10QSB 1 fwgo-10qsb103104.txt FWGO 10QSB 103104 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (Mark One) [X] THREE MONTHS REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Three months period ended October 31, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-17386 FISCHER-WATT GOLD COMPANY, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Nevada 88-0227654 (State or other jurisdiction ------------------- of incorporation or organization) (IRS Employer Identification No.) 1410 Cherrywood Dr. Coeur d'Alene, ID 83814 (Address of principal executive office) (208)-664-6757 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 [ ] The number of shares outstanding of each of Issuer's classes of common equity as of October 31, 2004. Common Stock, par value $.001 52,649,111 ----------------------------- ---------------- Title of Class Number of Shares Transitional Small Business Disclosure Format Yes [ ] No [X]
Index Exchange Rates........................................................................3 Conversion Table......................................................................3 Forward Looking Statements............................................................3 Item 1 - Financial Statements.........................................................4 1.1 Consolidated Balance Sheet................................................4 1.2 Consolidated Statements of Operation......................................5 1.3 Consolidated Statements of Cash Flow......................................6 1.4 Notes to Consolidated Financial Statements ...............................7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................8 2.1 Liquidity and Capital Resources...........................................8 2.1.1 Short Term Liquidity......................................................9 2.1.2 Long Term Liquidity.......................................................9 2.2 Results of Operations.....................................................9 2.3 Revenues..................................................................9 2.4 Costs and Expenses........................................................9 2.5 Commitments and Contingencies............................................10 2.6 Foreign Currency Exchange................................................10 2.7 Going Concern Consideration..............................................10 2.8 Other.......................................................................10 2.9 Cautionary Note Regarding Forward-Looking Statements........................15 Item 3 - Controls and Procedure......................................................15 3.1 Legal Proceedings.........................................................16 3.2 Changes in Securities.....................................................16 3.3 Default in Senior Securities..............................................16 3.4 Submission of Matters to a vote of Security Holders.......................16 3.5 Other Information.........................................................16 3.6 Exhibits and Reports on Form 8-K..........................................16
2 Exchange Rates Except as otherwise indicated, all dollar amounts described in this Report are expressed in United States (US) dollars. Conversion Table For ease of reference, the following conversion factors are provided:
======================================== ========= ============================================== 1 mile = 1.6093 kilometers 1 metric tonne = 2,204.6 pounds ---------------------------------------- --------- ---------------------------------------------- 1 foot = 0.305 meters 1 ounce (troy) = 31.1035 grams ---------------------------------------- --------- ---------------------------------------------- 1 acre = 0.4047 hectare 1 imperial gallon = 4.5546 liters ---------------------------------------- --------- ---------------------------------------------- 1 long ton = 2,240 pounds 1 liter = 1.057 U.S. quarts ======================================== ========= ==============================================
Forward Looking Statements The Company desires to take advantage of the "safe harbor" provisions contained in Section 27A of the Securities Act of 1933, as amended (the "1933 Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is including this statement herein in order to do so: From time to time, the Company's management or persons acting on the Company's behalf may wish to make, either orally or in writing, forward-looking statements (which may come within the meaning of Section 27A of the 1933 Act and Section 21E of the 1934 Act), to inform existing and potential security holders regarding various matters including, without limitation, projections regarding financial matters, timing regarding transfer of licenses and receipts of government approvals, effects of regulation and completion of work programs. Such forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believes," "expect," "anticipate," "goal" or other words that convey the uncertainty of future events or outcomes. Forward-looking statements by their nature are subject to certain risks, uncertainties and assumptions and will be influenced by various factors. Should one or more of these forecasts or underlying assumptions prove incorrect, actual results could vary materially. 3 Item 1 - Financial Statements 1.1
