of directors totalling $78,190 (1998 - $68,697) was settled with the issuance of 102,870 (1998 - 96,105) shares of common stock. Subsequent to year end, the Company reached agreement with a director to settle accounts payable to the director totalling $33,700 at December 31, 1999 for the issuance of 70,000 shares of common stock. - -------------------------------------------------------------------------------- 9. INCOME TAXES a) The Company has net losses for tax purposes totalling approximately $2,050,000 which may be applied against future taxable income. Accordingly, there is no tax expense for the years ended December 31, 1999 and 1998. The potential tax benefits arising from these losses have not been recorded in the financial statements. The Company evaluates its valuation allowance requirements on an annual basis based on projected future operations. When circumstances change and this causes a change in management's judgement about the realizability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current operations. The right to claim these losses expires as follows: 2011 $ 360,000 2012 564,000 2018 331,000 2019 795,000 ----------- $ 2,050,000 =========== b) The tax effects of temporary differences that give rise to the Company's deferred tax asset are as follows: 1999 1998 ---------------------- Tax loss carryforwards $ 697,000 $ 427,000 Mineral exploration expenses 39,000 39,000 Valuation allowance (736,000) (466,000) ---------------------- $ - $ - ====================== F - 37 EX-10.11 2 0002.txt SUBSCRIPTION AGREEMENT DATED AS OF JANUARY 29, 2001 BETWEEN: AURORA METALS (BVI) LIMITED - AND - BILLITON E&D 3 B.V. SUBSCRIPTION AGREEMENT THIS AGREEMENT is made as of the 29th day of January, 2001. BETWEEN: AURORA METALS (BVI) LIMITED, a company incorporated under the laws of the British Virgin Islands, having an office at Suite 517, 2 Old Brompton Road, London, SW7 3DQ, United Kingdom (the "Company") OF THE FIRST PART AND: BILLITON E&D 3 BV, a company incorporated under the laws of The Netherlands, having an office at Mariahoeveplein 6, 591 TV, The Hague, The Netherlands ("Billiton") OF THE SECOND PART WHEREAS Billiton wishes to subscribe for and purchase from the Company for an aggregate purchase price of $600,000, a total of 857,143 Units, each unit comprised of one share of common stock and one purchase warrant, each purchase warrant having the terms more particularly set forth herein; AND WHEREAS the Company wishes to issue and sell the Units to Billiton for a price of $0.70 per Unit, upon the terms and conditions hereinafter set forth; AND WHEREAS the Company has agreed that it will, contemporaneously with the execution of this Agreement, enter into an Option Agreement with Billiton UK Resources B.V., an Affiliate of Billiton, in the form set forth in Schedule "A" hereto. AND WHEREAS the parties have agreed to enter into a strategic alliance with respect to the conduct of further exploration and development of mineral properties in the Republic of Tunisia; NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and the covenants, agreements, warranties and payments herein set out and provided for, the parties hereto hereby respectively covenant and agree as follows: ARTICLE 1 - MISCELLANEOUS 1.1. DEFINITIONS Whenever used in this Agreement, including the recitals hereto, including, unless there is something in the subject matter or context inconsistent therewith, the following words and terms shall have the respective meanings ascribed to them as follows: (a) "IBCA" means the International Business Corporations Act of the British Virgin Islands, together with all regulations promulgated thereunder; (b) "ADDITIONAL EXPLORATION FUNDS" means an aggregate of $2,000,000 to be advanced by Billiton to the Company or otherwise expended by Billiton pursuant to Section 7.3 of the Option Agreement; (c) "AFFILIATE" means a company that is affiliated with another company if one of them is the subsidiary of the other, or both are subsidiaries of the same company, or each of them is controlled by the same person, company, partnership or party. In association with this definition, a company is a subsidiary of another company if: (i) it is controlled by: (A) that other company; (B) that other company and one or more company, each of which is controlled by that other company, or (C) two or more companies, each of which is controlled by that other company, or (ii) it is a subsidiary of a subsidiary of that other company. -2- In association with this definition, a company is controlled by a person, company, partnership or party if: (i) shares of the company carrying more than 50% of the votes for the election of directors are held, other than by way of security only, by or for the benefit of that person, company, partnership or party, and (ii) the votes carried by the shares mentioned in paragraph (i) are sufficient, if exercised, to elect a majority of the directors of the company. (d) "AGREEMENT" means this agreement and all schedules annexed hereto and any amendment hereto or any modifications hereof made in accordance with Section 1.3 hereof, and the terms "hereto", "herein", "hereby" and other similar terms are used in reference to this Agreement; (e) "ASSOCIATE" means, if used to indicate a relationship with any person, (i) a partner, other than a limited partner, of that person, (ii) a trust or estate in which that person has a substantial beneficial interest or for which that person serves as trustee or in a similar capacity, (iii) a company in respect of which that person beneficially owns or controls, directly or indirectly, voting securities carrying more than 10% of the voting rights attached to all outstanding voting securities of the company, or (iv) a relative, including the spouse, of that person or a relative of that person's spouse, if the relative has the same home as that person. (f) "BUSINESS DAY" means a day other than a Saturday, Sunday or any day on which chartered banks in London, England are not open for business during normal banking hours; (g) "CLOSING" means the completion of the sale to and the purchase by Billiton of the Units and the issuance thereof to Billiton as contemplated hereunder and the grant of the First Property Option by the Company to Billiton UK Resources B.V., an Affiliate of Billiton, as contemplated under the Option Agreement; (h) "CLOSING DATE" means the 29day of January, 2001 or such other date as the parties hereto may agree; (i) "CLOSING TIME" means 10:00 a.m. (London, England time) or such later time on the Closing Date as the parties hereto may agree; (j) "COMMON SHARE" means a share of common stock with a par value of $0.01 in the capital of the Company; -3- (k) "EXPLORATION EXPENDITURES" has the meaning set forth in Section 1.1(g) of the Option Agreement; (l) "FINANCIAL STATEMENTS" means the unaudited interim financial statements of the Company for the nine month periods ended September 30, 2000 and 1999 and the audited financial statements of the Company for the three month period ended March 31, 2000 and fiscal years ended December 31, 1999, 1998 and 1997 as reported on by the Company's independent accountants, in each case consisting of the balance sheets and the statements of stockholders equity and operations and cash flows each from June 17, 1997 (inception) to March 31, 2000 or September 30, 2000, as applicable and all notes and supplemental information thereto; (m) "FIRST PROPERTY OPTION" has the meaning set forth in Section 1.1(h) of the Option Agreement; (n) "HIGH MARSH" means High Marsh Holdings Ltd., a company incorporated under the laws of the British Virgin Islands; (o) "HIGH MARSH OPTION" means the option granted to Aurora Gold Corporation by High Marsh pursuant to that certain mineral property option agreement entered into between Aurora Gold Corporation and High Marsh dated January 20, 2000, as amended by letter agreement dated June 19, 2000 and further amended by agreements made as of and effective July 28, 2000 and January 25, 2001, a copy of which, as amended, is attached hereto as Schedule "D", and transferred to the Company by Aurora Gold Corporation by transfer agreement dated May 18, 2000 between Aurora Gold Corporation and the Company, a copy of which is attached hereto as Schedule "E"; (p) "INDEMNIFYING PARTY" and "INDEMNIFIED PARTY" shall have the meanings ascribed to them, respectively, in Section 5.5 hereof; (q) "INTEREST" means, without limitation, a legal, beneficial or equitable interest, whether direct, indirect, contingent or otherwise; (r) "OPTION AGREEMENT" means the Option Agreement dated the date hereof to be entered into between the Company and Billiton UK Resources B.V., an Affiliate of Billiton, which agreement will be in the form attached as Schedule "A" hereto; (s) "OPTIONED PROPERTIES" has the meaning set forth in Section 1.1(m) of the Option Agreement; (t) "OTCBB" means the over the counter bulletin board operated by the National Association of Securities Dealers Inc.; (u) "PROGRAM AND BUDGET" means (i) the exploration program and budget related to the expenditures of the Unit Proceeds, as set forth in Schedule "C" hereto; or (ii) the exploration program and budget related to the expenditure of the Additional Exploration Funds, as determined in accordance with Section 7.3 of the Option Agreement, as applicable; -4- (v) "SECURITIES" has the meaning set forth in Section 6.4(a) of this Agreement; (w) "SHARES" means, collectively, the Common Shares comprised in the Units, and the Common Shares issuable on exercise of the Warrants; (x) the phrase "TO THE BEST OF OUR KNOWLEDGE" or similar such expressions means to the best of the knowledge of such person(s), after due enquiry by them/him; (y) "UNIT PROCEEDS" means $600,000, being the aggregate price payable by Billiton to the Company in consideration for the issuance by the Company to Billiton of the Units; (z) "UNITS" means an aggregate of 857,143 units of the Company, each unit comprised of one Common Share and one Warrant; (aa) "U.S. SECURITIES ACT" means the United States Securities Act of 1933, as amended; and (bb) "WARRANT" means the non-transferable common share purchase warrant comprised in each Unit, each such warrant entitling Billiton to acquire one Common Share at any time prior to 5:00 p.m. (New York time) on the first anniversary of the Closing Date at a price of $0.85. 1.2. GENDER AND NUMBER Words importing the singular include the plural and vice-versa; and words importing gender include all genders. 1.3. ENTIRE AGREEMENT This Agreement, together with any and all agreements, documents and other instruments to be delivered pursuant thereto or simultaneously herewith (which, for the purposes of this Section are collectively referred to as the "Agreement"), constitutes the entire agreement between Billiton and the Company pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of and between the parties hereto, including, without limitation, the non-binding letter of intent between the Company and Billiton UK Resources B.V. dated -5- February 25, 2000, as amended, and there are no representations, warranties, covenants or other agreements among the parties hereto in connection with the subject matter hereof except as specifically set forth in the Agreement. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 1.4. HEADINGS The Articles, Sections, subsections and other headings contained herein are included solely for convenience, are not intended to be full or accurate descriptions of the contents hereof and shall not be considered part of this Agreement. 1.5. SCHEDULES The following Schedules attached to this Agreement are an integral part of this Agreement: Schedule "A" - Option Agreement; Schedule "B" - Outstanding Options, Rights, Warrants and Obligations; Schedule "C" - Program and Budget-Hammala and Kebbouch District Properties; Schedule "D" - High Marsh Option Agreement; Schedule "E" - Hammala Transfer Agreement; Schedule "F" - Kebbouch Transfer Agreement; Schedule "G" - Form of BVI Legal Opinion; and Schedule "H" - Form of Tunisian Legal Opinion. 