Fischer-Watt Gold Company, Inc. Consolidated Balance Sheet October 31, 2004 (Unaudited) ASSETS Current assets: Cash $ 3,234 Inventory 175,000 ------------ Total current assets $ 178,234 ============ LIABILITIES AND STOCKHOLDERS' (DEFICIT) Current liabilities: Accounts payable $ 39,306 Notes payable - shareholders 285,500 Accounts payable and accrued expenses - shareholders 1,301,349 ------------ Total current liabilities 1,626,155 ============ Stockholders' (deficit): Preferred stock, non-voting, convertible, $2 par value, 250,000 shares authorized, none outstanding -- Common stock, $.001 par value, 200,000,000 shares authorized, 52,649,111 shares issued and outstanding 52,649 Additional paid-in capital 15,679,774 Common stock subscriptions 257,721 Accumulated (deficit) (17,438,065) ------------ (1,447,921) ------------ $ 178,234 ============
See the accompanying notes to the consolidated financial statements. 4 1.2
Fischer-Watt Gold Company, Inc. Consolidated Statements of Operations Three Months and Nine Months Ended October 31, 2004 and 2003 (Unaudited) Three Months Nine Months ---------------------------- ---------------------------- 2004 2003 2004 2003 ------------ ------------ ------------ ------------ Revenue $ -- $ -- $ -- $ -- Costs and expenses: Exploration 4,325 31,096 60,745 130,113 General and administrative 122,995 50,161 304,476 172,331 ------------ ------------ ------------ ------------ 127,320 81,257 365,221 302,444 ------------ ------------ ------------ ------------ (Loss) from operations (127,320) (81,257) (365,221) (302,444) ------------ ------------ ------------ ------------ Other (income) and expense Gain on the write off of accounts payable -- -- (67,235) -- Interest expense 1,375 1,375 4,125 4,125 ------------ ------------ ------------ ------------ 1,375 1,375 (63,110) 4,125 ------------ ------------ ------------ ------------ Net (loss) $ (128,695) $ (82,632) $ (302,111) $ (306,569) ============ ============ ============ ============ Per share information - basic and fully diluted Net (loss) per share $ (0.00) $ (0.00) $ (0.01) $ (0.01) ------------ ------------ ------------ ------------ Weighted average shares outstanding 52,649,111 49,723,384 52,370,586 48,412,273 ============ ============ ============ ============
See the accompanying notes to the consolidated financial statements. 5 1.3
Fischer-Watt Gold Company, Inc. Consolidated Statements of Cash Flows Nine Months Ended October 31, 2004 and 2003 (Unaudited) 2004 2003 Cash flows from operating activities: Net cash (used in) operating activities $ (202,679) $ (238,340) ----------- ----------- Cash flows from investing activities: Net cash provided by (used in) investing activities -- -- ----------- ----------- Cash flows from financing activities: Net cash provided by financing activities 184,971 196,750 ----------- ----------- Increase (decrease) in cash and cash equivalents (17,708) (41,590) Cash and cash equivalents, beginning of period 20,942 64,160 ----------- ----------- Cash and cash equivalents, end of period $ 3,234 $ 22,570 =========== ===========
See the accompanying notes to the consolidated financial statements. 6 FISCHER-WATT GOLD COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS October 31, 2004 (UNAUDITED) (1) Basis Of Presentation The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and Item 310(b) of Regulation SB. They do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. For further information, refer to the financial statements of the Company as of January 31, 2004 and for the two years then ended, including notes thereto included in the Company's Form 10-KSB. The accompanying consolidated financial statements include the accounts of the Company and its subsidiary. Intercompany transactions and balances have been eliminated in consolidation. (2) Inventory Inventory is stated at the lower of cost or market on a first in, first out basis and consists of uncut gemstones. (3) Earnings Per Share The Company calculates net income (loss) per share as required by SFAS No. 128, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods presented common stock equivalents were not considered, as their effect would be anti-dilutive. (4) Notes Payable - Shareholders During the period ended October 31, 2004, a shareholder advanced an additional $175,000 to the Company by the direct payment for the Company's gemstone inventory. The Company accrues interest on this advance at 5% per annum. (5) Stockholders' (Deficit) During the period ended October 31, 2004 a third party subscribed to 1,442,308 shares of common stock for a cash payment of $149,971 and certain affiliates exercised options to purchase 500,000 shares of common stock for cash aggregating $5,000. In addition, a shareholder contributed $25,000 to the capital of the Company and certain affiliates exercised options to purchase 420,000 shares of common stock for $5,000, which shares have not yet been issued. The Company also issued 1,506,727 shares of common stock subscribed for in previous periods and recorded a subscription for 875,000 shares of common stock valued at fair market value of $70,000 for services. 