1.6. CURRENCY Unless otherwise indicated, all dollar amounts contained in this Agreement are and shall be construed to be in dollars in the lawful currency of the United States. -6- 1.7. PERIOD TERMINATING ON A NON-BUSINESS DAY Should the period of time permitted under this Agreement to perform any obligation or take any action, including the delivery of a notice, terminate on a day other than a Business Day, then such period shall be extended to the next following Business Day. 1.8. ILLEGALITY, INVALIDITY, ENFORCEABILITY, ETC. In the event that one or more provisions of this Agreement or any agreement, document or other instrument required to be delivered hereunder or pursuant hereto shall be illegal, invalid or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions hereof or thereof shall not be affected or impaired thereby. ARTICLE 2 - SUBSCRIPTION FOR UNITS 2.1. SUBSCRIPTION FOR UNITS Billiton hereby subscribes for and agrees to purchase the Units and the Company hereby agrees to issue and sell the same to Billiton for the Unit Proceeds. The Company shall issue such Units to Billiton and simultaneously therewith grant to Billiton UK Resources B.V., an Affiliate of Billiton, the First Property Option pursuant to the Option Agreement on the Closing Date against receipt of the Unit Proceeds. ARTICLE 3 - CONDITIONS 3.1. CONDITIONS TO BILLITON'S OBLIGATIONS AT CLOSING The obligations of Billiton under this Agreement are subject to the fulfilment, on or before the Closing, of each of the following conditions, unless waived by Billiton, and each of the Company and Billiton hereby agree that each of these conditions has been inserted into this Agreement at the request of Billiton and for Billiton's own benefit and that they may, accordingly, be waived unilaterally by Billiton: -7- (a) Representations and Warranties. The representations and warranties of ------------------------------- the Company contained in Section 5.1 hereof shall be true on and as of the Closing. (b) Performance. The Company and its management shall have performed and ----------- complied with all covenants, agreements, obligations and conditions contained in the Agreement or in any agreement, document or other instrument entered into or prepared pursuant hereto that are required to be performed or complied with by the Company on or before the Closing. (c) Compliance Certificate. The President of the Company shall deliver to ----------------------- Billiton at the Closing a certificate certifying that to the best of such officer's knowledge the representations and warranties of the Company in Article 5 are true and correct as of the Closing Date and that the conditions specified in this Section 3.1 and the covenants of the Company in Article 6 have been fulfilled and stating that there has been no material adverse change in the business, affairs, prospects, operations, properties, assets or condition of the Company since September 30, 2000. (d) Approvals. The Company shall have obtained, and have provided to --------- Billiton evidence of such approvals including, without limitation, any required approvals from the government of the Republic of Tunisia with respect to the transfer to High Marsh of the mineral exploration properties contemplated in the High Marsh Option and the transfer of all Optioned Properties other than the Hammala exploration permit to the Company and any required consents of High Marsh under the High Marsh Option, which are necessary or advisable and shall also have obtained or received, all governmental, statutory, regulatory and judicial courts orders, consents and approvals necessary for the Closing and the performance of its obligations under the Option Agreement. (e) Proceedings and Documents. All corporate and other proceedings on the -------------------------- part of the Company in connection with the transactions contemplated by this Agreement and the Option Agreement to occur at or to have occurred prior to the Closing, and the various transactions, deals and acts required or agreed to be performed by the Company in connection therewith, shall have occurred on or before the Closing and all documents incidental thereto shall be reasonably satisfactory in form and substance to Billiton and Billiton's counsel, who shall have received all such counterpart, original and certified or other copies of such documents as they may reasonably request. (f) Opinion of Company's Counsel. Billiton shall have received legal ------------------------------- opinions from Harney Westwood & Riegels, counsel for the Company, and Samir Abdelly Law Firm, Tunisian counsel to the Company, which opinions shall be substantially in form attached as Schedule "G" and "H" hereto. -8- 3.2. CONDITIONS OF THE COMPANY'S OBLIGATIONS ON CLOSING The obligations of the Company under this Agreement are subject to the fulfilment on or before the Closing of each of the following conditions: (a) Representations and Warranties. The representations and warranties of ------------------------------- Billiton contained in Section 5.2 below shall be true on and as of the date of such Closing. (b) Proceedings and Documents. All corporate and other proceedings on the -------------------------- part of Billiton in connection with the transactions contemplated by this Agreement and the Option Agreement to occur at or to have occurred prior to the Closing and the various transactions, deals and acts required or agreed to be performed by Billiton in connection therewith shall have occurred on or before the Closing and all documents incident thereto shall be satisfactory in form and substance to the Company and the Company's counsel, who shall have received all such counterpart, original and certified or other copies of such documents as they may reasonably request. (c) Performance. Billiton shall have performed and complied with all ----------- agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by Billiton on or before the Closing. ARTICLE 4 - CLOSING 4.1. CLOSING TIME The Closing of the transactions contemplated hereby shall be completed at the offices of McCarthy T trault, 1300 - 777 Dunsmuir Street, Vancouver, British Columbia at the Closing Time. 4.2. CLOSING ARRANGEMENTS At the Closing Time, (a) Billiton shall deliver or cause to be delivered to the Company a cheque made payable to the Company on the Closing Date in the aggregate amount of the Unit Proceeds; (b) the Company shall deliver or cause to be delivered, to or upon the direction of Billiton one or more certificates representing the Common Shares and Warrants comprised in the Units purchased at the Closing Time registered in such manner as Billiton shall notify the Company by written direction prior to the Closing Time; and -9- (c) the Company shall also deliver or cause to be delivered to Billiton the requisite certificates, opinions and other documents contemplated hereby and shall deliver to Billiton UK Resources B.V. the Option Agreement duly and validly executed by the Company granting to Billiton UK Resources B.V. an option on the Optioned Properties. ARTICLE 5 - REPRESENTATIONS AND WARRANTIES 5.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Billiton and acknowledges that Billiton is relying upon such representations and warranties in entering into this Agreement and purchasing the Units that: (a) the Company has been duly incorporated and organized and is validly existing under the laws of the jurisdiction of its incorporation and has all requisite corporate capacity, power and authority to carry on its business as now conducted by it and as is presently proposed to be conducted by it and to own, lease and operate its assets; (b) the Company has no subsidiaries; (c) the Company is duly qualified to carry on business under the laws of the jurisdictions in which it carries on its business and is in good standing in each of such jurisdictions; (d) the Company has conducted and is conducting its business in compliance in all respects with all applicable licensing and environmental protection legislation, regulations or by-laws or other similar legislation, laws, by-laws, rules and regulations or the lawful requirements of any governmental or regulatory bodies and has not at any time and is not presently emitting, depositing, issuing or otherwise discharging, or allowing the emission, deposit, issuance or other discharge of any contaminant in the environment in violation of federal, provincial, municipal, local or foreign law, statutes, regulations, by-laws, decrees, rules, policies, directives, guidelines, orders, permits, licenses, certificates, approvals, and authorizations of or applicable to the Company, its properties or activities; (e) the Company is not aware of any licensing or environmental protection legislation, regulation, by-law or lawful requirement presently in force or proposed to be brought into force which the Company anticipates that it will be unable to comply with without materially adversely affecting its financial condition, results of operations, business or prospects in each jurisdiction in which its business is carried on; -10- (f) no consent, approval, permit, authorization, order of or filing with any court or governmental agency or body is required by the Company for the execution and delivery of and the performance by the Company of its obligations under this Agreement or the Option Agreement; (g) other than as set forth in Schedule "A" to the Option Agreement, to the best of the knowledge of the Company no party other than the Company has any right, title, claim or other Interest in the Optioned Properties; (h) none of the execution and delivery of this Agreement, the performance by the Company of its obligations hereunder, the sale of the Units hereunder, the issuance of the Common Shares comprising part of the Units, the issuance of the Warrants and the issuance of the Common Shares upon the due exercise of the Warrants and the execution and delivery of the Option Agreement and the performance by the Company of its obligations thereunder, will conflict with or result in a breach of (i) any statute, rule or regulation applicable to the Company; (ii) the constating documents or resolutions of the directors (or any committee thereof) or shareholders of the Company which are in effect at the date hereof; (iii) any mortgage, note, indenture, contract, agreement, instrument, lease or other document to which the Company is a party or by which it is bound; or (iv) any judgment, decree or order binding the Company or the property or assets of the Company; (i) the Financial Statements: (i) have been prepared in accordance with generally accepted accounting principles in United States consistently applied; (ii) present fairly the assets, liabilities and financial condition of the Company as at September 30, 2000, December 31, 1999, 1998 and 1997, and the results of its operations and the changes in its financial position for the periods then ended; (iii) are in accordance with the books and records of the Company; and (iv) contain and reflect all necessary adjustments for the fair presentation of the results of operations and the financial condition of the business of the Company for the periods covered thereby, and there has not been any material adverse change in the financial position of the Company, or its business, assets, liabilities or undertaking since September 30, 2000 other than as specified in material change reports filed under applicable securities laws; (j) the auditors of the Company who have audited the Company's financial statements for the period ended March 31, 2000 and the years ended December 31, 1998 and 1999 and who provided their audit report thereon are independent public accountants as required under applicable securities laws; -11- (k) the Company has filed all necessary tax returns and notices and, to the best of the knowledge of the Company after due inquiry, has paid all applicable taxes of whatever nature for all tax years to the date hereof to the extent such taxes have become due or have been alleged to be due and the Company is not aware of any tax deficiencies or interest or penalties accrued or accruing, or alleged to be accrued or accruing thereon where it might reasonably be expected to result in any material adverse change in the condition, financial or otherwise, or in the earnings or business affairs of the Company; (l) all of the press releases, material change reports or other documents filed by or on behalf of the Company or by or on behalf of Aurora Gold Corporation, the predecessor parent of the Company, since June 30, 1997 with any securities regulatory authority, were true and correct in all material respects, provided full, true and plain disclosure of all material facts relevant to the Company to the extent required and did not contain a misrepresentation as at the respective dates of such filings; (m) the business and operations of the Company have been and are currently being conducted in compliance with all applicable laws including, without limitation, those relating to employee health and safety and labour standards, and no major capital expenditures will be required in the foreseeable future to maintain such compliance; (n) no order ceasing or suspending trading in securities of the Company or prohibiting the sale of securities by the Company has been issued and is currently effective and, to the best of the Company's knowledge, no proceedings for this purpose have been instituted or are pending, contemplated or threatened; (o) the authorized capital of the Company consists of 50,000,000 Common Shares which at the date hereof, and prior to the subscription contemplated herein, 13,000,000 Common Shares are issued and outstanding as fully paid and non-assessable; (p) the Company is not a party to nor has it granted any agreement, warrant, option or right or privilege capable of becoming an agreement, for the purchase, subscription or issuance of any Common Shares or shares of the Company or securities convertible into or exchangeable for Common Shares or shares of the Company except pursuant to existing outstanding options, rights, warrants and obligations as disclosed in Schedule "B" attached hereto; (q) the attributes of the Units and Warrants will conform in all material respects with the terms and conditions of this Agreement and the Units and Warrants will, when issued, constitute valid and binding obligations of the Company; (r) the attributes of the Common Shares comply in all respects with the requirements of the IBCA; -12- (s) each of this Agreement and the Option Agreement has been duly authorized, executed and delivered by the Company and constitutes a legal valid and binding obligation of the Company enforceable in accordance with its terms except that: (i) the enforcement thereof may be limited by bankruptcy, insolvency and other laws affecting the enforcement of creditors' rights generally, (ii) rights of indemnity, contribution and waiver of contribution thereunder may be limited