7 During July 2004 the Company issued 100,000 options to purchase common stock at $.12 per share for a period of 5 years to a director. The Company accounts for stock-based compensation by applying APB 25. SFAS 123 requires the Company to provide pro forma information regarding net income and earnings per share as if compensation cost for the Company's stock option plans had been determined in accordance with the fair value based method prescribed in SFAS 123. The fair value of the option grants is estimated on the date of grant utilizing the Black-Scholes option pricing model with the following weighted average assumptions for grants during the period ended October 31, 2004: expected life of options of 5 years, expected volatility of 1.14, risk-free interest rate of 3.0% and no dividend yield. The weighted average fair value at the date of grant for options granted during the period ended October 31, 2004, approximated $.10 per option. These results may not be representative of those to be expected in future years. Under the provisions of SFAS 123, the Company's net (loss) and (loss) per share would have been (increased) to the pro forma amounts indicated below: Net (loss) As reported $ (302,111) Pro forma $ (312,111) Earnings (loss) per share - basic and fully diluted As reported $(0.01) Pro forma $(0.01) (6) Going Concern Consideration The Company has incurred substantial operating losses since inception aggregating $17,438,065 and has working capital and stockholders' deficits of $1,447,921 at October 31, 2004. In addition, the Company has no revenue producing operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The Company is attempting to develop mineral properties in Mexico as Mexico is supportive of the mining industry and NAFTA has made doing business there attractive and has acquired a gemstone inventory. In addition, the Company has funded its operations from capital contributions from a shareholder a the sale of common stock. The ability of the Company to achieve its operating goals and thus positive cash flows from operations is dependent upon the future market price of metals, future capital raising efforts, and the ability to achieve future operating efficiencies anticipated with increased production levels. Management's plans will require additional financing, reduced exploration activity or disposition of or joint ventures with respect to mineral properties. While the Company has been successful in these capital raising, endeavors in the past, there can be no assurance that its future efforts and anticipated operating improvements will be successful. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------------------------------------------------- 2.1 Liquidity and Capital Resources 2.1.1 Short Term Liquidity As of October 31, 2004 the Company had $ 3,234 in cash and accounts payable and accrued expenses of $1,626,155. On October 31, 2004 the Company's current ratio of current assets to current liabilities was less than 1:1 A current ratio of less than 1:1 indicates that the Company does not have sufficient cash and other current assets to pay its bills and other liabilities incurred at the end of its fiscal year and due and payable within the next fiscal year The Company incurred a net loss of $302,111 for the nine-month period ending October 31, 2004 compared to $306,569 for the previous year. The loss was due to the lack of income producing operations and costs related to the development of the Mexican property. On October 31, 2004 the accumulated deficit was $17.4 Million 2.1.2 Long Term Liquidity It is likely that the Company will need to supplement anticipated cash from operations with future debt or equity financing and dispositions of or joint ventures with respect to mineral properties to fully fund its future business plan that includes exploration projects and property development. While the Company has been successful in capital raising endeavors in the past, there can be no assurance that its future efforts will be successful. There can be no assurance that the Company will be able to conclude transactions with respect to its mineral properties or additional debt or equity financing or that such capital raising opportunities will be available on terms acceptable to the Company, or at all. 2.2 Results of Operations The Company had net loss of $302,111 as compared to net loss of $306,569 for the comparable period in the prior year. 2.3 Revenues The Company had no sales during the period. 2.4 Costs and Expenses Abandonment's are a natural result of the Company's ongoing program of acquisition, exploration and evaluation of mineral properties. When the Company determines that a property lacks continuing economic value, it is abandoned. It cannot be determined at this time when or if any of the Company's current property interests will be abandoned. The Company incurred no abandonment costs in the periods presented. Selling, general and administrative cost increased to $365,221 from $302,444 for the comparable period of the prior year. Selling, general and administrative expenses consisted principally of accrued officer salaries and professional fees related to the preparation and filing of required periodic reports. 9 Exploration expense decreased from $130,113 to $60,745 for the 2004 comparable period. All exploration costs been incurred at the La Balsa property in Mexico. 2.5 Commitments and Contingencies Management is currently unaware of any legal action against the Company. 