under applicable law and (iii) equitable remedies, including, without limitation, specific performance and injunctive relief, may be granted only in the discretion of a court of competent jurisdiction; (t) there is no person, firm or company acting, or purporting to act at the request of the Company, who is entitled to any brokerage or finder's fee in connection with the transactions contemplated herein. In the event that any person, firm or company acting or purporting to act for the Company at the request of the Company establishes a claim for any such brokerage or finder's fee from Billiton or any Affiliate thereof, the Company covenants to indemnify and hold harmless Billiton or such Affiliate with respect thereto and with respect to all costs reasonably incurred in the defence thereof; (u) there is not in the constating documents of the Company, or in any agreement, mortgage, note, debenture, indenture or other instrument or document to which the Company is a party or by which it is bound, any restriction upon or impediment to the declaration or payment of dividends by the directors of the Company or the payment of dividends by the Company to the holders of its Common Shares other than restrictions relating to the sufficiency of profits from which dividends may be paid; (v) Holladay Stock Transfer, Inc. at its principal office located in the City of Scottsdale, Arizona, has been duly appointed as the transfer agent and registrar for all of the outstanding Common Shares; (w) the Company has not withheld, and will not withhold from Billiton, any facts relating to the Company that would reasonably be considered material to a prospective purchaser of the Units; (x) at the Closing Time, all necessary corporate action will have been taken by the Company to create the Units and Warrants and to authorize the Company to enter into this Agreement and the Option Agreement and to allot and authorize the issuance of the Common Shares comprised in the Units and issuable upon the due exercise of the Warrants, and upon such issuance, the Common Shares comprised in the Units, or issuable upon the Warrants will be issued as fully paid and non-assessable Common Shares; (y) there are no actions, claims, investigations, suits, proceedings or inquiries (judicial or otherwise) pending or, to the best of the knowledge of the Company, threatened against or relating to the Company or any of its properties or assets at law or in equity or -13- before or by any governmental or regulatory agency or board, domestic or foreign, which may, in any way, have a material adverse effect on the Company's ability to perform its obligations hereunder or under the Option Agreement or on the condition (financial or otherwise) of the business, properties, assets, capital, net worth or results of operations of the Company; (z) to the best of the knowledge of the Company, none of the directors or officers of the Company, or any Associate or Affiliate of any of the foregoing, had, has or intends to have, other than ownership of Common Shares of the Company, any material interest, direct or indirect, in the transactions contemplated by this Agreement or the Option Agreement or in any undisclosed proposed material transaction with the Company which, as the case may be, materially affects, is material to or will materially affect the Company; (aa) all property rights or Interests of the Company in the Optioned Properties are owned or held by the Company as indicated in Schedule "A" to the Option Agreement, are in good standing, are valid and enforceable, are free and clear of any liens, charges or encumbrances and no royalty is payable in respect of any of them except as set out in Schedule "A" to the Option Agreement. No other property rights are necessary for the conduct of the Company's business. There are no restrictions on the ability of the Company to use, transfer or otherwise exploit any such property rights or Interests in the Optioned Property except as set out in Schedule "A" to the Option Agreement, and the Company does not know of any claim or basis for a claim that may adversely affect such rights or Interests; (bb) except as set out in Schedule "A" to the Option Agreement, the Company has no responsibility or obligation to pay, or have paid on their behalf, any commission, royalty or similar payment to any person with respect to its property rights or Interests in the Optioned Properties as of the Closing Date; (cc) the Company is in compliance in all material respects with all terms and provisions of all contracts, agreements, indentures, leases, policies, instruments and licences in connection with the conduct of their respective businesses and all such contracts, agreements, indentures, leases, policies, instruments and licences are valid and binding in accordance with their terms and in full force and effect, and no breach or default by the Company or event which, with notice or lapse or both, could constitute a material breach or material default by the Company, exists with respect thereto; (dd) the Company maintains in full force such types and amounts of insurance issued by issuers of recognized responsibility insuring the Company with respect to its businesses and properties, in such amounts and against such losses and risks as is deemed appropriate by the Company under its present circumstances and as is typical to the industry in which the Company participates, which insurance coverage includes, but is not limited to, $5,000,000 of third party liability insurance; and -14- (ee) the Company has obtained all consents and approvals as may be necessary from the board of directors and the shareholders of the Company to the transactions contemplated by this Agreement. 5.2. REPRESENTATIONS AND WARRANTIES OF BILLITON Billiton hereby represents and warrants to the Company: (a) Billiton has been incorporated and duly organized and is validly existing and in good standing under the laws of the Netherlands; (b) Billiton has full power and authority to execute, deliver and perform this Agreement and the Option Agreement and to subscribe for the Units. This Agreement and each other agreement entered into by Billiton in connection with this Agreement constitute valid and legally binding obligations of Billiton, enforceable against Billiton in accordance with their respective terms except that: (i) the enforcement thereof may be limited by applicable bankruptcy, insolvency and other laws affecting the enforcement of creditors' rights generally, (ii) rights of indemnity, contribution and waiver of contribution thereunder may be limited under applicable law and (iii) equitable remedies including, without limitation, specific performance and injunctive relief, may be granted only in the discretion of a court of competent jurisdiction; (c) The Units will be acquired by Billiton as principal for investment for Billiton's own account, not as a nominee or agent and not with a view to the distribution of any part thereof. Billiton has no present intention of selling, granting any participation in or otherwise distributing the same; (d) Except as set forth in this Agreement, no authorization, consent, approval or other order of, declaration to, or filing with, any governmental agency or body is required for or in connection with the valid and lawful authorization, execution and delivery by Billiton of this Agreement or any other agreements, instruments or documents entered into by Billiton pursuant to this Agreement, for or in connection with the valid and lawful authorization, issuance, sale and delivery of the Units; (e) Billiton is a resident of the jurisdiction set out on the first page of this Agreement; (f) Billiton is not a "U.S. Person" (as such term is defined in Regulation S under the U.S. Securities Act); (g) This subscription has not been solicited by Billiton in any other manner contrary to the U.S. Securities Act and has been executed by the parties hereto outside of the U.S.; -15- (h) Billiton acknowledges that (i) the Units, the Warrants and any Common Shares issued on exercise of the Warrants (together, the "Combined Securities") have not been registered under the U.S. Securities Act and may not be offered or sold in the United States unless registered under the U.S. Securities Act and the securities laws of all applicable states of the United States or an exemption from such registration requirements is available, (ii) the Warrants may not be exercised by, or on behalf of, a U.S. Person, and (iii) the certificates representing the Units, the Warrants and the Common Shares comprising the Units or issuable on exercise of the Warrants may contain a legend reflecting the restrictions set forth in clauses (i) or (ii) of this paragraph, however the Company has covenanted to file a registration statement under the U.S. Securities Act in respect of the Combined Securities; (i) Billiton is aware that the Units will be distributed under an exemption from the registration requirements of the U.S. Securities Act and states that the Units are not being acquired as a result of any material information about the affairs of the Company that is not generally known to the public save knowledge of this particular transaction; (j) Billiton has been independently advised as to the applicable resale restrictions imposed in respect of the Combined Securities by securities legislation in the jurisdictions in which Billiton resides and confirms that no representation has been made respecting the applicable resale restrictions for the Combined Securities in such jurisdictions and is aware of the risks and other characteristics of the Combined Securities and of the fact that Billiton may not be able to resell the Combined Securities except in accordance with the applicable securities legislation and regulatory policies; and (k) Billiton as at the date of this Agreement, owns directly or indirectly, or exercises control or direction over, no common shares in the capital stock of the Company or securities convertible into common shares in the capital stock of the Company. 5.3. NON-WAIVER No investigation made by or on behalf of Billiton, the Company or any of their respective advisors or agents at any time shall have the effect of waiving, diminishing the scope of or otherwise affecting any representation or warranty made herein by the other party hereto or made pursuant hereto. No waiver by Billiton or the Company of any condition, in whole or in part, shall operate as a waiver of any other condition. 5.4. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES (a) Notwithstanding any right of Billiton fully to investigate the affairs of the Company, and notwithstanding any knowledge of facts determined or determinable by Billiton pursuant to such investigation or right of -16- investigation, each of Billiton and the Company has the right to rely fully upon the representations, warranties, covenants and agreements of the other of them contained in this Agreement and of their Affiliates, officers and agents delivered pursuant to this Agreement. (b) All statements contained in any certificate or other instrument delivered by or on behalf of any party pursuant hereto or in connection with the transactions contemplated by this Agreement shall be deemed to be made by such party hereunder. All representations, warranties, covenants and agreements herein contained on the part of each of the parties hereto shall survive the Closing, the execution and delivery hereunder of share or security transfer instruments or other documents of title to the Units or the Common Shares and Warrants comprised in the Units or the Common Shares issuable on exercise of the Warrants and the payment of the consideration therefor. 5.5. INDEMNIFICATION The Company or Billiton, as the case may be (hereinafter referred to as the "Indemnifying Party"), hereby covenants and agrees to indemnify and save harmless Billiton or the Company, as the case may be (hereinafter referred to as the "Indemnified Party"), effective as and from the Closing, from and against any claims, demands, actions, causes of action, damage, loss, costs, liability or expense, including reasonable legal expenses (hereinafter in this Section 5.5 called "Claims") which may be made or brought against the Indemnified Party and/or which it may suffer or incur as a result of, in respect of or arising out of any non-fulfilment of any covenant or agreement on the part of the Indemnifying Party under this Agreement or any incorrectness in or breach of any representation or warranty of the Indemnifying Party contained herein or in any certificate or other document furnished by the Indemnifying Party pursuant or in relation thereto. The foregoing obligation of indemnification in respect of such claims shall be subject to the requirement that the Indemnifying Party shall, in respect of any Claim made by any third party, be afforded an opportunity at its sole expense to resist, defend and compromise the same in a timely manner. -17- ARTICLE 6 - COVENANTS 6.1. AFFIRMATIVE COVENANTS The Company covenants that: (a) Regulatory Approvals. The Company has taken, or will cause to be --------------------- taken, all steps necessary to obtain all consents and approvals from applicable regulatory authorities, and has made or will cause to be made all such regulatory filings as may be necessary, advisable or reasonably requested by Billiton, in connection with each and every one of the transactions contemplated under this Agreement and the Option Agreement. (b) Use of Unit Proceeds. The Company will expend or cause to be expended --------------------- $475,000 of the Unit Proceeds in accordance with Schedule "C" attached hereto. (c) Registration Statement. As soon as possible following attaining a "no ----------------------- comment" position from the staff of the U.S. Securities and Exchange Commission with respect to the Company's Registration Statement on Form 20-F dated June 19, 2000, as amended, the Company will (i) file a Registration Statement on Form F-1 to register the Common Shares comprised in the Units and the Common Shares issuable on exercise of the Warrants and will thereafter maintain such Registration Statement effective for so long as such Common Shares remain subject to resale restrictions in the United States and (ii) will jointly file with its listing NASD member/broker Form 15-2c-11 with the National Association of Securities Dealers for listing and trading of its Common Shares on the OTCBB during February 2001. (d) Payment of Expenses. All costs and expenses including, without --------------------- limitation, the fees and disbursements of legal counsel incurred in connection with this Agreement and the Option Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses. (e) No Amendment to Agreements. The Company covenants with Billiton that ---------------------------- it will not amend or agree to any amendment of any agreement which in any way relates, or otherwise affects, the Optioned Properties without the prior written consent of Billiton. 6.2. CONFIDENTIALITY For a period of one year from the Closing Date, the parties to this Agreement shall keep confidential all books, records, files and other information supplied by any party to one of the other parties or their employees, agents or representative in connection with this Agreement or the Option Agreement or in respect of the activities carried out on any of the Optioned Property by a party, or related to the sale of minerals, or other products derived from such Optioned Property, including all analyses, reports, studies or other documents -18- prepared by a party or its employees, agents or representatives, which contain information from, or otherwise reflects such books, records, files or other information. The parties shall not and shall ensure that their employees, agents or representatives do not disclose, divulge, publish, transcribe, or transfer such information, all or in part, without the prior written consent of the other parties, which consent may not be arbitrarily withheld and which prohibition shall not apply to such information or any part thereof to the extent that: (a) prior to its receipt by a party such information was already in the possession of such party or its employees, agents or representatives; (b) it is required to be publicly disclosed pursuant to applicable securities or corporate laws; (c) such information becomes generally disclosed to the public, other than as a consequence of a breach hereof by one of the parties hereto; or (d) such information is provided to a third party in the ordinary course of business and such third party enters into a confidentiality agreement substantially in the form of this Section 6.2 without this subsection (d). 6.3. CO-OPERATION BY BILLITON Billiton shall co-operate with the Company in obtaining all necessary consents and approvals referred to in Section 3.1(d) of this Agreement. 6.4. MAINTENANCE OF BILLITON'S SHARE OWNERSHIP Except as otherwise provided below and provided that the Option Agreement is in good standing, the Company will perform and comply with the covenants set forth in this Section 6.4 from the date of the Closing and thereafter until the later of the fourth anniversary of the Closing Date and the second occasion on which Billiton elects not to acquire Securities, which the Company is prepared, under applicable securities laws and the terms of this Agreement, to issue to Billiton, after receiving a Notice (as defined in Section 6.4(b)) from the Company: -19- (a) Pre-Emptive Rights. In the event that the Company proposes to issue ------------------- any equity securities, including securities convertible or exchangeable for equity securities, (the "Securities") pursuant to a private placement or public offering (provided however that if such issuance of Securities involves securities convertible into or exchangeable for Common Shares, such Securities will be deemed to have been converted into or exchanged for equity securities for the purpose of determining whether such issuance falls within this subsection), Billiton or an Affiliate designated by Billiton shall have a right to acquire from the Company on the terms set out in subsection (b), such number of Securities so that immediately after the consummation of such issuance Billiton's Outstanding Interest (as hereinafter defined) remains the same as immediately prior to the consummation of such issuance and such acquisition. Notwithstanding anything in this subsection to the contrary, Billiton shall not have the right to maintain its Outstanding Interest with respect to any Securities issued by the Company, under (i) an employees' stock plan and (ii) in lieu of cash payments to employees or providers of services. (b) Notice. Within 5 Business Days after receipt of notice ("Notice") from ------ the Company in reasonable detail of the proposed issuance, Billiton shall, if it elects to acquire Securities pursuant hereto, give written notice to the Company of its irrevocable commitment to purchase or cause an Affiliate of Billiton to purchase such Securities from the Company simultaneously with the consummation of such proposed issuance at a price and on other terms and conditions equal to the price paid and the other bona fide terms and conditions agreed to by the other purchasers of such Securities provided the Company may require that Billiton's or such Affiliate's participation in such proposed issuance of Securities does not result in the Company being required to prepare any additional disclosure documents which would not have been required if Billiton or such Affiliate did not participate and the Company may consequently indicate to Billiton or such Affiliate as a result of such requirement. (c) Meaning of "Outstanding Interest". As used herein, the term ------------------------------------ "Outstanding Interest" means: (i) the percentage of the outstanding Securities of the Company represented by the aggregate Securities held by Billiton and any Affiliate of Billiton upon Closing. For greater certainty, the Company and Billiton hereby agree and acknowledge that, on the Closing Date, Billiton's Outstanding Interest shall be eleven point six five percent (11.65%); (ii) subject to Section 6.4(d), in the event Billiton elects at any time not to acquire Securities after receiving a Notice from the Company pursuant to subsection (b) above, the percentage of outstanding Securities of the Company represented by the Securities held by Billiton immediately following the consummation of the issuance of Securities for which the Company had given Billiton a Notice and in which Billiton declined to participate; or -20- (iii) in the event Billiton or any Affiliate of Billiton sells, transfers or otherwise disposes of any Securities of the Company other than to Billiton or an Affiliate of Billiton, the percentage of the outstanding Securities of the Company represented by the Securities held by Billiton together with such Affiliates shall be reduced by the number of Securities sold or otherwise disposed of by Billiton and/or such Affiliates. (d) Securities Carried Forward. In the event that any distribution of ---------------------------- Securities by the Company to Billiton or an Affiliate of Billiton pursuant to the provisions of Section 6.4(a) would not be exempt from the registration requirements of applicable securities laws or the Company otherwise declines to issue such Securities to Billiton pursuant to the provisions of Section 6.4(b), then in either event, such number of Securities required to be offered by the Company to Billiton or an Affiliate of Billiton pursuant to Section 6.4(a) shall be carried forward and included in any subsequent offering of Securities by the Company to Billiton pursuant to Section 6.4(a) and, for greater certainty, the provisions of Section 6.4(c)(ii) shall not apply to any Securities not acquired by Billiton or an Affiliate of Billiton pursuant to Section 6.4(a) for so long as such offer of Securities is required to be carried forward pursuant hereto. (e) The provision of this Section 6.4 shall no longer be operative if Billiton's outstanding interest shall at any time be less than five percent (5%). ARTICLE 7 - MEDIATION 7.1. MEDIATION All disputes arising out of or in connection with this Agreement or in respect of any defined legal relationship associated herewith or derived hereunder shall, subject to Section 7.2, be referred to a mediator chosen by mutual agreement of both parties. The mediator shall be a person with appropriate technical competence to assist the parties to resolve their dispute. The mediator agreed by the parties shall assist the parties to resolve their dispute in accordance with the Center for Dispute Resolution ("CEDR") Model Mediation Procedure, which mediation process shall be non-binding. In the event that the parties are unable to reach agreement on a choice of mediator or are otherwise unable to resolve their dispute through the use of such mediator, then either party shall be free to have the dispute resolved through the Courts of England. -21- 7.2. INTERIM RELIEF Nothing contained in this Article shall be interpreted as restricting the right of either Billiton or the Company to seek interim relief (whether legal, equitable or otherwise) from a court of competent jurisdiction, pending formal resolution of any dispute between the parties hereto. ARTICLE 8 - FURTHER CO-OPERATION 8.1. CO-OPERATION Each of the Company and Billiton: (a) recognize the possible mutual advantages to be realized from their co-operation in the conduct of the exploration and development of mineral properties in the Republic of Tunisia by or in any project involving the Company or any Affiliate of the Company; and (b) agree to co-operate and to consult with each other with respect to exploration and acquisition opportunities coming to the attention of either party in the Republic of Tunisia. 8.2. EXCLUSIVITY The parties hereto agree that for a period expiring on the later of 3 years from the date hereof and the termination of the Option Agreement or any joint venture agreement contemplated therein, (a) the Company agrees, and agrees to cause any Affiliate of the Company, to offer to Billiton the right to participate in mineral prospects in the Republic of Tunisia identified or acquired by the Company on terms and conditions substantially the same as are contained in the Option Agreement; and (b) Billiton agrees, and agrees to cause any Affiliate of Billiton, to offer to the Company the right to participate in any further mineral prospects in the Republic of Tunisia identified or acquired by Billiton on terms and conditions substantially the same as contained in the Option Agreement. -22- ARTICLE 9 - GENERAL 9.1. PUBLIC NOTICES All public notices to third parties and all other publicity concerning the transactions contemplated by this Agreement, shall be jointly planned and co-ordinated by the parties hereto and no parties hereto shall act unilaterally in this regard without the prior approval of the others of them, such approval not to be unreasonably withheld, unless such disclosure shall be required to meet timely disclosure obligations of either Billiton or the Company under applicable securities laws and stock exchange rules in circumstances where prior consultation with the other parties is not possible in any manner or in any event. 9.2. TIME Time shall be of the essence hereof. 9.3. NOTICES Any notice or other writing required or permitted to be given hereunder or for the purposes hereto to any party shall be sufficiently given if delivered personally, or if sent by prepaid registered mail or if transmitted by facsimile or other form of recorded communication tested prior to transmission to such party: (a) In the case of a notice to the Company at: Aurora Metals (BVI) Ltd. Suite 517 2 Old Brompton Road London, SW7 3DQ United Kingdom Attention: John James Facsimile No. 011-44-207-581-4445 -23- (b) In the case of a notice to Billiton, at: Billiton E&D 3 B.V. c/o Billiton International Development Limited 1 - 3 Strand London, WC2N 5HA United Kingdom Attention: Alain Liger Facsimile No. 011-44-207-747-3909 with a copy to: McCarthy Tetrault Barristers and Solicitors P.O. Box 10424, Pacific Centre 1300 - 777 Dunsmuir Street Vancouver, British Columbia V7Y I K2 Attention: George W. Holloway Facsimile No. (604) 643-7900 or at such other address or addresses as the party to whom such writing is to be given shall have last notified the party giving the same in the manner provided in this Section 9.3. Any notice delivered to the party to whom it is addressed hereinbefore provided shall be deemed to have been given and received on the day it is so delivered at such address, provided that if such day is not a Business Day, then the notice shall be deemed to have been given and received on the second Business Day next following such day. Any notice mailed as aforesaid shall be deemed to have been given and received on the seventh Business Day next following the date of its mailing. Any notice transmitted by facsimile or other form of recorded communication shall be deemed to be given and received on the first Business Day after its transmission. 