2.6 Foreign Currency Exchange The Company accounts for foreign currency translation in accordance with the provisions of Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS No.52"). The assets and liabilities of foreign operations are translated at the rate of exchange in effect at the balance sheet date. Income and expenses are translated using the weighted average rates of exchange prevailing during the period. The related translation adjustments are reflected in the accumulated translation adjustment section of shareholders' equity. 2.7 Going Concern Consideration As the independent certified public accountants have indicated in their report on the financial statements for the year ended January 31, 2004, and as shown in the financial statements, the Company has experienced significant operating losses that have resulted in an accumulated deficit of $17.4 million. These conditions raise doubt about the Company's ability to continue as a going concern. The ability of the Company to achieve its operating goals and thus positive cash flows from operations is dependent upon the future market price of gold, future capital raising efforts, and the ability to achieve future operating efficiencies anticipated with increased production levels. Management's plans will require additional financing, reduced exploration activity, or disposition of or joint ventures with respect to mineral properties. While the Company has been successful in these capital-raising endeavors in the past, there can be no assurance that its future efforts, and anticipated operating improvements will be successful. The Company does not currently have adequate capital to continue its contemplated business plan beyond 2004. The Company is presently investigating all of the alternatives identified above to meet its short-term liquidity needs. The Company believes that it can arrange a transaction or transactions to meet its short-term liquidity needs, however there can be no assurance that any such transactions will be concluded or that if concluded they will be on terms favorable to the Company. 2.8 Other Oronorte -------- On November 21, 2000, the Company announced that it had signed a letter on intent to sell the Oronorte operations to Grupo de Bullet, a Colombian Company. This sale included the El Limon mine and its related support facilities as well as all of the Company's exploration and development properties in the country. The sale price was US$3.7 million, which will be paid as a 3% Net Smelter Return royalty. If Grupo de Bullet vends the property to a third party within two years the full amount will be due upon sale, less a sales commission. 10 La Balsa -------- In August 2000, the Mexican government issued the Company the rights to a series of contiguous mining concessions. The concessions cover approximately 500 hectares and are located 12 kilometers north of Lazaro Cardenas, Michoacan. Work done by previous concession holders included 42 diamond drill holes, 35 percussion drill holes and a preliminary feasibility study. In October 2000 the Company retained K D Engineering, Tucson, Arizona, to perform a feasibility study on the Balsa project. Simultaneously, Mintec, Inc., Tucson, Arizona, was retained to determine the ore reserves and complete a mine design. K D Engineering subcontracted the geotechnical portion of the study to the Tucson office of Golder Associates. A pre-feasibility study was completed on January 4, 2001 and is summarized below. Class Type Tonnes %Cu -------------------------------------------------------------------------- Measured Clay Oxide 556,447 0.998 Rock Oxide 2,081,640 0.878 Sulphide 6,481,094 2.677 --------- ----- Sub Total 9,119,181 2.164 Indicated Clay Oxide 103,041 0.939 Rock Oxide 1,246,182 0.548 Sulphide 2,147,934 0.206 --------- ----- Sub Total 3,497,157 0.349 Inferred Clay Oxide 3,221 0.728 Rock Oxide 186,425 0.442 Sulphide 11,684,788 0.154 ---------- ----- Sub Total 11,874,434 0.159 Total Clay Oxide 662,709 0.99 Rock Oxide 3,514,247 0.74 Sulphide 20,313,816 0.96 ---------- ----- Total 24,490,772 0.93 Class Type Tonnes Cu% Measured Clay Oxide 659,488 0.989 and Rock Oxide 3,327,822 0.754 Indicated Sulphide 8,629,028 2.062 ---------- ----- Sub Total 12,616,338 1.661 -------------------------------------------------------------------------- Total Tonnes mined 3.5 million Average Grade of Ore Mined 1.42% Cu Striping Ratio (Waste to Ore) 0.68:1 Ton per day of refined copper 14 Process SX-EW Type of Copper Produced Electrolytic Total Capital Requirement $10 million (Approximately) Project Life 7.5 years Cash Cost per Lb of Cu $0.54 Revenue @ $0.85 per Lb of Cu $66 million 11 In August 2001 Mexican authorities notified the Company that the challenges to the title had been resolved in the Company's favor. Titles were issued the same month. On September 28, 2001 the Company began a drilling program at the La Balsa project. This program was initiated to confirm and expand the reserves, provide a better understanding of the geology, and to provide material for additional metallurgical testing. The drilling consisted of 435 meters of core. The work was preformed by B.D.W. Drilling, Guadalajara, Jalisco and supervised by Resource Geosciences de Mexico, Hermosillo, Sonora. The samples from the drilling were sent to the laboratory of Bondar Clegg, Vancouver, B.C. for assay. The results of the drilling are shown below.