9.4. ASSIGNMENT The rights and obligations hereunder relating to the subscription for the Units and this Agreement are not assignable other than by Billiton to an Affiliate of Billiton. Subject thereto, this Agreement shall enure to the benefit of and be binding upon Billiton and the Company and their respective successors (including any successor by reason of amalgamation, merger or other corporate reorganization of either party) and permitted assigns. For greater certainty, nothing herein shall prevent or limit Billiton from transferring, disposing of or otherwise dealing with its shareholdings in the Company. -24- 9.5. SEVERABILITY Each and every term, condition and provision of this Agreement is and shall be severable one from the other, and in the event that any term, condition or provision hereof is at any time declared by a court of competent jurisdiction to be void, invalid or unenforceable, same shall not extend to invalidate, make void or unenforceable any other term, condition or provision of this Agreement. 9.6. FURTHER ASSURANCES The parties hereto shall with reasonable diligence do all such things and provide all such reasonable assurances and assistance as may be required to consummate the transactions contemplated hereby, and each such party shall provide such further documents or instruments required by the other party as may reasonably be necessary or desirable to give effect to the terms and purpose of this Agreement and carry out its provisions, whether before or after the Closing. 9.7. COUNTERPARTS This Agreement may be simultaneously executed and delivered in counterparts, each of which when so executed and delivered shall be deemed to be an original and such counterparts together shall constitute one and the same agreement. 9.8. EXECUTION BY TELECOPY This Agreement may be executed by the parties and transmitted by telecopy and if so executed and transmitted this Agreement will be for all purposes as effective as if the parties had delivered an executed original Agreement. -25- 9.9. GOVERNING LAW This Agreement, including all Schedules annexed hereto and all other agreements, documents and other instruments delivered in connection herewith, shall be governed by and construed in accordance with the laws of England. IN WITNESS WHEREOF the parties have hereunto duly executed this Agreement as of the date and year first above written. AURORA METALS (BVI) LIMITED By: -------------------------------------- BILLITON E&D 3 B.V. By: -------------------------------------- -26- EX-10.12 3 0003.txt OPTION AGREEMENT THIS AGREEMENT is made as of the 29 day of January, 2001. BETWEEN: AURORA METALS (BVI) LIMITED, a company incorporated under the laws of the British Virgin Islands, having an office at Suite 517, 2 Old Brompton Road, London, SW7 3DQ, United Kingdom (the "Optionor") OF THE FIRST PART AND: BILLITON UK RESOURCES B.V., a company incorporated under the laws of The Netherlands, having an office at Mariahoeveplein 6, 2591 TV, The Hague, The Netherlands (the "Optionee") OF THE SECOND PART WHEREAS: A. The Optionor has direct or indirect Interests in certain mineral exploration properties in the Republic of Tunisia (the "Optioned Properties") which are more particularly described in Schedule "A" attached hereto; B. The Optionor has agreed to grant an Option to the Optionee to acquire an Interest in the Optioned Properties on the terms and conditions hereinafter set forth; and C. The Optionor has agreed that it will contemporaneously with the execution of this Agreement enter into a Subscription Agreement in the form set forth as Schedule "B" hereto. NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants contained herein and other good and valuable consideration paid by the Optionee to the Optionor, the receipt of which is hereby acknowledged, the parties agreed as follows: ARTICLE 1 - DEFINITIONS 1.1. For the purposes of this Agreement the following words and phrases shall have the following meanings, namely: (a) "AFFILIATE" means a company that is affiliated with another company if one of them is the subsidiary of the other, or both are subsidiaries of the same company, or each of them is controlled by the same person, company, partnership or party. In association with this definition, a company is a subsidiary of another company if: (i) it is controlled by: 1.0.a.i.1. that other company; 1.0.a.i.2. that other company and one or more company, each of which is controlled by that other company, or 1.0.a.i.3. two or more companies, each of which is controlled by that other company, or (ii) it is a subsidiary of a subsidiary of that other company. In association with this definition, a company is controlled by a person, company, partnership or party if: (i) shares of the company carrying more than 50% of the votes for the election of directors are held, other than by way of security only, by or for the benefit of that person, corporation, partnership or party, and (ii) the votes carried by the shares mentioned in paragraph (i) are sufficient, if exercised, to elect a majority of the directors of the company.; (b) "AREA OF INTEREST" means the area lying within the territory of the Republic of Tunisia which is located within two (2) kilometres of the perimeter of the Optioned Properties; (c) "BUSINESS DAY" has the meaning set forth in Section 1.1(g) of the Subscription Agreement; (d) "CLOSING" has the meaning set forth in Section 1.1(i) of the Subscription Agreement; (e) "COMMENCEMENT OF COMMERCIAL PRODUCTION" means the first day of the month following which a mine (including any associated processing or treatment facilities) on any portion of the Optioned Properties has operated for 30 consecutive days at not less than 70% of its designed capacity; -2- (f) "COMMON SHARE" has the meaning set forth in Section 1.1(l) of the Subscription Agreement; (g) "EXPLORATION EXPENDITURES" in respect of the Optioned Properties, means the sum of (i) all costs of acquisition and maintenance and all exploration and development expenditures and all other costs and expenses of whatsoever kind or nature, incurred or chargeable by the Operator with respect to the exploration or development of the Optioned Properties and the placing of the Optioned Properties into commercial production, and (ii) as compensation for general overhead expenses which the Operator will incur, an amount equal to 10% of all amounts included in subparagraph (i) above to be calculated and paid quarterly. For greater certainty, neither the expenditure of Unit Proceeds nor the expenditure of funds received by the Optionor from the Optionee on exercise of the Warrants shall be deemed to constitute Exploration Expenditures for the purposes of this agreement; (h) "FIRST PROPERTY OPTION" means the option granted by the Optionor to the Optionee to acquire a 51% Interest in the Optioned Properties as more particularly set forth in this Agreement; (i) "HIGH MARSH OPTION" has the meaning set forth in Section 1.1(o) of the Subscription Agreement (j) "INTEREST" means, without limitation, a legal, beneficial or equitable interest, in mineral properties, whether direct, indirect, contingent or otherwise, including, without limitation, options on mineral properties or on shares of corporations having a legal, beneficial or equitable interest in mineral properties, whether direct, indirect, contingent or otherwise; (k) "LIBOR" means the rate per annum (rounded upwards if necessary to the nearest whole one-sixteenth of one percent (1/16%)) equal to the average of the offered rates as of 11:00 a.m. London time appearing on the display designated as page "LIBO" on the Reuter Moniter Money Rates Service for U.S. dollar deposits for the relevant period of time; (l) "OPERATOR" shall mean the Optionor unless the Optionee elects, once it has elected to participate in the First Property Option by commencing the funding of Exploration Expenditures as contemplated in Section 1.12, to become the Operator of the Optioned Properties in which case the Optionee will upon such election become the Operator in respect of the Optioned Properties; (m) "OPTION" or "OPTIONS" means, collectively, the First Property Option and, if granted, the Second Property Option; (n) "OPTIONED PROPERTIES" means those certain mineral exploration properties more particularly described in Schedule "A" hereto; -3- (o) "OPTION PERIOD" means: (i) with respect to the First Property Option, the period from the date hereof to and including January 1, 2004 unless the Option is earlier exercised in accordance with Section 1.12; and (ii) with respect to the Second Property Option, the period from the date of exercise of the First Property Option to and including the date of satisfaction of the requirements set forth in Section 1.19; (p) "PRIVATE PLACEMENT" means the purchase and sale of the Units as contemplated in the Subscription Agreement; (q) "PROGRAM AND BUDGET" has the meaning set forth in Section 1.1(t) of the Subscription Agreement; (r) "PROJECT NET REVENUE" means the gross proceeds from the sale of production from the Optioned Properties less cash operating costs of production; (s) "SECOND PROPERTY OPTION" means the option which, upon exercise of the First Property Option, will be deemed to have been granted by the Optionor to the Optionee to acquire an additional 19% Interest in the Optioned Properties as provided in Section 1.17; (t) "SUBSCRIPTION AGREEMENT" means the subscription agreement dated as of January 29, 2001 between the Optionor and Billiton E&D 3 B.V., an affiliate of the Optionee, in the form attached as Schedule "B" hereto; (u) "UNIT PROCEEDS" has the meaning set forth in Section 1.1(z) of the Subscription Agreement; (v) "UNITS" has the meaning set forth in Section 1.1(aa) of the Subscription Agreement; and (w) "WARRANT" has the meaning set forth in Section 1.1(bb) of the Subscription Agreement. 1.2 ENTIRE AGREEMENT This Agreement, together with any and all agreements, documents and other instruments to be delivered pursuant hereto or simultaneously herewith (which, for the purposes of this Section are collectively referred to as the "Agreement"), constitutes the entire agreement between the Optionee and the Optionor pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of and between the parties hereto, including, without limitation, the non-binding letter of intent between Aurora Gold Corporation and Billiton UK -4- Resources B.V. dated February 25, 2000, as amended, and there are no representations, warranties, covenants or other agreements among the parties hereto in connection with the subject matter hereof except as specifically set forth in the Agreement. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 1.3. HEADINGS The Articles, Sections, subsections and other headings contained herein are included solely for convenience, are not intended to be full or accurate descriptions of the context hereof and shall not be considered part of this Agreement. 1.4. SCHEDULES The following Schedules attached to this Agreement are an integral part of this Agreement: Schedule "A" - Optioned Properties; Schedule "B" - Subscription Agreement; Schedule "C" - Summary of Major Joint Venture Agreement Terms; and Schedule "D" - Net Proceeds Interest. ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF THE OPTIONOR 1.5. The representations and warranties of the Optionor contained in the Subscription Agreement shall be deemed to be incorporated herein by reference and the Optionor confirms, agrees and acknowledges that the Optionee will have the benefit of all of the representations and warranties provided to or for the benefit of Billiton E&D 3 B.V. under the Subscription Agreement as if such representations and warranties were made directly to the Optionee under this Agreement, and the Optionor further acknowledges that the Optionee has relied on the fact that the representations and warranties of the Optionor to Billiton E&D 3 B.V. as contained in the Subscription Agreement are also being provided to or for the benefit of the Optionee in entering into this Agreement. 1.6. The representations and warranties incorporated by reference in Section 1.5 are provided for the exclusive benefit of the Optionee and a breach of any one or more thereof may be waived by the Optionee in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty, and the representations and warranties incorporated by reference in Section 1.5 shall survive the execution hereof. 1.7. The representations and warranties incorporated by reference in Section 1.5 shall be deemed to apply to all assignments, transfers, conveyances or other documents transferring to the Optionee or to any Affiliate of the Optionee any Interest to be acquired hereunder and there shall not be any merger of any covenant, representation or warranty in such assignments, transfers, conveyance or documents, any rule or law, in equity or statute to the contrary. -5- ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE 1.8. The Optionee hereby represents and warrants to the Optionor as follows: (a) the Optionee has been incorporated and duly organized and is validly existing and in good standing under the laws of The Netherlands; (b) the Optionee has full power and authority to execute, deliver and perform this Agreement. This Agreement and each other agreement entered into by the Optionee in connection with this Agreement constitute valid and legally binding obligations of the Optionee, enforceable against the Optionee in accordance with their respective terms except that: (i) the enforcement thereof may be limited by applicable bankruptcy, insolvency and other laws affecting the enforcement of creditors' rights generally, (ii) rights of indemnity, contribution and waiver of contribution thereunder may be limited under applicable law and (iii) equitable remedies including, without limitation, specific performance and injunctive relief, may be granted only in the discretion of a court of competent jurisdiction; (c) except as set forth in this Agreement, no authorization, consent, approval or other order of, declaration to, or filing with, any governmental agency or body is required for or in connection with the valid and lawful authorization, execution and delivery by the Optionee of this Agreement or any other agreements, instruments or documents entered into by the Optionee pursuant to this Agreement; and (d) there are no claims for brokerage commissions or finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangements made by or on behalf of the Optionee. 1.9. The representations and warranties of the Optionee set forth in Section 1.8 are provided for the exclusive benefit of the Optionor and a breach of any one or more thereof may be waived by the Optionor in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty, and the representations and warranties contained in Section 1.8 shall survive the execution hereof. 1.10. The representations and warranties set forth in Section 1.8 shall be deemed to apply to all assignments, transfers, conveyances or other documents transferring to the Optionee any Interest to be acquired hereunder and there shall not be any merger of any covenant, representation or warranty in such assignments, transfers, conveyance or documents, any rule or law, in equity or statute to the contrary. -6- ARTICLE 4 - GRANT AND EXERCISE OF FIRST PROPERTY OPTION 1.11. The Optionor hereby grants to the Optionee the First Property Option which constitutes the sole and exclusive right and option to acquire an undivided 51% Interest in and to the Optioned Properties free and clear of all charges, encumbrances, claims, royalties and net profit interests of whatsoever nature except as set forth in Schedule "A" attached hereto, it being agreed and understood that the Optionee shall have the right but not the obligation to elect by notice in writing to the Optionor within one year of the Closing to proceed to exercise the First Property Option. 1.12. If the Optionor is the Operator, such First Property Option shall be exercised without any further act on the part of the Optionee or the Optionor upon the Optionee advancing to the Operator sufficient funds to enable the Operator to incur Exploration Expenditures of a minimum of $500,000 on the Optioned Properties prior to December 1, 2002 and to enable the Operator to incur cumulative Exploration Expenditures on the Optioned Properties of $1,000,000 prior to January 1, 2004. It is further agreed that Exploration Expenditures incurred prior to December 1, 2002 in excess of $500,000 may be credited towards the subsequent year's funding requirement. 1.13. In the event that the Optionee elects to become Operator pursuant to Section 1.27 or the Optionor elects to withdraw as Operator during the Option Period, the First Property Option shall be exercised without any further act on the part of the Optionee or the Optionor upon the Optionee as Operator (i) incurring Exploration Expenditures of a magnitude and within the time stipulated in Section 1.12 and (ii) in the event the Optionee elects to become Operator pursuant to Section 1.27, paying to the Optionor an amount equal to 5% of Exploration Expenditures incurred from the date of election to become Operator to the date of exercise of the First Property Option. 1.14. Subject to Article 17, if and when such First Property Option has been exercised a 51% undivided right, title and/or Interest in and to the Optioned Properties shall vest in the Optionee or at the sole election of the Optionee, in a designated Affiliate of the Optionee, free and clear of all charges, encumbrances, claims, royalties or net profit interests of whatsoever nature other than as set forth in Schedule "A" attached hereto and the Optionor shall forthwith thereafter take all such steps and actions as are necessary to convey such interest to the Optionee or such designated Affiliate, as the case may be. ARTICLE 5 - FORMATION OF JOINT VENTURE 1.15. Unless the parties otherwise agree, the parties shall, on the date of exercise of the First Property Option in accordance with Section 1.12, be deemed to have entered into a joint venture to pursue the exploration, development, construction and mining of the Optioned Properties as joint venturers with the Optionee having an undivided 51% Interest in the joint -7- venture and the Optionor having an undivided 49% Interest in the joint venture. The joint venture, at formation, shall have a deemed expenditure base of $1,960,784 representing deemed Exploration Expenditures of $960,784 by the Optionor, and $1,000,000 by the Optionee, and with each party having responsibility for funding its proportionate share of future exploration and development expenditures, subject to the terms of the Second Property Option. 1.16. Upon exercise of the First Property Option the parties hereto shall forthwith negotiate and conclude a joint venture agreement which shall contain provisions to the effect that: (a) the Optionor shall be designated as initial Operator of the Optioned Properties; (b) work programs covering a maximum period of one year in respect of further Exploration Expenditures will be prepared and submitted by the Operator to each of the participants who will then have 60 days to consider and approve such work program, propose an alternative work program or decline to participate in such work program; (c) an election to proceed with a work program prepared and submitted by the Operator will make a participant liable to pay its proportionate share of such Exploration Expenditures and any cost overruns in respect of such work program up to but not exceeding 10% of the estimated Exploration Expenditures under such work program; (d) if it appears that Exploration Expenditures will exceed by greater than 10% those estimated by the Operator in respect of a work program, the Operator will immediately give written notice to the participants outlining the nature and extent of such cost overruns. If such cost overruns are accepted by all of the participants, then each participant will, on demand, pay to the Operator its proportionate share of such cost overruns. If any participant does not accept such cost overruns, all of such cost overruns will be at the Operator's sole expense and will be deemed not to be Exploration Expenditures unless the participants otherwise agree; (e) in the event that either party's Interest is subject to dilution pursuant to the provisions of the joint venture agreement, such party's Interest shall be recalculated based upon the proportion which such party's deemed Exploration Expenditures on the Optioned Properties represents of the total deemed Exploration Expenditures of all parties on the Optioned Properties; and (f) should the Interest of any participant in the joint venture fall below 10%, such participant shall be deemed to have exchanged its Interest therein for a net proceeds interest of 5%, as calculated in accordance with Schedule "D" attached hereto. and shall contain such other terms as are standard in the industry including, but not limited to, those summarized in Schedule "C" attached hereto. -8- ARTICLE 11 - GRANT AND EXERCISE OF SECOND PROPERTY OPTION 1.17. Upon exercise of the First Property Option, the Optionor shall be deemed to have granted to the Optionee a further, irrevocable, sole and exclusive right and option to acquire an additional 19% Interest in the Optioned Properties. 1.18. At any time after exercise of the First Property Option but prior to the date upon which cumulative Exploration Expenditures on the Optioned Properties from the date of exercise of the First Property Option exceed $2,000,000, the Optionee shall have the right to exercise the Second Property Option. 1.19. The Second Property Option shall be exercised without any further act on the part of the Optionee or the Optionor upon the Optionee (i) giving written notice to the Optionor of such exercise, and (ii) committing to provide the Optionor's pro rata share of project financing to the Commencement of Commercial Production on the basis that such amount would bear interest at Libor plus 4.0% and would be repaid by the Optionor to the Optionee from 90% of the Optionor's share of Project Net Revenue. 1.20. Upon exercise of the Second Property Option by the Optionee, an additional 19% undivided right, title and/or Interest in and to the Optioned Properties shall vest in the Optionee or at the discretion of the Optionee, in a designated Affiliate of the Optionee, free and clear of all charges, encumbrances, claims, royalties or net profit interests of whatsoever nature other than as set forth in Schedule "A" attached hereto and the Optionor shall forthwith thereafter take all such steps and actions as are necessary to convey such interest to the Optionee or such designated Affiliate, as the case may be. The terms of the joint venture agreement referred to in Article 5 shall continue to apply, with the interests of the participants thereunder adjusted to reflect the transfer and assignment to, and vesting in, the Optionee of such additional 19% undivided right, title and Interest in and to Optioned Properties. 1.21. Notwithstanding anything contained in this agreement, an election by the Optionee to exercise the Second Property Option shall not be deemed to constitute a commitment on behalf of the Optionee to place the Optioned Properties into commercial production. ARTICLE 7 - ACTIVITIES OF OPERATOR DURING OPTION PERIOD 1.22. During the Option Period, the Optionor will, subject to the rights of the Optionee as set forth in Section 1.27 hereof, be Operator of the Optioned Properties. The Operator shall have full right, power and authority to do everything necessary or desirable to determine the manner of exploration and development of such Optioned Properties and, without limiting the generality of the foregoing, the right, power and authority to: -9- (a) regulate access to such Optioned Properties subject only to the right of representatives of the Optionor and the Optionee to have access to such Optioned Properties at all reasonable times for the purpose of inspecting work being done thereon but at their own risk and expense; (b) employ and engage such employees, agents and independent contractors as the Operator may consider necessary or advisable to carry out its duties and obligations hereunder and in connection therewith to delegate any of its powers and rights to perform its duties and obligations hereunder to such employees, agents and independent contractors; (c) execute all documents, deeds and instruments, do or cause to be done all such acts and things and give all such assurances as may be necessary to maintain good and valid title to such Optioned Properties and each party hereby irrevocably constitutes the Operator its true and lawful attorney to give effect to the foregoing and hereby agrees to indemnify and save the Operator harmless from any and all costs, loss or damage sustained or incurred without gross negligence or bad faith by the Operator directly or indirectly as a result of the exercise of its powers; and (d) conduct such title examination and cure such title defects as may be advisable in the reasonable judgement of the Operator. 1.23. The Operator shall deliver to each of the Optionee and the Optionor, on or before July 1 of each year prior to the exercise of the First Property Option, and thereafter, within 60 days of completion of a Program and Budget, a report, including up-to-date maps, if any, describing the status of title of the Optioned Properties, together with the results of the Program and Budget then completed on the Optioned Properties and reasonable details of Exploration Expenditures made during such program. 1.24. During the Option Period with respect to the First Property Option and after the Optionee elects to proceed with the exercise of the First Property Option pursuant to Section 1.11, if the Optionor is the Operator, the Operator shall deliver to the Optionee, prior to the commencement of any further work program on the Optioned Properties and thereafter on or before April 1, 2002, and on or before April 1st in each subsequent year, a detailed Program and Budget with respect to the following year's Exploration Expenditures on the Optioned Properties. The Optionee shall have 60 days from delivery of such Program and Budget to modify, resubmit and approve a Program and Budget, and elect to fund the relevant Exploration Expenditures. When the Optionor is Operator, it shall be the Optionor's responsibility to make cash calls and ensure that funds are efficiently expended in a timely fashion and in any event in accordance with Section 1.12. 