LA BALSA SIGNIFICANT DRILL INTERCEPTS ------------ ---------------- ------------- ------------ ----------- ----------------- --------- ----------- --------- Hole Inclination Azimuth From To Vertical Total Ore # Degrees Degrees Meters Meters Thickness Cu % Type Zone ------------ ---------------- ------------- ------------ ----------- ----------------- --------- ----------- --------- 101 - 90 0 13.5 18.0 4.5 1.31 Oxide West 102 - 90 0 33.0 40.5 7.5 0.99 Sulfide West 103 - 50 030 0.00 10.5 8.0 3.79 Oxide West 18.0 28.5 8.0 2.08 Sulfide West 104 - 90 0 9.0 39.0 30.0 3.87 Oxide East 39.0 58.5 19.5 2.09 Sulfide East 105 -45 090 9.0 51.0 29.7 2.13 Oxide East 106 - 45 315 40.3 60.0 13.9 1.11 Sulfide East * 107 - 45 135 8.0 52.5 31.5 2.78 Oxide East 108 - 45 045 12.0 30.0 12.7 1.20 Oxide East ------------ ---------------- ------------- ------------ ----------- ----------------- --------- ----------- ---------
*Considered very important for porphyry potential. This hole ended in ore grade mineralization outside the current reserve area. 12 Concurrent with this work, Seegmiller and Associates, an internationally recognized slope stability firm based in Salt Lake City, Utah, performed various rock mechanic studies and slope stability analysis. Aguayo and Associates of Hermosillo, Sonora, performed environmental testing for potential acid rock drainage on representative samples. During the above mentioned drill program it was noted that several of the drill holes had terminated in porphyry-style, high grade, copper sulfide mineralization or favorable altered host rocks. This same bornite mineralization and porphyry association had also been noted in the drill logs of some of the 70 holes drilled previously by other companies. Fischer-Watt therefore contracted La Cuesta International, Inc. to determine the potential, and to make specific recommendations for future exploration, of this deeper, primary sulfide, target. In its conclusions, La Cuesta International noted that some of the drill holes beneath Zone C had intersected the throat of an important, well mineralized, copper-bearing porphyry intrusive and that "The La Balsa project is a porphyry hosted, bornite dominated, copper-silver-gold mineral system". This system may be a member of the "diorite-type" porphyry copper model but additional work is needed in order to verify this determination. In addition, JRA Geophysics, Inc. reviewed geophysical surveys over La Balsa that had been carried out previously by others. The regional airborne magnetic survey indicates that the main La Balsa mineralization lies in an area where a north-south fault intersects an ENE - WSW striking, regional magnetic high feature. The induced polarization survey data over this area suggests that a 600 meter long sulfide bearing zone exists along the ENE - WSW axis. The zone remains open to the west, north, south and to depth. Locating the primary source of mineralization at La Balsa could generate tremendous upside potential for Fischer-Watt. This exploration work will not, however, impede the preparation and implementation of the feasibility study for the mining of the surface oxide zones. Metallurgical testing was commenced at Mountain States R&D International, Inc. in Vail, Arizona and was completed, as scheduled, by the end of June, 2002. The core from the various mineralized zones was characterized into three distinct ore types, namely oxide ore, transitional ore and primary sulfide ore. The head grades of the samples were representative of each of the ore types, namely, oxide ore at 2.75% copper, transitional ore at 1.78% copper and primary sulfide ore at 1.09% copper. Two sets of samples were prepared, one at a crush size of minus 1 inch and the other at minus 1/2 inch. These two sets of samples were column leached for 100 days. The minus 1/2 inch samples returned the best results. The copper recovery in both the oxide and transitional ores was excellent and acid consumption was low in both cases. The recovery curves for the minus 1/2 inch samples showed good leaching characteristics with a total recovery of 93.9% of the copper in the oxide ore and 92.4% of the copper in the transitional ore. Leach, Inc. evaluated the data from the column leach tests for the purpose of projecting copper recoveries under various commercial operating scenarios. The test data indicated that copper recovery is controlled by the availability of the leaching reagents and it was calculated that 90 to 92 percent of the copper could be solubilized in 123 days of leaching using typical heap leach operating parameters. Copper recoveries would be somewhat lower than this in practice due to normal inventory builds up in the leach heaps and because of operating 13 inefficiencies. Comparable recoveries can be attained in the period between 76 and 245 days of leaching by varying the operating parameters. The precise operating parameters have not yet been established and will be the subject of the engineering design program currently being planned. The third ore group, the primary sulfide ore, is derived from the deeper La Balsa porphyry mineralization. At the present time this primary sulfide resource represents the second phase of mining that would take place at the property after the oxide and transitional ores have been mined. Copper recovery of 41.7% was much lower in this ore, as expected, and acid consumption was high. However, some interesting metallurgical opportunities were brought to light during the testing. For example, preliminary testwork has indicated that Heavy Media Separation can significantly upgrade this primary sulfide ore prior to flotation. In this way some of the gangue, or waste material, is separated from the ore minerals in a pre-concentration step thereby reducing the quantity of material that has to be treated in the following stage. This reduction would likely appreciably lower the capital cost of the processing plant. There are other options available also for treating the primary sulfide ore and they will be examined as the development of the oxide and transitional sulfide ore moves forward. Additional concessions, Balsa 7 through 11, have been filed contiguous to the original La Balsa land and at the present time the property is made up of 940.26 hectares. Fischer-Watt Gold (FWGO) has received the "Project Review & Resource Assessment II" of the La Balsa project from Mintec, Inc. The conclusions of this report are as follows: "As it presently stands, the La Balsa project is a small, high-grade deposit with oxide copper and mixed oxide-sulfide copper mineralization amenable to recovery by leaching. It is located in an area with very good infrastructure. It is within 15 kilometers from the industrial town of Lazaro Cardenas, which also has a major seaport. Geologically, it has the potential for additional reserves in a bulk-tonnage porphyry copper environment. The rocks in the area are highly suggestive of the presence of a mineralized porphyry copper system. Exploration drilling has been limited both in area and at depth. A number of existing drill holes bottomed in ore-grade material. At this point in the life of the project, this study confirms that the project area contains a resource totaling of 63.6 million tonnes of all classes of resources material at an average 0.245% total copper grade. Included in these total resources are approximately 30.9 million tonnes of measured and indicated resources with an average total copper grade of 0.332%. The Lerchs-Grossman economic analysis identified approximately 4.89 million tonnes of measured and indicated resources material at a cutoff of $0.01 profit per tonne with an average grade of 1.218% total copper as reserves. The designed pits mined 4.86 million tonnes of ore at an average total copper grade of 1.221%, recovered copper grade of 0.906% an at a strip ratio of 0.6 tonnes of waste per tonne of ore. Approximately 2.92 million tonnes of waste material is produced during mining. Areas close to the mining can accommodate the generated waste volume. Approximately 97.14 million pounds of copper may be recovered from the mined ore at an average recovery of 78.2%. Based on the mining schedule, the mining plan spans over 7 years. The total net revenue is approximately $63.5 million. At a 15% discount rate, the accumulative net present value of the project is $40.3 million before any capital expenditures and debt interest". Processing of the copper rich leach solutions from the La Balsa was originally going to be through the use of solvent extraction and electro-winning (SX/EW) to produce cathode copper. Discussions with people in the industry have indicated that for an oxide copper project the size of La Balsa; the capital cost of an (SX/EW) plant would be unattractive to investors. Therefore it has been decided that the leach solution 14 at La Balsa will be mixed with shredded iron from tin cans to produce a product called cement copper. This cement copper, which will contain between 85% to 90% metallic copper will be air dried on site, placed in large bags and sent to the deep-water port at Lazaro Cardenas. A metal trader has submitted a purchase proposal for the cement copper under these conditions. It is estimated that going to cement