1.25. During the Option Period with respect to the First Property Option, if the Optionee is the Operator, any Program and Budget delivered by the Optionee shall not require the consent or approval of the Optionor, and submittal of a Program and Budget by the Optionee shall not constitute a commitment by the Optionee to incur part or all of the Exploration Expenditures contemplated by such Program and Budget. -10- 1.26. During the Option Period with respect to the Second Property Option if the Optionee is the Operator, the Operator shall deliver to the Optionor, for its review a detailed Program and Budget with respect to a work program on the Optioned Properties, at least 90 days prior to commencement of such Program and Budget however, such Program and Budget shall not require the consent or approval of the Optionor. The Operator shall thereafter commence the Program and Budget delivered by the Optionee pursuant to this Section 1.26. 1.27. At any time during the Option Period with respect to the First Property Option but only after electing to proceed with the exercise of the First Property Option pursuant to Section 1.11 the Optionee shall have the right on 90 days notice in writing to the Optionor, to become Operator in respect of the Optioned Properties and shall thereafter be the Operator in respect of the Optioned Properties. ARTICLE 15 - OBLIGATIONS OF THE OPERATOR 1.28. During the term of this Agreement the Operator shall, with regard to the Optioned Properties: (a) maintain in good standing those mineral claims, concessions, permits or Interests comprised in the Optioned Properties by the doing and filing of assessment work or the making of payments in lieu thereof, and the performance of all other obligations which may be necessary in that regard and in order to keep such mineral claims, concessions, permits or Interests free and clear of all liens and other charges arising from the Operator's activities thereon except those at the time contested in good faith by the Operator; (b) subject to Section 1.22, permit the directors, officers, employees and designated consultants of the parties hereto, at their own risk and expense, access to the Optioned Properties at all reasonable times for the purpose of inspecting work being done thereon, and the Operator agrees to indemnify such parties against and to save the non operator harmless from all costs, claims, liabilities and expenses that the non operator may incur or suffer as a result of any injury (including injury causing death) to any director, officer, employee or designated consultant of the Operator arising out of or attributable to the gross negligence or wilful misconduct of the Operator while on the Optioned Properties; (c) in addition to the obligations of the Operator under Section 7.2 hereof, permit the parties hereto, at their own expense, reasonable access to the results of the work done on the Optioned Properties during the last completed calendar year; (d) keep the Optioned Properties free and clear of all liens, charges and encumbrances of every character arising from its operation hereunder (except for liens for taxes not then due, other inchoate liens and liens contested in good faith by the Operator) and proceed with all reasonable diligence to contest or discharge any lien that is filed. -11- (e) pay, when due and payable, all wages or salaries for services rendered in connection with the Optioned Properties and all accounts for materials supplied on or in respect of any work or operation performed on the Optioned Properties; (f) obtain and maintain, and cause any contractor or subcontractor to obtain and maintain, for the benefit of the Optionor and the Optionee as named insured parties adequate insurance having terms and coverage customary in the industry; (g) do all work on the Optioned Properties in a good and workmanlike fashion and in accordance with all applicable laws, regulations, orders and ordinances of any governmental authority; and (h) indemnify and save the parties hereto harmless in respect of any and all costs, claims, liabilities and expenses arising out of or attributable to the gross negligence or wilful misconduct of the Operator with respect to its activities on the Optioned Properties. ARTICLE 9 - TERMINATION OF OPTIONS 1.29. The Optionee may, at any time prior to exercise of the First Property Option, on 90 days' written notice to the Optionor, terminate this Agreement, and the Optionee shall thereafter have no liability to the Optionor as a result of such termination other than for its pro rata portion of Exploration Expenditures already incurred by the Optionor, at the time of termination in respect of the Program and Budget terms then applicable. 1.30. If this Agreement is terminated by the Optionee pursuant to Section 1.29 above, the Optionee shall deliver to the Optionor, at no cost to the Optionor, within 90 days of such termination, copies of all reports, maps, assay results and other relevant technical data compiled by, prepared at the direction of, or in the possession of the Optionee with respect to the Optioned Properties and not theretofore furnished to or otherwise in the possession of the Optionor. 1.31. Notwithstanding any agreement of the Optionee with respect to the provision of the Optionor's pro rata share of project financing to the Commencement of Commercial Production, the Optionee may, at any time after exercise of the Second Property Option, elect at its sole discretion to terminate its agreement to provide project financing, provided, however, the Optionee shall thereafter forthwith assign and transfer to the Optionor an aggregate 19% undivided right, title and interest in and to the Optioned Properties. Upon such termination, 50% of all Exploration Expenditures -12- funded by the Optionee on the Optioned Properties after the exercise of the Second Property Option and prior to such termination shall be deemed to constitute Exploration Expenditures of the Optionee on such property for the purposes of the joint venture contemplated under Article 5 and the joint venture shall thereafter continue to operate with Optionee having a 51% undivided Interest and the Optionor having a 49% undivided Interest in the joint venture and the deemed expenditure base of the Optionee for purposes of the dilution calculation being recalculated to include 50% of any Exploration Expenditures and other related expenditures on the Optioned Properties funded by the Optionee prior to such termination. ARTICLE 10 - TRANSFERS 1.32. If either the Optionee vor the Optionor should receive a bona fide offer from an independent third party (the "Offeror Purchaser") dealing at arm's length to purchase all or a part of such party's Interest in the Optioned Properties which offer the selling party desires to accept, or if the Optionee or the Optionor intend to sell or otherwise dispose of all or a part of its Interest in the Optioned Properties to an independent third party dealing at arm's length to the selling party ("the Proposed Offeree Purchaser"): (a) the selling party shall first offer (the "Offer") such Interest in writing to the other party upon terms no less favourable than those offered by the Offeror Purchaser or intended to be offered by the selling party to the Proposed Offeree Purchaser, as the case may be; (b) the Offer shall specify the price (with a cash alternative if the Offer contains a non-cash element), terms and conditions of such proposed sale and the name of the Offeror Purchaser or the Proposed Offeree Purchaser, as the case may be; (c) the other party shall have 20 Business Days from the date of receiving the Offer to notify the selling party in writing that it accepts the Offer in which case the selling party shall be bound to sell such Interest to the other party on the terms and conditions of the Offer; (d) if the other party fails to notify the selling party before the expiration of the time limited therefor that it will purchase the Interest offered, the selling party may sell and transfer such Interest to the Offeror Purchaser or the Proposed Offeree Purchaser at the price and on the terms and conditions specified in the Offer for a period of 60 days, but the terms of this paragraph shall again apply to such Interest if the sale of the Offeror Purchaser or the Proposed Offeree Purchaser is not completed within such 60 days; (e) any sale hereunder shall be conditional upon the Offeror Purchaser or the Proposed Offeree Purchaser, as the case may be, delivering to the selling party its agreement related to this Agreement and to the Optioned Properties containing: (i) a covenant by the Offeror Purchaser or the Proposed Offeree Purchaser to perform all the obligations of the selling party to be performed under this Agreement in respect of the Interest to be acquired by it from the selling party to the same extent as if this Agreement had been originally executed by the Offeror Purchaser or the Proposed Offeree Purchaser; and -13- (ii) a provision subjecting any further sale, transfer or other disposition of such Interest in such property and this Agreement or any portion thereof to the restrictions contained in this Section 1.32. 1.33. Notwithstanding the above, the provisions of Section 1.32 shall not apply in circumstances where a party constitutes a selling party as contemplated in 1.32 solely as a result of a proposal to undertake a corporate reorganization or other similar corporate transaction provided such corporate reorganization or other similar corporate transaction is proposed solely for bona fide strategic corporate reasons and not, in whole or in part, to avoid the provisions of Section 1.32 above. ARTICLE 11 - FORCE MAJEURE 1.34. If any party hereto is at any time either during the Option Period or thereafter prevented or delayed in complying with any provisions of this Agreement by reason of strikes, lock-outs, labour shortages, power shortages, fuel shortages, fires, floods, insurrections, rebellion, sabotage, wars, acts of God, governmental regulations restricting normal operations, expropriation or confiscation of facilities, shipping delays or any other reason or reasons, other than lack of funds, beyond the reasonable control of such party and which by the exercise of reasonable diligence such party is unable to prevent, the time limited for the performance by such party of its obligations hereunder shall be extended by a period of time equal in length to the period of each such prevention or delay, but nothing herein shall discharge such party from its obligations hereunder to maintain the Optioned Properties in respect of which it is the Operator in good standing. 1.35. Each party shall give prompt notice to the other of each event of force majeure under Section 1.34 and upon cessation of such event shall furnish to the other parties notice to that effect together with particulars of the number of days by which the obligations of the notifying party hereunder have been extended by virtue of such event of force majeure and all preceding events of force majeure. ARTICLE 12 - CONFIDENTIAL INFORMATION 1.36. The parties to this Agreement shall keep confidential all books, records, files and other information supplied by any party to the other parties or its employees, agents or representatives in connection with this Agreement or in respect of the activities carried out on the Optioned Properties by any party, or related to the sale of minerals, or other products derived from the Optioned Properties, including all analyses, reports, studies or other documents prepared by any party or its employees, agents or representatives, which contain information from, or otherwise reflects such books, records, files or other information. The parties shall not and shall -14- ensure that their employees, agents or representatives do not disclose, divulge, publish, transcribe, or transfer such information, all or in part, without the prior written consent of the Optionee or the Optionor, as the case may be, which consent may not be arbitrarily withheld and which shall not apply to such information or any part thereof to the extent that: (a) it is required to be publicly disclosed pursuant to applicable securities or corporate laws, in which event the party seeking to make such disclosure shall provide to the non-disclosing party at least one Business Day prior to making such disclosure, a written copy of such proposed disclosure, unless mutually agreed otherwise, and shall in good faith consider any comments the non-disclosing party may have on such proposed disclosure; or (b) such information becomes generally disclosed to the public, other than as a consequence of a breach hereof by one of the parties hereto. Consent required under this Section 1.36 shall not be unreasonably withheld by the non-disclosing party. 1.37. The Optionor agrees to provide the text of any proposed news release or information update related to this Agreement, the Subscription Agreement or the Optioned Properties to the Optionee at least one Business Day prior to release of such information to third parties. The Optionee shall review and comment on the text thereof within One Business Day of receipt of the proposed release. The Optionor, shall review the comments provided and shall take reasonable steps to modify the release according to the comments made by the Optionee. ARTICLE 13 - MEDIATION 1.38. All disputes arising out of or in connection with this agreement or in respect of any defined legal relationship associated herewith or derived hereunder shall, subject to Section 1.39, be referred to a mediator chosen by mutual agreement of both parties. The mediator shall be a person with appropriate technical competence to assist the parties to resolve their dispute. The mediator agreed by the parties shall assist the parties to resolve their dispute in accordance with the Center for Dispute Resolution ("CEDR") Model Mediation Procedure; which mediation process shall be non-binding. In the event that the parties are unable to reach agreement on a choice of mediator or are otherwise unable to resolve their dispute through the use of such mediator, then either party shall be free to have the dispute resolved through the Courts of England. 