copper processing will reduce the total project capital cost by 60%. Serious efforts are underway to fund La Balsa at this time. Mercedes -------- The company believes that the Mercedes is an excellent exploration property. However it has made the decision to put the La Balsa copper project into production as quickly as possible. This decision has made it necessary to return the Mercedes to Minera Meridian Minerales S. de R.L. de C.V. Afghanistan ----------- Through a board member's business affiliation in Afghanistan, the company was offered two opportunities to become involved with the mineral industry of the country: 1. To meet with the Director of the Afghan Department of Mines and begin negotiations for mining licenses. 2. To meet with a major owner of emerald mines in the Panjsher Valley and negotiate a purchasing and international distribution arrangement coupled with a consulting contract to improve mining techniques at the mining operations. The board member was authorized to begin due diligence during his next trip to Afghanistan and arrangements were made to send a Colombian emerald expert to meet with him there and evaluate the quality of the emeralds being offered by the mine owner. The consultant reported that the quality of the emerald was excellent and that a lot of approximately 2,000 carets for a purchase price of $175,000 could be sold internationally for between $250,000 and $300,000. The company, arranged to borrow the money to purchase these emeralds from the Chairman of the Board. The terms of this loan are 5% annual interest and 875,000 shares of restricted stock. Negotiations are presently underway with gemstone importer and distributor to sell the emeralds. The company had decided that security in Afghanistan has not reached the lever required to pursue mining exploration at this time. 2.9 Cautionary Note Regarding Forward-Looking Statements In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby providing cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in forward-looking statements (as such term is defined in the Reform Act) made by or on behalf of the Company herein or orally, whether in presentations, in response to questions or otherwise. Any statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will result", "are expected to", "will continue", "is anticipated", "estimated", "projection" and "outlook") are not historical facts 15 and may be forward-looking and, accordingly, such statements involve estimates, assumptions, and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Such uncertainties include, among other, the following: (i) the Company's ability to obtain additional financing to implement its business strategy; (ii) adverse weather conditions and other conditions beyond the control of the Company; (iii) imposition of new regulatory requirements affecting the Company; (iv) a downturn in general or local economic conditions where the Company operates; (v) effect of uninsured loss and (vi) other factors which are described in further detail in the Company's filings with the Securities and Exchange Commission. The Company cautions that actual results or outcomes could differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of such factors. Further, management cannot assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Item 3. CONTROLS AND PROCEDURES ------------------------------- Regulations under the Securities Exchange Act of 1934 require public companies to maintain "disclosure controls and procedures," which are defined to mean a company's controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. The Company's Chief Executive Officer, based on his evaluation of the Company's disclosure controls and procedures, concluded that the Company's disclosure and procedures were effective for this purpose. Changes in Internal Controls. There were no significant changes in the Company's internal controls or, to the Company's knowledge, in other factors that could significantly affect these controls subsequent to the date of their evaluation. 3.1 Legal Proceedings None 16 3.2 Changes in Securities and Use of Proceeds None 3.3 Defaults in Senior Securities None 3.4 Submission of Matters to a Vote of Security Holders. None 3.5 Other Information None 3.6 Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No 31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit No 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FISCHER-WATT GOLD COMPANY, INC. Date: December 14, 2004 By: /s/George Beattie ----------------------------- George Beattie, President, Chief Executive Officer (Principal Executive Officer) 17