1.39. Nothing contained in this Article shall be interpreted as restricting the right of the Optionee to seek interim relief (whether legal, equitable or otherwise) from a court of competent jurisdiction, pending formal resolution of any dispute between the parties hereto. -15- ARTICLE 14 - DEFAULT AND TERMINATION 1.40. If at any time during the Option Period the Optionee fails to perform any obligation required to be performed by it hereunder or is in breach of a warranty given by it hereunder, which failure or breach materially interferes with the implementation of this Agreement, the Optionor may terminate this Agreement but only if: (a) the Optionor, shall have first given to the defaulting Optionee a notice of default containing particulars of the obligation which the Optionor alleges the Optionee has not performed, or the warranty breached; and (b) the defaulting Optionee has not, within 15 Business Days (or such longer period as may, in the circumstances, reasonably allow for the default to be cured) following delivery of such notice of default, (i) cured such default, (ii) commenced proceedings to cure such default by appropriate payment or performance, the Optionee hereby agreeing that should it so commence to cure any default it will prosecute the same to completion without undue delay or (iii) delivered to the Optionor a notice contesting the notice of default and invoking the provisions of Article 13 herein, in which case the provisions of this Article 14 will be suspended pending resolution of such dispute in accordance with Article 13. 1.41. Should the Optionee fail to comply with the provisions of Section ARTICLE 14(b), the Optionor may thereafter terminate this Agreement provided however any such termination is by notice in writing given in accordance with Article 18. 1.42. If the Closing does not occur on or prior to February 28, 2001 or such later date as may be agreed in writing by the parties hereto, this Agreement shall terminate and be of no further force and effect. ARTICLE 15 - AREA OF INTEREST 1.43. If the parties hereto or their respective Affiliates during the term of this Agreement acquire any Interest, or the right to acquire any Interest, in any mineral claim, mining lease, license, concession or other mineral property Interest or portion thereof within the Area of Interest ("Area of Interest Property"), such party shall thereafter promptly notify the other party hereto of such acquisition and shall set out in such notice a detailed description of the Area of Interest Property and the acquisition cost and shall make all information, technical and otherwise, concerning the Area of Interest Property available for inspection by the other party thereto. The non-acquiring party may elect within 30 days of receipt of such notice to have the Area of Interest Property included, at cost as Exploration Expenditures, as part of the Optioned Properties. If the non-acquiring party fails to make such election within such 30 day period, such non-acquiring party shall have no further right or interest in or with respect to such Area of Interest Property. -16- ARTICLE 16 - COVENANT TO REGISTER AGREEMENT 1.44. Forthwith upon the execution of this Agreement, the Optionor shall, if requested by the Optionee by notice in writing to the Optionor, take such steps as are necessary to legalize the grant of the Option contemplated by this Agreement and register the Interest of the Optionee and any transfer of Interests contemplated hereunder at its own cost with the appropriate authority or registry office in the Republic of Tunisia to properly evidence this agreement and protect the rights and Interests of the Optionee acquired hereunder from adverse claims by third parties. ARTICLE 17 - ALTERNATIVE ACQUISITION STRUCTURE 1.45. Notwithstanding the proposed direct property interest acquisition by the Optionee contemplated in Sections 1.14 and 1.20, the Optionee may elect, on exercise of the First Property Option, to have the Optionor transfer or cause to be transferred 51%, and on exercise of the Second Property Option to have the Optionor transfer or cause to be transferred an additional 19%, of the outstanding voting securities of any company or other entity which then holds the Optionor's Interest in the Optioned Properties, to the Optionee or a designated Affiliate of the Optionee, free and clear of all charges, encumbrances, royalties or Net Proceeds Interests of whatsoever nature other than as set forth in this Agreement or to incorporate or otherwise establish a separate entity in the Republic of Tunisia to hold the Optioned Properties with each of the Optionor and Optionee having Interests in such entity equal to their respective Interests in the Optioned Properties and if such alternative structure is adopted, the parties hereto shall forthwith thereafter take all such steps and actions as are necessary to convey such interest in such outstanding voting securities to the Optionee or such designated Affiliate, as the case may be. Should the Optionee elect to adopt an alternative acquisition structure as contemplated in this Section 1.45, it hereby agrees that that alternative acquisition structure shall incorporate a form of shareholders' agreement reflecting the provisions of Section 1.16 hereof. ARTICLE 18 - NOTICES 1.46. Any notice or other writing required or permitted to be given hereunder or for the purposes hereto to either the Optionor or the Optionee shall be sufficiently given if delivered personally, or if sent by prepaid registered mail or if transmitted by facsimile or other form of recorded communication tested prior to transmission to such party: -17- (a) In the case of a notice to the Optionor, at: Aurora Metals (BVI) Limited Suite 517, 2 Old Brompton Road London, SW7 3DQ, United Kingdom Attention: John James ----------- Facsimile No. 011-44-207-581-4445 (b) In the case of a notice to the Optionee, at: Billiton UK Resources B.V. c/o Billiton International Development Limited 1 - 3 Strand London, WC2N 5HA, United Kingdom Attention: Alain Liger ------------------------ Facsimile No. 011-44-207-747-3909 with a copy to: McCarthy T trault Barristers and Solicitors P.O. Box 10424, Pacific Centre 1300 - 777 Dunsmuir Street Vancouver, British Columbia V7Y 1K2 Canada Attention: George W. Holloway -------------------------------- Facsimile No. (604) 643-7900 or at such other address or addresses as the parties to whom such writing is to be given shall have last notified the party giving the same in the manner provided in this Section 1.46. Any notice delivered to the party to whom it is addressed hereinbefore provided shall be deemed to have been given and received on the day it is so delivered at such address, provided that if such day is not a Business Day, then the notice shall be deemed to have been given and received on the second Business Day next following such day. Any notice transmitted by facsimile or other form of recorded communication shall be deemed to be given and received on the first Business Day after its transmission. -18- ARTICLE 19 - GENERAL 1.47. No consent or waiver expressed or implied by any party in respect of any breach or default by any other party in the performance by such other of its obligations hereunder shall be deemed or construed to be or consent to or a waiver of any other breach or default. 1.48. No investigation made by or on behalf of the Optionee or the Optionor or any of their respective advisors or agents at any time shall have the effect of waiving, diminishing the scope of or otherwise affecting any representation or warranty made herein by the other party hereto or made pursuant thereto. No waiver by the Optionee or the Optionor of any condition, in whole or in part, shall operate as a waiver of any other condition. 1.49. Notwithstanding any right of either party hereto fully to investigate the affairs of the other, and notwithstanding any knowledge of facts determined or determinable by the other party hereto pursuant to such investigation or right of investigation, each of the Optionee and the Optionor has the right to rely fully upon the representations, warranties, covenants and agreements of the other contained in this Agreement and of their affiliates, officers and agents delivered pursuant to this Agreement. 1.50. All statements contained in any certificate or other instrument delivered by or on behalf of any party pursuant hereto or in connection with the transactions contemplated by this Agreement shall be deemed to be made by such party hereunder. 1.51. The Optionor or the Optionee, as the case may be (hereinafter referred to as the "Indemnifying Party"), hereby covenants and agrees to indemnify and save harmless the other (hereinafter referred to as the "Indemnified Party"), effective as and from the Closing, from and against any claims, demands, actions, causes of action, damage, loss, costs, liability or expense, including reasonable legal expenses (hereinafter in this Section 1.51 called "Claims") which may be made or brought against the Indemnified Party and/or which it may suffer or incur as a result of, in respect of or arising out of any non-fulfilment of any covenant or agreement on the part of the Indemnifying Party under this Agreement or any incorrectness in or breach of any representation or warranty of the Indemnifying Party contained herein or in any certificate or other document furnished by the Indemnifying Party pursuant or in relation thereto. The foregoing obligation of indemnification in respect of such claims shall be subject to the requirement that the Indemnifying Party shall, in respect of any Claim made by any third party, be afforded an opportunity at its sole expense to resist, defend and compromise the same in a timely manner. 1.52. The Optionor covenants that it will, as soon as reasonably practicable, take all such steps as are necessary to exercise the High Marsh Option and acquire the subject mineral property interest thereunder. -19- 1.53. Notwithstanding anything to the contrary contained in this Agreement the rights and obligations hereunder and the Option granted hereby are assignable by either party hereto in its absolute discretion to an Affiliate of such party provided that such Affiliate first agrees in writing to retransfer such Interest to the originally assigning party immediately before ceasing to be an Affiliate of such party. 1.54. The parties shall promptly execute or cause to be executed all documents, deed, conveyances and other instruments of further assurance and do such further and other acts which may be reasonably necessary or advisable to carry out fully and effectively the intent and purpose of this Agreement or to record wherever appropriate the respective interest from time to time of the parties in the Optioned Properties. 1.55. This Agreement shall enure to the benefit of and be binding upon the parties and their respective successors and permitted assigns. 1.56. This Agreement shall be governed by and construed in accordance with the laws of England and shall be subject to the approval of all securities regulatory authorities having jurisdiction, such approvals to be sought in a timely and diligent manner. 1.57. Time shall be of the essence in this Agreement. 1.58. The preamble and Schedules attached hereto shall be deemed to be incorporated in, and to form part of, this Agreement. 1.59. Wherever the neuter and singular is used in this Agreement it shall be deemed to include the plural, masculine and feminine, as the case may be. 1.60. Nothing contained in this Agreement shall be deemed to constitute any party hereto the partner of the other, nor, except as otherwise herein expressly provided, to constitute either the Optionor or the Optionee as the agent or legal representative of the other, nor to create any fiduciary relationship between them. It is not the intention of the parties hereto to create, nor shall this Agreement be construed to create, any mining, commercial or other partnership. Neither the Optionor nor the Optionee shall have any authority to act for or to assume any obligation or responsibility on behalf of the other party, except as otherwise expressly provided herein. The rights, duties, obligations and liabilities of the parties hereto shall be several and not joint or collective. 1.61. All monetary amounts referred to herein are in United States dollars unless otherwise specified. -20- IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day and year first above written. AURORA METALS (BVI) LIMITED By: ----------------------------------- BILLITON UK RESOURCES B.V. By: ---------------------------------- -21- EX-21.1 4 0004.txt EXHIBIT 21.1 SUBSIDIARIES OF THE COMPANY SUBSIDIARIES OF THE COMPANY Name Jurisdiction of Incorporation Percentage of Voting - ------------------------- ----------------------------- --------------------- Securities Owned ---------------- Aurora Gold (BVI) Limited The British Virgin Islands 100 (a) Aurora Gold, S. A. Guatemala 100 (a) Deltango Gold Limited Yukon, Canada 100 (a) (a) Included in the consolidated financial statements filed herein. -----END PRIVACY-ENHANCED MESSAGE-----